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EX-31.1 - EX-31.1 - Bluegreen Vacations Holding Corpbfcf-20160630xex31_1.htm
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EX-32.1 - EX-32.1 - Bluegreen Vacations Holding Corpbfcf-20160630xex32_1.htm
EX-31.2 - EX-31.2 - Bluegreen Vacations Holding Corpbfcf-20160630xex31_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 June 30, 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 August 2, 2016 is as follows:

 

Class A Common Stock of $.01 par value, 74,517,931 shares outstanding.
Class B Common Stock of $.01 par value, 13,718,816 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 June  30, 2016 and December 31, 2015 -Unaudited



 

 



Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Six Months Ended June 30, 2016 and 2015 - Unaudited



 

 



Condensed Consolidated Statements of Changes in Equity for the Six Months Ended June 30, 2016 and 2015 - Unaudited



 

 



Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 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

36 



 

 

Item 4.

Controls and Procedures

60 



 

 

Part II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

60 



 

 

Item 1A.

Risk Factors

60 



 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

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)



 

 

 

 



 

June 30,

 

December 31,



 

2016

 

2015



 

(Unaudited)

 

 

ASSETS

 

 

 

 

Cash and cash equivalents

$

270,933 

 

198,905 

Restricted cash ($22,811 in 2016 and $25,358 in 2015 in variable

 

 

 

 

interest entities ("VIEs"))

 

58,388 

 

59,365 

Loans held-for-sale

 

 -

 

21,354 

Loans receivable, net

 

34,218 

 

34,035 

Notes receivable, net ($306,341 and $280,841 in VIEs in 2016 and 2015, respectively)

 

417,820 

 

415,598 

Inventory

 

216,553 

 

220,929 

Real estate held-for-investment

 

30,046 

 

31,290 

Real estate held-for-sale, net

 

32,854 

 

46,338 

Investments in unconsolidated real estate joint ventures

 

42,752 

 

42,962 

Property and equipment, net

 

96,670 

 

90,020 

Goodwill

 

7,601 

 

7,601 

Intangible assets, net

 

69,306 

 

70,188 

Other assets

 

107,701 

 

102,375 

Total assets

$

1,384,842 

 

1,340,960 



 

 

 

 



 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

Liabilities:

 

 

 

 

Accounts payable

$

28,015 

 

25,976 

Deferred income 

 

35,095 

 

28,847 

Escrow deposits

 

28,567 

 

24,525 

Other liabilities

 

92,236 

 

81,623 

Receivable-backed notes payable - recourse

 

61,645 

 

89,888 

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

 

 

 

 

costs of $6,017 and $4,905 in 2016 and 2015, respectively (in VIEs)

 

352,451 

 

314,024 

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

 

 

 

 

issuance costs of $1,884 and $2,011 in 2016 and 2015, respectively

 

112,753 

 

120,994 

Junior subordinated debentures, net of unamortized debt issuance costs

 

 

 

 

of $1,777 and $1,822 in 2016 and 2015, respectively

 

151,532 

 

150,485 

Deferred income taxes

 

13,341 

 

8,594 

Shares subject to mandatory redemption

 

13,303 

 

13,098 

Total liabilities

 

888,938 

 

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 72,236,519  in 2016 and 73,211,519 in 2015

 

722 

 

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

 

146,194 

 

143,231 

Accumulated earnings

 

237,419 

 

232,134 

Accumulated other comprehensive income

 

510 

 

616 

Total  BFC Financial Corporation equity

 

384,958 

 

376,826 

Noncontrolling interests

 

110,946 

 

106,080 

Total equity

 

495,904 

 

482,906 

Total liabilities and equity

$

1,384,842 

 

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

 

For the Six Months Ended



 

June 30,

 

June 30,



 

2016

 

2015

 

2016

 

2015

Revenues

 

 

 

 

 

 

 

 

Sales of VOIs

$

68,542 

 

59,732 

 

124,912 

 

112,914 

Fee-based sales commission revenue

 

54,188 

 

47,974 

 

94,335 

 

80,574 

Other fee-based services revenue

 

26,056 

 

24,948 

 

51,611 

 

48,701 

Trade sales

 

21,250 

 

19,583 

 

42,212 

 

39,118 

Interest income

 

