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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Year Ended December 31, 1998
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 34-027228
BankAtlantic Bancorp, Inc.
(Exact name of registrant as specified in its Charter)
Florida 65-0507804
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1750 East Sunrise Boulevard
Ft. Lauderdale, Florida 33304
(Address of principal executive offices) (Zip Code)
(954) 760-5000
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of Each Exchange on Which Registered
New York Stock Exchange
Title of Each Class
Class A common stock, Par Value $0.01 Per Share
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Name of Each Exchange on Which Registered
Nasdaq National Market
Title of Class
Class B common stock, Par Value $0.01 Per Share
Indicate, by check mark, if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10K or any
amendment to this Form 10K. [ ]
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 [ ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant at February 26, 1999 was approximately $40.2 million.
The number of shares of Registrant's Class A Common Stock outstanding on
February 26, 1999 was 25,802,978.
The number of shares of Registrant's Class B Common Stock outstanding on
February 26, 1999 was 10,359,994.
Portions of the 1998 Annual Report to Stockholders of Registrant are
incorporated in Parts I, II and IV of this report. Portions of the Proxy
Statement of Registrant relating to the Annual Meeting of shareholders, are
incorporated in Part III of this report.
PART I
ITEM 1. BUSINESS
Except for historical information contained herein, the matters
discussed in this report contain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), that involve substantial risks and uncertainties. When used in
this report, or in the documents incorporated by reference herein, the words
"anticipate", "believe", "estimate", "may", "intend", "expect" and similar
expressions identify certain of such forward-looking statements. Actual results,
performance or achievements could differ materially from those contemplated,
expressed or implied by the forward-looking statements contained herein. These
forward-looking statements are based largely on the expectations of BankAtlantic
Bancorp, Inc. ("the Company" or "Bancorp") and are subject to a number of risks
and uncertainties, including but not limited to, the risks and uncertainties
associated with the implementation of and the realization of benefits from its
restructuring initiatives and expense reductions, economic, competitive and
other factors affecting the Company and its operations, markets, products and
services, changes in interest rates and economic policies, the success of new
lines of business, significant growth in banking as well as non-banking
initiatives, and other factors discussed elsewhere in this report filed by the
Company with the Securities and Exchange Commission ("SEC"). Many of these
factors are beyond the Company's control.
GENERAL
THE COMPANY
The Company is a unitary savings bank holding company. The Company's
principal assets include the capital stock of:
/bullet/ BankAtlantic, a Federal Savings Bank ("BankAtlantic"), and its
subsidiaries and
/bullet/ Ryan, Beck & Co., Inc. ("RBCO"), an investment
banking firm and its subsidiaries.
The Company is registered with the Office of Thrift Supervision ("OTS") and
is subject to OTS regulations, examinations, supervision and reporting. RBCO is
subject to regulation, examination, supervision and reporting of various
agencies. See "Regulation and Supervision."
BANKATLANTIC
BankAtlantic is a federal savings bank headquartered in Ft. Lauderdale,
Florida. BankAtlantic provides a full range of commercial banking products and
services directly and through subsidiary corporations. The principal business of
BankAtlantic is attracting checking and savings deposits from the public and
general business customers and using these deposits to originate or acquire
commercial, small business, residential and consumer loans and to make permitted
investments such as the purchase of mortgage-backed securities, tax certificates
and other investment securities. On October 31, 1997, BankAtlantic acquired the
St. Lucie West Holding Corp. ("SLWHC") for approximately $20.0 million. SLWHC is
the developer of the master planned community of St. Lucie West, ("SLW") located
in St. Lucie County, Florida. In March 1998, the Company acquired Leasing
Technologies, Inc. ("LTI"), an equipment leasing company. LTI was subsequently
contributed to BankAtlantic during the second quarter of 1998 and operates as a
subsidiary of BankAtlantic.
BankAtlantic currently operates in 17 Florida counties through 67
branch offices, with 10 in Miami-Dade County, 23 in Broward County, 5 in the
Tampa Bay area and 13 in Palm Beach County as well as 16 branches located
throughout Florida in Wal-Mart SuperStores. As reported by an independent
statistical reporting service, BankAtlantic is the second largest independent
financial institution headquartered in the State of Florida based on assets at
September 30, 1998. BankAtlantic is regulated and examined by the OTS and the
Federal Deposit Insurance Corporation ("FDIC") and its deposit accounts are
insured up to applicable limits by the FDIC.
SEGMENTS
Bancorp considers its business segments to be bank loan operations,
bank investment operations, real estate operations and investment banking
operations. Bank loan operations consist primarily of loans originated through
BankAtlantic's salesforce and branch network by building relationships with its
customers. Bank investment operations consist of mortgage-backed securities, tax
certificates, other investment securities and bulk purchases of wholesale
residential loans which have been acquired primarily through dealers, brokers
and investment banking firms. Real estate operations consist of SLW and other
real estate joint ventures operated under BankAtlantic Development Corporation
("BDC"), a wholly owned subsidiary of BankAtlantic. Investment banking
operations consists of RBCO. During the fourth quarter of 1998 management
decided to exit the mortgage servicing business ("MSB") and management
anticipates that all such activities will cease during the second quarter of
1999. The MSB activities are classified as discontinued operations.
BANK LOAN OPERATIONS
General -- BankAtlantic's lending activities include residential real
estate lending, commercial lending (consisting of commercial real estate and
commercial business lending ), international lending, small business lending
(primarily commercial real estate and commercial non-mortgage loans under $1.0
million), lease financing, consumer lending (primarily consisting of loans
secured by subordinate liens on residential real property, loans secured by
automobiles and boats and unsecured signature loans), banker's acceptances and
issuances of standby letters of credit. See "Regulation and Supervision" for a
description of restrictions on BankAtlantic's lending activities.
Commercial Real Estate Loans -- BankAtlantic's commercial real estate
loans normally are secured by property located throughout Florida, primarily in
Miami-Dade, Broward and Palm Beach Counties. BankAtlantic's commercial real
estate loan originations include:
/bullet/ mortgage loans for commercial and industrial properties with five
to seven year maturities,
/bullet/ construction loans secured by income producing properties,
/bullet/ residential development loans and
/bullet/ land acquisition and development loans
BankAtlantic's commercial real estate loans, other than those relating
to BankAtlantic's affiliated joint ventures, typically are based on a minimum of
75% of the collateral's appraised value and typically require the borrower to
maintain escrow accounts for real estate taxes and insurance. The loan and
BankAtlantic's investment in affiliated joint ventures results in consolidated
exposure in excess of the typical 75% loan to value ratio. Prior to making a
loan BankAtlantic considers the value of the collateral, the quality of the
loan, the credit worthiness of the borrowers and guarantors, the location of the
real estate, the projected income stream of the property, the reputation and
quality of management constructing or administering the property, and the
interest rate and fees. BankAtlantic normally requires that these loans be
guaranteed by one or more of the principals of the borrowing entity.
Commercial Business Loans -- BankAtlantic's commercial business loans
are generally made to small to medium size companies located throughout Florida,
primarily in the Miami-Dade, Broward and Palm Beach Counties and the Tampa Bay
area. BankAtlantic makes both secured and unsecured loans, although the majority
of these loans are on a secured basis. New commercial business loans are
generally in excess of $1 million and typically secured by the accounts
receivable, inventory, equipment, and/or general corporate assets of the
borrowers. Commercial business loans generally have variable interest rates that
are prime-based. These loans typically are originated for terms ranging from one
to five years.
Commercial real estate and construction and development loans present
more credit risk than residential first mortgages, since many of the loans may
be secured by property in the early stages of development. BankAtlantic's
competitors over the last several years have also increased their available
funding for commercial real estate projects. Increased availability of funds
could result in over-building and a decline in the real estate values. A decline
in the real estate market, or in economic conditions in general, in Florida
could have a material adverse effect on BankAtlantic's financial condition and
results of operations. In addition, any changes in the commercial real estate
market could impact real estate operations as well.
Commercial business loans generally have a higher degree of risk than
residential loans because they are more likely to be adversely impacted by
unfavorable economic conditions. In addition, these loans typically are highly
dependent on the success of the business and the credit worthiness of the
principals or guarantors.
Residential Real Estate Loans -- BankAtlantic makes residential real
estate loans secured by property located throughout Florida, primarily in
Miami-Dade, Broward and Palm Beach Counties. BankAtlantic originates residential
loans through its branch banking network and through a staff of commissioned
mortgage officers. BankAtlantic originates both fixed rate and adjustable loans
with amortization periods up to 30 years.
Residential real estate loans are generally less risky than other
lending alternatives, since the collateral is secured by residential real estate
of primarily owner occupied properties located primarily in BankAtlantic's
market area.
International Lending -- BankAtlantic's international lending
operations provide the following:
/bullet/ trade financing for correspondent financial institutions in Latin
America, including pre-export financing, advances on letters of
credit and banker's acceptances,
/bullet/ trade financing for local commercial customers who are
primarily importing from or exporting
to Latin America,
/bullet/ term financing of the export of United States goods and
services guaranteed by the EximBank and
/bullet/ other correspondent banking services.
Loans to correspondent banks are generally Libor based and domestic
loans are generally prime-based and have maturities of one year or less.
Small Business Lending -- BankAtlantic's small business loans are
generally made to companies located throughout Florida, primarily in Miami-Dade,
Broward and Palm Beach Counties. Small business loans are originated on a
secured or unsecured basis and do not exceed $1.0 million. These loans are
originated with maturities ranging from one to twenty years or on demand. Lines
of credit are due upon demand. Small business loans typically have fixed and
variable prime-based interest rates.
Lease Financing-- BankAtlantic leases and finances equipment to
corporate customers through its subsidiary, LTI. LTI principally leases or
finances trucks and manufacturing and construction equipment to businesses
located primarily in Miami-Dade, Broward and Palm Beach Counties in Florida.
LTI's loans and leases are secured by the acquired equipment and generally do
not exceed $400,000 per financing. These loans and leases are originated with
terms ranging from two to five years. Residuals are typically less than 10% of
the original purchase price of the equipment. The lease interest component is at
a fixed rate.
Small business loans and lease financing generally have a higher degree
of risk than residential loans because they are more likely to be adversely
impacted by unfavorable economic conditions. In addition, these loans typically
are highly dependent on the success of the business and the quality of the
principals.
Consumer Loans -- During 1998 BankAtlantic originated consumer loans
directly and indirectly. In the fourth quarter of 1998, BankAtlantic ceased the
indirect origination of loans through automobile dealers. Direct consumer loan
originations consist of:
/bullet/ automobile loans,
/bullet/ overdraft lines of credit,
/bullet/ loans secured by deposits, and
/bullet/ second mortgages on owner occupied residences.
