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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 

Washington, DC  20549

 

FORM 10-Q

 

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the Quarter Ended March 31, 2015

 

[   ] 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.)

 

 

 

 

 

 

 

 

 

401 East Las Olas Boulevard, Suite 800

 

 

 

 

Fort Lauderdale, Florida

 

33301

 

 

(Address of principal executive office)

 

(Zip Code)

 

 

 

 

 

 

 

 

 

 

(954) 940-4900

 

 

(Registrant's telephone number, including area code)

 

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

YES [X]NO [   ]

 

Indicate 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 [X]NO [   ]

 

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 [ ]

Accelerated filer [X]

Non-accelerated filer [ ]

Smaller reporting company [ ]    

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

YES [   ]NO [ X ]

 

The number of shares outstanding of each of the registrant’s classes of common stock as of May 4, 2015 is as follows:

 

 

Class A Common Stock of $.01 par value,  76,953,106 shares outstanding.
Class B Common Stock of $.01 par value, 10,132,184 shares outstanding.

 

 


 

 

 

 

Arch 31, 2013

 

 

 

 

 

BFC Financial Corporation

TABLE OF CONTENTS

 

 

 

Part I.

FINANCIAL INFORMATION

Page

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

Consolidated Statements of Financial Condition as of March 31, 2015 and December 31, 2014 -Unaudited

 

 

 

 

Consolidated Statements of Operations for the Three Months Ended March 31, 2015 and 2014 - Unaudited

 

 

 

 

Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2015 and 2014 - Unaudited

 

 

 

 

Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2015 and 2014 - Unaudited

 

 

 

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2015 and 2014 - Unaudited

 

 

 

 

Notes to Consolidated Financial Statements - Unaudited

 

 

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

47 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

80 

 

 

 

Item 4.

Controls and Procedures

81 

 

 

 

Part II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

82 

 

 

 

Item 1A.

Risk Factors

82 

 

 

 

Item 5

Other Information

82 

 

 

 

Item 6.

Exhibits

83 

 

 

 

 

Signatures

84 

 

 

 

 

1

 


 

 

PART I – FINANCIAL INFORMATION

 

Item 1.  FINANCIAL STATEMENTS

 

 

 

 

 

 

BFC Financial Corporation

Consolidated Statements of Financial Condition

(In thousands, except share data)

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

2015

 

2014

 

 

(Unaudited)

 

 

ASSETS

 

 

 

 

Cash and interest bearing deposits in banks ($2,738 in 2015 and $4,993 in 2014

 

 

 

 

held by variable interest entities ("VIEs"))

$

253,158 

 

279,437 

Restricted cash ($41,172 in 2015 and $31,554 in 2014 held by VIEs)

 

73,029 

 

54,620 

Loans held for sale (held by VIEs)

 

32,072 

 

35,423 

Loans receivable, net of allowance for loan losses of $381 in 2015 and $977 in 2014

 

 

 

 

(including $18,740, net of $381 allowance in 2015 and $18,972, net of $977

 

 

 

 

allowance in 2014 held by VIEs)

 

26,582 

 

26,844 

Notes receivable, including net securitized notes held by VIEs of $301,430 in 2015

 

 

 

 

and $293,950 in 2014, net of allowance of $100,851 in 2015 and $102,566 in 2014

 

410,904 

 

424,267 

Inventory

 

219,185 

 

209,893 

Real estate held for investment ($19,346 in 2015 and $19,156 in 2014 held by VIEs)

 

83,335 

 

75,590 

Real estate held for sale ($13,059 in 2015 and $13,745 in 2014 held by VIEs)

 

39,763 

 

41,733 

Investments in unconsolidated real estate joint ventures

 

15,807 

 

16,065 

Properties and equipment, net ($8,439  in 2015 and $8,350 in 2014 held by VIEs)

 

89,521 

 

90,013 

Goodwill and intangible assets, net

 

77,809 

 

79,730 

Other assets ($1,512 in 2015 and $1,017 in 2014 held by VIEs)

 

97,440 

 

77,681 

Total assets

$

1,418,605 

 

1,411,296 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Liabilities:

 

 

 

 

BB&T preferred interest in FAR, LLC (held by VIEs)

$

6,132 

 

12,348 

Receivable-backed notes payable - recourse

 

61,780 

 

92,129 

Receivable-backed notes payable - non-recourse (held by VIEs)

 

360,824 

 

320,275 

Notes and mortgage notes payable and other borrowings

 

98,154 

 

107,984 

Junior subordinated debentures

 

150,675 

 

150,038 

Deferred income taxes

 

101,216 

 

92,609 

Shares subject to mandatory redemption

 

12,807 

 

12,714 

Other liabilities ($12,344 in 2015 and $12,602 in 2014 held by VIEs)

 

172,721 

 

176,493 

Total liabilities

 

964,309 

 

964,590 

 

 

 

 

 

Commitments and contingencies (See Note 12)

 

 

 

 

 

 

 

 

 

Preferred stock of $.01 par value; authorized 10,000,000 shares:

 

 

 

 

Redeemable 5% Cumulative Preferred Stock of $.01 par value; authorized 15,000 shares;

 

 

 

 

issued and outstanding 15,000 shares with a stated value of $1,000 per share

 

 -

 

 -

 

 

 

 

 

Equity:

 

 

 

 

Class A common stock of $.01 par value, authorized 150,000,000 shares;

 

 

 

 

issued and outstanding 73,282,734 in 2015 and 73,307,012 in 2014 

 

733 

 

733 

Class B common stock of $.01 par value, authorized 20,000,000 shares;

 

 

 

 

issued and outstanding 10,132,184 in 2015 and 10,168,105 in 2014

 

101 

 

102 

Additional paid-in capital

 

143,761 

 

142,058 

Accumulated earnings

 

111,546 

 

109,660 

Accumulated other comprehensive income

 

420 

 

353 

Total  BFC Financial Corporation ("BFC") equity

 

256,561 

 

252,906 

Noncontrolling interests

 

197,735 

 

193,800 

Total equity

 

454,296 

 

446,706 

Total liabilities and equity

$

1,418,605 

 

1,411,296 

 

 

 

 

 

See Notes to  Consolidated Financial Statements - Unaudited

 

