Edgar Filing: BFC FINANCIAL CORP

BFC Financial Corporation

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K/A

(Amendment No. 1)


þ		Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

		For the Year Ended December 31, 2004

o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number

333-72213

BFC Financial Corporation

(Exact name of registrant as specified in its Charter)


Florida		59-2022148
(State of Organization)		(IRS Employer Identification Number)

2200 West Cypress Creek Road Ft. Lauderdale, Florida (Address of Principal Executive Office)		33309 (Zip Code)

Registrant’s telephone number, including area code

(954) 940-4900

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:


(Title of Class)		(Name of Exchange on Which Registered)

Class A Common Stock $.01 par Value		NASDAQ National Market
Class B Common Stock $.01 par Value		None

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate, by check mark, if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes þ No o

The aggregate market value of the voting common equity held by non-affiliates was $103.7 million computed by reference to the closing price of the Registrant’s Class A Common Stock and Class B Common Stock on June 30, 2004.

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of March 7, 2005

Class A Common Stock of $.01 par value, 23,862,232 shares outstanding.

Class B Common Stock of $.01 par value, 4,278,956 shares outstanding.

Documents Incorporated by Reference in Part IV of this Form 10-K:

Portions of Registrant’s Definitive Proxy Statement relating to the 2005 Annual Meeting of Shareholders is incorporated in Part III of this

EXPLANATORY NOTE

BFC Financial Corporation (the “Company”) is filing this report on Form 10-K/ A as Amendment No. 1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, originally filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2005 (the “Original Report”) for the purpose of amending Item 8 — Financial Statements and Supplementary Data to include the Report of Independent Registered Public Accounting Firm of Ernst & Young LLP (the “EY Report”). The EY Report relates to the audit of Bluegreen Corporation, a company in which a subsidiary of the Company owns an approximate 31% equity interest. The EY Report was not included in the Original Report.

Except for the correction described above, the Company has not modified or updated disclosures presented in the Original Report. Accordingly, this Form 10-K/ A does not reflect events occurring after the filing of the Original Report or modify or update those disclosures affected by subsequent events. Information not affected by this amendment is unchanged and reflects the disclosure made at the time the Original Report was filed. This Form 10-K/ A should be read in conjunction with the Original Report and the filings made with the SEC subsequent to the filing of the Original Report, including any amendments to any such filings.


ITEM 8.	*FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA*

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Report of Independent Registered Certified Public Accounting Firm of PricewaterhouseCoopers LLP		1-2

Report of Independent Registered Certified Public Accounting Firm of Ernst & Young LLP		3

Report of Independent Registered Public Accounting Firm of KPMG LLP		4

Financial Statements:

	Consolidated Statements of Financial Condition as of December 31, 2004 and 2003	5

	Consolidated Statements of Operations for each of the years in the three year period ended December 31, 2004	6-7

	Consolidated Statements of Comprehensive Income for each of the years in the three year period ended December 31, 2004	8

	Consolidated Statements of Shareholders’ Equity for each of the years in the three year period ended December 31, 2004	9

	Consolidated Statements of Cash Flows for each of the years in the three year period ended December 31, 2004	10-13

	Notes to Consolidated Financial Statements	14

REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of BFC Financial Corporation:

We have completed an integrated audit of BFC Financial Corporation’s 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2004 and an audit of its 2003 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits and the report of other auditors, are presented below.

Consolidated financial statements

In our opinion, based on our audits and the report of other auditors, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of BFC Financial Corporation and its subsidiaries at December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Bluegreen Corporation, an investment of the Company accounted for under the equity method (Note 9 to the consolidated financial statements). Those statements were audited by other auditors whose report thereon has been furnished to us, and our opinion expressed herein, insofar as it relates to the amounts included for Bluegreen Corporation, is based solely on the report of the other auditors. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. The financial statements of the Company for the year ended December 31, 2002, were audited by other independent accountants whose report dated February 3, 2003, except as to the first paragraph of note 1 and note 24, which is as of February 11, 2005, expressed an unqualified opinion on those statements.

Internal control over financial reporting

Also, in our opinion, based on our audit, management’s assessment, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of December 31, 2004 based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, based on our audit, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control — Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Management’s assessment and our audit of BFC Financial Corporation’s internal control over financial reporting also included controls over the preparation of financial statements in accordance with the instructions to the Consolidated Financial Statements for Bank Holding Companies (Form FRY-9C) to comply with the reporting requirements of

REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM — (Continued)

Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA). A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PricewaterhouseCoopers LLP

Fort Lauderdale, Florida

March 16, 2005

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of

Bluegreen Corporation

We have audited the consolidated balance sheets of Bluegreen Corporation (the Company) as of December 31, 2003 and 2004, and the related consolidated statements of income, shareholders’ equity and cash flows for the nine-month period ended December 31, 2002 and each of the two years in the period ended December 31, 2004 (not presented separately herein). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above (not presented separately herein) present fairly, in all material respects, the consolidated financial position of Bluegreen Corporation at December 31, 2003 and December 31, 2004, and the consolidated results of its operations and its cash flows for the nine months ended December 31, 2002 and each of the years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, in the nine months ended December 31, 2002, the Company changed its method of accounting for the cost associated with generating vacation ownership tours.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Bluegreen Corporation’s internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 15, 2005 expressed an unqualified opinion thereon.



	ERNST & YOUNG LLP


	Certified Public Accountants

March 15, 2005

Miami, Florida

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

BFC Financial Corporation:

We have audited the accompanying consolidated statements of operations, shareholders’ equity and comprehensive income and cash flows of BFC Financial Corporation and subsidiaries for the year ended December 31, 2002. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of BFC Financial Corporation and subsidiaries for the year ended December 31, 2002, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for goodwill and intangible assets in 2002.

KPMG LLP

Fort Lauderdale, Florida

February 3, 2003, except as to note 25, which is as of February 11, 2005

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


			December 31,

			2004		2003

			(In thousands,
			except share data)
ASSETS
Cash and due from depository institutions			$	208,627	$	143,542
Federal funds sold and securities purchased under resell agreements				16,093		—
Securities owned (at fair value)				125,443		124,565
Securities available for sale (at fair value)				749,001		360,442
Investment securities and tax certificates (approximate fair value: $317,416 and $192,706)				317,891		192,706
Federal Home Loan Bank stock, at cost which approximates fair value				78,619		40,325
Loans receivable, net of allowance for loan losses of $47,082 and $46,667				4,561,073		3,611,612
Accrued interest receivable				35,995		27,912
Properties and equipment, net				160,997		98,340
Real estate held for development and sale				444,631		280,708
Investments in and advances to unconsolidated subsidiaries				89,090		106,048
Goodwill				77,981		76,674
Core deposit intangible asset				10,270		11,985
Due from clearing agent				16,619		—
Other assets				62,517		61,376

		Total assets	$	6,954,847	$	5,136,235

LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Interest bearing deposits			$	2,566,804	$	2,413,106
Non-interest bearing deposits				890,398		645,036

	Total deposits			3,457,202		3,058,142
Customer deposits on real estate held for sale				43,022		52,134
Advances from FHLB				1,544,497		782,205
Securities sold under agreements to repurchase				257,002		120,874
Federal funds purchased				105,000		—
Subordinated debentures, notes and bonds payable				278,605		164,100
Junior subordinated debentures				263,266		263,266
Securities sold not yet purchased				39,462		37,813
Due to clearing agent				—		8,583
Deferred tax liabilities, net				8,455		2,895
Other liabilities				220,433		140,614

	Total liabilities			6,216,944		4,630,626

Minority interest				612,652		419,934

Shareholders’ equity:
Preferred stock of $.01 par value; authorized 10,000,000 shares; 5% Cumulative Convertible Preferred Stock (“5% Preferred Stock”) issued and outstanding 15,000 shares in 2004 and none in 2003				—		—
Class A common stock of $.01 par value, authorized 70,000,000 shares; issued and outstanding 23,861,542 in 2004 and 17,989,194 in 2003				217		163
Class B common stock of $.01 par value, authorized 20,000,000 shares; issued and outstanding 4,279,656 in 2004 and 2,534,426 in 2003				41		23
Additional paid-in capital				50,962		24,654
Retained earnings				73,089		59,305

	Total shareholders’ equity before accumulated other comprehensive income			124,309		84,145
Accumulated other comprehensive income				942		1,530

	Total shareholders’ equity			125,251		85,675

Total liabilities and shareholders’ equity			$	6,954,847	$	5,136,235

See accompanying notes to consolidated financial statements.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS


		For the Years Ended December 31,

		2004			2003			2002

		(In thousands, except per share data)
Revenues
Financial Services:
	Interest and dividend income	$	258,181		$	260,621		$	303,087
	Investment banking		227,669			207,788			130,738
	Other income, net		115,728			73,501			58,519

			601,578			541,910			492,344

Homebuilding and Real Estate Development:
	Sales of real estate		549,652			283,058			207,808
	Interest and dividend income		1,108			863			1,259
	Other income		8,078			4,765			3,014

			558,838			288,686			212,081

Other Operations:
	Interest and dividend income		659			390			354
	Other income, net		5,526			1,318			982

			6,185			1,708			1,336

			1,166,601			832,304			705,761

Costs and Expenses
Financial Services:
	Interest expense, net of interest capitalized		87,471			111,989			150,336
	(Recovery) provision for loan losses		(5,109	)		(547	)		14,077
	Employee compensation and benefits		255,064			226,940			166,979
	Occupancy and equipment		48,146			40,036			39,196
	Advertising and promotion		21,036			12,724			10,447
	Amortization of intangible assets		1,715			1,772			1,360
	Impairment of securities		—			—			18,801
	Cost associated with debt redemption		11,741			12,543			3,125
	Acquisition related charges and impairments		—			—			4,925
	Other expenses		74,351			74,857			57,935

			494,415			480,314			467,181

Homebuilding and Real Estate Development:
	Cost of sales of real estate		403,900			209,431			159,675
	Interest expense, net of interest capitalized		259			233			389
	Employee compensation and benefits		35,321			19,845			13,983
	Selling, general and administrative expenses		34,797			21,968			16,083
	Other expenses		7,341			1,692			1,532

			481,618			253,169			191,662

Other Operations:
	Interest expense		1,171			1,163			1,153
	Employee compensation and benefits		3,865			2,553			2,332
	Impairment of securities		363			3,071			1,583
	Other expenses		2,551			1,022			876

			7,950			7,809			5,944

			983,983			741,292			664,787

	Income before income taxes and equity in earnings from unconsolidated subsidiaries		182,618			91,012			40,974
	Equity in earnings from unconsolidated subsidiaries		19,603			10,126			9,327

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS — (Continued)


		For the Years Ended December 31,

		2004		2003		2002

		(In thousands, except per share data)
Income before income taxes, minority interest, discontinued operations, extraordinary items and cumulative effect of a change in accounting principle			202,221		101,138		50,301
Provision for income taxes			83,997		44,166		17,993
Minority interest in income of consolidated subsidiaries			103,994		51,093		38,294

Income from continuing operations			14,230		5,879		(5,986	)
Discontinued operations, less income tax (benefit) provision of $(517) in 2003 and $303 in 2002			—		1,143		2,536
Extraordinary items, less income taxes of $2,771			—		—		23,749
Cumulative effect of a change in accounting principle, less income tax (benefit) provision of $(1,246) in 2002			—		—		(15,107	)

Net income			14,230		7,022		5,192
5% Preferred Stock dividends			392		—		—

Net income available to common shareholders		$	13,838	$	7,022	$	5,192

Earnings per share:
Basic earnings (loss) per share before discontinued operations, extraordinary items and cumulative effect of
	a change in accounting principle	$	0.57	$	0.26	$	(0.27	)
Basic earnings per share from discontinued operations			—		0.05		0.11
Basic earnings per share from extraordinary items			—		—		1.06
Basic loss per share from cumulative effect of a change in accounting principle			—		—		(0.67	)

Basic earnings per share		$	0.57	$	0.31	$	0.23

Diluted earnings (loss) per share before discontinued operations, extraordinary items and cumulative effect of a change in accounting principle		$	0.47	$	0.21	$	(0.28	)
Diluted earnings per share from discontinued operations			—		0.04		0.11
Diluted earnings per share from extraordinary items			—		—		1.04
Diluted loss per share from cumulative effect of a change in accounting principle			—		—		(0.66	)

Diluted earnings per share		$	0.47	$	0.25	$	0.21

Basic weighted average number of common shares outstanding			24,183		22,818		22,454
Diluted weighted average number of common and common equivalent shares outstanding			27,806		26,031		22,454

See accompanying notes to consolidated financial statements.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	For the Years Ended December 31,

	2004			2003			2002

	(In thousands)
Net income	$	14,230		$	7,022		$	5,192

Other comprehensive income (loss), net of tax:
Unrealized gains (loss) on securities available for sale, net of income tax provision (benefit) $281 in 2004, $ in $(620) in 2003 and $153 in 2002		448			(988	)		244
Minimum pension liability net of income tax provision (benefit) $(416) in 2004, $639 in 2003 and $(650) in 2002		(662	)		1,018			(1,035	)
Unrealized gain (loss) associated with investment in unconsolidated real estate subsidiary, net of income tax provision (benefit) $(17) in 2004, $79 in 2003 and $(39) in 2002		(42	)		121			(62	)
Accumulated gains associated with cash flow hedges, net of income tax $198 in 2003 and $(80) in 2002		—			315			(127	)
Reclassification adjustment for cash flow hedges		—			70			(74	)
Reclassification adjustment for net gain included in net income		(332	)		126			(770	)

		(588	)		662			(1,824	)

Comprehensive income	$	13,642		$	7,684		$	3,368

The components of other comprehensive income (loss) relate to the Company’s net unrealized gains (losses) on securities available for sale, net of income taxes and the Company’s proportionate shares of non-wholly owned subsidiaries other comprehensive income, net of income taxes, such as net unrealized gains (losses) on securities available for sale, minimum pension liability, unrealized gains or loss associated with investment in unconsolidated real estate subsidiary, and accumulated gains (losses) associated with cash flow hedges.