Direct consumer loans are originated with fixed and variable prime-based
interest rates with terms ranging from one to 15 years.
The indirect origination of automobile consumer loans required funding
of dealer reserves to dealers. The amount advanced to the dealer is amortized
over the life of the loan. The dealer is normally responsible to BankAtlantic
for the amount of the unamortized reserve if a loan defaults or is prepaid. The
ability of a dealer to refund the unearned dealer reserve to BankAtlantic, upon
default or loan prepayment, is contingent upon the dealer's financial condition.
Consumer loans, especially indirect automobile loans, generally present
more credit risk than other types of loans, such as home equity or residential
real estate loans. Because these loans present a greater risk, they also
generally result in higher level of charge-offs.
Banker's Acceptances -- Banker's Acceptances are collateralized by
inventory and accounts receivable of borrowers of the issuing bank and are
unconditional obligations of the issuing bank.
Standby Letters of Credit -- Standby letters of credit are conditional
commitments issued by BankAtlantic to guarantee the performance of a customer to
a third party. The credit risk involved in issuing letters of credit is the same
as extending loans to customers. BankAtlantic may retain certificates of deposit
and residential and commercial liens as collateral for letters of credit.
BANK LOAN OPERATIONS - ADMINISTRATION
Underwriting -- BankAtlantic evaluates a borrower's ability to make
principal and interest payments and the value of the collateral securing the
underlying loans. Independent appraisers generally perform on-site inspections
and valuations of the collateral for commercial real estate loans. Commercial
real estate and commercial business loans of $1.0 million or more require the
approval of BankAtlantic's Major Loan Committee. The Major Loan Committee
consists of the Chief Executive Officer, Vice Chairman, Chief Operating Officer,
and certain other Officers of the Bank. Residential and consumer loans of
$500,000 or more also require the approval of BankAtlantic's Major Loan
Committee. The Chief Operating Officer must approve all small business loans at
or above $500,000 but less than $1 million. The President of LTI must approve
all leases in excess of $75,000.
International loan underwriting procedures assess the country risk and
the credit quality of the borrower. International loans to correspondent banks
must be approved by the International Loan Committee ("ILC"). The ILC committee
includes the Chief Executive Officer, certain Executive Vice Presidents,
Miami-Dade County President, and the Manager of International Lending.
The Country Risk Committee ("CRC") also monitors the international
loans. The CRC members include the ILC members and an independent economist. The
CRC meets monthly to review each country and establish guidelines by country,
including amount of exposure, acceptable types of transactions, and duration.
Commitments -- BankAtlantic issues commitments to originate residential
loans. Loan commitments are issued for purchasing and refinancing residential
properties. In most cases, residential loan commitments are limited to 60 days
and are issued after the loan is approved. BankAtlantic offers interest rate
"locks" for a fee for periods of up to 270 days. BankAtlantic issues commitments
for commercial real estate and commercial business loans. In most cases these
commitments are for three months. BankAtlantic extends credit to financial
institutions in Latin America which can be terminated at any time by
BankAtlantic. Financial institutions are evaluated on a case by case basis.
Allowance for Loan Losses, Non-Performing Assets, Classified Assets and
Impaired Loans -- The following is a description of how the allowance for loan
losses is determined.
BankAtlantic's loan portfolio is divided into the following categories:
/bullet/ commercial real estate,
/bullet/ residential real estate,
/bullet/ commercial business,
/bullet/ Lease financing,
/bullet/ international,
/bullet/ small business - real estate,
/bullet/ small business -non-mortgage, and
/bullet/ various types of consumer loans.
In determining the adequacy of its allowance for loan losses management
segregates the loan portfolio into broad categories such as: commercial real
estate; residential real estate; small business; commercial business; lease
financing, international and various types of consumer loans. BankAtlantic
provides for a general allowance for losses inherent in the portfolio by the
above categories, which consists of two components. First, general loss
percentages are calculated based upon historical analyses. In considering this
portion of the provision, greater emphasis is placed on current trends, if such
trends are adverse. Secondly, a supplemental portion of the allowance is
calculated for inherent losses which probably exist as of the evaluation date
even though they might not have been identified by the more objective processes
used for the portion of the allowance described above. This is due to the risk
of error and/or inherent imprecision in the process. This portion of the
allowance is particularly subjective and requires judgments based on qualitative
factors which do not lend themselves to exact mathematical calculations such as:
trends in delinquencies and nonaccruals; trends in the portfolio, volume, terms
and portfolio mix; new credit products and/or changes in the geographic
distribution of these products; changes in lending policies and procedures;
changes in the outlook for local, regional and national economic conditions;
concentrations of credit; and peer group comparisons.
Specific allowances are provided when a collateral analysis on a
classified loan indicates that there will be a probable loss upon liquidation of
collateral.
A loan is considered impaired when collection of principal and
interest, based on the contractual terms of the loan, is not probable.
BankAtlantic measures impairment based on:
/bullet/ the present value of the expected future cash flows of the
impaired loan discounted at the loan's original effective
interest rate,
/bullet/ the observable market price of the impaired loan, or
/bullet/ the fair value of the collateral of a collateral-dependent
loan.
BankAtlantic selects the measurement method on a loan-by-loan basis,
except that collateral-dependent loans for which foreclosure is probable are
measured at the fair value of the collateral. Specific allowances are provided
in the event the impairment calculation is in excess of the general allowance
allocation. In a troubled debt restructuring, BankAtlantic measures impairment
by discounting the total expected future cash flows at the loan's original
effective rate of interest.
Loans collectively reviewed by BankAtlantic for impairment include all
residential, consumer small business loans, lease financings and performing
commercial real estate and business loans under $1.0 million, excluding loans
which are individually reviewed based on specific criteria, such as delinquency
and condition of collateral. BankAtlantic's impaired loans that are evaluated
individually include nonaccrual commercial loans, restructured loans, and
performing commercial loans less than 90 days delinquent where management does
not expect the loans to be repaid in accordance with their contractual terms but
which are expected to be collected in full.
BANK INVESTMENT OPERATIONS
Debt and Equity Securities -- The Company has a portfolio (independent
of BankAtlantic) of debt and equity securities. Additionally, BankAtlantic
maintains an investment portfolio consisting primarily of mortgage-backed
securities ("MBS"), treasury notes, real estate mortgage investment conduits
("REMIC") and tax certificates.
BankAtlantic has in the past purchased federal agency obligations,
securities, corporate bonds and other asset backed securities.
MBS are pools of residential loans which are made to consumers and then
generally sold to the Government National Mortgage Corporation ("GNMA"), Federal
National Mortgage Association ("FNMA") and Federal Home Loan Mortgage
Corporation ("FHLMC").
MBS have fixed or variable rates ("ARMs") and either 15-30 year
maturities or 5-7 year balloon maturities. BankAtlantic generally invests in
ARMs or 5-7 year balloon MBS which are insured or guaranteed by the above
agencies.
REMIC's are collateralized mortgage obligations. BankAtlantic generally
invests in highly rated securities with average maturities of three to five
years for fixed rate products and of longer duration for variable rate products.
Asset-backed securities purchased by BankAtlantic consisted of
investment grade pooled automobile receivables. Corporate bonds consisted
generally of investment grade obligations of corporate borrowers with an average
maturity of three years.
During the year ended December 31, 1998, the Company began trading
government securities which are generally bought and sold on the same day.
Securities that management has both the positive intent and ability to
hold to maturity are classified as securities held-to-maturity and are carried
at cost, adjusted for amortization of premium or accretion of discount using the
interest method. Securities that may be sold prior to maturity for
asset/liability management purposes, or that may be sold in response to changes
in interest rates, to changes in prepayment risk, to increase regulatory capital
or other similar factors, are classified as securities available-for-sale and
carried at fair value with any adjustments to fair value, after tax, reported as
a separate component of shareholders' equity. Declines in the fair value of
individual held-to-maturity and available-for-sale securities below their cost
that are other than temporary result in write-downs of the individual securities
to their fair value. The related write-downs are included in earnings as
realized losses. Securities purchased for trading purposes are held in the
trading portfolio at fair value, with changes in fair value included in
noninterest income.
Tax Certificates -- BankAtlantic's tax certificates portfolio is
classified as "held to maturity". Tax certificates are evidences of tax
obligations that are generally auctioned by various state taxing authorities on
an annual basis. The tax obligation arises when the property owner fails to
timely pay the real estate taxes on the property. The majority of BankAtlantic's
tax certificates relate to Florida properties. Florida tax certificates
represent a priority lien against the real property for the delinquent real
estate taxes. Interest accrues on the tax certificate at the rate established at
the auction. The minimum repayment on tax certificates, in order to satisfy the
lien, is the certificate amount plus the greater of five percent of the
certificate amount or the interest accrued through the redemption date. Tax
certificates have no payment schedule or stated maturity. The certificate holder
has the right to collect the delinquent tax amount, plus interest. The
certificate holder can file for a deed to the underlying property if the
delinquent tax amount is unpaid at the end of two years. If the certificate
holder does not file for the deed within seven years, the certificate becomes
null and void. BankAtlantic's experience with this type of investment has been
favorable as rates earned are generally higher than many alternative investments
and substantial repayments generally occur over a two year period.
BankAtlantic also acquires tax certificates from various municipalities
outside the State of Florida. The nature of priority, statutory periods and deed
procedures vary by applicable taxing authorities but the general characteristics
are similar to those in Florida. There is no significant concentration of tax
certificate holdings in any one taxing authority outside of the State of
Florida.
BankAtlantic establishes an allowance for tax certificate losses in an
amount which it believes is sufficient to provide for future losses. In
establishing its allowances for tax certificate losses, management considers:
/bullet/ past loss experience,
/bullet/ present indicators such as the length of time the
/bullet/ certificate has been outstanding,
/bullet/ economic conditions, and
/bullet/ collateral values.
Tax certificates and tax deed applications are classified as nonaccrual
no later than when a tax certificate is outstanding 48 months or a deed has aged
48 months from BankAtlantic's certificate acquisition date. At that time,
interest ceases to be accrued and previously accrued interest is reversed.
The risks BankAtlantic has experienced with tax certificates have
related to:
/bullet/ the risk that additional funds may be required to purchase other
certificates relating to the property,
/bullet/ the risk that the liened property may be unusable, and
/bullet/ the risk that potential environmental concerns may make
taking title to the property untenable.
