10-Q 1 bbx-20130331x10q.htm 10-Q b50a229d628540f

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March  31, 2013

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

 

Commission files number     001-13133

BBX CAPITAL CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Florida

(State or other jurisdiction of

incorporation or organization)

65-0507804

(I.R.S. Employer

Identification No.)

 

401 East Las Olas Boulevard

Fort Lauderdale, Florida

(Address of principal executive offices)

33301

(Zip Code)

 

(954) 940-4000

(Registrant's telephone number, including area code)

Not Applicable

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

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.   [X] YES   [   ] NO

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   [X] YES  [    ] NO

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

 

 

 

Large accelerated filer [    ]

Accelerated filer [    ]

Non-accelerated filer [    ]

Small reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   [   ] YES   [X] NO

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date.

 

 

Title of Each Class

Outstanding at May 8, 2013

Class A Common Stock, par value $0.01 per share

15,609,964

Class B Common Stock, par value $0.01 per share

195,045

 

 


 

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

 

Page

Part I.

FINANCIAL INFORMATION

 

 

 

 

Reference

 

 

 

 

 

Item 1.

Financial Statements

3-32

 

 

 

 

Consolidated Statements of Financial Condition - March 31, 2013

 

 and December 31, 2012 - Unaudited

 

 

 

 

 

Consolidated Statements of Operations - For the Three Months

 

 Ended March 31, 2013 and 2012 - Unaudited

 

 

 

 

 

Consolidated Statements of Comprehensive Loss - For the Three Months

 

 Ended March 31, 2013 and 2012 - Unaudited

 

 

 

 

 

Consolidated Statements of Stockholders' Equity (Deficit) - For the Three Months

 

 Ended March 31, 2013 and 2012 - Unaudited

 

 

 

 

 

Consolidated Statements of Cash Flows - For the Three Months Ended

 

 March 31, 2013 and 2012 - Unaudited

 

 

 

 

 

Notes to Consolidated Financial Statements - Unaudited

8-32

 

 

 

Item 2.

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

33-44

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

45 

 

 

 

Item 4.

Controls and Procedures

45 

 

 

 

Part II.

OTHER INFORMATION

 

 

 

 

Item 1A.

Risk Factors

46 

 

 

 

Item 6.

Exhibits

46 

 

 

 

 

Signatures

47 

 

 

 

 

 


 

 

 

 

 

 

 

BBX CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION - UNAUDITED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

(In thousands, except share data)

 

2013

 

2012

ASSETS

 

 

 

 

Cash and interest bearing deposits in banks ($5,635 and $6,615 in Variable Interest Entity ("VIE"))

$

70,080 

 

62,873 

Tax certificates, net of allowance of $2,096 and $3,559 ($2,241 and $3,389,  net of allowance of $2,096 and $3,559 in VIE)

 

2,241 

 

3,389 

Loans held for sale ($18,388 and $20,052 in VIE)

 

22,324 

 

24,748 

Loans receivable, net of allowance for loan losses of $5,249  and $5,311 ($206,404 and $242,506, net of allowance of $4,571 and $4,003 in VIE)

 

254,812 

 

292,562 

Accrued interest receivable ($1,226 and $1,636 in VIE)

 

1,239 

 

1,675 

Real estate owned ($24,690 and $21,997 in VIE)

 

76,780 

 

82,161 

Real estate held for sale

 

889 

 

889 

Office properties and equipment, net

 

1,068 

 

1,096 

Other assets ($188 and $13 in VIE)

 

1,751 

 

1,310 

Investments in real estate joint venture

 

1,300 

 

 -

        Total assets

$

432,484 

 

470,703 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Liabilities:

 

 

 

 

BB&T preferred interest in FAR, LLC ($164,070 and $196,877 in VIE)

$

164,070 

 

196,877 

Notes payable

 

10,360 

 

10,301 

Other liabilities ($13,725 and $13,603 in VIE)

 

23,702 

 

23,201 

        Total liabilities

 

198,132 

 

230,379 

Commitments and contingencies (Note 9)

 

 

 

 

Stockholders' Equity:

 

 

 

 

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

 

 

 

 

   none issued and outstanding 

 

 -

 

 -

 Class A common stock, $.01 par value, authorized 25,000,000

 

 

 

 

   shares; issued and outstanding 15,609,964 and 15,577,464 shares

 

155 

 

155 

 Class B common stock, $.01 par value, authorized 1,800,000

 

 

 

 

   shares; issued and outstanding 195,045 and 195,045 shares

 

 

 Additional paid-in capital

 

331,657 

 

331,097 

 Accumulated deficit

 

(97,462)

 

(90,930)

Total stockholders' equity

 

234,352 

 

240,324 

        Total liabilities and stockholders' equity

$

432,484 

 

470,703 

 

 

 

 

 

See Notes to Consolidated Financial Statements - Unaudited

 

 

 

3

 


 

 

 

 

BBX CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months

 

 

Ended March 31,

 

 

2013

 

2012

Revenues:

 

 

 

 

Interest income

$

3,045 

 

8,335 

Income from unconsolidated companies

 

 -

 

120 

Net gains on the sales of assets held for sale

 

2,062 

 

1,213 

Other

 

492 

 

84 

     Total revenues

 

5,599 

 

9,752 

Expenses:

 

 

 

 

BB&T's priority return in FAR distributions

 

1,013 

 

 -

Interest expense

 

169 

 

4,167 

Provision for (reversals of) loan losses

 

759 

 

(765)

Employee compensation and benefits

 

3,343 

 

5,259 

Occupancy and equipment

 

242 

 

2,168 

Professional fees

 

2,163 

 

6,197 

Asset impairments

 

2,165 

 

2,004 

Other

 

2,277 

 

3,893 

       Total expenses

 

12,131 

 

22,923 

Loss from continuing operations before income taxes

 

(6,532)

 

(13,171)

Provision for income taxes

 

 -

 

Loss from continuing operations

 

(6,532)

 

(13,172)

Discontinued operations

 