21,150 

 

21,888 

 

42,213 

 

41,601 

Other revenue

 

1,779 

 

16,846 

 

3,321 

 

18,103 

Total revenues

 

192,965 

 

190,971 

 

358,604 

 

341,011 



 

 

 

 

 

 

 

 

Costs and Expenses

 

 

 

 

 

 

 

 

Cost of sales of VOIs

 

9,666 

 

7,381 

 

13,582 

 

12,247 

Cost of other fee-based services

 

16,577 

 

16,748 

 

31,587 

 

31,549 

Cost of trade sales

 

18,959 

 

14,195 

 

34,006 

 

28,030 

Interest expense

 

9,738 

 

9,903 

 

18,805 

 

20,523 

Recoveries from loan losses, net

 

(6,287)

 

(6,608)

 

(8,035)

 

(10,429)

Impairments (recoveries) of assets, net

 

1,759 

 

(810)

 

1,722 

 

(1,873)

Litigation settlement

 

 -

 

36,500 

 

 -

 

36,500 

Selling, general and administrative expenses

 

142,204 

 

114,296 

 

254,259 

 

211,645 

Total costs and expenses

 

192,616 

 

191,605 

 

345,926 

 

328,192 



 

 

 

 

 

 

 

 

Equity in net earnings (losses) of unconsolidated

 

 

 

 

 

 

 

 

real estate joint ventures

 

1,655 

 

(291)

 

1,313 

 

(595)

Foreign exchange gain (loss)

 

110 

 

70 

 

320 

 

(399)

Other income, net

 

189 

 

1,114 

 

452 

 

2,215 

Income before income taxes

 

2,303 

 

259 

 

14,763 

 

14,040 

Benefit (provision) for income taxes (See Note 10)

 

368 

 

90,353 

 

(4,739)

 

81,744 

Net income

 

2,671 

 

90,612 

 

10,024 

 

95,784 

Less: Net income attributable to noncontrolling interests

 

2,427 

 

6,317 

 

4,298 

 

9,603 

Net income attributable to BFC

$

244 

 

84,295 

 

5,726 

 

86,181 



 

 

 

 

 

 

 

 

Basic earnings per share

$

0.00 

 

0.97 

 

0.07 

 

0.99 

Diluted earnings per share

$

0.00 

 

0.97 

 

0.07 

 

0.99 

Basic weighted average number of common

 

 

 

 

 

 

 

 

shares outstanding

 

85,946 

 

87,093 

 

86,392 

 

87,114 

Diluted weighted average number of common and

 

 

 

 

 

 

 

 

common equivalent shares outstanding

 

86,145 

 

87,286 

 

86,577 

 

87,309 



 

 

 

 

 

 

 

 

Cash dividends declared per Class A common share

$

0.005 

 

0.00 

 

0.005 

 

0.00 

Cash dividends declared per Class B common share

$

0.005 

 

0.00 

 

0.005 

 

0.00 



 

 

 

 

 

 

 

 

Net income

$

2,671 

 

90,612 

 

10,024 

 

95,784 

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

 

 

 

Unrealized gains (losses) on securities available for sale

 

41 

 

(12)

 

66 

 

(25)

Foreign currency translation adjustments

 

(42)

 

(33)

 

(190)

 

99 

Other comprehensive (loss) income, net

 

(1)

 

(45)

 

(124)

 

74 

Comprehensive income, net of tax

 

2,670 

 

90,567 

 

9,900 

 

95,858 

Less: Comprehensive income attributable

 

 

 

 

 

 

 

 

to noncontrolling interests

 

2,427 

 

6,303 

 

4,280 

 

9,641 

Total comprehensive  income attributable to BFC

$

243 

 

84,264 

 

5,620 

 

86,217 



 

 

 

 

 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited





 

 

2

 


 

 

 







 

 

 

 

 

 

 

 

 

 

 

BFC Financial Corporation

Condensed Consolidated Statements of Changes in Equity - Unaudited

For the Six Months Ended June 30, 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

 -

 -

 

 -

 -

 -

86,181 

 -

86,181  9,603  95,784 

Other comprehensive income

 -

 -

 

 -

 -

 -

 -

36  36  38  74 

Subsidiaries' capital transactions

 -

 -

 

