FORM 10Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------------- [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission file number 34-027228 BankAtlantic Bancorp, Inc. (Exact name of registrant as specified in its Charter) Florida 65-0507804 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1750 East Sunrise Boulevard Ft. Lauderdale, Florida 33304 (Address of principal executive offices) (Zip Code) (954) 760-5000 (Registrant's telephone number, including area code) 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. YES [X] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of preferred and common stock as of the latest practicable date. Outstanding at Title of Each Class September 30 , 1996 - ------------------- -------------------- Class A Common Stock, par value $0.01 per share 4,137,353 Class B Common Stock, par value $0.01 per share 10,582,980 BankAtlantic Bancorp, Inc. TABLE OF CONTENTS FINANCIAL INFORMATION Page Reference Financial Statements......................................................1 - 10 Consolidated Statements of Financial Condition - September 30, 1996 (unaudited)and December 31, 1995..............................................1 Consolidated Statements of Operations - Unaudited for the Three and Nine Months Ended September 30, 1996 and 1995.................................2 , Consolidated Statements of Cash Flows - Unaudited for the Nine Months Ended September 30, 1996 and 1995..........................................3 - 4 Notes to Consolidated Financial Statements - Unaudited....................5 - 10 Management's Discussion and Analysis of Results of Operations and Financial Condition.................................................... 11 - 18 OTHER INFORMATION Legal Proceedings............................................................ 19 Exhibits .................................................................... 19 Signatures................................................................... 20 [THIS PAGE INTENTIONALLY LEFT BLANK] BankAtlantic Bancorp, Inc. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION - UNAUDITED SEPTEMBER 30, DECEMBER 31, 1996 1995 ---- ---- ASSETS (In thousands, except share data) Cash and due from depository institutions .............................................................$ 78,901 $ 69,867 Investment securities-net, held to maturity, at cost which approximates market value .................. 65,818 49,856 Loans receivable, net ................................................................................. 1,264,616 828,630 Debt securities available for sale, at market value ................................................... 615,726 691,803 Accrued interest receivable ........................................................................... 16,897 14,553 Real estate owned, net ................................................................................ 5,451 6,279 Office properties and equipment, net .................................................................. 47,132 40,954 Federal Home Loan Bank stock, at cost which approximates market value ................................. 10,849 10,089 Mortgage servicing rights ............................................................................. 23,421 20,738 Deferred tax asset, net ............................................................................... 2,537 0 Cost over fair value of net assets acquired ........................................................... 9,905 10,823 Other assets .......................................................................................... 29,227 7,097 ----------- --------- TOTAL ASSETS ..........................................................................................$ 2,170,480 $1,750,689 =========== ========= LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES: Deposits ..............................................................................................$ 1,352,169 $ 1,300,377 Advances from FHLB .................................................................................... 216,985 201,785 Federal funds purchased ............................................................................... 0 1,200 Securities sold under agreements to repurchase ........................................................ 290,423 66,237 Subordinated debentures and note payable .............................................................. 78,500 21,001 Drafts payable ........................................................................................ 537 796 Deferred tax liabilities, net ......................................................................... 0 744 Advances by borrowers for taxes and insurance ......................................................... 56,647 15,684 Other liabilities ..................................................................................... 35,492 22,304 --------- --------- TOTAL LIABILITIES ..................................................................................... 2,030,753 1,630,128 --------- --------- Commitments and contingencies STOCKHOLDERS' EQUITY: Preferred stock, $0.01 par value, 10,000,000 shares authorized: none issued and outstanding .......... 0 0 Class A Common Stock, $0.01 par value, authorized 30,000,000 shares; issued and outstanding, 4,137,353 and zero shares ........................................................................... 41 0 Class B Common Stock, $0.01 par value, authorized 15,000,000 shares; issued and outstanding, 10,582,980 and 10,592,999 shares .................................................................... 106 106 Additional paid-in capital ............................................................................ 64,031 48,905 Retained earnings ..................................................................................... 75,559 65,817 ------ ------ Total stockholders' equity before net unrealized appreciation (depreciation) on debt securities available for sale - net of deferred income taxes ................................................. 139,737 114,828 Net unrealized appreciation (depreciation) on debt securities available for sale - net of deferred income taxes ............................................................................. (10) 5,733 ------- ------- TOTAL STOCKHOLDERS' EQUITY ............................................................................ 139,727 120,561 ------- ------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............................................................$ 2,170,480 $1,750,689 =========== =========== SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED For the Three Months For the Nine Months (In thousands, except share data) Ended September 30, Ended September 30, --------------------- --------------------- INTEREST INCOME: 1996 1995 1996 1995 ---- ---- ---- ---- Interest and fees on loans ................................. $ 27,277 $ 19,127 $ 69,487 $ 52,631 Interest on debt securities available for sale ............. 9,313 1,342 29,039 4,126 Interest and dividends on investment securities ............ 1,931 3,387 4,845 9,811 Interest on mortgage-backed securities held to maturity .... 0 9,827 0 30,155 ------ ------ ------- ------ Total interest income ...................................... 38,521 33,683 103,371 96,723 ------ ------ ------- ------ INTEREST EXPENSE: Interest on deposits ....................................... 12,644 12,243 37,356 34,349 Interest on advances from FHLB ............................. 2,625 2,203 5,448 5,589 Interest on securities sold under agreements to repurchase . 2,846 2,101 5,033 8,886 Interest on subordinated debentures and other borrowings ... 1,495 157 2,489 278 ------ ------ ------- ------ Total interest expense ..................................... 19,610 16,704 50,326 49,102 ------ ------ ------ ------ NET INTEREST INCOME ........................................ 18,911 16,979 53,045 47,621 Provision for loan losses .................................. 1,869 1,436 4,264 2,817 ------ ------ ------- ------ NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES ........ 17,042 15,543 48,781 44,804 ------ ------ ------ ------ NON-INTEREST INCOME: Loan servicing and other loan fees ......................... 956 885 2,900 2,728 Gains on sales of loans originated for resale .............. 1 49 287 202 Realized gains on trading account securities ............... 0 16 0 589 Gains on sales of mortgage servicing rights ................ 2,554 1,721 2,554 2,744 Gains on sales of debt securities available for sale ....... 0 0 3,946 0 Other ...................................................... 3,796 2,892 11,168 8,643 ------ ------ ------- ------ Total non-interest income .................................. 7,307 5,563 20,855 14,906 ----- ----- ------ ------ NON-INTEREST EXPENSE: Employee compensation and benefits ......................... 7,422 6,572 21,841 19,390 Occupancy and equipment .................................... 2,980 2,772 8,671 7,964 Federal insurance premium .................................. 689 705 1,949 2,097 Advertising and promotion .................................. 394 528 1,631 1,722 Foreclosed asset activity, net ............................. (36) (495) (545) (3,319) SAIF special assessment ................................... 7,160 0 7,160 0 Amortization of cost over fair value of net assets acquired 306 306 918 816 Other ...................................................... 3,457 2,997 8,947 8,886 ------ ------ ------- ------ Total non-interest expense ................................. 