See accompanying notes to consolidated financial statements.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For each of the years in the three year period ended December 31, 2004


												Accumulated
												Other
	Class A		Class B			Additional						Comprehensive
	Common		Common			Paid-In			Retained			Income
	Stock		Stock			Capital			Earnings			(Loss)			Total

	(In thousands)
Balance, December 31, 2001	$	58	$	21		$	24,206		$	47,195		$	2,692		$	74,172
Net income		—		—			—			5,192			—			5,192
Other comprehensive loss, net of tax		—		—			—			—			(1,824	)		(1,824	)
Net effect of Bancorp capital transactions, net of income taxes		—		—			(15	)		—			—			(15	)
Retirement of Class B common stock		—		(1	)		(318	)		—			—			(319	)
Issuance of Class B common stock		—		1			144			—			—			145
Tax effect relating to the exercise of stock options		—		—			60			—			—			60

Balance, December 31, 2002	$	58	$	21		$	24,077		$	52,387		$	868		$	77,411
Net income		—		—			—			7,022			—			7,022
Other comprehensive income		—		—			—			—			662			662
Net effect of subsidiaries capital transactions, net of income taxes		—		—			(252	)		—			—			(252	)
Common stock splits		104		—			—			(104	)		—			—
Issuance of common stock		1		2			279			—			—			282
Tax effect relating to the exercise of stock options		—		—			550			—			—			550

Balance, December 31, 2003	$	163	$	23		$	24,654		$	59,305		$	1,530		$	85,675
Net income		—		—			—			14,230			—			14,230
Other comprehensive loss, net of tax		—		—			—			—			(588	)		(588	)
Net effect of subsidiaries’ capital transactions, net of income taxes		—		—			5,812			—			—			5,812
Retirement of Common Stock		—		(6	)		(7,276	)		—			—			(7,282	)
Issuance of Common Stock		—		24			1,767			—			—			1,791
Issuance of 5% Preferred Stock		—		—			14,988			—			—			14,988
Cash dividends on 5% Preferred Stock		—		—			—			(392	)		—			(392	)
Common stock split		54		—			—			(54	)		—			—
Tax effect relating to the exercise of stock options		—		—			11,017			—			—			11,017

Balance, December 31, 2004	$	217	$	41		$	50,962		$	73,089		$	942		$	125,251

See accompanying notes to consolidated financial statements.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	For the Years Ended December 31,

	2004			2003			2002

	(In thousands)
Operating activities:
Income from continuing operations	$	14,230		$	5,879		$	(5,986	)
Income from discontinued operations, net of tax		—			1,143			2,536
Income from extraordinary item, net of tax		—			—			23,749
Cumulative effect of a change in accounting principle, net of tax		—			—			(15,107	)
Adjustment to reconcile net income to net cash provided by operating activities:
Minority interest in income of consolidated subsidiaries		103,994			51,093			38,294
Provision for loan losses, real estate owned and tax certificates		(5,105	)		1,465			17,019
Depreciation, amortization and accretion, net		17,577			19,167			11,128
Amortization of intangible assets		1,715			1,772			1,360
Securities activities, net		(7,198	)		1,110			(8,578	)
Gains on sale of REO		(694	)		(1,984	)		(117	)
Gain on Gruntal transaction		—			—			(26,520	)
Equity in earnings from unconsolidated subsidiaries		(19,603	)		(10,126	)		(9,327	)
Restructuring charges and impairment write-downs, net		—			257			4,852
Impairment of goodwill		—			—			16,353
Impairment of securities		362			3,071			20,384
Litigation settlements		(23,987	)		—			—
Cost associated with debt redemption		11,741			12,543			3,125
Issuance of forgivable notes receivable to Ryan Beck employees		(8,079	)		(6,260	)		(10,463	)
Originations and repayment of loans held for sale, net		(162,410	)		(32,305	)		(24,091	)
Proceeds from sales of loans held for sale		170,709			44,617			41,602
(Decrease) increase in securities owned activities, net		(878	)		(43,194	)		33,751
Increase in real estate inventory		(142,511	)		(52,642	)		(57,131	)
(Increase) decrease in accrued interest receivable		(8,093	)		6,124			2,557
Decrease (increase) in deferred tax liabilities, net		17,894			13,073			(1,954	)
(Increase) decrease in other assets		(2,085	)		(7,651	)		(849	)
Increase (decrease) in other liabilities		47,525			78,397			(25,399	)
(Decrease) increase in due to clearing agent		(25,202	)		10,353			(32,876	)
Increase (decrease) in securities sold but not yet purchased		1,649			3,591			(1,629	)

Net cash (used in) provided by operating activities	$	(18,449	)	$	99,493		$	(3,317	)

Investing activities:
Purchase of investment securities and tax certificates		(319,256	)		(205,209	)		(238,700	)
Proceeds from redemption and maturity of investment securities and tax certificates		220,414			205,677			239,176
Purchase of securities available for sale		(677,050	)		(279,127	)		(356,795	)
Proceeds from sales and maturities of securities available for sale		308,529			631,350			772,339
Net purchases and (originations) repayments of loans and leases		(928,493	)		(235,735	)		(23,776	)
Proceeds from sales of real estate owned		3,821			10,807			6,015


	For the Years Ended December 31,

	2004			2003			2002

	(In thousands)
Purchase of properties and net additions to office properties and equipment		(75,759	)		(16,104	)		(23,676	)
Proceeds from sales of properties and equipment		—			—			1,986
Proceeds from sales of bank facilities real estate held for sale		852			—			6,012
(Investments) and repayments from unconsolidated subsidiaries, net		10,442			1,044			(49,902	)
(Purchases) redemptions of FHLB stock, net		(38,294	)		24,618			(452	)
Net cash proceeds from the sale of Ryan Beck’s subsidiaries		—			9,955			—
Acquisitions, net of cash acquired		(6,109	)		—			(52,783	)

Net cash (used in) provided by investing activities	$	(1,500,903	)	$	147,276		$	279,444

Financing activities:
Net increase in deposits	$	399,060		$	137,587		$	47,858
Reduction in deposits from sale of in-store branches, net		—			—			(42,597	)
Proceeds from FHLB advances		1,220,000			275,000			227,499
Repayments of FHLB advances		(469,323	)		(799,991	)		(172,736	)
Net increase (decrease) in federal funds purchased		105,000			—			(61,000	)
Proceeds from notes and bonds payable		325,401			134,016			158,831
Issuance of trust preferred securities		—			—			180,375
Issuance of junior subordinated debentures		—			77,320			—
Repayment of notes and bonds payable		(227,621	)		(112,563	)		(95,772	)
Retirement of subordinated notes and debentures		—			(70,855	)		(21,716	)
Retirement of trust preferred securities		—			—			(74,750	)
Net increase (decrease) in securities sold under agreements to repurchase		133,119			4,767			(289,791	)
Change in minority interest		—			—			(61	)
Issuance of 5% Preferred Stock, net of issuance cost		14,988			—			—
5% Preferred Stock dividends paid		(392	)		—			—
Issuance of BFC common stock upon exercise of stock options		1,791			282			205
Retirement of BFC Class B common stock accepted as consideration for the minimum withholding tax upon the exercise of stock options		(7,282	)		—			(319	)
Issuance of Levitt Corporation common stock, net of issuance cost		114,769			—			—
Levitt common stock dividends paid to non-BFC shareholders		(661	)		—			—
BankAtlantic Bancorp common stock dividends paid to non-BFC shareholders		(6,331	)		(5,839	)		(5,411	)
Venture Partnerships distribution paid to non-BFC partners		(1,376	)		—			—
Issuance of BankAtlantic Bancorp common stock		2,334			4,472			1,296


	For the Years Ended December 31,

	2004			2003			2002

	(In thousands)
Retirement of BankAtlantic Bancorp Class A common stock accepted as consideration for the minimum withholding tax upon the exercise of stock options		(2,946	)		—			—

Net cash provided by (used in) financing activities		1,600,530			(355,804	)		(148,089	)

Increase (decrease) in cash and cash equivalents		81,178			(109,035	)		128,038
Cash and cash equivalents at the beginning of period		143,542			252,577			124,539

Cash and cash equivalents at end of period	$	224,720		$	143,542		$	252,577

Cash paid for:
Interest paid on borrowings and deposits, net of capitalized interest	$	89,193		$	121,384		$	160,069
Income taxes paid		56,044			31,115			36,790
Supplementary disclosure of non-cash investing and financing activities:
Loans transferred to REO		1,401			2,450			13,067
Net loan recoveries (charge-offs)		5,524			(1,146	)		(19,784	)
Tax certificate net charge-offs		(427	)		(203	)		(1,123	)
Decrease in minority interest resulting from the retirement of BankAtlantic Bancorp Class A common stock obtained from litigation settlement		6,058			—			—
BankAtlantic Bancorp decreases in current income taxes payable from the tax effect of fair value of employee stock options		6,610			2,264			440
Securities purchased pending settlement		25,546			—			—
Increase (decrease) in accumulated other comprehensive income, net of taxes		(588	)		662			(1,824	)
Net increase (decrease) in shareholders’ equity from the effect of subsidiaries’ capital transactions, net of income taxes		5,812			(252	)		(15	)
Increase in shareholders’ equity for the tax effect related to the exercise of employee stock options		11,017			550			60
Fair value of assets acquired from acquisition of Bowden Building Corporation		26,463			—			—
Fair value of liabilities assumed from acquisition of Bowden Building Corporation		20,354			—			—
Note receivable issued in connection with the GMS sale		—			13,681			—
Increase in joint venture investment resulting from unrealized gain on non-monetary exchange		409			—			—
Adjustment to goodwill related to the allowance for loan losses		—			734			9,144
Securities held to maturity transferred to available for sale		—			14,505			—
Transfer of fixed assets to real estate held for sale		—			1,000			—
Increase in investments in unconsolidated subsidiaries related to deconsolidation of trusts formed to issue trust preferred securities		—			7,910			—
Increase in junior subordinated debentures related to trust deconsolidation		—			7,910			—


	For the Years Ended December 31,

	2004		2003		2002

	(In thousands)
Transfer of guaranteed preferred beneficial interest in BankAtlantic Bancorp’s junior subordinated debentures to junior subordinated debentures		—		180,375		—
Change in minority interest resulting from issuance of BankAtlantic Bancorp Class A common stock upon conversion of subordinated debentures		—		211		25
Issuance of notes payable under the Ryan Beck deferred compensation plan		—		—		3,675
Decrease in minority interest resulting from the distribution of securities investment		—		—		(8,655	)

See accompanying notes to consolidated financial statements.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.	Summary of Significant Accounting Policies

Basis of Financial Statement Presentation — BFC Financial Corporation (“BFC” or the “Company”) is a diversified holding company with investments in companies engaged in retail and commercial banking, full service investment banking and brokerage, homebuilding, master planned community development and time share and vacation ownership. The Company also holds interests in an Asian themed restaurant chain and various real estate and venture capital investments. The Company’s principal holdings consist of direct controlling interests in BankAtlantic Bancorp, Inc. (“BankAtlantic Bancorp”) and Levitt Corporation (“Levitt”). Through its control of BankAtlantic Bancorp, BFC has indirect controlling interests in BankAtlantic and its subsidiaries (“BankAtlantic”) and RB Holdings, Inc. and its subsidiaries (“Ryan Beck”). Through its control of Levitt, BFC has indirect controlling interests in Levitt and Sons, LLC (“Levitt and Sons”) and Core Communities, LLC (“Core Communities”) and an indirect non-controlling interest in Bluegreen Corporation (“Bluegreen”). BFC also holds a direct non-controlling minority investment in Benihana, Inc. (“Benihana”). As a result of the Company’s position as the controlling stockholder of BankAtlantic Bancorp, the Company is a “unitary savings bank holding company” regulated by the Office of Thrift Supervision.