 

 

 

1

 


 

 

 

 

 

 

 

 

 

 

BFC Financial Corporation

Consolidated Statements of Operations - Unaudited

(In thousands, except per share data)

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

 

 

 

2015

 

2014

 

Revenues

 

 

 

 

 

Sales of VOIs

$

53,182 

 

60,244 

 

Sales, other

 

19,535 

 

16,555 

 

Interest income

 

19,566 

 

22,201 

 

Fee-based sales commission

 

32,600 

 

27,115 

 

Other fee-based services revenue

 

23,753 

 

21,925 

 

Other revenue

 

1,257 

 

2,370 

 

Total revenues

 

149,893 

 

150,410 

 

 

 

 

 

 

 

Costs and Expenses

 

 

 

 

 

Cost of sales of VOIs

 

4,866 

 

7,048 

 

Cost of sales, other

 

13,835 

 

12,101 

 

Cost of other fee-based services

 

14,801 

 

13,551 

 

Interest expense

 

10,656 

 

12,677 

 

Reversals of loan losses

 

(3,821)

 

(1,248)

 

(Loss recoveries) impairments of assets, net

 

(1,063)

 

1,319 

 

Selling, general and administrative expenses

 

97,782 

 

90,340 

 

Total costs and expenses

 

137,056 

 

135,788 

 

 

 

 

 

 

 

Equity losses in unconsolidated real estate joint ventures

 

(304)

 

(6)

 

Other income

 

1,248 

 

680 

 

Income from continuing operations before income taxes

 

13,781 

 

15,296 

 

Less: Provision for income taxes

 

8,609 

 

8,754 

 

Net income

 

5,172 

 

6,542 

 

Less: Net income attributable to noncontrolling interests

 

3,286 

 

3,406 

 

Net income attributable to BFC

$

1,886 

 

3,136 

 

 

 

 

 

 

 

 

 

 

 

CONTINUED

 

 

 

 

 

 

 

 

 

2

 


 

 

 

 

 

 

 

 

 

 

 

BFC Financial Corporation

Consolidated Statements of Operations - Unaudited

(In thousands, except per share data)

 

 

 

 

 

 

 

 

For the three Months Ended

March 31,

 

 

 

2015

 

2014

 

Basic and Diluted Earnings Per Common Share

 

 

 

 

 

Attributable to BFC (Note 16):

 

 

 

 

 

Basic Earnings Per Common Share

 

 

 

 

 

Earnings per share from continuing operations 

$

0.02 

 

0.04 

 

Earnings per share from discontinued operations

 

 -

 

 -

 

Net earnings per common share

$

0.02 

 

0.04 

 

 

 

 

 

 

 

Diluted Earnings Per Common Share

 

 

 

 

 

Earnings per share from continuing operations

$

0.02 

 

0.04 

 

Earnings per share from discontinued operations

 

 -

 

 -

 

Net earnings per common share

$

0.02 

 

0.04 

 

 

 

 

 

 

 

Basic weighted average number of

 

 

 

 

 

common shares outstanding

 

87,136 

 

83,185 

 

 

 

 

 

 

 

Diluted weighted average number of common

 

 

 

 

 

and common equivalent shares outstanding

 

87,332 

 

84,624 

 

 

 

 

 

 

 

Amounts attributable to BFC common shareholders:

 

 

 

 

 

Net income available to common shareholders

$

1,886 

 

3,136 

 

 

 

 

 

 

 

See Notes to Consolidated Financial Statements - Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 


 

 

 

 

 

 

 

 

 

 

 

BFC Financial Corporation

Consolidated Statements of Comprehensive Income - Unaudited

(In thousands)

 

 

 

 

 

 

 

 

For the three Months Ended

March 31,

 

 

 

2015

 

2014

 

Net income

$

5,172 

 

6,542 

 

 

 

 

 

 

 

Other comprehensive income, net of tax:

 

 

 

 

 

Unrealized (losses) gains on securities available for sale, net of tax

 

(13)

 

12 

 

 

 

 

 

 

 

Unrealized gains from foreign currency translation

 

132 

 

29 

 

 

 

 

 

 

 

Other comprehensive income, net of tax

$

119 

 

41 

 

 

 

 

 

 

 

Comprehensive income, net of tax

 

5,291 

 

6,583 

 

Less: Comprehensive income attributable

 

 

 

 

 

to noncontrolling interests

 

3,338 

 

3,418 

 

Total comprehensive income attributable to BFC

$

1,953 

 

3,165 

 

 

 

 

 

 

 

See Notes to Consolidated Financial Statements - Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BFC Financial Corporation

Consolidated Statements of Changes in Equity - Unaudited

For the Three Months Ended March 31, 2015 and 2014

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares of

 

 

 

 

 

Accumulated

 

 

 

 

Common Stock

 

Common

 

 

Other

 

Non-

 

 

Outstanding

 

Stock

Additional

 

Comprehen-

Total

controlling

 

 

Class

 

Class

Paid-in

Accumulated

sive

BFC

Interest in

Total

 

A

B

 

A

B

Capital

Earnings

Income

Equity

Subsidiaries

Equity

Balance, December 31,  2013

71,265 
7,337 

$

713 
73 
142,585 
95,810 
240 
239,421 
182,975 
422,396 

Net income

 -

 -

 

 -

 -

 -

3,136 

 -

3,136 
3,406 
6,542 

Other comprehensive income

 -

 -

 

 -

 -

 -

 -

29 
29 
12 
41 

Subsidiaries' capital transactions attributable to noncontrolling interest

 -

 -

 

 -

 -

 -

 -

 -

 -

732 
732 

Distributions to noncontrolling interest

 -

 -

 

 -

 -

 -

 -

 -

 -

(43)
(43)

Subsidiaries' capital transactions attributable to BFC

 -

 -

 

 -

 -

123 

 -

 -

123 

 -

123 

Conversion of Common Stock from Class B to Class A

25 
(25)

 

 -

 -

 -

 -

 -

 -

 -

 -

Issuance of Common Stock from exercise of options

29 

 

 -

 -

14 

 -

 -

14 

 -

14 

Share-based compensation

 -

 -

 

