SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 34-027228
BANKATLANTIC BANCORP, INC.
(Exact name of registrant as specified in its Charter)
Florida 65-0507804
------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1750 East Sunrise Boulevard
Ft. Lauderdale, Florida 33304
--------------------------- -----
(Address of principal executive offices) (Zip Code)
(954) 760-5000
--------------
(Registrant's telephone number, including area code)
Not Applicable
--------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
preferred and common stock as of the latest practicable date.
Outstanding at
Title of Each Class October 22, 1999
------------------- ----------------
Class A Common Stock, par value $0.01 per share 32,373,470
Class B Common Stock, par value $0.01 per share 10,235,217
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TABLE OF CONTENTS
FINANCIAL INFORMATION Page Reference
Financial Statements........................................... 1-16
Consolidated Statements of Financial Condition -
September 30, 1999 and 1998 and December 31, 1998
- Unaudited................................................. 1
Consolidated Statements of Operations - For the Three
and Nine Months Ended September 30, 1999 and 1998
- Unaudited................................................. 2-3
Consolidated Statements of Stockholders' Equity and
Comprehensive Income - For the Nine Months Ended
September 30, 1999 and 1998 - Unaudited..................... 4-5
Consolidated Statements of Cash Flows - For the Nine
Months Ended September 30, 1999 and 1998 - Unaudited........ 6-8
Notes to Consolidated Financial Statements - Unaudited....... 9-16
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 17-34
OTHER INFORMATION
Exhibits and Reports on Form 8K.............................. 35
Signatures................................................... 36
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<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION - UNAUDITED
September 30, December 31, September 30,
(In thousands, except share data) 1999 1998 1998
- --------------------------------- ------------ ----------- ------------
ASSETS
<S> <C> <C> <C>
Cash and due from depository institutions ...... $ 95,372 $ 100,823 $ 88,321
Federal Funds sold and securities
purchased under resell agreements ............. 5,824 0 3,250
Loans receivable, net .......................... 2,352,847 2,466,488 2,379,935
Loans held for sale ............................ 215,058 168,881 166,238
Tax certificates, net, held to maturity,
at cost which approximates market value ....... 87,981 49,896 55,853
Securities available for sale, at market value.. 872,149 599,435 609,115
Trading securities, at market value ............ 17,985 30,005 23,123
Accrued interest receivable .................... 29,184 27,771 26,912
Real estate held for development and sale
and joint ventures ............................ 75,148 67,845 51,056
Real estate owned, net ......................... 3,327 5,503 5,319
Office properties and equipment, net ........... 56,314 58,090 56,954
Federal Home Loan Bank stock, at cost which
approximates market value ..................... 46,058 52,230 52,377
Mortgage servicing rights, net ................. 897 44,315 51,651
Deferred tax asset, net ........................ 26,589 20,148 13,565
Cost over fair value of net assets acquired, net 54,729 55,493 56,368
Other assets ................................... 31,167 42,052 42,587
---------- ---------- ----------
Total assets ................................... $ 3,970,629 $ 3,788,975 $ 3,682,624
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits ....................................... $ 2,140,096 $ 1,925,772 $ 1,883,229
Advances from FHLB ............................. 921,135 1,044,572 1,047,520
Federal Funds purchased ........................ 10,200 18,500 0
Securities sold under agreements to repurchase . 328,210 162,093 110,060
Subordinated debentures, notes and bonds payable 186,544 177,114 178,334
Guaranteed preferred beneficial interests
in the Company's Junior Subordinated
Debentures .................................... 74,750 74,750 74,750
Advances by borrowers for taxes and insurance .. 9,131 62,346 71,906
Other liabilities .............................. 63,596 83,388 69,504
---------- ---------- ----------
Total liabilities .............................. 3,733,662 3,548,535 3,435,303
---------- ---------- ----------
Stockholders' equity:
Preferred stock, $0.01 par value, 10,000,000
shares authorized: none issued and outstanding 0 0 0
Class A Common Stock, $0.01 par value,
authorized 80,000,000 shares; issued and
outstanding, 31,525,106, 32,372,738 and
32,274,401 shares ............................. 315 268 267
Class B Common Stock, $0.01 par value,
authorized 45,000,000 shares; issued and
outstanding, 10,235,217, 10,356,431 and
10,387,431 shares ............................. 102 104 104
Additional paid-in capital ..................... 140,032 147,686 147,316
Unearned compensation - restricted stock grants (5,934) (7,062) (7,566)
Retained earnings .............................. 119,701 95,818 106,946
---------- ---------- ----------
Total stockholders' equity before accumulated
other comprehensive income .................... 254,216 236,814 247,067
---------- ---------- ----------
Accumulated other comprehensive income (loss)
- net unrealized (depreciation) appreciation
on securities available for sale - net of
deferred income taxes ......................... (17,249) 3,626 254
---------- ---------- ----------
Total stockholders' equity ..................... 236,967 240,440 247,321
---------- ---------- ----------
Total liabilities and stockholders' equity ..... $ 3,970,629 $ 3,788,975 $ 3,682,624
========== ========== ==========
See Notes to Consolidated Financial Statements - Unaudited
</TABLE>
-1-
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
For the Three Months For the Nine Months
(In thousands, except share data) Ended September 30, Ended September 30,
- --------------------------------- -------------------- -------------------
INTEREST INCOME: 1999 1998 1999 1998
------ ------- ------- -------
<S> <C> <C> <C> <C>
Interest and fees on loans and leases ......... $54,444 $ 54,847 $163,378 $157,374
Interest on banker's acceptances .............. 348 75 736 946
Interest and dividends on securities available
for sale ..................................... 14,496 8,865 39,167 26,237
Interest and dividends on investment securities
held to maturity and trading securities ...... 3,936 2,862 9,886 7,317
------ ------- ------- -------
Total interest income ......................... 73,224 66,649 213,167 191,874
------ ------- ------- -------
INTEREST EXPENSE:
Interest on deposits .......................... 20,525 16,707 57,645 49,680
Interest on advances from FHLB ................ 13,227 14,297 40,061 38,769
Interest on securities sold under agreements
to repurchase and federal funds purchased .... 4,732 4,161 13,129 10,975
Interest on subordinated debentures, guaranteed
preferred interest in the Company's Junior
Subordinated Debentures and notes and bonds
payable ...................................... 5,176 4,857 14,875 14,646
Capitalized interest on investments in and
advances to real estate joint ventures ....... (171) (252) (503) (470)
------ ------- ------- -------
Total interest expense ........................ 43,489 39,770 125,207 113,600
------ ------- ------- -------
Net interest income ........................... 29,735 26,879 87,960 78,274
Provision for loan losses ..................... 8,223 3,033 19,056 9,811
------ ------- ------- -------
Net interest income after provision for loan
losses ....................................... 21,512 23,846 68,904 68,463
------ ------- ------- -------
NON-INTEREST INCOME:
Loan late fees and other loan income .......... 1,404 1,022 3,893 3,132
Gains on sales of loans held for sale ......... 759 757 1,626 3,588
Gains (losses) on sales of property and
equipment .................................... 34 0 1,494 (3)
Gains on sales of securities available for sale 31 269 1,449 2,462
Trading securities losses ..................... (5) (1,226) (59) (523)
Gains on sales of real estate held for sale ... 241 676 5,628 5,935
Equity in (losses) earnings of unconsolidated
real estate joint ventures ................... (170) 0 1,140 0
Principal transactions - RBCO ................. 3,680 1,469 8,384 1,469
Investment banking - RBCO ..................... 14,475 3,914 18,815 3,914
Commissions - RBCO ............................ 4,422 2,088 10,429 2,088
Transaction fees .............................. 3,480 2,981 10,499 8,621
ATM fees ...................................... 2,617 1,786 7,320 4,673
Other ......................................... 1,426 1,281 3,924 3,328
------ ------- ------- -------
Total non-interest income ..................... 32,394 15,017 74,542 38,684
------ ------- ------- -------
NON-INTEREST EXPENSE:
Employee compensation/benefits excluding
RBCO and real estate operations .............. 9,657 11,245 28,332 33,269
Employee compensation/benefits for RBCO ....... 12,415 5,517 25,346 5,517
Employee compensation/benefits for real estate
operations ................................... 141 162 529 525
Occupancy and equipment ....................... 6,370 5,565 18,045 15,576
Federal insurance premium ..................... 288 266 828 786
Advertising and promotion ..................... 972 1,948 2,665 4,450
Foreclosed asset activity, net ................ (205) (7) (1,470) (53)
Amortization of cost over fair value of net
assets acquired .............................. 1,015 977 2,984 2,337
Other excluding RBCO and real estate operations 4,697 5,979 14,086 16,231
Other for RBCO ................................ 2,542 1,921 6,524 1,921
Other for real estate operations .............. 1,282 812 3,264 2,691
------ ------- ------- -------
Total non-interest expense .................... 39,174 34,385 101,133 83,250
------ ------- ------- -------
Income before income taxes and discontinued
operations ................................... 14,732 4,478 42,313 23,897
Provision for income taxes .................... 5,842 1,834 16,622 9,388
------ ------- ------- -------
Income from continuing operations ............ 8,890 2,644 25,691 14,509
Income (loss) from discontinued operations
(less applicable income taxes (benefit) of
$216, $(7,426), $715 and $(7,560)............. 373 (12,188) 1,174 (12,406)
------ ------- ------- -------
Net income (loss) ............................. $ 9,263 $ (9,544) $ 26,865 $ 2,103
====== ======= ======= =======
See Notes to Consolidated Financial Statements - Unaudited (Continued)
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
----------------------- -----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Class A common shares
Basic earnings per share from
continuing operations .......... $ 0.22 $ 0.06 $ 0.64 $ 0.38
Basic earnings (loss) per share
from discontinued operations ... 0.01 (0.29) 0.03 (0.33)
---------- ---------- ---------- ----------
Basic earnings (loss) per share . $ 0.23 $ (0.23) $ 0.67 $ 0.05
========== ========== ========== ==========
Diluted earnings per share from
continuing operations .......... $ 0.18 $ 0.06 $ 0.51 $ 0.36
Diluted earnings (loss) per share
from discontinued operations ... 0.00 (0.29) 0.02 (0.31)
---------- ---------- ---------- ----------
Diluted earnings (loss) per share $ 0.18 $ (0.23) $ 0.53 $ 0.05
========== ========== ========== ==========
Basic weighted average number of
common shares outstanding ...... 30,583,412 31,480,764 30,554,979 28,642,442
========== ========== ========== ==========
Diluted weighted average number
of common and common equivalent
shares outstanding ............. 48,762,287 32,012,108 48,764,910 29,422,558
========== ========== ========== ==========
Class B common shares
Basic earnings per share from
continuing operations .......... $ 0.20 $ 0.06 $ 0.59 $ 0.35
Basic earnings (loss) per share
from discontinued operations ... 0.01 (0.27) 0.03 (0.29)
---------- ---------- ---------- ----------
Basic earnings (loss) per share $ 0.21 $ (0.21) $ 0.62 $ 0.06
========== ========== ========== ==========
Diluted earnings per share from
continuing operations .......... $ 0.17 $ 0.06 $ 0.49 $ 0.33
Diluted earnings (loss) per
share from discontinued
operations ..................... 0.00 (0.27) 0.02 (0.28)
---------- ---------- ---------- ----------
Diluted earnings (loss) per share $ 0.17 $ (0.21) $ 0.51 $ 0.05
========== ========== ========== ==========
Basic weighted average number of
common shares outstanding ...... 10,295,600 10,384,137 10,339,276 10,524,893
========== ========== ========== ==========
Diluted weighted average number
of common and common equivalent
shares outstanding ............. 10,978,297 11,309,014 11,047,765 11,629,091
========== ========== ========== ==========
See Notes to Consolidated Financial Statements - Unaudited
-3-
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Net
Unearned Unrealized
Compen- Depreci-
Addi- sation ation on
Compre- tional Restricted Securities
hensive Common Paid-in Retained Stock Available
(In thousands) Income Stock Capital Earnings Grants For Sale Total
- -------------- ------ ------ ------- -------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 ....... $ 322 $ 98,475 $ 107,650 $ 0 $ 724 $207,171
Net income ....................... $ 2,103 0 0 2,103 0 0 2,103
------
Other comprehensive income
(loss), net of tax:
Unrealized gains on securities
available for sale ............ (1,273)
Reclassification adjustment
for net losses included in net
income ........................ 803
------
Other comprehensive loss ........ (470)
------
Comprehensive income ............. $ 1,633
======
Dividends on Class A common stock 0 0 (2,042) 0 0 (2,042)
Dividends on Class B common stock 0 0 (765) 0 0 (765)
Exercise of Class A common stock
options ......................... 0 200 0 0 0 200
Exercise of Class B common stock
options ......................... 4 1,380 0 0 0 1,384
Tax effect relating to the
exercise of stock options ....... 0 709 0 0 0 709
Purchase and retirement of Class B
common stock .................... (7) (10,640) 0 0 0 (10,647)
Issuance of Class A common stock
for acquisitions ................ 43 41,819 0 0 0 41,862
Issuance of Class A common stock
options upon acquisition of RBCO 0 1,582 0 0 0 1,582
Issuance of Class A common stock
upon conversion of subordinated
debentures, net ................. 9 5,720 0 0 0 5,729
Unearned compensation retention
pool ............................ 0 8,071 0 (8,071) 0 0
Amortization of unearned
compensation - restricted stock
grants .......................... 0 0 0 505 0 505
Net change in unrealized
depreciation on securities
available for sale-net of
deferred income taxes ........... 0 0 0 0 (470) (470)
------ ------- ------- --------- --------- -------
BALANCE, SEPTEMBER 30, 1998 ...... $ 371 $147,316 $106,946 $ (7,566) $ 254 $247,321
====== ======= ======= ========= ========= =======
See Notes to Consolidated Financial Statements - Unaudited (Continued)
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (Continued)
Net
Unearned Unrealized
Compen- Depreciation