The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

BankAtlantic Bancorp (NYSE:BBX) is a Florida-based diversified financial services holding company. BankAtlantic Bancorp’s principal assets include the capital stock of BankAtlantic and Ryan Beck. BankAtlantic is a federal savings bank headquartered in Fort Lauderdale, Florida, which provides traditional retail banking services and a wide range of commercial banking products and related financial services through a network of 74 branches. Ryan Beck is a full service broker-dealer headquartered in Florham Park, New Jersey. Ryan Beck offers a wide range of investment and insurance products for retail and institutional clients through 39 offices in 14 states.

Through December 31, 2003, Levitt was a wholly-owned subsidiary of BankAtlantic Bancorp. On December 2, 2003, the BankAtlantic Bancorp Board of Directors authorized the spin-off of Levitt to the shareholders of BankAtlantic Bancorp by declaring a stock dividend of all of BankAtlantic Bancorp’s shares of Levitt. BankAtlantic Bancorp’s shareholders, including the Company, each received one share of Levitt Class A Common Stock for every four shares of BankAtlantic Bancorp Class A Common Stock owned, and one share of Levitt Class B Common Stock for every four shares of BankAtlantic Bancorp Class B Common Stock owned. The shares were distributed on December 31, 2003 to shareholders of record on December 18, 2003. As a consequence of the spin-off, the Company’s ownership position in Levitt on December 31, 2003 was initially identical to the Company’s ownership position in BankAtlantic Bancorp, including the Company’s control of more than 50% of the vote of these companies. In April 2004, Levitt sold 5 million shares of its Class A Common Stock in an underwritten public offering, resulting in net proceeds to Levitt of approximately $114.8 million. As a result of this offering, the Company’s ownership position in Levitt was reduced to 16.6% of its total equity and a 52.9% voting interest at December 31, 2004.

Levitt (NYSE:LEV) engages in homebuilding, land development and other real estate activities through Levitt and Sons, Core Communities, Levitt Commercial, LLC (“Levitt Commercial”), Bowden Building Corporation (“Bowden”), and investments in real estate projects. Levitt also owns approximately 31% of the outstanding common stock of Bluegreen, a New York Stock Exchange-listed (NYSE:BXG) company that acquires, develops, markets and sells vacation ownership interests in primarily “drive-to” resorts and develops and sells residential home sites around golf courses or other amenities. Levitt acquired Bowden on April 28, 2004 for approximately $7.4 million.

As a holding company with control positions in BankAtlantic Bancorp and Levitt, generally accepted accounting principles (GAAP) require the consolidation of the financial results of both companies with those

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

of BFC. As a consequence, the assets and liabilities of both entities are presented on a consolidated basis in BFC’s financial statements. However, except as otherwise noted, the debts and obligations of the consolidated entities are not direct obligations of BFC and are non-recourse to BFC. Similarly, the assets of those entities are not available to BFC absent a dividend or distribution from the entity. The recognition by BFC of income from controlled entities is determined based on the percentage of its economic ownership in those entities. As shown below, BFC’s economic ownership in BankAtlantic Bancorp and Levitt is 22.0% and 16.6%, respectively, which results in BFC recognizing 22.0% and 16.6% of BankAtlantic Bancorp’s and Levitt’s income, respectively.

BFC’s ownership in BankAtlantic Bancorp and Levitt is as follows:


		Shares		Percent of			Percent
		Owned		Ownership			of Vote

BankAtlantic Bancorp
	Class A Common Stock		8,329,236		15.09	%		8.00	%
	Class B Common Stock		4,876,124		100.00	%		47.00	%
	Total		13,205,360		21.98	%		55.00	%
Levitt
	Class A Common Stock		2,074,243		11.15	%		5.91	%
	Class B Common Stock		1,219,031		100.00	%		47.00	%
	Total		3,293,274		16.62	%		52.91	%

In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition and operations for the periods presented. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the next year relate to the determination of the allowance for loan losses, evaluation of goodwill for impairment, the valuation of real estate acquired in connection with foreclosure or in satisfaction of loans, the valuation of the fair value of assets and liabilities in the application of purchase method accounting, the amount of deferred tax asset valuation allowance, the valuation of equity securities that are not publicly traded, accounting for contingencies, the valuation of real estate held for development, real estate joint venture investments and the cost to complete development work on real estate projects. In connection with the determination of the allowances for loan losses, real estate owned, real estate held for development and real estate joint venture investments, management obtains independent appraisals for significant properties when it is deemed prudent.

Certain amounts for prior years have been reclassified to conform with revised statement presentation for 2004.

Consolidation Policy — The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, majority-controlled subsidiaries, including BankAtlantic Bancorp and Levitt, majority-owned joint ventures and variable interest entities in which the Company’s subsidiaries are the primary beneficiary as defined by Financial Accounting Standards Board (“FASB”) revised Interpretation No. 46 “Consolidation of Variable Interest Entities” (“FIN 46”).

Cash Equivalents — Cash and due from depository institutions include demand deposits at other financial institutions and money market funds. Federal funds sold are generally sold for one-day periods, and securities purchased under resell agreements are settled in less than 30 days.

Restricted Cash — Cash and interest bearing deposits are segregated into restricted accounts for specific uses in accordance with the terms of certain land sale contracts, home sales and other arrangements. Restricted funds may only be utilized in accordance with the terms of the applicable governing documents.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The majority of restricted funds are controlled by third-party escrow fiduciaries. Restricted cash is included in Other Assets in the Company’s Statements of Financial Condition.

Debt and Equity Securities — Debt securities are classified based on management’s intention on the date of purchase. Debt securities that management has both the positive intent and ability to hold to maturity are classified as securities held-to-maturity and are carried at amortized cost. Trading account securities consist of securities that are bought and held principally for the purpose of selling them in the near term and are carried at fair value with changes in the fair value included in earnings. All other debt securities are classified as available for sale and carried at fair value with the net unrealized gains and losses included in stockholders’ equity on an after-tax basis as other comprehensive income. The fair value of securities available for sale was estimated by obtaining prices actively quoted on national markets using a price matrix or applying management valuation models. Declines in the fair value of individual held to maturity and available for sale securities below their amortized cost that are other than temporary result in write-downs through charges to earnings of the individual securities to their fair value.

Interest and dividends on securities, including the amortization of premiums and the accretion of discounts, are reported in interest and dividends income using the interest method over the lives of the securities, adjusted for actual prepayments. Gains and losses on the sale of securities are recorded on the trade date and are calculated using the specific-identification method.

Marketable equity securities and mutual funds which are included in securities available for sale are carried at fair value with the net unrealized gains and losses included in shareholders’ equity on an after-tax basis as other comprehensive income. Declines in the fair value of individual equity securities and mutual funds below their cost that are other than temporary result in write-downs through charges to earnings of the individual securities to their fair value. The fair value of marketable equity securities and mutual funds was estimated by obtaining prices actively quoted on national markets. Equity securities that do not have readily determinable fair values are classified as investment securities and carried at historical cost. These securities are evaluated for other than temporary declines in value, and, if impaired, the historical cost of the securities is written down through charges to earnings to estimated fair value.

The specific identification method was used in determining cost in computing realized gains and losses in connection with sales of debt and equity securities.

Tax Certificates — Tax certificates represent a priority lien against real property for which assessed real estate taxes are delinquent. Tax certificates are classified as investment securities and are carried at cost, net of an allowance for probable losses, which approximates fair value.

Allowance for Tax Certificate Losses — The allowance represents management’s estimate of incurred losses in the portfolio that are probable and subject to reasonable estimation. In establishing its allowance for tax certificate losses, management considers past loss experience, present indicators, such as the length of time the certificate has been outstanding, economic conditions and collateral values. Tax certificates and resulting deeds are classified as non-accrual when a tax certificate is 24 to 60 months delinquent, depending on the municipality, from the acquisition date. At that time, interest ceases to be accrued. The provision to record the allowance is included in other expenses.

Loans — Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding principal balances net of any unearned income, unamortized deferred fees or costs, premiums or discounts and an allowance for loan losses. Loan origination fees and direct loan origination costs are deferred and recognized in interest income over the estimated life of the loans using the interest method, adjusted for actual prepayments.

Loans Held for Sale — Such loans are reported at the lower of aggregate cost or estimated fair value based on current market prices for similar loans. Loan origination fees and related direct loan origination costs

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

on originated loans held for sale and premiums and discounts on purchased loans held for sale are deferred until the related loan is sold and included in gains and losses upon sale.

Allowance for Loan Losses — The allowance for loan losses reflects management’s estimate of probable incurred credit losses in the loan portfolios. Loans are charged off against the allowance when management believes the uncollectibility of the loan balance is confirmed. Recoveries are credited to the allowance.

The allowance consists of three components. The first component of the allowance is for high-balance “non-homogenous” loans that are individually evaluated for impairment. A loan is impaired when collection of principal and interest based on the contractual terms of the loan is not likely to occur. The process for identifying loans to be evaluated individually for impairment is based on management’s identification of classified loans. Once an individual loan is found to be impaired, a valuation allowance is assigned to the loan based on one of the following three methods: (1) present value of expected future cash flows, (2) fair value of collateral less costs to sell, or (3) observable market price. Non-homogenous loans that are not impaired are assigned an allowance based on historical data by product. The second component of the allowance is for “homogenous loans” in which groups of loans with common characteristics are evaluated to estimate the inherent losses in the portfolio. Homogenous loans have certain characteristics that are common to the entire portfolio so as to form a basis for predicting losses on historical data and delinquency trends as it relates to the group. Management segregates homogenous loans into groups such as residential real estate, small business mortgage, small business non-mortgage, lease financing, and various types of consumer loans. The methodology utilized in establishing the allowance for homogenous loans includes consideration of trends in industries, analysis of historical losses, static pool analysis, delinquency trends, and credit scores. The third component of the allowance is determined separately from the procedures outlined above. This component addresses certain industry and geographic concentrations, the view of regulators and changes in composition of the loan portfolio. Management believes the allowance for loan losses is adequate and that it has a sound basis for estimating the adequacy of the allowance for loan losses. Actual losses incurred in the future are highly dependent upon future events, including the economies of the geographic areas in which BankAtlantic holds loans.

Non-performing Loans — A loan is generally placed on non-accrual status at the earlier of (i) the loan becoming past due 90 days as to either principal or interest or (ii) when the borrower has entered bankruptcy proceedings and the loan is delinquent. Exceptions to placing 90-day past due loans on non-accrual may be made if there exists an abundance of collateral and the loan is in the process of collection. Loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. When a loan is placed on non-accrual status, interest accrued but not received is reversed against interest income. A non-accrual loan may be restored to accrual status when delinquent loan payments are collected and the loan is expected to perform in the future according to its contractual terms. Interest income on performing impaired loans is recognized on an accrual basis.

Consumer non-mortgage loans and lease financing contracts that are 120 days past due are charged off. Real estate secured consumer and residential loans that are 120 days past due are charged down to fair value less cost to sell.

Real Estate Owned (“REO”) — REO is recorded at the lower of cost or estimated fair value, less estimated selling costs when acquired, establishing a new cost basis. Write-downs required at the time of acquisition are charged to the allowance for loan losses. Expenditures for capital improvements made thereafter are generally capitalized. Real estate acquired in settlement of loans is anticipated to be sold and valuation allowance adjustments are made to reflect any subsequent changes in fair values from the initially recorded amount. The costs of holding REO are charged to operations as incurred. Provisions and reversals in the REO valuation allowance are reflected in operations. Management obtains independent appraisals for significant properties.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Investment Banking Activities — Investment banking revenues include gains, losses, and fees, net of syndicate expenses, arising from securities offerings in which Ryan Beck acts as an underwriter or agent. Investment banking revenues also include fees earned from providing merger and acquisition and financial restructuring advisory services. Investment banking management fees are recorded as earned, provided no contingency of payment exists. Sales concessions are recorded on trade date, and underwriting fees are recorded at the time the underwriting is completed and the income is reasonably determined.

