As filed with the United States Securities and Exchange Commission on May 18, 2007

Registration No. 333-141632

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

 

AMENDMENT NO. 1

TO

Form S-3

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

 

 

 

BFC FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

 

 

2100 West Cypress Creek Road

Fort Lauderdale, Florida 33309

(954) 940-4900

(Address, including zip code, and telephone number, including area code, of

registrant’s principal executive offices)

 

 

 

 

Alan B. Levan

BFC Financial Corporation

2100 West Cypress Creek Road

Fort Lauderdale, Florida 33309

(954) 940-4900

(Name, address, including zip code, and telephone number, including area code,

of agent for service)

 

 

 

 

Copies to:

 

 

 

 

 

Approximate date of commencement of proposed sale to the public:  As soon as practicable after this Registration Statement becomes effective.

 

If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box.  o

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box.  o

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box.  o

 

If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box.  o

 

CALCULATION OF REGISTRATION FEE

 

 

 

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

SUBJECT TO COMPLETION, DATED MAY 18, 2007

 

PROSPECTUS

 

 

BFC Financial Corporation

 

10,000,000 Shares

 

Class A Common Stock

 

 

 

 

We are a holding company that invests in and acquires businesses in diverse industries. Our ownership interests include direct and indirect interests in businesses in a variety of sectors, including consumer and commercial banking, investment banking, homebuilding and master-planned community development, time-share and vacation ownership, an Asian-themed restaurant chain and various real estate and venture capital investments.

 

We are offering 10,000,000 shares of our Class A Common Stock, par value $0.01 per share, at a price of $      per share. Our Class A Common Stock is listed on the NYSE Arca Stock Exchange, or the NYSE Arca, under the trading symbol “BFF.” On May 16, 2007, the last reported sale price of our Class A Common Stock on the NYSE Arca was $4.30 per share.

 

 

 

 

Investing in our Class A Common Stock involves risks. See “Risk Factors” beginning on page 11 for a discussion of certain factors you should consider before deciding to invest in shares of our Class A Common Stock.

 

These securities are not savings accounts, deposits or other obligations of any bank and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

 

 

 

 

The underwriters are offering shares of our Class A Common Stock as described under the section of this prospectus entitled “Underwriting.” We have granted the underwriters a 30-day option to purchase up to an additional 1,500,000 shares of our Class A Common Stock at the public offering price, less underwriting discounts and commissions, solely to cover over-allotments.

 

Neither the Office of Thrift Supervision, the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

 

The underwriters expect to deliver the shares to purchasers on or about          , 2007.

 

 

 

 

 

The date of this prospectus is               , 2007.

You should rely only on the information contained in or incorporated by reference into this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. The information in this prospectus may only be accurate as of the date appearing on the cover page of this prospectus and any information incorporated by reference is only accurate as of the date of such documents, regardless of the time this prospectus is delivered or our Class A Common Stock is sold.

 

 

TABLE OF CONTENTS

 

 

 

We are not making an offer to sell the shares in any jurisdiction where the offer or sale is not permitted. No action is being taken in any jurisdiction outside the United States to permit a public offering of our Class A Common Stock or the possession or distribution of this prospectus in any such jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside of the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus applicable in that jurisdiction.

 

Unless otherwise indicated, when we refer to “BFC,” the “Company,” “we,” “our,” “us” or “our Company” in this prospectus, we are referring to BFC Financial Corporation and all of its consolidated subsidiaries. When we refer to “BankAtlantic Bancorp,” we are referring to BankAtlantic Bancorp, Inc. and all of its subsidiaries. When we refer to “BankAtlantic,” or the “Bank,” we are referring to BankAtlantic, BankAtlantic Bancorp’s wholly-owned federal savings bank subsidiary. When we refer to “Levitt,” we are referring to Levitt Corporation and all of its subsidiaries. When we refer to “Levitt and Sons,” we are referring to Levitt and Sons, LLC and all of its subsidiaries. When we refer to “Core Communities,” we are referring to Core Communities, LLC and all of its subsidiaries. When we refer to “Bluegreen,” we are referring to Bluegreen Corporation and all of its subsidiaries. When we refer to “Benihana,” we are referring to Benihana, Inc. When we refer to “Stifel,” we are referring to Stifel Financial Corp. and all of its subsidiaries.

 

PROSPECTUS SUMMARY

	•	BankAtlantic Bancorp (NYSE: BBX), a Florida-based financial services holding company. BankAtlantic Bancorp owns BankAtlantic, a federally chartered, federally insured savings bank. At March 31, 2007, BankAtlantic had $6.2 billion of assets and a network of more than 93 branches in southeast Florida and the Tampa Bay and Orlando areas, primarily in the metropolitan areas surrounding the cities of Miami, Ft. Lauderdale, West Palm Beach, Tampa and Orlando. These cities are located in the heavily-populated Florida counties of Miami-Dade, Broward, Palm Beach, Hillsborough, Pinellas and Orange. As a result of its sale of Ryan Beck & Co, Inc., a full service, diversified investment banking and brokerage firm, to Stifel (NYSE: SF) on February 28, 2007, Bank Atlantic Bancorp holds approximately 16% of the outstanding shares of common stock of Stifel. While by virtue of our ownership interest in BankAtlantic Bancorp we are regulated by the Office of Thrift Supervision, or OTS, as a “unitary savings bank holding company,” we are not subject to any material regulatory restrictions on our activities.

	•	Levitt (NYSE: LEV), a homebuilding and real estate development company with activities throughout the southeastern United States, which operates through Levitt and Sons, its wholly-owned homebuilding subsidiary, and Core Communities, its wholly-owned master-planned community development subsidiary. Levitt also holds approximately 31% of the outstanding shares of common stock of Bluegreen (NYSE: BXG), which acquires, develops, markets and sells “time-share” vacation ownership interests primarily in “drive-to” vacation destinations as well as residential home sites in some cases on properties featuring golf courses or other related amenities.

	•	management teams with extensive experience and knowledge in their industries;
	•	solid business platforms and long-term sustainability;
	•	the ability to grow as part of the BFC platform and through our investment approach; and
	•	industry, business and management characteristics conducive to and compatible with our long-term “buy and hold” investment philosophy.

	•	board of directors oversight and counsel;
	•	financing advice and assistance;
	•	strategic planning;
	•	risk management;
	•	investment expertise and assistance with add-on acquisitions;
	•	strengthening of infrastructure and operations;
	•	management recruitment and retention; and
	•	an ownership and corporate governance environment that we believe is conducive to management teams performing to their full potential for the long-term profitable growth of portfolio companies.

	•	Creating an environment where businesses are managed for the long-term.

	¢	We believe our investment approach supports and facilitates a culture at our portfolio companies of decision-making based on long-term goals. Recently, we supported the decisions made at BankAtlantic and Levitt to implement or continue strategic, long-term initiatives despite the near-term impact of such initiatives on earnings.

	n	BankAtlantic’s branch network expansion and related “Florida’s Most Convenient Bank” initiatives adversely impacted its near-term results by increasing operating expenses.
	n	Levitt continued to make investments in its infrastructure, systems and personnel to position itself for the future despite the near-term impact of such investments on its results.

	•	Successfully managing and growing our investments.

	¢	BankAtlantic had net income of $9.5 million for the fiscal year ended September 30, 1986, the year prior to our acquisition of control, compared to net income of $55.8 million and $36.3 million for the fiscal years ended December 31, 2005 and 2006, respectively.
	¢	Ryan Beck was acquired in 1998 for approximately $38.1 million, and BankAtlantic Bancorp made additional investments of approximately $20.0 million in Ryan Beck during its ownership. On February 28, 2007, Ryan Beck was merged into a wholly-owned subsidiary of Stifel in a stock transaction. As a result of the transaction, BankAtlantic Bancorp received 2,377,354 shares

		of Stifel’s common stock valued at $125 million and consequently became Stifel’s largest shareholder, owning approximately 16% of the outstanding shares of Stifel’s common stock. Pursuant to the terms of the merger agreement, Stifel is also required to deliver either five-year warrants to acquire approximately 500,000 shares of Stifel’s common stock at an exercise price of $36.00 per share or $20 million in cash prior to June 30, 2007 as well as contingent earn-out payments based on (i) defined private client revenues of Ryan Beck during the two-year period commencing on February 28, 2007 up to a maximum of $40,000,000 and (ii) defined investment banking revenues of Ryan Beck equal to 25% of the amount by which such revenues exceed $25,000,000 during each of the two consecutive twelve-month periods commencing on February 28, 2007. Each of the contingent earn-out payments is payable, at Stifel’s election, in cash or shares of Stifel’s common stock.

	¢	Core Communities, which constitutes Levitt’s Land Division, had a loss of $3.0 million for the period from May 17, 1996 (its inception under its previous ownership) through our acquisition on December 31, 1996, compared to net income of $31.4 million and $11.5 million for the years ended December 31, 2005 and 2006, respectively.
	¢	Levitt acquired Levitt and Sons in late 1999. For the year ended December 31, 1998, Levitt and Sons had net income of $4.5 million, compared to net income of $13.8 million, $33.0 million and $22.2 million for the years ended December 31, 2003, 2004 and 2005, respectively. While Levitt and Sons had net loss of $8.9 million in 2006, Levitt’s management believes that Levitt and Sons’ 2006 results reflect the current downturn in the homebuilding industry as well as expenses associated with investments in infrastructure, systems and personnel that Levitt’s management believes will contribute to future performance when the homebuilding market returns to normal levels of growth.
	¢	Bluegreen’s net income for the year ended December 31, 2001, the year prior to Levitt’s principal share purchase, was $9.7 million, compared to $46.6 million and $29.8 million for the years ended December 31, 2005 and 2006, respectively.

	•	Assembling and retaining a strong, experienced executive management team.

	¢	Our senior officers have substantial financing and acquisition experience across a wide range of industries as well as considerable business and operating experience in financial services, commercial and retail banking, investment banking, real estate, homebuilding, land development, time-share, hospitality, travel, airlines, telecommunications, construction and national restaurant chains.
	¢	Since 1978, Alan B. Levan has been the Chairman of our board of directors and the President and Chief Executive Officer of our Company or its predecessors. He has been Chairman and Chief Executive Officer of BankAtlantic Bancorp since 1994 and Chairman of the board of directors of BankAtlantic since 1987. He is Chairman of the Board and Chief Executive Officer of Levitt and Chairman of Bluegreen.
	¢	John E. Abdo has served as a director of our Company since 1988 and Vice Chairman of the board of directors of our Company since 1993. He has been Vice Chairman of BankAtlantic since April 1987 and Chairman of the Executive Committee of BankAtlantic since October 1985. He has been a director and Vice Chairman of BankAtlantic Bancorp since 1994, Vice Chairman of Levitt since April 2001 and served as President of Levitt from 1985 to 2005. Mr. Abdo also has been a director of Benihana since 1990 and Vice Chairman of Bluegreen since 2002.
	¢	The senior operating executives at each of Levitt and Sons and Core Communities at the time of our investments continue to serve as either executives of, or post-retirement consultants to, these companies.

	•	We depend on dividends for a significant portion of our cash flow. The payment to us of dividends is subject to declaration by the boards of directors of our portfolio companies, and regulatory restrictions and the terms of indebtedness may limit their ability to pay dividends;
	•	We have in the past incurred operating cash flow deficits that we expect will continue in the future;
	•	Levitt engages in real estate activities, which are speculative and involve a high degree of risk, and if the merger with Levitt is consummated, we will increase our exposure to the homebuilding industry, which continues to experience significant weakness; and
	•	Adverse events in Florida could adversely impact BankAtlantic’s business and Levitt’s real estate operations.