Addi- sation on
Compre- tional Restricted Securities
hensive Common Paid-in Retained Stock Available
(In thousands) Income Stock Capital Earnings Grants For Sale Total
- -------------- ------- ------ ------- -------- ---------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1998 ........ $ 372 $147,686 $ 95,818 $ (7,062) $ 3,626 $240,440
Net income ....................... $ 26,865 0 0 26,865 0 0 26,865
-------
Other comprehensive income
(loss), net of tax:
Unrealized losses on securities
available for sale ............. (20,170)
Reclassification adjustment for
net gains included in
net income ..................... (705)
-------
Other comprehensive loss ......... (20,875)
-------
Comprehensive income .............. $ 5,990
=======
Dividends on Class A common stock . 0 0 (2,182) 0 0 (2,182)
Dividends on Class B common stock . 0 0 (746) 0 0 (746)
Fair value of stock options granted
to non-employees ................. 0 69 0 0 0 69
Exercise of Class A common stock
options .......................... 0 262 0 0 0 262
Exercise of Class B common stock
options .......................... 1 301 0 0 0 302
Tax effect relating to the
exercise of stock options ........ 0 124 0 0 0 124
Issuance of restricted Class A
common stock for acquisitions .... 2 1,082 0 0 0 1,084
Issuance of Class A common stock
upon conversion of subordinated
debentures ....................... 0 30 0 0 0 30
Purchase and retirement of Class A
common stock ..................... (10) (8,384) 0 0 0 (8,394)
Purchase and retirement of Class B
common stock ..................... (2) (1,562) 0 0 0 (1,564)
Forfeited Class A restricted
common stock ..................... 0 (89) 0 89 0 0
Unearned compensation - restricted
stock grants ..................... 0 513 0 (513) 0 0
Amortization of unearned
compensation - restricted stock
grants ........................... 0 0 0 1,552 0 1,552
Stock dividend August 1999 ........ 54 0 (54) 0 0 0
Net change in unrealized
depreciation on securities
available for sale-net of
deferred income taxes ............ 0 0 0 0 (20,875) (20,875)
----- -------- -------- ---------- ----------- -------
BALANCE, SEPTEMBER 30, 1999 ....... $ 417 $ 140,032 $ 119,701 $ (5,934) $ (17,249) $236,967
===== ======== ======== ========== ============ =======
See Notes to Consolidated Financial Statements - Unaudited
</TABLE>
-5-
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
For the Nine Months
(In thousands, except share data) Ended September 30,
-------------------
Operating activities: 1999 1998
------- -------
Income from continuing operations ............... $ 25,691 $ 14,509
Income (loss) from discontinued operations ...... 1,174 (12,406)
Adjustments to reconcile net income to net
cash (used) provided by operating activities:
Provision for loan losses ....................... 19,056 9,811
Provision for losses on real estate owned ....... 193 522
Depreciation, amortization and accretion, net ... 14,652 39,645
Losses on sales of mortgage servicing rights .... 0 (2,661)
Decrease (increase) in deferred tax asset, net .. 6,657 (9,592)
Trading account (gains) losses .................. (59) 523
Purchases of trading securities ................. (31) (1,621)
Proceeds from sales of trading securities ....... 59 1,848
Decrease in trading securities owned at market
- RBCO ......................................... 12,051 9,803
Gains on sales of real estate owned ............. (1,933) (984)
Gains on sales of real estate held for
development and sale ........................... (5,628) (5,935)
Gains on sales of securities available for sale . (1,449) (2,462)
(Gains) losses on sales of property and equipment (1,494) 3
Proceeds from sales of loans held for sale ...... 118,534 240,444
Fundings of loans held for sale ................. (54,211) (92,032)
Loans purchased, classified as held for sale .... (125,790) (29,997)
Gains on sales of loans held for sale ........... (1,682) (3,612)
Loans held for sale valuation allowance ......... 56 0
Provision for tax certificate losses ............ 373 98
Increase in accrued interest receivable ......... (1,413) (4,288)
(Decrease) increase in other assets ............. 541 (8,885)
Equity in joint venture earnings ................ (1,140) 0
Increase (decrease) in other liabilities ........ (26,095) 936
------- -------
Net cash (used) provided by operating activities (21,888) 143,667
======= =======
See Notes to Consolidated Financial Statements - Unaudited (Continued)
-6-
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED (Continued)
For the Nine Months
(In thousands, except share data) Ended September 30,
- --------------------------------- -----------------------
1999 1998
-------- ---------
Investing activities:
Proceeds from redemption and maturities of tax
certificates .................................. 44,017 43,464
Purchase of tax certificates ................... (82,475) (44,202)
Proceeds from sales of securities available for
sale .......................................... 224,026 702,999
Principal collected on securities available for
sale .......................................... 191,044 177,845
Proceeds from maturities of assets available for
sale .......................................... 5,000 0
Purchases of securities available for sale ..... (687,242) (881,781)
Proceeds from sales of FHLB stock .............. 13,380 9,827
FHLB stock acquired ............................ (7,208) (27,317)
Principal reduction on loans ................... 1,137,392 1,100,381
Loan fundings for portfolio .................... (909,755) (791,249)
Loans purchased for portfolio .................. (105,112) (1,050,542)
Proceeds from maturities of banker's acceptances 8,195 210,527
Purchases of banker's acceptances .............. (16,963) (94,622)
Proceeds from sales of banker's acceptances .... 0 41,877
Additions to dealer reserve .................... 0 (6,421)
Proceeds from sales of real estate owned ....... 9,898 6,300
REO acquired in connection with bulk
residential loan purchases .................... (1,025) 0
Mortgage servicing rights acquired ............. (897) (47,599)
Proceeds from sales of mortgage servicing rights 32,648 27,962
Cost of equipment acquired for lease ........... (24,363) (13,620)
Leases repurchased ............................. 0 (3,519)
Additions to office property and equipment ..... (4,588) (7,294)
Proceeds from sales of property and equipment .. 2,451 0
Investment in and advances to joint ventures,
net ........................................... (16,276) (30,871)
Proceeds from sales of real estate held for
development and sale .......................... 9,571 12,750
Additional investment in real estate held for
development and sale .......................... (8,600) (5,334)
(Acquisition) disposal, net of cash acquired ... (1,296) 433
--------- ----------
Net cash used in investing activities .......... (188,178) (670,006)
--------- ----------
Financing activities:
Net increase in deposits ....................... 157,857 78,345
Interest credited to deposits .................. 56,467 41,151
Repayments of FHLB advances .................... (502,437) (832,187)
Proceeds from FHLB advances .................... 379,000 1,182,000
Net increase in securities sold under agreements
to repurchase ................................. 166,117 51,344
Net decrease in federal funds purchased ........ (8,300) (2,500)
Repayment of notes payable ..................... (1,574) (7,376)
Increase in notes payable ...................... 5,085 3,680
Issuance of common stock relating to exercise of
employee stock options ........................ 564 1,584
Issuance of common stock options to nonemployees 69 0
Payments to acquire and retire common stock .... (9,958) (10,647)
(Repayments) receipts of advances by borrowers
for taxes and insurance ....................... (29,512) 32,509
Common stock dividends paid .................... (2,939) (2,780)
--------- ----------
Net cash provided by financing activities....... 210,439 535,123
--------- ----------
Increase in cash and cash equivalents .......... 373 8,784
Cash and cash equivalents at beginning of period 100,823 82,787
--------- ----------
Cash and cash equivalents at end of period...... $ 101,196 $ 91,571
========= ==========
See Notes to Consolidated Financial Statements - Unaudited (Continued)
-7-
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(CONTINUED)
For the Nine Months
Ended September 30,
-------------------
1999 1998
------- -------
Supplementary disclosure and non-cash
investing and financing activities:
Interest paid on borrowings and deposits .. $118,918 $109,674
Income taxes paid ......................... 5,000 8,737
Loans transferred to real estate owned .... 4,957 3,629
Net change in proceeds receivable from
sales of mortgage servicing rights ....... (7,528) (5,614)
Purchased residential loans held for
investment transferred to held for sale .. 0 108,465
Issuance of Class A common stock upon
acquisitions ............................. 1,084 41,862
Issuance of Class A common stock options
upon acquisition of RBCO ................. 0 1,582
Issuance of Class A common stock upon
conversion of subordinated debentures .... 30 5,729
Increase in deferred offering costs upon
conversion of subordinated debentures .... 0 214
Decrease in subordinated debentures upon
conversion to Class A common stock ....... (30) (5,943)
Loan charge-offs .......................... 18,715 10,342
Tax certificate recoveries, net ........... 156 41
Loan securitization ....................... 38,790 0
Proceeds from sale of servicing offset
by escrow reductions ..................... 23,703 0
Class A common stock dividends; not
paid until October ....................... 758 735
Class B common stock dividends; not
paid until October ....................... 228 260
Accrual for the purchase of bulk
mortgage servicing rights not yet
fully paid for ........................... 0 12,553
Increase in equity for the tax effect
related to the exercise of employee
stock options ............................ 124 709
Change in net unrealized depreciation
on securities available for sale ........ (33,973) (782)
Change in deferred taxes on net
unrealized depreciation on securities
available for sale ....................... (13,098) (312)
Change in stockholders' equity from
net unrealized depreciation on
securities available for sale, less
related deferred income taxes ............ (20,875) (470)
Loans to joint ventures transferred
to loans receivable ...................... 20,758 0
Increase in real estate held for
development and sale resulting from
roadway improvement development bond ..... 5,949 0
Increase in real estate held for
development and sale resulting from
St. Lucie West Holding Company ("SLWHC")
purchase accounting adjustments .......... 0 1,502
Decrease in other assets resulting
from SLWHC purchase accounting adjustments 0 (1,502)
======= =======
See Notes to Consolidated Financial Statements - Unaudited
-8-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
1. PRESENTATION OF INTERIM FINANCIAL STATEMENTS
BankAtlantic Bancorp, Inc. (the "Company") is a unitary savings bank
holding company. The Company's principal assets include the capital stock of
BankAtlantic, a Federal Savings Bank ("BankAtlantic") and its subsidiaries and
Ryan Beck & Co., Inc. ("RBCO"), an investment banking firm and its subsidiaries.
The Company acquired RBCO on June 30, 1998. As a consequence, the Company's
consolidated financial statements only reflect RBCO activity from June 30, 1998.
The Company's primary activities have related to the operations of BankAtlantic,
RBCO and their subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
In management's opinion, the accompanying consolidated financial statements
contain such adjustments necessary to present fairly the Company's consolidated
financial condition at September 30, 1999 and 1998, the consolidated results of
operations for the three and nine months ended September 30, 1999 and 1998, the
consolidated stockholders' equity and comprehensive income for the nine months
ended September 30, 1999 and 1998 and the consolidated cash flows for the nine
months ended September 30, 1999 and 1998. Such adjustments consisted only of
normal recurring items except that the September 30, 1998 valuation of mortgage
servicing rights, included in discontinued operations, resulted in a $15.0
million charge to earnings whereas no valuation allowance was needed in prior
periods. The consolidated financial statements and related notes are presented
as permitted by Form 10Q and should be read in conjunction with the notes to
consolidated financial statements appearing in the Company's Annual Report on
Form 10K for the year ended December 31, 1998 and the form 10Q for each of the
periods ended March 31, 1999 and June 30, 1999.
Loan origination and commitment fees collected are deferred net of direct
costs and are being amortized to interest income over the estimated life of the
loan, adjusted for prepayments using the level yield method.
2. COMMON STOCK DIVIDEND
On July 21, 1999, the Company's Board of Directors approved a 15% common
stock dividend, payable in Class A common stock to both Class A and Class B
common shareholders of record at the close of business on August 16, 1999.
However, accounting and tax considerations and the anti-dilution provisions
related to Class B common stock options under the Company's stock option plans
required that additional Class B stock options be granted rather than Class A
stock options. The distribution date of this common stock dividend was August
26, 1999. The Statement of Financial Condition, stock options, and earnings per
share information for prior periods have been restated to reflect the 15% stock
dividend.
3. EQUITY CAPITAL
On July 14, 1999, the Company's Board of Directors approved the
repurchase on the open market of up to 3.5 million shares of the Company's
common stock. The Board authorized the repurchase of common stock on a
"time-to-time" basis, depending upon market conditions and subject to compliance
with applicable securities laws. Pursuant to the above repurchase plan the
Company paid $1.6 million to repurchase and retire 221,345 shares of Class B
common stock during the nine months ended September 30, 1999. Pursuant to a
previously announced plan to repurchase shares of common stock, the Company paid
$8.4 million to repurchase and retire 1,149,655 shares of Class A common stock
during the nine months ended September 30, 1999. During the nine months ended
September 30, 1998, the Company paid $10.6 million to repurchase and retire
849,275 shareS of Class B common stock.
-9-
<PAGE>
During the nine months ended September 30, 1999, 51,996 and 89,121 of Class
A and Class B incentive and nonqualifying stock options, respectively, were
exercised resulting in a $688,000 increase in stockholders' equity. The tax
effect included in the preceding amount was $124,000.
During the nine months ended September 30, 1998, 17,655 and 499,723 of
Class A and Class B incentive and nonqualifying stock options, respectively,
were exercised resulting in a $2.3 million increase in stockholders' equity. The
tax effect included in the preceding amount was $709,000.