Securities Transactions — Proprietary securities transactions in regular-way trades are recorded on a trade date basis. Profit and loss arising from all securities transactions entered into for the account and risk of Ryan Beck are recorded on a trade date basis. Customers’ securities transactions are reported on a settlement date basis with related commission income and expenses reported on a trade date basis. Amounts receivable and payable for securities transactions that have not reached their contractual settlement date are recorded net on the statement of financial condition

Securities Owned and Securities Sold, But Not Yet Purchased — Securities owned and securities sold, but not yet purchased are associated with proprietary securities transactions entered into by Ryan Beck and are accounted for at fair value with changes in the fair value included in earnings. The fair value of these trading positions is generally based on listed market prices. If listed market prices are not available or if liquidating the positions would reasonably be expected to impact market prices, fair value is determined based on other relevant factors, including dealer price quotations, price quotations for similar instruments traded in different markets, management’s estimates of amounts to be realized on settlement or management valuation model associated with securities that are not readily marketable.

Real Estate Held for Development and Sale — This includes land, land development costs, interest and other construction costs associated with Levitt’s real estate inventory, BankAtlantic Bancorp’s investment in a real estate variable interest entity and BFC’s real estate property, an outlet center in North Carolina. Real estate inventory is stated at the accumulated cost or when circumstances indicate that the inventory is impaired at estimated fair value. The estimated fair value of real estate is evaluated based on disposition of real estate in the normal course of business under existing and anticipated market conditions. The evaluation takes into consideration the current status of property, various restrictions, carrying costs, debt service requirements, costs of disposition and any other circumstances which may affect fair value, including management’s plans for the property. Due to the large acreage of certain land holdings, disposition in the normal course of business is expected to extend over a number of years.

Land and indirect land development costs are accumulated by specific area and allocated to various parcels or housing units using specific identification and allocation based upon the relative sales value, unit or area methods. Direct construction costs are assigned to housing units based on specific identification. Construction costs primarily include direct construction costs and capitalized field overhead. Other costs are comprised of tangible selling costs, prepaid local government fees and capitalized real estate taxes. Tangible selling costs are capitalized by communities and represent costs incurred that are used directly throughout the selling period to aid in the sale of housing units, such as model furnishings and decorations, sales office furnishings and facilities, exhibits, displays and signage. These tangible selling costs are capitalized and expensed to cost of sales of the benefited home sales. Start-up costs and other selling expenses are expensed as incurred.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Interest is capitalized at the effective rates paid on borrowings incurred for real estate inventory during the preconstruction and planning stage and the periods that projects are under development. Capitalization of interest is discontinued if development ceases at a project. Interest is expensed as a component of cost of sales as related homes, land and units are sold. The following table is a summary of interest incurred on notes and mortgage notes payable and the amounts capitalized (in thousands):


	For the Years Ended December 31,

	2004			2003			2002

Interest expense	$	101,139		$	122,269		$	159,546
Interest capitalized		(12,238	)		(8,884	)		(7,668	)

Interest expense, net	$	88,901		$	113,385		$	151,878

Revenue and all related costs and expenses from home and land sales are recognized at the time that closing has occurred, when title and possession of the property and the risks and rewards of ownership transfer to the buyer, and when other sale and profit recognition criteria are satisfied as required under generally accepted principles in the United States of America for real estate transactions. In order to properly match revenues with expenses, an estimation is made as to certain construction and land development costs incurred but not yet paid at the time of closing. Estimated costs to complete are determined for each closed home and land sale based upon historical data with respect to similar product types and geographical areas. The accuracy of estimates are monitored by comparing actual costs incurred subsequent to closing to the estimate made at the time of closing and modifications are made to the estimates based on these comparisons. We do not expect the estimation process to change in the future nor do we expect actual results to materially differ from such estimates.

Investments in Unconsolidated Subsidiaries — The Company follows the equity method of accounting to record its interests in subsidiaries in which it does not own the majority of the voting stock. Effective January 1, 2003, the Company implemented FIN No. 46, which required the Company to use the equity method to account for its investments in variable interest entities in which it is not the primary beneficiary. As a result of the adoption of this standard in 2003, the Company began accounting for its interest in statutory business trusts (utilized in the issuance of trust preferred securities) under the equity method. Under this method, the Company’s initial investment is recorded at cost and is subsequently adjusted to recognize its share of earnings or losses. Distributions received reduce the carrying amount of the investment.

Goodwill and Other Intangible Assets — The Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets,” on January 1, 2002. As of the adoption date, the Company no longer amortizes goodwill over its useful life. Instead, goodwill is tested for impairment annually at the reporting unit level, by comparing the fair value of the reporting unit to its carrying amount. The Company will recognize a goodwill impairment charge if the carrying amount of the goodwill assigned to the reporting unit is greater than the implied fair value of the goodwill.

At the date of adoption the fair values of all reporting units, except for the Ryan Beck, exceeded their respective carrying amounts at the adoption date. Based on an independent valuation, a $15.1 million impairment loss (net of a $1.2 million tax benefit) related to Ryan Beck was recorded effective as of January 1, 2002 as the cumulative effect of a change in accounting principle.

Other intangible assets consist of core deposit intangible assets which were initially measured at fair value and are amortized over their useful life of ten years.

Properties and Equipment — Properties and equipment consists primarily of office premises, office furniture and fixtures, computer equipment and water treatment and irrigation facilities. Land is carried at cost. Office properties, equipment and computer software are carried at cost less accumulated depreciation. Depreciation is primarily computed on the straight-line method over the estimated useful lives of the assets

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

which generally range up to 40 years for buildings and 3-10 years for equipment. The cost of leasehold improvements is being amortized using the straight-line method over the terms of the related leases.

Expenditures for new properties and equipment and major renewals and betterments are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred, and gains or losses on disposal of assets are reflected in current operations.

Impairment of Long Lived Assets — Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing the review for impairment, the Company compares the expected future cash flows (undiscounted and without interest charges) to the carrying amount of the asset and records an impairment loss if the carrying amount exceeds the expected future cash flows.

Long-lived assets to be abandoned or distributed to owners in a spin-off are considered held and used until disposed. The depreciable life of a long-lived asset to be abandoned is revised and the asset is depreciated over its shortened depreciable life when an entity commits to a plan to abandon the asset before the end of its previously estimated useful life. An impairment loss is recognized at the date a long-lived asset is exchanged for a similar productive asset or distributed to owners in a spin-off if the carrying amount of the asset exceeds its fair value. Long-lived assets classified as held for sale are reported at the lower of its carrying amount or fair value less cost to sell and depreciation (amortization) is ceased.

Advertising — Advertising expenditures are expensed as incurred.

Income Taxes — BFC and its wholly owned subsidiaries file a consolidated U.S. federal income tax return. Subsidiaries in which the Company owns less than 80% of the outstanding common stock, including BankAtlantic Bancorp and Levitt, are not included in the Company’s consolidated U.S. federal income tax return. The Company and its subsidiaries file separate state income tax returns for each state jurisdiction.

The provision for income taxes is based on income before taxes reported for financial statement purposes after adjustment for permanent differences. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period that includes the statutory enactment date. A deferred tax asset valuation allowance is recorded when it is more likely than not that deferred tax assets will not be realized.

Derivative Instruments — All derivatives are recognized on the statement of financial condition at their fair value. On the date the derivative contract is entered, the Company evaluates the derivative in order to determine if it qualifies for hedge accounting. The hedging instrument must be highly effective in achieving offsetting changes in the hedge instrument and hedged item attributable to the risk being hedged. Any ineffectiveness which arises during the hedging relationship is recognized in earnings in the Company’s statements of operations. When it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the Company discontinues hedge accounting prospectively.

Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a fair-value hedge, along with the loss or gain on the hedged asset or liability or unrecognized firm commitment of the hedged item that is attributable to the hedged risk are recorded in earnings. Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a cash-flow hedge are recorded in other comprehensive income until earnings are affected by the variability in cash flows of the designated hedged item. Changes in the fair value of undesignated derivative instruments are reported in current-period earnings.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

At December 31, 2004 and 2003 the Company’s derivatives consisted of commitments to sell residential mortgage loans which were accounted for at fair value.

Minority Interest — Minority interest reflects third parties’ ownership interest in entities that are less than 100% owned by the Company.

Earnings Per Common Share — Basic earnings per share excludes dilution and is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if options to issue common shares were exercised. Common stock options, if dilutive, are considered in the weighted average number of dilutive common shares outstanding. The options are included in the weighted average number of dilutive common shares outstanding based on the treasury stock method. The diluted earnings per share computations take into consideration the potential dilution from securities issued by subsidiaries that enable their holders to obtain the subsidiary’s common stock. The resulting net income amount is divided by the weighted average number of dilutive common shares outstanding, when dilutive. For all periods, the shares of the Company issued in connection with a 1984 acquisition are considered outstanding after elimination of the Company’s percentage ownership of the entity that received the shares issued in that acquisition.

Brokered Deposits — Brokered deposits are accounted for at historical cost and discounts or premiums, if any, are amortized or accreted using the interest method over the term of the brokered deposit.

Stock-Based Compensation Plans — During the year ended December 31, 2004, the Company maintained both qualifying and non-qualifying stock-based compensation plans for its employees and directors. These are described more fully in Note 13. The Company accounts for these plans under the recognition and measurement principles of Accounting Principles Board (“APB”) Opinion No. 25 “Accounting for Stock Issued to Employee” and related Interpretations. No compensation is recognized in connection with option grants that had an exercise price equal to the market value of the underlying common stock on the date of grant. The tax benefit recognized upon the exercise of certain options is recorded as a component of additional paid-in-capital.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table illustrates the effect on net earnings and net earnings per share for each of the last three years as if the Company had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”, as amended by SFAS 148, “Accounting for Stock-Based compensation — Transition and Disclosure”, to stock-based employee compensation (in thousands, except per share data):


	For the Years Ended
	December 31,

	2004			2003			2002

	(In thousands, except
	per share data)
Pro forma net income
Net income available to common shareholders, as reported	$	13,838		$	7,022		$	5,192
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects and minority interest		38			52			55
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related income tax effects and minority interest		(897	)		(639	)		(477	)

Pro forma net income	$	12,979		$	6,435		$	4,770

Earnings per share:
Basic as reported	$	0.57		$	0.31		$	0.23

Basic pro forma	$	0.54		$	0.28		$	0.21

Diluted as reported	$	0.47		$	0.25		$	0.21

Diluted pro forma	$	0.44		$	0.23		$	0.19


	*New Accounting Pronouncements:*

In December 2004, FASB issued Statement No. 123 (revision) (“Share-based payments”.) This Statement is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. This Statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. The Statement also establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services and addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. The Statement eliminated the accounting for share-based transactions under APB No. 25 and its related interpretations instead requiring all share based payments be accounted for using a fair value method. For public companies the Statement will be effective in the first interim or annual reporting period that begins after June 15, 2005. The Statement can be adopted using the “Modified Prospective Application” or the “Modified Retrospective Application.” Under the modified prospective application, this Statement applies to new awards granted after the effective date and to unvested awards at the effective date. Under the modified retrospective application, the Company would apply the modified prospective method, but also restate the prior financial statements to include the amounts that were previously recognized in the pro forma disclosures under Statement No. 123. Additionally, under the modified retrospective application the Company can choose to only restate the prior interim periods in the year of adoption as the effective date of the Statement does not coincide with the beginning of the Company’s fiscal year. Management will adopt the Statement on July 1, 2005 and is currently evaluating the two transitional applications. Management estimates that compensation

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

expense resulting from currently unvested options would be approximately $1.9 million to be recorded over the remaining vesting period.

In December 2004, FASB issued Statement No. 152 (“Accounting for Real Estate Time-Sharing Transactions — an amendment of FASB Statements No. 66 and 67.) This Statement amends FASB Statement No. 66, Accounting for Sales of Real Estate, to reference the financial accounting and reporting guidance for real estate time-sharing transactions that is provided in AICPA Statement of Position (SOP) 04-2, Accounting for Real Estate Time-Sharing Transactions. This Statement also amends FASB Statement No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, to state that the guidance for (a) incidental operations and (b) costs incurred to sell real estate projects does not apply to real estate time-sharing transactions. The accounting for those operations and costs is subject to the guidance in SOP 04-2. This Statement is effective for financial statements for fiscal years beginning after June 15, 2005. Bluegreen has indicated in its periodic reports filed with the SEC that this pronouncement is not expected to have a material effect on Bluegreen’s financial statements. Accordingly, management does not believe that this Statement will have a material effect on the Company’s consolidated financial statements.

