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EX-31.2 - EX-31.2 - Bluegreen Vacations Holding Corpg22858exv31w2.htm
EX-32.1 - EX-32.1 - Bluegreen Vacations Holding Corpg22858exv32w1.htm
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EX-31.1 - EX-31.1 - Bluegreen Vacations Holding Corpg22858exv31w1.htm
EX-32.3 - EX-32.3 - Bluegreen Vacations Holding Corpg22858exv32w3.htm
EX-23.1 - EX-23.1 - Bluegreen Vacations Holding Corpg22858exv23w1.htm
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
     
þ   Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 2009
     
o   Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number
001-09071
BFC Financial Corporation
(Exact name of registrant as specified in its charter)
     
Florida   59-2022148
     
(State or other jurisdiction of
incorporation or organization)
  (I.R.S Employer Identification No.)
     
2100 West Cypress Creek Road    
Fort Lauderdale, Florida   33309
     
(Address of principal executive office)   (Zip Code)
(954) 940-4900
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None.
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $.01 par Value

Class B Common Stock, $.01 par Value
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES o      NO x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES o      NO x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x      NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes o      No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
             
Large accelerated filer o   Accelerated filer o   Non-accelerated filer o   Smaller reporting company x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     YES o     NO x
On June 30, 2009, the aggregate market value of the registrant’s voting common equity held by non-affiliates was $10.8 million computed by reference to the closing price of the registrant’s Class A Common Stock on such date. The registrant does not have any non-voting common equity.
The number of outstanding shares of each of the registrant’s classes of common stock, as of March 26, 2010 was as follows:
Class A Common Stock, $.01 par value: 68,521,497 shares outstanding
Class B Common Stock, $.01 par value: 6,854,251shares outstanding
Documents Incorporated by Reference
Portions of the registrant’s Definitive Proxy Statement on Schedule 14A relating to the registrant’s 2010 Annual Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K.
The audited financial statements of Bluegreen Corporation for the three years ended December 31, 2009 are incorporated in Part II of this Form 10-K and are filed as Exhibit 99.1 to this Form 10-K.
 
 

 


 

BFC Financial Corporation
Annual Report on Form 10-K for the Year Ended December 31, 2009
TABLE OF CONTENTS
             
PART I
       
   
 
       
Item 1.       3  
Item 1A.       30  
Item 1B.       56  
Item 2.       57  
Item 3.       58  
Item 4.       63  
   
 
       
PART II
       
   
 
       
Item 5.       64  
Item 6.       66  
Item 7.       68  
Item 7A.       148  
Item 8.       152  
Item 9.       262  
Item 9A.       263  
Item 9B.       265  
   
 
       
PART III
       
   
 
       
Item 10.       265  
Item 11.       265  
Item 12.       265  
Item 13.       265  
Item 14.       265  
   
 
       
PART IV
       
   
 
       
Item 15.       266  
   
 
       
SIGNATURES     268  

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PART I
ITEM 1. BUSINESS
     Except for historical information contained herein, the matters discussed in this document 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 document and in any 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 expectations of BFC Financial Corporation (“BFC” and, unless otherwise indicated or the context otherwise requires, “we”, “us”, “our” or the “Company”) and are subject to a number of risks and uncertainties that are subject to change based on factors which are, in many instances, beyond the Company’s control. When considering those forward-looking statements, the reader should keep in mind the risks, uncertainties and other cautionary statements made in this report. The reader should not place undue reliance on any forward-looking statement, which speaks only as of the date made. This document also contains information regarding the past performance of our investments and the reader should note that prior or current performance of investments and acquisitions is not a guarantee or indication of future performance.
     Some factors which may affect the accuracy of the forward-looking statements apply generally to the financial services, real estate, resort development and vacation ownership, and restaurant industries, while other factors apply directly to us. Risks and uncertainties associated with BFC, including its wholly-owned Woodbridge Holdings, LLC subsidiary, include, but are not limited to:
    the impact of economic, competitive and other factors affecting the Company and its subsidiaries, and their operations, markets, products and services;
 
    adverse conditions in the stock market, the public debt market and other capital markets and the impact of such conditions on the activities of the Company and its subsidiaries;
 
    the impact of the current economic downturn on the price and liquidity of BFC’s common stock and on BFC’s ability to obtain additional capital, including that if BFC needs or otherwise believes it is advisable to issue debt or equity securities to fund its operations, it may not be possible to issue any such securities on favorable terms, if at all;
 
    BFC’s shareholders’ interests may be diluted if additional shares of BFC’s common stock are issued, and BFC’s public company investments may be diluted if BankAtlantic Bancorp, Bluegreen or Benihana issue additional shares of its stock;
 
    the performance of entities in which the Company has made investments may not be profitable or their results as anticipated;
 
    BFC is dependent upon dividends from its subsidiaries to fund its operations, and currently BankAtlantic Bancorp is prohibited from paying dividends and may not pay dividends in the future, whether as a result of such restriction continuing in the future or otherwise, and Bluegreen has historically not paid dividends on its common stock, and even if paid, BFC has historically experienced and may continue to experience negative cash flow;
 
    the risks associated with the merger of Woodbridge and BFC, including the uncertainty regarding the amount of cash that will be required to be paid to dissenting Woodbridge shareholders;
 
    the risks related to the indebtedness of Woodbridge’s subsidiaries, certain of which is in default, including that such subsidiaries may not be successful in restructuring any or all of the debt on acceptable terms, if at all, and the risks related to all such defaults and the rights of the lenders as a result thereof;
 
    the risks relating to Core’s liquidity, cash position and ability to continue operations, including the risk that Core will be obligated to make additional payments under its outstanding development bonds;
 
    the risk that Core’s restructuring activities could cause the lenders under the defaulted loans to foreclose on any property which serves as collateral for the defaulted loans, and Core could be forced to cease or significantly curtail its operations, which would likely result in additional impairment charges and losses beyond those already incurred;
 
    the risk that creditors of the Company’s subsidiaries (or subsidiaries of those companies) may seek to recover distributions previously made by those companies to their respective parent companies;
 
    risks associated with the securities we hold directly or indirectly, including the risk that we may record further impairment charges with respect to such securities in the event trading prices decline in the future;

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    risks associated with the Company’s business strategy, including our ability to successfully make investments notwithstanding our current financial and cash position and adverse conditions in the economy and the credit markets;
 
    the preparation of financial statements in accordance with GAAP involves making estimates, judgments and assumptions, and our financial condition and operating results may be materially impacted in the future if our estimates, judgments or assumptions prove to be incorrect; and
 
    the Company’s success at managing the risks involved in the foregoing.
     With respect to BFC’s subsidiary, BankAtlantic Bancorp, and its subsidiary, BankAtlantic, the risks and uncertainties include:
    the impact of economic, competitive and other factors affecting BankAtlantic Bancorp and its operations, markets, products and services, including the impact of the changing regulatory environment, a continued or deepening recession, continued decreases in real estate values, and increased unemployment on its business generally, BankAtlantic’s regulatory capital ratios, and the ability of its borrowers to service their obligations and its customers to maintain account balances;
 
    credit risks and loan losses, and the related sufficiency of the allowance for loan losses, including the impact on the credit quality of BankAtlantic loans (including those held in the asset workout subsidiary of BankAtlantic Bancorp) of a sustained downturn in the economy and in the real estate market and other changes in the real estate markets in BankAtlantic’s trade area and where BankAtlantic’s collateral is located;
 
    the quality of BankAtlantic’s real estate based loans including its residential land acquisition and development loans (including Builder land bank loans, Land acquisition and development and construction loans) as well as Commercial land loans, other Commercial real estate loans; and Commercial business loans; and conditions specifically in those market sectors;
 
    the risks of additional charge-offs, impairments and required increases in our allowance for loan losses; changes in interest rates and the effects of, and changes in, trade, monetary and fiscal policies and laws including their impact on the bank’s net interest margin;
 
    new consumer banking regulations and the effect on our service fee income;
 
    adverse conditions in the stock market, the public debt market and other financial and credit markets and the impact of such conditions on our activities, the value of our assets and on the ability of our borrowers to service their debt obligations and maintain account balances;
 
    BankAtlantic’s initiatives not resulting in continued growth of core deposits or increasing average balances of new deposit accounts or producing results which do not justify their costs;
 
    the success of BankAtlantic Bancorp expense reduction initiatives and the ability to achieve additional cost savings or to maintain the current lower expense structure;
 
    the impact of periodic valuation testing of goodwill, deferred tax assets and other assets;
 
    past performance, actual or estimated new account openings and growth may not be indicative of future results;
 
    BankAtlantic Bancorp’s cash offers to purchase the outstanding Trust Preferred Securities (“TRUPS”) are subject to the risk the requisite holders of the particular series of TruPS to which each offer do not consent and tender, and that if received we are not able to obtain financing upon acceptable terms, in amounts sufficient to complete the offers, if at all; and
 
    BankAtlantic Bancorp success at managing the risks involved in the foregoing.
     With respect to Bluegreen Corporation, the risks and uncertainties include, but are not limited to:
    changes in economic conditions, generally, in areas where Bluegreen operates, or in the travel and tourism industry;
 
    the availability of financing;
 
    increases in interest rates;
 
    changes in regulations and other factors, all of which could cause Bluegreen’s actual results, performance or achievements, or industry trends, to differ materially from any future results, performance, or achievements or trends expressed or implied herein.

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     In addition to the risks and factors identified above and in PART I, Item 1A of this report, reference is also made to other risks and factors detailed in reports filed by the Company, BankAtlantic Bancorp and Bluegreen with the Securities and Exchange Commission (the “SEC”). The Company cautions that the foregoing factors are not exclusive.
The Company
     We are a diversified holding company whose principal holdings include a controlling interest in BankAtlantic Bancorp, Inc. and its subsidiaries (“BankAtlantic Bancorp”), a controlling interest in Bluegreen Corporation and its subsidiaries (“Bluegreen”), a non-controlling interest in Benihana, Inc. (“Benihana”) and an indirect interest in Core Communities, LLC (“Core” or “Core Communities”). As a result of our position as the controlling shareholder of BankAtlantic Bancorp, we are a “unitary savings bank holding company” regulated by the Office of Thrift Supervision (“OTS”). As of December 31, 2009, we had total consolidated assets of approximately $6.0 billion and shareholders’ equity attributable to BFC of approximately $245.1 million.
     Historically, BFC’s business strategy has been to invest in and acquire businesses in diverse industries either directly or through controlled subsidiaries. BFC believes that in the short term that the Company’s and shareholders’ interests are best served by providing strategic support for its existing investments. In furtherance of this strategy, the Company took several steps in 2009 which it believes will enhance the Company’s prospects. Key actions taken in 2009 included the merger of BFC with Woodbridge Holdings; the purchase of an additional 7% interest in BankAtlantic Bancorp, increasing our economic interest in BankAtlantic Bancorp to 37% and increasing our voting interest in BankAtlantic Bancorp to 66%; and the purchase of an additional 23% interest in Bluegreen increasing our ownership in Bluegreen to 52%. The acquisition of this control position in Bluegreen resulted in a bargain purchase gain of approximately $183.1 million in the fourth quarter and net income attributable to BFC of $25.7 million for the year. In addition, we took actions to restructure Core in recognition of the continued depressed real estate market and its inability to meet its obligations to its lenders. Over the longer term and as the economy improves, we may look to increase our ownership in our affiliates or seek to make other opportunistic investments, with no pre-determined parameters as to the industry or structure of the investment.
     On September 21, 2009, we consummated our merger with Woodbridge Holdings Corporation pursuant to which Woodbridge Holdings Corporation merged with and into Woodbridge Holdings, LLC (“Woodbridge”), which continued as the surviving company of the merger and the successor entity to Woodbridge Holdings Corporation. Pursuant to the terms of the merger, which was approved by each company’s shareholders at their respective meetings held on September 21, 2009, each outstanding share of Woodbridge’s Class A Common Stock automatically converted into the right to receive 3.47 shares of our Class A Common Stock. Shares otherwise issuable to us attributable to the shares of Woodbridge’s Class A Common Stock and Class B Common Stock owned by us were canceled in connection with the merger. As a result of the merger, Woodbridge Holdings Corporation’s separate corporate existence ceased and its Class A Common Stock is no longer publicly traded. See Note 3 of the “Notes to Consolidated Financial Statements” for additional information about the merger.
     On November 16, 2009, we purchased approximately 7.4 million additional shares of Bluegreen’s common stock, which increased our ownership in Bluegreen from 9.5 million shares, or 29%, to 16.9 million shares, or 52% of Bluegreen’s outstanding stock. As a result of the purchase, we now hold a controlling interest in Bluegreen and, accordingly, have consolidated Bluegreen’s results since November 16, 2009 into our financial statements. Any references to Bluegreen’s results of operations includes only 45 days of activity for Bluegreen relating to the period from November 16, 2009, the date of the share purchase, through December 31, 2009 (the “Bluegreen Interim Period”). Prior to November 16, 2009, our approximate 29% equity investment in Bluegreen was accounted for under the equity method. See Note 4 of the “Notes to Consolidated Financial Statements” of this report for additional information about the Bluegreen share acquisition on November 16, 2009.
     As a holding company with controlling positions in BankAtlantic Bancorp and Bluegreen, generally accepted accounting principles (“GAAP”) requires the consolidation of the financial results of both entities. As a consequence, the assets and liabilities of both entities are presented on a consolidated basis in BFC’s financial statements. However, except as otherwise noted, the debts and obligations of the consolidated entities, including Woodbridge, are not direct obligations of BFC and are non-recourse to BFC. Similarly, the assets of those entities are not available to BFC absent a dividend or distribution. The recognition by BFC of income from controlled entities is determined based on the total percent of economic ownership in those entities. At December 31, 2009, BFC owned approximately 37% of BankAtlantic Bancorp’s Class A and Class B common stock, representing approximately 66% of BankAtlantic Bancorp’s total voting power.

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Available Information
     Our corporate website is www.bfcfinancial.com. The Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports are available free of charge through our website, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The Company’s Internet website and the information contained on or connected to it are not incorporated into this Annual Report on Form 10-K.
Business Segments
     As a result of the Woodbridge merger on September 21, 2009 and the Bluegreen share acquisition on November 16, 2009, the Company reorganized its reportable segments to better align its segments with the current operations of its businesses. The Company’s business activities currently consist of (i) Real Estate and Other Activities and (ii) Financial Services Activities. We currently report the results of operations through six reportable segments: BFC Activities, Real Estate Operations, Bluegreen Resorts, Bluegreen Communities, BankAtlantic and BankAtlantic Bancorp Parent Company. As a result of this reorganization, our BFC Activities segment now includes activities formerly reported in the Woodbridge Other Operations segment and our Real Estate Operations segment is comprised of what was previously identified as our Land Division.
     The presentation and allocation of the assets, liabilities and results of operations of each segment may not reflect the actual economic costs of the segment as a stand-alone business. If a different basis of allocation were utilized, the relative contributions of the segment might differ but, in management’s view, the relative trends in segments would not likely be impacted. See also Item 7 of this report, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 34 of the “Notes to Consolidated Financial Statements” contained in Item 8 of this report for a discussion of trends, results of operations, and other relevant information on each segment.
Real Estate and Other
     Our Real Estate and Other business activities include four business segments: BFC Activities, Real Estate Operations, and Bluegreen’s two business segments; Bluegreen Resorts and Bluegreen Communities.
BFC Activities
     The “BFC Activities” segment consists of BFC operations, our investment in Benihana, and the other operations described below.
     BFC operations primarily consists of our corporate overhead and general and administrative expenses, including the expenses of Woodbridge, the financial results of a venture partnership that BFC controls and other equity investments, as well as income and expenses associated with BFC’s shared service operations which provides services in the areas of human resources, risk management, investor relations, executive office administration and other services that BFC provides to BankAtlantic Bancorp and Bluegreen. This segment also includes investments made by BFC/CCC, Inc., our wholly owned subsidiary (“BFC/CCC”).

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Investment in Benihana
     Benihana is a NASDAQ-listed company with two classes of common shares: Common Stock (BNHN) and Class A Common Stock (BNHNA). We own 800,000 shares of Benihana Series B Convertible Preferred Stock (“Convertible Preferred Stock”). The Convertible Preferred Stock is convertible into an aggregate of 1,578,943 shares of Benihana’s Common Stock at a conversion price of $12.67 per share of Convertible Preferred Stock, subject to adjustment from time to time upon certain defined events. Based on the number of currently outstanding shares of Benihana’s capital stock, the Convertible Preferred Stock, if converted, would represent an approximate 19% voting interest and an approximate 9% economic interest in Benihana. Holders of the Convertible Preferred Stock are entitled to receive cumulative quarterly dividends at an annual rate equal to $1.25 per share, payable on the last day of each calendar quarter. The Convertible Preferred Stock is subject to mandatory redemption of $20 million plus accumulated dividends on July 2, 2014 unless we elect to extend the mandatory redemption date to a date no later than July 2, 2024. At December 31, 2009, the closing price of Benihana’s Common Stock was $4.20 per share. The market value of the Convertible Preferred Stock if converted to Benihana’s Common Stock at December 31, 2009 would have been approximately $6.6 million.
     In December 2008, the Company performed an impairment evaluation of its investment in the Convertible Preferred Stock and determined that there was an other-than-temporary decline of approximately $3.6 million and, accordingly, the investment was written down to its fair value at that time of approximately $16.4 million. Concurrent with management’s evaluation of the impairment of this investment at December 31, 2008, it made the determination to reclassify this investment from investment securities to investment securities available for sale. At December 31, 2009, the Company’s estimated fair value of its investment in Benihana’s Convertible Preferred Stock was approximately $17.8 million. BFC will continue to monitor this investment to determine whether any further other-than-temporary impairment charges may be required in future periods. The estimated fair value of the Company’s investment in Benihana’s Convertible Preferred Stock was assessed using the income approach with Level 3 inputs by discounting future cash flows at a market discount rate combined with the fair value of the underlying shares that BFC would receive upon conversion of its shares of Benihana’s Convertible Preferred Stock. See Note 7 of the “Notes to Consolidated Financial Statements” in Item 8 of this report for further information.
Other Operations
     Other operations includes the consolidated operations of Pizza Fusion Holdings, LLC (“Pizza Fusion”) (which is a restaurant franchisor operating within the quick service and organic food industries), and the activities of Cypress Creek Capital Holdings, LLC (“Cypress Creek Capital”) and Snapper Creek Equity Management, LLC (“Snapper Creek”) and other investments and joint ventures. In addition, prior to obtaining a controlling interest in Bluegreen on November 16, 2009, we accounted for our investment in Bluegreen under the equity method of accounting and Bluegreen’s earnings or loss was included in the BFC Activities segment. Historically, the cost of the Bluegreen investment was adjusted to recognize our interest in Bluegreen’s earnings or losses. The difference between a) our ownership percentage in Bluegreen multiplied by its earnings and b) the amount of our equity in earnings of Bluegreen as reflected in our financial statements related to the amortization or accretion of purchase accounting adjustments made at the time of the initial acquisition of Bluegreen’s common stock in 2002 and a basis difference due to impairment charges recorded on the investment in Bluegreen, as described in Note 14 of the “Notes to Consolidated Financial Statements”.
     As part of our overall strategy to diversify our business, during the third quarter of 2009, we exercised our option to purchase 521,740 shares of Series B Convertible Preferred Stock of Pizza Fusion at a price of $1.15 per share or an aggregate purchase price of $600,000, resulting in an ownership interest of approximately 45% in Pizza Fusion. On January 15, 2010 we participated in Pizza Fusion’s $3 million private placement by investing another $400,000. As of March 31, 2010, Pizza Fusion had 18 restaurants, including 2 restaurants owned by Pizza Fusion and 16 franchised restaurants, operating in nine states and had entered into franchise agreements for an additional 12 stores by September 2010. Pizza Fusion is in its early stages and it will likely require additional financial support. Pizza Fusion is facing several challenges, including the effect of the current economic downturn on consumer spending patterns. In addition, adding to the adverse impact of the economy on the restaurant industry, the tightening of the credit markets has made it difficult for new franchisees to obtain financing. During 2009, the Company performed its annual review of goodwill for impairment and determined that the discounted value of estimated cash flows was below the carrying value of Pizza Fusion, resulting in a write-off of the entire $2.0 million of goodwill relating to the investment.

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Real Estate Operations
     The Real Estate Operations segment is comprised of the subsidiaries through which Woodbridge historically conducted its real estate business activities. It includes the operations of Core, Carolina Oak ,which engaged in homebuilding activities in South Carolina prior to the suspension of those activities in the fourth quarter of 2008, and Cypress Creek Holdings, LLC (“Cypress Creek Holdings”), which engages in leasing activities. These activities are concentrated primarily in Florida and South Carolina and have included the development and sale of land, the construction and sale of single family homes and town homes and the leasing of commercial properties and office space.
     Levitt and Sons was included in the Real Estate Operations segment until November 9, 2007 at which time it filed a voluntary bankruptcy petition and was deconsolidated from our audited consolidated financial statements. Levitt Commercial was also included in this segment until it ceased development activities after it sold all of its remaining units in 2007. Levitt Commercial which is also included in this segment disposed of its last asset in 2007.
Core Communities
     Core Communities was founded in May 1996 to develop a master—planned community in Port St. Lucie, Florida now known as St. Lucie West. Historically, its activities focused on the development of a master-planned community in Port St. Lucie, Florida called Tradition, Florida and a community outside of Hardeeville, South Carolina called Tradition Hilton Head. Until 2009, Tradition, Florida was in active development as was Tradition Hilton Head, although in a much earlier stage. As a master-planned community developer, Core Communities historically was engaged in four primary activities: (i) the acquisition of large tracts of raw land; (ii) planning, entitlement and infrastructure development; (iii) the sale of entitled land and/or developed lots to homebuilders and commercial, industrial and institutional end-users; and (iv) the development and leasing of income producing commercial real estate to commercial, industrial and institutional end-users.
     During 2009, the recession continued and the demand for residential and commercial inventory showed no signs of recovery, particularly in the geographic regions where Core’s properties are located. The decrease in land sales in 2009 and continued cash flow deficits contributed to, among other things, the deterioration of Core’s liquidity. As a result, Core has severely limited its development expenditures in Tradition, Florida and has completely discontinued development activity in Tradition Hilton Head. Its assets have been impaired significantly and in an effort to bring about an orderly liquidation without a bankruptcy filing, Core commenced negotiations with all of its lenders to restructure its outstanding debt in light of its cash position. Core is currently in default under the terms of all of its outstanding debt and Core continues to pursue all options with its lenders, including offering deeds in lieu and other similar transactions wherein Core would relinquish title to substantially all of its assets. As of February 5, 2010, with Core’s concurrence, a significant portion of the land in Tradition Hilton Head had been placed under the control of a court appointed receiver. There is no assurance that Core will be successful in restructuring its debts or achieving an orderly liquidation of its assets. In consideration of the foregoing, we evaluated Core’s real estate inventory for impairment on a project-by-project basis. As a result of the impairment analyses performed, we recorded impairment charges of $63.3 million related to Core’s real estate inventory to reduce the carrying amount of Core’s real estate inventory to its fair value at December 31, 2009.
     In December 2009, Core reinitiated efforts to sell two of its commercial leasing projects (the “Projects”) and began soliciting bids from several potential buyers to purchase assets associated with the Projects. The assets are available for immediate sale in their present condition and Core determined that it is probable that it will sell the Projects in 2010. Due to this decision, the assets associated with the Projects that are for sale have been classified as discontinued operations for all periods presented in accordance with the accounting guidance for the disposal of long-lived assets. Core has accepted an offer to sell the Projects, which has been approved by the lender with substantially all of the proceeds going to satisfy its obligations to the lender. However, there can be no assurance that the transaction will close or that the lender will release Core from its obligations. See Note 22 of the “Notes to Consolidated Financial Statements” for further information.

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Real Estate
 
Carolina Oak
     In 2007, Woodbridge acquired from Levitt and Sons all of the outstanding membership interests in Carolina Oak, a South Carolina limited liability company (formerly known as Levitt and Sons of Jasper County, LLC). The development activities at Carolina Oak, which is within Tradition Hilton Head, were suspended in the fourth quarter of 2008 as a result of, among other things, a deterioration in consumer confidence, overall softening of demand for new homes, a decline in the overall economy, increasing unemployment, a deterioration in the credit markets, and the direct and indirect impact of the turmoil in the mortgage loan market. In 2009, the housing industry continued to face significant challenges and Woodbridge made the decision to cease all activities at Carolina Oak. Furthermore, the lender declared a default of the $37.2 million loan that is collateralized by the Carolina Oak property. Subsequently, the lender was taken over by the FDIC and accordingly, the FDIC now holds the loan. While there may be issues with respect to compliance with certain loan covenants, we do not believe that an event of default occurred. Woodbridge is negotiating with representatives of the FDIC in an effort to bring about a satisfactory resolution with regard to the debt; however, the outcome of the negotiations is currently uncertain.
     At December 31, 2009 and 2008, we reviewed inventory of real estate at Carolina Oak for impairment in accordance with the accounting guidance for the impairment or disposal of long-lived assets. As a result of the analysis, we recorded impairment charges of $16.7 million and $3.5 million in cost of sales for the years ended December 31, 2009 and 2008, respectively, which are reflected in the Real Estate Operations segment. See Note 12 of the “Notes to the Consolidated Financial Statements” for further information.
Cypress Creek Holdings
     Since 2005, Cypress Creek Holdings has owned an 80,000 square foot office building in Fort Lauderdale, Florida. The building was previously 50% occupied by an unaffiliated third party pursuant to a lease which expired in March 2010. The tenant opted not to renew the lease and vacated the space as of March 31, 2010. We intend to seek to sell the building or lease the vacant space in the building to third parties, including our affiliates, in 2010. As of December 31, 2009, we evaluated the value of the office building for impairment in accordance with the accounting guidance for the impairment or disposal of long-lived assets and determined that the carrying value exceeded the fair value. Accordingly, we recorded an impairment charge of $4.3 million in our statement of operations for the year ended December 31, 2009.
Levitt Commercial
     During 2007, the Real Estate Operations segment also included Levitt Commercial, which was formed in 2001 to develop industrial, commercial, retail and residential properties. In 2007, Levitt Commercial ceased development activities after it sold all of its remaining units. Levitt Commercial’s revenues for the year ended December 31, 2007 amounted to $6.6 million which reflected the delivery of the 17 flex warehouse units at its remaining development project.
Levitt and Sons
     Acquired in December 1999, Levitt and Sons was a developer of single family homes and town home communities for active adults and families in Florida, Georgia, Tennessee and South Carolina. Increased inventory levels combined with weakened consumer demand for housing and tightened credit requirements negatively affected sales, deliveries and margins throughout the homebuilding industry. Levitt and Sons experienced decreased orders, decreased margins and increased cancellation rates on homes in backlog. Excess supply, particularly in previously strong markets like Florida, in combination with a reduction in demand resulting from tightened credit requirements and reductions in credit availability, as well as buyers’ fears about the direction of the market, exerted a continuous cycle of downward cycle of pricing pressure for residential homes.
     On November 9, 2007 (the “Petition Date”), Levitt and Sons and substantially all of its subsidiaries (collectively, the “Debtors”) filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the Southern District of Florida (the “Bankruptcy Court”).

9


 

Real Estate
 
     In connection with the filing of the Chapter 11 Cases, we deconsolidated Levitt and Sons as of November 9, 2007, eliminating all future operations from our financial results of operations. As a result of the deconsolidation of Levitt and Sons, we recorded our interest in Levitt and Sons under the cost method of accounting. Under cost method accounting, income is recognized only to the extent of cash received or upon the release of Levitt and Sons from its bankruptcy obligations through the approval of the Bankruptcy Court, at which time any recorded loss in excess of the investment in Levitt and Sons is recognized into income. As of November 9, 2007, Woodbridge had a negative investment in Levitt and Sons of $123.0 million and outstanding advances of $67.8 million due to Woodbridge resulting in a net negative investment of $55.2 million. Included in the negative investment was approximately $15.8 million associated with deferred revenue related to intra-segment sales between Levitt and Sons and Core Communities. During the fourth quarter of 2008, we identified approximately $2.3 million of deferred revenue on intercompany sales between Core and Carolina Oak that had been misclassified against the negative investment in Levitt and Sons. As a result, we recorded a $2.3 million reclassification between inventory of real estate and the loss in excess of investment in subsidiary in the consolidated statements of financial condition. Accordingly, as of December 31, 2008, our net negative investment was $52.9 million. During the pendency of the Chapter 11 Cases, we also incurred certain administrative costs in the amount of $1.6 million and $748,000 for the years ended December 31, 2008 and 2007, respectively, relating to certain services and benefits provided by us in favor of the Debtors. These costs included the cost of maintaining employee benefit plans, providing accounting services, human resources expenses, general liability and property insurance premiums, payroll processing expenses, licensing and third-party professional fees (collectively, the “Post Petition Services”). These costs were not significant in the year ended December 31, 2009.
     As previously reported, on February 20, 2009, the Bankruptcy Court entered an order confirming a plan of liquidation jointly proposed by Levitt and Sons and the Official Committee of Unsecured Creditors. That order also approved the settlement pursuant to the settlement agreement that was entered into on June 27, 2008, as amended. No appeal or rehearing of the Bankruptcy Court’s order was filed by any party, and the settlement was consummated on March 3, 2009, at which time, payment was made in accordance with the terms and conditions of the settlement agreement. Under cost method accounting, the cost of settlement and the related $52.9 million liability (less $500,000 which was determined as the settlement holdback and remained as an accrual pursuant to the settlement agreement), was recognized into income in the first quarter of 2009, resulting in a $40.4 million gain on settlement of investment in subsidiary. In the fourth quarter of 2009, we accrued approximately $10.7 million in connection with a portion of a tax refund of which the Levitt and Sons estate is entitled to pursuant to the Settlement Agreement entered into with the Joint Committee of Unsecured Creditors in the Chapter 11 Cases and, as a result, the gain on settlement of investment in subsidiary for the year ended December 31, 2009 was $29.7 million. See Note 25 of the “Notes to Consolidated Financial Statements” for more information regarding the tax refund.

10


 

Real Estate
 
Bluegreen
     On November 16, 2009, we purchased approximately 7.4 million additional shares of Bluegreen’s common stock, which increased our ownership in Bluegreen from 9.5 million shares, or 29%, to 16.9 million shares or 52% of Bluegreen’s common stock. As a result of the purchase, we hold a controlling interest in Bluegreen and, accordingly, have consolidated Bluegreen’s results since November 16, 2009 into our financial statements.
     Bluegreen is a leading provider of “Colorful Places to Live and Play™” through two divisions: Bluegreen Resorts and Bluegreen Communities. For the Bluegreen Interim Period, Bluegreen Resorts sales represented 83% of Bluegreen’s sales of real estate and Bluegreen Communities represented 17% of its sales of real estate. Bluegreen Resorts markets, sells and manages real estate-based vacation ownership interests (“VOIs”) in resorts generally located in popular, high-volume, “drive-to” vacation destinations, which were developed or acquired by Bluegreen or developed by others. Bluegreen also earns fees from third parties for providing sales, marketing, mortgage servicing, construction management, title, and resort management services to third party resort developers and owners. Bluegreen Communities acquires, develops and subdivides property and markets residential land home sites. The majority of these home sites are sold directly to retail customers who seek to build a home, in some cases on properties featuring a golf course and related amenities. Bluegreen Communities recently began offering real estate consulting and other services to third parties.
Bluegreen Resorts
     Bluegreen Resorts has been involved in the vacation ownership industry since its inception in 1994. As of December 31, 2009, Bluegreen managed approximately 222,600 VOI owners, including approximately 168,500 members in the Bluegreen Vacation Club, and it sells VOIs in the Bluegreen Vacation Club at 21 sales offices located at resorts located in the United States and Aruba. A deeded real estate interest in a Bluegreen Vacation Club VOI in any of Bluegreen resorts entitles the buyer to an annual or biennial allotment of “points” in perpetuity. Club members may use their points to stay in one of 27 Bluegreen Vacation Club — Club Resorts and 27 other Club Associated resorts as well as for other vacation options, including cruises and stays at over 4,000 resorts offered through Resort Condominiums International, LLC (“RCI”), an external exchange network. Club members who acquired or upgraded their VOIs on or after November 1, 2007 also have access to 21 Shell Vacation Club (“Shell”) resorts, through Bluegreen’s Select Connections™ joint venture with Shell. Shell is an unaffiliated privately-held resort developer.
     Since Bluegreen’s inception, it has generated approximately 328,000 VOI sales transactions, which include 2,593 VOI sales transactions on behalf of third party developers. Bluegreen Resorts’ estimated remaining life-of-project sales at December 31, 2009, were approximately $3.3 billion, which included $1.0 billion of completed inventory. For the Bluegreen Interim Period, Bluegreen Resorts recognized Sales and Segment Operating Profit of $15.3 million and $3.2 million, respectively.
     Bluegreen Resorts uses a variety of methods to attract prospective purchasers of VOIs, including marketing of mini-vacations either through face-to-face contact at kiosks in retail and leisure locations or through telemarketing campaigns and marketing to current owners of VOIs.
     Bluegreen’s Bluegreen Vacation Club system permits its VOI owners to purchase a real estate timeshare interest which provides owners with an annual or biennial allotment of points, which can be redeemed for occupancy rights at Bluegreen Vacation Club and Club Associate resorts. Bluegreen believes the Bluegreen Vacation Club allows its VOI owners to customize their vacation experience in a more flexible manner than traditional fixed-week vacation ownership programs. Bluegreen also offers a Sampler program. The Sampler program allows package purchasers to enjoy substantially the same amenities, activities and services offered to Bluegreen Vacation Club members during a one-year trial period. Bluegreen believes that it benefits from the Sampler program as it gives them an opportunity to market their VOIs to customers when they use their trial memberships at Bluegreen resorts and to recapture some of the costs incurred in connection with the initial marketing to prospective customers.

11


 

Real Estate
 
     Bluegreen’s emphasis on cash resulted in Bluegreen providing financing to approximately 68% of its vacation ownership customers in 2009. Customers are required to make a down payment of at least 10% of the VOI sales price and typically finance the balance of the sales price over a period of ten years. In 2009, Bluegreen began incentivizing its sales associates to encourage higher cash down payments, and Bluegreen has increased both the percentage of its sales that are 100% cash and its average down payment on financed sales. As of December 31, 2009, Bluegreen serviced $795.9 million of VOI receivables and its on-balance sheet vacation ownership receivables portfolio totaled approximately $348.7 million in principal amount. See “Accounting Pronouncements Not Yet Adopted” for further discussion. Historically Bluegreen has maintained vacation ownership receivables warehouse facilities and separate vacation ownership receivables purchase facilities to maintain liquidity associated with its vacation ownership receivables; however, the term securitization market had experienced significantly reduced activity and transactions that were consummated were on significantly more adverse terms. As a result of this and other factors, financial institutions are reluctant to enter into new credit facilities for the purpose of providing financing on consumer receivables. Several lenders to the timeshare industry, including certain of Bluegreen’s lenders, have announced that they either have or will be exiting the resort finance business or will not be entering into new financing commitments for the foreseeable future. In addition, the availability of financing for real estate acquisition and development and the capital markets for corporate debt have likewise been adversely impacted. See “Liquidity and Capital Resources” for a further discussion of Bluegreen’s vacation ownership receivables facilities and certain risks relating to such facilities.
Bluegreen Communities
     Bluegreen Communities focuses on developing and subdividing property and marketing residential home sites. The majority of sites are sold directly to retail customers who seek to build a home generally in the future (in some cases on properties featuring a golf course and other related amenities). Bluegreen Communities has historically sought to acquire and develop land near major metropolitan centers, but outside the perimeter of intense subdivision development, and in popular retirement areas. Starting in the fourth quarter of 2008 and in response to the challenging economic environment, Bluegreen began to sell home sites in only completed sections of its communities and significantly reduced its overall spending on development activities. As of December 31, 2009, Bluegreen Communities was actively engaged in marketing and selling home sites directly to retail consumers in communities primarily located in Texas, Georgia, and North Carolina. Bluegreen Communities had approximately $100.9 million of inventory at carrying value as of December 31, 2009. For the year ended December 31, 2009, Bluegreen Communities recognized sales of $3.1 million and Segment Operating Loss of $3.3 million.
     Historically Bluegreen has marketed its communities through a combination of newspaper, direct mail, television, billboard, internet and radio advertising. Bluegreen Communities also historically utilized a customer relationship management computer software system to assist it in compiling, processing, and maintaining information concerning future sales prospects. During 2009, its marketing of communities shifted to focus on internet advertising, consumer and broker outreach programs and billboards.
     Bluegreen Communities also currently owns and operates two daily fee golf courses which it believes will increase the marketability of adjacent home sites and communities.

12


 

Financial Services
(BankAtlantic Bancorp)
 
Financial Services
     Our Financial Services business activities are comprised of the operations of BankAtlantic Bancorp. BankAtlantic Bancorp presents its results in two reportable segments and its results of operations are consolidated with BFC Financial Corporation. The only assets available to BFC Financial Corporation from BankAtlantic Bancorp are dividends when and if declared and paid by BankAtlantic Bancorp. BankAtlantic Bancorp is a separate public company and its management prepared the following Item 1. Business regarding BankAtlantic Bancorp which was included in BankAtlantic Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2009 filed with the Securities and Exchange Commission. Accordingly, references to “the Company”, “we”, “us” or “our” in the following discussion under the caption “Financial Services” are references to BankAtlantic Bancorp and its subsidiaries, and are not references to BFC , Woodbridge or Bluegreen.
     BankAtlantic Bancorp is a Florida-based bank holding company and owns BankAtlantic and its subsidiaries. BankAtlantic provides a full line of products and services encompassing retail and business banking. The Company reports BankAtlantic Bancorp operations through two business segments consisting of BankAtlantic and BankAtlantic Bancorp Parent Company. Detailed operating financial information by segment is included in Note 34 to the Company’s consolidated financial statements. On February 28, 2007, BankAtlantic Bancorp completed the sale to Stifel Financial Corp. (“Stifel”) of Ryan Beck Holdings, Inc. (“Ryan Beck”), a subsidiary engaged in retail and institutional brokerage and investment banking. As a consequence, BankAtlantic Bancorp exited this line of business and the results of operations of Ryan Beck are presented as “Discontinued Operations” in the Company’s consolidated financial statements for the year ended December 31, 2007.
     BankAtlantic Bancorp internet website address is www.bankatlanticbancorp.com. BankAtlantic Bancorp’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports are available free of charge through our website, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. Our Internet website and the information contained in or connected to our website are not incorporated into, and are not part of this Annual Report on Form 10-K.
     As of December 31, 2009, BankAtlantic Bancorp had total consolidated assets of approximately $4.8 billion and stockholders’ equity of approximately $142 million.
BankAtlantic
     BankAtlantic is a federally-chartered, federally-insured savings bank organized in 1952. It is one of the largest financial institutions headquartered in Florida and provides traditional retail banking services and a wide range of business banking products and related financial services through a network of 100 branches or “stores” in southeast Florida and the Tampa Bay area, primarily in the metropolitan areas surrounding the cities of Miami, Ft. Lauderdale, West Palm Beach and Tampa, which are located in the heavily-populated Florida counties of Miami-Dade, Broward, Palm Beach, Hillsborough and Pinellas.
     BankAtlantic’s primary business activities have included:
    attracting checking and savings deposits from individuals and business customers,
 
    originating commercial real estate, middle market, consumer home equity and small business loans,
 
    purchasing wholesale residential loans, and
 
    investing in mortgage-backed securities and tax certificates.
     BankAtlantic’s business strategy
     BankAtlantic began its “Florida’s Most Convenient Bank” strategy in 2002, when it introduced seven-day banking in Florida. This banking initiative has contributed to a significant increase in core deposits (demand deposit accounts, NOW checking accounts and savings accounts). BankAtlantic’s core deposits increased from approximately $600 million as of December 31, 2001 to $2.6 billion as of December 31, 2009. Additionally, while the increase in core deposits during 2009 may reflect, in part, market conditions generally, we believe that the implementation of our local market management strategy in 2008 and our relationship marketing strategy in 2009 have enhanced our visibility in our market, increased customer loyalty and contributed significantly to the increase in core deposit balances.

13


 

Financial Services
(BankAtlantic Bancorp)
 
     BankAtlantic exceeded all applicable regulatory capital requirements and was considered a “well capitalized” financial institution at December 31, 2009. See “Regulation and Supervision — Capital Requirements” for an explanation of capital standards. Management has implemented initiatives with a view toward maintaining adequate capital in response to the current adverse economic environment. These initiatives primarily include the reduction of risk-based asset levels through loan and securities repayments in the ordinary course, eliminating cash dividends to BankAtlantic Bancorp Parent Company, and reducing expenses. These initiatives, while important to maintaining capital ratios, have also negatively impacted operations as the reduction in asset levels resulted in the reduction in earning assets adversely impacting our net interest income. Another source of regulatory capital for BankAtlantic was capital contributions from BankAtlantic Bancorp. During 2009 and 2008, BankAtlantic Bancorp contributed $105 million and $65 million, respectively, of capital to BankAtlantic. The $105 million capital contribution during 2009 was partially funded by the completion by BankAtlantic Bancorp of a $75 million rights offering.
     BankAtlantic structures its underwriting policies and procedures with a goal of balancing its ability to offer competitive and profitable products and services to its customers while minimizing its exposure to credit risk. However, the economic recession and the substantial decline in real estate values throughout the United States, and particularly in Florida, have had an adverse impact on the credit quality of our loan portfolio. In response, we have taken steps to attempt to address credit risk which included:
    Focused efforts and enhanced staffing relating to loan work-outs, collection processes and valuations;
 
    Substantially reduced the origination of land and residential acquisition, development and construction loans;
 
    Substantially reduced home equity loan originations through new underwriting requirements based on lower market values of collateral;
 
    Transferred certain non-performing commercial real estate loans to the Parent Company in March 2008 in exchange for $94.8 million; and
 
    Froze certain home equity loan unused lines of credit based on declines in borrower credit scores or the value of loan collateral;
     Notwithstanding the above, there is no assurance that the above initiatives will reduce the credit risk in our loan portfolio. During 2009, our allowance for loan losses increased from $137.3 million at December 31, 2008 to $187.2 million at December 31, 2009 reflecting the continued deterioration of economic conditions in our markets.
     We also continued our initiatives to decrease operating expenses during 2009. These initiatives included lowering advertising and marketing expenditures, maintaining reduced store and call center hours and reducing back-office operations, and staffing levels, and renegotiating vendor contracts. During 2010, management intends to seek further efficiencies and to maintain its decreased expense organizational structure. BankAtlantic is also continuing to evaluate its products and services as well as its delivery systems and back-office support infrastructure with a view toward enhancing its operational efficiency.
     As part of BankAtlantic’s efforts to diversify its loan portfolio, during 2009, BankAtlantic focused on originating small business and middle market commercial loans through its retail and lending networks. BankAtlantic anticipates a continued emphasis on small business and middle market lending and expects the percentage represented by its commercial real estate and residential mortgage loan portfolio balances to decline during 2010 through the scheduled repayment of existing loans and significant reductions in commercial real estate loan originations and residential loan purchases.
     Loan Products
     BankAtlantic offers a number of lending products to its customers. Historically, primary lending products have included residential loans, commercial real estate loans, consumer loans and small and middle market business loans.

14


 

Financial Services
(BankAtlantic Bancorp)
 
     Residential: Historically, BankAtlantic has purchased residential loans in the secondary markets that have been originated by other institutions. These loans, which are serviced by independent servicers, are secured by properties located throughout the United States. Residential loans are typically purchased in bulk and are generally non-conforming loans under agency guidelines due to the size of the individual loans (“jumbo loans”). BankAtlantic set general guidelines for loan purchases relating to loan amount, type of property, state of residence, loan-to-value ratios, the borrower’s sources of funds, appraised amounts and loan documentation, but actual purchases will generally reflect availability and market conditions, and may vary from BankAtlantic’s general guidelines. Included in these purchased residential loans are interest-only loans. These loans result in possible future increases in a borrower’s loan payments when the contractually required repayments increase due to interest rate adjustments and when required amortization of the principal amount commences. These payment increases could affect a borrower’s ability to repay the loan and lead to increased defaults and losses. At December 31, 2009, BankAtlantic’s residential loan portfolio included $776.2 million of interest-only loans, $65.2 million of which will become fully amortizing and have interest rates reset in 2010. The credit scores and loan-to-value ratios for interest-only loans are similar to those of amortizing loans. BankAtlantic has attempted to manage the credit risk associated with these loans by limiting purchases of interest-only loans to those originated to borrowers that it believes to be credit worthy, with loan-to-value and total debt to income ratios within agency guidelines. BankAtlantic does not purchase or originate sub-prime, option-arm, “pick-a-payment” or negative amortizing residential loans. Loans in the purchased residential loan portfolio generally do not have prepayment penalties. As part of its initiative to reduce assets with a view toward improving liquidity and regulatory capital ratios, BankAtlantic did not purchase any bulk residential loans during the year ended December 31, 2009.
     BankAtlantic also originates residential loans to customers that are then sold on a servicing released basis to a correspondent. It also originates and holds certain residential loans, which are made primarily to “low to moderate income” borrowers in accordance with requirements of the Community Reinvestment Act. The underwriting of these loans generally follows government agency guidelines and independent appraisers typically perform on-site inspections and valuations of the collateral.
     Commercial Real Estate: BankAtlantic provides commercial real estate loans for acquisition, development and construction of various types of properties including office buildings, retail shopping centers, residential construction and other non-residential properties. BankAtlantic also provides loans to acquire or refinance existing income-producing properties. These loans are primarily secured by property located in Florida. Commercial real estate loans are generally originated in amounts based upon the appraised value of the collateral or estimated cost to construct, generally have a loan to value ratio at the time of origination of less than 80%, and generally require that one or more of the principals of the borrowing entity guarantee these loans. Most of these loans have variable interest rates and are indexed to either prime or LIBOR rates.
     Historically, we made three categories of commercial real estate loans that we believe have resulted in significant exposure to BankAtlantic based on declines in the Florida residential real estate market. These categories are Builder land bank loans, Land acquisition and development loans, and Land acquisition, development and construction loans. The Builder land bank loan category consists of land loans to borrowers who have or had land purchase option agreements with regional and/or national builders. These loans were originally underwritten based on projected sales of the developed lots to the builders/option holders, and timely repayment of the loans is primarily dependent upon the sale of the property pursuant to the options. If the lots are not sold as originally anticipated, BankAtlantic anticipates that the borrower may not be in a position to service the loan, with the likely result being an increase in nonperforming loans and loan losses in this category. The Land acquisition and development loan category consists of loans secured by residential land which was intended to be developed by the borrower and sold to homebuilders. We believe that the underwriting on these loans was generally more stringent than Builder land bank loans, as an option agreement with a regional or national builder did not exist at the origination date. The Land acquisition, development and construction loans are secured by residential land which was intended to be fully developed by the borrower who also might have plans to construct homes on the property. These loans generally involved property with a longer investment and development horizon, and are guaranteed by the borrower or individuals such that it is expected that the borrower will have the ability to service the debt for a longer period of time. However, based on the declines in value in the Florida real estate market, all loans collateralized by Florida real estate expose the Bank to significant risk.

15


 

Financial Services
(BankAtlantic Bancorp)
 
     BankAtlantic has also originated commercial non-residential land loans and commercial non-residential construction loans. These loans generally have higher credit exposure than commercial income producing commercial loans. BankAtlantic has significantly decreased the origination of these commercial land and commercial non-residential construction loans beginning in 2008.
     BankAtlantic has historically sold participations in certain commercial real estate loans that it originated, and administers the loan and provides participants periodic reports on the progress of the project for which the loan was made. Major decisions regarding the loans are made by the participants on either a majority or unanimous basis. As a result, BankAtlantic generally cannot significantly modify the loans without either majority or unanimous consent of the participants. BankAtlantic’s sale of loan participations has the effect of reducing its exposure on individual projects and was required in some cases, in order to comply with the regulatory “loans to one borrower” limitations. BankAtlantic has also purchased commercial real estate loan participations from other financial institutions and in such cases, BankAtlantic may not be in a position to control decisions made with respect to the loans.
     Standby Letters of Credit and Commitments: Standby letters of credit are conditional commitments issued by BankAtlantic to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is the same as extending loans to customers. BankAtlantic may hold certificates of deposit, liens on corporate assets and liens on residential and commercial property as collateral for letters of credit. BankAtlantic issues commitments for commercial real estate and commercial business loans.
     Consumer: Consumer loans primarily consist of loans to individuals originated through BankAtlantic’s retail network. Approximately 97% of consumer loans are home equity lines of credit secured by a first or second mortgage on the primary residence of the borrower. Approximately 24% of home equity lines of credit balances are secured by a first mortgage on the property. Home equity lines of credit have pime-based interest rates and generally mature in 15 years. Other consumer loans generally have fixed interest rates with terms ranging from one to five years. The credit quality of consumer loans is adversely impacted by increases in the unemployment rate and declining real estate values. During 2008 and 2009, BankAtlantic experienced higher than historical losses in this portfolio as a result of deteriorating economic conditions. In an attempt to address this issue, BankAtlantic has adopted more stringent underwriting criteria for consumer loans which have had the effect of significantly reducing consumer loan originations.
     Middle Market commercial business: BankAtlantic lends on both a secured and unsecured basis, although the majority of its loans are secured. Middle market business loans are typically secured by the receivables, inventory, equipment, real estate, and/or general corporate assets of the borrowers. These loans generally have variable interest rates that are Prime or LIBOR based and are typically originated for terms ranging from one to five years.
     Small Business: BankAtlantic originates small business loans to companies located primarily in markets within BankAtlantic’s store network. Small business loans are primarily originated on a secured basis and generally do not exceed $1.0 million for non-real estate secured loans and $2.0 million for real estate secured loans. These loans are generally originated with maturities ranging from one to three years or upon demand; however, loans collateralized by real estate could have terms of up to fifteen years. Lines of credit extended to small businesses are due upon demand. Small business loans have either fixed or variable prime-based interest rates.

