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EX-32.2 - EX-32.2 - Bluegreen Vacations Holding Corpbfcf-20160331xex32_2.htm





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, 2016



[   ] 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 3, 2016 is as follows:

 

Class A Common Stock of $.01 par value,  74,492,819 shares outstanding.
Class B Common Stock of $.01 par value, 13,718,928 shares outstanding.



 


 

 





Arch 31, 2013

 

 



 

 

BFC Financial Corporation

TABLE OF CONTENTS



 

 

Part I.

FINANCIAL INFORMATION

Page



 

 

Item 1.

Financial Statements

 



 

 



Condensed Consolidated Statements of Financial Condition as of March 31, 2016 and December 31, 2015 -Unaudited



 

 



Condensed Consolidated Statements of Operations and Comprehensive Income for the Three Months Ended March 31, 2016 and 2015 - Unaudited



 

 



Condensed Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2016 and 2015 - Unaudited



 

 



Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015 - Unaudited



 

 



Notes to Condensed Consolidated Financial Statements - Unaudited



 

 

Item 2.

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

35 



 

 

Item 4.

Controls and Procedures

60 



 

 

Part II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

61 



 

 

Item 1A.

Risk Factors

61 



 

 

Item 6.

Exhibits

62 



 

 



Signatures

63 





















(i)



 

 

 


 

 

PART I – FINANCIAL INFORMATION



Item 1.  FINANCIAL STATEMENTS





 

 

 

 

BFC Financial Corporation

Condensed Consolidated Statements of Financial Condition

(In thousands, except share data)



 

 

 

 



 

March 31,

 

December 31,



 

2016

 

2015



 

(Unaudited)

 

 

ASSETS

 

 

 

 

Cash and cash equivalents

$

226,209 

 

198,905 

Restricted cash ($40,810 in 2016 and $25,358 in 2015 held by variable

 

 

 

 

interest entities ("VIEs"))

 

71,732 

 

59,365 

Loans held-for-sale

 

19,186 

 

21,354 

Loans receivable, net

 

33,281 

 

34,035 

Notes receivable, net ($312,894 and $280,841 in VIEs in 2016 and 2015, respectively)

 

410,401 

 

415,598 

Inventory

 

220,694 

 

220,929 

Real estate held-for-investment

 

32,838 

 

31,290 

Real estate held-for-sale, net

 

46,165 

 

46,338 

Investments in unconsolidated real estate joint ventures

 

42,922 

 

42,962 

Property and equipment, net

 

89,994 

 

90,020 

Goodwill and intangible assets, net

 

77,528 

 

77,789 

Other assets ($404 in 2015 held by VIEs)

 

109,248 

 

102,375 

Total assets

$

1,380,198 

 

1,340,960 



 

 

 

 



 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Liabilities:

 

 

 

 

Accounts payable

$

27,037 

 

25,976 

Deferred income 

 

30,097 

 

28,847 

Escrow deposits

 

24,925 

 

24,525 

Other liabilities

 

80,407 

 

81,623 

Receivable-backed notes payable - recourse

 

57,108 

 

89,888 

Receivable-backed notes payable - non-recourse, net of unamortized debt issuance

 

 

 

 

costs of $6,506 and $4,905 in 2016 and 2015, respectively (held by VIEs)

 

371,371 

 

314,024 

Notes and mortgage notes payable and other borrowings, net of unamortized debt

 

 

 

 

  issuance costs of $1,949 and $2,011 in 2016 and 2015, respectively

 

117,953 

 

120,994 

Junior subordinated debentures, net of unamortized debt issuance costs

 

 

 

 

  of $1,799 and $1,822 in 2016 and 2015, respectively

 

150,982 

 

150,485 

Deferred income taxes

 

13,702 

 

8,594 

Shares subject to mandatory redemption

 

13,199 

 

13,098 

Total liabilities

 

886,781 

 

858,054 



 

 

 

 

Commitments and contingencies (See Note 11)

 

 

 

 



 

 

 

 

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 73,211,519  in 2016 and 73,211,519 in 2015 

 

732 

 

732 

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

 

 

 

 

issued and outstanding 11,346,336 in 2016 and 11,346,336 in 2015

 

113 

 

113 

Additional paid-in capital

 

146,203 

 

143,231 

Accumulated earnings

 

237,616 

 

232,134 

Accumulated other comprehensive income

 

511 

 

616 

Total  BFC Financial Corporation equity

 

385,175 

 

376,826 

Noncontrolling interests

 

108,242 

 

106,080 

Total equity

 

493,417 

 

482,906 

Total liabilities and equity

$

1,380,198 

 

1,340,960 



 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited



 

1

 


 

 

 









 

 

 

 

 

BFC Financial Corporation

Condensed Consolidated Statements of Operations and Comprehensive Income - Unaudited

(In thousands, except per share data)



 

 

 

 

 



 

For the Three Months Ended



 

March 31,



 

2016

 

2015

 