 -

 -

371 

 -

 -

371 

 -

371 

Balance, March 31,  2014

71,319 
7,318 

$

713 
73 
143,093 
98,946 
269 
243,094 
187,082 
430,176 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31,  2014

73,307 
10,168 

$

733 
102 
142,058 
109,660 
353 
252,906 
193,800 
446,706 

Net income

 -

 -

 

 -

 -

 -

1,886 

 -

1,886 
3,286 
5,172 

Other comprehensive income

 -

 -

 

 -

 -

 -

 -

67 
67 
52 
119 

Subsidiaries' capital transactions attributable to noncontrolling interest

 -

 -

 

 -

 -

 -

 -

 -

 -

597 
597 

Subsidiaries' capital transactions attributable to BFC

 -

 -

 

 -

 -

634 

 -

 -

634 

 -

634 

Conversion of Common Stock from Class B to Class A

36 
(36)

 

 -

 -

 -

 -

 -

 -

 -

 -

Repurchase and retirement of Class A Common Stock

(60)

 -

 

 -

(1)
(173)

 -

 -

(174)

 -

(174)

Share-based compensation

 -

 -

 

 -

 -

1,242 

 -

 -

1,242 

 -

1,242 

Balance, March 31,  2015

73,283 
10,132 

$

733 
101 
143,761 
111,546 
420 
256,561 
197,735 
454,296 

 

 

 

 

 

 

 

 

 

 

 

 

See Notes to Consolidated Financial Statements - Unaudited

 

 

 

 

5

 


 

 

 

 

 

 

 

 

 

 

BFC Financial Corporation

 

Consolidated Statements of Cash Flows - Unaudited

 

(In thousands)

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

 

 

 

2015

 

2014

 

Net cash (used in) provided by operating activities

$

(5,034)

 

381 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

Increase in restricted cash and time deposits at financial institutions

 

(2,645)

 

 -

 

Proceeds from redemption of tax certificates

 

96 

 

321 

 

Purchase of securities available for sale

 

(5)

 

 -

 

Distributions from unconsolidated affiliates

 

 -

 

215 

 

Investments in unconsolidated real estate joint ventures

 

(68)

 

(72)

 

Repayment of loans receivable, net

 

6,658 

 

5,605 

 

Proceeds from the sale of loans receivable

 

89 

 

 -

 

Proceeds from sales of real estate held-for-sale

 

2,866 

 

4,852 

 

Proceeds from contribution of real estate to joint ventures

 

 -

 

2,880 

 

Additions to real estate held-for-investment

 

(7,024)

 

(193)

 

Purchases of property and equipment

 

(2,649)

 

(5,045)

 

Proceeds from the sale of property and equipment

 

247 

 

 -

 

Cash paid for acquisitions, net of cash received

 

 -

 

(1,900)

 

Net cash (used in) provided by investing activities

$

(2,435)

 

6,663 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

Repayment of BB&T preferred interest in FAR, LLC

 

(6,216)

 

(14,013)

 

Repayments of notes, mortgage notes payable and other borrowings

 

(53,890)

 

(39,214)

 

Proceeds from notes, mortgage notes payable and other borrowings

 

43,680 

 

20,268 

 

Payments for debt issuance costs

 

(2,210)

 

(263)

 

Proceeds from the exercise of BFC stock options

 

 -

 

14 

 

Retirement of Class A common stock

 

(174)

 

 -

 

Distributions to non-controlling interest

 

 -

 

(43)

 

Net cash used in financing activities

$

(18,810)

 

(33,251)

 

 

 

 

 

 

 

Decrease in cash and cash equivalents

 

(26,279)

 

(26,207)

 

Cash and cash equivalents at beginning of period 

 

279,437 

 

217,636 

 

Cash and cash equivalents at end of period 

$

253,158 

 

191,429 

 

 

 

 

 

 

 

 

 

 

 

CONTINUED

 

 

 

 

 

 

 

 

 

6

 


 

 

 

 

 

 

 

 

 

BFC Financial Corporation

 

Consolidated Statements of Cash Flows - Unaudited

 

(In thousands)

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31,

 

 

2015

 

2014

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

Interest paid on borrowings and deposits

$

9,038 

 

11,353 

 

Income taxes paid

 

2,122 

 

4,176 

 

Income tax refunded

 

(356)

 

(77)

 

 

 

 

 

 

 

Supplementary disclosure of non-cash investing and financing activities:

 

 

 

 

 

Restricted cash received on securitization, pending

 

 

 

 

 

provision of additional collateral

$

10,066 

 

 -

 

Loans and tax certificates transferred to real estate

 

 

 

 

 

held-for-sale or real estate held-for-investment

 

2,156 

 

12,406 

 

Real estate held-for-investment transferred to investment

 

 

 

 

 

in joint ventures

 

 -

 

1,920 

 

Real estate held-for-investment transferred to real

 

 

 

 

 

estate held-for-sale

 

1,027 

 

 -

 

Increase in BFC accumulated other comprehensive

 

 

 

 

 

income, net of taxes

 

67 

 

29 

 

Net increase in BFC shareholders' equity from

 

 

 

 

 

the effect of subsidiaries' capital transactions, net of taxes

 

634 

 

123 

 

 

 

 

 

 

 

 

 

 

 

 

 

See Notes to Consolidated Financial Statements - Unaudited

 

 

 

 

 

 

7

 


 

 

BFC Financial Corporation

Notes to Consolidated Financial Statements - Unaudited

 

 

1.    Presentation of Interim Financial Statements

 

Basis of Financial Statement Presentation

 

The accompanying unaudited consolidated financial statements of BFC Financial Corporation (“BFC” or, unless otherwise indicated or the context otherwise requires, “we,” “us,” “our,” or the “Company”) have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information.  Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. In management’s opinion, the accompanying unaudited consolidated financial statements contain all adjustments, which include normal recurring adjustments, as are necessary for a fair statement of the consolidated financial condition of BFC at March 31, 2015; the consolidated results of operations and comprehensive income of BFC for the three months ended March 31, 2015 and 2014; changes in consolidated equity of BFC for the three months ended March 31, 2015 and 2014; and the consolidated cash flows of BFC for the three months ended March 31, 2015 and 2014. Operating results for the three months ended March 31, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015 or any other future period.  These unaudited consolidated financial statements and related notes are presented as permitted by Form 10-Q and should be read in conjunction with the Company’s audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 (the “2014 Annual Report”).  All significant inter-company balances and transactions have been eliminated in consolidation.  As used throughout this document, the term “fair value” reflects the Company’s estimate of fair value as discussed herein.  Certain amounts for prior periods have been reclassified to conform to the current period’s presentation.