Purchased residential loans -- BankAtlantic purchases residential loans
in the secondary markets. These loans are secured by property located throughout
the United States. For residential loan purchases, BankAtlantic reviews the
seller's underwriting policies and also subjects certain of the individual loans
to an additional credit review. These loans are typically purchased in bulk and
are generally non-conforming loans due to the size and characteristics of the
individual loans. BankAtlantic sets guidelines for loan purchases relating to:
/bullet/ loan amount,
/bullet/ type of property,
/bullet/ state of residence,
/bullet/ loan-to-value ratios,
/bullet/ borrower's sources of funds,
/bullet/ appraisal, and
/bullet/ loan documentation.
BankAtlantic enters into contracts to purchase residential loans from
mortgage bankers, investment bankers and other financial institutions. These
contracts commit BankAtlantic to purchase the residential loans in 30 to 60 days
subject to the loans meeting BankAtlantic's underwriting guidelines. During
1998, BankAtlantic formed the Capital Markets group which began purchasing
residential loans on the secondary market with the intent to package and sell,
securitize or retain these loans based on their individual characteristics.
These loans are classified as "held for sale" or "held for investment "
depending on management's intent at the time the loans are purchased. The
Company continually evaluates these purchased loans and such evaluations may
result in transfers from the held for investment category; however, such
transfers would not normally exceed 10% of the average annual balance of the
portfolio.
Purchased wholesale residential loans included in bank investment
operations are generally secured by real estate located outside of
BankAtlantic's primary market area. Performance of these loans may be influenced
by the condition of the economy where the collateral is located and collection
risk.
REAL ESTATE OPERATIONS
Real Estate Held for Development and Sale Activities -- BDC acquired SLWHC
in late 1997. SLWHC is the developer of the master planned community of St.
Lucie West, located in St. Lucie County, Florida. SLWHC develops commercial and
residential parcels for sale to large developers. The master planned community
includes:
/bullet/ Fully amenitized residential developments
/bullet/ commercial development
/bullet/ industrial development
/bullet/ 3400 homes
/bullet/ a major league baseball spring training stadium
/bullet/ utilities
/bullet/ two PGA golf courses
/bullet/ medical facilities
/bullet/ shopping centers
/bullet/ banking facilities
/bullet/ educational facilities
/bullet/ religious facilities.
BDC has also invested in six real estate joint ventures. Five of these
joint ventures are in various stages of development. These joint ventures
required equity investments by BDC at the inception of the project of 44.5 - 90%
of the total venture equity with potential profit sharing of 40-50% in future
years. BankAtlantic has also provided financing to these joint ventures on terms
which are generally the same as offered to third parties, except for certain
joint ventures for which BBC has financed the other partners equity contribution
. Such lending activities have resulted in deferral of the recognition of
interest income on the financing activity and/or the deferral of profit
recognition from the joint venture.
Real estate held for development and sale includes land held for
development and land held for sale. Direct costs clearly associated with the
development of a specific parcel are capitalized as a cost of that parcel. Land
and indirect development costs are allocated to the various parcels based upon
the relative sales value method. Selling, general and other expenses not
directly related to the development of the property are expensed as incurred.
Real estate development activities are permissible activities for savings banks,
however, BankAtlantic's investment in BDC is excluded from BankAtlantic's
regulatory capital calculations.
As previously announced, the Company is considering alternatives
relating to its ownership of the real estate operations conducted through BDC
including a possible spin-off of BDC . See further discussion in Management
Discussion and Analysis - Liquidity and Capital Resources.
Risks associated with real estate operations relate to the highly
cyclical nature of the industry and that future market conditions are uncertain.
Factors which adversely affect the real estate and home building industries
include:
/bullet/ decreases in employment levels
/bullet/ the availability and cost of financing
/bullet/ decreases in demand
/bullet/ a slow down in home sales and construction
/bullet/ the significant volatility and fluctuations in
underlying real estate values.
SLWHC incurred $5.2 million in annual operating expenses during the
year ended December 31, 1998. In the future, periodic sales at SLW may not be
adequate to cover operating expenses. Additionally, none of the joint ventures
which are in development, have any operating history. There is no guarantee that
such ventures will be profitable. The current historically low interest rate
levels have had a positive impact on the pace of home sales and construction.
However, increases in interest rates may reverse this effect.
INVESTMENT BANKING OPERATIONS
Investment Banking Operations consist of the Company's subsidiary RBCO
which is an investment banking firm. RBCO is principally engaged in the
underwriting, market making, distribution and trading of tax-exempt obligations
and bank and thrift equity and debt securities. RBCO provides investment
banking, research, and financial advisory services.
RBCO provides these services primarily to financial services companies
with a focus on corporate finance and merger-related services. RBCO offers a
general securities brokerage business with investment products for retail and
institutional clients, as well as life insurance and annuity products. RBCO's
clients consist primarily of:
/bullet/ high net worth individuals (primarily in New Jersey, other
Mid-Atlantic and Northeastern states and Florida),
/bullet/ banking and thrift institutions (primarily in New Jersey,
Pennsylvania and Florida) and
/bullet/ to a much lesser extent, insurance companies and
specialty finance companies.
In February 1998, RBCO acquired Cumberland Advisors, a New Jersey based
money manager with approximately $430 million of assets under management. In the
transaction RBCO also acquired Cumberland Consulting, a financial advisor to
state and local governmental units.
In February 1999, RBCO began offering variable and fixed rate annuities
and mutual fund shares to BankAtlantic customers through BankAtlantic's branch
network. It is anticipated that in the near future, RBCO will offer a full range
of services to BankAtlantic customers.
The securities business is, by its nature, subject to various risks,
particularly in volatile or illiquid markets, including the risk of losses
resulting from the underwriting or ownership of securities, customer fraud,
employee errors and misconduct, failures in connection with the processing of
securities transactions and litigation. RBCO's business and its profitability
are affected by many factors including:
/bullet/ the volatility and price levels of the securities markets,
/bullet/ the volume, size and timing of securities transactions,
/bullet/ the demand for investment banking services,
/bullet/ the level and volatility of interest rates,
/bullet/ the availability of credit,
/bullet/ legislation affecting the business and financial
communities, and
/bullet/ the economy in general.
Markets characterized by low trading volumes and depressed prices
generally result in reduced commissions and investment banking revenues as well
as losses from declines in the market value of securities positions. Moreover,
RBCO is likely to be adversely affected by negative economic developments in New
Jersey, the mid-Atlantic region or the financial services industry in general.
INTEREST EXPENSE AND OVERHEAD
The Company considers its interest expense and overhead to consist of
interest expense net of non-interest income and operating costs, associated
with:
/bullet/ Deposits
/bullet/ Advances from FHLB
/bullet/ Securities Sold under Agreements to Repurchase
/bullet/ Federal Funds borrowings
/bullet/ Subordinated Debentures, Notes and Bonds Payable
/bullet/ Guaranteed preferred beneficial interest in
Company's Junior Subordinated Debentures Branch
operating expenses, net of income
/bullet/ ATM income, net of expenses
/bullet/ Back office operating expenses, net of income.
BankAtlantic's deposits include:
/bullet/ commercial demand deposit accounts
/bullet/ retail demand deposit accounts
/bullet/ regular passbook savings accounts
/bullet/ statement savings accounts
/bullet/ money market accounts
/bullet/ fixed-rate, fixed-maturity certificates of deposit,
ranging in maturity from 30 days to 8 years
/bullet/ variable-maturity jumbo certificates of deposit
/bullet/ various NOW accounts
/bullet/ IRA and Keogh retirement accounts
/bullet/ Brokered certificates of deposit
/bullet/ Public funds.
BankAtlantic's deposit accounts are insured by the FDIC through the
SAIF and the Bank Insurance Fund ("BIF") up to a maximum of $100,000 for each
insured depositor. BankAtlantic solicits deposits in its market areas through
relationship banking activities primarily conducted through its salesforce and
branch network.
Most of BankAtlantic's depositors are residents of Florida at least
part of the year. BankAtlantic has several facilities, including one with RBCO,
for brokered certificates of deposit. The facilities are considered an
alternative source of borrowings.
Advances from FHLB -- BankAtlantic is a member of the FHLB and is
authorized to apply for secured advances from the FHLB of Atlanta.
BankAtlantic's advances are collateralized by a security lien against its
residential loans. In addition, BankAtlantic must maintain certain levels of
FHLB stock for outstanding advances. BankAtlantic uses the following types of
advances:
/bullet/ fixed rate advances
/bullet/ fixed rate overnight advances - due within 24 hours
/bullet/ adjustable rate advances - indexed to one and three
month LIBOR rates
/bullet/ callable advances - callable at the option of the FHLB,
with the option to convert, at a specific date,
in whole, into a three month LIBOR based floating rate
advance
Securities Sold under Agreements to Repurchase -- BankAtlantic utilizes
wholesale repurchase agreements as an alternative borrowing source. In a
wholesale repurchase transaction, BankAtlantic sells a portion of its current
investment portfolio (usually MBS and REMIC's) at a negotiated rate and agrees
to repurchase the same assets on a specified date. BankAtlantic also issues
repurchase agreements for the benefit of its customers. These transactions are
collateralized by the investment portfolio. Customer repurchase agreements are
not insured by the FDIC. These transactions are classified as borrowings for
financial statement and tax reporting purposes.
Federal Funds Borrowings -- BankAtlantic has established unsecured
facilities with various federally insured banking institutions to purchase
Federal Funds aggregating $65 million. The facilities are used on an overnight
borrowing basis to assist in managing BankAtlantic's cash flow requirements.
These Federal Fund lines are subject to periodic review and may be terminated at
any time by the issuer institution.
Subordinated Debentures -- The Company from time to time has issued,
through public offerings, subordinated debentures to pay for acquisitions or for
working capital. In some instances, the subordinated debentures are convertible
into the Company's Class A Common Stock.
Guaranteed preferred beneficial interest in Company's Junior
Subordinated Debentures -- In March 1997, the Company formed BBC Capital Trust I
. BBC Capital Trust I issued common stock and 9 1/2% Cumulative Trust Preferred
Securities and invested the proceeds in Junior Subordinated Debentures of the
Company. The proceeds from the offering were utilized to contribute capital to
BankAtlantic, repurchase shares of common stock and for working capital.
Branch operating expenses, net of income -- Branch operating expenses,
net of income include:
/bullet/ Costs associated with the operations of the individual branches
/bullet/ Fee income associated with the depository accounts and branch
services
/bullet/ Costs associated with the back-office support of the deposit
operations
/bullet/ Costs associated with the administration of the
branch operations, and
/bullet/ Deposit insurance expense.