Common stock offered by BFC		10,000,000 shares of Class A Common Stock(1)

Common stock to be outstanding after the offering		38,756,088 shares of Class A Common Stock(2)

		7,090,653 shares of Class B Common Stock(3)

Over-allotment option		1,500,000 shares of Class A Common Stock

Voting Rights		Holders of our Class A Common Stock are entitled to one vote per share, and our Class A Common Stock possesses in the aggregate a fixed 22% of the total voting power of all of our common stock. The holders of our Class B Common Stock are entitled to a number of votes per share which represents in the aggregate a fixed 78% of the total voting power of all of our common stock. Alan B. Levan, our Chairman of the Board and Chief Executive Officer, and John E. Abdo, our Vice Chairman of the Board, may be deemed under SEC rules to beneficially own shares of our Class A Common Stock and Class B Common Stock representing in the aggregate 52.7% of our total common stock and 77.1% of the total voting power of all of our common stock at March 31, 2007. The holders of our Class A Common Stock and Class B Common Stock vote as a single class, except as may be required by law or as provided in our Articles of Incorporation.

Dividends		Holders of our Class A Common Stock and Class B Common Stock participate equally in dividends on a per share basis. Stock dividends and other non-cash distributions on our Class A Common Stock are identical to those issued on our Class B Common Stock, except that a stock dividend to holders of our Class A Common Stock may be declared and issued in the form of Class A Common Stock while a stock dividend to holders of our Class B Common Stock may be issued in either the form of Class A Common Stock or Class B Common Stock in the discretion of our board of directors. Since our inception, we have not paid any cash dividends on our common stock.
Convertibility		Our Class A Common Stock is not convertible. Our Class B Common Stock is convertible at the holder’s discretion into Class A Common Stock on a share-for-share basis.

Use of Proceeds		If the proposed merger with Levitt is consummated, we currently intend to use the net proceeds of this offering primarily to provide Levitt, as our wholly-owned subsidiary, with working capital. If the proposed merger with Levitt is not consummated, we currently intend to use the net proceeds of this offering primarily to participate fully in the rights offering made by Levitt or otherwise make additional debt or equity investments in Levitt. The net proceeds of this offering may also be used for our general corporate purposes, including working capital and potential new investments. See the section of this prospectus entitled “Use of Proceeds.”

Class A Common Stock NYSE Arca Symbol		“BFF”

(1)		Does not include 1,500,000 shares of Class A Common Stock issuable upon exercise of the underwriters’ over-allotment option.

(2)		As of May 8, 2007. Does not include (i) an additional 1,500,000 shares of Class A Common Stock issuable upon exercise of the underwriters’ over-allotment option, (ii) 1,562,000 shares of Class A Common Stock issuable upon conversion of the Company’s 5% Cumulative Convertible Preferred Stock, (iii) 468,000 shares of Class A Common Stock issuable upon the exercise of outstanding options with a weighted average exercise price of $7.63 per share or (iv) approximately 37,533,953 shares of Class A Common Stock that will be issued to Levitt’s shareholders and approximately 4,300,000 shares of Class A Common Stock that will be issuable to holders of options to purchase shares of Levitt Class A Common Stock if the proposed merger with Levitt is consummated.

(3)		As of May 8, 2007. Does not include 1,139,087 shares of Class B Common Stock issuable upon the exercise of outstanding options with a weighted average exercise price of $3.75 per share.

 

SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA

		For the Three
		Months Ended								For the Years Ended
		March 31,								December 31,
		2007				2006				2006				2005				2004
		(Dollars in thousands, except for per share data)
Income Statement
Revenues
BFC Activities		$	1,450			$	1,003			$	3,682			$	3,129			$	5,683
Financial Services			129,107				117,316				507,746				445,537				358,703
Homebuilding & Real Estate Development			145,968				128,242				583,152				574,824				558,838
			276,525				246,561				1,094,580				1,023,490				923,224
Costs and Expenses
BFC Activities			3,417				3,170				12,370				9,665				7,452
Financial Services			132,779				106,875				474,311				381,916				280,431
Homebuilding & Real Estate Development			146,035				129,134				606,655				498,760				481,618
			282,231				239,179				1,093,336				890,341				769,501
Equity in earnings from unconsolidated affiliates			2,893				771				10,935				13,404				19,603
(Loss) income from continuing operations			(2,813	)			8,153				12,179				146,553				173,326
(Benefit) provision for income taxes			(272	)			2,514				(528	)			59,566				70,920
Noncontrolling interest			(915	)			5,729				13,404				79,267				90,388
(Loss) income from continuing operations			(1,626	)			(90	)			(697	)			7,720				12,018
(Loss) income from discontinued operations, net of noncontrolling interest and income taxes			1,053				(209	)			(1,524	)			5,054				2,212
Net (loss) income			(573	)			(299	)			(2,221	)			12,774				14,230
5% Preferred Stock dividends			(188	)			(188	)			(750	)			(750	)			(392	)
Net (loss) income allocable to common stock		$	(761	)		$	(487	)		$	(2,971	)		$	12,024			$	13,838
Common Share Data(a),(c), (d)
Basic (loss) earnings per share:
Basic (loss) earnings per share from continuing operations		$	(0.05	)		$	(0.01	)		$	(0.04	)		$	0.24			$	0.48
Discontinued operations			0.03				—				(0.05	)			0.18				0.09
Basic (loss) earnings per share of common stock		$	(0.02	)		$	(0.01	)		$	(0.09	)		$	0.42			$	0.57
Diluted (loss) earnings per share:
Diluted earnings (loss) per share from continuing operations		$	(0.05	)		$	(0.01	)		$	(0.05	)		$	0.22			$	0.40
Discontinued operations			0.03				(0.01	)			(0.05	)			0.15				0.07
Diluted (loss) earnings per share of common stock		$	(0.02	)		$	(0.02	)		$	(0.10	)		$	0.37			$	0.47
Basic weighted average number of common shares outstanding			33,444				32,692				33,249				28,952				24,183
Diluted weighted average number of common shares outstanding			33,444				32,692				33,249				31,219				27,806
Ratio of earnings to fixed charges(e)			—				—				—				—				—
Dollar deficiency of earnings to fixed charges(e)		$	916			$	1,326			$	5,197			$	7,217			$	4,145

		As of March 31,								As of December 31,
		2007				2006				2006				2005				2004
		(Dollars in thousands, except for per share data)
Balance Sheet
Loans and leases, net		$	4,625,865			$	4,528,530			$	4,603,505			$	4,628,744			$	4,561,073
Securities			1,130,363				1,054,410				1,081,980				1,064,857				1,082,985
Total assets			7,523,794				7,308,003				7,605,766				7,395,755				6,954,847
Deposits			4,085,022				3,960,766				3,867,036				3,752,676				3,457,202
Securities sold under agreements to repurchase and federal funds purchased			119,513				156,675				128,411				249,263				257,002
Other borrowings(f)			2,261,784				1,978,668				2,426,000				2,131,976				2,086,368
Shareholders’ equity			176,761				178,368				177,585				183,080				125,251
Book value per share(d),(g)			4.82				4.87				4.84				5.25				4.25
Return on average equity(b)(h)			(0.32	)%			(0.17	)%			(1.24	)%			8.08	%			13.16	%
BankAtlantic Asset quality ratios
Non-performing assets, as a percent of total loans, tax certificates and real estate owned			1.02	%			0.18	%			0.55	%			0.17	%			0.19	%
Loan loss allowance as a percent of non-performing loans			195.65	%			686.59	%			982.89	%			605.68	%			582.18	%
Loan loss allowance as a percentage of total loans			1.08	%			0.94	%			0.94	%			0.88	%			1.00	%
Capital Ratios for BankAtlantic
Total risk based capital			12.11	%			12.21	%			12.08	%			11.50	%			10.80	%
Tier I risk based capital			10.49	%			10.65	%			10.50	%			10.02	%			9.19	%
Leverage			7.51	%			7.75	%			7.55	%			7.42	%			6.83	%
Levitt Corporation
Consolidated margin on sales of real estate		$	28,390			$	23,488			$	83,125			$	150,030			$	143,378
Consolidated Margin			20.00	%			18.71	%			14.70	%			26.90	%			26.10	%
Homes delivered (units)			362				439				1,660				1,789				2,126
Backlog of homes (units)			1,045				1,859				1,248				1,792				1,814
Backlog of homes (sales value)		$	359,029			$	608,437			$	438,240			$	557,325			$	448,647
Land division acres sold			0				56				371				1,647				1,212

(a)		Since its inception, the Company has not paid any cash dividends on its common stock.

(b)		Ratios were computed using quarterly averages.

(c)		While the Company has two classes of common stock outstanding, the two-class method is not presented because the Company’s capital structure does not provide for different dividend rates or other preferences, other than voting rights, between the two classes.

(d)		I.R.E. Realty Advisory Group, Inc. (“RAG”) owns 4,764,282 shares of the Company’s Class A Common Stock and 500,000 shares of the Company’s Class B Common Stock. Because the Company owns 45.5% of the outstanding common stock of RAG, 2,165,367 shares of the Company’s Class A Common Stock and 227,500 shares of the Company’s Class B Common Stock are eliminated from the number of shares outstanding for purposes of computing earnings per share and book value per share.

(e)		The operations, fixed charges and dividends of BankAtlantic Bancorp and Levitt are not included in the calculation because those subsidiaries are separate, publicly traded companies whose Boards of Directors are composed of individuals, a majority of whom are independent. Accordingly, decisions made by those Boards, including with respect to the payment of dividends, are not within the Company’s control.

(f)		Other borrowings consist of FHLB advances, subordinated debentures, notes, mortgage notes payable, bonds payable, secured borrowings, and junior subordinated debentures. Secured borrowings were recognized on loan participation agreements that constituted a legal sale of a portion of the loan but that were not qualified to be accounted for as a loan sale.

(g)		Preferred stock redemption price is eliminated from shareholders’ equity for purposes of computing book value per share.

(h)		The return on average equity is equal to net income (loss) divided by average consolidated shareholders’ equity during the respective year.