Revenues

 

 

 

 

 

Sales of VOIs

$

56,370 

 

53,182 

 

Fee-based sales commission revenue

 

40,147 

 

32,600 

 

Other fee-based services revenue

 

25,555 

 

23,753 

 

Trade sales

 

20,962 

 

19,535 

 

Interest income

 

21,063 

 

19,566 

 

Other revenue

 

1,542 

 

1,257 

 

Total revenues

 

165,639 

 

149,893 

 



 

 

 

 

 

Costs and Expenses

 

 

 

 

 

Cost of sales of VOIs

 

3,916 

 

4,866 

 

Cost of other fee-based services

 

15,010 

 

14,801 

 

Cost of trade sales

 

15,047 

 

13,835 

 

Interest expense

 

9,067 

 

10,656 

 

Recoveries from loan losses, net

 

(1,748)

 

(3,821)

 

Impairments of assets, net

 

(37)

 

(1,063)

 

Selling, general and administrative expenses

 

112,055 

 

97,313 

 

Total costs and expenses

 

153,310 

 

136,587 

 



 

 

 

 

 

Equity in net losses of unconsolidated

 

 

 

 

 

real estate joint ventures

 

(342)

 

(304)

 

Foreign exchange gain (loss)

 

210 

 

(469)

 

Other income, net

 

263 

 

1,248 

 

Income before income taxes

 

12,460 

 

13,781 

 

Provision for income taxes (See Note 10)

 

(5,107)

 

(8,609)

 

Net income

 

7,353 

 

5,172 

 

Less: Net income attributable to noncontrolling interests

 

1,871 

 

3,286 

 

Net income attributable to BFC

$

5,482 

 

1,886 

 



 

 

 

 

 

Basic earnings per share

$

0.06 

 

0.02 

 

Diluted earnings per share

$

0.06 

 

0.02 

 

Basic weighted average number of common

 

 

 

 

 

shares outstanding

 

86,839 

 

87,136 

 

Diluted weighted average number of common and

 

 

 

 

 

common equivalent shares outstanding

 

87,013 

 

87,332 

 



 

 

 

 

 

Net income

$

7,353 

 

5,172 

 

Other comprehensive income, net of tax:

 

 

 

 

 

Unrealized gains (losses) on securities available for sale

 

25 

 

(13)

 

Foreign currency translation adjustments

 

(148)

 

132 

 

Other comprehensive (loss) income, net of tax

 

(123)

 

119 

 

Comprehensive income, net of tax

 

7,230 

 

5,291 

 

Less: Comprehensive income attributable

 

 

 

 

 

to noncontrolling interests

 

1,853 

 

3,338 

 

Total comprehensive income attributable to BFC

$

5,377 

 

1,953 

 



 

 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited







 

 

2

 


 

 

 







 

 

 

 

 

 

 

 

 

 

 

BFC Financial Corporation

Condensed Consolidated Statements of Changes in Equity - Unaudited

For the Three Months Ended March 31, 2016 and 2015

(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, 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

 -

 -

 

 -

 -

634 

 -

 -

634  597  1,231 

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 



 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2015

73,212  11,346 

$

732  113  143,231  232,134  616  376,826  106,080  482,906 

Net income

 -

 -

 

 -

 -

 -

5,482 

 -

5,482  1,871  7,353 

Other comprehensive loss

 -

 -

 

 -

 -

 -

 -

(105) (105) (18) (123)

Subsidiaries' capital transactions

 -

 -

 

 -

 -

1,333 

 -

 -

1,333  309  1,642 

Share-based compensation

 -

 -

 

 -

 -

1,639 

 -

 -

1,639 

 -

1,639 

Balance, March 31, 2016

73,212  11,346 

$

732  113  146,203  237,616  511  385,175  108,242  493,417 



 

 

 

 

 

 

 

 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited 













 

3

 


 

 



 





 

 

 

 

 



 

 

 

 

 

BFC Financial Corporation

Condensed Consolidated Statements of Cash Flows - Unaudited

(In thousands)



 

 

 

 

 



 

For the Three Months Ended 



 

March 31,

 



 

2016

 

2015

 

Net cash provided by (used in) operating activities

$

17,884 

 

(4,846)

 



 

 

 

 

 

Investing activities:

 

 

 

 

 

Decrease (increase) in restricted cash and cash equivalents

 

1,306 

 

(2,645)

 

Investments in unconsolidated real estate joint ventures

 

(301)

 

(68)

 

Repayment of loans receivable, net

 

4,065 

 

6,658 

 

Proceeds from the sale of loans receivable

 

 -

 

89 

 

Proceeds from sales of real estate held-for-sale

 

830 

 

2,866 

 

Improvements to real estate held-for-investment

 

(1,558)

 

(7,024)

 

Purchases of real estate held-for-sale

 

(169)

 

 -

 

Purchases of property and equipment

 

(2,880)

 

(2,649)

 