ATM expenses, net of income -- ATM's include:
/bullet/ ATM income for non-branch operations
/bullet/ Costs associated with ATM rentals, telephone lines, maintenance
agreements, armored car delivery services, and other
administrative services.
At December 31, 1998, BankAtlantic leased 746 ATMs; of which 274 ATMs
are located in Wal-Mart and Sam's Club locations throughout Florida, Georgia and
Alabama; 185 ATMs are located in K-Mart stores and Cumberland Farms convenience
stores located in Florida and 28 ATMs are located on cruise ships. The remaining
ATMs are at BankAtlantic branch locations and various retail outlets, including
gasoline convenience food stores, malls, entertainment complexes and college
campuses. See "Legislative Developments" for a discussion of proposed
legislation which could prohibit surcharges on ATM transactions.
Interest rates recently have been at historically low levels but
fluctuations in interest rates are not predictable or controllable. BankAtlantic
has attempted to structure its asset and liability management strategies to
mitigate the impact of changing interest rates.
Back office operating expenses, net of income -- Back office operating
expenses, (including corporate headquarters) net of income relate to those
expenses that do not directly relate to any of the above categories.
DISCONTINUED OPERATIONS
Mortgage Servicing Business --During the fourth quarter of 1998,
Management determined that it would discontinue its MSB and all related assets
and liabilities would be disposed of during 1999. BankAtlantic's MSB services
loans relating to servicing agreements with various mortgage loan originators
and purchased blocks of mortgage servicing rights ("MSR") from mortgage bankers.
The amount of net revenue earned from MSB was dependent on period of
time the loan is outstanding contractual servicing fee, cost to service,
realization of late charges, and other fees.
BankAtlantic periodically sold servicing rights based upon market
conditions as well as maintaining predetermined levels set by management.
The fees received from servicing mortgage loans include:
/bullet/ mortgage servicing fees
/bullet/ return check charges
/bullet/ late charge fees
/bullet/ new loan setup fees
COMPETITION
As reported by an independent statistical reporting service,
BankAtlantic is the second largest financial institution headquartered in the
State of Florida based on assets at September 30, 1998, the most recent date
utilized by the reporting service.
BankAtlantic has substantial competition in attracting and retaining
deposits and in lending funds. The primary factors in competing for deposits and
loans are:
/bullet/ the range and quality of financial services offered
/bullet/ the ability to offer attractive rates and fees
/bullet/ the availability of convenient access to products and services
There is direct competition for deposits and loans from:
/bullet/ credit unions
/bullet/ commercial banks
/bullet/ other savings institutions
/bullet/ money market mutual funds
/bullet/ mortgage bankers
/bullet/ corporate and government securities
/bullet/ finance and insurance companies
/bullet/ real estate investment trusts
Legislative developments relating to interstate branching and the
ownership of financial institutions have resulted in consolidation of financial
institutions, and also provide larger financial institutions increased access in
the marketplace. BankAtlantic expects increased competition in the future.
RBCO is engaged in investment banking, securities brokerage and asset
management which are extremely competitive businesses. Competitors include:
/bullet/ all of the member organizations of the New York Stock Exchange and
other registered securities exchanges,
/bullet/ all members of the NASD,
/bullet/ commercial banks, thrift institutions, and
/bullet/ financial consultants.
With respect to RBCO's investment banking and merger-related services,
RBCO also competes with many of the larger Wall Street investment banking firms.
Many of these organizations have substantially more employees and greater
financial resources than RBCO. RBCO also competes for investment funds with:
/bullet/ banks,
/bullet/ insurance companies and
/bullet/ investment companies.
Discount brokerage firms oriented to the retail market, including
electronic brokers, on-line trading firms and firms affiliated with commercial
banks and thrift institutions, are devoting substantial funds to advertising and
direct solicitation of customers in order to increase their share of commission
dollars and other securities-related income. RBCO typically has not engaged in
extensive advertising programs for this type of business. RBCO believes that the
principal competitive factors relating to RBCO's business are the quality of
advice and service provided to investors and financial institutions and the
competitive pricing of their products.
The securities industry has become considerably more concentrated and
more competitive in recent years as numerous securities firms have either ceased
operations or have been acquired by or merged into other firms. In addition,
companies not engaging primarily in the securities business, but having
substantial financial resources, have acquired leading securities firms. These
developments have increased competition from firms with greater capital
resources than those of RBCO . Furthermore, many commercial banks offer various
securities related activities and investment vehicles. While it is presently not
possible to predict the type and extent of competitive services which other
financial institutions may offer or the extent to which administrative or legal
barriers are repealed or modified, ultimately these developments may lead to the
creation of integrated financial services firms that may be able to compete more
effectively than RBCO for investment funds by offering a greater range of
financial services.
Fixed minimum commissions for securities transactions were eliminated
in 1975. The elimination of fixed minimum commission rates has resulted in
substantial commission discounting by broker-dealers competing for institutional
and individual brokerage business. RBCO believes its commission structure
compares favorably with firms with which it competes. Nevertheless, the
anticipated continuation of such discounting and an increase in the number of
new and existing firms offering discounts, including companies which provide
trading over the internet, could adversely affect RBCO.
EMPLOYEES
At December 31, 1998, the Company employed 944 full-time and 95
part-time employees (excluding RBCO) which includes approximately 70 full-time
employees relating to discontinued operations and 15 full-time employees
relating to branch closures. At December 31, 1998, RBCO employed 217 full-time
employees. Management believes that its relations with its employees are
satisfactory. The Company, including RBCO, currently maintains comprehensive
employee benefits programs which are considered by management to be generally
competitive with employee benefits provided by other major employers in its
markets.
At December 31, 1998, the Company froze the benefits relating to its
qualified defined benefit pension plan. All employees were vested based on their
years of service. Employees will not receive any further credit for future
services, while the plan is frozen. Management is exploring alternative benefit
programs, including enhanced 401(k) benefits.BankAtlantic's employees are not
represented by any collective bargaining group.
REGULATION AND SUPERVISION
GENERAL
The following summary describes some of the laws and regulations
applicable to the Company, BankAtlantic and RBCO. The applicable statutes and
regulations are summarized and do not purport to be complete, and are qualified
in their entirety by reference to such statutes and regulations.
The Company is a unitary savings bank holding company and is subject to
regulatory oversight by the OTS because it owns all of the outstanding stock of
BankAtlantic. The Company is required to register with the OTS and is subject to
OTS examination, supervision and reporting requirements. The Company is subject
to the reporting and other requirements of the Securities and Exchange Act due
to their publicly held equity and debt securities. BFC Financial Corporation
("BFC") owns 47% of the Company's voting common stock at December 31, 1998 and
is also subject to the same oversight by the OTS.
BankAtlantic is a member of the FHLB system and its deposit accounts
are insured up to applicable limits by the FDIC. BankAtlantic is subject to
supervision, examination and regulation by the OTS and by the FDIC as the
insurer of its deposits. BankAtlantic must file reports with the OTS and the
FDIC concerning its activities and financial condition. BankAtlantic must obtain
regulatory approvals prior to entering into certain transactions. The OTS and
the FDIC periodically review BankAtlantic's compliance with various regulatory
requirements. The regulatory structure also gives regulatory authorities
extensive discretion with respect to the classification of non-performing and
other assets and the establishment of adequate loan loss reserves for regulatory
purposes.
HOLDING COMPANY REGULATIONS
The Home Owner's Loan Act ("HOLA") prohibits a savings bank holding
company from directly or indirectly acquiring control, including through an
acquisition by merger, consolidation or purchase of assets, of any savings
association (as defined in Section 3 of the Federal Deposit Insurance Act) or
any other savings and loan or savings bank holding company, without prior OTS
approval. In considering whether to grant approval for any such transaction, the
OTS will take into consideration a number of factors, including:
/bullet/ competitive effects of the transaction;
/bullet/ financial and managerial resources;
/bullet/ future prospects of the holding company and its bank or thrift
subsidiaries following the transaction; and
/bullet/ compliance records of such subsidiaries with the CRA.
Generally, a savings bank holding company may not acquire more than 5%
of the voting shares of any savings association unless by merger, consolidation
or purchase of assets, in each case subject to prior OTS approval. Another
provision of HOLA permits a savings bank holding company to acquire up to 15% of
the voting shares of certain undercapitalized savings associations.
Federal law allows the Director of the OTS to take action when it
determines that there is reasonable cause to believe that the continuation by a
savings bank holding company of any particular activity constitutes a serious
risk to the financial safety, soundness, or stability of a savings bank holding
company's subsidiary savings institution. The Director of the OTS has oversight
authority for all holding company affiliates, not just the insured institution.
Specifically, the Director of the OTS may, as necessary:
(i) limit the payment of dividends by the savings institution;
(ii) limit transactions between the savings institution, the holding
company and the subsidiaries or affiliates of either; or
(iii) limit any activities of the savings institution that might create
a serious risk that the liabilities of the holding company and
its affiliates may be imposed on the savings institution.
Activities Limitations -- The Company will remain a unitary savings
bank holding company under applicable law until it acquires as a separate
subsidiary another savings institution. A savings bank holding company whose
sole subsidiary qualifies as a qualified thrift lender ("QTL"), described below,
generally has the broadest authority to engage in various types of business
activities with little to no restrictions on its activities. A holding company
that acquires another institution and maintains it as a separate subsidiary or
whose sole subsidiary fails to meet the QTL test will become subject to the
activities limitations applicable to multiple savings bank holding companies. In
general, a multiple savings bank holding company (or subsidiary thereof that is
not an insured institution) may not commence, or continue for more than a
limited period of time after becoming a multiple savings bank holding company
(or a subsidiary thereof), any business activity other than:
(i) furnishing or performing management services for a subsidiary
insured institution;
(ii) conducting an insurance agency or an escrow business;
(iii) holding, managing or liquidating assets owned by or
acquired from a subsidiary insured institution;
(iv) holding or managing properties used or occupied by a subsidiary
insured institution;
(v) acting as trustee under deeds of trust;
(vi) those activities previously directly authorized by the
OTS by regulation as of March 5, 1987 to be engaged in by
multiple savings bank holding companies; or
(vii) subject to prior approval of the OTS, those activities
authorized by the Federal Reserve Board ("FRB") as permissible
investments for bank holding companies.
These restrictions do not apply to a multiple savings bank holding
company if (a) all, or all but one, of its insured institution subsidiaries were
acquired in emergency thrift acquisitions or assisted acquisitions and (b) all
of its insured institution subsidiaries are QTLs.