The following table sets forth the activity of all outstanding options and
restricted stock issued under the Company's benefit plans:
Outstanding Outstanding Restricted
Options Options Stock
Class B Class A Class A
- -------------------------------------- ----------- ----------- ----------
Outstanding at December 31, 1998 ..... 1,885,581 2,513,630 785,866
Issued in connection with acquisitions 0 40,250 200,081
Granted .............................. 0 1,468,263 33,760
Exercised or vested .................. (89,121) (51,996) (4,570)
Canceled ............................. (4,384) (255,162) (16,985)
--------- ---------- ----------
Outstanding at September 30, 1999 .... 1,792,076 3,714,985 998,152
========= ========== ==========
Exercisable at September 30, 1999 .... 1,101,109 334,104
========= ==========
Exercise price per share outstanding . $3.39-3.48 $4.57-12.23
========= ==========
4. SALES OF FINANCIAL ASSETS
The book value of securities sold from the securities available for sale
portfolio was as follows (in thousands):
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
-------------------- -------------------
1999 l998 1999 l998
------- ------- ------- -------
7 year balloon mortgage-backed
securities ...................... $ 0 $ 2,667 $ 0 $123,899
7 year mortgage-backed securities . 0 4,016 0 4,016
5 year balloon mortgage-backed
securities ...................... 0 0 0 27,151
U.S. treasury notes ............... 59,005 173,603 59,005 178,585
Federal agency obligations ........ 0 0 0 9,977
------- ------- ------- -------
Total fixed rate securities ..... 59,005 180,286 59,005 343,628
------- ------- ------- -------
5-1 adjustable rate mortgage-backed
securities ...................... 0 131,682 0 253,129
3-1 adjustable rate mortgage-backed
securities ...................... 0 0 138,481 103,183
Sale of loans securitizations ..... 24,103 0 24,103 0
Marketable equity securities ...... 988 477 988 597
------- ------- ------- -------
Total ........................... $ 84,096 $312,445 $222,577 $700,537
======= ======= ======= =======
Gains on sales of securities
available for sale .............. $ 31 $ 269 $ 1,449 $ 2,462
======= ======= ======= =======
During the three months ended September 30, 1999 the Company sold $30.1
million of loans originated for resale for gains of $759,000. During the nine
months ended September 30, 1999 the Company sold $95.1 million of loans
originated for resale, $20.4 million of loans purchased and classified as held
for sale and $1.4 million of leases for gains of $1.5 million, $60,000 and
$114,000, respectively. During the three and nine months ended September 30,
1998, the Company sold $94.9 million and $236.8 million of loans held for sale
for gains of $757,000 and $3.6 million, respectively. During the three and nine
months ended September 30, 1998 the Company transferred $0 and $108.5 million of
purchased loans from held for investment to held for sale. As part of its normal
operations from 1996 through the latter part of 1998, the Company purchased bulk
residential loans to be held for investment. These bulk purchased loans are
continually evaluated and such evaluations
-10-
<PAGE>
may result in transfers from the held for investment category to the held for
sale category. Such transfers, if any, have not and are not normally expected to
exceed 10% of the average annual balance of the portfolio.
5. TRADING SECURITIES
During the three and nine months ended September 30, 1999, the Company
realized losses of $5,000 and $59,000, respectively, on securities trading.
During 1999, the Company's securities trading activities were expanded beyond
trading in government securities, to include trading in options and futures
contracts on Eurodollar time deposits that settle in three months or less.
Eurodollar time deposits are indexed to the LIBOR interest rate. The Company
realized a $96,000 gain on government securities trading activities during the
three and nine months ended September 30, 1998. During the nine months ended
September 30, 1998, the Company transferred $1.8 million of equity securities
available for sale to trading securities resulting in a $562,000 unrealized gain
on the date of transfer. The unrealized and realized gains (losses) on the
trading securities for the three and nine months ended September 30, 1998 were
($1.3 million) and $0 and ($1.2 million) and $560,000, respectively.
The RBCO gains on trading securities were associated with sales and trading
activities conducted both as principal and as agent on behalf of individual and
institutional investor clients of RBCO. Transactions as principal involve making
markets in securities which are held in inventory to facilitate sales to and
purchases from customers. During the three and nine months ended September 30,
1999, RBCO realized net gains from principal transactions of $3.7 million and
$8.4 million, respectively. During the three and nine months ended September 30,
1998, RBCO realized net gains of $1.5 million from principal transactions.
Furthermore, included in other liabilities was $3.5 million and $2.9 million of
securities sold not yet purchased at September 30, 1999 and December 31, 1998,
respectively, relating to RBCO trading activity.
The Company's trading securities consist of the following (in thousands):
September 30, December 31,
1999 1998
------------ -----------
Debt obligations:
States and municipalities ..... $ 9,214 $18,476
Corporations .................. 756 615
U.S. Government and agencies .. 256 172
Corporate equities .............. 7,728 10,448
Option and future contracts ..... 31 0
Other ........................... 0 294
------ ------
$17,985 $30,005
====== ======
6. REAL ESTATE HELD FOR DEVELOPMENT AND SALE AND JOINT VENTURE ACTIVITIES
In October 1997, the Company acquired St. Lucie West Holding Corp.
("SLWHC"), the developer of the master planned community of St. Lucie West in
St. Lucie County Florida. During the three and nine months ended September 30,
1999, SLWHC land sales resulted in gains of $241,000 and $5.6 million,
respectively, compared to gains of $676,000 and $5.9 million during the same
1998 periods. Since the third quarter of 1997 the Company has entered into six
joint venture partnerships with developers to develop residential, multi-family
and commercial non-residential properties. During the three and nine months
ended September 30, 1999, the Company recorded equity in earnings (losses) from
unconsolidated joint ventures of ($170,000) and $1.1 million, respectively. In
March 1999, one of the Company's real estate joint ventures closed on a land
sale to an unrelated developer resulting in the Company recognizing a $1.7
million gain. Additionally, during the nine months ended September 30, 1999, the
Company relinquished its potential equity participation rights in a loan
accounted for as a joint venture in exchange for substantial principal
repayments on the loan and a guarantee from a real estate investment trust
resulting in the Company transferring $20.8 million in investments in joint
ventures to loans receivable. Included in investment in real estate held for
development and sale and joint ventures at September 30, 1999 was $34.4 million
of SLWHC land, $3.0 million for a marina, $4.4 million of equity investments in
real estate joint ventures, $31.1 million of advances to real estate joint
ventures and $2.2 million of investments and advances to a broker/dealer joint
venture partner, compared to $27.8 million of SLWHC land, $7.3 million of equity
investments in real estate joint ventures, $30.7 million of advances to real
estate joint ventures and $2.0 million of investments and advances to a
broker/dealer joint venture
-11-
<PAGE>
partner at December 31, 1998. During the three and nine months ended September
30, 1999, the Company capitalized $171,000 and $503,000 of interest expense in
connection with investments and advances to real estate joint ventures and
deferred $291,000 and $766,000 of interest income associated with loans to joint
ventures. Included in other expenses in the Company's Consolidated Statements of
Operations during the three and nine months ended September 30, 1999 was
$150,000 and $450,000 of consulting fees paid to the Abdo Companies, an
affiliate of the Company. Jack Abdo, the Vice Chairman and Director of the
Company is the President and Chief Executive Officer of the Abdo Companies.
Additionally, $97,500 of management fees were paid to BFC Financial Corporation,
an affiliate of the Company, during the three and nine months ended September
30, 1999. BFC Financial Corporation provides administrative and real estate
advisory services to BankAtlantic Development Corporation.
7. COMPREHENSIVE INCOME
The income tax provision relating to the comprehensive income
reclassification adjustment in the Consolidated Statements of Stockholders'
Equity and Comprehensive Income for the nine months ended September 30, 1999 was
$468,000 compared to a tax benefit for the nine months ended September 30, 1998
of $504,000.
8. DISCONTINUED OPERATIONS, RESTRUCTURING CHARGES AND OTHER WRITE-DOWNS
During December 1998, the Company commenced a restructuring of its
operations and established a restructuring liability. The table below summarizes
amounts paid associated with the restructuring liability during the nine months
ended September 30, 1999.
Amount Paid
or
Initial Written Down Ending
Type of Restructuring Charge Amount During Period Balance
- ---------------------------- ------ ------------- -------
Employee severance and benefits. $ 1,000 $(1,000) $ 0
Impairment of assets due to
facility closures ............. 956 (956) 0
Provision for lease contracts on
closed branches ............... 376 (69) 307
Other .......................... 233 (233) 0
------ ------ ------
Total restructuring charges .. $ 2,565 $(2,258) $ 307
====== ====== ======
There were no adjustments to the restructuring liability during the three
and nine months ended September 30, 1999.
Discontinued Operations
- -----------------------
At December 31, 1998, the Board of Directors adopted a formal plan to
dispose of the Company's mortgage servicing business ("MSB"). Substantially all
of the assets were sold during the second quarter of 1999. The MSB had total
assets of $982,000 and total liabilities of $2.6 million at September 30, 1999.
The assets primarily consisted of a building and the liabilities consisted
primarily of the allowance for discontinued operations. During the three and
nine months ended September 30, 1999, the Company recognized a $373,000 and $1.2
million gain net of taxes, respectively, from discontinued operations.
Activity in the allowance established for exiting the MSB and the operating
activity from the measurement date (December 31, 1998) through September 30,
1999 was as follows (in thousands):
Balance at Balance at
December 31, Amounts Change in September 30,
1998 Paid Estimates 1999
----------- ------- --------- ------------
Employee severance and benefits $ 925 $ 663 $ 37 $ 225
Provision for servicing contract
cancellation .................. 900 725 175 0
Fixed asset write-downs ........ 430 249 (5) 186
Estimated cost to sell MSR ..... 3,600 1,466 394 1,740
Anticipated loss from operations
through disposal date ......... 4,145 2,466 1,288 391
------ ------ ------ ------
Total ......................... $10,000 $ 5,569 $ 1,889 $ 2,542
====== ====== ====== ======
-12-
<PAGE>
The final costs of exiting the MSB are estimates and are subject to change
based on completeness of underlying loan documents, transferability issues and
the amount of time necessary to complete the exit plan. During the nine months
ended September 30, 1999 the MSB anticipated loss from operations was adjusted
to reflect slower loan repayment speeds than projected, higher than anticipated
servicing contract fees, and higher than projected disposal costs. The Company
settled the sale of its servicing portfolio on July 8, 1999 and the majority of
servicing personnel left the Company on July 23, 1999. The operations of the MSB
and all costs associated with the sale of the MSR are anticipated to be
significantly completed by December 31, 1999. Changes in estimates will be
accounted for prospectively.
9. SEGMENT REPORTING
Operating segments are defined as components of an enterprise about which
separate financial information is available that is regularly reviewed by the
chief operating decision maker in deciding how to allocate resources and in
assessing performance. Reportable segments consist of one or more operating
segments with similar economic characteristics, products and services,
production processes, type of customer, distribution system and regulatory
environment. The information provided for Segment Reporting is based on internal
reports utilized by management. Interest expense and certain revenue and expense
items are allocated to the various segments as interest expense and overhead.
The presentation and allocation of interest expense and overhead and the net
contribution calculated under the management approach may not reflect the actual
economic costs, contribution or results of operations of the unit as a stand
alone business. If a different basis of allocation was utilized, the relative
contributions of the segments might differ but the relative trends in segments
would, in management's view, likely not be impacted.
The following summarizes the aggregation of the Company's operating
segments into reportable segments:
Reportable Segment Operating Segments Aggregated
- ------------------ -----------------------------
Bank Investment Operations - Other Investment Division, Tax Certificate
Department, Trading, Equity Portfolio
Bank Investment Operations - Wholesale
Residential Real Estate Capital Services, Capital
Markets
Bank Loan Operations - Commercial Commercial Lending, Syndications, BA
Factors, Inc., International and
Trade Finance
Bank Loan Operations - Retail Residential Lending, CRA Lending,
BankAtlantic Mortgage, Indirect
and Direct Consumer Lending, Small
Business Lending, Lease financing
Real Estate Operations BankAtlantic Development Corp.
(includes SLWHC and real estate joint
ventures)
Investment Banking Operations Ryan, Beck & Co.
The accounting policies of the segments are generally the same as those
described in the summary of significant accounting policies. Intersegment
transactions consist of borrowings by real estate operations and investment
banking operations which are recorded based upon the terms of the underlying
loan agreements and are effectively eliminated in the interest expense and
overhead allocations.
