AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 22, 1997
REGISTRATION STATEMENT NO. 333-23771
REGISTRATION STATEMENT NO. 333-23771-01
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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<TABLE>
<CAPTION>
BANKATLANTIC BANCORP, INC. BBC CAPITAL TRUST I
<S> <C>
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(Exact name of registrant as specified in its charter) (Exact name of co-registrant as specified in its charter)
Florida Delaware
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(State or other jurisdiction of incorporation or organization) (State or other jurisdiction of incorporation or organization)
65-0507804 Applied For
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(I.R.S. Employer Identification Number) (I.R.S. Employer Identification Number)
ALAN B. LEVAN
BANKATLANTIC BANCORP, INC.
1750 EAST SUNRISE BOULEVARD 1750 EAST SUNRISE BOULEVARD
FORT LAUDERDALE, FLORIDA 33304 FORT LAUDERDALE, FLORIDA 33304
TELEPHONE (954) 760-5000 TELEPHONE (954) 760-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
OF REGISTRANT'S AND CO-REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
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PLEASE SEND COPIES OF ALL COMMUNICATIONS TO:
<TABLE>
<CAPTION>
<S> <C>
ALISON W. MILLER, ESQ.
STEARNS WEAVER MILLER WEISSLER JOHN J. SPIDI, ESQ.
ALHADEFF & SITTERSON, P.A. MALIZIA, SPIDI, SLOANE & FISCH, P.C.
150 WEST FLAGLER STREET, SUITE 2400 1301 K STREET, N.W., SUITE 700 EAST
MIAMI, FLORIDA 33130 WASHINGTON, D.C. 20005
</TABLE>
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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 [ ].
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering [ ].
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering [ ].
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box [ ].
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PROPOSED
AMOUNT PROPOSED MAXIMUM
TITLE OF EACH CLASS TO BE MAXIMUM AGGREGATE AMOUNT
OF SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE OFFERING PRICE REGISTRATION FEE
% Cumulative Trust Preferred Securities of
BBC Capital Trust I 2,990,000(1) $25 $74,750,000 $22,651.52(4)
% Junior Subordinated Debentures of
BankAtlantic Bancorp, Inc.(2) (2) -- -- --
Guarantee of BankAtlantic Bancorp, Inc. of certain
obligations under the Preferred Securities(3) (3) -- -- --
</TABLE>
(1) Includes up to 390,000 additional Cumulative Trust Preferred Securities
which may be acquired by the Underwriters to cover over-allotments, if
any.
(2) The Junior Subordinated Debentures will be purchased by BBC Capital Trust
I with the proceeds of the sale of the Cumulative Trust Preferred
Securities. Such securities may later be distributed for no additional
consideration to the holders of the Cumulative Trust Preferred Securities
of BBC Capital Trust I upon its dissolution and the distribution of its
assets.
(3) This Registration Statement is deemed to cover the Guarantee. No separate
consideration will be received for the Guarantee and pursuant to Rule
457(n) under the Securities Act of 1933, as amended, no separate
registration fee is payable for the Guarantee.
(4) Of the $22,651.52 registration fee, $17,424.25 was previously paid with the
initial filing of this Registration Statement on March 21, 1997.
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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 THE 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>
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 DATED APRIL 22, 1997
2,600,000 PREFERRED SECURITIES
[BANKATLANTIC BANCORP LOGO]
BBC CAPITAL TRUST I
% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED, AS DESCRIBED HEREIN, BY
BANKATLANTIC BANCORP, INC.
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$65,000,000 OF % JUNIOR SUBORDINATED DEBENTURES
WILL BE ISSUED BY BANKATLANTIC BANCORP, INC. TO BBC CAPITAL TRUST I
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The % Cumulative Trust Preferred Securities (the "Preferred Securities")
offered hereby represent preferred undivided beneficial interests in the
assets of BBC Capital Trust I, a statutory business trust created under the
laws of the State of Delaware ("BBC Capital"). BankAtlantic Bancorp, Inc., a
Florida corporation (the "Company" or "BBC"), will own all the common
securities representing undivided beneficial interests in the assets of BBC
Capital (the "Common Securities" and, together with the Preferred Securities
will be referred to herein as the "Trust Securities").
(CONTINUED ON FOLLOWING PAGE)
Application has been made to list the Preferred Securities on The Nasdaq
Stock Market's National Market under the symbol "BANCP." See "Risk
Factors--Absence of Prior Public Market for the Preferred Securities; Trading
Price and Tax Considerations."
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SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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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.
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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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Price to Underwriting Proceeds to
Public Commission(1) BBC Capital(2)(3)
Per Preferred Security $25.00 (2) $25.00
Total(4) $65,000,000 (2) $65,000,000
</TABLE>
(1) BBC Capital and the Company have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities
Act of 1933, as amended. See "Underwriting".
(2) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in the Junior Subordinated Debentures of the
Company, the Company has agreed to pay the Underwriters as compensation
for their arranging the investment of such proceeds in the Junior
Subordinated Debentures, $ per Preferred Security, or $ in
the aggregate ($ in the aggregate if the over-allotment option
is exercised in full). See "Underwriting."
(3) Before deducting expenses payable by the Company, estimated to be
approximately $ .
(4) BBC Capital and the Company have granted the Underwriters a 30-day option
to purchase up to 390,000 additional Preferred Securities on the same
terms and conditions set forth above solely to cover over-allotments, if
any. If this option is exercised in full, the total Price to Public and
Proceeds to BBC Capital will be $74,750,000. See "Underwriting."
The Preferred Securities are offered by the Underwriters subject to
receipt and acceptance by them, prior sale and the Underwriters' right to
reject any order in whole or in part and to withdraw, cancel or modify the
offer without notice. It is expected that delivery of certificates representing
the Preferred Securities will be made against payment therefor on or
about , 1997.
RYAN, BECK & CO. TUCKER ANTHONY INCORPORATED
The date of this Prospectus is , 1997
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
Wilmington Trust Company is the Property Trustee (as defined herein) of
BBC Capital. BBC Capital exists for the purpose of issuing the Trust
Securities and investing the proceeds thereof in an equivalent amount of %
Junior Subordinated Debentures (the "Junior Subordinated Debentures") of the
Company. The Junior Subordinated Debentures will mature on , 2027,
which date may be shortened to a date not earlier than , 2002, if
certain conditions are met (including the Company having received prior
regulatory approval to do so if then required under applicable capital
guidelines or regulatory policies). The Common Securities will represent an
aggregate liquidation amount equal to at least 3% of the total capital of BBC
Capital. The Preferred Securities will have a preference under certain
circumstances with respect to cash distributions and amounts payable on
liquidation, redemption or otherwise over the Common Securities. See
"Description of the Preferred Securities--Subordination of Common Securities."
Holders of Preferred Securities are entitled to receive preferential
cumulative cash distributions, at the annual rate of __% of the liquidation
amount of $25 per Preferred Security (the "Liquidation Amount"), accruing
from the date of original issuance and payable quarterly in arrears on the
last day of March, June, September and December of each year, commencing
, 1997 (the "Distributions"). Such distributions are considered under
current law to be interest income for United States federal income tax
purposes. The Company has the right, so long as no Debenture Event of Default
(as defined herein) has occurred and is continuing, to defer payment of
interest on the Junior Subordinated Debentures at any time or from time to
time for a period not to exceed 20 consecutive quarters with respect to each
deferral period (each, an "Extended Interest Payment Period"); provided that
no Extended Interest Payment Period may extend beyond the Stated Maturity of
the Junior Subordinated Debentures. Upon the termination of any such Extended
Interest Payment Period and the payment of all amounts then due, the Company
may elect to begin a new Extended Interest Payment Period subject to the
requirements set forth herein. If interest payments on the Junior
Subordinated Debentures are so deferred, Distributions on the Preferred
Securities will also be deferred, and the Company will not be permitted,
subject to certain exceptions described herein, to declare or pay any cash
distributions with respect to debt securities that rank pari passu with or
junior to the Junior Subordinated Debentures or with respect to its capital
stock. DURING AN EXTENDED INTEREST PAYMENT PERIOD, INTEREST ON THE JUNIOR
SUBORDINATED DEBENTURES WILL CONTINUE TO ACCRUE (AND THE AMOUNT OF
DISTRIBUTIONS TO WHICH HOLDERS OF THE PREFERRED SECURITIES ARE ENTITLED WILL
ACCUMULATE) AT THE RATE OF % PER ANNUM, COMPOUNDED QUARTERLY, AND HOLDERS
OF THE PREFERRED SECURITIES WILL BE REQUIRED TO INCLUDE INTEREST INCOME IN
THEIR GROSS INCOME FOR UNITED STATES FEDERAL INCOME TAX PURPOSES IN ADVANCE
OF RECEIPT OF THE CASH DISTRIBUTIONS WITH RESPECT TO SUCH DEFERRED INTEREST
PAYMENTS. See "Description of the Junior Subordinated Debentures--Option to
Extend Interest Payment Period," "Certain Federal Income Tax Consequences--
Interest Income and Original Issue Discount" and "--Sales of Preferred
Securities." The Company has no current intention of exercising its right to
defer payments of interest by extending the interest payment period on the
Junior Subordinated Debentures.
The Company and BBC Capital believe that, taken together, the obligations
of the Company under the Guarantee, the Trust Agreement, the Junior
Subordinated Debentures, the Indenture and the Expense Agreement (each as
defined herein) provide, in the aggregate, a full, irrevocable and
unconditional guaranty, on a subordinated basis, of all of the obligations of
BBC Capital under the Preferred Securities. See "Relationship Among the
Preferred Securities, the Junior Subordinated Debentures and the Guarantee--
Full and Unconditional Guarantee." The Guarantee of the Company guarantees
the payment of Distributions and payments on liquidation or redemption of the
Preferred Securities but only in each case to the extent of funds held by BBC
Capital, as described herein. See "Description of the Guarantee--General." If
the Company does not make interest payments on the Junior Subordinated
Debentures held by BBC Capital, BBC Capital will have insufficient funds to
pay Distributions on the Preferred Securities. The Guarantee does not cover
payments of Distributions when BBC Capital does not have sufficient funds to
pay such Distributions. In such event, a holder of Preferred Securities may
in certain circumstances institute a legal proceeding directly against the
Company pursuant to the terms of the Indenture to enforce payments of amounts
equal to such Distributions to such holder. See "Description of the Junior
Subordinated
2
<PAGE>
Debentures--Enforcement of Certain Rights by Holders of the Preferred
Securities." The obligations of the Company under the Guarantee and the
Preferred Securities are subordinate and junior in right of payment to all
Senior Debt and Subordinated Debt (each as defined herein) of the Company.
The Junior Subordinated Debentures are unsecured obligations of the Company
and are subordinated to all Senior Debt and Subordinated Debt of the Company,
currently comprised of $78.5 million of outstanding Subordinated Debt. See
"Description of the Junior Subordinated Debentures--Subordination."
The Preferred Securities are subject to mandatory redemption, in whole or
in part, upon repayment of the Junior Subordinated Debentures at maturity or
their earlier redemption. Subject to regulatory approval, if then required
under applicable capital guidelines or regulatory policies, the Junior
Subordinated Debentures are redeemable prior to maturity at the option of the
Company (i) on or after , 2002, in whole at any time or in part from
time to time, or (ii) at any time, in whole (but not in part), within 180
days following the occurrence of a Tax Event, an Investment Company Event, or
a Capital Treatment Event (each as defined herein), in each case at a
redemption price equal to the accrued and unpaid interest on the Junior
Subordinated Debentures so redeemed to the date fixed for redemption, plus
100% of the principal amount thereof. See "Description of the Preferred
Securities--Redemption or Exchange."
The Company intends to take the position that the Junior Subordinated
Debentures will be classified under current law as indebtedness of the
Company for United States federal income tax purposes and, accordingly, the
Company intends to treat the interest payable by the Company on the Junior
Subordinated Debentures as deductible for United States federal income tax
purposes. There is no assurance that such position of the Company will not be
challenged by the Internal Revenue Service or, if challenged, that such a
challenge will not be successful. See "Risk Factors--Proposed Tax
Legislation" and "Certain Federal Income Tax Consequences--Classification of
the Junior Subordinated Debentures."
The Company, as the holder of the Common Securities, has the right at any
time to dissolve, wind-up or terminate BBC Capital subject to the Company
having received prior regulatory approval if then required under applicable
capital guidelines or regulatory policies. In the event of the voluntary or
involuntary dissolution, winding up or termination of BBC Capital, after
satisfaction of liabilities to creditors of BBC Capital as required by
applicable law, the holders of Preferred Securities will be entitled to
receive a Liquidation Amount of $25 per Preferred Security, plus accumulated
and unpaid Distributions thereon to the date of payment, which may be in the
form of a Junior Subordinated Debenture having an aggregate principal amount
equal to the Liquidation Amount of such Preferred Securities subject to
certain exceptions. See "Description of the Preferred Securities--Redemption
or Exchange" and "--Liquidation Distribution Upon Termination."
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The Company will provide to the holders of the Preferred Securities
quarterly reports containing unaudited financial statements and annual
reports containing financial statements audited by the Company's independent
auditors. The Company will also furnish annual reports on Form 10-K and
quarterly reports on Form 10-Q free of charge to holders of the Preferred
Securities who so request in writing addressed to the Secretary of the
Company.
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
PREFERRED SECURITIES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
3
<PAGE>
[BANKATLANTIC MAP]
4
<PAGE>
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 COMMON SHARE STOCK SPLITS
OF THE COMPANY'S COMMON STOCK, PAR VALUE $.01 PER SHARE, EFFECTED IN THE FORM OF
25% STOCK DIVIDENDS ISSUED IN SHARES OF THE COMPANY'S CLASS A COMMON STOCK TO
ALL OF THE COMPANY'S COMMON SHAREHOLDERS IN AUGUST 1996 AND MARCH 1997,
RESPECTIVELY. WHERE APPROPRIATE, AMOUNTS THROUGHOUT THIS PROSPECTUS HAVE BEEN
ADJUSTED TO REFLECT THE STOCK SPLITS.
BANKATLANTIC BANCORP, INC.
BankAtlantic Bancorp, Inc. (the "Company" or "BBC") 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"). At December 31, 1996, the Company had
consolidated total assets of approximately $2.61 billion and total stockholders'
equity of approximately $147.7 million. 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, owned at December
31, 1996 4,876,124 shares or approximately 46% of the Company's issued and
outstanding Class B Common Stock and 2,742,820 shares or approximately 35% of
the Company's issued and outstanding Class A Common Stock. Holders of the
Company's Class B Common Stock are entitled to one vote per share while the
holders of the Company's Class A Common Stock have no voting rights other than
as may be required by Florida law.
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, to purchase wholesale residential loans from third
parties and to make other permitted investments including investments in
mortgage-backed securities, tax certificates and other investment securities.
BankAtlantic operates through 56 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
savings bank headquartered in the State of Florida and third in size among all
independent financial institutions headquartered in the State of Florida based
on deposits at September 30, 1996, the most recent date utilized by such
reporting service. The rapid pace of consolidation among Florida's depository
institutions has been reflected in the acquisition of many local competitors by
out-of-state institutions. The result in many cases is remote decision making on
larger loans. 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.
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.
5
<PAGE>
OPERATING STRATEGY
The Company's business strategy entails (i) emphasizing commercial real
estate and business loan and consumer loan originations; (ii) focusing on
non-interest income; (iii) promoting transaction, non- interest bearing and
escrow accounts; (iv) improving market penetration through de novo branching and
acquisitions; and (v) increasing the range of banking services. While pursuing
this strategy, management remains committed to maintaining asset quality,
managing interest rate risk and enhancing profitability.
The Company's business strategy has produced the following results:
/bullet/ PROFITABILITY-Implementation of the business strategy,
complemented in recent periods by improving economic conditions
and relatively lower market interest rates, has resulted in net
income of $19.0 million, $18.4 million and $16.8 million for the
years ended December 31, 1996, 1995 and 1994, respectively.
Return on average assets, excluding a $7.2 million pre-tax charge
in 1996 relating to the SAIF one-time special assessment, was
1.16%, 1.07% and 1.17% for the years ended December 31, 1996,
1995 and 1994, respectively.
/bullet/ ENHANCED DELIVERY SYSTEM-BankAtlantic has enhanced its delivery
system by establishing 30 drive-through facilities, 220 ATMs
(including 10 located on cruise ships) and 56 full service
branches with 11 located in Walmart Super Center Stores. In order
to enhance its presence in Dade County, Florida, in February
1995, BankAtlantic acquired MegaBank, a Miami based commercial
bank with five branches and approximately $120 million in
deposits. In October 1996, in an effort to strengthen its market
presence in Broward County, Florida, its primary market,
BankAtlantic acquired Bank of North America ("BNA"). BNA had
approximately $470 million of deposits and provided BankAtlantic
with eight branches, six of which are located in Broward County.
BankAtlantic plans to continue to expand its market presence
through de novo branching, by increasing the number of its ATMs
and drive-through facilities and, when available on attractive
terms, through acquisitions.
/bullet/ FEE INCOME-With the focus on reducing dependence on net interest
income, BankAtlantic has expanded its sources and amounts of fee
income, which is generated primarily through its commercial
banking services, loan servicing function, on-going sales of
servicing rights, ATM's and transaction accounts. Transaction
account and ATM fees increased from $6.4 million in 1994 to $12.5
million during 1996.
/bullet/ LOW COST ACCOUNTS-Management has focused on attracting
transaction, non-interest bearing and escrow accounts, which
carry a lower cost, generate service fee income and generally
represent a more stable source of funds than higher rate
certificate accounts. At December 31, 1996, these accounts
represented 50% of total deposits. BankAtlantic emphasizes such
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, prevailing market interest rates and competition.
/bullet/ LOAN PORTFOLIO DIVERSIFICATION-BankAtlantic emphasizes the
origination of shorter-term and variable interest rate consumer
loans and commercial business and real estate loans (including
commercial construction loans), which are generally higher
yielding than residential loans, have shorter terms and typically
have adjustable interest rates. Since December 31, 1992, such
loans have increased from approximately $203 million to
approximately $807 million at December 31, 1996. In addition,
BankAtlantic commenced purchasing wholesale residential loans in
late 1995 and purchased approximately $465.9 million of such
loans during 1996, adding geographic diversity to its loan
portfolio. The purchase of such wholesale loans, an incremental
profit strategy, is an alternative to concentrating funds in
investment securities.
6
<PAGE>
/bullet/ ASSET QUALITY-The Company seeks to maintain asset quality and
control and manage credit risk. While the loan portfolio has
grown substantially, with substantial growth in commercial loans
and consumer loans, which generally involve more credit risk than
residential real estate loans, BankAtlantic's non-performing
assets have decreased from 1992 levels. Non-performing assets
decreased from $27.0 million, or 2.07% of total assets at
December 31, 1992 to $24.1 million, or .93% of total assets at
December 31, 1996. Total allowances for losses on loans and tax
certificates as a percentage of non-performing assets was 112.79%
at December 31, 1996.
BBC CAPITAL TRUST I
BBC Capital is a statutory business trust formed under Delaware law
pursuant to (i) a trust agreement, dated as of March 21, 1997, executed by the
Company, as depositor and Wilmington Trust Company, as Property Trustee (the
"Property Trustee") and as Delaware Trustee (the "Delaware Trustee"), and the
administrative trustees (the "Administrative Trustees") named therein (the
"Trustees"), and (ii) a certificate of trust filed with the Secretary of State
of the State of Delaware on March 21, 1997. The initial trust agreement will be
amended and restated in its entirety (as so amended and restated, the "Trust
Agreement") substantially in the form filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. The Trust Agreement will be
qualified as an indenture under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). Upon issuance of the Preferred Securities, the
purchasers thereof will own all of the Preferred Securities, the Company will
acquire all of the Common Securities which will represent an aggregate
liquidation amount equal to at least 3% of the total capital of BBC Capital. The
Common Securities will rank pari passu, and payments will be made thereon pro
rata, with the Preferred Securities, except that upon the occurrence and during
the continuance of an Event of Default (as defined herein) under the Trust
Agreement resulting from a Debenture Event of Default, the rights of the Company
as holder of the Common Securities to payment in respect of Distributions and
payments upon liquidation, redemption or otherwise will be subordinated to the
rights of the holders of the Preferred Securities. See "Description of the
Preferred Securities-Subordination of Common Securities." BBC Capital exists for
the exclusive purposes of (i) issuing the Trust Securities representing
undivided beneficial interests in the assets of BBC Capital, (ii) investing the
gross proceeds of the Trust Securities in an equivalent amount of the Junior
Subordinated Debentures issued by the Company, and (iii) engaging in only those
other activities necessary, advisable, or incidental thereto. The Junior
Subordinated Debentures and payments thereunder will be the only assets of BBC
Capital and payments under the Junior Subordinated Debentures will be the only
revenue of BBC Capital. BBC Capital has a term of 31 years, but may terminate
earlier as provided in the Trust Agreement. The principal executive office of
BBC Capital is located at 1750 East Sunrise Boulevard, Fort Lauderdale, Florida
33304, and its telephone number is (954) 760-5000.
7
<PAGE>
THE OFFERING
Securities Offered ............2,600,000 Preferred Securities having a
Liquidation Amount of $25 per Preferred
Security. The Preferred Securities represent
preferred undivided beneficial interests in the
assets of BBC Capital, which will consist
solely of the Junior Subordinated Debentures
and payments thereunder. BBC Capital has
granted the Underwriters an option, exercisable
within 30 days after the date of this
Prospectus, to purchase up to an additional
390,000 Preferred Securities at the initial
offering price, solely to cover
over-allotments, if any.
Offering Price ............... $25 per Preferred Security (Liquidation Amount
$25).
Distributions ............... The Distributions payable on each Preferred
Security will be fixed at a rate per annum of
% of the Liquidation Amount of $25 per
Preferred Security, will be cumulative, will
accrue from the date of issuance of the
Preferred Securities, and will be payable
quarterly in arrears, on March 31, June 30,
September 30 and December 31 of each year,
commencing on the first payment date following
the date of issuance. See "Description of
the Preferred Securities-Distributions-Payment
of Distributions."
Junior Subordinated
Debentures .................. BBC Capital will invest the proceeds from the
issuance of the Preferred Securities and Common
Securities in an equivalent amount of ___%
Junior Subordinated Debentures of the Company.
The Junior Subordinated Debentures will mature
on ___________, 2027. The Junior Subordinated
Debentures will rank subordinate and junior in
right of payment to all Senior Debt and
Subordinated Debt of the Company. In addition,
the Company's obligations under the Junior
Subordinated Debentures will be structurally
subordinated to all existing and future
liabilities and obligations of its
subsidiaries.
Option to Extend
Interest Payment Period ... The Company has the right, at any time, so
long as no Debenture Event of Default has
occurred and is continuing, to defer payments
of interest on the Junior Subordinated
Debentures for a period not exceeding 20
consecutive quarters; PROVIDED, that no
Extended Interest Payment Period may extend
beyond the Stated Maturity of the Junior
Subordinated Debentures. In the event of an
extension by the Company of the interest
payment period, quarterly Distributions on the
Preferred Securities will be deferred (though
such Distributions would continue to accrue
with interest thereon compounded quarterly just
as interest will continue to accrue and
compound on the Junior Subordinated Debentures)
during any such Extended Interest Payment
Period. During an Extended Interest Payment
Period, the Company will be prohibited, subject
to certain exceptions described herein, from
declaring or paying any cash distributions with
respect to its debt
8
<PAGE>
securities that rank pari passu with or junior
to the Junior Subordinated Debentures or with
respect to its capital stock. Upon the
termination of any Extended Interest Payment
Period and the payment of all amounts then due,
the Company may commence a new Extended
Interest Payment Period, subject to the
foregoing restrictions. See "Description of the
Preferred Securities-Distributions- Extended
Interest Payment Period" and "Description of
the Junior Subordinated Debentures-Option to
Extend Interest Payment Period."
Should an Extended Interest Payment Period
occur, holders of Preferred Securities will be
required to include deferred interest income in
their gross income for United States federal
income tax purposes in advance of receipt of
the cash distributions with respect to such
deferred interest payments. See "Certain
Federal Income Tax Consequences-Interest Income
and Original Issue Discount." The Company
has no current intention of exercising its
right to defer payments of interest by
extending the interest payment period on the
Junior Subordinated Debentures.
Redemption .................. The Preferred Securities are subject to
mandatory redemption, in whole or in part, upon
repayment of the Junior Subordinated Debentures
at maturity or their earlier redemption.
Subject to regulatory approval, if then
required under applicable capital guidelines or
regulatory policies, the Junior Subordinated
Debentures are redeemable prior to maturity at
the option of the Company (i) on or after
_________, 2002, in whole at any time or in
part from time to time, or (ii) at any time, in
whole (but not in part), within 180 days
following the occurrence of a Tax Event, an
Investment Company Event or a Capital Treatment
Event, in each case at a redemption price equal
to 100% of the principal amount of the Junior
Subordinated Debentures so redeemed, together
with any accrued but unpaid interest to the
date fixed for redemption. See "Description of
the Junior Subordinated Debentures-Redemption
or Exchange."
Distribution of
Junior Subordinated
Debentures .................. Subject to receipt of any required regulatory
approvals, the Company, as the holder of the
Common Securities, has the right at any time to
terminate BBC Capital and cause the Junior
Subordinated Debentures to be distributed to
holders of Preferred Securities in liquidation
of BBC Capital. See "Description of the
Preferred Securities-Redemption or Exchange"
and "Description of the Preferred Securities-
Liquidation Distribution Upon Termination."
Guarantee ..................... The Company has guaranteed the payment of
Distributions and payments on liquidation or
redemption of the Preferred Securities, but
only in each case to the extent of funds held
by BBC Capital, as described herein. The
Company and
9
<PAGE>
BBC Capital believe that, taken together, the
obligations of the Company under the Guarantee,
the Trust Agreement, the Junior Subordinated
Debentures, the Indenture and the Expense
Agreement provide, in the aggregate, a full,
irrevocable and unconditional guaranty, on a
subordinated basis, of all of the obligations
of BBC Capital relating to the Preferred
Securities. The obligations of the Company
under the Guarantee and the Preferred
Securities are subordinate and junior in right
of payment to all Senior Debt and Subordinated
Debt of the Company. If the Company does not
make principal or interest payments on the
Junior Subordinated Debentures, BBC Capital
will not have sufficient funds to make
distributions on the Preferred Securities; in
which event, the Guarantee will not apply to
such Distributions until and unless BBC Capital
has sufficient funds available therefor. See
"Description of the Guarantee."
Voting Rights ................ Except in limited circumstances, the holders
of the Preferred Securities will have no voting
rights in BBC Capital. See "Description of the
Preferred Securities- Voting Rights; Amendment
of Trust Agreement."
Use of Proceeds ............ The proceeds from the sale of the Preferred
Securities offered hereby will be used by BBC
Capital to purchase the Junior Subordinated
Debentures issued by the Company. The Company
intends to use the net proceeds from the sale
of the Junior Subordinated Debentures for
general corporate purposes, including
repurchase of its common stock, for
acquisitions by either the Company or
BankAtlantic and contribution to BankAtlantic
to support growth and for working capital. See
"Use of Proceeds."
Nasdaq National Market
Symbol ..................... Application has been made to have the
Preferred Securities approved for quotation on
The Nasdaq Stock Market's National Market under
the symbol BANCP.
RISK FACTORS
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 "Risk Factors,"
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
integration of recent acquisitions, 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
Company's broad acquisition authority, the limited sources of payments to
holders of Preferred Securities and regulatory limitations on BankAtlantic's
ability to pay dividends, the ranking of subordinated obligations under the
Guarantee and the Junior Subordinated Debentures, the Company's ability to
extend interest payment periods and related tax and market consequences,
accelerated redemption rights upon certain events, the shortening of the stated
maturity of the Junior Subordinated Debentures, the nature of the Guarantee, the
potential exchange of Preferred Securities for Junior Subordinated Debentures
and the limited covenants contained in the Indenture and the Trust Agreement.
10
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
OF BANKATLANTIC BANCORP, INC.
<TABLE>
<CAPTION>
AT OR FOR THE YEARS ENDED
DECEMBER 31,
---------------------------------
1996 1995
---------------- ----------------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
OPERATING RESULTS:
Net interest income ................................................... $ 75,600 $ 64,391
Provision for loan losses ............................................. 5,844 4,182
----------- -----------
Net interest income after provision for loan losses ............... 69,756 60,209
----------- -----------
Total non-interest income .......................................... 33,737 19,388
----------- -----------
NON-INTEREST EXPENSES ................................................ 72,241 (B) 51,160
----------- -----------
Income before income taxes and extraordinary item ..................... 31,252 28,437
Provision for income taxes .......................................... 12,241 10,018
----------- -----------
Income before extraordinary item .................................... 19,011 18,419
Extraordinary item net of taxes ....................................... 0 0
----------- -----------
Net income ......................................................... 19,011 18,419
----------- -----------
Total dividends on non-cumulative preferred stock ..................... 0 2,030(A)
----------- -----------
Net income available for common shares .............................. $ 19,011 $ 16,389
=========== ===========
Net income per common and common equivalent share ..................... $ 1.01 $ 0.97(A)
=========== ===========
Net income per common and common equivalent share
assuming full dilution ............................................. $ 0.93 $ 0.96(A)
=========== ===========
Book value per common share .......................................... $ 8.05 $ 7.28
=========== ===========
Tangible book value per share ....................................... $ 6.47 $ 6.59
=========== ===========
BALANCE SHEET DATA:
Total assets ......................................................... $ 2,605,527 $ 1,750,689
Loans receivable-net ................................................ 1,824,856 828,630
Debt securities available for sale .................................... 439,345 691,803
Investment and trading account securities, net ........................ 54,511 49,856
Mortgage servicing rights ............................................. 25,002 20,738
Cost over fair value of net assets acquired and other intangibles ... 29,008 11,521
Deposits ............................................................ 1,832,780 1,300,377
Subordinated debentures, capital notes and note payable ............... 78,500 21,001
Total stockholders' equity .......................................... 147,704 120,561
PERFORMANCE RATIOS:
Net interest spread (during period) ................................. 3.76% 3.65%
Interest rate margin (during period) ................................. 4.08 4.04
Average equity to average assets .................................... 6.70 6.66
Return on average equity ............................................. 14.08 16.03
Return on average assets ............................................. 0.94 1.07
Efficiency ratio ...................................................... 66.07 61.07
NON-PERFORMING ASSETS AS A PERCENT OF:
Total loans, tax certificates and real estate owned .................. 1.26 2.37
Total assets ......................................................... 0.93 1.23
Allowances for loan losses and tax certificates as a percent of
non-performing assets ................................................ 112.79 96.06
Net loan charge-offs as a percent of average outstanding loans ...... 0.47 0.45
RATIO OF EARNINGS TO FIXED CHARGES:
Including interest on deposits ....................................... 1.40 1.43
Excluding interest on deposits ....................................... 2.34 2.41
<CAPTION>
AT OR FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------
1994 1993 1992
---------------- ---------------- ---------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
OPERATING RESULTS:
Net interest income ................................................... $ 57,118 $ 58,516 $ 60,909
Provision for loan losses ............................................. 2,299 3,450 6,650
---------- ---------- ----------
Net interest income after provision for loan losses ............... 54,819 55,066 54,259
---------- ---------- ----------
Total non-interest income .......................................... 13,763 11,638 17,051
---------- ---------- ----------
NON-INTEREST EXPENSES ................................................ 42,085 43,533 46,817
---------- ---------- ----------
Income before income taxes and extraordinary item ..................... 26,497 23,171 24,493
Provision for income taxes .......................................... 9,662 7,093 9,201
---------- ---------- ----------
Income before extraordinary item .................................... 16,835 16,078 15,292
Extraordinary item net of taxes ....................................... 0 0 756
---------- ---------- ----------
Net income ......................................................... 16,835 16,078 16,048
---------- ---------- ----------
Total dividends on non-cumulative preferred stock ..................... 880 880 880
---------- ---------- ----------
Net income available for common shares .............................. $ 15,955 $ 15,198 $ 15,168
========== ========== ==========
Net income per common and common equivalent share ..................... $ 0.97 $ 1.03 $ 1.32
========== ========== ==========
Net income per common and common equivalent share
assuming full dilution ............................................. $ 0.97 $ 1.02 $ 1.15
========== ========== ==========
Book value per common share .......................................... 6.12 $ 5.20 $ 5.06
========== ========== ==========
Tangible book value per share ....................................... 6.12 $ 5.20 $ 5.02
========== ========== ==========
BALANCE SHEET DATA:
Total assets ......................................................... $ 1,539,653 $ 1,359,195 $ 1,303,071
Loans receivable-net ................................................ 546,396 485,956 556,662
Debt securities available for sale .................................... 53,969 83,116 137,963
Investment and trading account securities, net ........................ 211,776 97,701 120,424
Mortgage servicing rights ............................................. 20,584 19,833 7,655
Cost over fair value of net assets acquired and other intangibles ... 0 0 0
Deposits ............................................................ 1,085,782 1,076,360 1,108,115
Subordinated debentures, capital notes and note payable ............... 0 0 9,524
Total stockholders' equity .......................................... 105,520 90,652 66,165
PERFORMANCE RATIOS:
Net interest spread (during period) ................................. 4.07% 4.67% 4.60%
Interest rate margin (during period) ................................. 4.32 4.90 4.78
Average equity to average assets .................................... 6.86 5.85 4.07
Return on average equity ............................................. 17.07 21.32 27.09
Return on average assets ............................................. 1.17 1.25 1.10
Efficiency ratio ...................................................... 59.37 62.03 60.22
NON-PERFORMING ASSETS AS A PERCENT OF:
Total loans, tax certificates and real estate owned .................. 3.66 3.34 3.80
Total assets ......................................................... 1.51 1.47 2.07
Allowances for loan losses and tax certificates as a percent of
non-performing assets ................................................ 82.86 99.90 66.88
Net loan charge-offs as a percent of average outstanding loans ...... 0.59 0.56 0.60
RATIO OF EARNINGS TO FIXED CHARGES:
Including interest on deposits ....................................... 1.63 1.63 1.43
Excluding interest on deposits ....................................... 3.50 5.67 3.62
</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 $0.08 for primary and fully diluted earnings per share.
(B) Includes the $7.2 million SAIF one-time special assessment.
11
<PAGE>
RECENT DEVELOPMENTS
BBC's net income for the quarter ended March 31, 1997 was $6.3 million or
$0.33 and $0.28 primary and fully diluted earnings per common and common
equivalent share, respectively, compared to net income of $4.7 million or $0.27
primary and fully diluted earnings per common and common equivalent share for
the quarter ended March 31, 1996.
Net interest income after provision for loan losses increased to $21.8
million for the quarter ended March 31, 1997, compared to $15.5 million for the
quarter ended March 31, 1996 due primarily to the October 1996 acquisition of
Bank of North America and the purchase of wholesale residential loans. The
provision for loan losses for the three months ended March 31, 1997 increased to
$2.5 million compared to $940,000 at the same date a year earlier. The increase
reflects a significant increase in total loans receivable, net to $1.9 billion
at March 31, 1997, compared to $863 million at March 31, 1996.
Non-interest income for the three months ended March 31, 1997 was $9.0
million, versus $6.8 million for the comparable quarter in 1996. Loan servicing
and other loan fees increased to $1.6 million in the first quarter of 1997,
compared to $838,000 in the same period of 1996. Gains on sales of servicing in
the first quarter of 1997 of $2.4 million were approximately equal to gain on
sales of debt securities available for sale for the same 1996 period. Other
non-interest income grew to $4.4 million in first quarter 1997, compared to $3.5
million in the first quarter of 1996. Included in other non-interest income was
checking account income and fees, as well as ATM fees that increased 35.3
percent to $3.5 million in the first quarter of 1997 versus $2.6 million for the
comparable period in 1996.
Non-interest expenses increased to $20.4 million in the quarter ended March
31, 1997, from $14.5 million in the same period of 1996. The increases were due
to the transfer of data processing to an outside service bureau, expenses
related to higher consumer loan volume, and occupancy and compensation costs
associated with the acquisition of the Bank of North America.
OPERATING RESULTS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------
1997 1996
------------ -----------
<S> <C> <C>
Net interest income .......................................... $ 24,280 $ 16,472
Provision for loan losses .................................... 2,476 940
----------- -----------
Net interest income after provision for loan losses ......... 21,804 15,532
----------- -----------
Non-interest income .......................................... 9,024 6,834
Non-interest expense ....................................... 20,400 14,515
----------- -----------
Income before income taxes ................................. 10,428 7,851
Provision for income taxes ................................. 4,087 3,141
----------- -----------
Net income ................................................... $ 6,341 $ 4,710
=========== ===========
Primary earnings per common share ........................... $ 0.33 $ 0.27
=========== ===========
Fully diluted earnings per common share ..................... $ 0.28 $ 0.27
=========== ===========
Weighted average number of primary common shares ............ 19,448,159 17,644,250
Weighted average number of fully diluted common shares ...... 25,117,894 17,699,328
</TABLE>
12
<PAGE>
RISK FACTORS
An investment in the Preferred Securities involves a high degree of risk.
Prospective investors should carefully consider, together with the other
information contained and incorporated by reference in this Prospectus, the
following factors in evaluating the Company, its business and BBC Capital before
purchasing the Preferred Securities offered hereby. Prospective investors should
note, in particular, that this Prospectus contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), that involve substantial risks and uncertainties.
When used in this Prospectus, or in the documents incorporated by reference
herein, the words "anticipate", "believe", "estimate", "may", "intend" and
"expect" and similar expressions identify certain of such forward-looking
statements. Actual results, performance or achievements could differ materially
from those contemplated, expressed or implied by the forward-looking statements
contained herein. The considerations listed below represent certain important
factors the Company believes could cause such results to differ. These
considerations are not intended to represent a complete list of the general or
specific risks that may affect the Company and BBC Capital. It should be
recognized that other risks, including general economic factors and expansion
strategies, may be significant, presently or in the future, and the risks set
forth below may affect the Company and BBC Capital to a greater extent than
indicated.
SOURCE OF PAYMENTS TO HOLDERS OF PREFERRED SECURITIES
The ability of BBC Capital to pay amounts due on the Preferred Securities
is solely dependent upon the Company making payments on the Junior Subordinated
Debentures as and when required. As a holding company without significant assets
other than the capital stock of BankAtlantic, the ability of the Company to pay
interest on the principal of the Junior Subordinated Debentures to BBC Capital
(and consequently, BBC Capital's ability to pay Distributions on the Preferred
Securities and the Company's ability to pay its obligations under the Guarantee)
will be significantly dependent on the ability of BankAtlantic to pay dividends
to the Company in amounts sufficient to service the Company's obligations. The
Company is currently obligated to pay interest semi-annually on its outstanding
9% Subordinated Debentures Due 2005 (the "9% Debentures") and its 63/4%
Convertible Subordinated Debentures Due 2006 (the "63/4% 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 Junior Subordinated
Debentures issued to BBC Capital with respect to the payment of principal,
interest or dividends. There is no restriction on the ability of the Company to
issue or limitations on the amount of securities which are PARI PASSU or have a
preference over the Junior Subordinated Debentures issued to BBC Capital 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 regulations promulgated by the Office of Thrift
Supervision ("OTS") 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 December 31, 1996, BankAtlantic's capital
exceeded its fully phased-in capital requirements by approximately $51 million
and BankAtlantic qualified as a Tier 1 association under applicable regulations.
However, all capital distributions of BankAtlantic are also subject to the OTS'
right to object to a distribution on safety and soundness
13
<PAGE>
grounds. There is no assurance that BankAtlantic will be 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 Junior Subordinated Debentures.
See "Regulation and Supervision-Savings Institution Regulation-Restrictions
on Dividends and Other Capital Distributions."
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE JUNIOR
SUBORDINATED DEBENTURES
The obligations of the Company under the Guarantee issued for the benefit
of the holders of Preferred Securities and under the Junior Subordinated
Debentures issued to BBC Capital are unsecured and rank subordinate and junior
in right of payment to all Senior Debt and Subordinated Debt of the Company. At
December 31, 1996, the aggregate outstanding Senior Debt and Subordinated Debt
of the Company was approximately $78.5 million. Only the capital stock of the
Company is currently junior in right of payment to the Junior Subordinated
Debentures issued to BBC Capital. Because the Company is a holding company, the
right of the Company to participate in any distribution of assets of a
subsidiary, including BankAtlantic, upon a liquidation or reorganization or
otherwise of such subsidiary (and thus the ability of holders of the Preferred
Securities to benefit indirectly from such distribution) is subject to the prior
claims of creditors of the subsidiary (including depositors in BankAtlantic),
except to the extent that the Company may itself be recognized as a creditor of
the subsidiary. If the Company is a creditor of a subsidiary, the claims of the
Company would be subject to any prior security interest in the assets of the
subsidiary and any indebtedness of the subsidiary senior to that of the Company.
The Junior Subordinated Debentures, therefore, will be effectively subordinated
to all existing and future liabilities of the Company's subsidiaries, including
BankAtlantic. At December 31, 1996, BankAtlantic had liabilities of $2.4 billion
(including $1.8 billion in deposits). Holders of Junior Subordinated Debentures
and Preferred Securities should look only to the assets of the Company for
payments on the Junior Subordinated Debentures. Neither the Indenture, the
Guarantee nor the Trust Agreement places any limitation on the amount of secured
or unsecured debt, including Senior Debt and Subordinated Debt that may be
incurred by the Company or any of its subsidiaries. See "Description of the
Guarantee-Status of the Guarantee" and "Description of the Junior Subordinated
Debentures-Subordination."
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES; MARKET PRICE
CONSIDERATIONS
The Company has the right under the Indenture, so long as no Debenture
Event of Default has occurred and is continuing, to defer the payment of
interest on the Junior Subordinated Debentures at any time or from time to time
for a period not exceeding 20 consecutive quarters with respect to each Extended
Interest Payment Period; provided that no Extended Interest Payment Period may
extend beyond the Stated Maturity of the Junior Subordinated Debentures. In the
event of any such deferral, quarterly Distributions on the Preferred Securities
by BBC Capital will be deferred (and the amount of Distributions to which
holders of the Preferred Securities are entitled will accumulate additional
Distributions thereon at the rate of % per annum, compounded quarterly from the
relevant payment date for such Distributions) during such Extended Interest
Payment Period. During any such Extended Interest Payment Period, the Company
may not (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of the
Company's capital stock (other than (a) the reclassification of any class of the
Company's capital stock into another class of capital stock, (b) dividends or
distributions payable in any class of the Company's common stock, (c) any
declaration of a dividend in connection with the implementation of a shareholder
rights plan, or the issuance of stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto and (d) purchases
of the Company's common stock related to the rights under any of the Company's
benefit plans for its or its subsidiaries' directors, officers or employees),
(ii) make any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities of the Company that rank PARI PASSU
with or junior in interest to the Junior Subordinated Debentures or make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company if such guarantee ranks PARI PASSU
with or junior in interest to the Junior Subordinated Debentures (other than
payments under the Guarantee), or (iii) redeem, purchase or acquire less than
all of the Junior Subordinated Debentures or any of the
14
<PAGE>
Preferred Securities. Prior to the termination of any such Extended Interest
Payment Period, the Company may further defer the payment of interest; provided
that no Extended Interest Payment Period may exceed 20 consecutive quarters or
extend beyond the Stated Maturity of the Junior Subordinated Debentures. Upon
the termination of any Extended Interest Payment Period and the payment of all
interest then accrued and unpaid (together with interest thereon at the annual
rate of % compounded quarterly, to the extent permitted by applicable law),
the Company may elect to begin a new Extended Interest Payment Period, subject
to the above restrictions. Subject only to compliance with the foregoing, there
is no limit on the number of times that the Company may elect to begin an
Extended Interest Payment Period so long as no Debenture Event of Default has
occurred and is continuing. See "Description of the Preferred
Securities-Distributions-Extended Interest Payment Period" and "Description of
the Junior Subordinated Debentures-Option to Extend Interest Payment Period."
Should an Extended Interest Payment Period occur, each holder of Preferred
Securities will be required to accrue and recognize income (in the form of
original issue discount) in respect of its pro rata share of the interest
accruing on the Junior Subordinated Debentures held by BBC Capital for United
States federal income tax purposes. A holder of Preferred Securities would, as a
result, be required to include such income in gross income for United States
federal income tax purposes in advance of the receipt of cash, and will not
receive the cash related to such income from BBC Capital if the holder disposes
of the Preferred Securities prior to the record date for the payment of the
related Distributions. See "Certain Federal Income Tax Consequences-Interest
Income and Original Issue Discount." See also "-Absence of Prior Public Market
for the Preferred Securities; Trading Price and Tax Considerations."
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Debentures. However, should the Company elect to exercise such
right in the future, the market price of the Preferred Securities is likely to
be adversely affected. As a result of the existence of the Company's right to
defer interest payments, the market price of the Preferred Securities may be
more volatile than the market prices of other securities on which original issue
discount accrues that do not provide for such optional deferrals.
PROPOSED TAX LEGISLATION
On February 6, 1997, President Clinton released his budget proposals for
fiscal year 1998. One of the revenue provisions of those proposals would
generally deny interest deductions for interest on an instrument issued by a
corporation that has a maximum term of more than 15 years and that is not shown
as indebtedness on the separate balance sheet of the issuer or, where the
instrument is issued to a related party (other than a corporation), where the
holder or some other related party issues a related instrument that is not shown
as indebtedness on the issuer's consolidated balance sheet. If enacted as
proposed by the President, this provision would be effective for instruments
issued on or after the date of first action by a Congressional committee with
respect to the proposal. It is not clear from the President's proposals as to
what constitutes Congressional "committee action" with respect to this proposal.
If the provision were to apply to the Junior Subordinated Debentures, the
Company would be unable to deduct interest on the Junior Subordinated
Debentures. Under current law, the Company will be able to deduct interest on
the Junior Subordinated Debentures. However, there is no assurance that future
legislative proposals or final legislation will not affect the ability of the
Company to deduct interest on the Junior Subordinated Debentures. Such a change
would give rise to a Tax Event. A Tax Event would permit the Company, upon
receipt of regulatory approval if then required under applicable capital
guidelines or regulatory policies to cause a redemption of the Preferred
Securities before, as well as after, , 2002. See "Description of the Junior
Subordinated Debentures- Redemption or Exchange-Tax Event Redemption, Investment
Company Event Redemption or Capital Treatment Event Redemption" and "Certain
Federal Income Tax Consequences-Effect of Proposed Changes in Tax Laws."
15
<PAGE>
REDEMPTION DUE TO TAX EVENT, INVESTMENT COMPANY EVENT, OR CAPITAL TREATMENT
EVENT
The Company has the right to redeem the Junior Subordinated Debentures in
whole (but not in part) within 180 days following the occurrence of a Tax Event,
an Investment Company Event or a Capital Treatment Event (whether occurring
before or after , 2002), and, therefore, cause a mandatory redemption of the
Preferred Securities. The exercise of such right is subject to the Company
having received prior regulatory approval to do so if then required under
applicable capital guidelines or regulatory policies.
"Tax Event" means the receipt by BBC Capital of an opinion of counsel
experienced in such matters to the effect that, as a result of any amendment to,
or change (including any announced prospective change) in the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or such
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) BBC Capital is, or will be within 90 days of the
date of such opinion, subject to United States federal income tax with respect
to income received or accrued on the Junior Subordinated Debentures, (ii)
interest payable by the Company on the Junior Subordinated Debentures is not,
or, within 90 days of such opinion, will not be, deductible by the Company, in
whole or in part, for United States federal income tax purposes, or (iii) BBC
Capital is, or will be within 90 days of the date of the opinion, subject to
more than a DE MINIMIS amount of other taxes, duties or other governmental
charges. The Company must request and receive an opinion with regard to such
matters within a reasonable period of time after it becomes aware of the
possible occurrence of any of the events described in clauses (i) through (iii)
above.
"Investment Company Event" means the receipt by BBC Capital of an opinion
of counsel experienced in such matters to the effect that, as a result of the
occurrence of a change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, BBC Capital is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), which change
occurs or becomes effective on or after the date of original issuance of the
Preferred Securities.
"Capital Treatment Event" means the reasonable determination by the Company
that, as a result of any amendment to, or change (including any proposed change)
in, the laws (or any regulations thereunder) of the United States or any
political subdivision thereof or therein, or as a result of any official or
administrative pronouncement or action or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such proposed change, pronouncement, action or decision is announced on or after
the date of original issuance of the Preferred Securities, there is more than an
insubstantial risk that the Company will not be entitled to treat an amount
equal to the Liquidation Amount of the Preferred Securities as "Tier 1 Capital"
(or the then equivalent thereof) for purposes of applicable capital adequacy
guidelines of the Federal Reserve (or any successor regulatory authority with
jurisdiction over bank holding companies), or any capital adequacy guidelines as
then in effect and applicable to the Company.
See "-Proposed Tax Legislation" for a discussion of certain legislative
proposals that, if adopted, could give rise to a Tax Event, which may permit the
Company to cause a redemption of the Preferred Securities prior to , 2002. For a
discussion of possible tax consequences of a redemption, see "-Exchange of
Preferred Securities for Junior Subordinated Debentures; Redemption and Tax
Consequences."
SHORTENING OF STATED MATURITY OF JUNIOR SUBORDINATED DEBENTURES
The Company has the right, at any time, to shorten the maturity of the
Junior Subordinated Debentures to a date not earlier than , 2002. The exercise
of such right is subject to the
16
<PAGE>
Company having received prior regulatory approval if then required under
applicable capital guidelines or regulatory policies. See "Description of the
Junior Subordinated Debentures-General."
RIGHTS UNDER THE GUARANTEE
The Guarantee guarantees to the holders of the Preferred Securities, to the
extent not paid by BBC Capital, (i) any accrued and unpaid Distributions
required to be paid on the Preferred Securities, to the extent that BBC Capital
has funds available therefor at such time, (ii) the Redemption Price (as defined
herein) with respect to any Preferred Securities called for redemption, to the
extent that BBC Capital has funds available therefor at such time, and (iii)
upon a voluntary or involuntary dissolution, winding-up or liquidation of BBC
Capital (other than in connection with the distribution of Junior Subordinated
Debentures to the holders of Preferred Securities or a redemption of all of the
Preferred Securities), the lesser of (a) the amount of the Liquidation
Distribution (as defined herein), to the extent BBC Capital has funds available
therefor at such time, and (b) the amount of assets of BBC Capital remaining
available for distribution to holders of the Preferred Securities in liquidation
of BBC Capital. The holders of not less than a majority in Liquidation Amount of
the Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Guarantee or to direct the exercise of any trust power conferred
upon the Guarantee Trustee under the Guarantee. Any holder of the Preferred
Securities may institute a legal proceeding directly against the Company to
enforce its rights under the Guarantee without first instituting a legal
proceeding against BBC Capital, the Guarantee Trustee or any other Person (as
defined in the Guarantee). If the Company were to default on its obligation to
pay amounts payable under the Junior Subordinated Debentures, BBC Capital would
lack funds for the payment of Distributions or amounts payable on redemption of
the Preferred Securities or otherwise, and, in such event, holders of Preferred
Securities would not be able to rely upon the Guarantee for such amounts. In the
event, however, that a Debenture Event of Default has occurred and is continuing
and such event is attributable to the failure of the Company to pay interest on
or principal of the Junior Subordinated Debentures on the payment date on which
such payment is due and payable, then a holder of Preferred Securities may
institute a legal proceeding directly against the Company for enforcement of
payment to such holder of the principal of or interest on such Junior
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Preferred Securities of such holder (a "Direct
Action"). The exercise by the Company of its right, as described herein, to
defer the payment of interest on the Junior Subordinated Debentures does not
constitute a Debenture Event of Default. In connection with such Direct Action,
the Company will have a right of set-off under the Indenture to the extent of
any payment made by the Company to such holder of Preferred Securities in the
Direct Action. Except as described herein, holders of Preferred Securities will
not be able to exercise directly any other remedy available to the holders of
the Junior Subordinated Debentures or assert directly any other rights in
respect of the Junior Subordinated Debentures. See "Description of the Junior
Subordinated Debentures-Enforcement of Certain Rights by Holders of Preferred
Securities," "Description of the Junior Subordinated Debentures-Debenture Events
of Default" and "Description of the Guarantee." The Trust Agreement provides
that each holder of Preferred Securities by acceptance thereof agrees to the
provisions of the Guarantee and the Indenture.
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have no voting rights in BBC Capital
except in limited circumstances relating only to the modification of the
Preferred Securities and the exercise of the rights of BBC Capital as holder of
the Junior Subordinated Debentures and the Guarantee. Holders of Preferred
Securities will not be entitled to vote to appoint, remove or replace the
Property Trustee or the Delaware Trustee, as such voting rights are vested
exclusively in the holder of the Common Securities (except upon the occurrence
of certain events described herein). The Property Trustee, the Administrative
Trustees and the Company may amend the Trust Agreement without the consent of
holders of Preferred Securities to ensure that BBC Capital will be classified
for United States federal income tax purposes as a grantor trust even if such
action adversely affects the interests of such holders.
17
<PAGE>
See "Description of the Preferred Securities-Voting Rights; Amendment of
Trust Agreement" and "Description of the Preferred Securities-Removal of
BBC Capital Trustees."
EXCHANGE OF PREFERRED SECURITIES FOR JUNIOR SUBORDINATED DEBENTURES;
REDEMPTION AND TAX CONSEQUENCES
The Company, as the holder of the Common Securities, has the right at any
time to dissolve, wind-up or terminate BBC Capital and cause the Junior
Subordinated Debentures to be distributed to the holders of the Preferred
Securities in exchange therefor in liquidation of BBC Capital. The exercise of
such right is subject to the Company having received prior regulatory approval
if then required under applicable capital guidelines or regulatory policies. The
Company will have the right, in certain circumstances, to redeem the Junior
Subordinated Debentures in whole or in part, in lieu of a distribution of the
Junior Subordinated Debentures by BBC Capital, in which event BBC Capital will
redeem the Trust Securities on a pro rata basis to the same extent as the Junior
Subordinated Debentures are redeemed by the Company. Any such distribution or
redemption prior to the Stated Maturity will be subject to prior regulatory
approval if then required under applicable capital guidelines or regulatory
policies. See "Description of the Preferred Securities-Redemption or
Exchange-Tax Event Redemption, Investment Company Event Redemption or Capital
Treatment Event Redemption."
Under current United States federal income tax law, a distribution of
Junior Subordinated Debentures upon the dissolution of BBC Capital would not be
a taxable event to holders of the Preferred Securities. If, however, BBC Capital
is characterized as an association taxable as a corporation at the time of the
dissolution of BBC Capital, the distribution of the Junior Subordinated
Debentures would constitute a taxable event to holders of Preferred Securities.
Moreover, upon occurrence of a Tax Event, a dissolution of BBC Capital in which
holders of the Preferred Securities receive cash may be a taxable event to such
holders. See "Certain Federal Income Tax Consequences- Receipt of Junior
Subordinated Debentures or Cash Upon Liquidation of BBC Capital."
There can be no assurance as to the market prices for the Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for Preferred Securities upon a dissolution or liquidation of BBC
Capital. The Preferred Securities or the Junior Subordinated Debentures, may,
therefore, trade at a discount to the price that the investor paid to purchase
the Preferred Securities offered hereby. Because holders of Preferred Securities
may receive Junior Subordinated Debentures, prospective purchasers of Preferred
Securities are also making an investment decision with regard to the Junior
Subordinated Debentures and should carefully review all the information
regarding the Junior Subordinated Debentures contained herein.
If the Junior Subordinated Debentures are distributed to the holders of
Preferred Securities upon the liquidation of BBC Capital, the Company will use
all reasonable efforts to list the Junior Subordinated Debentures on The Nasdaq
Stock Market's National Market or SmallCap Market or such stock exchanges, if
any, on which the Preferred Securities are then listed.