22,372 13,385 50,572 37,556 ------ ------ ------ ------ INCOME BEFORE INCOME TAXES ................................. 1,977 7,721 19,064 22,154 Provision for income taxes ................................. 886 2,683 7,714 7,799 ------ ------ ------- ------ NET INCOME ................................................. 1,091 5,038 11,350 14,355 Dividends on non-cumulative preferred stock ................ 0 220 0 660 ------ ------ ------- ------ NET INCOME AVAILABLE FOR COMMON STOCKHOLDERS ............... $ 1,091 $ 4,818 $ 11,350 $ 13,695 ============ ========== =========== ============ Net income per common and common equivalent share .......... $ 0.07 $ 0.35 $ 0.76 $ 1.02 ============ ========== =========== ============ Net income per common and common equivalent share, assuming full dilution ................................... $ 0.09 $ 0.35 $ 0.72 $ 1.00 ============ ========== =========== ============ WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING ............................ 15,409,888 13,779,544 15,010,504 13,420,330 ========== ========== ========== ========== WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING , ASSUMING FULL DILUTION .. 20,014,559 13,779,544 16,577,100 13,644,486 ========== ========== ========== ========== SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED FOR THE NINE MONTHS ENDED SEPTEMBER 30, ------------------- OPERATING ACTIVITIES: 1996 1995 ---- ---- Net income ...........................................................................$ 11,350 $ 14,355 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses ............................................................ 4,264 2,817 Reversal of allowance for losses on real estate owned ................................ (200) (1,400) Depreciation ......................................................................... 2,608 2,366 Amortization of mortgage servicing rights ........................................... 5,041 3,149 Increase in deferred income taxes .................................................... 171 744 Net accretion (amortization) of securities ........................................... 35 (421) Realized gains on trading account securities ......................................... 0 (589) Proceeds from sales of trading account securities .................................... 0 9,524 Net amortization of deferred loan origination fees ................................... (1,013) (764) Gains on sales of real estate owned .................................................. (346) (1,985) Net (gains) losses on sales of property and equipment ................................ 66 (18) Gains on sales of mortgage servicing rights .......................................... (2,554) (2,744) Gains on sales of debt securities available for sale ................................. (3,946) 0 Proceeds from loans originated for resale ............................................ 45,085 20,718 Fundings of loans for resale ......................................................... (46,609) (28,399) Gains on sales of loans originated for resale ........................................ (287) (202) Recovery from tax certificate losses ................................................. (259) (65) Amortization of dealer reserve ....................................................... 1,579 1,456 Amortization of cost over fair value of net assets acquired .......................... 918 816 Net accretion of purchase accounting adjustments ..................................... (244) (277) Amortization of borrowings deferred costs ........................................... 137 72 Decrease (increase) in accrued interest receivable ................................... (2,344) 877 Decrease (increase) in other assets .................................................. (3,675) 2,480 Write-off of property and equipment .................................................. 263 0 Increase in other liabilities ........................................................ 13,184 3,085 Increase (decrease) in drafts payable ................................................ (259) 64 ------ ------ NET CASH PROVIDED BY OPERATING ACTIVITIES ............................................ 22,965 25,659 ------ ------ INVESTING ACTIVITIES: Proceeds from redemption and maturities of investment securities ..................... 40,307 112,488 Purchase of investment securities .................................................... (56,010) (68,021) Proceeds from sale of debt securities available for sale ............................. 166,985 852 Principal collected on debt securities available for sale ............................ 135,642 9,130 Purchase of debt securities available for sale ....................................... (231,765) 0 Mortgage-backed securities purchased ................................................. 0 (75,262) Principal collected on mortgage-backed securities .................................... 0 74,852 Proceeds from sale of FHLB stock ..................................................... 1,249 0 FHLB stock acquired .................................................................. (2,009) 0 Principal reduction on loans ......................................................... 432,526 314,066 Loan fundings for portfolio ......................................................... (555,573) (431,343) Loans purchased ...................................................................... (315,247) (9,930) Additions to dealer reserve .......................................................... (2,196) (2,653) Proceeds from sales of real estate owned ............................................. 2,611 5,488 Mortgage servicing rights acquired ................................................... (19,042) (5,117) Proceeds from sales of mortgage servicing rights ..................................... 3,051 8,340 Repayment of advances to joint ventures .............................................. 0 1,239 Additions to office property and equipment ........................................... (9,115) (3,601) Proceeds from sales of property and equipment ........................................ 0 18 Purchase of MegaBank, net of cash acquired ........................................... 0 (14,914) Escrow deposit for the purchase of Bank of North America Bancorp...................... (5,000) 0 -------- ------- NET CASH USED BY INVESTING ACTIVITIES ............................................... (413,586) (84,368) ------- ------- SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED (CONTINUED) CONSOLIDATED STATEMENTS FOR CASH FLOWS - UNAUDITED (CONTINUED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, ------------------- 1996 1995 ---- ---- FINANCING ACTIVITIES: Net increase in deposits ......................................................$ 19,119 $ 10,573 Interest credited to deposits ................................................. 32,688 31,588 Repayments of FHLB advances ................................................... (438,755) (432,050) Proceeds from FHLB advances ................................................... 453,955 390,000 Net increase in securities sold under agreements to repurchase ................ 224,186 (857) Net increase (decrease) in federal funds purchased ............................ (1,200) 3,000 Net proceeds from issuance of subordinated debentures ......................... 55,137 18,983 Proceeds from note payable ................................................... 0 3,931 Repayment of note payable ..................................................... (1) (3,999) Issuance of common stock, net ................................................. 18,337 1,398 Payments to acquire and retire treasury stock ................................. (3,259) 0 Receipts of advances by borrowers for taxes and insurance ..................... 40,963 33,003 Preferred stock dividends paid ................................................ 0 (660) Common stock dividends paid ................................................... (1,515) (1,205) ------- ------ NET CASH PROVIDED BY FINANCING ACTIVITIES .................................... 399,655 53,705 ------- ------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ............................. 9,034 (5,004) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .............................. 69,867 55,980 ------- ------ CASH AND CASH EQUIVALENTS AT END OF PERIOD ....................................$ 78,901 $ 50,976 =========== ========= SUPPLEMENTARY DISCLOSURE AND NON-CASH INVESTING AND FINANCING ACTIVITIES: Interest paid on borrowings ...................................................$ 47,372 $ 48,870 Income taxes paid ............................................................. 8,000 7,070 Income taxes refunded ......................................................... 0 88 Loans transferred to real estate owned ........................................ 1,237 792 Proceeds receivable from sales of mortgage servicing rights ................... 10,821 0 Loan charge-offs .............................................................. 5,518 3,803 Tax certificate charge-offs, net of recoveries ................................ 142 1,533 Common stock dividend declared and not paid until October ..................... 550 464 Increase in equity for the tax effect related to the exercise of employee stock options ..................................................................... 