Proceeds from the sale of property and equipment

 

 -

 

247 

 

(Increase) decrease from other investing activities

 

(225)

 

91 

 

Net cash provided by (used in) investing activities

$

1,068 

 

(2,435)

 



 

 

 

 

 

Financing activities:

 

 

 

 

 

Repayment of BB&T preferred interest in Florida Asset

 

 

 

 

 

Resolution Group, LLC ("FAR")

 

 -

 

(6,216)

 

Repayments of notes, mortgage notes payable and other borrowings

 

(125,729)

 

(53,890)

 

Proceeds from notes, mortgage notes payable and other borrowings

 

136,591 

 

43,680 

 

Payments for debt issuance costs

 

(2,322)

 

(2,210)

 

Payments of interest on shares subject to mandatory redemption

 

(188)

 

(188)

 

Retirement of BFC's common stock

 

 -

 

(174)

 

Net cash provided by (used in) financing activities

$

8,352 

 

(18,998)

 



 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

27,304 

 

(26,279)

 

Cash and cash equivalents at beginning of period 

 

198,905 

 

279,437 

 

Cash and cash equivalents at end of period 

$

226,209 

 

253,158 

 



 

 

 

 

 



 

 

 

Continued

 



 

 

 

 

 



 

4

 


 

 





 

 

 

 

 



 

 

 

 

 

BFC Financial Corporation

Condensed Consolidated Statements of Cash Flows - Unaudited

(In thousands)



 

 

 

 

 



 

For the Three Months Ended 



 

March 31,

 



 

2016

 

2015

 

Supplemental cash flow information:

 

 

 

 

 

Interest paid on borrowings

$

8,757 

 

9,038 

 

Income taxes paid

 

481 

 

2,122 

 

Income tax refunded

 

 -

 

(356)

 



 

 

 

 

 

Supplementary disclosure of non-cash investing and financing activities:

 

 

 

 

 

Restricted cash received on securitization, pending

 

 

 

 

 

provision of additional collateral

$

13,981 

 

10,066 

 

Loans transferred to real estate held-for -sale or

 

 

 

 

 

real estate held-for-investment

 

826 

 

2,156 

 

Real estate held-for-investment transferred to real

 

 

 

 

 

estate held-for-sale

 

 -

 

1,027 

 

(Decrease) increase in BFC accumulated other comprehensive

 

 

 

 

 

income, net of taxes

 

(105)

 

67 

 

Net increase in BFC shareholders' equity from

 

 

 

 

 

the effect of subsidiaries' capital transactions, net of taxes

 

1,333 

 

634 

 



 

 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited







 

 

5

 


 

 

BFC Financial Corporation

Notes to Condensed Consolidated Financial Statements - Unaudited





1.    Presentation of Interim Financial Statements



Basis of Financial Statement Presentation



The accompanying unaudited condensed 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 in the United States of America (“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 condensed 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, 2016; the consolidated results of operations and comprehensive income of BFC for the three months ended March 31, 2016 and 2015; changes in consolidated equity of BFC for the three months ended March 31, 2016 and 2015; and the condensed consolidated cash flows of BFC for the three months ended March 31, 2016 and 2015. Operating results for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016 or any other future period. 



These unaudited condensed 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 condensed consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 (the “2015 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 consolidates the financial results of the entities in which it has controlling financial interests, including BBX Capital Corporation and its subsidiaries (“BBX Capital”), Woodbridge Holdings, LLC (“Woodbridge”) and Bluegreen Corporation and its subsidiaries (“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, Bluegreen’s parent company). 



BFC is a Florida-based holding company whose principal holdings include an approximately 81% equity interest in BBX Capital  and a direct 54% equity interest in Woodbridge. BBX Capital holds the remaining 46% equity interest in Woodbridge. Woodbridge owns 100% of Bluegreen



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’s principal asset until July 31, 2012 was its ownership of BankAtlantic.  BankAtlantic was a federal savings bank headquartered in Fort Lauderdale, Florida.  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 stock sale and related transactions described herein are collectively referred to as the “BankAtlantic Sale” or the “BB&T Transaction”).  The principal assets of BBX Capital currently consist of its 46% interest in Woodbridge, investments in real estate joint ventures, legacy loans and real estate transferred to BBX Capital in connection with the BB&T Transaction.



Bluegreen is a sales, marketing and management company focused on the vacation ownership industry. Bluegreen markets, sells and manages VOIs in resorts, which are generally located in popular, high-volume, “drive-to” vacation destinations, and were either developed or acquired by Bluegreen or developed and owned by others in

 

6

 


 

 

which case Bluegreen earns fees for providing these services. Bluegreen also provides other fee-based services, including property association management services, mortgage servicing, VOI title services, reservation services, and construction design and development services.



BFC Share Repurchase Program



On September 21, 2009, BFC’s board of directors approved a share repurchase program which authorized the repurchase of up to 20,000,000 shares of the Company’s Class A Common Stock and Class B Common Stock at an aggregate cost of up to $10 million, subject to market conditions and other factors.  