LIMITED COVENANTS
The covenants in the Indenture are limited and there are no covenants in
the Trust Agreement. As a result, neither the Indenture nor the Trust Agreement
protects holders of Junior Subordinated Debentures or Preferred Securities,
respectively, in the event of a material adverse change in the Company's
financial condition or results of operations or limits the ability of the
Company or any subsidiary to incur or assume additional indebtedness or other
obligations. Additionally, neither the Indenture nor the Trust Agreement contain
any financial ratios or specified levels of liquidity to which the Company must
adhere. Therefore, the provisions of these governing instruments should not be
considered a significant factor in evaluating whether the Company will be able
to comply with its obligations under the Junior Subordinated Debentures or the
Guarantee.
18
<PAGE>
ABSENCE OF PRIOR PUBLIC MARKET FOR THE PREFERRED SECURITIES; TRADING PRICE AND
TAX CONSIDERATIONS
There is no current public market for the Preferred Securities. Application
has been made to list the Preferred Securities on The Nasdaq National Market.
However, one of the requirements for listing and continued listing is the
presence of two market makers for the Preferred Securities. The Company has been
advised that the Underwriters intend to make a market in the Preferred
Securities. However, the Underwriters are not obligated to do so and such market
making may be discontinued at any time. Therefore, there is no assurance that an
active trading market will develop for the Preferred Securities or, if such
market develops, that it will be maintained or that the market price will equal
or exceed the public offering price set forth on the cover page of this
Prospectus. Accordingly, holders of Preferred Securities may experience
difficulty reselling them or may be unable to sell them at all. The public
offering price for the Preferred Securities has been determined through
negotiations between the Company and the Underwriters. Prices for the Preferred
Securities will be determined in the marketplace and may be influenced by many
factors, including prevailing interest rates, the liquidity of the market for
the Preferred Securities, investor perceptions of the Company and general
industry and economic conditions.
Further, should the Company exercise its option to defer any payment of
interest on the Junior Subordinated Debentures, the Preferred Securities may
trade at prices that do not fully reflect the value of accrued but unpaid
interest with respect to the underlying Junior Subordinated Debentures. In the
event of such a deferral, a holder of Preferred Securities that disposes of its
Preferred Securities between record dates for payments of Distributions (and
consequently does not receive a Distribution from BBC Capital for the period
prior to such disposition) will nevertheless be required to include accrued but
unpaid interest on the Junior Subordinated Debentures through the date of
disposition in income as ordinary income and to add such amount to the adjusted
tax basis in the holder's pro rata share of the underlying Junior Subordinated
Debentures deemed disposed of. Such holder will recognize a capital loss to the
extent the selling price (which may not fully reflect the value of accrued but
unpaid interest) is less than its adjusted tax basis (which will include all
accrued but unpaid interest). Subject to certain limited exceptions, capital
losses cannot be applied to offset ordinary income for United States federal
income tax purposes. See "Certain Federal Income Tax Consequences-Sales of
Preferred Securities."
PREFERRED SECURITIES ARE NOT INSURED
The Preferred Securities are not insured by the Bank Insurance Fund or the
Savings Association Insurance Fund of the Federal Deposit Insurance Corporation
or by any other governmental agency.
LOAN PORTFOLIO CONSIDERATIONS
Loans receivable, net at BankAtlantic increased by approximately $996
million or 120% at December 31, 1996, from December 31, 1995. All components of
lending increased in 1996 due to approximately $395.0 million of loans acquired
in connection with the BNA acquisition, $465.9 million of wholesale residential
loan purchases and an increase in loan fundings associated with residential real
estate, construction and development and consumer loans of $111.0 million during
1996 compared to 1995. Commercial real estate and construction loans at
BankAtlantic increased by approximately $155.4 million or 41% at December 31,
1996 from December 31, 1995. 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. Recent increases in funding availability from competitors for
commercial real estate projects could result in over-building and a decline in
real estate values. A decline in the real estate market, or in economic
conditions in general, in Dade, Broward, and Palm Beach counties could have a
material adverse effect on BankAtlantic's financial condition and results of
operations. With respect to the wholesale residential loan purchases, the real
estate securing such loans is located outside BankAtlantic's primary market
area. Future purchases of wholesale residential loans will more than likely
consist of loans secured by properties located outside BankAtlantic's market
area. See "Business-Lending Activities."
19
<PAGE>
BankAtlantic also makes various types of secured and unsecured consumer
loans, including indirect automobile loans, and commercial business 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. See
"Business-Lending Activities."
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 structure its asset and liability management
strategies to mitigate the impact on net interest income of changes in market
interest rates. At December 31, 1996, BankAtlantic had a one year cumulative
positive gap of .42%. 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 BankAtlantic
competitors which in turn could have a material adverse affect on BankAtlantic
and its operations. See "Regulation and Supervision- Legislative Developments."
BROAD ACQUISITION AUTHORITY
Under applicable law, the Company generally has broad authority to engage
in various types of business activities with few restrictions. The Company has
indicated that it may use a portion of the proceeds of this Offering to make
acquisitions. To the extent that acquisitions are made in businesses not engaged
in banking activities, such acquisitions could result in material changes to
the scope of the Company's business and would subject the Company to the risks
inherent in the businesses of the acquired companies.
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. The Company not only competes
with financial institutions headquartered in the State of Florida but also
competes with a number of financial institutions headquartered outside of
Florida who are active in the state. 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.
20
<PAGE>
THE COMPANY
The Company is the holding company for BankAtlantic. BankAtlantic
reorganized into a holding company form in 1994 based on the belief that a
holding company structure would provide 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.
USE OF PROCEEDS
BBC Capital will use the gross proceeds received from the sale of the
Preferred Securities to purchase the Junior Subordinated Debentures from the
Company. The net proceeds to the Company from the sale of the Junior
Subordinated Debentures are estimated to be approximately $ million ($ million
if the Underwriters' over-allotment option is exercised in full) after deduction
of the underwriting discount and estimated expenses. The net proceeds from the
sale of the Junior Subordinated Debentures will be used by the Company for
general corporate purposes, including repurchase of its common stock, financing
of possible future acquisitions and contribution to the capital of BankAtlantic.
Such funds will similarly be utilized by BankAtlantic for general corporate
purposes, including working capital, financing possible future acquisitions and
for supporting growth.
MARKET FOR THE PREFERRED SECURITIES
Application has been made to list the Preferred Securities on the Nasdaq
Stock Market's National Market under the symbol BANCP. Although the Underwriters
have informed the Company that they presently intend to make a market in the
Preferred Securities, the Underwriters are not obligated to do so and any such
market making may be discontinued at any time. Accordingly, there is no
assurance that an active and liquid trading market will develop or, if
developed, that such a market will be sustained. The offering price and
distribution rate have been determined by negotiations among representatives of
the Company and the Underwriters, and the offering price of the Preferred
Securities may not be indicative of the market price following the offering. See
"Underwriting."
ACCOUNTING TREATMENT
For financial reporting purposes, BBC Capital will be treated as a
subsidiary of the Company and, accordingly, the accounts of BBC Capital will be
included in the consolidated financial statements of the Company. The Preferred
Securities will be presented as a separate line item in the consolidated balance
sheet of the Company under the caption "Guaranteed Preferred Beneficial
Interests in Company's Junior Subordinated Debentures," and appropriate
disclosures about the Preferred Securities, the Guarantee and the Junior
Subordinated Debentures will be included in the notes to consolidated financial
statements. For financial reporting purposes, the Company will record
Distributions payable on the Preferred Securities as an expense in the
consolidated statements of operations.
As long as any Preferred Securities remain outstanding, all future reports
of the Company filed under the Exchange Act will (a) present the Trust
Securities issued by BBC Capital on the balance sheet as a separate line-item
entitled "Guaranteed preferred beneficial interests in Company's Junior
21
<PAGE>
Subordinated Debentures," (b) include in a footnote to the financial
statements disclosure that the sole assets of BBC Capital are the Junior
Subordinated Debentures (including the outstanding principal amount, interest
rate and maturity date of such Junior Subordinated Debentures), and (c) include
in an audited footnote to the financial statements disclosure that the Company
owns all of the Common Securities of BBC Capital, the sole assets of BBC Capital
are the Junior Subordinated Debentures, and the back-up obligations, in the
aggregate, constitute a full and unconditional guarantee by the Company of the
obligations of BBC Capital under the Preferred Securities.
CAPITALIZATION
The following table sets forth the consolidated historical capitalization,
including deposits, of the Company at December 31, 1996 and as adjusted to
reflect the issuance of the Preferred Securities hereby offered by BBC Capital
and receipt by the Company of the net proceeds from the corresponding sale of
the Junior Subordinated Debentures to BBC Capital. The information set forth
below should be read in conjunction with the Consolidated Financial Statements
of the Company included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------------
ACTUAL AS ADJUSTED
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
DEPOSITS AND BORROWINGS:
Deposits ............................................. $1,832,780 $1,832,780
Advances from FHLB .................................... 295,700 295,700
Securities sold under agreements to repurchase ......... 190,588 190,588
Subordinated debentures .............................. 78,500 78,500
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN COMPANY'S
JUNIOR SUBORDINATED DEBENTURES(1) ..................... 0 65,000
STOCKHOLDERS' EQUITY:
Class A Common Stock, 30,000,000 shares authorized,
7,807,258 shares issued and outstanding ............... 78 78
Class B Common Stock, 15,000,000 shares authorized,
10,542,116 shares issued and outstanding ............ 105 105
Additional paid in capital ........................... 64,171 64,171
Retained earnings .................................... 82,602 82,602
Net unrealized appreciation on debt securities available
for sale-net of deferred income taxes ............... 748 748
----------- -----------
Total stockholders' equity ........................... $ 147,704 $ 147,704
=========== ===========
</TABLE>
- ----------------
(1) Preferred Securities representing beneficial interest in an aggregate amount
of $65 million of the % Junior Subordinated Debentures of the Company. The
Junior Subordinated Debentures will mature on , 2027.
22
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The Selected Consolidated Financial Data presented below has been derived
from the 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 Reports, included elsewhere
within. Where appropriate, amounts and percentages have been adjusted for the
July 1996 and February 1997 five for four common stock splits effected in the
form of 25% stock dividends, issued August 1996 and March 1997.
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------
1996 1995
-------------- --------------
(IN THOUSANDS, EXCEPT SHARE
DATA)
<S> <C> <C>
STATEMENT OF FINANCIAL CONDITION:
Total assets .......................................... $ 2,605,527 $ 1,750,689
Loans receivable-net .................................... 1,824,856 828,630
Mortgage-backed securities held to maturity ............ 0 0
Debt securities available for sale ..................... 439,345 691,803
Investment and trading account securities, net(1) ...... 54,511 49,856
Mortgage servicing rights .............................. 25,002 20,738
Cost over fair value of net assets acquired and
other intangibles .................................... 29,008 11,521
Deposits ................................................ 1,832,780 1,300,377
Subordinated debentures, capital notes
and note payable ....................................... 78,500 21,001
Advances from FHLB, federal funds purchased and
securities sold under agreements to repurchase ......... 486,288 269,222
Total stockholders' equity ............................ 147,704 120,561
<CAPTION>
AT DECEMBER 31,
-------------------------------------------
1994 1993 1992
-------------- -------------- -------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF FINANCIAL CONDITION:
Total assets .......................................... $ 1,539,653 $ 1,359,195 $ 1,303,071
Loans receivable-net .................................... 546,396 485,956 556,662
Mortgage-backed securities held to maturity ............ 573,913 443,249 349,531
Debt securities available for sale ..................... 53,969 83,116 137,963
Investment and trading account securities, net(1) ...... 211,776 97,701 120,424
Mortgage servicing rights .............................. 20,584 19,833 7,655
Cost over fair value of net assets acquired and
other intangibles .................................... 0 0 0
Deposits ................................................ 1,085,782 1,076,360 1,108,115
Subordinated debentures, capital notes
and note payable ....................................... 0 0 9,524
Advances from FHLB, federal funds purchased and
securities sold under agreements to repurchase ......... 311,879 149,435 87,632
Total stockholders' equity ............................ 105,520 90,652 66,165
</TABLE>
- ----------------
(1) Excludes FHLB stock. Includes interest-bearing deposits in other banks and
securities purchased under agreement to resell. Excludes $109,931 of
banker's acceptances in 1993, and includes trading account securities of
$9.1 million in 1994.
<TABLE>
<CAPTION>
AT OR FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------------
1996 1995 1994 1993 1992
-------------- -------------- -------------- -------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Total interest income .................. $ 152,631 $ 130,077 $ 98,549 $ 94,503 $ 116,476
Total interest expense .................. 77,031 65,686 41,431 35,987 55,567
------------ ------------ ----------- ----------- -----------
Net interest income ..................... 75,600 64,391 57,118 58,516 60,909
Provision for loan losses ............... 5,844 4,182 2,299 3,450 6,650
------------ ------------ ----------- ----------- -----------
Net interest income after provision for
loan losses ........................... 69,756 60,209 54,819 55,066 54,259
------------ ------------ ----------- ----------- -----------
NON-INTEREST INCOME:
Loan servicing and other loan fees ...... 4,216 3,524 3,365 2,229 2,869
Gains on sales of loans originated
for resale .............................. 534 395 773 1,246 976
Gains on sales of mortgage
servicing rights ........................ 4,182 2,744 484 0 0
Gains on sales of investment and
mortgaged-backed securities, net ...... 5,959 0 0 0 5,869
Unrealized and realized gains (losses) on
trading account securities ............ 0 589 (558) 0 0
Gain (loss) on sales of property and
equipment, net ........................ 3,061 18 272 (73) (71)
Other .................................... 15,785 12,118 9,427 8,236 7,408
------------ ------------ ----------- ----------- -----------
Total non-interest income ............... 33,737 19,388 13,763 11,638 17,051
------------ ------------ ----------- ----------- -----------
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ --------------- ------------ ------------ --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS (CONTINUED)
NON-INTEREST EXPENSE:
Employee compensation and benefits ......... 33,216 25,403 22,382 19,617 19,202
Occupancy and equipment .................. 13,615 10,831 8,061 8,417 8,864
SAIF one time special assessment ......... 7,160 0 0 0 0
Federal insurance premium .................. 2,495 2,750 2,673 2,750 2,772
Advertising and promotion .................. 2,079 2,144 1,495 960 480
Foreclosed asset activity-net ............ (725) (3,178) (2,290) 1,243 4,323
Other .................................... 14,401 13,210 9,764 10,546 11,176
---------- ----------- ---------- ----------- ----------
Total non-interest expense ............... 72,241 51,160 42,085 43,533 46,817
---------- ----------- ---------- ----------- ----------
Income before income taxes and
extraordinary item ........................ 31,252 28,437 26,497 23,171 24,493
Provision for income taxes ............... 12,241 10,018 9,662 7,093 9,201
---------- ----------- ---------- ----------- ----------
Income before extraordinary item ......... 19,011 18,419 16,835 16,078 15,292
Extraordinary item net of taxes ............ 0 0 0 0 756(2)
---------- ----------- ---------- ----------- -----------
NET INCOME 19,011 18,419 16,835 16,078 16,048
Dividend on non-cumulative preferred
stock paid by BFC escrow .................. 0 0 0 147 880
Dividends on non-cumulative preferred
stock .................................... 0 677 880 733 0
Amounts classified as dividends on
non-cumulative preferred stock
redemption .............................. 0 1,353(1) 0 0 0
---------- --------------- ---------- ----------- ----------
Total dividends on non-cumulative
preferred stock ........................... 0 2,030 880 880 880
---------- ----------- ---------- ----------- ----------
Net income available for common shares . $ 19,011 $ 16,389 $ 15,955 $ 15,198 $ 15,168
========== =========== ========== =========== ==========
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE:
Net income before extraordinary item ...... $ 1.01 $ 0.97(1) $ 0.97 $ 1.03 $ 1.26
Extraordinary item ........................ 0.00 0.00 0.00 0.00 0.06
---------- ----------- ---------- ----------- ----------
Net income ................................. $ 1.01 $ 0.97 $ 0.97 $ 1.03 $ 1.32
========== =========== ========== =========== ==========
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE
ASSUMING FULL DILUTION:
Net income before extraordinary item ...... $ 0.93 $ 0.96(1) $ 0.97 $ 1.02 $ 1.09
Extraordinary item ........................ 0.00 0.00 0.00 0.00 0.06
---------- ----------- ---------- ----------- ----------
Net income ................................. $ 0.93 $ 0.96 $ 0.97 $ 1.02 $ 1.15
========== =========== ========== =========== ==========
Book value per common share ............... $ 8.05 $ 7.28 $ 6.12 $ 5.20 $ 5.06
========== =========== ========== =========== ==========
Tangible book value per share ............ $ 6.47 $ 6.59 $ 6.12 $ 5.20 $ 5.02
========== =========== ========== =========== ==========
Weighted average number of common and
common equivalent shares outstanding ...... 18,896,691 16,922,816 16,390,677 14,781,256 11,460,204
========== =========== ========== =========== ==========
Weighted average number of common and
common equivalent shares assuming full
dilution ................................. 21,833,015 17,084,563 16,438,264 14,872,560 13,283,200
========== =========== ========== =========== ==========
Actual common shares outstanding at
period end .............................. 18,349,374 16,551,561 15,871,239 15,816,906 11,429,756
========== =========== ========== =========== ==========
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
OTHER FINANCIAL AND STATISTICAL DATA
PERFORMANCE RATIOS:
Return on average assets(3) ........................... 0.94% 1.07% 1.17% 1.25% 1.10%
Return on average equity(3) ........................... 14.08 16.03 17.07 21.32 27.09
Cash dividend payout ratio(4) (8) ..................... 11.36 10.62 9.87 4.86 0.00
Average equity to average assets ..................... 6.70 6.66 6.86 5.85 4.07
Average yield on loans, mortgage-backed
securities, tax certificates and
investment securities .............................. 8.23 8.16 7.45 7.95 9.14
Average cost of deposits and borrowings ............... 4.47 4.51 3.38 3.28 4.54
Net interest spread-during period(5) .................. 3.76 3.65 4.07 4.67 4.60
Interest rate margin-during period(5) ............... 4.08 4.04 4.32 4.90 4.78
Efficiency ratio(6) ................................. 66.07 61.07 59.37 62.03 60.22
OTHER FINANCIAL DATA:
Cash dividends per common share(8) .................. $ 0.240 $ 0.133 $ 0.120 $ 0.062 $ 0.000
ASSET QUALITY RATIOS:
Non-performing assets as a percent of total loans,
tax certificates and real estate owned ............... 1.26% 2.37% 3.66% 3.34% 3.80%
Net charge-offs as a percent of average loans ......... 0.47 0.45 0.59 0.56 0.60
Loan loss allowance as a percent of total loans ...... 1.39 2.24 2.89 3.38 2.88
Loan loss allowance as a percent of
non-performing loans ................................. 167.37 149.49 134.87 173.01 142.93
Non-performing loans as a percent of
total loans .......................................... 0.83 1.50 2.14 1.95 2.01
Non-performing assets as a percent of
total assets ....................................... 0.93 1.23 1.51 1.47 2.07
RATIO OF EARNINGS TO FIXED CHARGES:(7)
Including interest on deposits ........................ 1.40 1.43 1.63 1.63 1.43
Excluding interest on deposits ........................ 2.34 2.41 3.50 5.67 3.62
NUMBER OF:
Offices (all full-service) ........................... 56 43 32 31 31
Branches with ATMs .................................... 56 43 29 29 29
Non-Branch ATMs ....................................... 164 154 153 0 0
Deposit accounts .................................... 218,061 120,067 110,002 113,459 120,558
Loans ................................................ 37,707 23,172 15,319 19,163 27,761
</TABLE>
- ----------------
(1) 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 $0.08 for primary and fully diluted earnings per share.
(2) Utilization of state net operating loss carry-forwards.
(3) Based on income before extraordinary item. The return on average assets and
average equity ("ROA" and "ROE") based on net income was 1.16%
and 28.43%, respectively, for the year ended December 31, 1992. ROA and ROE
excluding the $7.2 million SAIF one-time special assessment would have been
1.16% and 17.34%, respectively, for the year ended December 31, 1996.
(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 average interest earning assets, less the total of
interest expense divided by average interest-bearing liabilities. Interest
rate margin is equal to total interest earned on average interest earning
assets divided by average interest earning assets less the total of interest
expense divided by average interest earning assets. Interest rate spread and
margin during periods is based upon daily average balances of
interest-bearing assets and liabilities.
(6) The efficiency ratio is operating expenses (non-interest expenses) as a
percent of net interest income plus non-interest income. Excluding the $7.2
million SAIF one-time special assessment, this ratio for the year ended
December 31, 1996 would have been 59.52%.
(7) Represents earnings before fixed charges, income taxes, and extraordinary
items and non-cumulative preferred stock dividends and redemption. Fixed
charges includes interest expense (inclusive or exclusive of interest on
deposits as indicated).
(8) Includes dividends for both Class A and Class B common stock.
25
<PAGE>
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. During 1996 the
Company issued $57.5 million of the 63/4% Debentures. The 63/4% Debentures are
convertible into Class A common stock at an exercise price of $10.24 per share.
Net proceeds to the Company were $55.2 million net of underwriting discount and
offering expenses. The Company contributed $40.0 million of the proceeds to
BankAtlantic, and invested $3.9 million in marketable securities to cover two
semi-annual interest payments in accordance with the terms of the underlying
indenture. The balance of the net proceeds are available for general corporate
purposes. Also during 1996, the Company issued approximately 2.1 million shares
of Class A common stock in an underwritten public offering at $9.60 per share.
Net proceeds to the Company were $18.1 million. The Company used the proceeds to
contribute $14.0 million to the capital of BankAtlantic and repurchase $3.3
million of common stock. During 1995, the Company issued $21.0 million of the 9%
Debentures. The proceeds of 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's non-cumulative preferred stock, and in accordance with
the terms of the underlying indenture, $1.9 million was invested in marketable
securities to cover two semi-annual interest payments. Presently the Company has
no significant operations and does not require funds other than to pay certain
operating expenses, interest on the 63/4% and 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 intends to continue to pay regular
quarterly cash dividends on its common stock. Payment of dividends by the
Company will primarily be dependent upon BankAtlantic's ability to pay dividends
or otherwise distribute funds to the Company.
RESULTS OF OPERATIONS
Net income available for common shares of $19.0 million, 16.4 million, and
$16.0 million was recorded for the three years ended December 31, 1996, 1995 and
1994, respectively. Net interest income for 1996 reflects the October 1996
acquisition of BNA which increased loans, debt securities available for sale and
deposits by $395.0 million, $66.4 million, and $469.1 million, respectively. Net
interest income for 1995 reflects the February 1995 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, loan
fundings and purchases for portfolio during 1996 were $1.2 billion compared to
$648.5 million and $372.1 million during 1995 and 1994, respectively. 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 income 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.
Non-interest income during 1996 included $4.2 million of gains on the sales of
mortgage servicing rights, $6.0 million of realized gains on sales of debt
securities available for sale, $3.1 million of gains on sales of properties
leased to others and $534,000 of gains on the sales of loans originated for
resale. During 1995, non-interest income included gains on sales of mortgage
servicing rights, unrealized and realized gains on trading account securities,
gains on sales of property and equipment and gains on sales of loans originated
for resale of $2.7 million, $589,000, $18,000 and $395,000, respectively. During
1994, non-interest income included gains on sales of mortgage servicing rights,
unrealized losses on trading account securities, gains on sales of property and
equipment and gains on sales of loans originated for resale of $484,000,
($558,000), $272,000 and $773,000, respectively. ATM and transaction fee income
was $12.5 million during 1996 compared to $9.0 million and $6.4 million during
1995 and 1994, respectively. Non-interest expenses during 1996 included a $7.2
million SAIF one-time special assessment. Employee compensation and occupancy
and equipment expense increased for each of the years in the three year period
ended December 31, 1996 primarily as a result of the acquisition of MegaBank and
BNA during 1995 and 1996, respectively, and
26
<PAGE>
the expansion of Wal-Mart in-store branches during 1995 and 1996. Provision for
loan losses increased during 1996 to $5.8 million compared to $4.2 million and
$2.3 million for the years ended December 31, 1995 and 1994, respectively. The
increase during 1996 compared to the same period during 1995 reflects generally,
increased levels of loans and specifically higher consumer and non-mortgage loan
charge-offs. The increase during 1995 compared to 1994 reflects lower loan loss
recoveries from the Subject Portfolio and higher non-mortgage loan charge-offs.
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. See Note 11 of the
Consolidated Financial Statements for a further discussion.
Net income available for common shareholders increased in 1996 by $2.6
million compared to 1995 and 1995 net income available for common shareholders
increased by $434,000 compared to 1994. However, comparative net income per
share amounts decreased. The decrease in earnings per share in 1996 resulted
from the issuance of Class A common stock in early 1996, and the issuance of the
63/4% Debentures in July 1996. Income per common equivalent share assuming full
dilution and excluding the $7.2 million SAIF special assessment was $1.13 per
common share for 1996 compared to 1995 income per common equivalent share
assuming full dilution of $0.96. The decrease in 1995 income per share amounts
was due to the October 1995 redemption of the Company's preferred stock at the
stated redemption price of $25.00 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 since it is treated as a preferred stock dividend which reduced income
per common share by $0.08 for both primary and fully diluted earnings per share.
The primary reason for the redemption of the preferred stock was that the
redemption resulted in savings representing an estimated after tax equivalent
rate reduction of over 5%.
BankAtlantic experienced a declining interest rate environment in 1996.
During 1996, interest margins increased compared to 1995 as BankAtlantic shifted
the mix of its interest earning assets from lower earning debt securities and
investments to higher earning loans. During 1995 the interest margin decreased
compared to 1994 as interest rates increased. A negative interest rate
sensitivity gap provides the potential for widening interest margins and
increased earnings during times of declining rates. However, a negative gap will
correspondingly negatively impact earnings when rates increase. The cumulative
one year interest rate gap was a positive .42% at December 31, 1996 compared to
a negative 2.49% and 13.74% at December 31, 1995 and 1994, respectively. The
1996 improvement in the one year cumulative interest rate gap resulted from
higher commercial real estate and construction loan balances, an increase in
stockholders' equity, non-interest bearing deposits and intermediate term FHLB
advances, partially offset by higher fixed rate residential loan balances (See
"Asset and Liability Management" and "Interest Rate Sensitivity" for further
discussions). The 1995 decline in the one year cumulative negative interest rate
gap resulted from higher short term borrowings during the fourth quarter of
1994. In addition, during 1994, and most of 1995, a period when interest rates
were increasing, liabilities repriced at a faster pace than BankAtlantic's
assets, causing the net interest margin to decline from 4.32% during the
comparable 1994 period and to 4.04% during 1995. The net interest margin
increased during 1996 to 4.08% for the reasons discussed above.
27
<PAGE>
NET-INTEREST INCOME
A summary of net interest income follows:
<TABLE>
<CAPTION>
FOR THE YEARS 1996 1995
ENDED DECEMBER 31, TO TO
--------------------------------------- 1995 1994
1996 1995 1994 CHANGE CHANGE
----------- ----------- ----------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Interest and fees on loans ........................... $107,922 $ 72,841 $ 49,426 $ 35,081 $ 23,415
Interest on banker's acceptances ................... 22 0 406 22 (406)
Interest on mortgage-backed securities held to
maturity .......................................... 0 37,855 30,550 (37,855) 7,305
Interest on debt securities available for sale ...... 38,159 7,207 5,542 30,952 1,665
Interest and dividends on investment securities 6,528 12,174 12,625 (5,646) (451)
Interest on deposits ................................. (55,028) (46,646) (31,646) (8,382) (15,000)
Interest on advances from FHLB ..................... (9,221) (7,449) (4,976) (1,772) (2,473)
Interest on securities sold under agreements to
repurchase and federal funds purchased ............ (8,764) (10,815) (4,809) 2,051 (6,006)
Interest on capital notes, subordinated
debentures and note payable ........................ (4,018) (776) 0 (3,242) (776)
-------- -------- -------- -------- --------
Total net interest income ........................... $ 75,600 $ 64,391 $ 57,118 $ 11,209 $ 7,273
======== ======== ======== ======== ========
</TABLE>
Net interest income increased for the year ended December 31, 1996. The
increase in interest on loans during 1996 compared to 1995 was primarily due to
higher average balances, partially offset by lower average yields. The higher
loan average balances resulted from the 1996 BNA acquisition, residential loan
purchases and loan originations. The BNA acquisition increased residential,
commercial real estate, commercial business, and consumer loans by $221.0
million, $53.6 million, $31.8 million and $88.6 million, respectively. During
the year ended December 31, 1996, BankAtlantic funded and purchased $1.2 billion
of loans compared to $648.5 million of loans during 1995. As a result,
BankAtlantic's average loan balances increased from $750.1 million during the
year ended December 31, 1995 to $1.2 billion during 1996. The lower yields
earned on real estate loans resulted from a change in the loan portfolio mix
from higher yielding commercial real estate and non-mortgage loans to
residential loans. The decrease in consumer loan yields resulted from the
origination of loans at lower rates and the acquisition of the BNA loan
portfolio. The increase in commercial loan yields was due to higher yields in
the BNA loan portfolio. The composition of the loan portfolio changed as
follows: residential real estate loans as a percent of loans receivable, net
increased from 21.69% at December 31, 1995 to 48.63% at December 31, 1996. The
percent of consumer and commercial business loans to loans receivable, net at
December 31, 1996 was 18.89% and 4.28% compared to 26.82% and 7.75% at December
31, 1995, respectively. The percent of commercial real estate loans to loans
receivable, net at December 31, 1996 was 39.95% compared to 57.04% at December
31, 1995.
In December 1995, all mortgage-backed and investment securities, excluding
tax certificates then classified as held to maturity, were reclassified as
available for sale and all securities purchased during 1996 were also classified
as available for sale. During 1996 there were no mortgage-backed securities held
to maturity. Total mortgage-backed and investment securities average balances
declined from $844.8 million for the year ended December 31, 1995 to $677.4
million for the comparable 1996 period. During the year ended December 31, 1996,
BankAtlantic sold $368.5 million of mortgage-backed and investment securities
and collected $95.6 million of principal on mortgage-backed and investment
securities. The sales and principal repayments were partially offset by $231.8
million of treasury notes purchased and $66.4 million of treasury notes acquired
in connection with the BNA acquisition. The lower yields earned on total
mortgage-backed and investment securities reflect the prepayment of higher
yielding securities and the purchase of treasury notes described above.
BankAtlantic began issuing banker's acceptances with the acquisition of BNA in
October 1996.
28
<PAGE>
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 and yields earned on real estate
loans and commercial business loans, and higher average balances of consumer
loans. The above items were partially offset by lower average balances on
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 loans receivable by $116.4
million. During the year ended December 31, 1995 BankAtlantic funded and
purchased $648.5 million of loans compared to $372.1 million of loans during
1994. The higher yields earned on real estate and commercial business loans
reflect the increase in the prime rate of interest during 1995. The higher real
estate and commercial business loan yields were partially offset by lower
consumer loan yields as a result of the MegaBank acquisition and the repayment
of higher yielding consumer loans.
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 causing
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 from "held to maturity" of $638.8 million
of securities to "available for sale" on December 15, 1995. 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. The 1994 tax certificate
interest reversal was to previously established allowance accounts.
The increase in interest expense on deposits for the year ended December
31, 1996 resulted from higher deposit balances during 1996. The increased
deposit balances primarily resulted from $469.1 million of deposits acquired in
connection with the acquisition of BNA. Average deposits increased from $1.14
billion during the year ended December 31, 1995 to $1.33 billion during 1996.
Deposit rates during 1996 were lower on transaction accounts and higher on
certificate accounts compared to 1995. During 1996, the interest rate
environment enabled BankAtlantic to lower transaction account rates, whereas
higher certificate accounts rates were due to competition. The lower interest
cost on deposits during 1995 compared to 1994 was due to higher deposit balances
during 1995, a change in the deposit mix from transaction accounts to time
deposits and higher short term rates during 1995 compared to 1994. The average
deposit mix during 1996 was 55% and 45% certificate accounts and transaction
accounts, respectively. The increased deposit balances primarily resulted from
$120.2 million of deposits (including non-interest bearing deposits) acquired in
connection with the acquisition of MegaBank and additional growth in certificate
accounts. 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 and 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.
The increased interest expense on advances from FHLB during 1996 was
primarily due to higher average balances and secondarily to higher rates. During
1996, BankAtlantic used one to six year
29
<PAGE>
advances from the FHLB to finance the purchase of wholesale residential loans.
During 1995, advances from the FHLB had maturities of less than one year. The
lower interest expense on securities sold under agreements to repurchase reflect
a decline in the borrowing rates during 1996 and lower average balances. The
lower average balances in 1996 of securities sold under agreements to repurchase
were the result of the availability of funds provided by the July 1996 $57.5
million issuance of the 63/4% Debentures and $18.1 million of proceeds from the
Class A common stock offering. The increased interest expense on advances from
FHLB and securities sold under agreements to repurchase were due to higher
average balances and rates paid during 1995 compared to 1994. The higher
borrowings during 1995 were used to fund the purchase of mortgage-backed
securities, and investment securities and the acquisition of MegaBank. Interest
on subordinated debentures and note payable relates to a $4.0 million note
payable issued in March 1995, $21.0 million of 9% Debentures issued in 1995 and
$57.5 million of 6 3/4% Debentures issued in 1996.
During the year ended December 31, 1996, BankAtlantic's average interest
earning assets and average interest bearing liabilities increased compared to
the 1995 period, whereas BankAtlantic's rates earned on assets and average rates
paid on liabilities declined. The higher balances on earning assets increased
interest income by $27.0 million. Likewise, the higher balances on interest
bearing liabilities increased interest expense by $13.6 million. The above
increases were partially offset by the lower rates earned on assets which
reduced interest income by $4.5 million and the lower rates paid on interest
bearing liabilities which reduced interest expense by $2.3 million. The increase
in balances on earning assets and interest paying liabilities was caused by the
acquisition of BNA, loan originations, and loan purchases during 1996. The lower
rates earned on loans reflects a shift in the portfolio mix from higher yielding
commercial real estate and non-mortgage loans to lower yielding residential
loans. The lower rates paid on liabilities primarily reflects a decline in short
term interest rates and lower transaction account rates. During the year ended
December 31, 1995, BankAtlantic's average interest earning assets and interest
bearing liabilities increased. BankAtlantic's rates earned on assets and average
rates paid on liabilities also increased. The higher balances of earning assets
increased interest income by $25.9 million and the higher rates earned on assets
increased interest income by $5.7 million (which also reflects the 1994 reversal
of $1.4 million of tax certificate interest income). The increased interest
income was partially offset by $14.7 million of additional interest expense due
to higher volume and $9.5 million of additional interest expense due to a shift
in the deposit mix and a rising interest rate environment.
The net interest margin was 4.08%, 4.04%, and 4.32% for the three years
ended December 31, 1996, 1995 and 1994, respectively. The increased margin
during 1996 resulted from a shift in the composition of interest earning assets
from lower rate debt securities to higher rate loans and lower overall rates
paid on interest bearing liabilities. The reduced margin during 1995 compared to
1994 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 1994 margin was impacted by a $1.4 million reversal of tax certificate
interest income.
30
<PAGE>
YIELDS EARNED AND RATES PAID
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
-------------------------------------------------
DECEMBER 31, 1996 DECEMBER
31, 1995
----------------------------------- -------------
AVERAGE REVENUE/ YIELD/ AVERAGE
BALANCE EXPENSE RATE BALANCE
------------- ----------- --------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
INTEREST EARNING ASSETS
Loans:(A)
Real estate ................................. $ 869,176 $77,277 8.89% $ 499,275
Consumer .................................... 242,876 24,285 10.00 192,409
Commercial business ........................ 65,273 6,360 9.74 58,374
---------- -------- ------ ----------
Total loans ................................. 1,177,325 107,922 9.17 750,058
---------- -------- ------ ----------
Banker's acceptances ......................... 329 22 6.69 0
---------- -------- ------ ----------
Mortgage-backed securities held
to maturity ................................. 0 0 0.00 573,995
Debt securities available for sale(B) ...... 605,766 38,159 6.30 89,757
Investment securities(C) ..................... 68,996 6,419 9.30 178,449
Federal funds sold ........................... 2,670 109 4.08 2,571
---------- -------- ------ ----------
Total mortgage-backed and
investment securities ..................... 677,432 44,687 6.60 844,772
---------- -------- ------ ----------
Total interest earning assets ............... 1,855,086 152,631 8.23% 1,594,830
---------- -------- ------ ----------
NON-INTEREST EARNING ASSETS
Total non-interest earning assets ............ 160,588 130,008
---------- ----------
Total assets ................................. $2,015,674 $1,724,838
========== ==========
INTEREST BEARING LIABILITIES
Deposits:
Savings .................................... $ 118,306 $ 2,150 1.81% $ 109,068
NOW, money funds and checking ............... 478,127 12,154 2.54 421,135
Certificate accounts ........................ 738,254 40,724 5.50 607,300
---------- -------- ------ ----------
Total interest bearing deposits ............ 1,334,687 55,028 4.11 1,137,503
---------- -------- ------ ----------
Securities sold under agreements
to repurchase and federal funds
purchased ................................. 180,661 8,764 4.84 186,592
Advances from FHLB ........................... 152,138 9,221 6.04 125,246
Subordinated debentures and
note payable .............................. 49,750 4,018 8.05 5,759
Other borrowings ........................... 0 0 0.00 1,544
---------- -------- ------ ----------
Total interest bearing liabilities ......... 1,717,236 77,031 4.47 1,456,644
---------- -------- ------ ----------
NON-INTEREST BEARING LIABILITIES
Demand deposit and
escrows accounts ........................... 148,054 135,027
Other liabilities ........................... 15,396 18,278
---------- ----------
Total non-interest bearing liabilities ...... 163,450 153,305
---------- ----------
Stockholders' equity ........................ 134,988 114,889
---------- ----------
Total liabilities and
stockholders' equity ..................... $2,015,674 $1,724,838
========== ==========
Net interest income/net
interest spread ........................... $75,600 3.76%
======== ======
MARGIN
Interest income/interest earning assets ...... 8.23%
Interest expense/interest
earnings assets ........................... 4.15
------
Net interest margin ........................ 4.08%
======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
-------------------------------------------------------
DECEMBER 31, 1995 DECEMBER 31, 1994
--------------------- ---------------------------------
REVENUE/ YIELD/ AVERAGE REVENUE/ YIELD/
EXPENSE RATE BALANCE EXPENSE RATE
----------- --------- ------------ ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS
Loans:(A)
Real estate ................................. $47,591 9.53% $ 372,031 $33,022 8.89%
Consumer .................................... 19,636 10.21 122,235 14,118 11.55
Commercial business ........................ 5,614 9.62 26,647 2,286 8.58
-------- ------ ---------- -------- ------
Total loans ................................. 72,841 9.71 520,913 49,426 9.49
-------- ------ ---------- -------- ------
Banker's acceptances ........................ 0 0.00 12,366 406 3.28
-------- ------ ---------- -------- ------
Mortgage-backed securities held
to maturity ................................. 37,855 6.59 514,460 30,550 5.94
Debt securities available for sale(B) ...... 7,207 8.03 64,891 5,542 8.54
Investment securities(C) ..................... 12,019 6.74 209,588 12,579 6.00
Federal funds sold ........................... 155 6.03 924 46 4.98
-------- ------ ---------- -------- ------
Total mortgage-backed and
investment securities ..................... 57,236 6.78 789,863 48,717 6.17
-------- ------ ---------- -------- ------
Total interest earning assets ............... 130,077 8.16% 1,323,142 98,549 7.45%
-------- ------ ---------- -------- ------
NON-INTEREST EARNING ASSETS
Total non-interest earning assets ............ 114,545
----------
Total assets ................................. $1,437,687
==========
INTEREST BEARING LIABILITIES
Deposits:
Savings .................................... $ 1,987 1.82% $ 122,667 $ 2,116 1.72%
NOW, money funds and checking ............... 11,591 2.75 457,529 10,751 2.35
Certificate accounts ........................ 33,068 5.45 442,107 18,779 4.25
-------- ------ ---------- -------- ------
Total interest bearing deposits ............ 46,646 4.10 1,022,303 31,646 3.10
-------- ------ ---------- -------- ------
Securities sold under agreements
to repurchase and federal funds
purchased ................................. 10,815 5.80 105,462 4,809 4.56
Advances from FHLB ........................... 7,449 5.95 99,540 4,976 5.00
Subordinated debentures and
note payable .............................. 546 9.45 0 0 0.00
Other borrowings ........................... 230 14.86 0 0 0.00
-------- ------ ---------- -------- ------
Total interest bearing liabilities ......... 65,686 4.51 1,227,305 41,431 3.38%
-------- ------ ---------- -------- ------
NON-INTEREST BEARING LIABILITIES
Demand deposit and
escrows accounts ........................... 97,477
Other liabilities ........................... 14,265
----------
Total non-interest bearing liabilities ...... 111,742
----------
Stockholders' equity ........................ 98,640
----------
Total liabilities and
stockholders' equity ..................... $1,437,687
==========
Net interest income/net
interest spread ........................... $64,391 3.65% $57,118 4.07%
======== ====== ======== ======
MARGIN
Interest income/interest earning assets ...... 8.16% 7.45%
Interest expense/interest
earnings assets ........................... 4.12 3.13
------ ------
Net interest margin ........................ 4.04% 4.32%
====== ======
</TABLE>
- ----------------
(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.
31
<PAGE>
RATE/VOLUME ANALYSIS
YEAR ENDED
DECEMBER 31, 1996
COMPARED TO YEAR ENDED
DECEMBER 31, 1995
------------------------------------
VOLUME(A) RATE TOTAL
------------ ----------- -----------
INCREASE (DECREASE) DUE TO:
Loans ................................. $ 39,131 $ (4,050) $ 35,081
Banker's acceptances ............... 22 0 22
Mortgage-backed securities ............ (37,855) 0 (37,855)
Debt securities available for sale ... 32,505 (1,553) 30,952
Investment securities ............... (6,778) 1,178 (5,600)
Federal funds sold .................. 4 (50) (46)
-------- -------- --------
Total earnings assets ............... 27,029 (4,475) 22,554
-------- -------- --------
Deposits:
Savings .............................. 174 (11) 163
NOW, money funds,
and checking ........................ 1,405 (842) 563
Certificate accounts ............... 7,352 304 7,656
-------- -------- --------
Total deposits ........................ 8,931 (549) 8,382
-------- -------- --------
Securities sold under agreements
to repurchase ........................ (297) (1,754) (2,051)
Advances from FHLB .................. 1,659 113 1,772
Subordinated debentures ............... 3,553 (81) 3,472
Other borrowings ..................... (230) 0 (230)
-------- -------- --------
4,685 (1,722) 2,963
-------- -------- --------
Total interest bearing liabilities ... 13,616 (2,271) 11,345
-------- -------- --------
Change in net interest income ......... $ 13,413 $ (2,204) $ 11,209
======== ======== ========
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
COMPARED TO YEAR ENDED
DECEMBER 31, 1994
--------------------------------------------------
VOLUME(A) RATE TOTAL
---------------- ---------------- ----------------
<S> <C> <C> <C>
INCREASE (DECREASE) DUE TO:
Loans .................................... $22,322 $ 1,093 $23,415
Banker's acceptances .................. (406) 0 (406)
Mortgage-backed securities ............... 3,961 3,344 7,305
Debt securities available for sale ...... 1,996 (331) 1,665
Investment securities .................. (2,111) 1,551 (B) (560)
Federal funds sold ..................... 99 10 109
------- --------- -------
Total earnings assets .................. 25,861 5,667 31,528
------- --------- -------
Deposits:
Savings ................................. (251) 122 (129)
NOW, money funds,
and checking ........................... (990) 1,830 840
Certificate accounts .................. 8,984 5,305 14,289
------- --------- -------
Total deposits ........................... 7,743 7,257 15,000
Securities sold under agreements
to repurchase ........................... 4,698 1,308 6,006
Advances from FHLB ..................... 1,527 946 2,473
Subordinated debentures .................. 546 0 546
Other borrowings ........................ 230 0 230
------- --------- -------
7,001 2,254 9,255
------- --------- -------
Total interest bearing liabilities ...... 14,744 9,511 24,255
------- --------- -------
Change in net interest income ............ $11,117 $ (3,844) $ 7,273
======= ========= =======
</TABLE>
- ----------------
(A) Changes attributable to rate/volume have been allocated to volume.
(B) Includes $1.4 million reversal of accrued interest on tax certificates.
PROVISION FOR LOAN LOSSES AND PROVISION FOR (REVERSAL OF) LOSSES ON REAL ESTATE
OWNED
During the years ended December 31, 1996, 1995 and 1994, the provision for
loan losses was $5.8 million, $4.2 million, and $2.3 million, respectively. The
provision in each of these years was substantially impacted by larger consumer
loan balances. Consumer loan net charge-offs amounted to $4.7 million, $3.3
million, and $1.5 million in 1996, 1995 and 1994, respectively. The increase in
consumer loan net charge-offs resulted primarily from the acquisition of
MegaBank and BNA indirect automobile loan portfolios in 1995 and 1996,
respectively. Also, the 1994 consumer loan net charge-offs were significantly
impacted by $1.2 million of recoveries associated with the Covenant Not to
Execute (the "Covenant") described herein and in Note 15 of the Consolidated
Financial Statements. There were no consumer loan recoveries relating to the
Covenant during 1995 and 1996. In addition, the 1996 provision reflects $530,000
of commercial business loan net charge-offs compared to a recovery of $356,000
during 1995 and net charge-offs of $1.1 million during 1994, respectively. The
1996 commercial business net charge-offs primarily reflect charge-offs of
$478,000 and $450,000 relating to unsecured loans acquired in connection with
the BNA and MegaBank acquisitions, respectively. The 1996 charge- offs were
partially offset by $518,000 of commercial business recoveries relating to loans
charged-off in prior periods. Included in commercial 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 $6.8 million and $2.8 million during 1996 and 1995, respectively.
The initial allowance for loan losses acquired in connection with the BNA
acquisition was $6.4 million and in the 1995
32
<PAGE>
MegaBank acquisition the acquired allowance for loan losses was $1.9 million;
such amounts account for a significant portion of the increased allowance for
loan losses in 1996 and 1995. The remaining increase in the 1996 loan loss
allowance resulted from additional provisions due to loan growth. The remaining
increase in the 1995 loan loss allowance resulted from a $200,000 specific
allowance relating to an office building loan and a $600,000 increase in loan
loss allowances based on then current trends.
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 market rate of return 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 December 31, 1996 restructured loans were $3.7
million compared to $2.5 million and $1.6 million at December 31, 1996, 1995 and
1994, respectively. Non-performing assets, net of write downs and allowances,
were $24.1 million at December 31, 1996 compared to $21.5 million and $23.2
million during 1995 and 1994, respectively. Included in non-performing assets
was $7.0 million in assets acquired in connection with the BNA acquisition.
Risk elements, net of write-downs and dispositions, increased by $3.8
million in 1996 to $27.8 million at December 31, 1996 and decreased in 1995 by
$836,000 to $24.0 million at December 31, 1995. The increase in total risk
elements during 1996 primarily related to a $2.6 million rise in non-performing
assets and a $1.2 million increase in restructured loans. The restructured loan
increase primarily related to a $1.0 million non-residential loan classified as
non-accruing at December 31, 1995. The increase in non-performing assets from
1995 to 1996 resulted from a $1.5 million increase in consumer repossessed
assets, and a $517,000 increase in residential real estate owned, partially
offset by a $1.9 million reduction in commercial real estate owned. The increase
in consumer and residential repossessed assets was primarily the result of the
BNA acquisition. The decline in commercial real estate owned reflects the sale
of $4.4 million of commercial real estate owned partially offset by a $197,000
net reversal of allowance for losses on real estate owned, $1.0 million of REO
acquired from BNA, and transfers of $1.8 million of nonaccrual loans to real
estate owned. Non-accrual residential and consumer loans increased by $4.2
million and $1.5 million, whereas non-accrual commercial loans and tax
certificates declined by $4.5 million and $209,000, respectively. The increase
in non-accrual residential loans resulted from higher loan balances. Residential
loan balances increased from $179.7 million at December 31, 1995 to $887.3
million at December 31, 1996. Included in nonaccrual consumer loans at December
31, 1996 are $1.0 million of indirect automobile loans acquired in connection
with the BNA acquisition. The remaining increase in nonaccrual consumer loans
was due to increased consumer loan balances during 1996 compared to 1995. The
reduction in nonaccrual commercial real estate loans resulted from the
reinstatement of a $2.5 million non-residential loan, the restructuring of a
$1.0 million non-residential loan, transferring a $400,000 loan to an accruing
status and foreclosing on a $700,000 loan. The decline in nonaccrual tax
certificates was due to reduced investments in tax certificates in 1996. During
1996 loans contractually past due 90 days or more increased $1.4 million. These
loans have matured and are in the process of renewing or extending their terms
while the borrower continues to make payments under the matured loan agreement.
The 1995 risk element net decrease primarily related 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. The lower 1995 real estate
owned balances resulted from the sale 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.
33
<PAGE>
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 related 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 loan loss allowance as a percent of total loans declined from 2.24% at
December 31, 1995 to 1.39% at December 31, 1996. At December 31, 1996 gross real
estate loans amounted to $1.6 billion of which $887.3 million were residential
real estate loans which management believes carry minimal credit risk. The
remaining real estate loans consisted of $427.2 million of commercial real
estate loans, and $301.8 million of construction and development loans at
December 31, 1996, respectively. Gross other loans amounted to $422.9 million
and included commercial business loans and consumer loans (including second
mortgages) of $78.2 million and $344.7 million, respectively, at December 31,
1996. 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, 1996, management reversed $197,000 from
the allowance for real estate owned. Real estate owned charge-offs during the
year ended December 31, 1996 were $803,000 primarily relating to three REO
properties. Two of the properties were sold during 1996. During the year ended
December 31, 1995 and 1994, BankAtlantic's provisions for real estate owned was
a recovery of $1.2 million and a provision of $140,000, respectively. For the
years ended December 31, 1995, and 1994 charge-offs were $213,000, and $40,000,
respectively. The allowance for real estate owned is established by management
based on its evaluation of foreclosed properties.
34
<PAGE>
<TABLE>
<CAPTION>
RISK ELEMENTS
-----------------------------------------------------------------------
DECEMBER 31,
-----------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONTRACTUALLY PAST DUE 90
DAYS OR MORE
Commercial real estate and
business(1) .............................. $ 2,961 $ 1,536 $ 736 $ 2,580 $ 1,108
NON-ACCRUAL
Residential .............................. 6,477 2,228 1,718 2,468 3,642
Commercial real estate
and business .............................. 3,868 8,361 9,325 3,802 5,317
Consumer ................................. 2,079 585 270 976 1,477
Tax certificates(2) ........................ 1,835 2,044 3,578 0 0
--------- --------- --------- --------- ---------
14,259 13,218 14,891 7,246 10,436
REPOSSESSED(3)
Residential real estate owned ............ 748 231 303 319 756
Commercial real estate owned ............... 4,170 6,048 6,935 9,332 14,241
Consumer ................................. 1,992 461 350 512 461
--------- --------- --------- --------- ---------
6,910 6,740 7,588 10,163 15,458
--------- --------- --------- --------- ---------
TOTAL NON-PERFORMING
ASSETS .................................... 24,130 21,494 23,215 19,989 27,002
--------- --------- --------- --------- ---------
RESTRUCTURED LOANS
Commercial real estate
and business .............................. 3,718 2,533 1,648 2,647 2,661
--------- --------- --------- --------- ---------
TOTAL RISK ELEMENTS ........................ $ 27,848 $ 24,027 $ 24,863 $ 22,636 $ 29,663
========= ========= ========= ========= =========
Total risk elements as a percentage of:
Total assets .............................. 1.07% 1.37% 1.61% 1.67% 2.28%
========= ========= ========= ========= =========
Loans, tax certificates and net real
estate owned .............................. 1.46% 2.65% 3.92% 3.78% 4.18%
========= ========= ========= ========= =========
TOTAL ASSETS .............................. $2,605,527 $1,750,689 $1,539,653 $1,359,195 $1,303,071
========= ========= ========= ========= =========
TOTAL LOANS, TAX
CERTIFICATES AND NET
REAL ESTATE OWNED ........................ $1,911,501 $ 905,413 $ 634,001 $ 599,504 $ 709,482
========= ========= ========= ========= =========
Allowance for loan losses .................. $ 25,750 $ 19,000 $ 16,250 $ 17,000 $ 16,500
========= ========= ========= ========= =========
Total tax certificates ..................... $ 55,977 $ 51,504 $ 64,117 $ 86,897 $ 121,323
========= ========= ========= ========= =========
Allowance for tax certificate losses ...... $ 1,466 $ 1,648 $ 2,985 $ 2,970 $ 1,558
========= ========= ========= ========= =========
</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.
(3) Amounts are net of allowances for losses.
The above schedule reflects, at December 31, 1996, all loans, other than as
disclosed in Note 5 of the Consolidated Financial Statements as other impaired
commercial loans with specific allowances, 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.
35
<PAGE>
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 YEARS
ENDED DECEMBER 31,
---------------------------------------------------
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Interest income which would have been recorded ...... $1,505 $1,393 $1,170
Interest income recognized ........................... (698) (519) (443)
------ ------ ------
Interest income foregone ........................... $ 807 $ 874 $ 727
====== ====== ======
</TABLE>
Changes in the allowance for loan losses were as follows (dollars in
thousands):
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED DECEMBER 31,
------------------------------------
1996 1995
------------------- ----------------
<S> <C> <C>
Balance, beginning of period ..................... $ 19,000 $16,250
Charge-offs:
Commercial business loans ........................ (1,048) (382)
Commercial real estate loans ..................... (266) (222)
Consumer loans .................................... (6,337) (4,566)
Residential real estate loans ..................... (67) (263)
---------- ----------
(7,718) (5,433)
---------- ----------
Recoveries:
Commercial business loans ........................ 518 738
Commercial real estate loans ..................... 47 102
Consumer loans .................................... 1,659 1,219
Residential real estate loans ..................... 0 0
---------- ----------
2,224 2,059
---------- ----------
Net charge-offs .................................... (5,494) (3,374)
Additions charged to operations .................. 5,844 4,182
Allowance for loan losses acquired ............... 6,400 1,942
---------- ----------
Balance, end of period ........................... $ 25,750 $19,000
========== ==========
Allowance as a percentage of:
Total loans ....................................... 1.39% 2.24%
Total loans including banker's acceptances ...... 1.39 2.24
========== ==========
Non-performing assets(1) ........................ 115.5% 97.69%
========== ==========
Ratio of net charge-offs to average
outstanding loans ................................. 0.47% 0.45%
========== ==========
Ratio of net charge-offs to average outstanding
loans plus banker's acceptances .................. 0.47% 0.45%
========== ==========
<CAPTION>
FOR THE YEARS
ENDED DECEMBER 31,
-----------------------------------------------
1994 1993 1992
------------------- ---------------- ----------
<S> <C> <C> <C>
Balance, beginning of period ..................... $ 17,000 $16,500 $ 13,750
Charge-offs:
Commercial business loans ........................ (1,647) (835) (776)
Commercial real estate loans ..................... (220) 0 (1,028)
Consumer loans .................................... (3,829) (4,322) (10,430)
Residential real estate loans ..................... (272) (302) (445)
-------- ------- --------
(5,968) (5,459) (12,679)
-------- ------- --------
Recoveries:
Commercial business loans ........................ 565 262 175
Commercial real estate loans ..................... 18 6 20
Consumer loans .................................... 2,336 2,231 8,584
Residential real estate loans ..................... 0 10 0
-------- ------- --------
2,919 2,509 8,779
-------- ------- --------
Net charge-offs .................................... (3,049) (2,950) (3,900)
Additions charged to operations .................. 2,299 3,450 6,650
Allowance for loan losses acquired ............... 0 0 0
-------- ------- --------
Balance, end of period ........................... $ 16,250 $17,000 $ 16,500
======== ======= ========
Allowance as a percentage of:
Total loans ....................................... 2.89% 3.38% 2.88%
Total loans including banker's acceptances ...... 2.89 2.77 2.88
======== ======= ========
Non-performing assets(1) ........................ 82.75% 85.05% 61.11%
======== ======= ========
Ratio of net charge-offs to average
outstanding loans ................................. 0.59% 0.56% 0.60%
======== ======= ========
Ratio of net charge-offs to average outstanding
loans plus banker's acceptances .................. 0.57% 0.55% 0.60%
======= ====== ========
</TABLE>
- ----------------
(1) Excluding tax certificates. The allowance for tax certificates as a
percentage of total tax certificates was 2.62%, 3.20%, 4.66%, 3.47%, and
1.28%, for each of the years in the five-year period ended December 31,
1996, and as a percentage of non-performing tax certificates was 79.89%
and 80.63% at December 31, 1996 and 1995.