 

SUMMARY PARENT COMPANY ONLY FINANCIAL DATA

		As of or for the Three								As of or for the
		Months Ended								Years Ended
		March 31,								December 31,
		2007				2006				2006				2005				2004
		(In thousands)
Balance Sheet Data:
Assets
Cash and cash equivalents		$	15,910			$	19,464			$	17,815			$	26,683			$	1,520
Investment securities			2,211				2,434				2,262				2,034				1,800
Investment in Benihana, Inc.			20,000				20,000				20,000				20,000				10,000
Investment in venture partnerships			904				941				908				950				971
Investment in BankAtlantic Bancorp, Inc.			113,658				112,119				113,586				112,218				103,125
Investment in Levitt Corporation			57,255				58,070				57,009				58,111				48,983
Investment in and advances to wholly-owned subsidiaries			2,056				1,612				1,525				1,631				31,867
Loans receivable			1,987				1,500				2,157				2,071				3,364
Other assets			2,516				2,821				2,261				960				2,697
Total assets		$	216,497			$	218,961			$	217,523			$	224,658			$	204,327
Liabilities and Shareholders’ Equity
Notes payable		$	-			$	-			$	-			$	-			$	10,483
Advances from and negative basis in wholly-owned subsidiaries			1,373				544				1,290				462				34,636
Other liabilities			6,636				6,615				7,351				7,417				6,929
Deferred income taxes			31,727				33,434				31,297				33,699				27,028
Total liabilities			39,736				40,593				39,938				41,578				79,076
Total shareholders’ equity			176,761				178,368				177,585				183,080				125,251
Total liabilities and shareholders’ equity		$	216,497			$	218,961			$	217,523			$	224,658			$	204,327
Statements of Operations Data:
Revenues		$	559			$	573			$	2,232			$	1,775			$	3,514
Expenses			1,914				2,220				8,413				14,904				6,717
(Loss) before earnings (loss) from subsidiaries			(1,355	)			(1,647	)			(6,181	)			(13,129	)			(3,203	)
(Loss) equity from earnings in BankAtlantic Bancorp			(477	)			1,404				5,807				9,053				11,817
Equity from earnings (loss) in Levitt			162				(109	)			(1,522	)			9,125				10,265
Equity from earnings (loss) in wholly-owned subsidiaries			15				(32	)			(658	)			6,671				(35	)
(Loss) income before income taxes			(1,655	)			(384	)			(2,554	)			11,720				18,844
(Benefit) provision for income taxes			(29	)			(294	)			(1,857	)			4,000				6,826
(Loss) income from continuing operations			(1,626	)			(90	)			(697	)			7,720				12,018
Equity (loss) in subsidiaries’ discontinued operations, net of tax			1,053				(209	)			(1,524	)			5,054				2,212
Net (loss) income			(573	)			(299	)			(2,221	)			12,774				14,230
5% Preferred Stock dividends			(188	)			(188	)			(750	)			(750	)			(392	)
Net (loss) income allocable to common stock		$	(761	)		$	(487	)		$	(2,971	)		$	12,024			$	13,838
Statements of Cash Flow Data:
Operating Activities:
(Loss) income from continuing operations		$	(1,626	)		$	(90	)		$	(697	)		$	7,720			$	12,018
Equity (loss) in subsidiaries’ discontinued operations, net of tax			1,053				(209	)			(1,524	)			5,054				2,212
Other operating activities			(1,032	)			(1,577	)			(820	)			(12,709	)			(18,243	)
Net cash (used in) provided by operating activities			(1,605	)		$	(1,876	)			(3,041	)		$	65			$	(4,013	)
Net cash used in investing activities			-				(1,000	)			(923	)			(10,029	)			(9,577	)
Net cash (used in) provided by financing activities			(300	)			(4,343	)			(4,904	)			35,127				13,574
(Decrease) increase in cash and cash equivalents			(1,905	)			(7,219	)			(8,868	)			25,163				(16	)
Cash at beginning of period			17,815				26,683				26,683				1,520				1,536
Cash at end of period		$	15,910			$	19,464			$	17,815			$	26,683			$	1,520

 

You should carefully consider the following risks before deciding to invest in our Class A Common Stock. Our business, operating results or financial condition could be materially and adversely affected by any of these risks. In such case, the trading price of our Class A Common Stock could decline, and you may lose all or part of your investment. You should also refer to the other information included or incorporated by reference in this prospectus.

 

Risks Associated With the Company

 

We depend on dividends from BankAtlantic Bancorp for a significant portion of our cash flow. Regulatory restrictions and the terms of indebtedness limit the ability for BankAtlantic Bancorp to pay dividends.

 

At March 31, 2007, we held approximately 22.1% of the outstanding common stock of BankAtlantic Bancorp. Dividends by BankAtlantic Bancorp are subject to a number of conditions, including the cash flow and profitability of BankAtlantic Bancorp, declaration of dividends by BankAtlantic Bancorp’s board of directors, compliance with the terms of outstanding indebtedness, and regulatory restrictions applicable to BankAtlantic.

 

BankAtlantic Bancorp is a separate publicly traded company whose board of directors includes a majority of independent directors as required by the listing standards of the New York Stock Exchange. Decisions made by the BankAtlantic Bancorp’s board of directors are not within our control and may not be made in our best interests.

 

BankAtlantic Bancorp is a holding company and it depends upon dividends from BankAtlantic for a significant portion of its cash flow. BankAtlantic Bancorp uses dividends from BankAtlantic to service its debt obligations and to pay dividends on its capital stock. BankAtlantic Bancorp’s ability to service its debt and pay dividends is further subject to restrictions under its indentures and loan covenants. BankAtlantic’s ability to pay dividends or make other capital distributions to BankAtlantic Bancorp is subject to the regulatory authority of the OTS and the FDIC. BankAtlantic’s ability to make capital distributions is subject to regulatory limitations. Generally, BankAtlantic may make a capital distribution without prior OTS approval in an amount equal to BankAtlantic’s net income for the current calendar year to date, plus retained net income for the previous two years, provided that BankAtlantic does not become under-capitalized as a result of the distribution. BankAtlantic’s ability to make such distributions depends on maintaining eligibility for “expedited treatment.” BankAtlantic currently qualifies for expedited treatment, but there can be no assurance that it will maintain its current status.

 

Additionally, although no prior OTS approval may be necessary, BankAtlantic is required to give the OTS thirty (30) days notice before making any capital distribution to BankAtlantic Bancorp. The OTS may object to any capital distribution if it believes the distribution will be unsafe and unsound. Additional capital distributions above the limit for an expedited treatment institution are possible but require the prior approval of the OTS. The OTS is not likely to approve any distribution that would cause BankAtlantic to fail to meet its capital requirements on a pro forma basis after giving effect to the proposed distribution. The FDIC has backup authority to take enforcement action if it believes that a capital distribution by BankAtlantic constitutes an unsafe or unsound action or practice, even if the OTS has cleared the distribution.

 

At March 31, 2007, BankAtlantic Bancorp had approximately $263.3 million of indebtedness outstanding at the holding company level with maturities in 2032 and 2033. The aggregate annual interest expense on this indebtedness is approximately $21.1 million. During 2006, BankAtlantic Bancorp received $20 million of dividends from BankAtlantic. BankAtlantic Bancorp’s financial condition and results would be adversely affected if the amounts needed to satisfy its debt obligations, including any additional indebtedness incurred in the future, exceeded the amount of dividends it receives from its subsidiaries.

 

During 2006, we received $2.1 million in dividends from BankAtlantic Bancorp.

 

We also depend on dividends from Levitt for a portion of our cash flow. Regulatory restrictions and the terms of indebtedness limit the ability for Levitt to pay dividends.

 

We also depend on dividends from Levitt for a portion of our cash flow. Levitt commenced paying a quarterly dividend in August 2004. Future dividends are subject to Levitt’s results and dividends from its subsidiaries and declaration by Levitt’s board of directors. Levitt may also be limited contractually from paying

dividends by the terms of its outstanding indebtedness. Levitt’s subsidiaries currently have outstanding indebtedness, and may in the future incur additional indebtedness, the terms of which limit the payment of dividends by the subsidiaries to Levitt.

 

During 2006, we received $264,000 in dividends from Levitt.

 

We have in the past incurred operating cash flow deficits that we expect will continue in the future.

 

BFC itself has no revenue generating operating activities and is a holding company engaged in making investments in operating businesses. Accordingly, we have in the past incurred operating cash flow deficits at the BFC parent company level and expect to continue to do so in the foreseeable future. We incurred operating cash flow deficits of $3.0 million during the year ended December 31, 2006. We have financed these operating cash flow deficits with the proceeds of equity or debt financings. At December 31, 2006, BFC’s cash and cash equivalents balance was approximately $17.8 million. Since our acquisition strategy involves primarily long-term investments in growth-oriented businesses, the investments made are not likely to generate cash flow to BFC in the near term. As a result, if cash flow from our subsidiaries is not sufficient to fund parent company operating expenses in the future, we may be forced to reduce operating expenses, to liquidate some of our investments or to seek to fund the expenses from the proceeds of additional equity or debt financing. There is no assurance that any such financing would be available on commercially reasonable terms, if at all, or that we would not be forced to liquidate our investments at depressed prices.

 

Events in Florida, where our investments are currently concentrated, could adversely impact our results and future growth.

 

BankAtlantic’s business, the location of its branches and the real estate collateralizing its commercial real estate loans are concentrated in Florida. Further, Levitt develops and sells its properties primarily in Florida. Further, the State of Florida is subject to the risks of natural disasters, such as tropical storms and hurricanes. The occurrence of an economic downturn in Florida, adverse changes in laws or regulations in Florida or natural disasters could impact the credit quality of BankAtlantic’s assets, the desirability of Levitt’s properties, the financial wherewithal of Levitt’s and BankAtlantic’s customers and the overall success of Levitt and BankAtlantic.

 

Our activities and our subsidiaries’ activities are subject to a wide range of bank regulatory requirements that could have a material adverse effect on our business.

 

The Company and BankAtlantic Bancorp are each grandfathered unitary savings and loan holding companies and have broad authority to engage in various types of business activities. The OTS can stop either of us from engaging in activities or limit those activities if it determines that there is reasonable cause to believe that the continuation of any particular activity constitutes a serious risk to the financial safety, soundness, or stability of BankAtlantic. The OTS may also:

 

 

Unlike bank holding companies, as a unitary savings and loan holding company, the Company and BankAtlantic Bancorp are not subject to capital requirements. However, the OTS has indicated that it may in the future impose capital requirements on savings and loan holding companies. The OTS may in the future adopt regulations that would affect our operations or those of BankAtlantic Bancorp, including our and BankAtlantic Bancorp’s ability to pay dividends or to engage in certain transactions or activities.

 

We have many competitors who may have greater financial resources or operate under fewer regulatory constraints.

 

BFC will face competition in identifying and completing investments, including from strategic buyers, business development companies, private equity funds and other financial sponsors. Many of these competitors have substantially greater financial resources than us. This competition may make acquisitions more costly and

may make it more difficult for us to identify attractive investments and successfully complete any desired transaction.

 

Our success depends on key management, the loss of which could disrupt our business operations.

 

Our future success depends largely upon the continued efforts and abilities of key management employees, including Alan B. Levan, our Chairman and Chief Executive Officer, John E. Abdo, our Vice Chairman and Phil Bakes, our Managing Director and Executive Vice President. The loss of the services of one or more of our key employees or our failure to attract, retain and motivate qualified personnel could have a material adverse effect on our business, financial condition and results of operations. Effective March 29, 2007, Glen R. Gilbert retired from his positions as Executive Vice President and Chief Financial and Accounting Officer of the Company after 27 years of service. Mr. Gilbert continues to serve the Company in a non-executive position.

 

Certain members of our board of directors and certain of our executive officers are also directors and executive officers of our affiliates.

 

Alan B. Levan, our Chairman and Chief Executive Officer, and John E. Abdo, our Vice Chairman, are also members of the board of directors and/or executive officers of BankAtlantic Bancorp, BankAtlantic, Levitt and Bluegreen. Neither Mr. Levan nor Mr. Abdo is obligated to allocate a specific amount of time to the management of the Company, and they may devote more time and attention to the operations of our affiliates than they devote directly to our operations. Additionally, D. Keith Cobb, a member of our board of directors is a member of the board of directors of BankAtlantic Bancorp and BankAtlantic.