 

BFC is a Florida-based holding company whose principal holdings include an approximately 81% equity interest in BBX Capital Corporation (formerly BankAtlantic Bancorp, Inc.) and its subsidiaries (“BBX Capital”) and a direct 54% equity interest in Woodbridge Holdings, LLC (“Woodbridge”). Woodbridge owns 100% of Bluegreen Corporation and its subsidiaries (“Bluegreen”).  Bluegreen is a sales, marketing and management company focused on the vacation ownership industry. BBX Capital is a Florida-based company involved in the ownership, financing, acquisition, development and management of real estate, including through real estate joint ventures, and investments in middle market operating businesses.  BBX Capital holds the remaining 46% equity interest in Woodbridge.  BFC also holds interests in other investments and subsidiaries as described herein.  BFC’s 81% equity interest in BBX Capital includes 4,771,221 shares of BBX Capital’s Class A Common Stock purchased by BFC during April 2015 pursuant to the tender offer described below. Prior to the acquisition of these shares, as of March 31, 2015, BFC had an approximately 51% equity interest in BBX Capital.  The Company currently reports the results of its continuing operations through two reportable segments:  Bluegreen and BBX Capital.

 

GAAP requires that BFC consolidate the financial results of the entities in which it has controlling interests, including BBX Capital, Woodbridge and Bluegreen.  As a consequence, the assets and liabilities of all such 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 BBX Capital, Woodbridge, and Bluegreen, 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 from those entities (and, in the case of Bluegreen, a subsequent dividend or distribution by Woodbridge).  The recognition by BFC of income from controlled entities is determined based on the total percent of economic ownership in those entities, as described above.

 

 

Strategic Transactions and Other Recent Events 

 

Tender Offer for Shares of BBX Capital’s Class A Common Stock

 

On April 30, 2015, the Company completed a cash tender offer pursuant to which it purchased from the shareholders of BBX Capital a total of 4,771,221 shares of BBX Capital’s Class A Common Stock at a purchase price of $20.00 per share, for an aggregate purchase price of approximately $95.4 million.  Prior to the tender offer, the Company owned approximately 51% of the issued and outstanding shares of BBX Capital’s Class A Common Stock and all of the issued and outstanding shares of BBX Capital’s Class B Common Stock, collectively representing an approximately 51% equity interest and 74% voting interest in BBX Capital. As a result of the closing of the tender

 

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offer, the Company currently owns approximately 81% of the issued and outstanding shares of BBX Capital’s Class A Common Stock, which together with the shares of BBX Capital’s Class B Common Stock owned by the Company, represents an approximately 81% equity interest and 90% voting interest in BBX Capital.  

 

On April 17, 2015, BFC entered into a Loan Agreement and Promissory Note with Bluegreen Specialty Finance, LLC, a wholly owned subsidiary of Bluegreen (“BSF”), pursuant to which BSF provided an $80 million loan to BFC.  BFC used the proceeds of the loan and approximately $15.4 million in cash on hand to fund the purchase of shares in the tender offer. Amounts outstanding on the loan bear interest at a rate of 10% per annum.  Payments of interest only are required on a quarterly basis, with all outstanding amounts due and payable at the end of five years.  BFC is permitted to prepay the loan in whole or in part at any time, and prepayments are required, to the extent necessary, in order for Bluegreen or its subsidiaries to remain in compliance with covenants under their outstanding indebtedness.

 

Termination of BFC-BBX Capital Merger Agreement

 

During May 2013, BFC and BBX Capital entered into a merger agreement which provided for BBX Capital to be merged into and become a wholly owned subsidiary of BFC.   The merger agreement was terminated during December 2014 as a result of the inability to obtain the listing of BFC’s Class A Common Stock on a national securities exchange, which was a condition to closing the merger.

 

Woodbridge Acquisition of Bluegreen

 

On April 2, 2013, Bluegreen merged with a wholly-owned subsidiary of Woodbridge in a cash merger transaction (sometimes hereinafter referred to as the “Bluegreen merger” or the “Bluegreen cash merger”).  Pursuant to the terms of the merger agreement, Bluegreen’s shareholders (other than Woodbridge) received consideration of $10.00 in cash for each share of Bluegreen’s common stock that they held at the effective time of the merger, including unvested restricted securities. In addition, each option to acquire shares of Bluegreen’s common stock that was outstanding at the effective time of the merger, whether vested or unvested, was canceled in exchange for a cash payment to the holder in an amount equal to the excess, if any, of the $10.00 per share merger consideration over the exercise price per share of the option. The aggregate merger consideration was approximately $149.2 million.  As a result of the merger, Bluegreen, which was the surviving corporation of the merger, became a wholly-owned subsidiary of Woodbridge.  Prior to the merger, the Company indirectly through Woodbridge owned approximately 54% of Bluegreen’s outstanding common stock.

 