 -

 -

1,511 

 -

 -

1,511  952  2,463 

Distributions to noncontrolling interest

 -

 -

 

 -

 -

 -

 -

 -

 -

(2,268) (2,268)

Net effect of BFC's tender offer for BBX Capital attributable to non-controlling interest

 -

 -

 

 -

 -

92,763 

 -

 -

92,763  (92,763)

 -

Consideration paid in connection with the tender offer for BBX Capital

 -

 -

 

 -

 -

(95,424)

 -

 -

(95,424)

 -

(95,424)

Repurchase and retirement of Common Stock

(60)

 -

 

 -

(1) (173)

 -

 -

(174)

 -

(174)

Conversion of Common Stock from Class B to Class A

36  (36)

 

 -

 -

 -

 -

 -

 -

 -

 -

Issuance of Common Stock from exercise of options

25 

 -

 

 -

 -

10 

 -

 -

10 

 -

10 

Share-based compensation

 -

 -

 

 -

 -

2,503 

 -

 -

2,503 

 -

2,503 

Balance, June 30,  2015

73,308  10,132 

$

733  101  143,248  195,841  389  340,312  109,362  449,674 



 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2015

73,212  11,346 

$

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

Net income

 -

 -

 

 -

 -

 -

5,726 

 -

5,726  4,298  10,024 

Other comprehensive loss

 -

 -

 

 -

 -

 -

 -

(106) (106) (18) (124)

Subsidiaries' capital transactions

 -

 -

 

 -

 -

2,695 

 -

 -

2,695  586  3,281 

Class A common stock cash dividends declared

 -

 -

 

 -

 -

 -

(373)

 -

(373)

 -

(373)

Class B common stock cash dividends declared

 -

 -

 

 -

 -

 -

(68)

 -

(68)

 -

(68)

Repurchase and retirement of Class A Common Stock

(1,000)

 -

 

(10)

 -

(3,019)

 -

 -

(3,029)

 -

(3,029)

Issuance of Common Stock from exercise of options

25 

 -

 

 -

 -

10 

 -

 -

10 

 -

10 

Share-based compensation

 -

 -

 

 -

 -

3,277 

 -

 -

3,277 

 -

3,277 

Balance, June 30, 2016

72,237  11,346 

$

722  113  146,194  237,419  510  384,958  110,946  495,904 



 

 

 

 

 

 

 

 

 

 

 

See Notes to Condensed Consolidated Financial Statements - Unaudited







 

3

 


 

 



 





 

 

 

 

 



 

 

 

 

 

BFC Financial Corporation

Condensed Consolidated Statements of Cash Flows - Unaudited

(In thousands)



 

 

 

 

 



 

For the Six Months Ended 



 

June 30,

 



 

2016

 

2015

 

Net cash provided by operating activities

$

44,544 

 

14,641 

 



 

 

 

 

 

Investing activities:

 

 

 

 

 

Decrease (increase) in restricted cash

 

1,306 

 

(2,647)

 

Investments in unconsolidated real estate joint ventures

 

(785)

 

(1,103)

 

Repayment of loans receivable, net

 

26,360 

 

17,884 

 

Proceeds from the sale of loans receivable

 

 -

 

89 

 

Proceeds from sales of real estate held-for-sale

 

11,042 

 

34,758 

 

Additions to real estate held-for-investment

 

(1,816)

 

(11,488)

 

Additions to real estate held-for-sale

 

(225)

 

(10,667)

 

Purchases of property and equipment

 

(6,103)

 

(4,650)

 

Proceeds from the sale of property and equipment

 

 -

 

257 

 

Return of unconsolidated real estate joint venture investment

 

994 

 

 -

 

Acquisition of BBX Capital Class A shares

 

 -

 

(95,424)

 

(Increase) decrease from other investing activities

 

(323)

 

118 

 

Net cash provided by (used in) investing activities

$

30,450 

 

(72,873)

 



 

 

 

 

 

Financing activities:

 

 

 

 

 

Repayment of BB&T preferred interest in Florida Asset

 

 

 

 

 

Resolution Group, LLC ("FAR")

 

 -

 

(12,348)

 

Repayments of notes, mortgage notes payable and other borrowings

 