 

Our future acquisitions may reduce our earnings, require us to obtain additional financing and expose us to additional risks.

 

Our business strategy includes investing in and acquiring diverse operating companies and some of these investments and acquisitions may be material. While we will seek investments and acquisitions primarily in companies that provide opportunities for growth with seasoned and experienced management teams, we may not be successful in identifying these opportunities. Further, investments or acquisitions that we do complete may not prove to be successful. Acquisitions may expose us to additional risks and may have a material adverse effect on our results of operations. Any acquisitions we make may:

 

 

In addition, we will likely face competition in making investments or acquisitions which could increase the costs associated with the investment or acquisition. Our investments or acquisitions could initially reduce our per share earnings and add significant amortization expense or intangible asset charges. Since our acquisition strategy involves holding investments for the foreseeable future and because we do not expect to generate significant excess cash flow from operations, we may rely on additional debt or equity financing to implement our acquisition strategy. The issuance of debt will result in additional leverage which could limit our operating flexibility, and the issuance of equity could result in additional dilution to our then-current shareholders. In addition, such financing could consist of equity securities which have rights, preferences or privileges senior to our Class A Common Stock. If we do require additional financing in the future, we cannot assure the reader that it will be available on favorable terms, if at all. If we fail to obtain the required financing, we would be required to curtail or delay our acquisition plans or to liquidate certain of our assets. Additionally, we do not intend to seek shareholder approval of any investments or acquisitions unless required by law or regulation.

 

Recent changes in accounting standards regarding the treatment of stock options could harm our ability to attract and retain employees and negatively impact our results of operations.

 

In 2006, the Company’s net impact of adopting Statement of Financial Accounting Standards (“SFAS”) No. 123R “Share-Based Payment” (“SFAS 123R”) on the amount recognized in non-cash compensation expense was approximately $7.8 million and approximately $1.2 million, net of noncontrolling interests and income taxes, in the Company’s consolidated statement of operations for the year ended December 31, 2006. If the Company had been required to expense stock option grants during 2005 by applying the measurement provisions of

SFAS 123R our recorded net income available to common shareholders for the year ended December 31, 2005 of approximately $12.0 million would have been reduced to approximately $10.9 million. Stock options have historically been an important employee recruitment and retention tool, and BFC, BankAtlantic Bancorp and Levitt’s ability to attract and retain key personnel may be impacted if the scope of employee stock option programs is significantly reduced. In any event, if we continue to grant stock options, our future results of operations will be negatively impacted due to SFAS 123R.

 

Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.

 

We are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. This Act requires annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent auditors addressing these assessments. While management was able to certify in connection with the Company’s audited financial statements for the year ended December 31, 2006 that our internal controls over financial reporting were effective and the Company’s auditors issued their attestation of such report, we cannot assure the reader that we will maintain the adequacy of our internal controls. If we fail to maintain the adequacy of our internal controls, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Absolute assurance also cannot be provided that testing will reveal all material weaknesses or significant deficiencies in internal control over financial reporting. In addition, since BankAtlantic Bancorp and Levitt are entities consolidated in our financial statements, our ability to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act will be dependent, in part, on the ability of each of BankAtlantic Bancorp and Levitt to satisfy those requirements. Further, we may acquire privately-held businesses that are not then subject to the same stringent requirements for internal controls as public companies. While we intend to address any material weaknesses at acquired consolidated companies, there is no assurance that this will be accomplished. If we fail to strengthen the effectiveness of acquired companies’ internal controls, we may not be able to conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Failure to achieve and maintain an effective internal control environment could have a material adverse effect on our stock price.

 

Our portfolio of equity securities subjects us to equity pricing risks.

 

We maintain a portfolio of publicly traded and privately held equity securities that subject us to equity pricing risks arising in connection with changes in the relative values due to changing market and economic conditions. Volatility or a decline in the financial markets can negatively impact our net income as a result of devaluation of these investments. At March 31, 2007 we had equity securities available for sale with a book value of approximately $2.3 million, as well as our investment in Benihana Series B Convertible Preferred Stock for which no market is available. If the Company were to convert its investment in Benihana, it would represent 1,052,632 shares of Benihana Class A Common Stock. At March 31, 2007, the aggregate market value of such shares would have been $29.7 million.

 

Our control position may adversely affect the market price of BankAtlantic Bancorp’s and Levitt’s Class A Common Stock.

 

As of March 31, 2007, we owned all of BankAtlantic Bancorp’s issued and outstanding Class B Common Stock and 8,329,236 shares, or approximately 15.2%, of BankAtlantic Bancorp’s issued and outstanding Class A Common Stock, and we owned all of Levitt’s issued and outstanding Class B Common Stock and 2,074,243 shares, or approximately 11.1%, of Levitt’s issued and outstanding Class A Common Stock. Our share holdings in BankAtlantic Bancorp represent approximately 55.0% of its total voting power, and our share holdings in Levitt represent approximately 52.9% of its total voting power. Since the Class A Common Stock and Class B Common Stock of each of BankAtlantic Bancorp and Levitt vote as a single group on most matters, we are in a position to control BankAtlantic Bancorp and Levitt and elect BankAtlantic Bancorp’s and Levitt’s boards of directors. As a consequence, we have the voting power to significantly influence the outcome of any shareholder vote of BankAtlantic Bancorp and Levitt, except in those limited circumstances where Florida law mandates that the holders of each such company’s Class A Common Stock vote as a separate class. As indicated elsewhere in this document, we have entered into a merger agreement with Levitt which, if the merger contemplated thereby is consummated, would result in Levitt becoming a wholly-owned subsidiary of the

Company. Completion of the merger is subject to, among other things, the approval of the holders of a majority of the outstanding shares of Levitt’s Class A Common Stock as well as a separate vote of holders of Levitt’s Class A Common Stock other than BFC and certain other shareholders of Levitt. Our control position may have an adverse effect on the market prices of BankAtlantic Bancorp’s and Levitt’s Class A Common Stock.

 

Risks Associated with the Merger with Levitt

 

If the merger with Levitt is consummated, our shareholders will increase their exposure to the homebuilding industry, which continues to experience significant weakness.

 

If the merger with Levitt is consummated, we will significantly increase our exposure to the risks and uncertainties of the homebuilding industry. As of March 31, 2007, our investment in Levitt represented 27% of our parent company total assets. If the merger is consummated, our investment in Levitt will represent 64% of our parent company total assets. The homebuilding industry in general has recently experienced and continues to experience significant weakness. Adverse economic and other business conditions have had, and are expected to continue to have, a negative impact on the homebuilding industry in general. Homebuilders, including Levitt, have recently experienced declines in sale orders and increased cancellations of sale contracts and there is an increased inventory of new and used homes for sale. Prospective homebuyers are concerned about home prices and rising interest rates and there is a decline in homebuyer consumer confidence. Homebuilders have used increased sales incentives and advertising expenditures and paid higher broker commissions in an attempt to address the slowdown in the housing market, which has further negatively affected margins in the industry. These economic and other business conditions are expected to continue for the foreseeable future, and no assurance can be given as to the timing of any recovery in the homebuilding industry. For the year ended December 31, 2006 and the three months ended March 31, 2007, Levitt had net loss of $9,164,000 and net income of $976,000, respectively. See also “Risks Associated with Our Class A Common Stock and this Offering — Even if the merger with Levitt is not consummated, we may use the net proceeds of this offering to increase our investment in Levitt.”

 

If a significant number of holders of Levitt Class A Common Stock exercise their appraisal rights, it could have an adverse effect on us.

 

If a significant number of holders of Levitt Class A Common Stock exercise their appraisal rights, we may elect not to consummate the merger with Levitt, in which case we will have incurred significant transaction costs without consummating the transaction. Even if the merger is consummated, the number of shareholders exercising appraisal rights will impact our cash balances and cash flow, as we will be required to pay dissenting shareholders in cash. We have no operations other than activities relating to identifying, analyzing and in appropriate cases, acquiring new investments, as well as the monitoring and managing of our existing investments. Since we are dependent upon dividends from our subsidiaries for a significant portion of our cash flow, and since the declaration of dividends by our subsidiaries is not always within our control, any significant decrease in our cash position as a result of payments to dissenting shareholders could have a material adverse effect on our business.

 

Substantial sales of our Class A Common Stock could adversely affect its market price.

 

In connection with the merger with Levitt, it is anticipated that approximately 37,533,953 shares of our Class A Common Stock will be issued to holders of Levitt Class A Common Stock and approximately 4,300,000 additional shares of our Class A Common Stock will be issuable pursuant to options to purchase shares of Levitt Class A Common Stock outstanding as of March 31, 2007. These shares will represent approximately 52% of the total number of shares of our Class A Common Stock anticipated to be outstanding if the merger with Levitt is completed, including the 10,000,000 shares to be issued in this offering. Other than the shares issued or to be issued to affiliates of Levitt or the Company, which would represent approximately 28% of the total number of shares of our Class A Common Stock anticipated to be outstanding if the merger with Levitt is completed, including the 10,000,000 shares to be issued in this offering, the shares issued or to be issued in connection with the merger with Levitt will not be subject to restrictions on resale. The issuance of and potential resale of these new shares could have the effect of depressing the market price of our Class A Common Stock.

 

If the merger with Levitt is not consummated, we will have incurred substantial costs adversely impacting our results of operations and financial condition and the market price of our common stock.

 

We have incurred and will continue to incur substantial costs in connection with the merger with Levitt. These costs are primarily associated with the fees of our attorneys, accountants and financial advisors. In addition, we have diverted significant management resources in an effort to consummate the merger and each are subject to restrictions contained in the merger agreement on the conduct of our business prior to the effective time of the merger. If the merger is not consummated, we will have incurred significant costs, including the diversion of management resources, from which we will have received little or no benefit.

 

Risks Associated with the Banking Industry and Our Investment in BankAtlantic Bancorp

 

Changes in interest rates could adversely affect BankAtlantic Bancorp’s net interest income and profitability.

 

The majority of BankAtlantic’s assets and liabilities are monetary in nature. As a result, the earnings and growth of BankAtlantic are significantly affected by interest rates, which are subject to the influence of economic conditions generally, both domestic and foreign, and also to the monetary and fiscal policies of the United States and its agencies, particularly the Federal Reserve Board. The nature and timing of any changes in such policies or general economic conditions and their effect on BankAtlantic cannot be controlled and are extremely difficult to predict. Changes in interest rates can impact BankAtlantic’s net interest income as well as the valuation of its assets and liabilities.

 

Banking is an industry that depends to a large extent on its net interest income. Net interest income is the difference between:

 

 

Changes in interest rates can have differing effects on BankAtlantic’s net interest income and the cost of purchasing residential mortgage loans in the secondary market. In particular, changes in market interest rates, changes in the relationships between short-term and long-term market interest rates, or the yield curve, or changes in the relationships between different interest rate indices can affect the interest rates charged on interest-earning assets differently than the interest rates paid on interest-bearing liabilities. This difference could result in an increase in interest expense relative to interest income and therefore reduce BankAtlantic’s net interest income. While BankAtlantic has attempted to structure its asset and liability management strategies to mitigate the impact on net interest income of changes in market interest rates, there can be no assurance that BankAtlantic will be successful in doing so.