16


 

Financial Services
(BankAtlantic Bancorp)
 
     The composition of the loan portfolio was (in millions):
                                                                                 
    As of December 31,  
    2009     2008     2007     2006     2005  
    Amount     Pct     Amount     Pct     Amount     Pct     Amount     Pct     Amount     Pct  
Loans receivable:
                                                                               
Real estate loans:
                                                                               
Residential
  $ 1,550       42.35       1,930       45.34       2,156       47.66       2,151       46.81       2,030       43.92  
Consumer — home equity
    670       18.31       719       16.89       676       14.94       562       12.23       514       11.12  
Construction and development
    223       6.09       301       7.07       416       9.20       475       10.34       785       16.99  
Commercial
    897       24.51       930       21.85       882       19.49       973       21.17       979       21.18  
Small business
    213       5.82       219       5.14       212       4.69       187       4.07       152       3.29  
Other loans:
                                                                               
Commercial business
    154       4.21       143       3.36       131       2.90       157       3.42       88       1.90  
Small business — non-mortgage
    99       2.70       108       2.54       106       2.34       98       2.13       83       1.80  
Consumer
    21       0.57       26       0.61       31       0.68       26       0.57       27       0.59  
Residential loans held for sale
    4       0.11       3       0.07       4       0.09       9       0.20       3       0.06  
     
Total
    3,831       104.67       4,379       102.87       4,614       101.99       4,638       100.94       4,661       100.85  
     
Adjustments:
                                                                               
Unearned discounts (premiums)
    (3 )     -0.08       (3 )     -0.07       (4 )     -0.09       (1 )     -0.02       (2 )     -0.04  
Allowance for loan losses
    174       4.75       125       2.94       94       2.08       44       0.96       41       0.89  
     
Total loans receivable, net
  $ 3,660       100.00       4,257       100.00       4,524       100.00       4,595       100.00       4,622       100.00  
     
     At March 31, 2008, BankAtlantic transferred $101.5 million of non-performing commercial loans to a subsidiary of BankAtlantic Bancorp Parent Company.
     Included in BankAtlantic’s commercial and construction and development loan portfolios were the following commercial residential loans (in millions):
                         
    As of December 31,  
    2009     2008     2007  
Builder land bank loans
  $ 44       62       150  
Land acquisition and development loans
    172       210       245  
Land acquisition, development and construction loans
    11       32       108  
 
                 
Total commercial residential loans (1)
  $ 227       304       503  
 
                 
 
(1)   At March 31, 2008, $101.5 million of non-performing loans were transferred to a subsidiary of the BankAtlantic Bancorp Parent Company.
     Investments
     Securities Available for Sale: BankAtlantic invests in obligations of, or securities guaranteed by the U.S. government or its agencies, such as mortgage-backed securities and real estate mortgage investment conduits (REMICs), which are accounted for as securities available for sale. BankAtlantic’s securities available for sale portfolio at December 31, 2009 reflects a decision to seek high credit quality and securities guaranteed by government sponsored enterprises in an attempt to minimize credit risk in its investment portfolio to the extent possible. The available for sale securities portfolio serves as a source of liquidity as well as a means to moderate the effects of interest rate changes. The decision to purchase and sell securities from time to time is based upon a current assessment of the economy, the interest rate environment, and capital and liquidity strategies and requirements. BankAtlantic’s investment portfolio does not include credit default swaps, commercial paper, collateralized debt obligations, structured investment vehicles, auction rate securities, trust preferred securities or equity securities in Fannie Mae or Freddie Mac.

17


 

Financial Services
(BankAtlantic Bancorp)
 
     Tax Certificates: Tax certificates are evidences of tax obligations that are sold through auctions or bulk sales by various state and local taxing authorities. A tax obligation arises when the property owner fails to timely pay the real estate taxes on the property. Certain municipalities bulk sale their entire tax certificates for the prior year by auctioning the portfolio to the highest bidder instead of auctioning each certificate separately. Tax certificates represent a priority lien against the real property for the delinquent real estate taxes. The minimum repayment to satisfy the lien is the certificate amount plus the interest accrued through the redemption date, plus applicable penalties, fees and costs. Tax certificates have no payment schedule or stated maturity. If the certificate holder does not file for the deed within established time frames, the certificate may become null and void and lose its value. BankAtlantic’s experience with this type of investment has generally been favorable because the rates earned are generally higher than many alternative investments and substantial repayments typically occur over a one-year period. During 2008, BankAtlantic discontinued acquiring tax certificates through bulk acquisitions as it experienced higher than historical losses from these types of acquisitions. During 2009 BankAtlantic purchased tax certificates primarily in Florida and expects that the majority of tax certificates it acquires in 2010 will be in Florida.
     The composition, yields and maturities of BankAtlantic’s securities available for sale, investment securities and tax certificates were as follows (dollars in thousands):
                                         
                    Corporate                
            Mortgage-     Bond             Weighted  
    Tax     Backed     and             Average  
    Certificates     Securities     Other     Total     Yield  
December 31, 2009
                                       
Maturity: (1)
                                       
One year or less
  $ 79,099       2       250       79,351       5.66 %
After one through five years
    33,373       123             33,496       5.65  
After five through ten years
          31,121             31,121       4.60  
After ten years
          288,046             288,046       3.28  
     
Fair values (2)
  $ 112,472       319,292       250       432,014       4.00 %
     
Amortized cost (2)
  $ 110,991       307,314       250       418,555       5.35 %
     
Weighted average yield based on fair values
    5.66       3.41       4.30       4.00          
Weighted average maturity (yrs)
    1.30       20.65       0.67       15.69          
     
December 31, 2008
                                       
Fair values (2)
  $ 224,434       699,224       250       923,908       5.25 %
     
Amortized cost (2)
  $ 213,534       687,344       250       901,128       6.00 %
     
December 31, 2007
                                       
Fair values (2)
  $ 188,401       788,461       681       977,543       5.90 %
     
Amortized cost (2)
  $ 188,401       785,682       685       974,768       6.06 %
     
 
(1)   Except for tax certificates, maturities are based upon contractual maturities. Tax certificates do not have stated maturities, and estimates in the above table are based upon historical repayment experience (generally 2 years).
 
(2)   Equity and tax exempt securities held by BankAtlantic Bancorp Parent Company with a cost of $1.5 million, $3.6 million, and $162.6 million and a fair value of $1.5 million, $4.1 million, and $179.5 million, at December 31, 2009, 2008 and 2007, respectively, were excluded from the above table. At December 31, 2009, equities held by BankAtlantic with a cost of $0.8 million and a fair value of $0.8 million were excluded from the above table.

18


 

Financial Services
(BankAtlantic Bancorp)
 
     A summary of the amortized cost and gross unrealized appreciation or depreciation of estimated fair value of tax certificates and investment securities and available for sale securities follows (in thousands):
                                 
    December 31, 2009 (1)  
            Gross     Gross        
    Amortized     Unrealized     Unrealized     Estimated  
    Cost     Appreciation     Depreciation     Fair Value  
Tax certificates and investment securities:
                               
Tax certificates:
                               
Cost equals market
  $ 110,991       1,481             112,472  
Securities available for sale:
                               
Investment securities:
                               
Cost equals market
    250                   250  
Market over cost
                       
Cost over market
                       
Mortgage-backed securities:
                               
Cost equals market
                       
Market over cost
    285,200       11,998             297,198  
Cost over market
    22,114             20       22,094  
     
Total
  $ 418,555       13,479       20       432,014  
     
 
1)   The above table excludes BankAtlantic Bancorp Parent Company equity securities with a cost and fair value of $1.5 million at December 31, 2009. At December 31, 2009, equities held by BankAtlantic with a cost and fair value of $0.8 million were excluded from the above table.
     Deposit products and borrowed funds:
     Deposits: BankAtlantic offers checking and savings accounts to individuals and business customers. These include commercial demand deposit accounts, retail demand deposit accounts, savings accounts, money market accounts, certificates of deposit, various NOW accounts and IRA and Keogh retirement accounts. BankAtlantic also obtains deposits from brokers and municipalities. BankAtlantic solicits deposits from customers in its geographic market through marketing and relationship banking activities primarily conducted through its sales force and store network. BankAtlantic has primarily solicited deposits at its branches (or stores) through its “Florida’s Most Convenient Bank” initiative. During 2008, BankAtlantic began participating in the Certificate of Deposit Account Registry Services (“CDARS”) program. This program allows BankAtlantic to offer to its customers federally insured deposits up to $50 million. BankAtlantic has elected to participate in the FDIC’s “Transaction Account Guarantee Program” whereby the FDIC through June 30, 2010 fully insures BankAtlantic’s entire portfolio of non-interest bearing deposits, and interest-bearing deposits with rates at or below fifty basis points and, subject to applicable terms, insures up to $250,000 of other deposit accounts. See Note 17 of the “Notes to Consolidated Financial Statements” for more information regarding BankAtlantic’s deposit accounts.
     Federal Home Loan Bank (“FHLB”) Advances: BankAtlantic is a member of the FHLB of Atlanta and can obtain secured advances from the FHLB of Atlanta. These advances can be collateralized by a security lien against its residential loans, certain commercial loans and its securities. In addition, BankAtlantic must maintain certain levels of FHLB stock based upon outstanding advances. See Note 18 of the “Notes to Consolidated Financial Statements” for more information regarding BankAtlantic’s FHLB Advances.
     Other Short-Term Borrowings: BankAtlantic’s short-term borrowings generally consist of securities sold under agreements to repurchase treasury tax and loan borrowings.
    Securities sold under agreements to repurchase include a sale of a portion of its current investment portfolio (usually mortgage-backed securities and REMICs) at a negotiated rate and an agreement to repurchase the same assets on a specified future date. BankAtlantic issues repurchase agreements to institutions and to its customers. These transactions are collateralized by securities in its investment portfolio but are not insured by the FDIC. See Note 19 of the “Notes to Consolidated Financial Statements” for more information regarding BankAtlantic’s Securities sold under agreements to repurchase borrowings.
    Treasury tax and loan borrowings represent BankAtlantic’s participation in the Federal Reserve Treasury Investment Program. Under this program the Federal Reserve places funds with BankAtlantic obtained from treasury tax and loan payments received by financial institutions. See Note 20 of the “Notes to Consolidated Financial Statements” for more information regarding BankAtlantic’s treasury tax and loan borrowings.

19


 

Financial Services
(BankAtlantic Bancorp)
 
     BankAtlantic’s other borrowings have floating interest rates and consist of a mortgage-backed bond and subordinated debentures. See Notes 22 and 23 of the “Notes to Consolidated Financial Statements” for more information regarding BankAtlantic’s other borrowings.
BankAtlantic Bancorp Parent Company
     BankAtlantic Bancorp Parent Company operations primarily consist of financing the capital needs of BankAtlantic and its subsidiaries and management of the asset work-out subsidiary. In March 2008, BankAtlantic Bancorp Parent Company used a portion of the proceeds obtained from the sale of Ryan Beck to Stifel to purchase from BankAtlantic $101.5 million of non-performing loans at BankAtlantic’s carrying value. These loans are held in an asset workout subsidiary wholly-owned by the BankAtlantic Bancorp Parent Company, which has entered into an agreement with BankAtlantic to service the transferred non-performing loans. BankAtlantic Bancorp Parent Company also has arrangements with BFC for BFC to provide certain human resources, insurance management, investor relations, and other administrative services to BankAtlantic Bancorp Parent Company and its subsidiaries. The largest expense of BankAtlantic Bancorp Parent Company is interest expense on junior subordinated debentures issued in connection with trust preferred securities. BankAtlantic Bancorp has the right to defer quarterly payments of interest on the junior subordinated debentures for a period not to exceed 20 consecutive quarters without default or penalty. During all four quarters during 2009 and during the first quarter of 2010, BankAtlantic Bancorp notified the trustees under its junior subordinated debentures that it has elected to defer its quarterly interest payments. During the deferral period, the respective trusts will likewise suspend the declaration and payment of dividends on the trust preferred securities. Additionally, during the deferral period, BankAtlantic Bancorp may not pay dividends on or repurchase its common stock. BankAtlantic Bancorp Parent Company deferred the interest and dividend payments in order to preserve its liquidity in response to current economic conditions. In January 2010, BankAtlantic Bancorp commenced cash offers to purchase the outstanding trust preferred securities. See Note 23 of the “Notes to Consolidated Financial Statements” for more information regarding BankAtlantic Bancorp’s cash tender offer for its trust preferred securities.
     BankAtlantic Bancorp Parent Company had the following cash and investments as of December 31, 2009 (in thousands). There is no assurance that we would receive proceeds equal to the estimated fair value upon the liquidation of the equity securities.
                                 
    December 31, 2009  
            Gross     Gross        
    Carrying     Unrealized     Unrealized     Estimated  
    Value     Appreciation     Depreciation     Fair Value  
Cash and cash equivalents
  $ 14,002                   14,002  
Equity securities
    1,510             6       1,504  
     
Total
  $ 15,512             6       15,506  
     
     BankAtlantic Bancorp Parent Company’s work-out subsidiary had the following loans and real estate owned as of December 31, 2009:
         
(in millions)   Amount  
Builder land bank loans
  $ 14  
Land acquisition and development loans
    10  
Land acquisition, development and construction loans
    15  
Commercial
    9  
 
     
Total commercial loans
    48  
Real estate owned
    11  
 
     
Total loans and real estate owned
  $ 59  
 
     

20


 

Financial Services
(BankAtlantic Bancorp)
 
Regulation and Supervision
Holding Company
     We are a unitary savings and loan holding company within the meaning of the Home Owners’ Loan Act, as amended, or HOLA. As such, we are registered with the Office of Thrift Supervision, or OTS, and are subject to OTS regulations, examinations, supervision and reporting requirements. In addition, the OTS has enforcement authority over us. Among other things, this authority permits the OTS to restrict or prohibit activities that are determined to be a serious risk to the financial safety, soundness or stability of a subsidiary savings bank.
     HOLA prohibits a savings bank holding company, directly or indirectly, or through one or more subsidiaries, from:
    acquiring another savings institution or its holding company without prior written approval of the OTS;
 
    acquiring or retaining, with certain exceptions, more than 5% of a non-subsidiary savings institution, a non-subsidiary holding company, or a non-subsidiary company engaged in activities other than those permitted by HOLA; or
 
    acquiring or retaining control of a depository institution that is not insured by the FDIC.
     In evaluating an application by a holding company to acquire a savings institution, the OTS must consider the financial and managerial resources and future prospects of the company and savings institution involved, the effect of the acquisition on the risk to the insurance funds, the convenience and needs of the community and competitive factors.
     As a unitary savings and loan holding company, we generally are not restricted under existing laws as to the types of business activities in which we may engage, provided that BankAtlantic continues to satisfy the Qualified Thrift Lender, or QTL, test. See “Regulation of Federal Savings Banks — QTL Test” for a discussion of the QTL requirements. If we were to make a non-supervisory acquisition of another savings institution or of a savings institution that meets the QTL test and is deemed to be a savings institution by the OTS and that will be held as a separate subsidiary, then we would become a multiple savings and loan holding company within the meaning of HOLA and would be subject to limitations on the types of business activities in which we can engage. HOLA limits the activities of a multiple savings institution holding company and its non-insured institution subsidiaries primarily to activities permissible for bank holding companies under Section 4(c) of the Bank Holding Company Act, subject to the prior approval of the OTS, and to other activities authorized by OTS regulation.
     Transactions between BankAtlantic, including any of BankAtlantic’s subsidiaries, and us or any of BankAtlantic’s affiliates, are subject to various conditions and limitations. See “Regulation of Federal Savings Banks — Transactions with Related Parties.” BankAtlantic must seek approval from the OTS prior to any declaration of the payment of any dividends or other capital distributions to us. See “Regulation of Federal Savings Banks — Limitation on Capital Distributions.”
BankAtlantic
     BankAtlantic is a federal savings association and is subject to extensive regulation, examination, and supervision by the OTS, as its chartering agency and primary regulator, and the FDIC, as its deposit insurer. BankAtlantic’s deposit accounts are insured up to applicable limits by the Deposit Insurance Fund, which is administered by the FDIC. BankAtlantic must file reports with the OTS and the FDIC concerning its activities and financial condition. Additionally, BankAtlantic must obtain regulatory approvals prior to entering into certain transactions, such as mergers with, or acquisitions of, other depository institutions, and must submit applications or notices prior to forming certain types of subsidiaries or engaging in certain activities through its subsidiaries. The OTS and the FDIC conduct periodic examinations to assess BankAtlantic’s safety and soundness and compliance with various regulatory requirements. This regulation and supervision establishes a comprehensive framework of activities in which a savings bank can engage and is intended primarily for the protection of the insurance fund and depositors. The OTS and the FDIC have significant discretion in connection with their supervisory and enforcement activities and examination policies. Any change in such applicable activities or policies, whether by the OTS, the FDIC or the Congress, could have a material adverse impact on us, BankAtlantic, and our operations.

21


 

Financial Services
(BankAtlantic Bancorp)
 
     The following discussion is intended to be a summary of the material banking statutes and regulations applicable to BankAtlantic, and it does not purport to be a comprehensive description of such statutes and regulations, nor does it include every federal and state statute and regulation applicable to BankAtlantic.
Regulation of Federal Savings Banks
     Business Activities. BankAtlantic derives its lending and investment powers from HOLA and the regulations of the OTS thereunder. Under these laws and regulations, BankAtlantic may invest in:
    mortgage loans secured by residential and commercial real estate;
 
    commercial and consumer loans;
 
    certain types of debt securities; and
 
    certain other assets.
     BankAtlantic may also establish service corporations to engage in activities not otherwise permissible for BankAtlantic, including certain real estate equity investments and securities and insurance brokerage. These investment powers are subject to limitations, including, among others, limitations that require debt securities acquired by BankAtlantic to meet certain rating criteria and that limit BankAtlantic’s aggregate investment in various types of loans to certain percentages of capital and/or assets.
     Loans to One Borrower. Under HOLA, savings banks are generally subject to the same limits on loans to one borrower as are imposed on national banks. Generally, under these limits, the total amount of loans and extensions of credit made by a savings bank to one borrower or related group of borrowers outstanding at one time and not fully secured by collateral may not exceed 15% of the savings bank’s unimpaired capital and unimpaired surplus. In addition to, and separate from, the 15% limitation, the total amount of loans and extensions of credit made by a savings bank to one borrower or related group of borrowers outstanding at one time and fully secured by readily-marketable collateral may not exceed 10% of the savings bank’s unimpaired capital and unimpaired surplus. Readily-marketable collateral includes certain debt and equity securities and bullion, but generally does not include real estate. At December 31, 2009, BankAtlantic’s limit on loans to one borrower was approximately $76.6 million. At December 31, 2009, BankAtlantic’s largest aggregate amount of loans to one borrower was approximately $37.8 million and the second largest borrower had an aggregate balance of approximately $36.9 million.
     QTL Test. HOLA requires a savings bank to meet a QTL test by maintaining at least 65% of its “portfolio assets” in certain “qualified thrift investments” on a monthly average basis in at least nine months out of every twelve months. A savings bank that fails the QTL test must either operate under certain restrictions on its activities or convert to a bank charter. At December 31, 2009, BankAtlantic maintained approximately 74% of its portfolio assets in qualified thrift investments. BankAtlantic had also satisfied the QTL test in each of the nine months prior to December 2009 and, therefore, was a QTL.
     Capital Requirements. The OTS regulations require savings banks to meet three minimum capital standards:
    a tangible capital requirement for savings banks to have tangible capital in an amount equal to at least 1.5% of adjusted total assets;
 
    a leverage ratio requirement:
    for savings banks assigned the highest composite rating of 1, to have core capital in an amount equal to at least 3% of adjusted total assets; or
 
    for savings banks assigned any other composite rating, to have core capital in an amount equal to at least 4% of adjusted total assets, or a higher percentage if warranted by the particular circumstances or risk profile of the savings bank; and
    a risk-based capital requirement for savings banks to have capital in an amount equal to at least 8% of risk-weighted assets.

22


 

Financial Services
(BankAtlantic Bancorp)
 
     In determining the amount of risk-weighted assets for purposes of the risk-based capital requirement, a savings bank must compute its risk-based assets by multiplying its assets and certain off-balance sheet items by risk-weights assigned by the OTS capital regulations. The OTS monitors the risk management of individual institutions. The OTS may impose an individual minimum capital requirement on institutions that it believes exhibit a higher degree of risk.
     At December 31, 2009, BankAtlantic exceeded all applicable regulatory capital requirements. See Note 35 of the “Notes to Consolidated Financial Statements” for actual capital amounts and ratios.
     There currently are no regulatory capital requirements directly applicable to us as a unitary savings and loan holding company apart from the regulatory capital requirements for savings banks that are applicable to BankAtlantic; however, changes in regulations could result in additional requirements being imposed on us.
     Limitation on Capital Distributions. The OTS regulations impose limitations upon certain capital distributions by savings banks, such as certain cash dividends, payments to repurchase or otherwise acquire its shares, payments to shareholders of another institution in a cash-out merger and other distributions charged against capital.
     The OTS regulates all capital distributions by BankAtlantic directly or indirectly to us, including dividend payments. BankAtlantic currently must file an application to receive the approval of the OTS for a proposed capital distribution, as the total amount of all of BankAtlantic’s capital distributions (including any proposed capital distribution) for the applicable calendar year exceeds BankAtlantic’s net income for that year-to-date period plus BankAtlantic’s retained net income for the preceding two years.
     BankAtlantic may not pay dividends to BankAtlantic Bancorp if, after paying those dividends, it would fail to meet the required minimum levels under risk-based capital guidelines and the minimum leverage and tangible capital ratio requirements, or in the event the OTS notified BankAtlantic that it was in need of more than normal supervision. Under the Federal Deposit Insurance Act, or FDIA, an insured depository institution such as BankAtlantic is prohibited from making capital distributions, including the payment of dividends, if, after making such distribution, the institution would become “undercapitalized.” Payment of dividends by BankAtlantic also may be restricted at any time at the discretion of the appropriate regulator if it deems the payment to constitute an unsafe and unsound banking practice.
     Liquidity. BankAtlantic is required to maintain sufficient liquidity to ensure its safe and sound operation, in accordance with OTS regulations.
     Assessments. The OTS charges assessments to recover the costs of examining savings banks and their affiliates, processing applications and other filings, and covering direct and indirect expenses in regulating savings banks and their affiliates. These assessments are based on three components:
    the size of the savings bank, on which the basic assessment is based;
 
    the savings bank’s supervisory condition, which results in an additional assessment based on a percentage of the basic assessment for any savings bank with a composite rating of 3, 4 or 5 in its most recent safety and soundness examination; and
 
    the complexity of the savings bank’s operations, which results in an additional assessment based on a percentage of the basic assessment for any savings bank that has more than $1 billion in trust assets that it administers, loans that it services for others or assets covered by its recourse obligations or direct credit substitutes.
     These assessments are paid semi-annually. BankAtlantic’s assessment expense during the year ended December 31, 2009 was approximately $1.2 million.
     Branching. Subject to certain limitations, HOLA and the OTS regulations permit federally chartered savings banks to establish branches in any state or territory of the United States.

23


 

Financial Services
(BankAtlantic Bancorp)
 
     Community Reinvestment. Under the Community Reinvestment Act, or CRA, a savings institution has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA requires the OTS to assess the institution’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by the institution. This assessment focuses on three tests:
    a lending test, to evaluate the institution’s record of making loans in its designated assessment areas;
 
    an investment test, to evaluate the institution’s record of investing in community development projects, affordable housing, and programs benefiting low or moderate income individuals and businesses; and
 
    a service test, to evaluate the institution’s delivery of banking services throughout its designated assessment area.
     The OTS assigns institutions a rating of “outstanding,” “satisfactory,” “needs to improve,” or “substantial non-compliance.” The CRA requires all institutions to disclose their CRA ratings to the public. BankAtlantic received a “satisfactory” rating in its most recent CRA evaluation. Regulations also require all institutions to disclose certain agreements that are in fulfillment of the CRA. BankAtlantic has no such agreements in place at this time.
     Transactions with Related Parties. BankAtlantic’s authority to engage in transactions with its “affiliates” is limited by Sections 23A and 23B of the Federal Reserve Act, or FRA, by Regulation W of the Federal Reserve Board, or FRB, implementing Sections 23A and 23B of the FRA, and by OTS regulations. The applicable OTS regulations for savings banks regarding transactions with affiliates generally conform to the requirements of Regulation W, which is applicable to national banks. In general, an affiliate of a savings bank is any company that controls, is controlled by, or is under common control with, the savings bank, other than the savings bank’s subsidiaries. For instance, we are deemed an affiliate of BankAtlantic under these regulations.
     Generally, Section 23A limits the extent to which a savings bank may engage in “covered transactions” with any one affiliate to an amount equal to 10% of the savings bank’s capital stock and surplus, and contains an aggregate limit on all such transactions with all affiliates to an amount equal to 20% of the savings bank’s capital stock and surplus. A covered transaction generally includes:
    making or renewing a loan or other extension of credit to an affiliate;
 
    purchasing, or investing in, a security issued by an affiliate;
 
    purchasing an asset from an affiliate;
 
    accepting a security issued by an affiliate as collateral for a loan or other extension of credit to any person or entity; and
 
    issuing a guarantee, acceptance or letter of credit on behalf of an affiliate.
     Section 23A also establishes specific collateral requirements for loans or extensions of credit to, or guarantees, or acceptances of letters of credit issued on behalf of, an affiliate. Section 23B requires covered transactions and certain other transactions to be on terms and under circumstances, including credit standards, that are substantially the same, or at least as favorable to the savings bank, as those prevailing at the time for transactions with or involving non-affiliates. Additionally, under the OTS regulations, a savings bank is prohibited from:
    making a loan or other extension of credit to an affiliate that is engaged in any non-bank holding company activity; and
 
    purchasing, or investing in, securities issued by an affiliate that is not a subsidiary.
     Sections 22(g) and 22(h) of the FRA, Regulation O of the FRB, Section 402 of the Sarbanes-Oxley Act of 2002, and OTS regulations impose limitations on loans and extensions of credit from BankAtlantic and us to its and our executive officers, directors, controlling shareholders and their related interests. The applicable OTS regulations for savings banks regarding loans by a savings bank to its executive officers, directors and principal shareholders generally conform to the requirements of Regulation O, which is applicable to national banks.

24


 

Financial Services
(BankAtlantic Bancorp)
 
     Enforcement. Under the FDIA, the OTS has primary enforcement responsibility over savings banks and has the authority to bring enforcement action against all “institution-affiliated parties,” including any controlling stockholder or any shareholder, attorney, appraiser and accountant who knowingly or recklessly participates in any violation of applicable law or regulation, breach of fiduciary duty, or certain other wrongful actions that have, or are likely to have, a significant adverse effect on an insured savings bank or cause it more than minimal loss. In addition, the FDIC has back-up authority to take enforcement action for unsafe and unsound practices. Formal enforcement action can include the issuance of a capital directive, cease and desist order, removal of officers and/or directors, institution of proceedings for receivership or conservatorship and termination of deposit insurance.
     Examination. A savings institution must demonstrate to the OTS its ability to manage its compliance responsibilities by establishing an effective and comprehensive oversight and monitoring program. The degree of compliance oversight and monitoring by the institution’s management impacts the scope and intensity of the OTS’ examinations of the institution. Institutions with significant management oversight and monitoring of compliance will generally receive less extensive OTS examinations than institutions with less oversight.
     Standards for Safety and Soundness. Pursuant to the requirements of the FDIA, the OTS, together with the other federal bank regulatory agencies, has adopted the Interagency Guidelines Establishing Standards for Safety and Soundness, or the Guidelines. The Guidelines establish general safety and soundness standards relating to internal controls, information and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, asset quality, earnings and compensation, fees and benefits. In general, the Guidelines require, among other things, appropriate systems and practices to identify and manage the risks and exposures specified in the Guidelines. If the OTS determines that a savings bank fails to meet any standard established by the Guidelines, then the OTS may require the savings bank to submit to the OTS an acceptable plan to achieve compliance. If a savings bank fails to comply, the OTS may seek an enforcement order in judicial proceedings and impose civil monetary penalties.
     Shared National Credit Program. The Shared National Credit Program is an interagency program, established in 1977, to provide a periodic credit risk assessment of the largest and most complex syndicated loans held or agented by financial institutions subject to supervision by a federal bank regulatory agency. The Shared National Credit Program is administered by the FRB, FDIC, OTS and the Office of the Comptroller of the Currency. The Shared National Credit Program covers any loan or loan commitment of at least $20 million (i) which is shared under a formal lending agreement by three or more unaffiliated financial institutions or (ii) a portion of which is sold to two or more unaffiliated financial institutions with the purchasing financial institutions assuming their pro rata share of the credit risk. The Shared National Credit Program is designed to provide uniformity and efficiency in the federal banking agencies’ analysis and rating of the largest and most complex credit facilities in the country by avoiding duplicate credit reviews and ensuring consistency in rating determinations. The federal banking agencies use a combination of statistical and judgmental sampling techniques to select borrowers for review each year. The selected borrowers are reviewed and the credit quality rating assigned by the applicable federal banking agency’s examination team will be reported to each financial institution that participates in the loan as of the examination date. The assigned ratings are used during examinations of the other financial institutions to avoid duplicate reviews and ensure consistent treatment of these loans. BankAtlantic has entered into participations with respect to certain of its loans and has acquired participations in the loans of other financial institutions which are subject to this program and accordingly these loans may be subject to this additional review.
     Real Estate Lending Standards. The OTS and the other federal banking agencies adopted regulations to prescribe standards for extensions of credit that are secured by liens on or interests in real estate or are made for the purpose of financing the construction of improvements on real estate. The OTS regulations require each savings bank to establish and maintain written internal real estate lending standards that are consistent with OTS guidelines and with safe and sound banking practices and which are appropriate to the size of the savings bank and the nature and scope of its real estate lending activities.
     Prompt Corrective Regulatory Action. Under the OTS Prompt Corrective Action Regulations, the OTS is required to take certain, and is authorized to take other, supervisory actions against undercapitalized savings banks, such as requiring compliance with a capital restoration plan, restricting asset growth, acquisitions, branching and new lines of business and, in extreme cases, appointment of a receiver or conservator. The severity of the action required or authorized to be taken increases as a savings bank’s capital deteriorates. Savings banks are classified into five categories of capitalization as “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” Generally, a savings bank is categorized as “well capitalized” if:

25


 

Financial Services
(BankAtlantic Bancorp)
 
    its total capital is at least 10% of its risk-weighted assets;
 
    its core capital is at least 6% of its risk-weighted assets;
 
    its core capital is at least 5% of its adjusted total assets; and
 
    it is not subject to any written agreement, order, capital directive or prompt corrective action directive issued by the OTS, or certain regulations, to meet or maintain a specific capital level for any capital measure.
     The OTS categorized BankAtlantic as “well capitalized” following its last examination and BankAtlantic remained categorized “well capitalized” as of December 31, 2009. However, there is no assurance that it will continue to be deemed “well capitalized” even if current capital ratios are maintained where asset quality continues to deteriorate.
     Insurance of Deposit Accounts. Savings banks are subject to a risk-based assessment system for determining the deposit insurance assessments to be paid by them.
     Until December 31, 2006, the FDIC had assigned each savings institution to one of three capital categories based on the savings institution’s financial information as of its most recent quarterly financial report filed with the applicable bank regulatory agency prior to the assessment period. The FDIC had also assigned each savings institution to one of three supervisory subcategories within each capital category based upon a supervisory evaluation provided to the FDIC by the savings institution’s primary federal regulator and information that the FDIC determined to be relevant to the savings institution’s financial condition and the risk posed to the previously existing deposit insurance funds. A savings institution’s deposit insurance assessment rate depended on the capital category and supervisory subcategory to which it was assigned. Insurance assessment rates ranged from 0.00% of deposits for a savings institution in the highest category (i.e., well capitalized and financially sound, with no more than a few minor weaknesses) to 0.27% of deposits for a savings institution in the lowest category (i.e., undercapitalized and substantial supervisory concern).
     On January 1, 2007, the Federal Deposit Insurance Reform Act of 2005, or the Reform Act, became effective. The Reform Act, among other things, merged the Bank Insurance Fund and the Savings Association Insurance Fund, both of which were administered by the FDIC, into a new fund administered by the FDIC known as the Deposit Insurance Fund, or DIF, and increased the coverage limit for certain retirement plan deposits to $250,000, but maintained the basic insurance coverage limit of $100,000 for other depositors. On October 3, 2008, the Emergency Economic Stabilization Act of 2008, or the Stabilization Act, temporarily raised the basic insurance coverage limit to $250,000. This temporary increase in the basic insurance coverage limit will expire on December 31, 2013 and the basic insurance coverage limit will return to $100,000 on January 1, 2014.
     As a result of the Reform Act, the FDIC now assigns each savings institution to one of four risk categories based upon the savings institution’s capital evaluation and supervisory evaluation. The capital evaluation is based upon financial information as of the savings institution’s most recent quarterly financial report filed with the applicable bank regulatory agency at the end of each quarterly assessment period. The supervisory evaluation is based upon the results of examination findings by the savings institution’s primary federal regulator and information that the FDIC has determined to be relevant to the savings institution’s financial condition and the risk posed to the DIF. A savings institution’s deposit insurance base assessment rate depends on the risk category to which it is assigned. In April 2009, the FDIC implemented regulations to improve the way its insurance base assessment rates differentiate risk among insured institutions and make the risk-based system fairer by limiting the subsidization of riskier institutions by safer institutions. For the quarter which began January 1, 2010, insurance base assessment rates range from 12 cents per $100 (but could be as low as 7 cents per $100, after computing applicable adjustments) in assessable deposits for a savings institution in the least risk category (i.e., well capitalized and financially sound with only a few minor weaknesses) to 45 cents per $100 (but could be as high as 77.5 cents per $100, after computing applicable adjustments) in assessable deposits for a savings institution in the most risk category (i.e., undercapitalized and poses a substantial probability of loss to the DIF unless effective corrective action is taken) BankAtlantic’s FICE deposit insurance premium increased from $2.8 million for the year ended December 31, 2008 to $8.6 million for the same 2009 period.

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Financial Services
(BankAtlantic Bancorp)
 
     The FDIC is authorized to raise the assessment rates in certain circumstances, which would affect savings institutions in all risk categories. The FDIC is also authorized to impose special assessments. The FDIC has exercised its authority to raise assessment rates and impose special assessments several times in the past, including during 2009, and could raise rates and impose special assessments in the future. Increases in deposit insurance premiums and the imposition of special assessments would have an adverse effect on our earnings. BankAtlantic paid a $2.4 million FDIC special assessment for the year ended December 31, 2009.
     Privacy and Security Protection. BankAtlantic is subject to the OTS regulations implementing the privacy and security protection provisions of the Gramm-Leach-Bliley Act, or GLBA. These regulations require a savings bank to disclose to its customers and consumers its policy and practices with respect to the privacy, and sharing with nonaffiliated third parties, of its customers and consumers’ “nonpublic personal information.” Additionally, in certain instances, BankAtlantic is required to provide its customers and consumers with the ability to “opt-out” of having BankAtlantic share their nonpublic personal information with nonaffiliated third parties. These regulations also require savings banks to maintain policies and procedures to safeguard their customers and consumers’ nonpublic personal information. BankAtlantic has policies and procedures designed to comply with GLBA and applicable privacy and security regulations.
     Insurance Activities. BankAtlantic is generally permitted to engage in certain insurance activities through its subsidiaries. The OTS regulations implemented pursuant to GLBA prohibit, among other things, depository institutions from conditioning the extension of credit to individuals upon either the purchase of an insurance product or annuity or an agreement by the consumer not to purchase an insurance product or annuity from an entity that is not affiliated with the depository institution. The regulations also require prior disclosure of this prohibition to potential insurance product or annuity customers.
     Federal Home Loan Bank System. BankAtlantic is a member of the Federal Home Loan Bank, or FHLB, of Atlanta, which is one of the twelve regional FHLB’s composing the FHLB system. Each FHLB provides a central credit facility primarily for its member institutions as well as other entities involved in home mortgage lending. Any advances from a FHLB must be secured by specified types of collateral, and all long-term advances may be obtained only for the purpose of providing funds for residential housing finance. As a member of the FHLB of Atlanta, BankAtlantic is required to acquire and hold shares of capital stock in the FHLB of Atlanta. BankAtlantic was in compliance with this requirement with an investment in FHLB of Atlanta stock at December 31, 2009 of approximately $48.8 million. During the year ended December 31, 2009, the FHLB of Atlanta paid dividends of approximately $0.2 million on the capital stock held by BankAtlantic. The FHLB did not pay a dividend during the first six months of 2009 and in February 2009 suspended excess stock redemptions.
     Federal Reserve System. BankAtlantic is subject to provisions of the FRA and the FRB’s regulations, pursuant to which depository institutions may be required to maintain non-interest-earning reserves against their deposit accounts and certain other liabilities. Currently, federal savings banks must maintain reserves against transaction accounts (primarily NOW and regular interest and non-interest bearing checking accounts). The FRB regulations establish the specific rates of reserves that must be maintained, which are subject to adjustment by the FRB. BankAtlantic is currently in compliance with those reserve requirements. The required reserves must be maintained in the form of vault cash, a non-interest-bearing account at a Federal Reserve Bank, or a pass-through account as defined by the FRB. The FRB pays targeted federal funds rates on the required reserves which are lower than the yield on our traditional investments.
     Anti-Terrorism and Anti-Money Laundering Regulations. The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, or the USA PATRIOT Act, provides the federal government with additional powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements. By way of amendments to the Bank Secrecy Act, or BSA, the USA PATRIOT Act puts in place measures intended to encourage information sharing among bank regulatory and law enforcement agencies. In addition, certain provisions of the USA PATRIOT Act impose affirmative obligations on a broad range of financial institutions, including savings banks.

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Financial Services
(BankAtlantic Bancorp)
 
     Among other requirements, the USA PATRIOT Act and the related OTS regulations require savings banks to establish anti-money laundering programs that include, at a minimum:
    internal policies, procedures and controls designed to implement and maintain the savings bank’s compliance with all of the requirements of the USA PATRIOT Act, the BSA and related laws and regulations;
 
    systems and procedures for monitoring and reporting of suspicious transactions and activities;
 
    a designated compliance officer;
 
    employee training;
 
    an independent audit function to test the anti-money laundering program;
 
    procedures to verify the identity of each customer upon the opening of accounts; and
 
    heightened due diligence policies, procedures and controls applicable to certain foreign accounts and relationships.
     Additionally, the USA PATRIOT Act requires each financial institution to develop a customer identification program, or CIP, as part of its anti-money laundering program. The key components of the CIP are identification, verification, government list comparison, notice and record retention. The purpose of the CIP is to enable the financial institution to determine the true identity and anticipated account activity of each customer. To make this determination, among other things, the financial institution must collect certain information from customers at the time they enter into the customer relationship with the financial institution. This information must be verified within a reasonable time through documentary and non-documentary methods. Furthermore, all customers must be screened against any CIP-related government lists of known or suspected terrorists.
     The USA Patriot Act established the Office of Foreign Assets Control (“OFAC”), which is a division of the Treasury Department, and is responsible for helping to ensure that United States entities do not engage in transactions with “enemies” of the United States, as defined by various Executive Orders and Acts of Congress. OFAC has sent banking regulatory agencies lists of names of persons and organizations suspected of aiding, harboring or engaging in terrorist acts. If BankAtlantic identifies a name on any transaction, account or wire transfer that is on an OFAC list, it must freeze or reject such account or transaction, evaluate the need to file a suspicious activity report and notify the Financial Crimes Enforcement Network (“FinCEN”).
     Consumer Protection. BankAtlantic is subject to federal and state consumer protection statutes and regulations, including the Fair Credit Reporting Act, the Fair and Accurate Credit Transactions Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Truth in Lending Act, the Truth in Savings Act, the Real Estate Settlement Procedures Act and the Home Mortgage Disclosure Act. Among other things, these acts:
    require lenders to disclose credit terms in meaningful and consistent ways;
 
    require financial institutions to establish policies and procedures regarding identity theft and notify customers of certain information concerning their credit reporting;
 
    prohibit discrimination against an applicant in any consumer or business credit transaction;
 
    prohibit discrimination in housing-related lending activities;
 
    require certain lender banks to collect and report applicant and borrower data regarding loans for home purchase or improvement projects;
 
    require lenders to provide borrowers with information regarding the nature and cost of real estate settlements;
 
    prohibit certain lending practices and limit escrow account amounts with respect to real estate transactions; and
 
    prescribe penalties for violations of the requirements of consumer protection statutes and regulations.

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Employees
     Management believes that its relations with its employees are satisfactory. The Company currently maintains employee benefit programs that are considered by management to be generally competitive with programs provided by other major employers in its markets.
     As of December 31, 2009, the Company and its subsidiaries had approximately 5,368 employees, including 37 employees at BFC Parent and BFC Shared Service operations, 36 employees supporting Woodbridge, 6 employees supporting BankAtlantic Bancorp Parent Company, 1,638 employees supporting BankAtlantic (including 212 part time employees) and 3,651 employees supporting Bluegreen, of which 386 were located in Bluegreen’s headquarters in Boca Raton, Florida and 3,265 were located in regional field offices throughout the United States and Aruba. The field personnel at Bluegreen include 85 field employees supporting Bluegreen Communities and 3,180 field employees supporting Bluegreen Resorts. Several Bluegreen employees in New Jersey are represented by a collective bargaining unit.
Regulatory Matters — Real Estate
     The vacation ownership and real estate industries are subject to extensive and complex federal, state, and local governmental regulation. Federal, state, local and foreign environmental, zoning, consumer protection and other statutes regulate the acquisition, subdivision, marketing and sale of real estate and VOIs. On a federal level, the Federal Trade Commission has taken an active regulatory role through the Federal Trade Commission Act, prohibiting unfair or deceptive acts and unfair competition in interstate commerce. Vacation ownership interests are subject to various regulatory requirements including state and local approvals. The laws of most states require the filing of a detailed offering statement which provides disclosure of all material aspects of the project and sale of VOIs. Laws in each state where VOIs are sold generally grant the purchaser of a VOI the right to cancel a purchase contract at any time within a specified rescission period. There is also no assurance that in the future, VOIs will not be deemed to be securities subject to securities regulation. Most states also have other laws that regulate: real estate licensure; sellers of travel licensure; anti-fraud laws; telemarketing laws; prize, gift and sweepstakes laws; and, labor laws. In addition, we may be subject to the Fair Housing Act and various other federal statutes and regulations. The sales and marketing of homesites are subject to various consumer protection laws and to the Federal Interstate Land Sales Full Disclosure Act, which establishes strict guidelines with respect to the marketing and sale of land in interstate commerce.
     There is no assurance that the cost of complying with applicable laws and regulations will not be significant. Any failure to comply with current or future laws or regulations applicable to the sale of VOIs or real estate could have a material adverse effect on us.
Competition
Real Estate
     There has been significant dislocation in the real estate markets. Land values have deteriorated significantly, and lenders who have foreclosed on properties throughout the United States and particularly in those areas where the Company and its subsidiaries operate are selling properties at significant discounts. The purchasers of such properties may have a significantly lower basis than we have and accordingly such purchasers have a competitive advantage with respect to the development or resale of those properties.
     Bluegreen Resorts competes with various high profile and well-established operators, many of which have greater liquidity and financial resources than Bluegreen. Many of the world’s most recognized lodging, hospitality and entertainment companies develop and sell VOIs in resort properties. Major companies that now operate or are developing or planning to develop vacation ownership resorts directly or through subsidiaries include Marriott International, Inc., the Walt Disney Company, Hilton Hotels Corporation, Hyatt Corporation, Four Seasons Hotels and Resorts, Starwood Hotels and Resorts Worldwide, Inc. and Wyndham Worldwide Corporation. Bluegreen Resorts also competes with numerous other smaller owners and operators of vacation ownership resorts. In addition to competing for sales leads, prospects and service contracts, Bluegreen Resorts competes with other VOI developers for marketing, sales, and resort management personnel.
Financial Services
     The banking and financial services industry is very competitive and is in transition. The financial services industry is experiencing a severe downturn and there is increased competition in the marketplace. We expect continued consolidation in the financial service industry creating larger financial institutions. BankAtlantic’s primary method of competition is emphasis on relationship banking, customer service and convenience, including its Florida’s Most Convenient Bank initiative.
     BankAtlantic faces substantial competition for both loans and deposits. Competition for loans comes principally from other banks, savings institutions and other lenders. This competition could decrease the number and size of loans that BankAtlantic makes and the interest rates and fees that BankAtlantic receives on these loans. .BankAtlantic competes for deposits with banks, savings institutions and credit unions, as well as institutions offering uninsured investment alternatives, including money market funds and mutual funds, many of which are uninsured. These competitors may offer higher interest rates than BankAtlantic, which could decrease the deposits that Bank Atlantic attracts or require BankAtlantic to increase its rates to attract new deposits. Increased competition for deposits could increase BankAtlantic’s cost of funds, reduce its net interest margin and adversely affect its results of operations.

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ITEM 1A. RISK FACTORS
RISKS RELATED TO BFC, GENERALLY
We have in the past incurred cash flow deficits at the BFC parent company level which we expect will continue in the future.
     BFC is engaged in making investments in operating businesses and, in the past, BFC Parent has not had revenue generating operating activities. We have in the past incurred cash flow deficits at BFC Parent and expect to continue to incur cash flow deficits in the foreseeable future. We have financed these operating cash flow deficits with available working capital, issuances of equity or debt securities, and with dividends from our subsidiaries. BFC Parent is dependent upon dividends from its subsidiaries to fund its operations. Currently, BankAtlantic Bancorp is restricted from paying dividends and these restrictions may continue in the future. In addition, Bluegreen has historically not paid dividends on its common stock. As a result, if cash flow is not sufficient to fund our operating expenses in the future, we may be forced to reduce operating expenses, to liquidate some of our investments or to seek to fund our operations from the proceeds of additional equity or debt financing. There is no assurance that any such financing would be available on commercially reasonable terms, if at all, or that we would not be forced to liquidate our investments at depressed prices.
Adverse conditions and events where our investments are currently concentrated or in the industries in which our subsidiaries operate could continue to adversely impact our results and future growth.
     BankAtlantic Bancorp’s business, the location of BankAtlantic’s branches and the real estate collateralizing its commercial real estate loans and home equity loans are concentrated in Florida. Further, our operations are concentrated in Florida and South Carolina. Economic conditions generally, and the economies of both Florida and South Carolina in particular have adversely impacted our results and operations. Further, each of these states is subject to the risks of natural disasters, such as tropical storms and hurricanes. The continued impact of the economic downturn, natural disasters or adverse changes in laws or regulations applicable to the companies could impact the credit quality of BankAtlantic’s assets, the desirability of our properties, the financial condition and performance of our customers and our overall success. In addition, Bluegreen’s operations, which are primarily conducted within the vacation ownership and real estate industry, have also been adversely impacted by the current economic downturn. The persistence or further deterioration of the current adverse economic conditions could have a material adverse effect on our business and results of operations.
We are subject to the risks faced by the companies in which we currently hold investments.
     Our primary holdings consist of our direct and indirect investments in BankAtlantic Bancorp, Bluegreen, Core, Pizza Fusion and Benihana. As a result, we are subject to the risks faced by these companies in their respective industries. Each has been adversely affected by a downturn in the economy, loss of consumer confidence and disruptions in the credit markets. Our current business plan includes a focus on providing strategic support to the companies within our consolidated group, and in which we hold investments. Such support may include further investments in those companies. Any such additional investments will further expose us to the risks faced by those companies.
We will be required to make a cash payment to shareholders of Woodbridge who exercised appraisal rights in connection with the Merger.
     Under Florida law, holders of Woodbridge’s Class A Common Stock who did not vote to approve the Woodbridge Merger and who properly asserted and exercised their appraisal rights with respect to their shares (“Dissenting Holders”) are entitled to receive a cash payment in an amount equal to the fair value of their shares (as determined in accordance with the provisions of Florida law) in lieu of the shares of BFC’s Class A Common Stock which they would otherwise have been entitled to receive. Dissenting Holders, who owned in the aggregate approximately 4.6 million shares of Woodbridge’s Class A Common Stock, provided written notice to Woodbridge regarding their intent to exercise their appraisal rights. In accordance with Florida law, Woodbridge provided written notices and required forms to the Dissenting Holders setting forth, among other things, its determination that the fair value of Woodbridge’s Class A Common Stock immediately prior to the effectiveness of the Merger was $1.10 per share. Dissenting Holders were required to return their appraisal forms by November 10, 2009 and indicate on their appraisal forms whether the Dissenting Holder chose to (i) accept Woodbridge’s offer of $1.10 per share in cash, or (ii) demand payment of the fair value estimate determined by the Dissenting Holder plus interest. As of the date of this filing, one Dissenting Holder which held approximately 400,000 shares of Woodbridge’s Class A Common Stock had withdrawn its shares from the appraisal rights process, while the remaining Dissenting Holders, who collectively held approximately 4.2 million shares of Woodbridge’s Class A Common Stock, have rejected Woodbridge’s offer of $1.10 per share and requested payment for their shares based on their respective views of the fair value of Woodbridge’s Class A Common Stock prior to the merger. In December 2009, the Company recorded a $4.6 million liability with a corresponding reduction to additional paid-in capital representing, in the aggregate, Woodbridge’s offer to the Dissenting Holders. However, the appraisal rights litigation is currently ongoing and its outcome is uncertain. As a result, there is no assurance as to the amount of cash that Woodbridge will be required to pay to the Dissenting Holders and such amount may be greater than the $4.6 million that we have accrued. Any significant increase in Woodbridge’s obligation to Dissenting Holders who exercise their appraisal rights could have a material adverse effect on BFC’s and Woodbridge’s businesses.