89 86 Change in net unrealized appreciation (depreciation)on debt securities available for sale .......................................................... (9,349) 2,321 Change in deferred taxes on net unrealized appreciation (depreciation)on debt securities available for sale ............................................... (3,606) 902 Change in stockholders' equity from net unrealized appreciation (depreciation) on debt securities available for sale, less related deferred income taxes ... (5,743) 1,419 ====== ===== SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED BankAtlantic Bancorp, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED 1. PRESENTATION OF INTERIM FINANCIAL STATEMENTS BankAtlantic Bancorp, Inc. ("BBC") is a unitary savings bank holding company. BBC's primary asset is the capital stock of BankAtlantic, a Federal Savings Bank ("BankAtlantic"), its wholly owned subsidiary, and BBC's principal activities relate to the operations of BankAtlantic and BankAtlantic's subsidiaries. BankAtlantic's subsidiaries are primarily utilized to dispose of real estate acquired through foreclosure. All significant inter-company balances and transactions have been eliminated in consolidation. In management's opinion, the accompanying consolidated financial statements contain such adjustments necessary to present fairly BBC's consolidated financial condition at September 30, 1996, the consolidated results of operations for the three and nine months ended September 30, 1996 and 1995 and the consolidated cash flows for the nine months ended September 30, 1996 and 1995. Such adjustments, exclusive of the SAIF special assessment, consisted only of normal recurring items. The consolidated financial statements and related notes are presented as permitted by Form 10Q and should be read in conjunction with the notes to consolidated financial statements appearing in BBC's Annual Report on Form 10K for the year ended December 31, 1995 and the Form 10Q for each of the periods ended March 31, 1996 and June 30, 1996. 2. EQUITY CAPITAL The follow table sets forth the changes in common stockholders' equity for the nine months ended September 30, 1996 before net unrealized appreciation (depreciation) of debt securities available for sale: Additional Common Paid in Retained (in thousands) Stock Capital Earnings ----- ------- -------- Balance at December 31, 1995 ......................$ 106 $ 48,905 $ 65,817 Proceeds from issuance of Class A Common Stock, net 12 17,992 0 Exercise of 1984 stock options .................... 1 421 0 Net income ........................................ 0 0 11,350 Dividends on common stock ......................... 0 0 (1,608) 25% stock split................................... 30 (30) 0 Purchase and retirement of treasury stock ......... (2) (3,257) 0 ---------- -------- -------- Balance at September 30, 1996 .....................$ 147 $ 64,031 $ 75,559 ========== ======== ======== On July 9, 1996, the Board of Directors declared a common stock split effected in the form of a 25% stock dividend, payable in Class A common stock to BBC's Class A and Class B common shareholders of record on July 19, 1996. The stock dividend was payable in Class A common stock regardless of the class of shares held. Where appropriate, amounts throughout this report have been adjusted to reflect the stock dividend. In August 1996, BBC announced a plan to purchase up to one million shares of BBC's common stock. As of September 30, 1996, BBC repurchased in the secondary market 160,000 and 112,500 of Class A and Class B common shares, respectively. These shares were retired at the time of repurchase. On May 21, 1996 the shareholders approved the BankAtlantic Bancorp 1996 Stock Option Plan (the "1996 Plan") which authorized the issuance of options to acquire up to 1.0 million shares of Class A Common Stock. The 1996 Plan expires on April 2, 2006. On July 9, 1996, 274,868 of incentive stock options and 219,195 of non-qualifying stock options were granted pursuant to the BankAtlantic Bancorp 1996 Stock Option Plan to all officers of BankAtlantic. All of the incentive and non-qualifying stock options are exercisable for BBC's Class A Common Stock, with an exercise price equal to the fair market value at the date of grant ($11.20), expire ten years from the date of grant and are exercisable any time after five years from the date of grant. During August 1996 the Compensation Committee adjusted the stock options issued pursuant to the BankAtlantic 1984, 1994 and 1996 Stock Option Plans to reflect the 25% stock split. The following table sets forth all outstanding options adjusted for the July 1996 common stock split effected in the form of a 25% stock dividend: Outstanding Outstanding Options Options Class B Class A ------- ------- Options Outstanding at December 31, 1995 1,254,658 0 Options Issued .......................... 0 395,250 25% stock split ......................... 314,226 123,852 Options Exercised ....................... (56,857) 0 Options Canceled ........................ (13,196) (2,188) ------- ------ Options Outstanding at September 30, 1996 1,498,831 516,914 ========= ======= Price per share ......................... $4.45 - $7.81 $11.20-$12.20 3. SALES OF MORTGAGE SERVICING RIGHTS During the nine months ended September 30, 1996 and 1995, BankAtlantic sold $11.3 million and $5.6 million, respectively of mortgage servicing rights realizing gains of $2.6 million and $2.7 million, respectively. These mortgage servicing rights related to approximately $736.9 million and $492.1 million, respectively of loans. During the three months ended September 30, 1995, BankAtlantic sold $3.2 million of mortgage servicing rights realizing a $1.7 million gain. These mortgage servicing rights related to approximately $292.7 million of mortgage loans. Included in other assets at September 30, 1996 was a $10.8 million receivable from the sales of mortgage servicing rights. The receivable was collected in October 1996. 4. SAIF SPECIAL ASSESSMENT On September 30, 1996, President Clinton signed in law H.R. 3610, which is intended to recapitalize the SAIF and substantially bridge the assessment rate disparity existing between SAIF and BIF insured institutions. The new law subjects institutions with SAIF assessable deposits, including BankAtlantic, to a one-time assessment of 0.657% of covered deposits at March 31, 1995. BankAtlantic's one-time assessment resulted in a pre-tax charge of approximately $7.2 million for the three and nine months ended September 30, 1996, which is payable not later than November 29, 1996, and, under provisions of the new law, may be treated for tax purposes as a fully deductible "ordinary and necessary business expense" when paid. 5. ACQUISITION OF BANK OF NORTH AMERICA BANCORP, INC. On October 11, 1996, BankAtlantic consummated its acquisition of Bank of North America Bancorp ("BNAB") for $53.8 million in cash. The acquisition was accounted for as a purchase for financial reporting purposes. BNAB's primary asset was its wholly owned subsidiary, Bank of North America ("BNA"), a Florida chartered commercial bank. BNA had assets of $524.7 million and a net loss of $2.5 for the nine months ended September 30, 1996, and net income of $2.2 million for the year ended December 31, 1995. The pro forma information shown below is presented for comparative purposes only and is not necessarily indicative of the combined financial position or results of operations in the future. The pro forma information is also not necessarily indicative of the combined financial position or results of operations which would have been realized had the acquisition been consummated during the periods or as of the dates for which the pro forma financial information is presented. SEPTEMBER 30, 1996 ------------------ (In thousands, except per Adjust- COMBINED share data) BBC BNAB ments PROFORMA --- ---- ----- -------- ASSETS Cash ..........................$ 78,901 $ 29,779 $ $ 108,680 Investment securities, net .... 65,818 73,175 13 (1) 139,006 Loans receivable, net ......... 1,264,616 393,246 1,604 (1) 1,659,466 Debt securities available for sale ....................... 615,726 0 615,726 Real estate owned ............. 5,451 1,017 6,468 Office properties and equipment 47,132 8,277 (1,738)(1) 53,671 Federal Home Loan Bank stock .. 10,849 2,775 13,624 Mortgage servicing rights ..... 23,421 2,020 2,046 (1) 27,487 Deferred tax asset ............ 2,537 2,757 403 (6) 5,697 Cost over fair value of net assets acquired ............. 9,905 129 18,951 (3) 28,985 Other assets .................. 46,124 11,547 57,671 -------- -------- -------- -------- TOTAL ASSETS ..................$ 2,170,480 $ 524,722 $ 21,279 $ 2,716,481 ============ ========= ======== ============ SEPTEMBER 30, 1996 ------------------ LIABILITIES AND Adjust- Combined STOCKHOLDERS' EQUITY BBC BNAB ments Proforma --- ---- ----- -------- Deposits ......................$ 1,352,169 $ 468,982 $ 110(1) $1,821,261 FHLB advances ................. 216,985 5,000 27(1) 222,012 Subordinated debentures ....... 78,500 0 78,500 Other borrowings .............. 290,423 2,022 53,813(2) 346,258 Advances by borrowers for taxes and insurance ................ 56,647 8,740 65,387 Other liabilities ............. 36,029 4,096 3,211(4) 43,336 --------- ------- ------ --------- Total Liabilities ............. 2,030,753 488,840 57,161 2,576,754 --------- ------- ------ --------- Stockholders' Equity Class A Common Stock .......... 41 0 0 41 Class B Common Stock .......... 106 100 (100) 106 Additional paid-in capital .... 64,031 30,000 (30,000) 64,031 Net unrealized depreciation ... (10) 0 0 (10) Retained earnings ............. 75,559 5,782 (5,782) 75,559 ------- ------ ------- ------- Total Stockholders' Equity .... 139,727 35,882 (35,882) 139,727 ------- ------ ------- ------- Total Liabilities and Stockholders' Equity ......................