36
<PAGE>
The table below presents (dollars in thousands) 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 amounts or trends.
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
-------------------------- -------------------------
PERCENT PERCENT
OF GROSS OF GROSS
ALLOCATION LOANS ALLOCATION LOANS
OF IN EACH OF IN EACH
ALLOWANCE CATEGORY ALLOWANCE CATEGORY
FOR LOAN TO TOTAL FOR LOAN TO TOTAL
LOSS BY GROSS LOSS BY GROSS
CATEGORY(1) LOANS CATEGORY LOANS
-------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Commercial
business ......... $3,676 3.83% $2,288 6.84%
Real estate ...... 8,727 79.27 6,657 69.49
Consumer(2) ...... 8,921 16.90 5,346 23.67
Unallocated ...... 4,426 N/A 4,709 N/A
------- ------- ------- -------
$25,750 100.00% $19,000 100.00%
======= ======= ======= =======
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993 DECEMBER 31, 1992
------------------------- -------------------------- -------------------------
PERCENT PERCENT PERCENT
OF GROSS OFGROSS OF GROSS
ALLOCATION LOANS ALLOCATION LOANS ALLOCATION LOANS
OF IN EACH OF IN EACH OF IN EACH
ALLOWANCE CATEGORY ALLOWANCE CATEGORY ALLOWANCE CATEGORY
FOR LOAN TO TOTAL FOR LOAN TO TOTAL FOR LOAN TO TOTAL
LOSS BY GROSS LOSS BY GROSS LOSS BY GROSS
CATEGORY LOANS CATEGORY(1) LOANS CATEGORY LOANS
------------- ----------- -------------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Commercial
business ......... $1,109 4.00% $1,924 5.48% $2,676 5.69%
Real estate ...... 8,102 75.82 6,038 67.29 5,261 57.61
Consumer(2) ...... 2,527 20.18 4,687 27.23 5,613 36.70
Unallocated ...... 4,512 N/A 4,351 N/A 2,950 N/A
------- ------- ------- ------- ------- -------
$16,250 100.00% $17,000 100.00% $16,500 100.00%
======= ======= ======= ======= ======== =======
</TABLE>
- ----------------
(1) Excludes banker's acceptances.
(2) Includes second mortgage loans.
NON-INTEREST INCOME
A summary of non-interest income follows:
<TABLE>
<CAPTION>
FOR THE YEARS 1996 1995
ENDED DECEMBER 31, TO TO
------------------------------------ 1995 1994
1996 1995 1994 CHANGE CHANGE
---------- ---------- ---------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Loan servicing and other loan fees ........................ $4,216 $3,524 $3,365 $ 692 $ 159
Gains on sales of loans originated for resale ............ 534 395 773 139 (378)
Unrealized and realized gain (losses) on trading
account securities ....................................... 0 589 (558) (589) 1,147
Gains on sales of debt securities available for sale ...... 5,959 0 0 5,959 0
Gains on sales of property and equipment .................. 3,061 18 272 3,043 (254)
Gains on sales of mortgage servicing rights ............... 4,182 2,744 484 1,438 2,260
Other ...................................................... 15,785 12,118 9,427 3,667 2,691
------- ------- ------- ------- ------
Total non-interest income .............................. $33,737 $19,388 $13,763 $14,349 $5,625
======= ======= ======= ======= ======
</TABLE>
For a discussion relating to gains on sales of debt securities available
for sale, see "Mortgage-Backed Securities and Investments."
Loan servicing and other loan fees increased during each of the three years
ended December 31, 1996. The increase for the year ended December 31, 1996
compared to the same period during 1995 resulted from higher loan and late fee
income. Late fee income increased from $955,000 for the year ended December 31,
1995 to $1.4 million during the comparable 1996 period. Loan fee income was $1.1
million during 1995 compared to $1.4 million during 1996. The increase in loan
and late fees reflects higher loan production and balances during 1996 compared
to the comparable 1995 period. 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.
37
<PAGE>
During the years ended December 31, 1996, 1995 and 1994, BankAtlantic sold
mortgage servicing rights with a book value of $20.9 million, $5.6 million and
$2.4 million, respectively, for gains as reported in the above table. These
rights related to approximately $1.4 billion, $492.1 million and $233.0 million
of loans serviced for others during 1996, 1995 and 1994, respectively. At
December 31, 1996, 1995 and 1994, BankAtlantic serviced loans for the benefit of
others amounting to approximately $2.7 billion, $1.8 billion, and $1.9 billion,
respectively. BankAtlantic periodically sells mortgage servicing rights based on
the composition of the servicing portfolio and market conditions.
During the year ended December 31, 1996, BankAtlantic sold properties
leased to others with a book value of $5.0 million for gains as reported in the
above table. During the years ended December 31, 1995 and 1994 BankAtlantic sold
properties with a book value of $0 and $371,000, respectively.
Non-interest income - other increased during the three years ended December
31, 1996. 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 $3.5 million during 1996 and $2.6 million during 1995. Transaction
account fee income was $8.6 million during 1996 compared to $7.0 million during
1995 and $5.4 million in 1994. The higher transaction fee income during 1996 and
1995 reflects an increase in transaction account balances primarily obtained in
connection with acquisitions and an increase in the fees charged during the
latter part of 1994 and 1995. ATM fee income was $3.9 million during 1996
compared to $2.0 million during 1995 and $958,000 during 1994, respectively. In
April 1996, BankAtlantic's ATM network initiated surcharge fees for
non-customers. The significant increase in ATM fee income during 1996 was
primarily the result of this surcharge. BankAtlantic established its ATM network
to enhance fee income and to expand banking services throughout Florida.
Currently, BankAtlantic has 144 ATM machines located in Wal-Mart Superstores, 10
ATM machines located on cruise ships, and 66 machines located in branches,
shopping centers and businesses throughout South Florida. Furthermore, 1996
lease income increased by $320,000 compared to 1995 due to additional rents
received on leased property. As indicated previously, the leased property was
sold in December 1996. Non-interest income-other for 1994 was also favorably
impacted by a $332,000 dormant account settlement with the State of Florida. The
settlement related to a review by the Florida Comptroller's Office of
BankAtlantic's procedures for the assessment of fees on dormant accounts.
NON-INTEREST EXPENSE
A summary of non-interest expense follows:
<TABLE>
<CAPTION>
FOR THE YEARS 1996 1995
ENDED DECEMBER 31, TO TO
------------------------------------ 1995 1994
1996 1995 1994 CHANGE CHANGE
---------- ---------- ---------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Employee compensation and benefits ............... $33,216 $25,403 $22,382 $7,813 $3,021
Occupancy and equipment ........................ 13,615 10,831 8,061 2,784 2,770
SAIF one-time special assessment ............... 7,160 0 0 7,160 0
Federal insurance premium ........................ 2,495 2,750 2,673 (255) 77
Advertising and promotion ........................ 2,079 2,144 1,495 (65) 649
Foreclosed asset activity, net .................. (725) (3,178) (2,290) 2,453 (888)
Amortization of cost over fair value of net assets
required ....................................... 1,545 1,122 0 423 1,122
Other .......................................... 12,856 12,088 9,764 768 2,324
------- ------- ------- ------ ------
Total non-interest expenses .................. $72,241 $51,160 $42,085 $21,081 $9,075
======= ======= ======= ====== ======
</TABLE>
The increase in employee compensation and benefits for the three years
ended December 31, 1996 resulted from the number of full-time equivalent
employees increasing from 624 at December 31, 1994
38
<PAGE>
to 746 at December 31, 1995 and to 989 at December 31, 1996 as well as annual
salary and benefit increases throughout the three year period. During 1996,
approximately 160 of the new employees were related to the BNA acquisition and
the remaining new employees primarily related to five new Wal-Mart branches.
During 1995 approximately 70 of the new employees were related to the
acquisition of MegaBank and the remaining new employees primarily related to six
new branches. Occupancy and equipment expenses increased during the year ended
December 31, 1996 compared to the 1995 period due to the opening of five
additional Wal-Mart in-store branches and the acquisition of BNA. The new
branches and the BNA acquisition resulted in increased depreciation and rent
expense. Depreciation and rent expense increased from $3.2 million and $1.9
million during 1995 to $3.8 million and $2.1 million during the same 1996
period, respectively. Also included in occupancy and equipment expenses during
1996 was $1.7 million of conversion costs and processing fees associated with
the conversion of all data processing functions to an outside service bureau.
BankAtlantic converted to the service bureau on October 11, 1996 and the
estimated annual expense for the service bureau is approximately $2.4 million.
The service bureau conversion is intended to enable BankAtlantic to offer
innovative new products and services. Occupancy and equipment expenses increased
during the year ended December 31, 1995 compared to 1994 due to the acquisition
of MegaBank and the opening of three additional Wal-Mart in-store branches and
three branches in South Florida. Furthermore, in December 1994 BankAtlantic
converted to a service bureau for its serviced residential loans resulting in
$350,000 of expenses during the year ended December 31, 1995 compared to $93,000
during 1994. The residential loan service bureau expense was $558,000 during the
year ended December 31, 1996.
On September 30, 1996, President Clinton signed into law H.R. 3610, which
was intended to recapitalize the SAIF and substantially bridge the assessment
rate disparity existing between SAIF and BIF insured institutions. The law
required institutions with SAIF assessable deposits, including BankAtlantic, to
pay a one-time assessment of 0.657% of covered deposits at March 31, 1995.
BankAtlantic's one-time assessment resulted in a pre-tax charge of $7.2 million
for the year ended December 31, 1996. The $7.2 million charge excludes the $2.3
million amount assessed on BNA deposits which was considered in recording the
acquisition of BNA under the purchase method of accounting. Future assessments
paid by BankAtlantic to the SAIF will be reduced as a consequence of the
recapitalization.
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 components of "Foreclosed asset activity, net" were (in
thousands):
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994
-------- ----------------- ----------
<S> <C> <C> <C>
Real estate acquired in settlement of loans:
Operating expenses (income), net ............... $ 47 $ 41 $ (325)
Provision for (reversal of) losses on REO ...... (197) (1,187) 140
Net (gains) on sales ........................... (575) (2,032)(A) (2,105)
----- ---------- -------
Net (income) .................................... $(725) $ (3,178) $(2,290)
===== ========== =======
</TABLE>
- ----------------
(A) Including a $1.3 million gain related to a property originally acquired
through a tax deed during 1995.
The decline in foreclosed asset activity, net during 1996 compared to 1995
was primarily due to sales of commercial real estate owned and a $1.2 million
reduction in the allowance for real estate owned during 1995 compared to a
$197,000 reduction during 1996. The improvement in foreclosed asset activity,
net during 1995 compared to 1994 was primarily due to the $1.2 million reduction
in the allowance for real estate owned compared to a $140,000 provision during
1994, partially offset by lower operating expenses during 1994 compared to 1995.
For further discussion, see "Provision for Loan Losses and Provision for
(Reversal of) Losses on Real Estate Owned."
39
<PAGE>
Other non-interest expense increased during the three years ended December
31, 1996. The additional other expenses in 1996 were associated with expanding
the branch network and the acquisition of eight BNA branches. Stationery,
printing and supplies, and telephone expenses increased by a total of $798,000
during 1996 compared to 1995. The additional 1995 non-interest expenses compared
to 1994 related to the acquisition of five MegaBank branches and the opening of
three South Florida branches and three Florida West Coast branches. During 1995,
stationery, printing and supplies, and telephone expenses increased by a total
of $538,000. In addition, legal costs, ATM expenses and tax certificate
provision increased by $660,000, $283,000 and $260,000, respectively. The higher
legal expenses incurred during 1995 related to $1.2 million of Subject Portfolio
legal costs. During 1994, legal costs were reimbursed pursuant to the terms of
the Covenant, while only $120,000 was 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. Also included in 1995 other expenses
was a write-off of $400,000 associated with a Senior Note offering withdrawn in
March 1995.
The amortization of cost over fair value of net assets acquired relates to
the BNA and MegaBank acquisitions.
MORTGAGE-BACKED SECURITIES AND INVESTMENT SECURITIES
In 1994, Statement of Financial Accounting Standards No. 115, ACCOUNTING
FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES ("FAS 115") was
implemented. 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. 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 Savings Association
Insurance Fund ("SAIF") one-time 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 year ended December 31, 1996 BankAtlantic purchased $231.8 million of
treasury notes and acquired $66.4 million of treasury notes in connection with
the BNA acquisition. All treasury notes purchased or acquired were classified as
available for sale. During 1996 BankAtlantic sold from its available for sale
portfolio, $205.5 million of treasury notes, $136.6 million of adjustable rate
mortgage- backed securities, $20.5 million of 15 year mortgage-backed
securities, and $5.9 million of seven year balloon mortgage backed securities
for gains of $6.0 million. The proceeds from the sales of securities were
utilized to support loan growth. BankAtlantic currently sells substantially all
fixed rate residential real estate loans it originates. During the year ended
December 31, 1995 two $5.0 million treasury notes classified as trading
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.
40
<PAGE>
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>
DECEMBER 31, 1996
---------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST APPRECIATION DEPRECIATION FAIR VALUE
------------ --------------- --------------- ------------
<S> <C> <C> <C> <C>
Tax certificates held to maturity:
Cost equals market ........................... $54,511 $ 0 $ 0 $54,511
Investment securities available for sale(1):
Cost equals market ........................... 6,038 0 0 6,038
Market over cost .............................. 92,483 481 0 92,962
Cost over market .............................. 45,717 0 114 45,605
Mortgage-backed securities available for sale(1):
Market over cost .............................. 157,178 1,756 0 158,934
Cost over market .............................. 136,711 0 905 135,806
-------- ------ ------ --------
Total .......................................... $492,638 $2,237 $1,019 $493,856
======== ====== ====== ========
</TABLE>
- ----------------
(1) Amortized cost excludes net unrealized appreciation of $851,000 on
mortgage-backed securities and unrealized appreciation of $367,000 on
investment securities.
At December 31, 1996 and 1995 all mortgage-backed and investment
securities, excluding tax certificates, were available for sale, whereas during
1994 only certain mortgage-backed securities with a fair value and amortized
cost of $54.0 million and $53.7 million at December 31, 1994 were classified as
available for sale. The composition, yields and maturities of debt securities
were as follows (in thousands):
<TABLE>
<CAPTION>
MORTGAGE ASSET WEIGHTED
U.S. TREASURY TAX BACKED BACKED AVERAGE
AND AGENCIES CERTIFICATES SECURITIES SECURITIES TOTAL TOTAL
---------------- --------------- ------------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1996:
MATURITY:(1)
One year or less .................. $ 44,485 $ 41,656 $ 25,198 $ 0 $ 111,339 6.26%
After one through five years ...... 70,169 12,855 252,704 28,967 364,695 6.00
After five through ten years ...... 984 0 4,887 0 5,871 6.04
After ten years .................. 0 0 11,951 0 11,951 6.10
--------- --------- --------- --------- --------- -----
Fair values ........................ $ 115,638 $ 54,511 $ 294,740 $ 28,967 $ 493,856 6.06%
========= ========= ========= ========= ========= ======
Amortized cost ..................... $ 115,295 $ 54,511 $ 293,889 $ 28,943 $ 492,638 6.08%
========= ========= ========= ========= ========= ======
Weighted average yield based on
fair value ........................ 5.73% 6.92% 6.10% 5.43% 6.06%
Weighted average maturity ......... 1.2 years 2.0 years 2.9 years 2.5 years 2.3 years
--------- --------- --------- --------- ---------
DECEMBER 31, 1995
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%
========= ========= ========= ========= ========= ======
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%
========= ========= ========= ========= ========= ======
</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.
41
<PAGE>
Activity in the allowance for tax certificate losses was (dollars in
thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------
1996 1995 1994
--------------- ---------- -----------
<S> <C> <C> <C>
Balance, beginning of period ................................. $1,648 $ 2,985 $ 2,970
Charge-offs ................................................ (909) (1,854) (1,892)
Recoveries ................................................... 911 662 1,792
------ ------- -------
Net charge-offs ............................................. 2 (1,192) (100)
Additions (reversals) charged to operations .................. (184) (145) 115
------ ------- -------
Balance, end of period ....................................... $1,466 $ 1,648 $ 2,985
====== ======= =======
Average yield on tax certificates during the period(1) ...... 9.73% 9.27% 7.43%
====== ======= =======
</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 December 31, 1996 and 1995 were $2.6 billion
and $1.75 billion, respectively. The increase in total assets was primarily the
result of a $996.2 million increase in loans receivable, partially offset by a
$252.5 million decrease in debt securities available for sale. The loans
receivable increase reflects $395.0 million of loans acquired in the BNA
acquisition and $1.2 billion of loan fundings and purchases during 1996. The
loan fundings and purchases were partially offset by $548.8 million of principal
reductions on loans and $59.4 million of loan sales. The decline in debt
securities available for sale balances resulted from the sale of $374.4 million
of securities and $43.2 million of principal reductions, partially offset by the
purchase of approximately $231.8 million of treasury notes and $66.4 million of
treasury notes acquired in connection with the BNA acquisition. Furthermore,
cash including federal funds sold and other short term investments, cost over
fair value of net assets acquired, other assets and tax certificates increased
by $39.3 million, $17.8 million, $24.9 million, and $4.7 million, respectively.
Cash including federal funds sold and other short term investments increased due
to the eight branches acquired from BNA and the five branches opened during
1996. The increase in cost over fair value of net assets relates to the BNA
acquisition. The increase in other assets resulted from receivables of $9.5
million and $5.4 million from the sale of servicing and the sale of properties
leased to others, respectively. During 1996 BankAtlantic purchased $56.9 million
of tax certificates and $52.4 million of tax certificates paid off.
At December 31, 1996, deposits increased by $532.4 million including
deposits acquired in connection with the BNA acquisition ($490.1 million at
acquisition including non-interest bearing deposits). The remaining net deposit
increase primarily resulted from money market account deposit growth. Advances
from the Federal Home Loan Bank and securities sold under agreements to
repurchase increased by $93.9 million and $124.4 million, respectively. The
additional borrowings were used to fund loan growth. In July 1996, the Company
issued $57.5 million of 63/4% Debentures. Repayment of securities sold under
agreements to repurchase, common stock redemptions, payments for advances by
borrowers for taxes and insurance, the acquisition of BNA, loan originations,
and the purchases of loans, debt securities and tax certificates were primarily
funded through the sales of debt securities available for sale, mortgage
servicing rights and properties leased to others, proceeds from FHLB advances,
federal funds purchased, loan and debt securities repayments, proceeds from the
issuance of 63/4% Debentures and Class A common stock.
42
<PAGE>
LOAN ACTIVITY-The following table shows loan activity by major categories
for the periods indicated (in thousands):
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED DECEMBER 31,
----------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
LOAN FUNDINGS:(1)
Residential real estate loans ............ $ 133,184 $ 111,361 $ 40,706 $ 52,674 $ 41,336
Construction and development loans ...... 147,200 93,102 22,958 13,744 18,912
Commercial real estate and
business loans ........................... 314,319 319,530 259,285 186,584 108,744
Consumer loans(2) ........................ 154,940 114,607 45,159 10,222 7,075
--------- --------- --------- --------- ---------
Total loan fundings ..................... 749,643 638,600 368,108 263,224 176,067
--------- --------- --------- --------- ---------
PURCHASES:(3)(4)
Residential real estate loans ............ 465,942 9,930 0 0 0
Commercial real estate and
business loans ........................... 0 0 3,989 5,142 0
--------- --------- --------- --------- ---------
Total purchases ........................ 465,942 9,930 3,989 5,142 0
--------- --------- --------- --------- ---------
Total loan production .................. 1,215,585 648,530 372,097 268,366 176,067
--------- --------- --------- --------- ---------
Loan sales .............................. (59,408) (34,153) (38,168) (44,983) (36,054)
Principal reduction on loans(1) ......... (548,847) (444,867) (270,986) (289,037) (297,263)
Transfer to real estate owned(5) ......... (1,788) (1,029) (1,282) (2,396) (7,994)
--------- --------- --------- --------- ---------
Net loan activity ..................... $ 605,542 $ 168,481 $ 61,661 $ (68,050) $(165,244)
========= ========= ========= ========= =========
</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 $395.0 million in 1996 and $116.4 million in 1995 of loans acquired
in the BNA and MegaBank acquisitions, respectively.
(5) Includes foreclosures.
Total loan originations for the years ended December 31, 1996, 1995 and
1994 were $133.2 million, $111.0 million, and $36.1 million, respectively, for
residential real estate loans, and $316.0 million, $224.7 million, and $203.3
million, respectively, for commercial real estate and business loans (including
construction and development loans) and $75.4 million, $55.8 million, and $47.7
million, respectively, for direct consumer loans, and $76.9 million, $56.1
million, and $0, respectively, for indirect consumer loans (all of which were
indirect automobile loans). In addition there were $465.9 million in residential
real estate loan purchases during the year ended December 31, 1996.
43
<PAGE>
PRINCIPAL REPAYMENTS-The following table sets forth the scheduled
contractual principal repayments at maturity dates of BankAtlantic's loan
portfolios and debt securities available for sale at December 31, 1996. As of
December 31, 1996, the total amount of principal repayments on loans and debt
securities available for sale contractually due after December 31, 1997 was $2.2
billion, $1.4 billion having fixed interest rates and $749.0 million having
floating or adjustable interest rates.
<TABLE>
<CAPTION>
FOR THE PERIOD ENDING
DECEMBER 31,(1)
OUTSTANDING ------------------------
ON DECEMBER 31,
1996 1997 1998-1999
----------------- ----------- ------------
<S> <C> <C> <C>
Commercial and residential
real estate .................. $1,314,536 $67,592 $68,874
Real estate construction ...... 301,813 112,840 79,387
Consumer (2) .................. 344,690 17,110 22,476
Commercial business ............ 78,177 55,714 5,900
----------- -------- --------
Total loans(3) ............... $2,039,216 $253,256 $176,637
=========== ======== ========
Total debt securities
available for sale(3) ......... $ 439,345 $69,683 $320,839
=========== ======== ========
<CAPTION>
FOR THE PERIOD ENDING DECEMBER 31,(1)
-----------------------------------------------------------
2000-2004 2005-2009 2010-2014 /greater than/2015
------------ ------------ ------------ --------------------
<S> <C> <C> <C> <C>
Commercial and residential
real estate .................. $117,209 $155,621 $57,692 $847,548
Real estate construction ...... 88,538 20,520 528 0
Consumer (2) .................. 114,497 129,733 38,959 21,915
Commercial business ............ 10,673 5,890 0 0
--------- --------- -------- ---------
Total loans(3) ............... $330,917 $311,764 $97,179 $869,463
========= ========= ======== =========
Total debt securities
available for sale(3) ......... $ 36,673 $ 7,041 $ 791 $ 4,318
========= ========= ======== =========
</TABLE>
- ----------------
(1) Does not include banker's acceptances, deductions for undisbursed portion
of loans in process, deferred loan fees, unearned discounts and allowances
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
December 31, 1996 was:
Florida ......... 67%
California ...... 7%
Northeast ...... 9%
Other ............ 17%
----
Total ......... 100%
====
The loan concentration for BankAtlantic's portfolio is primarily in South
Florida where economic conditions have generally remained stable during the
three years ended December 31, 1996. The concentration in California and the
Northeast primarily relates to purchased wholesale residential loans during
1996. The balance of the portfolio is 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 December 31,
1996 were (in thousands):
<PAGE>
<TABLE>
<CAPTION>
COMMERCIAL REAL ESTATE
BUSINESS CONSTRUCTION TOTAL
------------- --------------- ---------
<S> <C> <C> <C>
One year or less .............................. $73,513 $292,846 $366,359
Over one year, but less than five years ...... 4,871 8,967 13,838
Over five years .............................. 0 0 0
-------- --------- ---------
$78,384 $301,813 $380,197
======== ========= =========
Pre-determined interest rate .................. $ 4,871 $ 8,967 $ 13,838
Floating or adjustable interest rate ......... 0 0 0
-------- --------- ---------
$ 4,871 $ 8,967 $ 13,838
======== ========= =========
</TABLE>
44
<PAGE>
DEPOSITS-Deposit accounts consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------
1996 1995 1994
------------- ------------- ------------
<S> <C> <C> <C>
Non-interest bearing deposits ......... $ 163,616 $ 98,964 $ 69,658
Interest bearing deposits:
Insured money fund savings ............ 358,927 249,273 267,770
NOW account ........................... 216,587 171,726 151,890
Savings account ..................... 170,352 103,759 113,578
Time deposits less than $100,000 ...... 739,622 528,163 413,415
Time deposits $100,000 and over ...... 183,676 148,492 69,471
---------- ---------- ----------
Total .............................. $1,832,780 $1,300,377 $1,085,782
========== ========== ==========
</TABLE>
Time deposits $100,000 and over, have the following maturities:
DECEMBER 31,
1996
--------------
Less than 3 months ...... $ 55,743
3 to 6 months ............ 45,946
6 to 12 months ............ 50,412
More than 12 months ...... 31,575
--------
Total .................. $183,676
========
BankAtlantic currently has no brokered deposits however, has established a
facility with Merrill Lynch enabling it to issue up to $150 million of deposits
at BankAtlantic's discretion. BankAtlantic's deposit accounts are insured by the
Federal Deposit Insurance Corporation ("FDIC") through SAIF and the Bank
Insurance Fund ("BIF") up to a maximum of $100,000 for each insured depositor.
45
<PAGE>
The stated rates and balances at which BankAtlantic paid interest on
deposits were (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------
1996 1995 1994
------------- ------------- ------------
<S> <C> <C> <C>
Interest free checking ................................. $ 163,616 $ 98,964 $ 69,658
Insured money fund savings: 3.76% at December 31,
1996, 3.22% at December 31, 1995, and 3.71% at
December 31, 1994 ....................................... 358,927 249,273 267,770
NOW accounts: 1.60% at December 1996, 1.66% at
December 31, 1995, and 1.57% at December 31, 1994 ...... 216,587 171,726 151,890
Savings accounts: 1.30% at December 31, 1996, 1.71% at
December 31, 1995, and 1.87% December 31, 1994 ......... 170,352 103,759 113,578
--------- --------- ---------
Total non-certificate accounts ........................... 909,482 623,722 602,896
--------- --------- ---------
Certificate accounts:
0.00% to 3.00% .......................................... 12,104 56,667 54,738
3.01% to 4.00% .......................................... 11,257 25,602 82,934
4.01% to 5.00% .......................................... 275,991 135,107 182,518
5.01% to 6.00% .......................................... 478,148 303,497 123,016
6.01% to 7.00% .......................................... 112,865 137,917 27,857
7.01% and greater ....................................... 30,749 17,543 11,674
--------- --------- ---------
Total certificate accounts .............................. 921,114 676,333 482,737
--------- --------- ---------
1,830,596 1,300,055 1,085,633
--------- --------- ---------
Interest earned not credited to deposit accounts ......... 2,184 322 149
--------- --------- ---------
Total deposit accounts ................................. $1,832,780 $1,300,377 $1,085,782
========= ========= =========
Weighted average stated interest rate on deposits
at the end of each period .............................. 3.78% 3.85% 3.45%
========= ========= =========
</TABLE>
The amounts of scheduled maturities of certificate accounts were (dollars
in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------------------------------------------------------------
DECEMBER 31, 1996 1997 1998 1999 2000 2001 THEREAFTER
- -------------------------- ----------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
0.00% to 3.00% ......... $10,533 $1,379 $ 50 $ 32 $ 50 $ 60
3.01% to 4.00% ......... 10,536 479 191 0 51 0
4.01% to 5.00% ......... 252,171 20,041 2,051 215 1,085 428
5.01% to 6.00% ......... 395,414 63,178 10,420 3,634 4,869 633
6.01% to 7.00% ......... 76,563 8,742 13,574 5,009 8,170 807
7.01% and greater ...... 18,995 773 1,074 9,719 66 122
-------- ------- ------- ------- ------- ------
Total ............... $764,212 $94,592 $27,360 $18,609 $14,291 $2,050
======== ======= ======= ======= ======= ======
</TABLE>
The following table sets forth the deposit activities for the periods
indicated (in thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Net increase (decrease) before interest credited ............... $ 15,905 $ 51,093 $ (20,814)
Deposits acquired net of purchase accounting amortization ...... 469,065 120,055 0
Interest credited ............................................. 47,433 43,447 30,236
-------- -------- ---------
Total ......................................................... $532,403 $214,595 $ 9,422
======== ======== =========
</TABLE>
46
<PAGE>
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 were
affiliated with each other but were 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 referred to herein as the "Subject Portfolio."
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. After BankAtlantic made a claim against its fidelity bond
carrier, the carrier and BankAtlantic entered into a 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. In accordance with the terms of the
Covenant the carrier paid BankAtlantic a total of $18 million through December
31, 1996 to reimburse it for losses incurred by BankAtlantic in connection with
the Subject Portfolio.
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. The New York action and the action
brought by the State of New Jersey were resolved in 1996 and 1995, respectively.
The remaining New Jersey action purports to be a class action on behalf of named
and unnamed plaintiffs that may have obtained loans from dealers who
subsequently sold the loans to financial institutions including BankAtlantic.
The New Jersey action seeks civil remedies against certain contractors and a
named dealer and also seeks to cancel or modify certain mortgage loans and was
commenced immediately after resolution of the State of New Jersey action. The
pending New Jersey action which was brought against over 25 parties, including
BankAtlantic, purports to be a class action on behalf of named and unnamed
plaintiffs that may have obtained loans from dealers who subsequently sold the
loans to financial institutions including BankAtlantic. The New Jersey action
seeks, among other things, rescission of the loan agreements and damages. In
November 1995, the court in the remaining 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.
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. See Note 15 to the Consolidated Financial Statements for
further discussion on the Subject Portfolio.
47
<PAGE>
Loans receivable composition, including mortgage-backed securities, at the
dates indicated was (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------
1996 1995
----------------------- ----------------------
AMOUNT PERCENT AMOUNT PERCENT
------------ ---------- ----------- ----------
<S> <C> <C> <C> <C>
LOANS RECEIVABLE:
Real estate loans:
Residential real estate ...... $ 867,081 47.52% $157,361 18.99%
Residential real estate
available for sale ......... 16,207 0.89 17,122 2.07
Construction and
development .................. 301,813 16.54 122,371 14.77
FHA and VA insured ......... 4,013 0.22 5,183 0.63
Commercial real
estate ..................... 427,235 23.41 350,256 42.27
Other loans:
Second mortgage -
direct ..................... 86,234 4.73 63,052 7.61
Second mortgage -
indirect ..................... 9,894 0.54 25,621 3.09
Commercial business ......... 78,177 4.28 64,194 7.75
Consumer - other
direct ..................... 74,072 4.06 37,502 4.53
Consumer - other
indirect ..................... 174,490 9.56 96,042 11.59
--------- ------- --------- -------
Total ..................... 2,039,216 111.75 938,704 113.30
--------- ------- --------- -------
Adjustments:
Undisbursed portion of
loans in process ............ 190,874 10.45 89,896 10.85
Other ........................ 0 0.00 0 0.00
Unearned discounts on
commercial real
estate loans ............... 705 0.04 793 0.10
Unearned discounts
(premium) on purchased
and consumer loans ......... (2,762) (0.15) 385 0.05
Allowance for
loan losses .................. 25,750 1.41 19,000 2.30
--------- ------- --------- -------
Total loans
receivable, net ............ $1,824,649 100.00% $828,630 100.00%
========= ======= ========= =======
Mortgage-backed
securities:
FNMA participation
certificates ............... $ 101,381 34.40% $132,554 22.18%
GNMA and FHLMC
mortgage-backed
securities .................. 193,359 65.60 465,197 77.82
--------- ------- --------- -------
Total mortgage-
backed
securities(1) ............... $ 294,740 100.00% $597,751 100.00%
========= ======= ========= =======
Banker's acceptances ......... $ 207 100.00% $ 0 0.00%
========= ======= ========= =======
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------
1994 1993 1992
---------------------- ---------------------- ---------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
----------- ---------- ----------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
LOANS RECEIVABLE:
Real estate loans:
Residential real estate ...... $102,677 18.79% $120,531 24.80% $147,654 26.52%
Residential real estate
available for sale ......... 6,843 1.25 5,752 1.19 7,641 1.37
Construction and
development .................. 45,725 8.37 11,333 2.34 12,961 2.33
FHA and VA insured ......... 6,395 1.17 7,972 1.64 9,854 1.77
Commercial real
estate ..................... 303,877 55.61 198,095 40.76 156,844 28.18
Other loans:
Second mortgage -
direct ..................... 40,564 7.42 15,971 3.29 7,434 1.34
Second mortgage -
indirect ..................... 34,585 6.33 47,307 9.73 65,074 11.69
Commercial business ......... 24,566 4.50 27,979 5.76 33,071 5.94
Consumer - other
direct ..................... 16,386 3.00 19,667 4.05 31,722 5.70
Consumer - other
indirect ..................... 32,373 5.93 56,896 11.71 109,187 19.61
--------- ------- --------- ------- --------- -------
Total ..................... 613,991 112.37 511,503 105.27 581,442 104.45
--------- ------- --------- ------- --------- -------
Adjustments:
Undisbursed portion of
loans in process ............ 49,981 9.15 5,570 1.15 6,492 1.17
Other ........................ 63 0.01 33 0.01 55 0.01
Unearned discounts on
commercial real
estate loans ............... 874 0.16 2,124 0.44 0 0.00
Unearned discounts
(premium) on purchased
and consumer loans ......... 427 0.08 820 0.17 1,733 0.31
Allowance for
loan losses .................. 16,250 2.97 17,000 3.50 16,500 2.96
--------- ------- --------- ------- --------- -------
Total loans
receivable, net ............ $546,396 100.00% $485,956 100.00% $556,662 100.00%
========= ======= ========= ======= ========= =======
Mortgage-backed
securities:
FNMA participation
certificates ............... $147,652 23.52% $178,928 33.99% $174,666 35.83%
GNMA and FHLMC
mortgage-backed
securities .................. 480,230 76.48 347,437 66.01 312,828 64.17
--------- ------- --------- ------- --------- -------
Total mortgage-
backed
securities(1) ............... $627,882 100.00% $526,365 100.00% $487,494 100.00%
========= ======= ========= ======= ========= =======
Banker's acceptances ......... $ 0 0.00% $109,931 100.00% $ 0 0.00%
========= ======= ========= ======= ========= =======
</TABLE>
- ----------------
(1) Includes net unrealized appreciation on mortgage-backed securities available
for sale of $851,000, $8.8 million and $314,000 at December 31, 1996, 1995
and 1994, respectively.
48
<PAGE>
ASSET AND LIABILITY MANAGEMENT
BankAtlantic's business emphasis is the origination of commercial real
estate loans, commercial business loans and consumer loans which generally have
higher yields and shorter durations than residential real estate loans.
BankAtlantic originates residential loans with both fixed and adjustable rates.
The majority of fixed rate and some adjustable rate loans are currently sold to
correspondents. BankAtlantic also purchases residential loans with both fixed
and adjustable rates, which are retained for portfolio. Since these bulk loan
purchases are acquired periodically, management is in a position (unlike the
case of individual loan originations) to partially hedge the underlying interest
rate risk in this portfolio due to the size and generally homogeneous nature of
these purchases. BankAtlantic also acquires mortgage-backed securities and
Treasury securities with intermediate terms. During recent years in order to
lower its cost of funds, BankAtlantic has not emphasized certificates of deposit
and seeks to emphasize generating low cost transaction and escrow accounts as
market opportunities allow. See "Mortgage-Backed Securities and Investment
Securities." Management continually assesses general economic conditions, the
interest rate environment and the yields and credit risk associated with
alternative investments.
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 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.
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 positive .42% at December 31, 1996. The gap ratio
was a negative 2.49% at December 31, 1995. The improvement in the 1996 gap ratio
resulted from higher commercial and construction loan balances, and an increase
in stockholder's equity, non-interest bearing deposits, and intermediate term
FHLB borrowings. The above items were partially offset by increased fixed rate
residential loan balances. Commercial and construction loan balances increased
from $472.6 million at December 31, 1995 to $729.0 at December 31, 1996.
Commercial and construction loans generally have floating rates and terms of
less than one year. BankAtlantic's non-interest bearing deposits increased from
$99.0 million at December 31, 1995 to $163.6 million at December 31, 1996. The
increase in non-interest bearing deposits primarily resulted from the BNA
acquisition. BankAtlantic's stockholder's equity increased by $63.9 million due
to contributions by the Company and earnings. During 1996, BankAtlantic borrowed
$175.7 million of one to six year FHLB advances to fund fixed rate residential
loans. Fixed rate residential loans increased from $48.5 million at December 31,
1995 to $468.9 million at December 31, 1996. The higher fixed rate residential
loan balances resulted from the BNA acquisition and purchased loans. The
absolute amount of BankAtlantic's one year gap changed from a negative $43.6
million at December 31, 1995, to a positive $10.9 million at December 31, 1996.
49
<PAGE>
At December 31, 1996 BankAtlantic had a negative 91-180 day cumulative gap
of 5.06% and a positive cumulative gap of .15%, .42%, 6.45%, 8.74% 13.33%,
14.31% and 14.33% for 0-90 days, 181 days to 1 year, 1-3 years, 3-5 years, 5-10
years, 10-20 years and greater than 20 years, respectively. Interest rates
declined during 1996. Interest rate rises would be minimized by the fact that a
significant amount of BankAtlantic's interest bearing liabilities are deposits
for which interest rates paid do not generally increase at the same
proportionate rate as an increase in the prime rate. However, the interest rates
charged on BankAtlantic's adjustable rate loans and securities are priced on the
basis of the prime rate and other indices and increase at the same rate as the
prime or applicable index rate, subject only to caps that may exist in the loan
or security instrument. At the present time, caps on interest earning assets
generally do not have the effect of limiting increases in the interest rate
charged on such assets. As noted above, the cumulative positive gap in future
periods provides the opportunity to increase earnings in a rising interest rate
environment due to the ability to reprice more assets than liabilities.
Management considers BankAtlantic's current gap position to be within
acceptable parameters. To the extent the gap position deviates from this status,
actions which could be taken, if deemed appropriate, include the lengthening or
shortening of maturities for borrowings and investment security purchases,
disposing of debt securities which are available for sale as well as purchasing
more variable rate 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. At December 31, 1996, no
interest rate risk deduction to capital would have been required under the rule,
although BankAtlantic's net portfolio value ("NPV") would decrease in a rising
interest rate environment. NPV is the difference between incoming and outgoing
discounted cash flows from assets, liabilities and off-balance sheet contracts.
For further discussion see "Savings Institution Regulation".
Presented below is an analysis of BankAtlantic's interest rate risk at
September 30, 1996 (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 (dollars in thousands):
NET PORFOLIO VALUE
------------------------
CHANGE
IN RATES $ AMOUNT $ CHANGE
- ---------- ----------- ----------
+200bp 223,252 (32,495)
+100bp 242,106 (13,641)
0bp 255,747 0
-100bp 260,825 5,078
-200bp 258,669 2,922
50
<PAGE>
BANKATLANTIC'S CUMULATIVE RATE SENSITIVITY GAP AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
181
0-90 91-180 DAYS TO 1-3
DAYS DAYS 1 YEAR YEARS
----------- ------------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest earning assets:
Investment securities(5)(7) ...... $35,921 $ 11,450 $15,220 $12,855
Residential loans(1)(2)
Conventional single
family ........................... 19,226 11,276 21,862 78,910
Adjustable single family ......... 138,911 101,446 141,866 36,199
Debt securities available for
sale - fixed rates(3)(6) ......... 27,280 22,438 80,264 172,734
Debt securities available for
sale floating rates ............ 8,168 0 0 0
Commercial real estate
loans ........................... 68,392 19,086 227,704 124,960
Adjustable commercial real
estate loans ..................... 259,154 0 0 0
Other loans:
Commercial business ............... 1,732 1,290 2,373 4,871
Commercial business
adjustable ..................... 68,118 0 0 0
Consumer ........................ 23,655 22,743 42,216 131,607
Consumer prime rate ............... 51,194 0 0 0
------- ----------- ------- -------
Total interest earning
assets ........................... 701,751 189,729 531,505 562,136
------- ----------- ------- -------
Interest bearing liabilities:
Money fund savings(4) ............ 70,888 56,888 91,305 73,265
Savings and NOW(4) ............... 26,561 24,520 44,678 124,066
Certificate accounts ............ 269,659 243,758 252,979 121,952
Borrowings:
Securities sold under
agreements to
repurchase ..................... 210,854 0 0 0
Advances from FHLB ............... 119,963 0 0 86,036
------- ----------- ------- -------
Total interest-bearing
liabilities ..................... $697,925 $ 325,166 $388,962 $405,319
======= =========== ======= =======
Interest rate sensitivity GAP
(repricing difference) ......... $ 3,826 $(135,437) $142,543 $156,817
Cumulative GAP .................. $ 3,826 $(131,611) $10,932 $167,749
Cumulative ratio of GAP to
total assets ..................... 0.15% (5.06)% 0.42% 6.45%
======= =========== ======= =======
<CAPTION>
3-5 5-10 10-20 /greater than/20
YEARS YEARS YEARS YEARS TOTAL
----------- ----------- ----------- ------------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Interest earning assets:
Investment securities(5)(7) ...... $ 0 $ 0 $ 0 $ 0 $ 75,446
Residential loans(1)(2)
Conventional single
family ........................... 66,839 254,664 15,550 552 468,879
Adjustable single family ......... 0 0 0 0 418,422
Debt securities available for
sale - fixed rates(3)(6) ......... 95,849 25,886 854 29 425,334
Debt securities available for
sale floating rates ............ 0 0 0 0 8,168
Commercial real estate
loans ........................... 29,752 0 0 0 469,894
Adjustable commercial real
estate loans ..................... 0 0 0 0 259,154
Other loans:
Commercial business ............... 0 0 0 0 10,266
Commercial business
adjustable ..................... 0 0 0 0 68,118
Consumer ........................ 59,253 4,804 9,218 0 293,496
Consumer prime rate ............... 0 0 0 0 51,194
------- -------- -------- -------- ---------
Total interest earning
assets ........................... 251,693 285,354 25,622 581 2,548,371
------- -------- -------- -------- ---------
Interest bearing liabilities:
Money fund savings(4) ............ 34,882 31,699 0 0 358,927
Savings and NOW(4) ............... 50,340 116,774 0 0 386,939
Certificate accounts ............ 32,900 2,050 0 0 923,298
Borrowings:
Securities sold under
agreements to
repurchase ..................... 0 0 0 0 210,854
Advances from FHLB ............... 74,011 15,690 0 0 295,700
------- -------- -------- -------- ---------
Total interest-bearing
liabilities ..................... $192,133 $166,213 $ 0 $ 0 $2,175,718
======= ======== ======== ======== =========
Interest rate sensitivity GAP
(repricing difference) ......... $59,560 $119,141 $ 25,622 $ 581 $ 372,653
Cumulative GAP .................. $227,309 $346,450 $372,072 $372,653
Cumulative ratio of GAP to
total assets ..................... 8.74% 13.33% 14.31% 14.33%
======= ======= ======= =======
</TABLE>
- ----------------
(1) Fixed rate mortgages are shown in periods which reflect normal amortization
plus prepayments of 7-8% 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 9-15% 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 and federal funds sold.
(6) Asset-backed securities are shown in periods which reflect normal
amortization plus prepayments equal to BankAtlantic's experience of 45% 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.
51
<PAGE>
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.
The Company's principal source of cash flow is dividends from BankAtlantic
and it is anticipated that such funds will be utilized by the Company to pay
dividends on its outstanding common stock and interest on outstanding
debentures. The Company also obtains funds through the exercise of stock
options.
A summary of the Company's consolidated cash flows follows (in thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------
1996 1995 1994
------------- ----------- -------------
<S> <C> <C> <C>
Net cash provided (used) by:
Operating activities ..................... $ 29,159 $ 36,649 $ 12,199
Investing activities ..................... (336,615) (65,233) (162,055)
Financing activities ..................... 346,732 42,471 169,485
--------- -------- ---------
Increase in cash and due from banks ...... $ 39,276 $ 13,887 $ 19,629
========= ======== =========
</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 of 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.
In August 1996, the Company announced a plan to purchase up to 1.25 million
shares of the Company's common stock. As of December 31, 1996, the Company had
repurchased, in the secondary market, 228,125 and 112,500 of Class A and Class B
common shares, respectively, for $3.3 million. These shares were retired at the
time of repurchase.
Management believes that the company and BankAtlantic have adequate
liquidity to meet their business needs and regulatory requirements.
The Company's primary use of funds is to pay cash dividends and interest
expense on $57.5 million and $21.0 million of currently outstanding 63/4% and 9%
Debentures, respectively. It is anticipated that funds for payment of such
expenses will continue to be obtained from BankAtlantic. Additionally, the
ultimate repayment by the Company of its outstanding Debentures may be dependent
upon dividends from BankAtlantic, refinancing of the debt or raising additional
equity capital by the Company.
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,
mortgage servicing rights, investment securities, proceeds from securities sold
under agreements to repurchase, advances from the FHLB, operations, other
borrowings, and capital transactions. These funds were primarily utilized to
fund loan disbursements and purchases, repayments of securities sold under
agreements to repurchase, maturities of advances from the FHLB, purchases of tax
certificates and payments of maturing certificates of deposit. In August 1994
the FHLB
52
<PAGE>
granted BankAtlantic a $300 million line of credit with a maximum term of ten
years. In January 1997, the FHLB increased BankAtlantic's line of credit to
$500 million. In November 1996, Merrill Lynch granted BankAtlantic a facility of
up to $150.0 million for broker deposits. The facility will be exercised as an
alternative source of borrowings, when and if needed. BankAtlantic also has
three $5.0 million lines of credit with three federally insured banking
institutions to purchase Federal Funds. At December 31, 1996, there were $6.1
million of Federal funds balances outstanding.
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
12.98% under these regulations at December 31, 1996. See "Regulation and
Supervision-Savings Institution Regulations-Liquidity Requirements of the OTS."
Total commitments to originate and purchase loans, asset-backed securities
and mortgage-backed securities, excluding the undisbursed portion of loans in
process, were approximately $83.7 million, $69.7 million and $83.9 million at
December 31, 1996, 1995 and 1994, respectively. BankAtlantic funded its
commitments out of loan repayments and, for a limited period of time, short-term
borrowings. At December 31, 1996, loan commitments were approximately 4.6% of
loans receivable, net.
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.
DIVIDENDS
The Company intends to pay regular quarterly cash dividends on its common
stock. Funds for dividend payments and interest expense on the 9% and 63/4%
Debentures are or will be dependent upon BankAtlantic's ability to pay dividends
to the Company. 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. See discussion on
Regulation and Supervision "Restriction on Dividends and Other Capital
Distributions."
In August 1993, BankAtlantic declared and paid a quarterly cash dividend to
its common stockholders and has paid a regular quarterly dividend since that
time. Subject to the results of operations and regulatory capital requirements
for BankAtlantic, the Company will seek to declare regular quarterly cash
dividends on its common stock. The Company declared five for four common share
stock splits effected in the form of 25% stock dividends payable in Class A
shares to all shareholders of both classes of common stock in February 1997 paid
in March 1997, and July 1996 paid in August 1996. Due to accounting and tax
considerations, the Company issued the stock dividend in shares of Class B
common stock with respect to options to purchase Class B common stock previously
granted under the Company's stock option plans. See discussion on "Restrictions
on Dividends and Other Capital Distributions."
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 is the holding company for BankAtlantic. The Company acquired
all of the capital stock of BankAtlantic on July 13, 1994 pursuant to a 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 Office of Thrift Supervision ("OTS") and is
subject to OTS regulations, examinations, supervision and reporting. See
"Regulation and Supervision."
BankAtlantic is headquartered in Ft. Lauderdale, Florida and provides 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 or acquire
commercial, residential and consumer loans and to make other permitted
investments such as the purchase of mortgage-backed securities, tax certificates
and other investment securities. BankAtlantic has shifted its activities from
those of a traditional savings and loan to those generally associated with
commercial banking. In February 1995, BankAtlantic acquired MegaBank, a
Miami-based commercial bank with deposits of approximately $120 million. The
MegaBank acquisition added 5 branches to BankAtlantic's branch network. In
October 1996, BankAtlantic acquired BNA, a Florida chartered commercial bank
with deposits of approximately $470 million and 13 branches, 5 of which were
closed upon acquisition. See Note 20 of the Consolidated Financial Statements.
BankAtlantic operates through 56 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
savings bank headquartered in the State of Florida and third in size among all
independent financial institutions headquartered in the State of Florida, based
on deposits at September 30, 1996, 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, fees
and interest earned from its mortgage servicing operations and fees earned on
deposits and ATMs. 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 (including purchases of
wholesale residential real estate loans), 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.
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."
UNDERWRITING PROCEDURES-BankAtlantic's loan origination 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.
BankAtlantic's loan purchasing underwriting procedures are designed to
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assess the seller's underwriting procedures, as well as individual loan quality
including credit review. BankAtlantic obtains a current credit history for each
loan. The Company has developed comprehensive purchase guidelines for its loan
eligibility requirements with respect to loan amount, type of property, state of
residence, loan-to-value ratios, borrower's sources of funds, appraisal and
loan documentation, among other things. An underwriting and legal due diligence
review is completed prior to purchase. A legal review of every file is conducted
to determine the adequacy of the legal documentation. In its loan purchases,
BankAtlantic generally reserves the right to reject particular loans from a loan
package being considered for purchase and does so for loans in a package that do
not meet its eligibility requirements. Commitments to purchase residential loans
are made to mortgage bankers, investment bankers and unrelated financial
institutions typically thirty to sixty days in advance of delivery, subject to
due diligence.
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 BankAtlantic's Major Loan Committee.
The Major Loan Committee consists of the Chairman of the Board, the Vice
Chairman, the Senior Executive Vice President, certain Executive Vice Presidents
and certain other officers of BankAtlantic.
COMMERCIAL REAL ESTATE LOANS-Substantially all of BankAtlantic's commercial
real estate loans relate to property located in Dade, Broward and Palm Beach
Counties, Florida. BankAtlantic has, however, made commercial real estate loans
elsewhere in Florida and anticipates increasing lending outside the South
Florida area in the future. BankAtlantic's commercial real estate loans include
permanent mortgage loans on commercial and industrial properties (generally
having five to seven year maturities), 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 collateral's appraised
value and requires borrowers to maintain, appropriate escrow accounts at
BankAtlantic for 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 weight 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 the concentration of
principal is on a limited number of loans and borrowers and repayment is
significantly 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 developers.
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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.
RESIDENTIAL REAL ESTATE LOANS-BankAtlantic's residential real estate
lending includes home mortgage loans originated by BankAtlantic and secured by
residential real estate located in Dade, Broward and Palm Beach Counties,
Florida. and commencing in 1996, substantially increased the purchase of
wholesale residential real estate loans located throughout the United States.
BankAtlantic's residential loans have been originated through its branch banking
network, a staff of commissioned lending officers, and outside brokers. These
outside brokers had received a fee for services rendered upon the successful
underwriting and closing of a loan. Applicable regulations require that all
loans in excess of 90% of appraised value be insured by private mortgage
insurance. BankAtlantic's policy is in compliance with these regulations and
generally requires insurance on loan to value ratios 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. 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, the majority of which have
been sold to correspondents with a lesser number retained for portfolio
investment based on specific needs and criteria.
During 1996, BankAtlantic purchased approximately $465.9 million of
one-to-four family of fixed and adjustable residential loans from various
mortgage bankers, investment bankers and unrelated financial institutions
throughout the United States. Purchases of residential loans throughout the
United States reduces BankAtlantic's loan concentration in South Florida.
BankAtlantic primarily purchases loans in the secondary market where yields are
generally lower than on originated loans, however, management believes that the
lower yield is significantly offset by lower administrative costs based on the
volume of activity and the ability to partially hedge the interest rate risk
associated with these loans due to the size and generally homogenous nature of
the purchases.
CONSUMER LOANS-BankAtlantic originates consumer loans bearing both fixed
and prime-based interest rates primarily ranging in terms up to 5 years other
than second mortgage loans which may have longer terms. Loans are originated
directly through the branch network. 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. The volume of direct consumer lending increased in 1996 from 1995
levels but is expected to decline during 1997. Prior to 1997, direct consumer
loans were solicited through mass and direct marketing and through the
distribution and display of advertising materials at branch offices and,
brokers. During 1997, direct consumer loans will primarily be solicited through
branch offices. BankAtlantic also obtains automobile loans indirectly through
automobile dealerships located in South Florida.
BankAtlantic's primary focus of its consumer lending in recent years has
been the origination of direct second mortgage loans (home equity loans secured
by a junior lien on residential real property).
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These loans are typically based on a maximum 80% loan-to-value ratio. Second
mortgage loans generally are originated on both a line of credit and a fixed
term basis ranging from 5 to 15 years.
BankAtlantic also extends personal loans which 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.
For several years, BankAtlantic eliminated its indirect lending activities
and through its acquisition of MegaBank in February 1995, BankAtlantic reentered
the indirect automobile lending market, which consists of automobile loans made
by others and acquired by BankAtlantic. MegaBank historically obtained
fixed-rate automobile loans indirectly through various automobile dealerships
located in Dade County, Florida and BankAtlantic has continued this practice and
has increased its indirect lending activities with various dealerships
throughout South Florida.
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 Note 15
of the Consolidated Financial Statements regarding BankAtlantic's experience
relating to the Subject Portfolio.
LOAN COMMITMENTS-BankAtlantic issues commitments to originate 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 60 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 a fee for periods of up to 270 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.
FACTORING-In January 1997, BankAtlantic Factors, Inc. ("Factors Inc.") was
established as a subsidiary of BankAtlantic. Factors Inc. purchases accounts
receivable from a client with recourse. Clients are generally manufacturers,
distributors, importers and service companies in various industries. Factors
Inc. will advance funds to the client based on the eligible collateral. However,
it may suffer a loss if the client's customer fails to pay and the client does
not meet its recourse obligations to Factors, Inc. Credit facilities of $500,000
or more require the approval of BankAtlantic's Major Loan Committee. Discounts
will generally vary between 11/4% to 2% per month based on various criteria up
to statutory limits. Outside brokers may be used to obtain certain relationships
and will be paid commissions based on a percentage of earnings from an account
as collected. During 1997, it is anticipated that the average balances of
factored receivables will not exceed $10.0 million.
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MORTGAGE SERVICING RIGHTS-As part of its strategic business plan,
BankAtlantic periodically purchases mortgage servicing rights in small volumes
through concurrent flow servicing arrangements supplemented with small bulk
purchases and sells such rights in larger volumes where the premiums available
are generally greater.
It is BankAtlantic's intent to maintain servicing right balances below 35%
of core capital. Further, BankAtlantic generally retains servicing rights on
loans that its sells, and purchases wholesale residential real estate loans on
both a servicing retained and servicing released basis. Sales of servicing
rights are made based on market conditions as well as maintaining servicing
rights below the determined level. The fees derived from servicing mortgage
loans include mortgage servicing fees as well as return check and late charge
fees. 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 higher amortization of mortgage servicing
rights due to the write- off of rights relating to loans that are prepaid. A
decline in the value of mortgage servicing rights may also reduce regulatory
capital. (See "Savings Institutions Regulation"). Conversely, as interest rates
rise, loan prepayments decline, resulting in a longer average life of the rights
and higher cumulative net revenues earned on mortgage servicing rights. .
Premiums paid in connection with the purchase of mortgage loan servicing rights
are amortized by BankAtlantic using prepayment assumptions that management
believes are on the conservative end of a probable range which results in higher
expenses on a monthly basis but may result in increased gains on a sale of the
mortgage servicing rights.