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Regulatory restrictions, BankAtlantic’ performance and the terms of indebtedness limit or restrict BankAtlantic Bancorp’s ability to pay dividends which may impact our cash flow.
     At December 31, 2009, we held approximately 37% of the outstanding common stock of BankAtlantic Bancorp. Dividends by BankAtlantic Bancorp are subject to a number of conditions, including the cash flow and profitability of BankAtlantic Bancorp, declaration of dividends by BankAtlantic Bancorp’s Board of Directors, compliance with the terms of outstanding indebtedness, and regulatory restrictions applicable to BankAtlantic.
     BankAtlantic Bancorp is a separate publicly traded company whose Board of Directors includes a majority of independent directors as required by the listing standards of the New York Stock Exchange. Decisions made by BankAtlantic Bancorp’s Board are not within our control and may not be made in our best interests.
     The declaration and payment of dividends and the ability of BankAtlantic Bancorp to meet its debt service obligations will depend upon adequate cash holdings, which are driven by the results of operations, financial condition and cash requirements of BankAtlantic Bancorp, and the ability of BankAtlantic to pay dividends to BankAtlantic Bancorp. The ability of BankAtlantic to pay dividends or make other distributions to BankAtlantic Bancorp is subject to regulations and prior approval of the Office of Thrift Supervision (“OTS”). The OTS would not approve any distribution that would cause BankAtlantic to fail to meet its capital requirements or if the OTS believes that a capital distribution by BankAtlantic would constitute an unsafe or unsound action or practice, and there is no assurance that the OTS would approve future applications for capital distributions from BankAtlantic. During the first quarter of 2009, BankAtlantic suspended the payment of dividends to BankAtlantic Bancorp and BankAtlantic has indicated that it does not intend to seek to make any capital distributions for the foreseeable future. In February 2009, BankAtlantic Bancorp elected to exercise its right to defer payments of interest on its trust preferred junior subordinated debt. BankAtlantic Bancorp is permitted to defer quarterly interest payments for up to 20 consecutive quarters. During the deferral period, BankAtlantic Bancorp is prohibited from paying dividends to its shareholders, including BFC. While BankAtlantic Bancorp can end the deferral period at any time, BankAtlantic Bancorp has indicated that it anticipates that is may continue to defer such interest payments for the foreseeable future. Accordingly, BFC does not expect to receive dividends from BankAtlantic Bancorp for the foreseeable future.
The payment of dividends by Bluegreen is not within our control.
     Bluegreen is a separate publicly traded company whose Board of Directors includes a majority of independent directors as required by the listing standards of the New York Stock Exchange. Decisions made by Bluegreen’s Board are not within our control and may not be made in our best interests.
     Bluegreen has not paid cash dividends during the three years ending December 31, 2009. Future dividends from Bluegreen are subject to approval by Bluegreen’s Board of Directors (a majority of whom are independent directors) and will depend upon, among other factors, Bluegreen’s results of operations, financial condition and operating and capital needs. Bluegreen may also be limited contractually from paying dividends by the terms of its credit facilities. Accordingly, there is no assurance that Bluegreen will pay dividends for the foreseeable future.
Dividends and distributions from our subsidiaries to their respective parent companies may be subject to claims in the future from creditors of the subsidiary.
     Subsidiaries have in the past and may in the future make dividends or distributions to their parent companies. Dividend payments and other distributions by a subsidiary to its parent company, including payments or distributions from Core to Woodbridge, from BankAtlantic to BankAtlantic Bancorp, or from Woodbridge or BankAtlantic Bancorp to BFC may, in certain circumstances, be subject to claims made by creditors of the subsidiary which made the payment or distribution. Any such claim, if successful, may have a material and adverse impact on the financial condition of the parent company against which the claim was brought.

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There are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of financial statements in accordance with GAAP. Any changes in estimates, judgments and assumptions used could have a material adverse effect on our financial position and operating results.
     The consolidated financial statements included in the periodic reports we file with the SEC, including those included as part of this Annual Report on Form 10-K, are prepared in accordance with GAAP. The preparation of financial statements in accordance with GAAP involves making estimates, judgments and assumptions that affect reported amounts of assets (including purchase accounting fair value measurements, goodwill and other intangible assets), liabilities and related reserves, revenues, expenses and income. This includes estimates, judgments and assumptions for assessing the amortization /accretion of purchase accounting fair value differences and the future value of goodwill and other intangible assets pursuant to applicable accounting guidance. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. However, estimates, judgments and assumptions are inherently subject to change in the future. As a result, our estimates, judgments and assumptions may prove to be incorrect and our actual results may differ from these estimates under different assumptions or conditions. If any estimates, judgments or assumptions change in the future, or our actual results differ from our estimates or assumptions, we may be required to record additional expenses or impairment charges, which would be recorded as a charge against our earnings and could have a material adverse impact on our financial condition and operating results.
Our activities and our subsidiaries’ activities are subject to a wide range of regulatory requirements applicable to financial institutions and holding companies, and noncompliance with such regulations could have a material adverse effect on our business.
     The Company and BankAtlantic Bancorp are each grandfathered unitary savings and loan holding companies and have broad authority to engage in various types of business activities. However, the OTS can stop either of us from engaging in activities or limit those activities if it determines that there is reasonable cause to believe that the continuation of any particular activity constitutes a serious risk to the financial safety, soundness or stability of BankAtlantic. The OTS may also:
    limit the payment of dividends by BankAtlantic to BankAtlantic Bancorp;
 
    limit transactions between us, BankAtlantic, BankAtlantic Bancorp and the subsidiaries or affiliates of either;
 
    limit the activities of BankAtlantic, BankAtlantic Bancorp or us; or
 
    impose capital requirements on us or BankAtlantic Bancorp.
     In addition, unlike bank holding companies, as unitary savings and loan holding companies, BFC and BankAtlantic Bancorp are not currently subject to capital requirements. However, the OTS has indicated that it may, in the future, impose capital requirements on savings and loan holding companies. In addition, the current administration has proposed legislation which would, among other things, eliminate the status of “savings and loan holding company” and require us and BankAtlantic Bancorp to register as a bank holding company, which would subject us and BankAtlantic Bancorp to regulatory capital requirements. Further, the OTS or other regulatory bodies having authority over the Company in the future may adopt regulations in the future that would affect the Company’s operations, including BankAtlantic Bancorp’s ability to pay dividends or to engage in certain transactions or activities. See “Financial Services Regulation and Supervision — Holding Company.”

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Certain members of our Board of Directors and certain of our executive officers are also directors and executive officers of our affiliates.
     Alan B. Levan, our Chairman and Chief Executive Officer, and John E. Abdo, our Vice Chairman, are also members of the Boards of Directors and/or executive officers of BankAtlantic Bancorp, BankAtlantic, Woodbridge, Bluegreen and Benihana. Neither Mr. Levan nor Mr. Abdo is obligated to allocate a specific amount of time to the management of the Company, and they may devote more time and attention to the operations of our affiliates than they devote directly to our operations. Jarett S. Levan, a member of our Board of Directors, is the President of BankAtlantic Bancorp and the Chief Executive Officer of BankAtlantic and a member of the Board of each of them, and D. Keith Cobb, a member of our Board of Directors, is a member of the Boards of Directors of BankAtlantic Bancorp and BankAtlantic.
Risks Associated with Our Investments in the Restaurant Industry
     We have an investment in preferred shares of Benihana which are convertible to shares of Benihana’s Common Stock. Benihana operates 98 restaurants in the United States, including 64 Benihana teppanyaki restaurants, nine Haru sushi restaurants and 25 RA Sushi Bar restaurants. In addition, 23 franchised Benihana teppanyaki restaurants operate in the United States, Latin America and the Caribbean. We have an investment in Pizza Fusion which has 18 restaurants, including 2 Company owned restaurants and 16 franchised restaurants, operating in 9 states and had entered into franchise agreements for an additional 12 stores by September 2010. As such, we are subject to the risks faced by these companies and the value of our investment will be influenced by the market performance and financial performance of these companies. Some of the risk factors common to the restaurant industry which might affect the performance of these companies include:
    the current economic downturn has adversely impacted consumer spending patterns and has had negative effects on consumer discretionary spending;
 
    the limited availability and high cost of credit may continue or deteriorate further;
 
    higher than normal food costs may adversely impact our results of operations;
 
    the failure of existing or new restaurants to perform as expected;
 
    the inability to construct new restaurants and remodel existing restaurants within projected budgets and time periods;
 
    increases in the minimum wage;
 
    increases in unemployment;
 
    intense competition in the restaurant industry;
 
    the food service industry is affected by litigation and publicity concerning food quality, health and other issues, which could cause customers to avoid a particular restaurant, result in significant liabilities or litigation costs or damage reputation or brand recognition; and
 
    implementing growth and renovation strategies may strain available resources.
Our portfolio of equity securities and our investments in BankAtlantic Bancorp, Benihana and Bluegreen subjects us to equity pricing risks.
     Because BankAtlantic Bancorp and Bluegreen are consolidated in the Company’s financial statements, the decline in the market price of their stock would not impact the Company’s consolidated financial statements. However, a decline in the market price of the securities of either of these companies would likely have an adverse effect on the market price of our common stock. The market price of our common stock and our equity securities are important to our valuation and ability to obtain equity or debt financing.
     We also have an investment in Benihana Series B Convertible Preferred Stock (“Benihana Preferred Stock”) for which no current market exists (unless converted into common stock). The 800,000 shares of Benihana Preferred Stock owned by the Company are convertible into 1,578,943 shares of Benihana Common Stock. At December 31, 2009, if converted, the aggregate market value of such shares would have been $6.6 million. The ability to realize or liquidate this investment will depend on future market and economic conditions and the ability to register our sale of shares of Benihana’s common stock in the event of the conversion of our shares of Benihana Convertible Preferred stock, all of which are subject to significant risk.

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Our net operating loss carryforwards will be substantially limited as a result of the Merger with Woodbridge because the Merger resulted in an “ownership change” as defined in the Internal Revenue Code.
     We have experienced and continue to experience net operating losses. Under the Internal Revenue Code, we may utilize our net operating loss carryforwards in certain circumstances to offset future taxable income and to reduce federal income tax liability, subject to certain requirements and restrictions. The Woodbridge merger, which was consummated on September 21, 2009, resulted in an “ownership change”, as defined in Section 382 of the Internal Revenue Code. As a result, our ability in the future to use our historic net operating loss carryforwards will be substantially limited, which could have a negative impact on our financial position and results of operations. However, we believe that BFC may utilize Woodbridge’s net operating loss carryforwards. Accordingly, in September 2009, our Board of Directors adopted a shareholder rights plan designed to preserve shareholder value and protect our ability to use Woodbridge’s net operating loss carryforwards by providing a deterrent to holders of less than 5% of our common stock from acquiring a 5% or greater ownership interest in our common stock. However, there is no assurance that the shareholder rights plan will successfully prevent against an “ownership change” or otherwise preserve our ability to utilize our net operating loss carryforwards to offset any future taxable income, nor is there any assurance that we will be in a position to utilize our net operating loss carryforwards in the future even if we do not experience an “ownership change.”
Issuance of Additional Securities In The Future.
     There is generally no restriction on our ability to issue debt or equity securities which are pari passu or have a preference over our common stock. Authorized but unissued shares of our capital stock are available for issuance from time to time at the discretion of our Board of Directors, including issuances in connection with acquisitions, and any such issuance may be dilutive to our shareholders. There is also no restriction on the ability of BankAtlantic Bancorp or Bluegreen to issue additional capital stock or incur additional indebtedness. Any future securities issuances by BankAtlantic Bancorp or Bluegreen may dilute our economic investment or voting interest in those companies.
Our control position may adversely affect the market price of BankAtlantic Bancorp’s Class A Common Stock and Bluegreen’s common stock.
     As of December 31, 2009, we owned all of BankAtlantic Bancorp’s issued and outstanding Class B Common Stock and approximately 17.3 million shares, or approximately 36%, of BankAtlantic Bancorp’s issued and outstanding Class A Common Stock, representing approximately 66% of BankAtlantic Bancorp’s total voting power. Additionally, we own approximately 16.9 million shares, or approximately 52%, of Bluegreen’s issued and outstanding common stock. Accordingly, we hold a controlling position with respect to BankAtlantic Bancorp and Bluegreen and have the voting power to significantly influence the outcome of any shareholder vote of the companies, except with respect to BankAtlantic Bancorp in those limited circumstances where Florida law mandates separate class votes. Our control position may have an adverse effect on the market prices of BankAtlantic Bancorp’s Class A Common Stock and Bluegreen’s common stock.
Alan B. Levan And John E. Abdo’s Control Position May Adversely Affect The Market Price Of Our Common Stock.
     Alan B. Levan, our Chairman of the Board of Directors and Chief Executive Officer, and John E. Abdo, our Vice Chairman of the Board of Directors, may be deemed to beneficially own shares of our common stock representing approximately 72% of our total voting power. These shares consist of 10,694,685 shares or 15.6% of our Class A Common Stock and 6,521,228 shares, or 87.4%, of our Class B Common Stock. Additionally, Alan B. Levan and John E. Abdo have agreed to vote their shares of our Class B common stock in favor of the election of the other to our Board of Directors for so long as they are willing and able to serve as directors of the Company. Further, John E. Abdo has agreed, subject to certain exceptions, not to transfer certain of his shares of our Class B common stock and to obtain the consent of Alan B. Levan prior to the conversion of certain of his shares of our Class B common stock into shares of our Class A common stock. Since our Class A common stock and Class B common stock vote as a single class on most matters, Alan B. Levan and John E. Abdo effectively have the voting power to control the outcome of any shareholder vote (except in those limited circumstances where Florida law mandates that the holders of our Class A common stock vote as a separate class) and to elect the members of our Board of Directors. Alan B. Levan and John E. Abdo’s control position may have an adverse effect on the market price of our common stock. Alan B. Levan’s and John E. Abdo’s interests may conflict with the interests of our other shareholders.

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The terms of our articles of incorporation, which establish fixed relative voting percentages between our Class A Common Stock and Class B Common Stock, may not be well accepted by the market.
     Our Class A Common Stock and Class B Common Stock generally vote together as a single class. The Class A Common Stock possesses in the aggregate 22% of the total voting power of all our common stock and the Class B Common Stock possesses in the aggregate the remaining 78% of the total voting power. These relative voting percentages will remain fixed unless the number of shares of Class B Common Stock outstanding decreases to 1,800,000 shares, at which time the Class A Common Stock’s aggregate voting power will increase to 40% and the Class B Common Stock will have the remaining 60%. If the number of shares of Class B Common Stock outstanding decreases to 1,400,000 shares, the Class A Common Stock’s aggregate voting power will increase to 53% and the Class B Common Stock will have the remaining 47%. These relative voting percentages will remain fixed unless the number of shares of Class B Common Stock outstanding decreases to 500,000 shares, at which time the fixed voting percentages will be eliminated. These changes in the relative voting power represented by each class of our common stock are based only on the number of shares of Class B Common Stock outstanding. Thus issuances of Class A Common Stock will have no effect on these provisions. If additional shares of Class A Common Stock are issued, it is likely that the disparity between the equity interest represented by the Class B Common Stock and its voting power will widen. While the amendment creating this capital structure was approved by our shareholders, the fixed voting percentage provisions are somewhat unique. If the market does not view this structure favorably, the trading price and market for our Class A Common Stock would be adversely affected.
The loss of the services of our key management and personnel could adversely affect our business.
     Our ability to successfully implement our business strategy will depend on our ability to attract and retain experienced and knowledgeable management and other professional staff. There is no assurance that we will be successful in attracting and retaining key management personnel.

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RISKS RELATED TO WOODBRIDGE
The defaults by Woodbridge and its subsidiaries under the terms of their outstanding indebtedness have resulted in acceleration of the debt and may result in judgments against the obligors.
     Lenders with respect to approximately $37.2 million of debt owed by Woodbridge and all of the approximately $209.9 million of debt owed by Core have declared the debt to be in default. While Woodbridge is disputing the fact that an event of default occurred under the terms of its indebtedness and is currently in negotiations with respect to the purported default with the FDIC (which holds the debt as a result of the failure of the lender), Core is currently pursuing all options with its lenders, including offering deeds in lieu of foreclosure with respect to the property collateralizing its loans. If these negotiations and efforts are not successful, the lenders may exercise remedies available to them as a result of the defaults, which may result in judgments against the obligors, the loss of the collateral and related losses beyond those previously incurred. This would be expected to materially and adversely impact our financial condition and operating results.
Core has ceased substantially all development operations and may not be successful in achieving an orderly liquidation of its assets.
     As discussed throughout this report, Core is experiencing cash flow deficits. The significant decrease in land sales in 2009 and continued cash flow deficits contributed to, among other things, the deterioration of Core’s liquidity. As a result, Core has severely limited its development expenditures in Tradition, Florida and has completely discontinued development activity in Tradition Hilton Head. The value of Core’s assets has decreased, resulting in $78.0 million of impairment charges, including $13.6 million of impairment charges related to assets held for sale during 2009. Further, as described above, Core is currently in default under the terms of all of its loans. Core has commenced negotiations with its lenders in an effort to achieve an orderly liquidation of its operations without a bankruptcy filing, but there is no assurance that Core will be successful in its negotiations. If Core is not successful in its efforts to liquidate its assets or otherwise renegotiate its debt with its lenders, Core may need to pursue a bankruptcy filing and may be required to record additional impairment charges and losses beyond those previously incurred, which would likely have a material and adverse impact on our financial condition and operating results.
Core utilized community development district and special assessment district bonds to fund development costs, and Core will be responsible for assessments until the underlying property is sold or otherwise transferred.
     Core established community development district and special assessment district bonds to access tax-exempt bond financing to fund infrastructure development at Core’s master-planned communities. Core is responsible for any assessed amounts until the underlying property is sold. Accordingly, if Core continues to hold certain of its properties longer than originally projected (as a result of a continued downturn in the real estate markets or otherwise), Core may be required to pay a higher portion of annual assessments on such properties. In addition, Core could be required to pay down a portion of the bonds in the event its entitlements were to decrease as to the number of residential units and/or commercial space that can be built on the properties encumbered by the bonds. Moreover, Core has guaranteed payments for assessments under the district bonds in Tradition, Florida which would require funding if future assessments to be allocated to property owners are insufficient to repay the bonds.
It may be difficult and costly to rent vacant space and space which may become vacant in future periods.
     We may not be able to maintain our overall occupancy levels in the commercial property we own. Our ability to continue to lease or re-lease vacant space in our commercial properties will be affected by many factors, including our properties’ locations, current market conditions and the provisions of the leases we enter into with the tenants at our properties. In fact, many of the factors which could cause our current tenants to vacate their space could also make it more difficult for us to re-lease that space. If we are able to re-lease vacated space, there is no assurance that rental rates will be equal to or in excess of current rental rates. In addition, we may incur substantial costs in obtaining new tenants, including brokerage commission fees paid by us in connection with new leases or lease renewals, and the cost of leasehold improvements. The failure to lease or to re-lease vacant space on satisfactory terms will have an adverse effect on our operating results.

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If prospective purchasers of assets and tenants are not able to obtain suitable financing, our results of operations may further decline.
     Our results of operations are dependent in part on the ability of prospective purchasers of our real estate inventory and prospective commercial tenants to secure financing. The deterioration of the credit markets and the related tightening of credit standards may impact the ability of prospective purchasers and tenants to secure financing on acceptable terms, if at all. This may, in turn, negatively impact long-term rental and occupancy rates as well as the value of our commercial properties.
Product liability litigation and claims that arise in the ordinary course of business may be costly.
     Our real estate operations are subject to construction defect and product liability claims arising in the ordinary course of business. These claims are particularly common in the commercial real estate industry and can be costly. We have, and many of our subcontractors have, general liability, property, errors and omissions, workers compensation and other business insurance. However, these insurance policies only protect us against a portion of our risk of loss from claims. In addition, because of the uncertainties inherent in these matters, we cannot provide reasonable assurance that our insurance coverage or our subcontractor arrangements will be adequate to address all warranty, construction defect and liability claims in the future. In addition, the costs of insuring against construction defect and product liability claims, if applicable, are substantial and the amount of coverage offered by insurance companies is also currently limited. There can be no assurance that this coverage will not be further restricted and become more costly. If we are not able to obtain adequate insurance against these claims, we may experience losses that could negatively impact our operating results.
We are subject to governmental regulations that may limit our operations, increase our expenses or subject us to liability.
     We are subject to laws, ordinances and regulations of various federal, state and local governmental entities and agencies concerning, among other things:
    environmental matters, including the presence of hazardous or toxic substances;
 
    wetland preservation;
 
    health and safety;
 
    zoning, land use and other entitlements;
 
    building design; and
 
    density levels.
     We may also at times not be in compliance with all regulatory requirements. If we are not in compliance with regulatory requirements, we may be subject to penalties, lose our entitlement or be forced to incur significant expenses to cure any noncompliance.
We are subject to environmental laws and the cost of compliance could adversely affect our business.
     As a current or previous owner or operator of real property, we may be liable under federal, state, and local environmental laws, ordinances and regulations for the costs of removal or remediation of hazardous or toxic substances on, under or in the property. These laws often impose liability whether or not we knew of, or were responsible for, the presence of such hazardous or toxic substances. The cost of investigating, remediation or removing such hazardous or toxic substances may be substantial. The presence of any such substance, or the failure to promptly remediate any such substance, may adversely affect our ability to sell or lease the property or to use the property for its intended purpose.

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Levitt and Sons had surety bonds on most of their projects, some of which were subject to indemnity by Woodbridge.
     Levitt and Sons had $33.3 million in surety bonds relating to its ongoing projects at the time of the filing of the Chapter 11 Cases. In the event that these obligations are drawn and paid by the surety, Woodbridge could be responsible for up to $8.0 million plus costs and expenses in accordance with the surety indemnity agreements it executed. At December 31, 2009, we had a $0.5 million in surety bonds accrual related to certain Levitt and Sons bonds where management believes it to be probable that Woodbridge will be required to reimburse the surety under applicable indemnity agreements. It is unclear whether and to what extent the remaining outstanding surety bonds of Levitt and Sons will be drawn and the extent to which Woodbridge may be responsible for additional amounts beyond this accrual. Woodbridge will not receive any repayment, assets or other consideration as recovery of any amount it may be required to pay. If losses on additional surety bonds are identified, we will need to take additional charges associated with our exposure under our indemnities, and this may have a material adverse effect on our results of operations and financial condition.

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RISKS RELATED TO BLUEGREEN
     Bluegreen presents its results in two reportable segments. Bluegreen’s results of operations for the Bluegreen Interim Period are consolidated in BFC Financial Corporation’s financial statements. Bluegreen is a separate public company and its management prepared the following discussion regarding Bluegreen which was included in Bluegreen’s Annual Report on Form 10-K for the year ended December 31, 2009 which was filed with the Securities and Exchange Commission on March 31, 2010. Accordingly, references to “we”, “us” or “our” in this section are references to Bluegreen and its subsidiaries, and are not references to BFC, Woodbridge, or BankAtlantic Bancorp.
We are subject to various risks and uncertainties relating to or arising out of the nature of our business and general business, economic, financing, legal and other factors or conditions that may affect us. Moreover, we operate in a very competitive, highly regulated and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to either predict all risk factors, or assess the impact of all risk factors on our business or the extent to which any factor, or combination of factors, may affect our business. These risks and uncertainties include, but are not limited, to the risk factors set forth below and those identified elsewhere in this Annual Report on Form 10-K, including in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. Investors should also refer to our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K (available on our website and the SEC’s website) in future periods for information relating to risks and uncertainties with respect to us and our business.
The state of the economy, generally, interest rates and the availability of financing affect our ability to market VOIs and residential homesites.
Our business has been adversely affected by unfavorable general economic and industry conditions, including effects of weak domestic and world economies, rising unemployment and job insecurity, a decrease in discretionary spending, a decline in housing values, limited availability of financing, and geopolitical conflicts. If such conditions continue, or deteriorate further, our business and results may continue to be adversely impacted, particularly if the availability of financing for us or for our customers continues to be limited or if changes in general economic conditions adversely affect our customers ability to pay amounts owed under our notes receivable. Further, because our operations are conducted mainly within the vacation ownership industry, any adverse changes affecting the industry, such as an oversupply of vacation ownership units, a reduction in demand for such units, changes in travel and vacation patterns, changes in governmental regulation of the industry, continued disruptions in the credit markets and unavailability of financing, imposition of increased taxes by governmental authorities, the declaration of bankruptcy and/or credit defaults by other vacation ownership companies and negative publicity for the industry, could also have a material adverse effect on our business.
We would incur substantial losses if the customers we finance default on their obligations, and new credit underwriting standards may not have the anticipated favorable impact on performance.
Historically, we did not perform credit checks of the purchasers of our VOIs at the time of sale in connection with our financing of their purchases. From time to time, however, we obtained FICO® scores on the overall VOI portfolio originated by us. Based on a review conducted in October 2008, approximately 30.4% of VOI borrowers in our serviced loan portfolio had a FICO® score below 620. Effective December 15, 2008, we implemented a formal FICO® score based credit underwriting program. However, there is no assurance that any of these FICO® score-based underwriting standards will result in decreased default rates or otherwise improve the performance of our receivables. Conditions in the mortgage industry, including both credit sources as well as borrowers’ financial profiles, have deteriorated in recent years. As of December 31, 2009, approximately 5.4% of our vacation ownership receivables and approximately 22.5% of residential land receivables which we held or which third parties held under sales transactions were more than 30 days past due. Although in many cases we may have recourse against a buyer for the unpaid purchase price, certain states have laws that limit our ability to recover personal judgments against customers who have defaulted on their loans or the cost of doing so may not be justified. Historically, we have generally not pursued such recourse against our customers. In the case of our VOI receivables, if we are unable to collect the defaulted amount due, we traditionally have terminated the customer’s interest in the Bluegreen Vacation Club and then remarketed the recovered VOI. Irrespective of our remedy in the event of a default, we cannot recover the marketing, selling and administrative costs associated with the original sale, and we would have to incur such costs again to resell the VOI or home site. If default rates for our borrowers increase further, it may require an increase in the provision for loan losses and an impairment of the value of our retained interests in notes receivable sold. In addition, it may cause buyers of, or lenders whose loans are secured by, our VOI notes receivable to reduce the amount of availability under receivables purchase and credit facilities, or to increase the interest costs associated with such facilities. In such an event, the cost of financing may increase and we may not be able to secure financing on terms acceptable to us, if at all, which would adversely affect our earnings, financial position and liquidity.
Under the terms of our pledged and receivable sale facilities, we may be required, under certain circumstances, to replace receivables or to pay down the loan to within permitted loan-to-value ratios. Additionally, the terms of our securitization-type transactions i.) require us to repurchase or replace loans if we breach any of the representations and warranties we made at the time we sold the receivables and ii.) include provisions that in the event of defaults by customers in excess of stated thresholds would require substantially all of our cash flow from our retained interest in the receivable portfolios sold to be paid to the parties who purchased the receivables from us.

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Further, if defaults and other performance criteria adversely differ from estimates used to value our retained interests in notes receivable sold in the securitization transactions, we may be required to write down these assets, which could have a material adverse effect on our results of operations. Accordingly, we bear some risks of delinquencies and defaults by buyers who finance the purchase of their VOIs or residential land through us, regardless of whether or not we sell or pledge the buyer’s loan to a third party.
Our business plan historically has depended on our ability to sell or borrow against our notes receivable to support our liquidity and profitability.
We offer financing of up to 90% of the purchase price to purchasers of our VOIs and homesites. Approximately 68% of our VOI customers and approximately 6% of our home site customers utilized our in-house financing during the year ended December 31, 2009. However, we incur selling, marketing and administrative cash expenditures prior to and concurrent with the sale. These costs generally exceed the down payment we receive at the time of the sale. Accordingly, our ability to borrow against or sell the notes receivable we receive from our customers has been a critical factor in our continued liquidity.
We have also been a party to a number of customary securitization-type transactions under which we sell receivables to a wholly-owned special purpose entity which, in turn, sells the receivables to a trust established for the transaction. We typically recognized gains on the sale of receivables and such gains have historically comprised a significant portion of our income. In recent years, the markets for notes receivable facilities and receivable securitization transactions were negatively impacted by problems in the residential mortgage markets and credit markets in general and an associated reduction in liquidity which resulted in reduced availability of financing and less favorable pricing. If our pledged receivables facilities terminate or expire and we are unable to replace them with comparable facilities, or if we are unable to continue to participate in securitization-type transactions on acceptable terms, our liquidity, cash flow, and profitability would be materially and adversely affected. If any of our current facilities terminate or expire, there is no assurance that we will be able to negotiate the pledge or sale of our notes receivable at favorable rates, or at all.
While we have attempted to restructure our business to reduce our need for and reliance on financing for liquidity in the short term, there is no assurance that such restructuring will be successful or that our business and profitability will not otherwise continue to depend on our ability to obtain financing, which may not be available on favorable terms, or at all.
We have historically depended on funds from our credit facilities and securitization transactions to finance our operations. In recent years, there have been unprecedented disruptions in the credit markets, which has made obtaining additional and replacement external sources of liquidity more difficult and more costly. The term securitization market has experienced significantly reduced volumes in recent years and, as a result, financial institutions are reluctant to enter into new credit facilities for the purpose of providing financing on consumer receivables. Several lenders to the timeshare industry, including certain of our lenders, have announced that they will be either be exiting the finance business or will not be entering into new financing commitments for the foreseeable future, although such lenders continue to honor existing commitments. In addition, financing for real estate acquisition and development and the capital markets for corporate debt have been generally unavailable. In response to these conditions, we adopted strategic initiatives in an attempt to conserve cash. Further, because we had debt facilities maturing or requiring partial repayment in 2009 and 2010, as well as facilities for which the advance period has or will expire, the implementation of our strategic initiatives was needed to address these matters with our lenders. However, there is no assurance that our implementation of these strategic initiatives will enhance our financial position or otherwise be successful. If these initiatives do not have their intended results, our financial condition may be materially and adversely impacted.
In addition, notwithstanding our implementation of the strategic initiatives described above, we anticipate that we will continue to finance our future business activities, in part, with funds that we obtain pursuant to additional borrowings under our existing credit facilities, under credit facilities that we may obtain in the future, under securitizations in which we may participate in the future or pursuant to other borrowing arrangements. Moreover, we are, and will be, required to seek continued external sources of liquidity to:
    support our operations;
 
    finance the acquisition and development of VOI inventory and residential land;
 
    finance a substantial percentage of our sales; and
 
    satisfy our debt and other obligations.

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Our ability to service or to refinance our indebtedness or to obtain additional financing (including our ability to consummate future notes receivable securitizations) depends on the credit markets and on our future performance, which is subject to a number of factors, including the success of our business, results of operations, leverage, financial condition and business prospects, prevailing interest rates, general economic conditions and perceptions about the residential land and vacation ownership industries. We have approximately $87.5 million of indebtedness which becomes due during 2010. While we have received a non-binding term sheet to refinance $40.2 million of this amount which would reduce our contractual obligations less than one year by $26.6 million, there can be no assurances that this transaction will close on favorable terms, if at all. Historically, much of Bluegreen’s debt has been renewed or refinanced in the ordinary course of business. But there is no assurance that we will be able to obtain sufficient external sources of liquidity on attractive terms, or at all, or otherwise renew, extend or refinance a significant portion of our outstanding debt. Any of these occurrences may have a material and adverse impact on our liquidity and financial condition.
Our results of operations and financial condition could be adversely impacted if our estimates concerning our notes receivable are incorrect.
A portion of our revenue historically has been comprised of gains on sales of notes receivable in off-balance sheet arrangements. The amount of any gains recognized and the fair value of the retained interests recorded were based in part on management’s best estimates of future prepayment, default and loss severity rates, discount rates and other considerations in light of then-current conditions. Our results of operations and financial condition could be adversely affected if, among other things:
    actual prepayments with respect to loans sold occur more quickly than was projected;
 
    actual defaults and/or loss severity rates with respect to loans sold are greater than estimated;
 
    the portfolio of receivables sold fails to satisfy specified performance criteria; or
 
    conditions in the securitization market continue to result in a widening of interest spreads, causing the discount rates used to value our retained interest in notes receivable sold to increase.
If any of these situations were to occur, it could cause a decline in the fair value of the retained interests and a charge to earnings currently. Further, in certain events the cash flow on the retained interests in notes receivable sold could be reduced, in some cases, until the outside investors are paid or the regular payment formula was resumed.
Our future success depends on our ability to market our products successfully and efficiently.
We compete for customers with other hotel and resort properties and vacation ownership resorts. While in the short term we have made a decision to limit sales and reduce cash requirements, in the long run, the identification of sales prospects and leads, and the marketing of our products to them are essential to our success. We have incurred and will continue to incur the expenses associated with marketing programs in advance of closing sales to the leads that we identify. If our lead identification and marketing efforts do not yield enough leads or we are unable to successfully convert sales leads to a sufficient number of sales, we may be unable to recover the expense of our marketing programs and systems and our business would be adversely affected.
We are subject to the risks of the real estate market and the risks associated with real estate development, including the declines in real estate values and the deterioration of real estate sales.
Real estate markets are cyclical in nature and highly sensitive to changes in national and regional economic conditions, including:
    levels of unemployment;
 
    levels of discretionary disposable income;
 
    levels of consumer confidence;
 
    the availability of financing;
 
    overbuilding or decreases in demand;
 
    interest rates; and,
 
    federal, state and local taxation methods.

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The real estate market is currently experiencing a significant correction, the depth and duration of which are as yet unknown and many economists and financial analysts, as well as the media in general, believe that we are in the midst of a general economic recession. These circumstances have exerted pressure upon our Bluegreen Communities and Bluegreen Resorts divisions. Further, a continued deterioration of the economy in general or the market for residential land or VOIs would have a material adverse effect on our business.
The availability of land at favorable prices for the development of our Bluegreen Resorts and Bluegreen Communities real estate projects by the time we will need more real estate inventory to sell is critical to our profitability and the ability to cover our significant selling, general and administrative expenses, cost of capital and other expenses. While we believe that the property we have purchased at our adjusted carrying amounts will generate appropriate margins, land prices have fallen significantly and the projects we bought in the last several years may have been bought at higher price levels than available in the current market. If we are unable to acquire such land or, in the case of Bluegreen Resorts, resort properties, at a favorable cost, it could have an adverse impact on our results of operations.
The profitability of our real estate development activities is also impacted by the cost of construction materials and services. Should the cost of construction materials and services rise, the ultimate cost of our Bluegreen Resorts’ and Bluegreen Communities’ inventories when developed could increase and have a material, adverse impact on our results of operations.
Our adoption on January 1, 2010, of recently issued accounting guidance will have a material adverse impact on our net worth, leverage, and book value per share.
The initial adoption of FASB ASC 860-10 and FASB ASC 810-10 in our 2010 first quarter will require us to consolidate our existing qualifying special purpose entities associated with past securitization transactions. As such, we will record a one-time non-cash after-tax charge directly to shareholders’ equity of approximately $35.0 million to $55.0 million, representing the cumulative effect of a change in accounting principle, in the first quarter of 2010. The cumulative effect will consist primarily of the reestablishment of notes receivable (net of reserves) associated with those securitization transactions, the elimination of residual interests that we initially recorded in connection with those transactions, the impact of recording debt obligations associated with third party interests held in the special purpose entities and related adjustments to deferred financing costs and inventory balances. We anticipate that our adoption of these standards will have the following impacts on our balance sheet: (1) assets will increase by approximately $335.0 million to $345.0 million primarily related to the consolidation of notes receivable; (2) liabilities will increase by approximately $380.0 million to $390.0 million, primarily representing the consolidation of debt obligations associated with third party interests; and (3) shareholders’ equity will decrease by approximately $35.0 million to $55.0 million. There can be no assurances that this change in accounting principle will not adversely affect the market value of our common stock or the assessment of our financial position by investors and lenders.
Claims for development-related defects could adversely affect our financial condition and operating results.
We engage third-party contractors to construct our resorts and to develop our communities. However, our customers may assert claims against us for construction defects or other perceived development defects, including, without limitation, structural integrity, the presence of mold as a result of leaks or other defects, water intrusion, asbestos, electrical issues, plumbing issues, road construction, water and sewer defects and defects in the engineering of amenities. In addition, certain state and local laws may impose liability on property developers with respect to development defects discovered in the future. We could have to accrue a significant portion of the cost to repair such defects in the quarter when such defects arise or when the repair costs are reasonably estimable. A significant number of claims for development-related defects could adversely affect our liquidity, financial condition and operating results.
The resale market for VOIs could adversely affect our business.
Based on our experience at our resorts and at destination resorts owned by third parties, we believe that resales of VOIs generally are made at net sales prices below their original customer purchase prices. The relatively lower sales prices are partly attributable to the high marketing and sales costs associated with the initial sales of such VOIs. Accordingly, the initial purchase of a VOI may be less attractive to prospective buyers. Also, buyers who seek to resell their VOIs compete with our efforts to sell our VOIs. While VOI resale clearing houses or brokers currently do not have a material impact on our business, if a secondary market for VOIs were to become more organized and liquid, the resulting availability of resale VOIs at lower prices could adversely affect our sales prices and the number of sales we can close, which in turn would adversely affect our business and results of operations.

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We may be adversely affected by extensive federal, state and local laws and regulations and changes in applicable laws and regulations, including with respect to the imposition of additional taxes on operations.
The federal government and the states and local jurisdictions in which we conduct business have enacted extensive regulations that affect the manner in which we market and sell VOIs and homesites and conduct our other business operations. In addition, many states have adopted specific laws and regulations regarding the sale of VOIs and homesites. Many states, including Florida and South Carolina, where some of our resorts are located, extensively regulate the creation and management of timeshare resorts, the marketing and sale of timeshare properties, the escrow of purchaser funds prior to the completion of construction and closing, the content and use of advertising materials and promotional offers, the delivery of an offering memorandum and the creation and operation of exchange programs and multi-site timeshare plan reservation systems. Moreover, with regard to sales conducted in South Carolina, the closing of real estate and mortgage loan transactions must be conducted under the supervision of an attorney licensed in South Carolina. In June 2006, South Carolina enacted the “Time Sharing Transaction Procedures Act” which, among other things, further clarified the process that must be followed in the sale and purchase of timeshare interests. Most states also have other laws that regulate our activities, such as:
    timeshare project registration laws;
 
    real estate licensure laws;
 
    mortgage licensure laws;
 
    sellers of travel licensure laws;
 
    anti-fraud laws;
 
    consumer protection laws;
 
    telemarketing laws;
 
    prize, gift and sweepstakes laws; and
 
    consumer credit laws.
We currently are authorized to market and sell VOIs and homesites in all states in which our operations are currently conducted. If our agents or employees violate applicable regulations or licensing requirements, their acts or omissions could cause the states where the violations occurred to revoke or refuse to renew our licenses, render our sales contracts void or voidable, or impose fines on us based on past activities. See “Item 3 — Legal Proceedings”.
In addition, the federal government and the states and local jurisdictions in which we conduct business have enacted extensive regulations relating to direct marketing and telemarketing generally, including the federal government’s national “Do Not Call” list. The regulations have impacted our marketing of VOIs, and we have taken steps in an attempt to decrease our dependence on restricted calls. However, these steps have increased and are expected to continue to increase our marketing costs. We cannot predict the impact that these legislative initiatives or any other legislative measures that may be proposed or enacted now or in the future may have on our marketing strategies and results. Further, from time to time, complaints are filed against the Company by individuals claiming that they received calls in violation of the regulation.
Currently, most states have taxed VOIs as real estate, imposing property taxes that are billed to the respective property owners’ associations that maintain the related resorts and have not sought to impose sales tax upon the sale of the VOI or accommodations tax upon the use of the VOI. From time to time, however, various states have attempted to promulgate new laws or apply existing laws impacting the taxation of vacation ownership interests to require that sales or accommodations taxes be collected. Should new state or local laws be implemented or interpreted to impose sales or accommodations taxes on VOIs, our resorts business could be materially adversely affected.
We believe we are in material compliance with applicable federal, state, and local laws and regulations relating to the sale and marketing of VOIs and homesites. From time to time, however, consumers file complaints against us in the ordinary course of our business. We could be required to incur significant costs to resolve these complaints. There is no assurance that we will remain in material compliance with all applicable federal, state and local laws and regulations, or that violations of applicable laws will not have adverse implications for us, including negative public relations, potential litigation and regulatory sanctions. The expense, negative publicity and potential sanctions associated with any failure to comply with applicable laws or regulations could have a material adverse effect on our results of operations, liquidity or financial position.

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Environmental liabilities, including claims with respect to mold or hazardous or toxic substances, could have a material adverse impact on our business.
Under various federal, state and local laws, ordinances and regulations, as well as common law, we may be liable for the costs of removal or remediation of certain hazardous or toxic substances, including mold, located on, in or emanating from property that we own, lease or operate, as well as related costs of investigation and property damage at such property. These laws often impose liability without regard to whether we knew of, or were responsible for, the presence of the hazardous or toxic substances. The presence of such substances, or the failure to properly remediate such substances, may adversely affect our ability to sell or lease our property or to borrow money using such real property or receivables generated from the sale of such real property as collateral. Noncompliance with environmental, health or safety requirements may require us to cease or alter operations at one or more of our properties. Further, we may be subject to common law claims by third parties based on damages and costs resulting from violations of environmental regulations or from contamination associated with one or more of our properties.
The ratings of third-party rating agencies could adversely impact our ability to obtain, renew, or extend credit facilities, debt, or otherwise raise capital.
Rating agencies from time to time review prior corporate and specific transaction ratings in light of tightened ratings criteria. During the third quarter of 2009, we were informed that one of the rating agencies downgraded its original ratings on certain bond classes in our prior securitizations. As a result of this or any future downgrades, holders of such bonds may be required to sell bonds in the market place and such sales could occur at a discount, which could impact the perceived value of such bonds and our ability to sell future securitization bonds at favorable terms, if at all.
In addition, if rating agencies were to downgrade our corporate credit ratings, our ability to raise capital and/or issue debt at favorable terms or at all could be adversely impacted. Such a downgrade could materially adversely affect our liquidity, financial condition and results of operations.
The loss of the services of our key management and personnel could adversely affect our business.
Our ability to successfully implement our business strategy will depend on our ability to attract and retain experienced and knowledgeable management and other professional staff. There is no assurance that we will be successful in attracting and retaining key management personnel.

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Financial Services Risk Factors
     Our Financial Services activities consist of BankAtlantic Bancorp (and its federal savings bank subsidiary, BankAtlantic), whose results of operations are consolidated with BFC. The only assets available to BFC from BankAtlantic Bancorp are dividends when and if declared and paid by BankAtlantic Bancorp. BankAtlantic Bancorp is a separate public company and its management prepared the following discussion which was included in BankAtlantic Bancorp’s Annual Report on Form 10-K for the year ended December 31, 200,9 which was filed with the Securities and Exchange Commission on March 19, 2010. Accordingly, references to “we”, “us” or “our” in this section under the caption “Financial Services” are references to BankAtlantic Bancorp and its subsidiaries, and are not references to BFC Financial Corporation, Bluegreen Corporation or Woodbridge.
BankAtlantic Bancorp has incurred significant losses during the last three years and if BankAtlantic Bancorp continues to incur significant losses BankAtlantic Bancorp will need to raise additional capital, which may not be available on attractive terms, if at all.
     BankAtlantic Bancorp has incurred losses of $22.2 million, $202.6 million and $185.8 million during the years ended December 31, 2007, December 31, 2008 and December 31, 2009, respectively. As part of its efforts to maintain regulatory capital ratios, BankAtlantic has reduced its assets and repaid borrowings. However, the reduction of earning asset balances has resulted in reduced income while at the same time BankAtlantic has experienced significant credit losses.
     BankAtlantic Bancorp contributed $65 million and $105 million to the capital of BankAtlantic during the years ended December 31, 2008 and December 31, 2009, respectively. At December 31, 2009, BankAtlantic Bancorp had $14 million of liquid assets. While a wholly-owned work-out subsidiary of BankAtlantic Bancorp also holds a portfolio of approximately $31.3 million of nonperforming loans, net of reserves, $3.1 million of performing loans and $10.5 million of real estate owned which it could seek to liquidate, BankAtlantic Bancorp’s sources of funds to continue to support BankAtlantic are limited.
     If BankAtlantic Bancorp and BankAtlantic continue to experience losses and BankAtlantic’s capital ratios decline, we may become subject to regulatory actions with respect to BankAtlantic, including the requirement to raise capital, and there is no assurance that at that time BankAtlantic Bancorp would have sufficient funds in order to provide BankAtlantic capital, or that BankAtlantic Bancorp or BankAtlantic would have access to capital or that capital would be available without significant cost or without resulting in significant dilution to BankAtlantic Bancorp’s shareholders.
Continued capital and credit market volatility may adversely affect our ability to access capital and may have a material adverse effect on our business, financial condition and results of operations.
     In light of the current challenging economic environment and the desire for BankAtlantic Bancorp to be in a position to provide capital to BankAtlantic, BankAtlantic Bancorp has and will continue to evaluate the advisability of raising additional funds through the issuance of securities. Any such financing could be obtained through additional public offerings, private offerings, in privately negotiated transactions or otherwise. We could also pursue these financings at the BankAtlantic Bancorp level or directly at BankAtlantic or both. Issuances of equity directly at BankAtlantic would dilute BankAtlantic Bancorp’s interest in BankAtlantic. During February 2010, we filed a shelf registration statement with the SEC pursuant to which we may issue up to $75 million of our Class A common stock and/or other securities in the future. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. As a result, our shareholders bear the risk of future offerings at the BankAtlantic Bancorp level reducing the price of our Class A common stock and future offerings directly at BankAtlantic diluting BankAtlantic Bancorp’s interest in BankAtlantic.