Restrictions on Transactions with BankAtlantic -- BankAtlantic is
subject to restrictions in its dealings with the Company and any other companies
that are "affiliates" of the Company under HOLA and certain provisions of the
Federal Reserve Act ("FRA") that are made applicable to savings institutions by
the Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") and OTS regulations. See "Regulation and Supervision -- Savings
Institution Regulations -- Transactions with Affiliates" below for a general
discussion of the restrictions on dealing with affiliates.
LEGISLATIVE DEVELOPMENTS
Various bills have been introduced into the United States Congress that
would repeal in some respects the provisions of the Glass-Steagall Act
prohibiting certain banking organizations from engaging in certain securities
activities and the provisions of the Bank Holding Company Act prohibiting
affiliations between banking organizations and non-banking organizations. This
legislation is still under discussion.
In March 1999, a bill was introduced in the Florida legislature which
if passed, would prohibit the owner of an ATM from imposing surcharges on
transactions at ATMs. If this bill is enacted into law, BankAtlantic's future
results of operations would be adversely impacted. Bills similar to this bill
have previously been proposed in other jurisdictions, including at the national
level.
SAVINGS INSTITUTION REGULATIONS
Regulatory Capital -- Both the OTS and the FDIC have promulgated
regulations establishing capital requirements applicable to savings
institutions. The effect and interrelationship of these regulations is discussed
below.
Savings institutions must meet the OTS specific capital standards which
by law must be no less stringent than capital standards applicable to national
banks, with exceptions for risk-based capital requirements to reflect interest
rate risk or other risk. Capital calculated pursuant to the OTS regulations
varies substantially from capital calculated pursuant to GAAP. At December 31,
1998, BankAtlantic exceeded all applicable regulatory capital requirements. The
capital requirements are as follows:
(a) The leverage limit requires savings institutions to maintain core
capital of at least 3% of adjusted total assets. Adjusted total assets are
calculated as GAAP total assets, minus intangible assets (except those included
in core capital as described below). Core capital consists of common
shareholders' equity, including retained earnings, noncumulative perpetual
preferred stock and related surplus, less specified intangible assets (including
goodwill and MSRs as well as the amount equal to BankAtlantic's equity
investment in subsidiaries engaged in activities not permissible to national
banks. However, a portion of MSRs may be included in adjusted assets and core
capital. Generally, an amount may be included equal to the lower of ;
(i) 90% of the fair market value of readily marketable MSRs
(ii) the current amortized book value as determined under
GAAP or
(iii) 50% of core capital.
(b) Under the tangible capital requirement, savings institutions must
maintain tangible capital in an amount not less than 1.5% of adjusted total
assets. Tangible capital is defined in the same manner as core capital. The
percentage of MSRs which may be included in tangible capital is equal to the
lesser of :
(a) 100% of the amount of tangible capital that exists
before the deduction of any disallowed MSRs or
(b) the amount of MSRs allowed to be included in core
capital.
(c) The risk-based standards of the OTS currently require maintenance
of core capital equal to at least 4% of risk-weighted assets, and total capital
equal to at least 8% of risk-weighted assets. Total capital includes core
capital plus supplementary capital, but supplementary capital that may be
included in computing total capital for this purpose may not exceed core
capital. Supplementary capital includes cumulative perpetual preferred stock,
allowable subordinated debt and general loan loss allowances, within specified
limits. Such general loan loss allowances may not exceed 1.25% of risk-weighted
assets. Risk-weighted assets are determined by assigning to all assets
designated risk weights ranging from 0% to 100%, based on the credit risk
assumed to be associated with the particular asset.
In addition to the capital requirements set forth in the OTS
regulations, the OTS has delegated to its Regional Directors the authority to
establish higher individual minimum capital requirements for savings
institutions based upon a determination that the institution's capital is or may
become inadequate in view of its circumstances.
The U.S. banking agencies (Federal Reserve Board, Office of the
Comptroller of the Currency, Federal Deposit Insurance Corporation -
collectively "the Agencies") have each approved an interagency final rule which
incorporates a measure for market risk into their risk-based capital standards.
The final rule is based on an amendment to the Basle Capital Accord which
requires banks to measure and hold capital in support of their exposure to
market risk. Due to the final asset size and trading activity criteria, the rule
is expected to apply to a limited number of very large institutions. The most
significant modification to the rule is the elimination of the "standardized
approach" and introduction of a requirement that all depository institutions and
bank holding companies meeting the applicable criteria use their own internal
model to measure market risk exposure. The standardized approach, however, has
been retained for determining capital charges associated with specific risk in
trading accounts to the extent that such risk is not addressed by an
institution's internal model. Mandatory compliance with the rule is required
beginning January 1, 1998. Back testing must begin one-year after implementation
of market risk calculations. BankAtlantic, based on its asset size and current
trading activity, is not subject to the above rule.
Additionally, the OCC, which is the primary regulator for national
banks, has adopted a final rule increasing the leverage ratio requirements for
all but the most highly rated national banks. Pursuant to FIRREA, the OTS is
required to issue capital standards for savings institutions that are no less
stringent than those applicable to national banks. Based on the OCC rule,
savings institutions would be required to maintain a leverage ratio (defined as
the ratio of core capital to adjusted total assets) of between 4% and 5%. If the
OCC rule was in effect for OTS regulated financial institutions at December 31,
1998, BankAtlantic would have been in full compliance with the requirement.
Insurance of Accounts -- BankAtlantic's deposits are insured by the
SAIF and BIF for up to $100,000 for each insured account holder, the maximum
amount currently permitted by law.
As an insurer, the FDIC issues regulations and conducts examinations of
its insured members. Insurance of deposits by the FDIC may be terminated by the
FDIC, after notice and hearing, upon a finding that an institution has engaged
in unsafe and unsound practices, is in an unsafe and unsound condition to
continue operations, or has violated any applicable law, regulation, rule, order
or condition imposed by the OTS or the FDIC. When conditions warrant, the FDIC
may impose less severe sanctions as an alternative to termination of insurance.
BankAtlantic's management does not know of any present condition pursuant to
which the FDIC would seek to impose sanctions on BankAtlantic or terminate
insurance of its deposits.
Restrictions on Dividends and Other Capital Distributions -- Current
regulations applicable to the payment of cash dividends by savings institutions
impose limits on capital distributions based on an institution's regulatory
capital levels and net income. All dividends and capital distributions are
subject to regulatory safety and soundness objections. An institution that meets
or exceeds all of its fully phased-in capital requirements (both before and
after giving effect to the distribution) and is not in need of more than normal
supervision would be a "Tier 1 association." Upon prior notice to, and
non-objection by the OTS, a Tier 1 association may make capital distributions
during a calendar year up to the greater of:
(i) 100% of net income for the current calendar year plus 50%
of its capital surplus, or
(ii) 75% of its net income over the most recent four quarters.
Any additional capital distributions would require prior regulatory
approval.
A "well capitalized" institution must have risk-based capital of 10% or
more, core capital of 5% or more and Tier 1 risk-based capital (based on the
ratio of core capital to risk-weighted assets) of 6% or more and may not be
subject to any written agreement, order, capital directive or prompt corrective
action directive issued by the OTS to meet and maintain a specific capital level
or a specific capital measure. An institution will be categorized as:
"adequately capitalized" if it has total risk-based capital of 8% or more, Tier
1 risk-based capital of 4% or more and core capital of 4% or more;
"undercapitalized" if it has total risk-based capital of less than 8%, Tier 1
risk-based capital of less than 4% or core capital of less than 4%;
"significantly undercapitalized" if it has total risk-based capital of less than
6%, Tier 1 risk-based capital of less than 3% or core capital of less than 3%;
and "critically undercapitalized" if it has tangible capital of less than 2%.
Any savings institution that fails its regulatory capital requirement is subject
to enforcement action by the OTS or the FDIC. At December 31, 1998 BankAtlantic
met the capital requirements of a "well capitalized" institution as defined
above.
The Federal Home Loan Bank ("FHLB") System -- BankAtlantic is a member
of the FHLB system, which consists of 12 regional FHLBs governed and regulated
by the Federal Housing Finance Board ("FHFB"). The FHLBs provide a central
credit facility for member institutions. BankAtlantic, as a member of the FHLB
of Atlanta, is required to acquire and hold shares of capital stock in the FHLB
of Atlanta in an amount at least equal to the greater of 1% of the aggregate
principal amount of its unpaid residential mortgage loans, home purchase
contracts and similar obligations as of the close of each calendar year, or 5%
of its borrowings from the FHLB of Atlanta (including advances and letters of
credit issued by the FHLB on BankAtlantic's behalf). BankAtlantic is currently
in compliance with this requirement.
Each FHLB makes loans (advances) to members in accordance with policies
and procedures established by the board of directors of the FHLB. These policies
and procedures are subject to the regulation and oversight of the FHLB. All
advances from the FHLB must be fully secured by sufficient collateral as
determined by the FHLB of Atlanta. All long-term advances are required to be
used to fund residential home financings. The FHLB of Atlanta has established
standards of community service that members must meet to maintain access to
long-term advances.
Fees and Assessments of the OTS -- The OTS has adopted regulations to
assess fees on savings institutions to fund the operations of the OTS. The
regulations provide for the OTS assessments to be made based on the total
consolidated assets of a savings institution as shown on its most recent report
to the agency. Troubled savings institutions (generally, those operating in
conservatorship or with the lowest two (of five) supervisory subgroup ratings)
are to be assessed at a rate 50% higher than similarly sized thrifts that are
not experiencing problems.
Investment Activities -- As a federally-chartered savings bank,
BankAtlantic is subject to various restrictions and prohibitions with respect to
its investment activities. These restrictions and prohibitions are set forth in
HOLA and in the rules of the OTS and include dollar amount and procedural
limitations. BankAtlantic is in compliance with these restrictions.
Under the Federal Deposit Insurance Act ("FDIA"), a savings institution
is required to provide 30 days prior notice to the FDIC and the OTS of its
desire to establish or acquire a new subsidiary or conduct any new activity
through a subsidiary. The institution is also required to conduct the activities
of the subsidiary in accordance with the OTS orders and regulations. The
Director of the OTS has the power to force divestiture of any subsidiary or the
termination of any activity it determines is a serious threat to the safety,
soundness or stability of the savings institution or is otherwise inconsistent
with sound banking principles. Additionally, the FDIC is authorized to determine
whether any specific activity poses a threat to SAIF and to prohibit any member
of SAIF from engaging directly in the activity, even if it is an activity that
is permissible for a federally-chartered savings institution or for a subsidiary
of a state-chartered savings institution.