-13-
<PAGE>
The Company evaluates segment performance based on net contribution after
tax. The table below is segment information for continuing operations for the
three months ended September 30, 1999 and 1998:
<TABLE>
<CAPTION>
Bank Investment Bank Loan
Operations Operations
-------------------- -------------------
Investment
Wholesale Real Estate Banking
(in thousands) Other Residential Commercial Retail Operations Operations Total
- ------------------------ ------- ----------- ---------- -------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
SEPTEMBER 30, 1999
Interest income ....... $ 17,349 $ 21,625 $ 20,215 $ 13,006 $ 588 $ 441 $ 73,224
Interest expense and
overhead ............ (14,228) (17,871) (12,505) (7,332) (976) (222) (53,134)
Recovery from
(provision for) loan
losses ............... 0 42 (604) (7,661) 0 0 (8,223)
Non-interest income ... 579 51 669 990 197 22,788 25,274
Segment profits before
taxes ................ 2,655 4,075 7,615 (4,431) (1,771) 6,589 14,732
Provision (benefit) for
income taxes ......... 1,053 1,616 3,020 (1,758) (702) 2,613 5,842
------- --------- -------- ------- ------ ------ ---------
Segment net income
(loss) ............... $ 1,602 $ 2,459 $ 4,595 $ (2,673) $(1,069) $ 3,976 $ 8,890
======= ========= ======== ======= ====== ====== =========
Segment total assets .. $937,317 $1,307,792 $ 918,070 $438,907 $72,126 $64,526 $3,738,738
======= ========= ======== ======= ====== ====== =========
SEPTEMBER 30, 1998
Interest income ....... $ 11,334 $ 24,649 $ 16,132 $ 13,931 $ 277 $ 326 $ 66,649
Interest expense and
overhead.............. (10,266) (20,213) (9,936) (8,674) (258) (261) (49,608)
Recovery from
(provision for) loan
losses ............... 0 93 (731) (2,395) 0 0 (3,033)
Non-interest (loss)
income ............... (932) 73 394 1,316 223 7,594 8,668
Segment (losses)
profits before taxes.. (132) 2,786 4,108 (671) (902) (711) 4,478
Provision (benefit)
for income taxes ..... (54) 1,141 1,683 (275) (370) (291) 1,834
------- --------- -------- ------- ------ ------ ---------
Segment net income
(loss) ............... $ (78) $ 1,645 $ 2,425 $ (396) $ (532) $ (420) $ 2,644
======= ========= ======== ======= ====== ====== =========
Segment total assets $695,927 $1,458,516 $ 654,828 $547,020 $23,583 $56,848 $3,436,722
======= ========= ======== ======= ====== ====== =========
</TABLE>
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-14-
<PAGE>
The following table is segment information for continuing operations for
the nine months ended September 30, 1999 and 1998:
<TABLE>
<CAPTION>
Bank Investment Bank Loan
Operations Operations
--------------------- --------------------
Investment
Wholesale Real Estate Banking
(in thousands) Other Residential Commercial Retail Operations Operations Total
- ----------------------- ------- ----------- ---------- -------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SEPTEMBER 30, 1999
Interest income ....... $ 46,570 $ 66,123 $ 58,215 $ 40,379 $ 742 $ 1,138 $ 213,167
Interest expense and
overhead ............. (37,825) (53,865) (34,018) (22,352) (1,783) (671) (150,514)
Recovery from
(provision for)
loan losses .......... 0 (43) (737) (18,276) 0 0 (19,056)
Non-interest income ... 1,995 9 1,560 3,643 5,584 38,134 50,925
Segment profits
(losses) before taxes 8,656 11,600 24,097 (7,250) 2,360 2,850 42,313
Provision (benefit)
for income taxes ..... 3,362 4,532 9,395 (2,810) 868 1,275 16,622
------- -------- ------- ------- ------ ------ --------
Segment net income
(loss) ............... $ 5,294 $ 7,068 $ 14,702 $ (4,440) $ 1,492 $ 1,575 $ 25,691
======= ======== ======= ======= ====== ====== ========
SEPTEMBER 30, 1998
Interest income ...... $ 33,931 $ 70,713 $ 45,616 $ 40,619 $ 669 $ 326 $ 191,874
Interest expense and
overhead ............ (31,711) (57,227) (29,070) (26,251) (1,062) (261) (145,582)
Recovery from
(provision for) loan
losses .............. 0 (32) (1,912) (7,867) 0 0 (9,811)
Non-interest income .. 1,336 1,052 1,157 4,481 6,025 7,594 21,645
Segment profits
(losses) before taxes 1,107 11,110 11,455 (772) 1,708 (711) 23,897
Provision (benefit)
for income taxes .... 405 4,347 4,512 (316) 731 (291) 9,388
------- ------- ------- ------- ------ ------ --------
Segment net income
(loss) .............. $ 702 $ 6,763 $ 6,943 $ (456) $ 977 $ (420) $ 14,509
======= ======= ======= ======= ====== ====== ========
</TABLE>
The difference between total segment assets and total consolidated assets
and segment non-interest income, and total non-interest income are as follows:
At September 30,
------------------------
1999 1998
(in thousands) --------- ----------
Total Assets
Total assets for reportable segments $3,738,738 $ 3,436,722
Assets in discontinued operations .. 982 56,203
Assets in overhead ................. 230,909 189,699
--------- ----------
Total consolidated assets .......... $3,970,629 $ 3,682,624
========= ==========
-15-
<PAGE>
For the Three Months For the Nine Months
(in thousands) Ended September 30, Ended September 30,
- -------------- -------------------- -------------------
1999 1998 1999 1998
------ ------ ------ ------
Noninterest Income
Total non-interest income for
reportable segments ........ $25,274 $ 8,668 $50,925 $21,645
Items included in interest
expense and overhead:
Transaction fee income ...... 3,480 2,981 10,499 8,621
ATM fees .................... 2,617 1,786 7,320 4,673
Gains (losses) on sales of
property and equipment ..... 34 0 1,494 (3)
Other ....................... 989 1,582 4,304 3,748
------ ------ ------ ------
Total consolidated
non-interest income ........ $32,394 $15,017 $74,542 $38,684
====== ====== ====== ======
10. RECLASSIFICATIONS
Certain amounts for prior periods have been reclassified to conform with
the statement presentation for 1999.
-16-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Except for historical information contained herein, the matters discussed
in this report contain forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended (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
report, or in the documents incorporated by reference herein, the words
"anticipate", "believe", "estimate", "may", "intend", "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. These
forward-looking statements are based largely on the Company's expectations and
are subject to a number of risks and uncertainties, including but not limited
to, the risks and uncertainties associated with the implementation of and the
realization of benefits from its restructuring initiatives and expense
reductions, economic, competitive and other factors affecting the Company and
its operations, markets, products and services, changes in interest rates and
economic policies, the success of technological, strategic and business
initiatives, significant growth in banking as well as non-banking initiatives,
Year 2000 issues and other factors discussed elsewhere in this report and other
reports filed by the Company with the Securities and Exchange Commission
("SEC"). Many of these factors are beyond the Company's control.
RESULTS OF OPERATIONS
(In thousands, except per share For the Three Months For the Nine Months
data) Ended September 30, Ended September 30,
-------------------- -------------------
1999 1998 1999 1998
-------- ------- ------- -------
Income from continuing operations. $ 8,890 $ 2,644 $ 25,691 $ 14,509
Income (loss) from discontinued
operations net of taxes ......... 373 (12,188) 1,174 (12,406)
------- ------- ------- -------
Net income (loss) ................ $ 9,263 $ (9,544) $ 26,865 $ 2,103
======= ======= ======= =======
CLASS A COMMON SHARES
Basic earnings per share from
continuing operations ........... $ 0.22 $ 0.06 $ 0.64 $ 0.38
Basic earnings (loss) per share
from discontinued operations .... 0.01 (0.29) 0.03 (0.33)
------- ------- ------- -------
Basic earnings (loss) per share .. $ 0.23 $ (0.23) $ 0.67 $ 0.05
======= ======= ======= =======
Diluted earnings per share from
continuing operations ........... $ 0.18 $ 0.06 $ 0.51 $ 0.36
Diluted earnings (loss) per share
from discontinued operations .... 0.00 (0.29) 0.02 (0.31)
------- ------- ------- -------
Diluted earnings (loss) per share $ 0.18 $ (0.23) $ 0.53 $ 0.05
======= ======= ======= =======
CLASS B COMMON SHARES
Basic earnings per share from
continuing operations ........... $ 0.20 $ 0.06 $ 0.59 $ 0.35
Basic earnings (loss) per share
from discontinued operations .... 0.01 (0.27) 0.03 (0.29)
------- ------- ------- -------
Basic earnings (loss) per share .. $ 0.21 $ (0.21) $ 0.62 $ 0.06
======= ======= ======= =======
Diluted earnings per share from
continuing operations ........... $ 0.17 $ 0.06 $ 0.49 $ 0.33
Diluted earnings (loss) per share
from discontinued operations .... 0.00 (0.27) 0.02 (0.28)
------- ------- ------- -------
Diluted earnings (loss) per share $ 0.17 $ (0.21) $ 0.51 $ 0.05
======= ======= ======= =======
Continuing Operations - Income from continuing operations increased by 236%
during the three months ended September 30, 1999 compared to the same period
during 1998. The primary reasons for the increase in income from continuing
operations were:
1) an improvement in net interest income resulting from an increase in
interest earning assets reflecting higher securities available for
sale balances,
-17-
<PAGE>
2) higher transaction fee income resulting from changes made to the
pricing of the Company's deposit products,
3) Significantly higher income from RBCO operations,
4) the sale of one parcel of previously foreclosed commercial real estate
for a $316,000 gain,
5) lower trading securities losses during 1999,
6) a decline in employee compensation from bank operations due to a
reduction of the Company's full time employees resulting from the
December 1998 restructuring,
7) lower other expenses from bank operations caused by the December 1998
restructuring, and
8) a decline in advertising expense.
The above improvements in income from continuing operations were partially
offset by:
1) an increase in the provision for loan losses resulting from small
business loan charge-offs,
2) higher occupancy costs due to the expansion of RBCO activities and
expanded branch and ATM network, and
3) lower gains from real estate sales and real estate joint venture
operations.
Income from continuing operations increased by 77% during the nine months
ended September 30, 1999 compared to the same period during 1998. The primary
reasons for the net increase in income from continuing operations were related
to the items discussed above for the quarter as well as increased earnings from
the Company's real estate joint venture activities.
Discontinued operations - Income from discontinued operations for the three
and nine months ended September 30, 1999 was $373,000 and $1.2 million compared
to losses of $12.2 million and $12.4 million, net of income taxes, respectively
for the same 1998 periods. All of the mortgage servicing assets except for the
building were sold during the second quarter. Income from discontinued
operations during the three months ended September 30, 1999 resulted primarily
from lower than anticipated cost to sell mortgage servicing rights. Income from
discontinued operations during the nine months ended September 30, 1999 resulted
primarily from the recovery of a portion of the 1998 valuation allowance. This
valuation allowance was established based upon the then interest rate
environment which anticipated certain prepayment speeds. Due to rising interest
rates during 1999, prepayment speeds were less than estimated and resulted in a
partial recovery of the allowance. Losses from discontinued operations during
the three and nine months ended September 30, 1998 resulted from accelerated
amortization of mortgage servicing rights reflecting prepayments of loans during
the period, related valuation allowances and higher operating expenses.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-18-
<PAGE>
<TABLE>
<CAPTION>
NET INTEREST INCOME
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
-------------------------------- --------------------------------
(In thousands) 1999 1998 Change 1999 1998 Change
- -------------- ------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Interest and fees on loans and leases $ 54,444 $ 54,847 $ (403) $163,378 $157,374 $ 6,004
Interest on banker's acceptances .... 348 75 273 736 946 (210)
Interest and dividends on securities
available for sale ................. 14,496 8,865 5,631 39,167 26,237 12,930
Interest and dividends on investment
securities held to maturity and
trading securities ................. 3,936 2,862 1,074 9,886 7,317 2,569
Interest on deposits ................ (20,525) (16,707) (3,818) (57,645) (49,680) (7,965)
Interest on advances from FHLB ...... (13,227) (14,297) 1,070 (40,061) (38,769) (1,292)
Interest on securities sold under
agreements to repurchase ........... (4,732) (4,161) (571) (13,129) (10,975) (2,154)
Interest on subordinated debentures,
notes payable and guaranteed
preferred interest in the Company's
Junior Subordinated Debentures ..... (5,176) (4,857) (319) (14,875) (14,646) (229)
Capitalized interest ................ 171 252 (81) 503 470 33
------- ------- ------ ------- ------- ------
Net interest income ............... $ 29,735 $ 26,879 $ 2,856 $ 87,960 $ 78,274 $ 9,686
======= ======= ====== ======= ======= ======
Net interest spread ................. 2.83% 2.82% 0.01% 2.89% 2.86% 0.03%
======= ======= ====== ======= ======= ======
</TABLE>
Net interest income increased by 11% during the three months ended
September 30, 1999 compared to the same period in 1998. Total interest income
increased by $6.6 million while total interest expense increased by $3.7
million. The increase in interest income resulted from higher average securities
available for sale balances, increased tax certificate interest income, and
additional accretion of a utility receivable associated with the St. Lucie West
development.
Loan interest income declined during the three months ended September 30,
1999 compared to the same 1998 period. Overall loan average balances during the
three months ended September 30, 1999 and 1998 were approximately the same.
Increases in small business, commercial real estate and corporate syndication
loan average balances were substantially offset by lower residential and
consumer loan average balances. The decline in consumer loan average balances
resulted from the Company ceasing the origination of indirect consumer loans as
part of its December 1998 restructuring plan.
Interest income from banker's acceptances were higher during the three
months ended September 30, 1999 compared to the same 1998 period due to an
increase in average balances. Banker's acceptances interest income during 1999
and 1998 was primarily from international banking and trade finance
relationships.
The substantial increase in securities available for sale interest income
resulted from the purchase during the nine months ended September 30, 1999 of
$611.1 million of REMIC mortgage backed securities. As a result of the above
purchases, securities available for sale average balances increased from $599.1
million during the three months ended September 30, 1998 to $949.5 million for
the same 1999 period.
The increase in interest and dividends on investment securities held to
maturity and trading securities primarily resulted from interest income
associated with the RBCO trading portfolio, higher tax certificate average
balances and increased accretion of utility receivables associated with the St.
Lucie West development.
-19-
<PAGE>
A lower overall yield on earning assets resulted from a change in the mix
of earning assets from higher yielding loans to lower yielding securities
available for sale. Yields on earning assets declined from 7.88% during the
three months ended September 30, 1998 to 7.74% during the comparable 1999
period. During the three months ended September 30, 1998, securities available
for sale were 17.8% of total earning assets compared to 25.2% for the three
months ended September 30, 1999.
The increase in deposit expense during the three months ended September 30,
1999 compared to the same 1998 period resulted from higher average balances. The
increased deposit average balances resulted from the acquisition of brokered
deposits primarily through RBCO and an increase in public funds. The average
balance of brokered deposits and public funds increased from $62.1 million
during the three months ended September 30, 1998 to $470.0 million during the
same 1999 period. The amount of time deposits acquired through RBCO during the
three and nine months ended September 30, 1999 were $5.6 million and $277.1
million, respectively.
The decrease in interest expense on advances from FHLB was primarily due to
lower average balances resulting from the redemption and maturities of FHLB
advances.