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     BankAtlantic’s capital levels at December 31, 2009 exceeded “well capitalized” regulatory capital levels. BankAtlantic Bancorp during the years ended December 31, 2009 and 2008 contributed $105 million and $65 million, respectively, of capital to BankAtlantic and at December 31, 2009 BankAtlantic Bancorp had $14 million of liquid assets. BankAtlantic Bancorp’s ability to contribute additional capital to BankAtlantic will depend on its ability to raise capital in the secondary markets and on its ability to liquidate its portfolio of non-performing loans. The OTS has the right to impose additional capital requirements on banks at its discretion and could impose additional capital requirements on BankAtlantic. Our ability to raise additional capital will depend on, among other things, conditions in the financial markets at the time, which are outside of our control, and our financial condition, results of operations and prospects. The ongoing liquidity crisis and the loss of confidence in financial institutions may make it more difficult or more costly to obtain financing. There is no assurance that such capital will be available to us on acceptable terms or at all. The terms and pricing of any future transaction by BankAtlantic Bancorp or BankAtlantic could result in additional substantial dilution to our existing shareholders and could adversely impact the price of our Class A common stock. If BankAtlantic sustains additional operating losses or if the OTS imposes more stringent capital requirements, there is no assurance that BankAtlantic Bancorp will be able to provide additional capital, if needed, in order for BankAtlantic to meet its capital requirements in future periods.
BankAtlantic Bancorp has deferred interest on its outstanding junior subordinated debentures and anticipates that it will continue to defer this interest for the foreseeable future which could adversely affect its financial condition and liquidity.
     BankAtlantic Bancorp began deferring interest on all of its $294 million of junior subordinated debentures as of March 2009 which resulted in the deferral and accrual of $14.1 million of regularly scheduled quarterly interest payments that would otherwise have been paid during the year ended December 31, 2009. The terms of the junior subordinated debentures allow BankAtlantic Bancorp to defer interest payments for up to 20 consecutive quarterly periods, and BankAtlantic Bancorp anticipates that it will continue to defer such interest for the foreseeable future. During the deferral period, interest continues to accrue on the junior subordinated debentures, as well as on the deferred interest, at the relevant stated coupon rate, and at the end of the deferral period BankAtlantic Bancorp will be required to pay all interest accrued during the deferral period. In the event that BankAtlantic Bancorp elects to defer interest on its junior subordinated debentures for the full 20 consecutive quarterly periods permitted under the terms of the junior subordinated debentures, BankAtlantic Bancorp would owe approximately $72 million of accrued interest as of December 31, 2013 (based on average interest rates applicable at December 31, 2009, which were at historically low interest rate levels). As most of the outstanding junior subordinated debentures bear interest at rates that are indexed to LIBOR, if LIBOR rates increase the interest that would accrue during the deferral period would be significantly higher and likewise increase the amount BankAtlantic Bancorp would owe at the conclusion of the deferral period.
BankAtlantic Bancorp’s cash offers to purchase $230 million of trust preferred securities issued by statutory business trusts formed by BankAtlantic Bancorp may not be consummated.
     During January 2010, BankAtlantic Bancorp commenced cash offers to purchase all outstanding trust preferred securities having an aggregate principal amount of approximately $285 million at a purchase price of $200 per $1,000 liquidation amount, or an aggregate of $57 million. During February 2010, the cash offer with respect to the approximate $55 million of publicly traded trust preferred securities expired without any such trust preferred securities being repurchased, while the expiration date for the offers relating to the remaining $230 million of trust preferred securities was extended until March 22, 2010. BankAtlantic Bancorp’s ability to complete the offers to purchase $230 million of BankAtlantic Bancorp’s trust preferred securities is contingent upon the completion of a financing transaction sufficient to pay the purchase price, and the receipt of tenders and consents from Holders of the requisite amount of the relevant series of trusts preferred securities. The structure of the ownership of the trust preferred securities (the majority of which are held in pools with the securities of other issuers as collateral for collateralized debt obligations) has made it very difficult to communicate with the beneficial owners or negotiate the repurchase or modification of the terms of the outstanding securities. Accordingly, there is no assurance that BankAtlantic Bancorp will be able to repurchase or redeem any or a significant portion of the trust preferred securities. Further, as noted above, BankAtlantic Bancorp has deferred making interest payments on the trust preferred securities and BankAtlantic Bancorp financial condition would be adversely affected if interest payments on the trust preferred securities were deferred for a prolonged period of time. While BankAtlantic Bancorp anticipates that it will continue to defer interest payments for the foreseeable future, in the event that BankAtlantic Bancorp completes offers to purchase for less than all of its series of trust preferred securities, BankAtlantic Bancorp expects that it may cease the deferral of interest on the series of trust preferred securities which will not be repurchased prior to completing the repurchase of the other series and immediately thereafter once again commence the deferral of interest with respect to all remaining series of trust preferred securities not repurchased. Any issuance of our Class A common stock to raise funds to finance the purchase of any or all of the trust preferred securities subject to these offers could be extremely dilutive to existing shareholders.

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Historically BankAtlantic Bancorp has relied on dividends from BankAtlantic to service its debt and pay dividends, but no dividends from BankAtlantic are anticipated or contemplated for the foreseeable future.
     Generally, a financial institution is permitted to make capital distributions without prior OTS approval in an amount equal to its net income for the current calendar year to date, plus retained net income for the previous two years, provided that the financial institution would not become under-capitalized as a result of the distribution. At December 31, 2009, BankAtlantic had a retained net deficit and therefore is required to obtain approval from the OTS in order to make capital distributions to BankAtlantic Bancorp. BankAtlantic does not intend to seek to make any capital distribution for the foreseeable future.
     For a further discussion refer to “Management’s Discussion and Analysis of Results of Operations and Financial Condition — Liquidity and Capital Resources”.
The decline in the Florida real estate market has adversely affected, and may continue to adversely affect, our earnings and financial condition.
     The continued deterioration of economic conditions in the Florida residential real estate market, including the continued decline in median home prices year-over-year in all major metropolitan areas in Florida, and the downturn in the Florida commercial real estate market, resulted in a substantial increase in BankAtlantic’s non-performing assets and provision for loan losses over the past three years. The housing industry is in the midst of a substantial and prolonged downturn reflecting, in part, decreased availability of mortgage financing for residential home buyers, reduced demand for new construction resulting in a significant over-supply of housing inventory and increased foreclosure rates. Additionally, the deteriorating condition of the Florida economy and these adverse market conditions have negatively impacted the commercial non-residential real estate market. BankAtlantic’s earnings and financial condition were adversely impacted over the past three years as the majority of its loans are secured by real estate in Florida. We expect that our earnings and financial condition will continue to be unfavorably impacted if market conditions do not improve or deteriorate further in Florida. At December 31, 2009, BankAtlantic’s loan portfolio included $263 million of non-accrual loans concentrated in Florida.
BankAtlantic’s loan portfolio is concentrated in loans secured by real estate, a majority of which are located in Florida, which makes us very susceptible to credit losses given the current depressed real estate market.
     Conditions in the United States real estate market have deteriorated significantly beginning in 2007, particularly in Florida, BankAtlantic’s primary lending area. BankAtlantic’s loan portfolio is concentrated in commercial real estate loans (most of which are located in Florida and many of which involve residential land development), residential mortgages (nationwide), and consumer home-equity loans (throughout BankAtlantic’s markets in Florida). BankAtlantic has a heightened exposure to credit losses that may arise from this concentration as a result of the significant downturn in the Florida real estate markets. At December 31, 2009, BankAtlantic’s loan portfolio included $2.5 billion of loans concentrated in Florida, which represented approximately 62% of its loan portfolio.
     We believe that BankAtlantic’s commercial residential loan portfolio has significant exposure to further declines in the Florida residential real estate market. The “Builder land bank loan” category held by BankAtlantic consists of 7 loans and aggregates $43.7 million of which six loans totaling $42.6 million were on non-accrual as of December 31, 2009. The “Land acquisition and development loan” category held by BankAtlantic consists of 27 loans and aggregates $171.9 million of which ten loans totaling $60.2 million were on non-accrual as of December 31, 2009. The “Land acquisition, development and construction loan” category held by BankAtlantic consists of 6 loans and aggregates $11.3 million of which one loan totaling $3.8 million was on non-accrual as of December 31, 2009.
     In addition to the loans described above, during 2008, the Company formed an asset workout subsidiary which acquired non-performing commercial residential real estate loans from BankAtlantic. The balance of these non-performing loans as of December 31, 2009 was $39.4 million with $14.1 million, $10.4 million and $14.9 million of “builder land bank loans”, “land acquisition and development loans”, and “land acquisition, development and construction loans”, respectively.

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     Market conditions have and may in the future result in our commercial real estate borrowers having difficulty selling lots or homes in their developments for an extended period, which in turn could result in an increase in residential construction loan delinquencies and non-accrual balances. Additionally, if the current depressed economic environment continues or deteriorates further, collateral values may decline further which likely would result in increased credit losses in these loans.
     Included in the commercial and construction and development real estate loans are approximately $638.4 million of commercial non-residential and commercial land loans. A borrower’s ability to repay these loans is dependent upon additional leasing through the life of the loan or the borrower’s successful operation of a business. Weak economic conditions may impair a borrower’s business operations and typically slow the execution of new leases. Such economic conditions may also lead to existing lease turnover. As a result of these factors, vacancy rates for retail, office and industrial space are expected to continue to rise in 2010. Increased vacancies could result in rents falling further over the next several quarters. The combination of these factors could result in further deterioration in real estate market conditions and BankAtlantic may recognize higher credit losses on these loans, which would adversely affect our results of operations and financial condition.
     BankAtlantic’s commercial real estate loan portfolio includes 16 large lending relationships totaling $429.0 million, including relationships with unaffiliated borrowers involving lending commitments in each case in excess of $20 million. Defaults by any of these borrowers could have a material adverse effect on BankAtlantic’s results.
BankAtlantic’s consumer loan portfolio is concentrated in home equity loans collateralized by Florida properties primarily located in the markets where BankAtlantic operates its store network.
     The decline in residential real estate prices and higher unemployment throughout Florida has resulted in an increase in mortgage delinquencies and higher foreclosure rates. Additionally, in response to the turmoil in the credit markets, financial institutions have tightened underwriting standards which has limited borrowers’ ability to refinance. These conditions have adversely impacted delinquencies and credit loss trends in BankAtlantic’s home equity loan portfolio and it does not currently appear that these conditions will improve in the near term. Approximately 76% of the loans in BankAtlantic’s home equity portfolio are residential second mortgages and BankAtlantic experienced higher delinquencies and credit losses in this portfolio during 2009. If current economic conditions do not improve and home prices continue to fall, BankAtlantic may continue to experience higher credit losses from this loan portfolio. Since the collateral for this portfolio consists primarily of second mortgages, it is unlikely that BankAtlantic will be successful in recovering all or any portion of its loan proceeds in the event of a default unless BankAtlantic is prepared to repay the first mortgage and such repayment and the costs associated with a foreclosure are justified by the value of the property.
An increase in BankAtlantic’s allowance for loan losses will result in reduced earnings.
     As a lender, BankAtlantic is exposed to the risk that its customers will be unable to repay their loans according to their terms and that any collateral securing the payment of their loans will not be sufficient to assure full repayment. BankAtlantic’s management evaluates the collectability of BankAtlantic’s loan portfolio and provides an allowance for loan losses that it believes is adequate based upon such factors as:
    the risk characteristics of various classifications of loans;
 
    previous loan loss experience;
 
    specific loans that have probable loss potential;
 
    delinquency trends;
 
    estimated fair value of the collateral;
 
    current economic conditions;
 
    the views of its regulators; and
 
    geographic and industry loan concentrations.

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     Many of these factors are difficult to predict or estimate accurately, particularly in a changing economic environment. The process of determining the estimated losses inherent in BankAtlantic’s loan portfolio requires subjective and complex judgments and the level of uncertainty concerning economic conditions may adversely affect BankAtlantic’s ability to estimate the losses which may be incurred in its loan portfolio. If BankAtlantic’s evaluation is incorrect and borrower defaults cause losses exceeding the portion of the allowance for loan losses allocated to those loans or if BankAtlantic perceives adverse trends that require it to significantly increase its allowance for loan losses in the future, our earnings could be significantly and adversely affected.
     Increases in the allowance for loan losses with respect to the loans held by our asset workout subsidiary, or losses in that portfolio which exceed the current allowance assigned to that portfolio, would similarly adversely affect us.
Adverse events in Florida, where BankAtlantic Bancorp business is currently concentrated, could adversely impact our results and future growth.
     BankAtlantic’s business, the location of its stores, the primary source of repayment for its small business loans and the real estate collateralizing its commercial real estate loans (and the loans held by BankAtlantic Bancorp asset workout subsidiary) and its home equity loans are primarily concentrated in Florida. As a result, BankAtlantic Bancorp is exposed to geographic risks as increasing unemployment, declines in the housing industry and declines in the real estate market are more severe in Florida than in the rest of the country. Adverse changes in laws and regulations in Florida would have a greater negative impact on our revenues, financial condition and business than on similar institutions in markets outside of Florida. Further, the State of Florida is subject to the risks of natural disasters such as tropical storms and hurricanes, which may disrupt our operations, adversely impact the ability of our borrowers to timely repay their loans and the value of any collateral held by us or otherwise have an adverse effect on our results of operations. The severity and impact of tropical storms, hurricanes and other weather related events are difficult to predict and may be exacerbated by global climate change.
BankAtlantic’s interest-only residential loans expose it to greater credit risks.
     Approximately $776 million of BankAtlantic’s purchased residential loan portfolio consists of interest-only loans which represent approximately 50% of the total purchased residential loan portfolio. While these loans are not considered sub-prime or negative amortizing loans, they are loans with reduced initial loan payments with the potential for significant increases in monthly loan payments in subsequent periods, even if interest rates do not rise, as required amortization of the principal commences. Monthly loan payments will also increase as interest rates increase. This presents a potential repayment risk if the borrower is unable to meet the higher debt service obligations or refinance the loan. As previously noted, current economic conditions in the residential real estate markets and the mortgage finance markets have made it more difficult for borrowers to refinance their mortgages which also increase our exposure to loss.
Nonperforming assets take significant time to resolve and adversely affect our results of operations and financial condition, and could result in further losses in the future.
     At December 31, 2009 and 2008, BankAtlantic Bancorp’s consolidated nonperforming loans totaled $331 million and $287.4 million, or 8.96% and 6.65% of its loan portfolio, respectively. At December 31, 2009 and 2008, BankAtlantic Bancorp’s consolidated nonperforming assets (which include nonperforming loans and foreclosed real estate) were $379.7 million and $307.9 million, or 7.88% and 5.30% of our total assets, respectively. In addition, the Company had, on a consolidated basis, approximately $72.9 million and $95.3 million in accruing loans that were 30-89 days delinquent at December 31, 2009 and 2008, respectively. BankAtlantic Bancorp’s consolidated nonperforming assets adversely affect our net income in various ways. Until economic and real estate market conditions improve, particularly in Florida but also nationally, we expect to continue to incur additional losses relating to an increase in nonperforming loans and nonperforming assets. BankAtlantic Bancorp does not record interest income on nonperforming loans or real estate owned. When BankAtlantic Bancorp receives the collateral in foreclosures or similar proceedings, BankAtlantic Bancorp is required to mark the related collateral to the then fair market value, generally based on appraisals of the property obtained by us which often results in an additional loss. These loans and real estate owned also increase our risk profile, and increases in the level of nonperforming loans and nonperforming assets could impact our regulators’ view of appropriate capital levels in light of such risks. While BankAtlantic Bancorp seeks to manage its problem assets through loan sales, workouts, restructurings and other alternatives, decreases in the value of these assets, or the underlying collateral, or in these borrowers’ performance or financial conditions, which is often impacted by economic and market conditions beyond our control, could adversely affect our business, results of operations and financial condition. In addition, the resolution of nonperforming assets requires significant commitments of time from management, which can be detrimental to the performance of their other responsibilities.

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Changes in interest rates could adversely affect our net interest income and profitability.
     The majority of BankAtlantic’s assets and liabilities are monetary in nature. As a result, the earnings and growth of BankAtlantic are significantly affected by interest rates, which are subject to the influence of economic conditions generally, both domestic and foreign, events in the capital markets and also to the monetary and fiscal policies of the United States and its agencies, particularly the Federal Reserve Board. The nature and timing of any changes in such policies or general economic conditions and their effect on BankAtlantic cannot be controlled and are extremely difficult to predict. Changes in interest rates can impact BankAtlantic’s net interest income as well as the valuation of its assets and liabilities.
     Banking is an industry that depends to a large extent on its net interest income. Net interest income is the difference between:
    interest income on interest-earning assets, such as loans; and
 
    interest expense on interest-bearing liabilities, such as deposits.
     Changes in interest rates can have differing effects on BankAtlantic’s net interest income. In particular, changes in market interest rates, changes in the relationships between short-term and long-term market interest rates, or the yield curve, or changes in the relationships between different interest rate indices can affect the interest rates charged on interest-earning assets differently than the interest rates paid on interest-bearing liabilities. This difference could result in an increase in interest expense relative to interest income and therefore reduce BankAtlantic’s net interest income. While BankAtlantic has attempted to structure its asset and liability management strategies to mitigate the impact on net interest income of changes in market interest rates, there is no assurance that BankAtlantic will be successful in doing so.
     Loan and mortgage-backed securities prepayment decisions are also affected by interest rates. Loan and securities prepayments generally accelerate as interest rates fall. Prepayments in a declining interest rate environment reduce BankAtlantic’s net interest income and adversely affect its earnings because:
    it amortizes premiums on acquired loans and securities, and if loans or securities are prepaid, the unamortized premium will be charged off; and
 
    the yields it earns on the investment of funds that it receives from prepaid loans and securities are generally less than the yields that it earned on the prepaid loans.
     Significant loan prepayments in BankAtlantic’s mortgage and investment portfolios in the future could have an adverse effect on BankAtlantic’s earnings as proceeds from the repayment of loans may be reinvested in loans with lower interest rates. Additionally, increased prepayments associated with purchased residential loans may result in increased amortization of premiums on acquired loans, which would reduce BankAtlantic’s interest income.
     In a rising interest rate environment, loan and securities prepayments generally decline, resulting in yields that are less than the current market yields. In addition, the credit risks of loans with adjustable rate mortgages may worsen as interest rates rise and debt service obligations increase.

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     BankAtlantic uses a computer model using standard industry software to assist it in its efforts to quantify BankAtlantic’s interest rate risk. The model measures the potential impact of gradual and abrupt changes in interest rates on BankAtlantic’s net interest income. While management would attempt to respond to the projected impact on net interest income, there is no assurance that management’s efforts will be successful.
BankAtlantic obtains a significant portion of its non-interest income through service charges on core deposit accounts, and recent legislation designed to limit service charges could reduce our fee income.
     BankAtlantic’s deposit account growth has generated a substantial amount of service charge income. The largest component of this service charge income is overdraft fees. Changes in banking regulations, in particular the Federal Reserve’s new rules prohibiting banks from automatically enrolling customers in overdraft protection programs which will become effective July 1, 2010, may have a significant adverse impact on BankAtlantic’s service charge income and overall results. Additionally, changes in customer behavior as well as increased competition from other financial institutions could result in declines in deposit accounts or in overdraft frequency resulting in a decline in service charge income. Further, the downturn in the Florida economy could result in the inability to collect overdraft fees. A reduction in deposit account fee income could have an adverse impact on our earnings.
The cost and outcome of pending legal proceedings may impact our results of operations.
     BankAtlantic Bancorp, BankAtlantic and their subsidiaries are currently parties in ongoing litigation and legal proceedings which have resulted in a significant increase in non-interest expense relating to legal and other professional fees. Pending proceedings include class action securities litigation and an SEC investigation as well as litigation arising out of our banking operations, including workouts and foreclosures, potential class actions by customers relating to their accounts and service and overdraft fees and legal proceedings associated with our tax certificate business and relationships with third party tax certificate ventures. While we believe that we have meritorious defenses in these proceedings and that the outcomes should not materially impact us, we anticipate continued elevated legal and related costs as parties to the actions and the ultimate outcomes of the matters are uncertain.
BankAtlantic has significantly reduced operating expenses over the past three years and BankAtlantic may not be able to continue to reduce expenses without adversely impacting its operations.
     BankAtlantic’s operating expenses have declined from $313.9 million for the year ended December 31, 2007 to $258.8 million for the year ended December 31, 2009. BankAtlantic reorganized its operations during this period and significantly reduced operating expenses while focusing on its core businesses and seeking to maintain quality customer service. While management is focused on reducing overall expenses, there is no assurance that BankAtlantic will be successful in efforts to further reduce expenses or that the current expense reductions can be maintained in the current environment. BankAtlantic’s inability to reduce or maintain its current expense structure may have an adverse impact on our results.
Deposit insurance premium assessments may increase substantially, which would adversely affect expenses.
     BankAtlantic’s FDIC deposit insurance expense for the year ended December 31, 2009 was $11.0 million, including a $2.4 million special assessment. In September 2009, the FDIC issued a rule requiring institutions to prepay their insurance premiums for all of 2010, 2011 and 2012, and increased annual insurance rates uniformly by three basis points in 2011. BankAtlantic’s prepaid insurance assessment was $31.3 million at December 31, 2009. If the economy worsens and the number of bank failures significantly increase or if the FDIC otherwise determines that action is necessary, BankAtlantic may be required to pay additional FDIC specific assessments or incur increased annual insurance rates which would increase our expenses and adversely impact our results.
Further reductions in BankAtlantic’s assets may adversely affect our earnings and/or operations.
     BankAtlantic has reduced its assets and repaid borrowings in order to improve its liquidity and regulatory capital ratios. The reduction of earning asset balances has reduced our net interest income. BankAtlantic Bancorp consolidated net interest income was $193.6 million for the year ended December 31, 2008 and $163.3 million for the year ended December 31, 2009. The reduction in net interest income from earning asset reductions has previously been offset by lower operating expenses in prior periods. BankAtlantic Bancorp abilities to further reduce expenses without adversely affecting our operations may be limited and as a result further reductions in BankAtlantic Bancorp consolidated earning asset balances in future periods, may adversely affect earnings and/or operations.

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Adverse market conditions have affected and may continue to affect the financial services industry as well as our business and results of operations.
     Our financial condition and results of operations have been, and may continue to be, adversely impacted as a result of the downturn in the U.S. housing market and general economic conditions. Dramatic declines in the national and, in particular, Florida housing markets over the past three years, with falling home prices and increasing foreclosures and unemployment, have negatively impacted the credit performance of our loans and resulted in significant asset impairments at all financial institutions, including government-sponsored entities, major commercial and investment banks, and regional and community financial institutions including BankAtlantic. Reflecting concern about the stability of the financial markets generally and the strength of counterparties, many lenders and institutional investors have reduced or ceased providing funding to borrowers, including to other financial institutions. This market turmoil and tightening of credit have led to an increased level of commercial and consumer delinquencies, lack of consumer confidence, increased market volatility and widespread reduction of business activity generally. The continuing economic pressure on consumers and lack of confidence in the financial markets has adversely affected and may continue to adversely affect our business, financial condition and results of operations. Further negative market and economic developments may cause adverse changes in payment patterns, causing increases in delinquencies and default rates, which may impact our charge-offs and provisions for loan losses. Continuing economic deterioration that affects household and/or corporate incomes could also result in reduced demand for credit or fee-based products and services. A worsening of these conditions would likely exacerbate the adverse effects of these difficult market conditions on BankAtlantic and others in the financial services industry. In particular, we may face the following risks in connection with these events:
    BankAtlantic’s borrowers may be unable to make timely repayments of their loans, or the value of real estate collateral securing the payment of such loans may continue to decrease which could result in increased delinquencies, foreclosures and customer bankruptcies, any of which would increase levels of non-performing loans resulting in significant credit losses, and increased expenses and could have a material adverse effect on our operating results.
 
    Further disruptions in the capital markets or other events, including actions by rating agencies and deteriorating investor expectations, may result in an inability to borrow on favorable terms or at all from other financial institutions or government entities.
 
    Increased regulation of the industry may increase costs, decrease fee income and limit BankAtlantic’s activities and operations.
 
    Increased competition among financial services companies based on the recent consolidation of competing financial institutions and the conversion of investment banks into bank holding companies, may adversely affect BankAtlantic’s ability to competitively market its products and services.
 
    BankAtlantic may be required to pay significantly higher FDIC deposit premiums and assessments.
 
    Continued asset valuation declines could adversely impact our credit losses and result in additional impairments of goodwill and other assets.
Legislative and regulatory actions taken now or in the future may have a significant adverse effect on our financial statements.
     During 2009, the U.S. Treasury implemented various initiatives in response to the financial crises affecting the banking system and financial markets. These initiatives include the U.S. Treasury’s Capital Purchase Program (the “CPP”), the guarantee of certain financial institution indebtedness, purchasing certain legacy loans and assets from financial institutions, the purchase of mortgage securitizations, homeowner relief that encourages loan restructuring and modification, the establishment of significant liquidity and credit facilities for financial institutions and investment banks, the lowering of the federal funds rate, emergency action against short selling practices, a temporary guaranty program for money market funds, the establishment of a commercial paper funding facility to provide back-stop liquidity to commercial paper issuers, coordinated international efforts to address illiquidity and other weaknesses in the banking sector and other programs being developed. There can be no assurance as to the actual impact that the initiatives that have been adopted or may be adopted in the future will have on the financial markets. The initiatives could have a material and adverse affect on BankAtlantic’s business, financial condition, results of operations and access to credit.

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     Further, recent events in the financial services industry and, more generally, in the financial markets and the economy, have led to various proposals for changes in the regulation of the financial services industry. Earlier in 2009, legislation proposing significant structural reforms to the financial services industry was introduced in the U.S. Congress. Among other things, the legislation proposes the establishment of a Consumer Financial Protection Agency, which would have broad authority to regulate providers of credit, savings, payment and other consumer financial products and services. Additional legislative proposals call for heightened scrutiny and regulation of any financial firm whose combination of size, leverage, and interconnectedness could, if it failed, pose a threat to the country’s financial stability, including the power to restrict the activities of such firms and even require the break-up of such firms at the behest of the relevant regulator. New rules have also been proposed for the securitization market, including requiring sponsors of securitizations to retain a material economic interest in the credit risk associated with the underlying securitization.
     Other recent initiatives also include:
    The Federal Reserve’s proposed guidance on incentive compensation policies at banking organizations and the FDIC’s proposed rules tying employee compensation to assessments for deposit insurance;
 
    Proposals to limit a lender’s ability to foreclose on mortgages or make such foreclosures less economically viable, including by allowing Chapter 13 bankruptcy plans to “cram down” the value of certain mortgages on a consumer’s principal residence to its market value and/or reset interest rates and monthly payments to permit defaulting debtors to remain in their home;
 
    Proposed legislation concerning the comprehensive regulation of the “over-the-counter” derivatives market, including robust and comprehensive prudential supervision (including strict capital and margin requirements) for all “over-the-counter” derivative dealers and major market participants and central clearing of standardized “over-the-counter” derivatives; and
 
    Proposal which would prohibit banks and bank holding companies from engaging in proprietary trading or owning, investing or sponsoring a hedge fund or private equity fund.
     The proposed legislation contains several provisions that would have a direct impact on us. Under the proposed legislation, the federal savings association charter would be eliminated and the Office of Thrift Supervision would be consolidated with the Comptroller of the Currency into a new regulator, the National Bank Supervisor. The proposed legislation would also require BankAtlantic to convert to a national bank.
     While there can be no assurance that any or all of the proposed regulatory or legislative changes will ultimately be adopted, these changes or any future changes, if enacted or adopted, may impact our business activities, require us to change certain of our business practices, materially affect our business model or affect retention of key personnel, and could expose us to additional costs (including increased compliance costs). These changes may also require us to invest significant management attention and resources to make any necessary changes, and could therefore also adversely affect our business and operations.
     There can be no assurance as to the actual impact that the initiatives that have been adopted or may be adopted in the future will have on banks or the financial markets. These government initiatives could potentially have a material and adverse affect on BankAtlantic’s business, financial condition, results of operations and access to credit.
BankAtlantic Bancorp and BankAtlantic are each subject to significant regulation and BankAtlantic Bancorp’s activities and the activities of BankAtlantic Bancorp’s subsidiaries, including BankAtlantic, are subject to regulatory requirements that could have a material adverse effect on BankAtlantic Bancorp’s business.
     The banking industry is an industry subject to multiple layers of regulation. Failure to comply with any of these regulations can result in substantial penalties, significant restrictions on business activities and growth plans and/or limitations on dividend payments. As a holding company, BankAtlantic Bancorp is also subject to significant regulation. For a description of the primary regulations applicable to BankAtlantic and BankAtlantic Bancorp, see “Regulations and Supervision”. Changes in the regulation or capital requirements associated with holding companies generally or BankAtlantic Bancorp in particular could also have an adverse impact on our business and operating results.

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     BankAtlantic Bancorp is a “grandfathered” unitary savings and loan holding company and has broad authority to engage in various types of business activities. The OTS can prevent BankAtlantic Bancorp from engaging in activities or limit those activities if it determines that there is reasonable cause to believe that the continuation of any particular activity constitutes a serious risk to the financial safety, soundness, or stability of BankAtlantic. The OTS can also:
    prohibit the payment of dividends by BankAtlantic to BankAtlantic Bancorp;
 
    limit transactions between BankAtlantic Bancorp, BankAtlantic and the subsidiaries or affiliates of either;
 
    limit BankAtlantic Bancorp’s activities and the activities of BankAtlantic; or
 
    Impose capital requirements on BankAtlantic Bancorp or additional capital requirements on BankAtlantic.
     Unlike bank holding companies, as a unitary savings and loan holding company BankAtlantic Bancorp has not historically been subject to capital requirements. However, the OTS has indicated that it may, in the future, impose capital requirements on savings and loan holding companies. In addition, as noted above, the current administration has proposed legislation which would, among other things, eliminate the status of “savings and loan holding company” and require BankAtlantic Bancorp to register as a bank holding company, which would subject BankAtlantic Bancorp to regulatory capital requirements. Further, the OTS or other regulatory bodies having authority over BankAtlantic Bancorp in the future may adopt regulations in the future that would affect the Company’s operations, including BankAtlantic Bancorp’s ability to pay dividends or to engage in certain transactions or activities. See “Regulation and Supervision — Holding Company.”
BankAtlantic is subject to liquidity risk as its loans are funded by its deposits.
     Like all financial institutions, BankAtlantic’s assets are primarily funded through its customer deposits and changes in interest rates, availability of alternative investment opportunities, a loss of confidence in financial institutions in general or BankAtlantic in particular, and other factors may make deposit gathering more difficult. If BankAtlantic experiences decreases in deposit levels, it may need to increase its borrowings or liquidate a portion of its assets which may not be readily saleable. Additionally, interest rate changes or further disruptions in the capital markets may make the terms of borrowings and deposits less favorable. For a further discussion on liquidity, refer to “Management’s Discussion and Analysis of Results of Operations and Financial Condition — Liquidity and Capital Resources.”
Our loan portfolio subjects BankAtlantic Bancorp to high levels of credit and counterparty risk.
     BankAtlantic is exposed to the risk that its borrowers or counter-parties may default on their obligations. Credit risk arises through the extension of loans, certain securities, letters of credit, and financial guarantees and through counter-party exposure on trading and wholesale loan transactions. In an attempt to manage this risk, we seek to establish policies and procedures to manage both on and off-balance sheet (primarily loan commitments) credit risk.
     BankAtlantic reviews the creditworthiness of individual borrowers or counter-parties, and limits are established for the total credit exposure to any one borrower or counter-party, however, such limits may not have the effect of adequately limiting credit exposure. In addition, when deciding whether to extend credit or enter into other transactions with customers and counterparties, we often rely on information furnished to us by such customers and counterparties, including financial statements and other financial information, and representations of the customers and counterparties that relates to the accuracy and completeness of the information. While we take all actions we deem necessary to ensure the accuracy of the information provided to us, there is no assurance that all information provided to us will be accurate or that we will successfully identify all information needed to fully assess the risk which may expose us to increased credit risk and counterparty risk.
     BankAtlantic also enters into participation agreements with or acquires participation interests from other lenders to limit its credit risk, but will continue to be subject to risks with respect to its interest in the loan, as well as not being in a position to make independent determinations with respect to its interest. Further, the majority of BankAtlantic’s residential loans are serviced by others. The servicing agreements may restrict BankAtlantic’s ability to initiate work-out and modification arrangements with borrowers which could adversely impact BankAtlantic’s ability to minimize losses on non-performing loans.

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     BankAtlantic Bancorp is also exposed to credit and counterparty risks with respect to loans held in its asset workout subsidiary.
BankAtlantic Bancorp is controlled by BFC Financial Corporation and its controlling shareholders and this control position may adversely affect the market price of BankAtlantic Bancorp’s Class A common stock.
     As of December 31, 2009, BFC owned all of BankAtlantic Bancorp’s issued and outstanding Class B common stock and 17,333,428 shares, or approximately 35.9%, of BankAtlantic Bancorp’s issued and outstanding Class A common stock. BFC’s holdings represent approximately 66% of BankAtlantic Bancorp’s total voting power. Additionally, Alan B. Levan, our Chairman and Chief Executive Officer, and John E. Abdo, our Vice Chairman, beneficially own shares of BFC’s Class A and Class B common stock representing approximately 71.6% of BFC’s total voting power. BankAtlantic Bancorp’s Class A common stock and Class B common stock vote as a single group on most matters. Accordingly, BFC, directly, and Messrs. Levan and Abdo, indirectly through BFC, are in a position to control BankAtlantic Bancorp, elect BankAtlantic Bancorp’s Board of Directors and significantly influence the outcome of any shareholder vote, except in those limited circumstances where Florida law mandates that the holders of BankAtlantic Bancorp’s Class A common stock vote as a separate class. This control position may have an adverse effect on the market price of BankAtlantic Bancorp’s Class A common stock.
BFC can reduce its economic interest in us and still maintain voting control.
     BankAtlantic Bancorp’s Class A common stock and Class B common stock generally vote together as a single class, with BankAtlantic Bancorp Class A common stock possessing a fixed 53% of the aggregate voting power of all of BankAtlantic Bancorp common stock and BankAtlantic Bancorp Class B common stock possessing a fixed 47% of such aggregate voting power. BankAtlantic Bancorp Class B common stock currently represents approximately 2% of our common equity and 47% of the total voting power. As a result, the voting power of BankAtlantic Bancorp Class B common stock does not bear a direct relationship to the economic interest represented by the shares. Any issuance of shares of BankAtlantic Bancorp Class A common stock will further dilute the relative economic interest of BankAtlantic Bancorp Class B common stock, but will not decrease the voting power represented by its Class B common stock. Further, BankAtlantic Bancorp’s Restated Articles of Incorporation provide that these relative voting percentages will remain fixed until such time as BFC and its affiliates own less than 487,613 shares of BankAtlantic Bancorp Class B common stock, which is approximately 50% of the number of shares of BankAtlantic Bancorp Class B common stock that BFC now owns, even if additional shares of BankAtlantic Bancorp Class A common stock are issued. Therefore, BFC may sell up to approximately 50% of its shares of BankAtlantic Bancorp Class B common stock (after converting those shares to Class A common stock), and significantly reduce its economic interest in BankAtlantic Bancorp, while still maintaining its voting power. If BFC were to take this action, it would widen the disparity between the equity interest represented by BankAtlantic Bancorp Class B common stock and its voting power. Any conversion of shares of BankAtlantic Bancorp Class B common stock into shares of BankAtlantic Bancorp Class A common stock would further dilute the voting interests of the holders of BankAtlantic Bancorp Class A common stock.
Provisions in BankAtlantic Bancorp charter documents may make it difficult for a third party to acquire BankAtlantic Bancorp and could depress the price of its Class A Common Stock.
     BankAtlantic Bancorp Restated Articles of Incorporation and Amended and Restated Bylaws contain provisions that could delay, defer or prevent a change of control of the Company or our management. These provisions could make it more difficult for shareholders to elect directors and take other corporate actions. As a result, these provisions could limit the price that investors are willing to pay in the future for shares of BankAtlantic Bancorp Class A common stock. These provisions include:
    the provisions in BankAtlantic Bancorp Restated Articles of Incorporation regarding the voting rights of BankAtlantic Bancorp Class B common stock;
 
    the authority of BankAtlantic Bancorp board of directors to issue additional shares of common or preferred stock and to fix the relative rights and preferences of the preferred stock without additional shareholder approval;
 
    the division of BankAtlantic Bancorp board of directors into three classes of directors with three-year staggered terms; and
 
    advance notice procedures to be complied with by shareholders in order to make shareholder proposals or nominate directors.

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A sustained decline in BankAtlantic Bancorp’s Class A common stock price may result in the delisting of its Class A common stock from the New York Stock Exchange.
     BankAtlantic Bancorp’s Class A common stock currently trades on the New York Stock Exchange. Like many other companies involved in the financial services industry, the trading price of BankAtlantic Bancorp’s Class A common stock has experienced a substantial decline. A listed company would be deemed to be below compliance with the continued listing standards of the New York Stock Exchange if, among other things, the listed company’s average closing price was less than $1.00 over a consecutive 30 trading day period or the listed company’s average market capitalization was less than $15 million over a consecutive 30 trading day period. As of February 25, 2010, the average market price of BankAtlantic Bancorp’s Class A common stock over the prior 30 trading day period was $1.41, and BankAtlantic Bancorp’s average market capitalization over that period was $69.3 million. However, the market price of BankAtlantic Bancorp’s Class A common stock is subject to significant volatility and there is no assurance that it will not decrease in the future so as to cause BankAtlantic Bancorp not to comply with the New York Stock Exchange’s requirement for continued listing.
     If BankAtlantic Bancorp does not meet the requirements for continued listing, then BankAtlantic Bancorp’s Class A common stock will be delisted from the New York Stock Exchange. In such case, BankAtlantic Bancorp would attempt to cause its Class A common stock to be eligible for quotation on the OTC Bulletin Board. However, in such event, the trading price of BankAtlantic Bancorp’s Class A common stock would likely be adversely impacted, it may become more difficult for the holders of BankAtlantic Bancorp’s Class A common stock to sell or purchase shares of BankAtlantic Bancorp’s Class A common stock, and it may become more difficult for BankAtlantic Bancorp to raise capital, which could materially and adversely impact our business, prospects, financial condition and results of operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS
     None

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ITEM 2. PROPERTIES
     The principal and executive offices of BFC, Woodbridge and BankAtlantic are located at 2100 West Cypress Creek Road, Fort Lauderdale, Florida, 33309. In May 2008, BFC and BFC Shared Service Corporation (“BFC Shared Service”), a wholly-owned subsidiary of BFC, entered into office lease agreements with BankAtlantic for office space in BankAtlantic’s corporate headquarters which is owned by BankAtlantic. Also, in May 2008, BFC entered into an office sub-lease agreement with Woodbridge pursuant to which Woodbridge leases from BFC office space in BankAtlantic’s corporate headquarters.
     We own an office building located at 2200 West Cypress Creek Road, Fort Lauderdale, Florida 33309. Two floors of this office building were previously leased to a third party pursuant to a lease which expired in March 2010. The tenant has opted not to renew the lease and has vacated the space. We will continue to seek to sell the building or lease the vacant space available at this office building to third parties, including to affiliates. In addition to Woodbridge’s properties used for offices, we additionally own commercial space in Florida that is leased to third parties. Because of the nature of Woodbridge’s real estate operations, significant amounts of property are held as inventory and property and equipment in the ordinary course of business.
     Bluegreen’s principal executive office is located in Boca Raton, Florida in approximately 158,838 square feet of leased space. At December 31, 2009, Bluegreen also maintained sales offices at 21 of its resorts. In addition, Bluegreen maintains four regional sales/administrative offices for its Communities division.
     The following table sets forth BankAtlantic owned and leased stores by region at December 31, 2009:
                                 
    Miami -             Palm     Tampa  
    Dade     Broward     Beach     Bay  
Owned full-service stores
    9       13       25       7  
Leased full-service stores
    11       11       5       5  
Ground leased full-service stores (1)
    3       3       1       7  
 
                       
Total full-service stores
    23       27       31       19  
 
                       
Lease expiration dates
    2010-2018       2010-2015       2011-2014       2010-2023  
 
                       
Ground lease expiration dates
    2026-2027       2017-2072       2026       2026-2032  
 
                       
 
(1)   Stores in which BankAtlantic owns the building and leases the land.
     The following table sets forth BankAtlantic leased drive-through facilities and leased back-office facilities by region at December 31, 2009:
                                         
    Miami -             Palm     Tampa     Orlando /  
    Dade     Broward     Beach     Bay     Jacksonville  
Leased drive-through facilities
    1       2                    
 
                             
Leased drive through expiration dates
    2010       2011-2014                    
 
                             
Leased back-office facilities
                      2       1  
 
                             
Leased back-office expiration dates
                      2014       2013  
 
                             
     As of December 31, 2009, BankAtlantic was seeking to sublease or terminate eight operating leases and was a party under two ground leases for the construction of new stores. BankAtlantic also has six parcels of land held for sale with an estimated market value of $6.0 million.
                                         
    Miami -             Palm     Tampa     Orlando /  
    Dade     Broward     Beach     Bay     Jacksonville  
Executed leases for new stores
          1       1              
 
                             
Executed lease expiration dates
          2030       2028              
 
                             
Executed leases held for sublease
          1             5       2  
 
                             
Executed lease expiration dates
          2013             2010-2048       2028-2029  
 
                             
Land held for sale
                1       1       4  
 
                             

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ITEM 3. LEGAL PROCEEDINGS
BFC and its Wholly Owned Subsidiaries
     Under Florida law, holders of Woodbridge’s Class A Common Stock who did not vote to approve the merger and properly asserted and exercised their appraisal rights with respect to their shares (“Dissenting Holders”) are entitled to receive a cash payment in an amount equal to the fair value of their shares (as determined in accordance with the provisions of Florida law) in lieu of the shares of BFC’s Class A Common Stock which they would otherwise have been entitled to receive. Dissenting Holders, who owned in the aggregate approximately 4.6 million shares of Woodbridge’s Class A Common Stock, provided written notice to Woodbridge regarding their intent to exercise their appraisal rights. In accordance with Florida law, Woodbridge provided written notices to the Dissenting Holders setting forth, among other things, its determination that the fair value of Woodbridge’s Class A Common Stock immediately prior to the effectiveness of the merger was $1.10 per share. As of the date of this filing, one Dissenting Holder which held approximately 400,000 shares of Woodbridge’s Class A Common Stock had withdrawn its shares from the appraisal rights process, while the remaining Dissenting Holders, who collectively held approximately 4.2 million shares of Woodbridge’s Class A Common Stock, have rejected Woodbridge’s offer of $1.10 per share and requested payment for their shares based on their respective fair value estimates of Woodbridge’s Class A Common Stock. Woodbridge is currently in litigation in connection with the Dissenting Holders appraisal process. In December 2009, a $4.6 million liability was recorded with a corresponding reduction to additional paid-in capital which is reflected in our consolidated financial statements representing in the aggregate Woodbridge’s offer to the Dissenting Holders. There is no assurance as to the amount of the cash payment that will be required to be made to the Dissenting Holders, which amount may exceed the $4.6 million that we have accrued related to this matter.
National Bank of South Carolina v. Core Communities of South Carolina, LLC, et al., South Carolina Court of Common Pleas, Fourteenth Judicial Circuit
     On January 13, 2010, National Bank of South Carolina filed a complaint with the South Carolina Court of Common Pleas, Fourteenth Judicial Circuit, to commence foreclosure proceedings related to property at Tradition Hilton Head which served as collateral under a note and mortgage executed and delivered by Core Communities of South Carolina in favor of the lender. With Core’s concurrence, the property was subsequently placed under the control of a receiver appointed by the court. Core is secondarily liable to the lender as a guarantor but is not currently a party to the action.
In re: Levitt and Sons, LLC, et al., No. 07-19845-BKC-RBR, U.S. Bankruptcy Court Southern District of Florida
     On November 9, 2007, Levitt and Sons and the Debtors (“the Debtors”) filed voluntary petitions for relief under the Chapter 11 Cases in the Bankruptcy Court. The Debtors commenced the Chapter 11 Cases in order to preserve the value of their assets and to facilitate an orderly wind-down of their businesses and disposition of their assets in a manner intended to maximize the recoveries of all constituents. On November 27, 2007, the Office of the United States Trustee (the “U.S. Trustee), appointed an official committee of unsecured creditors in the Chapter 11 Cases (the “Creditors’ Committee”). On January 22, 2008, the U.S. Trustee appointed a Joint Home Purchase Deposit Creditors Committee of Creditors Holding Unsecured Claims (the “Deposit Holders Committee”, and together with the Creditors Committee, the “Committees”) The Committees have a right to appear and be heard in the Chapter 11 Cases.
     In 2008, the Debtors asserted certain claims against Woodbridge, including an entitlement to a portion of the $29.7 million federal tax refund which Woodbridge received as a consequence of losses incurred at Levitt and Sons in prior periods. However, on June 27, 2008, Woodbridge entered into a settlement agreement (the “Settlement Agreement”) with the Debtors and the Joint Committee of Unsecured Creditors (the “Joint Committee”) appointed in the Chapter 11 Cases. Pursuant to the Settlement Agreement, among other things, (i) Woodbridge agreed to pay to the Debtors’ bankruptcy estates the sum of $12.5 million plus accrued interest from May 22, 2008 through the date of payment, (ii) Woodbridge agreed to waive and release substantially all of the claims it had against the Debtors, including its administrative expense claims through July 2008, and (iii) the Debtors (joined by the Joint Committee) agreed to waive and release any claims they had against Woodbridge and its affiliates. After certain of Levitt and Sons’ creditors indicated that they objected to the terms of the Settlement Agreement and stated a desire to pursue claims against Woodbridge, Woodbridge, the Debtors and the Joint Committee entered into an amendment to the Settlement Agreement, pursuant to which Woodbridge would, in lieu of the $12.5 million payment previously agreed to, pay $8 million to the Debtors’ bankruptcy estates and place $4.5 million in a release fund to be disbursed to third party creditors in exchange for a third party release and injunction. The amendment also provided for an additional $300,000 payment by Woodbridge to a deposit holders fund. The Settlement Agreement, as amended, was subject to a number of conditions, including the approval of the Bankruptcy Court.

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     As previously reported, on February 20, 2009, the Bankruptcy Court presiding over Levitt and Sons’ Chapter 11 bankruptcy case entered an order confirming a plan of liquidation jointly proposed by Levitt and Sons and the Official Committee of Unsecured Creditors. That order also approved the settlement pursuant to the Settlement Agreement, as amended. No appeal or rehearing of the court’s order was filed by any party, and the settlement was consummated on March 3, 2009, at which time, payment was made in accordance with the terms and conditions of the Settlement Agreement.
Robert D. Dance, individually and on behalf of all others similarly situated v. Woodbridge Holdings Corp. (formerly known as Levitt Corp.), Alan B. Levan, and George P. Scanlon, Case No. 08-60111-Civ-Graham/O’Sullivan, Southern District of Florida
     On January 25, 2008, plaintiff Robert D. Dance filed a purported class action complaint as a putative purchaser of our securities against us and certain of our officers and directors, asserting claims under the federal securities law and seeking damages. This action was filed in the United States District Court for the Southern District of Florida and is captioned Dance v. Levitt Corp. et al., No. 08-CV-60111-DLG. The securities litigation purports to be brought on behalf of all purchasers of our securities beginning on January 31, 2007 and ending on August 14, 2007. The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder by issuing a series of false and/or misleading statements concerning our financial results, prospects and condition.
Westchester Fire Insurance Company vs. City of Brooksville, United States District Court, Middle District of Florida, Tampa Division, Case No. 8:09 CV 00062-T23 TBM
     This litigation arises from a dispute regarding liability under two performance bonds issued in connection with a plat issued by the City of Brooksville for a single family housing project that was not commenced and was abandoned prior to the bankruptcy of Levitt and Sons. Although the property was deeded over to the lender as part of the bankruptcy, Levitt’s parent company was a guarantor on the bonds. The City of Brooksville contends that, notwithstanding that the single family project was never commenced for which utilities were to be provided, it has a right to collect the cash sum of the bonds in the amount of approximately $5.4 million. Following Levitt and Son’s failure, Key Bank acquired the property and conveyed it to a buyer who negotiated a new agreement eliminating any requirement for completing the planned utilities. Nonetheless, the City continued to assert rights against the bonds. Woodbridge has fully secured the obligations of the surety under the bonds and will be liable if the City’s position is found to be correct.
Bluegreen Corporation
Kelly Fair Labor Standards Act Lawsuit
     In Cause No. 08-cv-401-bbc, styled Steven Craig Kelly and Jack Clark, individually and on behalf of others similarly situated v. Bluegreen Corporation, in the United States District Court for the Western District of Wisconsin, two former sales representatives brought a lawsuit on July 28, 2008 in the Western District of Wisconsin on behalf of themselves and putative class members who are or were employed by Bluegreen as sales associates and compensated on a commission-only basis. Plaintiffs alleged that Bluegreen violated the Fair Labor Standards Act (“FLSA”) and that they and the collective class are or were covered, non-exempt employees under federal wage and hour laws, and were entitled to minimum wage and overtime pay consistent with the FLSA. On July 10, 2009, the parties settled the case and Bluegreen agreed to pay approximately $1.5 million (including attorney’s fees and costs) without admitting any wrongdoing. As of December 31, 2009, the settlement was paid and the case dismissed.