Safety and Soundness -- Operational and managerial standards for
internal controls, information systems, loan documentation, credit underwriting,
interest rate exposure, asset growth and compensation and benefits for bank
officers, employees, directors and principal shareholders are all the subject of
extensive guidelines. Additionally, the OTS is empowered to set standards for
any other facet of an institution's operations, not specifically covered by
regulations. The OTS is required to prescribe asset quality, earnings and stock
valuation standards specifying:
(i) a maximum ratio of classified assets to capital;
(ii) minimum earnings sufficient to absorb losses without
impairing capital;
(iii) to the extent feasible, a minimum ratio of market value to
book value for publicly traded shares of the institution;
and
(iv) such other standards relating to asset quality, earnings
and valuation as the OTS deems appropriate.
Loans to One Borrower -- Generally, a savings institution's total loans
and extensions of credit to one borrower or related group of borrowers,
outstanding at one time and not fully secured by readily marketable collateral,
may not exceed 15% of the institution's unimpaired capital and surplus. Except
as set forth below for certain highly rated securities, an institution's
investment in commercial paper and corporate debt securities of any one issuer
or related entity must be aggregated "loans" for purposes of the immediately
preceding sentence. Savings institutions may invest, in addition to the 15%
general limitation, up to 10% of unimpaired capital and surplus in commercial
paper of one issuer rated by two nationally recognized rating services in the
highest category, or in corporate debt securities rated in one of the two
highest categories by at least one such service. A savings institution may also
lend up to 10% of unimpaired capital and surplus, if the loan is fully secured
by readily marketable collateral. Readily marketable collateral is defined to
include certain securities and bullion, but generally does not include real
estate. At December 31, 1998, BankAtlantic was in compliance with the loans to
one borrower limitations.
Qualified Thrift Lender ("QTL") -- BankAtlantic, like all savings
institutions, is required to meet the QTL test for, among other things, future
eligibility for advances from the FHLB. The QTL test requires that a savings
institution's qualified thrift investments equal or exceed 65% of the savings
institution's portfolio assets calculated on a monthly average basis in nine out
of every twelve months. For the purposes of the QTL test, portfolio assets are
total assets less intangibles, properties used to conduct business and liquid
assets (up to 20% of total assets).
Any savings institution that fails to meet the QTL test must convert to
a commercial bank charter or limit its future investments and activities to
those permitted for both savings institutions and national banks. Additionally,
any such savings institution that does not convert to a commercial bank charter
will be ineligible to receive future advances from the FHLB and, beginning three
years after the loss of QTL status, will be required to repay all outstanding
advances from the FHLB except for special liquidity advances, and dispose of or
discontinue all preexisting investments and activities not permitted for both
savings institutions and national banks. If an institution converts to a
commercial bank charter, its deposits remain insured by SAIF until the FDIC
permits it to transfer to BIF. If any institution that fails the QTL test is
controlled by a holding company, then, within one year after the failure, the
holding company must register as a bank holding company and will be subject to
all applicable restrictions on bank holding companies. At December 31, 1998,
BankAtlantic was in compliance with current QTL requirements.
Transaction with Affiliates -- As a federally chartered savings
institution, BankAtlantic is subject to the OTS' regulations relating to
transactions with affiliates, including officers and directors. BankAtlantic is
subject to substantially similar restrictions regarding affiliate transactions
as those imposed on member banks under Sections 22(g), 22(h), 23A, and 23B of
the FRA.
Sections 22(g) and 22(h) establish restrictions on loans to directors,
controlling shareholders and their related companies and certain officers.
Section 22(g) provides that no institution may extend credit to an executive
officer unless
(i) the bank would be authorized to make such extension of
credit to borrowers other than its officers
(ii) the extension of credit is on terms not more favorable
than those afforded to other borrowers
(iii) the officer has submitted a detailed current financial
statement and
(iv) the extension of credit is on the condition that it
shall become due and payable on demand at any time that
the officer is indebted to any other bank or banks on
account of extensions of credit in any one of the
following three categories, in an aggregate amount
greater than the amount of credit of the same category
that could be extended to the officer by the
institution:
(a) an extension of credit secured by a first lien on
a dwelling which is expected to be owned by the
officer and used by the officer as his or her
residence;
(b) an extension of credit to finance the education of
the children of the officer; or
(c) for any other purpose prescribed by the OTS.
Section 22(g) also imposes reporting requirements on both the officers
to whom it applies and on the institution. Section 22(h) requires that loans to
directors, controlling shareholders and their related companies and certain
officers be made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons and that those loans do not involve more than the normal risk of
repayment or present other unfavorable features or give preference to insiders
over other employees.
Section 23A limits transactions with any one affiliate to 10% of the
institution's capital and surplus and limits aggregate affiliate transactions to
20% of such capital and surplus. Sections 23A and 23B provide that a loan
transaction with an affiliate generally must be collateralized (other than by a
low-quality asset or by securities issued by an affiliate) and that all covered
transactions as well as the sale of assets, the payment of money or the
providing of services by a savings institution to an affiliate must be on terms
and conditions that are substantially the same, or at least as favorable to the
savings institution, as those prevailing for comparable non-affiliated
transactions. A covered transaction is defined as a loan to an affiliate, the
purchase of securities issued by an affiliate, the purchase of assets from an
affiliate (with some exceptions), the acceptance of securities issued by an
affiliate as collateral for a loan or the issuance of a guarantee, acceptance or
letter of credit on behalf of an affiliate. The OTS regulations clarify that
transactions between either a thrift or a thrift subsidiary and an unaffiliated
person that benefit an affiliate are considered covered transactions. A savings
institution may make loans to or otherwise extend credit to an affiliate only if
the affiliate is engaged solely in activities permissible for bank holding
companies. In addition, no savings institution may purchase the securities of
any affiliate other than the shares of a subsidiary. The Director of the OTS may
further restrict these transactions in the interest of safety and soundness. At
December 31, 1998, BankAtlantic was in compliance with the restrictions
regarding transactions with affiliates.
Liquidity Requirements of the OTS -- The OTS regulations currently
require all member savings institutions to maintain an average daily balance of
liquid assets (cash, certain time deposits, banker's acceptances, specified
United States government, state or Federal agency obligations and other
corporate debt obligations, certain mortgage related securities and commercial
paper) equal to between 4% and 10% of the sum of the average daily balance
during the preceding calendar month of net withdrawable accounts maturing in one
year or less and short-term borrowings payable in one year or less. Monetary
penalties may be imposed by the OTS for failure to meet liquidity requirements.
During the year ended December 31, 1998 the liquidity requirement was 4% and
BankAtlantic was in compliance with all applicable liquidity requirements.
The Federal Reserve System ("FRB") -- BankAtlantic is subject to
certain regulations promulgated by the FRB. Pursuant to such regulations,
savings institutions are required to maintain non-interest bearing reserves
against their transaction accounts (which include deposit accounts that may be
accessed by writing checks) and non-personal time deposits. The FRB has
authority to adjust reserve percentages and to impose in specified circumstances
emergency and supplemental reserves in excess of the percentage limitations
otherwise prescribed. The balances maintained to meet the reserve requirements
imposed by the FRB may be used to satisfy liquidity requirements which may be
imposed by the OTS. In addition, FRB regulations limit the periods within which
depository institutions must provide availability for and pay interest on
deposits to transaction accounts. Depository institutions are required to
disclose their check holding policies and any changes to those policies in
writing to customers. BankAtlantic believes that it is in compliance with all
such FRB regulations.
Community Reinvestment Act -- Under the CRA, as implemented by OTS
regulations, a savings institution has a continuing and affirmative obligation
consistent with its safe and sound operation to help meet the credit needs of
its entire community, including low- and moderate-income neighborhoods. The CRA
requires the OTS, in connection with its examination of a savings institution,
to assess the institution's record of meeting the credit needs of its community
and to take such record into account in its evaluation of certain applications
by such institution. The CRA, as amended by FIRREA, requires public disclosure
of an institution's CRA rating and requires that the OTS provide a written
evaluation of an institution's CRA performance utilizing a four-tiered
descriptive rating system. An institution's CRA rating is taken into account in
determining whether to grant charters, branches and other deposit facilities,
relocations, mergers, consolidations and acquisitions. Poor CRA performance may
be the basis for denying an application.
SECURITIES INDUSTRY REGULATIONS
The securities industry in the United States is subject to extensive
regulation under both federal and state laws. The SEC is the federal agency
charged with administration of the federal securities laws. Much of the
regulation of broker-dealers has been delegated to self-regulatory authorities,
principally the NASD and, in the case of broker-dealers that are members of a
securities exchange, the particular securities exchange. These self-regulatory
organizations conduct periodic examinations of member broker-dealers in
accordance with rules they have adopted and amended from time to time, subject
to approval by the SEC.
Securities firms are also subject to regulation by state securities
commissions in those states in which they do business. As of December 31, 1998,
RBCO was registered as a broker-dealer in 50 states and the District of
Columbia.
Broker-dealers are subject to regulations which cover all aspects of
the securities business, including:
/bullet/ sales methods,
/bullet/ trade practices among broker-dealers,
/bullet/ uses and safekeeping of customers funds and securities,
/bullet/ capital structure of securities firms,
/bullet/ record-keeping, and
/bullet/ the conduct of directors, officers and employees.
Additionally, legislation, changes in rules promulgated by the SEC and
self-regulatory authorities, or changes in the interpretation or enforcement of
existing laws and rules, may directly affect the operations and profitability of
broker-dealers. The SEC, self-regulatory authorities and state securities
commissions may conduct administrative proceedings which can result in censure,
fine, suspension or expulsion of a broker-dealer, its officers or employees.
Such administrative proceedings, whether or not resulting in adverse findings,
can require substantial expenditures. The principal purpose of regulation and
discipline of broker/dealers is the protection of customers and the securities
market, rather than protection of creditors and shareholders of broker-dealers.
As a broker-dealer, RBCO is required by federal law to belong to the
Securities Investor Protection Corp. ("SIPC"). Currently, all members, including
RBCO, pay a fixed annual assessment of $150. However, should the SIPC fund fall
below a certain minimum amount, as it did in 1983, members are required to pay
annual assessments in amounts (based upon adjusted gross revenues) necessary to
restore the fund. The first $500,000 of insurance protection is provided by SIPC
and the balance to $150.0 million is provided by RBCO's clearing broker under a
separate policy issued by a private insurer. There is a limitation of $100,000
on claims for cash balances.