The higher interest expense on securities sold under agreements to
repurchase resulted from higher average balances during 1999. The higher average
balances funded the purchase of securities available for sale.
The increase in interest on subordinated debentures, guaranteed preferred
interest in the Company's Junior Subordinated Debentures and notes and bonds
payable resulted from higher average balances associated with St. Lucie West
utility bonds, road improvement notes payable, and other notes payable during
the three months ended September 30, 1999 compared to the same period during
1998.
Interest expense of $171,000 and $252,000 was capitalized during the three
months ended September 30, 1999 and 1998, respectively, in connection with
investments and advances to real estate joint ventures.
Net interest income increased by 12% during the nine months ended September
30, 1999 compared to the same period in 1998. Total interest income increased by
$21.3 million while total interest expense increased by $11.6 million. The
increase in interest income resulted from higher average interest earning
assets, primarily higher loans receivable and securities available for sale
average balances. The higher net interest income primarily resulted from the
items discussed above for the three months ended September 30, 1999 as well as
the recognition of $1.1 million of interest income resulting from the full
repayment of a $5.9 million commercial loan which had been classified as
nonaccrual and the recognition of $1.2 million of deferred interest income
resulting from a loan accounted for as a joint venture during 1998. The increase
in FHLB advance interest expense resulted from higher average balances during
the 1999 nine month period compared to the same 1998 period.
The net interest spread slightly increased during the three and nine months
ended September 30, 1999 compared to the same 1998 period. The increase resulted
from lower rates on interest paying liabilities caused by a change in the
interest bearing liability mix from higher rate other borrowings to lower rate
deposit accounts and lower short term borrowing rates during the 1999 period
compared to the same 1998 period. The lower rates paid on interest bearing
liabilities were partially offset by lower yields earned on interest earning
assets. The lower yields earned primarily resulted from significantly higher
securities available for sale average balances relative to loans and investment
securities during the 1999 period compared to the same 1998 period. The yields
on securities available for sale are generally lower than yields on loans and
investment securities.
-20-
<PAGE>
PROVISION FOR LOAN LOSSES
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1999 1998 1999 1998
------- ------ ------- -------
Balance, beginning of period $38,100 $30,600 $ 37,950 $ 28,450
Charge-offs:
Commercial real estate loans .. 0 (117) (211) (385)
Nonmortgage commercial ........ (26) (8) (87) (791)
Lease financing ............... (231) (332) (779) (683)
Small business - real estate .. (51) (70) (136) (70)
Small business - non-mortgage . (3,039) (325) (7,870) (483)
Consumer loans - indirect ..... (2,321) (2,188) (7,939) (6,473)
Consumer loans - direct ....... (368) (230) (1,580) (1,288)
Residential real estate loans . (10) 0 (10) (61)
Purchased residential
real estate loans ............ 0 0 (103) (108)
------ ------ ------- -------
(6,046) (3,270) (18,715) (10,342)
------ ------ ------- -------
Recoveries:
Commercial real estate loans .. 5 6 203 9
Lease financing ............... 32 54 181 166
Nonmortgage commercial ........ 18 41 168 430
Small business - non-mortgage . 49 0 123 17
Consumer loans - indirect ..... 479 337 1,429 1,153
Consumer loans - direct ....... 140 199 605 630
------ ------ ------- -------
723 637 2,709 2,405
------ ------ ------- -------
Net charge-offs ............... (5,323) (2,633) (16,006) (7,937)
Additions charged to operations 8,223 3,033 19,056 9,811
Allowance for loan losses
acquired ..................... 0 0 0 676
------ ------ ------- -------
Balance, end of period ........ $41,000 $31,000 $ 41,000 $ 31,000
====== ====== ======= =======
The provision for loan losses increased during the three and nine months
ended September 30, 1999 compared to the same 1998 periods due to:
1) charge-offs in the indirect consumer loan portfolio,
2) charge-offs in the small business non-mortgage loan portfolio, and
3) delinquency and charge-off trends in the small business loan portfolio
increasing the allowance for loan losses.
The Company ceased the origination of indirect consumer loans as part of
its December 1998 restructuring. The high charge offs and historical trends in
the small business non-mortgage portfolio has resulted in additions to the
allowance for loan losses. Modifications to the small business program have been
and will continue to be implemented as the Company continues to address issues
relating to this portfolio.
The above increases in the provision for loan losses were partially offset
by lower nonmortgage commercial charge-offs associated with the Company's
factoring operations during 1998. The Company ceased its factoring operations
during 1998.
-21-
<PAGE>
At the indicated dates the Company's risk elements and non-performing
assets were (in thousands):
September 30, December 31,
1999 1998
------------ -----------
Nonaccrual :
Tax certificates ....................... $ 859 $ 765
Loans and leases ....................... 28,668 23,364
------ ------
Total nonaccrual ....................... 29,527 24,129
------ ------
Repossessed Assets:
Real estate owned, net of allowance .... 3,077 5,503
REO acquired in connection with bulk
residential loan purchases ............ 250 0
Vehicles and equipment ................. 1,050 1,896
------ ------
Total repossessed assets ............... 4,377 7,399
------ ------
Contractually past due 90 days or more (1) 3 3,182
------ ------
Total non-performing assets ............ 33,907 34,710
Restructured loans ....................... 0 7
------ ------
Total risk elements .................... $33,907 $34,717
====== ======
(1) The majority of these loans at December 31, 1998 had matured and the
borrowers continued to make payments under the matured loan agreement.
BankAtlantic is in the process of renewing or extending these matured loans.
The increase in nonaccrual loans and leases resulted from:
1) a $2.7 million increase in small business nonaccrual loans,
2) an $8.2 million increase in nonaccrual residential loans primarily
resulting from the purchase of nonaccrual residential loans held for
sale as part of bulk purchases of residential loans and higher
nonaccrual purchased residential loans, and
3) a $349,000 increase in nonaccruals leases due to a larger portfolio.
Nonaccrual loans and REO in the purchased residential loans held for sale
portfolio amounted to $5.0 million and $250,000, respectively at September 30,
1999. These loans were acquired in connection with a $156 million bulk
residential loan purchase from the Resolution Trust Corporation. The Company
intends to segregate the portfolio and sell these loans to unrelated financial
service companies. Such loans are valued by individual loan pools at the lower
of cost or market. Included in gains on sale of loans held for sale during the
three and nine months ended September 30, 1999 was a $31,000 valuation allowance
recovery and a $56,000 valuation allowance charge related to purchased loans
held for sale. During the three months ended September 30, 1999, the Company
securitized $38.8 million of loans held for sale and sold $24.1 million of the
resulting mortgage-backed securities for a gain of $83,000.
The increase in nonaccrual loans was partially offset by declines in:
1) consumer nonaccrual loans, due primarily to the cessation
in December 1998 of indirect automobile lending, and
2) nonaccrual commercial real estate loans resulting from
the repayment of a $5.9 million nonaccrual loan.
The decline in repossessed assets resulted from the sale of a $2.9 million
commercial real estate property, a decline in consumer repossessed automobiles
and lower residential real estate owned. The decline was partially offset by the
foreclosure of a $2.2 million commercial real estate property.
The decline in loans contractually past due 90 days or more primarily
resulted from the payoff of two commercial real estate loans.
-22-
<PAGE>
NON-INTEREST INCOME
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
----------------------------- ----------------------------
(In thousands) 1999 1998 Change 1999 1998 Change
- -------------- ------ ------ ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Non-interest Income Excluding RBCO
and Real Estate Operations
Loan late fees and other loan income $ 1,404 $ 1,022 $ 382 $ 3,893 $ 3,132 $ 761
Gains on sales of loans held for sale 759 757 2 1,626 3,588 (1,962)
Trading account losses .............. (5) (1,226) 1,221 (59) (523) 464
Gains on sales of securities
available for sale ................. 31 269 (238) 1,449 2,462 (1,013)
Gains (losses) on sales of property
and equipment ...................... 34 0 34 1,494 (3) 1,497
Transaction accounts ................ 3,480 2,981 499 10,499 8,621 1,878
ATM fees ............................ 2,617 1,786 831 7,320 4,673 2,647
Other ............................... 791 920 (129) 2,919 2,448 471
------ ------ ------ ------ ------ ------
Non-interest income excluding RBCO
and real estate operations ......... 9,111 6,509 2,602 29,141 24,398 4,743
------ ------ ------ ------ ------ ------
RBCO Operations
Principal transactions .............. 3,680 1,469 2,211 8,384 1,469 6,915
Investment banking .................. 14,475 3,914 10,561 18,815 3,914 14,901
Commissions ......................... 4,422 2,088 2,334 10,429 2,088 8,341
Other ............................... 210 121 89 504 121 383
------ ------ ------ ------ ------ ------
Non-interest income - RBCO .......... 22,787 7,592 15,195 38,132 7,592 30,540
------ ------ ------ ------ ------ ------
Real Estate Operations
Gains on sales of real estate held
for development and sale ........... 241 676 (435) 5,628 5,935 (307)
Equity in earnings (losses) of
unconsolidated real estate joint
ventures ........................... (170) 0 (170) 1,140 0 1,140
Other ............................... 425 240 185 501 759 (258)
------ ------ ------ ------ ------ ------
Non-interest income - real estate
operations ......................... 496 916 (420) 7,269 6,694 575
------ ------ ------ ------ ------ ------
Total non-interest income ........... $32,394 $15,017 $17,377 $74,542 $38,684 $35,858
====== ====== ====== ====== ====== ======
</TABLE>
NON-INTEREST INCOME EXCLUDING RBCO AND REAL ESTATE OPERATIONS
Loan late fees and other fee income increased during the three and nine
months ended September 30, 1999 compared to the same 1998 period. The increase
resulted from higher late fees, consumer loan extension fees, loan repayment
penalties, and trade finance fees. The additional late fee income was related to
fees collected on consumer loans.
During the three months ended September 30, 1999 the Company sold $30.1
million of loans originated for resale for gains shown on the above table.
During the nine months ended September 30, 1999 the Company sold $95.1 million
of loans originated for resale, $20.4 million of loans purchased and classified
as held for sale and $1.4 million of leases for gains shown on the above table.
During the three and nine months ended September 30, 1998, the Company sold
$94.9 million and $236.8 million of loans held for sale for gains shown on the
above table.
During the three and nine months ended September 30, 1999, the Company's
losses on trading activities were $5,000 and $59,000, respectively. During 1999,
the Company's trading activities were expanded beyond trading in government
securities to include trading in options and future contracts on Eurodollar time
deposits that settle in three month or less. The Company did not have such
activities during the three and nine months ended September 30, 1998.
-23-
<PAGE>
During the three and nine months ended September 30, 1998, the Company sold
marketable equity trading securities for a $560,000 gain and realized $96,000 of
gains related to government securities trading. The unrealized losses on trading
securities for the three and nine months ended September 30, 1998 were $1.3
million and $1.2 million , respectively.
During the three months ended September 30, 1999 and 1998, the Company sold
$84.1 million and $312.4 million, respectively, of securities available for sale
for gains as shown on the above table. During the nine months ended September
30, 1999 and 1998 the Company sold $222.6 million and $700.5 million of
securities available for sale for gains as shown on the above table. Included in
the sales of securities available for sale were $24.1 million of securitized
loans during the three and nine months ended September 30, 1999.
During the three and nine months ended September 30, 1999, two branches
were consolidated and the vacated property was sold for a gain categorized as
gains on sales of property and equipment as shown on the above table.
The increase in transaction fee income during the three and nine months
ended September 30, 1999 compared to the same periods in 1998 resulted from:
1) an increase in the Company's non-interest bearing transaction
accounts, reflecting in part an increase in small business loans, and
2) changes made to the pricing of the Company's deposit products.
The significant increase in ATM fee income during 1999 was primarily
the result of additional ATM machines added during 1998, which brought the
Company's total number of ATM machines to approximately 800.
The decline in other income during the three months ended September 30,
1999 was due to lower commissions earned from brokers and teller check
outsourcing. The decrease in other income during the nine months ended September
30, 1999 compared to the same period in 1998 resulted from higher other account
service charges during 1998 compared to 1999.
NON-INTEREST INCOME - RBCO OPERATIONS
Principal transactions income during the three months ended September 30,
1999 increased compared to the same 1998 period due to improved equity trading
results. During the 1998 quarter the equity market plunged reflecting concerns
in Asia, Russia and Latin America. As a result of these market conditions,
equity trading revenues during the third quarter of 1998 were adversely
impacted.
Investment banking income significantly increased during the three months
ended September 30, 1999 compared to the same 1998 period resulting from a
completed $544 million initial public offering for Hudson City Bancorp, Inc.,
the holding company for Hudson City Savings Bank. RBCO served as the sole
manager for the issue.
Commission income during the three months ended September 30, 1999 compared
to the same 1998 period more than doubled reflecting income from the brokerage
operations conducted in various BankAtlantic's branches and income from
Southeast Research Group. Such brokerage operations began early in 1999 and the
Southeast Research Group was acquired by RBCO in June 1999.
During the nine months ended September 30, 1999 RBCO earned revenues on
principal transactions, investment banking and commissions as shown in the
preceding table. The activity for 1998 includes RBCO from the acquisition date
of June 30, 1998 through September 30, 1998.
NON-INTEREST INCOME - REAL ESTATE OPERATIONS
Real estate held for development and sale represents the net profits on
sales of real estate by SLWHC. Equity in earnings (losses) from unconsolidated
joint ventures reflects the Company's five real estate joint ventures. During
the three and nine months ended September 30, 1999 and 1998 SLWHC sold developed
land for gains as reported above. Other income represents accretion of SLWHC
impact fee receivables established at the acquisition date and storage income
from a marina property. The equity in earnings (loss) from real estate joint
ventures during the three and nine months ended September 30, 1999 primarily
resulted from the operations of the joint ventures and the sale of property in
one joint venture.