$ 2,170,480 $ 524,722 $ 21,279 $2,716,481 ============= ============ =========== ========== FOR THE NINE MONTHS ENDED FOR THE YEAR ENDED SEPTEMBER 30, 1996 DECEMBER 31, 1995 ------------------ ----------------- ADJUST- COMBINED ADJUST- COMBINED BBC BNAB MENTS PROFORMA BBC BNAB MENTS PROFORMA (In Thousands) --- ---- ----- -------- --- ---- ----- -------- Interest income ........$ 103,371 $ 30,708 $ (418) (1)$ 133,661 $ 130,077 $ 40,552 $ (558) (1) $170,071 Interest expense ....... 50,326 16,339 2,605 (1)(2) 69,270 65,686 23,016 3,054 (1)(2) 91,756 Provision for loan losses................ 4,264 3,243 0 7,507 4,182 1,150 0 5,332 Noninterest income ..... 20,855 966 (422) (1) 21,399 19,388 5,204 (563) (1) 24,029 Noninterest expense (8). 50,572 16,111 294 (1)(3) 66,977 51,160 18,299 615 (1)(3) 70,074 Provision (benefit) for income taxes.......... 7,714 (1,500) (1,054) (6) 5,160 10,018 1,113 (1,336) (6) 9,795 ------------ -------- -------- --------- --------- --------- --------- -------- Net Income (loss) ......$ 11,350 $ (2,519) $ (2,685) $ 6,146 $ 18,419 $ 2,178 $ (3,454) $ 17,143 ============ ======== ======== ========= ========= ========= ========= ======== Per common share Primary(8)............$ 0.76 $ (25.19) $ 0.41 $ 1.21 $ 21.78 $ 1.11(7) ============ ======== ========= ========= ========= ========== Fully diluted (8) ......$ 0.72 $ (25.19) $ 0.41 $ 1.20 $ 21.78 $ 1.10(7) ============ ======== ========= ========= ========= ========== Average shares outstanding: Primary ................ 15,010,504 100,000 15,010,504 15,010,504 100,000 13,538,254 ========== ======= ========== ========== ======= ========== Fully diluted .......... 16,577,100 100,000 16,577,100 16,577,100 100,000 13,667,650 ========== ======= ========== ========== ======= ========== <FN> (1) Adjustments to fair value of BNAB's loans receivable, mortgage servicing rights, office properties and equipment, certificates of deposit, investments and FHLB advances at September 30, 1996 were approximately $1.6 million, $2.0 million, ($1.7) million, $110,000, $13,000 and $27,000, respectively. Adjustments to fair values are estimated to be amortized as follows: Loans receivable 3 years straight line method. Mortgage servicing rights Based on projected portfolio cash flows of 28% in year one and 22% for the nine months ended September 30, 1996. Certificates of deposit Based on estimated deposit maturities of 85% in year one and 64% for the nine months ended September 30, 1996. FHLB Advances 1 year straight line. Investments 1 year straight line. Office properties and Equipment Straight line over remaining life of property. (2) The purchase price of $53.8 million was funded through securities sold under agreements to repurchase. The weighted average interest rate of the borrowings was 4.91% and 5.80% for the nine months ended September 30, 1996 and for the year ended December 31, 1995, respectively. (3) Cost over fair value of net assets acquired (goodwill) will not qualify for amortization for tax purposes based on the structure of the acquisition. The useful life is estimated at fifteen years and is assumed to be amortized on a straight line basis. (4) The total purchase price will include other direct acquisition costs, such as legal, accounting and other professional fees and expenses. For purposes of the pro forma financial information such other acquisition costs are estimated at $500,000. Also included in other liabilities were BNA employee retention bonuses, lease termination costs, contract buy-out fees, and branch closure expenditures. BankAtlantic closed five of the thirteen BNAB branches on October 11, 1996. (5) The pro forma does not include the effect of any potential expense reductions or revenue increases, except for a $140,000 BNA merger expense reduction. (6) The effective income tax rate is assumed to be 38%. (7) Includes a reduction of $0.10 for primary and fully diluted earnings per share, respectively, related to the October 1995 Preferred Stock redemption. (8) Includes BankAtlantic's and BNA's one-time SAIF special assessment of $7.2 million and $2.3 million , respectively, for the nine months ended September 30, 1996. The SAIF assessment reduced combined proforma primary and fully diluted earnings per share by $0.40 and $0.36, respectively. </FN> The following table indicates the estimated net decrease in earnings resulting from the net amortization/accretion of the adjustments, including the excess of cost over fair value of net assets acquired, resulting from the use of the purchase method of accounting during each of the next five years. The amounts (in thousands) assume no sales or dispositions of the related assets or liabilities. YEARS ENDING NET DECREASE OF DECEMBER 31, NET EARNINGS ------------ ------------ 1996...................... $ (360) 1997...................... $ (1,588) 1998...................... $ (1,795) 1999...................... $ (1,683) 2000...................... $ (1,399) 2001...................... $ (1,374) Thereafter................ $(11,803) 6. CONVERTIBLE SUBORDINATED DEBENTURES On July 3, 1996, BBC closed the public offering of $57.5 million of its 6 3/4% convertible debentures ("6 3/4% Debentures") due July 1, 2006. The 6 3/4% Debentures are convertible into Class A Common Stock at an exercise price of $12.80 per share; representing an aggregate of 4,492,188 shares of Class A Common Stock. Net proceeds to BBC were $55.1 million net of underwriting discount and offering expenses. BBC contributed $35.0 million of the proceeds to BankAtlantic, and on October 11, 1996 BankAtlantic used the contribution to acquire BNA. The remaining net proceeds will be utilized by BBC for general corporate purposes including the repurchase of up to one million shares of BBC common stock. As of September 30, 1996, BBC repurchased in the secondary market 160,000 and 112,500 of Class A and Class B common shares, respectively. Any subsequent common stock repurchases are dependent upon market conditions and are subject to compliance with all applicable securities laws. BBC cannot declare or pay dividends on, or purchase, redeem or acquire for value its capital stock, return any capital to holders of capital stock as such, or make any distribution of assets to holders of capital stock as such, unless, from and after the date of any such dividend declaration (a "Declaration Date") or the date of any such purchase, redemption, payment of distribution specified above (a "Redemption Date"), BBC retains cash, cash equivalents (as determined in accordance with generally accepted accounting principles) or marketable securities (with a market value as measured on the applicable Declaration Date or Redemption Date) in an amount sufficient to cover the two consecutive semi-annual interest payments that will be due and payable on the 6 3/4% Debentures and on BBC's 9% Subordinated Debentures (the "9% Debentures") following such Declaration Date or Redemption Date, as the case may be. Any interest payment made by BBC with respect to the 6 3/4% Debentures or the 9% Debentures after any applicable Declaration Date or Redemption Date shall be deducted from the aggregate amount of cash or cash equivalents which BBC shall be required to retain pursuant to the foregoing provision. 7. EARNINGS PER SHARE The 6 3/4% Debentures are not common stock equivalents and therefore, will not affect primary net income per common and common equivalent share. However, convertible securities, if dilutive, are included in net income per common and common equivalent share calculations assuming full dilution. Fully diluted income per common share assumes the hypothetical conversion of the 6 3/4% Debentures by excluding the interest charges of the 6 3/4% Debentures from fully diluted net income and by increasing the weighted average number of common and common equivalent shares outstanding assuming full dilution. 8. LOANS RECEIVABLE -- NET The components of loans receivable - net: SEPTEMBER 30, DECEMBER 31, (IN THOUSANDS) 1996 1995 ---- ---- Real estate loans: ................................. Residential ......................................$ 514,890 $ 157,361 Residential held for sale ........................ 21,492 17,122 Construction and development ..................... 217,292 122,371 FHA and VA insured ............................... 4,255 5,183 Commercial ....................................... 346,789 350,256 Other loans: ....................................... Second mortgages - direct ........................ 74,178 63,052 Second mortgages - indirect ...................... 19,412 25,621 Commercial business .............................. 57,141 64,194 Deposit overdrafts ............................... 1,120 832 Consumer loans - other direct .................... 38,709 36,670 Consumer loans - other indirect .................. 109,628 96,042 ------- ------ Total gross loans............................. 1,404,906 938,704 --------- ------- Deduct: ............................................ Undisbursed portion of loans in process .......... 119,841 89,896 Unearned discounts on commercial real estate loans 730 793 Unearned discounts on consumer loans ............ 194 385 Allowance for loan losses ........................ 19,525 19,000 ------ ------ Loan receivable -- net........................$ 1,264,616 $ 828,630 ============== =========== During the nine months ended September 30, 1996, BankAtlantic purchased $315.2 million of residential first mortgage loans from various mortgage bankers and financial institutions located in various states. 