The Emerging Issues Task Force (“EITF”) reached a consensus on EITF 03-1 “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.” The EITF provides guidance on the meaning of other-than-temporary impairment and its application to investments classified as either available for sale or held to maturity under FASB Statement No. 115 and investments accounted for under the cost method of accounting. The guidance of EITF 03-01 requires that the Company make evidence-based judgments about the recovery of the unrealized loss (impairment), if any, on each security considering the severity and duration of the impairment and the Company’s ability and intent to hold the securities until the forecasted recovery. In September 2004 the FASB issued a FSP that delayed the effective date for the measurement and recognition guidance for the meaning of other-than-temporary impairment. The disclosure requirements were not deferred. At December 31, 2004, the securities portfolios were evaluated for other-than-temporary declines in value based on existing guidance contained in FASB No. 115, SAB Topic 5-M and FASB Staff Implementation Guide to FASB No. 115 resulting in approximately $362,000 in other-than-temporary impairment of the securities portfolios.

In December 2003, the American Institute of Certified Public Accountants’ (“AICPA”) Accounting Standards Executive Committee (“AcSEC”) issued Statement of Position 03-3 (“SOP”). The SOP addresses accounting for loans and debt securities acquired in purchase business combinations or purchased subsequent to origination with evidence of deterioration in credit quality since origination. The SOP prohibits the creation of valuation allowances in the initial accounting of all loans acquired that meet the criteria of the SOP. The SOP does not apply to originated loans. The SOP limits the yield that may be accreted to the excess of the purchaser’s estimate of undiscounted expected principal, interest and other cash flows over the purchaser’s initial investment. The SOP requires excess contractual cash flows over cash flows expected to be collected to not be recognized as an adjustment of yield, loss accrual or valuation allowance. Subsequent increases in cash flows expected to be collected generally should be recognized prospectively through adjustment of the loan’s yield over its remaining life. Decreases in cash flows expected to be collected should be recognized as impairments. The SOP is effective for loans and securities acquired in fiscal years beginning after December 15, 2004 with early adoption encouraged. Upon adoption as of January 1, 2005, the SOP did not have an impact on the Company’s financial statements


2.	Discontinued Operations and Acquisitions


	*Discontinued Operations*

During the year ended December 31, 2003, Ryan Beck sold two of its subsidiaries, GMS and Cumberland Advisors, Inc. (“Cumberland”). The above transactions are presented as discontinued operations in the Company’s statements of operations for the years ended December 31, 2003 and 2002.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As part of Ryan Beck’s acquisition of certain of the assets and assumption of certain of the liabilities of Gruntal & Co, LLC, in April 2002, Ryan Beck acquired all of the membership interests in The GMS Group, L.L.C. (“GMS”). Since its acquisition, GMS was operated as an independent business unit. After a receipt of an offer by GMS’s management to purchase GMS from Ryan Beck, Ryan Beck sold its entire membership interest in GMS to GMS Group Holdings Corp. (“Buyer”) in August 2003 for $22.6 million. The Buyer was formed by the management of GMS along with other investors. Ryan Beck received cash proceeds from the sale of $9.0 million and a $13.6 million secured promissory note issued by the Buyer with recourse to the management of GMS. The note is secured by the membership interest in GMS and contains covenants that require GMS to maintain certain capital and financial ratios. If these covenants are not maintained, Ryan Beck can exercise its rights of default under the note, including pursing the sale of the collateral. Ryan Beck did not recognize any gain or loss associated with the transaction. The promissory note is at a federal funds rate plus an applicable margin and is payable in 27 equal quarterly installments continuing until June 2010 with a final payment of $4.4 million in September 2010. At December 31, 2004 and 2003, the outstanding balance of the promissory note was $6.1 million and $12.0 million, respectively.

During the second quarter of 2003, Ryan Beck sold its entire interest in Cumberland for $1.5 million and recognized a $228,000 loss.

The components of earnings from discontinued operations were as follows (in thousands):


	For the Years Ended
	December 31,

	2003			2002

	(In thousands)
Revenues:
Interest income	$	6,279		$	5,424
Investment banking income		17,782			20,418
Other		1,375			1,706

		25,436			27,548

Expenses:
Interest expense		1,039			1,237
Employee compensation and benefits		17,377			17,986
Other		6,394			5,486

		24,810			24,709

Income before income taxes		626			2,839
(Benefit) provision for income taxes		(517	)		303

Income from discontinued operations, net of tax	$	1,143		$	2,536

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes the assets and liabilities sold or transferred associated with discontinued operations and the cash proceeds received or transferred (in thousands):


Cash	$	815
Securities owned		105,083
Property and equipment		559
Goodwill		1,204
Other assets		5,479
Securities sold but not yet purchased		(3,781	)
Due to clearing agent		(80,561	)
Other liabilities		(4,347	)

Net assets sold or transferred		24,451
Notes receivable — GMS Holdings, Inc.		(13,681	)
Cash sold		(815	)

Net cash proceeds received	$	9,955


	*Acquisitions*

On April 28, 2004 Levitt acquired Bowden for approximately $7.4 million in cash. The acquisition was accounted for under the purchase method of accounting. Under this method the assets acquired and the liabilities assumed were recorded at their estimated fair value. The amount of the purchase price in excess of the estimated fair value of net assets acquired, recorded as goodwill, was approximately $1.3 million. The following table summarizes the fair value of the assets acquired and liabilities assumed in connection with the purchase of all of Bowden’s capital stock (in thousands):


Cash, cash equivalents and restricted cash	$	1,335
Inventory		21,927
Property and equipment		409
Other assets		2,820
Goodwill		1,307

Fair value of assets acquired		27,798

Accounts payable and accrued liabilities		2,747
Customer deposits		287
Notes payable		16,725
Deferred tax liability		595

Fair value of liabilities assumed		20,354

Purchase price		7,444
Cash acquired		(1,335	)

Purchase of Bowden, net of cash acquired	$	6,109

On April 26, 2002, Ryan Beck acquired certain of the assets and assumed certain of the liabilities of Gruntal and acquired all of the membership interests in GMS the (“Gruntal transaction”). The assets acquired from Gruntal include all of Gruntal’s customer accounts, furniture, leasehold improvements and equipment owned by Gruntal at the offices where Gruntal’s financial consultants were located, assets related to Gruntal’s deferred compensation plan and forgivable notes. The consideration provided by Ryan Beck for this transaction was the assumption of a note payable related to furniture and equipment in the Gruntal

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

offices, assumption of non-cancelable leases associated with the Gruntal offices acquired, obligations owed to financial consultants participating in Gruntal’s deferred compensation plan that accepted employment with Ryan Beck, and the payment of $6.0 million in cash.

The Gruntal transaction was accounted for by the purchase method of accounting. Under this method the acquired assets and assumed liabilities of Gruntal were recorded at their estimated fair value, and the amount of estimated fair value of net assets in excess of the purchase price was used to write down non-financial assets. The remaining balance was recorded as an extraordinary income item. The Company’s financial statements reflect the Gruntal transaction since April 26, 2002.

On March 22, 2002, BankAtlantic acquired Community, for $170.3 million in cash and immediately merged Community into BankAtlantic. At the acquisition date, BankAtlantic Bancorp made a $78.5 million capital contribution to BankAtlantic. BankAtlantic funded the acquisition of Community using such capital contribution received from BankAtlantic Bancorp and funds obtained from the liquidation of investments. Community’s results of operations have been included in the Company’s consolidated financial statements since March 22, 2002. Community was a federally chartered savings and loan association founded in 1955 and headquartered in North Palm Beach, Florida. At March 22, 2002, Community had assets of $909 million, deposits of $637 million and 21 branches.

The following table summarizes the fair value of assets acquired and liabilities assumed in connection with the acquisition of Community and the Gruntal transaction effective March 22, 2002 and April 26, 2002, respectively (in thousands):


		Community			Gruntal			Total

Cash and interest-earning deposits		$	124,977		$	886		$	125,863
Securities available for sale			79,768			—			79,768
Securities owned			—			151,909			151,909
Loans receivable, net			623,469			—			623,469
FHLB stock			8,063			—			8,063
Investments and advances in unconsolidated subsidiaries			16,122			—			16,122
Goodwill			55,068			—			55,068
Core deposit intangible asset			15,117			—			15,117
Other assets			46,620			12,597			59,217

	Fair value of assets acquired		969,204			165,392			1,134,596

Deposits			639,111			—			639,111
FHLB advances			138,981			—			138,981
Other borrowings			14,291			3,427			17,718
Securities sold, but not yet purchased			—			1,201			1,201
Due to clearing agent			—			101,705			101,705
Other liabilities			6,022			27,463	(1)		33,485

	Fair value of liabilities assumed		798,405			133,796			932,201
Fair value of net assets acquired over cost			—			(23,749	)(2)		(23,749	)

Purchase price			170,799			7,847			178,646
Cash acquired			(124,977	)		(886	)		(125,863	)

Purchase price net of cash acquired		$	45,822		$	6,961		$	52,783

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


(1)	Included in Gruntal’s other liabilities were a $21 million deferred compensation plan obligation, of which $18.3 million was vested. Also included in other liabilities was $675,000 of termination costs for contract obligations related to leased equipment and $654,000 of contract termination obligations associated with closing certain Gruntal branches.

(2)	The Company recognized an extraordinary gain of $23.7 million, net of income taxes of $2.8 million, and reduced the carrying amount of non-financial assets by $11.2 million as a result of the fair value of the assets acquired exceeding the cost of the Gruntal transaction. BankAtlantic Bancorp did not establish a deferred tax liability for the extraordinary gain associated with the GMS membership interest acquired because BankAtlantic Bancorp acquired the GMS membership interest rather than the net assets.

The purchase price of Community consisted of $170.3 million in cash and $500,000 of acquisition professional fees. The cost of the Gruntal transaction consisted of a $6.0 million cash payment, $750,000 of acquisition professional fees and an estimated $1.05 million of contingent consideration payable to Gruntal. The $1.05 million contingent consideration to Gruntal relates to possible deferred compensation plan participant forfeitures and represents the maximum amount of additional consideration. Ryan Beck paid Gruntal $350,000 of contingent consideration during each of the years ended December 31, 2004 and 2003.

The following pro forma information for the year ended December 31, 2002 is presented as if the Gruntal and Community transactions had been consummated on January 1, 2002. The pro forma information is not necessarily indicative of the combined results of operations which would have been realized had the transactions been consummated during the period or as of the date for which the pro forma financial information is presented.


	2002

	Historical			Pro Forma

	(In thousands, except per
	share data)
Interest income	$	304,700		$	320,654
Interest expense		151,878			158,598
Provision for loan losses		14,077			16,121
Loss from continuing operations	$	(5,986	)	$	(6,498	)

Basic loss per share from continuing operations	$	(0.27	)	$	(0.29	)

Diluted loss per share from continuing operations	$	(0.28	)	$	(0.30	)

During April 2002, BankAtlantic Bancorp and Levitt’s ownership in Bluegreen Corporation, a New York Stock Exchange-listed company engaged in the acquisition, development, marketing and sale of primarily drive-to vacation interval resorts, golf communities and residential land, increased from approximately 5% to 40%. This interest in Bluegreen was acquired for an aggregate purchase price of approximately $56 million. BankAtlantic Bancorp acquired approximately 5% of Bluegreen common stock during the first quarter of 2001, and Levitt acquired approximately 35% of Bluegreen common stock in April 2002. The Company’s investment in Bluegreen is accounted for as an investment in an unconsolidated subsidiary using the equity method of accounting.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


3.	Available for Sale Securities, Investment Securities, Tax Certificates and Short-Term Investments

The following tables summarize available-for-sale securities, investment securities and tax certificates (in thousands):


			Available for Sale December 31, 2004								Available for Sale December 31, 2003

					Gross		Gross						Gross		Gross
			Amortized		Unrealized		Unrealized		Estimated		Amortized		Unrealized		Unrealized		Estimated
			Cost		Appreciation		Depreciation		Fair Value		Cost		Appreciation		Depreciation		Fair Value

Mortgage-Backed Securities:
Mortgage-backed securities			$	401,566	$	3,848	$	1,587	$	403,827	$	315,520	$	6,262	$	529	$	321,253
Real estate mortgage investment conduits				96,938		188		436		96,690		17,378		120		—		17,498

	Total mortgage-backed securities			498,504		4,036		2,023		500,517		332,898		6,382		529		338,751

Investment Securities:
Tax-exempt securities				219,322		2,062		1,030		220,354		—		—		—		—
Other bonds				585		—		—		585		585		—		—		585
Equity securities				23,141		4,404		—		27,545		16,635		4,471		—		21,106

	Total investment securities			243,048		6,466		1,030		248,484		17,220		4,471		—		21,691

		Total	$	741,552	$	10,502	$	3,053	$	749,001	$	350,118	$	10,853	$	529	$	360,442


		Investment Securities and Tax Certificates

		December 31, 2004								December 31, 2003

				Gross		Gross						Gross		Gross
		Amortized		Unrealized		Unrealized		Estimated		Amortized		Unrealized		Unrealized		Estimated
		Cost		Appreciation		Depreciation		Fair Value		Cost		Appreciation		Depreciation		Fair Value

Tax certificates(1) —
	Net of allowance of $3,297	$	166,731	$	—	$	—	$	166,731	$	—	$	—	$	—	$	—
	Net of allowance of $2,870		—		—		—		—		190,906		—		—		190,906
Tax-exempt securities			133,562		302		777		133,087		—		—		—		—
Limited partnership(2)			5,000		345		—		5,345		—		—		—		—
Investment securities(3)			12,253		—		—		12,253		1,800		—		—		1,800

		$	317,546	$	647	$	777	$	317,416	$	192,706	$	—	$	—	$	192,706


(1)	Management considers estimated fair value equivalent to book value for tax certificates since these securities have no readily traded market and are deemed to approximate fair value.