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Pennsylvania Attorney General Lawsuit
     On October 28, 2008, in Cause No. 479 M.D. 2008, styled Commonwealth of Pennsylvania Acting by Attorney General Thomas W. Corbett, Jr. v. Bluegreen Corporation, Bluegreen Resorts, Bluegreen Vacations Unlimited, Inc. and Great Vacation Destinations, Inc., in the Commonwealth Court of Pennsylvania, the Commonwealth of Pennsylvania acting through its Attorney General filed a lawsuit against Bluegreen Corporation, Bluegreen Resorts, Bluegreen Vacations Unlimited, Inc. and Great Vacation Destinations, Inc. (a wholly owned subsidiary of Bluegreen Corporation) alleging violations of Pennsylvania’s Unfair Trade Practices and Consumer Protection Laws. The lawsuit seeks civil penalties against Bluegreen and restitution on behalf of Pennsylvania consumers who may have suffered losses as a result of the alleged unlawful sales and marketing methods and practices. The lawsuit does not seek to permanently restrain Bluegreen or any of its affiliates from doing business in the Commonwealth of Pennsylvania. The parties have reached settlement on this matter and on March 15, 2010 Bluegreen signed a consent petition and forwarded it to the Attorney General’s office for counter-signature and filing with the appropriate court offices. As of December 31, 2009, Bluegreen had accrued $225,000 in connection with anticipated payments to resolve this matter.
Destin, Florida Deposit Dispute Lawsuit
     In Cause No. 2006-Ca-3374, styled Joseph M. Scheyd, Jr., P.A. vs. Bluegreen Vacations Unlimited, Inc.,; Hubert A. Laird; and MSB of Destin, Inc., in the Circuit Court of the First Judicial Circuit in and for Okaloosa County, Florida, the Plaintiff as escrow agent brought an interpleader action seeking a determination as to whether Bluegreen, as purchaser, or Hubert A. Laird and MSB of Destin, Inc. as seller, were entitled to the $1.4 million escrow deposit being maintained with the escrow agent pursuant to a purchase and sale contract for real property located in Destin, Florida. Both Bluegreen and the seller have brought cross-claims for breach of the underlying purchase and sale contract. The seller alleges Bluegreen failed to perform under the terms of the purchase and sale contract and alleges fraud. Bluegreen maintains that its decision not to close on the purchase of the subject real property was in accordance with the terms of the purchase and sale contract and therefore Bluegreen is entitled to a return of the full escrow deposit.
Mountain Lakes Mineral Rights
     Bluegreen Southwest One, L.P., (“Southwest”), a subsidiary of Bluegreen Corporation, is the developer of the Mountain Lakes subdivision in Texas. In Cause No. 28006, styled Betty Yvon Lesley et a1 v. Bluff Dale Development Corporation, Bluegreen Southwest One. L.P. et al., in the 266th Judicial District Court, Erath County, Texas, the plaintiffs filed a declaratory judgment action against Southwest seeking to develop their reserved mineral interests in, on and under the Mountain Lakes subdivision. The plaintiffs’ claims are based on property law, oil and gas law, contract and tort theories. The property owners association and some of the individual landowners have filed cross actions against Bluegreen, Southwest and individual directors of the property owners association related to the mineral rights and certain amenities in the subdivision as described below. On January 17, 2007, the court ruled that the restrictions placed on the development that prohibited oil and gas production and development were invalid and not enforceable as a matter of law, that such restrictions did not prohibit the development of the plaintiffs’ prior reserved mineral interests and that Southwest breached its duty to lease the minerals to third parties for development. The court further ruled that Southwest was the sole holder of the right to lease the minerals to third parties. The order granting the plaintiffs’ motion was severed into a new cause styled Cause No. 28769 Betty Yvon Lesley et a1 v. Bluff Dale Development Corporation, Bluegreen Southwest One. L.P. et al. in the 266th Judicial District Court, Erath County, Texas. Southwest appealed the trial court’s ruling. On January 22, 2009, in Bluegreen Southwest One, L.P. et al. v. Betty Yvon Lesley et al., in the 11th Court of Appeals, Eastland, Texas, the Appellate Court reversed the trial court’s decision and ruled in Southwest’s favor and determined that all executive rights were owned by Southwest and then transferred to the individual property owners in connection with the sales of land. All property owner claims were decided in favor of Southwest. It was also decided that Southwest did not breach a fiduciary duty to the plaintiffs as an executive rights holder. As a result of this decision, no damages or attorneys’ fees are owed to the plaintiffs. On May 14, 2009, the plaintiffs filed an appeal with the Texas Supreme Court asking the Court to reverse the Appellate Court’s decision in favor of Bluegreen. No information is available as to when the Texas Supreme Court will render a decision as to whether or not it will take the appeal.

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     Separately, one of the amenity lakes in the Mountain Lakes development did not reach the expected water level after construction was completed. Owners of home sites within the Mountain Lakes subdivision and the property owners Association of Mountain Lakes have asserted cross claims against Southwest and Bluegreen regarding such failure as part of the Lesley litigation described above as well as in Cause No. 067-223662-07, Property Owners Association of Mountain Lakes Ranch, Inc. v. Bluegreen Southwest One, L.P. et al., in the 67th Judicial District Court of Tarrant County, Texas. This case has been settled and the $3.4 million that was accrued related to this matter as of December 31, 2009 was paid in March of 2010. Additional claims may be pursued in the future in connection with these matters, but it is not possible at this time to estimate the likelihood of loss.
Marshall, et al. Lawsuit regarding Community Amenities
     On September 14, 2009, in Cause No. 09-09-08763-CV, styled William Marshall and Patricia Marshall, et al. v. Bluegreen Southwest One, L.P., Bluegreen Southwest Land, Inc., Bluegreen Corporation, Stephen Davis, and Bluegreen Communities of Texas, L.P., Plaintiffs brought suit against Bluegreen alleging fraud, negligent misrepresentation, breach of contract, and negligence with regards to the Ridgelake Shores subdivision Bluegreen developed in Montgomery County, Texas. More specifically, the Plaintiffs allege misrepresentation concerning the usability of the lakes within the community for fishing and sporting and the general level of quality at which the community would be developed and thereafter maintained. The lawsuit seeks material damages and the estimated cost to remediate the lake is $500,000. Bluegreen intends to vigorously defend the lawsuit.
Schwarz, et al. Lawsuit regarding Community Amenities
     On September 18, 2008, in Cause No. 2008-5U-CV-1358-WI, styled Paul A. Schwarz and Barbara S. Schwarz v. Bluegreen Communities of Georgia, LLC and Bluegreen Corporation, Plaintiffs brought suit against Bluegreen alleging fraud and misrepresentation with regards to the construction of a marina at the Sanctuary Cove subdivision located in Camden County, Georgia. Plaintiff subsequently withdrew the fraud and misrepresentation counts and replaced them with a count alleging violation of racketeering laws, including mail fraud and wire fraud. On January 25, 2010, Plaintiffs filed a second complaint seeking approval to proceed with the lawsuit as a class action representing more than 100 persons who were harmed by the alleged racketeering activities in a similar manner as Plaintiffs. No decision has yet been made by the Court as to whether a class will be certified. Bluegreen denies the allegations and intends to vigorously defend the lawsuit.
     In the ordinary course of Bluegreen’s business, Bluegreen becomes subject to claims or proceedings from time to time relating to the purchase, sale or financing of VOIs and real estate. Additionally, from time to time, Bluegreen becomes involved in disputes with existing and former employees, vendors, taxing jurisdictions and various other parties.
BankAtlantic Bancorp
In re BankAtlantic Bancorp, Inc. Securities Litigation, No. 0:07-cv-61542-UU, United States District Court, Southern District of Florida
     On October 29, 2007, Joseph C. Hubbard filed a purported class action in the United States District Court for the Southern District of Florida against BankAtlantic Bancorp and four of its current or former officers. The Defendants in this action are BankAtlantic Bancorp, Inc., James A. White, Valerie C. Toalson, Jarett S. Levan, and Alan B. Levan. The Complaint, which was later amended, alleges that during the purported class period of November 9, 2005 through October 25, 2007, BankAtlantic Bancorp and the named officers knowingly and/or recklessly made misrepresentations of material fact regarding BankAtlantic and specifically BankAtlantic’s loan portfolio and allowance for loan losses. The Complaint seeks to assert claims for violations of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and seeks unspecified damages. On December 12, 2007, the Court consolidated into Hubbard a separately filed action captioned Alarm Specialties, Inc. v. BankAtlantic Bancorp, Inc., No. 0:07—cv-61623-WPD. On February 5, 2008, the Court appointed State-Boston Retirement System lead plaintiff and Lubaton Sucharow LLP to serve as lead counsel pursuant to the provisions of the Private Securities Litigation Reform Act. BankAtlantic Bancorp believes the claims to be without merit and intends to vigorously defend the actions.

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D.W. Hugo, individually and on behalf of Nominal Defendant BankAtlantic Bancorp, Inc. vs. BankAtlantic Bancorp, Inc., Alan B. Levan, Jarett S. Levan, Jay C. McClung, Marcia K. Snyder, Valerie Toalson, James A. White, John E. Abdo, D. Keith Cobb, Steven M. Coldren, and David A. Lieberman, Case No. 0:08-cv-61018-UU, United States District Court, Southern District of Florida
     On July 2, 2008, D.W. Hugo filed a purported class action which was brought as a derivative action on behalf of BankAtlantic Bancorp pursuant to Florida laws in the United States District Court, Southern District of Florida against BankAtlantic Bancorp and the above listed officers and directors. The Complaint alleges that the individual defendants breached their fiduciary duties by engaging in certain lending practices with respect to BankAtlantic Bancorp’s Commercial Real Estate Loan Portfolio. The Complaint further alleges that BankAtlantic Bancorp’s public filings and statements did not fully disclose the risks associated with the Commercial Real Estate Loan Portfolio and seeks damages on behalf of BankAtlantic Bancorp.
     On December 2, 2008, the Circuit Court for Broward County stayed a separately filed action captioned Albert R. Feldman, Derivatively on behalf of Nominal Defendant BankAtlantic Bancorp, Inc. vs. Alan B. Levan, et al., Case No. 0846795 07. The court granted the motion to stay the action pending further order of the court and allowing any party to move for relief from the stay, provided the moving party gives at least thirty days’ written notice to all of the non-moving parties. BankAtlantic Bancorp believes the claims to be without merit and intends to vigorously defend the actions.
Wilmine Almonor, individually and on behalf of all others similarly situated, vs. BankAtlantic Bancorp, Inc., Steven M. Coldren, Mary E. Ginestra, Willis N. Holcombe, Jarett S. Levan, John E. Abdo, David A. Lieberman, Charlie C. Winningham II, D. Keith Cobb, Bruno L. DiGiulian, Alan B. Levan, James A. White, the Security Plus Plan Committee, and Unknown Fiduciary Defendants 1-50, No. 0:07-cv-61862- DMM, United States District Court, Southern District of Florida.
     On December 20, 2007, Wilmine Almonor filed a purported class action in the United States District Court for the Southern District of Florida against BankAtlantic Bancorp and the above-listed officers, directors, employees, and organizations. The Complaint alleges that during the purported class period of November 9, 2005 to present, BankAtlantic Bancorp and the individual defendants violated the Employment Retirement Income Security Act (“ERISA”) by permitting company employees to choose to invest in BankAtlantic Bancorp’s Class A common stock in light of the facts alleged in the Hubbard securities lawsuit. The Complaint seeks to assert claims for breach of fiduciary duties, the duty to provide accurate information, the duty to avoid conflicts of interest under ERISA and seeks unspecified damages. On February 18, 2009, the Plaintiff filed a Second Amended Complaint, which, for the first time, identified by name the following additional Defendants that Plaintiff had previously attempted to identify by position: Anne B. Chervony, Lewis F. Sarrica, Susan D. McGregor, Jeff Callan, Patricia Lefebvre, Jeffrey Mindling, Tim Watson, Gino Martone, Jose Valle, Juan Carlos Ortigosa, Gerry Lachnicht, Victoria Bloomenfeld, Rita McManus, and Kathleen Youlden.
     On July 14, 2009, the Court granted in part Defendants’ motion to dismiss the Second Amended Complaint, dismissing the following individual Defendants from Count II: Lewis Sarrica, Susan McGregor, Patricia Lefebvre, Jeffrey Mindling and Gerry Lachnicht. On July 28, 2009, the Court denied Plaintiff’s motion for class certification. On January 13, 2010, the Court ruled that the Plaintiff’s status as a Plan representative threatens the interests of the Plan, and in turn other Plan participants, and threatens the integrity of the judicial process. The court denied the Plaintiff’s request to proceed as a Plan representative and accordingly, the case is currently proceeding solely on the basis of the Plaintiff’s individual claim. BankAtlantic Bancorp believes the claim to be without merit and intends to vigorously defend the action.
SEC Investigation
     BankAtlantic Bancorp has received a notice of investigation from the Securities and Exchange Commission, Miami Regional Office and subpoenas for information. The subpoenas request a broad range of documents relating to, among other matters, recent and pending litigation to which BankAtlantic Bancorp is or was a party, certain of BankAtlantic’s non-performing, non-accrual and charged-off loans, BankAtlantic Bancorp’s cost saving measures, BankAtlantic Bancorp’s recently formed asset workout subsidiary and any purchases or sales of BankAtlantic Bancorp’s common stock by officers or directors of BankAtlantic Bancorp. Various current and former employees have also received subpoenas for documents and testimony. BankAtlantic Bancorp is fully cooperating with the SEC.

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Lashelle Farrington, individually and on behalf of all others similarly situated, v. BankAtlantic, a Federal Savings Bank, Case No. 09-006210 (11), in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida.
     The original Farrington complaint was filed on February 2, 2009 against BankAtlantic and several of BankAtlantic’s affiliates (namely, BA Financial Services, LLC, BankAtlantic Bancorp, Inc., BFC Financial Corporation, and Joe Does 1-10), and the Plaintiff subsequently amended the complaint to drop the non-BankAtlantic defendants. The Amended Complaint alleges that BankAtlantic breached its Personal Account Depositor’s Agreement by charging overdraft fees for certain debit card purchases when the customer allegedly had sufficient funds in her account at the time that the items were paid even though the account was overdrawn at the close of business. The Plaintiff seeks to establish a class comprised of all persons or entities with accounts that incurred these allegedly improper overdraft fees on debit card transactions in the previous 5 years. The Plaintiff has not yet moved to certify a class. BankAtlantic Bancorp believes the claims to be without merit and intends to vigorously defend the action
Joel and Elizabeth Rothman, on behalf of themselves and all persons similarly situated vs. BankAtlantic, Case No. 09-059341 (07), Circuit Court of the 17th Judicial Circuit for Broward County, Florida.
     On November 2, 2009, Joel and Elizabeth Rothman filed a purported class action against BankAtlantic in Florida state court. The Complaint asserts claims for breach of contract, breach of duty of good faith and fair dealing, unjust enrichment, conversion, and usury. Each of these counts is related to BankAtlantic’s collection of overdraft fees. The Complaint alleges that BankAtlantic failed to adequately warn its customers about overdrafts, failed to give its customers the ability to opt out of an automatic overdraft protection program and improperly manipulated debit card transactions. The Plaintiffs seek to represent three classes of BankAtlantic customers in the State of Florida who were assessed overdraft fees. BankAtlantic Bancorp believes the claims to be without merit and intends to vigorously defend the action.
     In the ordinary course of business, the Company and its subsidiaries are also parties to lawsuits as plaintiff or defendant involving its bank operations, lending, tax certificates activities and real estate activities. Additionally, from time to time, Bluegreen becomes involved in disputes with existing and former employees, vendors, taxing jurisdictions and various other parties. Although the Company believes it has meritorious defenses in the pending legal actions and that the outcomes of these pending legal matters should not materially impact us, the ultimate outcomes of these matters are uncertain.
ITEM 4. REMOVED AND RESERVED

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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
     Our Class A Common Stock and Class B Common Stock have substantially identical terms, except as follows:
    Each share of Class A Common Stock is entitled to one vote for each share held, with all holders of Class A Common Stock possessing in the aggregate 22% of the total voting power. Holders of Class B Common Stock have the remaining 78% of the total voting power. If the number of shares of Class B Common Stock outstanding decreases to 1,800,000 shares, the Class A Common Stock’s aggregate voting power will increase to 40% and the Class B Common Stock will have the remaining 60%. If the number of shares of Class B Common Stock outstanding decreases to 1,400,000 shares, the Class A Common Stock’s aggregate voting power will increase to 53% and the Class B Common Stock will have the remaining 47%. If the number of shares of Class B Common Stock outstanding decreases to 500,000, the fixed voting percentages will be eliminated.
 
    Each share of Class B Common Stock is convertible at the option of the holder thereof into one share of Class A Common Stock.
     In addition to any other approval required by Florida law, the foregoing voting structure may not be amended without the approval of holders of a majority of the outstanding shares of the Company’s Class B Common Stock, voting as a separate class.
Market Information
     Since, December 9, 2008, our Class A Common Stock has been quoted on the Pink Sheets Electronic Quotation Service (“Pink Sheets”) under the ticker symbol “BFCF.PK.” Prior to that time, our Class A Common Stock traded on NYSE Arca (after the previously trading on the NASDAQ National Market). Our Class B Common Stock is quoted on the OTC Bulletin Board under the symbol “BFCFB.OB.”
     The following table sets forth, for the indicated periods, (i) the high and low trading prices for our Class A Common Stock as reported by NYSE Arca from January 1, 2008 through December 8, 2008 and as quoted on the Pink Sheets from December 9, 2008 through December 31, 2009 and (ii) the high and low trading prices for our Class B Common Stock as reported by the National Association of Securities Dealers Automated Quotation System. The over-the-counter stock prices do not include retail mark-ups, mark-downs or commissions.
                 
Class A Common Stock:   High     Low  
2008
               
First Quarter
  $ 1.56     $ 0.50  
Second Quarter
    1.26       0.57  
Third Quarter
    1.04       0.45  
Fourth Quarter
    0.68       0.12  
2009
               
First Quarter
  $ 0.32     $ 0.06  
Second Quarter
    0.51       0.16  
Third Quarter
    0.70       0.26  
Fourth Quarter
    0.74       0.31  

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Class B Common Stock:   High     Low  
2008
               
First Quarter
  $ 1.50     $ 1.08  
Second Quarter
    1.20       0.65  
Third Quarter
    0.75       0.52  
Fourth Quarter
    0.55       0.25  
2009
               
First Quarter
  $ 0.25     $ 0.25  
Second Quarter
    0.51       0.25  
Third Quarter
    0.40       0.30  
Fourth Quarter
    1.24       0.31  
Holders
     On March 26, 2010, there were approximately 684 record holders of our Class A Common Stock and approximately 452 record holders of our Class B Common Stock.
Dividends
     While there are no restrictions on our payment of cash dividends we have never paid cash dividends on our common stock.
     There are restrictions on the payment of dividends by BankAtlantic to BankAtlantic Bancorp and in certain circumstances on the payment of dividends by BankAtlantic Bancorp to holders of its common stock, including BFC. BankAtlantic Bancorp does not expect to receive dividend payments from BankAtlantic, and BankAtlantic Bancorp is currently prohibited from paying dividends on its common stock due to its decision to defer interest payments on its junior subordinated debentures. See Financial Services Risk Factors and Financial Services — Regulation and Supervision — “Limitation on Capital Distributions” and Note 23 of the “Notes to Consolidated Financial Statements” for additional information.
Issuer Purchases of Equity Securities
     On September 21, 2009, our Board of Directors approved a share repurchase program which authorizes the repurchase of up to 20,000,000 shares of Class A and Class B Common Stock at an aggregate cost of no more than $10 million. The share repurchase program replaced our $10 million repurchase program that our Board of Directors approved in October 2006 which placed a limitation on the number of shares which could be repurchased under the program at 1,750,000 shares of Class A Common Stock. In 2008, we repurchased 100,000 shares of Class A Common Stock at an aggregate cost of $54,000 under the prior program. The current program, like the prior program, authorizes management, at its discretion, to repurchase shares from time to time subject to market conditions and other factors. No shares were repurchased during the year ended December 31, 2009.

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ITEM 6. SELECTED FINANCIAL DATA
     The following table sets forth selected consolidated financial data as of and for the years ended December 31, 2005 through 2009. Certain selected financial data presented below is derived from our consolidated financial statements. This table is a summary and should be read in conjunction with the consolidated financial statements and related notes thereto which are included elsewhere in this report.
(Dollars in thousands, except for per share data)
                                         
    For the Years Ended December 31,  
    2009     2008     2007     2006     2005  
Statement of Operations Data (e):
                                       
Revenues
                                       
Real Estate and Other
  $ 39,726       16,870       415,881       573,574       564,697  
Financial Services
    354,087       449,571       520,793       507,746       445,537  
 
                             
 
    393,813       466,441       936,674       1,081,320       1,010,234  
 
                             
 
                                       
Costs and Expenses
                                       
Real Estate and Other
    206,892       76,470       711,073       617,211       507,948  
Financial Services
    573,467       634,970       579,458       474,311       381,916  
 
                             
 
    780,359       711,440       1,290,531       1,091,522       889,864  
 
                             
 
                                       
Gain on bargain purchase of Bluegreen
    183,138                          
Gain on settlement of investment in Woodbridge’s subsidiary
    29,679                          
Equity in earnings from unconsolidated affiliates
    33,381       15,064       12,724       10,935       13,404  
Impairment of unconsolidated affiliates
    (31,181 )     (96,579 )                  
Investments gains (losses), interest and other income
    19,549       (5,722 )     17,183       11,479       13,033  
 
                             
(Loss) income from continuing operations before income taxes
    (151,980 )     (332,236 )     (323,950 )     12,212       146,807  
(Benefit) provision for income taxes
    (67,218 )     15,763       (70,246 )     (516 )     59,672  
 
                             
(Loss) income from continuing operations
    (84,762 )     (347,999 )     (253,704 )     12,728       87,135  
Discontinued operations, net of income tax
    (11,931 )     19,388       8,799       (10,554 )     17,926  
Extraordinary gain, net of income tax
          9,145       2,403              
 
                             
Net (loss) income
    (96,693 )     (319,466 )     (242,502 )     2,174       105,061  
Less: Net (loss) income attributable to noncontrolling interests
    (122,414 )     (260,567 )     (212,043 )     4,395       92,287  
 
                             
Net income (loss) attributable to BFC
    25,721       (58,899 )     (30,459 )     (2,221 )     12,774  
Preferred Stock dividends
    (750 )     (750 )     (750 )     (750 )     (750 )
 
                             
Net income (loss) allocable to common stock
  $ 24,971       (59,649 )     (31,209 )     (2,971 )     12,024  
 
                             
 
                                       
Common Share Data (a), (b), (c)
                                       
Basic earnings (loss) per share of common stock from:
                                       
continuing operations
  $ 0.68       (1.63 )     (0.90 )     (0.04 )     0.24  
discontinued operations
    (0.24 )     0.11       0.03       (0.05 )     0.18  
extraordinary items
          0.20       0.06              
 
                             
Basic earnings (loss) per share of common stock
  $ 0.44       (1.32 )     (0.81 )     (0.09 )     0.42  
 
                             
 
                                       
Diluted earnings (loss) per share of common stock from:
                                       
continuing operations
  $ 0.68       (1.63 )     (0.90 )     (0.05 )     0.22  
discontinued operations
    (0.24 )     0.11       0.03       (0.05 )     0.15  
extraordinary items
          0.20       0.06              
 
                             
Diluted earnings (loss) per share of common stock
  $ 0.44       (1.32 )     (0.81 )     (0.10 )     0.37  
 
                             
 
                                       
Basic weighted average number of common shares outstanding
    57,235       45,097       38,778       33,249       28,952  
Diluted weighted average number of common shares outstanding
    57,235       45,097       38,778       33,249       31,219  

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Item 6. Selected Financial Data — continued
(Dollars in thousands)
                                         
    December 31,  
    2009     2008     2007     2006     2005  
Balance Sheet (at period end)
                                       
Loans, loans held for sale and notes receivable, net
  $ 3,960,715       4,317,645       4,528,538       4,603,505       4,628,744  
Real estate inventory
  $ 494,291       268,763       270,229       847,492       632,597  
Securities
  $ 467,520       979,417       1,191,173       1,081,980       1,064,857  
Total assets
  $ 6,047,037       6,395,582       7,114,433       7,605,766       7,395,755  
Deposits
  $ 3,948,818       3,919,796       3,953,405       3,867,036       3,752,676  
Securities sold under agreements to repurchase and federal funds purchased
  $ 27,271       279,726       159,905       128,411       249,263  
Other borrowings (d)
  $ 1,362,000       1,556,362       1,992,718       2,398,662       2,121,315  
BFC shareholders’ equity
  $ 245,059       112,867       184,037       177,585       183,080  
Noncontrolling interests
  $ 158,852       262,554       558,950       698,323       696,522  
Total equity
  $ 403,911       375,421       742,987       875,908       879,602  
 
(a)   Since its inception, BFC has not paid any cash dividends on its common stock.
 
(b)   While the Company has two classes of common stock outstanding, the two-class method is not presented because the company’s capital structure does not provide for different dividend rates or other preferences, other than voting rights, between the two classes.
 
(c)   Prior to the merger of I.R.E. Realty Advisory Group, Inc. (“I.R.E. RAG”) in November 2007, the 4,764,285 shares of the Company’s Class A Common Stock and 500,000 shares of the Company’s Class B Common Stock that were owned by I.R.E. RAG were considered outstanding,. However, because the Company owned 45.5% of the outstanding common stock of I.R.E. RAG, 2,165,367 shares of Class A Common Stock and 227,250 shares of Class B Common Stock were eliminated from the number of shares outstanding for purposes of computing earnings per share.
 
(d)   Other borrowings include advances from FHLB, notes and mortgage notes payable, receivable-backed notes payable and junior subordinated debentures.
 
(e)   Reclassified to reflect the reporting of discontinued operations, and to conform to the 2009 presentation.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
     BFC Financial Corporation (“BFC” or, unless otherwise indicated or the context otherwise requires, “we” “us” “our” or the “Company”) is a diversified holding company whose principal holdings include a controlling interest in BankAtlantic Bancorp, Inc. and its subsidiaries (“BankAtlantic Bancorp”), a controlling interest in Bluegreen Corporation and its subsidiaries (“Bluegreen”), a non-controlling interest in Benihana, Inc. (“Benihana”) and a controlling interest in Core Communities, LLC (“Core” or “Core Communities”). As a result of our position as the controlling shareholder of BankAtlantic Bancorp, we are a “unitary savings bank holding company” regulated by the Office of Thrift Supervision (“OTS”). As of December 31, 2009, BFC and its subsidiaries had total consolidated assets and liabilities of approximately $6.0 billion and $5.6 billion, respectively (including the assets and liabilities of its consolidated subsidiaries, noncontrolling interests of $158.9 million) and BFC’s shareholders’ equity of approximately $245.1 million.
     Historically, BFC’s business strategy has been to invest in and acquire businesses in diverse industries either directly or through controlled subsidiaries. BFC believes that in the short term that the Company’s and shareholders’ interests are best served by providing strategic support for its existing investments. In furtherance of this strategy, the Company took several steps in 2009 which it believes will enhance the Company’s prospects. Key actions taken in 2009 included the merger of BFC with Woodbridge Holdings; the purchase of an additional 7% interest in BankAtlantic Bancorp, increasing our economic interest in BankAtlantic Bancorp to 37% and increasing our voting interest in BankAtlantic Bancorp to 66%; and the purchase of an additional 23% interest in Bluegreen increasing our ownership in Bluegreen to 52%. The acquisition of this control position in Bluegreen resulted in a bargain purchase gain of approximately $183.1 million in the fourth quarter and net income attributable to BFC of $25.7 million for the year. In addition, we took actions to restructure Core in recognition of the continued depressed real estate market and its inability to meet its obligations to its lenders. Over the longer term and as the economy improves, we may look to increase our ownership in our affiliates or seek to make other opportunistic investments, with no pre-determined parameters as to the industry or structure of the investment.
     As a holding company with controlling positions in BankAtlantic Bancorp and Bluegreen, generally accepted accounting principles (“GAAP”) requires the consolidation of the financial results of both entities. As a consequence, the assets and liabilities of both entities are presented on a consolidated basis in BFC’s financial statements. However, except as otherwise noted, the debts and obligations of the consolidated entities, including Woodbridge, are not direct obligations of BFC and are non-recourse to BFC. Similarly, the assets of those entities are not available to BFC absent a dividend or distribution. The recognition by BFC of income from controlled entities is determined based on the total percent of economic ownership in those entities. At December 31, 2009, BFC owned approximately 37% of BankAtlantic Bancorp’s Class A and Class B common stock representing approximately 66% of BankAtlantic Bancorp total voting power. At December 31, 2009, we owned approximately 52% of Bluegreen’s common stock.
     The following had significant financial impact on us during 2009:
     BFC and Woodbridge Merger - On September 21, 2009, we consummated our merger with Woodbridge Holdings Corporation pursuant to which Woodbridge Holdings Corporation merged with and into Woodbridge Holdings, LLC, our wholly-owned subsidiary which continued as the surviving company of the merger and the successor entity to Woodbridge Holdings Corporation. Pursuant to the terms of the merger, which was approved by each company’s shareholders at their respective meetings held on September 21, 2009, each outstanding share of Woodbridge’s Class A Common Stock (other than Dissenting Holders, as defined below) automatically converted into the right to receive 3.47 shares of our Class A Common Stock. Shares otherwise issuable to us attributable to the shares of Woodbridge’s Class A Common Stock and Class B Common Stock owned by us were canceled in connection with the merger. As a result of the merger, Woodbridge Holdings Corporation’s separate corporate existence ceased and its Class A Common Stock is no longer publicly traded. The merger resulted in a net increase in BFC’s shareholders’ equity of approximately $95.0 million, an increase in common stock and additional paid-in capital of approximately $303,000 and $94.7 million, respectively, and a corresponding decrease to noncontrolling interest of approximately $99.6 million.

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     Under Florida law, holders of Woodbridge’s Class A Common Stock who did not vote to approve the merger and properly asserted and exercised their appraisal rights with respect to their shares (“Dissenting Holders”) are entitled to receive a cash payment in an amount equal to the fair value of their shares (as determined in accordance with the provisions of Florida law) in lieu of the shares of BFC’s Class A Common Stock which they would otherwise have been entitled to receive. Dissenting Holders, who collectively held approximately 4.2 million shares of Woodbridge’s Class A Common Stock, have rejected Woodbridge’s offer of $1.10 per share and requested payment for their shares based on their respective fair value estimates of Woodbridge’s Class A Common Stock. In connection with Woodbridge’s offer to the Dissenting Holders, the Company accrued a $4.6 million liability with a corresponding decrease to additional paid-in capital, representing in the aggregate Woodbridge’s offer to the Dissenting Holders. Woodbridge is currently in litigation with the Dissenting Holders, and the outcome of such litigation is uncertain. There is no assurance that the actual payment required to be made to the Dissenting Holders will not exceed the amount accrued. See Note 3 of the “Notes to Consolidated Financial Statements” for additional information about the merger.
     Acquisition of Bluegreen shares - On November 16, 2009, we purchased approximately 7.4 million additional shares of the common stock of Bluegreen for an aggregate purchase price of approximately $23 million. As a result of such share purchase, we increased our ownership interest in Bluegreen from 29% of Bluegreen’s outstanding common stock to approximately 52%. Accordingly, we now have a controlling interest in Bluegreen and, under GAAP, Bluegreen’s results are consolidated in our financial statements since November 16, 2009. Prior to November 16, 2009, the approximate 29% equity investment in Bluegreen was accounted under the equity method. See Note 4 of the “Notes to Consolidated Financial Statements” of this report for additional information about the Bluegreen share acquisition on November 16, 2009.
     Acquisition of BankAtlantic Bancorp shares - During the third quarter of 2009, BankAtlantic Bancorp distributed to its shareholders 4.441 subscription rights for each share of its Class A Common Stock and Class B Common Stock held on August 24, 2009. Each whole subscription right entitled the holder to purchase one share of BankAtlantic Bancorp’s Class A Common Stock at a purchase price of $2.00 per share. BFC exercised its subscription rights in the rights offering to purchase an aggregate of 14.9 million shares of BankAtlantic Bancorp’s Class A Common Stock for an aggregate purchase price of $29.9 million. This purchase increased BFC’s ownership interest in BankAtlantic Bancorp by approximately 7.3% to approximately 37.2% and increased BFC’s voting interest by approximately 6.7% to 66.0%. BFC’s purchase of the 14.9 million shares of BankAtlantic Bancorp’s Class A Common Stock was accounted for as an equity transaction in accordance with recently adopted FASB authoritative guidance effective on January 1, 2009, which provides that changes in a parent’s ownership interest which do not result in the parent losing its controlling financial interest in its subsidiary are reported as equity transactions. Accordingly, BFC’s increase in BankAtlantic Bancorp’s ownership interest resulted in an increase to additional paid-in capital of approximately $7.0 million, which represents the excess carrying value of the noncontrolling interest acquired over the consideration paid.
     Levitt and Sons Bankruptcy Settlement - On February 20, 2009, the Bankruptcy Court entered an order confirming a plan of liquidation jointly proposed by Levitt and Sons and the Official Committee of Unsecured Creditors. That order also approved the settlement pursuant to the settlement agreement that was entered into with the Joint Committee of Unsecured Creditors. No appeal or rehearing of the Bankruptcy Court’s order was filed by any party, and the settlement was consummated on March 3, 2009, at which time payment was made in accordance with the terms and conditions of the settlement agreement. Under cost method accounting, the cost of settlement and the related $52.9 million liability (less $500,000 which was determined as the settlement holdback and remained as an accrual pursuant to the settlement agreement) was recognized into income in the first quarter of 2009, resulting in a $40.4 million gain on settlement of investment in subsidiary. Pursuant to the settlement agreement, we agreed to share a percentage of any tax refund attributable to periods prior to the bankruptcy with the Debtors Estate. In the fourth quarter of 2009, we accrued approximately $10.7 million in connection with the portion of the tax refund that we will be required to pay to the Debtors Estate pursuant to the settlement agreement. As a result, the gain on settlement of investment in subsidiary for the year ended December 31, 2009 was $29.7 million. See Note 25 of the “Notes to Consolidated Financial Statements” for more information regarding the tax refund.

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     Reclassification of Discontinued Operations - In December 2009, Core Communities reinitiated efforts to sell two of its commercial leasing projects (“the Projects”) and began soliciting bids from several potential buyers to purchase assets associated with the Projects. The assets are available for immediate sale in their present condition and Core determined that it is probable that it will sell the Projects in 2010. Due to this decision, the assets associated with the Projects that are for sale have been classified as discontinued operations for all periods presented in accordance with the accounting guidance for the disposal of long-lived assets.
     The assets were reclassified as assets held for sale and the liabilities related to these assets were reclassified as liabilities related to assets held for sale in the audited consolidated statements of financial condition. Additionally, the results of operations for the projects were reclassified to income from discontinued operations. Depreciation related to these assets held for sale ceased in December 2009. The Company has elected not to separate these assets in the audited consolidated statements of cash flows for the periods presented. Management has reviewed the net asset value and estimated the fair market value of the assets based on the bids received related to these assets and determined that an impairment charge was necessary to write down the carrying value of the Projects to their fair value less the costs to sell and, accordingly, recorded an impairment charge of approximately $13.6 million for the year ended December 31, 2009. For a discussion of negotiations with respect to the Projects, see “Core’s Liquidity and Capital Resources”.
     Additional recent developments and related financial matters are discussed below.
BFC Financial Corporation Summary of Consolidated Results of Operations
The table below sets forth the Company’s summarized results of operations (in thousands):
                         
    For the Years Ended December 31,  
    2009     2008     2007  
Real Estate and Other
  $ 104,758       (128,755 )     (223,692 )
Financial Services
    (189,520 )     (219,244 )     (30,012 )
 
                 
Loss from continuing operations
    (84,762 )     (347,999 )     (253,704 )
Discontinued operations, net of income tax
    (11,931 )     19,388       8,799  
Extraordinary gain, net of income tax
          9,145       2,403  
 
                 
Net loss
    (96,693 )     (319,466 )     (242,502 )
Less: Net loss attributable to noncontrolling interests
    (122,414 )     (260,567 )     (212,043 )
 
                 
Net income (loss) attributable to BFC
    25,721       (58,899 )     (30,459 )
5% Preferred stock dividends
    (750 )     (750 )     (750 )
 
                 
Net income (loss) allocable to common stock
  $ 24,971       (59,649 )     (31,209 )
 
                 
     The Company reported net income attributable to BFC of $25.7 million in 2009 as compared to a net loss attributable to BFC of $58.9 million in 2008 and a net loss of $30.5 million in 2007. Results for the years ended December 31, 2009, 2008 and 2007 included an $11.9 million loss, $19.4 million of income and $8.8 million of income from discontinued operations, net of income tax, respectively. The results from discontinued operations related to financial results associated with Ryan Beck and Core Communities commercial leasing projects, as discussed further in Note 5 of the “Notes to Consolidated Financial Statements”. Real Estate and Other includes an approximately $183.1 million bargain purchase gain associated with Bluegreen’s share acquisition on November 16, 2009. See Note 4 of the “Notes to Consolidated Financial Statements”.
     In 2009, the Company acquired additional shares of BankAtlantic Bancorp Class A Common Stock. Effective on January 1, 2009, the FASB adopted authoritative guidance which provides that changes in a parent’s ownership interest which do not result in the parent losing its controlling financial interest in its subsidiary are reported as equity transactions. Accordingly, BFC’s increase in its ownership interest in BankAtlantic Bancorp resulted in an increase to additional paid-in capital of approximately $7.0 million, which represents the excess carrying value of the noncontrolling interest acquired over the consideration paid.

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     In 2008, the Company acquired additional shares of BankAtlantic Bancorp’s Class A Common Stock in the open market, and in 2007 the Company acquired shares of Woodbridge’s Class A Common Stock in Woodbridge’s rights offerings to its shareholders, including the Company. The acquisition of these shares resulted in negative goodwill (based on the excess of fair value of acquired net assets over the purchase price of the shares) of approximately $19.6 million in connection with the 2008 acquisition of shares of BankAtlantic Bancorp and $11 million in connection with the 2007 acquisition of shares of Woodbridge. After ratably allocating this negative goodwill to non-current and non-financial assets, the Company recognized in 2008 and 2007 an extraordinary gain, net of tax, of $9.1 million and $2.4 million, respectively.
     As a result of the Woodbridge merger on September 21, 2009 and the Bluegreen share acquisition on November 16, 2009, in each case as described above, the Company reorganized its reportable segments to better align its segment reporting with the current operations of its businesses. The Company’s business activities currently consist of (i) Real Estate and Other activities and (ii) Financial Services activities, which are reported through six segments: BFC Activities, Real Estate Operations, Bluegreen Resorts, Bluegreen Communities, BankAtlantic and BankAtlantic Bancorp Parent Company. As a result of this reorganization, our BFC Activities segment now includes, in addition to other activities historically included in the segment, Woodbridge Other Operations (which was previously a segment). Our Real Estate Operations segment is now comprised of what was previously identified as our Land Division, including the real estate business activities of Woodbridge and its subsidiaries, Core Communities and Carolina Oak Homes, LLC (“Carolina Oak”). In 2007, the Real Estate Operations segment also included the operations of Levitt and Sons, which was deconsolidated as of November 9, 2007 in connection with the filing of its Chapter 11 Cases, and Levitt Commercial.
     The Company’s Real Estate and Other business activities are reported in four segments which are i) BFC Activities ii) Real Estate Operations, iii) Bluegreen Communities and iv) Bluegreen Resorts. BFC’s consolidated financial statements include the results of operations of Bluegreen from November 16, 2009 (when we acquired a controlling interest in Bluegreen) through December 31, 2009. Accordingly, Bluegreen’s results of operations since November 16, 2009 are reported through the Bluegreen Resorts and Bluegreen Communities segments. Prior to November 16, 2009, when we owned approximately 9.5 million shares of Bluegreen common stock representing approximately 29% of such stock, the investment in Bluegreen was accounted for under the equity method of accounting. In prior years, the investment in Bluegreen was included in Woodbridge other operations, and our interest in Bluegreen’s earnings and losses prior to November 16, 2009 are included in our BFC Activities segment. The Company’s Financial Services business activities include BankAtlantic Bancorp’s results of operations and are reported in two segments: BankAtlantic and BankAtlantic Bancorp Parent Company.
     The presentation and allocation of the assets, liabilities and results of operations of each segment may not reflect the actual economic costs of the segment as a stand-alone business. If a different basis of allocation were utilized, the relative contributions of the segments might differ but, in management’s view, the relative trends in segments would not likely be impacted.
     The results of our business segments and other information on each segment are discussed below in BFC Activities, Real Estate Operations, Bluegreen Resorts, Bluegreen Communities, BankAtlantic and BankAtlantic Bancorp Parent Company. See also Note 34 of the “Notes to Consolidated Financial Statements” contained in Item 8 of this report.

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Consolidated Financial Condition
Consolidated Assets and Liabilities
     Total assets at December 31, 2009 and December 31, 2008 were $6.0 billion and $6.4 billion, respectively. The changes in components of total assets between December 31, 2008 and December 31, 2009 are summarized below. The acquisition of a controlling interest in Bluegreen in November 2009 resulted in increases in cash and cash equivalents, notes receivable, inventory of real estate, retained interest in notes receivable sold and intangible assets of $70.5 million, $277.3 million, $322.9 million $26.3 million and $63.0 million respectively. Other than such increases, the change in total assets primarily resulted from:
    an increase in cash and cash equivalents primarily reflecting BankAtlantic Bancorp $116.7 million of higher cash balances at the Federal Reserve Bank associated with daily cash management activities. This contributed to the net increase in cash and cash equivalents of approximately $37.1 million and cash provided by operations of approximately $6.0 million. Cash provided by investing activities was approximately $919.4 million and cash used in financing activities was $888.3 million;
 
    a decrease in securities available for sale reflecting BankAtlantic’s sale of $284.0 million of residential mortgage-backed securities as well as prepayments by borrowers associated with residential mortgage refinancing of $59 million in response to low historical residential mortgage interest rates during 2009;
 
    an increase in current income tax receivable reflecting BankAtlantic Bancorp’s and Woodbridge’s receivable of approximately $31.8 million and $34.6 million, respectively, from the Department of the Treasury associated with a change in the income tax net operating loss carry-back laws;
 
    a decrease in BankAtlantic’s tax certificate balances primarily due to redemptions and decreased tax certificate acquisitions during 2009;
 
    a decrease in BankAtlantic’s loan receivable balances associated with $185.9 million of loan charge-offs, $50.0 million increase in the allowance for loan losses, as well as refinancing of residential loans in the normal course of business combined with a significant decline in loan purchases and originations;
 
    an increase in real estate inventory mainly due to the consolidation of Bluegreen and partially offset by an impairment charge of approximately $101.9 million recorded in connection with Core Communities and Carolina Oak’s inventory of real estate, including purchase accounting adjustment of $8.9 million;
 
    an increase in real estate owned associated with BankAtlantic’s commercial real estate and residential loan foreclosures;
 
    a decrease in BankAtlantic’s goodwill associated with an $8.5 million impairment charge to goodwill, net of purchase accounting adjustment in the amount of $0.8 million, and a $2.0 million impairment charge related to goodwill associated with Woodbridge’s investment in Pizza Fusion;
 
    a decrease in assets held for sale resulting from the decrease in value of Core Communities’ assets from discontinued operations; and
 
    an increase in other assets due in part to $31.3 million prepaid FDIC insurance assessments for the three years ended December 31, 2012.
     The Company’s total liabilities at December 31, 2009 were $5.6 billion compared to $6.0 billion at December 31, 2008. The changes in components of total liabilities from December 31, 2008 to December 31, 2009 are summarized below. The acquisition of a controlling interest in Bluegreen in November 2009 resulted in increases in long term debt and deferred income taxes of $479.6 million and $30.3 million, respectively. Other than such increases, the change in total liabilities primarily resulted from:
    a decrease in BankAtlantic’s interest bearing deposit account balances of $36 million associated with $445.2 million of lower time deposits and insured money market savings accounts partially offset by $416.4 million of higher interest bearing checking account balances reflecting higher NOW account balances combined with intercompany eliminations of $8.7 million;
 
    a $85.9 million increase in non-interest-bearing deposit balances at BankAtlantic primarily due to increased customer balances combined with intercompany eliminations of $12.2 million;
 
    lower FHLB advances and short term borrowings at BankAtlantic due to repayments using proceeds from the sales of securities, loan repayments and increases in deposit account balances;
 
    an increase in BankAtlantic Bancorp’s junior subordinated debentures liability due to interest deferrals;

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    the reversal of the loss in excess of investment in Levitt and Sons as a result of the Bankruptcy Court’s approval of the Levitt and Sons’ bankruptcy plan; and
 
    a decrease in other liabilities primarily reflecting a significant decline in accrued interest payable due to lower FHLB advance and short term borrowing balances as well as a substantial decline in the cost of funds for 2009 compared to 2008. The decrease in other liabilities was partially offset with an accrual recorded in the fourth quarter of 2009 of approximately $10.7 million in connection with a portion of the tax refund, that will be payable to the Levitt and Sons estate upon receipt.
Redeemable 5% Cumulative Preferred Stock
     On June 7, 2004, the Board of Directors of the Company designated 15,000 shares of the Company’s preferred stock as 5% Cumulative Convertible Preferred Stock (“5% Preferred Stock”). On June 21, 2004, the Company sold all 15,000 shares of the Preferred Stock to an investor group in a private offering.
     The 5% Preferred Stock has a stated value of $1,000 per share. The shares of 5% Preferred Stock may be redeemed at the option of the Company, from time to time, at redemption prices (the “Redemption Price”) ranging from $1,025 per share for the year 2010 to $1,000 per share for the year 2015 and thereafter. The 5% Preferred Stock liquidation preference is equal to its stated value of $1,000 per share plus any accumulated and unpaid dividends or an amount equal to the Redemption Price in a voluntary liquidation or winding up of the Company. Holders of the 5% Preferred Stock are entitled to receive, when and as declared by the Company’s Board of Directors, cumulative quarterly cash dividends on each such share at a rate per annum of 5% of the stated value from the date of issuance, payable quarterly. Since June 2004, the Company has paid quarterly dividends on the 5% Preferred Stock of $187,500. The 5% Preferred Stock has no voting rights except as required by Florida law.
     On December 17, 2008, the Company amended its Articles of Incorporation (the “Amendment”) to change certain of the previously designated relative rights, preferences and limitations of the Company’s 5% Preferred Stock. The Amendment eliminated the right of the holders of the 5% Preferred Stock to convert their shares of 5% Preferred Stock into shares of the Company’s Class A Common Stock. The Amendment also requires the Company to redeem shares of the 5% Preferred Stock with the net proceeds it receives in the event (i) the Company sells any of its shares of Benihana Series B Convertible Preferred Stock (the “Convertible Preferred Stock”), (ii) the Company sells any shares of Benihana’s common stock received upon conversion of Benihana’s Convertible Preferred Stock or (iii) Benihana redeems any shares of Benihana’s Convertible Preferred Stock owned by the Company. Additionally, in the event the Company defaults on its obligation to make dividend payments on the 5% Preferred Stock, the Amendment entitles the holders of BFC’s 5% Preferred Stock, to receive directly from Benihana certain payments on the shares of Benihana’s Convertible Preferred Stock owned by the Company or on the shares of Benihana’s common stock received by the Company upon conversion of Benihana’s Convertible Preferred Stock.
     In December 2008, based on an analysis of the 5% Preferred Stock after giving effect to the Amendment, the Company determined that the 5% Preferred Stock met the requirements to be re-classified outside of permanent equity at its fair value at the Amendment date of approximately $11.0 million into the mezzanine category as Redeemable 5% Cumulative Preferred Stock. The remaining amount of approximately $4.0 million continues to be classified in Additional Paid in Capital in the Company’s Consolidated Statements of Financial Condition. The fair value of the 5% Preferred Stock was calculated by using an income approach by discounting estimated cash flows at a market discount rate.
Noncontrolling Interest
     The following table summarizes the noncontrolling interests held by others in our subsidiaries (in thousands):
                 
    December 31,  
    2009     2008  
BankAtlantic Bancorp
  $ 88,910       170,888  
Woodbridge
          91,389  
Bluegreen
    41,905        
Joint ventures
    28,037       277  
 
           
 
  $ 158,852       262,554  
 
           

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Critical Accounting Policies
     Management views critical accounting policies as accounting policies that are important to the understanding of our financial statements and also involve estimates and judgments about inherently uncertain matters. In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated statements of financial condition and assumptions that affect the recognition of income and expenses on the consolidated statement of operations for the periods presented. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in subsequent periods relate to the determination of the allowance for loan losses, evaluation of goodwill and other intangible assets for impairment, the valuation of real estate acquired in connection with foreclosure or in satisfaction of loans, the valuation of real estate held for development and sale and its impairment reserves, revenue and cost recognition on percent complete projects, estimated costs to complete construction, the valuation of investments in unconsolidated subsidiaries, the valuation of the fair value of assets and liabilities in the application of the acquisition method of accounting, accounting for deferred tax asset valuation allowance, accounting for uncertain tax positions, accounting for contingencies, and assumptions used in the valuation of stock based compensation. The accounting policies that we have identified as critical accounting policies are: (i) allowance for loan losses and notes receivables; (ii) the valuation of retained interests in notes receivable sold; (iii) impairment of goodwill and long-lived assets; (iv) valuation of securities as well as the determination of other-than-temporary declines in value; (v) accounting for business combinations; (vi) the valuation of real estate; (vii) revenue and cost recognition on percent complete projects; (viii) estimated cost to complete construction; (ix) the valuation of equity method investments; (x) accounting for deferred tax asset valuation allowance; and (xi) accounting for contingencies. See also Note 1, Summary of Significant Accounting Policies, of the “Notes to Consolidated Financial Statements” included in Item 8 of this report for a detailed discussion of our significant accounting policies.
Business Combinations
     The Company accounts for its acquisitions in accordance with the accounting guidance for business combinations. If the Company makes a “bargain purchase”, the Company recognizes a gain in the income statement on the acquisition date. A bargain purchase is a business combination in which the acquisition date amounts of the identifiable net assets acquired and the liabilities assumed, as measured in accordance with the accounting guidance for business combinations exceeds the aggregate of (i) the consideration transferred, as measured in accordance with the accounting guidance, which generally require acquisition date fair value; (ii) the fair value of any non-controlling interest in the acquiree, and (iii) in a business combination achieved in stages, the acquisition date fair value of the Company’s previously held equity interest in the acquiree. This allocation process requires extensive use of estimates and assumptions, including estimates of future cash flows to be generated by the acquired assets. The Company may utilize independent third parties to assist the Company in assessing market conditions. The Company is also required to periodically review these judgments and estimates and adjust them accordingly. If conditions change from those expected, it is possible that the results could change in future periods. Certain identifiable intangible assets, such as management contracts, are not amortized, but instead are reviewed for impairment on at least an annual basis, or if events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Accordingly, the acquisition cost allocation of Bluegreen has had, and will continue to have, a significant impact on the Company’s operating results.
Fair Value Measurements
     We are required to disclose the fair value of our investments under accounting guidance for fair value measurements. Based on this accounting guidance, fair value is the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, this accounting guidance establishes a three-tier fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The three-tier fair value hierarchy prioritizes the inputs used in measuring fair value as follows:

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    Level 1. Observable inputs such as quoted prices in active markets for identical assets or liabilities;
 
    Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
 
    Level 3. Unobservable inputs, when there is little or no market data, which require the reporting entity to develop its own assumptions.
     In determining fair value, we are sometimes required to use various valuation techniques. When valuation techniques other than those described as Level 1 are utilized, management must make estimates and judgments in determining the fair value for its investments. The degree to which management’s estimates and judgments is required is generally dependent upon the market pricing available for the investments, the availability of observable inputs, the frequency of trading in the investments and the investment’s complexity. If we make different judgments regarding unobservable inputs, we could potentially reach different conclusions regarding the fair value of our investments.
Intangible Assets
     We evaluate our intangible assets when events and circumstances indicate that assets may be impaired and when the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. The carrying value of these assets is dependent upon estimates of future earnings that they are expected to generate. If cash flows decrease significantly, intangible assets may be impaired and would be written down to their fair value. The estimates of useful lives and expected cash flows require us to make significant judgments regarding future periods that are subject to outside factors.
     Intangible assets which consisted of management contracts in the amount of $63 million originated from the November 16, 2009 acquisition of a controlling interest in Bluegreen. Such management contracts, are not amortized, but instead are reviewed for impairment on at least an annual basis, or if events or changes in circumstances indicate that the related carrying amounts may not be recoverable.
     At December 31, 2009 and 2008, we also held intangible assets of approximately $18.7 million and $24.2 million, respectively, which are being amortized over the average life of the respective assets, ranging from 7 years to 10 years.
Revenue Recognition and Inventory Cost Allocation
     Revenue and all related costs and expenses from house and land sales are recognized at the time that closing has occurred, when title and possession of the property and the risks and rewards of ownership transfer to the buyer, and when we do not have a substantial continuing involvement in accordance with accounting guidance for sales of real estate. In order to properly match revenues with expenses, we estimate construction and land development costs incurred and to be incurred, but not paid at the time of closing. Estimated costs to complete are determined for each closed home and land sale based upon historical data with respect to similar product types and geographical areas and allocated to closings along with actual costs incurred based on a relative sales value approach. To the extent the estimated costs to complete have significantly changed, we will adjust cost of sales in the current period for the impact on cost of sales of previously sold homes and land to ensure a consistent margin of sales is maintained.
     Revenue is recognized for certain land sales on the percentage-of-completion method when the land sale takes place prior to all contracted work being completed. Pursuant to the requirements of accounting guidance for sales of real estate, if the seller has a continuing involvement with the property and does not transfer substantially all of the risks and rewards of ownership, profit is recognized based on the nature and extent of the seller’s continuing involvement. In the case of our land sales, this involvement typically consists of final development activities. We recognize revenue and related costs as work progresses using the percentage-of-completion method, which relies on estimates of total expected costs to complete required work. Revenue is recognized in proportion to the percentage of total costs incurred in relation to estimated total costs at the time of sale. Actual revenues and costs to complete construction in the future could differ from our current estimates. If our estimates of development costs remaining to be completed are significantly different from actual amounts, then our revenues, related cumulative profits and costs of sales may be revised in the period that estimates change.