On March 29, 2016, the Company entered into a Rule 10b5-1 Repurchase Plan (the “Repurchase Plan”) which authorized the Company’s designated broker to repurchase up to 1.0 million shares of the Company’s Class A Common Stock in the open market or through privately negotiated transactions in accordance with the terms, and subject to the limitations, specified in the Repurchase Plan.  In April 2016, the Company repurchased 1.0 million shares of its Class A Common Stock under the Repurchase Plan for approximately $3.0 million. Repurchases under the Repurchase Plan were subject to applicable securities laws and regulations, including Rule 10b-18 under the Securities Exchange Act of 1934, as amended, as well as certain price and other limitations specified by the Company in the Repurchase Plan.



 Recently Adopted Accounting Pronouncements



In February 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-02, “Consolidation (Topic 810) – Amendments to the Consolidation Analysis” (“ASU 2015-02”).  This guidance changed the manner in which a reporting entity assesses one of the five characteristics that determines if an entity is a variable interest entity.  In particular, the update changes how a reporting entity assesses if the equity holders at risk lack decision making rights when decision-making over the entity’s most significant activities has been outsourced.  The update also introduces a separate analysis specific to limited partnerships and similar entities for assessing if the equity holders at risk lack decision making rights.  This standard became effective for the Company on January 1, 2016.  The adoption of ASU 2015-02 had no effect on the Company’s condensed consolidated financial statements.



In April 2015, the FASB issued ASU 2015-03, ”Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs” as amended by ASU 2015-15, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount.  However, ASU 2015-03 also permits presentation of debt issuance costs on line-of-credit arrangements as assets. This standard became effective for the Company on January 1, 2016.  The Company’s adoption of ASU 2015-03 is reflected in the accompanying balance sheets as of March 31, 2016 and December 31, 2015 and in the tables included in Note 9.  As further displayed in the table below, pursuant to the adoption of ASU 2015-03, the Company has reclassified certain unamortized debt issuance costs as a direct deduction from the carrying value of the associated debt liability previously reported in the Company’s Consolidated Balance Sheets as of December 31, 2015 as follows (in thousands):





 

 

 

 

 

 



 

 

 

 

 

 



 

As previously

 

 

 

 



 

presented

 

 

 

As adjusted



 

December 31,

 

 

 

December 31,



 

2015

 

Reclassification

 

2015

Other assets

$

111,113 

$

(8,738)

$

102,375 

Receivable backed notes payable - non-recourse (VIE)

 

318,929 

 

(4,905)

 

314,024 

Lines of credit and notes payable

 

123,005 

 

(2,011)

 

120,994 

Junior subordinated debentures

 

152,307 

 

(1,822)

 

150,485 



New Accounting Pronouncements



The FASB has issued the following accounting pronouncements and guidance which may be applicable to the Company but have not yet become effective. (See the Company’s Annual Report on Form 10-K for the year ended

 

7

 


 

 

December 31, 2015 for accounting pronouncements issued prior to March 15, 2016 which may be applicable to the Company.) 



Accounting Standards Update Number 2016-09 – Compensation – Stock Compensation (Topic 718).  The amendments in this update affect all entities that issue share-based payment awards to their employees. The areas for simplification in this update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  The guidance will be effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.  Early adoption is permitted in any interim or annual period.  The Company is currently evaluating the requirements of this update and has not yet determined its impact on the Company’s condensed consolidated financial statements.



Accounting Standards Update Number 2016-07 – Investments – Equity Method and Joint Ventures (Topic 323) – Simplifying the Transition to the Equity Method of AccountingThis update addresses the use of the equity method of accounting as a result of an increase in the level of ownership interest or degree of influence.  The amendments in this update eliminate the requirement to retroactively adopt the equity method of accounting.  The guidance will be effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.  Early adoption is permitted.  The Company is currently evaluating the requirements of this update and has not yet determined its impact on the Company’s condensed consolidated financial statements.



Accounting Standards Update Number 2014-09 –  Revenue Recognition (Topic 606): Revenue from Contracts with Customers. This guidance is intended to improve the financial reporting requirements for revenue from contracts with customers by providing a principle based approach.  It also requires disclosures designed to enable readers of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.  Further, in March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue Gross versus Net), and in April 2016, the FASB issued ASU 2016-10 Revenue from Contracts with Customers – Identifying Performance Obligations and Licensing (Topic 606). These updates clarify implementation guidance on the related topic.  The accounting guidance updates will replace most existing revenue recognition guidance in GAAP.  The standard was to be effective for annual and interim reporting periods beginning after December 15, 2016.  ASU 2015-14 deferred the effective date of this update for all entities by one year.  Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.  The Company is currently evaluating the requirements of theses updates and has not yet determined its impact on the Company's condensed consolidated financial statements. 