 

Loan prepayment decisions are also affected by interest rates. Loan prepayments generally accelerate as interest rates fall. Prepayments in a declining interest rate environment reduce BankAtlantic’s net interest income and adversely affect its earnings because:

 

 

Significant loan prepayments in BankAtlantic’s mortgage portfolio in the future could have an adverse effect on BankAtlantic’s earnings. Additionally, increased prepayments associated with purchased residential loans may result in increased amortization of premiums on acquired loans, which would reduce BankAtlantic’s interest income.

 

In a rising interest rate environment loan prepayments generally decline resulting in loan yields that are less than the current market yields. In addition, the credit risks of loans with adjustable rate mortgages may worsen as interest rates rise and debt service obligations increase.

 

BankAtlantic has developed a computer model using standard industry software to quantify its interest rate risk, referred to as an “ALCO model” in support of its Asset/Liability Committee. This model measures the potential impact of gradual and abrupt changes in interest rates on BankAtlantic’s net interest income. While

management would attempt to respond to the projected impact on net interest income, there is no assurance that management’s efforts will be successful.

 

The current level of short term interest rates is approximately equal to longer term rates. This is referred to as a “flat yield curve.” This situation has existed for some time extending back to 2005. BankAtlantic’s net interest income is largely derived from a combination of two factors: the level of core deposits, such as demand savings and NOW deposits, and the ability of banks to raise short term deposits and other borrowings and invest them at longer maturities. The current flat yield curve has significantly impacted the ability of BankAtlantic to profitably raise short term funds for longer term investment as the interest rate spread between short term and long term maturities is negligible. The future pattern of interest rates, including the relationship between short term and long term rates, will determine BankAtlantic’s ability to improve net interest income.

 

BankAtlantic’s “Florida’s Most Convenient Bank” initiative has resulted in higher operating expenses, which has had an adverse impact on BankAtlantic Bancorp’s earnings.

 

BankAtlantic’s “Florida’s Most Convenient Bank” initiative and its associated expanded operations have required it to provide additional management resources, hire additional personnel, increase compensation, occupancy and marketing expenditures and take steps to enhance and expand its operational and management information systems. Employee compensation, occupancy and advertising expenses have significantly increased since the inception, during 2002, of the initiative from $78.9 million during 2001 to $182.0 million during 2005 and $238.0 million during 2006. Additionally, BankAtlantic has renovated the interior of most of its existing stores and has committed to a program to expand its store network. As of March 31, 2007, BankAtlantic had opened 22 new stores since January 2005, and BankAtlantic anticipates accelerating the pace of store openings in future periods.

 

As a result of these growth initiatives, BankAtlantic has incurred and will continue to incur increased operating expenses, which occur in advance of any anticipated benefit resulting from these expenses. In the event that the “Florida’s Most Convenient Bank” initiative does not produce the results anticipated, BankAtlantic’s increased operating expenses will not be adequately offset by the benefits of the initiative and BankAtlantic Bancorp’s earnings will continue to be adversely impacted. Additionally, if BankAtlantic Bancorp’s growth initiatives do not produce results which justify these increases in operating expenses, it may be forced to reduce expenses which could result in additional charges and costs.

 

Further, while its management is currently undertaking a review of all non-interest expenses, including marketing expenses which increased significantly in 2006 with a view of reducing expenses not directly associated with new stores or customer service, there is no assurance that BankAtlantic will be successful in its efforts to reduce expenses.

 

BankAtlantic’s loan portfolio is concentrated in real estate lending.

 

The national real estate market is showing signs of a slow down, particularly in areas that have seen significant growth, including Florida and California. BankAtlantic’s loan portfolio is concentrated in commercial real estate loans (virtually all of which are located in Florida), residential mortgages (nationwide), and consumer home-equity loans (Florida). BankAtlantic has exposure to credit losses that may arise from this concentration in what many believe is a softening real estate sector. BankAtlantic had a total commercial real estate acquisition and development loan portfolio of approximately $562 million at March 31, 2007. Included in the commercial real estate loans at March 31, 2007 are approximately $140 million of “builder land loans,” which are land loans to borrowers who have option agreements with regional and/or national builders and which are susceptible to extended maturities or borrower default due to a slow-down in Florida construction activity.

 

BankAtlantic obtains a significant portion of its non-interest income through service charges on core deposit accounts.

 

BankAtlantic’s core deposit account growth has generated a substantial amount of service charge income. The largest component of this service charge income is overdraft fees. Changes in customer behavior as well as increased competition from other financial institutions could result in declines in core deposit accounts or in overdraft frequency resulting in a decline in service charge income. Additionally, any future changes in banking regulations may impact this revenue source. Any of such changes could have a material adverse effect on BankAtlantic’s results.

 

BankAtlantic’s loan portfolio subjects it to high levels of credit risk.

 

BankAtlantic is exposed to the risk that its borrowers or counter-parties may default on their obligations. Credit risk arises through the extension of loans, certain securities, letters of credit, and financial guarantees and through counter-party exposure on trading and wholesale loan transactions. In an attempt to manage this risk, BankAtlantic establishes policies and procedures to manage both on and off-balance sheet (primarily loan commitments) credit risk.

 

BankAtlantic attempts to manage credit exposure to individual borrowers and counter-parties on an aggregate basis including loans, securities, letters of credit, derivatives and unfunded commitments. Credit personnel analyze the creditworthiness of individual borrowers or counter-parties, and limits are established for the total credit exposure to any one borrower or counter-party. Credit limits are subject to varying levels of approval by senior line and credit risk managers. BankAtlantic also enters into participation agreements with other lenders to limit its credit risk.

 

The majority of BankAtlantic’s loan portfolio consists of loans secured by real estate. BankAtlantic’s loan portfolio included $2.2 billion of loans secured by residential real estate and $1.8 billion of commercial real estate, construction and development loans at March 31, 2007. At March 31, 2007, BankAtlantic’s commercial real estate, construction and development loans, which are concentrated mainly in Florida, represented approximately 40.0% of its loan portfolio. The real estate market in Florida is currently exhibiting signs of weakness. If real estate values in Florida were to decline, the credit quality of BankAtlantic’s loan portfolio and its earnings could be adversely impacted. Real estate values are affected by various factors, including changes in general and/or regional economic conditions, governmental rules and policies and natural disasters such as hurricanes.

 

BankAtlantic’s commercial real estate loan portfolio includes large lending relationships, including relationships with unaffiliated borrowers involving lending commitments in each case in excess of $30 million. These relationships represented an aggregate outstanding balance of $532 million as of December 31, 2006. Defaults by any of these borrowers could have a material adverse effect on BankAtlantic’s results.

 

BankAtlantic’s interest-only residential loans expose it to greater credit risks.

 

A portion of BankAtlantic’s residential loan portfolio consists of interest-only loans. These loans have reduced initial loan payments with the potential for significant increases in monthly loan payments in subsequent periods, even if interest rates do not rise, as required amortization of the principal amount commences. Monthly loan payments will also increase as interest rates increase. This presents a potential repayment risk if the borrower is unable to meet the higher debt service obligations or refinance the loan. It is anticipated that it will be difficult for borrowers to refinance residential loans in markets where real estate values have declined.

 

An inadequate allowance for loan losses would result in reduced earnings.

 

As a lender, BankAtlantic is exposed to the risk that its customers will be unable to repay their loans according to their terms and that any collateral securing the payment of their loans will not be sufficient to assure full repayment. BankAtlantic evaluates the collectibility of its loan portfolio and provides an allowance for loan losses that it believes is adequate based upon such factors as:

 

 

If BankAtlantic’s evaluation is incorrect and borrower defaults cause losses exceeding the portion of the allowance for loan losses allocated to those loans, BankAtlantic Bancorp’s earnings could be significantly and adversely affected. BankAtlantic may experience losses in its loan portfolios or perceive adverse trends that require it to significantly increase its allowance for loan losses in the future, which would reduce future earnings.

In addition, BankAtlantic’s regulators may require it to increase or decrease its allowance for loan losses even if BankAtlantic thinks such change is unjustified.

 

Adverse events in Florida, where BankAtlantic’s business is currently concentrated, could adversely impact BankAtlantic’s results and future growth.

 

BankAtlantic’s business, the location of its stores and the real estate collateralizing its commercial real estate loans are primarily concentrated in Florida. As a result, BankAtlantic Bancorp is exposed to geographic risks, and any economic downturn in Florida or adverse changes in laws and regulations in Florida would have a negative impact on its revenues and business. Further, the State of Florida is subject to the risks of natural disasters such as tropical storms and hurricanes. The occurrence of an economic downturn in Florida, adverse changes in laws or regulations in Florida or natural disasters could impact the credit quality of BankAtlantic’s assets, growth, the level of deposits BankAtlantic’s customers maintain, the success of BankAtlantic’s customers’ business activities, and the ability of BankAtlantic to expand its business.

 

Regulatory Compliance.

 

The banking industry is an industry subject to multiple layers of regulation. A risk of doing business in the banking industry is that a failure to comply with any of these regulations can result in substantial penalties, significant restrictions on business activities and growth plans and/or limitations on dividend payments, depending upon the type of violation and various other factors. As a holding company, BankAtlantic Bancorp is also subject to significant regulation.

 

BankAtlantic has entered into a deferred prosecution agreement with the Department of Justice and a Cease and Desist Order with the OTS regarding its compliance with the USA PATRIOT Act, anti-money laundering laws and the Bank Secrecy Act.

 

In April 2006, BankAtlantic entered into a deferred prosecution agreement with the U.S. Department of Justice relating to past deficiencies in BankAtlantic’s compliance with the Bank Secrecy Act and anti-money laundering laws. Under the Department of Justice agreement, BankAtlantic agreed to the filing of one-count information charging it with failing to establish an adequate anti-money laundering compliance program in accordance with the Bank Secrecy Act. BankAtlantic simultaneously entered into a cease and desist order with the OTS and a consent agreement with the Financial Crimes Enforcement Network (FinCEN) relating to deficiencies in its compliance with the Bank Secrecy Act. The Department of Justice has agreed to take no further action against BankAtlantic in connection with this matter, the court will dismiss the information, and the deferred prosecution agreement will expire if BankAtlantic complies with the obligations under the deferred prosecution agreement for a period of twelve months. While BankAtlantic believes that it has appropriate policies and procedures in place to maintain full compliance with the terms of the Department of Justice agreement and the OTS order, compliance with the Bank Secrecy Act is inherently difficult and there is no assurance that BankAtlantic will remain in full compliance with the Bank Secrecy Act or the terms of the Department of Justice agreement or the OTS order. If the federal agencies deem BankAtlantic not in compliance with its obligations under the deferred prosecution agreement or the cease and desist order BankAtlantic may not be able to obtain regulatory approvals necessary to proceed with certain aspects of its business plan, including its store expansion and other acquisition plans, and its ability to pay dividends, could be adversely affected by a cease and desist order or any other actions taken by regulators or other federal agencies.

 

BankAtlantic Bancorp’s portfolio of equity securities subjects it to equity pricing risks.