(169,414)

 

(90,186)

 

Proceeds from notes, mortgage notes payable and other borrowings

 

172,290 

 

78,490 

 

Payments for debt issuance costs

 

(2,448)

 

(2,537)

 

Payments of interest on shares subject to mandatory redemption

 

(375)

 

(375)

 

Proceeds from the exercise of BFC stock options

 

10 

 

10 

 

Retirement of BFC's Class A Common Stock

 

(3,029)

 

(174)

 

Distributions to noncontrolling interest

 

 -

 

(2,268)

 

Net cash used in financing activities

$

(2,966)

 

(29,388)

 



 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

72,028 

 

(87,620)

 

Cash and cash equivalents at beginning of period 

 

198,905 

 

279,437 

 

Cash and cash equivalents at end of period 

$

270,933 

 

191,817 

 



 

 

 

 

 



 

 

 

Continued

 



 

 

 

 

 



 

4

 


 

 





 

 

 

 

 



 

 

 

 

 

BFC Financial Corporation

Condensed Consolidated Statements of Cash Flows - Unaudited

(In thousands)



 

 

 

 

 



 

For the Six Months Ended 



 

June 30,

 



 

2016

 

2015

 

Supplemental cash flow information:

 

 

 

 

 

Interest paid on borrowings

$

16,599 

 

17,641 

 

Income taxes paid

 

592 

 

12,039 

 

Income tax refunded

 

 -

 

(317)

 



 

 

 

 

 

Supplementary disclosure of non-cash investing and financing activities:

 

 

 

 

 

Loans transferred to real estate held-for-sale or

 

 

 

 

 

real estate held-for-investment

$

3,663 

 

2,427 

 

Loans held-for-sale transferred to loans receivable

 

16,078 

 

7,365 

 

Real estate held-for-investment transferred to real

 

 

 

 

 

estate held-for-sale

 

3,040 

 

3,572 

 

Real estate held-for-sale transferred to property and equipment

 

6,557 

 

 -

 

Issuance of notes payable to acquire business

 

 -

 

1,395 

 

Fair value of net assets acquired in connection with business acquisitions

 

 -

 

1,404 

 

(Decrease) increase in BFC accumulated other comprehensive

 

 

 

 

 

income, net of taxes

 

(106)

 

36 

 

Net increase in BFC shareholders' equity from

 

 

 

 

 

the effect of subsidiaries' capital transactions, net of taxes

 

2,695 

 

1,511 

 



 

 

 

 

 

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 condensed consolidated financial condition of BFC at June 30, 2016; the condensed consolidated results of operations and comprehensive income of BFC for the three and six months ended June 30, 2016 and 2015; the changes in condensed consolidated equity of BFC for the six months ended June 30, 2016 and 2015; and the condensed consolidated cash flows of BFC for the six months ended June 30, 2016 and 2015. Operating results for the three and six months ended June 30, 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 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, and 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 vacation ownership interests (“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 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. In addition, Bluegreen provides financing to credit qualified individual purchasers of VOIs  which generates significant interest income.





6

 


 

 