2.    Variable Interest Entities



Bluegreen



Bluegreen sells VOI notes receivable through special purpose finance entities. These transactions are generally structured as non-recourse to Bluegreen, and are designed to provide liquidity for Bluegreen and to transfer the economic risks and certain benefits of the notes receivable to third-parties.  In a securitization, various classes of debt securities are issued by the special purpose finance entities that are generally collateralized by a single tranche of transferred assets, which consist of VOI notes receivable.  Bluegreen services the securitized notes receivable for a fee pursuant to servicing agreements negotiated with third parties based on market conditions at the time of the securitization.



With each securitization, Bluegreen generally retains a portion of the securities and continues to service the securitized notes receivable.  Under these arrangements, the cash payments received from obligors on the receivables sold are generally applied monthly to pay fees to service providers, make interest and principal payments to investors, and fund required reserves, if any, with the remaining balance of such cash retained by Bluegreen; however, to the extent the portfolio of receivables fails to satisfy specified performance criteria (as may occur due to, among other things, an increase in default rates or credit loss severity) or other trigger events occur, the funds received from obligors are distributed on an accelerated basis to investors.  Depending on the circumstances and the transaction, the application of the accelerated payment formula may be permanent or temporary until the trigger

 

8

 


 

 

event is cured.  As of March 31, 2016, Bluegreen was in compliance with all applicable terms under its securitization transactions, and no triggering events had occurred.



In accordance with applicable accounting guidance for the consolidation of VIEs, Bluegreen analyzes its variable interests, which may consist of loans, servicing rights, guarantees, and equity investments, to determine if an entity in which Bluegreen has a variable interest is a variable interest entity with Bluegreen as its primary beneficiary.  Bluegreen’s analysis includes a review of both quantitative and qualitative factors.  Bluegreen bases its quantitative analysis on the forecasted cash flows of the entity, and bases its qualitative analysis on the design of the entity, its organizational structure, including decision-making ability, and relevant financial agreements.  Bluegreen also uses its qualitative analysis to determine if Bluegreen must consolidate a variable interest entity as the primary beneficiary.  In accordance with applicable accounting guidance, Bluegreen has determined these securitization entities to be VIEs of which Bluegreen is the primary beneficiary and, therefore, Bluegreen consolidates the entities into its financial statements.  As previously described, BFC consolidates Bluegreen and its consolidated subsidiaries and VIEs into BFC’s financial statements.



Under the terms of certain of Bluegreen’s timeshare note sales, Bluegreen has the right to repurchase or substitute a limited amount of defaulted mortgage notes receivable for new notes receivable at the outstanding principal balance plus accrued interest.  Voluntary repurchases and substitutions by Bluegreen of defaulted notes receivable during the three months ended March 31, 2016 and 2015 were $1.2 million and $1.1 million, respectively.  Bluegreen’s maximum exposure to loss relating to its non-recourse securitization entities is the difference between the outstanding VOI notes receivable and the notes payable, plus cash reserves and any additional residual interest in future cash flows from collateral.



Information related to the assets and liabilities of Bluegreen’s consolidated VIEs included in the Company’s condensed consolidated statements of financial condition is set forth below (in thousands):







 

 

 

 



 

 

 

 



 

March 31,

 

December 31,



 

2016

 

2015

Restricted cash

$

40,810 

 

25,358 

Securitized notes receivable, net

 

312,894 

 

280,841 

Receivable backed notes payable - non-recourse

 

371,371 

 

314,024 





The restricted cash and securitized notes receivable balances disclosed above are restricted to satisfy obligations of the VIEs.







 

9

 


 

 

3.     Investments in Unconsolidated Real Estate Joint Ventures 



BBX Capital had the following investments in unconsolidated real estate joint ventures (in thousands):







 

 

 

 



 

 

 

 



 

March 31,

 

December 31,

Investment in unconsolidated real estate joint ventures

 

2016

 

2015

Altis at Kendall Square, LLC

$

722 

 

764 

Altis at Lakeline - Austin Investors LLC

 

5,266 

 

5,210 

New Urban/BBX Development, LLC

 

1,015 

 

864 

Sunrise and Bayview Partners, LLC

 

1,561 

 

1,577 

Hialeah Communities, LLC

 

4,376 

 

4,569 

PGA Design Center Holdings, LLC

 

1,895 

 

1,911 

CCB Miramar, LLC

 

875 

 

875 

Centra Falls, LLC

 

717 

 

727 

The Addison on Millenia Investment, LLC

 

5,778 

 

5,778 

BBX/S Millenia Blvd Investments, LLC

 

4,905 

 

4,905 

Altis at Bonterra - Hialeah, LLC

 

15,812 

 

15,782 

Investments in unconsolidated real estate joint ventures

$

42,922 

 

42,962 





BBX Capital’s investments in unconsolidated real estate joint ventures are unconsolidated variable interest entities. 



The amount of interest capitalized in investments in unconsolidated real estate joint ventures associated with joint venture real estate development activities for the three months ended March 31, 2016 and 2015 was  $121,000 and  $96,000, respectively.   