In connection with the financing of the merger, BFC and Woodbridge entered into a Purchase Agreement with BBX Capital on April 2, 2013 (the “Purchase Agreement”).  Pursuant to the terms of the Purchase Agreement, BBX Capital invested $71.75 million in Woodbridge contemporaneously with the closing of the merger in exchange for a 46% equity interest in Woodbridge. BFC continues to hold the remaining 54% of Woodbridge’s outstanding equity interests. BBX Capital’s investment in Woodbridge consisted of $60 million in cash, which was utilized to pay a portion of the aggregate merger consideration, and a promissory note in Woodbridge’s favor in the principal amount of $11.75 million (the “Note”). The Note has a term of five years, accrues interest at a rate of 5% per annum and provides for payments of interest only on a quarterly basis during the term of the Note, with all outstanding amounts being due and payable at the end of the five-year term. During the first quarter of 2015 and the year ended December 31, 2014, BBX Capital paid to Woodbridge a total of approximately $147,000 and $587,000, respectively, of interest on the Note.  In connection with BBX Capital’s investment in Woodbridge, BFC and BBX Capital entered into an Amended and Restated Operating Agreement of Woodbridge, which sets forth BFC’s and BBX Capital’s respective rights as members of Woodbridge and provides for, among other things, unanimity on certain specified “major decisions” and for distributions by Woodbridge to be made on a pro rata basis in accordance with BFC’s and BBX Capital’s respective percentage equity interests in Woodbridge. During April 2015, Bluegreen paid a total of $14.0 million in cash dividends to Woodbridge, and Woodbridge declared and paid cash dividends totaling $13.4 million, which were allocated pro rata to BFC and BBX Capital based on their percentage ownership interests in Woodbridge. During 2014, Bluegreen paid cash dividends totaling $71.5 million to Woodbridge, and Woodbridge declared and paid cash dividends totaling $69.1 million, which was allocated pro rata to BFC and BBX Capital based on their percentage ownership interests in Woodbridge.

 

On March 26, 2013, Bluegreen issued $75 million of senior secured notes (the “2013 Notes Payable”) in a private transaction, the proceeds of which, together with approximately $14 million of Bluegreen’s unrestricted cash, were utilized in connection with the funding of the $149.2 million merger consideration indicated above. See Note 15 to

 

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the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 for additional information regarding the 2013 Notes Payable.

 

Two consolidated class action lawsuits relating to the Bluegreen merger remain pending.  The plaintiffs in these actions have asserted that the consideration received by Bluegreen’s minority shareholders in the transaction was inadequate and unfair, and are seeking to recover damages in connection with the transaction. The Company believes that these lawsuits are without merit and intends to continue to vigorously defend the actions. See Note 12 for additional information regarding these actions.

 

Sale of BankAtlantic

 

On July 31, 2012, BBX Capital completed the sale to BB&T Corporation (“BB&T”) of all of the issued and outstanding shares of capital stock of BankAtlantic, the former wholly-owned banking subsidiary of BBX Capital (the stock sale and related transactions are referred to in this report as the “BankAtlantic Sale” or the “BB&T Transaction”).  The BankAtlantic Sale was consummated pursuant to the terms of a definitive agreement, dated November 1, 2011, between BBX Capital and BB&T, as amended on March 13, 2012 (the “BB&T Agreement”). The March 13, 2012 amendment amended the previously contemplated terms of the transaction to, among other things, provide for the assumption by BB&T of BBX Capital’s $285.4 million in principal amount of then-outstanding trust preferred securities (“TruPS”) obligations. 

 

Pursuant to the BB&T Agreement, prior to the closing of the BankAtlantic Sale, BankAtlantic formed two subsidiaries, BBX Capital Asset Management, LLC (“CAM”) and Florida Asset Resolution Group, LLC (“FAR”). 

BankAtlantic contributed to FAR certain performing and non-performing loans, tax certificates, and real estate owned that had an aggregate carrying value on BankAtlantic’s Consolidated Statement of Financial Condition of approximately $346 million as of July 31, 2012 (the date the BB&T Transaction was consummated).  FAR assumed all liabilities related to these assets. BankAtlantic also contributed approximately $50 million in cash to FAR on July 31, 2012 and thereafter distributed all of the membership interests in FAR to BBX Capital.  At the closing of the BankAtlantic Sale, BBX Capital transferred 95% of the outstanding preferred membership interests in FAR to BB&T in connection with BB&T’s assumption of BBX Capital’s then-outstanding approximately $285 million of TruPS obligations, with BBX Capital continuing to hold the remaining 5% of FAR’s preferred membership interests. BB&T was entitled to hold its 95% preferred interest in the net cash flows of FAR until it recovered $285 million in preference amount plus a priority return of LIBOR + 2.00% per annum on any unpaid preference amount. Upon payment in full, BB&T’s interest in FAR would terminate, with BBX Capital becoming the 100% owner of FAR.  BBX Capital entered into an incremental $35 million guarantee in BB&T’s favor to further assure BB&T’s recovery of the $285 million preferred interest within seven years.  At March 31, 2015, BB&T’s preferred interest in FAR was approximately $6.1 million.  On May 6, 2015, BB&T’s preferred interest in FAR was paid in full and redeemed, and BBX Capital now owns 100% of FAR.

 

Prior to the closing of the BankAtlantic Sale, BankAtlantic contributed to CAM certain commercial loans, commercial real estate owned and previously written off assets that had an aggregate carrying value on BankAtlantic’s Consolidated Statement of Financial Condition of $125 million as of July 31, 2012. CAM assumed all liabilities related to these assets.  BankAtlantic also contributed $82 million of cash to CAM on July 31, 2012.  Prior to the closing of the BankAtlantic Sale, BankAtlantic distributed all of the membership interests in CAM to BBX Capital.  CAM remains a wholly-owned subsidiary of BBX Capital.

 

 

2.    Liquidity

 

BFC

 

As of March 31, 2015 and December 31, 2014, BFC and its wholly-owned subsidiaries had cash, cash equivalents and short-term investments of approximately $26.8 million and $34.7 million, respectively. 

 

Except as otherwise noted, the debts and obligations of BBX Capital, Woodbridge and Bluegreen are not direct obligations of BFC and generally are non-recourse to BFC.  Similarly, the assets of those entities are not available to BFC absent a dividend or distribution from those entities (and, in the case of Bluegreen, a subsequent dividend or distribution by Woodbridge). BFC’s principal sources of liquidity are its available cash and short-term investments and dividends from its subsidiaries.  BFC expects to receive dividends from Woodbridge and utilize such dividends

 

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to fund its current and future operations and investments.  However, as described below, dividend payments are dependent on a number of factors and may be subject to limitations outside of BFC’s control.