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     In accordance with the requirements of the accounting guidance for real estate time-sharing activities regarding vacation ownership interests (“VOI”) sales, Bluegreen recognizes revenue on VOI and homesite sales when a minimum of 10% of the sales price has been received in cash (buyer’s commitment), the legal rescission period has expired, collectibility of the receivable representing the remainder of the sales price is reasonably assured and Bluegreen has completed substantially all of its obligations with respect to any development related to the real estate sold. Bluegreen believes that it uses a reasonably reliable methodology to estimate the collectibility of the receivables representing the remainder of the sales price of real estate sold. See the further discussion of policies regarding the estimation of credit losses on Bluegreen’s notes receivable below. Should Bluegreen become unable to reasonably estimate the collectibility of its receivables, the recognition of sales may have to be deferred and our results of operations could be negatively impacted. Under timeshare accounting rules, the buyer’s minimum cash down payment towards the purchase of Bluegreen VOIs is met only if the cash down payment received, reduced by the value of certain incentives provided to the buyer at the time of sale, is at least 10% of the sales price. If, after consideration of the value of the incentive, the total down payment received from the buyer is less than 10% of the sales price, the VOI sale, and the related cost of sales and direct selling expenses, are deferred until such time that sufficient cash is received from the customer, generally through receipt of mortgage payments. Changes to the quantity, type, or value of sales incentives that Bluegreen provides to buyers of its VOIs may result in additional VOI sales being deferred, which could materially adversely impact our results of operations.
     In cases where all development has not been completed, Bluegreen recognizes revenue in accordance with the percentage-of-completion method of accounting. Should Bluegreen’s estimates of the total anticipated cost of completing Bluegreen Resorts’ or Bluegreen Communities’ projects increase, Bluegreen may be required to defer a greater amount of revenue or may be required to defer revenue for a longer period of time, which could materially adversely impact our results of operations.
     The timeshare accounting rules define a specific method of the relative sales value method for relieving VOI inventory and recording cost of sales. Under the relative sales value method, cost of sales is calculated as a percentage of net sales using a cost-of-sales percentage—the ratio of total estimated development cost to total estimated VOI revenue, including the estimated incremental revenue from the resale of repossessed VOI inventory, generally as a result of the default of the related receivable. For Communities real estate projects, costs are allocated to individual homesites in the Communities’ projects based on the relative estimated sales value of each homesite without regards to defaults or repossessed inventory. Under this method, the allocated cost of a homesite is relieved from inventory and recognized as cost of sales upon recognition of the related sale. Should Bluegreen’s estimates of the sales values of its VOI and homesite inventories differ materially from their ultimate selling prices, our gross profit could be adversely impacted. Bluegreen’s completed timeshare and homesite inventory is carried at the lower of cost or market.
Allowance for Loan Losses on VOI Notes Receivables
     Bluegreen estimates uncollectible VOI notes receivable based on historical uncollectibles for similar VOI notes receivable over the applicable historical period. Bluegreen uses a static pool analysis, which tracks uncollectibles for each year’s sales over the entire life of those notes. Bluegreen also considers whether the historical economic conditions are comparable to current economic conditions. Additionally, under timeshare accounting requirements, no consideration is given for future recoveries of defaulted inventory in the estimate of uncollectible VOI notes receivable. If defaults increase, our results of operations could be materially adversely impacted.
Transfers of Financial Assets and Valuation of Retained Interests
     When Bluegreen transfers financial assets to third parties, such as when it sells VOI notes receivable pursuant to its vacation ownership receivables purchase facilities, Bluegreen evaluates whether or not such transfer should be accounted for as a sale pursuant to accounting rules in place at the time of the transaction. The evaluation of sale treatment involves legal assessments of the transactions, which includes determining whether the transferred assets have been isolated from Bluegreen (i.e., put presumptively beyond Bluegreen’s reach or the reach of Bluegreen’s creditors, even in bankruptcy or other receivership), determining whether each transferee has the right to pledge or exchange the assets it received, and ensuring that Bluegreen does not maintain effective control over the transferred assets through either (1) an agreement that both entitles and obligates Bluegreen to repurchase or redeem them before their maturity or (2) the ability to unilaterally cause the holder to return specific assets (other than through a cleanup call). Bluegreen believes that it has obtained appropriate legal opinions and other guidance deemed necessary to properly account for its transfers of financial assets as sales. As indicated below in “Recent Accounting Pronouncements Not Yet Adopted”, should Bluegreen be successful in selling additional notes receivable in the future, such transactions will be evaluated under new rules which become effective on January 1, 2010. Accordingly, Bluegreen does not expect to recognize any future gains on the sale of notes receivable.

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     In connection with the sales of notes receivable referred to above, Bluegreen retains subordinated tranches and rights to excess interest spread, which are retained interests in the notes receivable sold. Gain or loss on the sale of the notes receivable has depended in part on the allocation of the previous carrying amount of the financial assets involved in the transfer between the assets sold and the retained interests based on their relative fair value at the date of transfer. Bluegreen initially and periodically estimates the fair value of its retained interest in notes receivable sold based on the present value of future expected cash flows using management’s best estimates of the key assumptions — prepayment rates, loss severity rates, default rates and discount rates commensurate with the risks involved. Should Bluegreen’s estimates of these key assumptions change or should the portfolios sold fail to satisfy specified performance criteria and therefore trigger provisions whereby outside investors in the portfolios are paid on an accelerated basis, there could be a reduction in the fair value of the retained interests and Bluegreen results of operations and financial condition could be materially and adversely impacted.
Allowance for loan losses
     The allowance for loan losses is maintained at an amount that BankAtlantic Bancorp believes to be a reasonable estimate of probable losses inherent in its loan portfolio. BankAtlantic Bancorp has developed policies and procedures for evaluating its allowance for loan losses which considers all information available to BankAtlantic Bancorp. However, BankAtlantic Bancorp relies on estimates and judgments regarding issues where the outcome is unknown. As a consequence, if circumstances differ from its estimates and judgments, the allowance for loan losses may decrease or increase significantly.
     The calculation of BankAtlantic Bancorp’s allowance for loan losses consists of two components. The first component requires identifying impaired loans based on BankAtlantic Bancorp’s management classification and, if necessary, assigning a valuation allowance to the impaired loans. Valuation allowances are established using BankAtlantic Bancorp’s management estimates of the fair value of collateral or based on valuation models that present value estimated expected future cash flows discounted at the loans effective interest rate. These valuations are based on available information and require estimates and subjective judgments about fair values of the collateral or expected future cash flows. Most of BankAtlantic Bancorp’s loans do not have an observable market price, and an estimate of the collection of contractual cash flows is based on the judgment of management. It is likely that materially different results would be obtained if different assumptions or conditions were to prevail. As a consequence of the estimates and assumptions required to calculate the first component of the allowance for loan losses, a change in these highly uncertain estimates could have a materially favorable or unfavorable impact on our financial condition and results of operations.
     The second component of the allowance for loan losses requires BankAtlantic Bancorp to group loans that have similar credit risk characteristics so as to form a basis for estimating probable losses inherent in the group of loans based on historical loss percentages and delinquency trends as it relates to the group. BankAtlantic Bancorp’s management assigns a quantitative allowance to these groups of loans by utilizing historical loss experiences. BankAtlantic Bancorp’s management uses its judgment to determine the length of the time used in the historical loss experience. During each of the years in the two year period ended December 31, 2008, management used a 2 year loss experience to calculate the loss experience. However, due to the rapid decline in economic conditions and real estate values, during 2009, management shortened its historical loss experience by portfolio to between six months and one year, in order to reflect the current heighted loss experience in the quantitative allowance. The historical loss period is selected based on management’s judgment and a change in this loss period may result in material changes to the quantitative loss allowance. BankAtlantic Bancorp’s management also assigns a qualitative allowance to these groups of loans in order to adjust the historical data, if necessary, for qualitative factors that exist currently that were not present in the historical data. These qualitative factors include delinquency trends, actual loan classification migration trends, economic and business conditions, concentration of credit risk, loan-to-value ratios, problem loan trends and external factors. In deriving the qualitative allowance BankAtlantic Bancorp’s management uses significant judgment to qualitatively adjust the historical loss experiences for current trends that existed at period end that were not reflected in the calculated historical loss ratios and to adjust the allowance for the changes in the current economic climate compared to the economic environment that existed historically. A subsequent change in data trends or the external environment may result in material changes in this component of the allowance from period to period.

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     Management believes that the allowance for loan losses reflects a reasonable estimate of incurred credit losses as of the statement of financial condition date. As of December 31, 2009, BankAtlantic Bancorp’s allowance for loan losses was $187.2 million. See “Provision for Loan Losses” for a discussion of the amounts of BankAtlantic Bancorp’s allowance assigned to each loan product. The estimated allowance, which was derived from the above methodology, may be significantly different from actual realized losses. Actual losses incurred in the future are highly dependent upon future events, including the economies of geographic areas in which BankAtlantic Bancorp holds loans, especially in Florida. These factors are beyond management’s control. Accordingly, there is no assurance that BankAtlantic Bancorp will not incur credit losses in excess of the amounts estimated by its allowance for loan losses. In addition, various regulatory agencies, as an integral part of their examination process, periodically review its allowance for loan losses. Such agencies may require BankAtlantic Bancorp to recognize additions to the allowance based on its judgments and information available to them at the time of their examination and such judgments may differ from management’s judgment.
     BankAtlantic Bancorp analyzes its loan portfolio quarterly by monitoring the loan mix, credit quality, loan-to-value ratios, concentration by geographical area, vintage, historical trends and economic conditions. As a consequence, the allowance for loan losses estimates will change from period to period. During the three year period ended December 31, 2006, real estate markets experienced significant price increases accompanied by an abundance of available mortgage financing. Additionally, based on historical loss experience during that time, BankAtlantic Bancorp’s credit policies focused its loan production on collateral based loans and the discontinuation of certain loan products. These factors, other internal metrics and external market factors favorably impacted their provision for loan losses and allowance for loan losses during the years ended December 31, 2006. Conversely, during the three years ended December 31, 2009, the residential real estate market and general economic conditions, both nationally and in Florida, rapidly deteriorated with significant reductions in the sales prices and volume of residential real estate sold, plummeting collateral values, dramatic increases in unemployment and severe tightening of credit availability to borrowers. The impact of these rapidly deteriorating real estate market conditions and adverse economic conditions on our loan portfolios resulted in a significant increase in the ratio of allowance for loan losses to total loans from 0.94% at December 31, 2006 to 4.83% at December 31, 2009. We believe that our earnings in subsequent periods will be highly sensitive to changes in the Florida real estate market as well as the length of the current downturn in real estate valuation, availability of mortgage financing and the severity of unemployment in Florida and nationally. If the current negative real estate and economic conditions continue or deteriorate further BankAtlantic Bancorp is likely to experience significantly increased credit losses.
Valuation of investment securities
     We record our securities available for sale and derivative instruments in our statement of financial condition at fair value. We also disclose fair value estimates in our statement of financial condition for investment securities at cost. We generally use market and income approach valuation techniques and a fair value hierarchy to prioritize the inputs used in valuation techniques. Our policy is to use quoted market prices (Level 1 inputs) when available. However quoted market prices are not available for BankAtlantic Bancorp’s mortgage-backed securities, REMIC’s, other securities and certain equity securities requiring BankAtlantic Bancorp to use Level 2 and Level 3 inputs. The classification of assumptions as Level 2 or Level 3 inputs is based on judgment and the classification of the inputs could change based on the availability of observable market data.
     BankAtlantic Bancorp subscribes to a third-party service to assist it in determining the fair value of their mortgage-backed securities and real estate mortgage conduits. The estimated fair value of these securities at December 31, 2009 was $319.3 million. Matrix pricing are used to value these securities as identical securities that they own are not traded on active markets. Matrix pricing computes the fair value of mortgage-backed securities and real estate mortgage conduits based on the coupon rate, maturity date and estimates of future prepayment rates obtained from trades of securities with similar characteristic and from market data obtained from brokers. BankAtlantic Bancorp considers the above inputs Level 2. Upon the sale of securities, BankAtlantic Bancorp back-tests the values obtained from matrix pricing for reasonableness. The valuations obtained from matrix pricing are not actual transactions and may not reflect the actual amount that would be realized upon sale. While the interest rate and prepayment assumptions used in matrix pricing are representative of assumptions that BankAtlantic Bancorp believes market participants would use in valuing these securities, different assumptions may result in significantly different results. Additionally, current observable data may not be available in subsequent periods which would cause BankAtlantic Bancorp to utilize Level 3 inputs to value these securities. The mortgage-backed and REMIC securities that BankAtlantic owns are government agency guaranteed with minimal credit risk. These securities are of high credit quality and BankAtlantic believes could be liquidated in the near future; however, the price obtained upon sale could be higher or lower than the fair value obtained through matrix pricing. In light of the current volatility and uncertainty in credit markets, it is difficult to estimate with accuracy the price that could be obtained for these securities and the time that it could take to sell them in an orderly transaction.

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Other-than-Temporary Impairment of Securities
     We perform an evaluation on a quarterly basis to determine if any of our equity investments and debt securities are other-than-temporarily impaired. In making this determination, we consider the extent and duration of the impairment, the nature and financial condition of the issuer and our ability and intent to hold securities for a period sufficient to allow for any anticipated recovery in market value. If an equity security is determined to be other-than-temporarily impaired, we record an impairment loss as a charge to income for the period in which the impairment loss is determined to exist, resulting in a reduction to our earnings for that period. If a debt security is determined to be other-than-temporarily impaired, we record an impairment loss as a charge to income if we intend to sell the securities before they recover or if we do not expect to recover the securities historical cost due to credit loss. Management exercises significant judgment in determining the amount of credit loss in an impairment which is generally based on the present value of expected cash flows. As of December 31, 2009, BankAtlantic Bancorp had $22.1 million of impaired securities with an unrealized loss of $26,000 and $298.2 million of securities that were determined not to be impaired. However, in light of the current market uncertainties, and the challenging economic and credit market conditions, there is no assurance that future events will not cause us to have additional impaired securities in the foreseeable future.
Impairment of Goodwill and Long Lived Assets
Goodwill Impairment
     We test goodwill for impairment annually or when events or circumstances occur that may result in goodwill impairment during interim periods. On the BankAtlantic Bancorp level, the test requires BankAtlantic Bancorp to determine the fair value of its reporting units and compare the reporting units’ fair value to its carrying value. BankAtlantic Bancorp’s reporting units are comprised of Community Banking, Commercial Lending, Tax Certificate Operations, Capital Services and Investment Operations. The fair values of the reporting units are estimated using discounted cash flow present value valuation models and market multiple techniques.
     While management of BankAtlantic Bancorp believes the sources utilized to arrive at the fair value estimates are reliable, different sources or methods could have yielded different fair value estimates. These fair value estimates require a significant amount of judgment. If the fair value of a reporting unit is below the carrying amount, a second step of the goodwill impairment test is performed. This second step requires BankAtlantic Bancorp to determine the fair value of all assets (recognized and unrecognized) and liabilities in a manner similar to a business combination purchase price allocation. Since there is no active market for many of BankAtlantic Bancorp’s assets, management derives the fair value of the majority of these assets using net present value models. As a consequence, BankAtlantic Bancorp’s management estimates rely on assumptions and judgments regarding issues where the outcome is unknown and, as a result, actual results or values may differ significantly from these estimates. Additionally, declines in the market capitalization of BankAtlantic Bancorp’s common stock affect the aggregate fair value of the reporting units. Changes in management’s valuation of BankAtlantic Bancorp reporting units and the underlying assets as well as declines in BankAtlantic Bancorp’s market capitalization may affect future earnings through the recognition of additional goodwill impairment charges.
     During the year ended December 31, 2009, BankAtlantic Bancorp recognized goodwill impairment charges of $10.5 million. As of December 31, 2009 our remaining goodwill was $12.2 million.

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     In determining the fair value of the reporting units, BankAtlantic Bancorp used a combination of discounted cash flow techniques and market multiple methodologies. These methods utilize assumptions for expected cash flows, discount rates, and comparable financial institutions to determine market multiples. The aggregate fair value of all reporting units derived from the above valuation techniques was compared to BankAtlantic Bancorp’s market capitalization adjusted for a control premium in order to determine the reasonableness of the financial model output. A control premium represents the value an investor would pay above minority interest transaction prices in order to obtain a controlling interest in the subject company. The values separately derived from each valuation technique (i.e., discounted cash flow and market multiples) were used to develop an overall estimate of a reporting unit’s fair value. Different weighting of the various fair value techniques could result in a higher or lower fair value. Judgment is applied in determining the weightings that are most representative of fair value. BankAtlantic Bancorp used financial projections over a period of time, considered necessary to achieve a steady state of cash flows for each reporting unit. The primary assumptions in the projections were anticipated loan and deposit growth, interest rates and revenue growth. The discount rates were estimated based on the Capital Asset Pricing Model, which considers the risk-free interest rate, market risk premium, beta, and unsystematic risk and size premium adjustments specific to a particular reporting unit. The estimated fair value of a reporting unit is highly sensitive to changes in the discount rate and terminal value assumptions. Minor changes in these assumptions could impact significantly the fair value assigned to a reporting unit. Future potential changes in these assumptions may impact the estimated fair value of a reporting unit and cause the fair value of the reporting unit to be below its carrying value.
     When the estimated fair value of a reporting unit is below the carrying value, goodwill may be impaired, and the second step of the goodwill impairment evaluation is performed. The second step involves calculating the implied fair value of the reporting unit’s goodwill. The implied fair value of goodwill is determined in the same manner as it is determined in a business combination. The fair value of the reporting unit’s assets and liabilities, including previously unrecognized intangible assets, is individually determined. The excess fair value of the reporting unit over the fair value of the reporting unit’s net assets is the implied goodwill. Significant judgment and estimates are involved in estimating the fair value of the assets and liabilities of the reporting unit.
     The value of the implied goodwill is highly sensitive to the estimated fair value of the reporting unit’s net assets. The fair value of the reporting unit’s net assets is estimated using a variety of valuation techniques including the following:
    recent data observed in the market, including for similar assets,
 
    cash flow modeling based on projected cash flows and market discount rates, and
 
    estimated fair value of the underlying loan collateral.
     The estimated fair values reflect assumptions regarding how a market participant would value the net assets and includes appropriate credit, liquidity, and market risk premiums that are indicative of the current environment. If the implied fair value of the goodwill for the reporting unit exceeds the carrying value of the goodwill for the respective reporting unit, no goodwill impairment is recorded. Changes in the estimated fair value of the individual assets and liabilities may result in a different amount of implied goodwill, and the amount of goodwill impairment, if any. Future changes in the fair value of the reporting unit’s net assets may result in future goodwill impairment.
Impairment of Long-lived Assets
     Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When testing a long-lived asset for recoverability, it may be necessary to review estimated lives and adjust the depreciation period. Changes in circumstances and the estimates of future cash flows, as well as evaluating estimated lives of long-lived assets, are subjective and involve a significant amount of judgment. A change in the estimated life of a long-lived asset may substantially change depreciation and amortization expense in subsequent periods. For purposes of recognition and measurement of an impairment loss, BankAtlantic Bancorp is required to group long-lived assets at the lowest level for which identifiable cash flows are independent of other assets. These cash flows are based on projections from management reports which are based on subjective interdepartmental allocations. Real estate inventory and other long-lived real estate assets are evaluated for impairment on a project-by-project basis. Fair values are not available for many of our long-lived assets, and estimates must be based on available information, including prices of similar assets and present value valuation techniques using Level 3 unobservable inputs. Long-lived assets subject to the above impairment analysis included property and equipment, internal-use software, real estate inventory and real estate owned.

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     We generally utilize broker price opinions, third party offers to purchase, discounted cash flows or third party appraisals to assist us in determining the fair value of real estate inventory, operating lease contracts and real estate owned. The appraiser or brokers use professional judgment in determining the fair value of the properties and we may also adjust these values for changes in market conditions subsequent to the valuation date when current appraisals are not available. The assumptions used to calculate the fair values are generally Level 3 inputs and are highly subjective and extremely sensitive to changes in market conditions. The amount ultimately realized upon the sale of these properties or the termination of operating leases may be significantly different than the recorded amounts. The assumptions used are representative of assumptions that we believe market participants would use in fair valuing these assets or lease contracts, but different assumptions may result in significantly different results. BankAtlantic Bancorp also validates its assumptions by comparing completed transactions with its prior period fair value estimates and may check its assumptions against multiple valuation sources. The outstanding balance of real estate owned and real estate inventory was $46.5 million and $494.6 million, respectively, as of December 31, 2009. The minimum lease payments of operating lease contracts executed for BankAtlantic’s branch expansion were $23.4 million at December 31, 2009. There is no assurance that future events including declines in real estate values will not cause us to have additional impairments of long-lived assets or operating leases in the foreseeable future.
Accounting for Deferred Tax Asset Valuation Allowance
     The Company reviews the carrying amount of its deferred tax assets quarterly to determine if the establishment of a valuation allowance is necessary. If, based on the available evidence, it is more-likely-than-not that all or a portion of the Company’s deferred tax assets will not be realized, a deferred tax valuation allowance would be established. Consideration is given to all positive and negative evidence related to the realization of the deferred tax assets.
     In evaluating the available evidence, management considers historical financial performance, expectation of future earnings, length of statutory carry forward periods, experience with operating loss and tax credit carry forwards not expiring unused, tax planning strategies and timing of reversals of temporary differences. Significant judgment is required in assessing future earnings trends and the timing of reversals of temporary differences. The Company’s evaluation is based on current tax laws as well as management’s expectations of future performance based on its strategic initiatives. Changes in existing tax laws and future results differing from expectations may result in significant changes in the deferred tax assets valuation allowance.
     Based on our evaluation as of December 31, 2009 and 2008, a net deferred tax asset valuation allowance was established for the entire amount of the Company’s net deferred tax assets as the realization of these assets did not meet the more-likely-than-not criteria of the Accounting Standards Codification (“ASC”). During the fourth quarter of 2008, market conditions in the financial services industry significantly deteriorated with the bankruptcies and government bail-outs of large financial services entities. This market turmoil led to a tightening of credit, lack of consumer confidence, increased market volatility and widespread reduction in business activity. These economic conditions as well as the continued deterioration in local real estate markets adversely effected BankAtlantic’s profitable lines of business. As a consequence of the worsening economic conditions during the fourth quarter of 2008, it appeared more-likely-than-not that the Company would not realize its deferred tax assets resulting in a deferred tax asset valuation allowance for the entire amount of the Company’s net deferred tax assets. During the year ended December 31, 2009, the Company recognized significant losses and the economic conditions did not improve, resulting in the Company maintaining its deferred tax valuation allowance for the entire amount of its deferred tax asset. However, significant judgment is required in evaluating the positive and negative evidence for the establishment of the deferred tax asset valuation allowance, and if future events differ from expectations or if there are changes in the tax laws, a substantial portion or the entire deferred tax asset benefit may be realized in the future. The Company’s net deferred tax assets can be carried forward for 20 years and applied to offset future taxable income. In November 2009, net operating loss tax laws changed enabling the Company’s subsidiaries to recognize a benefit in the aggregate of approximately $66.3 million associated with the Company’s 2009 taxable loss.

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Recent Accounting Pronouncements Not Yet Adopted
     In June 2009, the FASB issued an amendment to the accounting guidance for transfers of financial assets, which became effective for us on January 1, 2010. This amendment eliminates the concept of a qualifying special-purpose entity (“QSPE”) and changes the requirements for derecognizing financial assets. It also requires the disclosure of more information about transfers of financial assets, including securitization transactions and transactions where companies have continuing exposure to the risks related to the transferred financial assets. See discussion of the amended guidance related to variable interest entities (“VIEs”) below, for the anticipated impact of the adoption of this accounting guidance for transfers of financial assets.
     In June 2009, the FASB issued an amendment to the accounting guidance for consolidation of VIEs, which became effective for Bluegreen on January 1, 2010. The initial adoption of this amendment in the first quarter of 2010 will require Bluegreen to consolidate its existing qualifying special purpose entities associated with past securitization transactions. As such, it is expected that Bluegreen will record a one-time non-cash after-tax adjustment to shareholders’ equity of approximately $35.0 million to $55.0 million, representing the cumulative effect of a change in accounting principle, in the first quarter of 2010. The cumulative effect will consist primarily of the reestablishment of notes receivable (net of reserves) associated with those securitization transactions, the elimination of residual interests that were initially recorded in connection with those transactions, the impact of recording debt obligations associated with third party interests held in the special purpose entities and related adjustments to deferred financing costs and inventory balances. The Company anticipates that its adoption of these standards will have the following impacts on its balance sheet: (1) assets will increase by approximately $380 million to $400 million primarily related to the consolidation of notes receivable; (2) liabilities will increase by approximately $390 million to $410 million, primarily representing the consolidation of debt obligations associated with third party interests; (3) equity will decrease by approximately $5 million to $12 million.
Impact of Inflation
     The financial statements and related financial data and notes presented herein have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation.
     Unlike most industrial companies, virtually all of the Company’s and its subsidiaries’ assets and liabilities are monetary in nature. As a result, interest rates have a more significant impact on our performance than the effects of general price levels. Although interest rates generally move in the same direction as inflation, the magnitude of such changes varies. Inflation could also have a long-term impact on us because any increase in the cost of land, materials and labor would result in a need to increase the sales prices of land which may not be possible. Furthermore, as it relates to Bluegreen, increases in Bluegreen’s construction and development costs would result in increases in the sales price of its VOIs. There is no assurance that Bluegreen will be able to increase or maintain the current level of its sales prices or that increased construction costs will not have a material adverse impact on Bluegreen’s gross margin. In addition, inflation is often accompanied by higher interest rates which could have a negative impact on consumer demand and the costs of financing activities. Rising interest rates as well as increased materials and labor costs may reduce margins.

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BFC Activities
 
BFC Activities
     “BFC Activities” consists primarily of (i) BFC operations, (ii) our investment in Benihana and (iii) Woodbridge other operations.
     BFC operations primarily consists of our and Woodbridge’s corporate overhead and general and administrative expenses, the financial results of a venture partnership that BFC controls and other equity investments, as well as income and expenses associated with shared service operations in the areas of human resources, risk management, investor relations, executive office administration and other services that BFC provides to BankAtlantic Bancorp, Woodbridge and Bluegreen. BFC operations also includes investments made by BFC/CCC, Inc. Woodbridge other operations consist of the operations of Pizza Fusion Holdings, LLC (“Pizza Fusion”) (which is a restaurant franchisor operating within the quick service and organic food industries), and the activities of Cypress Creek Capital Holdings, LLC (“Cypress Creek Capital”) and Snapper Creek Equity Management, LLC (“Snapper Creek”). Prior to November 16, 2009, when we acquired additional shares of Bluegreen’s common stock giving us a controlling interest in Bluegreen, Woodbridge other operations included an equity investment in Bluegreen. Woodbridge other operations also includes investments in other securities.
     The discussion that follows reflects the operations and related matters of BFC Activities (in thousands).
                                         
                            Change     Change  
    For the Years Ended December 31,     2009 vs.     2008 vs.  
    2009     2008     2007     2008     2007  
Revenues
                                       
Sale of real estate
  $                          
Other revenues
    1,296                   1,296        
 
                             
 
    1,296                   1,296        
 
                             
 
                                       
Cost and Expenses
                                       
Cost of sales of real estate
    7,749       59       11,047       7,690       (10,988 )
Interest expense, net
    6,511       7,641       903       (1,130 )     6,738  
Selling, general and administrative expenses
    30,388       36,886       45,840       (6,498 )     (8,954 )
Impairment of goodwill
    2,001                   2,001        
Other expenses
                2,363             (2,363 )
 
                             
 
    46,649       44,586       60,153       2,063       (15,567 )
Gain on bargain purchase of Bluegreen
    183,138                   183,138        
Gain on settlement of investment in Woodbridge’s subsidiary
    16,296                   16,296        
Equity in earnings from unconsolidated affiliates
    32,276       8,844       10,224       23,432       (1,380 )
Impairment of unconsolidated affiliates
    (31,181 )     (94,426 )           63,245       (94,426 )
Impairment of investments
    (2,396 )     (17,694 )           15,298       (17,694 )
Investment gains
    6,654       2,076       1,295       4,578       781  
Interest, dividend and other income
    5,775       8,963       14,688       (3,188 )     (5,725 )
 
                             
Income (loss) from continuing operations before income taxes
    165,209       (136,823 )     (33,946 )     302,032       (102,877 )
Less: Benefit for income taxes
    (34,986 )     (14,887 )     (53,965 )     (20,099 )     39,078  
 
                             
Income (loss) from continuing operations
    200,195       (121,936 )     20,019       322,131       (141,955 )
Extraordinary gain, net of income tax of $0 in 2008 and $1,509 in 2007
          9,145       2,403       (9,145 )     6,742  
 
                             
Net income (loss)
  $ 200,195       (112,791 )     22,422       312,986       (135,213 )
 
                             
     Other revenues for the year ended December 31, 2009 related to franchise revenues generated by Pizza Fusion totaling $1.3 million.
     Cost of sales of real estate for the year ended December 31, 2009 increased to $7.7 million as a result of a capitalized interest write-off in the amount of $7.7 million recorded in connection with the impairment charges of inventory of real estate recorded in Core and Carolina Oak. Cost of sales of real estate for the year ended December 31, 2008 was $59,000 and related to the expensing of interest previously capitalized as a result of sales at Core and Carolina Oak.

83


 

BFC Activities
 
     General and administrative expenses decreased $6.5 million to $30.4 million for the year ended December 31, 2009 compared to $36.9 million for 2008. The decrease was attributable to lower professional services as we incurred costs associated with certain of our securities investments in the year ended December 31, 2008 while these costs were not incurred in the year ended December 31, 2009, and lower severance charges related to the reductions in workforce associated with the bankruptcy filing of Levitt and Sons. In addition, we also had lower insurance costs, as Levitt and Sons’ related insurance costs were not incurred after June 30, 2008, and lower incentive expenses. These decreases were offset in part by incurred franchise expenses related to Pizza Fusion in the year ended December 31, 2009, compared to no franchise expenses in 2008 period as we acquired Pizza Fusion in September 2008.
     Interest expense consists of interest incurred less interest capitalized. Interest incurred totaled $7.4 million and $8.6 million for the years ended December 31, 2009 and 2008, respectively, while interest capitalized totaled $931,000 for the year ended December 31, 2009 and $927,000 for 2008. This resulted in interest expense of $6.5 million in the year ended December 31, 2009, compared to $7.6 million in 2008. The decrease in interest expense was mainly due to the repayment of an intersegment loan in June 2008, which resulted in lower interest expense in 2009, and lower interest rates in 2009 compared to 2008.
     During the year ended December 31, 2009, we experienced a write-off in goodwill related to our investment in Pizza Fusion in the amount of $2.0 million.
     Prior to the consolidation of Bluegreen into our consolidated financial statements on November 16, 2009, we accounted for our investment in Bluegreen under the equity method of accounting. Our interest in Bluegreen’s earnings during the period from January 1 through November 16, 2009 was $32.7 million (after the amortization of approximately $28.4 million related to the change in the basis as a result of the impairment charges on this investment during the quarters ended September 30, 2008, December 31, 2008 and March 31, 2009. For the year ended December 31, 2008, our interest in Bluegreen’s earnings was $9.0 million (after the amortization of approximately $9.2 million related to the change in the basis as a result of the impairment charge on this investment at September 30, 2008). We reviewed our investment in Bluegreen for impairment on a quarterly basis or as events or circumstances warranted for other-than-temporary declines in value. Based on the results of the evaluations of the investment in Bluegreen, other-than-temporary impairment charges of approximately $31.2 million and $94.4 million were recorded during the years ended December 31, 2009 and 2008, respectively. In the year ended December 31, 2007, no other-than-temporary charges related to the investment in Bluegreen were recorded.
     Investment gains were approximately $6.7 million for the year ended December 31, 2009 compared to $2.1 million in 2008. This increase was primarily due to a gain related to the sale of our shares in Office Depot during 2009. This was offset by a realized gain on the sale of publicly traded equity securities in 2008 of approximately $796,000 by venture partnership that BFC controls.
     Interest income was approximately $1.6 million for the year ended December 31, 2009 compared to $3.8 million in 2008. This decrease was primarily due to lower cash balances and lower interest rates in 2009 compared to 2008.
     Income tax benefit includes the amount of the expected refund from the Department of the Treasury of approximately $34.6 million. In November 2009, the Workers, Homeownership, and Business Assistance Act of 2009 (the “Act”) was enacted. The Act includes a provision that allows most businesses to elect to increase the net operating loss (“NOLs”) carryback period from two years under current law to as much as five years for NOLs generated in either 2008 or 2009 (but not both). BFC anticipates that this election will benefit the Company by allowing it to carryback Woodbridge’s NOLs that were generated in 2008 and obtain refunds of taxes paid in the carryback years.

84


 

BFC Activities
 
For the Year Ended December 31, 2008 Compared to the Year Ended December 31, 2007
     Cost of sales of real estate decreased to $59,000 for the year ended December 31, 2008 from $11.0 million in the same 2007 period. Cost of sales of real estate was comprised of the expensing of interest previously capitalized in 2008 and 2007 and also included in 2007 capitalized interest impairment charges related to the cessation of development on certain Levitt and Sons’ projects in the third quarter of 2007.
     General and administrative expenses decreased $8.9 million to $36.9 million for the year ended December 31, 2008 compared to $45.8 million for the same 2007 period. The decrease was attributable to decreased compensation and benefits expenses, decreased office related expenses and decreased severance charges related to the reductions in workforce associated with the bankruptcy filing of Levitt and Sons in 2007. The decrease in compensation, benefits and office related expenses was attributable to lower headcount. These decreases were offset in part by increases in professional fees associated with our securities investments and the bankruptcy filing of Levitt and Sons, and increased insurance costs due to the absorption of certain of Levitt and Sons’ insurance costs.
     Interest incurred totaled $8.6 million and $10.2 million for the years ended December 31, 2008 and 2007, respectively, while interest capitalized totaled $927,000 for the year ended December 31, 2008 and $9.3 million for the same 2007 period. This resulted in interest expense of $7.6 million in the year ended December 31, 2008, compared to $903,000 in the same 2007 period. The increase in interest expense was due to the completion of certain phases of development associated with our real estate inventory late in 2007, which resulted in a decreased amount of assets which qualified for interest capitalization and, therefore, the expensing of the related interest was only recorded in the fourth quarter of 2007 compared to the full year of 2008. The increase in interest incurred was attributable to higher average debt balances for the year ended December 31, 2008 compared to 2007, offset in part by lower average interest rates.
     We did not incur other expenses in the year ended December 31, 2008. Other expenses for the year ended December 31, 2007 were $2.4 million and consisted of a surety bonds accrual and a write-off of leasehold improvements. In 2007, we recorded $1.8 million in surety bonds accrual related to certain bonds where management considered it probable that reimbursement of the surety under the applicable indemnity agreement would be required. In addition to the surety bond accrual, we also recorded a write-off of leasehold improvements as we vacated certain leased space as part of our workforce reductions and the Levitt and Sons bankruptcy. Leasehold improvements in the amount of $564,000 related to this vacated space will not be recovered and were written off in the year ended December 31, 2007.
     Bluegreen reported a net loss for the year ended December 31, 2008 of $516,000, compared to net income of $31.9 million in 2007. For the year ended December 31, 2008, our interest in Bluegreen’s earnings was $9.0 million (after the amortization of approximately $9.2 million related to the change in the basis as a result of the impairment charge on this investment at September 30, 2008), compared to $10.3 million in 2007. We reviewed our investment in Bluegreen for impairment on a quarterly basis or as events or circumstances warranted for other-than-temporary declines in value. Based on the evaluations performed, we recorded an other-than-temporary impairment charge of $53.6 million at September 30, 2008 and an additional other-than-temporary impairment charge of $40.8 million at December 31, 2008. See Note 14 of the “Notes to Consolidated Financial Statements” included in Item 8 for further details of the impairment analysis of our investment in Bluegreen.

85


 

BFC Activities
 
2008 and 2007 Step acquisitions — Purchase Accounting
     The acquisitions in 2008 and 2007 of additional shares of BankAtlantic Bancorp’s and Woodbridge’s Class A Common Stock, respectively, were accounted for as step acquisitions under the purchase method of accounting. Accordingly, the assets and liabilities acquired have been revalued to reflect market values at the respective dates of acquisition. For further information see Note 4 of the “Notes to Consolidated Financial Statements”. The discounts and premiums arising as a result of such revaluations are generally being accreted or amortized, net of tax, over the remaining life of the assets and liabilities. The net impact of such accretion, amortization and other effects of purchase accounting increased our consolidated net loss during 2009 by approximately $5.9 million, comprised primarily of an approximately $8.9 million purchase accounting associated with Core’s real estate impairment, partially offset by the effect of purchase accounting associated with property and equipment of approximately $1.2 million, loans receivable of approximately $2.2 million and goodwill of approximately $583,000. In 2008, the net impact of purchase accounting decreased our consolidated net loss by approximately $8.4 million, of which approximately $4.7 million and $1.7 million was due to effects of purchase accounting associated with the investment in Bluegreen and goodwill, respectively. There were no purchase accounting adjustments in 2007.
BFC Activities- Liquidity and Capital Resources
     As of December 31, 2009 and 2008, we had cash, cash equivalents and a short term investment in certificates of deposit totaling approximately $45.1 million and $117.2 million, respectively. During the third quarter of 2009, funds were used to purchase 14.9 million shares of BankAtlantic Bancorp’s Class A Common Stock through participation in BankAtlantic Bancorp’s rights offering for an aggregate purchase price of $29.9 million. The remaining decrease in cash and equivalents during the year ended December 31, 2009 primarily related to the purchase of 7.4 million shares of the common stock of Bluegreen for an aggregate purchase price of approximately $23 million on November 16, 2009 and general and administrative expenses.
     BFC’s acquisition of 14.9 million additional shares of BankAtlantic Bancorp’s Class A Common Stock increased BFC’s ownership interest in BankAtlantic Bancorp by approximately 7% to 37% and increased BFC’s voting interest in BankAtlantic Bancorp by approximately 7% to 66%. BankAtlantic Bancorp is currently prohibited from paying dividends on its common stock, and BFC does not expect to receive cash dividends from BankAtlantic Bancorp for the foreseeable future.
     On November 16, 2009, we purchased approximately 7.4 million additional shares of Bluegreen’s common stock, which increased our ownership in Bluegreen’s common stock from 9.5 million shares, or 29% of Bluegreen outstanding common stock, to 16.9 million shares, or 52%. As a result of the purchase, we have a controlling interest in Bluegreen and, accordingly, since November 16, 2009 have consolidated Bluegreen’s results into our financial statements.
     BFC’s principal source of liquidity is our available cash, short-term investments, dividends or distributions from Woodbridge, dividends from Benihana and other investments, as well as amounts paid by affiliates relating to our shared service operations from our affiliated companies. We may use these funds to make additional investments in the companies within our consolidated group, invest in equity securities and other investments or to otherwise fund operations.
     We believe that our current financial condition and credit relationships, together with anticipated cash flows from operations and other sources of funds, which may include proceeds from the disposition of certain properties or investments, will provide for anticipated near-term liquidity needs. We expect to meet our long-term liquidity requirements through the foregoing, as well as, if necessary, long-term secured and unsecured indebtedness, future issuances of equity and/or debt securities or the sale of assets, as determined to be appropriate by the Company’s board of directors and management.

86


 

BFC Activities
 
     Woodbridge has been declared in default of its loan in the amount of $37.2 million that is collateralized by the Carolina Oak property. Subsequently, the lender was taken over by the FDIC and accordingly, the FDIC now holds the loan. While there may have been an issue with respect to compliance with certain covenants in the loan agreements, we do not believe that an event of default had occurred as was alleged. Woodbridge is negotiating with representatives of the FDIC in an effort to bring about a satisfactory conclusion with regard to that debt. However, the outcome of the negotiation is uncertain.
     During 2008, Woodbridge entered into a settlement agreement, as amended (the “Settlement Agreement”), with the Debtors and the Joint Committee of Unsecured Creditors (the “Joint Committee”) appointed in the Chapter 11 Cases. Pursuant to the Settlement Agreement, among other things, (i) Woodbridge agreed to pay $8 million to the Debtors’ bankruptcy estates, establish a $4.5 million release fund to be disbursed to third party creditors in exchange for a third party release and injunction, pay an additional $300,000 to a deposit holders fund and waive and release substantially all of the claims it had against the Debtors, including its administrative expense claims through July 2008, and (ii) the Debtors (joined by the Joint Committee) agreed to waive and release any claims they had against Woodbridge and its affiliates. The Settlement Agreement also provided that if, within one year after the Bankruptcy Court’s confirmation of the Settlement Agreement, Section 172 of the Internal Revenue Code was amended to permit a carry back of tax losses from calendar years 2007 or 2008 to one or more years preceding calendar year 2005, then Woodbridge would share a portion of any resulting tax refund with the Debtors and the Joint Committee based on an agreed upon formula. The Settlement Agreement was subject to a number of conditions, including the approval of the Bankruptcy Court. On February 20, 2009, the Bankruptcy Court entered an order confirming a plan of liquidation jointly proposed by Levitt and Sons and the Joint Committee. That order also approved the settlement pursuant to the Settlement Agreement. No appeal or rehearing of the Bankruptcy Court’s order was timely filed by any party, and the settlement was consummated on March 3, 2009, at which time payment was made in accordance with the terms and conditions of the Settlement Agreement. Under cost method accounting, the cost of settlement and the related $52.9 million liability (less $500,000 which was determined as the settlement holdback and remained as an accrual pursuant to the Settlement Agreement) was recognized into income in year ended December 31, 2009, resulting in a $40.4 million gain on settlement of investment in subsidiary. As discussed above we will be allowed to increase our NOL carryback period to as much as five years for NOLs generated in 2008 or 2009 and obtain refunds of taxes paid in the newly included carryback years of approximately $34.6 million. As described above, under the terms of the Settlement Agreement, a portion of the refund, upon receipt, will be payable to the Levitt and Sons estate. Accordingly, in the fourth quarter of 2009, we accrued approximately $10.7 million in connection with the portion of the tax refund pursuant to the Settlement Agreement. As a result, the gain on settlement of investment in subsidiary for the year ended December 31, 2009 was $29.7 million.
     On September 21, 2009, our Board of Directors approved a share repurchase program which authorizes the repurchase of up to 20,000,000 shares of Class A and Class B Common Stock at an aggregate cost of no more than $10 million. The share repurchase program replaced our $10 million repurchase program that our Board of Directors approved in October 2006 which placed a limitation on the number of shares which could be repurchased under the program at 1,750,000 shares of Class A Common Stock. In 2008, we repurchased 100,000 shares of Class A Common Stock at an aggregate cost of $54,000 under the prior program. The current program, like the prior program, authorizes management, at its discretion, to repurchase shares from time to time subject to market conditions and other factors. No shares were repurchased during the year ended December 31, 2009.
     As discussed above, on September 21, 2009, BFC and Woodbridge consummated their previously announced merger pursuant to which Woodbridge merged with and into a wholly-owned subsidiary of BFC. In connection with the merger, Dissenting Holders who collectively held approximately 4.2 million shares of Woodbridge’s Class A Common Stock exercised their appraisal rights and are entitled to receive an amount equal to the fair value of their shares calculated in accordance with Florida law. Since these Dissenting Holders have not withdrawn their demands, the Company canceled and retired the 14,524,557 shares of the Company’s Class A Common which the Dissenting Holders would have been entitled to receive in exchange for their shares of Woodbridge’s Class A Common Stock. During the fourth quarter of 2009, the Company recorded a liability of approximately $4.6 million, which represented, in the aggregate, Woodbridge’s offer of $1.10 per share to the Dissenting Holders with a corresponding reduction to the Company’s additional paid-in capital. Each Dissenting Holder rejected Woodbridge’s offer of $1.10 per share. The appraisal rights litigation is ongoing and the results are uncertain, and there is no assurance that the actual payment that we may be required to make will not exceed the amount accrued.