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, such as automobile loans, factored
receivables and 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
the loan is placed on non-accrual. 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, or classified as
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
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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 have matured or
are contractually 90 days or more past due as to interest or principal payments;
(iii) assets acquired in 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 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. For
collateral dependent loans, impairment is based on the fair value of the
underlying collateral. 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 MBS, tax certificates, Treasury Notes, Federal agency obligations, and
asset-backed securities. Additionally, BankAtlantic has, in the past, purchased
banker's acceptances and corporate bonds. Federal regulations limit the types
and quality of instruments in which BankAtlantic may invest.
MBS are pools of residential loans which are made to consumers and then
enerally sold to governmental agencies, such as the Government National
Mortgage Corporation ("GNMA"), Federal
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National Mortgage Association ("FNMA") and Federal Home Loan Mortgage
Corporation ("FHLMC"). MBS have fixed or variable rates ("ARMs") and
either 15-30 year maturities or 5-7 year balloon maturities. BankAtlantic
generally invests in ARMs or 5-7 year balloon MBS insured or guaranteed by these
government agencies. 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
purchased by BankAtlantic 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.
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. 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.
Currently, 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.
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. During
1997, BankAtlantic intends to acquire tax certificates from various
municipalities outside of the State of Florida. The nature of priority,
statutory periods and deed procedures does vary by applicable taxing
authorities. It is not anticipated that there will be any significant
concentration of tax certificate purchases in any one taxing authority outside
of the State of Florida.
The OTS has reviewed the amount invested in, and procedures utilized in the
acquisition and administration of, tax certificates by savings institutions.
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 certificates,
including interest thereon, not exceed 100% of risk-based capital. Based on
market conditions, BankAtlantic purchased approximately $49 million, $44 million
and $47 million in tax certificates at auctions in 1996, 1995 and 1994,
respectively, less than that permitted by the OTS recommendation. At December
31,
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1996, BankAtlantic had an outstanding balance of approximately $54.5 million in
tax certificates. For descriptions of BankAtlantic's investments in tax
certificates and other investment securities, see Note 2 to the Consolidated
Financial Statements. For a discussion of regulatory limitations on
BankAtlantic's investments, see "Regulation and Supervision."
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.
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, 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 to intermediate 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 and purchases of investments. 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
Bank Insurance Fund ("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 currently hold
any deposits obtained through brokers. In November 1996, Merrill Lynch granted
BankAtlantic a facility of up to $150 million for brokered deposits. The
facility is considered to be an alternative source of borrowings.
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 match fund or partially match fund
fixed rate wholesale residential real estate loans purchased, to repay other
borrowings, meet deposit withdrawals and expand its lending and short-term
investment activities. See Note 8 to the Consolidated Financial Statements.
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FEDERAL FUNDS BORROWINGS-BankAtlantic has established three $5.0 million
unsecured facilities with 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
is currently the largest independent savings bank and third largest independent
financial institution headquartered in the State of Florida based on deposits at
September 30, 1996, 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.
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 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 funds, credit
unions, 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, finance and insurance companies.
Legislative developments relating to interstate branching and the ownership
of financial institutions are expected to result in continued consolidation of
financial institutions, and also provide larger financial institutions increased
access in the marketplace. Accordingly, BankAtlantic expects increased
competition in the immediate future. See further discussion under "Regulation
and Supervision- Legislative Developments".
EMPLOYEES
The Company does not have any employees who are not also employees of
BankAtlantic. At December 31, 1996, BankAtlantic employed 961 full-time and 56
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.
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 Securities
and Exchange Act. In addition, BFC which owns 46% of the Company's voting common
stock, 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
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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. The OTS and the FDIC
periodically review BankAtlantic's compliance with various regulatory
requirements. The regulatory structure also gives regulatory authorities
extensive discretion in connection with their 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 insured
institution 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 insured institution 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
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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. See "Regulation and Supervision-Savings Institution
Regulations-Transactions with Affiliates" below for a general discussion of the
restrictions on dealing with affiliates.
LEGISLATIVE DEVELOPMENTS
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 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.
FDIC DEPOSIT INSURANCE-On September 30, 1996, President Clinton signed into
law H.R. 3610, which recapitalized the SAIF and substantially bridged the
assessment rate disparity existing between SAIF and BIF insured institutions.
The new law subjected institutions with SAIF assessable deposits, including
BankAtlantic, to a one-time assessment of 0.657% of covered deposits at March
31, 1995. BankAtlantic's one-time assessment, which was paid in November 1996,
resulted in a pre-tax charge of $7.2 million for the year ended December 31,
1996, and under provisions of the law, was treated as a fully deductible
"ordinary and necessary business expense" for tax purposes. The $7.2 million
charge excludes the $2.3 million amount assessed on BNA deposits which was
included considered in recording the acquisition of BNA under the purchase
method of accounting. in As a result of the special assessment, discussed
herein, the SAIF was capitalized at the target Designated Reserve Ratio ("DRR")
of 1.25 percent of estimated insured deposits on October 1, 1996.
On December 1, 1996 the FDIC finalized a rule lowering the rates on
insurance assessments paid to the SAIF, effective October 1, 1996. The rule also
separates, effective January 1, 1997, the Financing Corporation ("FICO")
assessment to service the interest on its bond obligations from the SAIF
assessment. The amount assessed on individual institutions by the FICO will be
in addition to the
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amount paid for deposit insurance according to the FDIC's risk-related
assessment rate schedules. The FICO assessment rate for the first semi-annual
period in 1997 was set at 6.48 basis points annually for SAIF-assessable
deposits and 1.30 basis points for BIF assessable deposits. By law, the FICO
rate on BIF-assessable deposits must be one-fifth the rate on SAIF-assessable
deposits until pro-rata sharing begins, when the insurance funds merge or
January 1, 2000, whichever occurs first. The rule established a special interim
rate schedule of 18 to 27 basis points annually between October 1, 1996 and
January 1, 1997. Excess assessments were refunded during January 1997. Insurance
premiums range from zero to 27 basis points annually, with well capitalized
institutions in the highest supervisory subgroup paying zero basis points and
undercapitalized institutions in the lowest supervisory subgroup paying 27 basis
points. At December 31, 1996, BankAtlantic met the capital requirements for a
well capitalized institution and anticipates paying zero basis points for
insurance premiums and anticipates paying 6.48 basis points for its
SAIF-assessable deposits and 1.30 for its BIF-assessable deposits based on it
supervisory subgroup for FICO assessments. 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. All BNA
deposits acquired are subject to SAIF premiums. At December 31, 1996,
BankAtlantic had approximately $143.8 million of deposits subject to BIF
premiums and $1.7 billion subject to SAIF premiums.
The Company has been considering converting BankAtlantic's charter to that
of a commercial bank, however, 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 possible consolidation of bank and thrift
charters.
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 generally accepted
accounting principles ("GAAP"). At December 31, 1996, BankAtlantic exceeded 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 mortgage servicing rights ("MSR")). However, a portion of MSR 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 MSR (ii) the current amortized book value as determined under GAAP or
(iii) 50% of core capital.
(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 MSR, must be deducted. The percentage of MSR
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 MSR or (b) the amount of MSR allowed to be included in core capital.
(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
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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.
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, including 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. See
"Liquidity and Capital Resources" and Note 14 of the Consolidated Financial
Statements for a discussion on BankAtlantic's capital position.
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.
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 that
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, 1996 deduction would have been based on the
lesser of the March 1996, June 1996 or September 1996 interest rate risk
components. At December 31, 1996, based on the above, no interest rate risk
deduction to capital would have been required by BankAtlantic.
Additionally, 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 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 rule was in
effect for OTS regulated financial institutions at December 31, 1996,
BankAtlantic would have been in full compliance with the requirement.
Effective March 1, 1994, core deposit intangibles ("CDIs") have been
excluded in the determination of regulatory capital. BankAtlantic did not have
CDIs since the effective date of the final rule and accordingly, BankAtlantic
was not affected by this exclusion from capital. However, as a result of the
MegaBank and BNA acquisitions, 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 December 31, 1996, $29.0 million has been deducted
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in connection with the MegaBank and BNA acquisitions based upon the intangible
exclusion. For a further discussion of the 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. See also "Legislative
Developments-FDIC Deposit Insurance."
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.
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.
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
or 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 December 31, 1996 BankAtlantic
met the capital requirements of a "well capitalized" institution as defined
above.
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
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safety and soundness grounds. While proposed regulations would eliminate the
notice requirement for certain institutions, the proposal would not apply to
BankAtlantic because it is owned by a holding company.
THE FEDERAL HOME LOAN BANK ("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 FHLB. 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 forth in HOLA
and in the rules of the OTS and include dollar amount 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
guidelines. 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
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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.
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. BankAtlantic has requested
and received approval for one construction lending relationship under the above
exception. This exception is an alternative to the 15% limitation and not in
addition to that limitation. At December 31, 1996, BankAtlantic was in
compliance with the loans to one borrower limitations. During 1997, BankAtlantic
originated a $35.0 million commercial real estate loan in which the Company
participated $6.5 million of the loan.
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 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 and is
controlled by a holding company, then, within one year after the failure, the
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holding company must register as a bank holding company and will be subject to
all applicable restrictions on bank holding companies. At December 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, 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. On September 30, 1996, Congress amended Section 22(h) by adding an
exception for extensions of credit made pursuant to a program that is widely
available to all employees of the lending institution and does not give
preference to insiders over other employees. Effective November 4, 1996, the FRB
amended Regulation O to implement this amendment to 22(h).
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 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
December 31, 1996, BankAtlantic was in compliance with the restrictions
regarding transactions with affiliates.
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%)
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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 December 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 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 an "outstanding record of
meeting community credit needs" during its most recent OTS examination.
NEW ACCOUNTING STANDARDS AND POLICIES
Financial Accounting Standards Board Statement No. 125, Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities
("FAS 125") was issued in June 1996. FAS 125 provides accounting and reporting
standards for transfers and servicing of financial assets and extinguishment of
liabilities based on consistent application of a financial-components approach
that focuses on control. If a transfer does not meet the criteria for a sale,
the transfer is accounted for as a secured borrowing with pledge of collateral.
FAS 125 must be implemented, prospectively on January 1, 1997. Implementation of
FAS 125 is not expected to have a material impact on BankAtlantic's Statement of
Operations or Statement of Financial Condition upon adoption.
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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. The Company's Board of Directors consists of seven directors
divided into three classes, two composed of three directors each and one
composed of one director. The Company's Board of Directors consists of the same
persons who serve on BankAtlantic's Board of Directors. The directors are
elected for staggered three-year terms with one class elected each year.
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------- ------ ---------------------------------------------------
<S> <C> <C>
Alan B. Levan 52 Chairman of the Board; President and
Chief Executive Officer
John E. Abdo 53 Vice Chairman of the Board
Jean E. Carvalho 62 Executive Vice President; Corporate Secretary
Frank V. Grieco 52 Director; Senior Executive Vice President
Jasper R. Eanes 51 Executive Vice President; Chief Financial Officer
Steven M. Coldren 49 Director
Bruno L. DiGiulian 63 Director
Charlie C. Winningham, II 64 Director
Mary E. Ginestra 72 Director
</TABLE>
ALAN B. LEVAN has been the Company's Chairman of the Board and Chief
Executive Officer since its inception and President since January 1997. 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 and became President
in January 1997. 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.
JEAN E. CARVALHO has been the Company's Corporate Secretary since
November 1994. She initially joined BankAtlantic in December 1978 and became
Executive Vice President, Corporate Secretary, in March 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.
Mr. Grieco's term as a director expires in 1997.
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.
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
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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 PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the Trust
Agreement. The Trust Agreement will be qualified as an indenture under the Trust
Indenture Act. The Property Trustee, Wilmington Trust Company, will act as
indenture trustee for the Preferred Securities under the Trust Agreement for
purposes of complying with the provisions of the Trust Indenture Act. The terms
of the Preferred Securities will include those stated in the Trust Agreement and
those made part of the Trust Agreement by the Trust Indenture Act. The following
summary of the material terms and provisions of the Preferred Securities and the
Trust Agreement does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the Trust Agreement, the Delaware
Business Trust Act (the "Trust Act"), and the Trust Indenture Act.
Wherever particular defined terms of the Trust Agreement are referred to, but
not defined herein, such defined terms are incorporated herein by reference. The
form of the Trust Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part.
GENERAL
Pursuant to the terms of the Trust Agreement, the Trustees, on behalf of
BBC Capital, will issue the Trust Securities. All of the Common Securities will
be owned by the Company. The Preferred Securities will represent preferred
undivided beneficial interests in the assets of BBC Capital and the holders
thereof will be entitled to a preference in certain circumstances with respect
to Distributions and amounts payable on redemption or liquidation over the
Common Securities, as well as other benefits as described in the Trust
Agreement. The Trust Agreement does not permit the issuance by BBC Capital of
any securities other than the Trust Securities or the incurrence of any
indebtedness by BBC Capital.
The Preferred Securities will rank PARI PASSU, and payments will be made
thereon pro rata, with the Common Securities, except as described under
"-Subordination of Common Securities." Legal title to the Junior
Subordinated Debentures will be held by the Property Trustee in trust for the
benefit of the holders of the Trust Securities. The Guarantee executed by the
Company for the benefit of the holders of the Preferred Securities will be a
guarantee on a subordinated basis with respect to the Preferred Securities, but
will not guarantee payment of Distributions or amounts payable on redemption or
liquidation of such Preferred Securities when BBC Capital does not have funds on
hand available to make such payments. Wilmington Trust Company, as Guarantee
Trustee, will hold the Guarantee for the benefit of the holders of the Preferred
Securities. See "Description of the Guarantee."
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DISTRIBUTIONS
PAYMENT OF DISTRIBUTIONS. Distributions on each Preferred Security will be
payable at the annual rate of % of the stated Liquidation Amount of $25,
payable quarterly in arrears on March 31, June 30, September 30 and December 31
of each year, to the holders of the Preferred Securities on the relevant record
dates (each date on which Distributions are payable in accordance with the
foregoing, a "Distribution Date"). The record date will be the 15th day of
the month in which the relevant Distribution Date occurs. Distributions will
accumulate from the date of original issuance. The first Distribution Date for
the Preferred Securities will be the first payment date following the date of
issuance. The amount of Distributions payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months. In the event that any date
on which Distributions are payable on the Preferred Securities is not a Business
Day, then payment of the Distributions payable on such date will be made on the
next succeeding day that is a Business Day (and without any additional
Distributions, interest or other payment in respect of any such delay) with the
same force and effect as if made on the date such payment was originally due and
payable. "Business Day" means any day other than a Saturday or a Sunday, a
day on which banking institutions in The City of New York are authorized or
required by law or executive order to remain closed or a day on which the
corporate trust office of the Property Trustee or the Debenture Trustee is
closed for business.
EXTENSION PERIOD. The Company has the right under the Indenture, so long
as no Debenture Event of Default has occurred and is continuing, to defer the
payment of interest on the Junior Subordinated Debentures at any time, or from
time to time (each, an "Extended Interest Payment Period"), which, if
exercised, would result in quarterly Distributions on the Preferred Securities
also being deferred during any such Extended Interest Payment Period.
Distributions to which holders of the Preferred Securities are entitled will
accumulate additional Distributions thereon at the rate per annum of %
thereof, compounded quarterly from the relevant Distribution Date. The term
"Distributions," as used herein, includes any such additional
Distributions. The right to defer the payment of interest on the Junior
Subordinated Debentures is limited, however, to a period, in each instance, not
exceeding 20 consecutive quarters and no Extended Interest Payment Period may
extend beyond the Stated Maturity of the Junior Subordinated Debentures. During
any such Extended Interest Payment Period, the Company may not (i) declare or
pay any dividends or distributions on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of the Company's capital stock (other
than (a) the reclassification of any class of the Company's capital stock into
another class of capital stock, (b) dividends or distributions payable in any
class of the Company's common stock, (c) any declaration of a dividend in
connection with the implementation of a shareholder rights plan, or the issuance
of stock under any such plan in the future, or the redemption or repurchase of
any such rights pursuant thereto and (d) purchases of the Company's common
stock related to the rights under any of the Company's benefit plans for its or
its subsidiaries' directors, officers or employees), (ii) make any payment of
principal, interest or premium, if any, on or repay, repurchase or redeem any
debt securities of the Company that rank pari passu with or junior in interest
to the Junior Subordinated Debentures or make any guarantee payments with
respect to any guarantee by the Company of the debt securities of any subsidiary
of the Company if such guarantee ranks pari passu with or junior in interest to
the Junior Subordinated Debentures (other than payments under the Guarantee), or
(iii) redeem, purchase or acquire less than all of the Junior Subordinated
Debentures or any of the Preferred Securities. Prior to the termination of any
such Extended Interest Payment Period, the Company may further defer the payment
of interest; provided that such Extended Interest Payment Period may not exceed
20 consecutive quarters or extend beyond the Stated Maturity of the Junior
Subordinated Debentures. Upon the termination of any such Extended Interest
Payment Period and the payment of all amounts then due, the Company may elect to
begin a new Extended Interest Payment Period, subject to the above requirements.
Subject to the foregoing, there is no limitation on the number of times that the
Company may elect to begin an Extended Interest Payment Period.
The Company has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Junior
Subordinated Debentures.
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SOURCE OF DISTRIBUTION. The funds of BBC Capital available for
distribution to holders of its Preferred Securities will be limited to payments
received the Junior Subordinated Debentures in which BBC Capital will invest the
proceeds from the issuance and sale of its Trust Securities. See "Description
of the Junior Subordinated Debentures." Distributions will be paid through
the Property Trustee who will hold amounts received in respect of the Junior
Subordinated Debentures in the Property Account for the benefit of the holders
of the Trust Securities. If the Company does not make interest payments on the
Junior Subordinated Debentures, the Property Trustee will not have funds
available to pay Distributions on the Preferred Securities. The payment of
Distributions (but only if and to the extent BBC Capital has funds legally
available for the payment of such Distributions and cash sufficient to make such
payments) is guaranteed by the Company. See "Description of the
Guarantee." Distributions on the Preferred Securities will be payable to the
holders thereof as they appear on the register of holders of the Preferred
Securities on the relevant record dates, which will be the 15th day of the month
in which the relevant Distribution Date occurs.
REDEMPTION OR EXCHANGE
GENERAL. The Junior Subordinated Debentures will mature on , 2027.
The Company will have the right to redeem the Junior Subordinated Debentures (i)
on or after , 2002, in whole at any time or in part from time to time, or
(ii) at any time, in whole (but not in part), within 180 days following the
occurrence of a Tax Event, an Investment Company Event or a Capital Treatment
Event, in each case subject to receipt of prior regulatory approval if then
required under applicable capital guidelines or regulatory policies. Subject to
the foregoing events, the Company will not have the right to purchase the Junior
Subordinated Debentures, in whole or in part, from BBC Capital until after
, 2002. See "Description of the Junior Subordinated Debentures-
General."
MANDATORY REDEMPTION. Upon the repayment or redemption, in whole or in
part, of any Junior Subordinated Debentures, whether at Stated Maturity or upon
earlier redemption as provided in the Indenture, the proceeds from such
repayment or redemption will be applied by the Property Trustee to redeem a Like
Amount (as defined herein) of the Trust Securities, upon not less than 30 nor
more than 60 days notice, at a redemption price (the "Redemption Price") equal
to the aggregate Liquidation Amount of such Trust Securities plus accumulated
but unpaid Distributions thereon to the date of redemption (the "Redemption
Date"). See "Description of the Junior Subordinated Debentures- Redemption or
Exchange." If less than all of the Junior Subordinated Debentures are to be
repaid or redeemed on a Redemption Date, then the proceeds from such repayment
or redemption will be allocated to the redemption of the Trust Securities pro
rata.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES. Subject to the Company
having received prior regulatory approval if then required, the Company, as
holder of the Common Securities, will have the right at any time to dissolve,
wind-up or terminate BBC Capital and, after satisfaction of the liabilities of
creditors of BBC Capital as provided by applicable law, cause the Junior
Subordinated Debentures to be distributed to the holders of Trust Securities in
liquidation of BBC Capital. See "-Liquidation Distribution Upon Termination."
TAX EVENT REDEMPTION, INVESTMENT COMPANY EVENT REDEMPTION OR CAPITAL
TREATMENT EVENT REDEMPTION. If a Tax Event, an Investment Company Event or a
Capital Treatment Event occurs and is continuing, the Company has the right to
redeem the Junior Subordinated Debentures in whole (but not in part) and thereby
cause a mandatory redemption of the Trust Securities in whole (but not in part)
at the Redemption Price within 180 days following the occurrence of such Tax
Event, Investment Company Event or Capital Treatment Event. In the event a Tax
Event, an Investment Company Event or a Capital Treatment Event in respect of
the Trust Securities has occurred and the Company does not elect to redeem the
Junior Subordinated Debentures and thereby cause a mandatory redemption of the
Trust Securities or to liquidate BBC Capital and cause the Junior Subordinated
Debentures to be distributed to holders of such Trust Securities in liquidation
of BBC Capital as described below under "-Liquidation Distribution Upon
Termination," such Preferred Securities will remain outstanding and Additional
Interest (as defined herein) may be payable on the Junior Subordinated
Debentures.
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"Additional Interest" means the additional amounts as may be necessary in
order that the amount of Distributions then due and payable by BBC Capital on
the outstanding Trust Securities will not be reduced as a result of any
additional taxes, duties and other governmental charges to which BBC Capital has
become subject as a result of a Tax Event.
"Like Amount" means (i) with respect to a redemption of Trust Securities,
Trust Securities having a Liquidation Amount equal to that portion of the
principal amount of Junior Subordinated Debentures to be contemporaneously
redeemed in accordance with the Indenture, which will be used to pay the
Redemption Price of such Trust Securities, and (ii) with respect to a
distribution of Junior Subordinated Debentures to holders of Trust Securities in
connection with a dissolution or liquidation of BBC Capital, Junior Subordinated
Debentures having a principal amount equal to the Liquidation Amount of the
Trust Securities of the holder to whom such Junior Subordinated Debentures are
distributed. Each Junior Subordinated Debenture distributed pursuant to clause
(ii) above will carry with it accumulated interest in an amount equal to the
accumulated and unpaid interest then due on such Junior Subordinated Debentures.
"Liquidation Amount" means the stated amount of $25 per Trust Security.
There can be no assurance as to the market prices of the Preferred
Securities or the Junior Subordinated Debentures that may be distributed in
exchange for Preferred Securities if a dissolution and liquidation of BBC
Capital were to occur. The Preferred Securities that an investor may purchase,
or the Junior Subordinated Debentures that an investor may receive on
dissolution and liquidation of BBC Capital, may trade at a discount to the price
that the investor paid to purchase the Preferred Securities offered hereby.
REDEMPTION PROCEDURES
Preferred Securities redeemed on each Redemption Date will be redeemed at
the Redemption Price with the applicable proceeds from the contemporaneous
redemption of the Junior Subordinated Debentures. Redemptions of the Preferred
Securities will be made and the Redemption Price will be payable on each
Redemption Date only to the extent that BBC Capital has funds on hand available
for the payment of such Redemption Price. See "-Subordination of Common
Securities."
If BBC Capital gives a notice of redemption in respect of its Preferred
Securities, then, by 12:00 noon, eastern standard time, on the Redemption Date,
to the extent funds are available, the Property Trustee will irrevocably deposit
with the paying agent for the Preferred Securities funds sufficient to pay the
aggregate Redemption Price and will give the paying agent for the Preferred
Securities irrevocable instructions and authority to pay the Redemption Price to
the holders thereof upon surrender of their certificates evidencing such
Preferred Securities. Notwithstanding the foregoing, Distributions payable on or
prior to the Redemption Date for any Preferred Securities called for redemption
will be payable to the holders of such Preferred Securities on the relevant
record dates for the related Distribution Dates. If notice of redemption shall
have been given and funds deposited as required, then upon the date of such
deposit, all rights of the holders of such Preferred Securities so called for
redemption will cease, except the right of the holders of such Preferred
Securities to receive the Redemption Price, but without interest on such
Redemption Price, and such Preferred Securities will cease to be outstanding. In
the event that any date fixed for redemption of Preferred Securities is not a
Business Day, then payment of the Redemption Price payable on such date will be
made on the next succeeding day which is a Business Day (and without any
additional Distribution, interest or other payment in respect of any such delay)
with the same force and effect as if made on such date. In the event that
payment of the Redemption Price in respect of Preferred Securities called for
redemption is improperly withheld or refused and not paid either by BBC Capital
or by the Company pursuant to the Guarantee, Distributions on such Preferred
Securities will continue to accrue at the then applicable rate, from the
Redemption Date originally established by BBC Capital for such Preferred
Securities to the date such Redemption Price is actually paid, in which case the
actual payment date will be considered the date fixed for redemption for
purposes of calculating the Redemption Price. See "Description of the
Guarantee."
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Subject to applicable law (including, without limitation, United States
federal securities law) and, further provided, that the Company has not and is
not continuing to exercise its right to defer interest payments, the Company or
its subsidiaries may at any time and from time to time purchase outstanding
Preferred Securities by tender, in the open market or by private agreement.
Payment of the Redemption Price on the Preferred Securities and any
distribution of Junior Subordinated Debentures to holders of Preferred
Securities will be made to the applicable recordholders thereof as they appear
on the register for the Preferred Securities on the relevant record date, which
date will be the date 15 days prior to the Redemption Date or liquidation date,
as applicable.
If less than all of the Trust Securities are to be redeemed on a Redemption
Date, then the aggregate Liquidation Amount of such Trust Securities to be
redeemed will be allocated pro rata to the Trust Securities based upon the
relative Liquidation Amounts of such classes. The particular Preferred
Securities to be redeemed will be selected by the Property Trustee from the
outstanding Preferred Securities not previously called for redemption, by such
method as the Property Trustee deems fair and appropriate and which may provide
for the selection for redemption of portions (equal to $25 or an integral
multiple of $25 in excess thereof) of the Liquidation Amount of Preferred
Securities of a denomination larger than $25. The Property Trustee will promptly
notify the registrar for the Preferred Securities in writing of the Preferred
Securities selected for redemption and, in the case of any Preferred Securities
selected for partial redemption, the Liquidation Amount thereof to be redeemed.
For all purposes of the Trust Agreement, unless the context otherwise requires,
all provisions relating to the redemption of Preferred Securities will relate to
the portion of the aggregate Liquidation Amount of Preferred Securities which
has been or is to be redeemed.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Trust Securities to be
redeemed at its registered address. Unless the Company defaults in payment of
the redemption price on the Junior Subordinated Debentures, on and after the
Redemption Date interest will cease to accrue on such Junior Subordinated
Debentures or portions thereof (and Distributions will cease to accrue on the
related Preferred Securities or portions thereof) called for redemption.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Preferred
Securities and Common Securities, as applicable, will be made pro rata based on
the Liquidation Amount of the Preferred Securities and Common Securities;
provided, however, that if on any Distribution Date or Redemption Date a
Debenture Event of Default has occurred and is continuing, no payment of any
Distribution on, or Redemption Price of, any of the Common Securities, and no
other payment on account of the redemption, liquidation or other acquisition of
such Common Securities, will be made unless payment in full in cash of all
accumulated and unpaid Distributions on all of the outstanding Preferred
Securities for all Distribution periods terminating on or prior thereto, or in
the case of payment of the Redemption Price the full amount of such Redemption
Price on all of the outstanding Preferred Securities then called for redemption,
will have been made or provided for, and all funds available to the Property
Trustee will first be applied to the payment in full in cash of all
Distributions on, or Redemption Price of, the Preferred Securities then due and
payable.
In the case of any Event of Default resulting from a Debenture Event of
Default, the Company as holder of the Common Securities will be deemed to have
waived any right to act with respect to any such Event of Default under the
Trust Agreement until the effect of all such Events of Default with respect to
the Preferred Securities have been cured, waived or otherwise eliminated. Until
any such Events of Default under the Trust Agreement with respect to the
Preferred Securities has been so cured, waived or otherwise eliminated, the
Property Trustee will act solely on behalf of the holders of the Preferred
Securities and not on behalf of the Company, as holder of the Common Securities,
and only the holders of the Preferred Securities will have the right to direct
the Property Trustee to act on their behalf.
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LIQUIDATION DISTRIBUTION UPON TERMINATION
The Company will have the right at any time to dissolve, wind-up or
terminate BBC Capital and cause the Junior Subordinated Debentures to be
distributed to the holders of the Preferred Securities. Such right is subject,
however, to the Company having received prior regulatory approval if then
required under applicable capital guidelines or regulatory policies.
Pursuant to the Trust Agreement, BBC Capital will automatically terminate
upon expiration of its term and will terminate earlier on the first to occur of
(i) certain events of bankruptcy, dissolution or liquidation of the Company,
(ii) the distribution of a Like Amount of the Junior Subordinated Debentures to
the holders of its Trust Securities, if the Company, as depositor, has given
written direction to the Property Trustee to terminate BBC Capital (which
direction is optional and wholly within the discretion of the Company, as
depositor), (iii) redemption of all of the Preferred Securities as described
under "Description of the Preferred Securities-Redemption or Exchange-Mandatory
Redemption," or (iv) the entry of an order for the dissolution of BBC Capital by
a court of competent jurisdiction.
If an early termination occurs as described in clause (i), (ii) or (iv) of
the preceding paragraph, BBC Capital will be liquidated by the Trustees as
expeditiously as the Trustees determine to be possible by distributing, after
satisfaction of liabilities to creditors of BBC Capital as provided by
applicable law, to the holders of such Trust Securities a Like Amount of the
Junior Subordinated Debentures, unless such distribution is determined by the
Property Trustee not to be practical, in which event such holders will be
entitled to receive out of the assets of BBC Capital available for distribution
to holders, after satisfaction of liabilities to creditors of BBC Capital as
provided by applicable law, an amount equal to, in the case of holders of
Preferred Securities, the aggregate of the Liquidation Amount plus accrued and
unpaid Distributions thereon to the date of payment (such amount being the
"Liquidation Distribution"). If such Liquidation Distribution can be paid only
in part because BBC Capital has insufficient assets available to pay in full the
aggregate Liquidation Distribution, then the amounts payable directly by BBC
Capital on the Preferred Securities will be paid on a pro rata basis. The
Company, as the holder of the Common Securities, will be entitled to receive
distributions upon any such liquidation pro rata with the holders of the
Preferred Securities, except that, if a Debenture Event of Default has occurred
and is continuing, the Preferred Securities will have a priority over the Common
Securities. See "-Subordination of Common Securities."
After the liquidation date fixed for any distribution of Junior
Subordinated Debentures for Preferred Securities (i) such Preferred Securities
will no longer be deemed to be outstanding, and (ii) any certificates
representing Preferred Securities will be deemed to represent the Junior
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Preferred Securities and bearing accrued and unpaid interest in an
amount equal to the accumulated and unpaid Distributions on the Preferred
Securities until such certificates are presented to the Administrative Trustees
and their agent for transfer or reissuance.
Under current United States federal income tax law and interpretations and
assuming, as expected, that BBC Capital is treated as a grantor trust, a
distribution of the Junior Subordinated Debentures should not be a taxable event
to holders of the Preferred Securities. Should there be a change in law, a
change in legal interpretation, a Tax Event or other circumstances, however, the
distribution could be a taxable event to holders of the Preferred Securities.
See "Certain Federal Income Tax Consequences- Receipt of Junior Subordinated
Debentures or Cash Upon Liquidation of BBC Capital."
If the Company elects neither to redeem the Junior Subordinated Debentures
prior to maturity nor to liquidate BBC Capital and distribute the Junior
Subordinated Debentures to holders of the Preferred Securities, the Preferred
Securities will remain outstanding until the repayment of the Junior
Subordinated Debentures. If the Company elects to liquidate BBC Capital and
thereby causes the Junior Subordinated Debentures to be distributed to holders
of the Preferred Securities in liquidation of BBC Capital, the Company will
continue to have the right to shorten the maturity of such Junior Subordinated
Debentures, subject to certain conditions. See "Description of the Junior
Subordinated Debentures-General."
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LIQUIDATION VALUE
The amount of the Liquidation Distribution payable on the Preferred
Securities in the event of any liquidation of BBC Capital is $25 per Preferred
Security plus accrued and unpaid Distributions thereon to the date of payment,
which may be in the form of a distribution of such amount in Junior Subordinated
Debentures with a like amount of accrued interest, subject to certain
exceptions. See "-Liquidation Distribution Upon Termination."
EVENTS OF DEFAULT; NOTICE
Any one of the following events constitutes an event of default under the
Trust Agreement (an "Event of Default") with respect to the Preferred Securities
(whatever the reason for such Event of Default and whether voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court or any order, rule or regulation of any administrative or
governmental body):
(i) the occurrence of a Debenture Event of Default (see "Description of the
Junior Subordinated Debentures-Debenture Events of Default"); or
(ii) default by BBC Capital in the payment of any Distribution when it
becomes due and payable, and continuation of such default for a period of 30
days; or
(iii) default by BBC Capital in the payment of any Redemption Price of any
Trust Security when it becomes due and payable: or
(iv) default in the performance, or breach, in any material respect, of any
covenant or warranty of the Trustee(s) in the Trust Agreement (other than a
covenant or warranty a default in the performance of which or the breach of
which is dealt with in clauses (ii) or (iii) above), and continuation of such
default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the Trustee(s) by the holders of at least
25% in aggregate Liquidation Amount of the outstanding Preferred Securities,
a written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" under
the Trust Agreement: or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Property Trustee and the failure by the Company to appoint a
successor Property Trustee within 60 days thereof.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee will transmit
notice of such Event of Default to the holders of the Preferred Securities, the
Administrative Trustees and the Company, as depositor, unless such Event of
Default has been cured or waived. The Company, as depositor, and the
Administrative Trustees are required to file annually with the Property Trustee
a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Trust Agreement.
If a Debenture Event of Default has occurred and is continuing, the
Preferred Securities will have a preference over the Common Securities upon
termination of BBC Capital. See "-Liquidation Distribution Upon Termination."
The existence of an Event of Default does not entitle the holders of Preferred
Securities to accelerate the maturity thereof.
REMOVAL OF BBC CAPITAL TRUSTEES
Unless a Debenture Event of Default has occurred and is continuing, any
Trustee may be removed at any time by the holder of the Common Securities. If a
Debenture Event of Default has occurred and is continuing, the Property Trustee
and the Delaware Trustee may be removed by the holders of a
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majority in Liquidation Amount of the outstanding Preferred Securities. In no
event, however, will the holders of the Preferred Securities have the right to
vote to appoint, remove or replace the Administrative Trustees, which voting
rights are vested exclusively in the Company as the holder of the Common
Securities. No resignation or removal of a Trustee and no appointment of a
successor trustee will be effective until the acceptance of appointment by the
successor trustee in accordance with the provisions of the Trust Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless an Event of Default has occurred and is continuing, at any time or
times, for the purpose of meeting the legal requirements of the Trust Indenture
Act or of any jurisdiction in which any part of the Trust Property (as defined
in the Trust Agreement) may at the time be located, the Company, as the holder
of the Common Securities, will have power to appoint one or more Persons (as
defined in the Trust Agreement) either to act as a co-trustee, jointly with the
Property Trustee, of all or any part of such Trust Property, or to act as
separate trustee of any such Trust Property, in either case with such powers as
may be provided in the instrument of appointment, and to vest in such Person or
Persons in such capacity any property, title, right or power deemed necessary or
desirable, subject to the provisions of the Trust Agreement. In case a Debenture
Event of Default has occurred and is continuing, the Property Trustee alone will
have power to make such appointment.
MERGER OR CONSOLIDATION OF TRUSTEES
Any Person into which the Property Trustee, the Delaware Trustee or any
Administrative Trustee that is not a natural person may be merged or converted
or with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which such Trustee is a party, or any Person
succeeding to all or substantially all the corporate trust business of such
Trustee, will be the successor of such Trustee under the Trust Agreement,
provided such Person is otherwise qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF BBC CAPITAL
BBC Capital may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, except as described below. BBC
Capital may, at the request of the Company, with the consent of the
Administrative Trustees and without the consent of the holders of the Preferred
Securities, the Property Trustee or the Delaware Trustee, merge with or into,
consolidate, amalgamate, or be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to a trust organized as such
under the laws of any State; provided, that (i) such successor entity either (a)
expressly assumes all of the obligations of BBC Capital with respect to the
Preferred Securities, or (b) substitutes for the Preferred Securities other
securities having substantially the same terms as the Preferred Securities (the
"Successor Securities") so long as the Successor Securities rank the same as the
Preferred Securities rank in priority with respect to distributions and payments
upon liquidation, redemption and otherwise, (ii) the Company expressly appoints
a trustee of such successor entity possessing the same powers and duties as the
Property Trustee in its capacity as the holder of the Junior Subordinated
Debentures, (iii) the Successor Securities are listed, or any Successor
Securities will be listed upon notification of issuance, on any national
securities exchange or other organization on which the Preferred Securities are
then listed (including, if applicable, The Nasdaq Stock Market's National
Market), if any, (iv) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Preferred Securities (including any
Successor Securities) in any material respect, (v) prior to such merger,
consolidation, amalgamation, replacement, conveyance, transfer or lease, the
Company has received an opinion from independent counsel to the effect that (a)
such merger, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not adversely affect the rights, preferences and privileges of the
holders of the Preferred Securities (including any Successor Securities) in any
material respect, and (b) following such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, neither BBC Capital nor such
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successor entity will be required to register as an "investment company"
under the Investment Company Act, and (vi) the Company owns all of the common
securities of such successor entity and guarantees the obligations of such
successor entity under the Successor Securities at least to the extent provided
by the Guarantee. Notwithstanding the foregoing, BBC Capital will not, except
with the consent of holders of 100% in Liquidation Amount of the Preferred
Securities, consolidate, amalgamate, merge with or into, or be replaced by or
convey, transfer or lease its properties and assets substantially as an entirety
to any other Person or permit any other Person to consolidate, amalgamate, merge
with or into, or replace it if such consolidation, amalgamation, merger,
replacement, conveyance, transfer or lease would cause BBC Capital or the
successor entity to be classified as other than a grantor trust for United
States federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENT
Except as provided below and under "Description of the Guarantee-Amendments
and Assignment" and as otherwise required by the Trust Act and the Trust
Agreement, the holders of the Preferred Securities will have no voting rights.
The Trust Agreement may be amended from time to time by the Company, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Preferred Securities (i) with respect to acceptance of
appointment by a successor trustee, (ii) to cure any ambiguity, correct or
supplement any provisions in such Trust Agreement that may be inconsistent with
any other provision, or to make any other provisions with respect to matters or
questions arising under the Trust Agreement (provided such amendment is not
inconsistent with the other provisions of the Trust Agreement), or (iii) to
modify, eliminate or add to any provisions of the Trust Agreement to such extent
as is necessary to ensure that BBC Capital will be classified for United States
federal income tax purposes as a grantor trust at all times that any Trust
Securities are outstanding or to ensure that BBC Capital will not be required to
register as an "investment company" under the Investment Company Act; provided,
however, that in the case of clause (ii), such action may not adversely affect
in any material respect the interests of any holder of Trust Securities, and any
amendments of such Trust Agreement will become effective when notice thereof is
given to the holders of Trust Securities. The Trust Agreement may otherwise be
amended by the Trustees and the Company with (i) the consent of holders
representing not less than a majority in the aggregate Liquidation Amount of the
outstanding Trust Securities, and (ii) receipt by the Trustees of an opinion of
counsel to the effect that such amendment or the exercise of any power granted
to the Trustees in accordance with such amendment will not affect BBC Capital's
status as a grantor trust for United States federal income tax purposes or BBC
Capital's exemption from status as an "investment company" under the Investment
Company Act. Notwithstanding anything in this paragraph to the contrary, without
the consent of each holder of Trust Securities, the Trust Agreement may not be
amended to (a) change the amount or timing of any Distribution on the Trust
Securities or otherwise adversely affect the amount of any Distribution required
to be made in respect of the Trust Securities as of a specified date, or (b)
restrict the right of a holder of Trust Securities to institute suit for the
enforcement of any such payment on or after such date.
The Trustees will not, so long as any Junior Subordinated Debentures are
held by the Property Trustee, (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
executing any trust or power conferred on the Property Trustee with respect to
the Junior Subordinated Debentures, (ii) waive any past default that is waivable
under the Indenture, (iii) exercise any right to rescind or annul a declaration
that the principal of all the Junior Subordinated Debentures will be due and
payable, or (iv) consent to any amendment, modification or termination of the
Indenture or the Junior Subordinated Debentures, where such consent is required,
without, in each case, obtaining the prior approval of the holders of a majority
in aggregate Liquidation Amount of all outstanding Preferred Securities;
provided, however, that where a consent under the Indenture requires the consent
of each holder of Junior Subordinated Debentures affected thereby, no such
consent will be given by the Property Trustee without the prior consent of each
holder of the Preferred Securities. The Trustees may not revoke any action
previously authorized or approved by a vote of the holders of the Preferred
Securities except by subsequent vote of the holders of the Preferred Securities.
The Property
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Trustee will notify each holder of Preferred Securities of any notice of default
with respect to the Junior Subordinated Debentures. In addition to obtaining the
foregoing approvals of the holders of the Preferred Securities, prior to taking
any of the foregoing actions, the Trustees must obtain an opinion of counsel
experienced in such matters to the effect that BBC Capital will not be
classified as an association taxable as a corporation for United States federal
income tax purposes on account of such action.
Any required approval of holders of Preferred Securities may be given at a
meeting of holders of Preferred Securities convened for such purpose or pursuant
to written consent. The Property Trustee will cause a notice of any meeting at
which holders of Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such holders is to be taken, to be given
to each holder of record of Preferred Securities in the manner set forth in the
Trust Agreement.
No vote or consent of the holders of Preferred Securities will be required
for BBC Capital to redeem and cancel its Preferred Securities in accordance with
the Trust Agreement.
Notwithstanding the fact that holders of Preferred Securities are entitled
to vote or consent under any of the circumstances described above, any of the
Preferred Securities that are owned by the Company, the Trustees or any
affiliate of the Company or any Trustee, will, for purposes of such vote or
consent, be treated as if they were not outstanding.
PAYMENT AND PAYING AGENCY
Payments in respect of the Preferred Securities will be made by check
mailed to the address of the holder entitled thereto as such address appears on
the register of holders of the Preferred Securities. The paying agent for the
Preferred Securities will initially be the Property Trustee and any co-paying
agent chosen by the Property Trustee and acceptable to the Administrative
Trustees and the Company. The paying agent for the Preferred Securities will be
permitted to resign as paying agent upon 30 days' written notice to the Property
Trustee and the Administrative Trustees. If the Property Trustee is no longer
the paying agent for the Preferred Securities, the Administrative Trustees will
appoint a successor (which must be a bank or trust company reasonably acceptable
to the Administrative Trustees) to act as paying agent.
REGISTRAR AND TRANSFER AGENT
The Property Trustee will act as the registrar and the transfer agent for
the Preferred Securities. Registration of transfers of Preferred Securities will
be effected without charge by or on behalf of BBC Capital, except for the
payment of any tax or other governmental charges that may be imposed in
connection with any transfer or exchange. In the event of any redemption, BBC
Capital will not be required to (i) issue, register the transfer of, or exchange
any Preferred Securities during a period beginning at the opening of business 15
days before the date of mailing of a notice of redemption of any Preferred
Securities called for redemption and ending at the close of business on the day
of such mailing; or (ii) register the transfer of or exchange any Preferred
Securities so selected for redemption, in whole or in part, except the
unredeemed portion of any such Preferred Securities being redeemed in part.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, other than upon the occurrence and during the
continuance of an Event of Default, undertakes to perform only such duties as
are specifically set forth in the Trust Agreement and, after such Event of
Default, must exercise the same degree of care and skill as a prudent person
would exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Property Trustee is under no obligation to exercise any of the
powers vested in it by the Trust Agreement at the request of any holder of
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby. If no Event of
Default has occurred and is continuing and
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the Property Trustee is required to decide between alternative causes of action,
construe ambiguous provisions in the Trust Agreement or is unsure of the
application of any provision of the Trust Agreement, and the matter is not one
on which holders of Preferred Securities are entitled under the Trust Agreement
to vote, then the Property Trustee will take such action as is directed by the
Company and if not so directed, will take such action as it deems advisable and
in the best interests of the holders of the Trust Securities and will have no
liability except for its own bad faith, negligence or willful misconduct.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate BBC Capital in such a way that BBC Capital will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
for United States federal income tax purposes and so that the Junior
Subordinated Debentures will be treated as indebtedness of the Company for
United States federal income tax purposes. In this connection, the Company and
the Administrative Trustees are authorized to take any action, not inconsistent
with applicable law, the certificate of trust of BBC Capital or the Trust
Agreement, that the Company and the Administrative Trustees determine in their
discretion to be necessary or desirable for such purposes.
Holders of the Preferred Securities have no preemptive or similar rights.
The Trust Agreement and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
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DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
Concurrently with the issuance of the Preferred Securities, BBC Capital
will invest the proceeds thereof, together with the consideration paid by the
Company for the Common Securities, in the Junior Subordinated Debentures issued
by the Company. The Junior Subordinated Debentures will be issued as unsecured
debt under the Indenture, to be dated as of , 1997 (the
"Indenture"), between the Company and Wilmington Trust Company, as trustee
(the "Debenture Trustee"). The Indenture will be qualified as an indenture
under the Trust Indenture Act. The following summary of the material terms and
provisions of the Junior Subordinated Debentures and the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Indenture and to the Trust Indenture Act. Wherever particular
defined terms of the Indenture are referred to, but not defined herein, such
defined terms are incorporated herein by reference. The form of the Indenture
has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part.
GENERAL
The Junior Subordinated Debentures will be limited in aggregate principal
amount to approximately $67,010,310 (or $77,061,856 if the Underwriters'
over-allotment option is exercised in full by the Underwriters), such amount
being the sum of the aggregate stated Liquidation Amount of the Trust
Securities. The Junior Subordinated Debentures will bear interest at the annual
rate of % of the principal amount thereof, payable quarterly in arrears on
March 31, June 30, September 30, and December 31 of each year (each, an
"Interest Payment Date") beginning , 1997, to the Person (as defined
in the Indenture) in whose name each Junior Subordinated Debenture is
registered, subject to certain exceptions, at the close of business on the
Business Day next preceding such Interest Payment Date. It is anticipated that,
until the liquidation, if any, of BBC Capital, the Junior Subordinated
Debentures will be held in the name of the Property Trustee in trust for the
benefit of the holders of the Preferred Securities. The amount of interest
payable for any period will be computed on the basis of a 360-day year of twelve
30-day months. In the event that any date on which interest is payable on the
Junior Subordinated Debentures is not a Business Day, then payment of the
interest payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any such
delay) with the same force and effect as if made on the date such payment was
originally due and payable. Accrued interest that is not paid on the applicable
Interest Payment Date will bear additional interest on the amount thereof (to
the extent permitted by law) at the rate per annum of % thereof, compounded
quarterly. The term "interest," as used herein, includes quarterly
interest payments, interest on quarterly interest payments not paid on the
applicable Interest Payment Date and Additional Interest, as applicable.
The Junior Subordinated Debentures will mature on , 2027 (such date,
as it may be shortened as hereinafter described, the "Stated Maturity").
Such date may be shortened at any time by the Company to any date not earlier
than , 2002, subject to the Company having received prior regulatory
approval if then required under applicable capital guidelines or regulatory
policies. In the event that the Company elects to shorten the Stated Maturity of
the Junior Subordinated Debentures, it will give notice thereof to the Debenture
Trustee, BBC Capital and to the holders of the Junior Subordinated Debentures no
more than 180 days and no less than 90 days prior to the effectiveness thereof.
The Junior Subordinated Debentures will be unsecured and will rank junior
and be subordinate in right of payment to all Senior Debt and Subordinated Debt
of the Company. Because the Company is a holding company, the right of the
Company to participate in any distribution of assets of a subsidiary, including
BankAtlantic, upon any liquidation or reorganization or otherwise of such
subsidiary (and thus the ability of holders of the Junior Subordinated
Debentures to benefit indirectly from such distribution), is subject to the
prior claim of creditors of the subsidiary (including depositors in
BankAtlantic), except to the extent that the Company may itself be recognized as
a creditor of the subsidiary. The Junior Subordinated Debentures will,
therefore, be effectively subordinated to all existing and future liabilities of
the Company's subsidiaries, including BankAtlantic, and holders of
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Junior Subordinated Debentures should look only to the assets of the Company for
payments on the Junior Subordinated Debentures. The Indenture does not limit the
incurrence or issuance of other secured or unsecured debt of the Company,
including Senior Debt and Subordinated Debt, whether under the Indenture or any
existing indenture or other indenture that the Company or any of its
subsidiaries may enter into in the future or otherwise. See "-Subordination."
The Indenture does not contain provisions that afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged
transaction or other similar transaction involving the Company that may
adversely affect such holders.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company has the right under the Indenture at any time during the term
of the Junior Subordinated Debentures, so long as no Debenture Event of Default
has occurred and is continuing, to defer the payment of interest at any time, or
from time to time (each, an "Extended Interest Payment Period"). The right to
defer the payment of interest on the Junior Subordinated Debentures is limited,
however, to a period, in each instance, not exceeding 20 consecutive quarters
and no Extended Interest Payment Period may extend beyond the Stated Maturity of
the Junior Subordinated Debentures. At the end of each Extended Interest Payment
Period, the Company must pay all interest then accrued and unpaid (together with
interest thereon at the annual rate of %, compounded quarterly, to the extent
permitted by applicable law). During an Extended Interest Payment Period,
interest will continue to accrue and holders of Junior Subordinated Debentures
(or the holders of Preferred Securities if such securities are then outstanding)
will be required to accrue and recognize income for United States federal income
tax purposes. See "Certain Federal Income Tax Consequences-Interest Income and
Original Issue Discount."
During any such Extended Interest Payment Period, the Company may not (i)
declare or pay any dividends or distributions on, or redeem, purchase, acquire
or make a liquidation payment with respect to, any of the Company's capital
stock (other than (a) the reclassification of any class of the Company's capital
stock into another class of capital stock, (b) dividends or distributions
payable in any class of the Company's common stock, (c) any declaration of a
dividend in connection with the implementation of a shareholder rights plan, or
the issuance of stock under any such plan in the future, or the redemption or
repurchase of any such rights pursuant thereto and (d) purchases of the
Company's common stock related to the rights under any of the Company's benefit
plans for its or its subsidiaries' directors, officers or employees), (ii) make
any payment of principal, interest or premium, if any, on or repay, repurchase
or redeem any debt securities of the Company that rank pari passu with or junior
in interest to the Junior Subordinated Debentures or make any guarantee payments
with respect to any guarantee by the Company of the debt securities of any
subsidiary of the Company if such guarantee ranks pari passu or junior in
interest to the Junior Subordinated Debentures (other than payments under the
Guarantee), or (iii) redeem, purchase or acquire less than all of the Junior
Subordinated Debentures or any of the Preferred Securities. Prior to the
termination of any such Extended Interest Payment Period, the Company may
further defer the payment of interest; provided that no Extended Interest
Payment Period may exceed 20 consecutive quarters or extend beyond the Stated
Maturity of the Junior Subordinated Debentures. Upon the termination of any such
Extended Interest Payment Period and the payment of all amounts then due on any
Interest Payment Date, the Company may elect to begin a new Extended Interest
Payment Period subject to the above requirements. No interest will be due and
payable during an Extended Interest Payment Period, except at the end thereof.
The Company must give the Property Trustee, the Administrative Trustees and the
Debenture Trustee notice of its election of such Extended Interest Payment
Period at least two Business Days prior to the earlier of (i) the next
succeeding date on which Distributions on the Trust Securities would have been
payable except for the election to begin such Extended Interest Payment Period,
or (ii) the date the Trust is required to give notice of the record date, or the
date such Distributions are payable, to The Nasdaq Stock Market's National
Market (or other applicable self-regulatory organization) or to holders of the
Preferred
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Securities, but in any event at least one Business Day before such record date.
Subject to the foregoing, there is no limitation on the number of times that the
Company may elect to begin an Extended Interest Payment Period.
ADDITIONAL SUMS
If BBC Capital or the Property Trustee is required to pay any additional
taxes, duties or other governmental charges as a result of the occurrence of a
Tax Event, the Company will pay as additional amounts (referred to herein as
"Additional Interest") on the Junior Subordinated Debentures such additional
amounts as may be required so that the net amounts received and retained by BBC
Capital after paying any such additional taxes, duties or other governmental
charges will not be less than the amounts BBC Capital would have received had
such additional taxes, duties or other governmental charges not been imposed.
REDEMPTION OR EXCHANGE
The Company will have the right to redeem the Junior Subordinated
Debentures prior to maturity (i) on or after , 2002, in whole at any time or in
part from time to time, or (ii) at any time in whole (but not in part), within
180 days following the occurrence of a Tax Event, an Investment Company Event or
a Capital Treatment Event, in each case at a redemption price equal to the
accrued and unpaid interest on the Junior Subordinated Debentures so redeemed to
the date fixed for redemption, plus 100% of the principal amount thereof. Any
such redemption prior to the Stated Maturity will be subject to prior regulatory
approval if then required under applicable capital guidelines or regulatory
policies.
"Tax Event" means the receipt by BBC Capital of an opinion of counsel
experienced in such matters to the effect that, as a result of any amendment to,
or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or as a result of any official
administrative pronouncement or judicial decision interpreting or applying such
laws or regulations, which amendment or change is effective or which
pronouncement or decision is announced on or after the date of issuance of the
Preferred Securities under the Trust Agreement, there is more than an
insubstantial risk that (i) interest payable by the Company on the Junior
Subordinated Debentures is not, or within 90 days of the date of such opinion
will not be, deductible by the Company, in whole or in part, for United States
federal income tax purposes, (ii) BBC Capital is, or will be within 90 days
after the date of such opinion of counsel, subject to United States federal
income tax with respect to income received or accrued on the Junior Subordinated
Debentures, or (iii) BBC Capital is, or will be within 90 days after the date of
such opinion of counsel, subject to more than a DE MINIMIS amount of other
taxes, duties, assessments or other governmental charges. The Company must
request and receive an opinion with regard to such matters within a reasonable
period of time after it becomes aware of the possible occurrence of any of the
events described in clauses (i) through (iii) above.
"Investment Company Event" means the receipt by BBC Capital of an opinion
of counsel experienced in such matters to the effect that, as a result of the
occurrence of a change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, BBC Capital is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act, which change becomes effective on or after the date of original
issuance of the Preferred Securities.
"Capital Treatment Event" means the reasonable determination by the Company
that, as a result of any amendment to, or change (including any proposed change)
in, the laws (or any regulations thereunder) of the United States or any
political subdivision thereof or therein, or as a result of any official or
administrative pronouncement or action or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
such proposed change pronouncement, action or decision is announced on or after
the date of original issuance of the Preferred Securities,
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there is more than an insubstantial risk that the Company will not be entitled
to treat an amount equal to the Liquidation Amount of the Preferred Securities
as "Tier 1 Capital" (or the then equivalent thereof) for purposes of the
capital adequacy guidelines of the Federal Reserve (or any successor regulatory
authority with jurisdiction over bank holding companies), or any capital
adequacy guidelines as then in effect and applicable to the Company. There are
currently no capital adequacy guidelines applicable to savings bank holding
companies such as the Company.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Junior Subordinated
Debentures to be redeemed at its registered address. Unless the Company defaults
in payment of the redemption price for the Junior Subordinated Debentures, on
and after the redemption date interest ceases to accrue on such Junior
Subordinated Debentures or portions thereof called for redemption.
The Junior Subordinated Debentures will not be subject to any sinking fund.
DISTRIBUTION UPON LIQUIDATION
As described under "Description of the Preferred Securities-Liquidation
Distribution Upon Termination," under certain circumstances involving the
termination of BBC Capital, the Junior Subordinated Debentures may be
distributed to the holders of the Preferred Securities in liquidation of BBC
Capital after satisfaction of liabilities to creditors of BBC Capital as
provided by applicable law. Any such distribution will be subject to receipt of
prior regulatory approval if then required under applicable regulatory policies
or guidelines. If the Junior Subordinated Debentures are distributed to the
holders of Preferred Securities upon the liquidation of BBC Capital, the Company
will use its best efforts to list the Junior Subordinated Debentures on The
Nasdaq Stock Market's National Market or such stock exchanges, if any, on which
the Preferred Securities are then listed. There can be no assurance as to the
market price of any Junior Subordinated Debentures that may be distributed to
the holders of Preferred Securities.