 

BankAtlantic Bancorp maintains a portfolio of publicly traded and privately held equity securities that subject it to equity pricing risks arising in connection with changes in the relative values due to changing market and economic conditions. Volatility or a decline in the financial markets can negatively impact BankAtlantic Bancorp’s net income as a result of devaluation of these investments. At March 31, 2007, BankAtlantic Bancorp had equity securities with a book value of approximately $91 million. Additionally, in connection with the merger of Ryan Beck with Stifel in February 2007, BankAtlantic Bancorp received approximately 2,377,000 shares of Stifel common stock with a market value at March 31, 2007 of $103.7 million and anticipates receiving warrants to acquire approximately 481,700 shares of Stifel common stock upon Stifel shareholder approval. Stifel had approximately 12,400,000 shares of common stock outstanding at the acquisition date, excluding the shares of common stock issued to BankAtlantic Bancorp at the closing of the Ryan Beck acquisition. In addition to

limitations imposed by federal securities laws, BankAtlantic Bancorp is subject to contractual restrictions which limit the number of shares of Stifel common stock that it is permitted to sell during the two-year period following the merger. Even after these restrictions lapse, the trading market for Stifel common stock may not be liquid enough to permit BankAtlantic Bancorp to sell Stifel common stock that it owns without significantly reducing the market price of these shares, if BankAtlantic Bancorp is able to sell them at all.

 

Risks Associated with the Homebuilding and Real Estate Industry and Our Investment in Levitt

 

Levitt engages in real estate activities which are speculative and involve a high degree of risk.

 

The real estate industry is highly cyclical by nature, the current market is experiencing a significant decline and future market conditions are uncertain. Factors which adversely affect the real estate and homebuilding industries, many of which are beyond Levitt’s control, include:

 

 

Levitt has experienced a decline in its homebuilding operations over the past year which has adversely affected its sales volume and pricing.

 

In 2006, the homebuilding industry in Levitt’s markets experienced a significant decline in demand for new homes. The trends in the homebuilding industry continue to be unfavorable. Demand has slowed as evidenced by fewer new orders and lower conversion rates in the markets in which Levitt operates. These conditions have been particularly difficult in Florida, which is the market in which Levitt has the strongest presence. Spec inventories have increased as a result of higher cancellation rates on pending contracts as new homeowners sometimes find it more advantageous to forfeit a deposit than to close on the purchase of the home. The combination of the lower demand and higher inventories affects both the number of homes Levitt can sell and the prices at which Levitt can sell them. Levitt cannot predict how long demand and other factors in the homebuilding market will remain unfavorable, how active the market will be during the coming periods and if sales volume and pricing will return to past levels or levels that will enable Levitt to operate more profitably.

 

The homebuilding industry is highly competitive.

 

The homebuilding industry is highly competitive. Levitt competes in each of its markets with numerous national, regional and local homebuilders. This competition with other homebuilders could reduce the number of homes Levitt delivers or cause Levitt to accept reduced margins in order to maintain sales volume.

 

Levitt also competes with the resale of existing homes, including foreclosed home sales by lenders, sales by housing speculators and available rental housing. As demand for homes has slowed, the number of completed unsold homes has increased as well as the supply of existing homes. Competition with existing inventory, including homes purchased for speculation, has resulted in increased pressure on the prices at which Levitt is able to sell homes, as well as upon the number of homes Levitt can sell.

 

Continued decline in land values could result in further impairment write-offs.

 

Some of the land Levitt currently owns was purchased at prices that reflected the recent historic high demand cycle in the homebuilding industry. The recent slowdown in the homebuilding industry in Levitt’s markets resulted in $36.8 million of homebuilding inventory impairments for the year ended December 31, 2006 and $282,000 of homebuilding inventory impairments for the quarter ended March 31, 2007. If market conditions continue to deteriorate, the fair value of some of these assets or additional assets may decrease and be subject to future impairment write-offs and adversely affect our financial condition and operating results. Further, impairment write-offs could also result in the acceleration of debt which is secured by impaired assets. In order to remain competitive, Levitt is aggressively offering sales incentives which will negatively impact its margins and may impact its backlog.

 

Because real estate investments are illiquid, a decline in the real estate market or in the economy in general could adversely impact Levitt’s business and cash flow.

 

Real estate investments are generally illiquid. Companies that invest in real estate have a limited ability to vary their portfolio of real estate investments in response to changes in economic and other conditions. In addition, the market value of any or all of Levitt’s properties or investments may decrease in the future. Moreover, Levitt may not be able to timely dispose of an investment when it finds dispositions advantageous or necessary, or complete the disposition of properties under contract to be sold, and any such dispositions may not provide proceeds in excess of the amount of Levitt’s investment in the property or even in excess of the amount of any indebtedness secured by the property. As part of Levitt’s strategy for future growth, Levitt significantly increased its land inventory during 2006, with its inventory of real estate increasing from $611.3 million at December 31, 2005 to $844.6 million at March 31, 2007. This substantial increase in Levitt’s land holdings and concentration in Florida subjects Levitt to a greater risk from declines in real estate values in its markets. Further, these newly acquired properties were purchased at a time when competition for land was very high, and accordingly these properties may be more susceptible to impairment write downs in the current real estate environment. Declines in real estate values or in the economy generally could have a material adverse impact on Levitt’s financial condition and results of operations.

 

Shortages of supplies and labor could increase costs and delay deliveries, which may adversely affect Levitt’s operating results.

 

Levitt’s ability to develop its projects may be affected by circumstances beyond its control, including:

 

 

Any of these circumstances could give rise to delays in the start or completion of, or increase the cost of, developing one or more of Levitt’s projects or individual homes. Levitt competes with other real estate developers, both regionally and nationally, for labor as well as raw materials, and the competition for materials has recently become global. Increased costs or shortages of lumber, drywall, steel, concrete, roofing materials, pipe and asphalt could cause increases in construction costs and construction delays.

 

Historically, Levitt has sought to manage its costs, in part, by entering into short-term, fixed-price materials contracts with selected subcontractors and material suppliers. Levitt may be unable to achieve cost containment in the future by using fixed-price contracts. Without corresponding increases in the sales prices of Levitt’s real estate inventories (both land and finished homes), increasing materials costs associated with land development and home building could negatively affect Levitt’s margins. Levitt may not be able to recover these increased costs by raising its home prices because, typically, the price for each home is set in a home sale contract with the customer months prior to delivery. If Levitt is unable to increase its prices for new homes to offset these increased costs, Levitt’s operating results could be adversely affected.

 

Natural disasters could have an adverse effect on Levitt’s real estate operations.

 

Levitt currently develops and sells a significant portion of its properties in Florida. The Florida markets in which Levitt operates are subject to the risks of natural disasters such as hurricanes and tropical storms. These natural disasters could have a material adverse effect on Levitt’s business by causing the incurrence of uninsured losses, increased homebuyer insurance rates, delays in construction, and shortages and increased costs of labor and building materials. In 2005, three named storms made landfall in the State of Florida causing little damage to Levitt’s communities. In addition, during the 2004 hurricane season, five named storms made landfall in the State of Florida causing property damage in several of Levitt’s communities; however, Levitt’s losses were primarily related to landscaping and claims based on water intrusion associated with the hurricanes, and Levitt has attempted to address those issues. In May 2005, a purported class action was brought on behalf of owners of homes in a particular Central Florida Levitt and Sons’ subdivision alleging construction defects and damage suffered during certain of the hurricanes in 2004.

 

In addition to property damage, hurricanes may cause disruptions to Levitt’s business operations. New homebuyers cannot obtain insurance until after named storms have passed, creating delays in new home deliveries. Approaching storms require that sales, development and construction operations be suspended in favor of storm preparation activities such as securing construction materials and equipment. After a storm has passed, construction-related resources such as sub-contracted labor and building materials are likely to be redeployed to hurricane recovery efforts around the state. Governmental permitting and inspection activities may similarly be focused primarily on returning displaced residents to homes damaged by the storms, rather than on new construction activity. Depending on the severity of the damage caused by the storms, disruptions such as these could last for several months.

 

Levitt’s ability to sell lots and homes, and, accordingly, Levitt’s operating results, will be affected by the availability of financing to potential purchasers.

 

Most purchasers of real estate finance their acquisitions through third-party mortgage financing. Residential real estate demand is generally adversely affected by:

 

 

Increases in interest rates or decreases in the availability of mortgage financing could depress the market for new homes because of the increased monthly mortgage costs or the unavailability of financing to potential homebuyers. Even if potential customers do not need financing, increases in interest rates and decreased mortgage availability could make it harder for them to sell their homes. Recently, increases in rates on certain adjustable rate mortgage products and a trend of increasing defaults by borrowers generally, including under subprime, interest only and negative amortization mortgage loans, could lead to a reduction in the availability of mortgage financing. If demand for housing declines, land may remain in Levitt’s inventory longer and Levitt’s corresponding borrowing costs would increase. This would adversely affect Levitt’s operating results and financial condition.

 

Levitt’s ability to successfully develop communities could affect its financial condition.

 

It may take several years for a community development to achieve positive cash flow. Before a community development generates any revenues, material expenditures are required to acquire land, to obtain development approvals and to construct significant portions of project infrastructure, amenities, model homes and sales facilities. If Levitt is unable to develop and market its communities successfully and to generate positive cash flows from these operations in a timely manner, it will have a material adverse effect on Levitt’s ability to meet its working capital requirements.

 

A portion of Levitt’s revenues from land sales in its master planned communities are recognized for accounting purposes under the percentage of completion method, therefore, if Levitt’s actual results differ from its assumptions, Levitt’s profitability may be reduced.

 

Under the percentage of completion method for recognizing revenue, Levitt records revenue as work on the project progresses. This method relies on estimates of total expected project costs. Revenue and cost estimates are reviewed and revised periodically as the work progresses. Adjustments are reflected in contract revenue in the period when such estimates are revised. Variation of actual results and Levitt’s estimates in these large master planned communities could be material.

 

Product liability litigation and claims that arise in the ordinary course of business may be costly which could adversely affect Levitt’s business.

 

Levitt’s homebuilding and commercial development business is subject to construction defect and product liability claims arising in the ordinary course of business. These claims are common in the homebuilding and commercial real estate industries and can be costly. Levitt has, and many of Levitt’s subcontractors have, general liability, property, errors and omissions, workers compensation and other business insurance. However, these insurance policies only protect Levitt against a portion of its risk of loss from claims. In addition, because of the uncertainties inherent in these matters, Levitt cannot provide reasonable assurance that its insurance coverage or its subcontractor arrangements will be adequate to address all warranty, construction defect and liability claims in the future. In addition, the costs of insuring against construction defect and product liability claims, if applicable, are high and the amount of coverage offered by insurance companies is also currently limited. There can be no assurance that this coverage will not be further restricted and become more costly. If Levitt is not able to obtain adequate insurance against these claims, Levitt may experience losses that could negatively impact its operating results. Levitt is currently a defendant in a purported class action lawsuit alleging construction defects and seeking damages. While Levitt is vigorously defending this action, it will be required to incur legal fees and there is no assurance that Levitt will be successful in litigation.

 

Further, as a community developer, Levitt may be expected by community residents from time to time to resolve any real or perceived issues or disputes that may arise in connection with the operation or development of its communities. Any efforts made by Levitt in resolving these issues or disputes may not satisfy the affected residents and any subsequent action by these residents could negatively impact sales and results of operations. In addition, Levitt could be required to make material expenditures related to the settlement of such issues or disputes or to modify its community development plans.

 

Levitt is subject to governmental regulations that may limit its operations, increase its expenses or subject it to liability.