87


 

BFC Activities
 
     On June 21, 2004, the Company sold 15,000 of its 5% Preferred Stock to an investor group in a private offering. The Company’s 5% Preferred Stock has a stated value of $1,000 per share. The shares of 5% Preferred Stock may be redeemed at the option of the Company, from time to time, at redemption prices ranging from $1,025 per share for the year 2010 to $1,000 per share for the year 2015 and thereafter. The 5% Preferred Stock liquidation preference is equal to its stated value of $1,000 per share plus any accumulated and unpaid dividends or an amount equal to the applicable redemption price in a voluntary liquidation or winding up of the Company. Holders of the 5% Preferred Stock have no voting rights, except as provided by Florida law, and are entitled to receive, when and as declared by the Company’s Board of Directors, cumulative quarterly cash dividends on each such share at a rate per annum of 5% of the stated value from the date of issuance. Since June 2004, the Company has paid quarterly dividends on the 5% Preferred Stock of $187,500. On December 17, 2008, the Company amended (the “Amendment”) certain of the previously designated relative rights, preferences and limitations of the Company’s 5% Preferred Stock. The Amendment eliminated the right of the holders of the 5% Preferred Stock to convert their shares of Preferred Stock into shares of the Company’s Class A Common Stock. The Amendment also requires the Company to redeem shares of the 5% Preferred Stock with the net proceeds it receives in the event (i) the Company sells any of its shares of Benihana’s Convertible Preferred Stock, (ii) the Company sells any shares of Benihana’s Common Stock received upon conversion of Benihana’s Convertible Preferred Stock or (iii) Benihana redeems any shares of its Convertible Preferred Stock owned by the Company. Additionally, in the event the Company defaults on its obligation to make dividend payments on its 5% Preferred Stock, the Amendment entitles the holders of the 5% Preferred Stock, in place of the Company, to receive directly from Benihana certain payments on the shares of Benihana’s Convertible Preferred Stock owned by the Company or on the shares of Benihana’s Common Stock received by the Company upon conversion of Benihana’s Convertible Preferred Stock.
     The Company owns 800,000 shares of Benihana’s Convertible Preferred Stock, which it purchased for $25.00 per share. The Convertible Preferred Stock is convertible into Benihana’s common stock. Based on the number of currently outstanding shares of Benihana’s capital stock, the Convertible Preferred Stock, if converted, would represent an approximate 19% voting interest and an approximate 9% economic interest in Benihana’s capital stock. The Company has the right to receive cumulative quarterly dividends at an annual rate equal to 5% or $1.25 per share, payable on the last day of each calendar quarter. It is anticipated that the Company will continue to receive approximately $250,000 per quarter in dividends on Benihana’s Convertible Preferred Stock. The Convertible Preferred Stock is subject to mandatory redemption of $20 million plus accumulated dividends on July 2, 2014 unless we elect to extend the mandatory redemption date to a date no later than July 2, 2024.
     On March 31, 2008, the membership interests of two of the Company’s indirect subsidiaries which owned two South Florida shopping centers were sold to an unaffiliated third party. The Company received proceeds of approximately $1.3 million in connection with the sale and BFC was relieved of its guarantee related to the loans collateralized by the shopping centers. BFC believes that any possible remaining obligations are both remote and immaterial.
     At June 30, 2009, a wholly-owned subsidiary of BFC/CCC, Inc. (“BFC/CCC”) had a 10% interest in a limited partnership as a non-managing general partner. The partnership owns an office building located in Boca Raton, Florida. In connection with the purchase of the office building in March 2006, BFC/CCC guaranteed repayment of a portion of the non-recourse loan on the property on a joint and several basis with the managing general partner. BFC/CCC’s maximum exposure under this guarantee agreement is $2.0 million (which is shared on a joint and several basis with the managing general partner), representing approximately 8.5% of the current indebtedness of the property. In July 2009, BFC/CCC’s wholly-owned subsidiary withdrew as partner of the limited partnership and transferred its 10% interest to another unaffiliated partner. In return, the partner to whom this interest was assigned agreed to use its reasonable best efforts to obtain the release of BFC/CCC from the guarantee. If the partner is unable to secure such a release, that partner has agreed to indemnify BFC/CCC’s wholly-owned subsidiary for any losses that may arise under the guarantee after the date of the assignment. There are no carrying amounts on our financial statements at December 31, 2009 for this joint venture.
     A wholly-owned subsidiary of BFC/CCC has a 10% interest in a limited liability company that owns two commercial properties in Hillsborough County, Florida. At December 31, 2009 and 2008, the carrying amount of this investment was approximately $690,000 and $743,000, respectively, which is included in investments in unconsolidated affiliates in the Company’s consolidated statements of financial condition. In connection with the purchase of the commercial properties in November 2006, BFC and the unaffiliated member each guaranteed the payment of up to a maximum of $5.0 million for certain environmental indemnities and specific obligations that are not related to the financial performance of the assets. BFC and the unaffiliated member also entered into a cross indemnification agreement which limits BFC’s obligations under the guarantee to acts of BFC and its affiliates.

88


 

BFC Activities
 
     A wholly-owned subsidiary of BFC/CCC has a 50% limited partner interest in a limited partnership that has a 10% interest in a limited liability company that owns an office building in Tampa, Florida. At December 31, 2009 and 2008, the carrying amount of this investment was approximately $319,000 and $485,000, respectively, which is included in investments in unconsolidated affiliates in the Company’s consolidated statements of financial condition. In connection with the purchase of the office building by the limited liability company in June 2007, BFC guaranteed the payment of certain environmental indemnities and specific obligations that are not related to the financial performance of the asset up to a maximum of $15.0 million, or $25.0 million in the event of any petition or involuntary proceedings under the U.S. Bankruptcy Code or similar state insolvency laws or in the event of any transfers of interests not in accordance with the loan documents. BFC and the unaffiliated members also entered into a cross indemnification agreement which limits BFC’s obligations under the guarantee to acts of BFC and its affiliates.
     No amounts are recorded in the Company’s financial statements for the obligations associated with the above guarantees (including the transaction associated with the transfer of BFC/CCC’s wholly-owned subsidiary’s 10% ownership interest) based on the potential indemnification by unaffiliated members and the limit of the specific obligations to non-financial matters.

89


 

Real Estate
 
Real Estate Operations Segment
     The Real Estate Operations segment includes the subsidiaries through which Woodbridge historically conducted its real estate business activities. These activities are concentrated in Florida and South Carolina and have included the development and sale of land, the construction and sale of single family homes and townhomes and the leasing of commercial properties and office space, and include the operations of Core, the operations of Carolina Oak, which engaged in homebuilding activities in South Carolina prior to the suspension of those activities in the fourth quarter of 2008, and Cypress Creek Holdings, which engages in leasing activities.
     Levitt and Sons was also included in the Real Estate Operations segment prior to November 9, 2007 at which time it filed a voluntary bankruptcy petition and was deconsolidated from our audited consolidated financial statements. Levitt Commercial was also included in this segment until it ceased development activities after it sold all of its remaining units in 2007.
Executive Overview
     Woodbridge’s operations historically were concentrated in the real estate industry which is cyclical in nature. In 2009, the real estate markets continued to experience a significant downturn. Demand for residential and commercial inventory in Florida and South Carolina remained weak and land sales continued to decline. Sales of real estate at Core for the years ended December 31, 2009, 2008 and 2007were $6.3 million, $11.3 million and $16.6 million, respectively. The decrease in land sales in 2009 and continued cash flow deficits contributed to, among other things, the deterioration of Core’s liquidity. As a result, Core severely limited its development expenditures in Tradition, Florida and completely discontinued development activity in Tradition Hilton Head. The value of Core’s assets were significantly impaired, resulting in impairment charges relating to those assets of $78.0 million, which includes $13.6 million of impairment charges related to assets held for sale during 2009. Core is currently in default under the terms of all of its loans which have an aggregate outstanding principal amount of $209.9 million, including $71.6 million of loans attributable to assets held for sale. Core continues to pursue all options with its lenders, including offering deeds in lieu and other similar transactions wherein Core would relinquish title to substantially all of its assets in return for a release. As of February 5, 2010, a significant portion of the land in Tradition Hilton Head had been placed under the control of a court appointed receiver. Further, Core has accepted an offer to sell its commercial leasing projects, which has been approved by the lender with substantially all of the proceeds going to satisfy its obligations to the lender. Negotiations continue on all of Core’s obligations, however, there is no assurance that Core will be successful in restructuring any or all of its outstanding debt.
     The development activities at Carolina Oak, which is within Tradition Hilton Head, were suspended in the fourth quarter of 2008 as a result of, among other things, a further deterioration in consumer confidence, an overall softening of demand for new homes, a decline in the overall economy, increasing unemployment, a deterioration in the credit markets, and the direct and indirect impact of the turmoil in the mortgage loan market. In 2009, the housing industry continued to face significant challenges and Woodbridge made the decision to cease all activities at Carolina Oak. As previously described in this document, the $37.2 million loan that is collateralized by the Carolina Oak property was declared to be in default by the lender. Subsequently, the lender was taken over by the FDIC and accordingly, the FDIC now holds the loan.. Woodbridge is negotiating with representatives of the FDIC in an effort to bring about a satisfactory resolution with regard to that debt; however, the outcome of the negotiation is uncertain.
     See Note 22 of the “Notes to Consolidated Financial Statements” included in Item 8 of this report for a detailed description of Core’s and Woodbridge’s indebtedness.
     In conjunction with the reduced activity at Core and in light of current market conditions, management made the decision to further reduce Core’s headcount by 41 employees in 2009 and recorded severance charges of approximately $1.3 million in the fourth quarter of 2009.
     On November 16, 2009, we purchased approximately 7.4 million additional shares of Bluegreen’s common stock for an aggregate purchase price of approximately $23 million, which increased our ownership in Bluegreen from 9.5 million shares, or 29%, to 16.9 million shares or 52%. As a result of the purchase, we have a controlling interest in Bluegreen and, accordingly, have consolidated Bluegreen’s results since November 16, 2009 into our financial statements.

90


 

Real Estate
 
Financial and Non-Financial Metrics
     Performance and prospects are evaluated using a variety of financial and non-financial metrics. The key financial metrics utilized to evaluate historical operating performance include revenues from sales of real estate, margin (which we measure as revenues from sales of real estate minus cost of sales of real estate), margin percentage (which we measure as margin divided by revenues from sales of real estate), net (loss) income and return on equity. We also continue to evaluate and monitor selling, general and administrative expenses as a percentage of revenue, our ratios of debt to total capitalization and our cash requirements. Non-financial metrics used to evaluate historical performance include saleable acres in Core and the number of acres in our backlog. In evaluating future prospects, management considers financial results as well as non-financial information such as acres in backlog (measured as land subject to an executed sales contract). Cash requirements are also considered when evaluating future prospects, as are general economic factors and interest rate trends. These metrics are not an exhaustive list, and management may from time to time utilize different financial and non-financial information or may not use all of the metrics mentioned above.
Real Estate Operations
                                         
    Year Ended December 31,     2009     2008  
                            vs. 2008     vs. 2007  
    2009     2008     2007     Change     Change  
    (Dollars in thousands)  
Revenues
                                       
Sales of real estate
  $ 6,605       13,752       410,849       (7,147 )     (397,097 )
Other revenues
    2,312       3,033       6,088       (721 )     (3,055 )
 
                             
Total revenues
    8,917       16,785       416,937       (7,868 )     (400,152 )
 
                             
 
                                       
Costs and expenses
                                       
Cost of sales of real estate
    82,105       22,724       565,759       59,381       (543,035 )
Selling, general and administrative expenses
    16,343       20,648       85,758       (4,305 )     (65,110 )
Interest expense
    5,822       2,075       10,208       3,747       (8,133 )
Other expenses
    5,433             1,566       5,433       (1,566 )
 
                             
Total costs and expenses
    109,703       45,447       663,291       64,256       (617,844 )
 
                             
 
                                       
Interest income
    141       1,938       4,520       (1,797 )     (2,582 )
Other income
    385       1,403       6,971       (1,018 )     (5,568 )
 
                             
Loss from continuing operations before income taxes
    (100,260 )     (25,321 )     (234,863 )     (74,939 )     209,542  
Provision for income taxes
                (5,377 )           5,377  
 
                             
Loss income from continuing operations
    (100,260 )     (25,321 )     (240,240 )     (74,939 )     214,919  
 
                                       
Discontinued operations:
                                       
(Loss) income from discontinued operations, net of tax
    (15,632 )     2,783       1,765       (18,415 )     1,018  
 
                             
Net loss
  $ (115,892 )     (22,538 )     (238,475 )     (93,354 )     215,937  
 
                             
     As of November 9, 2007, the accounts of Levitt and Sons were deconsolidated from our consolidated statements of financial condition and statements of operations. Therefore, the financial data in the preceding table related to Levitt and Sons reflected operations through November 9, 2007, and no results of operations or financial metrics related to Levitt and Sons were included for the years ended December 31, 2009 or 2008.

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Real Estate
 
For the Year Ended December 31, 2009 Compared to the Year Ended December 31, 2008
     Revenues from sales of real estate decreased to $6.6 million for the year ended December 31, 2009 from $13.8 million for 2008. Revenues from sales of real estate for the years ended December 31, 2009 and 2008 were comprised of land and home sales, recognition of deferred revenue and look back revenue. During the year ended December 31, 2009, Core sold approximately 13 acres, generating revenues of approximately $1.1 million, compared to the sale of approximately 35 acres, which generated revenues of approximately $9.1 million, net of deferred revenue, in 2008. Core recognized deferred revenue on previously sold land of approximately $5.3 million for the year ended December 31, 2009, compared to approximately $1.9 million in 2008. Look back revenues for the years ended December 31, 2009 and 2008 were approximately $32,000 and $145,000, respectively. We also earned $320,000 in revenues in 2009 from sales of real estate as a result of 1 unit sold in Carolina Oak, compared to revenues from sales of real estate of $2.5 million in 2008 as a result of 8 units sold in Carolina Oak.
     Other revenues decreased to $2.3 million for the year ended December 31, 2009 compared to $3.0 million for 2008. The decrease in other revenues was primarily due to a decrease in marketing fees collected at Core Communities and fewer impact fees earned in 2009 compared to 2008.
     Cost of sales of real estate increased to $82.1 million for the year ended December 31, 2009 from $22.7 million for 2008 due to impairment charges of $80.3 million associated with inventory of real estate recorded in 2009 compared to $13.7 million in impairment charges of inventory of real estate in 2008. Costs of sales of real estate before impairment charges for the years ended December 31, 2009 and 2008 were $1.8 million and $9.0 million, respectively. The decrease in cost of sales of real estate excluding impairment charges was due to a decrease in sales of real estate at Core and Carolina Oak in 2009 compared to 2008.
     Selling, general and administrative expenses decreased to $16.3 million for the year ended December 31, 2009 from $20.6 million for 2008. The decrease was a result of, among other things, lower sales and marketing expenses as a result of a reduced marketing budget, lower developer expenses related to property owner associations in Tradition, Florida, lower compensation and benefits expense, and lower office related expenses. These decreases were partially offset by an increase in severance charges as a result of reductions in force at Core in 2009 and an increase in property tax expense.
     Interest incurred totaled $7.8 million for the year ended December 31, 2009 and $11.0 million for 2008. Interest capitalized totaled $2.0 million for the year ended December 31, 2009 and $8.9 million for 2008. Net interest expense increased in the year ended December 31, 2009 compared to the year ended December 31, 2008 primarily as a result of the Company’s decision to stop the capitalization of interest in light of the significantly reduced development activities in Florida and the ceasing of development activities in South Carolina. The increase was partially offset by lower interest rates during the year ended December 31, 2009 compared to 2008. Historically, the capitalized interest allocated to inventory is charged to cost of sales. Cost of sales of real estate for the years ended December 31, 2009 and 2008 included previously capitalized interest of approximately $64,000 and $268,000, respectively.
     Other expense for the year ended December 31, 2009 related to $5.4 million of impairment charges recorded to reduce the carrying value of Core and Carolina Oak’s property and equipment to their respective fair value.
     Interest income decreased to $141,000 during year ended December 31, 2009 from $1.9 million during 2008. This decrease was mainly due to the repayment of an intersegment loan in June 2008, of which the related interest was eliminated in consolidation, lower interest rates as well as a decrease in cash balances for the year ended December 31, 2009 compared to 2008.
     Other income decreased to $385,000 during the year ended December 31, 2009 from $1.4 million during 2008. This decrease was mainly due to less forfeited deposits in 2009 compared to 2008.

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Real Estate
 
     Income from discontinued operations, which relates to the income generated by Core’s Projects, decreased to a loss of $15.6 million in the year ended December 31, 2009 from income of $2.8 million in 2008. The decrease was mainly due to impairment charges in the amount of $13.6 million recorded in the year ended December 31, 2009 compared to no impairment charges recorded in 2008. In addition, three ground lease parcels comprised of approximately 5 acres were sold in 2008 and were accounted for as discontinued operations and resulted in a $2.5 million gain on sale of real estate assets for the year ended December 31, 2008, compared to no comparable sales in discontinued operations in 2009.
For the Year Ended December 31, 2008 Compared to the Year Ended December 31, 2007
     Revenues from sales of real estate decreased to $13.8 million for the year ended December 31, 2008 from $410.8 million for the year ended December 31, 2007. This decrease was primarily attributable to the deconsolidation of Levitt and Sons at November 9, 2007 as well as a decrease in sales of real estate at Core and Levitt Commercial. Levitt and Sons’ revenues from sales of real estate amounted to $387.7 million in 2007. Revenues from sales of real estate for the year ended December 31, 2008 at Core decreased to $11.3 million, from $16.6 million in 2007 reflecting the sale of approximately 35 acres in 2008 compared to 40 acres in 2007. For the year ended December 31, 2008, we earned revenues from sales of real estate at Carolina Oak of $2.5 million reflecting the delivery of 8 units, while revenues from sales of real estate at Levitt Commercial for the year ended December 31, 2007 were $6.6 million reflecting the delivery of 17 units in 2007. Levitt Commercial completed the sale of all remaining flex warehouse units in inventory in 2007 and ceased development activities thereafter.
     Other revenues decreased $3.1 million to $3.0 million for the year ended December 31, 2008, compared to $6.1 million during the year ended December 31, 2007. The decrease was primarily due to decreased title and mortgage operations revenues associated with Levitt and Sons as it was not included in the consolidated results of operations for the year ended December 31, 2008. In addition, there was decreased marketing income associated with Tradition, Florida.
     Cost of sales of real estate increased to $22.7 million during the year ended December 31, 2008, as compared to $13.2 million (excluding cost of sales, which included impairment provisions, associated with Levitt and Sons) for the year ended December 31, 2007 primarily as a result of impairment charges related to Carolina Oak’s inventory of real estate recorded in 2008 compared to no impairment charges recorded at Carolina Oak in 2007. The increase was offset in part by a decrease in sales of real estate at Core and Levitt Commercial. Cost of sales of real estate at Core decreased as we sold approximately 35 acres in the year ended December 31, 2008, compared to approximately 40 acres in 2007. We delivered 8 units at Carolina Oak in the year ended December 31, 2008, compared to the delivery of 17 units at Levitt Commercial in 2007.
     Selling, general and administrative expenses decreased $65.1 million to $20.6 million during the year ended December 31, 2008 compared to $85.8 million during the year ended December 31, 2007. This decrease was primarily related to the deconsolidation of Levitt and Sons at November 9, 2007. Selling, general and administrative expenses attributable to Levitt and Sons in the year ended December 31, 2007 were $66.6 million. Selling, general and administrative expenses, excluding those attributable to Levitt and Sons, increased slightly in 2008 compared to 2007 totaling $20.6 million in the year ended December 31, 2008, and $19.2 million in 2007. We incurred higher property tax expense due to less acreage in active development and higher expenses related to the support of community and commercial associations in our master-planned communities at Core as well as higher other administrative expenses associated with marketing activities in South Carolina in 2008 compared to 2007. In addition, insurance costs were higher due to the absorption of certain of Levitt and Sons’ insurance costs. The above increases were offset by lower office related expenses, decreased severance charges and decreased employee compensation, benefits and incentives expense reflecting a lower associate headcount in the year ended December 31, 2008 compared to 2007 as a result of staff reductions.
     Interest expense consists of interest incurred minus interest capitalized. Interest incurred for the years ended December 31, 2008 and 2007 totaled $11.0 million and $44.1 million, respectively, while interest capitalized totaled $8.9 million for the year ended December 31, 2008 compared to $33.9 million in 2007. Interest expense for the year ended December 31, 2008 was $2.1 million compared to $10.2 million in 2007. The decrease in interest expense was primarily the result of interest expense related to intersegment loans recorded in the year ended December 31, 2007, which was eliminated in consolidation, whereas no comparable interest expense related to intersegment loans existed in 2008. This decrease in interest expense was partly offset by the completion of certain phases of development associated with our real estate inventory late in 2007, which resulted in a decreased amount of assets which qualified for interest capitalization and, therefore, the expensing of the related interest was only recorded in the fourth quarter of 2007 compared to the full year of 2008. Interest incurred was lower mainly due to decreases in the average interest rates on our debt and lower outstanding balances of notes and mortgage notes payable primarily due to the deconsolidation of Levitt and Sons at November 9, 2007. At the time of land or home sales, the capitalized interest allocated to inventory is charged to cost of sales. Cost of sales of real estate for the years ended December 31, 2008 and 2007 included previously capitalized interest of approximately $268,000 and $16.1 million, respectively.

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Real Estate
 
     We did not incur other expenses in the year ended December 31, 2008. Other expenses of $1.6 million for the year ended December 31, 2007 mostly related to title and mortgage expenses in Levitt and Sons for closing costs and title insurance costs for closings processed internally.
     Interest income decreased to $1.9 million in the year ended December 31, 2008, from $4.5 million in 2007. This decrease was mainly related to lower intersegment interest income, which was eliminated in consolidation, related to an intersegment loan which was repaid in 2008 resulting in less intersegment interest income recorded in 2008 compared to the full year of 2007.
     Other income decreased to $1.4 million in the year ended December 31, 2008, from $7.0 million in 2007. This decrease was mainly related to a $5.8 million decrease in forfeited deposits in 2008 due to the deconsolidation of Levitt and Sons at November 9, 2007. This decrease was partly offset by higher forfeited deposits at Core.
     Income from discontinued operations, which relates to the income generated by Core’s Projects, increased to $2.8 million in the year ended December 31, 2008 from $1.8 million in the same 2007 period. The increase was mainly due to the sale of three ground lease parcels comprised of approximately 5 acres which resulted in a $2.5 million gain on sale of real estate assets accounted for as discontinued operations and increased commercial lease activity as a result of the opening of the Landing at Tradition retail power center in late 2007. These increases were partly offset by an increase in selling, general and administrative expenses in 2008 compared to 2007 mainly as a result of a depreciation recapture recorded in the fourth quarter of 2008.
     The following table shows Core’s operational data for the years ended December 31, 2009, 2008 and 2007:
                                         
                 
    Twelve Months            
    Ended December 31,     2009 vs.     2008 vs.  
    2009     2008     2007     2008     2007  
Acres sold (a)
    28       40       40       12        
Margin percentage (b) (c)
    N/A       41.1 %     55.0 %     N/A       (13.9 )%
Unsold saleable acres
    6,611       6,639       6,679       (28 )     (40 )
Acres subject to sales contracts — third parties (d)
    8       10       259       (2 )     (249 )
Aggregate sales price of acres subject to sales contracts to third parties (in thousands) (d)
  $       1,050       77,888       (1,050 )     (76,838 )
 
(a)   Includes 15 acres donated to the City of Port St. Lucie in the fourth quarter of 2009.
 
(b)   Includes revenues from lot sales, look back provisions and recognition of deferred revenue associated with sales in prior periods.
 
(c)   Margin percentage for the year ended December 31, 2009 was not a meaningful measure since $63.3 million of impairment charges were recorded in Core’s cost of sales of real estate.
 
(d)   As of December 31, 2009, approximately 8 acres were subject to a sales contract with a sales price of approximately $2.5 million at a cost of approximately $2.2 million. The sale is contingent upon the purchaser obtaining financing and, if consummated on the contemplated terms, would not result in a loss.
     The value of acres subject to third party sales contracts was approximately $2.5 million at December 31, 2009 compared to $1.1 million at December 31, 2008. While backlog is not an exclusive indicator of future sales activity, it provides an indication of potential future sales activity.

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Real Estate
 
Core’s Liquidity and Capital Resources
     At December 31, 2009 and December 31, 2008, Core had cash and cash equivalents of $2.9 million and $16.9 million, respectively. Cash decreased $14.0 million during the year ended December 31, 2009 primarily as a result of cash used to fund the development of Core’s projects and payments of interest on its outstanding debt as well as selling, general and administrative expenses. Core’s cash balance at December 31, 2008 reflected Core’s receipt of a repayment from Woodbridge of a $40 million intercompany loan during the second quarter of 2008, partially offset by a $30 million dividend payment from Core to Woodbridge during the fourth quarter of 2008. At December 31, 2009, Core had no immediate availability under its various lines of credit.
     During 2009, the recession continued and the demand for residential and commercial inventory showed no signs of recovery, particularly in the geographic regions where Core’s properties are located. The decrease in land sales in 2009 and continued cash flow deficits contributed to, among other things, the deterioration of Core’s liquidity. As a result, Core has severely limited its development expenditures in Tradition, Florida and has completely discontinued development activity in Tradition Hilton Head. Its assets have been impaired significantly and in an effort to bring about an orderly liquidation without a bankruptcy filing, Core commenced negotiations with all of its lenders to restructure its outstanding debt in light of its cash position and to liquidate its assets in an orderly way. Core is currently in default under the terms of all of its outstanding debt totaling approximately $209.9 million (including loans associated with assets held for sale). Core continues to pursue all options with its lenders, including offering deeds in lieu and other similar transactions wherein Core would relinquish title to substantially all of its assets. As of February 5, 2010, with Core’s concurrence, a significant portion of the land in Tradition Hilton Head had been placed under the control of a court appointed receiver. While negotiations with the lender continue, there is no assurance that Core will be successful in restructuring any or all of its outstanding debt. In consideration of the foregoing, we evaluated Core’s real estate inventory for impairment on a project-by-project basis. As a result of the impairment analyses performed, we recorded impairment charges of $63.3 million to reduce the carrying amount of Core’s inventory to its fair value at December 31, 2009.
     Core is also a party to a certain Development Agreement with the city of Hardeeville, SC, under which Core is obligated to fund $1 million towards the building of a fire station. Funding is scheduled in three installments: the first installment of $100,000 was due October 21, 2009; the second installment of $450,000 was due on January 1, 2010; and the final installment was due on April 1, 2010. Additionally, Core is obligated to fund certain staffing costing $200,000 under the terms of this agreement. Core did not pay any of the required installments and has not funded the $200,000 payment for staffing. On November 5, 2009, Core received a notice of default from the city for non payment. Core is in discussions with one of its lenders to fund the required payments out of an interest reserve account established under its loan agreement with the lender while it seeks to resolve this issue. However, in the event that Core is unable to obtain additional funds to make these payments, it may be unable to cure the default on its obligation to the city which could result in a loss of entitlements associated with the development project.
     In December 2009, Core reinitiated efforts to sell two of its commercial leasing projects (the “Projects”) and began soliciting bids from several potential buyers to purchase assets associated with the Projects. The assets are available for immediate sale in their present condition and Core determined that it is probable that it will sell the Projects in 2010. Due to this decision, the assets associated with the Projects that are for sale have been classified as discontinued operations for all periods presented in accordance with the accounting guidance for the disposal of long-lived assets Core has accepted an offer to sell the Projects, which has been approved by the lender with substantially all of the proceeds going to satisfy its obligations to the lender. However, there can be no assurance that the transaction will close or that the lender will release Core from its obligations. See Note 12 of the “Notes to Consolidated Financial Statements” for further information.
     Based on an ongoing evaluation of its cost structure and in light of current market conditions, Core reduced its head count by 41 employees during 2009, resulting in approximately $1.3 million in severance charges which were recorded during the fourth quarter of 2009.

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Real Estate
 
     The negative impact of the adverse real estate market conditions on Core, together with Core’s limited liquidity, have caused substantial doubt regarding Core’s ability to continue as a going concern if Woodbridge chooses not to provide Core with the cash needed to meet its obligations when and as they arise. Woodbridge has not committed to fund any of Core’s obligations or cash requirements, and there is no assurance that Woodbridge will provide any funds to Core. Core’s results are reported in the Real Estate Operations segment in Note 34 of the “Notes to Consolidated Financial Statements” included in Item 8 of this report. Core’s financial information included in the consolidated financial statements has been prepared assuming that Core will meet its obligations and continue as a going concern. As a result, the consolidated financial statements and the financial information provided for Core do not include any adjustments that might result from the outcome of this uncertainty.
Off Balance Sheet Arrangements and Contractual Obligations
     In connection with the development of certain of Core’s projects, community development, special assessment or improvement districts have been established and may utilize tax-exempt bond financing to fund construction or acquisition of certain on-site and off-site infrastructure improvements near or at these communities. If these improvement districts were not established, Core would need to fund community infrastructure development out of operating cash flow or through sources of financing or capital, or be forced to delay its development activity. The obligation to pay principal and interest on the bonds issued by the districts is assigned to each parcel within the district, and a priority assessment lien may be placed on benefited parcels to provide security for the debt service. The bonds, including interest and redemption premiums, if any, and the associated priority lien on the property are typically payable, secured and satisfied by revenues, fees, or assessments levied on the property benefited. Core pays a portion of the revenues, fees, and assessments levied by the districts on the properties it still owns that are benefited by the improvements. Core may also be required to pay down a specified portion of the bonds at the time each unit or parcel is sold. The costs of these obligations are capitalized to inventory during the development period and recognized as cost of sales when the properties are sold.
     Core’s bond financing at December 31, 2009 and December 31, 2008 consisted of district bonds totaling $218.7 million at each of these dates with outstanding amounts of approximately $170.8 million and $130.5 million, respectively. Bond obligations at December 31, 2009 mature in 2035 and 2040. As of December 31, 2009, Core owned approximately 16% of the property subject to assessments within the community development district and approximately 91% of the property subject to assessments within the special assessment district. During the years ended December 31, 2009, 2008 and 2007, Core recorded a liability of approximately $693,000, $584,000 and $1.3 million, respectively, in assessments on property owned by it in the districts. Core is responsible for any assessed amounts until the underlying property is sold and will continue to be responsible for the annual assessments through the maturity dates of the respective bonds issued if the property is never sold. Based on Core’s approximate 91% ownership of property within the special assessment district as of December 31, 2009, it will be responsible for the payment of approximately $10 million in assessments by March 2011. If Core sells land within the special assessment district and reduces its ownership percentage, the potential payment of approximately $10 million would decrease in relation to the decrease in the ownership percentage. In addition, Core has guaranteed payments for assessments under the district bonds in Tradition, Florida which would require funding if future assessments to be allocated to property owners are insufficient to repay the bonds. Management has evaluated this exposure based upon the criteria in accounting guidance for contingencies, and has determined that there have been no substantive changes to the projected density or land use in the development subject to the bond which would make it probable that Core would have to fund future shortfalls in assessments.
     In accordance with accounting guidance for real estate, the Company records a liability for the estimated developer obligations that are fixed and determinable and user fees that are required to be paid or transferred at the time the parcel or unit is sold to an end user. At each of December 31, 2009 and December 31, 2008, the liability related to developer obligations associated with Core’s ownership of the property was $3.3 million, of which $3.1 million is included in the liabilities related to assets held for sale in the accompanying consolidated statements of financial condition as of December 31, 2009 and December 31, 2008.

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Real Estate
 
     The following table summarizes our Real Estate and Other contractual obligations (excluding Bluegreen) as of December 31, 2009 (in thousands):
                                         
    Payments due by period  
            Less than     13 - 36     37 - 60     More than  
Category (1)   Total     12 Months     Months     Months     60 Months  
Long-term debt obligations (2)
  $ 272,400       175,757       501       546       95,596  
Interest payable on long-term debt (3)
    191,294       7,883       15,755       15,699       151,957  
Operating lease obligations
    1,131       865       207       59        
Long-term debt obligations associated with assets held for sale
    74,748       71,698       110       124       2,816  
Severance related termination obligations
    1,114       1,114                    
 
                             
Total obligations
  $ 540,687       257,317       16,573       16,428       250,369  
 
                             
 
(1)   Long-term debt obligations consist of notes, mortgage notes and bonds payable and junior subordinated debentures. Interest payable on these long-term debt obligations is the interest that will be incurred related to the outstanding debt. Operating lease obligations consist of lease commitments. The timing of contractual payments for debt obligations assumes the exercise of all extensions available at our sole discretion. Long-term debt obligations and long-term debt obligations associated with assets held for sale include defaulted loans totaling approximately $247.0 million as of December 31, 2009 of which repayment of the outstanding debt was accelerated by the lender and is currently being shown as immediately due and payable in less than 12 months. See Note 2 of the “Notes to Consolidated Financial Statements” included in Item 8 of this report for more information regarding the defaulted loans.
 
(2)   These amounts represent scheduled principal payments.
 
(3)   Excludes interest payable associated with defaulted loans as of December 31, 2009 mentioned above.
     In addition to the above contractual obligations, we have $2.4 million in unrecognized tax benefits in accordance with accounting guidance for uncertainty in income taxes, which provides guidance for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that a company has taken or expects to take on a tax return.
     Tradition Development Company, LLC, a wholly-owned subsidiary of Core Communities (“TDC”), had advertising agreements pursuant to which, among other advertising rights, TDC obtained a royalty-free license to use, among others, the trademark “Tradition Field” at the sports complex located in Port St. Lucie and the naming rights to that complex. The advertising agreement was terminated during the first quarter of 2010 based on TDC’s default for non-payment. TDC is contractually obligated to pay all amounts due under the agreement at the time of termination which is estimated to be approximately $250,000.
     We have future obligations relating to the termination of facilities associated with property and equipment leases that we had entered into that are no longer providing a benefit to us, as well as termination fees related to contractual obligations we cancelled. As of December 31, 2009, these obligations amounted to $240,000 and are included under “Operating lease obligations” in the table above.
     At December 31, 2009 and 2008, Woodbridge had outstanding surety bonds of approximately $860,000 and $8.2 million, respectively, which were related primarily to its obligations to various governmental entities to construct improvements in its various communities. It is estimated that approximately $495,000 of work remains to complete these improvements and it is not currently anticipated that any outstanding surety bonds will likely be drawn upon.
     In the ordinary course of business, Core sells land to third parties where obligations exist to complete site development and infrastructure improvements subsequent to the sale date. Future development and construction obligations amounted to $2.1 million at December 31, 2009. The timing of future development will depend on factors such as the timing of future sales, demographic growth rates in the areas in which these obligations occur and the impact of any future deterioration or improvement in the local real estate market.

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Real Estate
 
     Levitt and Sons had approximately $33.3 million of surety bonds related to its ongoing projects at the time of the filing of the Chapter 11 Cases. In the event that these obligations are drawn and paid by the surety, Woodbridge could be responsible for up to $8.0 million plus costs and expenses in accordance with the surety indemnity agreements executed by Woodbridge. As of December 31, 2009 and 2008, Woodbridge had $527,000 and $1.1 million, respectively, in surety bond accruals at Woodbridge related to certain bonds where management believes it to be probable that Woodbridge will be required to reimburse the surety under applicable indemnity agreements. Woodbridge reimbursed the surety approximately $348,000 and $532,000 during the years ended December 31, 2009 and 2008, respectively, in accordance with the indemnity agreement for bond claims paid during the period, while no reimbursements were made in 2007. It is unclear whether and to what extent the remaining outstanding surety bonds of Levitt and Sons will be drawn and the extent to which Woodbridge may be responsible for additional amounts beyond this accrual. There is no assurance that Woodbridge will not be responsible for amounts in excess of the $527,000 accrual. Woodbridge will not receive any repayment, assets or other consideration as recovery of any amounts it may be required to pay. In September 2008, a surety filed a lawsuit to require Woodbridge to post collateral against a portion of the surety bonds exposure in connection with demands made by a municipality. Woodbridge believes that the municipality does not have the right to demand payment under the bonds and Woodbridge initiated a lawsuit against the municipality. Woodbridge does not believe a loss is probable and accordingly have not accrued any amount related to this claim. However, based on claims made on the bonds, the surety requested that Woodbridge post a $4.0 million escrow deposit as security while the matter is litigated with the municipality, and Woodbridge has complied with that request.
     On November 9, 2007, Woodbridge put in place an employee fund and offered up to $5 million of severance benefits to terminated Levitt and Sons employees to supplement the limited termination benefits paid by Levitt and Sons to those employees. Levitt and Sons was restricted in the payment of termination benefits to its former employees by virtue of the Chapter 11 Cases. In 2009, Core reduced its workforce by approximately 41 employees mainly as a result of the challenging conditions in the real estate market and the negative impact it has had on Core’s liquidity. Woodbridge incurred severance and benefits related restructuring charges in the year ended December 31, 2009 of approximately $1.4 million, while Woodbridge incurred charges of approximately $2.2 million during the year ended December 31, 2008. For the year ended December 31, 2009, Woodbridge paid approximately $415,000 in severance and termination charges related to the above described employee fund or for employees other than Levitt and Sons employees while it paid approximately $4.1 million in severance and termination charges in the same 2008 period. Employees entitled to participate in the fund either received a payment stream, which in certain cases extends over two years, or a lump sum payment, dependent on a variety of factors.

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Real Estate
 
Bluegreen
The Company’s consolidated financial statements for the year ended December 31, 2009 include the results of operations of Bluegreen from November 16, 2009, the date on which the Company acquired additional shares of Bluegreen’s common stock resulting in the Company having a controlling interest in Bluegreen, through December 31, 2009. Bluegreen’s results of operations for the Bluegreen Interim Period are reported through two reportable segments which are Bluegreen Resorts and Bluegreen Communities. In prior periods, our earnings attributable to Bluegreen were reported as part of Woodbridge other operations, which is currently included in the BFC Activities segment.
     In response to conditions in the economy and real estate and credit markets, Bluegreen’s focus has been on efforts to improve its cash flows from operations by deliberately reducing the number of VOI sales transactions for which it provides financing and to increase its selling and marketing efficiencies in the Bluegreen Resorts segment. Bluegreen also made a decision to pursue opportunities to grow its cash fee-based service businesses. While Bluegreen cash flows from operations and the Bluegreen Resorts segment operating margin reflects the success of these efforts, the Bluegreen Communities segment continued to struggle given the low consumer demand for homesites.
     The following table details the contribution to consolidated sales of real estate by the reportable segments for the Bluegreen Interim Period (in thousands, except percentage amounts):
                 
    Bluegreen Interim Period  
    Sales of real estate     % of total sales  
Bluegreen Resorts
  $ 15,251       83 %
Bluegreen Communities
    3,139       17 %
 
             
Total
  $ 18,390       100 %
 
             
     As discussed further under “Liquidity and Capital Resources”, Bluegreen Resorts sales operations are materially dependent on the availability of liquidity in the credit markets. Historically, Bluegreen has provided financing to a significant portion of its Bluegreen Resorts customers. Such financing typically involves the consumer making a minimum 10% cash down payment, with the balance being financed over a ten-year period. As Bluegreen Resorts’ selling, general and administrative expenses typically exceed the cash down payment, Bluegreen has historically maintained credit facilities pursuant to which Bluegreen pledged or sold its consumer note receivables. Furthermore, Bluegreen also engaged in private placement term securitization transactions to periodically pay down all or a portion of its note receivable credit facilities.
     There has been and continues to be an unprecedented disruption in the credit markets that has made obtaining additional and replacement external sources of liquidity more difficult and, if available, more expensive. For most of 2009, the term securitization market was severely limited and, as a result, financial institutions have been and continue to be reluctant to enter into new credit facilities for the purpose of providing financing on consumer receivables. Several lenders to the timeshare industry, including certain of Bluegreen’s lenders, have announced that they will either be exiting the finance business or will not be entering into new financing commitments for the foreseeable future. In addition, financing for real estate acquisition and development and the capital markets for corporate debt have generally been unavailable to Bluegreen.

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Real Estate
 
     While Bluegreen believes that the market for its Resorts product remains relatively strong, Bluegreen is continuing to deemphasize sales to conserve cash because of the uncertainties in the credit markets. In an effort to conserve cash and availability under Bluegreen receivables credit facilities, Bluegreen implemented strategic initiatives which have included closing certain sales offices; eliminating what they identified as lower-efficiency marketing programs; emphasizing cash sales and higher cash down payments as well as pursuing other cash-based services; reducing overhead, including eliminating a significant number of staff positions across a variety of areas at various locations; limiting sales to borrowers who meet newly applied underwriting standards; and increasing interest rates on new sales transactions for which Bluegreen provides financing. Bluegreen’s goal is to reduce the number of sales while increasing the ultimate profitability of the sales it makes. Additional information on Bluegreen’s strategic initiatives is provided in “Liquidity and Capital Resources” below. Bluegreen believes that it has adequate timeshare inventory to satisfy its projected sales for 2010 and based on anticipated sales levels, for a number of years thereafter.
     Bluegreen continues to actively pursue additional credit facility capacity, capital markets transactions, and alternative financing solutions, and hopes that the steps being taken will position Bluegreen to maintain its existing credit relationships as well as attract new sources of capital. Regardless of the state of the credit markets, Bluegreen believes that its resorts management and finance operations will continue to represent recurring cash-generating sources of income which do not require material liquidity support from the credit markets.
     While the vacation ownership business has historically been capital intensive, Bluegreen’s goal is to leverage its sales and marketing, mortgage servicing, resort management, title and construction expertise to generate fee-based-service relationships with third parties that produce strong cash flows and require less capital investment. During 2009, Bluegreen began providing resort management services to four resorts under these agreements. In addition, for the Bluegreen Interim Period, Bluegreen sold $8.9 million of outside developer inventory and earned sales and marketing commissions of approximately $5.4 million, as well as title fees on such transactions. Bluegreen has also begun providing resort design and development services and mortgage services under certain of these arrangements. Bluegreen intends to pursue additional fee-based services relationships and believes that these activities will become an increasing portion of its business over time.
     Bluegreen has historically experienced and expects to continue to experience seasonal fluctuations in its gross revenues and results of operations. This seasonality may result in fluctuations in its quarterly operating results. Although Bluegreen expects to see more potential customers at its sales offices during the quarters ending in June and September, ultimate recognition of the resulting sales during these periods may be delayed due to complex down payment requirements for recognition of real estate sales under GAAP or due to the timing of development and the requirement that Bluegreen uses the percentage-of-completion method of accounting.
     To the extent that inflation in general or increased prices for Bluegreen’s VOIs and homesites adversely impacts consumer demand, Bluegreen’s results of operations could be adversely impacted. Also, to the extent inflationary trends, tightened credit markets or other factors affect interest rates, Bluegreen’s debt service costs may increase. There is no assurance that Bluegreen will be able to increase or maintain the current level of its sales prices or that increased construction costs will not have a material adverse impact on its gross margin.
     Bluegreen Communities business is being adversely impacted by the deterioration in the real estate markets. Demand for its homesites has decreased as well as sales volume and such reductions have adversely impacted the carrying costs of Bluegreen Communities’ inventories. There can be no assurances that future changes in Bluegreen’s intentions or pricing will not result in future material inventory valuation adjustments.
     Bluegreen has historically financed a majority of Bluegreen Resorts sales of VOIs, and accordingly, are subject to the risk of defaults by customers. GAAP requires that Bluegreen reduces sales of VOIs by its estimate of future uncollectible note balances on originated VOI receivables, excluding any benefit for the value of future recoveries. The allowance for loan losses for the Bluegreen Interim Period was approximately $4.0 million and was mainly associated with Bluegreen Resorts. The allowance for loan losses attributable to Bluegreen Communities was not significant.
     Bluegreen believes that rising unemployment in the United States and adverse economic conditions in general have adversely impacted the performance of Bluegreen’s notes receivable portfolio. However, Bluegreen anticipates that credit underwriting standards on new loan originations and increasing customer equity in the existing loan portfolio will have a favorable impact on the performance of the portfolio over time.

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     Substantially all defaulted vacation ownership notes receivable result in the holder of the note receivable recovering the related VOI that secured the note receivable, typically soon after default and at little or no cost. In cases where Bluegreen has retained ownership of the vacation ownership note receivable, the VOI is recovered and resold in the normal course of business. In most cases the resales of the VOI’s partially mitigate the loss from the default, as these recoveries generally range from approximately 40% to 100% of the defaulted principal balance depending on the age of the defaulted receivable. Bluegreen may also remarket VOI’s relating to defaulted receivables on behalf of note holders in exchange for a remarketing fee designed to approximate its sales and marketing costs. From time to time, Bluegreen will reacquire a defaulted note receivable from one of its off-balance sheet term securitization or purchase facility transactions by substituting the defaulted receivable for a performing receivable. The related VOI that secured the defaulted note receivable is reacquired at a price equal to the defaulted principal amount, which typically is in excess of Bluegreen’s historical cost of product. The reacquisition of inventory in this manner has resulted in an increase in Bluegreen Resort’s cost of sales.
     Recent economic events have resulted in further constrictions in the financial markets to unprecedented low levels. There can be no assurance that Bluegreen will be able to secure financing for its VOI notes receivable on acceptable terms, if at all.
     Bluegreen is in the process of negotiating a significant debt extension on one of its credit facilities (See the “Liquidity and Capital Resources” section for further information). In connection with debt renewals and extensions, Bluegreen may, in certain cases, agree to pay higher interest rates and fees. In addition, conditions in the commercial credit markets are expected to increase interest rates on new debt Bluegreen may obtain from time to time in the future. Any such increased interest rates would increase Bluegreen’s expenses and adversely impact its results of operations.

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Bluegreen Segments Financial Results
     The following tables include Bluegreen’s financial results for the Bluegreen Interim Period. No comparative analysis was performed as Bluegreen’s results prior to November 16, 2009 are not included in the financial results below, but rather our earnings attributable to Bluegreen were reported in our BFC Activities segment.
                                                 
    Bluegreen Resorts     Bluegreen Communities     Total  
            Percentage             Percentage             Percentage  
    Amount     of Sales     Amount     of Sales     Amount     of Sales  
  (dollars in thousands)  
Bluegreen Interim Period:
                                               
 
                                               
System-wide sales (2)
  $ 27,167             $ 3,139             $ 30,306          
Estimated uncollectible VOI notes receivable
    (3,041 )                           (3,041 )        
 
                                         
System-wide sales, net
    24,126       100 %     3,139       100 %     27,265       100 %
 
                                               
Sales of third-party VOIs
    (8,875 )     (37 )                 (8,875 )     (33 )
 
                                         
Sales of real estate
    15,251       63       3,139       100 %     18,390       67  
Cost of real estate sales
    (3,294 )     (22) *     (1,788 )     (57 )     (5,082 )     (28) *
 
                                         
 
                                               
Gross profit
    11,957       78 *     1,351       43       13,308       72 *
Fee-based sales commission revenue
    5,354       22                   5,354       20  
Other resort and communities operations revenues
    5,239       22       593       19       5,832       21  
Cost of other resort and communities operations
    (3,538 )     (15 )     (1,480 )     (47 )     (5,018 )     (18 )
Segment selling, general and administrative expenses (1)
    (15,775 )     (65 )     (3,738 )     (119 )     (19,513 )     (72 )
 
                                         
Segment operating profit (loss)
  $ 3,237       13 %     ($3,274 )     (104 )%     ($37 )     (0.14 )%
 
                                         
 
*   Bluegreen Resorts cost of sales and Gross profit are calculated as a percentage of sales of real estate
 
(1)   General and administrative expenses attributable to corporate overhead have been excluded from the tables. Corporate general and administrative expenses (excluding mortgage operations) totaled $4.0 million for the Bluegreen Interim Period. (See “Corporate General and Administrative Expenses” below for further discussion).
 
(2)   Includes sales of VOI’s made on behalf of third parties, which are effected through the same process as the sale of Bluegreen’s vacation ownership inventory, and involve similar selling and marketing costs.