 

 

 

Loss from discontinued operations

 

 -

 

(1,036)

Provision for income taxes

 

 -

 

 -

Loss from discontinued operations

 

 -

 

(1,036)

Net loss

$

(6,532)

 

(14,208)

Basic loss per share

 

 

 

 

 Continuing operations

$

(0.41)

 

(0.84)

 Discontinued operations

 

 -

 

(0.07)

Basic loss per share

$

(0.41)

 

(0.91)

Diluted loss per share

 

 

 

 

 Continuing operations

$

(0.41)

 

(0.84)

 Discontinued operations

 

 -

 

(0.07)

Diluted loss per share

$

(0.41)

 

(0.91)

Basic weighted average number

 

 

 

 

 of common shares outstanding

 

15,785,870 

 

15,659,257 

Diluted weighted average number

 

 

 

 

 of common and common

 

 

 

 

 equivalent shares outstanding

 

15,785,870 

 

15,659,257 

 

 

 

 

 

See Notes to Consolidated Financial Statements - Unaudited

 

 

 

 

 

 

 

4

 


 

BBX CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - UNAUDITED

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months

 

 

Ended March 31,

(In thousands, except share and per share data)

 

2013

 

2012

Net loss

$

(6,532)

 

(14,208)

 

 

 

 

 

Other comprehensive loss, net of tax:

 

 

 

 

   Unrealized loss on securities available for sale, net of tax

 

 -

 

(524)

   Reclassification adjustments

 

 -

 

 -

Other comprehensive loss, net of tax

 

 -

 

(524)

Comprehensive loss

$

(6,532)

 

(14,732)

 

 

 

 

 

See Notes to Consolidated Financial Statements - Unaudited

 

 

5

 


 

 

 

 

 

 

 

 

 

 

 

 

BBX CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012 - UNAUDITED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

Additional

 

Other

Total

 

 

Common

Paid-in

(Accumulated

Comprehensive

Stockholders'

(In thousands)

 

Stock

Capital

Deficit)

Loss

(Deficit) Equity

BALANCE, DECEMBER 31, 2011

$

156 
329,995 
(326,692)
(20,385)
(16,926)

Net loss

 

 -

 -

(14,208)

 -

(14,208)

Other comprehensive loss

 

 -

 -

 -

(524)
(524)

Share based compensation expense

 

95 

 -

 -

96 

BALANCE, MARCH 31, 2012

$

157 
330,090 
(340,900)
(20,909)
(31,562)

 

 

 

 

 

 

 

BALANCE, DECEMBER 31, 2012

$

157 
331,097 
(90,930)

 -

240,324 

Net loss

 

 

 

(6,532)

 -

(6,532)

Share based compensation expense

 

 -

560 

 -

 -

560 

BALANCE, MARCH 31, 2013

$

157 
331,657 
(97,462)

 -

234,352 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See Notes to Consolidated Financial Statements - Unaudited

 

 

6

 


 

 

 

BBX CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months

 

 

Ended March 31,

(In thousands)

 

2013

 

2012

Net cash (used in) provided by operating activities

$

(4,485)

 

9,186 

Investing activities:

 

 

 

 

Proceeds from redemption of tax certificates

 

812 

 

10,345 

Purchase of tax certificates

 

(31)

 

(145)

Proceeds from maturities of securities available for sale

 

 -

 

5,365 

Proceeds from maturities of interest bearing deposits

 

 -

 

5,655 

Net repayments of loans

 

30,789 

 

120,498 

Proceeds from the sales of loans

 

 

 

 

 transferred to held for sale

 

 -

 

1,000 

Proceeds from sales of real estate owned

 

14,256 

 

14,081 

Purchases of office property and equipment

 

(27)

 

(8)

Proceeds from the sale of office properties

 

 

 

 

 and equipment

 

 -

 

1,154 

Investment in real estate joint venture

 

(1,300)

 

 -

Net cash provided by investing activities

 

44,499 

 

157,945 

Financing activities:

 

 

 

 

Net increase in deposits

 

 -

 

177,377 

Repayment of BB&T preferred interest in FAR, LLC

 

(32,807)

 

 -

Net cash (used in) provided by financing activities

 

(32,807)

 

177,377 

Increase in cash and cash equivalents

 

7,207 

 

344,508 

Cash and cash equivalents at the beginning of period

 

62,377 

 

764,636 

Change in cash and cash equivalents held for sale

 

 -

 

(49,676)

Cash and cash equivalents at end of period

$

69,584 

 

1,059,468 

 

 

 

 

 

Cash paid (received) for:

 

 

 

 

Interest on borrowings and deposits

$

1,098 

 

3,286 

Income tax refund

 

 -

 

(1,053)

Supplementary disclosure of non-cash investing and

 

 

 

 

 financing activities:

 

 

 

 

Loans and tax certificates transferred to REO

 

8,023 

 

12,467 

Loans receivable transferred to loans held-for-sale

 

 -

 

16,140 

 

 

 

 

 

See Notes to Consolidated Financial Statements - Unaudited

 

 

 

 

7

 


 

BBX Capital Corporation and Subsidiaries

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

 

1.  Presentation of Interim Financial Statements

 

Basis of Financial Statement Presentation  BBX Capital Corporation is referred to herein as the “Parent Company” or “BBX Capital” and, together with its subsidiaries, is referred to as “the Company”, “we”, “us,” or “our”.  BBX Capital was organized under the laws of the State of Florida in 1994. We are a Florida-based company, involved in the ownership, financing, acquisition and management of real estate and real estate related assets and businesses.

 

The Company has two classes of common stock, Class A Common Stock and Class B Common Stock. Holders of the Class A common stock are entitled to one vote per share, which in the aggregate represents 53% of the combined voting power of the Class A common stock and the Class B common stock. Class B common stock represents the remaining 47% of the combined vote. BFC Financial Corporation (“BFC”) currently owns 100% of the Company’s Class B common stock and 53% of the Company’s outstanding Class A common stock, which represents 53% of the Company’s aggregate outstanding common stock and 75% of the voting power of the Company’s common stock. 