Merger Agreement



On July 27, 2016, BFC entered into a definitive merger agreement (the “Merger Agreement”) with BBX Capital Corporation and BBX Merger Subsidiary LLC, a newly formed wholly owned subsidiary of BFC (“Merger Sub”). The Merger Agreement provides for BBX Capital Corporation to merge with and into Merger Sub (the “Merger”), with Merger Sub continuing as the surviving company of the Merger and a wholly owned subsidiary of BFC. Under the terms of the Merger Agreement, which has been approved by a special committee comprised of BBX Capital Corporation’s independent directors as well as the full boards of directors of both BFC and BBX Capital Corporation, each share of BBX Capital’s Class A Common Stock outstanding immediately prior to the effective time of the Merger (other than shares of BBX Capital’s Class A Common Stock held by BFC and shares of BBX Capital’s Class A Common Stock as to which appraisal rights are exercised and perfected in accordance with Florida law) will be converted into the right to receive, at the election of the holder, 5.4 shares of BFC’s Class A Common Stock or $20.00 in cash.  BBX Capital’s shareholders will have the right to elect to receive all cash, all stock, or a combination of cash and stock in exchange for their shares.  If all BBX Capital shareholders other than BFC elect cash, the merger consideration will be $61.5 million and if all were to elect stock, BFC would issue 16,592,845 shares of its Class A Common Stock in connection with the merger.  Each option to acquire shares of BBX Capital’s Class A Common Stock that is outstanding at the effective time of the Merger, whether or not then exercisable, will be converted into an option to acquire shares of BFC’s Class A Common Stock and be subject to the same terms and conditions as in effect at the effective time of the Merger, except that the number of shares which may be acquired upon exercise of the option will be multiplied by the exchange ratio of 5.4 shares of BFC’s Class A Common Stock for each share of BBX Capital’s Class A Common Stock subject to the option and the exercise price of the option will be divided by 5.4. In addition, each share of BBX Capital’s Class A Common Stock subject to a restricted stock award outstanding at the effective time of the Merger will be converted into a restricted share of BFC’s Class A Common Stock and be subject to the same terms and conditions as in effect at the effective time of the Merger, except that the number of shares subject to the award will be multiplied by the exchange ratio of 5.4 shares of BFC’s Class A Common Stock for each share of BBX Capital’s Class A Common Stock subject to the award.  Consummation of the Merger is subject to certain closing conditions, including, without limitation, the approval of the Merger Agreement by both (i) holders of shares of BBX Capital’s Class A Common Stock and Class B Common Stock representing a majority of the votes entitled to be cast on the Merger Agreement, and (ii) holders of a majority of the shares of BBX Capital’s Class A Common Stock voted on the Merger Agreement other than shares held by BFC and its affiliates.  Pursuant to the Merger Agreement, BFC has agreed to vote all of BBX Capital’s Class A Common Stock and Class B Common Stock owned by it in favor of the Merger Agreement. Accordingly, approval of the Merger Agreement with respect to the combine vote of the holders of BBX Capital’s Class A Common Stock and Class B Common Stock described under clause (i) above is assured. There is no assurance that the approval of the unaffiliated shareholders will be received.  The Merger is also conditioned on holders of not more than 150,000 shares of BBX Capital’s Class A Common Stock exercising appraisal rights and the absence of any “Material Adverse Effect” (as defined in the Merger Agreement) with respect to either BFC or BBX Capital. The Merger is not subject to a financing condition. There is no assurance that the conditions to close the Merger will be satisfied or that the Merger will otherwise be consummated when anticipated, on the contemplated terms, or at all.



BFC Dividends



On June 6, 2016, BFC’s Board of Directors declared a cash dividend on BFC’s Class A and Class B Common Stock of $0.005 per share. The dividend was paid on July 20, 2016 to all holders of record of BFC’s Class A and Class B Common Stock at the close of trading on June 20, 2016.



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 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, including price limitations and limitations under Rule 10b-18 under the Securities Exchange Act of 1934, as amended, specified in the Repurchase Plan. During April 2016, the Company repurchased 1.0 million shares of its Class A Common Stock under the Repurchase Plan for approximately $3.0 million.  See Part II, Item 2 of this report for additional information regarding the share repurchases during April 2016.

7

 


 

 



Recently Adopted Accounting Pronouncements



In April 2015, the Financial Accounting Standards Board (“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 June 30, 2016 and December 31, 2015 and in the tables included in Note 9.  As further reflected in the table below, as a result of 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 reported in the Company’s Consolidated Balance Sheet as of December 31, 2015 contained in the 2015 Annual Report (in thousands):





 

 

 

 

 

 



 

 

 

 

 

 



 

As presented

 

 

 

 



 

in the 2015

 

 

 

 



 

Annual Report

 

 

 

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



Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements. This ASU introduces an approach based on expected credit losses to estimate credit losses on certain types of financial instruments.  This ASU also expands the disclosure requirements regarding a company’s assumptions, models, and methods for estimating the allowance for loan losses. Further, public entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination (i.e., by vintage year). This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the requirements of this update and has not yet determined its impact on the Company’s consolidated financial statements.



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 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 adoption of this update is not expected to have a material impact on the Company’s consolidated financial statements..