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Bluegreen Resorts
Bluegreen Resorts — Resort Sales and Marketing
     The following table sets forth certain information for sales of both Bluegreen VOIs and VOI sales made on behalf of outside developers for a fee for the periods indicated. The information is provided before giving effect to the percentage-of-completion method of accounting and the deferral of sales in accordance with timeshare accounting rules:
         
    Bluegreen Interim Period  
Number of Bluegreen VOI sales transactions
    1,625  
 
       
Number of sales made on behalf of outside developers for a fee
    694  
Total VOI sales transactions
    2,319  
Average sales price per transaction
  $ 11,703  
Number of total prospects tours
    16,140  
Sale-to-tour conversion ratio— total prospects
    14.4 %
Number of new prospects tours
    5,974  
Sale-to-tour conversion ratio— new prospects
    10.9 %
Resort Management and Other Services
     The following table sets forth pre-tax profit generated by Bluegreen’s resort management and other services (in thousands):
         
    Bluegreen Interim Period  
Resort Management Operations
  $ 2,725  
Title Operations
    442  
Net Carrying Cost of Developer Inventory
    (392 )
Other
    (313 )
 
     
Total
  $ 2,462  
 
     
Bluegreen Communities
     The table below sets forth the number of homesites sold by Bluegreen Communities and the average sales price per homesite for the periods indicated, before giving effect to the percentage-of-completion method of accounting, and excluding sales of bulk parcels:
         
    Bluegreen Interim  
    Period  
Number of homesites sold
    50  
Average sales price per homesite
  $ 66,004  

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     The tables below set forth information with respect to contracts to sell homesites at December 31, 2009 (in thousands):
         
    Contracts to Sell Property at  
    Projects Not Substantially Sold  
    Out at December 31, 2009  
Project
       
Vintage Oaks at the Vineyard
  $ 4,547  
Havenwood at Hunter’s Crossing
    1,291  
Lake Ridge at Joe Pool Lake
    1,696  
King Oaks
    1,451  
Chapel Ridge
    792  
The Bridges at Preston Crossings
    394  
Sugar Tree on the Brazos
    790  
 
     
Total
  $ 10,961  
 
     
         
    Contracts to Sell Property at Projects  
    Substantially Sold Out at  
    December 31, 2009  
Project
       
Mystic Shores
  $ 1,519  
Saddle Creek Forest
    1,890  
Miscellaneous
    1,147  
Total
  $ 4,556  
 
     
Total Contracts
  $ 15,517  
 
     
Finance Operations
     Bluegreen’s finance operations include the ongoing excess interest spread earned on its on-balance sheet notes receivable, as well as continued earnings on its off-balance sheet notes receivable, realized through its retained interests in those notes. In addition, finance operations include providing mortgage servicing for the off-balance sheet notes receivable and for other third parties all on a cash fee-for-service basis.
Interest Income
     The following table details the sources of Bluegreen’s interest income (in thousands):
         
    Bluegreen Interim  
    Period  
VOI notes receivable
  $ 10,169  
Retained interest in notes receivable sold
    2,027  
Other
    (14 )
 
     
Total
  $ 12,182  
 
     
Interest Expense
     Interest expense was $5.3 million for the Bluegreen Interim Period.

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     Bluegreen believes that the adoption of new accounting standards related to the consolidation of variable interest entities in January 2010 (See “Accounting Pronouncements Not-Yet Adopted) will significantly increase both interest income and interest expense due to the recognition of approximately $453.6 million of notes receivable and $411.4 million of non-recourse receivable-backed debt, which are currently accounted for off-balance sheet, and which Bluegreen expects will be consolidated and included on-balance sheet, on a prospective basis, beginning in 2010.
     Total interest expense capitalized to construction in progress was approximately $110,000 for the Bluegreen Interim Period.
Mortgage Servicing Operations
     Bluegreen’s mortgage servicing operations include recording and processing payments, and performing collections of its owned notes receivable, as well as collect payments on notes receivable sold to or owned by third parties. In addition, Bluegreen’s mortgage servicing operations facilitate the monetization of its VOI notes receivable through its various credit facilities, as well as perform monthly reporting activities for its lenders and receivable investors. Bluegreen earns a fee for servicing loans that have been sold to off-balance sheet qualified special purpose entities and for providing loan services to other third-party portfolio owners, on a cash-fee basis. The following is a summary of the results of its mortgage servicing operations (in thousands):
         
    Bluegreen Interim  
    Period  
Servicing fee income
  $ 867  
Cost of mortgage servicing operations
    104  
 
     
Gross profit from mortgage servicing operations
  $ 971  
 
     
     Effective January 2010, the adoption of new accounting standards requires consolidation of Bluegreen’s qualified special purpose entities and as a result, the servicing fees earned on servicing the off-balance sheet notes receivable will no longer be separately recognized as such but will instead be accounted for as a component of interest income (See “Accounting Pronouncements Not-Yet Adopted).
Corporate General and Administrative Expenses
     Bluegreen’s corporate general and administrative expenses consist primarily of expenses associated with administering the various support functions at its corporate headquarters, including accounting, human resources, information technology, treasury, and legal. Corporate general and administrative expenses, excluding mortgage servicing operations, were $4.0 million for the Bluegreen Interim Period.
Non-controlling Interests in Income of Consolidated Subsidiary
     We include the results of operations and financial position of Bluegreen/Big Cedar Vacations, LLC (the “Subsidiary”), Bluegreen’s 51%-owned subsidiary, in our consolidated financial statements (See Note 1 of the Notes to Consolidated Financial Statements for further information). Non-controlling interests in income of consolidated subsidiary was approximately $1.0 million for the Bluegreen Interim Period.
Bluegreen’s Liquidity and Capital Resources
     Bluegreen’s primary source of funds from internal operations are: (i) cash sales, (ii) down payments on homesite and VOI sales which are financed, (iii) proceeds from the sale of, or borrowings collateralized by, notes receivable, including cash received from its retained interests in notes receivable sold, (iv) cash from its finance operations, including principal and interest payments received on the purchase money mortgage loans arising from sales of VOIs and homesites and mortgage servicing fees, and (v) net cash generated from its sales and marketing fee-based services and other resort services, including its resorts management operations, and other communities operations.

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     Historically Bluegreen’s business model has depended on the availability of credit in the commercial markets. Resorts sales are generally dependent upon Bluegreen providing financing to its buyers. Bluegreen’s ability to sell and/or borrow against its notes receivable from VOI buyers is a critical factor in its continued liquidity. When Bluegreen sells VOIs, a financed buyer is only required to pay a minimum of 10% to 20% of the purchase price in cash at the time of sale; however, selling, marketing, and administrative expenses attributable to the sale are primarily cash expenses and exceed the buyer’s minimum required down-payment. Accordingly, having financing facilities available for the hypothecation, sale, or transfer of these vacation ownership receivables is a critical factor in Bluegreen’s ability to meet its short and long-term cash needs. Historically, Bluegreen has relied on its ability to sell receivables in the term securitization market in order to generate liquidity and create capacity in its receivable facilities. In addition, maintaining adequate VOI inventory to sell and pursue growth into new markets has historically required in the incurrence of debt for the acquisition, construction and development of new resorts. Bluegreen Communities has also historically incurred debt for the acquisition and development of its residential land communities.
     Since 2008, there have been unprecedented disruptions in the credit markets, which have made obtaining additional and replacement external sources of liquidity more difficult and more costly in the term securitization market. There is significantly reduced activity and transactions that have been consummated have been on dramatically more adverse terms. As a result, financial institutions are reluctant to enter into new credit facilities for the purpose of providing financing on consumer receivables. Several lenders to the timeshare industry, including certain of Bluegreen’s lenders, have announced that they either have or will be exiting the resort finance business or will not be entering into new financing commitments for the foreseeable future. In addition, financing for real estate acquisition and development and the capital markets for corporate debt have generally been unavailable on reasonable terms, if at all.
     Bluegreen has certain strategic initiatives in place with a view to better position its operations in light of the downturn in the commercial credit markets. Bluegreen intends to continue to monitor its results as well as the external environment in order to attempt to adjust its business to existing conditions. The ongoing goals of its strategic initiatives are designed to conserve cash and enhance its financial position, to the extent possible by:
    Significantly reducing its Resorts sales operations in an effort to match its sales pace to its liquidity and known receivable capacity;
 
    Emphasizing cash-based business in its sales, resort management and finance operations, with particular focus on growing its fee-based service business;
 
    Minimizing the cash requirements of Bluegreen Communities;
 
    Reducing overhead and increasing efficiency;
 
    Minimizing capital spending;
 
    Working with its lenders to renew, extend, or refinance its credit facilities;
 
    Maintaining compliance under its outstanding indebtedness; and
 
    Continuing to provide what Bluegreen believes to be a high level of quality vacation experiences and customer service to its VOI owners.
     While Bluegreen believes that it has realized initial success with its strategic initiatives, there is no assurance that Bluegreen will be successful in achieving its goals.
     While the vacation ownership business has historically been capital intensive, one of Bluegreen’s principal goals is to leverage its sales and marketing, mortgage servicing, resort management, title and construction expertise to pursue low-capital requirement, fee-based-service business relationships that produce strong cash flows for its business.
     Bluegreen has a material amount of debt maturing or requiring partial repayment in 2010, as well as facilities for which the advance period has or will expire. Bluegreen intends to seek to renew, extend or refinance certain of its debt issuances and credit facilities and Bluegreen believes that the implementation of its strategic initiatives has positioned them to address these matters with its existing and future lenders. However, there is no assurance that Bluegreen will be successful in its efforts to renew, extend or refinance its debt, and if Bluegreen is not successful, its liquidity would be significantly adversely impacted. Further, while Bluegreen may seek to raise additional debt or equity financing in the future to fund operations or repay outstanding debt, there is no assurance that such financing will be available to them on favorable terms or at all. In light of the current trading price of Bluegreen’s common stock, financing involving the issuance of its common stock or securities convertible into its common stock would be highly dilutive to its existing shareholders.

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     Bluegreen’s levels of debt and debt service requirements have several important effects on its operations, including the following: (i) its significant cash requirements to service debt reduces the funds available for operations and future business opportunities and increase its vulnerability to adverse economic and industry conditions, as well as conditions in the credit markets, generally; (ii) its leverage position increases its vulnerability to economic and competitive pressures; (iii) the financial covenants and other restrictions contained in indentures, credit agreements and other agreements relating to its indebtedness requires Bluegreen to meet certain financial tests and restricts its ability to, among other things, borrow additional funds, dispose of assets, make investments or pay cash dividends on or repurchase common stock (although Bluegreen does not currently believe that any such transactions are likely to be structured so as to materially limit its ability to pay cash dividends on its common stock, if its board were to choose to do so, or its ability to repurchase shares in the near term; although there is no assurance that this will remain true in the future); and (iv) its leverage position may limit funds available for working capital, capital expenditures, acquisitions and general corporate purposes. Certain of Bluegreen’s competitors operate on a less leveraged basis and have greater operating and financial flexibility than they do.
Credit Facilities
     The following is a discussion of Bluegreen’s material purchase and credit facilities, including those that were important sources of its liquidity as of December 31, 2009. These facilities do not constitute all of its outstanding indebtedness as of December 31, 2009. Bluegreen’s other indebtedness includes outstanding junior subordinated debentures, borrowings collateralized by real estate inventories that were not incurred pursuant to a significant credit facility, and capital leases.
Credit Facilities for Bluegreen Receivables with Future Availability
     Bluegreen maintains various credit facilities with financial institutions that provide receivable financing for its operations. Bluegreen had the following credit facilities with future availability as of December 31, 2009 (in thousands):
                                 
                            Advance    
            Outstanding     Availability     Period   Borrowing
    Revolving     Balance as     as of     Expiration;   Rate; Rate as
    Borrowing     of December     December     Borrowing   of December
    Limit     31, 2009     31, 2009     Maturity   31, 2009
BB&T Purchase Facility(1)
  $ 150,000     $ 131,302     $ 18,698     June 29, 2010;
June 5, 2022
  Prime + 2.50%;
5.75%
Liberty Bank Facility(1)
    75,000       59,055       15,945     Aug. 27, 2010;
Aug. 27, 2014
  30 day LIBOR+2.50%;
5.75% (2)
 
                         
Total
  $ 225,000     $ 190,357     $ 34,643          
 
                         
 
(1)   Facility is revolving during the advance period, providing additional availability as the facility is paid down, subject to eligible collateral and applicable terms and conditions.
 
(2)   Interest charged on this facility is variable, subject to a floor of 5.75%.

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BB&T Purchase Facility
     The amended and restated timeshare notes receivable purchase facility with Branch Banking and Trust Company (“BB&T”) (the “BB&T Purchase Facility”) provides for the sale of Bluegreen’s timeshare receivables at an advance rate of 67.5% of the principal balance up to a cumulative purchase price of $150.0 million on a revolving basis, subject to the terms of the facility, eligible collateral and customary terms and conditions. The BB&T Purchase Facility revolving advance period under the facility will end on June 29, 2010. Should a “takeout financing” (as defined in the applicable facility agreements) occur prior to June 29, 2010, the facility limit will either remain at the current facility limit of $150.0 million or decrease to $100.0 million, under certain circumstances. While ownership of the receivables is transferred for legal purposes, the transfers of receivables under the facility are accounted for as a financing transaction for financial accounting purposes. Accordingly, the receivables will continue to be reflected as assets and the associated obligations will be reflected as liabilities on our balance sheet. The BB&T Purchase Facility is nonrecourse and was not guaranteed by Bluegreen.
     As of December 31, 2009, the outstanding balance of the BB&T Purchase Facility reflected an advance of 80.7% on the receivables transferred to BB&T under the facility; however, Bluegreen will equally share with BB&T in the excess cash flows generated by the receivables sold (excess meaning after customary payments of fees, interest and principal under the facility) until the advance rate on the existing receivables decreases to 67.5% as the outstanding balance amortizes. The interest rate on the BB&T Purchase Facility is the prime rate plus 2.5%.
     For the Bluegreen Interim Period, Bluegreen pledged $9.5 million of VOI notes receivable to this facility and received cash proceeds of $2.0 million. Bluegreen also made repayments of $4.9 million on the facility during the same period.
Liberty Bank Facility
     Bluegreen has a $75.0 million revolving timeshare receivables hypothecation facility with a syndicate of lenders led by Liberty Bank and assembled by Wellington Financial (the “Liberty Bank Facility”). The facility provides for a 90% advance on eligible receivables pledged under the facility during a two-year period ending on August 27, 2010, subject to customary terms and conditions. Amounts borrowed under the facility and interest incurred will be repaid as cash is collected on the pledged receivables, with the remaining balance, if any, due on August 27, 2014. The facility bears interest at a rate equal to the one-month LIBOR plus 2.5%, subject to a floor of 5.75%. As the Liberty Bank facility is revolving, availability under the facility increases up to the $75.0 million facility limit as cash is received on the VOI notes receivable collateralized under the facility and Liberty Bank is repaid through the expiration of the advance period, pursuant to the terms of the facility.
     For the Bluegreen Interim Period, Bluegreen pledged $7.6 million of VOI notes receivable to this facility and received cash proceeds of $729,000. Bluegreen also made repayments of $2.8 million under the facility during the same period.
Other Effective Receivable Capacity
     Pursuant to the terms of certain of Bluegreen’s prior term securitizations and similar type transactions, Bluegreen has the ability to substitute new eligible VOI notes receivable into such facilities in the event receivables that were previously sold in such transactions are defaulted or are the subject of an owner upgrade transaction, subject to certain limitations. These substitutions result in Bluegreen receiving additional cash through its monthly distribution on its retained interest in notes receivable sold. Bluegreen intends to continue to use this other effective receivable capacity, subject to the terms and conditions of the applicable facilities. As of December 31, 2009, the aggregate remaining substitution capacity under all of such existing facilities would allow Bluegreen to substitute approximately $120.5 million of eligible VOI notes receivable in the future, subject to the terms and conditions of the applicable facilities.

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Credit Facilities for Bluegreen Receivables without Future Availability
     Bluegreen has outstanding obligations under various receivable-backed credit facilities that have no remaining future availability as the advance periods have expired. Bluegreen had the following outstanding balances under such credit facilities as of December 31, 2009 (in thousands):
                 
    Balance as         Borrowing Rate;
    of December     Borrowing   Rate as of December
    31, 2009     Maturity   31, 2009
The GE Bluegreen/Big Cedar Facility
  $ 32,834     April 16, 2016   30 day LIBOR+1.75%;
1.98%
Foothill Facility
    14,409     Dec. 31, 2010   Prime + 0.25-0.50%;
4.00% (1)]
The GMAC Receivables Facility
    5,228     Feb. 15, 2015   30 day LIBOR+4.00%;
4.23%
 
             
Total
  $ 52,471          
 
             
 
(1)    Interest charged on this facility is variable and may be subject to a 4.00% floor under certain circumstances.
The GE Bluegreen/Big Cedar Facility
     The Bluegreen/Big Cedar Joint Venture has a $45.0 million revolving VOI receivables credit facility with GE (the “GE Bluegreen/Big Cedar Receivables Facility”). Bluegreen Corporation has guaranteed the full payment and performance of the Bluegreen/Big Cedar Joint Venture in connection with the GE Bluegreen/Big Cedar Receivables Facility. The advance period under this facility has expired and all outstanding borrowings mature no later than April 16, 2016. The facility has detailed requirements with respect to the eligibility of receivables for inclusion and other conditions to funding. The facility includes affirmative, negative and financial covenants and events of default. All principal and interest payments received on pledged receivables are applied to principal and interest due under the facility. Indebtedness under the facility bears interest adjusted monthly at a rate equal to the 30 day LIBOR rate plus 1.75%.
     For the Bluegreen Interim Period, Bluegreen repaid $1.7 million under this facility.
The Wells Fargo Facility
     Bluegreen has a credit facility with Wells Fargo Foothill, LLC (“Wells Fargo”). Historically, Bluegreen has primarily used this facility for borrowings collateralized by the pledge of certain VOI receivables which typically have been Bluegreen’s one-year term receivables. The borrowing period for advances on eligible receivables expired on December 31, 2009, and the maturity date of all borrowings is December 31, 2010. The advance rate ranges from 85% to 90% of certain VOI receivables. Borrowings under this facility are subject to eligible collateral and customary terms and conditions. The interest rate charged on outstanding receivable borrowings under the facility, as amended, is the prime lending rate plus 0.25% when the average monthly outstanding loan balance under certain sub-lines is greater than or equal to $15.0 million. If the average monthly outstanding loan balance under certain sub-lines is less than $15.0 million, the interest rate is the greater of 4.00% or the prime lending rate plus 0.50%. All principal and interest payments received on pledged receivables are applied to principal and interest due under the facility.
     For the Bluegreen Interim Period, Bluegreen pledged $7.0 million of notes receivable to this facility and received cash proceeds of $6.2 million. Bluegreen also made repayments of $4.2 million during the same period.

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Credit Facilities for Bluegreen Inventories without Existing Future Availability
     Bluegreen has outstanding obligations under various credit facilities and other notes payable collateralized by its resorts or communities inventories. As of December 31, 2009 these included the following significant items (in thousands):
                 
    Balance as of          
    December 31,     Borrowing   Borrowing Rate; Rate as of
    2009     Maturity (1)   December 31, 2009
The GMAC AD&C Facility
  $ 87,415     June 30, 2012   30 day LIBOR+4.50%;
4.73%
The GMAC Communities Facility
    38,479     December 31, 2012   Prime + 2.00%;
10.00%
Wachovia Notes Payable
    24,497     Varies by loan (2)   30 day LIBOR + 2.00%-2.35%;
2.23% - 2.58%
The Textron Facility
    12,757     Varies by loan (3)   Prime + 1.25% - 1.50%;
4.50% - 4.75%
 
             
Total
  $ 163,148          
 
             
 
(1)   Repayment of the outstanding amount is effected through release payments as the related collateral is sold, subject to periodic minimum required amortization between December 31, 2009 and maturity.
 
(2)   The maturity dates vary by loan. The maturity date associated with Bluegreen’s Williamsburg Patrick Henry loan, which had an outstanding balance of $10.5 million as of December 31, 2009, is April 30, 2010. The maturity date associated with Bluegreen’s Williamsburg Liberty Inn loan, which had an outstanding balance of $6.5 million as of December 31, 2009, is July 31, 2010. The maturity date associated with Bluegreen’s Club La Pension loan, which had an outstanding balance of $3.7 million as of December 31, 2009, is June 10, 2012. The maturity date associated with Bluegreen’s Rocky River Preview Center loan, which had an outstanding balance of $3.8 million as of December 31, 2009, is May 1, 2026. See discussion of a term sheet Bluegreen received to extend the maturities on the Wachovia Notes Payable, below.
 
(3)   The maturity date for this facility varies by loan. The maturity date associated with Bluegreen’s Odyssey Dells Resort loan, which had an outstanding balance of $7.0 million as of December 31, 2009, is December 31, 2011. The maturity date associated with Bluegreen’s Atlantic Palace Resort, which had an outstanding balance of $5.8 million as of December 31, 2009, is April 2013.
The GMAC AD&C Facility
     This facility was used to finance the acquisition and development of certain of Bluegreen resorts and currently has three outstanding project loans. The maturity date for the project loan collateralized by Bluegreen’s Club 36TM resort in Las Vegas, Nevada (the “Club 36 Loan”), is June 30, 2012. Approximately $70.1 million was outstanding on this loan as of December 31, 2009. Maturity dates for two project loans related to Bluegreen’s Fountains resort in Orlando, Florida (the “Fountains Loans”) are September 2010 and March 2011, with $10.6 million and $6.7 million, respectively, outstanding as of December 31, 2009. Principal payments are effected through agreed-upon release prices as timeshare interests in the resorts collateralizing the GMAC AD&C Facility are sold, subject to periodic minimum required amortization on the Club 36 Loan and the Fountains Loans. The facility bears interest at a rate equal to the 30-day LIBOR plus 4.50%. For the Bluegreen Interim Period, Bluegreen repaid $5.5 million of the outstanding balance under this facility. As of December 31, 2009, Bluegreen had no availability under this facility.

110


 

Real Estate
 
The GMAC Communities Facility
     Bluegreen has an outstanding balance under a credit facility (the “GMAC Communities Facility”) historically used to finance its Bluegreen Communities real estate acquisitions and development activities. The GMAC Communities Facility is secured by the real property homesites (and personal property related thereto) at the following Bluegreen Communities projects (the “Secured Projects”): Havenwood at Hunter’s Crossing (New Braunfels, Texas); The Bridges at Preston Crossings (Grayson County, Texas); King Oaks (College Station, Texas); Vintage Oaks at the Vineyard (New Braunfels, Texas); and Sanctuary Cove at St. Andrews Sound (Waverly, Georgia). In addition, the GMAC Communities Facility is secured by certain of Bluegreen’s golf courses: The Bridges at Preston Crossings (Grayson County, Texas) and Sanctuary Cove (Waverly, Georgia). The period during which Bluegreen can add additional projects to the GMAC Communities Facility has expired.
     Bluegreen will start making minimum quarterly cumulative payments commencing in January 2010 with the final maturity of December 31, 2012, according to the agreement. Principal payments are effected through agreed-upon release prices as real estate collateralizing the GMAC Communities Facility is sold, subject to the minimum required amortization discussed above. The interest rate on the GMAC Communities Facility is the prime rate plus 2%, subject to the following floors: (1) 10% until the balance of the loan has been reduced by a total of $25 million from the closing date balance, (2) 8% until the balance of the loan is less than or equal to $20 million, and (3) 6% thereafter.
     In connection with the previously discussed sale of Bluegreen’s golf courses at Carolina National (Southport, North Carolina), the Preserve at Jordan Lake (Chapel Hill, North Carolina), Brickshire (New Kent, Virginia), and Chapel Ridge (Pittsboro, NC) during December 2009, Bluegreen repaid $7.1 million under this facility as a release payment for the sold courses which had been part of the collateral for the GMAC Communities Facility. For the Bluegreen Interim Period, Bluegreen repaid a total of $7.8 million under this facility.
The Wachovia Notes Payable
     As of December 31, 2009, Bluegreen had approximately $24.5 million of outstanding debt to Wachovia Bank, N.A. (“Wachovia”) under various notes payable collateralized by certain of its timeshare resorts or sales offices (the “Wachovia Notes Payable”). The maturity date of a $10.5 million note payable collateralized by Bluegreen’s Williamsburg resort will expire on April 30, 2010. Bluegreen has a non-binding term sheet with Wachovia to refinance the Wachovia Notes Payable, extending the maturity to 24 months after the closing of the extension. The term sheet also includes the Wachovia Line-of-credit (See section below — Unsecured Credit Facility — Wachovia Line-of-Credit) which had a balance of $15.7 million as of December 31, 2009. The term sheet and subsequent discussions required that Bluegreen makes release principal payments as the VOIs which will collateralize the extended loan are sold, subject to a minimum monthly amortization. The extended loan would consolidate the Wachovia Notes Payable and the Wachovia Line-of-Credit into one term loan which bears interest at the 3-month LIBOR + 6.87%. The term sheet contemplates Bluegreen providing additional collateral for this facility and amending covenants, other terms and conditions. There is no assurance that the transactions contemplated by the term sheet will occur on these terms, if at all.
Textron AD&C Facility
     Bluegreen Vacations Unlimited, Inc. (“BVU”), Bluegreen’s wholly-owned subsidiary, has a $75.0 million, revolving master acquisition, development and construction facility loan agreement (the “Textron AD&C Facility”) with Textron Financial Corporation (“Textron”). The Textron AD&C Facility has historically been used to facilitate the borrowing of funds for resort acquisition and development activities. Bluegreen has guaranteed all sub-loans under the master agreement. Interest on the Textron AD&C Facility is equal to the prime rate plus 1.25% — 1.50% and is due monthly. The Textron AD&C Facility has no remaining availability for additional borrowings under the facility.

111


 

Real Estate
 
     Bluegreen has a sub-loan under the Textron AD&C Facility which was used to fund the acquisition and development of its Odyssey Dells Resort (the “Odyssey Sub-Loan”). The outstanding borrowings under the Odyssey Sub-Loan mature on December 31, 2011. The Sub-Loan requires a periodic minimum required principal amortization. The first minimum required principal payment in March 2010 was approximately $0.4 million with additional minimum required principal payments of $1.0 million per quarter thereafter through maturity. Bluegreen will continue to pay Textron principal payments as Bluegreen sells timeshare interests that collateralize the Odyssey Sub-Loan, and these payments will count towards the minimum required principal payments. As of December 31, 2009, Bluegreen’s outstanding borrowings under the Sub-Loan totaled approximately $7.0 million.
     The maturity date of the other outstanding sub-loan under the Textron AD&C Facility, subject to minimum required amortization during the periods prior to maturity, is April 2013. Bluegreen’s outstanding balance on the sub-loan used to acquire its Atlantic Palace Resort in Atlantic City, New Jersey was $5.8 million as of December 31, 2009.
Unsecured Credit Facility — Wachovia Line-of-Credit
     Bluegreen currently has an unsecured line-of-credit with Wachovia. Amounts borrowed under the line bear interest at 30-day LIBOR plus 1.75% (1.98 % at December 31, 2009). Interest is due monthly. The line-of-credit agreement contains certain covenants and conditions typical of arrangements of this type.
     The current maturity of this line-of-credit is April 30, 2010; however Bluegreen has received a non-binding term sheet from Wachovia to extend the maturity for an additional 24 months from the closing of the extension, subject to required monthly amortization. As contemplated in the term sheet, the extended loan would consolidate the Wachovia Notes Payable and the Wachovia Line-of-Credit into one term loan, which would bear interest at the 3-month LIBOR + 6.87%. The term sheet contemplates Bluegreen providing additional collateral for this facility and amending covenants, other terms and conditions. There can be no assurances that such refinancing will be obtained on the terms contemplated in the term sheet, if at all.
     There is no availability under the Wachovia Line-of-Credit.
Commitments
     Bluegreen’s material commitments as of December 31, 2009 included the required payments due on its receivable-backed debt, lines-of-credit and other notes payable, commitments to complete its Bluegreen Resorts and Communities projects based on its sales contracts with customers and commitments under noncancelable operating leases.
     Bluegreen estimates that the cash required to complete Bluegreen resort buildings, resort amenities and other common costs in projects in which sales have occurred was approximately $1.9 million as of December 31, 2009. Bluegreen estimates that the cash required to complete communities in which sales have occurred was approximately $7.7 million. These amounts assume that Bluegreen is not obligated to develop any building, project or amenity in which a commitment has not been made in a sales contract with a customer; however, Bluegreen anticipates that it will incur such obligations in the future. Bluegreen plans to fund these expenditures over the next three to ten years, primarily with cash generated from operations. There is no assurance that Bluegreen will be able to generate the cash from operations necessary to complete the foregoing commitments or that actual costs will not exceed those estimated.

112


 

Real Estate
 
     The following table summarizes the contractual minimum principal and interest payments, respectively, required on all of Bluegreen’s outstanding debt (including its receivable-backed debt, lines-of-credit and other notes and debentures payable) and its noncancelable operating leases by period date, as of December 31, 2009, which excludes the extension contemplated by the Wachovia loan term sheet previously discussed (in thousands):
                                                 
            Purchase                          
            Accounting     Less than     13 - 36     37 - 60     More than  
Category   Total     Adjustments     12 Months     Months     Months     60 Months  
Long-term debt obligations
  $ 479,576       (59,860 )     87,480       102,679       63,890       285,387  
Interest payable on long-term debt
    287,212             30,162       45,364       34,319       177,367  
Noncancelable operating leases
    70,135             11,747       17,176       10,225       30,987  
 
                                   
Total obligations
  $ 836,923       (59,860 )     129,389       165,219       108,434       493,741  
 
                                   
Vacation Ownership Receivables Purchase Facilities — Off-Balance Sheet Arrangements
     Bluegreen historically chose to monetize its receivables through various facilities and through periodic term securitization transactions, as these arrangements provided them with cash inflows both currently and in the future at what they believe to be competitive rates without adding leverage to its financial condition or retaining recourse for losses on the receivables sold. In addition, these sale transactions have historically generated gains on its financial results on a periodic basis, which would not be realized under a traditional financing arrangement. Bluegreen made the decision to structure future sales of its notes receivable so that they are accounted for as on-balance sheet borrowings. Recently, the term securitization market has had minimal activity and there is no assurance that these types of transactions will be available in the future at acceptable cost, if at all.
     Historically, Bluegreen has been a party to a number of securitization-type transactions, all of which in its opinion utilize customary structures and terms for transactions of this type. In each securitization-type transaction, Bluegreen sold receivables to a wholly-owned special purpose entity which, in turn, sold the receivables either directly to third parties or to a trust established for the transaction. The receivables were sold on a non-recourse basis (except for breaches of certain representations and warranties) and the special purpose entity retained residual interest in the receivables sold. Bluegreen has acted as servicer of the receivables pools in each transaction for a fee, with the servicing obligations specified under the applicable transaction documents. Under the terms of the applicable transaction documents, the cash payments received from obligors on the receivables sold are distributed to the investors (which, depending on the transaction, may acquire the receivables directly or purchase an interest in, or make loans secured by the receivables to, a trust that owns the receivables), parties providing services in connection with the facility, and its special purpose subsidiary as the holder of the retained interest in the receivables according to specified formulas. In general, available funds are applied monthly to pay fees to service providers, make interest and principal payments to investors, fund required reserves, if any, and pay distributions in respect of the retained interests in the receivables, pursuant to the terms of the transaction documents. However, to the extent the portfolio of receivables fails to satisfy specified performance criteria (as may occur due to an increase in default rates or loan loss severity) or other trigger events, the funds received from obligors are distributed on an accelerated basis to investors. In effect, during a period in which the accelerated payment formula is applicable, funds are paid to outside investors until they receive the full amount owed to them and only then are payments made to Bluegreen’s subsidiary in its capacity as the holder of the retained interests. Depending on the circumstances and the transaction, the application of the accelerated payment formula may be permanent or temporary until the trigger event is cured. If the accelerated payment formula were to become applicable, the cash flow on the retained interests in the receivables would be reduced until the outside investors were paid or the regular payment formula was resumed. Such a reduction in cash flow could cause a decline in the fair value of Bluegreen’s retained interests in the receivables sold. Declines in fair value that are determined to be other than temporary are charged to operations in the current period. In each facility, the failure of the pool of receivables to comply with specified portfolio covenants can create a trigger event, which results in the utilization of the accelerated payment formula (in certain circumstances until the trigger event is cured and in other circumstances permanently) and, to the extent of any remaining commitment to purchase receivables from Bluegreen’s special purpose subsidiary, the suspension or termination of that commitment. In addition, in each securitization-type facility, certain breaches of Bluegreen’s obligations as servicer or other events allow the indenture trustee to cause the servicing to be transferred to a substitute third party servicer. In that case, Bluegreen’s obligation to service the receivables would terminate and they would cease to receive a servicing fee.

113


 

Real Estate
 
     The following is a summary of significant financial information related to Bluegreen’s off-balance sheet facilities and securitizations and the related on-balance sheet retained interests during the periods presented below (in thousands):
         
    As of  
    December 31, 2009  
On-Balance Sheet:
       
Retained interests in notes receivable sold
  $ 26,340  
 
       
Off-Balance Sheet:
       
Notes receivable sold without recourse
    453,591  
Principal balance owed to note receivable purchasers
    411,369  
         
    Bluegreen Interim  
    Period  
Income Statement:
       
Gain on sales of notes receivable
  $  
Interest accretion on retained interests in notes receivable sold
    2,065  
Servicing fee income
    867  
     See Note 11 in Item 8 of this Report for additional information relating to Bluegreen’s off-balance sheet arrangements.
     In June 2009, the FASB issued an amendment to the accounting guidance for transfers of financial assets, which became effective for us on January 1, 2010. This amendment addresses the effects of eliminating the QSPE concept and responds to concerns about the application of certain key provisions of previous accounting rules, including concerns over the transparency of an enterprise’s involvement with VIEs. As a result of the adoption of this amendment on January 1, 2010, Bluegreen expects that it will be required to consolidate its QSPEs described in Note 4 to our consolidated financial statements. See Note 1 of the “Notes to Consolidated Financial Statements” included in Item 8 of this report for additional information relating to the effects of this accounting pronouncement.

114


 

Financial Services
(BankAtlantic Bancorp)
 
Financial Services
     Our Financial Services activities of BFC are comprised of the operations of BankAtlantic Bancorp and its subsidiaries. BankAtlantic Bancorp in 2009 presents its results in two reportable segments and its results of operations are consolidated in BFC Financial Corporation. The only assets available to BFC Financial Corporation from BankAtlantic Bancorp are dividends when and if paid by BankAtlantic Bancorp. BankAtlantic Bancorp is a separate public company and its management prepared the following discussion regarding BankAtlantic Bancorp which was included in BankAtlantic Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2009 filed with the Securities and Exchange Commission. Accordingly, references to “we”, “us” or “our” in the following discussion under the caption “Financial Services” are references to BankAtlantic Bancorp and its subsidiaries, and are not references to BFC Financial Corporation.
Introduction
     BankAtlantic Bancorp, Inc. is a Florida-based financial services holding company offering a full range of products and services through BankAtlantic, our wholly-owned banking subsidiary. As of December 31, 2009, BankAtlantic Bancorp had total consolidated assets of approximately $4.8 billion, deposits of approximately $4.0 billion and shareholders’ equity of approximately $141.6 million. BankAtlantic Bancorp operates through two primary business segments: BankAtlantic and BankAtlantic Bancorp Parent Company.
     On February 28, 2007, BankAtlantic Bancorp completed the sale to Stifel Financial Corp. (“Stifel”) of Ryan Beck Holdings, Inc. (“Ryan Beck”), a subsidiary engaged in retail and institutional brokerage and investment banking. As a consequence of the sale of Ryan Beck to Stifel, the results of operations of Ryan Beck are presented as “Discontinued Operations” in the consolidated financial statements for the year ended December 31, 2007.
Consolidated Results of Operations
     Loss from continuing operations from each of BankAtlantic Bancorp’s reportable business segments follows (in thousands):
                         
    For the Years Ended December 31,  
    2009     2008     2007  
BankAtlantic
  $ (148,708 )     (166,144 )     (19,440 )
BankAtlantic Bancorp Parent Co.
    (40,812 )     (53,100 )     (10,572 )
     
Net loss
  $ (189,520 )     (219,244 )     (30,012 )
     
     The lower loss from continuing operations at BankAtlantic during 2009 compared to the same 2008 period primarily resulted from BankAtlantic recognizing a $31.7 million income tax benefit during 2009 in connection with a change in tax regulations which enabled BankAtlantic to utilize additional net operating losses, while during 2008, BankAtlantic established a deferred tax valuation allowance on its entire amount of net deferred tax assets resulting in a tax provision of $31.1 million. BankAtlantic’s 2009 loss before income taxes increased by $45.4 million compared to 2008. The higher 2009 loss primarily resulted from a $78.9 million increase in the provision for loan losses, a $30.3 million reduction in net interest income and $8.0 million of lower non-interest income. The increase in BankAtlantic’s loss before income taxes was partially offset by $71.8 million of lower non-interest expenses.
     The substantial increase in the provision for loan losses resulted primarily from a significant increase in charge-offs and loan loss reserves in our consumer, residential and commercial real estate loan portfolios. These portfolios continued to be negatively affected by the current adverse economic environment, especially declining collateral values and rising unemployment. If economic and real estate market conditions do not improve, we believe that additional provisions for loan losses may be required in future periods.
     The reduction in BankAtlantic’s net interest income was primarily due to a decline in earning assets. BankAtlantic reduced its assets in order to improve its liquidity and regulatory capital ratios. BankAtlantic’s average earnings assets declined by $790.6 million during 2009 compared to 2008.

115


 

Financial Services
(BankAtlantic Bancorp)
 
     The reduction in non-interest income primarily relates to a decline in overdraft fees. Overdraft fees represented approximately 54% of our non-interest income during 2009. This overdraft fee income decline reflects, in part, management’s focus on targeting retail customers and businesses that maintain higher average deposit balances which generally will result in fewer overdrafts per account. We believe that this trend of declining overdraft fees will continue and could be accelerated by recent overdraft rules adopted by the Federal Reserve effective July 1, 2010. Congress has also proposed additional legislation to further limit the assessment of overdraft fees. These events could significantly reduce our overdraft fee income in subsequent periods.
     In response to adverse economic conditions, BankAtlantic during 2009 continued to reduce expenses with a view towards increasing operating efficiencies. These operating expense initiatives included workforce reductions, consolidation of certain back-office facilities, renegotiation of vendor contracts, outsourcing of certain back-office functions, reduction in marketing expenses and other targeted expense reductions. Also, restructuring charges and other impairments declined by $33.0 million. These expense reductions were partially offset by $8.2 million of additional FDIC insurance premiums, including a $2.4 million FDIC special assessment in June 2009.
     The significant decline in BankAtlantic’s performance during the year ended December 31, 2008 compared to the same 2007 period primarily resulted from a $48.3 million goodwill impairment charge, the establishment of a $66.9 million deferred tax valuation allowance, a $64.5 million increase in the provision for loan losses and a decline in non-interest income. These items were partially offset by lower non-interest expenses, excluding the goodwill impairment charge. The substantial increase in BankAtlantic’s provision for loan losses for 2008 compared to 2007 reflects net charge-offs for 2008 of $97.4 million compared to $20.4 million for 2007 and a $31.6 million increase in the allowance for loan losses during 2008. The charge-offs and loan reserve increases were primarily related to commercial real estate and consumer loans. The decline in BankAtlantic’s non-interest income was primarily due to lower net assessments of overdraft fees. BankAtlantic non-interest expenses, excluding the goodwill impairment charge, declined by $31.6 million primarily due to management’s expense reduction initiatives.
     The decrease in BankAtlantic Bancorp Parent Company segment loss during 2009 compared to 2008 reflects a $6.0 million reduction in the provision for loan losses and $4.9 million of reduced net interest expense. The provision for loan losses for both years was associated with non-performing loans acquired from BankAtlantic in March 2008. The 2009 provision for loan losses represents additional charge-offs and specific reserves associated with these loans due to declining real estate collateral values. The improvement in net interest expense reflects historically low LIBOR interest rates during 2009. The majority of BankAtlantic Bancorp Parent Company’s debt is indexed to the three-month LIBOR interest rate. The decline in interest rates was partially offset by interest accrued on the junior subordinated debentures deferred interest. BankAtlantic Bancorp Parent Company operating expenses were higher by $0.3 million during 2009 compared to 2008. Lower property management costs associated with non-performing loans during 2009 were offset by higher compensation expenses.
     The increase in BankAtlantic Bancorp Parent Company segment loss during 2008 compared to 2007 reflects a provision for loan losses of $24.4 million as well as the establishment of a $20.9 million deferred tax valuation allowance. BankAtlantic Bancorp Parent Company had no provision for loan losses during the comparable 2007 period as it held no loans during that period. Additionally, gains from securities activities declined from $6.1 million during 2007 to a loss of $0.4 million during 2008 as BankAtlantic Bancorp Parent Company liquidated its managed fund investment portfolio and sold its entire investment in Stifel securities acquired by it in connection with the 2007 sale of Ryan Beck. BankAtlantic Bancorp Parent Company operating expenses were higher by $4.5 million during 2008 compared to 2007. The increase reflects property management costs associated with non-performing loans and an increase in professional fees in 2008 compared to 2007.
     During 2009 and 2008, BankAtlantic Bancorp Parent Company recognized in discontinued operations $3.7 million and $16.6 million, respectively, of additional proceeds from the sale of Ryan Beck in connection with contingent earn-out payments under the Ryan Beck merger agreement with Stifel. Included in discontinued operations during 2007 relating to the Ryan Beck segment was income of $7.8 million. Ryan Beck’s 2007 segment income reflects a $16.4 million gain from the sale of Ryan Beck to Stifel partially offset by an $8.6 million loss from operations during the two months ended February 28, 2007, the closing date of the sale to Stifel.

116


 

Financial Services
(BankAtlantic Bancorp)
 
BankAtlantic Results of Operations
Summary
     The following events over the past several years have had a significant impact on BankAtlantic’s results of operations:
     In April 2002, BankAtlantic launched its “Florida’s Most Convenient Bank” initiative which resulted in significant demand deposit, NOW checking and savings account growth (we refer to these accounts as “core deposit” accounts). Since inception of this campaign, BankAtlantic has increased core deposit balances from $600 million at December 31, 2001 to approximately $2.7 billion at December 31, 2009. These core deposits represented 67% of BankAtlantic’s total deposits at December 31, 2009, compared to 26% of total deposits at December 31, 2001.
     In 2004, BankAtlantic announced its de novo store expansion strategy and had opened 32 stores as of December 31, 2009 in connection with this strategy. BankAtlantic’s non-interest expenses substantially increased as a result of the hiring of additional personnel, increased marketing to support new stores, increased leasing and operating costs for the new stores and expenditures for back-office technologies to support a larger institution.
     During the fourth quarter of 2005, the growth in core deposits slowed reflecting rising short-term interest rates and increased competition among financial institutions. In response to these market conditions, BankAtlantic significantly increased its marketing expenditures and continued its new store expansion program in an effort to sustain core deposit growth. The number of new core deposit accounts opened increased from 226,000 during 2005 to 270,000 during 2006, while core deposit balances grew to $2.2 billion at December 31, 2006 from $2.1 billion at December 31, 2005. In response to adverse economic conditions and the slowed deposit growth, BankAtlantic significantly reduced its marketing expenditures beginning during the fourth quarter of 2006 as part of an overall effort to reduce its non-interest expenses.
     During the latter half of 2007, the real estate markets deteriorated rapidly throughout the United States, and particularly in Florida where BankAtlantic’s commercial and consumer real estate loans are concentrated. In response to these market conditions, BankAtlantic significantly increased its allowance for loan losses for commercial loans collateralized by real estate property and to a lesser extent home equity consumer loans.
     During the fourth quarter of 2007, the decision was made to delay BankAtlantic’s retail network expansion, consolidate certain back-office facilities and implement other initiatives to reduce non-interest expenses.
     As economic conditions deteriorated in late 2007 and 2008, real estate property values continued to decline. The adverse economic and real estate market conditions severely impacted the credit quality of BankAtlantic’s loan portfolio. In March 2008, BankAtlantic Bancorp Parent Company purchased $101.5 million of non-performing loans from BankAtlantic and during the year contributed $65 million of capital to BankAtlantic. During the fourth quarter of 2008, financial and credit markets further experienced rapid deterioration, investor confidence in financial institutions was significantly and adversely affected and the market capitalization of BankAtlantic Bancorp’s Class A common stock declined materially. As BankAtlantic’s non-performing loans increased, additional loan loss reserves were established, impairments of long-lived assets were recognized and earnings were adversely affected. As a consequence of the substantial losses during 2007 and 2008, the deterioration in the price of BankAtlantic Bancorp’s Class A common stock and the unprecedented economic and market uncertainty, BankAtlantic recognized a $48.3 million non-cash goodwill impairment charge and established $66.9 million non-cash deferred tax valuation allowance.
     During 2009, in response to the continued deteriorating economic conditions including falling real estate collateral values and rising unemployment, and the significant adverse impact on the credit quality of our assets and our results of operations, BankAtlantic reduced its assets, repaid its wholesale borrowings and increased core deposits with a view towards strengthening its liquidity and regulatory capital ratios. However, the credit quality of its loans continued to deteriorate in 2009, and BankAtlantic’s losses increased. As a result BankAtlantic Bancorp, Inc. contributed an additional $105 million of capital to BankAtlantic. Additionally, as a consequence of the adverse economic environment, an additional $22.5 million of restructuring charges and asset impairments were recognized during 2009.

117


 

Financial Services
(BankAtlantic Bancorp)
 
     The following table is a condensed income statement summarizing BankAtlantic’s results of operations (in thousands):
                                         
    For the Years Ended     Change     Change  
    Ended December 31,     2009 vs     2008 vs  
    2009     2008     2007     2008     2007  
Net interest income
  $ 163,324       193,648       199,510       (30,324 )     (5,862 )
Provision for loan losses
    (214,244 )     (135,383 )     (70,842 )     (78,861 )     (64,541 )
     
Net interest income (loss) after provision for loan losses
    (50,920 )     58,265       128,668       (109,185 )     (70,403 )
Non-interest income
    129,292       137,308       144,412       (8,016 )     (7,104 )
Non-interest expense
    (258,799 )     (330,623 )     (313,898 )     71,824       (16,725 )
BankAtlantic (loss) income before income taxes
    (180,427 )     (135,050 )     (40,818 )     (45,377 )     (94,232 )
Benefit/(provision) for income taxes
    31,719       (31,094 )     21,378       62,813       (52,472 )
     
BankAtlantic net loss
  $ (148,708 )     (166,144 )     (19,440 )     17,436       (146,704 )
     
BankAtlantic’s Net Interest Income
     The following table summarizes net interest income:
                                                                                 
            For the Years Ended  
            December 31, 2009     December 31, 2008     December 31, 2007  
(Dollars are in thousands)           Average     Revenue/     Yield/     Average     Revenue/     Yield/     Average     Revenue/     Yield/  
Interest earning assets           Balance     Expense     Rate     Balance     Expense     Rate     Balance     Expense     Rate  
Loans: (a)
                                                                               
Residential real estate
          $ 1,758,188       89,836       5.11       2,053,645       111,691       5.44       2,209,832       120,768       5.47  
Commercial real estate
            1,204,005       46,746       3.88       1,238,307       69,642       5.62       1,367,095       108,931       7.97  
Consumer
            723,135       21,104       2.92       743,863       33,950       4.56       650,764       47,625       7.32  
Commercial business
            143,224       7,461       5.21       132,565       9,516       7.18       142,455       12,720       8.93  
Small business
            316,328       20,010       6.33       320,853       22,162       6.91       298,774       23,954       8.02  
                     
Total loans
            4,144,880       185,157       4.47       4,489,233       246,961       5.50       4,668,920       313,998       6.73  
                     
Tax exempt securities
                                                328,583       19,272       5.87  
Taxable investment securities (b)
            661,216       37,857       5.73       1,078,189       65,570       6.08       689,263       42,849       6.22  
Federal funds sold
            14,760       33       0.22       44,031       754       1.71       3,638       195       5.36  
                     
Total investment securities
            675,976       37,890       5.61       1,122,220       66,324       5.91       1,021,484       62,316       6.10  
                     
Total interest earning assets
            4,820,856       223,047       4.63       5,611,453       313,285       5.58       5,690,404       376,314       6.61  
                     
Total non-interest earning assets
            365,257                       503,028                       510,173                  
 
                                                                         
Total assets
          $ 5,186,113                       6,114,481                       6,200,577                  
 
                                                                         
Interest bearing liabilities
                                                                               
Deposits:
                                                                               
Savings
          $ 436,169       1,612       0.37       503,464       4,994       0.99       584,542       12,559       2.15  
NOW, money funds and checking
            1,589,340       9,961       0.63       1,506,479       17,784       1.18       1,450,960       26,031       1.79  
Certificate accounts
            1,192,012       30,311       2.54       1,088,170       41,485       3.81       992,043       45,886       4.63  
                     
Total interest bearing deposits
            3,217,521       41,884       1.30       3,098,113       64,263       2.07       3,027,545       84,476       2.79  
                     
Securities sold under agreements to repurchase and federal funds purchased
  &