9. RECLASSIFICATIONS Certain prior year balances have been reclassified to conform with the 1996 financial statement presentation. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations BBC's net income available for common stockholders for the quarter ended September 30, 1996 was $1.1 million or $.07 primary earnings per common and common equivalent share and $.09 fully diluted earnings per common and common equivalent share compared to net income available for common stockholders of $4.8 million or $.35 primary and fully diluted earnings per common and common equivalent share for the quarter ended September 30, 1995. BBC's net income available for common stockholders for the nine months ended September 30, 1996 was $11.4 million or $.76 primary earnings per common and common equivalent share and $.72 fully diluted earnings per common and common equivalent share compared to net income available for common stockholders of $13.7 million or $1.02 primary earnings per common and common equivalent share and $1.00 fully diluted earnings per common and common equivalent share for the nine months ended September 30, 1995. Included in BBC's net income for the three and nine months ended September 30, 1996 was a one-time SAIF special assessment which reduced net income by $4.4 million or $.29 and $.22 primary and fully diluted earnings per common and common equivalent share for the three months ended September 30, 1996, respectively, and $.29 and $.27 primary and fully diluted earnings per common and common equivalent share for the nine months ended September 30, 1996, respectively. Net interest income after provision for loan losses was $17.0 million for the September 30, 1996 quarter compared to $15.5 million for the quarter ended September 30, 1995. During the 1996 quarter, total interest income increased by $4.8 million primarily due to higher interest income earned on loans, partially offset by lower interest income on securities and investments. This increase in loan interest income reflects higher average balances resulting from the purchase of $315.2 million of residential first mortgage loans as well as loan originations. The decline in interest income on securities and investments resulted from lower average balances primarily due to $175.9 million of principal repayments and the sale of $163.0 million of mortgage-backed securities available for sale during the nine months ended September 30, 1996. During the three months ended September 30, 1996 total interest expense was $19.6 million compared to $16.7 million during the comparable 1995 period. The higher interest expense primarily resulted from deposit growth and increased borrowings, partially offset by lower average rates paid on borrowings. The increased borrowings reflect the issuance of $57.5 million of 6 3/4% convertible subordinated debentures in July 1996 and higher average borrowings due to increased loan balances. The decline in average rates paid on short term borrowings reflects a lower rate environment during 1996 compared to 1995. The provision for loan losses was $1.9 million for the three months ended September 30, 1996 compared to $1.4 million during the comparable 1995 period. The increased 1996 provision resulted from a $325,000 increase in the allowance for loan losses during the 1996 quarter compared to a $100,000 increase during the comparable 1995 quarter and higher consumer and commercial net loan charge-offs in the 1996 period compared to the same period during 1995. The increased allowance for loan losses reflects higher loan balances during the 1996 quarter compared to the same quarter during 1995. Non-interest income was $7.3 million for the three months ended September 30, 1996 compared to $5.6 million for the comparable 1995 period. The $1.7 million increase primarily related to $819,000 of higher ATM and transaction account fee income, and a $833,000 increase in gains on sales of mortgage servicing rights. Non-interest expense for the quarter ended September 30, 1996 was $22.4 million compared to $13.4 million for the same period in 1995. The net increase of $9.0 million primarily resulted from the $7.2 million one-time SAIF special assessment, $850,000 of additional compensation expenses and $531,000 of decreased gains on the sale of foreclosed assets. The increased employee compensation primarily related to the opening of eight additional branches since June 30 1995. The 1995 provision for income taxes was reduced by $319,000 due to a reduction in the deferred tax asset valuation allowance. Net interest income after provision for loan losses was $48.8 million for the nine months ended September 30, 1996 compared to $44.8 million for the comparable 1995 period. Total interest income increased due to greater interest income earned on loans partially offset by reduced interest income from securities. The increased loan interest income was the result of higher loan average balances primarily related to wholesale residential loan purchases and loan fundings. The lower securities interest income was caused by lower average balances resulting from sales of mortgage-backed securities and principal paydowns. The increased interest expense resulted from higher deposit average balances and the issuance of the $57.5 million of convertible debentures discussed above and $21.0 million of subordinated debentures issued during the latter part of 1995. Non-interest income was $20.9 million for the 1996 nine month period compared to $14.9 million during the comparable 1995 period. Increased gains on the sales of assets and increased ATM and transaction fee income were the primary reasons for the increase. Non-interest expense was $50.6 million for the nine months ended September 30, 1996 compared to $37.6 million during the comparable 1995 period. The increase was associated with items discussed above for the current quarter including the $7.2 million one-time SAIF assessment. The 1995 provision for income taxes was reduced by $900,000 due to a reduction in the deferred tax asset valuation allowance. Net Interest Income FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED September 30, September 30, ------------- ------------- (In thousands) 1996 1995 CHANGE 1996 1995 CHANGE ---- ---- ------ ---- ---- ------ Interest and fees on loans ............................$ 27,277 $ 19,127 $ 8,150 $ 69,487 $ 52,631 $ 16,856 Interest on debt securities available for sale ........ 9,313 1,342 7,971 29,039 4,126 24,913 Interest and dividends on investment securities ....... 1,931 3,387 (1,456) 4,845 9,811 (4,966) Interest on mortgage-backed securities held to maturity 0 9,827 (9,827) 0 30,155 (30,155) Interest on deposits .................................. (12,644) (12,243) (401) (37,356) (34,349) (3,007) Interest on advances from FHLB ........................ (2,625) (2,203) (422) (5,448) (5,589) 141 Interest on securities sold under agreements to repurchase ......................................... (2,846) (2,101) (745) (5,033) (8,886) 3,853 Interest on subordinated debentures and note payable .. (1,495) (157) (1,338) (2,489) (278) (2,211) ------ ---- ------ ------ ---- ------ Net interest income ..............................$ 18,911 $ 16,979 $ 1,932 $ 53,045 $ 47,621 $ 5,424 ========== ======== ======== ======== ======== ========= The increase in interest and fees on loans during the three months ended September 30, 1996 compared to the same period in 1995 reflected higher average balances resulting from wholesale residential loan purchases and loan fundings partially offset by lower rates earned on residential and consumer loans. Residential loan average balances were $355.0 million during the three months ended September 30, 1996 compared to $139.3 million during the comparable period during 1995. Loan fundings for portfolio were $198.6 million for the three months ended September 30, 1996 compared to $168.3 million for the comparable 1995 period. During the three months ended September 30, 1996 BankAtlantic purchased for portfolio $115.43 million of residential first mortgage loans from various mortgage bankers and financial institutions located in various states. As a result, total loans receivable, net increased from $1.1 billion at June 30, 1996 to $1.3 billion at September 30, 1996. The decrease in yields earned on residential loans resulted from an increase in adjustable rate loan balances and the purchased loans discussed above. Adjustable rate residential loans increased from $87.8 million at September 30, 1995 to $204.2 million at September 30, 1996. Yields on consumer loans were lower due to the origination of lower yielding loans during the latter part of 1995 and 1996 as well as payoffs of higher yielding loans. In December 1995, all mortgage-backed and investment securities, excluding tax certificates, then classified as held-to-maturity were reclassified as available for sale and all securities purchased during 1996 were also classified as available for sale; therefore, during 1996 there were no mortgage-backed securities held for investment. The decline in interest on securities and investments resulted from lower average balances. Average balances on investment securities declined from $793.0 million for the three months ended September 30, 1995 to 677.5 million for the comparable 1996 period. The decline in investment securities average balances reflected principal repayments and the sale of $163.0 million of mortgage-backed securities available for sale during the nine months ended September 30, 1996. The decline in average balances of securities and investments associated with such