 

Levitt is subject to laws, ordinances and regulations of various federal, state and local governmental entities and agencies concerning, among other things:

 

 

In developing a project and building homes or commercial properties, Levitt may be required to obtain the approval of numerous governmental authorities regulating matters such as:

 

 

These laws or regulations could, among other things:

 

 

Levitt may also at times not be in compliance with all regulatory requirements. If Levitt is not in compliance with regulatory requirements, it may be subject to penalties or be forced to incur significant expenses to cure any noncompliance. In addition, some of Levitt’s land and some of the land that Levitt may acquire have not yet received planning approvals or entitlements necessary for planned or future development. Failure to obtain entitlements necessary for further development of this land on a timely basis or to the extent desired may adversely affect Levitt’s future results and prospects.

 

Several governmental authorities have also imposed impact fees as a means of defraying the cost of providing governmental services to developing areas, and many of these fees have increased significantly during recent years.

 

Building moratoriums and changes in governmental regulations may subject Levitt to delays or increased costs of construction or prohibit development of Levitt’s properties.

 

Levitt may be subject to delays or may be precluded from developing in certain communities because of building moratoriums or changes in statutes or rules that could be imposed in the future. The State of Florida and various counties have in the past and may in the future continue to declare moratoriums on the issuance of building permits and impose restrictions in areas where the infrastructure, such as roads, schools, parks, water and sewage treatment facilities and other public facilities, does not reach minimum standards. Additionally, certain counties in Florida, including counties where Levitt is developing projects, have enacted more stringent building codes which have resulted in increased costs of construction. As a consequence, Levitt may incur significant expenses in connection with complying with new regulatory requirements that Levitt may not be able to pass on to buyers.

 

Levitt is subject to environmental laws and the cost of compliance could adversely affect its business.

 

As a current or previous owner or operator of real property, Levitt may be liable under federal, state, and local environmental laws, ordinances and regulations for the costs of removal or remediation of hazardous or toxic substances on, under or in the property. These laws often impose liability whether or not Levitt knew of, or was responsible for, the presence of such hazardous or toxic substances. The cost of investigating, remediating or removing such hazardous or toxic substances may be substantial. The presence of any such substance, or the failure promptly to remediate any such substance, may adversely affect Levitt’s ability to sell or lease the property, to use the property for Levitt’s intended purpose, or to borrow using the property as collateral.

 

Increased insurance risk could negatively affect Levitt’s business.

 

Insurance and surety companies may take actions that could negatively affect Levitt’s business, including increasing insurance premiums, requiring higher self-insured retentions and deductibles, requiring additional collateral or covenants on surety bonds, reducing limits, restricting coverages, imposing exclusions, and refusing to underwrite certain risks and classes of business. Any of these actions may adversely affect Levitt’s ability to obtain appropriate insurance coverage at reasonable costs which could have a material adverse effect on Levitt’s business.

 

Levitt utilizes community development districts to fund development costs.

 

Levitt establishes community development districts to access tax-exempt bond financing to fund infrastructure and other projects at its master-planned communities. Levitt is responsible for any assessed amounts until the underlying property is sold. Levitt will continue to be responsible for the annual assessments if the property is never sold.

 

Levitt’s indebtedness and leverage could adversely affect its financial condition, restrict its ability to operate and prevent it from fulfilling its obligations.

 

Levitt has a significant amount of debt. At March 31, 2007, Levitt’s consolidated debt was approximately $671.8 million. Levitt’s debt could:

 

 

Levitt’s ability to meet its debt service and other obligations, to refinance its indebtedness or to fund planned capital expenditures will depend upon Levitt’s future performance. Levitt is engaged in businesses that are substantially affected by changes in economic cycles. Levitt’s revenues and earnings vary with the level of general economic activity in the markets it serves. The factors that affect Levitt’s ability to generate cash can also affect its ability to raise additional funds for these purposes through the sale of equity securities, the refinancing of debt, or the sale of assets. Changes in prevailing interest rates may affect Levitt’s ability to meet its debt service obligations, because borrowings under a significant portion of its debt instruments bear interest at floating rates.

 

Levitt’s anticipated minimum debt payment obligations in 2007 total approximately $46.0 million, which does not include repayments of specified amounts upon a sale of portions of the property securing the debt or any amounts that could be accelerated in the event that property serving as collateral becomes impaired. Levitt’s business may not generate sufficient cash flow from operations, and future borrowings may not be available under Levitt’s existing credit facilities or any other financing sources in an amount sufficient to enable Levitt to service its indebtedness, or to fund its other liquidity needs. Levitt may need to refinance all or a portion of its debt on or before maturity, which it may not be able to do on favorable terms or at all.

 

Levitt’s outstanding debt instruments and bank credit facilities impose restrictions on its operations and activities. The most significant restrictions relate to debt incurrence, lien incurrence, sales of assets and cash distributions by Levitt and require Levitt to comply with certain financial covenants. If Levitt fails to comply with any of these restrictions or covenants, the holders of the applicable debt could cause Levitt’s debt to become due and payable prior to maturity. In addition, some of Levitt’s debt instruments contain cross-default provisions, which could cause a default in a number of debt instruments if Levitt defaults on only one debt instrument.

 

Levitt’s current land development plans may require additional capital, which may not be available.

 

Levitt anticipates that it will need to obtain additional financing as it funds its current land development projects. These funds may be obtained through public or private debt or equity financings, additional bank borrowings or from strategic alliances. Levitt may not be successful in obtaining additional funds in a timely manner, on favorable terms or at all. Moreover, certain of Levitt’s bank financing agreements contain provisions that limit the type and amount of debt Levitt may incur in the future without its lenders’ consent. In addition, the availability of borrowed funds, especially for land acquisition and construction financing, may be greatly reduced, and lenders may require increased amounts of equity to be invested in a project by borrowers in connection with both new loans and the extension of existing loans. If Levitt does not have access to additional capital, it may be required to delay, scale back or abandon some or all of its land development activities or reduce capital expenditures and the size of its operations.

 

Levitt’s results may vary.

 

Levitt has historically experienced, and expects to continue to experience, variability in operating results on a quarterly basis and from year to year. Factors expected to contribute to this variability include:

 

 

The volume of sales contracts and closings typically varies from quarter to quarter depending on the stages of development of Levitt’s projects. In the early stages of a project’s development (two to three years depending on the project), Levitt incurs significant start-up costs associated with, among other things, project design, land acquisition and development, construction and marketing expenses. Since revenues from sales of properties are generally recognized only upon the transfer of title at the closing of a sale, no revenue is recognized during the early stages of a project unless land parcels or residential homesites are sold to other developers. Levitt’s costs and expenses were approximately $607.8 million, $500.6 million and $484.9 million during the years ended December 31, 2006, 2005 and 2004, respectively. For the quarter ended March 31, 2007, Levitt’s costs and expenses were approximately $146.3 million. Periodic sales of properties may be insufficient to fund operating expenses and the current trends Levitt is experiencing with respect to new sales and cancellations in its homebuilding operations makes it likely that Levitt’s level of sales over the next 12 months will be significantly below past levels. Further, if sales and other revenues are not adequate to cover costs and expenses, Levitt will be required to seek a source of additional operating funds. Accordingly, Levitt’s financial results will vary from community to community and from time to time.

 

Levitt may not successfully integrate acquired businesses.

 

As part of Levitt’s business strategy, Levitt has in the past and expects to continue to evaluate acquisition prospects that would complement Levitt’s existing business, or that might otherwise offer growth opportunities. Acquisitions entail numerous risks, including:

 

 

Levitt may not be able to acquire or profitably manage additional businesses, or to integrate successfully any acquired businesses, properties or personnel into its business, without substantial costs, delays or other operational or financial difficulties. Levitt’s failure to do so could have a material adverse effect on its business, financial condition and results of operations. If Levitt is unable to successfully realize the anticipated benefits of an acquisition, Levitt may be required to incur an impairment charge with respect to any goodwill recognized in the acquisition. For the year ended December 31, 2006, $1.3 million of goodwill recorded in connection with Levitt’s acquisition of Bowden Homes in 2004 was fully written off. In addition, Levitt may incur debt or contingent liabilities in connection with future acquisitions, which could materially adversely affect its operating results.

 

Levitt owns a significant, illiquid investment in Bluegreen, from which Levitt does not expect to receive any cash flow.

 

Levitt owns approximately 31% of the outstanding common stock of Bluegreen, a publicly-traded corporation whose common stock is listed on the New York Stock Exchange under the symbol “BXG”. Although traded on the New York Stock Exchange, the shares of Bluegreen’s common stock owned by Levitt may be deemed restricted stock, which would limit Levitt’s ability to liquidate its investment in Bluegreen if it chose to

do so. While Levitt has made a significant investment in Bluegreen, it does not expect to receive any dividends from Bluegreen for the foreseeable future.

 

Levitt’s results of operations would be adversely affected by decreased earnings or losses at Bluegreen.

 

For the year ended December 31, 2006, Levitt’s earnings from its investment in Bluegreen were $9.7 million, decreasing from $12.7 million and $13.1 million for the years ended December 31, 2005, and 2004, respectively. For the quarter ended March 31, 2007, Levitt’s earnings from its investment in Bluegreen were approximately $1.7 million. At March 31, 2007, the book value of Levitt’s investment in Bluegreen was $108.6 million. Accordingly, a significant portion of Levitt’s earnings and book value are dependent upon Bluegreen’s ability to continue to generate earnings and maintain its market value. Further, declines in the market value of the shares of Bluegreen’s common stock or other events that could impair the value of Levitt’s holdings would have an adverse impact on the value of Levitt’s investment in Bluegreen. Levitt annually reviews its investment in Bluegreen for impairment. You are referred to the public reports filed by Bluegreen with the SEC for information regarding Bluegreen.

 

Risks Associated with the Restaurant Industry and Our Investment in Benihana

 

We have an investment in preferred shares of Benihana which are convertible to common stock. As such, the value of our investment will be influenced by the market performance of Benihana’s stock. Some of the risk factors common to the restaurant industry which might affect the performance of Benihana are as follows:

 

 

Risks Associated with Our Class A Common Stock and this Offering

 

Even if the merger with Levitt is not consummated, we may use the net proceeds of this offering to increase our investment in Levitt.

 

If the merger with Levitt is not consummated, Levitt would need to take alternative measures in order to satisfy its liquidity needs. Levitt has filed a registration statement on Form S-3 with the SEC with respect to a proposed distribution to its shareholders of rights to purchase up to $200 million of shares of its Class A Common Stock. In the event that the merger is not consummated, Levitt has indicated that it will pursue the rights offering, in which case, we currently intend to use the net proceeds of this offering to participate fully in such rights offering, which will have the effect of increasing our shareholders’ exposure to the homebuilding industry. See “Risks Associated with the Merger with Levitt — If the merger with Levitt is consummated, our shareholders will increase their exposure to the homebuilding industry, which continues to experience significant weakness.”

 

We have never paid cash dividends on our common stock and there is no assurance that we will pay cash dividends in the future.

 

We have never paid regular cash dividends on our common stock, and we do not anticipate that we will pay cash dividends on our common stock in the foreseeable future. Further, our ability to pay cash dividends is

dependent on the ability of our subsidiaries to pay sufficient dividends to us. Our subsidiaries are subject to limitations that restrict their ability to pay dividends. See “Risks Associated With Us — We depend on dividends from our subsidiaries for a significant portion of our cash flow. Regulatory restrictions and the terms of indebtedness limit the ability of some of our subsidiaries to pay dividends.”

 

Alan B. Levan and John E. Abdo’s control position may adversely affect the market price of our common stock.