 

On May 7, 2013, BFC and BBX Merger Sub, LLC, a newly formed wholly owned subsidiary of BFC (“Merger Sub”), entered into a definitive merger agreement (the “Merger Agreement”) with BBX Capital.  The Merger Agreement provides for BBX Capital to merge with and into Merger Sub (the “Merger”), with Merger Sub continuing as the surviving company of the Merger and a wholly owned subsidiary of BFC. Under the terms of the Merger Agreement, which has been approved by a special committee comprised of BBX Capital’s independent directors as well as the full boards of directors of both BFC and BBX Capital, BBX Capital’s shareholders (other than BFC and shareholders of BBX Capital who exercise and perfect their appraisal rights in accordance with Florida law) will be entitled to receive 5.39 shares of BFC’s Class A Common Stock in exchange for each share of BBX Capital’s Class A Common Stock that they hold at the effective time of the Merger (as such exchange ratio may be adjusted in accordance with the terms of the Merger Agreement, the “Exchange Ratio”).  Each option to acquire shares of BBX Capital’s Class A Common Stock that is outstanding at the effective time of the Merger, whether or not then exercisable, will be converted into an option to acquire shares of BFC’s Class A Common Stock and be subject to the same terms and conditions as in effect at the effective time of the Merger, except that the number of shares which may be acquired upon exercise of the option will be multiplied by the Exchange Ratio and the exercise price of the option will be divided by the Exchange Ratio. In addition, each share of BBX Capital’s Class A Common Stock subject to a restricted stock award outstanding at the effective time of the Merger will be converted into a restricted share of BFC’s Class A Common Stock and be subject to the same terms and conditions as in effect at the effective time of the Merger, except that the number of shares subject to the award will be multiplied by the Exchange Ratio. 

 

Consummation of the Merger is subject to certain closing conditions, including, without limitation, the approval of BFC’s and BBX Capital’s respective shareholders, BFC’s Class A Common Stock being approved for listing on a national securities exchange (or interdealer quotation system of a registered national securities association) at the effective time of the Merger, holders of not more than 10% of BBX Capital’s common stock exercising appraisal rights, and the absence of any “Material Adverse Effect” (as defined in the Merger Agreement) with respect to either BFC or BBX Capital.

 

BBX Capital currently expects to consummate the Merger promptly after all conditions to closing are satisfied.

 

On April 2, 2013, the Company invested $71.75 million in Woodbridge Holdings, LLC (“Woodbridge”) in exchange for a 46% equity interest in Woodbridge.  The investment was made in connection with Woodbridge’s acquisition of the publicly held shares of Bluegreen Corporation (“Bluegreen”).  BFC owns the remaining 54% of Woodbridge.  The Company’s investment in Woodbridge consisted of $60 million in cash and a promissory note in Woodbridge’s favor in the principal amount of $11.75 million (the “Note”). The Note has a term of five years, accrues interest at a rate of 5% per annum and provides for the Company to make payments of interest only on a quarterly basis during the term of the Note, with all outstanding amounts being due and payable at the end of the five-year term.

 

BBX Capital’s principal asset until July 31, 2012 was its investment in BankAtlantic and its subsidiaries (“BankAtlantic”).  BankAtlantic was a federal savings bank headquartered in Fort Lauderdale, Florida and provided traditional retail banking services and a wide range of commercial banking products and related financial services through a broad network of community branches located in Florida.  On July 31, 2012, BBX Capital completed the sale to BB&T Corporation (“BB&T”) of all of the issued and outstanding shares of capital stock of BankAtlantic (the stock sale and related transactions described herein are collectively referred to as the “BB&T Transaction”).

 

8

 


 

BBX Capital Corporation and Subsidiaries

 

Pursuant to the terms of the BB&T Transaction, BankAtlantic formed BBX Capital Asset Management, LLC (“CAM”) and Florida Asset Resolution Group, LLC (“FAR”). BankAtlantic contributed to FAR certain performing and non-performing loans, tax certificates and real estate owned that had an aggregate carrying value on BankAtlantic’s balance sheet of approximately $346 million as of July 31, 2012 (the date the BB&T Transaction was consummated).  FAR assumed all liabilities related to these assets.  BankAtlantic also contributed $50 million of cash to FAR on July 31, 2012.  Prior to the closing of the BB&T Transaction, BankAtlantic distributed all of the membership interests in FAR to the Company.  At the closing of the BB&T Transaction, the Company transferred to BB&T 95% of the outstanding preferred membership interests in FAR in connection with BB&T’s assumption of the Company’s then outstanding trust preferred securities (“TruPS”) obligations. The Company continues to hold the remaining 5% of FAR’s preferred membership interests. BB&T will hold its 95% preferred interest in the net cash flows of FAR until such time as it has recovered $285 million in preference amount plus a priority return of LIBOR + 200 basis points per annum on any unpaid preference amount. At that time, BB&T’s interest in FAR will terminate, and the Company will thereafter be entitled to any and all residual proceeds from FAR through its ownership of FAR’s Class R units. It is expected that the assets contributed to FAR will be monetized over a period of seven years, or longer provided BB&T’s preference amount is repaid within such seven-year period. The Company entered into an incremental $35 million guarantee in BB&T’s favor to further assure BB&T’s recovery of the $285 million preferred interest.

 

Prior to the closing of the BB&T Transaction, BankAtlantic contributed to CAM certain non-performing commercial loans, commercial real estate owned and previously written-off assets that had an aggregate carrying value on BankAtlantic’s Consolidated Statement of Financial Condition of $125 million as of July 31, 2012.  CAM assumed all liabilities related to these assets.  BankAtlantic also contributed $82 million of cash to CAM on July 31, 2012.  Prior to the closing of the BB&T Transaction, BankAtlantic distributed all of the membership interests in CAM to the Company.  CAM remains a wholly-owned subsidiary of the Company. 