 

We expect to use our available cash to fund operations and meet our obligations.  We may also use available funds to make additional investments in the companies within our consolidated group.  During April 2015, we used approximately $15.4 million of cash, together with the proceeds of an $80 million loan provided by a subsidiary of Bluegreen, to purchase an additional 30% of BBX Capital’s Class A Common Stock.  Available funds may also be used to invest in real estate based opportunities and middle market operating businesses, such as the investment we made in Renin during October 2013, or invest in other opportunities and/or repurchase shares of our common stock pursuant to our share repurchase program.  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 Common Stock and Class B Common Stock at an aggregate cost of up to $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. The program authorizes management, at its discretion, to repurchase shares from time to time subject to market conditions and other factors considered by management.  There were no shares repurchased under the share repurchase program during the three months ended March 31, 2015 or the year ended December 31, 2014.

 

BFC has not received cash dividends from BBX Capital since March 2009. Prior to its deregistration as a savings and loan holding company during July 2012, BBX Capital’s payment of dividends was subject to the oversight of the Federal Reserve.  In addition, prior to its sale of BankAtlantic during July 2012, BBX Capital was restricted from paying dividends pursuant to the terms of the indentures governing its outstanding TruPs.  While these restrictions no longer apply, BBX Capital may only pay dividends if and when declared by its board of directors, a majority of whom are independent directors under the listing standards of the NYSE. Decisions with respect to future dividend payments by BBX Capital will depend on the financial condition of BBX Capital and other factors deemed relevant by its Board of Directors.

 

Dividends from Bluegreen will be dependent on and subject to Bluegreen’s results of operations, available cash and business as well as the outcome of legal proceedings against Bluegreen. Furthermore, certain of Bluegreen’s credit facilities contain terms which could limit the payment of cash dividends and Bluegreen may only pay dividends subject to such restrictions as well as the declaration of dividends by its board of directors. Additionally, in April 2015, BFC borrowed $80 million from a wholly owned subsidiary of Bluegreen to finance the purchase of 4,771,221 shares of BBX Capital’s Class A Common Stock in BFC’s recently completed tender offer. Woodbridge, as the parent company of Bluegreen, is entitled to 100% of all dividends paid by Bluegreen and any subsequent dividend or distribution by Woodbridge requires the approval of the boards of directors of both BBX Capital and BFC.  BBX Capital and BFC own 46% and 54%, respectively, of Woodbridge.  During April 2015, Bluegreen paid a total of $14.0 million in cash dividends to Woodbridge, and Woodbridge declared and paid cash dividends of approximately $13.4 million, which were allocated pro-rata among BFC and BBX Capital based on their percentage ownership interests in Woodbridge ($7.2 million to BFC and $6.2 million to BBX Capital). During 2014, Bluegreen paid a total of $71.5 million in cash dividends to Woodbridge, and Woodbridge declared and paid cash dividends of approximately $69.1 million, which were allocated pro rata among BFC and BBX Capital based on their percentage ownership interests in Woodbridge ($37.3 million to BFC and $31.8 million to BBX Capital). 

 

We believe that our current financial condition and credit relationships, together with anticipated cash flows from other sources of funds, including potential dividends, will allow us to meet our anticipated liquidity needs.  We may also seek to dispose of some of our investments, assets or subsidiaries or fund operations or investments with the proceeds from additional equity or debt financings or secured or unsecured indebtedness. However, these alternatives may not be available to us on attractive terms, or at all. The inability to raise any necessary funds through the sources discussed above would have a material adverse effect on the Company’s business, results of operations and financial condition.

 

Woodbridge

 

Woodbridge, at its parent company level, had cash and cash equivalents totaling approximately $0.1 million and $0.6 million at March 31, 2015 and December 31, 2014, respectively.  Woodbridge’s principal sources of liquidity are its cash holdings and dividend distributions received from Bluegreen, as described above.

 

On September 21, 2009, BFC consummated its merger with Woodbridge Holdings Corporation (“WHC”). Pursuant to the merger, WHC merged with and into Woodbridge, which was a wholly-owned subsidiary of BFC at that time. 

 

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The shareholders of WHC at the effective time of the merger (other than BFC) were entitled to receive 3.47 shares of BFC’s Class A Common Stock in exchange for each share of WHC’s Class A Common Stock that they owned. Under Florida law, holders of WHC’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 that they would otherwise have been entitled to receive.  Dissenting Holders, who collectively held approximately 4.2 million shares of WHC’s Class A Common Stock, rejected Woodbridge’s offer of $1.10 per share and requested payment for their shares based on their respective fair value estimates of WHC’s Class A Common Stock.  In accordance with Florida law, Woodbridge thereafter commenced legal proceedings relating to the appraisal process.  In December 2009, a $4.6 million liability was recorded based on Woodbridge’s $1.10 per share offer to the Dissenting Holders, with a corresponding reduction to additional paid-in capital.  On July 5, 2012, the presiding court in the appraisal rights action determined the fair value of the Dissenting Holders’ shares to be $1.78 per share and awarded legal and other costs in favor of the Dissenting Holders.  As a result, the $4.6 million liability was increased to approximately $7.5 million (with a corresponding reduction to additional paid in capital of $2.8 million) during the quarter ended September 30, 2012 to account for the per share value awarded.  On March 11, 2013, the court awarded legal fees and pre and post judgment interest to the Dissenting Holders for a total award to the Dissenting Holders of approximately $11.9 million (including the $7.5 million based on the $1.78 per share value determination).  As a result, the liability was increased by approximately $4.4 million during the fourth quarter of 2012.  Woodbridge has appealed the court’s ruling with respect to its fair value determination and the award of legal fees and costs.  On April 5, 2013, Woodbridge posted a $13.4 million bond in connection with the appeal.  The outcome of the appeal is uncertain.

 

Bluegreen

 

Bluegreen had cash and cash equivalents totaling $186.1 million and $185.2 million at March 31, 2015 and December 31, 2014, respectively.  As described above, BSF, a wholly owned subsidiary of Bluegreen, provided an $80 million loan to BFC during April 2015 in connection with the financing of the tender offer.  Bluegreen believes that its existing cash, anticipated cash generated from operations, anticipated future permitted borrowings under existing or proposed credit facilities, interest on its loan to BFC and anticipated future sales of notes receivable under the purchase facilities and one or more replacement facilities it may put in place will be sufficient to meet its anticipated working capital, capital expenditure and debt service requirements, for the foreseeable future. Subject to the successful implementation of ongoing strategic initiatives and the availability of credit, Bluegreen will continue its efforts to renew, extend or replace any credit and receivables purchase facilities that have expired or that will expire in the near term.  Bluegreen may, in the future, also obtain additional credit facilities and may issue corporate debt or equity securities.  Any debt incurred or issued by Bluegreen may be secured or unsecured, bear interest at fixed or variable rates and may be subject to such terms as the lender may require.  Bluegreen’s efforts to renew or replace the credit facilities or receivables purchase facilities which have expired or which are scheduled to expire in the near term may not be successful, and sufficient funds may not be available from operations or under existing, proposed or future revolving credit or other borrowing arrangements or receivables purchase facilities to meet its cash needs, including debt service obligations.  To the extent Bluegreen is not able to sell notes receivable or borrow under such facilities, its ability to satisfy its obligations would be materially adversely affected.