sales was partially offset by the $231.8 million purchase of treasury notes during the nine months ended September 30, 1996. The increase in interest on deposits for the quarter ended September 30, 1996 compared to the 1995 quarter resulted from higher average deposit balances and rates during 1996. Average deposit balances increased from $1.19 billion for the three months ended September 30, 1995 to $1.23 billion for the comparable period ended September 30, 1996, and average rates paid on deposits increased from 4.08% during the 1995 quarter to 4.11% during the 1996 quarter. The increase in the rates paid on deposits reflected higher rates paid on money market funds partially offset by lower certificate of deposit rates. The increase in interest expense on advances from FHLB was primarily due to higher average balances partially offset by lower average rates. Advances from FHLB average balances during the quarter increased from $132.6 million during 1995 to $170.3 million during 1996, and average rates paid on advances from FHLB declined from 6.59% during the 1995 three month period to 6.16% during the same period in 1996. The additional interest expense on securities sold under agreements to repurchase resulted from higher average balances. Securities sold under agreements to repurchase average balances increased from $180.9 million during the three months ended September 30, 1995 to $216.0 million during the comparable 1996 three month period. The higher average balance of advances from FHLB and securities sold under agreements to repurchase resulted from increased average loan balances discussed above. The interest on subordinated debentures and note payable relates to the issuance of $57.5 million of convertible subordinated debentures in July 1996, the $21.0 million of debentures issued in September and October 1995 and a $4.0 million note issued in March 1995 which was subsequently paid in March 1996. During the nine months ended September 30, 1996, net interest income increased by $5.4 million. The increase in total interest income was impacted by higher average loan balances partially offset by lower average balances on securities and investment. Average loan balances increased from $719.4 million during the nine months ended September 30, 1995 to $992.3 million during the comparable 1996 period. Securities and investments average balances declined from $869.0 million during the nine months ended September 30, 1995 to $686.6 million during the comparable 1996 period. The yields on interest earning assets increased from 8.12% for the 1995 nine month period to 8.21% during the same period in 1996. The higher yields reflected a change in the mix of interest earning assets from lower yielding securities and investments to higher yielding loans. The average yield on loans was 9.34% for the nine months ended September 30, 1996 compared to 9.75% during the comparable 1995 period, while the average yield on securities was 6.76% during the 1995 nine month period compared to 6.58% for the comparable 1996 period. The increase in total interest expense was primarily related to higher deposit average balances and the issuance of the subordinated debentures discussed above, partially offset by a decline in average balances and rates of securities sold under agreements to repurchase. PROVISION FOR LOAN LOSSES The provision for loan losses for third quarter 1996 was $1.9 million compared to $1.4 million during the comparable 1995 period. The provision for the 1996 quarter resulted in a $325,000 increase in the allowance for loan losses related to loan growth and $420,000 of commercial loan net charge-offs compared to a $100,000 increase in the allowance for loan losses and $238,000 of non-mortgage commercial loan net charge-offs during the third quarter of 1995. In addition, residential loan net charge-offs were $27,000 during the 1996 quarter compared to net charge-offs of $14,000 during the 1995 quarter. Consumer loan net charge-offs were $1.1 million for the three months ended September 30, 1996 and 1995. Consumer loan indirect net charge-offs increased by $292,000 and Subject Portfolio net charge-offs declined by $164,000. The increased 1996 commercial non-mortgage loan net charge-offs resulted primarily from a $450,000 charge-off of one non-mortgage commercial loan. The provision for loan losses for the nine months ended September 30, 1996 increased $1.4 million from the comparable 1995 period. The increase primarily related to $1.0 million of additional consumer loan net charge-offs during 1996 compared to 1995, and $262,000 of commercial loan net charge-offs compared to $337,000 of recoveries during 1995. Net charge-offs from indirect automobile loans were $2.3 million during the 1996 nine month period compared to $1.0 during the comparable 1995 period. Subject Portfolio net charge-offs during the 1996 nine month period were $592,000 compared to $828,000 during the comparable 1995 period. The following table presents the amounts of BBC's risk elements and non-performing assets (in thousands): SEPTEMBER 30, DECEMBER 31, 1996 1995 ---- ---- Nonaccrual Tax certificates .................... $ 2,698 $ 2,044 Loans ............................... 6,585 11,174 ------- ------- 9,283 13,218 ------- ------- Repossessed Assets: Real estate owned .................... 5,451 6,279 Repossessed assets ................... 359 461 ------- ------- 5,810 6,740 Contractually past due 90 days or more (1) 812 1,536 ------- ------- Total non-performing assets ..... 15,905 21,494 Restructured loans ....................... 3,672 2,533 ------- ------- Total risk elements ............ $19,577 $24,027 ======= ======= (1) The majority of these loans have matured and the borrower continues to make payments under the matured loan agreement. BankAtlantic is in the process of renewing or extending these matured loans. BankAtlantic's "risk elements" consist of restructured loans and "non-performing" assets. The classification of loans as "non-performing" is generally based upon non-compliance with loan performance and collateral coverage standards, as well as management's assessment of problems relating to the borrower's or guarantor's financial condition. BankAtlantic generally designates any loan that is 90 days or more delinquent as non-performing. BankAtlantic may designate loans as non-performing prior to the loan becoming 90 days delinquent, if the borrower's ability to repay is questionable. A "non-performing" classification alone does not indicate an inherent principal loss; however, it generally indicates that management does not expect the asset to earn a market rate of return in the current period. Restructured loans are loans for which BankAtlantic has modified the loan terms due to the financial difficulties of the borrower. The decrease in total risk elements at September 30, 1996 as compared to December 31, 1995 primarily relates to decreases in non-accrual loans, loans contractually past due 90 days or more, and real estate owned. The above decreases were partially offset by increases in restructured loans and non-accrual tax certificates. The $4.6 million decrease in nonaccrual loans primarily resulted from the restructuring of a $1.4 million commercial real estate loan, the pay-off of a $1.6 million commercial non-residential loan, the foreclosure of a $680,000 office building loan, and the reinstatement of a $391,000 commercial real estate loan to accruing status. Furthermore, residential non-accrual loans decreased from $2.2 million at December 31, 1995 to $1.7 million at September 30, 1996. The increase in restructured loans reflects the nonaccrual loan restructured above less cash repayments. The decline in real estate owned balances reflects the sale of $2.3 million of properties during the nine month period ending September 30, 1996 partially offset by the office building foreclosure discussed above and residential loan foreclosures. Furthermore, tax certificate nonaccrual balances increased by $654,000 due to the aging of tax certificates in the portfolio, while loans contractually past due 90 days or more declined by $724,000 resulting from loan renewals and loan repayments. Non-Interest Income FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------- ------------- (In thousands) 1996 1995 CHANGE 1996 1995 CHANGE ---- ---- ------ ---- ---- ------ Loan servicing and other loan fees ................. $ 956 $ 885 $ 71 $ 2,900 $ 2,728 $ 172 Gains on sale of loans originated for resale ....... 1 49 (48) 287 202 85 Realized gains on trading account securities ...................................... 0 16 (16) 0 589 (589) Gains on sale of mortgage servicing rights ......... 2,554 1,721 833 2,554 2,744 (190) Gains on sales of debt securities available for sale 0 0 0 3,946 0 3,946 Other .............................................. 