8

 


 

 

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 better 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), in April and May 2016, the FASB issued ASU 2016-10 and 2016-12, respectively, Revenue from Contracts with Customers (Topic 606), and in May, the FASB issued ASUs 2016-11 – Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09. These updates clarify implementation guidance on the related topic.  The accounting guidance updates will replace most existing revenue recognition guidance in GAAP. The standard is effective for annual and interim reporting periods beginning after December 15, 2017.  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 their impact on the Company's 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.



In these securitizations, 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 event is cured.  As of June 30, 2016, Bluegreen was in compliance with all applicable terms under its securitization transactions, and no trigger 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 VIE.  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 VIE 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 six months ended June 30, 2016 and 2015 were $1.1 million and $1.6 million, respectively.  Bluegreen’s maximum exposure to loss relating to its nonrecourse 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.



9

 


 

 

The assets and liabilities of Bluegreen’s consolidated VIEs included in the Company’s condensed consolidated statements of financial condition are as follows (in thousands):





 

 

 

 



 

 

 

 



 

June 30,

 

December 31,



 

2016

 

2015

Restricted cash

$

22,811 

 

25,358 

Securitized notes receivable, net

 

306,341 

 

280,841 

Receivable backed notes payable - non-recourse

 

352,451 

 

314,024 





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





3.     Investments in Unconsolidated Real Estate Joint Ventures 



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







 

 

 

 



 

 

 

 



 

June 30,

 

December 31,

Investment in unconsolidated real estate joint ventures

 

2016

 

2015

Altis at Kendall Square, LLC

$

701 

 

764 

Altis at Lakeline - Austin Investors LLC

 

5,257 

 

5,210 

New Urban/BBX Development, LLC

 

775 

 

864 

Sunrise and Bayview Partners, LLC

 

1,570 

 

1,577 

Hialeah Communities, LLC

 

4,023 

 

4,569 

PGA Design Center Holdings, LLC

 

1,874 

 

1,911 

CCB Miramar, LLC

 

875 

 

875 

Centra Falls, LLC

 

700 

 

727 

The Addison on Millenia Investment, LLC

 

5,810 

 

5,778 

BBX/S Millenia Blvd Investments, LLC

 

4,933 

 

4,905 

Altis at Bonterra - Hialeah, LLC

 

15,902 

 

15,782 

Altis at Shingle Creek Manager, LLC

 

332 

 

 -

Investments in unconsolidated real estate joint ventures

$

42,752 

 

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 and six months ended June 30, 2016 was  $211,000 and $333,000, respectively and for the three and six months ended June 30, 2015 was $132,000 and $228,000, respectively.  



10

 


 

 

The condensed statements of operations for the three and six months ended June 30, 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

 

For the Six Months Ended



 

June 30,

 

June 30,



 

2016

 

2015

 

2016

 

2015

Total revenues

$

5,063 

 

658 

 

6,254 

 

1,037 

Total costs and expenses

 

(3,171)

 

(1,317)

 

(5,027)

 

(2,388)

Net earnings (loss)

$

1,892 

 

(659)

 

1,227 

 

(1,351)

Equity in net earnings (losses) of unconsolidated real estate joint ventures

$

1,655 

 

(291)

 

1,313 

 

(595)



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.  

 



4.  BBX Capital’s Loans Held-For-Sale



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







 

 

 

 



 

 

 

 



 

June 30,

 

December 31,



 

2016

 

2015

Residential 

$

 -

 

21,354 





Loans held-for-sale are reported at the lower of cost or fair value measured on an aggregate basis.   As of December 31, 2015 the lower of cost or fair value adjustment on loans held-for-sale was  $1.6 million. BBX Capital transfers loans from held-for-sale to loans receivable when, based on the current economic environment and related market conditions, it has the intent to hold those loans for the foreseeable future.  Based on current market conditions and an evaluation of the residential loan portfolio, BBX Capital’s management decided to hold the residential loans for the foreseeable future.  As of June 30, 2016, BBX Capital transferred residential loans with aggregate unpaid principal balances, net of charge-offs, of $17.3 million from held-for-sale to loans receivable. The lower of cost or fair value of the residential loans on the transfer date was $16.1 million.  Any difference between the lower of cost or fair value of the loan and the unpaid principal balance net of charge-offs was recognized as a discount. Such loans are included in loans receivable, net of a  $1.2 million discount, on the Company’s condensed consolidated statement of financial condition as of June 30, 2016.