 

BankAtlantic’s historical Community Banking, Investment, Capital Services and Tax Certificate reporting units are reflected as “Discontinued Operations” in the Company’s unaudited Consolidated Statements of Operations for the three months ended March 31, 2012.  The Company has continued to service and manage and may originate commercial loans following the sale of BankAtlantic to BB&T. As a result, the historical operations for BankAtlantic’s commercial lending reporting unit are included in the Company’s unaudited Consolidated Statement of Operations as continuing operations for the three months ended March 31, 2012.  The Consolidated Statement of Stockholders’ Equity (Deficit), Consolidated Statements of Comprehensive Loss and Consolidated Statement of Cash Flows remain unchanged from the historical presentation for the three months ended March 31, 2012.

 

The Company’s consolidated financial statements have been prepared on a going concern basis, which reflects the realization of assets and the repayments of liabilities in the normal course of business.

 

Included in cash and due from banks in the Company’s Consolidated Statement of Financial Condition as of March 31, 2013 and December 31, 2012 was $0.5 million and $0.5 million, respectively, of time deposits with other banks. These time deposits had original maturities of greater than 90 days and accordingly are not considered cash equivalents.    

 

All significant inter-company balances and transactions have been eliminated in consolidation.  Throughout this document, the term “fair value” in each case is an estimate of fair value as discussed herein.

 

In management's opinion, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) as are necessary for a fair statement of the Company's consolidated financial condition at March 31, 2013, the consolidated results of operations and consolidated statement of comprehensive loss for the three months ended March 31, 2013 and 2012, and the consolidated stockholders' equity (deficit) and cash flows for the three months ended March 31, 2013 and 2012.  The results of operations for the three months ended March 31, 2013 are not necessarily indicative of results of operations that may be expected for subsequent interim periods during 2013 or for the year ended December 31, 2013.  The consolidated financial statements and related notes are presented as permitted by Form 10-Q and should be read in conjunction with the consolidated financial statements appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 2012.

 

Certain amounts for prior years have been reclassified to conform to the revised financial statement presentation for 2013.    

 

 

9

 


 

BBX Capital Corporation and Subsidiaries

 

 

2.  Discontinued Operations

 

BankAtlantic’s five reporting units each reflected a component of the BankAtlantic entity and was the lowest level for which cash flows could be clearly distinguished, operationally and for financial reporting purposes.  These five components were Community Banking, Commercial Lending, Tax Certificates, Investments, and Capital Services.   Based on the terms for the sale of BankAtlantic under the Agreement with BB&T, the Company determined that the Community Banking, Investments, Capital Services and Tax Certificates reporting units should be treated as discontinued operations.  The Company sold all operations and the majority of the assets and liabilities of these discontinued reporting units to BB&T upon consummation of the BB&T Transaction on July 31, 2012.  Management does not intend to continue in any material respect any activities of or have any continuing involvement with these reporting units.  Although certain assets of the Commercial Lending reporting unit were sold to BB&T, the Company has continued Commercial Lending reporting unit activities resulting in the Company including the Commercial Lending reporting unit in continuing operations in the Company’s Statements of Operations.

 

Pursuant to the Agreement with BB&T, in addition to certain assets associated with the Company’s continuing Commercial Lending reporting unit, FAR also retained certain assets and liabilities that were associated with the Company’s disposed reporting units (Community Banking, Tax Certificates, Investments, and Capital Services reporting units). The Company determined that the ongoing cash flows relating to the retained assets of the disposed reporting units expected in future periods were not significant relative to the historical cash flows from the activities of each reporting unit; therefore, the income and expenses associated with the disposed reporting units are reported in discontinued operations for the three months ended March 31, 2012.  The results of operations and cash flows associated with the retained assets associated with the disposed reporting units were included in continuing operations for the three months ended March 31, 2013.  

 

The income  from Community Banking, Investments, Capital Services and Tax Certificates reporting units included in discontinued operations for the three months ended March 31, 2012 was as follows (in thousands):

 

 

 

 

 

 

 

 

 

For the Three 

 

 

Months Ended

 

 

March 31, 2012

Net interest income  

 $

17,473 

Provision for loan losses

 

9,217 

Net interest income after

 

 

 provision for loan losses

 

8,256 

Total non-interest income

 

17,524 

Total non-interest expense (1)

 

26,816 

Loss from discontinued operations  

 

 

 before provision for income taxes

 

(1,036)

Provision for income taxes

 

 -

Loss from discontinued operations

 $

(1,036)

 

(1) Pursuant to applicable accounting rules, all general corporate overhead was allocated to continuing operations.

 

3Variable Interest Entity - FAR

 

In consideration for BB&T assuming the Company’s $285.4 million in principal amount of TruPS, BB&T received from the Company at the closing of the BB&T Transaction a 95% preferred membership interest in the net cash flows of FAR until such time as it has recovered $285 million in preference amount plus a priority return of LIBOR + 200 basis points per annum.  At that time, BBT’s interest in FAR will terminate, and the Company, which initially holds a 5% preferred membership interest in the net cash flows of FAR, will thereafter be entitled to any and all residual proceeds. FAR’s assets are expected to be monetized over a period of seven years, or longer provided BB&T’s preference amount is repaid within such seven-year period. The Company provided BB&T with an incremental $35 million guarantee to further

10

 


 

BBX Capital Corporation and Subsidiaries

 

assure BB&T’s recovery of the $285 million preference amount.  At March 31, 2013, BB&T’s preferred interest in FAR has been reduced to approximately $164 million.

The Company’s variable interests in FAR include its 5%  preferred membership interest in the cash flows of FAR, rights to all residual cash flows after satisfaction of the preferred membership interests, and the incremental $35 million guarantee in favor of BB&T.  The Company also services approximately $37 million of FAR commercial loans and has a right of first refusal to acquire certain FAR commercial loans. It can also purchase certain commercial loans on a basis established in FAR’s operating agreement. 