RESTRICTIONS ON CERTAIN PAYMENTS
If at any time (i) there has occurred a Debenture Event of Default, (ii)
the Company is in default with respect to its obligations under the Guarantee,
or (iii) the Company has given notice of its election of an Extended Interest
Payment Period as provided in the Indenture with respect to the Junior
Subordinated Debentures and has not rescinded such notice, or such Extended
Interest Payment Period, or any extension thereof, is continuing, the Company
will not (1) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of the
Company's capital stock (other than (a) the reclassification of any class of the
Company's capital stock into another class of capital stock, (b) dividends or
distributions payable in any class of the Company's common stock, (c) any
declaration of a dividend in connection with the implementation of a shareholder
rights plan, or the issuance of stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto and (d) purchases
of the Company's common stock related to the rights under any of the Company's
benefit plans for its or its subsidiaries' directors, officers or employees),
(2) make any payment of principal, interest or premium, if any, on or repay or
repurchase or redeem any debt securities of the Company that rank PARI PASSU
with or junior in interest to the Junior Subordinated Debentures or make any
guarantee payments with respect to any guarantee by the Company of the debt
securities of any subsidiary of the Company if such guarantee ranks PARI PASSU
or junior in interest to the Junior Subordinated Debentures (other than payments
under the Guarantee), or (3) redeem, purchase or acquire less than all of the
Junior Subordinated Debentures or any of the Preferred Securities.
SUBORDINATION
The Indenture provides that the Junior Subordinated Debentures are
subordinated and junior in right of payment to all Senior Debt and Subordinated
Debt of the Company. Upon any payment or
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distribution of assets to creditors upon any liquidation, dissolution, winding
up, reorganization, assignment for the benefit of creditors, marshaling of
assets or any bankruptcy, insolvency, debt restructuring or similar proceedings
in connection with any insolvency or bankruptcy proceedings of the Company, the
holders of Senior Debt and Subordinated Debt of the Company will first be
entitled to receive payment in full of principal of (and premium, if any) and
interest, if any, on such Senior Debt and Subordinated Debt of the Company
before the holders of Junior Subordinated Debentures will be entitled to receive
or retain any payment in respect of the principal of or interest on the Junior
Subordinated Debentures.
In the event of the acceleration of the maturity of any Junior Subordinated
Debentures, the holders of all Senior Debt and Subordinated Debt of the Company
outstanding at the time of such acceleration will first be entitled to receive
payment in full of all amounts due thereon (including any amounts due upon
acceleration) before the holders of the Junior Subordinated Debentures will be
entitled to receive or retain any payment in respect of the principal of or
interest on the Junior Subordinated Debentures.
No payments on account of principal or interest in respect of the Junior
Subordinated Debentures may be made if there has occurred and is continuing a
default in any payment with respect to Senior Debt and Subordinated Debt of the
Company or an event of default with respect to any Senior Debt and Subordinated
Debt of the Company resulting in the acceleration of the maturity thereof, or if
any judicial proceeding is pending with respect to any such default.
"Debt" means, with respect to any Person, whether recourse is to all or a
portion of the assets of such Person and whether or not contingent, (i) every
obligation of such person for money borrowed, (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses, (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person, (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business), (v) every capital lease obligation of such Person, and (vi) every
obligation of the type referred to in clauses (i) through (v) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or is responsible or liable, directly or indirectly, as
obligor or otherwise.
"Senior Debt" means, with respect to the Company, the principal of (and
premium, if any) and interest, if any (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Company whether or not such claim for post-petition interest is allowed in such
proceeding), on Debt, whether incurred on or prior to the date of the Indenture
or thereafter incurred, unless, in the instrument creating or evidencing the
same or pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Junior Subordinated
Debentures or to other Debt which is PARI PASSU with, or subordinated to, the
Junior Subordinated Debentures; provided, however, that Senior Debt will not be
deemed to include (i) any Debt of the Company which when incurred and without
respect to any election under section 1111(b) of the United States Bankruptcy
Code of 1978, as amended, was without recourse to the Company, (ii) any Debt of
the Company to any of its subsidiaries, (iii) any Debt to any employee of the
Company, (iv) any Debt which by its terms is subordinated to trade accounts
payable or accrued liabilities arising in the ordinary course of business to the
extent that payments made to the holders of such Debt by the holders of the
Junior Subordinated Debentures as a result of the subordination provisions of
the Indenture would be greater than they otherwise would have been as a result
of any obligation of such holders to pay amounts over to the obligees on such
trade accounts payable or accrued liabilities arising in the ordinary course of
business as a result of subordination provisions to which such Debt is subject,
and (v) Debt which constitutes Subordinated Debt.
"Subordinated Debt" means, with respect to the Company, the principal of
(and premium, if any) and interest, if any (including interest accruing on or
after the filing of any petition in bankruptcy or for
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reorganization relating to the Company whether or not such claim for
post-petition interest is allowed in such proceeding), on Debt, whether incurred
on or prior to the date of the Indenture or thereafter incurred, which is by its
terms expressly provided to be junior and subordinate to other Debt of the
Company (other than the Junior Subordinated Debentures). On December 31, 1996,
the Company had Subordinated Debt of $78.5 million outstanding, consisting of
$21 million in aggregate principal amount of the 9% Debentures and $57.5 million
in aggregate principal amount of the 63/4% Debentures.
The Indenture places no limitation on the amount of additional Senior Debt
and Subordinated Debt that may be issued or incurred by the Company. The Company
expects from time to time to issue or incur additional indebtedness constituting
Senior Debt and Subordinated Debt. As of December 31, 1996, the Company had
aggregate Senior Debt and Subordinated Debt of approximately $78.5 million.
Because the Company is a holding company, the Junior Subordinated Debentures are
effectively subordinated to all existing and future liabilities of the Company's
subsidiaries, including obligations to depositors of BankAtlantic.
PAYMENT AND PAYING AGENTS
Payment of principal of and any interest on the Junior Subordinated
Debentures will be made at the office of the Debenture Trustee, except that, at
the option of the Company, payment of any interest may be made (i) by check
mailed to the address of the Person entitled thereto as such address appears in
the register of holders of the Junior Subordinated Debentures, or (ii) by
transfer to an account maintained by the Person entitled thereto as specified in
the register of holders of the Junior Subordinated Debentures, provided that
proper transfer instructions have been received by the regular record date.
Payment of any interest on Junior Subordinated Debentures will be made to the
Person in whose name such Junior Subordinated Debenture is registered at the
close of business on the regular record date for such interest, except in the
case of defaulted interest. The Company may at any time designate additional
paying agents for the Junior Subordinated Debentures or rescind the designation
of any paying agent for the Junior Subordinated Debentures; however, the Company
will at all times be required to maintain a paying agent in each place of
payment for the Junior Subordinated Debentures.
Any moneys deposited with the Debenture Trustee or any paying agent for the
Junior Subordinated Debentures, or then held by the Company in trust, for the
payment of the principal of or interest on the Junior Subordinated Debentures
and remaining unclaimed for two years after such principal or interest has
become due and payable will be repaid to the Company on May 31 of each year or
(if then held in trust by the Company) will be discharged from such trust and
the holder of such Junior Subordinated Debenture will thereafter look, as a
general unsecured creditor, only to the Company for payment thereof.
REGISTRAR AND TRANSFER AGENT
The Debenture Trustee will act as the registrar and the transfer agent for
the Junior Subordinated Debentures. Junior Subordinated Debentures may be
presented for registration of transfer (with the form of transfer endorsed
thereon, or a satisfactory written instrument of transfer, duly executed) at the
office of the registrar. The Company may at any time rescind the designation of
any such transfer agent or approve a change in the location through which any
such transfer agent acts; provided that the Company maintains a transfer agent
in the place of payment. The Company may at any time designate additional
transfer agents with respect to the Junior Subordinated Debentures. In the event
of any redemption, neither the Company nor the Debenture Trustee will be
required to (i) issue, register the transfer of or exchange Junior Subordinated
Debentures during a period beginning at the opening of business 15 days before
the day of selection for redemption of Junior Subordinated Debentures and ending
at the close of business on the day of mailing of the relevant notice of
redemption, or (ii) transfer or exchange any Junior Subordinated Debentures so
selected for redemption, except, in the case of any Junior Subordinated
Debentures being redeemed in part, any portion thereof not to be redeemed.
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MODIFICATION OF INDENTURE
The Company and the Debenture Trustee may, from time to time without the
consent of the holders of the Junior Subordinated Debentures, amend, waive or
supplement the Indenture for specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies and qualifying, or maintaining
the qualification of, the Indenture under the Trust Indenture Act. The Indenture
also contains provisions permitting the Company and the Debenture Trustee, with
the consent of the holders of not less than a majority in principal amount of
the outstanding Junior Subordinated Debentures, to modify the Indenture;
provided, that no such modification may, without the consent of the holder of
each outstanding Junior Subordinated Debenture affected by such proposed
modification, (i) extend the fixed maturity of the Junior Subordinated
Debentures, or reduce the principal amount thereof, or reduce the rate or extend
the time of payment of interest thereon, or (ii) reduce the percentage of
principal amount of Junior Subordinated Debentures, the holders of which are
required to consent to any such modification of the Indenture; provided that so
long as any of the Preferred Securities remain outstanding, no such modification
may be made that requires the consent of the holders of the Junior Subordinated
Debentures, and no termination of the Indenture may occur, and no waiver of any
Debenture Event of Default may be effective, without the prior consent of the
holders of at least a majority of the aggregate Liquidation Amount of the
Preferred Securities and that if the consent of the holder of each Junior
Subordinated Debenture is required, such modification will not be effective
until each holder of Trust Securities has consented thereto.
DEBENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to the Junior Subordinated Debentures that has occurred and
is continuing constitutes an event of default (each, a "Debenture Event of
Default") with respect to the Junior Subordinated Debentures:
(i) failure for 30 days to pay any interest on the Junior Subordinated
Debentures, when due (subject to the deferral of any due date in the case of
an Extended Interest Payment Period); or
(ii) failure to pay any principal on the Junior Subordinated Debentures
when due whether at maturity, upon redemption by declaration or otherwise; or
(iii) failure to observe or perform in any material respect certain other
covenants contained in the Indenture for 90 days after written notice to the
Company from the Debenture Trustee or the holders of at least 25% in
aggregate outstanding principal amount of the Junior Subordinated Debentures;
or
(iv) certain events in bankruptcy, insolvency or reorganization of the
Company.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee. The Debenture Trustee, or the holders of not less than 25% in aggregate
outstanding principal amount of the Junior Subordinated Debentures, may declare
the principal due and payable immediately upon a Debenture Event of Default. The
holders of a majority in aggregate outstanding principal amount of the Junior
Subordinated Debentures may annul such declaration and waive the default if the
default (other than the non-payment of the principal of the Junior Subordinated
Debentures which has become due solely by such acceleration) has been cured and
a sum sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration has been deposited with the Debenture Trustee.
Should the holders of the Junior Subordinated Debentures fail to annul such
declaration and waive such default, the holders of a majority in aggregate
Liquidation Amount of the Preferred Securities will have such right.
The Company is required to file annually with the Debenture Trustee a
certificate as to whether or not the Company is in compliance with all the
conditions and covenants applicable to it under the Indenture.
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If a Debenture Event of Default has occurred and is continuing, the
Property Trustee will have the right to declare the principal of and the
interest on such Junior Subordinated Debentures, and any other amounts payable
under the Indenture, to be forthwith due and payable and to enforce its other
rights as a creditor with respect to such Junior Subordinated Debentures.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF THE PREFERRED SECURITIES
If a Debenture Event of Default has occurred and is continuing and such
event is attributable to the failure of the Company to pay interest on or the
principal of the Junior Subordinated Debentures on the payment date on which
such payment is due and payable, then a holder of Preferred Securities may
institute a legal proceeding directly against the Company for enforcement of
payment to such holder of the principal of or interest on such Junior
Subordinated Debentures having a principal amount equal to the aggregate
Liquidation Amount of the Preferred Securities of such holder (a "Direct
Action"). In connection with such Direct Action, the Company will have a right
of set-off under the Indenture to the extent of any payment made by the Company
to such holder of Preferred Securities in the Direct Action. The Company may
not amend the Indenture to remove the foregoing right to bring a Direct Action
without the prior written consent of the holders of all of the Preferred
Securities. If the right to bring a Direct Action is removed, BBC Capital may
become subject to the reporting obligations under the Exchange Act.
The holders of the Preferred Securities will not be able to exercise
directly any remedies, other than those set forth in the preceding paragraph,
available to the holders of the Junior Subordinated Debentures unless there has
been an Event of Default under the Trust Agreement. See "Description of the
Preferred Securities-Events of Default; Notice."
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Company may not consolidate with or merge into any other Person or
convey or transfer its properties and assets substantially as an entirety to any
Person, and any Person may not consolidate with or merge into the Company or
sell, convey, transfer or otherwise dispose of its properties and assets
substantially as an entirety to the Company, unless (i) in the event the Company
consolidates with or merges into another Person or conveys or transfers its
properties and assets substantially as an entirety to any Person, the successor
Person is organized under the laws of the United States or any State or the
District of Columbia, and such successor Person expressly assumes by
supplemental indenture the Company's obligations on the Junior Subordinated
Debentures issued under the Indenture, (ii) immediately after giving effect
thereto, no Debenture Event of Default, and no event which, after notice or
lapse of time or both, would become a Debenture Event of Default, has occurred
and is continuing, and (iii) certain other conditions as prescribed in the
Indenture are met.
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to the
Company's obligations to pay certain sums due pursuant to the Indenture and to
provide certain officers' certificates and opinions of counsel described
therein) and the Company will be deemed to have satisfied and discharged the
Indenture when, among other things, all Junior Subordinated Debentures not
previously delivered to the Debenture Trustee for cancellation (i) have become
due and payable, or (ii) will become due and payable at their Stated Maturity
within one year or are to be called for redemption within one year, and the
Company deposits or causes to be deposited with the Debenture Trustee funds, in
trust, for the purpose and in an amount sufficient to pay and discharge the
entire indebtedness on the Junior Subordinated Debentures not previously
delivered to the Debenture Trustee for cancellation, for the principal and
interest to the date of the deposit or to the Stated Maturity or redemption
date, as the case may be.
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GOVERNING LAW
The Indenture and the Junior Subordinated Debentures will be governed by
and construed in accordance with the laws of the State of Florida.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
The Debenture Trustee has and is subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act. Subject to such provisions, the Debenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and liabilities
which might be incurred thereby. The Debenture Trustee is not required to expend
or risk its own funds or otherwise incur personal financial liability in the
performance of its duties if the Debenture Trustee reasonably believes that
repayment or adequate indemnity is not reasonably assured to it.
MISCELLANEOUS
The Company has agreed, pursuant to the Indenture, for so long as Trust
Securities remain outstanding, (i) to maintain directly or indirectly 100%
ownership of the Common Securities of BBC Capital (provided that certain
successors which are permitted pursuant to the Indenture may succeed to the
Company's ownership of the Common Securities), (ii) not to voluntarily
terminate, wind up or liquidate BBC Capital without prior regulatory approval if
then so required under applicable capital guidelines or regulatory policies, and
(a) in connection with a distribution of Junior Subordinated Debentures to the
holders of the Preferred Securities in liquidation of BBC Capital, or (b) in
connection with certain mergers, consolidations or amalgamations permitted by
the Trust Agreement, and (iii) to use its reasonable efforts, consistent with
the terms and provisions of the Trust Agreement, to cause BBC Capital to remain
classified as a grantor trust and not as an association taxable as a corporation
for United States federal income tax purposes.
DESCRIPTION OF THE GUARANTEE
The Preferred Securities Guarantee Agreement (the "Guarantee") will
be executed and delivered by the Company concurrently with the issuance of the
Preferred Securities for the benefit of the holders of the Preferred Securities.
The Guarantee will be qualified as an indenture under the Trust Indenture Act.
The Guarantee Trustee will act as indenture trustee under the Guarantee for
purposes of complying with the provisions of the Trust Indenture Act. The
Guarantee Trustee, Wilmington Trust Company, will hold the Guarantee for the
benefit of the holders of the Preferred Securities. The following summary of the
material terms and provisions of the Guarantee does not purport to be complete
and is subject to, and qualified in its entirety by reference to, all of the
provisions of the Guarantee and the Trust Indenture Act. Wherever particular
defined terms of the Guarantee are referred to, but not defined herein, such
defined terms are incorporated herein by reference. The form of the Guarantee
has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part.
GENERAL
The Guarantee will be an irrevocable guarantee on a subordinated basis of
BBC Capital's obligations under the Preferred Securities, but will apply only
to the extent that BBC Capital has funds sufficient to make such payments. The
Company will, pursuant to the Guarantee, irrevocably agree to pay in full on a
subordinated basis, to the extent set forth therein, the Guarantee Payments (as
defined below) to the holders of the Preferred Securities, as and when due,
regardless of any defense, right of set-off or counterclaim that BBC Capital may
have or assert other than the defense of payment. The
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following payments with respect to the Preferred Securities, to the extent not
paid by or on behalf of BBC Capital (the "Guarantee Payments"), will be
subject to the Guarantee: (i) any accrued and unpaid Distributions required to
be paid on the Preferred Securities, to the extent that BBC Capital has funds
available therefor at such time, (ii) the Redemption Price with respect to any
Preferred Securities called for redemption to the extent that BBC Capital has
funds available therefor at such time, and (iii) upon a voluntary or involuntary
dissolution, winding up or liquidation of BBC Capital (other than in connection
with the distribution of Junior Subordinated Debentures to the holders of
Preferred Securities or a redemption of all of the Preferred Securities), the
lesser of (a) the amount of the Liquidation Distribution, to the extent BBC
Capital has funds available therefor at such time, and (b) the amount of assets
of BBC Capital remaining available for distribution to holders of Preferred
Securities in liquidation of BBC Capital. The obligation of the Company to make
a Guarantee Payment may be satisfied by direct payment of the required amounts
by the Company to the holders of the Preferred Securities or by causing BBC
Capital to pay such amounts to such holders.
The Guarantee will not apply to any payment of Distributions except to the
extent BBC Capital has funds available therefor. If the Company does not make
interest payments on the Junior Subordinated Debentures held by BBC Capital, BBC
Capital will not pay Distributions on the Preferred Securities and will not have
funds legally available therefor.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Company and
will rank subordinate and junior in right of payment to all Senior Debt and
Subordinated Debt of the Company in the same manner as the Junior Subordinated
Debentures. The Guarantee does not place a limitation on the amount of
additional Senior Debt and Subordinated Debt that may be incurred by the
Company. The Company expects from time to time to incur additional indebtedness
constituting Senior Debt and Subordinated Debt. The Guarantee will constitute a
guarantee of payment and not of collection (that is, the guaranteed party may
institute a legal proceeding directly against the Company to enforce its rights
under the Guarantee without first instituting a legal proceeding against any
other Person). The Guarantee will not be discharged except by payment of the
Guarantee Payments in full to the extent not paid by BBC Capital or upon
distribution of the Junior Subordinated Debentures to the holders of the
Preferred Securities. Because the Company is a holding company, the right of the
Company to participate in any distribution of assets of a subsidiary, including
BankAtlantic, upon a liquidation or reorganization or otherwise is subject to
the prior claims of creditors of the subsidiary, except to the extent the
Company may itself be recognized as a creditor of the subsidiary. The Company's
obligations under the Guarantee, therefore, will be effectively subordinated to
all existing and future liabilities of the Company's subsidiaries, including
BankAtlantic, and claimants should look only to the assets of the Company for
payments thereunder.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the Preferred Securities (in which case no vote will be
required), the Guarantee may not be amended without the prior approval of the
holders of not less than a majority of the aggregate Liquidation Amount of the
outstanding Preferred Securities. See "Description of the Preferred
Securities-Voting Rights; Amendment of Trust Agreement." All guarantees and
agreements contained in the Guarantee will bind the successors, assigns,
receivers, trustees and representatives of the Company and will inure to the
benefit of the holders of the Preferred Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder. The
holders of not less than a majority in aggregate Liquidation Amount of the
Preferred Securities have the right to direct the time, method and place of
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conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Guarantee.
Any holder of Preferred Securities may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against BBC Capital, the Guarantee Trustee
or any other Person.
The Company, as guarantor, is required to file annually with the Guarantee
Trustee a certificate as to whether or not the Company is in compliance with all
the conditions and covenants applicable to it under the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of
a default by the Company in performance of the Guarantee, undertakes to perform
only such duties as are specifically set forth in the Guarantee and, after
default with respect to the Guarantee, must exercise the same degree of care and
skill as a prudent person would exercise or use in the conduct of his or her own
affairs. Subject to such provisions, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by the Guarantee at the
request of any holder of any Preferred Securities, unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon (a)
full payment of the Redemption Price of the Preferred Securities, (b) full
payment of the amounts payable upon liquidation of BBC Capital, or (c)
distribution of the Junior Subordinated Debentures to the holders of the
Preferred Securities. The Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of the Preferred
Securities must restore payment of any sums paid under such Preferred Securities
or the Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of Florida.
EXPENSE AGREEMENT
The Company will, pursuant to the Agreement as to Expenses and Liabilities
entered into by it under the Trust Agreement (the "Expense Agreement"),
irrevocably and unconditionally guarantee to each person or entity to whom BBC
Capital becomes indebted or liable, the full payment of any costs, expenses or
liabilities of BBC Capital, other than obligations of BBC Capital to pay to the
holders of the Preferred Securities or other similar interests in BBC Capital of
the amounts due such holders pursuant to the terms of the Preferred Securities
or such other similar interests, as the case may be. Third party creditors of
BBC Capital may proceed directly against the Company under the Expense
Agreement, regardless of whether such creditors had notice of the Expense
Agreement.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED DEBENTURES AND THE GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the Preferred Securities
(to the extent BBC Capital has funds available for the payment of such
Distributions) are irrevocably guaranteed by the
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Company as and to the extent set forth under "Description of the
Guarantee." The Company and BBC Capital believe that, taken together, the
obligations of the Company under the Junior Subordinated Debentures, the
Indenture, the Trust Agreement, the Expense Agreement, and the Guarantee
provide, in the aggregate, a full, irrevocable and unconditional guarantee, on a
subordinated basis, of payment of Distributions and other amounts due on the
Preferred Securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
obligations of BBC Capital under the Preferred Securities. If and to the extent
that the Company does not make payments on the Junior Subordinated Debentures,
BBC Capital will not pay Distributions or other amounts due on the Preferred
Securities. The Guarantee does not cover payment of Distributions when BBC
Capital does not have sufficient funds to pay such Distributions. In such event,
the remedy of a holder of Preferred Securities is to institute a legal
proceeding directly against the Company for enforcement of payment of such
Distributions to such holder. The obligations of the Company under the Guarantee
are subordinate and junior in right of payment to all Senior Debt and
Subordinated Debt of the Company.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Preferred Securities, primarily
because (i) the aggregate principal amount of the Junior Subordinated Debentures
will be equal to the sum of the aggregate stated Liquidation Amount of the Trust
Securities, (ii) the interest rate and interest and other payment dates on the
Junior Subordinated Debentures will match the Distribution rate and Distribution
and other payment dates for the Preferred Securities, (iii) the Company will pay
for all and any costs, expenses and liabilities of BBC Capital (except the
obligations of BBC Capital to holders of the Preferred Securities), and (iv) the
Trust Agreement further provides that BBC Capital will not engage in any
activity that is not consistent with the limited purposes of BBC Capital.
ENFORCEMENT RIGHTS OF HOLDERS OF PREFERRED SECURITIES
A holder of any Preferred Security may institute a legal proceeding
directly against the Company to enforce its rights under the Guarantee without
first instituting a legal proceeding against the Guarantee Trustee, BBC Capital
or any other Person. A default or event of default under any Senior Debt and
Subordinated Debt of the Company would not constitute a default or Event of
Default. In the event, however, of payment defaults under, or acceleration of,
Senior Debt and Subordinated Debt of the Company, the subordination provisions
of the Indenture provide that no payments may be made in respect of the Junior
Subordinated Debentures until such Senior Debt and Subordinated Debt has been
paid in full or any payment default thereunder has been cured or waived. Failure
to make required payments on the Junior Subordinated Debentures would constitute
an Event of Default.
LIMITED PURPOSE OF BBC CAPITAL
The Preferred Securities evidence a preferred undivided beneficial interest
in the assets of BBC Capital. BBC Capital exists for the sole purpose of issuing
the Trust Securities and investing the proceeds thereof in Junior Subordinated
Debentures. A principal difference between the rights of a holder of a Preferred
Security and the rights of a holder of a Junior Subordinated Debenture is that a
holder of a Junior Subordinated Debenture is entitled to receive from the
Company the principal amount of and interest accrued on Junior Subordinated
Debentures held, while a holder of Preferred Securities is entitled to receive
Distributions from BBC Capital (or from the Company under the Guarantee) if and
to the extent BBC Capital has funds available for the payment of such
Distributions.
RIGHTS UPON TERMINATION
Upon any voluntary or involuntary termination, winding-up or liquidation of
BBC Capital involving the liquidation of the Junior Subordinated Debentures, the
holders of the Preferred Securities
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will be entitled to receive, out of assets held by BBC Capital, the Liquidation
Distribution in cash. See "Description of the Preferred
Securities-Liquidation Distribution Upon Termination." Upon any voluntary or
involuntary liquidation or bankruptcy of the Company, the Property Trustee, as
holder of the Junior Subordinated Debentures, would be a subordinated creditor
of the Company, subordinated in right of payment to all Senior Debt and
Subordinated Debt of the Company (as set forth in the Indenture), but entitled
to receive payment in full of principal and interest before any shareholders of
the Company receive payments or distributions. Since the Company is the
guarantor under the Guarantee and has agreed to pay for all costs, expenses and
liabilities of BBC Capital (other than the obligations of BBC Capital to the
holders of its Preferred Securities), the positions of a holder of the Preferred
Securities and a holder of the Junior Subordinated Debentures relative to other
creditors and to shareholders of the Company in the event of liquidation or
bankruptcy of the Company are expected to be substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a summary of the material United States federal income tax
considerations that may be relevant to the purchasers of Preferred Securities.
The statements of law or legal conclusions set forth in this summary constitute
the opinion of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.,
counsel to the Company and BBC Capital. The conclusions expressed herein are
based upon current provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), regulations thereunder and current administrative rulings
and court decisions, all of which are subject to change at any time, with
possible retroactive effect. Subsequent changes to these authorities may cause
tax consequences to vary substantially from the consequences described below.
Furthermore, the authorities on which the following summary is based are subject
to various interpretations, and it is therefore possible that the United States
federal income tax treatment of the purchase, ownership, and disposition of
Preferred Securities may differ from the treatment described below.
No attempt has been made in the following discussion to comment on all
United States federal income tax matters affecting purchasers of Preferred
Securities. Moreover, the discussion generally focuses on holders of Preferred
Securities who are individual citizens or residents of the United States and who
acquire Preferred Securities on their original issue at their offering price and
hold Preferred Securities as capital assets. The discussion has only limited
application to dealers in securities, corporations, estates, trusts or
nonresident aliens and does not address all the tax consequences that may be
relevant to holders who may be subject to special tax treatment, such as, for
example, banks, thrifts, real estate investment trusts, regulated investment
companies, insurance companies, dealers in securities or currencies, tax-exempt
investors, or persons that will hold the Preferred Securities as a position in a
"straddle," as part of a "synthetic security" or "hedge," as
part of a "conversion transaction" or other integrated investment, or as
other than a capital asset. The following summary also does not address the tax
consequences to persons that have a functional currency other than the U.S.
dollar or the tax consequences to shareholders, partners or beneficiaries of a
holder of Preferred Securities. Further, it does not include any description of
any alternative minimum tax consequences or the tax laws of any state or local
government or of any foreign government that may be applicable to the Preferred
Securities. Accordingly, each prospective investor should consult, and should
rely exclusively on, such investor's own tax advisors in analyzing the federal,
state, local and foreign tax consequences of the purchase, ownership or
disposition of Preferred Securities.
CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
The Company intends to take the position that the Junior Subordinated
Debentures will be classified for United States federal income tax purposes as
indebtedness of the Company under current law, and, by acceptance of a Preferred
Security, each holder covenants to treat the Junior Subordinated
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Debentures as indebtedness and the Preferred Securities as evidence of an
indirect beneficial ownership interest in the Junior Subordinated Debentures.
Counsel for the Company is of the opinion that, under current law, and based
upon the representations, facts and assumptions set forth herein, the Junior
Subordinated Debentures will be classified as indebtedness for United States
federal income tax purposes. No assurance can be given, however, that such
position of the Company will not be challenged by the Internal Revenue Service
or, if challenged, that such a challenge will not be successful. The remainder
of this discussion assumes that the Junior Subordinated Debentures will be
classified for United States federal income tax purposes as indebtedness of the
Company.
CLASSIFICATION OF BBC CAPITAL
Under current law and assuming full compliance with the terms of the Trust
Agreement and Indenture (and certain other documents described herein), BBC
Capital will be classified for United States federal income tax purposes as a
grantor trust and not as an association taxable as a corporation. Accordingly,
for United States federal income tax purposes, each holder of Preferred
Securities generally will be treated as owning an undivided beneficial interest
in the Junior Subordinated Debentures, and each holder will be required to
include in its gross income its pro rata share of interest income, including any
original issue discount ("OID"), paid or accrued with respect to its
allocable share of the Junior Subordinated Debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under applicable Treasury regulations (the "Regulations"), a "remote"
contingency that stated interest will not be timely paid will be ignored in
determining whether a debt instrument is issued with OID. The Company believes
that the likelihood of its exercising its option to defer payments of interest
is remote. Based on the foregoing, the Company believes that the Junior
Subordinated Debentures will not be considered to be issued with OID at the time
of their original issuance and, accordingly, a holder should include in gross
income such holder's allocable share of interest on the Junior Subordinated
Debentures in accordance with such holder's method of tax accounting.
Under the Regulations, if the Company exercised its option to defer any
payment of interest, the Junior Subordinated Debentures would at that time be
treated as issued with OID, and all stated interest (and DE MINIMIS OID, if any)
on the Junior Subordinated Debentures would thereafter be treated as OID as long
as the Junior Subordinated Debentures remained outstanding. In such event, all
of the holder's taxable interest income with respect to the Junior Subordinated
Debentures would be accounted for as OID on an economic accrual basis regardless
of such holder's method of tax accounting, and actual distributions of stated
interest would not be reported as taxable income.
Consequently, a holder would be required to include in gross income OID
even though the Company would not make any actual cash payments during an
Extended Interest Payment.
The Regulations have not been addressed in any published rulings or other
published interpretations by the Internal Revenue Service, and it is possible
that the Internal Revenue Service could take a position contrary to the
interpretation herein.
Because income on the Preferred Securities will constitute interest or OID,
corporate holders will not be entitled to a dividends-received deduction with
respect to any income recognized with respect to the Preferred Securities.
Subsequent uses of the term "interest" in this summary include income in
the form of OID.
MARKET DISCOUNT AND ACQUISITION PREMIUM
Holders of Preferred Securities other than a holder who purchased the
Preferred Securities upon original issuance may be considered to have acquired
their undivided interests in the Junior
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Subordinated Debentures with "market discount" or "acquisition
premium" as such phrases are defined for United States federal income tax
purposes. Such holders are advised to consult their tax advisors as to the
income tax consequences of the acquisition, ownership and disposition of the
Preferred Securities.
RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF BBC
CAPITAL
Under certain circumstances, as described under "Description of the
Preferred Securities- Redemption or Exchange" and "-Liquidation Distribution
Upon Termination," the Junior Subordinated Debentures may be distributed to
holders of Preferred Securities upon a liquidation of BBC Capital. Under current
United States federal income tax law, such a distribution would be treated as a
nontaxable event to each such holder and would result in such holder having an
aggregate tax basis in the Junior Subordinated Debentures received in the
liquidation equal to such holder's aggregate tax basis in the Preferred
Securities immediately before the distribution. A holder's holding period in the
Junior Subordinated Debentures so received in liquidation of BBC Capital would
include the period for which such holder held the Preferred Securities.
If, however, a Tax Event occurs which results in BBC Capital being treated
as an association taxable as a corporation, the distribution would constitute a
taxable event to holders of the Preferred Securities. Under certain
circumstances described herein, the Junior Subordinated Debentures may be
redeemed for cash and the proceeds of such redemption distributed to holders in
redemption of their Preferred Securities. Under current law, such a redemption
would, for United States federal income tax purposes, constitute a taxable
disposition of the redeemed Preferred Securities, and a holder would recognize
gain or loss as if the holder sold such Preferred Securities for cash. See
"Description of the Preferred Securities-Redemption or Exchange" and
"-Liquidation Distribution Upon Termination."
SALES OF PREFERRED SECURITIES
A holder that sells Preferred Securities will recognize gain or loss equal
to the difference between its adjusted tax basis in the Preferred Securities and
the amount realized on the sale of such Preferred Securities. Assuming that the
Company does not exercise its option to defer payment of interest on the Junior
Subordinated Debentures, and the Preferred Securities are not considered issued
with OID, a holder's adjusted tax basis in the Preferred Securities generally
will be its initial purchase price. If the Junior Subordinated Debentures are
deemed to be issued with OID as a result of the Company's deferral of any
interest payment, or otherwise, a holder's tax basis in the Preferred Securities
generally will be its initial purchase price, increased by OID previously
includible in such holder's gross income to the date of disposition and
decreased by distributions or other payments received on the Preferred
Securities since and including the date of commencement of the first Extended
Interest Payment Period. Such gain or loss generally will be a capital gain or
loss (except to the extent of any accrued interest with respect to such holder's
pro rata share of the Junior Subordinated Debentures required to be included in
income) and generally will be a long-term capital gain or loss if the Preferred
Securities have been held for more than one year.
Should the Company exercise its option to defer any payment of interest on
the Junior Subordinated Debentures, the Preferred Securities may trade at a
price that does not accurately reflect the value of accrued but unpaid interest
with respect to the underlying Junior Subordinated Debentures. In the event of
such a deferral, a holder that disposes of its Preferred Securities between
record dates for payments of distributions thereon will be required to include
accrued but unpaid interest on the Junior Subordinated Debentures to the date of
disposition as OID, but may not receive the cash related thereto. However, such
Securityholder will add such amount to its adjusted tax basis in the Preferred
Securities. To the extent the selling price is less than the holder's adjusted
tax basis in the Preferred Securities, such holder will recognize a capital
loss. Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States federal income tax purposes.
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EFFECT OF PROPOSED CHANGES IN TAX LAWS
On February 6, 1997, President Clinton released his budget proposals for
fiscal year 1998. One of the revenue provisions of those proposals would
generally deny interest deductions for interest on an instrument issued by a
corporation that has a maximum term of more than 15 years and that is not shown
as indebtedness on the separate balance sheet of the issuer or, where the
instrument is issued to a related party (other than a corporation), where the
holder or some other related party issues a related instrument that is not shown
as indebtedness on the issuer's consolidated balance sheet. If enacted as
proposed by the President, this provision would be effective for instruments
issued on or after the date of first action by a Congressional committee with
respect to the proposal. It is not clear from the President's proposals as to
what constitutes Congressional "committee action" with respect to this proposal.
If the provision were to apply to the Junior Subordinated Debentures, the
Company would be unable to deduct interest on the Junior Subordinated
Debentures. Under current law, the Company will be able to deduct interest on
the Junior Subordinated Debentures. However, counsel for the Company has advised
that such proposed legislation could change the deductibility of the interest
paid by the Company on the Junior Subordinated Debentures for federal income tax
purposes, and that Congress could amend such legislation giving it retroactive
effect prior to its enactment to law. There can be no assurance that future
legislative proposals or final legislation will not affect the ability of the
Company to deduct interest on the Junior Subordinated Debentures. Such a change
would give rise to a Tax Event. A Tax Event would permit the Company, upon prior
regulatory approval if then required under applicable capital guidelines or
regulatory policies, to cause a redemption of the Preferred Securities before,
as well as after, , 2002. See "Description of the Junior Subordinated
Debentures- Redemption or Exchange" and "Description of the Preferred
Securities-Redemption or Exchange- Tax Event Redemption, Investment Company
Event Redemptions or Capital Treatment Event Redemptions."
BACKUP WITHHOLDING AND INFORMATION REPORTING
The amount of OID accrued on the Preferred Securities held of record by
individual citizens or residents of the United States, or certain trusts,
estates, and partnerships, will be reported to the Internal Revenue Service on
Forms 1099, which forms should be mailed to such holders of Preferred Securities
by January 31 following each calendar year. Payments made on, and proceeds from
the sale of, the Preferred Securities may be subject to a "backup" withholding
tax (currently at 31%) unless the holder complies with certain identification
and other requirements. Any amounts withheld under the backup withholding rules
will be allowed as a credit against the holder's United States federal income
tax liability, provided the required information is provided to the Internal
Revenue Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON THE
PARTICULAR SITUATION OF A HOLDER OF PREFERRED SECURITIES. HOLDERS OF PREFERRED
SECURITIES SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE PREFERRED
SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER
TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER
TAX LAWS.
ERISA CONSIDERATIONS
Employee benefit plans that are subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code
("Plans"), generally may purchase Preferred Securities, subject to the investing
fiduciary's determination that the investment in Preferred Securities satisfies
ERISA's fiduciary standards and other requirements applicable to investments by
the Plan.
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In any case, the Company and/or any of its affiliates may be considered a
"party in interest" (within the meaning of ERISA) or a "disqualified
person" (within the meaning of Section 4975 of the Code) with respect to
certain plans (generally, Plans maintained or sponsored by, or contributed to
by, any such persons with respect to which the Company or an affiliate is a
fiduciary or Plans for which the Company or an affiliate provides services). The
acquisition and ownership of Preferred Securities by a Plan (or by an individual
retirement arrangement or other Plans described in Section 4975(e)(1) of the
Code) with respect to which the Company or any of its affiliates is considered a
party in interest or a disqualified person may constitute or result in a
prohibited transaction under ERISA or Section 4975 of the Code, unless such
Preferred Securities are acquired pursuant to and in accordance with an
applicable exemption.
As a result, Plans with respect to which the Company or any of its
affiliates is a party in interest or a disqualified person should not acquire
Preferred Securities unless such Preferred Securities are acquired pursuant to
and in accordance with an applicable exemption. Any other Plans or other
entities whose assets include Plan assets subject to ERISA or Section 4975 of
the Code proposing to acquire Preferred Securities should consult with their own
counsel.
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UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Underwriters, Ryan, Beck & Co., Inc. and Tucker Anthony
Incorporated, have severally agreed to purchase from BBC Capital the number of
Preferred Securities set forth opposite their respective names below. The
Underwriters are committed to purchase and pay for all Preferred Securities if
any Preferred Securities are purchased.
NUMBER OF
UNDERWRITER SHARES
- ----------------------------------- -----------
Ryan, Beck & Co., Inc. ............
Tucker Anthony Incorporated ......
-----------
TOTAL ........................ 2,600,000
===========
The Company has been advised by the Underwriters that the Underwriters
propose initially to offer the Preferred Securities 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 $ per Preferred
Security. The Underwriters may allow and such dealers may re-allow a concession
not in excess of $ per Preferred Security to certain other dealers. After
the initial public offering, the public offering price and such concessions may
be changed by the Underwriters.
In view of the fact that the proceeds from the sale of the Preferred
Securities will be used to purchase the Junior Subordinated Debentures issued by
the Company, the Underwriting Agreement provides that the Company will pay as
compensation an amount of $ per Preferred Security for the Underwriters'
arranging the investment therein of such proceeds.
BBC Capital has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to an additional 390,000
Preferred Securities at the public offering price set forth on the cover page
hereof less underwriting discounts. The Underwriters may exercise such option to
purchase additional Preferred Securities solely for the purpose of covering
over-allotments, if any, incurred in the sale of the Preferred Securities.
To the extent that the Underwriters exercise their option to purchase
additional Preferred Securities, BBC Capital will issue and sell to the Company
additional Common Securities and the Company will issue and sell to BBC Capital
Junior Subordinated Debentures in an aggregate principal amount equal to the
total aggregate Liquidation Amount of the additional Preferred Securities being
purchased pursuant to the option and the additional Common Securities.
Because the National Association of Securities Dealers, Inc. ("NASD") is
expected to view the Preferred Securities as interests in a direct participation
program, the offering of the Preferred Securities is being made in compliance
with the applicable provisions of Rule 2810 of the NASD's Conduct Rules.
The Company and BBC Capital have agreed to indemnify the Underwriters
against and contribute toward certain liabilities, including liabilities under
the Securities Act. The Company has agreed to reimburse the Underwriters for
certain expenses and legal fees related to the sale of the Preferred Securities.
The Preferred Securities are a new series of securities with no established
trading market. Application has been made to list the Preferred Securities on
The Nasdaq Stock Market's National Market. The Underwriters have advised BBC
Capital that they presently intend to make a market in the Preferred Securities
after the commencement of trading on The Nasdaq National Market, but no
assurances can be made as to the liquidity of such Preferred Securities or that
an active and liquid trading market will develop or, if developed, that it will
be sustained. The Underwriters will have no obligation to make a market in the
Preferred Securities, however, and may cease market-making activities, if
commenced, at any time.
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VALIDITY OF SECURITIES
Certain matters of Delaware law relating to the validity of the Preferred
Securities, the enforceability of the Trust Agreement and the formation of BBC
Capital will be passed upon by Richards, Layton & Finger, special Delaware
counsel to the Company and BBC Capital. Certain legal matters for the Company
and BBC Capital, including the validity of the Guarantee and the Junior
Subordinated Debentures will be passed upon for the Company and BBC Capital by
Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A., counsel to the
Company and BBC Capital. Certain legal matters will be passed upon for the
Underwriters by Malizia, Spidi, Sloane & Fisch, P.C., Washington, D.C. Stearns
Weaver Miller Weissler, Alhadeff & Sitterson, P.A., and Malizia, Spidi, Sloane &
Fisch, P.C. will rely on the opinion of Richards, Layton & Finger as to matters
of Delaware law. Certain matters relating to United States federal income tax
considerations will be passed upon for the Company by Stearns Weaver Miller
Weissler Alhadeff & Sitterson, P.A.
EXPERTS
The consolidated financial statements of BankAtlantic Bancorp, Inc. as of
December 31, 1996 and 1995, and for each of the years in the three-year period
ended December 31, 1996, 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.
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 Commission maintains an Internet
web site that contains reports, proxy and information statements and other
information regarding issuers who file electronically with the Commission. The
address of that site is http://www.sec.gov.
The Company and BBC Capital have filed with the Commission a Registration
Statement on Form S-3 (together with all amendments thereto, the "Registration
Statement"), of which this Prospectus is a part, under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Preferred
Securities, the Junior Subordinated Debentures and the Guarantee. This
Prospectus does not contain all of 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, BBC Capital, the Preferred Securities
and the Junior Subordinated Debentures, reference is made to the Registration
Statement, including the exhibits thereto and the documents incorporated herein
by reference. Any statements contained herein concerning the provisions of any
document filed as an exhibit to the Registration Statement or otherwise filed
with the Commission or incorporated by reference herein are not necessarily
complete, and, in each instance, reference is made to the copy of such document
so filed for a more complete description of the matter involved. Each such
statement is qualified in its entirety by such 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.
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No separate financial statements of BBC Capital have been included herein.
The Company does not consider that such financial statements would be material
to holders of Preferred Securities because (i) all of the voting securities of
BBC Capital will be owned by the Company, a reporting company under the Exchange
Act, (ii) BBC Capital has no independent operations but exists for the sole
purpose of issuing securities representing undivided beneficial interests in the
assets of BBC Capital and investing the proceeds thereof in Junior Subordinated
Debentures issued by the Company, and (iii) the obligations of the Company
described herein to provide certain indemnities in respect of and be responsible
for certain costs, expenses, debts and liabilities of BBC Capital under the
Indenture and pursuant to the Trust Agreement, the guarantee issued by the
Company with respect to the Preferred Securities, the Junior Subordinated
Debentures purchased by BBC Capital, the related Indenture and the Expense
Agreement, taken together, constitute, in the belief of the Company and BBC
Capital, a full and unconditional guarantee of payments due on the Preferred
Securities. See "Description of the Junior Subordinated Debentures" and
"Description of the Guarantee."
BBC Capital is not currently subject to the information reporting
requirements of the Exchange Act and the Company does not expect that BBC
Capital will file reports, proxy statements and other information under the
Exchange Act with the Commission.
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,
1996, filed with the Commission on March 21, 1997.
(2) The Company's Current Report on Form 8-K, dated January 6, 1997, filed
with the Commission on January 13, 1997.
(3) The Company's Current Report on Form 8-K, dated February 4, 1997, filed
with the Commission on February 13, 1997.
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 the Junior Subordinated 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.
103
<PAGE>
F-
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Independent Auditors' Report ................................................................. F-3
Consolidated Statements of Financial Condition as of December 31, 1996 and 1995 ............. F-4
Consolidated Statements of Operations for each of the years in the three year period ended
December 31, 1996 ............................................................................ F-5
Consolidated Statements of Stockholders' Equity for each of the years in the three year
period ended December 31, 1996 ............................................................... F-6
Consolidated Statements of Cash Flows for each of the years in the three year period ended
December 31, 1996 ............................................................................ F-7
Notes to Consolidated Financial Statements ................................................... F-10
</TABLE>
F-1
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
BankAtlantic Bancorp, Inc.:
We have audited the accompanying consolidated statements of financial
condition of BankAtlantic Bancorp, Inc. and subsidiaries as of December 31,
1996 and 1995, 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, 1996. These consolidated financial statements 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 at December 31, 1996 and 1995,
and the results of their operations and their cash flows for each of the
years in the three year period ended December 31, 1996, in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Fort Lauderdale, Florida
January 28, 1997
F-3
<PAGE>
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1996 1995
-------------- --------------
(IN THOUSANDS, EXCEPT SHARE
DATA)
<S> <C> <C>
ASSETS
Cash and due from depository institutions ........................... $ 102,995 $ 69,867
Federal Funds sold .................................................. 6,148 0
Investment securities, net--held to maturity, at cost which
approximates market value ......................................... 54,511 49,856
Loans receivable, net ............................................... 1,824,856 828,630
Debt securities available for sale (at market value) ................ 439,345 691,803
Accrued interest receivable ......................................... 20,755 14,553
Real estate owned, net .............................................. 4,918 6,279
Office properties and equipment, net ................................ 48,274 40,954
Federal Home Loan Bank stock, at cost which approximates
market value ...................................................... 14,787 10,089
Mortgage servicing rights ........................................... 25,002 20,738
Deferred tax asset, net ............................................. 3,355 0
Cost over fair value of net assets acquired ......................... 28,591 10,823
Other assets ........................................................ 31,990 7,097
-------------- --------------
Total assets ...................................................... $ 2,605,527 $ 1,750,689
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits ............................................................ $ 1,832,780 $ 1,300,377
Advances from FHLB .................................................. 295,700 201,785
Federal Funds purchased ............................................. 0 1,200
Securities sold under agreements to repurchase ...................... 190,588 66,237
Subordinated debentures and note payable ............................ 78,500 21,001
Drafts payable ...................................................... 386 796
Deferred tax liabilities, net ....................................... 0 744
Advances by borrowers for taxes and insurance ....................... 29,659 15,684
Other liabilities ................................................... 30,210 22,304
-------------- --------------
Total liabilities ................................................. 2,457,823 1,630,128
-------------- --------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value, $25 per share preference value,
10,000,000 shares authorized; none issued and outstanding ......... 0 0
Class A common stock, $.01 par value, authorized 30,000,000 shares;
issued and outstanding 7,807,258 and 0 shares ..................... 78 0
Class B common stock, $.01 par value, authorized 15,000,000 shares;
issued and outstanding 10,542,116 and 10,592,999 shares ........... 105 106
Additional paid-in capital .......................................... 64,171 48,905
Retained earnings ................................................... 82,602 65,817
-------------- --------------
Total stockholders' equity before net unrealized appreciation on
debt securities available for sale--net of deferred income taxes .. 146,956 114,828
Net unrealized appreciation on debt securities available for sale--
net of deferred income taxes ...................................... 748 5,733
-------------- --------------
Total stockholders' equity ........................................ 147,704 120,561
-------------- --------------
Total liabilities and stockholders' equity ........................ $ 2,605,527 $ 1,750,689
============== ==============
</TABLE>
See Notes to Consolidated Financial Statements
F-4
<PAGE>
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATION
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1996 1995 1994
------------ ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE DATE)
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans .......................................... $ 107,922 $ 72,841 $49,426
Interest on banker's acceptances .................................... 22 0 406
Interest on mortgage-backed securities held to maturity ............ 0 37,855 30,550
Interest on debt securities available for sale ...................... 38,159 7,207 5,542
Interest and dividends on investment securities ..................... 6,528 12,174 12,625
------------ ------------ ---------
Total interest income ............................................. 152,631 130,077 98,549
------------ ------------ ---------
INTEREST EXPENSE:
Interest on deposits ................................................ 55,028 46,646 31,646
Interest on advances from FHLB ...................................... 9,221 7,449 4,976
Interest on securities sold under agreements to repurchase
and federal funds purchased ....................................... 8,764 10,815 4,809
Interest on subordinated debentures and note payable ................ 4,018 776 0
------------ ------------ ---------
Total interest expense ............................................ 77,031 65,686 41,431
------------ ------------ ---------
Net interest income ................................................. 75,600 64,391 57,118
Provision for loan losses ........................................... 5,844 4,182 2,299
------------ ------------ ---------
Net interest income after provision for loan losses ................. 69,756 60,209 54,819
------------ ------------ ---------
NON-INTEREST INCOME:
Loan servicing and other loan fees .................................. 4,216 3,524 3,365
Gains on sales of loans originated for resale ....................... 534 395 773
Unrealized and realized gains (losses) on trading account securities 0 589 (558)
Gains on sales of mortgage servicing rights ......................... 4,182 2,744 484
Gains on sales of debt securities available for sale ................ 5,959 0 0
Gains on sales of property and equipment, net ....................... 3,061 18 272
Other ............................................................... 15,785 12,118 9,427
------------ ------------ ---------
Total non-interest income ......................................... 33,737 19,388 13,763
------------ ------------ ---------
NON-INTEREST EXPENSE:
Employee compensation and benefits .................................. 33,216 25,403 22,382
Occupancy and equipment ............................................. 13,615 10,831 8,061
SAIF special assessment ............................................. 7,160 0 0
Federal insurance premium ........................................... 2,495 2,750 2,673
Advertising and promotion ........................................... 2,079 2,144 1,495
Foreclosed asset activity, net ...................................... (725) (3,178) (2,290)
Amortization of cost over fair value of net assets acquired ........ 1,545 1,122 0
Other ............................................................... 12,856 12,088 9,764
------------ ------------ ---------
Total non-interest expense ........................................ 72,241 51,160 42,085
------------ ------------ ---------
Income before income taxes .......................................... 31,252 28,437 26,497
Provision for income taxes .......................................... 12,241 10,018 9,662
------------ ------------ ---------
Net income .......................................................... 19,011 18,419 16,835
------------ ------------ ---------
Dividends on non-cumulative preferred stock ......................... 0 677 880
Amount classified as dividends on non-cumulative
preferred stock redemption ....................................... 0 1,353 (A) 0
------------ ------------ ---------
Total dividends on non-cumulative preferred stock ................. 0 2,030 880
------------ ------------ ---------
Net income available for common shares .............................. $ 19,011 $ 16,389 $ 15,955
============ =========== =========
Income per common and common equivalent share ....................... $ 1.01 $ 0.97 (A) $ 0.97
============ =========== =========
Income per common equivalent share assuming full dilution .......... $ 0.93 $ 0.96 (A) $ 0.97
============ =========== =========
</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 $0.08 for primary and fully diluted earnings per share.
See Notes to Consolidated Financial Statements
F-5
<PAGE>
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR EACH OF THE YEARS IN THE THREE YEAR PERIOD ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
ADDITIONAL
PAID-IN
CAPITAL
PREFERRED PREFERRED COMMON ADDITIONAL
STOCK STOCK STOCK PAID-IN
------------ ------------- --------- -------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 ............ $ 3 $ 7,033 $ 65 $ 46,726
Net income ............................ 0 0 0 0
Dividends on preferred stock .......... 0 0 0 0
Dividends on common stock ............. 0 0 0 0
Exercise of 1984 common
stock options ......................... 0 0 0 266
Tax effect relating to the exercise of
employee stock options .............. 0 0 0 35
Net unrealized appreciation on debt
securities available for sale--net of
deferred income taxes ................. 0 0 0 0
Preferred stock redemption ............ 0 (6) 0 0
------------ ------------- --------- -------------
BALANCE, DECEMBER 31, 1994 ............ 3 7,027 65 47,027
Net income ............................ 0 0 0 0
5 for 4 stock split June 1995 ......... 0 0 16 0
5 for 4 stock split January 1996 ..... 0 0 21 0
Dividends on preferred stock .......... 0 0 0 0
Redemption of preferred stock ......... 3 (7,027) 0 0
Dividends on common stock ............. 0 0 0 0
Exercise of 1984 common
stock options ......................... 0 0 2 706
Tax effect relating to the exercise of
employee stock options .............. 0 0 0 173
Exercise of stock warrants ............ 0 0 2 999
Net change in unrealized appreciation
on debt securities available for
sale--net of deferred income taxes .. 0 0 0 0
------------ ------------- --------- -------------
BALANCE, DECEMBER 31, 1995 ............ 0 0 106 48,905
Net income ............................ 0 0 0 0
Proceeds from issuance of Class A ....
common stock, net ................... 0 0 12 17,992
Dividends on common stock ............. 0 0 0 0
Exercise of 1984 Class B
common stock options .................. 0 0 0 413
Tax effect relating to the exercise of
employee stock options .............. 0 0 0 118
Purchase and retirement of Class A
common stock .......................... 0 0 (1) (1,856)
Purchase and retirement of Class B
common stock .......................... 0 0 (1) (1,401)
5 for 4 stock split July 1996 ......... 0 0 30 0
5 for 4 stock split February 1997 .... 0 0 37 0
Net change in unrealized appreciation
on debt securities available for
sale--net of deferred income taxes .. 0 0 0 0
------------ ------------- --------- -------------
BALANCE, DECEMBER 31, 1996 ............ $ 0 $ 0 $ 183 $ 64,171
============ ============= ========= =============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
NET
UNREALIZED
APPRECIATION
ON SECURITIES
RETAINED AVAILABLE
EARNINGS FOR SALE TOTAL
----------- ---------------- -----------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 ............ $ 36,825 $ 0 $ 90,652
Net income ............................ 16,835 0 16,835
Dividends on preferred stock .......... (880) 0 (880)
Dividends on common stock ............. (1,575) 0 (1,575)
Exercise of 1984 common
stock options ......................... 0 0 266
Tax effect relating to the exercise of
employee stock options .............. 0 0 35
Net unrealized appreciation on debt
securities available for sale--net of
deferred income taxes ................. 0 193 193
Preferred stock redemption ............ 0 0 (6)
----------- ---------------- -----------
BALANCE, DECEMBER 31, 1994 ............ 51,205 193 105,520
Net income ............................ 18,419 0 18,419
5 for 4 stock split June 1995 ......... (16) 0 0
5 for 4 stock split January 1996 ..... (21) 0 0
Dividends on preferred stock .......... (677) 0 (677)
Redemption of preferred stock ......... (1,353) 0 (8,383)
Dividends on common stock ............. (1,740) 0 (1,740)
F-6
<PAGE>
NET
UNREALIZED
APPRECIATION
ON SECURITIES
RETAINED AVAILABLE
EARNINGS FOR SALE TOTAL
----------- ---------------- -----------
Exercise of 1984 common
stock options ......................... 0 0 708
Tax effect relating to the exercise of
employee stock options .............. 0 0 173
Exercise of stock warrants ............ 0 0 1,001
Net change in unrealized appreciation
on debt securities available for
sale--net of deferred income taxes .. 0 5,540 5,540
----------- ---------------- -----------
BALANCE, DECEMBER 31, 1995 ............ 65,817 5,733 120,561
Net income ............................ 19,011 0 19,011
Proceeds from issuance of Class A ....
common stock, net ................... 0 0 18,004
Dividends on common stock ............. (2,159) 0 (2,159)
Exercise of 1984 Class B
common stock options .................. 0 0 413
Tax effect relating to the exercise of
employee stock options .............. 0 0 118
Purchase and retirement of Class A
common stock .......................... 0 0 (1,857)
Purchase and retirement of Class B
common stock .......................... 0 0 (1,402)
5 for 4 stock split July 1996 ......... (30) 0 0
5 for 4 stock split February 1997 .... (37) 0 0
Net change in unrealized appreciation
on debt securities available for
sale--net of deferred income taxes .. 0 (4,985) (4,985)
----------- ---------------- -----------
BALANCE, DECEMBER 31, 1996 ............ $ 82,602 $ 748 $ 147,704
=========== ================ ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income ................................................. $ 19,011 $ 18,419 $ 16,835
ADJUSTMENT TO RECONCILE NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Provision for loan losses ................................ 5,844 4,182 2,299
Provision for (reversal of) losses on real estate owned ... (197) (1,187) 140
FHLB stock dividends ....................................... 0 0 (110)
Depreciation ............................................... 3,835 3,203 2,731
Amortization of mortgage servicing rights .................. 6,849 4,362 4,960
Increase (decrease) in deferred income taxes ............... 1,495 1,551 (1,266)
Net amortization (accretion) of securities ................. (257) 780 1,068
Gains on sales of real estate owned ........................ (575) (2,032) (2,105)
Net accretion of deferred loan origination fees ........... (1,154) (1,095) (1,078)
Proceeds from sales of loans originated for resale ........ 59,942 34,548 38,941
Fundings of loans originated for resale .................... (57,097) (41,326) (39,259)
Gains on sales of loans originated for resale .............. (534) (395) (773)
Gains on sales of office properties and equipment ......... (3,061) (18) (272)
Purchase of trading account securities, net ................ 0 0 (9,658)
Proceeds from sales of trading account securities ......... 0 9,524 0
Unrealized and realized (gains) losses on trading
account securities ....................................... 0 (589) 558
Gains on sales of debt securities available for sale ...... (5,959) 0 0
Gains on sales of mortgage servicing rights ................ (4,182) (2,744) (484)
Income (loss) from joint venture operations ................ 0 (6) 30
Decrease (increase) in accrued interest receivable ........ (2,021) 1,593 2,636
Amortization of dealer reserve ............................. 4,159 2,071 453
Amortization of cost over fair value of net assets acquired 1,545 1,122 0
Net accretion of other purchase accounting adjustments .... (329) (612) 0
Amortization of subordinated debentures and note
payable deferred costs ..................................... 222 98 0
Decrease in other assets ................................... 804 4,574 2,505
Increase (decrease) in drafts payable ...................... (410) 111 112
Increase (decrease) in other liabilities ................... 1,150 540 (6,179)
Write down of office properties and equipment .............. 263 120 0
Provision for (recovery from) tax certificate losses ...... (184) (145) 115
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES .................. 29,159 36,649 12,199
----------- ----------- -----------
</TABLE>
(Continued)
See Notes to Consolidated Financial Statements.