The condensed statements of operations for the three months ended March 31, 2016 and 2015 for all of the above listed equity method joint ventures in the aggregate were as follows (in thousands):







 

 

 

 



 

 

 

 



 

For the Three Months Ended



 

March 31,



 

2016

 

2015

Total revenues

$

1,191 

 

379 

Total costs and expenses

 

(1,856)

 

(1,071)

Net loss

$

(665)

 

(692)

Equity in net losses of unconsolidated real estate joint ventures

$

(342)

 

(304)





See Note 10 to the Consolidated Financial Statements included in the 2015 Annual Report for additional information on BBX Capital’s investments in unconsolidated real estate joint ventures.  

 





 

10

 


 

 

4.  BBX Capital’s Loans Held-For-Sale



BBX Capital’s loans-held-for-sale are as follows (in thousands):







 

 

 

 



 

 

 

 



 

March 31,

 

December 31,



 

2016

 

2015

Residential 

$

19,186 

 

21,354 





Loans held-for-sale are reported at the lower of cost or fair value measured on an aggregate basis.   As of March 31, 2016 and December 31, 2015 the lower of cost or fair value adjustment on loans held-for-sale was $1.6 million. BBX Capital transfers loans to held-for-sale when, based on the current economic environment and related market conditions, it does not have the intent to hold those loans for the foreseeable future. 



As of March 31, 2016, foreclosure proceedings were in-process on $12.5 million of BBX Capital’s residential loans held-for-sale.

 



5.    BBX Capital’s Loans Receivable 



BBX Capital’s loans receivable portfolio consisted of the following (in thousands):





 

 

 

 



 

 

 

 



 

March 31,

 

December 31,



 

2016

 

2015

Commercial non-real estate

$

11,231 

 

11,250 

Commercial real estate

 

16,017 

 

16,294 

Small business

 

3,614 

 

4,054 

Consumer

 

2,264 

 

2,368 

Residential

 

155 

 

69 

         Total loans, net of discount

 

33,281 

 

34,035 

Allowance for loan losses

 

 -

 

 -

         Loans receivable -- net

$

33,281 

 

34,035 





As of March 31, 2016, foreclosure proceedings were in process on $0.3 million of BBX Capital’s consumer loans.



The total discount on loans receivable was $3.2 million and $3.3 million as of March 31, 2016 and December 31, 2015, respectively.



The recorded investment (unpaid principal balance less charge-offs and discounts) of non-accrual loans receivable was as follows (in thousands):





 

 

 

 



 

 

 

 



 

March 31,

 

December 31,

Loan Class

 

2016

 

2015

Commercial non-real estate

$

1,231 

 

1,250 

Commercial real estate

9,543 

 

9,639 

Small business

 

3,614 

 

4,054 

Consumer

 

2,165 

 

2,368 

Residential

 

155 

 

69 

Total nonaccrual loans

$

16,708 

 

17,380 



 

11

 


 

 

An age analysis of the past due recorded investment in BBX Capital’s loans receivable as of March 31, 2016 and December 31, 2015 was as follows (in thousands):







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

Total



 

31-59 Days

 

60-89 Days

 

90 Days

 

Total

 

 

 

Loans

March 31, 2016

 

Past Due

 

Past Due

 

or More (1)

 

Past Due

 

Current

 

Receivable

Commercial non-real estate

$

 -

 

 -

 

329 

 

329 

 

10,902 

 

11,231 

Commercial real estate

 

 -

 

 -

 

3,986 

 

3,986 

 

12,031 

 

16,017 

Small business

 

 -

 

27 

 

 -

 

27 

 

3,587 

 

3,614 

Consumer

 

108 

 

 -

 

622 

 

730 

 

1,534 

 

2,264 

Residential

 

 -

 

23 

 

132 

 

155 

 

 -

 

155 

Total

$

108 

 

50 

 

5,069 

 

5,227 

 

28,054 

 

33,281 





1)

BBX Capital had no loans that were 90 days or more past due and still accruing interest as of March 31, 2016.









 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

Total



 

31-59 Days

 

60-89 Days

 

90 Days

 

Total

 

 

 

Loans

December 31, 2015

 

Past Due

 

Past Due

 

or More (1)

 

Past Due

 

Current

 

Receivable

Commercial non-real estate

$

 -

 

 -

 

329 

 

329 

 

10,921 

 

11,250 

Commercial real estate

 

 -

 

 -

 

3,986 

 

3,986 

 

12,308 

 

16,294 

Small business:

 

 -

 

205 

 

 -

 

205 

 

3,849 

 

4,054 

Consumer

 

316 

 

138 

 

562 

 

1,016 

 

1,352 

 

2,368 

Residential

 

 -

 

24 

 

42 

 

66 

 

 

69 

Total

$

316 

 

367 

 

4,919 

 

5,602 

 

28,433 

 

34,035 



1)

BBX Capital had no loans that were 90 days or more past due and still accruing interest as of December 31, 2015.