The Company analyzed FAR’s amended and restated limited liability agreement and determined that it was the primary beneficiary and therefore should consolidate FAR in its financial statements. This conclusion was based primarily on the determination that the Company has the right to receive any appreciation of the assets of FAR through its rights to the residual cash flows of FAR and has the obligation to absorb losses as well as its obligation under the incremental $35 million guarantee to BB&T assuring the repayment of BB&T’s preferred interest in FAR.  Also contributing to the Company’s determination that it was the primary beneficiary of FAR was its ability to direct the activities relating to the commercial loans that it services, its ability to purchase certain commercial loans, and its right of first refusal in connection with the disposition of certain commercial loans. 

BB&T’s preferred equity interest in FAR only entitles it to a  $285 million preference amount plus the related priority return.  Based on the amended and restated limited liability company agreement, FAR is required to make quarterly distributions, or more frequently as approved by FAR’s Board of Managers, of excess cash flows from its operations and the orderly disposition of its assets to redeem the preferred membership interests in FAR.  As such, the Class A units, which represent the preferred interest in FAR, are considered mandatorily redeemable and are reflected as debt obligations in the Company’s Consolidated Statement of Financial Condition and the priority return is considered interest expense in the Company’s Consolidated Statements of Operations.

The activities of FAR are governed by the amended and restated limited liability company agreement which grants the Board of Managers management authority over FAR.  The Board has four members, two members elected by the Company and two members elected by BB&T.  Any action on matters before the Board requires three of the members approval.  BB&T members will resign from the Board upon the redemption of its preferred interest in FAR. 

The carrying amount of the assets and liabilities of FAR and the classification of these assets and liabilities in the Company’s Consolidated Statements of Financial Condition was as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

March 31,

December 31,

 

 

2013

2012

Cash and interest bearing deposits in banks

 $

5,635 
6,615 

Tax certificates, net

 

2,241 
3,389 

Loans held for sale

 

18,388 
20,052 

Loans receivable, net

 

206,404 
242,506 

Real estate owned

 

24,690 
21,997 

Accrued interest receivable

 

1,226 
1,636 

Other assets

 

188 
13 

        Total assets

 $

258,772 
296,208 

BB&T preferred interest in FAR, LLC

$

164,070 
196,877 

Other liabilities

 

13,725 
13,603 

       Total liabilities

$

177,795 
210,480 

 

Until BB&T’s preference amount is repaid, the proceeds from the monetization of FAR’s assets are restricted to  payments of expenses, including the priority return and estimated working capital requirements of FAR, and the repayment of FAR’s preferred membership interests. FAR anticipates making quarterly distributions.  As such, the Company will

11

 


 

BBX Capital Corporation and Subsidiaries

 

receive 5% of the net cash flows from the monetization of FAR’s assets, net of expenses. FAR finances its activities through revenues from principal and interest payments received on, and the monetization of, its assets.  

 

The Company’s maximum loss exposure in FAR if all of FAR’s assets were deemed worthless would have been  $116 million as of March 31, 2013, consisting of $81 million of net assets plus the $35 million incremental guarantee.

 

 

4.  Liquidity Considerations

 

BBX Capital’s cash at banks was $64.4 million at March 31, 2013, which does not include $5.6 million of cash held in FAR.  BBX Capital had $8.7 million of current liabilities as of March  31,  2013.  BBX Capital’s principal source of liquidity is its cash holdings, funds obtained from payments on and sales of its loans, loan payoffs, sales of real estate owned, income from income producing real estate, and distributions received from FAR. While FAR is consolidated in the Company’s financial statements, the cash held in FAR and generated from its assets will be used primarily to pay FAR’s operating expenses and to pay BB&T’s 95% preferred membership interest and the related priority return and will generally not be available for distribution to BBX Capital. The balance of BB&T’s preferred membership interest in FAR was approximately $164 million at March 31, 2013.  Based on current and expected liquidity needs and sources, the Company expects to be able to meet its liquidity needs over the next twelve months.  As discussed above in Note 1, on April 2, 2013 BBX Capital completed an investment in Woodbridge, which included an investment of $60 million in cash.

 

   5.  Fair Value Measurement

 

There were no assets or liabilities measured at fair value on a recurring basis in the Company’s financial statements as of March 31, 2013 or December 31, 2012.

 

The following table presents major categories of assets measured at fair value on a non-recurring basis as of March 31, 2013 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

 

Quoted prices in

 

 

 

 

 

 

Active Markets

Significant

Significant

Total

 

 

 

for Identical

Other Observable

Unobservable

Impairments (1)

 

 

March 31,

Assets

Inputs

Inputs

For the Three

Description

 

2013

(Level 1)

(Level 2)

(Level 3)

Months Ended

Loans measured for

 

 

 

 

 

 

 impairment using the fair value

 

 

 

 

 

 

 of the underlying collateral

$

9,298 

 -

 -

9,298 
935 

Impaired real estate owned

 

19,198 

 -

 -

19,198 
1,528 

Impaired loans held for sale

 

17,078 

 -

 -

17,078 
536 

Total

$

45,574 

 -

 -

45,574 
2,999 

 

(1)

Total impairments represent the amount of losses recognized during the three months ended March 31, 2013 on assets that were held and measured at fair value on a non-recurring basis as of March 31, 2013.