(2)	The limited partnership invests in companies in the financial service industry and is recorded at fair value in Investment Securities and Tax Certificates.

(3)	Investment securities consist of equity instruments purchased through private placements and are accounted for at historical cost adjusted for other-than-temporary declines in value. Also included in investment securities is BFC’s investment in Benihana of $10.0 million as discussed in Note 4.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table shows the gross unrealized losses and fair value of the Company’s available for sale securities and investment securities with unrealized losses that are deemed temporary, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2004 (in thousands):


		Less Than 12 Months					12 Months or Greater					Total

		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
		Value		Losses			Value		Losses			Value		Losses

Available for sale securities:
	Mortgage-backed securities	$	91,091	$	(1,256	)	$	52,253	$	(331	)	$	143,344	$	(1,587	)
	Real estate mortgage investment conduits		71,705		(436	)		—		—			71,705		(436	)
	Tax exempt securities		71,523		(1,030	)		—		—			71,523		(1,030	)

Total available for sale securities			234,319		(2,722	)		52,253		(331	)		286,572		(3,053	)

Investment securities
	Tax exempt securities		78,585		(777	)		—		—			78,585		(777	)

Total		$	312,904	$	(3,499	)	$	52,253	$	(331	)	$	365,157	$	(3,830	)

Unrealized losses on mortgage-backed securities outstanding greater than twelve months at December 31, 2004 were caused by interest rate increases. The cash flows of these securities are guaranteed by government agencies. Management expects that the mortgage-backed securities would not be settled at a price less than the carrying amount. Accordingly, the Company does not consider these investments other-than-temporarily impaired at December 31, 2004.

Unrealized losses on securities outstanding less than twelve months at December 31, 2004 were also caused by interest rate increases. These securities are guaranteed by government agencies and are of high credit quality. Since these securities are of high credit quality and the decline in value has existed for a short period of time, management believes that these securities may recover their losses in the foreseeable future. Accordingly, the Company does not consider these investments other-than-temporarily impaired at December 31, 2004.

The scheduled maturities of debt securities and tax certificates were (in thousands):


		Debt Securities				Tax Certificates and
		Available for Sale				Investment Securities

		Amortized		Estimated		Amortized		Estimated
		Cost		Fair Value		Cost		Fair Value

December 31, 2004(1)(2)
Due within one year		$	4,419	$	4,398	$	118,725	$	118,725
Due after one year, but within five years			6,285		6,226		48,006		48,006
Due after five years, but within ten years			86,136		86,051		—		—
Due after ten years(3)			621,571		624,781		133,562		133,087

	Total	$	718,411	$	721,456	$	300,293	$	299,818


(1)	Scheduled maturities in the above table may vary significantly from actual maturities due to prepayments.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


(2)	Except for tax certificates, maturities are based upon contractual maturities. Tax certificates do not have stated maturities, and estimates in the above table are based upon historical repayment experience (generally 1 to 2 years).

(3)	Amounts include $294 million of callable tax exempt securities with call dates ranging from 2008 to 2015.

Activity in the allowance for tax certificate losses was (in thousands):


	For the Years Ended
	December 31

	2004			2003			2002

Balance, beginning of period	$	2,870		$	1,873		$	1,521

Charge-offs		(491	)		(869	)		(1,783	)
Recoveries		918			666			660

Net recoveries (charge-offs)		427			(203	)		(1,123	)

Provision charged to operations		—			1,200			1,475

Balance, end of period	$	3,297		$	2,870		$	1,873

The components of gains and losses on sales of securities included in other income were (in thousands):


	For the Years Ended
	December 31,

	2004		2003			2002

Gross gains on securities activities	$	7,162	$	900		$	8,711
Gross losses on securities activities		—		(1,961	)		(67	)
Realized gain on future contract		36		—			—
Realized loss on future contract		—		(49	)		(66	)

Net (losses) gains on securities activities	$	7,198	$	(1,110	)	$	8,578

Proceeds from sales of securities available for sale were $99.1 million, $41.2 million, and $197.6 million during the years ended December 31, 2004, 2003 and 2002, respectively. Included in gross losses on securities activities, net during the year ended December 31, 2003 was $1.9 million of realized losses related to the settlement of interest rate swap contracts. The interest rate swaps were accounted for as a cash flow hedge and the unrealized losses were recorded i other comprehensive income during the year ended December 31, 2002.

In October 1999, BankAtlantic Bancorp made a $15 million investment in 3,033,386 shares of a privately held technology company’s common stock for cash and 848,364 shares of BankAtlantic Bancorp’s Class A common stock. A limited partnership in which BFC has an approximately 57% controlling interest invested $2 million for 219,300 shares of the technology company’s common stock, at a price per share of $9.12 in October 2000. At December 31, 2001, the carrying value of this investment by the limited partnership was written down to $4.95 per share and in 2002, based on performance of the technology company, the investment in the technology company was written off entirely by the limited partnership and BankAtlantic Bancorp. The Company also recognized an impairment charge of $362,000, $3.1 million and $4.3 million during the year ended December 31, 2004, 2003 and 2002, respectively, on other equity securities resulting from significant declines in their value that were considered other than temporary due to the financial condition and near term prospects of the issuers of the equity securities. Approximately $3.8 million of the impairment charge in 2002 relates to BankAtlantic Bancorp impairment charge in its equity securities.

In March 2004, the Company recorded a $24 million litigation gain pursuant to a settlement between the Company and its affiliates and the technology company. In accordance with the terms of the settlement,

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

BankAtlantic Bancorp sold its stock in the technology company to a third party investor group for its original cost of $15 million and received from the investor group and the technology company additional compensation for legal expenses and damages consisting of $1.7 million in cash and 378,160 shares of BankAtlantic Bancorp’s Class A common stock with a $6.1 million fair value that had been owned by the technology company. BankAtlantic Bancorp retired the Class A common stock on the settlement date. The limited partnership and other affiliates of the Company chose not to sell their shares in the technology company but recovered legal fees and damages. The limited partnership received $309,845 in cash and 50,422 shares of BankAtlantic Bancorp Class A Common Stock in connection with the settlement and the Company’s other affiliates, without regard to BankAtlantic Bancorp or their interests in the limited partnership, received in the aggregate $132,747 in cash and 29,413 shares of BankAtlantic Bancorp Class A Common Stock. The legal fees associated with the lawsuit and the damages received by the Company and its affiliates were shared pro rata based on the amount of each party’s original investment in the technology company.

Securities owned consisted of the following (in thousands):


			December 31,

			2004		2003

Debt obligations:
	States and municipalities		$	10,824	$	9,903
	Corporations			10,093		5,159
	U.S. Government and agencies			57,659		62,229
Corporate equity				18,042		15,072
Mutual funds				27,898		24,639
Certificates of deposits				927		7,563

		Total	$	125,443	$	124,565

All the securities owned at December 31, 2004 and 2003 were associated with Ryan Beck’s trading activities conducted both as principal and as agent on behalf of the firm and individual and institutional investor clients of Ryan Beck. Transactions as principal involve making markets in securities which are held in inventory to facilitate sales to and purchases from customers. Ryan Beck realized income from principal transactions of $90.4 million, $95.5 million and $49.1 million for the years ended December 31, 2004, 2003 and 2002, respectively.

In the ordinary course of business, Ryan Beck borrows or carries excess funds under an agreement with its clearing broker. Securities owned are pledged as collateral for clearing broker borrowings. As of December 31, 2004, balances due from the clearing broker were $16.6 million. As of December 31, 2003, balances due to the clearing broker were $8.6 million.

Securities sold, but not yet purchased consists of the following (in thousands):


	December 31,

	2004		2003

Corporate equity	$	3,498	$	3,544
Corporate bonds		9,958		1,963
State and municipalities		269		67
U.S. Government agencies		25,384		32,231
Certificates of deposits		353		8

	$	39,462	$	37,813

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Securities sold, but not yet purchased are a part of Ryan Beck’s normal activities as a broker and dealer in securities and are subject to off-balance-sheet risk should Ryan Beck be unable to acquire the securities for delivery to the purchaser at prices equal to or less than the current recorded amounts.

The following table provides information on securities purchased under resell agreements (in thousands):


	For the Years Ended December 31,

	2004		2003			2002

Ending Balance	$	—	$	—		$	30,145
Maximum outstanding at any month end within period	$	—	$	160,000		$	30,145
Average amount invested during period	$	—	$	31,589		$	4,558
Average yield during period		—		0.60	%		0.73

The underlying securities associated with the securities purchased under resell agreements during the years ended December 31, 2003 and 2002 were held by the Company.

The following table provides information on Federal Funds sold (in thousands):


	For the Years Ended

	2004			2003			2002

Ending Balance	$	5,100		$	—		$	20,000
Maximum outstanding at any month end within period	$	54,530		$	83,000		$	20,000
Average amount invested during period	$	6,282		$	16,499		$	3,928
Average yield during period		0.75	%		1.01	%		1.45	%

The estimated fair value of securities and short term investments pledged for the following obligations were (in thousands):


	December 31,

	2004		2003

Treasury tax and loan	$	1,784	$	1,724
Repurchase agreements		312,171		144,984
Public deposits		53,838		—
Interest rate swap and forward contracts		—		174

	$	367,793	$	146,882

The counter party to the repurchase agreements has the right to engage in other repurchase transactions with the pledged securities but must deliver the pledged securities to BankAtlantic at the termination of the agreement.


4.	Benihana Convertible Preferred Stock Investment

Benihana has operated teppanyaki-style dinnerhouse restaurants in the United States for 40 years. Benihana has exclusive rights to own, develop and license Benihana and Benihana Grill restaurants in the United States, Central and South America and the islands of the Caribbean. John E. Abdo, Vice Chairman of the Company Board of Directors, is a member of Benihana Board of Directors. Further, Darwin Dornbush, a member of Levitt’s Board of Directors is a director and corporate secretary of Benihana.