5.    BBX Capital’s Loans Receivable 



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



 

 

 

 



 

 

 

 



 

June 30,

 

December 31,



 

2016

 

2015

Commercial non-real estate

$

1,211 

 

11,250 

Commercial real estate

 

11,292 

 

16,294 

Small business

 

3,360 

 

4,054 

Consumer

 

2,124 

 

2,368 

Residential

 

16,231 

 

69 

Loans receivable -net

$

34,218 

 

34,035 





As of June 30, 2016, foreclosure proceedings were in-process on $11.3  million of BBX Capital’s residential loans, $0.3 million of consumer loans and $64,000 of small business loans.



11

 


 

 

The total discount on loans receivable was  $4.1 million and $3.3 million as of June 30, 2016 and December 31, 2015, respectively.  As of June 30, 2016, $16.1 million of residential loans, net of a $1.2 million discount were transferred from loans held-for-sale to loans receivable.



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





 

 

 

 



 

 

 

 



 

June 30,

 

December 31,

Loan Class

 

2016

 

2015

Commercial non-real estate

$

1,211 

 

1,250 

Commercial real estate

9,351 

 

9,639 

Small business

 

3,360 

 

4,054 

Consumer

 

2,025 

 

2,368 

Residential

 

14,722 

 

69 

Total nonaccrual loans

$

30,669 

 

17,380 





An age analysis of the past due recorded investment in BBX Capital’s loans receivable as of June 30, 2016 and December 31, 2015 was as follows (in thousands):





 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

Total



 

31-59 Days

 

60-89 Days

 

90 Days

 

Total

 

 

 

Loans

June 30, 2016

 

Past Due

 

Past Due

 

or More (1)

 

Past Due

 

Current

 

Receivable

Commercial non-real estate

$

 -

 

 -

 

330 

 

330 

 

881 

 

1,211 

Commercial real estate

 

 -

 

 -

 

3,986 

 

3,986 

 

7,306 

 

11,292 

Small business

 

 -

 

64 

 

27 

 

91 

 

3,269 

 

3,360 

Consumer

 

122 

 

28 

 

527 

 

677 

 

1,447 

 

2,124 

Residential

 

22 

 

276 

 

11,285 

 

11,583 

 

4,648 

 

16,231 

Total

$

144 

 

368 

 

16,155 

 

16,667 

 

17,551 

 

34,218 









 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

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 June 30, 2016 and December 31, 2015.





12

 


 

 

The activity in BBX Capital’s allowance for loan losses for the three and six months ended June 30, 2016 and 2015 was as follows (in thousands): 





 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

For the Three Months

 

For the Six Months



 

Ended June 30,

 

Ended June 30,

Allowance for Loan Losses:

2016

 

2015

 

2016

 

2015

Beginning balance

$

 -

 

381 

 

 -

 

977 

    Charge-offs :

 

(66)

 

(221)

 

(96)

 

(896)

     Recoveries :

 

6,353 

 

6,620 

 

8,131 

 

10,520 

     Provision :

 

(6,287)

 

(6,608)

 

(8,035)

 

(10,429)

Ending balance

$

 -

 

172 

 

 -

 

172 

Ending balance individually evaluated for impairment

$

 -

 

 -

 

 -

 

 -

Ending balance collectively evaluated for impairment

 

 -

 

172 

 

 -

 

172 

Total

$

 -

 

172 

 

 -

 

172 

Loans receivable:

 

 

 

 

 

 

 

 

Ending balance individually evaluated for impairment

$

26,986 

 

15,862 

 

26,986 

 

15,862 

Ending balance collectively evaluated for impairment

 

7,232 

 

15,585 

 

7,232 

 

15,585 

Total

$

34,218 

 

31,447 

 

34,218 

 

31,447 

Proceeds from loan sales

$

 -

 

 -

 

 -

 

89 

Transfer from loans held-for-sale

$

16,078 

 

7,365 

 

16,078 

 

7,365 





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.  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.  BBX Capital’s 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 June 30, 2016 and December 31, 2015 were as follows (in thousands):







 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 



 

As of June 30, 2016

 

As of December 31, 2015



 

 

Unpaid