 

12

 


 

BBX Capital Corporation and Subsidiaries

 

Quantitative information about significant unobservable inputs within Level 3 on major categories of assets measured on a non-recurring basis is as follows (dollars in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2013

 

Fair

Valuation

Unobservable

 

 

Description

 

Value

Technique

Inputs

Range (Average) (1)(2)

 

Loans measured for

 

 

 

 

 

 

 impairment using the fair value

 

 

 

 

 

 

 of the underlying collateral

$

9,298 

Fair Value of Collateral

Appraisal

$0.1 - 3.5 million (0.2 million)

 

Impaired real estate owned

 

19,198 

Fair Value of Property

Appraisal

$0.2 - 11.2 million (1.9 million)

 

Impaired loans held for sale

 

17,078 

Fair Value of Collateral

Appraisal

$0.1 - 0.6 million (0.2 million)

 

Total

$

45,574 

 

 

 

 

 

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

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

 

The following table presents major categories of assets measured at fair value on a non-recurring basis as of March 31, 2012 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

 

Quoted prices in

 

 

 

 

 

 

Active Markets

Significant

Significant

Total

 

 

 

for Identical

Other Observable

Unobservable

Impairments (1)

 

 

March 31,

Assets

Inputs

Inputs

For the Three

Description

 

2012

(Level 1)

(Level 2)

(Level 3)

Months Ended

Impaired loans held for sale

$

7,914 

                          -

                          -

7,914 
263 

Impaired real estate owned

 

15,223 

                          -

                          -

15,223 
1,741 

Total

$

23,137 

 -

 -

23,137 
2,004 

 

(1)  Total impairments represent the amount of losses recognized during the three months ended March 31, 2012 on assets that were held and measured at fair value on a non-recurring basis as of March 31, 2012

 

Quantitative information about significant unobservable inputs within Level 3 on major categories of assets measured on a non-recurring basis is as follows (dollars in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2012

 

Fair

Valuation

Unobservable

 

Description

 

Value

Technique

Inputs

Range (Average) (1)(2)

Impaired real estate owned

$

15,223 

Fair Value of Property

Appraisal

$0.4 - 3.5 million (2.5 million)

Impaired loans held for sale

 

7,914 

Fair Value of Collateral

Appraisal

$0.9 - 3.6 million (2.6 million)

Total

$

23,137 

 

 

 

 

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

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

 

Loans Measured For Impairment

 

Impaired loans are generally valued based on the fair value of the underlying collateral less cost to sell. The fair value of our loans may significantly increase or decrease based on changes in property values as our loans are primarily secured by real estate.  The Company primarily uses third party appraisals to assist in measuring non-homogenous impaired

13

 


 

BBX Capital Corporation and Subsidiaries

 

loans. These appraisals generally use the market or income approach valuation technique and use market observable data to formulate an opinion of the fair value of the loan’s collateral. However, the appraiser uses professional judgment in determining the fair value of the collateral or properties, and we may also adjust these values for changes in market conditions subsequent to the appraisal date. When current appraisals are not available for certain loans, we use our judgment on market conditions to adjust the most current appraisal. The sales prices may reflect prices of sales contracts not closed, and the amount of time required to sell out the real estate project may be derived from current appraisals of similar projects. As a consequence, the calculation of the fair value of the collateral are considered Level 3 inputs. The Company generally recognizes impairment losses based on third party broker price opinions or automated valuation services to obtain the fair value of the collateral less cost to sell when impaired homogenous loans become 120 days delinquent. These third party valuations from real estate professionals also use Level 3 inputs in determining fair values. The observable market inputs used to fair value loans include comparable property sales, rent rolls, market capitalization rates on income producing properties, risk adjusted discounts rates and foreclosure timeframes and exposure periods. 

 

Impaired Real Estate Owned

 

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

 

Loans Held for Sale

 

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

14

 


 

BBX Capital Corporation and Subsidiaries

 

Financial Disclosures about Fair Value of Financial Instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

Carrying

 

Quoted prices in

 

 

 

 

Amount

 

Active Markets

Significant

Significant

 

 

As of

As of

for Identical

Other Observable

Unobservable

(in thousands)

 

March 31,

March 31,

Assets

Inputs

Inputs

Description

 

2013

2013

(Level 1)

(Level 2)

(Level 3)

Financial assets:

 

 

 

 

 

 

Cash and interest bearing

 

 

 

 

 

 

 deposits in banks

$

70,080 
70,080 
70,080 

-

-

 Tax certificates, net

 

2,241 
2,241 

-

-

2,241 

Loans receivable including loans held for sale, net

 

277,136 
282,647 

 -

 -

282,647 

Financial liabilities:

 

 

 

 

 

 

Notes payable

 

10,360 
10,425 

-

-

10,425 

BB&T preferred interest in FAR

 

164,070 
167,700 

-

 -

167,700 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

Carrying

 

Quoted prices in

 

 

 

 

Amount

 

Active Markets

Significant

Significant

 

 

As of

As of

for Identical

Other Observable

Unobservable

(in thousands)

 

December 31,

December 31,

Assets

Inputs

Inputs

Description

 

2012

2012

(Level 1)

(Level 2)

(Level 3)

Financial assets:

 

 

 

 

 

 

Cash and interest bearing

 

 

 

 

 

 

 deposits in other banks

$

62,873 
62,873 
62,873 

-

-

 Tax certificates

 

3,389 
3,318 

-

-

3,318 

Loans receivable including loans held for sale, net

 

317,310 
316,075 

 -

 -

316,075 

Financial liabilities:

 

 

 

 

 

 

Notes payable

 

10,301 
10,301 

-

-

10,301 

BB&T preferred interest in FAR

 

196,877 
201,099 

-

 -

201,099 

 

 

Management has made estimates of fair value that it believes to be reasonable. However, because there is no active market for many of these financial instruments, management has derived the fair value of the majority of these financial instruments using the income approach technique with Level 3 unobservable inputs. Management estimates used in its net present value financial models rely on assumptions and judgments regarding issues where the outcome is unknown and actual results or values may differ significantly from these estimates. The Company’s fair value estimates do not consider the tax effect that would be associated with the disposition of the assets or liabilities at their fair value estimates.  As such, the Company may not receive the estimated value upon sale or disposition of the asset or pay the estimated value upon disposition of the liability in advance of its scheduled maturity.

 

15

 


 

BBX Capital Corporation and Subsidiaries

 

Interest-bearing deposits in other banks include $0.5 million of certificates of deposits guaranteed by the FDIC with maturities of less than one year as of March 31, 2013 and December 31, 2012.  Due to the FDIC guarantee and the short-term maturity of these certificates of deposit, the fair value of these deposits approximates the carrying value.