RBCO is subject to the net capital provision of Rule 15c3-1 under the
Securities Exchange Act of 1934 which requires that RBCO's aggregate
indebtedness shall not exceed 15 times net capital as defined under such
provision. Additionally, RBCO, as a market marker, is subject to supplemental
requirements of Rule 15c3-1(a)4, which provides for the computation of net
capital to be based on the number and price of issues in which markets are made
by RBCO, not to exceed $1.0 million. At December 31, 1998, RBCO's regulatory net
capital was approximately $12.1 million, which exceeded minimum net capital rule
requirements by $11.1 million.
RBCO operates under the provisions of paragraph (K)(2)(ii) of Rule
15c3-3 of the SEC as a fully-disclosed broker and, accordingly, customer
accounts are carried on the books of the clearing broker. However, RBCO
safekeeps and redeems municipal bond coupons for the benefit of its customers.
Accordingly, RBCO is subject to the provisions of SEC Rule 15c3-3 relating to
possession or control and customer reserve requirements and was in compliance
with such provisions at December 31, 1998.
NEW ACCOUNTING STANDARDS AND POLICIES
Financial Accounting Standards Board Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("FAS 133") was issued in June
1998. This statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, (collectively referred to as derivatives) and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial condition and measure those
instruments at fair value. If certain conditions are met, a derivative may be
specifically designated as:
(a) a hedge of the exposure to changes in the fair value of a
recognized asset or liability or an unrecognized firm
commitment,
(b) a hedge of the exposure to variable cash flows of a forecasted
transaction, or
(c) a hedge of the foreign currency exposure of a net investment in
a foreign operation, an unrecognized firm commitment, an
available-for-sale security, or a foreign-currency-denominated
forecasted transaction.
The accounting for changes in the fair value of a derivative (that is,
gains and losses) depends on the intended use of the derivative and the
resulting designation. For a derivative designated as hedging the exposure to
changes in the fair value of a recognized asset or liability or a firm
commitment (referred to as a fair value hedge), the gain or loss is recognized
in earnings in the period of change together with the offsetting loss or gain on
the hedged item attributable to the risk being hedged. The effect of that
accounting is to reflect in the results of operations the extent to which the
hedge is not effective in achieving offsetting changes in fair value. For a
derivative designated as hedging the exposure to variable cash lows of a
forecasted transaction (referred to as a cash flow hedge), the effective portion
of the derivative as a gain or loss is initially reported as a component of
other comprehensive income (outside the results of operations ) and subsequently
reclassified into earnings when the forecasted transaction affects the results
of operations . The ineffective portion of the gain or loss is reported in the
results of operations immediately. For a derivative designated as hedging the
foreign currency exposure of a net investment in a foreign operation, the gain
or loss is reported in other comprehensive income (outside the results of
operations) as part of the cumulative translation adjustment. The accounting for
a fair value hedge described above applies to a derivative designated as a hedge
of the foreign currency exposure of an unrecognized firm commitment or an
available-for-sale security. Similarly, the accounting for a cash flow hedge
described above applies to a derivative designated as a hedge of the foreign
currency exposure of a foreign-currency-denominated forecasted transaction. For
a derivative not designated as a hedging instrument, the gain or loss is
recognized in the results of operations in the period of change.
Under this statement, an entity that elects to apply hedge accounting
is required to establish at the inception of the hedge the method it will use
for assessing the effectiveness of the hedging derivative and the measurement
approach for determining the ineffective aspect of the hedge. Those methods must
be consistent with the entity's approach to managing risk.
This statement is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. Initial application of this statement should be
as of the beginning of an entity's fiscal quarter; on that date, hedging
relationships must be designated and documented pursuant to the provisions of
this statement. This statement should not be applied retroactively to financial
statements of prior periods. The Company intends to implement FAS 133, as of
January 1, 2000 and its potential impact on the Statement of Operations and
Statement of Condition is currently under review by management.
Financial Accounting Standards Board Statement No. 134 "Accounting for
Mortgage-Backed Securities Retained After the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise" was issued in October 1998. This
statement requires that after the securitization of mortgage loans held for
sale, an entity engaged in mortgage banking activities classify the resulting
mortgage-backed securities or other retained interest based on its ability and
intent to sell or hold those investments. This statement shall be effective for
the first fiscal quarter beginning after December 15, 1998. The Company
implemented this statement on January 1, 1999 and this statement did not have a
material impact on the Company's financial condition or results of operations.
Financial Accounting Standards Board Statement No. 135 "Rescission of
FASB Statement No. 75 and Technical Corrections" was issued in February 1999.
This statement rescinds certain accounting requirements for pension plans to
state and local governmental units and amends other existing authoritative
literature to make various technical corrections, clarify meanings, or describe
applicability under changed conditions. The statement is effective for financial
statements issued for fiscal years ending after February 15, 1999. This
statement will not have a material impact on the Company's financial statements.
ITEM 2. PROPERTIES
The Company's and BankAtlantic's principal and executive offices are
located at 1750 East Sunrise Boulevard, Fort Lauderdale, Florida 33304.
BankAtlantic owns five buildings and leases four locations which house its back
office operations. At December 31, 1998, the aggregate net book value of
premises and equipment, including leasehold improvements and equipment, was
$58.1 million. The following table sets forth at December 31, 1998 owned and
leased branch offices:
Miami- Palm Wal-Mart Tampa
Dade Broward Beach SuperStores Bay
---- ------- ----- ----------- ---
Owned full-service branches 2 14 9 0 2
Leased full-service branches 9 11 4 16 3
- -- - -- -
Total full-service branches 11 25 13 16 5
-- -- -- -- -
Lease expiration dates 1999-2005 1999-2007 1999-2003 1999-2003 2000-2003
BankAtlantic also maintains:
/bullets/ three ground leases in Broward County expiring in
1999-2072 and
/bullets/ one ground lease in Palm Beach Countyexpiring in 2000.
BankAtlantic's leased branch offices in Wal-Mart SuperStores are
located in the following Florida counties:
Brevard Orlando
Charlotte Osceola
Flagler Sarasota
Hernando St. John
Lee St. Lucie
Manatee Volusia
RBCO's office space includes leased facilities in the following cities
and states with year of lease expiration:
Lease
Location Expiration
-------- ----------
Livingston, New Jersey 2007
Shrewsbury, New Jersey 2002
Bala Cynwyd, Pennsylvania 1999
West Palm Beach, Florida 1999
ITEM 3. LEGAL PROCEEDINGS
The following is a description of certain lawsuits other than ordinary
routine litigation incidental to BankAtlantic's business to which the Company or
BankAtlantic is a party:
Jose Daniel Ruiz Coronado vs. BankAtlantic Bancorp, Inc. in the United
States District Court for the Southern District of Florida. Case No.
96-7115-Civ-Gonzalez. This action was filed as a purported class action on
September 27, 1996 on behalf of certain account holders of BankAtlantic whose
bank accounts were seized by federal authorities. The complaint alleges that the
financial privacy rights of the account holders under various federal and state
laws were violated. On January 22, 1997, the Court entered an order dismissing
the complaint against BankAtlantic. The Court found that BankAtlantic complied
with applicable federal statutes. On appeal, the trial court decision was
reversed and the action remanded on the grounds that a factual basis must be
shown to establish the right to immunity. BankAtlantic filed a motion for
summary judgment asserting the same grounds as the motion to dismiss but
providing the factual basis for the immunity. On January 27, 1999 the Court
granted BankAtlantic's motion for summary judgment and on January 31, 1999
Plaintiff filed a motion for relief from such order. BankAtlantic has responded
to Plaintiff's motion, objecting in part and recommending an alternative
procedure from that requested by Plaintiff. On March 10, 1999, the Court denied
Plaintiff's motion for determination that the action is maintainable as a class
action. The Court also granted Plaintiff's motion for relief on BankAtlantic's
motion for summary judgment. Accordingly, the January 27, 1999 Court Order
granting BankAtlantic's motion for summary judgment was vacated. Plaintiff' was
directed to respond to BankAtlantic's motion for summary judgment within 30 days
of March 10, 1999.
In Re Sterling Resources - Two actions were filed in New Jersey. One of the
actions was brought on behalf of the State of New Jersey and was resolved in
1995. The other action, entitled - Frances Scott, on behalf of herself and all
other similarly situated against Mayflower Home Improvement Corp., EquiCredit
Corporation of America, Bernard Perry, Gino Ciuffetelli, Hyman Beyer, Jeffrey
Beyer, Bruce Beyer, MNC Credit Corp., Shawmut Bank, First Tennessee Bank, CIT
Group/Credit Finance, Inc., Security Pacific Financial Services, Inc., Jerome
Goldman, BankAtlantic, FSB., Michael Bisceglia and Gerald Annabel, was filed in
the Superior Court of New Jersey, Law Division-Passaic County-Docket No:
PAS-L-2628-95, Honorable Frank M. Donato, J.S.C. and was commenced immediately
after the resolution of the State of New Jersey action. This action purported to
be a class action on behalf of the named and unnamed plaintiffs that may have
obtained loans from dealers who subsequently sold the loans to financial
institutions, including BankAtlantic. This action sought, among other things,
recision of the loan agreements and damages. In November 1995, the court in this
action entered an order dismissing the complaint against BankAtlantic;
plaintiff's appealed this ruling. In January 1996, the Appellate Court reversed
the lower court's decision and remanded the case back to the trial court to
determine whether the action could be maintained as a class action. The reversal
was without prejudice to BankAtlantic's right to renew their summary judgment
motion after the trial court made a determination as to plaintiff's ability to
maintain this case as a class action. In December 1997, the trial court denied
the plaintiff's motion for class certification and in January 1998 granted
BankAtlantic's summary judgment motion. The Plaintiffs have appealed the order
to the Appellate Division, which decline to hear the interlocutory appeal.
Plaintiffs appealed that decision to the New Jersey Supreme Court, which
reversed the Appellate Division's decision refusing to consider the appeal and
ordered the Appellate Division to render a decision with respect to the merits
of Plaintiff's class certification motion.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Company's Class A common stock is quoted on the New York Stock Exchange
under the symbol "BBX" and the Company's Class B common stock is quoted on the
Nasdaq National Market under the symbol "BANC". On February 26,1999 there were
approximately 1,220 record holders of the Class A common stock and 25,802,978
shares issued and outstanding and 605 record holders of the Class B common stock
and 10,359,994 shares issued and outstanding.