-24-
<PAGE>
NON-INTEREST EXPENSES
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
-------------------------- -------------------------
(In thousands) 1999 1998 Change 1999 1998 Change
- -------------- ---- ---- ------ ---- ---- ------
Non-Interest Expense Excluding RBCO
and Real Estate Operations
- -----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Employee compensation and benefits $ 9,657 $11,245 $(1,588) $ 28,332 $33,269 $(4,937)
Occupancy and equipment ........... 5,497 5,098 399 16,086 15,109 977
Federal insurance premium ......... 288 266 22 828 786 42
Advertising and promotion ......... 483 1,579 (1,096) 1,282 3,757 (2,475)
Amortization of cost over fair
value of net assets acquired ..... 709 706 3 2,130 2,066 64
Foreclosed asset activity, net .... (205) (7) (198) (1,470) (53) (1,417)
Other ............................. 4,697 5,979 (1,282) 14,086 16,231 (2,145)
------ ------ ------ ------- ------ ------
Non-interest expenses ............ 21,126 24,866 (3,740) 61,274 71,165 (9,891)
------ ------ ------ ------- ------ ------
RBCO Operations
- ---------------
Employee compensation and benefits 12,415 5,517 6,898 25,346 5,517 19,829
Occupancy and equipment ........... 873 467 406 1,959 467 1,492
Advertising and promotion ......... 337 192 145 846 192 654
Amortization of cost over fair
value of net assets .............. 306 271 35 854 271 583
Other ............................. 2,542 1,921 621 6,524 1,921 4,603
------ ------ ------ ------- ------ ------
Non-interest expenses ............. 16,473 8,368 8,105 35,529 8,368 27,161
------ ------ ------ ------- ------ ------
Real Estate Operations
- ----------------------
Employee compensation and benefits 141 162 (21) 529 525 4
Advertising and promotion ......... 152 177 (25) 537 501 36
Selling, general and administrative 1,243 812 431 3,225 2,691 534
------ ------ ------ ------- ------ ------
Non-interest expenses ............ 1,536 1,151 385 4,291 3,717 574
------ ------ ------ ------- ------ ------
Total non-interest expenses ....... $39,135 $34,385 $4,750 $101,094 $83,250 $17,844
====== ====== ===== ======= ====== ======
</TABLE>
NON-INTEREST EXPENSES BANK OPERATIONS
The decrease in employee compensation and benefits during the three and
nine months ended September 30, 1999 compared to the same periods in 1998
resulted primarily from the Company's December 1998 restructuring which reduced
the number of full time employees by approximately 115 and froze the accrual of
benefits under the defined benefit pension plan. The Company's full time
employees for bank operations declined by 210 at September 30, 1999 compared to
September 30, 1998.
Occupancy and equipment expenses increased during the three and nine
months ended September 30, 1999 compared to the same periods in 1998 due to the
expanded ATM network resulting in higher rental and repair and maintenance
expenses.
The decrease in advertising and promotion expenses during the three and
nine months ended September 30, 1999 compared to the same 1998 periods resulted
from:
1) the introduction of BankAtlantic's new corporate logo during 1998
using a TV identity campaign,
2) expenses relating to new products introduced by BankAtlantic during
1998, and
3) promotions to introduce BankAtlantic's new branches in Miami-Dade
County, Florida during 1998.
-25-
<PAGE>
Included in foreclosed asset activity, net during the three months ended
September 30, 1999 was a $316,000 gain on the sale of foreclosed land acquired
in connection with the 1996 acquisition of Bank of North America. Included in
foreclosed asset activity, net for the nine months ended September 30, 1999 was
a $1.3 million gain from the sale of one parcel of previously foreclosed
commercial real estate property. The above gains on sales of foreclosed assets
during the three and nine months ended September 30, 1999 were partially offset
by real estate owned operating expenses.
The decrease in other expenses during the three and nine months ended
September 30, 1999 compared to the same periods during 1998 reflects lower
operating expenses resulting primarily from the December 1998 restructuring and
management's continuing focus on expense reduction. As a consequence of the
above, the Company experienced a significant decrease in the following expense
categories:
1) Stationery, printing and supplies,
2) Postage, and
3) Consulting.
Additionally, corporate legal fees declined during the nine months ended
September 30, 1999 compared to the same 1998 period primarily as a result of an
insurance company reimbursement of $326,000 of previously expensed legal fees.
The above declines in other expenses were partially offset by higher ATM
expenses due to the expanded ATM network.
RBCO NON-INTEREST EXPENSES
The significant increase in employee compensation and benefits during the
three months ended September 30, 1999 compared to the same 1998 period was
primarily due to increases in commission and bonus expenses associated with the
Hudson City Bancorp initial public offering and salaries associated with the
expansion of business activities. The expansion of business activities includes
the diversification into the healthcare, consumer and technology industries, the
expansion of investment banking activities, expansion of retail operations into
BankAtlantic branches and the acquisition of the Southeast Research Group.
The increases in occupancy and equipment, advertising and other expenses
during the three months ended September 30, 1999 compared to the same 1998
period resulted from the expansion of business activities mentioned above.
The higher amortization of cost over fair value of net assets acquired
during the three months ended September 30, 1999 compared to the same 1998
period was attributable to the June 28, 1999 acquisition of the Southeast
Research Group which resulted in $30,000 of increased amortization of goodwill.
RBCO non-interest expenses during the nine months ended September 30, 1999
were primarily impacted by the items discussed above. RBCO was acquired by the
Company on June 30, 1998.
REAL ESTATE OPERATIONS NON-INTEREST EXPENSES
Real estate operations non-interest expenses primarily related to SLWHC
expenses. The increase in selling, general and administrative expenses during
the three and nine months ended September 30, 1999 compared to the same 1998
period resulted from higher real estate taxes reflecting the purchase of
additional land during 1999 and higher consulting fees. Included in selling,
general and administrative expenses during the three and nine months ended
September 30, 1999 was $150,000 and $450,000 of consulting fees, respectively,
paid to the Abdo Companies, Inc., an affiliate of the Company. Additionally,
included in selling, general and administrative expenses during the three and
nine months ended September 30, 1999 were $95,000 of management fees paid to BFC
Financial Corporation, an affiliate of the Company.
During the three and nine months ended September 30, 1998, consulting fees
of $50,000 were paid to the Abdo Companies, Inc. There was no management fee
paid to BFC Financial Corporation during the three and nine months ended
September 30, 1998.
-26-
<PAGE>
SEGMENT REPORTING
The table below provides segment information for continuing operations for
the three and nine months ended September 30, 1999 and 1998:
For the Three Months For the Nine Months
(in thousands) Ended September 30, Ended September 30,
- -------------- -------------------- -------------------
1999 1998 1999 1998
Net Contribution After Income Taxes ------ ------- ------ ------
Bank investment operations -
wholesale residential ............ $ 2,459 $ 1,645 $ 7,068 $ 6,763
Bank investment operations - other 1,602 (78) 5,294 702
Bank loan operations - retail
products ......................... (2,673) (396) (4,440) (456)
Bank loan operations - commercial
products ......................... 4,595 2,425 14,702 6,943
Real estate operations ............ (1,069) (532) 1,492 977
Investment banking operations ..... 3,976 (420) 1,575 (420)
------ ------- ------ ------
Net contribution .................. $ 8,890 $ 2,644 $25,691 $14,509
====== ======= ====== ======
BANK INVESTMENT OPERATIONS
Segment net contribution from bank investment operations - other improved
during the three and nine months ended September 30, 1999 compared to the same
periods in 1998. The improvement resulted from increased earning assets relating
primarily to the purchase of REMIC securities during the period. The higher
interest expense and overhead also resulted from an increase in earning assets
during the 1999 periods compared to the same periods during 1998. Non-interest
income improved during the three months ended September 30, 1999 compared to the
same period during 1998 due to lower losses from trading activities during 1999
compared to 1998.
Segment net contribution from bank investment operations - wholesale
residential increased during the three months ended September 30, 1999 compared
to the same period in 1998 primarily from lower direct expenses resulting from
the Company's 1998 restructuring. Segment net contribution from bank investment
operations - wholesale residential increased during the nine months ended
September 30, 1999 compared to the same period in 1998 primarily from increases
in purchased residential loan yields as a result of decreased prepayments of the
underlying loans and corresponding slower premium amortization during 1999
compared to 1998.
BANK LOAN OPERATIONS
Segment net contribution from bank loan operations - commercial increased
during the three months ended September 30, 1999 compared to the same 1998
period due to an improvement in the net margin, recognition of $408,000 of
deferred interest income from a commercial real estate loan accounted for as a
joint venture during 1998, higher interest earning balances resulting from loan
growth, and higher noninterest income due to loan prepayment fees. Segment net
contribution from bank loan operations - commercial also increased during the
nine months ended September 30, 1999 compared to the same period in 1998 due to
the items mentioned above as well as interest income recognized upon the full
repayment of a $5.9 million nonaccrual loan and $1.2 million of deferred income
recognized from the commercial real estate loan accounted for as a joint
venture.
Segment net contribution from bank loan operations - retail declined during
the three and nine months ended September 30, 1999 primarily from an increase in
the provision for loan losses. The additional provision for loan losses during
1999 was the result of increased small business and indirect consumer loan
charge-offs and delinquency trends.
REAL ESTATE OPERATIONS
Segment net contribution from real estate operations during the three
months ended September 30, 1999 decreased compared to 1998 due to higher
overhead allocation during 1999. The additional overhead allocation reflects a
significant increase in intercompany borrowings during 1999 compared to 1998.
Segment net contribution from real estate operations during the nine months
ended September 30, 1999 increased primarily due to the sale of property in one
joint venture.
-27-
<PAGE>
INVESTMENT BANKING OPERATIONS
Investment banking operations consisted of the operations of RBCO. During
the three and nine months ended September 30, 1999, RBCO's net contribution
increased significantly resulting primarily from the Hudson City Bancorp initial
public offering. RBCO was acquired by the Company on June 30, 1998.
FINANCIAL CONDITION
The Company's total assets at September 30, 1999 were $4.0 billion compared
to $3.8 billion at December 31, 1998. The increase in total assets primarily
resulted from increased:
1) loans held for sale balances due to bulk purchases of residential
loans categorized as held for sale,
2) securities available for sale resulting from the purchase of REMIC's,
and
3) tax certificates due to certificates purchased in Florida in June
1999.
The above increases in total assets were partially offset by decreased:
1) loans receivable resulting from the repayment of consumer indirect
automobile loans and purchased residential loans held to maturity,
2) mortgage servicing rights resulting from the April 1999 sale, and
3) trading securities due to lower RBCO state and municipality bond
inventories.
The Company's total liabilities at September 30, 1999 were $3.7 billion
compared to $3.5 billion at December 31, 1998. The increase in total liabilities
primarily resulted from increased:
1) deposit balances reflecting the acquisition of brokered deposits and
public funds and an increase in noninterest bearing deposit balances.
The majority of the brokered deposits were acquired through RBCO,
2) securities sold under agreements to repurchase used to fund securities
available for sale growth, and
3) bonds payable resulting from a roadway and improvement bond associated
with the St. Lucie West development and other notes payable.
The above increases in total liabilities were partially offset by
decreased:
1) advances from FHLB due to maturities and redemptions,
2) advances by borrowers for taxes and insurance reflecting the April
1999 sale of mortgage servicing rights which was completed during July
1999, and
3) other liabilities resulting from activities associated with
discontinued operations and restructuring charge liabilities.
MARKET RISK
Market risk is defined as the risk of loss arising from adverse changes in
market valuation which arise from interest rate risk, foreign currency exchange
rate risk, commodity price risk, and equity price risk. The Company's primary
market risk is interest rate risk and its secondary market risk is equity price
risk.
EQUITY PRICE RISK
The Company maintains a portfolio of trading and available for sale
securities which subjects the Company to equity pricing risks. The change in
fair values of equity securities represents instantaneous changes in all equity
prices segregated by trading securities, securities sold not yet purchased and
available for sale securities. The following are hypothetical changes in the
fair value of the Company's securities sold not yet purchased, trading and
available for sale securities at September 30,
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<PAGE>
1999 based on percentage changes in fair value. Actual future price appreciation
or depreciation may be different from the changes identified in the table below.
Available Securities Total
Percent Trading for Sale Sold Not Dollar
Change in Securities Securities Yet Change from
Fair Value Fair Value Fair Value Purchased 0%
---------- ---------- ---------- --------- -----------
(dollars in thousands)
20 % $21,582 $31,584 $4,165 $ 9,555
10 % $19,784 $28,952 $3,818 $ 4,778
0 % $17,985 $26,320 $3,471 $ 0
(10)% $16,187 $23,688 $3,124 $(4,778)
(20)% $14,388 $21,056 $2,777 $(9,555)
RBCO is a market maker in equity securities which could from time to time
require them to hold securities during declining markets. The Company attempts
to manage its equity price risk by maintaining a relatively small portfolio of
securities and evaluating equity securities as part of the Company's overall
asset and liability management process.
INTEREST RATE RISK
The majority of the Company's assets and liabilities are monetary in nature
subjecting the Company to significant interest rate risk. During 1998, the
Company began trading government securities which are generally bought and sold
on the same day. During the second quarter of 1999 the Company's trading
activities were expanded beyond trading in government securities to trading in
options and futures on Eurodollar time deposits which expire in three months or
less. Eurodollar time deposits are indexed to the LIBOR.