 

Fair values are estimated for loan portfolios with similar financial characteristics. Loans are segregated by category, and each loan category is further segmented into performing and non-performing categories.

 

The fair value of performing loans is calculated by using an income approach with Level 3 inputs.  The fair value of performing loans is estimated by discounting forecasted cash flows through the estimated maturity using estimated market discount rates that reflect the interest rate risk inherent in the loan portfolio.  The fair value of non-performing collateral dependent loans is estimated using an income approach with Level 3 inputs. The fair value of non-performing loans utilizes the fair value of the collateral adjusted for operating and selling expenses and discounted over the estimated holding period.

 

The fair value of tax certificates is calculated using the income approach with Level 3 inputs.  The fair value is based on discounted expected cash flows using discount rates that take into account the risk of the cash flows of tax certificates relative to alternative investments.    

 

BB&T preferred interest in FAR is considered an adjustable rate debt security.  The fair value of the security is calculated using the income approach with Level 3 inputs and was obtained by discounting forecasted cash flows by risk adjusted market interest rate spreads to the LIBOR swap curve.  The market spreads were obtained from reference data in the secondary institutional market place. 

 

The fair value of notes payable is measured using the income approach with Level 3 inputs and was obtained by discounting the forecasted cash flows based on risk adjusted market interest rates.  

16

 


 

BBX Capital Corporation and Subsidiaries

 

6.  Loans Receivable

 

The loan portfolio consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

2013

 

2012

Commercial non-real estate

$

10,819 

 

12,006 

Commercial real estate:

 

 

 

 

 Residential

 

47,252 

 

62,523 

 Other

 

133,852 

 

151,524 

Consumer 

 

16,393 

 

16,907 

Residential:

 

 

 

 

 Residential-interest only

 

16,826 

 

17,798 

 Residential-amortizing

 

34,777 

 

36,999 

         Total gross loans

 

259,919 

 

297,757 

Adjustments:

 

 

 

 

 Premiums, discounts and net deferred fees

 

142 

 

116 

 Allowance for loan  losses

 

(5,249)

 

(5,311)

         Loans receivable -- net

$

254,812 

 

292,562 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

Loan Class

 

2013

 

2012

Commercial non-real estate

$

3,362 

 

3,362 

Commercial real estate:

 

 

 

 Residential

 

45,953 

 

60,937 

 Other

 

77,251 

 

79,014 

Consumer

 

7,624 

 

7,859 

Residential:

 

 

 

 

  Interest only

14,681 

 

16,115 

  Amortizing

 

26,393 

 

28,507 

Total nonaccrual loans

$

175,264 

 

195,794 

 

 

17

 


 

BBX Capital Corporation and Subsidiaries

 

An age analysis of the past due recorded investment in loans receivable as of March  31, 2013 and December 31, 2012 was as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

31-59 Days

 

60-89 Days

 

90 Days

 

Total

 

 

 

Loans

March 31, 2013

 

Past Due

 

Past Due

 

or More (1)

 

Past Due

 

Current

 

Receivable

Commercial non-real estate

$

 -

 

4,644 

 

2,268 

 

6,912 

 

3,907 

 

10,819 

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 Residential

 

4,164 

 

 -

 

37,690 

 

41,854 

 

5,398 

 

47,252 

 Other

 

16,430 

 

2,962 

 

52,126 

 

71,518 

 

62,334 

 

133,852 

Consumer

 

864 

 

291 

 

7,166 

 

8,321 

 

8,072 

 

16,393 

Residential:

 

 

 

 

 

 

 

 

 

 

 

 

Residential-interest only

 

416 

 

438 

 

14,681 

 

15,535 

 

1,291 

 

16,826 

Residential-amortizing

 

1,671 

 

806 

 

25,678 

 

28,155 

 

6,622 

 

34,777 

Total

$

23,545 

 

9,141 

 

139,609 

 

172,295 

 

87,624 

 

259,919 

 

(1)  The Company had no loans that were past due greater than 90 days and still accruing interest as of March 31, 2013.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

31-59 Days

 

60-89 Days

 

90 Days

 

Total

 

 

 

Loans

December 31, 2012

 

Past Due

 

Past Due

 

or More (1)

 

Past Due

 

Current

 

Receivable

Commercial non-real estate

$

2,411 

 

 -

 

3,362 

 

5,773 

 

6,233 

 

12,006 

Commercial real estate:

 

 

 

 

 

 

 

 

 

 

 

 

 Residential

 

842 

 

1,716 

 

50,634 

 

53,192 

 

9,331 

 

62,523 

 Other

 

 -

 

5,843 

 

30,102 

 

35,945 

 

115,579 

 

151,524 

Consumer

 

677 

 

524 

 

7,165 

 

8,366 

 

8,541 

 

16,907 

Residential:

 

 

 

 

 

 

 

 

 

 

 

 

Residential-interest only

 

397 

 

 -

 

16,115 

 

16,512 

 

1,286 

 

17,798 

Residential-amortizing

 

984 

 

1,520 

 

28,052 

 

30,556 

 

6,443 

 

36,999 

Total

$

5,311 

 

9,603 

 

135,430 

 

150,344 

 

147,413 

 

297,757 

 

(1)  The Company had no loans that were past due greater than 90 days and still accruing interest as of December 31, 2012.