F-7
<PAGE>
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
INVESTING ACTIVITIES:
Purchase of investment securities ............................... (56,884) (70,872) (240,726)
Purchase of debt securities available for sale .................. (231,765) 0 0
Proceeds from redemption and maturity of investment securities . 52,413 140,837 135,978
Principal collected on debt securities available for sale ...... 43,236 11,989 29,312
Proceeds from sales of debt securities available for sale ...... 374,413 852 0
Residential loans purchased ..................................... (465,942) (9,930) (3,989)
Principal reduction on loans .................................... 548,847 444,867 270,986
Loan fundings for portfolio ..................................... (692,546) (597,274) (328,849)
Banker's acceptances funded ..................................... (86) 0 0
Proceeds from maturity of banker's acceptances .................. 108 0 109,931
Mortgage--backed securities purchased ........................... 0 (75,262) (268,776)
Proceeds from sales of real estate owned ........................ 4,938 5,373 5,660
Principal collected on mortgage-backed securities ............... 131,361 110,084 136,863
Additions to dealer reserve ..................................... (4,203) (3,684) 0
Additions to office properties and equipment .................... (10,326) (5,535) (3,861)
Proceeds from sales of properties and equipment ................. 2,666 18 643
Proceeds received from joint ventures ........................... 0 1,239 0
Purchases of FHLB stock net of redemptions ...................... (1,923) (1,249) 0
Proceeds from maturities of interest bearing deposits with banks 19,795 0 0
Proceeds from sales of mortgage servicing rights ................ 15,586 8,340 2,920
Mortgage servicing rights purchased and originated .............. (27,992) (10,112) (8,147)
Bank acquisitions, net of cash acquired ......................... (38,311) (14,914) 0
------------ ------------ ------------
NET CASH USED BY INVESTING ACTIVITIES ........................... (336,615) (65,233) (162,055)
------------ ------------ ------------
FINANCING ACTIVITIES:
Net increase (decrease) in deposits ............................. 15,905 51,093 (20,814)
Interest credited to deposits ................................... 47,433 43,447 30,236
Proceeds from FHLB advances ..................................... 577,643 641,785 516,400
Repayments of FHLB advances ..................................... (488,755) (602,050) (482,650)
Net increase (decrease) in federal funds purchased .............. (1,200) 1,200 0
Proceeds from note payable ...................................... 0 4,000 0
Repayment of note payable ....................................... (1) (3,999) 0
Net increase (decrease) in securities sold under
agreements to repurchase ........................................ 122,329 (104,207) 128,694
Proceeds from the issuance of subordinated debentures .......... 57,500 21,000 0
Deferred costs on subordinated debentures ....................... (2,356) (1,052) 0
Preferred stock redemption ...................................... 0 (8,383) (6)
Payment to acquire and retire common stock ...................... (3,259) 0 0
Issuance of common stock , net .................................. 18,417 1,709 266
Receipts (payments) of advances by borrowers for
taxes and insurance, net ........................................ 5,235 277 (584)
Preferred stock dividends paid .................................. 0 (677) (880)
Common stock dividends paid ..................................... (2,159) (1,672) (1,177)
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES ....................... 346,732 42,471 169,485
Increase in cash and cash equivalents ........................... 39,276 13,887 19,629
------------ ------------ ------------
Cash and cash equivalents at the beginning of period ........... 69,867 55,980 36,351
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ...................... $ 109,143 $ 69,867 $ 55,980
============ ============ ============
</TABLE>
(Continued)
See Notes to Consolidated Financial Statements
F-8
<PAGE>
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Interest paid ............................................................ $ 71,656 $ 65,708 $ 40,334
Income taxes paid ........................................................ 8,600 9,320 10,435
Income taxes refunded .................................................... 0 88 0
Loans transferred to real estate owned ................................... 1,788 1,029 1,282
Loans charged-off ........................................................ 7,718 5,433 5,968
Real estate owned charged-off ............................................ 803 213 40
Tax certificates charged-off (recoveries), net ........................... (2) 1,192 100
Book value of debt securities transferred to available for sale ......... 0 638,818 0
Increase in equity for the tax effect related to the
exercise of employee stock options ..................................... 118 173 35
Common stock cash dividends declared and paid in
subsequent period ...................................................... 551 467 398
Net change in unrealized appreciation on debt securities
available for sale ..................................................... (8,115) 9,019 314
Change in deferred taxes on net unrealized appreciation on debt
securities available for sale .......................................... (3,130) 3,479 121
Change in stockholders' equity from net unrealized
appreciation on debt securities available for sale, less related
deferred income taxes .................................................. (4,985) 5,540 193
Proceeds receivable from sales of mortgage servicing rights ............. 9,522 0 0
Proceeds receivable from sales of properties leased to others ........... 5,401 0 0
</TABLE>
See Notes to Consolidated Financial Statements
F-9
<PAGE>
BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
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
December 31, 1996 BFC owned 46% of the Company's voting common stock.
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, the valuation of real estate acquired in connection with
foreclosure or in satisfaction of loans and the evaluation of the value of
mortgage servicing rights. 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.
Certain amounts for prior years 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 sold for one-day periods.
INVESTMENTS AND MORTGAGE-BACKED SECURITIES --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. 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. Losses relating to permanent impairment of securities are
reflected in the statement of operations.
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,
F-10
<PAGE>
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. 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.
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.
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 December 31, 1996, 1995 and 1994. 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. 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. 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 loan agreement. 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
F-11
<PAGE>
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,
based 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 are anticipated to be sold and
valuation allowance 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.
F-12
<PAGE>
IMPAIRMENT --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, assets to be disposed of, 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, assets to be disposed of, and identifiable intangibles
that an entity expects to hold and use should be based on the fair value of the
asset. FAS 121 was effective for the year beginning January 1, 1996. There was
no significant impact upon adoption.
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.
LOANS ORIGINATED FOR RESALE --Residential first mortgage loans originated
for resale are reported at the lower of cost or estimated fair value. 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, in 1994, 1995 and 1996, a portion of these
loans had not been 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. 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
F-13
<PAGE>
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 amortization of mortgage servicing rights ("MSR") are on an individual
loan basis. Both purchased and originated MSR 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, BankAtlantic 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 and the impact of
adoption related to MSR on originated loans was not material. 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 funds 100% of the dealer reserves at the inception of the loan.
Dealer reserves are amortized over the contractual life of the related loans,
adjusted for actual prepayments and losses, 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, 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 assets acquired is being amortized on a straight-line
basis over its estimated useful life of 10-15 years. A non-competition agreement
is being amortized on a straight-line basis over its useful life of
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 and in
accordance with FAS 121.
INCOME TAXES --BankAtlantic and its subsidiaries 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. A deferred tax asset valuation
allowance is recorded when it is more likely than not that deferred tax assets
will not be utilized.
PREFERRED STOCK --All three Series of 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
F-14
<PAGE>
outstanding, when dilutive. Common stock equivalents consist of common stock
warrants and options. On July 3, 1996, the Company closed a public offering
of $57.5 million of 6 3/4 % convertible subordinated debentures ("6 3/4 %
Debentures"). The 6 3/4 % Debentures are not common stock equivalents and
therefore, will not affect net income per common and common equivalent share.
However, convertible securities, if dilutive, are considered in net income
per common and common equivalent share assuming full dilution. Fully diluted
income per common share will assume the hypothetical conversion of the 6 3/4
% Debentures by excluding the interest charges of the 6 3/4 % Debentures from
fully diluted net income and by increasing the weighted average number of
common and common equivalent shares outstanding assuming full dilution. In
July 1995, January 1996, July 1996 and February 1997, the Board of Directors
declared five for four stock splits effected in the form of 25% stock
dividends issued in August 1995 and February 1996, July 1996 and March 1997,
respectively. Where appropriate, amounts throughout this report have been
adjusted to reflect the stock splits.
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 YEARS ENDED DECEMBER 31,
-------------------------------------------
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Weighted average number of common and common
equivalent shares outstanding ...................... 18,896,691 16,922,816 16,390,677
Weighted average number of common and common
equivalent shares outstanding assuming full dilution 21,833,015 17,084,563 16,438,264
</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") relating to stock-based compensation for
employees, 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. The Company has elected to
continue to account for stock-based compensation for employees under APB 25. See
Note 10.
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.
F-15
<PAGE>
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
DECEMBER 31, 1996 COST APPRECIATION DEPRECIATION FAIR VALUE
- ------------------------------------------------ ------------ --------------- --------------- -------------
<S> <C> <C> <C> <C>
MORTGAGE-BACKED SECURITIES (1) :
FNMA mortgage backed securities ................ $ 95,180 $ 822 $ 172 $ 95,830
FHLMC mortgage backed securities ............... 191,462 443 708 191,197
FNMA real estate mortgage investment conduits . 5,201 352 2 5,551
FHLMC real estate mortgage investment conduits 2,046 139 23 2,162
------------ --------------- --------------- -------------
Total mortgage-backed securities .............. 293,889 1,756 905 294,740
------------ --------------- --------------- -------------
INVESTMENT SECURITIES:
FHLB Bonds ..................................... 15,406 150 34 15,522
FHLMC Bond ..................................... 1,843 102 0 1,945
FNMA Bond ...................................... 6,762 57 0 6,819
Asset-backed securities ........................ 28,943 89 65 28,967
U.S. Treasury Notes ............................ 91,284 83 15 91,352
------------ --------------- --------------- -------------
Total investment securities ................... 144,238 481 114 144,605
------------ --------------- --------------- -------------
Total ........................................ $ 438,127 $ 2,237 $ 1,019 $ 439,345
============ =============== =============== =============
</TABLE>
<TABLE>
<CAPTION>
AVAILABLE FOR SALE
-------------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
DECEMBER 31, 1995 COST APPRECIATION DEPRECIATION FAIR VALUE
- ------------------------------------------------ ------------ --------------- --------------- -------------
<S> <C> <C> <C> <C>
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
------------ --------------- --------------- -------------
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
============ =============== =============== =============
(1) Pledged as collateral were $4.1 million, $5.9 million, $214.2 million and
$18.7 million for commercial letters of credit, treasury tax and loan,
repurchase agreements and public funds, respectively.
(2) Pledged as collateral was $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.
</TABLE>
F-16
<PAGE>
Included in the December 31, 1996 and 1995 tables are approximately $14.7
million and $17.0 million of government agency bonds and real estate mortgage
conduits (at market) 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>
DECEMBER 31, 1996
--------------------------
FAIR
AMORTIZED ESTIMATED
COST VALUE
------------ ------------
<S> <C> <C>
Due within one year ........................ $ 69,568 $ 69,683
Due after one year, but within five years . 351,888 351,840
Due after five years, but within ten years 5,613 5,871
Due after ten years ........................ 11,058 11,951
------------ ------------
Total .................................... $ 438,127 $ 439,345
============ ============
</TABLE>
<TABLE>
<CAPTION>
HELD TO MATURITY
------------------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1996 COST APPRECIATION DEPRECIATION VALUE
- ------------------------------------ ------------ --------------- --------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Tax certificates--net of allowance
of $1,466 (1) .................... $ 54,511 $ 0 $ 0 $54,511
=========== =============== =============== ============
DECEMBER 31, 1995
- ------------------------------------
Tax certificates--net of allowance
of $1,648 (1) .................... $49,856 $ 0 $ 0 $49,856
============ =============== =============== ============
(1) Management considers estimated fair value equivalent to book value for
tax certificates since these securities have no readily traded market.
The maturities of tax certificates held to maturity were (in thousands):
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------
BOOK ESTIMATED
VALUE FAIR VALUE
----------- -------------
<S> <C> <C>
Due in one year or less ................ $ 41,656 $ 41,656
Due after one year through five years . 12,855 12,855
Due after five years through ten years 0 0
----------- -------------
Total ................................ $54,511 $54,511
=========== =============
</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
F-17
<PAGE>
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 year ended December 31, 1994, there were no sales of debt
securities. During the year ended December 31, 1995, $253,000 of Federal Reserve
stock and $599,000 of GNMA mortgage-backed securities classified as available
for sale were sold. During the year ended December 31, 1996, BankAtlantic sold
$136.6 million of adjustable rate mortgage-backed securities, $20.5 million of
15 year mortgage-backed securities, $5.9 million of seven year balloon
mortgage-backed securities and $205.5 million of treasury notes for gains of
$6.0 million
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 year ended December 31, 1995 on
the sale of the trading account securities upon exercise of the call option.
During the years ended December 31, 1996 and 1995, BankAtlantic invested in
repurchase agreements. The ending balances at December 31, 1996 and 1995 were
zero. The maximum amount of repurchase agreements outstanding at any month end
was zero and $20.0 million for 1996 and 1995, respectively, and the average
amount invested was $1.9 million and $771,000 for 1996 and 1995, respectively.
The average yield on repurchase agreements for the years ended December 31, 1996
and 1995 was 5.47% and 5.82%, respectively. The underlying securities were in
the possession of BankAtlantic. During the years ended December 31, 1996 and
1995 BankAtlantic sold Federal Funds. The outstanding balances at December 31,
1996 and 1995, of Federal Funds sold was zero. The maximum amount of Federal
Funds sold outstanding at any month end and the average amount invested for the
period were $16.0 million and $11.0 million and $2.7 million and $2.6 million,
respectively.
F-18
<PAGE>
3. LOANS RECEIVABLE--NET
Loans receivable net are summarized below:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
------------- -----------
(IN THOUSANDS)
<S> <C> <C>
Real estate loans:
Residential .......................................... $ 867,081 $157,361
Residential held for sale (market value of $16,535
and $17,254) ....................................... 16,207 17,122
Construction and development ......................... 301,813 122,371
FHA and VA insured ................................... 4,013 5,183
Commercial ........................................... 427,235 350,256
Other loans:
Second mortgages--direct ............................. 86,234 63,052
Second mortgages--indirect ........................... 9,894 25,621
Commercial business .................................. 78,177 64,194
Banker's acceptances ................................. 207 0
Deposit overdrafts ................................... 2,434 832
Consumer loans--other direct ......................... 74,072 36,670
Consumer loans--other indirect ....................... 172,056 96,042
------------- -----------
Total gross loans ................................... 2,039,423 938,704
------------- -----------
Adjustments:
Undisbursed portion of loans in process .............. 190,874 89,896
Unearned premiums .................................... (2,762) 0
Unearned discounts on commercial real estate loans .. 705 793
Unearned discounts on consumer loans ................. 0 385
Allowance for loan losses ............................ 25,750 19,000
------------- -----------
Loan receivable--net ................................ $1,824,856 $828,630
============= ===========
</TABLE>
BankAtlantic is subject to economic conditions which could adversely affect
both the performance of the borrower or the collateral securing the loan. At
December 31, 1996, 67% of total aggregate outstanding loans were to borrowers in
Florida, 9% of total loans were to borrowers in the Northeastern United States
7% of the total loans were to borrowers in California, and 17% were to borrowers
located elsewhere. Additionally, deferred loan fees netted against loan balances
were $1.5 million and $1.8 million at December 31, 1996 and 1995, respectively.
Commitments to sell residential mortgage loans were $7.3 million and $5.7
million at December 31, 1996 and 1995, respectively. Variable rate commitments
to sell residential mortgage loans were $153,000 and $122,000, whereas, fixed
rate commitments to sell residential mortgage loans were $7.1 million and $5.6
million at December 31, 1996 and 1995, respectively. Such residential mortgage
loan sales related to loans originated for sale. Included in other assets was
$9.1 million and $4.4 million of prepaid dealer reserves at December 31, 1996
and 1995, respectively.
F-19
<PAGE>
Activity in the allowance for loan losses was (in thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------
1996 1995 1994 (1)
-------------- ------------ ------------
<S> <C> <C> <C>
Balance, beginning of period .......................... $ 19,000 $ 16,250 $ 17,000
Charge-offs:
Commercial business loans ............................ (1,048) (382) (1,647)
Commercial real estate loans ......................... (266) (222) (220)
Consumer loans ....................................... (6,337) (4,566) (3,829)
Residential real estate loans ........................ (67) (263) (272)
-------------- ------------ ------------
(7,718) (5,433) (5,968)
-------------- ------------ ------------
Recoveries:
Commercial business loans ............................ 518 738 565
Commercial real estate loans ......................... 47 102 18
Consumer loans ....................................... 1,659 1,219 2,336
-------------- ------------ ------------
Net charge-offs ....................................... (5,494) (3,374) (3,049)
Additions charged to operations ....................... 5,844 4,182 2,299
Allowance for loan losses acquired .................... 6,400 1,942 0
-------------- ------------ ------------
Balance, end of period ................................ $ 25,750 $ 19,000 $ 16,250
============== ============ ============
Average outstanding loans during the period .......... $ 1,177,325 $ 750,058 $ 520,913
============== ============ ============
Average outstanding banker's acceptances
during the period ................................... $ 329 $ 0 $ 12,366
============== ============ ============
Ratio of net charge-offs to average outstanding loans 0.47 % 0.45 % 0.59 %
============== ============ ============
Ratio of net charge-offs to average outstanding
loans including banker's acceptances ................ 0.47 % 0.45 % 0.57 %
============== ============ ============
(1) Included in installment loan recoveries for the year ended December 31,
1994 is approximately $1.2 million 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% for the
year ended December 31, 1994.
</TABLE>
Aggregate loans to and repayments of loans by directors, executive
officers, principal stockholders and other related interests for the years ended
December 31, 1996 and 1995, were (in thousands):
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT BALANCE AT
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 ADDITIONS DELETIONS 1995 ADDITIONS DELETIONS 1996
- --------------- ------------ ------------ --------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
$992 15 70 937 24 594 $ 367
=============== ============ ============ =============== ============ ============ ===============
</TABLE>
F-20
<PAGE>
Accrued interest receivable consisted of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
----------- ----------
<S> <C> <C>
Loans receivable ....................... $ 13,713 $ 5,970
Investment securities held to maturity 3,705 3,407
Debt securities available for sale .... 3,337 5,176
----------- ----------
$20,755 $ 14,553
=========== ==========
</TABLE>
4. MORTGAGE SERVICING RIGHTS
At December 31, 1996, 1995 and 1994, BankAtlantic serviced loans for the
benefit of others amounting to approximately $2.7 billion, $1.8 billion and $1.9
billion, respectively. At December 31, 1996 and 1995, other liabilities includes
approximately $7.7 million and $7.9 million, respectively, of loan payments due
to others. Activity in mortgage servicing rights was (in thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Balance, beginning of period ..... $ 20,738 $ 20,584 $ 19,833
Mortgage servicing rights acquired
in BNA acquisition .............. 4,047 0 0
Servicing rights originated ...... 311 0 0
Servicing rights purchased ........ 27,681 10,112 8,147
Servicing rights sold ............. (20,926) (5,596) (2,436)
Amortization of servicing rights . (6,849) (4,362) (4,960)
----------- ----------- -----------
Balance, end of period ............ $ 25,002 $ 20,738 $ 20,584
=========== =========== ===========
</TABLE>
The fair value of the MSR at December 31, 1996 was estimated at $31.6
million. Upon implementation of FAS 122 on January 1, 1996, no additional
valuation allowance was required and during the year ended December 31, 1996,
and there was no activity in the valuation allowance. The fair value was
calculated using market prepayment assumptions and discount rates.
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
December 31, 1996 and 1995. Past-due loans are accruing loans that are
contractually past due 90 days or more as to interest or principal payments.
F-21
<PAGE>
Risk elements were (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Non-accrual--tax certificates .................... $ 1,835 $ 2,044 $ 3,578
Non-accrual--loans ............................... 12,424 11,174 11,313
Loans contractually past due 90 days or more (1) 2,961 1,536 736
Real estate owned, net of allowance .............. 4,918 6,279 7,238
Other repossessed assets ......................... 1,992 461 350
----------- ----------- -----------
Total non-performing ........................... 24,130 21,494 23,215
Restructured ..................................... 3,718 2,533 1,648
----------- ----------- -----------
Total risk elements ............................ $ 27,848 $ 24,027 $ 24,863
=========== =========== ===========
Allowance for tax certificate losses ............. $ 1,466 $ 1,648 $ 2,985
=========== =========== ===========
Allowance for loan losses ........................ $ 25,750 $ 19,000 $ 16,250
=========== =========== ===========
(1) 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.
</TABLE>
The following summarizes impaired loans at:
<TABLE>
<CAPTION>
DECEMBER 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 ...... $ 1,047 $ 350 $ 1,962 $ 800
Without specific allowances ... 11,727 0 10,012 0
------------- ------------- ------------- -------------
12,774 350 11,974 800
------------- ------------- ------------- -------------
Restructured loans:
Without specific allowances ... $ 3,718 $ 0 $ 2,533 $ 0
------------- ------------- ------------- -------------
Other impaired loans:
Other impaired commercial loans
with specific allowances (1) . $ 977 $ 514 $ 1,340 $ 577
Other impaired commercial loans
without specific allowances .. 2,961 0 1,536 0
------------- ------------- ------------- -------------
Total ......................... $ 20,430 $ 864 $ 17,383 $ 1,377
============= ============= ============= =============
(1) Theses loans are not included in risk elements, since subsequent to the
date of impairment these loans have performed based on their contractual
terms.
</TABLE>
The above schedules reflect at December 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.
F-22
<PAGE>
The average net recorded investment in impaired loans for the years ended
December 31, 1996 and 1995 were $15.4 million and $16.9 million, respectively.
Interest income of $988,000 and $788,000 for the year ended December 31, 1996
and 1995, was recognized on impaired loans during the periods of impairment.
Recorded investment of impaired loans reflects direct deferrals of interest
of $240,000 and $480,000 at December 31, 1996 and 1995, respectively.
There was no net interest forgone related to restructured loans at December
31, 1996 and 1995. Interest income of $336,000 and $243,000 were recognized on
restructured loans during 1996 and 1995, respectively.
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 YEARS ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Interest income which would have been recorded $ 1,505 $ 1,393 $ 1,170
Interest income recognized ..................... (698) (519) (443)
---------- ---------- ----------
Interest income foregone ....................... $ 807 $ 874 $ 727
========== ========== ==========
</TABLE>
The components of "Foreclosed asset activity, net" were (in thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
---------- ------------ -----------
<S> <C> <C> <C>
Real estate acquired in settlement of loans:
Operating expenses (income), net ............ $ 47 $ 41 $ (325)
Provision for (reversals of) losses on REO . (197) (1,187) 140
Net gains on sales .......................... (575) (2,032) (2,105)
---------- ------------ -----------
Total (income) ............................ $ (725) $ (3,178) $ (2,290)
========== ============ ===========
</TABLE>
Activity in the allowance for real estate owned consisted of (in thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Balance, beginning of period ............... $ 2,800 $ 4,200 $ 4,100
Charge-offs:
Commercial real estate .................... (781) (213) 0
Residential real estate ................... (22) 0 (40)
---------- ---------- ----------
(803) (213) (40)
Provision for (reversals of) losses on REO (197) (1,187) 140
---------- ---------- ----------
Balance, end of period ..................... $ 1,800 $ 2,800 $ 4,200
========== ========== ==========
</TABLE>
F-23
<PAGE>
Activity in the allowance for tax certificate losses was: (in thousands)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Balance, beginning of period ................ $ 1,648 $ 2,985 $ 2,970
Charge-offs ................................. (909) (1,854) (1,892)
Recoveries .................................. 911 662 1,792
---------- ---------- ----------
Net recoveries (charge-offs) ................ 2 (1,192) (100)
Additions (reversals) charged to operations (184) (145) 115
---------- ---------- ----------
Balance, end of period ...................... $ 1,466 $ 1,648 $ 2,985
========== ========== ==========
</TABLE>
6. OFFICE PROPERTIES AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
----------- ----------
(IN THOUSANDS)
<S> <C> <C>
Land ........................................................ $ 12,115 $ 8,721
Building and improvements ................................... 42,593 35,620
Furniture and equipment ..................................... 26,257 20,743
Properties under operating lease and property held for lease 0 5,906
----------- ----------
Total ..................................................... 80,965 70,990
Less accumulated depreciation ............................... 32,691 30,036
----------- ----------
Office properties and equipment--net ........................ $ 48,274 $ 40,954
=========== ==========
</TABLE>
Properties with a net book value of $4.0 million at December 1995, were
leased to unrelated third parties. Capitalized improvements to the properties of
$1.0 million were performed during the year ended December 31, 1996. These
properties were sold for $8.1 million (net of selling costs) as of December 31,
1996 for a net gain of $3.1 million.
Net rental income for the three years ended December 31, 1996 was $368,000,
$343,000 and $248,000, respectively.
F-24
<PAGE>
7. DEPOSITS
The weighted average nominal interest rate payable on deposit accounts at
December 31, 1996 and 1995 was 3.78% and 3.85%, respectively. The stated rates
and balances at which BankAtlantic paid interest on deposits were:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------
1996 1995
--------------------------- --------------------------
AMOUNT PERCENT AMOUNT PERCENT
-------------- ----------- -------------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest free checking ........................... $ 163,616 8.93% $ 98,964 7.61 %
Insured money fund savings
3.76% at December 31, 1996,
3.22% at December 31, 1995 ...................... 358,927 19.58 249,273 19.17
NOW accounts .....................................
1.60% at December 31, 1996,
1.66% at December 31, 1995 ...................... 216,587 11.82 171,726 13.21
Savings accounts .................................
1.30% at December 31, 1996,
1.71% at December 31, 1995 ...................... 170,352 9.29 103,759 7.98
-------------- ----------- -------------- ----------
Total non-certificate accounts ................... 909,482 49.62 623,722 47.97
-------------- ----------- -------------- ----------
Certificate accounts:
0.00% to 3.00% .................................. 12,104 0.66 56,667 4.36
3.01% to 4.00% .................................. 11,257 0.61 25,602 1.97
4.01% to 5.00% .................................. 275,991 15.06 135,107 10.39
5.01% to 6.00% .................................. 478,148 26.09 303,497 23.34
6.01% to 7.00% .................................. 112,865 6.16 137,917 10.61
7.01% and greater ............................... 30,749 1.68 17,543 1.34
-------------- ----------- -------------- ----------
Total certificate accounts ....................... 921,114 50.26 676,333 52.01
-------------- ----------- -------------- ----------
Total deposit accounts ........................... 1,830,596 99.88 1,300,055 99.98
-------------- ----------- -------------- ----------
Interest earned not credited to deposit accounts 2,184 0.12 322 0.02
-------------- ----------- -------------- ----------
Total ............................................ $ 1,832,780 100.00 % $ 1,300,377 100.00 %
============== =========== ============== ==========
</TABLE>
Interest expense by deposit category was (in thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Money fund savings and NOW accounts ..... $ 12,154 $ 11,591 $ 10,751
Savings accounts ......................... 2,150 1,987 2,116
Certificate accounts--below $100,000 .... 32,416 27,059 16,480
Certificate accounts, $100,000 and above 8,513 6,269 2,471
Less early withdrawal penalty ............ (205) (260) (172)
----------- ----------- -----------
Total .................................. $ 55,028 $ 46,646 $ 31,646
=========== =========== ===========
</TABLE>
Included in other non-interest income is approximately $8.6 million, $7.0
million and $5.4 million of checking account fees for years ended December 31,
1996, 1995 and 1994, respectively.
F-25
<PAGE>
At December 31, 1996, the amounts of scheduled maturities of certificate
accounts were (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
--------------------------------------------------------------------------------
1997 1998 1999 2000 2001 THEREAFTER
------------ ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
0.00% to 3.00% ... $ 10,533 $ 1,379 $ 50 $ 32 $ 50 $ 60
3.01% to 4.00% ... 10,536 479 191 0 51 0
4.01% to 5.00% ... 252,171 20,041 2,051 215 1,085 428
5.01% to 6.00% ... 395,414 63,178 10,420 3,634 4,869 633
6.01% to 7.00% ... 76,563 8,742 13,574 5,009 8,170 807
7.01% and greater 18,995 773 1,074 9,719 66 122
------------ ----------- ----------- ----------- ----------- -------------
Total ........... $ 764,212 $ 94,592 $ 27,360 $ 18,609 $ 14,291 $ 2,050
============ =========== =========== =========== =========== =============
</TABLE>
Time deposits of $100,000 and over had the following maturities at (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996
---------------
<S> <C>
Less than 3 months . $ 55,743
3 to 6 months ....... 45,946
6 to 12 months ...... 50,412
More than 12 months 31,575
---------------
Total ............. $ 183,676
===============
</TABLE>
Currently, BankAtlantic does not obtain deposits from brokers. In November
1996, Merrill Lynch granted BankAtlantic a facility for broker deposits of up to
$150.0 million. The facility will be evaluated as an alternative source of
borrowings, when and if needed.
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. BankAtlantic amended its procedures to satisfy
the Comptroller's interpretation. On June 30, 1994 all issues were resolved with
the Comptroller and in connection therewith, BankAtlantic recognized $332,000 of
previously deferred dormant account fee income.
F-26
<PAGE>
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 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
REPAYABLE DURING YEAR
ENDING DECEMBER 31, INTEREST RATE 1996 1995
- ---------------------- --------------- ----------- -----------
<S> <C> <C> <C>
1996 ................. 5.62% to 5.94% $ 0 $201,785
1997 ................. 5.50% to 7.73% 119,965 0
1998 ................. 6.00% to 6.58% 43,143 0
1,999 ................ 6.13% to 6.83% 42,892 0
2000 ................. 6.29% to 7.00% 40,892 0
2001 ................. 6.35% to 7.18% 33,118 0
2002 ................. 6.61% to 7.16% 6,150 0
2003 ................. 7.24% to 7.25% 9,540 0
----------- -----------
Total .............. $295,700 $ 201,785
=========== ===========
</TABLE>
In June 1994, the FHLB accepted BankAtlantic's request to establish a
blanket floating lien for additional advance borrowings. Under the lien,
BankAtlantic assigns a security lien against its residential loans. At December
31, 1996, $611.4 million of 1-4 family residential loans were pledged against
FHLB advances and at December 31, 1995 approximately $160.0 million and $105.6
million of residential loans and mortgage-backed securities were pledged against
FHLB advances. 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 10 years. In January 1997,
BankAtlantic increased its $300 million credit availability to $500 million. The
two FHLB advance forward commitments were funded in January 1997. Both FHLB
advances forward commitments were for $6.0 million each, bear interest at 6.29%
and 6.35% and mature in the year 2001 and 2002, respectively.
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. BankAtlantic had not used these
lines of credit as of December 31, 1994. At December 31, 1996 and 1995, the
outstanding balance of these lines of credit was $0 and $1.2 million,
respectively. The average balance outstanding at any month end during 1996 and
1995, of the three Federal Funds purchased lines of credit was $2.7 million and
$1.0 million. respectively. The maximum outstanding balance at any month end
during 1996 and 1995 of the three Federal Funds purchased lines of credit was
$16.0 million and $4.5 million, respectively.
9. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Securities sold under agreements to repurchase are summarized below (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995
------------ -----------
<S> <C> <C>
Agreements to repurchase the same security $ 143,377 $ 23,860
Customer repurchase agreements ............. 47,211 42,377
------------ -----------
Total .................................... $190,588 $ 66,237
============ ===========
</TABLE>
F-27
<PAGE>
The following table provides information on the agreements to repurchase
(dollars in thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Maximum borrowing at any month-end
within the period ........................ $ 362,147 $ 328,666 $ 182,736
Average borrowing during the period ....... $ 178,883 $ 186,592 $ 105,462
Average interest cost during the period ... 4.83 % 5.80 % 4.56 %
Average interest cost at end of the period 5.13 % 4.59 % 5.94 %
============ ============ ============
</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.
Customer repurchase agreements at December 31, 1996 and 1995 included a
$9.7 million and $7.5 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
$312,000, $374,000 and $284,000 during the year ended December 31, 1996, 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
DECEMBER 31, 1996 AMORTIZED FAIR REPURCHASE INTEREST
(1) COST VALUE BALANCE RATE
- --------------------- ------------ ------------ ------------- -----------
<S> <C> <C> <C> <C>
US Treasuries ....... $ 70,637 $ 70,686 $ 66,622 5.54 %
FHLB Bonds .......... 2,015 2,006 1,481 4.02
FNMA ................ 73,707 73,897 67,848 5.18
FHLMC ............... 67,735 67,650 54,637 4.59
------------ ------------ ------------- -----------
Total ............. $ 214,094 $ 214,239 $ 190,588 5.13 %
============ ============ ============= ===========
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 %
============ ============ ============= ===========
(1) At December 31, 1996 and 1995 these securities are classified as
available for sale and recorded at market value in the consolidated
statements of financial condition.
</TABLE>
All repurchase agreements at December 31, 1996 and 1995, matured and were
repaid in January 1997 and 1996, respectively. These securities were held by
unrelated broker dealers.
F-28
<PAGE>
10. CAPITAL NOTES, SUBORDINATED DEBENTURES, NOTE PAYABLE, PREFERRED STOCK,
COMMON STOCK WARRANTS, AND COMMON STOCK OPTIONS
In March 1991, $10.2 million of 1986 Capital Notes were exchanged for
noncumulative preferred stock. All three series of 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 October 1995,
all series of preferred stock were redeemed at $25.00 per share.
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 528,742 shares of BankAtlantic's common stock at an exercise
price of $1.89 per share at any time prior to maturity. On March 31, 1991,
BankAtlantic issued to certain of its existing shareholders, 11,911 shares of
common stock and $8,000 of 14% subordinated debentures, having a March 1998
maturity date, with related detachable warrants to purchase 11,231 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
528,742 and 8,419 with exercise prices of $1.89 and $0.71, respectively. On May
12, 1995, 528,742 of these stock warrants were exercised for $1.89 per share.
The proceeds of $1.0 million were utilized to partially repay the note payable
discussed below. The warrants outstanding at December 31, 1996 relating to the
redeemed debentures are 7,016 with a $0.71 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.
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
"Debentures"). The underwriting discount and other expenses of $1.0 million are
included in other assets in the December 31, 1996 and 1995 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 Debentures
were issued, $1.9 million was invested in marketable securities to cover two
semi-annual interest payments. The net proceeds retained by the Company are
available for general corporate purposes. 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 $.08 per share, 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
F-29
<PAGE>
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. In March 1996, BBC issued 1.80 million shares of Class
A Common Stock in an underwritten public offering at $9.60 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
252,817 shares of Class A Common Stock resulting in net proceeds to BBC of
$2.3 million. In March 1996, BBC contributed $14.0 million of the net
proceeds to the capital of BankAtlantic where it was used for general
corporate purposes. The Company utilized $3.3 million relating to the
repurchase of 228,125 and 112,500 shares of the Company's Class A and Class B
common stock, respectively. As of result of the above Class A Common Stock
issuance, BFC Financial Corporation's ("BFC") ownership in BBC's total
outstanding (A and B) Common Stock was approximately 42% at December 31,
1996, comprised of 35% of Class A Common Stock and 46% of BBC's outstanding
Class B Common Stock.
On July 3, 1996, The Company closed a public offering of $57.5 million of 6
3/4 % Convertible Subordinated Debentures due July 1, 2006 (the "6 3/4 %
Debentures"). The 6 3/4 % Debentures are convertible at an exercise price of
$10.24 per share into and aggregate of 5,615,235 shares of Class A Common Stock.
Net proceeds to BBC were $55.2 million net of underwriting discount and offering
expenses. The Company contributed $40.0 million of the proceeds to BankAtlantic
which were utilized for the acquisition of BNA and general corporate purposes.
The remaining net proceeds are available for general corporate purposes.
The Debenture Indentures provide 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
Debentures following such Declaration Date or Redemption Date, as the case may
be. The Indentures further provide 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. At December 31, 1996 and 1995 the Company designated $5.8
million and $1.9 million of Federal Agency investments to satisfy the above
provision.
The Company intends to pay a regular cash quarterly common stock dividend.
The availability of funds for the payment of dividends is dependent upon
BankAtlantic's ability to pay dividends to the Company. Currently, the Company
pays a quarterly dividend of $.0324, and $.0291 per share for Class A and Class
B Common Stock, respectively.
On April 6, 1984, BankAtlantic's stockholders approved a Stock Option Plan
("1984 Plan") under which options to purchase up to 756,836 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
F-30
<PAGE>
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 465,380
incentive stock options and 264,602 non-qualifyingstock options under the 1984
plan. Of the incentive and non-qualifying stock options, 106,348 were issued at
110% of the fair market value at the date of grant. The remaining incentive and
non-qualifyingstock options were issued at the fair market value at the date of
grant. Non-qualifying stock options for 56,153 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 1,464,844 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 stock options issued in May 1993 expire on May 25, 1998 and are fully
vested as of December 31, 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, 444,484 of incentive stock options and 455,236 of
non-qualifying stock 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 ($6.09) 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, 128,063 of incentive stock options and 439,755 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 ($6.25), expire
ten years from date of grant, vest and are exercisable five years from grant
date, and directors stock options vest immediately.
On May 21, 1996 the shareholders approved the BankAtlantic Bancorp 1996
Stock Option Plan (the "1996 Plan") which authorized the issuance of options to
acquire up to 1.25 million shares of Class A common stock. The 1996 Plan expires
on April 2, 2006. On May 22, 1996, 31,250 non-qualifying stock options were
issued outside of the Plan to non-employee directors. On July 9, 1996, 344,216
of incentive stock options and 274,001 of non-qualifying stock options were
granted pursuant to the BankAtlantic Bancorp 1996 Stock Option Plan to all
officers of BankAtlantic. On September 3, 1996, 9,375 incentive stock options
were granted to an officer of BankAtlantic. All of the incentive and
non-qualifying stock options are exercisable for The Company's Class A common
stock, with an exercise price equal to the fair market value at the date of
grant ($9.76, $8.96 and $9.50) from the May, July and September grants,
respectively. All employee stock options vest and are exercisable five years for
the date of grant and directors stock options vested immediately.
During the latter part of 1996 and early 1997, certain executives and
officers received prorata vesting as part of their severance arrangements
relating to previously granted 1994 and 1996 plan options. Forfeited and vested
options were 95,218 shares and 124,518 shares for the 1994 plan and 53,908
shares and 16,406 shares for the 1996 plan, respectively.
F-31
<PAGE>
The following table sets forth all outstanding options, adjusted for the
July 1996 and February 1997 five for four common share stock splits effected in
the form of 25% stock dividends in Class A common stock, however, due to
accounting and tax considerations, with respect to options to purchase Class B
common stock previously granted under the Company's stock option plan
anti-dilution provisions related to Class B common stock options required that
additional Class B options be granted in lieu of Class A options.
A summary of 1984, 1994 and 1996 Plan activity was:
<TABLE>
<CAPTION>
CLASS B
OUTSTANDING
OPTIONS PRICE PER SHARE
-------------- ---------------------------
<S> <C> <C> <C> <C>
Outstanding December 31, 1993 ............ 794,569 $ 3.56 to $ 5.17
Exercised ................................ (52,928) 4.63 to 4.63
Forfeited ................................ (33,325) 4.70 to 6.09
Issued ................................... 899,720 6.09 to 6.09
-------------- ---------
Outstanding December 31, 1994 ............ 1,608,036 3.56 to 6.09
Exercised ................................ (149,962) 4.63 to 4.76
Forfeited ................................ (65,488) 4.70 to 6.25
Issued ................................... 567,817 6.25 to 6.25
-------------- ---------
Outstanding December 31, 1995 ............ 1,960,403 3.56 to 6.25
Exercised ................................ (88,571) 4.63 to 4.70
Forfeited ................................ (121,393) 6.09 to 6.25
-------------- --------- ---------
Outstanding December 31, 1996 ............ 1,750,439 $ 3.56 to $ 6.25
============== =========
Exercisable at December 31, 1996 ........ 535,605 $3.56 to $6.25
============== ========= =========
Available for grant at December 31, 1996 201,174
==============
</TABLE>
<TABLE>
<CAPTION>
CLASS A
OUTSTANDING
OPTIONS PRICE PER SHARE
-------------- ---------------------------
<S> <C> <C> <C> <C>
Outstanding December 31, 1995 ............ 0 $0.00 to $0.00
Exercised ................................ 0 0.00 to 0.00
Forfeited ................................ (64,065) 8.96 to 8.96
Issued ................................... 658,252 8.96 to 9.76
-------------- --------- ---------
Outstanding December 31, 1996 ............ 594,187 $ 8.96 to $ 9.76
============== ========= =========
Exercisable at December 31, 1996 ........ 31,250 $ 9.76 to $ 9.76
============== ========= =========
Available for grant at December 31, 1996 655,814
==============
</TABLE>
The weighted average exercise price of options outstanding at December 31,
1996, 1995 and 1994 was $6.59, $5.74, and $5.49, respectively. The weighted
average exercise price of stock options exercised was $4.70 and $4.71 for the
years ended December 31, 1996 and 1995, respectively. The weighted average
exercise price of options forfeited during the years ended December 31, 1996 and
1995 was $7.13 and $6.13, respectively.
F-32
<PAGE>
During the years ended December 31, 1996 and 1995, 8,151 and 39,041 of
non-qualifying and 80,420 and 100,922 of incentive stock options issued under
the 1984 Plan were exercised resulting in increases of $531,000 and $881,000 in
stockholders' equity, respectively. The tax effect of the exercise of 1984 stock
options for December 31, 1996 and 1995 was $117,530 and $173,000, respectively,
and has been reflected in additional paid in capital. During the years ended
December 31, 1996 and 1995, 64,065 of options under the 1996 Plan and 121,983
and 40,410 of options under the 1994 Plan and 0 and 1,499 of options under the
1984 Plan were forfeited. At December 31, 1996, 486,769, 48,836 and 31,250 of
options from the 1984, 1994 and 1996 Plan were exercisable.
The adoption of FAS 123 under the fair value based method would have
increased compensation expense by $474,000 and $272,000 for the years ended
December 31, 1996 and 1995, respectively. The effect of FAS 123 under the fair
value based method would have effected net income and earnings per share as
follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
Net income available for common shares
As reported ................................. $ 19,011 $ 16,389
=========== ===========
Pro forma ................................... $ 18,537 $ 16,117
=========== ===========
Income per common and common equivalent share
As reported ............................... $ 1.01 $ 0.97
=========== ===========
Pro forma ................................... $ 0.99 $ 0.96
=========== ===========
Income per common and common equivalent
share assuming full dilution
As reported ............................... $ 0.93 $ 0.96
=========== ===========
Pro forma ................................... $ 0.91 $ 0.95
=========== ===========
</TABLE>
The option method used to calculate the FAS 123 compensation adjustment was
the Black-Scholes model with the following grant date fair values and
assumptions:
<TABLE>
<CAPTION>
NUMBER OF CLASS OF RISK FREE EXPECTED EXPECTED
DATE OF OPTIONS GRANT DATE COMMON EXERCISE INTEREST LIFE EXPECTED DIVIDEND
GRANT GRANTED FAIR VALUE STOCK PRICE RATE (YEARS) VOLATILITY YIELD
- ---------- ------------ ------------- ----------- ----------- ------------ ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
4/04/95 567,817 $ 3.35 B $ 6.25 6.32 % 7.5 25.8 % 0.47 %
5/22/96 31,250 $ 4.90 A $ 9.76 6.55 % 7.5 18.6 % 0.33 %
7/09/96 618,217 $ 4.60 A $ 8.96 6.88 % 7.5 18.6 % 0.36 %
9/03/96 9,375 $ 4.86 A $ 9.50 6.81 % 7.5 18.6 % 0.34 %
</TABLE>
The employee turnover factor was 13.4% for incentive stock options and 5.2%
for non-qualifying stock options. The weighted average fair value of options
granted during the years ended December 31, 1996 and 1995 was $4.62 and $3.35,
respectively.
F-33
<PAGE>
The following table summarizes information about fixed stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------- -------------------------------
WEIGHTED-
CLASS OF NUMBER AVERAGE WEIGHTED- NUMBER WEIGHTED-
COMMON RANGE OF OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
STOCK EXERCISE PRICES AT 12/31/96 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/96 EXERCISE PRICE
- ----------- ---------------- -------------- ----------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
B $3.56 to 5.17 486,769 1.4 years $ 4.77 486,769 $ 4.77
B $6.09 to 6.25 1,263,670 8.3 years 6.15 48,836 6.09
A $8.96 to 9.76 594,187 9.5 years 9.01 31,250 9.76
-------------- ----------------- --------------- -------------- ---------------
2,344,626 7.15 years $ 6.59 566,855 $ 6.59
============== ================= =============== ============== ===============
</TABLE>
11. INCOME TAXES
For federal income tax purposes, BankAtlantic reports its income and
expenses on the accrual method of accounting. Prior to 1996, savings
institutions that met 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 were,
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 could elect annually, and was 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 was BankAtlantic's annual bad debt deduction.
The Small Business Job Protection Act of 1996 repealed the reserve method
of accounting for bad debts for tax years beginning after 1995. As a "large"
thrift (more than $500 million in assets), BankAtlantic must switch to the
specific charge-off method to compute its bad debt deduction starting in 1996.
BankAtlantic is required to recapture into taxable income the portion of its bad
debt reserves that exceeds its base year reserves. For financial reporting
purposes, deferred taxes have previously been provided for amounts in excess of
the base year tax bad debt reserve and accordingly, recapture of such amounts
for tax purposes will not trigger expense for financial reporting purposes.
BankAtlantic will have to recapture $1.7 million (after tax) of bad debt reserve
due to the law change. BankAtlantic's recapture amount will be taken into
taxable income ratably (on a straight-line basis) over a six-year period. If
BankAtlantic meets a residential loan requirement for a tax year beginning in
1996 or 1997, the recapture of the reserves will be suspended for such tax
years. BankAtlantic met this residential loan requirement for 1996 and therefore
does not have to recapture its reserve in 1996. At December 31, 1996 ,
BankAtlantic had a $3.9 million (after tax) base year reserve for which deferred
taxes have not been provided which is subject to recapture if BankAtlantic,
redeems its common stock
F-34
<PAGE>
or certain other events occur. The base year reserve is not amortized and
remains fixed. Such amount would not be subject to recapture upon conversion to
a commercial bank charter.
The provision for income taxes consisted of (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Current:
Federal ................... $ 9,305 $ 7,257 $ 9,379
State ..................... 1,441 1,210 1,549
----------- ----------- ----------
10,746 8,467 10,928
----------- ----------- ----------
Deferred:
Federal ................... 1,287 1,191 (1,159)
State ..................... 208 360 (107)
----------- ----------- ----------
1,495 1,551 (1,266)
----------- ----------- ----------
Provision for income taxes $ 12,241 $ 10,018 $ 9,662
=========== =========== ==========
</TABLE>
The December 31, 1996, 1995 and 1994 amounts above do not include deferred
taxes of $470,000, $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.
BankAtlantic's actual provision differs from the Federal expected income
tax provision as follows (in thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Income tax provision at expected
federal income tax rate (1) ............................... $ 10,938 $ 9,953 $ 9,274
Increase (decrease) resulting from:
Base year bad debt reserve increase ........................ (362) 0 0
Tax-exempt interest income ................................. (26) (104) (110)
Provision for state taxes net of federal benefit .......... 1,117 897 941
Change in the beginning of the period balance of the
valuation allowance for deferred tax assets allocated
to income tax expense (credit) ........................... 0 (972) (492)
Expenses related to holding company reorganization ........ 0 0 30
Amortization of costs over fair value of net assets acquired 541 393 0
Charitable deduction of appreciated property ................ 0 (70) 0
Other--net .................................................. 33 (79) 19
----------- ----------- ----------
Provision for income taxes ................................ $12,241 $ 10,018 $ 9,662
=========== =========== ==========
(1) The expected federal income tax rate is 35% for the years ended December
31, 1996, 1995 and 1994.
</TABLE>
F-35
<PAGE>
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,
--------------------------------------
1996 1995 1994
------------ ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C>
DEFERRED TAX ASSETS:
Allowance for loans, REO and tax certificate losses,
for financial statement purposes ................................. $ 8,692 $ 6,798 $ 5,713
Other allowances and expense accruals recorded for financial
statement purposes not currently recognized for tax purposes ..... 1,495 3,330 4,244
Deferred compensation accrued for financial statement purposes
not currently recognized for tax purposes ........................ 266 199 186
Unearned commitment fees ........................................... 114 101 75
Amortization of mortgage servicing rights for financial reporting
purposes in excess of amount amortized for tax purposes .......... 251 255 188
Amortization of intangible assets for financial reporting purposes
in excess of amounts amortized for tax purposes .................. 225 0 0
Purchase accounting adjustments for Bank acquisitions ............. 170 1,073 0
Other .............................................................. 10 171 123
------------ ------------ ----------
Total gross deferred tax assets ..................................... 11,223 11,927 10,529
Less valuation allowance ............................................ 0 0 972
------------ ------------ ----------
Total deferred tax assets ........................................... 11,223 11,927 9,557
------------ ------------ ----------
DEFERRED TAX LIABILITIES:
Tax bad debt reserve in excess of base year reserve ................ 1,684 2,725 1,095
Office properties and equipment and real estate owned due
to depreciation differences ...................................... 1,172 1,613 1,202
FHLB stock, due to differences in the recognition of
stock dividends .................................................. 1,740 1,646 1,689
Deferred loan income, due to differences in the recognition
of loan origination fees and discounts ........................... 2,039 1,479 1,461
Discount on securities, due to the accretion of discounts ......... 286 673 1,010
Capital leases for financial reporting purposes and operating
leases for tax purposes .......................................... 0 21 309
Prepaid pension expenses ........................................... 313 473 370
Deferred tax liability on unrealized appreciation on debt
securities available for sale .................................... 470 3,600 121
Prepaid insurance, primarily FDIC assessments ...................... 142 355 679
Other .............................................................. 22 86 53
------------ ------------ ----------
Total gross deferred tax liabilities ................................ 7,868 12,671 7,989
------------ ------------ ----------
Net deferred tax asset (liability) .................................. 3,355 (744) 1,568
Less deferred income tax (assets) liabilities at beginning of period 744 (1,568) (423)
Deferred tax asset, net related to acquisitions ..................... (2,464) (2,718) 0
Increase (decrease) in deferred tax liability on unrealized
appreciation on debt securities available for sale included as
a separate component of stockholders' equity ...................... (3,130) 3,479 121
------------ ------------ ----------
Benefit (provision) for deferred income taxes ....................... $ (1,495) $ (1,551) $ 1,266
============ ============ ==========
</TABLE>
F-36
<PAGE>
On December 31, 1994, BankAtlantic had a $972,000 valuation allowance. The
valuation allowance was reduced to zero due to management's determination that,
more likely than not, the valuation allowance was not required. The valuation
allowance at December 31, 1996 and 1995 was zero.
At December 31, 1996, the Company had a tax refund receivable of $723,000
and $132,000 for Federal and State income taxes, respectively. The tax refunds
were acquired with the BNA acquisition.
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 was utilized in 1995. The remaining NOL
and ITC was 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, 1996 and 1995.
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,
----------------------------
1996 1995
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of accumulated benefit obligation,
including vested benefits of $13,301 and $9,911 ......... $ (14,370) $ (10,533)
Actuarial present value of projected benefit obligation
for
service rendered to date ................................ (17,301) (13,435)
Plan assets at fair value as of the actuarial date ....... 15,728 12,768
------------- -------------
Plan assets in excess (below) projected benefit obligation (1,573) (667)
Unrecognized net loss from past experience different from
that assumed and effects of changes in assumptions ...... 3,868 3,638
Prior service (cost) benefit not yet recognized in net
periodic pension cost ................................... 61 69
Unrecognized net asset at October 1, 1987, being
recognized
over 15 years ........................................... (1,540) (1,808)
------------- -------------
Prepaid pension cost ...................................... $ 816 $ 1,232
============= =============
</TABLE>
F-37
<PAGE>
Net pension cost includes the following components:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost benefits earned during the period $ 1,065 $ 785 $ 811
Interest cost on projected benefit obligation . 1,151 1,010 833
Estimated return on plan assets ................ (1,297) (1,009) (1,044)
Net amortization and deferral .................. (3) 44 45
---------- ---------- ----------
Net periodic pension expense ................... $ 916 $ 830 $ 645
========== ========== ==========
</TABLE>
The actuarial assumptions used in accounting for the Plan were:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Weighted average discount rate ..................... 7.50 % 8.50 % 8.50 %
Rate of increase in future compensation levels .... 5.00 % 6.50 % 6.50 %
Expected long-term rate of return .................. 9.00 % 9.00 % 9.00 %
=========== =========== ===========
</TABLE>
Actuarial assumptions for the years ended December 31, 1996, 1995 and 1994
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, 1996 that would significantly effect the actuarial
assumptions. During the years ended December 31, 1996 and 1995 and 1994,
BankAtlantic funded $500,000, $1.1 million and $490,000, respectively to the
plan.
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. 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. Included in employee compensation
and benefits on the consolidated statement of operations was $147,000, $75,000
and $98,000 of expenses and employer contributions related to the 401k Plan for
the years ended December 31, 1996, 1995 and 1994, respectively. For the year
ended December 31, 1996, the Board of Directors declared a discretionary match
of 25% of the first 4% of an employee's contribution. Ten percent of the 25%
discretionary match related to meeting specific profit goals. For the year ended
December 31, 1996 and 1995, participating employees were matched 25% and 15% of
their first 4% of contributions.