The Company has developed a model using vendor software to quantify its
interest rate risk. A sensitivity analysis was performed measuring the Company's
potential gains and losses in net portfolio fair values of interest rate
sensitive instruments at September 30, 1999 resulting from a change in interest
rates. Interest rate sensitive instruments included in the model were the
Company's:
/bullet/ loan portfolio,
/bullet/ debt securities available for sale,
/bullet/ investment securities,
/bullet/ FHLB stock,
/bullet/ Federal Funds sold,
/bullet/ government securities,
/bullet/ Eurodollar time deposit options and futures
/bullet/ deposits, including brokered deposits and public funds,
/bullet/ advances from FHLB,
/bullet/ securities sold under agreements to repurchase,
/bullet/ Federal Funds purchased,
/bullet/ Notes and Bonds payable
/bullet/ Subordinated Debentures,
/bullet/ Trust Preferred Securities, and
/bullet/ off-balance sheet loan commitments,
The Company has fixed rate loan commitments aggregating $12.6 million at
September 30, 1999.
The model calculates the net potential gains and losses in net portfolio
fair value by:
(i) discounting anticipated cash flows from existing assets, liabilities
and off-balance sheet contracts at market rates to determine fair
values at September 30, 1999,
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<PAGE>
(ii) discounting the above expected cash flows based on instantaneous and
parallel shifts in the yield curve to determine fair values, and
(iii) the difference between the fair value calculated in (i) and (ii) is
the potential gain or loss in net portfolio fair values.
Management has made estimates of fair value discount rates that it believes
to be reasonable. However, because there is no quoted market for many of these
financial instruments, 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.
Presented below is an analysis of the Company's interest rate risk at
September 30, 1999 as calculated utilizing the Company's model. The table
measures changes in net portfolio value for instantaneous and parallel shifts in
the yield curve in 100 basis point increments up or down.
Net Portfolio
Changes Value Dollar
in Rate Amount Change
------- ------------- -------
(Dollars in thousands)
+200 bp $270,473 $(77,835)
+100 bp $309,094 $(39,214)
0 bp $348,308 $ 0
(100) bp $380,643 $ 32,335
(200) bp $351,428 $ 3,120
In preparing the above table, the Company makes various assumptions to
determine the net portfolio value at the assumed changes in interest rate. These
assumptions include:
/bullet/ loan prepayment rates,
/bullet/ deposit decay rates,
/bullet/ market values of certain assets under the representative
interest rate scenarios, and
/bullet/ repricing of certain deposits and borrowings
It was also assumed that delinquency rates would not change as a result of
changes in interest rates although there can be no assurance that this would be
the case. Even if interest rates change in the designated increments, there can
be no assurance that the Company's assets and liabilities would be impacted as
indicated in the table above. In addition, a change in U.S. Treasury rates in
the designated amounts, accompanied by a change in the shape of the yield curve
could cause significantly different changes to the fair values than indicated
above. Furthermore, the result of the calculations in the preceding table are
subject to significant deviations based upon actual future events, including
anticipatory and reactive measures which the Company may take in the future.
LIQUIDITY AND CAPITAL RESOURCES
On October 1, 1999, the Company entered into a strategic relationship and
agreed to invest $15 million in cash and shares of the Company's Class A common
stock in an internet-based company which provides marketing information,
application solutions and customer relationship management applications. In
exchange for its investment, the Company received appoximately 12.37% of this
Company's currently outstanding common stock. The Company will pay $10 million
in cash over a five month period commencing in October, 1999 and issued on
October 6, 1999 848,364 shares of restricted Class A common stock to this
Company. The Company anticipates benefits from this strategic relationship
through the exchange of ideas and cooperation in the development by this Company
of technology and support systems for use by financial institutions. The Company
is entitled to select two nominees to participate as directors on the Board of
Directors of this Company.
On August 23, 1999, BankAtlantic Development Corporation, a wholly owned
subsidiary of the Company, entered into an agreement to buy Levitt Corporation,
headquartered in Boca Raton, Florida. Levitt is currently operating in Florida
and is focused on the development of active adult communities. The purchase
price for the acquisition is approximately $21 million in cash, subject to
adjustments. The transaction will be accounted for under the purchase method of
accounting,
-30-
<PAGE>
however it is not anticipated to create goodwill. Closing of the acquisition is
expected to occur by late 1999 or early next year and is subject to a number of
conditions, including receipt of required regulatory approvals.
On July 15, 1999, the Company announced it had established strategic
alliances for the purpose of providing BankAtlantic customers with a full range
of internet banking and financial services. The Company has entered into
contracts with Edify Corporation, NCR Corporation, M&I Data Services and
CheckFree Corporation. These companies will assist BankAtlantic in the
development of web based banking. The cost of the above contracts is estimated
at $1.7 million, the majority of which will be capitalized and amortized over
three years.
During the second quarter of 1999, the Company acquired for $3.0 million a
9.9% ownership interest in 1stVirtual, Inc., an independent company formed to
engage in internet banking that raised an aggregate of $31 million in a private
offering from institutional and individual investors. BankAtlantic has agreed
subject to receipt by BankAtlantic of regulatory approval, to allow 1stVirtual
to operate as a division of BankAtlantic until such time as their thrift charter
is obtained. At that time, subject to the terms of a purchase and assumption
agreement, 1stVirtual will buy the assets and liabilities of the division at
cost. At the time of the acquisition of the division, BankAtlantic will be
entitled to receive the greater of 50% of 1stVirtual's profits from the calendar
month after deposit products are first offered by the division through the end
of the calendar month subsequent to the closing date or $10,000 per month for
the period that deposit products are first offered by the division through the
closing date. BankAtlantic will be reimbursed for 100% of any losses in the
division. This investment in 1stVirtual is included in the Statement of
Financial Condition as securities available for sale.
On July 14, 1999, the Company's Board of Directors approved the repurchase
on the open market of up to 3.5 million shares of the Company's common stock.
The Board authorized the repurchase of common stock on a "time-to-time" basis,
depending upon market conditions and subject to compliance with applicable
securities laws. Pursuant to the above repurchase plan the Company paid $1.6
million to repurchase and retire 221,345 shares of Class B common stock during
the three months ended September 30, 1999.
BankAtlantic's primary sources of funds during the first nine months of
1999 were from principal collected on loans, securities available for sale and
investment securities held to maturity, sales of securities available for sale,
FHLB stock, REO, and real estate held for development, borrowings from FHLB
advances and securities sold under agreements to repurchase, sales of property
and equipment, sales of FHLB stock, sales of mortgage servicing rights and
deposit inflows. These funds were primarily utilized to fund operating expenses,
deposit outflows, loan purchases and fundings, pay dividends, repay advances
from borrowers for taxes and insurance and to purchase FHLB stock, tax
certificates, trading securities, joint venture investments and securities
available for sale and acquire common stock. At September 30, 1999, BankAtlantic
met all applicable liquidity and regulatory capital requirements.
The Company is currently considering various corporate alternatives
concerning its real estate operations conducted through its wholly owned
subsidiary BankAtlantic Development Corporation ("BDC"). The Company was
originally considering a spin off of BDC to shareholders; however, as a result
of potential adverse tax consequences, the Company is now exploring other
alternatives, including the possibility of selling a portion of BDC's common
stock. Any transaction would be subject to Board of Directors' and regulatory
approval.
The Company's commitments to originate loans at September 30, 1999 were
$173.8 million compared to $169.0 million at September 30, 1998. Additionally at
September 30, 1998, the Company had commitments to purchase securities available
for sale of $12.0 million. The Company did not have any commitments to purchase
loans and securities available for sale at September 30, 1999. At September 30,
1999, loan commitments were 6.8% of net loans receivable. At September 30, 1999,
commitments to sell fixed rate mortgage backed securities were $9.6 million.
LTI is obligated on leases sold with full recourse by LTI to investors
prior to the Company's acquisition. Under the terms of such agreements, LTI is
subject to recourse for 100% of the remaining balance of the lease receivable
sold upon a default by the lessees. At September 30, 1999, the amount of lease
payments subject to such recourse provisions was approximately $3.4 million and
a $137,000 estimated liability on leases sold with recourse is included in other
liabilities in the Company's Statement of Financial Condition.
-31-
<PAGE>
At the indicated date BankAtlantic's capital amounts and ratios were:
<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>
AT SEPTEMBER 30, 1999:
Total risk-based capital $349,611 14.27% > $196,026 > 8.00% > $245,033 > 10.00%
= = = =
Tier I risk-based capital $318,847 13.01% > $ 98,013 > 4.00% > $147,020 > 6.00%
= = = =
Tangible capital ........ $318,847 8.39% > $ 56,994 > 1.50% > $ 57,021 > 1.50%
= = = =
Core capital ............ $318,847 8.39% > $151,985 > 4.00% > $189,981 > 5.00%
= = = =
AT DECEMBER 31, 1998:
Total risk-based capital $336,131 13.92% > $193,150 > 8.00% > $241,438 > 10.00%
= = = =
Tier I risk-based capital $305,860 12.67% > $ 96,575 > 4.00% > $144,863 > 6.00%
= = = =
Tangible capital ........ $305,860 8.48% > $ 54,111 > 1.50% > $ 54,111 > 1.50%
= = = =
Core capital ............ $305,680 8.48% > $144,297 > 4.00% > $180,371 > 5.00%
= = = =
</TABLE>
Savings institutions are also subject to the provisions of the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"). Regulations
implementing the prompt corrective action provisions of FDICIA define specific
capital categories based on FDICIA's defined capital ratios, as discussed more
fully in the Company's Annual Report on Form 10K for the year ended December 31,
1998.
The Company's wholly owned subsidiary, RBCO, is subject to the net capital
provision of Rule 15c3-1 under the Securities Exchange Act of 1934 which
requires that RBCO's aggregate indebtedness shall not exceed 15 times net
capital as defined under such provision. Additionally, RBCO, as a market marker,
is subject to supplemental requirements of Rule 15c3-1(a)4, which provides for
the computation of net capital to be based on the number and price of issues in
which markets are made by RBCO, not to exceed $1,000,000. At September 30, 1999,
RBCO's regulatory net capital was approximately $12.9 million, which exceeded
minimum net capital rule requirements by $11.9 million.
RBCO operates under the provisions of paragraph (K)(2)(ii) of Rule 15c3-3
of the Securities and Exchange commission as a fully-disclosed broker and,
accordingly, customer accounts are carried on the books of the clearing broker.
However, RBCO safekeeps and redeems municipal bond coupons for the benefit of
its customers. Accordingly, RBCO is subject to the provisions of SEC Rule 15c3-3
relating to possession or control and customer reserve requirements and was in
compliance with such provisions at September 30, 1999.
YEAR 2000 ISSUES
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the upcoming change in the century. If not corrected, many
computer applications could fail or create erroneous results by or at the Year
2000. The consequences of incomplete or untimely resolution of Year 2000 issues
represent an uncertainty that could affect future financial results. The Year
2000 issue affects virtually all companies and organizations.
The Company has undertaken various initiatives intended to ensure that
computer applications will function properly with respect to dates in the Year
2000 and thereafter. The Company has established a Year 2000 action plan which
was presented to the Board of Directors on December 2, 1997. The action plan was
developed using the guidelines outlined in the Federal Financial Institutions
Examination Council's "The Effect of 2000 on Computer Systems". The six phases
of the Company's action plan are: (1) Awareness - Define the Year 2000 issues,
gain executive level support, establish a project team
-32-
<PAGE>
and develop a strategy which encompasses technology and business issues, (2)
Assessment - Assess the size and complexity of the issues and detail the
magnitude of the effort necessary to address them, (3) Renovation - Code
enhancements, hardware and software upgrades, and system replacements, (4)
Validation - Testing of software, system components and connections between
systems, (5) Implementation - Systems should be certified as Year 2000 ready by
the business users, and (6) Contingency planning determination of strategy to
handle the most likely worst case scenarios on Year 2000 issues.
The Company has completed its action plan for mission critical and
non-critical systems and processes.
The majority of the Company's mission critical information technology
system structure ("IT") has been outsourced to third party vendors. The
Company's internal IT primarily consists of a minicomputer for item processing
and a personal computer based wide area network. The wide area network's primary
function is to communicate with third party service bureaus and secondarily to
run non-critical personal computer applications such as E-mail, word processing
and spreadsheet programs. The Company has various non-IT systems including but
not limited to, vault security equipment, branch security equipment, telephone
systems, circuit boards on building equipment, building elevators, and
appliances. While the above IT and non-IT systems could fail or create erroneous
results by or at the Year 2000, the Company believes that all mission critical
IT and non-IT systems are Year 2000 compliant.
The Company relies on third party vendors to perform loan, deposit, general
ledger, clearing agent functions and other application processing. The Company
has monitored the Year 2000 progress of its mission critical and non-mission
critical vendors. Most contracts with vendors signed after January 1998 have
included Year 2000 warranty language. While the Company believes that these
contractual provisions are enforceable, the Company nevertheless has established
alternatives in its contingency planning in the event Year 2000 problems arise.
For those contracts signed prior to January 1998, the Company has worked closely
with vendors to evaluate Year 2000 compliance. The Company sent out
questionnaires to all of its vendors and 62% of the total vendors responded,
including 100% of the mission critical vendors. Thirty-three vendors have been
identified as providing mission critical systems, processes or services. All but
one of the mission critical vendors are believed to be Year 2000 compliant. The
one noncompliant vendor is a governmental agency which provides software for
regulatory reports filed with such agency. The Company expects to receive an
upgraded version of the reporting software from the governmental agency later
this year, however the reporting requirement can be satisfied by filing manual
documents if the software is not compliant. Although the Company expects all of
its vendors to be Year 2000 compliant, the Company may experience adverse
consequences if any of its vendors or the services provided by the vendors are
impacted by Year 2000 computer failures. Included in the Statement of Operations
during the three and nine months ended September 30, 1999 and 1998 were $32,000
and $125,000 and $87,000 and $150,000, respectively, of third party expenses
related to the Year 2000 action plan. The Company estimates that it will spend
approximately $75,000 on Year 2000 consulting services, $100,000 on software and
hardware maintenance specifically related to Year 2000, $100,000 on RBCO system
upgrades and consulting services and $150,000 for contingency planning during
the remainder of 1999. The above items were or will be expensed as incurred and
do not include employee compensation allocated for time spent on the Year 2000
project. Included in the above Year 2000 expenses are remediation expenses.