During the quarter ended June 30, 2004, the Company entered into an agreement with Benihana Inc., to purchase an aggregate of 800,000 shares of Series B Convertible Preferred Stock (“Convertible Preferred Stock”) for $25.00 per share. Benihana is a NASDAQ-listed company with two listed classes of common shares: Common Stock (BNHN) and Class A Common Stock (BNHNA). On July 1, 2004, the Company

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

funded the first tranche of Convertible Preferred Stock in the amount of $10.0 million for the purchase of 400,000 shares. The purchase of the remaining 400,000 shares of Convertible Preferred Stock will be funded from time to time at the election of Benihana during the two-year period commencing on the first anniversary of the closing. The shares of Convertible Preferred Stock are convertible into Benihana Common Stock at a conversion price of $19.00 per share, subject to adjustment from time to time upon certain defined events. The shares of the Convertible Preferred Stock have voting rights on “as if converted” basis together with Benihana’s Common Stock on all matters put to a vote of the holders of Benihana’s Common Stock. The approval of a majority of the holders of the Convertible Preferred Stock then outstanding, voting as a single class, are required for certain events outside the ordinary course of business. Holders of the Convertible Preferred Stock are entitled to receive cumulative quarterly dividends at an annual rate equal to $1.25 per share, payable on the last day of each calendar quarter commencing September 30, 2004. The Convertible Preferred Stock is subject to mandatory redemption at the original issue price plus accumulated dividends on July 2, 2014 unless the holders of a majority of the outstanding Convertible Preferred Stock elect to extend the mandatory redemption date to a later date not to extend beyond July 2, 2024. In addition, the Convertible Preferred Stock may be redeemed by Benihana for a limited beginning three years from the date of issue if the price of Benihana’s Common Stock is at least $38.00 for sixty consecutive trading days. Based upon Benihana’s currently outstanding capital stock, the Convertible Preferred Stock currently held represents approximately 13% of Benihana’s voting and 5% of Benihana economic interest. Accordingly, the Benihana investment is currently accounted for at historical cost and is included in investment securities.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


5.	Loans Receivable

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


			December 31,

			2004			2003

Real estate loans:
	Residential		$	2,065,658		$	1,343,657
	Construction and development			1,454,048			1,322,268
	Commercial			1,082,294			1,071,787
	Small business			123,740			107,835
Other loans:
	Home equity			457,058			333,655
	Commercial business			91,505			91,724
	Small business — non-mortgage			66,679			51,898
	Consumer loans			14,540			17,892
	Deposit overdrafts			3,894			4,036
	Residential loans held for sale			4,646			2,254
	Other loans			3,364			4,175
	Discontinued loans products(1)			8,285			35,544

		Total gross loans		5,375,711			4,386,725

Adjustments:
	Undisbursed portion of loans in process			(767,804	)		(728,100	)
	Premiums related to purchased loans			6,609			6,898
	Deferred fees			(5,812	)		(6,655	)
	Deferred profit on commercial real estate loans			(549	)		(589	)
	Allowance for loan and lease losses			(47,082	)		(46,667	)

		Loans receivable — net	$	4,561,073		$	3,611,612


(1)	Discontinued loan products consist of non-mortgage syndication loan, lease financings, indirect consumer loans and certain small business loans originated before 2002. These loan products were discontinued during prior periods.

BankAtlantic’s loan portfolio had the following geographic concentration at December 31, 2004:


Florida	56	%
California	12	%
Northeast	8	%
Other	24	%

	100	%

In February 2001, BFC originated several loans to officers and directors totaling approximately $1.1 million, $100,000 of which are non-recourse loans secured by investments in BankAtlantic Financial Ventures II, Ltd. These loans bear interest payable annually at the prime rate plus 1% and are due in February 2006. On July 16, 2002, John Abdo borrowed from the Company $3.5 million on a recourse basis and paid off his existing loan due to the Company of $500,000. The $3.5 million loan bears interest at the prime rate plus

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

1%, requires monthly interest payments, is due on demand and is secured by 2,127,470 shares of BFC Class A Common Stock and 370,750 shares of BFC Class B Common Stock. The balance of these loans at December 31, 2004 and 2003 is $3.4 million and $4.2 million (See note 24).

Loans to Levitt amounting to $38.0 million are unsecured and $8.6 million of loans are construction loans secured by land and improvements at December 31, 2004. These inter-company loans and related interest were eliminated in consolidation. Investments in and advances to unconsolidated subsidiaries includes loans due to BankAtlantic from Levitt’s joint ventures of approximately $23.2 million at December 31, 2003 and none at December 31, 2004. In January 2004, a joint venture loan due to BankAtlantic in the amount of $21.5 million was repaid in connection with the sale of the joint venture project.

BankAtlantic began originating residential loans held for sale with an independent mortgage company in August 2003. The mortgage company provides processing and closing assistance to BankAtlantic. Pursuant to an agreement, this mortgage company purchases the loans from BankAtlantic 14 days after the date of funding. BankAtlantic owns the loans during the 14 day period and accordingly earns the interest income during the period. The sales price is negotiated quarterly for all loans sold during the quarter.


	*Allowance for Loan Losses (in thousands):*


	For the Years Ended December 31,

	2004			2003			2002

Balance, beginning of period	$	46,667		$	49,094		$	45,657
Loans charged-off		(4,076	)		(11,723	)		(28,663	)
Recoveries of loans previously charged-off		9,600			10,577			8,879

Net recoveries (charge-offs)		5,524			(1,146	)		(19,784	)
Allowance for loan losses, acquired		—			(734	)		9,144
Net provision charged (credited) to operations		(5,109	)		(547	)		14,077

Balance, end of period	$	47,082		$	46,667		$	49,094

The following summarizes impaired loans (in thousands):


		December 31, 2004				December 31, 2003

		Gross				Gross
		Recorded		Specific		Recorded		Specific
		Investment		Allowances		Investment		Allowances

Impaired loans with specific valuation allowances		$	247	$	123	$	361	$	181
Impaired loans without specific valuation allowances			8,123		—		12,325		—

	Total	$	8,370	$	123	$	12,686	$	181

The average gross recorded investment in impaired loans was $10.3 million, $16.3 million and $39.3 million during the years ended December 31, 2004, 2003 and 2002, respectively.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Interest income which would have been recorded under the contractual terms of impaired loans and the interest income actually recognized was (in thousands):


	For the Years Ended
	December 31,

	2004			2003			2002

Contracted interest income	$	464		$	666		$	1,575
Interest income recognized		(192	)		(396	)		(768	)

Foregone interest income	$	272		$	270		$	807

Non-performing assets consist of non-accrual loans, non-accrual tax certificates, REO and repossessed assets. Non-accrual loans are loans on which interest recognition has been suspended because of doubts as to the borrower’s ability to repay principal or interest. Non-accrual tax certificates are tax deeds or certificates in which interest recognition has been suspended due to the aging of the certificate or deed.

Non-Performing Assets (in thousands):


			December 31,

			2004		2003		2002

Non-accrual — tax certificates			$	381	$	894	$	1,419
Non-accrual — loans
	Residential			5,538		9,777		14,237
	Commercial real estate and business			340		52		1,474
	Small business			88		155		239
	Lease financing			727		25		3,900
	Consumer			1,210		794		532
Real estate owned				692		2,422		9,607
Other repossessed assets				—		—		4

		Total non-performing assets		8,976		14,119		31,412
Specific valuation allowance				—		—		(1,386	)

		Total non-performing assets, net	$	8,976	$	14,119	$	30,026


	*Other potential problem loans (in thousands):*


	December 31,

	2004		2003		2002

Loans contractually past due 90 days or more and still accruing	$	—	$	135	$	100
Performing impaired loans, net of specific allowances		320		180		—
Restructured loans		24		1,387		1,882

Total potential problem loans	$	344	$	1,702	$	1,982

Loans contractually past due 90 days or more represent loans that have matured and the borrower continues to make the payments under the matured loan agreement. BankAtlantic is in the process of renewing or extending these matured loans. Restructured loans are loans in which the original terms were modified granting the borrower loan concessions due to financial difficulties. Performing impaired loans are impaired loans which are still accruing interest. There were no commitments to lend additional funds on non-

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

performing loans and BankAtlantic has $200,000 of commitments to lend additionally funds to potential problem loans at December 31, 2004.

Foreclosed asset activity in non-interest expense includes the following (in thousands):


		For the Years Ended
		December 31,

		2004			2003			2002

Real estate acquired in settlement of loans and tax certificates:
Operating expenses, net		$	137		$	1,122		$	872
Provisions for losses on REO			5			812			1,467
Net (gains) losses on sales			(694	)		(1,984	)		(117	)

	Total (income) loss	$	(552	)	$	(50	)	$	2,222

Activity in the allowance for real estate owned consisted of (in thousands):


		For the Years Ended
		December 31,

		2004			2003			2002

Balance, beginning of period		$	—		$	—		$	—
Net charge-offs:
	Commercial real estate		—			(750	)		(1,500	)
	Residential real estate		(5	)		(62	)		33

Total net charge-offs			(5	)		(812	)		(1,467	)
	Provision for losses on REO		5			812			1,467

Balance, end of period		$	—		$	—		$	—


6.	Accrued Interest Receivable

Accrued interest receivable consists of (in thousands):


		December 31,

		2004		2003

Loans receivable		$	22,141	$	15,746
Investment securities and tax certificates			9,527		10,269
Securities available for sale			4,327		1,897

	Accrued interest receivable	$	35,995	$	27,912

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


7.	Properties and Equipment

Properties and equipment was comprised of (in thousands):


		December 31,

		2004		2003

Land		$	31,208	$	28,749
Buildings and improvements			95,005		64,119
Furniture, fixtures and equipment			79,455		52,211
Other			13,763		3,505

	Total		219,431		148,584
Less accumulated depreciation			58,434		50,245

Office properties and equipment — net		$	160,997	$	98,340

During 2004, BankAtlantic finalized a plan to renovate the interior of its existing branches. BankAtlantic has incurred approximately $4.1 million of renovation costs as of December 31, 2004. As a consequence of the branch renovation plan, BankAtlantic shortened the estimated lives of $2.8 million of branch fixed assets resulting in $1.5 million of additional depreciation expense during the year ended December 31, 2004.

During 2002, BankAtlantic purchased a $14.3 million facility to consolidate BankAtlantic’s headquarters and back office operations into a centralized location. BankAtlantic has incurred approximately $24.5 million in renovation costs on this building as of December 31, 2004.

During 2002, the BankAtlantic discontinued certain ATM relationships, resulting in an $801,000 restructuring charge and a $206,000 impairment write-down.

In October 2004, Levitt purchased an occupied office building for approximately $16.2 million in Fort Lauderdale, Florida that it intends to use as its executive offices upon termination or modification of the existing tenant lease.

Depreciation expense was $13.2 million, $11.6 million and $11.4 million for the years ended December 31, 2004, 2003 and 2002, respectively. Included in furniture and equipment at December 31, 2004 and 2003 was $5.4 million and $4.7 million, respectively of unamortized software costs.


8.	Real Estate Held for Development and Sale

Real estate held for development and sale consist of the following (in thousands):


		December 31,

		2004		2003

Land and land development costs		$	302,076	$	172,172
Construction costs			112,292		74,936
Other capitalized costs			13,509		11,903
Other real estate			16,754		21,697

	Total	$	444,631	$	280,708

Real estate held for development and sale consisted of the combined activities of Levitt and its subsidiaries as well as the activities of a 50% owned real estate joint venture (“Riverclub”) in which BankAtlantic Bancorp is the primary beneficiary. The joint venture was accounted for under the equity method during prior periods. Also included in other real estate held for development and sale is BFC’s real estate, Burlington Manufacturers Outlet Center (“BMOC”), a shopping center in North Carolina and the

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

unsold land at the commercial development known as Center Port in Pompano Beach, Florida. Also included in real estate held for development and sale at December 31, 2004 and 2003 is $2.5 million and $3.1 million, respectively, associated with branch banking facilities.


9.	Investments in and Advances to Unconsolidated Subsidiaries

The consolidated statements of financial condition include the following amounts for investments in and advance to unconsolidated subsidiaries (in thousands):


	December 31,

	2004		2003

Investment in Bluegreen Corporation	$	80,572	$	70,852
Investments in and loans to real estate joint ventures		608		27,286
Investment in statutory business trusts		7,910		7,910

Investments in and advances to unconsolidated subsidiaries	$	89,090	$	106,048

The consolidated statements of operations include the following amounts for equity earnings from unconsolidated subsidiaries (in thousands):


	For the Years Ended December 31,

	2004		2003		2002

Equity in Bluegreen earnings	$	13,068	$	9,085	$	5,349
Equity in joint ventures earnings		6,050		616		3,978
Earnings from statutory business trusts		485		425		—

	$	19,603	$	10,126	$	9,327

Investments in and advances to unconsolidated subsidiaries consisted of Levitt’s investment in Bluegreen, Levitt’s investment in real estate joint ventures, BankAtlantic Bancorp’s investment in 11 statutory business trusts that were formed to issue trust preferred securities, and in 2002, Riverclub. Prior to January 1, 2003, BankAtlantic Bancorp’s statutory business trusts were consolidated in the Company’s financial statements. At December 31, 2004, the 9.5 million shares of Bluegreen common stock owned by Levitt represented approximately 31% of Bluegreen’s outstanding common stock.