 

BBX Capital

 

BBX Capital had cash of $36.1 million at March 31, 2015, which does not include $2.7 million, $0 and $2.1 million of cash held in FAR, Renin and BBX Sweet Holdings, respectively. BBX Capital had cash of $45.9 million at December 31, 2014, which does not include $5.0 million, $0.8 million and $1.5 million of cash held in FAR, Renin and BBX Sweet Holdings, respectively. BBX Capital’s principal source of liquidity is its cash holdings, funds obtained from payments on and sales of its loans, sales of real estate, income from income producing real estate, and distributions received from FAR and Woodbridge. While FAR is consolidated in BFC and BBX Capital’s financial statements, the cash held in FAR and generated by its assets was used primarily to pay FAR’s operating expenses and to pay BB&T’s 95% preferred membership interest and the related priority return to BB&T and will generally not be available for distribution to BBX Capital, until the BB&T preferred membership interest is repaid.  The balance of BB&T’s preferred membership interest in FAR was approximately $6.1 million at March 31, 2015 but was redeemed in full on May 6, 2015As a result of the redemption, BBX Capital owns 100% of FAR.  On May 6, 2015, the two Board members designated by BB&T resigned in connection with the redemption of BB&T’s preferred interest in FAR.  See also the discussion under “BFC” above regarding dividends from Bluegreen and Woodbridge, including restrictions relating thereto. BBX Capital does not expect its investments in Renin or BBX

 

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Sweet Holdings to be a source of liquidity for the foreseeable future.  Based on current and expected liquidity needs and sources, BBX Capital expects to be able to meet its liquidity needs over the next twelve months. 

 

 

3.    Fair Value Measurement 

 

Assets and liabilities on a recurring basis

 

There were no significant assets or liabilities measured at fair value on a recurring basis in the Company’s financial statements as of March 31, 2015 or December 31, 2014.

 

Assets on a non-recurring basis

 

The following table presents major categories of assets measured at fair value on a non-recurring basis as of March 31, 2015 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

 

 

Quoted prices in

Significant

 

Total

 

 

 

 

Active Markets

Other

Significant

Impairments (1)

 

 

As of

 

for Identical

Observable

Unobservable

For the Three

 

 

March 31,

 

Assets

Inputs

Inputs

Months Ended

Description

 

2015

 

(Level 1)

(Level 2)

(Level 3)

March 31, 2015

Loans measured for impairment

 

 

 

 

 

 

 

using the fair value of the

 

 

 

 

 

 

 

underlying collateral

$

110 

 

 -

 -

110 
117 

Impaired real estate held-for-sale

 

 

 

 

 

 

 

and held-for-investment

 

1,631 

 

 -

 -

1,631 
372 

Total

$

1,741 

 

 -

 -

1,741 
489 

 

 

(1)

Total impairments represent the amount of losses recognized during the three months ended March 31, 2015 on assets that were held and measured at fair value as of March 31, 2015.

 

Quantitative information about significant unobservable inputs within Level 3 on major categories of assets measured at fair-value on a non-recurring basis as of March 31, 2015 is as follows (Fair Value in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2015

 

Fair

 

Valuation

Unobservable

 

Description

 

Value

 

Technique

Inputs

Range (Average)(1)(2)

Loans measured for impairment

 

 

 

 

 

 

using the fair value of the

 

 

 

Fair Value of

Discounted Rates and Appraised

 

underlying collateral

$

110 

 

Collateral

Value less Cost to Sell

$0.3 million

Impaired real estate held-for-sale

 

 

 

Fair Value of

Discounted Rates and Appraised

 

and held-for-investment

 

1,631 

 

Property

Value less Cost to Sell

$0.2 - $1.0 million ($0.6 million)

Total

$

1,741 

 

 

 

 

 

 

(1)

Range and average appraised values were reduced by costs to sell.

(2)

Average was computed by dividing the aggregate appraisal amounts by the number of appraisals.

 

 

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The following table presents major categories of assets measured at fair value on a non-recurring basis as of March 31, 2014 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

 

 

Quoted prices in

Significant

 

Total

 

 

 

 

Active Markets

Other

Significant

Impairments (1)

 

 

As of

 

for Identical

Observable

Unobservable

For the Three

 

 

March 31,

 

Assets

Inputs

Inputs

Months Ended

Description

 

2014

 

(Level 1)

(Level 2)

(Level 3)

March 31, 2014

Loans measured for impairment

 

 

 

 

 

 

 

using the fair value of the

 

 

 

 

 

 

 

underlying collateral

$

57 

 

 -

 -

57 
32 

Impaired real estate held-for-sale

 

 

 

 

 

 

 

and held-for-investment

 

10,541 

 

 -

 -

10,541 
2,321 

Impaired loans held for sale

 

5,607 

 

 -

 -

5,607 
305 

Total

$

16,205 

 

 -

 -

16,205 
2,658 

 

 

(1)

Total impairments represent the amount of losses recognized during the three months ended March 31, 2014 on assets that were held and measured at fair value as of March 31, 2014.