Remediation expenses through September 30, 1999 were approximately $25,000.
Risk factors associated with the Year 2000 include the risk that the
Company's business could be disrupted due to vendors, suppliers, and customer
system failures, or even the possible loss of electrical power or phone service.
The Company has assessed the probability of these events and has formulated a
contingency plan. The Company could also be subjected to Year 2000 litigation
from customers, borrowers and suppliers as a result of both internal and third
party system failures. Further, the credit quality of the Company's loans may be
affected by the failure of a borrower's operating or other systems as a
consequence of a Year 2000 issue or the related failure of a borrower's key
suppliers, customers, or service providers resulting in higher provisions for
loan losses.
The Company's underwriting and credit policies include consideration of a
borrower's potential Year 2000 issues. The Company has determined that consumer
and residential loans involve little or no Year 2000 risk, while small business
loans and commercial loans have potential Year 2000 risk. Small business and
commercial lending departments have established specific Year 2000 credit
policies, which are summarized below.
<PAGE>
Small Business Loans - The individual dollar amount of these loans in this
category is low. Most loans are for less than $100,000. The Company has sent out
Year 2000 questionnaires to all small business borrowers and received a 60%
response rate. Based on our review of the responses, the Company attempted to
assess the Year 2000 risk of each borrower.
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<PAGE>
Commercial Loans - The majority of our commercial loans are collateralized
by real estate, some of which involve land only, which mitigates the Bank's risk
for this category of loan. The Company has sent out Year 2000 questionnaires to
all commercial loan borrowers and received a 54% response rate. The Commercial
Loan officers have had one-on-one meetings with each borrower to discuss Year
2000 issues. Based on the responses and the meetings, the officer's categorized
each loan as High, Medium or Low Year 2000 risk. High risk loans are being
monitored to determine the Borrower's progress towards Year 2000 compliance.
Once achieved, the loan is moved to a lower risk category. There have been no
loans made in 1999 that are considered High Risk. Should BankAtlantic decide to
extend credit to a high risk borrower, policies are in place to mitigate the
risk, such as charging a premium on the loan's interest rate.
There is no assurance that the Company's borrowers will be able to meet
their obligations to the Company if these borrowers experience Year 2000
problems.
Certain assets of the Company may have to be replaced, based on upgrades to
equipment and software that are part of the Company's normal business needs,
rapidly developing technology, and a three year capital equipment and software
replacement plan. The Company does not anticipate impairment or significant
replacement of assets related to the Year 2000 issue.
There is no assurance that the foregoing has identified all costs, risks or
possible losses which the Company may experience associated with Year 2000
issues. The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in part from the
uncertainty of the Year 2000 readiness of third-party suppliers, borrowers and
customers, the Company is unable to determine at this time whether the
consequences of Year 2000 failures will have a material impact on the Company's
results of operations, liquidity or financial condition. The goal of the Year
2000 Project is to significantly reduce the Company's level of uncertainty about
the Year 2000 issues and, the Company believes that, with the implementation of
new business systems and completion of the project as scheduled, the possibility
of significant interruptions of normal operations should be reduced.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-34-
<PAGE>
PART II - OTHER INFORMATION
Exhibits and Reports on Form 8K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BANKATLANTIC BANCORP, INC.
November 15, 1999 By: /s/Alan B. Levan
- ----------------- --------------------------------
Date Alan B. Levan
Chief Executive Officer/
Chairman/President
November 15, 1999 By: /s/Frank V. Grieco
- ----------------- --------------------------------
Date Frank V. Grieco
Senior Executive Vice President,
Principal Financial and
Accounting Officer
<PAGE>
EXHIBIT 11
EARNINGS PER SHARE
The following reconciles the numerators and denominators of the basic and
diluted earnings per share.
<TABLE>
<CAPTION>
For the Three Months ended For the Three Months ended
(In thousands, except share data and September 30, 1999 September 30, 1998
percentages) ----------------------------------- -----------------------------------
Class A Class B Total Class A Class B Total
---------- --------- ------ ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
BASIC NUMERATOR
Actual dividends declared ........... $ 758 $ 228 $ 986 $ 735 $ 260 $ 995
Basic allocation of undistributed
earnings from continuing operations 6,051 1,853 7,904 1,269 380 1,649
---------- ---------- ------ ---------- ---------- -------
Income from continuing operations ... 6,809 2,081 8,890 2,004 640 2,644
Income from discontinued operations . 286 87 373 (9,377) (2,811) (12,188)
---------- ---------- ------ ---------- ---------- -------
Net income .......................... $ 7,095 $ 2,168 $ 9,263 $ (7,373) $ (2,171) $ (9,544)
========== ========== ====== ========== ========== =======
BASIC DENOMINATOR
Weighted average shares outstanding . 30,583,412 10,295,600 31,480,764 10,384,137
========== ========== ========== ==========
Allocation percentage ............... 76.57% 23.43% 76.93% 23.07%
========== ========== ========== ==========
Basic earnings per share ............ $ 0.23 $ 0.21 $ (0.23) $ (0.21)
========== ========== ========== ==========
DILUTED NUMERATOR
Actual dividends declared ........... $ 758 $ 228 $ 986 $ 735 $ 260 $ 995
---------- ---------- ------ ---------- ---------- -------
Basic allocation of undistributed
earnings from continuing operations 6,051 1,853 7,904 1,269 380 1,649
Reallocation of basic undistributed
earnings due to change in allocation
percentage ......................... 509 (509) 0 (21) 21 0
---------- ---------- ------ ---------- ---------- -------
Diluted allocated undistributed
earnings from continuing operations 6,560 1,344 7,904 1,248 401 1,649
---------- ---------- ------ ---------- ---------- -------
Interest expense on convertible debt 1,250 256 1,506 0 0 0
---------- ---------- ------ ---------- ---------- -------
Dilutive net income from continuing
operations ........................ 8,568 1,828 10,396 1,983 661 2,644
Dilutive net income from discontinued
operations ........................ 309 64 373 (9,225) (2,963) (12,188)
---------- ---------- ------ ---------- ---------- -------
Net income .......................... $ 8,877 $ 1,892 $10,769 $ (7,242) $ (2,302) $ (9,544)
========== ========== ====== ========== ========== =======
DILUTED DENOMINATOR
Basic weighted average shares
outstanding ........................ 30,583,412 10,295,600 31,480,764 10,384,137
Convertible debentures .............. 17,870,080 0 0 0
Options ............................. 308,795 682,697 531,344 924,877
---------- ---------- ---------- ----------
Diluted weighted average shares
outstanding ........................ 48,762,287 10,978,297 32,012,108 11,309,014
========== ========== ========== ==========
Allocation percentage ............... 83.01% 16.99% 75.69% 24.31%
===== ===== ===== =====
Diluted earnings per share .......... $ 0.18 $ 0.17 $ (0.23) $ (0.21)
========== ========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
For the Nine Months Ended For the Nine Months Ended
(In thousands, except share data and September 30, 1999 September 30, 1998
percentages) ------------------------------------ -------------------------------------
Class A Class B Total Class A Class B Total
---------- ---------- ------ ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
BASIC NUMERATOR
Actual dividends declared .......... $ 2,182 $ 746 $ 2,928 $ 2,042 $ 765 $ 2,807
Basic allocation of undistributed
earnings from continuing operations 17,407 5,356 22,763 8,771 2,931 11,702
---------- ---------- ------ ---------- ---------- -------
Income from continuing operations .. 19,589 6,102 25,691 10,813 3,696 14,509
Income from discontinued operations 898 276 1,174 (9,299) (3,107) (12,406)
---------- ---------- ------ ---------- ---------- -------
Net income ......................... $ 20,487 $ 6,378 $26,865 $ 1,514 $ 589 $ 2,103
========== ========== ====== ========== ========== =======
BASIC DENOMINATOR
Weighted average shares outstanding 30,554,979 10,339,276 28,642,442 10,524,893
========== ========== ========== ==========
Allocation percentage .............. 76.47% 23.53% 74.96% 25.04%
========== ========== ========== ==========
Basic earnings per share ........... $ 0.67 $ 0.62 $ 0.05 $ 0.06
========== ========== ========== ==========
DILUTED NUMERATOR
Actual dividends declared .......... $ 2,182 $ 746 $ 2,928 $ 2,042 $ 765 $ 2,807
---------- ---------- ------ ---------- ---------- -------
Basic allocation of undistributed
earnings from continuing operations 17,407 5,356 22,763 8,771 2,931 11,702
Reallocation of basic undistributed
earnings due to change in
allocation percentage ............. 1,468 (1,468) 0 (163) 163 0
---------- ---------- ------ ---------- ---------- -------
Diluted allocated undistributed
earnings from continuing operations 18,875 3,888 22,763 8,608 3,094 11,702
---------- ---------- ------ ---------- ---------- -------
Interest expense on convertible debt 3,742 771 4,513 0 0 0
---------- ---------- ------ ---------- ---------- -------
Dilutive net income from continuing
operations ........................ 24,799 5,405 30,204 10,650 3,859 14,509
Dilutive net income from
discontinued operations ........... 973 201 1,174 (9,127) (3,279) (12,406)
---------- ---------- ------ ---------- ---------- -------
Net income ......................... $ 25,772 $ 5,606 $31,378 $ 1,523 $ 580 $ 2,103
========== ========== ====== ========== ========== =======
DILUTED DENOMINATOR
Basic weighted average shares
outstanding ....................... 30,554,979 10,339,276 28,642,442 10,524,893
Convertible debentures ............. 17,872,231 0 0 0
Options ............................ 337,700 708,489 780,116 1,104,198
---------- ---------- ---------- ----------
Diluted weighted average shares
outstanding ....................... 48,764,910 11,047,765 29,422,558 11,629,091
========== ========== ========== ==========
Allocation percentage .............. 82.92% 17.08% 73.57% 26.43%
========== ========== ========== ==========
Diluted earnings per share ......... $ 0.53 $ 0.51 $ 0.05 $ 0.05
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information
extracted from the Consolidated Statement of Financial
Condition at September 30, 1999 and the
Consolidated Statement of Operations for the nine months
ended September 30, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 921768
<NAME> BankAtlantic Bancorp, Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 95,372
<INT-BEARING-DEPOSITS> 5,824
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 17,985
<INVESTMENTS-HELD-FOR-SALE> 872,149
<INVESTMENTS-CARRYING> 87,981
<INVESTMENTS-MARKET> 87,981
<LOANS> 2,567,905
<ALLOWANCE> 41,000
<TOTAL-ASSETS> 3,970,629
<DEPOSITS> 2,140,096
<SHORT-TERM> 338,410
<LIABILITIES-OTHER> 72,727
<LONG-TERM> 1,182,429
0
0
<COMMON> 417
<OTHER-SE> 236,550
<TOTAL-LIABILITIES-AND-EQUITY> 3,970,629
<INTEREST-LOAN> 164,114
<INTEREST-INVEST> 49,053
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 213,167
<INTEREST-DEPOSIT> 57,645
<INTEREST-EXPENSE> 125,207
<INTEREST-INCOME-NET> 87,960
<LOAN-LOSSES> 19,056
<SECURITIES-GAINS> 1,390
<EXPENSE-OTHER> 101,133
<INCOME-PRETAX> 42,313
<INCOME-PRE-EXTRAORDINARY> 42,313
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,865
<EPS-BASIC> 0.67
<EPS-DILUTED> 0.53
<YIELD-ACTUAL> 7.74
<LOANS-NON> 28,668
<LOANS-PAST> 3
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 37,950
<CHARGE-OFFS> 18,715
<RECOVERIES> 2,709
<ALLOWANCE-CLOSE> 41,000
<ALLOWANCE-DOMESTIC> 40,470
<ALLOWANCE-FOREIGN> 530
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Statement of Financial Condition at September 30, 1998 (Unaudited)
and the Consolidated Statement of Operations for the nine months ended September
30, 1998 (Unaudited) and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Sep-30-1998
<EXCHANGE-RATE> 1
<CASH> 88,321
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,250
<TRADING-ASSETS> 23,123
<INVESTMENTS-HELD-FOR-SALE> 609,115
<INVESTMENTS-CARRYING> 55,853
<INVESTMENTS-MARKET> 55,853
<LOANS> 2,546,173
<ALLOWANCE> 31,000
<TOTAL-ASSETS> 3,682,624
<DEPOSITS> 1,883,229
<SHORT-TERM> 110,060
<LIABILITIES-OTHER> 141,410
<LONG-TERM> 1,300,604
0
0
<COMMON> 371
<OTHER-SE> 246,950
<TOTAL-LIABILITIES-AND-EQUITY> 3,682,624
<INTEREST-LOAN> 158,320
<INTEREST-INVEST> 33,554
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 191,874
<INTEREST-DEPOSIT> 49,680
<INTEREST-EXPENSE> 113,600
<INTEREST-INCOME-NET> 78,274
<LOAN-LOSSES> 9,811
<SECURITIES-GAINS> 1,939
<EXPENSE-OTHER> 83,250
<INCOME-PRETAX> 23,897
<INCOME-PRE-EXTRAORDINARY> 23,897
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,103
<EPS-BASIC> 0.05
<EPS-DILUTED> 0.05
<YIELD-ACTUAL> 7.88
<LOANS-NON> 18,281
<LOANS-PAST> 3,710
<LOANS-TROUBLED> 10
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 28,450
<CHARGE-OFFS> 10,342
<RECOVERIES> 2,405
<ALLOWANCE-CLOSE> 31,000
<ALLOWANCE-DOMESTIC> 30,480
<ALLOWANCE-FOREIGN> 520
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