 

12

 


 

 

The activity in BBX Capital’s allowance for loan losses for the three months ended March 31, 2016 and 2015 was as follows (in thousands): 





 

 

 

 



 

 

 

 



 

For the Three Months



 

Ended March 31,

Allowance for Loan Losses:

2016

 

2015

Beginning balance

$

 -

 

977 

    Charge-offs :

 

(30)

 

(675)

     Recoveries :

 

1,778 

 

3,900 

     Provision :

 

(1,748)

 

(3,821)

Ending balance

$

 -

 

381 

Ending balance individually evaluated for impairment

$

 -

 

 -

Ending balance collectively evaluated for impairment

 

 -

 

381 

Total

$

 -

 

381 

Loans receivable:

 

 

 

 

Ending balance individually evaluated for impairment

$

12,924 

 

17,018 

Ending balance collectively evaluated for impairment

 

20,357 

 

9,945 

Total

$

33,281 

 

26,963 

Proceeds from loan sales

$

 -

 

89 





Impaired Loans  BBX Capital’s loans are considered impaired when, based on current information and events, BBX Capital believes it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan agreement.  For a loan that has been restructured, the contractual terms of the loan agreement refer to the contractual terms specified by the original loan agreement, not the contractual terms specified by the restructured agreement.  Impairment is evaluated based on past due status for consumer and residential loans.  Impairment is evaluated by BBX Capital for commercial and small business loans based on-past payment history, financial strength of the borrower or guarantors, and cash flow associated with the collateral or business.  If a loan is impaired, a specific valuation allowance is established, if necessary, based on the present value of estimated future cash flows using the loan’s existing interest rate or based on the fair value of the loan.    Collateral dependent impaired loans are charged down to the fair value of collateral less cost to sell.  Interest payments on impaired loans are recognized on a cash basis as interest income.   Impaired loans, or portions thereof, are charged off when deemed uncollectible.    



BBX Capital’s impaired loans as of March 31, 2016 and December 31, 2015 were as follows (in thousands):







 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

As of March 31, 2016

 

As of December 31, 2015



 

 

Unpaid

 

 

 

Unpaid

 



 

Recorded

Principal

Related

 

Recorded

Principal

Related



 

Investment

Balance

Allowance

 

Investment

Balance

Allowance



 

 

 

 

 

 

 

 

Total with allowance recorded

$

 -

 -

 -

 

 -

 -

 -

Total with no allowance recorded

 

16,708  29,450 

 -

 

17,380  30,212 

 -

Total

$

16,708  29,450 

 -

 

17,380  30,212 

 -



 

13

 


 

 

Average recorded investment and interest income recognized on BBX Capital’s impaired loans for the three months ended March 31, 2016 and 2015 were as follows (in thousands):







 

 

 

 

 

 



 

 

 

 

 

 



 

For the Three Months Ended March 31,



 

2016

 

2015



 

Average Recorded

Interest Income

 

Average Recorded

Interest Income



 

Investment

Recognized

 

Investment

Recognized

Total with allowance recorded

$

 -

 -

 

273 

Total with no allowance recorded

 

16,797  337 

 

17,145  228 

Total

$

16,797  337 

 

17,418  229 





BBX Capital’s impaired loans without valuation allowances represent loans that were written-down to the fair value of the collateral less cost to sell, loans in which the collateral value less cost to sell was greater than the carrying value of the loan, loans in which the present value of the cash flows discounted at the loans’ effective interest rate were equal to or greater than the carrying value of the loans, or loans that were collectively measured for impairment.



BBX Capital had no commitments to lend additional funds on impaired loans as of March 31, 2016.







 

14

 


 

 



6.    Bluegreen’s Notes Receivable



The table below sets forth information relating to Bluegreen’s notes receivable and Bluegreen’s allowance for credit losses (in thousands):







 

 

 

 



 

 

 

 



 

March 31,

 

December 31,



 

2016

 

2015

Notes receivable secured by VOIs:

 

 

 

 

VOI notes receivable - non-securitized

$

116,758 

 

166,040 

VOI notes receivable - securitized

 

401,603 

 

357,845 



 

518,361 

 

523,885 

Allowance for credit losses

 

(109,929)

 

(110,467)

VOI notes receivable, net

$

408,432 

 

413,418 

Allowance as a % of VOI notes receivable

 

21% 

 

21% 



 

 

 

 

Notes receivable secured by homesites: (1)

 

 

 

 

Homesite notes receivable

$

2,216 

 

2,427 

Allowance for credit losses

 

(247)

 

(247)

Homesite notes receivable, net

$

1,969 

 

2,180 

Allowance as a % of homesite notes receivable

 

11% 

 

10% 



 

 

 

 

Total notes receivable

 

 

 

 

Gross notes receivable

$

520,577 

 

526,312 

Allowance for credit losses

 

(110,176)

 

(110,714)

Notes receivable, net

$

410,401 

 

415,598 

Allowance as a % of notes receivable

 

21% 

 

21% 



(1)

Notes receivable secured by homesites were originated through a business, substantially all of the assets of which were sold by Bluegreen in 2012.    