F-38
<PAGE>
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, 1996, for the periods shown was (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
- ------------------------- ----------
<S> <C>
1997 .................... $ 3,477
1998 .................... 3,103
1999 .................... 2,382
2000 .................... 1,232
2001 .................... 741
Thereafter .............. 3,339
----------
Total ................. $ 14,274
==========
</TABLE>
Rental expense for premises and equipment was $3.8 million, $3.4 million,
and $2.4 million for the years ended December 31, 1996, 1995 and 1994,
respectively. Included in other liabilities at December 31, 1996 and 1995, is an
allowance of $266,000 and $110,000, respectively, for future rental payments on
closed branches. Included in the December 31, 1996 allowance for branches closed
was a $195,000 reserve for future lease payments on five BNA branches that were
closed at acquisition. BankAtlantic opened 5 Wal-Mart in-store branches and
added eight branches associated with the BNA acquisition during the year ended
December 31, 1996. BankAtlantic purchased two branch locations from unrelated
financial institutions, opened three Wal-Mart in-store branches and acquired
five branches associated with the MegaBank acquisition during the year ended
December 31, 1995. Management has committed to two additional in-store full
service branches, which are anticipated to open during the year ended December
31, 1997. The estimated annual lease payments are $48,600, other annual expenses
are $50,000, and estimated leasehold improvements and other capitalizable costs
associated with the two branches to be opened during 1997, will be approximately
$420,000.
BankAtlantic signed an agreement dated April 29, 1994 with Wal-Mart Stores,
Inc., pursuant to which BankAtlantic leased and 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.
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 believes results of operations or financial
position will not be significantly impacted by the resolution of these matters.
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 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.
F-39
<PAGE>
Financial instruments with off-balance sheet risk were:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Commitments to extend credit, including the
undisbursed
portion of loans in process ......................... $ 345,524 $ 201,717
Standby and documentary letters of credit ............. 520 5,671
FHLB advance forward commitments ...................... 12,000 0
Commitments to purchase residential loans ............. 28,000 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
December 31, 1996, $4.1 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 $28.3 million and $21.5 million December 31, 1996 and 1995, 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
December 31, 1996, BankAtlantic was in compliance with this requirement with an
investment of approximately $14.8 million in stock of the FHLB of Atlanta.
14. REGULATORY MATTERS
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
F-40
<PAGE>
subject to the reporting and the other requirements of the Exchange Act. In
addition, BFC owns 2,654,945 and 4,876,124 of Class A and Class B common
stock, respectively, which amounts to 41.52% of the Company's common stock.
BFC is subject to the same oversight by the OTS as discussed herein with
respect to the Company.
On September 30, 1996, President Clinton signed into law H.R. 3610, which
recapitalized the SAIF and substantially bridged the assessment rate disparity
existing between SAIF and BIF insured institutions. The new law subjected
institutions with SAIF assessable deposits, including BankAtlantic, to a
one-time assessment of 0.657% of covered deposits at March 31, 1995.
BankAtlantic's one-time assessment, which was paid in November 1996, resulted in
a pre-tax charge of $7.2 million for the year ended December 31, 1996, and under
provisions of the law, was treated as a fully deductible "ordinary and necessary
business expense" for tax purposes. The $7.2 million charge excludes the $2.3
million amount assessed on BNA deposits which was considered in recording the
acquisition of BNA under the purchase method of accounting. As a result of the
special assessment, discussed herein, the SAIF was capitalized at the target
Designated Reserve Ratio ("DRR") of 1.25 percent of estimated insured deposits
on October 1, 1996.
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.
On December 1, 1996 the FDIC finalized a rule lowering the rates on
assessments paid to the SAIF, effective October 1, 1996. The rule also
separates, effective January 1, 1997, the Financing Corporation ("FICO")
assessment to service the interest on its bond obligations from the SAIF
assessment. The amount assessed on individual institutions by the FICO will be
in addition to the amount paid for deposit insurance according to the FDIC's
risk-related assessment rate schedules. The FICO assessment rate for the first
semi-annual period in 1997 was set at 6.48 basis points annually for
SAIF-assessable deposits and 1.30 basis points for BIF assessable deposits. By
law, the FICO rate on BIF-assessable deposits must be one-fifth the rate on
SAIF-assessable deposits until the insurance funds merge or until January 1,
2000, whichever occurs first. The rule established a special interim rate
schedule of 18 to 27 basis points annually between October 1, 1996 and January
1, 1997. Excess assessments were refunded during January 1997. Insurance
premiums range from zero to 27 basis points, with well capitalized institutions
in the highest supervisory subgroup paying zero basis points and
undercapitalized institutions in the lowest supervisory subgroup paying 27 basis
points. BankAtlantic anticipates paying 6.48 basis points for its
SAIF-assessable deposits and 1.30 for its BIF-assessable deposits based on it
supervisory subgroup. 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. All Bank of North America ("BNA")
deposits acquired are subject to SAIF premiums. At December 31, 1996,
BankAtlantic had approximately $143.8 million of deposits subject to BIF
premiums and $1.7 billion subject to SAIF premiums.
BankAtlantic is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory--and
F-41
<PAGE>
possibly additional discretionary actions by regulators that, if undertaken,
could have a direct material effect on BankAtlantic's financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, BankAtlantic must meet specific capital guidelines that
involve quantitative measures of BankAtlantic's assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. BankAtlantic's capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk weightings,
and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require BankAtlantic to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1996, that
BankAtlantic meets all capital adequacy requirements to which it is subject.
As of December 31, 1996, BankAtlantic is considered a well capitalized
under the regulatory framework for prompt corrective action. To be categorized
as well capitalized BankAtlantic must maintain minimum total risk-based, Tier I
risk-based, tangible and core capital ratios as set forth in the table. There
are no conditions or events since December 31, 1996 that management believes
have changed the institution's category.
BankAtlantic's actual capital amounts and ratios are presented in the
table:
<TABLE>
<CAPTION>
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
----------------------- ----------------------------------------- ------------------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------------ ---------- ------------------- -------------------- ------------ -----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996:
Total risk-based capital . $ 193,196 10.83% $/greater than/142,691 /greater than/8.00% $ 178,407 /greater than/10.00%
Tier I risk-based capital $ 170,865 9.58% $/greater than/ 71,363 /greater than/4.00% $ 107,004 /greater than/ 6.00%
Tangible capital .......... $ 170,865 6.65% $/greater than/ 38,547 /greater than/1.50% $ 38,547 /greater than/ 1.50%
Core capital .............. $ 170,865 6.65% $/greater than/ 77,094 /greater than/3.00% $ 128,491 /greater than/ 5.00%
As of December 31, 1995:
Total risk-based capital . $133,846 11.67% $/greater than/ 91,770 /greater than/8.00% $ 114,713 /greater than/10.00%
Tier I risk-based capital $119,451 10.41% $/greater than/ 45,885 /greater than/4.00% $ 68,828 /greater than/ 6.00%
Tangible capital .......... $119,451 6.90% $/greater than/ 25,949 /greater than/1.50% $ 25,949 /greater than/ 1.50%
Core capital .............. $119,451 6.90% $/greater than/ 51,899 /greater than/3.00% $ 86,498 /greater than/ 5.00%
</TABLE>
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
F-42
<PAGE>
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 fund 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 future payments by the carrier are
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 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 to be reimbursed were reflected in the period for which
the reimbursement is related. Through December 31, 1995 and 1994, the carrier
has 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. 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. 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
F-43
<PAGE>
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 has 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. The New York action and the action
brought by the State of New Jersey were resolved in 1996 and 1995, respectively.
The remaining New Jersey action, which was brought against over 25 parties,
including BankAtlantic, purports to be a class action on behalf of named and
unnamed plaintiffs that may have obtained loans from dealers who subsequently
sold the loans to financial institutions including BankAtlantic. This action
seeks, among other things, rescission of the loan agreements and damages. In
November 1995, the court in the remaining New Jersey action entered an order
dismissing the complaint against BankAtlantic and plaintiffs appealed this
ruling. In January 1996, the Appellate Court reversed the lower court's decision
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 summary judgment motion after the trial court
has made a determination as to plaintiff's ability to maintain this case as a
class action.
The balance of the loans associated with the Subject Portfolio amounted to
approximately $9.9 million and $14.2 million at December 31, 1996 and 1995,
respectively. The related dealer reserve had been completely charged-off by
December 31, 1993. Net charge-offs relating to the Subject Portfolio amounted to
$666,000, $1.0 million, and $1.2 million for the years ended December 31, 1996,
1995 and 1994, respectively. All 1994 charge-offs were recovered from the
carrier compared to none in 1995. At December 31, 1996, 10% of the loans were
secured by collateral in South Florida and 90% of such loans were secured by
collateral in the northeastern United States, respectively. 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.
16. PARENT COMPANY FINANCIAL INFORMATION
The Company was not in existence prior to July 13, 1994. Condensed
Statements of Financial Condition and Condensed Statements of Operations of the
Company, at December 31, 1996 and 1995 and for each of the periods shown below.
(in thousands):
F-44
<PAGE>
CONDENSED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Cash deposited at BankAtlantic ................................................. $ 20,226 $ 2,079
Debt securities available for sale ............................................. 5,843 1,892
Investment in subsidiaries ..................................................... 200,760 136,816
Due from BankAtlantic .......................................................... 0 639
Deferred offering costs on subordinated debentures ............................. 3,156 1,023
Income tax receivable .......................................................... 1,819 448
Other assets ................................................................... 175 0
------------ ------------
Total assets ................................................................... $ 231,979 $ 142,897
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Subordinated debentures and note payable ....................................... $ 78,500 $ 21,001
Due to BankAtlantic ............................................................ 2,742 0
Other liabilities .............................................................. 3,033 1,335
------------ ------------
Total liabilities .............................................................. 84,275 22,336
------------ ------------
Stockholders' equity:
Preferred Stock, $25.00 per share preference value, $0.01 par value
10,000,000 shares authorized; none outstanding ............................... 0 0
Class A Common Stock, $0.01 par value, authorized 30,000,000 shares; issued
and outstanding, 7,807,258 and zero .......................................... 78 0
Class B Common Stock, $0.01 par value, authorized 15,000,000 shares; issued
and outstanding, 10,542,116 and 10,592,999 shares ............................ 105 106
Additional paid-in capital ..................................................... 64,171 48,905
Retained earnings .............................................................. 82,602 65,817
------------ ------------
Total stockholder's equity before net unrealized appreciation on debt
securities
available for sale--net of deferred income taxes ............................. 146,956 114,828
Net unrealized appreciation on debt securities available for sale
and owned by BankAtlantic--net of deferred income taxes ...................... 748 5,733
Total stockholders' equity ..................................................... 147,704 120,561
------------ ------------
Total liabilities and stockholders' equity ..................................... $ 231,979 $ 142,897
============ ============
</TABLE>
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------------------
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Interest income on repurchase agreements and deposits at BankAtlantic ..... $ 597 $ 51 $ 0
Interest income on Federal agency securities ............................... 209 29 0
----------- ----------- ----------
Total interest income ...................................................... 806 80 0
----------- ----------- ----------
Interest expense on subordinated debentures and note payable .............. 4,018 776 0
----------- ----------- ----------
Net interest (expense) ..................................................... (3,212) (696) 0
Other expenses ............................................................. (39) (5) 0
----------- ----------- ----------
Loss before income tax benefit and earnings of subsidiaries ............... (3,251) (701) 0
Income tax benefit ......................................................... 1,253 274 0
----------- ----------- ----------
(Loss) before earnings of subsidiaries ..................................... (1,998) (427) 0
Equity in undistributed net earnings of subsidiaries excluding BankAtlantic 27 1 0
Equity in net earnings of BankAtlantic ..................................... 20,982 18,845 16,835
----------- ----------- ----------
Net income ................................................................. $ 19,011 $ 18,419 $ 16,835
=========== =========== ==========
</TABLE>
F-45
<PAGE>
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
------------------------
1996 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ............................................................. $ 19,011 $ 18,419
Adjustment to reconcile net income to net cash provided (used)
by operating activities:
Equity in net earnings of BankAtlantic and other subsidiaries ........ (21,009) (18,846)
Accretion on debt securities available for sale ........................ (209) (29)
Amortization of note payable deferred costs ............................ 0 69
Amortization of subordinated debentures deferred costs ................. 222 29
Increase in dividends payable .......................................... 85 69
Increase in accrued interest payable ................................... 1,859 522
Increase (decrease) in other liabilities ............................... (127) 347
(Decrease) increase in receivable (payable) from (to) BankAtlantic .... 3,381 (241)
Increase in income tax receivable ...................................... (1,371) (448)
----------- -----------
Net cash provided (used) by operating activities ....................... 1,842 (109)
----------- -----------
INVESTING ACTIVITIES:
Purchase of BankAtlantic preferred stock ............................... 0 (4,000)
Additional investment in BankAtlantic .................................. (54,000) (6,000)
Dividends from BankAtlantic preferred and common stock ................. 6,080 3,034
Purchase of investment securities ...................................... (13,617) (3,663)
Proceeds from maturity of investment securities ........................ 9,700 1,800
----------- -----------
Net cash used by investing activities .................................. (51,837) (8,829)
----------- -----------
FINANCING ACTIVITIES:
Issuance of common stock upon exercise of options, net ................. 18,417 1,709
Common stock dividends paid ............................................ (2,159) (1,672)
Preferred stock dividends paid ......................................... 0 (677)
Proceeds from note payable ............................................. 0 4,000
Repayment of note payable .............................................. (1) (3,999)
Proceeds from issuance of subordinated debentures ...................... 57,500 21,000
Deferred costs on subordinated debentures .............................. (2,356) (1,052)
Preferred stock redemption ............................................. 0 (8,383)
Payment to acquire and retire common stock ............................. (3,259) 0
----------- -----------
Net cash provided by financing activities .............................. 68,142 10,926
----------- -----------
Increase in cash and cash equivalents .................................. 18,147 1,988
Cash and cash equivalents at beginning of period ....................... 2,079 91
----------- -----------
Cash and cash equivalents at end of period ............................. $ 20,226 $ 2,079
=========== ===========
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Interest paid ........................................................ $ 1,937 $ 161
Common stock dividends declared and not paid until subsequent period .. 551 467
Increase (decrease) in stockholders' equity from net unrealized
appreciation on debt securities available for sale by BankAtlantic,
less related deferred income taxes ................................... (4,985) 5,540
Increase in equity for the tax effect related to the exercise
of employee stock options ............................................ 118 173
</TABLE>
F-46
<PAGE>
17. SELECTED QUARTERLY RESULTS (UNAUDITED)
The following tables summarize the quarterly results of operations for the
years ended December 31, 1996 and 1995 (in thousands except per share data):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
1996 QUARTER QUARTER QUARTER QUARTER TOTAL
- ------------------------------------ ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Interest income .................... $ 32,092 $ 32,758 $ 38,521 $ 49,260 $ 152,631
Interest expense ................... 15,620 15,096 19,610 26,705 77,031
------------- ------------- ------------- ------------- -------------
Net interest income ................ $ 16,472 $ 17,662 $ 18,991 $ 22,555 $ 75,600
Provision for loan losses .......... $ 940 $ 1,455 $ 1,869 $ 1,580 $ 5,844
------------- ------------- ------------- ------------- -------------
Net interest income after provision
for loan losses .................. $ 15,532 $ 16,207 $ 17,042 $ 20,975 $ 69,756
------------- ------------- ------------- ------------- -------------
Income before income taxes ......... $ 7,851 $ 9,236 $ 1,977 $ 12,188 $ 31,252
------------- ------------- ------------- ------------- -------------
Net income ......................... $ 4,710 $ 5,549 $ 1,091 $ 7,661 $ 19,011
============= ============= ============= ============= =============
Income per common and common
equivalent share ................. $ 0.27 $ 0.29 $ 0.06 $ 0.40 $ 1.01
============= ============= ============= ============= =============
Income per common and common
equivalent share assuming full di-
lution ........................... $ 0.27 $ 0.29 $ 0.06 $ 0.33 $ 0.93
============= ============= ============= ============= =============
Weighted average number of common
and common equivalent shares out-
standing ......................... 17,644,250 19,377,105 19,262,360 19,295,514 18,896,691
============= ============= ============= ============= =============
Weighted average number of common
and common equivalent shares out-
standing assuming full dilution .. 17,699,328 19,377,105 19,402,964 24,911,634 21,833,015
============= ============= ============= ============= =============
</TABLE>
During the third quarter of 1996, a SAIF one-time special assessment
resulted in a pre-tax charge of $7.2 million. During the fourth quarter of
1996, the Company sold office properties with a book value of $8.1 million
for a pre-tax gain of $3.1 million. Furthermore, during the fourth quarter of
1996 mortgage servicing rights were sold for a pre-tax gain of $1.6 million.
F-47
<PAGE>
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
1995 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 com-
mon equivalent share .... $ 0.25 $ 0.28 $ 0.28 $ 0.16(A) $ 0.97(A)
============= ============= ============= ============= =============
Income per common and com-
mon equivalent share as-
suming full dilution .... $ 0.25 $ 0.28 $ 0.28 $ 0.16(A) $ 0.96(A)
============= ============= ============= ============= =============
Weighted average number
of common and
common equivalent
shares outstanding ...... 16,518,078 16,577,091 17,224,430 17,361,981 16,922,816
============= ============= ============= ============= =============
Weighted average number of
common and common equiva-
lent shares outstanding
assuming
full dilution ........... 16,518,078 16,739,850 17,360,134 17,361,981 17,084,563
============= ============= ============= ============= =============
</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 preferred stock dividend which impacted
earnings per share by $.08 primary and fully diluted earnings per share,
for the year 1995 and $.08 for both primary and fully diluted earnings
per share for the fourth quarter of 1995.
18. OTHER INFORMATION
Alan B. Levan, serves as the Chairman, Chief Executive Officer and
President of BankAtlantic, the Company and BFC. John E. Abdo is the Vice
Chairman of BankAtlantic, the Company, and BFC and President of BankAtlantic
Development Corporation, a wholly owned subsidiary of BankAtlantic. On January
6, 1997, John O'Neill, the former President and Director of BankAtlantic and the
Company resigned.
F-48
<PAGE>
In August 1996, BBC announced a plan to purchase up to 1.25 million shares
of the Company's common stock. As of December 31, 1996, the Company repurchased
in the secondary market 228,125 and 112,500 of Class A and Class B common
shares, respectively, for $3.3 million. These shares were retired at the time of
repurchase.
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.
F-49
<PAGE>
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,
1996 and 1995. The fair value of certificates of deposit is based on the
discounted value of contractual cash flows. The discount rate is estimated using
current rates offered by the Bank for such remaining maturities.
The book value of securities sold under agreements to repurchase and note
payable approximates fair value.
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 December 31, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------------ ------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from depository
institutions ..................... $ 102,995 $ 102,995 $ 69,867 $ 69,867
Federal funds sold and other
short term investments ........... 6,148 6,148 0 0
Debt securities available for sale 439,345 439,345 691,803 691,803
Investment securities .............. 54,511 54,511 49,856 49,856
Loans receivable ................... 1,824,856 1,832,814 828,630 839,763
Financial liabilities:
Deposits ........................... $ 1,832,780 $ 1,828,656 $ 1,300,377 $ 1,306,732
Securities sold under agreements
to repurchase .................... 190,588 190,593 66,237 66,240
Advances from FHLB ................. 295,700 293,587 201,785 201,795
Subordinated debentures and
note payable ..................... 78,500 73,036 21,001 21,537
Federal funds purchased ............ 0 0 1,200 1,200
</TABLE>
The contract amount and related fees of BankAtlantic's commitments to
extend credit, standby letters of credit, financial guarantees and forward FHLB
commitments approximates fair value (see Note 15 for the contractual amounts of
BankAtlantic's financial instrument commitments).
20. ACQUISITIONS
On October 11, 1996, BankAtlantic consummated its acquisition of Bank of
North America Bancorp ("BNAB") for $53.8 million in cash. The acquisition was
accounted for as a purchase for financial reporting purposes as of October 1,
1996. The results of operations include BNAB since October 1, 1996. Funds were
obtained through a $57.5 million debt offering and traditional sources. Interest
expense of $87,000 was imputed on the purchase price for the period of October
1, 1996 (effective date) through October 11, 1996 (acquisition date).
BNAB's primary asset was its wholly owned subsidiary, Bank of North America
("BNA"), a Florida chartered commercial bank. BNA had assets of $525.5 million
and a net loss of $2.5 million for the nine
F-50
<PAGE>
months ended September 30, 1996 and net income of $2.2 million for the year
ended December 31, 1995. BNA had 13 branches, 5 of which were closed upon
acquisition.
On February 17, 1995, BankAtlantic completed an acquisition of MegaBank, a
Miami-based commercial bank, for $21.4 million in cash, of which $900,000 was
paid to the 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 (acquisition date).
F-51
<PAGE>
The net cash utilized in the purchase is summarized below. The fair value
of assets acquired and liabilities assumed inconjunction with the purchase of
all the capital stock of Bank of North America in 1996 and MegaBank in 1995 is
as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1996 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash ........................................... $ 16,814 $ 6,512
Interest bearing deposits with banks ........... 19,795 0
Investments .................................... 0 1,700
FHLB stock ..................................... 2,788 0
Deferred tax asset ............................. 2,464 2,697
Loans receivable, net .......................... 395,030 116,389
Debt securities available for sale ............. 66,371 18,119
Cost over fair value of net assets acquired ... 19,313 12,072
Accrued interest receivable .................... 4,181 1,208
Real estate owned .............................. 1,017 348
Property and equipment ......................... 6,098 613
Mortgage loan servicing rights ................. 4,047 0
Non-competition agreement ...................... 0 900
Other assets ................................... 8,220 3,137
----------- -----------
Fair value of assets acquired ................ 546,138 163,695
Deposits ....................................... 469,092 120,165
Securities sold under agreements to repurchase 1,935 20,615
FHLB advances .................................. 5,027 0
Advances by borrowers for taxes and insurance . 8,740 0
Other liabilities .............................. 6,874 1,954
----------- -----------
Fair value of liabilities assumed ............ 491,668 142,734
Acquisition costs .............................. 655 465
----------- -----------
Purchase of Bank ............................... $ 55,125 $ 21,426
----------- -----------
Cash acquired .................................. 16,814 6,512
----------- -----------
Purchase of Bank, net of cash acquired ........ $ 38,311 $ 14,914
=========== ===========
</TABLE>
F-52
<PAGE>
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 1997 through 2001.
The amounts (in thousands) assume no sales or dispositions of the related assets
or liabilities.
<TABLE>
<CAPTION>
NET DECREASE OF
YEARS ENDING DECEMBER 31, NET EARNINGS
- -------------------------- ----------------
<S> <C>
1997 ..................... $ (2,957)
1998 ..................... $ (3,142)
1999 ..................... $ (2,737)
2000 ..................... $ (2,635)
2001 ..................... $ (2,610)
Thereafter ............... $ (15,547)
</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 15 years and 10 years for
the BNA and MegaBank acquisitions, respectively. The cost over fair value of net
assets acquired as of December 31, 1996 and 1995 is $28.6 million and $10.8
million. The $900,000 non-competition agreement is considered an intangible
asset for tax purposes and amortized ratably over 15 years. At December 31, 1996
and 1995, the non-competition agreement balance was $417,000 and $696,000,
respectively. The agreement is being amortized 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.
F-53
<PAGE>
The following is proforma information for the year ended December 31, 1996
and 1995 as if the acquisitions were consummated on January 1, 1996 and 1995,
respectively. The proforma information is not necessarily indicative of the
combined financial position or results of operations which would have been
realized had the acquisition been consummated during the period or as of the
dates for which the proforma financial information is presented. (in thousands,
except for per share data):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
--------------------------------------------------------
DECEMBER 31, 1996 DECEMBER 31, 1995
--------------------------- ---------------------------
HISTORICAL PROFORMA HISTORICAL PROFORMA
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Interest income ........................ $ 152,631 $ 182,921 $ 130,077 $ 170,071
Interest expense ....................... 77,031 95,975 65,686 91,756
Provision for loan losses .............. 5,844 9,087 4,182 5,332
------------- ------------ ------------- ------------
Net interest income after provision
for loan losses ...................... 69,756 77,859 60,209 72,983
------------- ------------ ------------- ------------
Net Income ............................. $ 19,011 $ 13,807 $ 18,419 $ 17,143
============= ============ ============= ============
Income per common and common
equivalent share ..................... $ 1.01 $ 0.73 $ 0.97 $ 0.89
============= ============ ============= ============
Income per common and common equivalent
share assuming full dilution ......... $ 0.93 $ 0.69 $ 0.96 $ 0.88
============= ============ ============= ============
</TABLE>
The proforma includes losses incurred by BNA of $3.0 million on the sale of
treasury notes and a $2.3 million SAIF one time special assessment.
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 PROFORMA
------------- ------------
<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 ...... $ 0.97 $ 0.96
============= ============
Income per common and common equivalent share
assuming full dilution ............................ $ 0.97 $ 0.96
============= ============
</TABLE>
The proforma 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>
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, BBC CAPITAL OR THE
UNDERWRITERS. 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>
Summary ..................................... 5
Risk Factors ................................ 13
The Company ................................. 21
Use of Proceeds ............................. 21
Market for the Preferred Securities ........ 21
Accounting Treatment ........................ 21
Capitalization .............................. 22
Selected Consolidated Financial Data ....... 23
Management's Discussion and Analysis of
Results of Operations and Financial
Condition ................................... 26
Business .................................... 54
Regulation and Supervision .................. 62
Management .................................. 72
Description of the Preferred Securities .... 73
Description of the Junior Subordinated
Debentures .................................. 85
Description of the Guarantee ................ 93
Relationship Among the Preferred Securities,
the Junior Subordinated Debentures and the
Guarantee ................................... 96
Certain Federal Income Tax Consequences .... 97
ERISA Considerations ........................ 101
Underwriting ................................ 102
Validity of the Securities .................. 103
Experts ..................................... 103
Available Information ....................... 103
Incorporation of Certain Documents
By Reference ................................ 104
Index to Consolidated Financial Statements . F-1
</TABLE>
2,600,000 PREFERRED SECURITIES
[PU LOGO]
BBC CAPITAL TRUST I
__% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT
$25 PER PREFERRED SECURITY)
GUARANTEED, AS DESCRIBED HEREIN, BY
BANKATLANTIC BANCORP, INC.
- -----------------------------------------------------------------------------
PROSPECTUS
- -----------------------------------------------------------------------------
RYAN, BECK & CO.
TUCKER ANTHONY INCORPORATED
, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
SEC Registration Fee ............... $22,652
NASD Filing Fee .................... 6,250
Nasdaq National Market Listing Fee 17,500
Legal Fees and Expenses ............ 150,000
Trustee Fees and Expenses .......... 20,000
Accounting Fees and Expenses ......
Printing and Mailing Expenses ..... 90,000
Blue Sky Fees and Expenses ......... 25,000
Miscellaneous Expenses .............
-------------
TOTAL FEES AND EXPENSES .......... $
=============
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 607.0850 of the Florida Business Corporation Act and the Articles
of Incorporation and Bylaws of BankAtlantic Bancorp, Inc. (the "Company")
provide for indemnification of the Company'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 Company 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.
Under the Trust Agreement of BBC Capital Trust I ("BBC Capital"), the
Company will agree to indemnify each of the Trustees of BBC Capital or any
predecessor Trustee for BBC Capital, and to hold each Trustee harmless against,
any loss, damage, claim, liability or expense incurred without negligence or bad
faith on its part, arising out of or in connection with the acceptance or
administration of the Trust Agreement, 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 under the Trust Agreement.
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
- --------------------------------------------------------------------------------------------------------------
<S> <C>
1 Form of Underwriting Agreement
3.1 Amended and Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit
3.1 to the Registration Statement on Form S-3, filed on June 5, 1996 (Registration No. 333-05287)
3.2 Bylaws of the Company (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 with respect to the Company's % Junior Subordinated Debentures
4.2 Form of Specimen Junior Subordinated Debenture (included as an exhibit to the Form of Indenture filed
as Exhibit 4.1)
4.3 Certificate of Trust of BBC Capital Trust I*
4.4 Trust Agreement of BBC Capital Trust I*
4.5 Form of Amended and Restated Trust Agreement of BBC Capital Trust I*
4.6 Form of Certificate for Cumulative Trust Preferred Security of BBC Capital Trust I (included as an
exhibit to Exhibit 4.5)*
4.7 Form of Guarantee Agreement for BBC Capital Trust I
II-1
<PAGE>
EXHIBITS DESCRIPTION
- --------------------------------------------------------------------------------------------------------------
4.8 Form of Agreement as to Expenses and Liabilities (included as an exhibit to Exhibit 4.5)*
5.1 Opinion of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A. regarding validity of the issuance
of the Junior Subordinated Debentures*
5.2 Opinion of Richards, Layton & Finger, special Delaware counsel, as to the validity of the issuance
of the Cumulative Trust Preferred Securities to be issued by BBC Capital Trust I*
8.1 Tax Opinion of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.*
12 Statement regarding computation of earnings to fixed charges (incorporated by reference to Exhibit 12.1 to the
Company's Annual Report on Form 10-K for the year ended March 31, 1996, filed on March 21, 1997)*
23.1 Consent of Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A. (included in Exhibit 5 and Exhibit
8.1)*
23.2 Consent of Richards, Layton & Finger (included in Exhibit 5.2)*
23.3 Consent of KPMG Peat Marwick L.L.P.
24 Power of Attorney (included with signature pages to this Registration Statement).*
25.1 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as trustee under the Indenture*
25.2 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as trustee under the Amended
and Restated Trust Agreement*
25.3 Form T-1: Statement of Eligibility of Wilmington Trust Company to act as trustee under the Guarantee
Agreement for BBC Capital Trust I*
</TABLE>
- -----------------------------------------------------------------------------
* Previous filed
ITEM 17. UNDERTAKINGS
Each of the undersigned Registrants hereby undertake:
(a) That, for purposes of determining any liability under the Securities
Act, each filing of the Company'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
Registrants pursuant to the foregoing provisions, or otherwise, the Registrants
have 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 Registrants of expenses
incurred or paid by a director, officer or controlling person of the Registrants
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 Registrants will, unless in the opinion of their 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)(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 Registrants 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>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
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 Amendment to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Fort Lauderdale, State of Florida, on the 21st day of April, 1997.
BANKATLANTIC BANCORP, INC.
By: /s/ ALAN B. LEVAN
--------------------------------------
Alan B. Levan,
Chairman of the Board of Directors,
Chief Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, BBC Capital
Trust I 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 Amendment to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Fort Lauderdale, State of Florida, on the 21st day of April, 1997.
BBC CAPITAL TRUST I
By: /s/ ALAN B. LEVAN
--------------------------
Alan B. Levan,
Trustee
By: /s/ FRANK V. GRIECO
--------------------------
Frank V. Grieco,
Trustee
By: /s/ JASPER R. EANES
--------------------------
Jasper R. Eanes,
Trustee
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
- -----------------------------------------------------------------------------------------
<S> <C> <C>
/s/ ALAN B. LEVAN Chairman of the Board April 21, 1997
- ------------------------- Chief Executive Officer
Alan B. Levan and President
II-3
<PAGE>
/s/ JASPER R. EANES Executive Vice President, April 21, 1997
- ------------------------- Chief Financial Officer
Jasper R. Eanes
/s/ * Vice-Chairman of the Board April 21, 1997
- ------------------------- Chief Financial Officer
John E. Abdo
/s/ FRANK V. GRIECO Senior Executive Vice President April 21, 1997
- ------------------------- and Director
Frank V. Grieco
- ------------------------- Director
Steven M. Coldren
/s/ * Director April 21, 1997
- ----------------------
Mary E. Ginestra
/s/ * Director April 21, 1997
- ----------------------
Bruno DiGiulian
/s/ * Director April 21, 1997
- ----------------------
Charlie C. Winningham, II
- ----------------------
By: /s/ ALAN B. LEVAN
- -------------------------
Alan B. Levan
Attorney-in-Fact
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
1 Form of Underwriting Agreement
4.7 Form of Guarantee Agreement for BBC Capital Trust I
23.3 Consent of KPMG Peat Marwick L.L.P.
EXHIBIT 1
BBC CAPITAL TRUST I
(a Delaware business trust)
2,000,000 Preferred Securities
_____% Cumulative Trust Preferred Securities
(Liquidation Amount $25 per Preferred Security)
UNDERWRITING AGREEMENT
__________, 1997
Ryan, Beck & Co., Inc.
80 Main Street
West Orange, New Jersey 07052
Tucker Anthony Incorporated
One Beacon Street
Boston, Massachusetts 02108
Ladies and Gentlemen:
BBC Capital Trust I (the "Trust"), a statutory business trust
organized under the Business Trust Act (the "Delaware Act") of the State of
Delaware (Chapter 38, Title 12, of the Delaware Business Code, 12 Del. C.
Section 3801 et seq.), and BankAtlantic Bancorp, Inc., a Florida corporation
(the "Company" and, together with the Trust, the "Offerors") as depositor of the
Trust and as guarantor, hereby confirm their agreement (the "Agreement") with
Ryan Beck & Co., Inc. and Tucker Anthony Incorporated (the "Underwriters"), with
respect to the issue and sale by the Trust and the purchase by the Underwriters,
acting severally and not jointly, in such amounts as are set forth in Schedule A
hereto opposite the name of such Underwriter, 2,000,000 (the "Initial
Securities") of the Trust's _____% Cumulative Trust Preferred Securities (the
"Preferred Securities"). The Trust and the Company also propose to issue and
sell to the Underwriters, at the Underwriter's option, up to an additional
300,000 Preferred Securities (the "Option Securities") as set forth herein. The
term "Preferred Securities" as used herein, unless indicated otherwise, shall
mean the Initial Securities and the Option Securities.
<PAGE>
The Preferred Securities and the Common Securities (as defined herein)
are to be issued pursuant to the terms of an Amended and Restated Trust
Agreement dated as of ____________, 1997 (the "Trust Agreement"), among the
Company, as depositor, and Wilmington Trust Company ("Trust Company"), a
Delaware banking corporation, as property trustee ("Property Trustee") and as
Delaware trustee ("Delaware Trustee") and Alan B. Levan, Frank V. Grieco and
Jasper R. Eanes (the "Administrative Trustees," and together with the Property
Trustee and the Delaware Trustee, the "Trustees") and the holders from time to
time of undivided interests in the assets of the Trust. The Preferred Securities
will be guaranteed by the Company, on a subordinated basis and subject to
certain limitations, with respect to distributions and payments upon
liquidation, redemption or otherwise (the "Guarantee") pursuant to the Preferred
Securities Guarantee Agreement dated as of ____________, 1997 (the "Guarantee
Agreement") between the Company and the Trust Company, as guarantee trustee (the
"Guarantee Trustee"). The assets of the Trust will consist of _____% junior
subordinated debentures due ____________, 2027 (the "Junior Subordinated
Debentures") of the Company which will be issued under an indenture dated as of
____________, 1997 (the "Indenture"), between the Company and the Trust Company,
as trustee (the "Indenture Trustee"). Under certain circumstances, the Junior
Subordinated Debentures will be distributable to the holders of undivided
beneficial interests in the assets of the Trust. The entire proceeds from the
sale of the Preferred Securities will be combined with the entire proceeds from
the sale by the Trust to the Company of the Trust's common securities (the
"Common Securities"), and will be used by the Trust to purchase an equivalent
amount of the Junior Subordinated Debentures.
The initial public offering price for the Preferred Securities, the
purchase price to be paid by the Underwriters for the Preferred Securities, the
commission per Preferred Security to be paid by the Company to the Underwriters
and the rate of interest to be paid on the Preferred Securities shall be agreed
upon by the Company and the 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 Underwriters and shall specify such applicable
information as is indicated in Exhibit A hereto. The offering of the Preferred
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 Offerors have prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (File Nos.
333-23771 and 333-23771-01) covering the registration of the Preferred
Securities, the Guarantee and the Junior Subordinated Debentures 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
2
<PAGE>
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 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 Preferred 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 Preferred Securities (the "Offering") as soon as possible 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 participate in the
solicitation of purchase orders for the Preferred 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 Offerors jointly and severally represent and warrant
to and agree 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
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representation and warranty does not apply to statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Offerors 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 Offerors
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 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 Offerors and, when duly executed by the Underwriters,
will constitute the valid and binding agreement of the Offerors
enforceable against the Offerors 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 Guarantee Agreement, the Junior Subordinated
Debentures, the Trust Agreement and the Indenture have each been duly
authorized and when validly executed and delivered by the Company and,
in the case of the Guarantee, by the Guarantee Trustee, in the case of
the Trust Agreement, by the Trustees, and in the case of the
Indenture, by the Indenture Trustee, will constitute valid and legally
binding obligations of the Company enforceable in accordance with
their respective 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; the Junior Subordinated
Debentures are entitled to the benefits of the Indenture; and the
Guarantee Agreement, the Junior Subordinated Debentures, the Trust
Agreement and the Indenture conform in all material respects to the
descriptions thereof in the Prospectus.
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(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. 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
currently conducted, except to the extent that the failure to be so
authorized would not have a material adverse effect on the Company and
its subsidiaries, considered as one enterprise; 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 Offerors have 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 Preferred 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
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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 Prospectus under
the caption "Capitalization"; the Preferred 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.
(xi) The Preferred Securities have been duly authorized for
issuance and sale to the Underwriters pursuant to this Agreement and,
when issued and delivered by the Company pursuant to this Agreement
against payment of the consideration set forth herein, will be validly
issued and fully paid and non-assessable; the Preferred Securities
conform, in all material respects, to the statements relating thereto
contained in the Prospectus and such description conforms, in all
material respects, to the rights set forth in the instruments defining
the same; the holders of the Preferred Securities (the
"Securityholders") will be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit
organized under the General Corporation Law of the State of Delaware;
and the issuance of the Preferred Securities is not subject to the
preemptive or other similar rights of any securityholder of the
Company.
(xii) The Common Securities have been duly and validly
authorized by the Trust and upon delivery by the Trust to the Company
against payment therefor as described in the Prospectus, will be duly
and validly issued and fully paid and non-assessable undivided
beneficial interests in the assets of the Trust and will conform, in
all material respects, to the description thereof contained in the
Prospectus; the issuance of the Common Securities is not subject to
preemptive or other similar rights; and at the Closing Time, all of
the issued and outstanding Common Securities of the Trust will be
directly owned by the Company free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity.
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(xiii) The Trust has been duly created and is validly
existing as a statutory business trust in good standing under the
Delaware Act with the power and authority to own, lease and operate
its properties and conduct its business as described in the
Prospectus, and the Trust has conducted no business to date, and it
will conduct no business in the future that would be inconsistent with
the description of the Trust set forth in the Prospectus; the Trust is
not a party to or bound by any agreement or instrument other than this
Agreement, the Trust Agreement and the agreements and instruments
contemplated by the Trust Agreement or described in the Prospectus;
the Trust has no liabilities or obligations other than those arising
out of the transactions contemplated by this Agreement and the Trust
Agreement and described in the Prospectus; and the Trust is not a
party to or subject to any action, suit or proceeding of any nature.
(xiv) The issue and sale of the Preferred Securities and the
Common Securities by the Trust, the compliance by the Trust with all
of the provisions of this Agreement, the purchase of the Junior
Subordinated Debentures by the Trust, and the consummation of the
transactions herein contemplated will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default
under, any indenture, loan agreement, mortgage, deed of trust or other
agreement or instrument to which the Trust is a party or by which the
Trust is bound or to which any of the property or assets of the Trust
is subject, nor will such action result in any violation of the
provisions of the Trust Agreement or any statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Trust or any of its properties; and no consent,
approval, authorization, order, license, certificate, permit,
registration or qualification of or with any such court or other
governmental agency or body is required to be obtained by the Trust
for the issue and sale of the Preferred Securities and the Common
Securities by the Trust, the purchase of the Junior Subordinated
Debentures by the Trust or the consummation by the Trust of the
transactions contemplated by this Agreement and the Trust Agreement,
except for such consents, approvals, authorizations, licenses,
certificates, permits, registrations or qualifications as have already
been obtained, or as may be required under the 1933 Act or the 1933
Act Regulations, 1934 Act or 1934 Act Regulations, state securities
laws or under the Trust Indenture Act of 1939, as amended ("TIA").
The issuance by the Company of the Guarantee and the Junior
Subordinated Debentures, the compliance by the Company with all of the
provisions of this Agreement, the execution, delivery and performance
by the Company of the Trust Agreement, the Junior Subordinated
Debentures, the Guarantee Agreement and the Indenture, and the
consummation of the transactions herein and therein contemplated will
not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any material
indenture, loan agreement, mortgage, deed of trust, or other material
agreement or instrument to which the Company is a party or by which
the Company is bound or to which any of
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the property or assets of the Company is subject, nor will such action
result in any violation of the provisions of the Articles of
Incorporation or by-laws of the Company or any statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its properties except in any
case for such conflicts, breaches, defaults or violations that would
not have a material adverse effect on the condition (financial or
otherwise), earnings, business, assets or prospects of the Company and
its subsidiaries considered as one enterprise; and no consent,
approval, authorization, order, license, certificate, permit,
registration or qualification of or with any such court or other
governmental agency or body is required for the issue of the Guarantee
and the Junior Subordinated Debentures or the consummation by the
Company of the other transactions contemplated by this Agreement,
except for such consents, approvals, authorizations, licenses,
certificates, permits, registrations or qualifications as have already
been obtained, or as may be required under the 1993 Act or the 1993
Act Regulations, 1934 Act or 1934 Act Regulations, state securities
laws or under the TIA.
(xv) The Trust is not, and after giving effect to the
offering and sale of the Preferred Securities will not be, an
"investment company," or an entity "controlled" by an "investment
company," as such terms are defined in the Investment Company Act of
1940, as amended (the "Investment Company Act").
(xvi) 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.
(xvii) 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 $______ per share quarterly dividend paid on
Class B Common Stock and the regular $______ 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.
(xviii) 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,
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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.
(xix) 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; 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.
(xx) There are no material 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.
(xxi) 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 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.
(xxii) 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
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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.
(xxiii) 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.
(xxiv) 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; however, the Company has undertaken in
connection with the issuance of its 6 3/4% Convertible Subordinated
Debentures to take reasonable steps to ensure that the shares of
common stock issuable upon exercise thereof may be issued without a
legend restricting transfer.
(xxv) Except as disclosed in the Prospectus, 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 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.
(xxvi) 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
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returns and no material deficiency has been asserted with respect
thereto by any taxing authority.
(xxvii) 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").
(xxviii) The Company and the Bank have no agreement or
understanding with any entity 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.
(b) Any certificate signed by any authorized officer of the Company or
the Bank and delivered to the Underwriters or to counsel for the Underwriters
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 Trust
agrees to sell to each Underwriter, and each Underwriter agrees, severally and
not jointly, to purchase from the Trust that amount of Initial Securities set
forth in Schedule A of the 2,000,000 Initial Securities at the purchase price
and terms set forth herein and 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 300,000 Preferred Securities in accordance with the
terms set forth herein and 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, on one occasion only, 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 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 "Option Closing
Date") shall be determined by the Underwriters but shall not be later than five
full business days after
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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) 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 Underwriters, 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 Underwriters,
on the Option Closing Date as specified in the notice from the Underwriters to
the Company. Payment for the Initial Securities and the Option Securities, if
any, shall be made to the Company by wire transfer of immediately available
funds, against delivery to the Underwriters for the respective accounts of the
Underwriters of Preferred Securities to be purchased by them.
(c) Certificates for the Initial 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 Option Closing Date, 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 Option Closing Date, as the case may be.
Section 3. CERTAIN COVENANTS OF THE OFFERORS. Each of the
Offerors covenants jointly and severally with each Underwriter as follows:
(a) The Offerors will use their best efforts to cause the
Registration Statement to become effective and will notify the Underwriters
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 (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 Preferred Securities or capital
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stock, for offering or sale in any jurisdiction, or of the institution or
threatening of any proceedings for any of such purposes. The Offerors 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 Offerors will not at any time file or make any
amendment to the Registration Statement, or any amendment or supplement if the
Offerors have elected to rely upon Rule 430A, to the Prospectus (including
documents incorporated by reference into such prospectus or to the Prospectus)
of which the Underwriters shall not have previously been advised and have
previously been furnished a copy, or to which the Underwriters or counsel for
the Underwriters shall reasonably object.
(c) The Offerors have 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.
(d) The Offerors will deliver or cause to be delivered 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 Offerors hereby consent to the use
of such copies for purposes permitted by the 1933 Act. The Offerors will deliver
or cause to be delivered to each Underwriter, without charge, as soon as the
Registration Statement shall have become effective (or, if the Offerors have
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.
(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 Preferred
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 Preferred Securities, any event shall occur or condition exist
as a result of which it is necessary, in the reasonable opinion of counsel for
the Underwriters or counsel for the Offerors, 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
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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 Offerors will use their best efforts, in cooperation
with the Underwriters, to qualify the Preferred Securities and the Junior
Subordinated Debentures, for offering and sale under the applicable securities
laws of such states and other jurisdictions as the Underwriters 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; 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 Preferred Securities
have been qualified as above provided.
(g) The Company will make generally available (within the
meaning of Rule 158) to its security holders, the Underwriters and the
Securityholders as soon as practicable, but not later than 90 days after the
close of the period covered thereby, an earnings statement of the Company and
its subsidiaries (in form complying with the provisions of Rule 158 of the 1933
Act Regulations) covering a period of at least 12 months beginning 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 Trust shall apply the proceeds from its sale of the
Preferred Securities, combined with the entire proceeds from the sale by the
Trust to the Company of the Trust's Common Securities, to purchase an equivalent
amount of Junior Subordinated Debentures. The Company and the Bank will use the
net proceeds received by them from the sale of the Junior Subordinated
Debentures in the manner specified in the Prospectus under the caption "Use of
Proceeds".
(i) The Offerors, 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 Underwriters, 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.
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(k) The Offerors 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 Underwriters to prepare one or more "blue sky"
surveys (each, a "Blue Sky Survey") for use in connection with the offering of
the Preferred 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
Underwriters.
(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 Offerors 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 Preferred Securities, prepare and distribute to each of the
Underwriters and counsel to the Underwriters, a hard-bound copy of the documents
used in connection with the issuance of the Preferred Securities.
(o) The Offerors will not, prior to the Option Closing Date or
thirty (30) days after the date of this Agreement, whichever occurs first, incur
any material liability or obligation, direct or contingent, or enter into any
material transaction, other than in the ordinary course of business, or any
transaction with a related party which is required to be disclosed in the
Prospectus pursuant to Item 404 of Regulation S-K under the Securities Act,
except as contemplated by the Prospectus.
(p) During a period of five days from the date of the
Prospectus, neither the Trust nor the Company will, without the prior written
consent of the Underwriters, directly or indirectly, offer, sell, offer to sell,
or otherwise dispose of any Preferred Securities, any other beneficial interests
in the assets of the Trust, or any preferred securities or other securities of
the Trust or the Company which are substantially similar to the Preferred
Securities, including any guarantee of such securities. The foregoing sentence
shall not apply to any of the Preferred Securities to be sold hereunder.
Section 4. PAYMENT OF EXPENSES. The Company will pay and bear
all costs and expenses incident to the performance of its and the Trust's
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,
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and the cost of furnishing copies thereof to the Underwriters, (b) the
preparation, printing and distribution of this Agreement, the Preferred
Securities and the Blue Sky Survey, (c) the issuance and delivery of the
Preferred Securities to the Underwriters, including any transfer taxes payable
upon the sale of the Preferred 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 Underwriters in connection with the
Blue Sky Survey, (g) the qualification of the Preferred 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 Underwriters' counsel (such
counsel's fees shall not exceed $____________) and general out-of-pocket
expenses of the Underwriters not to exceed $____________, (i) the fees and
expenses of the Indenture Trustee, including the fees and disbursements of
counsel for the Indenture Trustee, in connection with the Indenture and the
Junior Subordinated Debentures; (j) the fees and expenses of the Property
Trustee and Delaware Trustee, including the fees and disbursements of counsel
for the Property Trustee and the Delaware Trustee, in connection with the Trust
Agreement and the Certificate of Trust, and (k) all other costs incident to the
performance of the Offerors' obligations hereunder.
If (i) the Closing Time does not occur on or before ____________,
1997, (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 11(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 Underwriters, but excluding
fees associated with the Blue Sky Survey, which shall be paid directly to the
Underwriters' counsel.
Section 5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The
obligations of the several Underwriters to purchase and pay for the Preferred
Securities that they have respectively agreed to purchase pursuant to this
Agreement are subject to the accuracy of the representations and warranties of
the Offerors contained herein or in certificates of the officers or trustees of
the Offerors or any subsidiary delivered pursuant to the provisions hereof, to
the performance by the Offerors of their 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 Offerors
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 Underwriters. If the Offerors have elected to
rely upon Rule 430A, a prospectus containing
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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:
(i) The favorable opinion, dated as of Closing Time, of
Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A., counsel for
the Company, in form and substance reasonably satisfactory to counsel
for the Underwriters, substantially in the form set forth in Exhibit
C.
(ii) The favorable opinion, dated as of Closing Time, of
Richards, Layton & Finger, special Delaware counsel for the Offerors,
in form and substance satisfactory to counsel for the Underwriters,
substantially in the form set forth in Exhibit D.
(iii) The favorable opinion, dated as of Closing Time, of
Richards, Layton & Finger, counsel for the Indenture Trustee, in form
and substance satisfactory to counsel for the Underwriters,
substantially in the form set forth in Exhibit E.
(iv) The favorable opinion, dated as of Closing Time, of
Malizia, Spidi, Sloane & Fisch, P.C., counsel for the Underwriters, in
form and substance satisfactory to the Underwriters.
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 Underwriters (the Underwriters agree and acknowledge that
Stearns Weaver Miller Weissler Alhadeff and Sitterson, P.A. and Malizia, Spidi,
Sloane & Fisch, P.C. will rely on the opinion of Richards, Layton & Finger with
respect to matters of Delaware law), 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, the Bank and the Trust and certificates of public officials.
(c) 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 Offerors shall
have complied in all material respects with Rule 430A (if they 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,
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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 Offerors, threatened against
the Company or any subsidiary or the Trust 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 Offerors, threatened against the Offerors
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) each of the Offerors 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 Offerors 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 Offerors threatened by the Commission. At the Closing Time, the
Underwriters 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.
(d) 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 public accountants with respect to the Company 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, 1996 and 1995, and for each of the years in the
three year period ended December 31, 1996 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 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 December 31,
1996, inquiries of certain officials of the Company and its
subsidiaries responsible for financial and accounting matters, and
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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 Class A Common Stock or Class B Common Stock of the
Company and its consolidated subsidiaries, in each case as
compared with amounts shown in the financial statements at
December 31, 1996 included in the Registration Statement; or
(B) for the period from December 31, 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.
(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 Selected Consolidated Financial Data) (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).
(e) At the Closing Time, the Underwriters 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(d), except
that the specified date referred to shall be a date not more than two days prior
to the Closing Time.
(f) At the Closing Time, counsel for the Underwriters 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 Preferred 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
Offerors, the performance of any of the covenants of the Offerors, or the
fulfillment of any of the conditions herein contained; all proceedings taken by
the Company
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at or prior to the Closing Time in connection with the authorization, issuance
and sale of the Preferred Securities and the Junior Subordinated Debentures as
contemplated in this Agreement shall be satisfactory in form and substance to
the Underwriters and to counsel for the Underwriters.
(g) 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 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.
(h) 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.
(i) 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 Offerors contained
herein and of the statements in any certificates furnished by the Offerors
hereunder as of such Option Closing Date (as if made on such date), to the
performance by the Offerors of their obligations hereunder and to the receipt by
you on the Option Closing Date of:
(1) A certificate, dated the Option Closing Date, 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(c) hereof remains true as of the
Option Closing Date;
(2) The favorable opinion of Stearns Weaver Miller
Weissler Alhadeff & Sitterson, P.A., counsel for the Company, addressed
to you and dated the Option Closing Date, 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 Richards, Layton &
Finger, special Delaware counsel for the Offerors and counsel for the
Indenture Trustee, addressed to you and dated the Option Closing Date,
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;
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(4) The favorable opinion of Malizia, Spidi, Sloane &
Fisch, P.C., dated the Option Closing Date, relating to the Option
Shares and otherwise to the same effect as the opinion required by
Section 5(b) hereof; and
(5) Letters from KPMG Peat Marwick LLP addressed to
the Underwriters and dated the Option Closing Date, in form and
substance satisfactory to the Underwriters and substantially the same
in form and substance as the letters furnished to the Underwriters
pursuant to Section 5(d) hereof.
(j) The Preferred Securities, the Guarantee and the Junior
Subordinated Debentures shall have been qualified or registered for sale, or
subject to an available exemption from such qualification or registration, under
the Blue Sky Laws of such jurisdictions as shall have been reasonably specified
by the Underwriters and the offering contemplated by this Agreement shall have
been cleared by the NASD.
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 Underwriters on notice to the Offerors 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 6, 7, and 10
shall remain in effect.
Section 6. 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 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 Preferred Securities under the "blue sky" or securities
laws thereof or filed with
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the Commission or any securities exchange; unless such statement or omission or
alleged 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 or 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. The foregoing indemnification with respect to any
preliminary prospectus shall not inure to the benefit of the Underwriters if the
person asserting any such losses, claims, damages or liabilities purchased
Preferred Securities and a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) was not sent or given by or on behalf of the Underwriters to such
person, if such is required by law, in connection with the written confirmation
of the sale of such Preferred Securities to such person and if the Prospectus
(as so amended or supplemented) would have cured the defect giving rise to such
loss, claim, damage or liability, provided, that the Company delivered the
Prospectus, as amended or supplemented, to the Underwriters on a timely basis to
permit such delivery or sending. 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 Offerors, their directors, officers who signed the
Registration Statement, and each person, if any, who controls the Offerors
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) or any application in reliance upon and in conformity with written
information about that Underwriter, the Underwriting Agreement, or the
compensation of that Underwriter, furnished to either of the Offerors 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) or in any application.
(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
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shall not relieve the indemnifying party from its obligations to indemnify
hereunder, except to the extent that the indemnifying party has been prejudiced
in any material respect by such failure. 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 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
commission paid by the Company to such Underwriter with respect to the Preferred
Securities purchased by that Underwriter.
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(e) The indemnity 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 7. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO
SURVIVE DELIVERY. The representations, warranties, indemnities, agreements and
other statements of the Offerors or its officers or trustees 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 Offerors or
any Underwriter or any controlling person and will survive delivery of and
payment for the Preferred Securities.
Section 8. OFFERING BY THE UNDERWRITERS. The Trust and the
Company are advised by the Underwriters that the Underwriters propose to make a
public offering of the Preferred Securities, on the terms and conditions set
forth in the Registration Statement from time to time as and when the
Underwriters deem advisable after the Registration Statement becomes effective.
Because the NASD is expected to view the Preferred Securities as interests in a
direct participation program, the offering of the Preferred Securities is being
made in compliance with the applicable provisions of Rule 2810 of the NASD's
Conduct Rules.
Section 9. TERMINATION OF AGREEMENT.
(a) You may terminate this Agreement, by notice to the
Offerors, 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 Preferred Securities or enforce contracts for the sale of the
Preferred 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 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 or Florida authorities, or (v) if there shall
have been such material and substantial change in the market for securities in
general or
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in political, financial or economic conditions as in your reasonable judgment
makes it inadvisable to proceed with the Offering, sale and delivery of the
Preferred 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 Offerors in the Offerors' disclosure documents and that the sale of the
Preferred 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 6 and 7 shall remain in effect.
Section 10. 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 aggregate principal amount of Defaulted
Securities does not exceed 10% of the aggregate principal amount 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 aggregate principal amount of Defaulted
Securities exceeds 10% of the aggregate principal amount 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 Offerors 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 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 10.
Section 11. NOTICES. All notices and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given if delivered,
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mailed or transmitted by any standard form of telecommunication. Notices shall
be addressed as follows:
If to the Underwriters:
Ryan, Beck & Co., Inc.