The following table sets forth, for the periods indicated, the high and low
closing sale prices of the Class A common stock and the Class B common stock:
Class A Common Class B Common
Stock Price Stock Price
------------------- -----------------
High Low High Low
- --------------------------------------------------------------------------------
For the Year ended December 31, 1998 $14 3/4 $ 5 $ 15 1/2 $ 6 1/4
Fourth Quarter .................... 8 5 9 7/8 6 1/4
Third Quarter ..................... 12 1/16 7 13 8 1/2
Second Quarter .................... 14 3/8 11 3/16 15 1/2 12 1/4
First Quarter ..................... 14 3/4 11 35/64 15 3/8 11 13/32
- --------------------------------------------------------------------------------
For the Year ended December 31, 1997 13 1/16 6 9/16 13 3/8 6 5/8
Fourth Quarter .................... 13 1/16 10 1/2 13 3/8 10 11/16
Third Quarter ..................... 12 13/16 9 1/16 12 3/16 9 9/16
Second Quarter .................... 9 7 5/16 9 1/4 7 3/4
First Quarter ..................... 8 7/16 6 9/16 8 3/4 6 5/8
On December 31, 1998, the last sale price of the Class A common stock as
reported by the New York Stock Exchange was $6.44 per share, and the last sale
price of the Class B common stock as reported by the Nasdaq National Market was
$7.13 per share.
On July 3, 1996, the Company consummated a public offering of $57.5 million
aggregate principal amount of 6 3/4% Convertible Subordinated Debentures due
July 1, 2006 (the "6 3/4% Debentures"). The 6 3/4% Debentures are convertible
into shares of Class A common stock at an exercise price of $6.55 per share.
The Company's 6 3/4% Debentures are quoted on the Nasdaq SmallCap Market
under the symbol "BANCG". On December 31, 1998 $51.2 million aggregate principal
amount of the 6 3/4% Debentures were outstanding. The following table sets
forth, for the periods indicated, the high and low closing sale prices as
reported by the Nasdaq SmallCap Market for the 6 3/4% Debentures.
High Low
----------------------------------------------------------------
For the Year Ended December 31, 1998 $ 215 $ 96
Fourth Quarter .................... 117 96
Third Quarter ..................... 178 117
Second Quarter .................... 208 176 1/2
First Quarter ..................... 215 182
---------------------------------------------------------------
For the Year Ended December 31, 1997 $ 199 $109 3/4
Fourth Quarter .................... 196 164
Third Quarter ..................... 199 142
Second Quarter .................... 143 1/4 121
First Quarter ..................... 131 109 3/4
On November 26, 1997, the Company consummated a public offering of $100
million aggregate principal amount of 5 5/8% Convertible Subordinated Debentures
due December 1, 2007, ("the 5 5/8% Debentures"). The 5 5/8% Debentures are
convertible into shares of Class A common stock at an exercise price of $12.94
per share. The Company's 5 5/8% Debentures are quoted on the Nasdaq SmallCap
Market under the symbol "BANCH". On December 31, 1998 there was $100.0 million
aggregate principal amount of 5 5/8% Debentures issued and outstanding. The
following table sets forth, for the periods indicated, the high and low closing
sale prices as reported by the Nasdaq SmallCap Market for the 5 5/8% Debentures.
High Low
- --------------------------------------------------------------
For the Year Ended December 31, 1998 $122 3/16 $ 71 1/2
Fourth Quarter .................... 89 1/2 71 1/2
Third Quarter ..................... 109 91 1/2
Second Quarter .................... 121 1/4 107 3/4
First Quarter ..................... 122 3/16 107 1/4
-------------------------------------------------------------
For the Year Ended December 31, 1997 $108 $ 100 1/4
Fourth Quarter .................... 108 100 1/4
See Regulation and Supervision "Restrictions on Dividends and Other Capital
Distributions" and "Management's Discussion and Analysis - Liquidity and Capital
Resources" for a description of certain limitations on the payment of dividends
by BankAtlantic. Subject to the results of operations and regulatory capital
requirements, the Company has indicated that it will seek to declare regular
quarterly cash dividends on its common stock. The declaration and payment of
dividends will depend upon, among other things, the results of operations,
financial condition and cash requirements of the Company and on the ability of
BankAtlantic to pay dividends or otherwise advance funds to the Company, which
in turn is subject to OTS regulations and is based upon BankAtlantic's
regulatory capital levels and net income.
Cash Dividends Per Cash Dividends Per
Share of Class B Share of Class A
Common Stock Common Stock
- ----------------------------------------------------------------------------
Fiscal Year Ended December 31, 1998 $ 0.0980 $ 0.1078
Fourth Quarter .................. $ 0.0250 $ 0.0275
Third Quarter ................... $ 0.0250 $ 0.0275
Second Quarter .................. $ 0.0240 $ 0.0264
First Quarter ................... $ 0.0240 $ 0.0264
- ----------------------------------------------------------------------------
Fiscal Year Ended December 31, 1997 $ 0.0852 $ 0.0942
Fourth Quarter .................. $ 0.0240 $ 0.0264
Third Quarter ................... $ 0.0240 $ 0.0264
Second Quarter .................. $ 0.0186 $ 0.0207
First Quarter ................... $ 0.0186 $ 0.0207
- ----------------------------------------------------------------------------
Fiscal Year Ended December 31, 1996 $ 0.07 $ 0.0828
Fourth Quarter .................. $ 0.01 $ 0.0207
Third Quarter ................... $ 0.01 $ 0.0207
Second Quarter .................. $ 0.01 $ 0.0207
First Quarter ................... $ 0.01 $ 0.0207
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The Selected Consolidated Financial Data presented below has been
derived from the audited Consolidated Financial Statements of the Company and
are qualified in their entirety by reference to the more detailed Consolidated
Financial Statements and Independent Auditors Reports, included elsewhere
within.
AT DECEMBER 31,
----------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
STATEMENT OF FINANCIAL CONDITION:
Total assets ........................................ $3,788,975 $3,064,480 $2,605,527 $1,750,689 $1,539,653
Loans receivable-net (1)............................. 2,635,369 2,072,825 1,824,856 828,630 546,396
Mortgage-backed securities held to maturity ......... 0 0 0 0 573,913
Securities available for sale ....................... 597,520 607,490 439,345 691,803 53,969
Investment and trading securities, net (2)........... 81,816 60,280 54,511 49,856 211,776
Mortgage servicing rights ........................... 44,315 38,789 25,002 20,738 20,584
Cost over fair value of net assets acquired
and other intangibles ............................. 55,493 26,327 29,008 11,521 0
Deposits ............................................ 1,925,772 1,763,733 1,832,780 1,300,377 1,085,782
Subordinated debentures, notes and bonds payable .... 177,114 179,600 78,500 21,001 0
Guaranteed preferred beneficial interest in Company's
Junior Subordinated Debentures .................... 74,750 74,750 0 0 0
Advances from FHLB, federal funds purchased and
securities sold under agreements to repurchase .... 1,225,165 758,923 486,288 269,222 311,879
Total stockholders' equity .......................... 240,440 207,171 147,704 120,561 105,520
(1) Includes $9.7 million and $160.1 million of banker's acceptances in 1998 and
1997.
(2) Excludes FHLB stock. Includes interest-bearing deposits in other banks,
securities purchased under agreements to resell and trading securities of
$30.0 million, $5.1 million and $9.1 million in 1998, 1997 and 1994,
respectively. At December 31, 1998, trading securities of $30.0 million
related to RBCO operations.
27
SELECTED CONSOLIDATED FINANCIAL DATA (CONTINUED)
AT OR FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
(IN THOUSANDS EXCEPT PER SHARE DATA) 1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
OPERATING RESULTS
Total interest income ................................ $ 254,138 $ 210,554 $ 152,631 $ 130,077 $ 98,549
Total interest expense ............................... 151,853 116,024 76,365 66,156 41,994
--------- --------- --------- --------- ---------
Net interest income .................................. 102,285 94,530 76,266 63,921 56,555
Provision for loan losses ............................ 21,788 11,268 5,844 4,182 2,299
--------- --------- --------- --------- ---------
Net interest income after provision for loan losses .. 80,497 83,262 70,422 59,739 54,256
--------- --------- --------- --------- ---------
NON-INTEREST INCOME:
Loan late fees and other loan income ................. 4,299 2,293 1,590 1,042 857
Gains on sales of loans held for sale ................ 4,104 6,820 534 395 773
Gains on sales of real estate held for sale .......... 6,055 470 0 0 0
Gains on sales of securities available for sale, net . 309 2,367 5,959 0 0
Trading securities gains (losses) .................... 898 2,463 0 589 (558)
Gain (losses) on sales of property and equipment, net (11) 852 3,061 18 272
Principal transactions ............................... 4,417 0 0 0 0
Investment banking ................................... 8,345 0 0 0 0
Commissions .......................................... 4,132 103 21 0 0
Other ................................................ 24,332 17,998 15,653 11,930 9,339
--------- --------- --------- --------- ---------
Total non-interest income ............................ 56,880 33,366 26,818 13,974 10,683
--------- --------- --------- --------- ---------
NON-INTEREST EXPENSE:
Employee compensation/benefits excluding RBCO and
real estate operations ............................. 45,063 37,666 30,893 24,145 20,813
Employee compensation/benefits for RBCO and real
estate operations .................................. 12,443 144 0 0 0
Occupancy and equipment .............................. 21,444 17,693 12,823 10,243 7,783
SAIF special assessment .............................. 0 0 7,160 0 0
Federal insurance premium ............................ 1,042 1,084 2,495 2,750 2,673
Advertising and promotion ............................ 5,749 2,203 2,061 2,142 1,492
Foreclosed asset activity, net ....................... 754 82 (725) (3,178) (2,290)
Pension curtailment gain, net ........................ (3,128) 0 0 0 0
Restructuring charges and write-downs ................ 2,565 0 0 0 0
Other excluding RBCO and real estate operations ...... 26,952 18,595 13,514 12,683 9,235
Other for RBCO and real estate operations ............ 7,781 255 0 0 0
--------- --------- --------- --------- ---------
Total non-interest expense ........................... 120,665 77,722 68,221 48,785 39,706
--------- --------- --------- --------- ---------
Income before income taxes and discontinued operations 16,712 38,906 29,019 24,928 25,233
Provision for income taxes ........................... 6,526 15,248 11,380 8,664 9,174
--------- --------- --------- --------- ---------
INCOME FROM CONTINUING OPERATIONS ................ 10,186 23,658 17,639 16,264 16,059
Income (loss) from operations of mortgage servicing
business ........................................... (18,220) 4,111 1,372 2,155 776
--------- --------- --------- --------- ---------
Net income (loss) .................................... (8,034) 27,769 19,011 18,419 16,835
--------- --------- --------- --------- ---------
Total dividends on non-cumulative preferred stock .... 0 0 0 2,030(1) 880
--------- --------- --------- --------- ---------
Net income (loss) available for common shares ........ $ (8,034)