 

Alan B. Levan, our Chairman of the board of directors and Chief Executive Officer, and John E. Abdo, our Vice Chairman of the board of directors, may be deemed to have beneficially owned at March 31, 2007 approximately 44.4% of our Class A Common Stock and 86.4% of our Class B Common Stock. These shares represented approximately 52.7% of our total common stock and 77.1% of our total voting power at March 31, 2007. Additionally, Messrs. Levan and Abdo have entered into a shareholders agreement and irrevocable proxy with respect to the shares of Class B Common Stock controlled by them. Under the agreement, they have agreed to vote their shares of Class B Common Stock in favor of the election of each other to our board of directors for so long as they are willing and able to serve as directors of the Company. Additionally, Mr. Abdo has granted an irrevocable proxy to an entity controlled by Mr. Levan and will obtain the consent of Mr. Levan prior to the sale or conversion of certain of his shares of Class B Common Stock. Since our Class A Common Stock and Class B Common Stock vote as a single class on most matters, Alan B. Levan and John E. Abdo effectively have the voting power to control the outcome of any shareholder vote and elect the members of our board of directors. Alan B. Levan and John E. Abdo’s control position may have an adverse effect on the market price of our common stock.

 

Certain provisions of our charter documents may have anti-takeover effects.

 

Certain provisions of our Articles of Incorporation and Bylaws could have the effect of making it more difficult for a third party to acquire control of the Company. These include provisions regarding both the voting rights of our Class B Common Stock and the advance notice procedures to be complied with by our shareholders in order to make shareholder proposals or nominate directors, provisions giving our board of directors the authority to issue additional shares of preferred stock and to fix the relative rights and preferences of the preferred stock without additional shareholder approval and provisions dividing our board of directors into classes with staggered terms. In addition, our board of directors has in the past adopted, and has the authority to and may in the future adopt, a shareholder rights plan, or “poison pill,” which has the intended effect of causing substantial dilution to a person or group who attempts to acquire a significant interest in us without the approval of our board of directors. These anti-takeover provisions may have an adverse effect on the market price of our common stock.

 

We may issue additional securities in the future, including in connection with the merger with Levitt.

 

There is generally no restriction on our ability to issue debt or equity securities which are pari passu or have a preference over our Class A Common Stock. Likewise, there is also no restriction on the ability of BankAtlantic Bancorp or Levitt to issue additional capital stock or incur additional indebtedness. Authorized but unissued shares of our capital stock are available for issuance from time to time in the discretion of our board of directors, including issuances in connection with acquisitions. In connection with, and as part of, the merger with Levitt, we agreed to amend our Articles of Incorporation to increase the number of authorized shares of our Class A Common Stock from 70,000,000 to 130,000,000. If the merger is consummated, we will issue approximately 37,533,953 shares of our Class A Common Stock to holders of Levitt Class A Common Stock and approximately 4,300,000 additional shares of our Class A Common Stock will be issuable to holders of options to purchase shares of Levitt Class A Common Stock. These and other issuances may be dilutive to our earnings per share or to our shareholders’ ownership position.

 

We do not anticipate that we will seek shareholder approval in connection with any future issuances of our stock unless we are required by law or the rules of any stock exchange on which our securities are listed. There are no limitations on our ability to incur additional debt or issue additional notes or debentures.

 

The terms of our Articles of Incorporation, which establish fixed relative voting percentages between our Class A Common Stock and Class B Common Stock, may not be well accepted by the market.

 

Our Class A Common Stock and Class B Common Stock generally vote together as a single class. The Class A Common Stock possesses in the aggregate 22% of the total voting power of all our common stock and the Class B Common Stock possesses in the aggregate the remaining 78% of the total voting power. These relative voting percentages will remain fixed unless the number of shares of Class B Common Stock outstanding decreases to 1,800,000 shares, at which time the Class A Common Stock aggregate voting power will change to 40% and the Class B Common Stock will have the remaining 60%. If the number of shares of Class B Common Stock outstanding decreases to 1,400,000 shares, the Class A Common Stock aggregate voting power will change to a fixed 53% and the Class B Common Stock will have the remaining 47%. These relative voting percentages will remain fixed unless the number of shares of Class B Common Stock outstanding decreases to 500,000 shares, at which time the fixed voting percentages will be eliminated. These changes in the relative voting power represented by each class of our common stock are based only on the number of shares of Class B Common Stock outstanding, thus issuances of Class A Common Stock, including the issuance of shares in connection with the proposed merger with Levitt, will have no effect on these provisions. As additional shares of Class A Common Stock are issued, it is likely that the disparity between the equity interest represented by the Class B Common Stock and its voting power will widen. While the amendment creating this capital structure was approved by our shareholders, the fixed voting percentage provisions are somewhat unique. If the market does not sufficiently accept this structure, the trading price and market for our Class A Common Stock would be adversely affected.

 

Except for historical information contained herein, the matters discussed in this document contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties. When used in this document and in any documents incorporated by reference herein, the words “anticipate,” “believe,” “estimate,” “may,” “intend,” “expect” and similar expressions identify certain of such forward-looking statements. Actual results, performance, or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements contained herein. These forward-looking statements are based largely on the expectations of BFC and are subject to a number of risks and uncertainties that are subject to change based on factors which are, in many instances, beyond the Company’s control. When considering those forward-looking statements, the reader should keep in mind the risks, uncertainties and other cautionary statements made in this document, including those identified in the section entitled “Risk Factors.” These risks are subject to change based on factors which are, in many instances, beyond the Company’s control. The reader should not place undue reliance on any forward-looking statement, which speaks only as of the date made. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, or new information, data or methods, future events or other changes.

 

This document also contains information regarding the past performance of our investments and the reader should note that prior or current performance of investments and acquisitions is not a guarantee or indication of future performance. Some factors which may affect the accuracy of the forward-looking statements apply generally to the financial services, real estate development, homebuilding, resort development and vacation ownership, and restaurant industries, while other factors apply directly to us. Risks and uncertainties associated with BFC include, but are not limited to:

 

 

With respect to BankAtlantic Bancorp and BankAtlantic, the risks and uncertainties that may affect BFC include, but are not limited to:

 

 

 

With respect to Levitt, the risks and uncertainties that may affect us include, but are not limited to:

 

 

With respect to the proposed merger with Levitt, the risks and uncertainties that may affect us include, but are not limited to, the risks:

 

 

In addition to the risks and factors identified above, reference is also made to other risks and factors detailed in reports filed by the Company, BankAtlantic Bancorp and Levitt with the SEC. The Company cautions that the foregoing factors are not all inclusive.

 

We estimate that the net proceeds from the sale of the 10,000,000 shares of our Class A Common Stock we are offering will be approximately $39,970,000 after deducting estimated offering expenses and underwriting discounts. For purposes of this calculation we have assumed a public offering price of $4.30 per share, which was the closing price of our Class A Common Stock on the NYSE Arca on May 16, 2007.

 

We currently intend to use the net proceeds of this offering to support Levitt and for our general corporate purposes, including working capital and potential new investments. If the proposed merger with Levitt is consummated, we currently intend to use the net proceeds of this offering primarily to provide Levitt, which will be our wholly-owned subsidiary following the merger, with working capital. Levitt has indicated that, if the merger is not consummated for any reason, it currently intends to pursue a rights offering to holders of its common stock, giving each such holder, including BFC, the right to purchase a proportional number of additional shares of Levitt’s Class A Common Stock. In the event that the merger is not consummated, we currently intend to use the net proceeds of this offering primarily to participate fully in any rights offering made by Levitt or to otherwise make additional debt or equity investments in Levitt.

 

From time to time in the ordinary course of our business, we evaluate potential business investment or acquisition opportunities, some of which may be material. At the present time, we have not reached any agreements relating to any material business investment or acquisition.

 

The precise amounts and timing of the application of such proceeds depends upon many factors, including, but not limited to, the amount of any such proceeds and whether or not the proposed merger with Levitt is consummated, and if not so consummated, the timing and consummation of any rights offering pursued by Levitt. Until the proceeds are used, we intend to invest the net proceeds in short and long-term investments, including, but not limited to treasury bills, commercial paper, certificates of deposit, securities issued by U.S. government agencies, money market funds, repurchase agreements and other similar investments.

 

Our Class A Common Stock is listed for trading on the NYSE Arca under the trading symbol “BFF.” Prior to June 22, 2006, our Class A Common Stock was quoted on the NASDAQ National Market under the trading symbol “BFCF.” Our Class B Common Stock is quoted on the OTC Bulletin Board under the symbol “BFCFB.OB.” The following table sets forth, for the indicated periods, the high and low per share sales prices for our Class A Common Stock as reported on the NASDAQ National Market, with respect to the time period prior to June 22, 2006, and as reported on the NYSE Arca, with respect to the time period on and after such date, and for our Class B Common Stock as reported by the National Association of Securities Dealers Automated Quotation System. The stock prices do not include retail mark-ups, mark-downs or commissions.

 

 

 

 

 

 

On May 16, 2007, the closing sale price of our Class A Common Stock as reported on the NYSE Arca was $4.30 per share and the closing sale price of our Class B Common Stock as reported by the National Association of Securities Dealers Automated Quotation System was $4.60 per share.

 

As of May 16, 2007, there were approximately 3,340 holders of record of our Class A Common Stock and approximately 760 holders of record of our Class B Common Stock.

 

We have not declared or distributed cash dividends to the holders of either our Class A Common Stock or our Class B Common Stock since our inception in 1980, and it is not likely that any cash dividends on our common stock will be declared in the foreseeable future. Our board of directors intends, for the foreseeable future, to follow a policy of retaining all of our earnings to finance the operations and expansion of our business.

 

The following table sets forth the parent company only capitalization of BFC on (i) an actual basis at March 31, 2007, (ii) an as adjusted basis to reflect the sale of the 10,000,000 shares of Class A Common Stock offered by us in this offering at a price of $4.30 per share, the closing price of our Class A Common Stock on the NYSE Arca on May 16, 2007 (after deducting underwriting discounts and estimated offering expenses), and the application of the estimated net proceeds from the offering as described in the section of this prospectus entitled “Use of Proceeds” on page 32 and (iii) a pro forma, as adjusted basis to reflect the sale of the 10,000,000 shares of Class A Common Stock offered by us in this offering, the application of the estimated net proceeds of this offering and the consummation of the merger with Levitt. You should read the information in the following table in conjunction with our consolidated financial statements and related notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2006 and Amendment No. 1 to our Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2007, which are incorporated herein by reference.

 

 

 

 

 

 

 

 

The following table sets forth selected consolidated financial and other data for BFC as of, and for the years ended, December 31, 2002 through 2006 and as of, and for the three months ended, March 31, 2006 and 2007. Certain selected consolidated financial and other data presented below as of, and for the years ended, December 31, 2002 through 2006 are derived from our consolidated financial statements. The selected consolidated financial and other data as of, and for the three months ended, March 31, 2006 and 2007 are derived from our unaudited consolidated financial statements and reflect, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of such data. Results for the three months ended March 31, 2007 are not necessarily indicative of results that may be expected for the entire year or any future period. The following table is a summary and should be read in conjunction with “Management’s Discussion and Analysis of Results of Operations and Financial Condition” and the consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the year ended December 31, 2006 and Amendment No. 1 to our Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2007, which are incorporated herein by reference.