 

Quantitative information about significant unobservable inputs within Level 3 on major categories of assets measured at fair value on a non-recurring basis as of March 31, 2014 was as follows (Fair Value in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2014

 

Fair

 

Valuation

Unobservable

 

Description

 

Value

 

Technique

Inputs

Range (Average)(1)(2)

Loans measured for impairment

 

 

 

 

 

 

using the fair value of the

 

 

 

Fair Value of

Discounted Rates and Appraised

 

underlying collateral

$

57 

 

Collateral

Value less Cost to Sell

$0.1 - $0.2 million ($0.2 million)

Impaired real estate held-for-sale

 

 

 

Fair Value of

Discounted Rates and Appraised

 

and held-for-investment

 

10,541 

 

Property

Value less Cost to Sell

$0.1 - $9.0 million ($2.2 million)

 

 

 

 

Fair Value of

 

 

Impaired loans held for sale

 

5,607 

 

Collateral

Appraisal

$0.1 - $0.7 million ($0.1 million)

Total

$

16,205 

 

 

 

 

 

 

(1)

Range and average appraised values were reduced by costs to sell.

(2)

Average was computed by dividing the aggregate appraisal amounts by the number of appraisals.

 

Liabilities on a non-recurring basis

 

There were no significant liabilities measured at fair value on a non-recurring basis in the Company’s financial statements as of March 31, 2015 or December 31, 2014.

 

Loans Measured For Impairment

 

Impaired loans are generally valued based on the fair value of the underlying collateral less cost to sell as the majority of BBX Capital’s loans are collateral dependent.  The fair value of BBX Capital’s loans may significantly increase or decrease based on changes in property values as its loans are primarily secured by real estate.  BBX Capital primarily uses third party appraisals to assist in measuring non-homogenous impaired loans. These appraisals generally use the market or income approach valuation technique and use market observable data to formulate an estimate of the fair value of the loan’s collateral.  However, the appraiser uses professional judgment in determining the fair value of the collateral, and BBX Capital may also adjust these values for changes in market conditions subsequent to the appraisal date.  When current appraisals are not available for certain loans, BBX Capital uses its judgment on market conditions to adjust the most current appraisal. As a consequence, the calculation of the fair value of the collateral are considered Level 3 inputs.  BBX Capital generally recognizes impairment losses on based on third party broker price opinions to obtain the fair value of the collateral less cost to sell when impaired homogenous loans become 120 days delinquent.  These third party valuations from real estate

 

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professionals also use Level 3 inputs in determining fair values.  The observable market inputs used to fair value loans include comparable property sales, rent rolls, market capitalization rates on income producing properties, risk adjusted discount rates and foreclosure time frames and exposure periods. 

 

Impaired Real Estate Held-for-Sale and Held-for-Investment

 

Real estate is generally valued using third party appraisals or broker price opinions.  These appraisals generally use the market approach valuation technique and use market observable data to formulate an estimate of the fair value of the properties.  The market observable data typically consists of comparable property sales, rent rolls, market capitalization rates on income producing properties and risk adjusted discount rates.  However, the appraisers or brokers use professional judgment in determining the fair value of the properties and BBX Capital may also adjust these values for changes in market conditions subsequent to the valuation date.  As a consequence of using appraisals, broker price opinions and adjustments to appraisals, the calculation of the fair values of the properties is considered a Level 3 input.    

 

Loans Held for Sale

 

Loans held for sale are valued using an income approach with Level 3 inputs as market quotes or sale transactions of similar loans are generally not available.  The fair value is estimated by discounting forecasted cash flows, using a discount rate that reflects the risks inherent in the loans held for sale portfolio.  For non-performing loans held for sale, the forecasted cash flows are based on the estimated fair value of the collateral less cost to sell adjusted for foreclosure expenses and other operating expenses of the underlying collateral until foreclosure or sale. 

 

 

15

 


 

 

Financial Disclosures about Fair Value of Financial Instruments

 

The following tables present information for financial instruments at March 31, 2015 and December 31, 2014 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

 

 

Quoted prices

 

 

 

 

Carrying

 

 

in Active

Significant

 

 

 

Amount

 

Fair Value

Markets

Other

Significant

 

 

As of

 

As of

for Identical

Observable

Unobservable

 

 

March 31,

 

March 31,

Assets

Inputs

Inputs

 

 

2015

 

2015

(Level 1)

(Level 2)

(Level 3)

Financial assets:

 

 

 

 

 

 

 

Loans receivable including loans held-

 

 

 

 

 

 

 

for-sale, net

$

58,654 

 

75,782 

 -

 -

75,782 

Notes receivable, net

 

410,904 

 

505,000 

 -

 -

505,000 

Notes receivable from preferred shareholders (1)

 

5,063 

 

4,400 

 -

 -

4,400 

 

 

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

 

Receivable-backed notes payable

$

422,604 

 

426,300 

 -

 -

426,300 

Notes and mortgage notes payable and

 

 

 

 

 

 

 

other borrowings

 

98,154 

 

99,886 

 -

 -

99,886 

BB&T preferred interest in FAR

 

6,132 

 

6,139 

 -

 -

6,139 

Junior subordinated debentures

 

150,675 

 

166,500 

 -

 -

166,500 

Shares subject to mandatory redemption

 

12,807 

 

12,215 

 -

 -

12,215 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

 

 

Quoted prices

 

 

 

 

Carrying

 

 

in Active

Significant

 

 

 

Amount

 

Fair Value

Markets

Other

Significant

 

 

As of

 

As of

for Identical

Observable

Unobservable

 

 

December 31,

 

December 31,

Assets

Inputs

Inputs

 

 

2014

 

2014

(Level 1)

(Level 2)

(Level 3)

Financial assets:

 

 

 

 

 

 

 

Loans receivable including loans held-

 

 

 

 

 

 

 

for-sale, net

$

62,267 

 

73,423 

 -

 -

73,423 

Notes receivable, net

 

424,267 

 

520,000 

 -

 -

520,000 

Notes receivable from preferred shareholders (1)

 

5,000 

 

4,400 

 -

 -

4,400 

 

 

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

 

Receivable-backed notes payable

$

412,404 

 

411,400 

 -

 -

411,400 

Notes and mortgage notes payable and

 

 

 

 

 

 

 

other borrowings

 

107,984 

 

108,828 

 -

 -

108,828 

BB&T preferred interest in FAR

 

12,348 

 

12,383 

 -

 -

12,383 

Junior subordinated debentures

 

150,038 

 

134,500 

 -

 -

134,500 

Shares subject to mandatory redemption

 

12,714 

 

12,215 

 -

 -