80 Main Street
West Orange, New Jersey 07052
Attention: Bruce G. Miller, Senior Vice President
Tucker Anthony Incorporated
One Beacon Street
Boston, Massachusetts 02108
Attention: Gregory Benning, Managing Director
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 or the Trust:
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 12. PARTIES. This Agreement herein set forth is made
solely for the benefit of the Underwriters, the Trust and the Company and, to
the extent expressed, any person controlling the Trust, the Company or the
Underwriters, and the directors of the Company, or trustees of the Trust, their
respective officers who have signed the Registration Statement, and their
respective executors, administrators, successors and assigns and subject to the
provisions of Section 10, 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,
26
<PAGE>
as such purchaser, from the Underwriters of the Preferred Securities. All of the
obligations of the Underwriters hereunder are several and not joint.
Section 13. 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 14. 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 15. 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.
27
<PAGE>
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
Underwriters in accordance with its terms.
Very truly yours,
BBC CAPITAL TRUST I
By:
--------------------------------
Name:
Title: Administrative Trustee
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
TUCKER ANTHONY INCORPORATED
By:
- --------------------------------
Name: Gregory Benning
Title: Managing Director
28
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
AMOUNT OF PERCENTAGE OF INITIAL
INITIAL SECURITIES SECURITIES
UNDERWRITER TO BE PURCHASED TO BE PURCHASED
----------- ------------------ ---------------------
<S> <C> <C>
Ryan, Beck & Co, Inc.................................... %
Tucker Anthony Incorporated.............................
TOTAL.............................................. 2,000,000 100%
========= ===
</TABLE>
29
<PAGE>
EXHIBIT A
BBC CAPITAL TRUST I
(a Delaware business trust)
2,000,000 Preferred Securities
___% Cumulative Trust Preferred Securities
(Liquidation Amount $25 per Preferred Security)
PRICE DETERMINATION AGREEMENT
____________, 1997
Ryan, Beck & Co., Inc.
80 Main Street
West Orange, New Jersey 07052
Tucker Anthony Incorporated
One Beacon Street
Boston, Massachusetts 02108
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement dated the date hereof
(the "Underwriting Agreement") among BBC Capital Trust I, a Delaware business
trust, (the "Trust"), BankAtlantic Bancorp, Inc. (the "Company" and together
with the Trust, the "Offerors") and the Underwriters named above (the
"Underwriters"). The Underwriting Agreement provides for the purchase by the
Underwriters from the Trust, subject to the terms and conditions set forth
therein, of 2,000,000 shares, subject to a 300,000 adjustment (to cover
over-allotments, if any), of the _____% Cumulative Trust Preferred Securities of
the Trust (the "Preferred Securities"). This Agreement is the Price
Determination Agreement referred to in the Underwriting Agreement.
Pursuant to Section 2 of the Underwriting Agreement, the Offerors agree
with the Underwriters as follows:
1. The public offering price per Preferred Security shall be
$25.
1
<PAGE>
2. The purchase price for the Preferred Securities to be paid
by the Underwriters shall be $25 per Preferred Security.
3. The commission per Preferred Security to be paid by the
Company to the Underwriters for their commitments hereunder shall be
$_____ per Preferred Security.
4. The interest rate on the Preferred Securities shall be
_____% per annum.
The Offerors represent and warrant to each of the Underwriters that the
representations and warranties of the Offerors set forth in Section 1(a) of the
Underwriting Agreement are accurate as though expressly made at and as of the
date hereof.
As contemplated by Section 2 of the Underwriting Agreement, attached as
Schedule A is a list of the Underwriters, which shall be a part of the Agreement
and the Underwriting Agreement.
This Agreement shall be governed by the laws of the State of New
Jersey.
2
<PAGE>
If the foregoing is in accordance with the understanding of the
Underwriters of the agreement between the Underwriters and the Offerors, please
sign and return to the Company a counterpart hereof, whereupon this instrument,
along with all counterparts and together with the Underwriting Agreement, shall
be a binding agreement between the Underwriters and the Offerors in accordance
with its terms and the terms of the Underwriting Agreement.
Very truly yours,
BBC CAPITAL TRUST I
By:
---------------------------------
Name:
Title: Administrative Trustee
BANKATLANTIC BANCORP, INC.
By:
---------------------------------
Alan B. Levan
Chairman of the Board
Chief Executive Officer
Confirmed and accepted as of
the date first above written:
RYAN, BECK & CO., INC.
By:
----------------------------
Bruce G. Miller
Senior Vice President
TUCKER ANTHONY INCORPORATED
By:
----------------------------
Gregory Benning
Managing Director
3
<PAGE>
EXHIBIT B
BBC CAPITAL TRUST I
2,000,000 PREFERRED SECURITIES
_____% CUMULATIVE TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
SELECTED DEALER AGREEMENT
___________ __, 1997
Ladies and Gentlemen:
BBC Capital Trust I, a Delaware business trust (the "Trust") and
BankAtlantic Bancorp, Inc., a Florida corporation (the "Company" and together
with the Trust, the "Offerors"), are offering for sale to the public 2,000,000
shares, subject to a 300,000 share adjustment (to cover over-allotments, if any)
of the Trust's __% Cumulative Trust Preferred Securities (the "Preferred
Securities").
1. The Underwriters named in the enclosed Prospectus have severally
agreed to purchase from the Trust 2,000,000 Preferred Securities and have an
option to purchase from the Trust any or all of the 300,000 Preferred Securities
to cover over-allotments, if any. The purchase is subject to the terms of an
agreement among the Underwriters and the Offerors (the "Underwriting
Agreement"). The Preferred Securities are more fully described in the
Prospectus. One or more of the Underwriters, are severally offering, subject to
the terms and conditions stated herein and in the Underwriting Agreement, a
portion of the Preferred Securities to certain dealers (the "Selling Group") as
principals, subject to the terms and conditions stated herein and in the
Underwriting Agreement, subject to modification or cancellation of the offering
without notice, at the initial public offering price per Preferred Security
hereinafter set forth and on the cover page of the Prospectus (the "Authorized
Public Offering Price") less concessions (the "Selling Concessions").
Authorized Public Offering
Price: $25 per Preferred Security
Dealer's Selling Concession: $____ per Preferred Security, payable or
allowable as set forth below.
1
<PAGE>
Reallowances: You may reallow not in excess of $____ per
Preferred Security as a Selling Concession
to dealers who are members in good standing
of the National Association of Securities
Dealers, Inc. (the "NASD").
Delivery and Payment: Payment for the Preferred Securities sold to
you hereunder is to be made on ____________,
1997, or such other date as we advise you
and in such manner as we advise you, against
delivery of the Preferred Securities, which
shall be paid for in full at the applicable
Authorized Public Offering Price or, if we
so advise you, at such price less the
applicable Selling Concession. If payment is
at the applicable Authorized Public Offering
Price, the applicable Selling Concession
will be paid to you upon termination of this
Agreement.
Termination: This Agreement will terminate 30 days from
its date unless sooner terminated or
extended by us.
2. Members of the Selling Group may immediately offer Preferred
Securities for sale and take orders therefor at the Authorized Public Offering
Price, subject to confirmation and allotment by us. We, in turn, are prepared to
receive orders subject to confirmation and allotment by us. We reserve the right
to reject any order in whole or in part or to allot less than the number of
Preferred Securities applied for. Orders transmitted by telephone should be
confirmed by letter or facsimile transmission.
3. By becoming a member of the Selling Group, you agree (a) to take and
pay for Preferred Securities allotted and confirmed to you, (b) not to use any
such Preferred Securities to reduce or cover any short position you may have,
(c) to comply with Rules 2730, 2740, and 2750 and related interpretive material
of the NASD Conduct Rules, and (d) upon our request, to advise us of the number
of Preferred Securities purchased from us hereunder remaining unsold by you and
to resell to us any and all such unsold Preferred Securities at the prices
stated above, less all of such part of the concession allowed you as we may
determine.
4. It is assumed that the Preferred Securities sold by you will be
effectively placed for investment. If we purchase in the open market, for the
account of any Underwriter, Preferred Securities sold to you and not effectively
placed for investment, we may not allow you the dealer's concession on the
Preferred Securities so purchased or, if such concession has theretofore been
allowed you, you agree to pay it to us on demand.
2
<PAGE>
5. Each Underwriter has consented that each of us, for our own account
as one of the Underwriters, in our discretion, may make purchases and sales of
the Preferred Securities and, in arranging for sales, to over-allot. You agree
that until termination of this Agreement, you will not make purchases or sales
of any Preferred Securities except (a) pursuant to this Agreement, (b) purchases
authorized by us, or (c) in the ordinary course of business as broker or agent
for a customer pursuant to an unsolicited order.
6. Additional copies of the Prospectus will be supplied to you in
reasonable quantity upon request.
7. The Preferred Securities are offered by us for delivery when, as,
and if sold and accepted by the Underwriters and subject to the terms stated
herein and in the Prospectus, to our right to vary the concession and terms of
the offering after their release for public sale, to the approval of counsel as
to legal matters and to withdrawal, cancellation or modification of the offer
without notice.
8. You represent that you are a member in good standing of the NASD or,
if a foreign dealer, that you will conform to the Conduct Rules of the NASD in
making sales in the United States. You represent that you will comply with the
"Free-Riding and Withholding" interpretation (IM-2110-1) of the Board of
Governors of the NASD. You are not authorized to give any information or make
any representations other than as contained in the Prospectus, or to act as
agent for any Underwriter or for us. Nothing will constitute the Selling Group
as an association or other separate entity or partners with the Underwriters,
with us, or with each other, but you will be responsible for your share of any
liability or expense based on any claim to the contrary. Neither we nor any
Underwriter will be under any liability to you, except for obligations expressly
assumed in this Agreement and any liabilities under the Securities Act of 1933,
as amended. No obligations on our part will be implied or inferred herefrom.
9. Neither we nor any of the other Underwriters will have any
responsibility with respect to the right of any dealer to sell the Preferred
Securities in any jurisdiction, notwithstanding any information that we may
furnish in that connection. Upon application to us, you will be informed as to
the states in which we have been advised by counsel that the Preferred
Securities have been qualified for sale or are exempt under the respective Blue
Sky or securities laws of such states. You agree that you will not offer or sell
such Preferred Securities in violation of any applicable law including, but not
limited to, the Blue Sky or securities laws of any state or jurisdiction in
which such Preferred Securities are offered or sold by you.
10. This Agreement will be governed and construed in accordance with
the laws of the State of New Jersey.
3
<PAGE>
If you desire to become a member of the Selling Group, please advise us
to that effect immediately by facsimile transmission ((201) 325-0600, attention
________________) and sign and return the enclosed copy of this letter to Ryan,
Beck & Co., Inc., 80 Main Street, West Orange, New Jersey 07052.
Very truly yours,
RYAN, BECK & CO., INC.
By:
---------------------------------
Name:
Title:
TUCKER ANTHONY INCORPORATED
By:
---------------------------------
Name:
Title:
Confirmed as of the above date:
- ---------------------------------
(Firm Name)
- ---------------------------------
(Street Address)
- ---------------------------------
(City, State and Zip Code)
By:------------------------------
- ---------------------------------
(Title)
4
<PAGE>
EXHIBIT C
The opinion of special counsel to the Company to be delivered
pursuant to Section 5(b)(i) of the Underwriting Agreement shall be substantially
to the effect that:
1. 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.
2. 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.
3. 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 such laws to own, lease and operate its properties and conduct
its business as now being conducted.
4. 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.
5. 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.
6. The Company is registered as a savings & loan holding company under
the Home Owners' Loan Act, as amended.
7. 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.
8. The authorized capital stock of the Company at December 31, 1996 is
as set forth in the Prospectus under the heading "Capitalization".
5
<PAGE>
9. To such counsel's knowledge, 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.
10. The Company and the Trust each has full corporate power and
authority to execute, deliver, and perform the Underwriting Agreement and to
issue, sell, and deliver the Preferred Securities to be sold by it to the
Underwriters as provided herein; the Underwriting Agreement has been duly
authorized, executed and delivered by the Company and the Trust, and constitutes
a legal, valid, and binding obligation of each of the Company and the Trust and
is enforceable against each of the Company and the Trust in accordance with its
terms, except as enforceability of this Agreement may be limited by bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting creditors'
rights generally, and by equitable principles limiting the right to specific
performance or other equitable relief and except as the obligations of the
Company under the indemnification and contribution provisions of Section 6 of
the Agreement may be limited by laws or unenforceable as against public policy,
as to which no opinion is expressed.
11. The Trust Agreement has been duly authorized, executed and
delivered by the Company, and is a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, readjustment of debt, moratorium, fraudulent
conveyance or similar laws relating to or affecting creditors' rights generally,
general equity principles (whether considered in a proceeding in equity or at
law).
12. The Guarantee Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, receivership, readjustment of debt, moratorium, fraudulent
conveyance or similar laws relating to or affecting creditors' rights generally,
general equity principles (whether considered in a proceeding in equity or at
law).
13. The Indenture has been duly authorized, executed and delivered by
the Company, has been duly qualified under the Trust Indenture Act, and is a
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, receivership, readjustment of
debt, moratorium, fraudulent conveyance or similar laws affecting creditors'
rights generally, general equity principles (whether considered in a proceeding
in equity or at law).
14. The Junior Subordinated Debentures have been duly authorized,
executed and delivered by the Company and when duly authenticated in accordance
with the Indenture
6
<PAGE>
and delivered and paid for in accordance with the Underwriting Agreement, will
be valid and binding obligations of the Company, entitled to the benefits of
the Indenture and enforceable against the Company in accordance with their
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, receivership, readjustment of debt, moratorium,
fraudulent conveyance or similar laws affecting creditors' rights generally,
general equity principles (whether considered in a proceeding in equity or at
law).
15. The Trust is not an "investment company" or an entity "controlled"
by an "investment company," as such terms are defined in Investment Company Act
of 1940, as amended.
16. The statements set forth in the Registration Statement under the
captions "Regulation and Supervision," "Description of the Preferred
Securities," "Description of the Junior Subordinated Debentures," "Description
of the Guarantee" and "Relationship Among the Preferred Securities, the Junior
Subordinated Debentures and the Guarantee," 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.
17. The statements of law or legal conclusions and opinions set forth
in the Registration Statement under the caption "Certain Federal Income Tax
Consequences," subject to the assumptions and conditions described therein,
constitute such counsel's opinion.
18. 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.
19. The Registration Statement (including the Rule 430A Information, if
applicable) and the Prospectus, excluding the 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.
20. 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,
7
<PAGE>
and to such counsel's knowledge, 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 exhibits to the Registration
Statement that are not described, referred to or filed as required.
21. No approval, authorization, consent, registration, qualification or
other order of any public board or body is required in connection with the
execution and delivery of this Agreement, the Trust Agreement, the Guarantee
Agreement, and the Indenture or the issuance and sale of the Preferred
Securities or the consummation by the Company of the other transactions
contemplated by this Agreement, the Trust Agreement, the Guarantee Agreement,
or the Indenture, except such as have been obtained under the Securities Act,
the Exchange Act and the Trust Indenture Act or such as may be required under
the blue sky or securities laws of various states in connection with the
offering and sale of the Preferred Securities (as to which such counsel need
express no opinion).
22. The execution and delivery of this Agreement, the Trust Agreement,
the Guarantee Agreement, and the Indenture, the issuance and sale of the
Preferred Securities and the Junior Subordinated Debentures, the compliance by
the Company with the provisions of the Preferred Securities, the Junior
Subordinated Debentures, the Indenture and this Agreement and the consummation
of the transactions herein and therein contemplated will not conflict with or
constitute a breach of, or default under, the articles of incorporation or
by-laws of the Company or a breach or default under any contract, indenture,
mortgage, loan agreement, note, lease or other instrument known to such counsel
to which either the Company or any Subsidiary is a party or by which either of
them or any of their respective properties may be bound except for such breaches
as would not have a material adverse effect on the Company and its Subsidiaries
considered as one enterprise, nor will such action result in a violation on the
part of the Company or any Subsidiary of any applicable law or regulation or of
any administrative, regulatory or court decree known to such counsel.
Counsel will supplementally provide a written 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 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
8
<PAGE>
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.
9
<PAGE>
EXHIBIT D
The opinion of counsel, as special Delaware counsel to the Company and
the Trust to be delivered pursuant to Section 5(b)(ii) of the Underwriting
Agreement shall be substantially to the effect that:
1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Business Trust Act, 12 Del. C.
Section 3801 et seq. (the "Delaware Act"), and all filings required under the
laws of the State of Delaware with respect to the creation and valid existence
of the Trust as a business trust have been made.
2. Under the Delaware Act and Trust Agreement the Trust has the trust
power and authority to own its property and to its conduct its business, all as
described in the Prospectus.
3. The Trust Agreement constitutes a valid and binding obligation of
the Company and the Property Trustee and the Delaware Trustee, and is
enforceable against the Company and the Trustees, in accordance with its terms.
4. Under the Delaware Act and the Trust Agreement, the Trust has the
trust power and authority to execute and deliver, and to perform its obligations
under, the Underwriting Agreement and to issue and perform its obligations under
the Preferred Securities and the Common Securities.
5. Under the Delaware Act and the Trust Agreement, the execution and
delivery by the Trust of the Underwriting Agreement, and the performance by the
Trust of its obligations thereunder, have been duly authorized by all necessary
trust action on the part of the Trust.
6. The Preferred Securities have been duly authorized by the Trust
Agreement and are duly and validly issued and, subject to the qualifications set
forth herein, fully paid and nonassessable undivided beneficial interests in the
assets of the Trust and are entitled to the benefits of the Trust Agreement. The
Holders, as beneficial owners of the Trust, will be entitled to the same
limitations of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware. We note that the Holders may be obligated pursuant to the Trust
Agreement (i) to provide indemnity and/or security in connection with and pay
taxes or governmental charges arising from transfers or exchanges of Preferred
Securities Certificates and the issuance of replacement Preferred Securities
Certificates, and (ii) to provide security or indemnity in connection with
requests of or directions to the Property Trustee to exercise its rights and
powers under the Trust Agreement.
10
<PAGE>
7. Under the Delaware Act and the Trust Agreement, the issuance of the
Preferred Securities and Common Securities is not subject to preemptive rights.
8. The Common Securities have been duly authorized by the Trust
Agreement and are duly and validly issued undivided beneficial interests in the
assets of the Trust and are entitled to the benefits of the Trust Agreement.
9. The issuance and sale by the Trust of the Preferred Securities and
Common Securities, the purchase by the Trust of the Junior Subordinated
Debentures, the execution, delivery and performance by the Trust of the
Underwriting Agreement, the consummation by the Trust of the transactions
contemplated by the Underwriting Agreement and the compliance by the Trust with
its obligations thereunder will not violate (i) any of the provisions of the
Certificate of Trust or the Trust Agreement or (ii) any applicable Delaware law
or administrative regulation.
11
<PAGE>
EXHIBIT E
The opinion of counsel to the Trust Company to be delivered pursuant to
Section 5(b)(iii) of the Underwriting Agreement shall be substantially to the
effect that:
1. The Trust Company is duly incorporated and is validly existing in
good standing as a banking corporation with trust powers under the laws of the
State of Delaware.
2. The Indenture Trustee has the requisite power and authority to
execute, deliver and perform its obligations under the Indenture, and has taken
all necessary corporate action to authorize the execution, delivery and
performance by it of the Indenture.
3. The Guarantee Trustee has the requisite power and authority to
execute, deliver and perform its obligations under the Guarantee Agreement, and
has taken all necessary corporate action to authorize the execution, delivery
and performance by it of the Guarantee Agreement.
4. The Property Trustee has the requisite power and authority to
execute and deliver the Trust Agreement, and has taken all necessary corporate
action to authorize the execution and delivery of the Trust Agreement.
5. Each of the Indenture and the Guarantee Agreement has been duly
executed and delivered by the Indenture Trustee and the Guarantee Trustee,
respectively, and constitutes a legal, valid and binding obligation of the
Indenture Trustee and the Guarantee Trustee, respectively, enforceable against
the Indenture Trustee and the Guarantee Trustee, respectively in accordance with
its respective terms, except that certain payment obligations may be enforceable
solely against the assets of the Trust and except that such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium, liquidation,
fraudulent conveyance and transfer or other similar laws affecting the
enforcement of creditors' rights generally, and by general principles of equity,
including, without limitation, concepts of materiality, reasonableness, good
faith and fair dealing (regardless of whether such enforceability is considered
in a proceeding in equity or at law), and by the effect of applicable public
policy on the enforceability of provisions relating to indemnification or
contribution.
6. The Junior Subordinated Debentures delivered on the date hereof have
been duly authenticated by the Indenture Trustee in accordance with the terms of
the Indenture.
12
PREFERRED SECURITIES GUARANTEE AGREEMENT
BY AND BETWEEN
BANKATLANTIC BANCORP, INC.
AND
WILMINGTON TRUST COMPANY
APRIL __, 1997
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TABLE OF CONTENTS
Page No.
ARTICLE I DEFINITIONS AND INTERPRETATION.................. 1
SECTION 1.1 DEFINITIONS AND INTERPRETATION.................. 1
ARTICLE II TRUST INDENTURE ACT............................. 5
SECTION 2.1 TRUST INDENTURE ACT; APPLICATION................ 5
SECTION 2.2 LISTS OF HOLDERS OF SECURITIES.................. 5
SECTION 2.3 REPORTS BY THE PREFERRED GUARANTEE
TRUSTEE......................................... 5
SECTION 2.4 PERIODIC REPORTS TO PREFERRED GUARANTEE
TRUSTEE......................................... 5
SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS
PRECEDENT....................................... 6
SECTION 2.6 EVENTS OF DEFAULT; WAIVER....................... 6
SECTION 2.7 EVENT OF DEFAULT; NOTICE........................ 6
SECTION 2.8 CONFLICTING INTERESTS........................... 6
ARTICLE III POWERS, DUTIES AND RIGHTS OF PREFERRED
GUARANTEE TRUSTEE........................................ 7
SECTION 3.1 POWERS AND DUTIES OF THE PREFERRED
GUARANTEE TRUSTEE............................... 7
SECTION 3.2 CERTAIN RIGHTS OF PREFERRED GUARANTEE
TRUSTEE......................................... 9
SECTION 3.3 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
GUARANTEE....................................... 11
ARTICLE IV PREFERRED GUARANTEE TRUSTEE.............................. 11
SECTION 4.1 PREFERRED GUARANTEE TRUSTEE; ELIGIBILITY........ 11
SECTION 4.2 APPOINTMENT, REMOVAL AND RESIGNATION OF
PREFERRED GUARANTEE TRUSTEES.................... 12
ARTICLE V GUARANTEE....................................... 13
SECTION 5.1 GUARANTEE....................................... 13
SECTION 5.2 WAIVER OF NOTICE AND DEMAND..................... 13
SECTION 5.3 OBLIGATIONS NOT AFFECTED........................ 13
SECTION 5.4 RIGHTS OF HOLDERS............................... 14
SECTION 5.5 GUARANTEE OF PAYMENT............................ 14
SECTION 5.6 SUBROGATION..................................... 14
SECTION 5.7 INDEPENDENT OBLIGATIONS......................... 15
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ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION................ 15
SECTION 6.1 LIMITATION OF TRANSACTIONS...................... 15
SECTION 6.2 RANKING......................................... 15
ARTICLE VII TERMINATION.............................................. 16
SECTION 7.1 TERMINATION..................................... 16
ARTICLE VIII INDEMNIFICATION................................. 16
SECTION 8.1 EXCULPATION..................................... 16
SECTION 8.2 INDEMNIFICATION................................. 17
ARTICLE IX MISCELLANEOUS............................................ 17
SECTION 9.1 SUCCESSORS AND ASSIGNS.......................... 17
SECTION 9.2 AMENDMENTS...................................... 17
SECTION 9.3 NOTICES......................................... 17
SECTION 9.4 BENEFIT......................................... 18
SECTION 9.5 GOVERNING LAW................................... 18
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CROSS REFERENCE TABLE
SECTION OF TRUST SECTION OF
INDENTURE ACT OF GUARANTEE
1939, AS AMENDED AGREEMENT
- ---------------- ----------
310(a) 4.1 (a)
310(b) 4.1 (c), 2.8
310(c) Not Applicable
311(a) 2.2(b)
311(b) 2.2(b)
311(c) Not Applicable
312(a) 2.2(a)
312(b) 2.2(b)
313 2.3
314(a) 2.4
314(b) Not Applicable
314(c) 2.5
314(d) Not Applicable
314(e) 1.1,2.5,3.2
314(f) 2.1,3.2
315(a) 3.1(d)
315(b) 2.7
315(c) 3.1
315(d) 3.1(d)
316(a) 1.1,2.6, 5.4
316(b) 5.3
317(a) 3.1
317(b) Not Applicable
318(a) 2.1(a)
318(b) 2.1
318(c) 2.1(b)
Note: This Cross-Reference Table does not constitute part of this Agreement and
shall not affect the interpretation of any of its terms or provisions
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PREFERRED SECURITIES GUARANTEE AGREEMENT
THIS PREFERRED SECURITIES GUARANTEE AGREEMENT (this "Preferred Securities
Guarantee"), dated as of __________, 1997, is executed and delivered by
BANKATLANTIC BANCORP, INC., a Florida corporation (the "Guarantor"), and
WILMINGTON TRUST COMPANY, a Delaware banking corporation, as trustee (the
"Preferred Guarantee Trustee"), for the benefit of the Holders (as defined
herein) from time to time of the Preferred Securities (as defined herein) of BBC
Capital Trust I, a Delaware statutory business trust (the "Trust").
RECITALS
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the "Trust
Agreement"), dated as of __________, 1997, among the trustees of the Trust named
therein, the Guarantor, as depositor, and the holders from time to time of
undivided beneficial interests in the assets of the Trust, the Trust is issuing
on the date hereof _________ preferred securities, having an aggregate
liquidation amount of $___________, designated the _______% Cumulative Trust
Preferred Securities (the "Preferred Securities") representing undivided
beneficial ownership interests in the assets of the Trust and having the terms
set forth in the Trust Agreement;
WHEREAS, the Preferred Securities will be issued by the Trust and the proceeds
thereof, together with the proceeds from the issuance of the Trust's Common
Securities, will be used to purchase the Junior Subordinated Debentures due 2007
(the "Junior Subordinated Debentures") of the Guarantor which will be deposited
with Wilmington Trust Company, as Property Trustee under the Trust Agreement, as
trust assets; and
WHEREAS, as an incentive for the Holders to purchase the Preferred Securities,
the Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth in this Preferred Securities Guarantee, to pay to the Holders of the
Preferred Securities the Guarantee Payments (as defined herein) and to make
certain other payments on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of Preferred
Securities, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Preferred Securities
Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 DEFINITIONS AND INTERPRETATION.
In this Preferred Securities Guarantee, unless the context otherwise requires:
(a) capitalized terms used in this Preferred Securities Guarantee but
not defined in the preamble above have the respective meanings assigned to them
in this Section 1.1;
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(b) terms defined in the Trust Agreement in effect on the date of
execution of this Preferred Securities Guarantee have the same meaning when used
in this Preferred Securities Guarantee unless otherwise defined herein;
(c) a term defined anywhere in this Preferred Securities Guarantee has
the same meaning throughout;
(d) all references to "the Preferred Securities Guarantee" or "this
Preferred Securities Guarantee" are to this Preferred Securities Guarantee as
modified, supplemented or amended from time to time;
(e) all references in this Preferred Securities Guarantee to Articles
and Sections are to Articles and Sections of this Preferred Securities
Guarantee, unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the same meaning when
used in this Preferred Securities Guarantee, unless otherwise defined in this
Preferred Securities Guarantee or unless the context otherwise requires; and
(g) a reference to the singular includes the plural and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act of 1933, as amended, or any successor rule thereunder.
"Business Day" means any day other than a day on which federal or state banking
institutions in New York, New York or the State of Florida are authorized or
required by law, executive order or regulation to close or a day on which the
Corporate Trust Office of the Preferred Guarantee Trustee is closed for
business.
"Corporate Trust Office" means the office of the Preferred Guarantee Trustee at
which the corporate trust business of the Preferred Guarantee Trustee shall, at
any particular time, be principally administered, which office at the date of
execution of this Agreement is located at Wilmington Trust Company, Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration.
"Covered Person" means any Holder or beneficial owner of Preferred Securities.
"Debentures" means the ____% Junior Subordinated Debentures due 2027, of the
Debenture Issuer held by the Property Trustee of the Trust.
"Debenture Issuer" means the Guarantor.
"Event of Default" means a default by the Guarantor on any of its payment or
other obligations under this Preferred Securities Guarantee.
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"Guarantor" means BankAtlantic Bancorp, Inc., a Florida corporation.
"Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the Preferred Securities, to the extent not paid or
made by the Trust: (i) any accrued and unpaid Distributions (as defined in the
Trust Agreement) that are required to be paid on such Preferred Securities, to
the extent the Trust shall have funds available therefor, (ii) the redemption
price, including all accrued and unpaid Distributions to the date of redemption
(the "Redemption Price"), to the extent the Trust has funds available therefor,
with respect to any Preferred Securities called for redemption by the Trust, and
(iii) upon a voluntary or involuntary dissolution, winding-up or termination of
the Trust (other than in connection with the distribution of Junior Subordinated
Debentures to the Holders in exchange for Preferred Securities as provided in
the Trust Agreement or a redemption of all of the Preferred Securities), the
lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid
Distributions on the Preferred Securities to the date of payment, to the extent
the Trust shall have funds available therefor (the "Liquidation Distribution"),
and (b) the amount of assets of the Trust remaining available for distribution
to Holders in liquidation of the Trust.
"Holder" shall mean any holder, as registered on the books and records of the
Trust, of any Preferred Securities; provided, however, that, in determining
whether the holders of the requisite percentage of Preferred Securities have
given any request, notice, consent or waiver hereunder, "Holder" shall not
include the Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Preferred Guarantee Trustee, any Affiliate of the
Preferred Guarantee Trustee, or any officers, directors, shareholders, members,
partners, employees, representatives, nominees, custodians or agents of the
Preferred Guarantee Trustee.
"Indenture" means the Indenture dated as of _________, 1997, among the Debenture
Issuer and Wilmington Trust Company, as trustee, and any indenture supplemental
thereto pursuant to which certain subordinated debt securities of the Debenture
Issuer are to be issued to the Property Trustee of the Trust.
"Liquidation Distribution" has the meaning provided therefor in the definition
of Guarantee Payments.
"Majority in liquidation amount of the Preferred Securities" means the holders
of more than 50% of the liquidation amount (including the stated amount that
would be paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined) of
all of the Preferred Securities.
"Officers' Certificate" means, with respect to any Person, a certificate signed
by two authorized officers of such Person. Any Officers' Certificate delivered
with respect to compliance with a condition or covenant provided for in this
Preferred Securities Guarantee shall include:
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(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the
definition relating thereto;
(b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in
rendering the Officers' Certificate;
(c) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is
necessary to enable such officer 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
officer, such condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation, estate,
partnership, joint venture, association, joint stock company, limited liability
company, trust, unincorporated association, or government or any agency or
political subdivision thereof, or any other entity of whatever nature.
"Preferred Guarantee Trustee" means Wilmington Trust Company, until a Successor
Preferred Guarantee Trustee has been appointed and has accepted such appointment
pursuant to the terms of this Preferred Securities Guarantee and thereafter
means each such Successor Preferred Guarantee Trustee.
"Redemption Price" has the meaning provided therefor in the definition of
Guarantee Payments.
"Responsible Officer" means, with respect to the Preferred Guarantee Trustee,
any officer of the Preferred Guarantee Trustee, including any vice-president,
any assistant vice-president, any assistant secretary, the treasurer, any
assistant treasurer or other officer 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 that officer's knowledge of and familiarity with
the particular subject.
"Successor Preferred Guarantee Trustee" means a successor Preferred Guarantee
Trustee possessing the qualifications to act as Preferred Guarantee Trustee
under Section 4.1.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
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ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 TRUST INDENTURE ACT; APPLICATION.
(a) This Preferred Securities Guarantee is subject to the provisions of
the Trust Indenture Act that are required to be part of this Preferred
Securities Guarantee and shall, to the extent applicable, be governed
by such provisions.
(b) If and to the extent that any provision of this Preferred
Securities Guarantee limits, qualifies or conflicts with the duties
imposed by Section 310 to 317, inclusive, of the Trust Indenture Act,
such imposed duties shall control.
SECTION 2.2 LISTS OF HOLDERS OF SECURITIES.
(a) The Guarantor shall provide the Preferred Guarantee Trustee with a
list, in such form as the Preferred Guarantee Trustee may reasonably
require, of the names and addresses of the Holders of the Preferred
Securities ("List of Holders") as of such date, (i) within one Business
Day after January 1 and June 30 of each year, and (ii) at any other
time within 30 days of receipt by the Guarantor of a written request
for a List of Holders as of a date no more than 15 days before such
List of Holders is given to the Preferred Guarantee Trustee; provided,
that the Guarantor shall not be obligated to provide such List of
Holders at any time the List of Holders does not differ from the most
recent List of Holders given to the Preferred Guarantee Trustee by the
Guarantor. The Preferred Guarantee Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.
(b) The Preferred Guarantee Trustee shall comply with its obligations
under Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture
Act.
SECTION 2.3 REPORTS BY THE PREFERRED GUARANTEE TRUSTEE.
On or before July 15 of each year, the Preferred Guarantee Trustee shall provide
to the Holders of the Preferred Securities such reports as are required by
Section 313 of the Trust Indenture Act, if any, in the form and in the manner
provided by Section 313 of the Trust Indenture Act. The Preferred Guarantee
Trustee shall also comply with the requirements of Section 313(d) of the Trust
Indenture Act.
SECTION 2.4 PERIODIC REPORTS TO PREFERRED GUARANTEE TRUSTEE.
The Guarantor shall provide to the Preferred Guarantee Trustee such documents,
reports and information as required by Section 314 (if any) and the compliance
certificate required by Section 314 of the Trust Indenture Act in the form, in
the manner and at the times required by Section 314 of the Trust Indenture Act.
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SECTION 2.5 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
The Guarantor shall provide to the Preferred Guarantee Trustee such evidence of
compliance with any conditions precedent, if any, provided for in this Preferred
Securities Guarantee that relate to any of the matters set forth in Section
314(c) of the Trust Indenture Act. Any certificate or opinion required to be
given by an officer pursuant to Section 314(c) may be given in the form of an
Officers' Certificate.
SECTION 2.6 EVENTS OF DEFAULT; WAIVER.
The Holders of a Majority in liquidation amount of Preferred Securities may, by
vote, on behalf of the Holders of all of the Preferred Securities, waive any
past Event of Default and its consequences. Upon such waiver, any such Event of
Default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been cured, for every purpose of this Preferred Securities
Guarantee, but no such waiver shall extend to any subsequent or other default or
Event of Default or impair any right consequent thereon.
SECTION 2.7 EVENT OF DEFAULT; NOTICE.
(a) The Preferred Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class
postage prepaid, to the Holders of the Preferred Securities, notices of
all Events of Default actually known to a Responsible Officer of the
Preferred Guarantee Trustee, unless such defaults have been cured
before the giving of such notice; provided, that the Preferred
Guarantee Trustee shall be protected in withholding such notice if and
so long as a Responsible Officer of the Preferred Guarantee Trustee in
good faith determines that the withholding of such notice is in the
interest of the Holders of the Preferred Securities.
(b) The Preferred Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless the Preferred Guarantee
Trustee shall have received written notice, or of which a Responsible
Officer of the Preferred Guarantee Trustee charged with the
administration of the Trust Agreement shall have obtained actual
knowledge.
SECTION 2.8 CONFLICTING INTERESTS.
The Trust Agreement shall be deemed to be specifically described in this
Preferred Securities Guarantee for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.
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ARTICLE III
POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 POWERS AND DUTIES OF THE PREFERRED GUARANTEE
TRUSTEE.
(a) This Preferred Securities Guarantee shall be held by the Preferred
Guarantee Trustee for the benefit of the Holders of the Preferred
Securities, and the Preferred Guarantee Trustee shall not transfer this
Preferred Securities Guarantee to any Person except a Holder of
Preferred Securities exercising his or her rights pursuant to Section
5.4(b) or to a Successor Preferred Guarantee Trustee on acceptance by
such Successor Preferred Guarantee Trustee of its appointment to act as
Successor Preferred Guarantee Trustee. The right, title and interest of
the Preferred Guarantee Trustee shall automatically vest in any
Successor Preferred Guarantee Trustee, and such vesting and cessation
of title shall be effective whether or not conveyancing documents have
been executed and delivered pursuant to the appointment of such
Successor Preferred Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible Officer of
the Preferred Guarantee Trustee has occurred and is continuing, the
Preferred Guarantee Trustee shall enforce this Preferred Securities
Guarantee for the benefit of the Holders of the Preferred Securities.
(c) The Preferred Guarantee Trustee, before the occurrence of any Event
of Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are
specifically set forth in this Preferred Securities Guarantee, and no
implied covenants shall be read into this Preferred Securities
Guarantee against the Preferred Guarantee Trustee. In case an Event of
Default has occurred (that has not been cured or waived pursuant to
Section 2.6) and is actually known to a Responsible Officer of the
Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall
exercise such of the rights and powers vested in it by this Preferred
Securities Guarantee, and use the same degree of care and skill in its
exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(d) No provision of this Preferred Securities Guarantee shall be
construed to relieve the Preferred Guarantee Trustee from liability for
its own negligent action, its own negligent failure to act, or its own
willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may
have occurred:
(A) the duties and obligations of the Preferred
Guarantee Trustee shall be determined solely by the
express provisions of this Preferred Securities
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Guarantee, and the Preferred Guarantee Trustee shall
not be liable except for the performance of such
duties and obligations as are specifically set forth
in this Preferred Securities Guarantee, and no
implied covenants or obligations shall be read into
this Preferred Securities Guarantee against the
Preferred Guarantee Trustee; and
(B) in the absence of bad faith on the part of the
Preferred Guarantee Trustee, the Preferred Guarantee
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions
expressed therein, upon any certificates or opinions
furnished to the Preferred Guarantee Trustee and
conforming to the requirements of this Preferred
Securities Guarantee; but in the case of any such
certificates or opinions that by any provision hereof
are specifically required to be furnished to the
Preferred Guarantee Trustee, the Preferred Guarantee
Trustee shall be under a duty to examine the same to
determine whether or not they conform to the
requirements of this Preferred Securities Guarantee;
(ii) the Preferred Guarantee Trustee shall not be liable for
any error of judgment made in good faith by a Responsible
Officer of the Preferred Guarantee Trustee, unless it shall be
proved that the Preferred Guarantee Trustee was negligent in
ascertaining the pertinent facts upon which such judgment was
made;
(iii) the Preferred Guarantee 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 liquidation amount of the
Preferred Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the
Preferred Guarantee Trustee, or exercising any trust or power
conferred upon the Preferred Guarantee Trustee under this
Preferred Securities Guarantee; and
(iv) no provision of this Preferred Securities Guarantee shall
require the Preferred Guarantee Trustee to expend or risk its
own funds or otherwise incur personal financial liability in
the performance of any of its duties or in the exercise of any
of its rights or powers, if the Preferred Guarantee Trustee
shall have reasonable grounds for believing that the repayment
of such funds or liability is not reasonably assured to it
under the terms of this Preferred Securities Guarantee or
indemnity, reasonably satisfactory to the Preferred Guarantee
Trustee, against such risk or liability is not reasonably
assured to it.
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SECTION 3.2 CERTAIN RIGHTS OF PREFERRED GUARANTEE TRUSTEE.
(a) Subject to the provisions of Section 3.1:
(i) the Preferred Guarantee Trustee may conclusively rely, and
shall be fully protected in acting or refraining from acting
upon, any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have
been signed, sent or presented by the proper party or parties;
(ii) any direction or act of the Guarantor contemplated by
this Preferred Securities Guarantee shall be sufficiently
evidenced by an Officers' Certificate;
(iii) whenever, in the administration of this Preferred
Securities Guarantee, the Preferred Guarantee Trustee shall
deem it desirable that a matter be proved or established
before taking, suffering or omitting any action hereunder, the
Preferred Guarantee Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on
its part, request and conclusively rely upon an Officers'
Certificate which, upon receipt of such request, shall be
promptly delivered by the Guarantor;
(iv) the Preferred Guarantee Trustee shall have no duty to see
to any recording, filing or registration of any instrument (or
any rerecording, refiling or reregistration thereof);
(v) the Preferred Guarantee Trustee may consult with counsel,
and the written advice or opinion of such counsel with respect
to legal matters 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 accordance with such
advice or opinion. Such counsel may be counsel to the
Guarantor or any of its Affiliates and may include any of its
employees. The Preferred Guarantee Trustee shall have the
right at any time to seek instructions concerning the
administration of this Preferred Securities Guarantee from any
court of competent jurisdiction;
(vi) the Preferred Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in
it by this Preferred Securities Guarantee at the request or
direction of any Holder, unless such Holder shall have
provided to the Preferred Guarantee Trustee such security and
indemnity, reasonably satisfactory to the Preferred Guarantee
Trustee, against the costs, expenses (including attorneys'
fees and expenses and the expenses of the Preferred Guarantee
Trustee's agents, nominees or custodians) and liabilities that
might be incurred by it in complying with such request or
direction, including such
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reasonable advances as may be requested by the Preferred
Guarantee Trustee; provided that, nothing contained in this
Section 3.2(a)(vi) shall be taken to relieve the Preferred
Guarantee Trustee, upon the occurrence of an Event of Default,
of its obligation to exercise the rights and powers vested in
it by this Preferred Securities Guarantee;
(vii) the Preferred Guarantee 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, note, other evidence of indebtedness or other paper
or document, but the Preferred Guarantee Trustee, in its
discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit;
(viii) the Preferred Guarantee Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents, nominees, custodians
or attorneys, and the Preferred Guarantee 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;
(ix) any action taken by the Preferred Guarantee Trustee or
its agents hereunder shall bind the Holders of the Preferred
Securities, and the signature of the Preferred Guarantee
Trustee or its agents alone shall be sufficient and effective
to perform any such action. No third party shall be required
to inquire as to the authority of the Preferred Guarantee
Trustee to so act or as to its compliance with any of the
terms and provisions of this Preferred Securities Guarantee,
both of which shall be conclusively evidenced by the Preferred
Guarantee Trustee's or its agent's taking such action;
(x) whenever in the administration of this Preferred
Securities Guarantee the Preferred Guarantee Trustee shall
deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action
hereunder, the Preferred Guarantee Trustee (i) may request
instructions from the Holders of a Majority in liquidation
amount of the Preferred Securities, (ii) may refrain from
enforcing such remedy or right or taking such other action
until such instructions are received, and (iii) shall be
protected in conclusively relying on or acting in accordance
with such instructions.
(b) No provision of this Preferred Securities Guarantee shall be deemed
to impose any duty or obligation on the Preferred Guarantee Trustee to
perform any act or acts or exercise any right, power, duty or
obligation conferred or imposed on it in any jurisdiction in which it
shall be illegal, or in which the Preferred Guarantee Trustee shall be
unqualified or incompetent in accordance with applicable law, to
perform any such act or acts or to exercise any such right, power, duty
or obligation. No permissive
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power or authority available to the Preferred Guarantee Trustee shall
be construed to be a duty.
SECTION 3.3 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE.
The Recitals contained in this Guarantee shall be taken as the statements of the
Guarantor, and the Preferred Guarantee Trustee does not assume any
responsibility for their correctness. The Preferred Guarantee Trustee makes no
representation as to the validity or sufficiency of this Preferred Securities
Guarantee.
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1 PREFERRED GUARANTEE TRUSTEE; ELIGIBILITY.
(a) There shall at all times be a Preferred Guarantee Trustee which
shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory
thereof or of the District of Columbia, or a corporation or
Person permitted by the Securities and Exchange Commission to
act as an institutional trustee under the Trust Indenture Act,
authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $50,000,000,
and subject to supervision or examination by Federal, 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 supervising or
examining authority referred to above, then, for the purposes
of this Section 4.1(a)(ii), 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.
(b) If at any time the Preferred Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Preferred Guarantee
Trustee shall immediately resign in the manner and with the effect set
out in Section 4.2(c).
(c) If the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the
Trust Indenture Act, the Preferred Guarantee Trustee and Guarantor
shall in all respects comply with the provisions of Section 310(b) of
the Trust Indenture Act.
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SECTION 4.2 APPOINTMENT, REMOVAL AND RESIGNATION OF PREFERRED GUARANTEE
TRUSTEES.
(a) Subject to Section 4.2(c), the Preferred Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.
(b) The Preferred Guarantee Trustee may be removed for cause at any
time by Act (within the meaning of Section 608 of the Trust Agreement)
of the Holders of at least a Majority in Liquidation Amount of the
Preferred Securities, delivered to the Preferred Guarantee Trustee.
(c) The Preferred Guarantee Trustee shall not be removed in accordance
with Sections 4.2(a) and 4.2(b) until a Successor Preferred Guarantee
Trustee has been appointed and has accepted such appointment by written
instrument executed by such Successor Preferred Guarantee Trustee and
delivered to the Guarantor.
(d) The Preferred Guarantee Trustee appointed to office shall hold
office until a Successor Preferred Guarantee Trustee shall have been
appointed or until its removal or resignation. The Preferred Guarantee
Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing executed by the Preferred
Guarantee Trustee and delivered to the Guarantor, which resignation
shall not take effect until a Successor Preferred Guarantee Trustee has
been appointed and has accepted such appointment by instrument in
writing executed by such Successor Preferred Guarantee Trustee and
delivered to the Guarantor and the resigning Preferred Guarantee
Trustee.
(e) If no Successor Preferred Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.2
within 60 days after delivery to the Guarantor of an instrument of
resignation, the resigning Preferred Guarantee Trustee may petition any
court of competent jurisdiction for appointment of a Successor
Preferred Guarantee Trustee. Such court may thereupon, after
prescribing such notice, if any, as it may deem proper, appoint a
Successor Preferred Guarantee Trustee.
(f) No Preferred Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Preferred Guarantee Trustee.
(g) Upon termination of this Preferred Securities Guarantee or removal
or resignation of the Preferred Guarantee Trustee pursuant to this
Section 4.2, the Guarantor shall pay to the Preferred Guarantee Trustee
all amounts accrued to the date of such termination, removal or
resignation.
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ARTICLE V
GUARANTEE
SECTION 5.1 GUARANTEE.
The Guarantor irrevocably and unconditionally agrees to pay in full to the
Holders the Guarantee Payments (without duplication of amounts theretofore paid
by the Trust), as and when due, regardless of any defense, right of set-off or
counterclaim that the Trust may have or assert. The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by causing the Trust to pay such
amounts to the Holders.
SECTION 5.2 WAIVER OF NOTICE AND DEMAND.
The Guarantor hereby waives notice of acceptance of this Preferred Securities
Guarantee and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the Trust or
any other Person before proceeding against the Guarantor, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices and
demands.
SECTION 5.3 OBLIGATIONS NOT AFFECTED.
The obligations, covenants, agreements and duties of the Guarantor under this
Preferred Securities Guarantee shall in no way be affected or impaired by reason
of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Trust of any express or implied
agreement, covenant, term or condition relating to the Preferred
Securities to be performed or observed by the Trust;
(b) the extension of time for the payment by the Trust of all or any
portion of the Distributions, Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the Preferred
Securities or the extension of time for the performance of any other
obligation under, arising out of, or in connection with, the Preferred
Securities (other than an extension of time for payment of
Distributions, Redemption Price, Liquidation Distribution or other sum
payable that results from the extension of any interest payment period
on the Junior Subordinated Debentures);
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power
or remedy conferred on the Holders pursuant to the terms of the
Preferred Securities, or any action on the part of the Trust granting
indulgence or extension of any kind;
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(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the
Trust or any of the assets of the Trust;
(e) any invalidity of, or defect or deficiency in, the Preferred
Securities;
(f) any failure or omission to receive any regulatory approval or
consent required in connection with the Preferred Securities (or the
common equity securities issued by the Trust), including the failure to
receive any regulatory approval required in connection with the
redemption of the Preferred Securities.
(g) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
(h) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the
intent of this Section 5.3 that the obligations of the Guarantor
hereunder shall be absolute and unconditional under any and all
circumstances.
There shall be no obligation of the Holders to give notice to, or obtain consent
of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 5.4 RIGHTS OF HOLDERS.
(a) The Holders of a Majority in liquidation amount of the Preferred
Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Preferred
Guarantee Trustee in respect of this Preferred Securities Guarantee or
exercising any trust or power conferred upon the Preferred Guarantee
Trustee under this Preferred Securities Guarantee.
(b) Any Holder of Preferred Securities may institute a legal proceeding
directly against the Guarantor to enforce its rights under this
Preferred Securities Guarantee, without first instituting a legal
proceeding against the Trust, the Preferred Guarantee Trustee or any
other Person.
SECTION 5.5 GUARANTEE OF PAYMENT.
This Preferred Securities Guarantee creates a guarantee of payment and not of
collection.
SECTION 5.6 SUBROGATION.
The Guarantor shall be subrogated to all (if any) rights of the Holders of
Preferred Securities against the Trust in respect of any amounts paid to such
Holders by the Guarantor under this
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Preferred Securities Guarantee; provided, however, that the Guarantor shall not
(except to the extent required by mandatory provisions of law) be entitled to
enforce or exercise any right that it may acquire by way of subrogation or any
indemnity, reimbursement or other agreement, in all cases as a result of payment
under this Preferred Securities Guarantee, if, at the time of any such payment,
any amounts are due and unpaid under this Preferred Securities Guarantee. If any
amount shall be paid to the Guarantor in violation of the preceding sentence,
the Guarantor agrees to hold such amount in trust for the Holders and to pay
over such amount to the Holders.
SECTION 5.7 INDEPENDENT OBLIGATIONS.
The Guarantor acknowledges that its obligations hereunder are independent of the
obligations of the Trust with respect to the Preferred Securities, and that the
Guarantor shall be liable as principal and as debtor hereunder to make Guarantee
Payments pursuant to the terms of this Preferred Securities Guarantee
notwithstanding the occurrence of any event referred to in subsections (a)
through (h), inclusive, of Section 5.3 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 LIMITATION OF TRANSACTIONS.
So long as any Preferred Securities remain outstanding, if there shall have
occurred an Event of Default under this Preferred Securities Guarantee, an Event
of Default under the Trust Agreement or during an Extended Interest Payment
Period (as defined in the Indenture), then (a) the Guarantor shall not declare
or pay any dividend on, make any distributions with respect to, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
capital stock (other than (i) the reclassification of any class of the Company's
capital stock into another class of capital stock, (ii) dividends or
distributions payable in any class of the Company's common stock, (iii) any
declaration of a dividend in connection with the implementation of a shareholder
rights plan, or the issuance of stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto and (iv) purchases
of the Company's common stock related to the rights under any of the Company's
benefit plans for its or its subsidiaries' directors, officers or employees),
and (b) the Guarantor shall not make any payment of interest or principal on or
repay, repurchase or redeem any debt securities issued by the Guarantor which
rank pari passu with or junior to the Junior Subordinated Debentures.
SECTION 6.2 RANKING.
This Preferred Securities Guarantee will constitute an unsecured obligation of
the Guarantor and will rank (i) subordinate and junior in right of payment to
all other liabilities of the Guarantor, (ii) pari passu with the most senior
preferred securities or preference stock now or hereafter issued by the
Guarantor and with any guarantee now or hereafter entered into by the Guarantor
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in respect to any preferred securities or preference stock of any Affiliate of
the Guarantor, and (iii) senior to the Guarantor's common stock.
ARTICLE VII
TERMINATION
SECTION 7.1 TERMINATION.
This Preferred Securities Guarantee shall terminate upon (i) full payment of the
Redemption Price of all Preferred Securities, (ii) upon full payment of the
amounts payable in accordance with the Trust Agreement upon liquidation of the
Trust, or (iii) upon distribution of the Junior Subordinated Debentures to the
Holders of the Preferred Securities. Notwithstanding the foregoing, this
Preferred Securities Guarantee shall continue to be effective or shall be
reinstated, as the case may be, if at any time any Holder of Preferred
Securities must restore payment of any sums paid under the Preferred Securities
or under this Preferred Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 EXCULPATION.
(a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Guarantor or any Covered Person for any
loss, damage or claim incurred by reason of any act or omission
performed or omitted by such Indemnified Person in good faith in
accordance with this Preferred Securities Guarantee and in a manner
that such Indemnified Person reasonably believed to be within the scope
of the authority conferred on such Indemnified Person by this Preferred
Securities Guarantee or by law, except that an Indemnified Person shall
be liable for any such loss, damage or claim incurred by reason of such
Indemnified Person's negligence or willful misconduct with respect to
such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any
Person as to matters the Indemnified Person reasonably believes are
within such other Person's professional or expert competence and who
has been selected with reasonable care by or on behalf of the
Guarantor, including information, opinions, reports or statements as to
the value and amount of the assets, liabilities, profits, losses, or
any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Preferred Securities might properly
be paid.
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SECTION 8.2 INDEMNIFICATION.
The Guarantor agrees to indemnify each Indemnified Person for, and to hold each
Indemnified Person 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 the trust or trusts hereunder,
including the costs and expenses (including reasonable legal fees and expenses)
of defending itself against, or investigating, any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder. The obligation to indemnify as set forth in this Section 8.2 shall
survive the termination of this Preferred Securities Guarantee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 SUCCESSORS AND ASSIGNS.
All guarantees and agreements contained in this Preferred Securities Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders of the Preferred
Securities then outstanding. Except in connection with a consolidation, merger
or sale involving the Guarantor that is permitted under Article XII of the
Indenture and pursuant to which the assignee agrees in writing to perform the
Guarantor's obligations hereunder, and any purported assignment that is not in
accordance with these provisions shall be void.
SECTION 9.2 AMENDMENTS.
Except with respect to any changes that do not materially adversely affect the
rights of Holders (in which case no consent of Holders will be required), this
Preferred Securities Guarantee may only be amended with the prior approval of
the Holders of at least a Majority in liquidation amount of the Preferred
Securities. The provisions of Article VI of the Trust Agreement with respect to
meetings of Holders of the Preferred Securities apply to the giving of such
approval.
SECTION 9.3 NOTICES.
All notices provided for in this Preferred Securities Guarantee shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by registered or certified mail, as follows:
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(a) If given to the Preferred Guarantee Trustee, at the Preferred
Guarantee Trustee's mailing address set forth below (or such other
address as the Preferred Guarantee Trustee may give notice of to the
Holders of the Preferred Securities):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
(b) If given to the Guarantor, at the Guarantor's mailing address set
forth below (or such other address as the Guarantor may give notice of
to the Holders of the Preferred Securities):
BankAtlantic Bancorp, Inc., 1750 East Sunrise Boulevard,
Fort Lauderdale, Florida 33304
Attention: Chief Financial Officer
(c) If given to any Holder of Preferred Securities, at the address set
forth on the books and records of the Trust.
All such notices shall be deemed to have been given when received in person,
telecopied with receipt confirmed, or mailed by first class mail, postage
prepaid except that if a notice or other document is refused delivery or cannot
be delivered because of a changed address of which no notice was given, such
notice or other document shall be deemed to have been delivered on the date of
such refusal or inability to deliver.
SECTION 9.4 BENEFIT.
This Preferred Securities Guarantee is solely for the benefit of the Holders of
the Preferred Securities and, subject to Section 3.1 (a), is not separately
transferable from the Preferred Securities.
SECTION 9.5 GOVERNING LAW.
THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA.
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This Preferred Securities Guarantee is executed as of the day and year first
above written.
BANKATLANTIC BANCORP, INC.
as Guarantor
By: _______________________________
Name: _____________________________
Title: ____________________________
WILMINGTON TRUST COMPANY, as
Preferred Guarantee Trustee
By: _______________________________
Name: _____________________________
Title: ____________________________
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EXHIBIT 23.3
ACCOUNTANTS' CONSENT
The Board of Directors
BankAtlantic Bancorp. Inc.:
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
s/KPMG Peat Marwick LLP
Fort Lauderdale, Florida
April 18, 1997