3,796 2,892 904 11,168 8,643 2,525 ----- ----- --- ------ ----- ----- Total non-interest income ....................... $7,307 $ 5,563 $ 1,744 $ 20,855 $ 14,906 $ 5,949 ====== ======= ======= ======== ======== ======= The increase in loan servicing and other loan fees during the three month period in 1996 compared to the corresponding 1995 period resulted from higher mortgage and consumer loan late fee income. Mortgage and consumer loan late fee income increased from $145,000 during the three months ended September 30, 1995 to $262,000 during the comparable 1996 period. The increased late fee income was partially offset by a $58,000 decline in commercial loan commitment fees during the comparable three month period. The increase in loan servicing and other loan fees during the nine months ended September 30, 1996 resulted from higher commercial loan commitment fees, and increased late fee income, partially offset by lower loan servicing income. Commitment and late fee income increased from $390,000 and $420,000, respectively, during the nine months ended September 30, 1996 to $492,000 and $698,000, respectively during the comparable 1996 period. The increased commitment and late fee income was partially offset by lower loan servicing income due to increased amortization of mortgage servicing rights based on increased residential loan prepayments. During the three and nine months ended September 30, 1996 and 1995, BankAtlantic sold $11.4 million and $8.5 million and $44.8 million and $20.5 million, respectively, of recently originated residential loans for gains as reported in the above table. During the three and nine months ended September 30, 1996, BankAtlantic sold $11.3 million of mortgage servicing rights for gains as reported in the above table. These rights related to approximately $736.9 million of loans serviced for others. During the three and nine months ended September 30, 1995, BankAtlantic sold $3.2 million and $5.6 million of mortgage servicing rights for gains as reported in the above table. These rights related to approximately $292.7 million and $492.1 million of loans serviced for others During the nine months ended September 30, 1996, BankAtlantic sold from its available for sale portfolio $136.6 million of adjustable rate mortgage-backed securities, $20.5 million of 15 year mortgage-backed securities and $5.9 million of seven year balloon mortgage-backed securities for gains, as reported in the above table. The realized gains on trading account securities during 1995 related to two $5.0 million U.S. treasury notes acquired upon the exercise of European put options in 1993. The treasury notes were subsequently sold during August 1995. The increase in other non-interest income during the three months ended September 30, 1996 compared to the 1995 period was due to higher fees earned on checking accounts and ATM services. Checking account income and ATM fees were $2.0 million and $1.1 million for the third quarter 1996, respectively, compared to $1.8 million and $513,000, respectively, during the comparable 1995 period. Furthermore, lease income increased by $89,000 due to additional rents received on a leased property. In April 1996 BankAtlantic's ATM network initiated surcharge fees for non-customers. The significant increase in ATM fee income was primarily the result of this surcharge fee. The additional checking account income reflects higher fees earned on overdrafts and demand deposit accounts based on higher balances of transaction accounts. The increase in other non-interest income during the nine months ended September 30, 1996 compared to the 1995 period was due to the items discussed above. Checking account income and ATM fees were $6.0 million and $2.8 million for nine months ended September 30, 1996, respectively, compared to $5.1 million and $1.5 during the comparable 1995 period, respectively. Lease income increased from $427,000 during the 1995 nine month period to $724,000 during the comparable 1996 period. NON-INTEREST EXPENSES FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------- ------------- (IN THOUSANDS) 1996 1995 CHANGE 1996 1995 CHANGE - -------------- ---- ---- ------ ---- ---- ------ Employee compensation and benefits .... $ 7,422 $ 6,572 $ 850 $ 21,841 $ 19,390 $ 2,451 Occupancy and equipment ............... 2,980 2,772 208 8,671 7,964 707 Federal insurance premium ............. 689 705 (16) 1,949 2,097 (148) Advertising and promotion ............. 394 528 (134) 1,631 1,722 (91) Foreclosed asset activity, net ........ (36) (495) 459 (545) (3,319) 2,774 SAIF special assessment ............... 7,160 0 7,160 7,160 0 7,160 Amortization of cost over fair value of net assets acquired ................ 306 306 0 918 816 102 Other ................................. 3,457 2,997 460 8,947 8,886 61 -------- --------- ------- --------- -------- -------- Total non-interest expenses ....... $ 22,372 $ 13,385 $ 8,987 $ 50,572 $ 37,556 $ 13,016 ======== ========= ======= ========= ======== ======== The increase in employee compensation and benefits during the three and nine months ended September 30, 1996 reflected an increase in the number of full time equivalent employees from 746 at December 31, 1995 to 775 at September 30, 1996 as well as annual salary increases and additional temporary employees. The increase in the number of employees primarily related to the opening of five branches since December 31, 1995. Occupancy and equipment expenses increased due to the new branches mentioned above, higher data equipment maintenance costs and increased depreciation expenses. Depreciation expense increased during the three and nine month period by $105,000, and $242,000, respectively. The additional depreciation expense resulted from the purchase of $9.1 million of fixed assets during the nine months ended September 30, 1996. The amortization of cost over fair value of net assets acquired for the three and nine months ended September 30, 1996 related to the acquisition of MegaBank in 1995. The components of "Foreclosed asset activity, net" were (in thousands): FOR THE THREE MONTHS FOR THE NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, ------------------- ------------------- Real estate acquired in settlement of loans: 1996 1995 1996 1995 ---- ---- ---- ---- Operating income, net ...................$ 151 $ 152 $ 1 $ 66 Provision for (reversal of) losses on REO (200) (400) (200) (1,400) Net loss (gains) on sales ............... 13 (247) (346) (1,985) ---------- ------- ------- ------- Foreclosed asset activity, net ..........$ (36) $ (495) $ (545) $(3,319) ========== ======= ======= ======= The lower earnings in foreclosed asset activity, net during the three months ended September 30, 1996 were primarily due to decreases in gains on sale of real estate owned and lower REO loss reversals. During the three months ended September 30, 1995, BankAtlantic sold a non-residential real estate property with a book value of $900,000 for a $26,000 loss and recognized gains of $13,000 on sales of various residential REO properties. The reversal of the REO allowances related to the sales mentioned above. During the three months end September 30, 1995, BankAtlantic sold various residential properties for gains as shown on the above table and reversed REO reserves based on sales of several parcels of vacant land. The lower foreclosed asset activity, net for the nine months ended September 30, 1996 resulted from a $1.3 million gain on the sale of nonresidential real estate owned, acquired through tax certificate operations during the 1995 period and a reversal of the allowance for losses on real estate owned during the nine months ended September 30, 1995 due to the sale of the vacant land referred to above. The increase in other non-interest expenses during the three months ended September 30, 1996 was caused by a $263,000 write-off of data equipment due to the conversion of BankAtlantic's data processing functions to a third party vendor in October 1996. Installment loan and telephone expenses increased by $108,000 and $89,000, respectively. The higher installment loan expenses reflected an increase in repossession and loan origination expenses during the 1996 quarter compared to the same 1995 period. The higher telephone expenses were primarily caused by additional branch locations. Other non-interest expenses were $8.9 million for the nine months ended September 30, 1996 and 1995. Expense increases associated with the opening of branches such as stationery, printing , supplies, telephone and ATM operations were offset by recoveries in the tax certificate provision and lower general corporate expenses. FINANCIAL CONDITION BankAtlantic's total assets at September 30, 1996 were $2.2 billion compared to $1.75 billion at December 31, 1995. Loans receivable, net and tax certificates increased by $436.0 million and $16.0 million, respectively. The increase in loans receivable, net reflects $315.2 million of residential loan purchases and $555.6 million of loan fundings for portfolio. The loan fundings were partially offset by $432.5 million of loan principal repayments. The higher tax certificate balances reflected $56.0 million of tax certificate purchases ($49.8 million at auction) partially offset by $40.3 million of tax certificate redemptions. Debt securities available for sale decreased by $76.1 million. The decline in debt securities available for sale reflected the sale of $163.0 million of mortgage-backed securities and $135.6 million of principal reductions, partially offset by the purchase of $231.8 million of treasury notes. At September 30, 1996 total deposits, FHLB advances and securities sold under agreements to repurchase increased by $51.8 million, $15.2 million and $224.2 million, respectively. The increase in deposits resulted from money fund deposit and interest free checking growth. Money fund deposits and interest free checking increased from $249.3 million and $99.0 million at December 31, 1995 to $312.1 million and $104.3 million at September 30, 1996, respectively, The deposit inflows, additional securities sold under agreements to repurchase, proceeds from mortgage-backed securities sales, principal repayments, and the $49.0 million contributed to BankAtlantic's capital by BBC from the issuance of Class A common stock and the 6 3/4% convertible subordinated