The table above includes notes receivable deemed to have been acquired by BFC, indirectly through Woodbridge, in connection with Woodbridge’s November 2009 acquisition of approximately 7.4 million additional shares of Bluegreen’s Common Stock, which resulted in BFC, indirectly through Woodbridge, holding a controlling interest in Bluegreen.  In accordance with applicable accounting guidance, “Loans and Debt Securities Acquired with Deteriorated Credit Quality”, BFC elected to recognize interest income on these notes receivable using the expected cash flows method.  BFC treated expected prepayments consistently in determining cash flows expected to be collected, such that the non-accretable difference was not affected and the difference between actual prepayments and expected prepayments will not affect the non-accretable difference.  The assumption for prepayment rates was derived from Bluegreen’s historical performance information for its off-balance sheet securitizations and ranges from 4% to 9%.  As of March 31, 2016 and December 31, 2015, the outstanding contractual unpaid principal balance of the acquired notes was  $41.2 million and $47.8 million, respectively. As of March 31, 2016 and December 31, 2015, the carrying amount of the acquired notes was $37.8 million and $43.6 million, respectively,  and the acquired notes are included in the amounts of notes receivable in the condensed consolidated statements of financial condition at March 31, 2016 and December 31, 2015.  

 

15

 


 

 

The following is a reconciliation of accretable yield for the three months ended March 31, 2016 and 2015 (in thousands):







 

 

 

 



 

 

 

 

Accretable Yield

 

For the Three Months Ended March 31,



 

2016

 

2015

Balance, beginning of period

$

9,033 

 

17,867 

Accretion

 

(1,613)

 

(2,487)

Reclassification (to) from nonaccretable yield

 

(22)

 

250 

Balance, end of period

$

7,398 

 

15,630 





The weighted-average interest rate on Bluegreen’s notes receivable was 15.9%  as of March 31, 2016 and December 31, 2015.  All of Bluegreen’s VOI notes receivable bear interest at fixed rates.  The weighted-average interest rate charged on notes receivable secured by VOIs was 16.0% as of March 31, 2016 and December 31, 2015



Bluegreen’s notes receivable are carried at amortized cost less an allowance for credit losses.  Interest income is suspended, and previously accrued but unpaid interest income is reversed, on all delinquent notes receivable when principal or interest payments are more than three months contractually past due and not resumed until such loans are less than three months past due.  As of March 31, 2016 and December 31, 2015,  $10.3 million and $10.4 million, respectively, of Bluegreen’s VOI notes receivable were more than 90 days past due, and accordingly, consistent with Bluegreen’s policy, were not accruing interest income.  After 120 days, Bluegreen’s VOI notes receivable are generally written off against the allowance for credit loss.



Credit Quality for Financed Receivables and the Allowance for Credit Losses



Bluegreen holds large amounts of homogeneous VOI notes receivable and assesses uncollectibility based on pools of receivables.  In estimating future credit losses, Bluegreen’s management does not use a single primary indicator of credit quality but instead evaluates its VOI notes receivable based upon a combination of factors, including a static pool analysis, the aging of the respective receivables, current default trends and prepayment rates by origination year, as well as the FICO® scores of the borrowers.



The activity in Bluegreen’s allowance for loan losses (including with respect to notes receivable secured by homesites) was as follows (in thousands):







 

 

 

 



 

 

 

 



 

For the Three Months Ended March 31,



 

2016

 

2015

Balance, beginning of period

$

110,714 

 

102,566 

Provision for credit losses

 

10,485 

 

7,084 

Write-offs of uncollectible receivables

 

(11,023)

 

(8,799)

Balance, end of period

$

110,176 

 

100,851 





 

16

 


 

 

The following table shows the delinquency status of Bluegreen’s VOI notes receivable as of March 31, 2016 and December 31, 2015 (in thousands):







 

 

 

 



 

 

 

 



 

March 31,

 

December 31,



 

2016

 

2015

Current

$

498,679 

 

501,738 

31-60 days

 

5,453 

 

6,889 

61-90 days

 

3,923 

 

4,869 

> 90 days (1)

 

10,306 

 

10,389 

Total

$

518,361 

 

523,885 





(1)

Includes $5.2 million at both March 31, 2016 and December 31, 2015 related to VOI notes receivable that, as of such dates, had defaulted, but the related VOI notes receivable balance had not yet been charged off in accordance with the provisions of certain of Bluegreen's receivable-backed notes payable transactions.  These VOI notes receivable have been reflected in the allowance for credit losses.    

   



7.     Inventory



Inventory consisted of the following (in thousands):





 

 

 

 



 

March 31,

 

December 31,



 

2016