 

18

 


 

BBX Capital Corporation and Subsidiaries

 

The activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2013 was as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

Commercial

Real

Small

 

 

 

 

 

Non-Real Estate

Estate

Business

Consumer

Residential

Total

Allowance for Loan Losses:

 

 

 

 

 

 

Beginning balance

$

1,735 
1,869 

 -

1,261 
446 
5,311 

    Charge-off :

 

 -

(1,179)

 -

(376)
(389)
(1,944)

     Recoveries :

 

171 
277 
74 
458 
143 
1,123 

     Provision:

 

(710)
470 
(74)
650 
423 
759 

Ending balance

$

1,196 
1,437 

 -

1,993 
623 
5,249 

Ending balance individually

 

 

 

 

 

 

 

 evaluated for impairment

$

634 
663 

 -

 -

 -

1,297 

Ending balance collectively

 

 

 

 

 

 

 

 evaluated for impairment

 

562 
774 

 -

1,993 
623 
3,952 

Total

$

1,196 
1,437 

 -

1,993 
623 
5,249 

Loans receivable:

 

 

 

 

 

 

 

Ending balance individually

 

 

 

 

 

 

 

 evaluated for impairment

$

3,362 
157,144 

 -

7,501 
41,198 
209,205 

Ending balance collectively

 

 

 

 

 

 

 

 evaluated for impairment

$

7,457 
23,960 

 -

8,892 
10,405 
50,714 

Total

$

10,819 
181,104 

 -

16,393 
51,603 
259,919 

Purchases of loans

$

                          -

 -

                 -

                -

                   -

                   -

Proceeds from loan sales

$

                          -

 -

                 -

                -

                   -

 -

Transfer to loans held for sale

$

                          -

 -

 -

                -

                   -

                   -

Transfer from loans held for sale

$

                          -

 -

 -

                -

 -

 -

19

 


 

BBX Capital Corporation and Subsidiaries

 

The activity in the allowance for loan losses by portfolio segment for the three months ended March  31, 2012 was as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

Commercial

Real

Small

 

 

 

 

 

Non-Real Estate

Estate

Business

Consumer

Residential

Total

Allowance for Loan Losses:

 

 

 

 

 

 

 

Beginning balance

$

16,407 
67,054 
7,168 
22,554 
16,704 
129,887 

     Charge-offs:

 

(14,615)
(51,503)
(1,624)
(6,564)
(10,209)
(84,515)

     Recoveries :

 

54 

 -

142 
795 
996 
1,987 

     Provision :

 

1,410 
(2,175)

 -

 -

 -

(765)

     Discontinued operations

 

 

 

 

 

 

 

        provision:

 

 -

 -

(212)
4,220 
5,210 
9,218 

Transfer to loans held for sale

 

(1,897)
(9,164)
(4,454)
(20,639)
(12,491)
(48,645)

Ending balance

$

1,359 
4,212 
1,020 
366 
210 
7,167 

Ending balance individually

 

 

 

 

 

 

 

 evaluated for impairment

$

243 
222 
702 

 -

 -

1,167 

Ending balance collectively

 

 

 

 

 

 

 

 evaluated for impairment

 

1,116 
3,990 
318 
366 
210 
6,000 

Total

$

1,359 
4,212 
1,020 
366 
210 
7,167 

Loans receivable:

 

 

 

 

 

 

 

Ending balance individually

 

 

 

 

 

 

 

 evaluated for impairment

$

7,403 
197,551 
959 
9,048 
44,617 
259,578 

Ending balance collectively

 

 

 

 

 

 

 

 evaluated for impairment

$

22,402 
55,971 
34,192 
12,026 
8,899 
133,490 

Total

$

29,805 
253,522 
35,151 
21,074 
53,516 
393,068 

Purchases of loans

$

 -

 -

 -

 -

 -

 -

Proceeds from loan sales

$

 -

1,000 

 -

 -

 -

1,000 

Transfer to loans held for sale

$

 -

16,140 

 -

 -

 -

16,140 

 

20

 


 

BBX Capital Corporation and Subsidiaries

 

 

 

 

As part of the transition of the regulation of OTS savings associations like BankAtlantic to the OCC, the OCC  provided  guidance to thrifts related to their transition to OCC regulatory reporting, which was to be implemented no later than March 31, 2012, including guidance regarding specific valuation allowances on collateral dependent loans.  Under OCC guidance, where the appraised value of collateral on a collateral dependent loan was less than the recorded investment of the loan, a charge-off of the amount of the deficiency rather than a specific valuation allowance was generally required. Management considered the appraisals on its impaired collateral dependent loans, including appraised values and appraisal dates, and during the first quarter of 2012 the Company charged down the recorded investment of loans by $66.5 million to the fair value of the collateral less cost to sell.  This charge down consisted entirely of the charging off of existing specific valuation allowances.  As  a specific valuation allowance was previously established for these loans, the charge-offs did not impact the provision for loan losses or the net loss during the three months ended March 31, 2012, but did reduce the Company’s allowance for loan losses and recorded investment in the loans. 

 

Impaired Loans -  Loans are considered impaired when, based on current information and events, the Company believes it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan agreement. For a loan that has been restructured, the contractual terms of the loan agreement refer to the contractual terms specified by the original loan agreement, not the contractual terms specified by the restructured agreement.  Impairment is evaluated based on past due status for consumer and residential loans.  Impairment is evaluated as part of the Company’s on-going credit monitoring process for commercial loans which results in the evaluation for impairment of substandard loans.  Factors considered in determining if a loan is impaired are past payment history, strength of the borrower or guarantors, and cash flow associated with the collateral or business.  If a loan is impaired, a specific valuation allowance is allocated, if necessary, based on the present value of estimated future cash flows using the loan’s existing interest rate or based on the fair value of the loan. Collateral dependent impaired loans are charged down to the fair value of collateral less cost to sell. Interest payments on impaired loans for all loan classes are recognized on a cash basis, unless collectability of the principal and interest amount is probable, in which case interest is recognized on an accrual basis. Impaired loans, or portions thereof, are charged off when deemed uncollectible. 

21

 


 

BBX Capital Corporation and Subsidiaries

 

Impaired loans as of March  31, 2013 and December 31, 2012 were as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2013

 

As of December 31, 2012

 

 

 

Unpaid

 

 

 

Unpaid

 

 

 

Recorded

Principal

Related

 

Recorded

Principal

Related

 

 

Investment

Balance

Allowance

 

Investment

Balance

Allowance

With a related allowance recorded:

 

 

 

 

 

 

 

 

Commercial non-real estate

$

3,032 
4,478 
634 

 

3,032 
3,287 
784 

Commercial real estate:

 

 

 

 

 

 

 

 

 Residential