debentures which were used to fund loan growth, tax certificate purchases, and treasury note purchases. On October 11, 1996, BankAtlantic used capital contributions from BBC to acquire Bank of North America Bancorp, Inc. for $53.8 million. LIQUIDITY AND CAPITAL RESOURCES On July 3, 1996, BBC closed the public offering of $57.5 million of its 6 3/4% Debentures due July 1, 2006. The 6 3/4% Debentures are convertible into Class A Common Stock at an exercise price of $12.80 per share; representing an aggregate of 4,492,188 shares of Class A Common Stock. Net proceeds to BBC were $55.1 million net of underwriting discount and offering expenses. BBC contributed $35.0 million of the proceeds to BankAtlantic, and on October 11, 1996 BankAtlantic used the contribution to acquire BNA. The remaining net proceeds will be utilized by BBC for general corporate purposes including the repurchase of up to one million shares of BBC common stock. As of September 30, 1996, BBC repurchased in the secondary market 160,000 and 112,500 of Class A and Class B common shares, respectively. Any subsequent common stock repurchases are dependent upon market conditions and are subject to compliance with all applicable securities laws. BBC cannot declare or pay dividends on, or purchase, redeem or acquire for value its capital stock, return any capital to holders of capital stock as such, or make any distribution of assets to holders of capital stock as such, unless, from and after the date of any such dividend declaration (a "Declaration Date") or the date of any such purchase, redemption, payment of distribution specified above (a "Redemption Date"), BBC retains cash, cash equivalents (as determined in accordance with generally accepted accounting principles) or marketable securities (with a market value as measured on the applicable Declaration Date or Redemption Date) in an amount sufficient to cover the two consecutive semi-annual interest payments that will be due and payable on the 6 3/4% Debentures and on BBC's 9% Subordinated Debentures (the "9% Debentures") following such Declaration Date or Redemption Date, as the case may be. Any interest payment made by BBC with respect to the 6 3/4% Debentures or the 9% Debentures after any applicable Declaration Date or Redemption Date shall be deducted from the aggregate amount of cash or cash equivalents which BBC shall be required to retain pursuant to the foregoing provision. Payment of interest and ultimate repayment of the 6 3/4% and 9% Debentures is significantly dependent upon the operations and distributions from BankAtlantic. BBC's primary sources of funds during the nine months of 1996 were from its public offerings of its Class A Common Stock, 6 3/4 % Debentures and dividends from BankAtlantic. The primary use of funds during the nine month period was to contribute $49 million of capital to BankAtlantic, payment of cash dividends to common stockholders and interest expense on its outstanding 9% Debentures. It is anticipated that funds for interest and dividend payments will continue to be obtained from BankAtlantic. Additionally, the ultimate repayment by BBC of its outstanding 6 3/4% Convertible Debentures and 9% Debentures may be dependent upon dividends from BankAtlantic, refinancing of the debt or raising additional equity capital by BBC. BBC currently anticipates that it will pay regular quarterly cash dividends on its common stock. Payment of interest and ultimate repayment of the 6 3/4% and 9% Debentures is significantly dependent upon the operations and distributions from BankAtlantic. BankAtlantic's primary sources of funds during the nine months of 1996 were from operations, principal collected on loans, mortgage-backed securities, investment securities, sales of debt securities available for sale and mortgage servicing rights, deposit inflows, proceeds from the capital contribution from BBC, securities sold under agreements to repurchase, and advances from borrowers for taxes and insurance. These funds were primarily utilized for loan purchases and fundings, and the purchase of tax certificates, treasury notes and subsequently on October 11, 1996 the acquisition of BNA. At September 30, 1996, BankAtlantic met all applicable liquidity and regulatory capital requirements. Commitments to originate loans at September 30, 1996 were $101.1 million compared to $73.9 million at September 30, 1995. Commitments to purchase residential loans were $62.5 million and $0 at September 30, 1996 and 1995, respectively. BankAtlantic expects to fund the 1996 loan commitments from loan and debt securities available for sale repayments. At September 30, 1996, loan commitments were 12.9% of loans receivable, net. At September 30, 1996, BankAtlantic's regulatory capital position was: TANGIBLE CORE TOTAL RISK-BASED CAPITAL CAPITAL CAPITAL ------- ------- ------- (DOLLARS IN THOUSANDS) BALANCE % BALANCE % BALANCE % ------- - ------- - ------- - Capital calculated under GAAP .......... $ 189,072 $ 189,072 $ 189,072 Adjustments: Non-includable subsidiaries ........ (110) (110) (110) Unrealized holding losses .......... 10 10 10 Non-qualifying intangible assets .. (10,392) (10,392) (10,392) Allowable allowance for loan and tax certificate losses ............... 17,000 ------- ---- ------- ---- ------- ----- Regulatory capital ..................... 178,580 8.29% 178,580 8.29% 195,580 14.41% Required minimum capital ............... 32,293 1.50% 64,587 3.00% 108,581 8.00% ------- ---- ------- ---- ------- ----- Excess regulatory capital .............. $ 146,287 6.79% $ 113,993 5.29% $ 86,999 6.41% ========= ==== ========= ==== ========= ==== Savings institutions are also subject to the provisions of the Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"). Regulations implementing the prompt corrective action provisions of FDICIA define specific capital categories based on FDICIA's defined capital ratios, as discussed more fully in BBC's Annual Report on Form 10K for the year ended December 31, 1995. At September 30, 1996, BankAtlantic's core, Tier 1 risk-based and total risk-based capital ratios were 8.29%, 13.16% and 14.41%, respectively. Based on these capital ratios, BankAtlantic meets the definition of a well capitalized institution. On September 30, 1996, President Clinton signed in law H.R. 3610, which is intended to recapitalize the SAIF and substantially bridge the assessment rate disparity existing between SAIF and BIF insured institutions. The new law subjects institutions with SAIF assessable deposits, including BankAtlantic, to a one-time assessment of approximately 0.657% of covered deposits at March 31, 1995. BankAtlantic's one-time assessment resulted in a pre-tax charge of approximately $7.2 million for the three and nine months ended September 30, 1996, which is payable not later than November 29, 1996, and, under provisions of the new law, may be treated for tax purposes as a fully deductible "ordinary and necessary business expense" when paid. On August 9, 1996, Congress passed the Small Business Job Protection Act of 1996 (the "Act"). Included in the Act was the repeal of the thrift bad debt deduction for income tax purposes, and a change in the bad debt reserve recapture rules. As a result of the change, BankAtlantic must change from the reserve method of accounting to the specific charge-off method. Furthermore, BankAtlantic is required to recapture into taxable income over a six year period the portion of its bad debt reserves that exceeds its base year reserves which is estimated at $3.9 million. The change in the method of accounting for bad debt deductions should have no effect on BankAtlantic's net income. Except for the residential loan servicing operation, all data processing functions were previously performed by BankAtlantic. On April 24, 1996, BankAtlantic signed a contract with M&I Data Services, a division of the Marshall & Ilsley Corporation, ("M&I") to provide data processing services for seven years. The conversion to the M&I service bureau was completed on October 11, 1996. The purpose of the conversion is to increase capacity as well as improve customer service. The estimated annual expense for the service bureau is approximately $2.4 million. The additional costs associated with the conversion are anticipated to be $2.1 million in technology upgrades, primarily associated with the cost of new computer equipment. OTHER INFORMATION ITEM 1: LEGAL PROCEEDINGS JOSE DANIEL RUIZ CORONADO VS. BANKATLANTIC BANCORP, INC. IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF FLORIDA. CASE NO. 96-7115-CIV-GONZALEZ. This action was filed as a purported class action on September 27, 1996 on behalf of certain account holders of BankAtlantic whose bank accounts were seized by Federal Authorities. The complaint alleges that the financial privacy rights of the account holders under various Federal and State laws were violated. Management believes that the allegations are without merit. EXHIBITS Exhibit Description ------- ----------- 23 Consent of KPMG Peat Marwick L.L.P. 27 Financial Data Schedule. 99.1 Bank of North America Bancorp, Inc. December 31, 1995 Financial Statements (Audited). 99.2 Bank of North America Bancorp, Inc. September 30, 1996 Financial Statements (Unaudited). Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BANKATLANTIC BANCORP, INC. October 28, 1996 By: /s/Alan B. Levan -------------------- ------------------ Date Alan B. Levan Chief Executive Officer/ Chairman October 28, 1996 By: /s/Jasper R. Eanes ---------------- ------------------ Jasper R. Eanes Executive Vice President/ Chief Financial Officer