At December 31, 2004, Levitt and its subsidiaries owned equity investments associated with real estate joint ventures at various stages of development, ranging from 40% to 50% profit sharing interests. At December 31, 2003, Levitt’s investment in real estate joint ventures included BankAtlantic’s loans of approximately $23.2 million and none at December 31, 2004. In January 2004, a joint venture loan due to BankAtlantic in the amount of $21.5 million was repaid in connection with the sale of the joint venture project

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Bluegreen’s condensed consolidated financial statements are presented below (in thousands):

Condensed Consolidated Balance Sheet


	December 31,

	2004		2003

	(In thousands)
Total assets	$	634,809	$	551,022

Total liabilities		363,933		359,494
Minority interest		6,009		4,648
Total shareholders’ equity		264,867		186,880

Total liabilities and shareholders’ equity	$	634,809	$	551,022

Condensed Consolidated Statements of Income


					Nine Months
	Year Ended		Year Ended		Ended
	December 31,		December 31,		December 31,
	2004		2003		2002

	(In thousands)
Revenues	$	601,623	$	438,454	$	271,973
Cost and expenses		538,282		393,129		247,302
Provision for income taxes		22,821		16,168		8,479
Minority interest		4,065		3,330		816

Income before cumulative effect of a change in accounting principle		36,455		25,827		15,376
Cumulative effect of change in accounting principle, net of income taxes		—		—		(5,929	)
Minority interest in cumulative effect of change in accounting principle, net of income taxes		—		—		(350	)

Net income	$	36,455	$	25,827	$	9,797

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Condensed Combined Balance Sheets and Statements of Operations for the joint ventures accounted for using the equity method are as follows (unaudited):

Condensed Combined Balance Sheets


			December 31,

			2004		2003

			(In thousands)
Real estate assets			$	1,785	$	57,402
Other assets				1.686		5,931

	Total assets		$	3,471	$	63,333

Mortgage notes payable to BankAtlantic			$	—	$	22,726
Mortgage notes payable non-affiliates				—		25,628
Other liabilities				1,055		6,879

	Total liabilities			1,055		55,233

Partners’ capital				2,416		8,100

		Total liabilities and partners’ capital	$	3,471	$	63,333

Condensed Combined Statements of Operations


		For the Years Ended December 31,

		2004		2003		2002

		(In thousands)
Revenues		$	54,738	$	18,893	$	43,924
Cost and expenses			42,666		18,332		41,963

	Net income	$	12,072	$	561	$	1,961

For the years ended December 31, 2004, 2003 and 2002, interest paid to BankAtlantic by Levitt’s joint ventures was approximately $84,000, $1.6 million and $2.2 million, respectively.

The Condensed Combined Statements of Financial Condition and Condensed Combined Statements of Operation for the BankAtlantic Bancorp statutory business trusts (in thousands):


		December 31,

Statement of Financial Condition		2004		2003

Junior subordinated debentures		$	263,266	$	263,266
Other assets			694		637

	Total Assets	$	263,960	$	263,903

Trust preferred securities		$	255,375	$	255,375
Other liabilities			675		618

	Total Liabilities		256,050		255,993
Common securities			7,910		7,910

Total Liabilities and Equity		$	263,960	$	263,903

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	For the Years Ended December 31,

Statement of Operations	2004			2003			2002(1)

Interest income from subordinated debentures	$	16,161		$	14,534		$	—
Revenue from the sale of real estate		—			—			7,942
Selling, general and administrative expenses		—			—			(6,775	)
Interest expense		(15,676	)		(14,109	)		—

Net income	$	485		$	425		$	1,167


(1)	The above Condensed Combined Statements of Operation for 2002 includes the operation of a joint venture that was consolidated in the Company’s financial statements as of January 1, 2003.


10.	Investment in BankAtlantic Bancorp and Levitt, and Equity Transactions


	*Dividends from BankAtlantic Bancorp and Levitt*

The payment of dividends by BankAtlantic Bancorp is subject to declaration by BankAtlantic Bancorp’s Board of Directors and compliance with applicable indenture covenants and will depend upon, among other things, the results of operations, financial condition and cash requirements of BankAtlantic Bancorp and the ability of BankAtlantic to pay dividends or otherwise advance funds to BankAtlantic Bancorp, which in turn is subject to OTS regulation and is based upon BankAtlantic’s regulatory capital levels and net income. Currently, BankAtlantic Bancorp pays a quarterly dividend of $0.035 per share for Class A and Class B Common Stock.

The payment of dividends by Levitt is subject to declaration by Levitt’s Board of Directors and compliance with applicable indenture covenants and will depend upon, among other things, the results of operations, financial condition and cash requirements of Levitt. In July 2004 and October 2004, Levitt paid cash dividends on its common stock of $0.02 per share on its Class A common stock and Class B common stock. Additionally, another $0.02 per share dividend on its Class A common stock and Class B common stock has been declared for payment in January 2005. Levitt’s Board has not adopted a policy of regular dividend payments.

EQUITY TRANSACTIONS

Equity transactions at the subsidiary level have an impact on the ownership position that BFC has in the entity. As additional shares are issued by the subsidiary either by exercise of stock options or the issuance of additional shares, BFC’s ownership position is diluted. Conversely, if a subsidiary retires shares for any reason, BFC’s ownership position would be increased.

The following are equity transactions of BankAtlantic Bancorp and Levitt that impact or could impact the Company’s ownership percentage and minority interest.


	Issuance and Redemption of BankAtlantic Bancorp Class A Common Stock

In April 2003, BankAtlantic Bancorp called for redemption approximately $45.8 million of its 5.625% Convertible Subordinated Debentures due 2007. The Convertible Subordinated Debentures were redeemed at a redemption price of 102% of the principal amount plus accrued and unpaid interest through the redemption date. During the period between the mailing of the notice of redemption and the redemption, approximately $211,000 of Convertible Subordinated Debentures were converted by holders into an aggregate of 18,754 shares of Class A Common Stock.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During the years ended December 31, 2004, 2003 and 2002, BankAtlantic Bancorp received net proceeds of $3.7 million, $4.5 million and $1.2 million, respectively, from the exercise of stock options. During the year ended December 31, 2004, BankAtlantic Bancorp redeemed 268,644 shares of Class A common stock as consideration for the payment of the exercise price of stock options and for the payment of the optionee’s minimum statutory withholding taxes.


	BankAtlantic Bancorp Restricted Stock:

In December 1998, BankAtlantic Bancorp adopted a Restricted Stock Incentive Plan (“BankAtlantic Bancorp-Ryan Beck Restricted Stock Incentive Plan”) to provide additional incentives to officers and key employees of Ryan Beck. The Plan provided up to 862,500 shares of restricted Class A common stock, of which not more than 287,500 shares may be granted to any one person. The Plan allows the Board of Directors of BankAtlantic Bancorp to impose an annual cap on awards.

During the years ended December 31, 2004, 2003 and 2002, BankAtlantic Bancorp issued 0, 12,500 and 1,500 shares, respectively, of restricted Class A common stock to certain key employees of BankAtlantic. The restricted stock vests over designated periods and had a fair market value of $0, $148,000 and $17,000 on the issue dates, respectively. During the years ended December 31, 2004, 2003 and 2002, 19,500, 54,760 and 21,000 shares, respectively, of restricted stock vested and 163,787 shares of restricted stock remain outstanding.

In May 2004, BankAtlantic Bancorp’s stockholders approved the BankAtlantic Bancorp 2004 restricted stock incentive plan for the purpose of attracting and retaining the best available personnel for positions of substantial responsibility and to provide additional incentive to the employees of BankAtlantic Bancorp or its subsidiaries. The maximum aggregate number of shares which may be issued for restricted stock awards under the Plan is 250,000 shares. No shares have been granted under the Plan at December 31, 2004.


	BankAtlantic Bancorp Retention Pool:

In connection with the acquisition of Ryan Beck in June 1998, BankAtlantic Bancorp established a retention pool covering certain key officers of Ryan Beck. All participants in the retention pool vested on June 28, 2002, and received, in the aggregate, 5,941 shares of BankAtlantic Bancorp Class A common stock, and $3.8 million in cash and notes payable for an aggregate principal amount of $3.7 million. The notes payable had a 5.75% interest rate and were paid in full in May 2003. Included in the statement of operations during 2002 was $1.0 million of compensation expense associated with the retention pool.


	BankAtlantic Bancorp Stock Option Plans:

Stock Option Plans

Maximum

Shares

Class of

Vesting

Type of

Term(3)

Authorized(6)

Stock

Requirements

Options(5)

1996 Stock Option Plan

10 years

2,246,094

5 Years

(1)

ISO, NQ

1998 Ryan Beck Option Plan

10 years

362,417

(4)

ISO, NQ

1998 Stock Option Plan

10 years

920,000

5 Years

(1)

ISO, NQ

1999 Non-qualifying Stock Option Plan

10 years

862,500

(2)

1999 Stock Option Plan

10 years

862,500

(2)

ISO, NQ

2000 Non-qualifying Stock Option Plan

10 years

1,704,148

Immediately

2001 Amended and Restated Stock Option Plan

10 years

3,918,891

5 Years

(1)

ISO, NQ

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


(1)	Vesting is established by the BankAtlantic Bancorp Compensation Committee in connection with each grant of options. All directors’ stock options vest immediately.

(2)	Vesting is established by the BankAtlantic Bancorp Compensation Committee.

(3)	All outstanding options must be exercised no later than 10 years after their grant date.

(4)	Upon acquisition of Ryan Beck, BankAtlantic Bancorp assumed all options outstanding under Ryan Beck’s existing stock option plans at various exercise prices based upon the exercise prices of the assumed option. No new options will be issued under the 1998 Ryan Beck option plan and the plan will terminate when the outstanding options are exercised or expire.

(5)	ISO — Incentive Stock Option; NQ — Non-qualifying Stock Option

(6)	During 2001 shares underlying options available for grant under all stock options plans except the 2001 stock option plan were canceled. BankAtlantic Bancorp’s shareholders increased the number of shares authorized under the 2001 stock option plan to 3,000,000 at the 2002 Annual Meeting and in January 2004, in connection with the Levitt spin-off, BankAtlantic Bancorp adjusted the shares authorized under the 2001 Amended and Restated Stock Option Plan to 3,918,891.

In January 2004, BankAtlantic Bancorp’s Compensation Committee adjusted all outstanding options to acquire Class A common stock that were outstanding prior to the Levitt spin-off to reflect the change in intrinsic value of BankAtlantic Bancorp’s Class A common stock that resulted from the spin-off. The options were adjusted in accordance with FASB Interpretation No. 44 whereby the aggregate intrinsic value of the options immediately after the Levitt spin-off was adjusted to equal the aggregate intrinsic value of the options immediately before the Levitt spin-off and options were also adjusted so that the ratio of the exercise price per share to the market value per share remained unchanged. The option adjustment was accounted for as if the outstanding options prior to the Levitt spin-off were cancelled and new options were issued at the adjusted exercise price and number of shares. As a consequence of the above adjustments the outstanding options increased from 5,311,365 to 6,938,220 and the weighted average exercise price was reduced from $6.04 to $4.62. Prior period shares and exercise prices have been retroactively adjusted in the tables below to reflect the Levitt spin-off adjustment.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following is a summary of BankAtlantic Bancorp’s Class A common stock option activity:


	Class A
	Outstanding
	Options

Outstanding at December 31, 2001		7,127,260
Exercised		(351,953	)
Forfeited		(318,222	)
Issued		992,263

Outstanding at December 31, 2002		7,449,348
Exercised		(1,301,470	)
Forfeited		(224,781	)
Issued		1,015,123

Outstanding at December 31, 2003		6,938,220
Exercised		(1,461,678	)
Forfeited		(77,797	)
Issued		776,100

Outstanding at December 31, 2004		6,174,845

Available for grant at December 31, 2004		596,393


	For the Years Ended
	December 31,

	2004		2003		2002

Weighted average exercise price of options outstanding	$	6.79	$	4.62	$	4.17
Weighted average exercise price of options exercised		2.56		4.10		3.81
Weighted average price of options forfeited	$	8.15	$	5.14	$	6.76

The method used to calculate the fair value of the options granted was the Black-Scholes model with the following grant date fair values and assumptions:


			Weighted Average

	Number of						Risk Free				Expected
	Options		Grant Date		Exercise		Interest		Expected		Dividend
Year of Grant	Granted		Fair Value		Price		Rate		Volatility		Yield

2002		992,263	$	4.25	$	8.56		4.65%		47.00%		1.04%
2003		1,015,123	$	3.66	$	7.45		3.34%		50.00%		1.27%
2004		776,100	$	8.42	$	18.20		4.32%		41.00%		0.73%

The employee turnover factor was 1.00% for officer incentive and non-qualifying stock options during the year ended December 31, 2004 and 2002, respectively. The employee turnover factor was 6.00% for incentive and non-qualifying stock options during the year ended December 31, 2003. The expected life for options issued during 2004, 2003 and 2002 was 7.0 years.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes information about BankAtlantic Bancorp fixed stock options outstanding at December 31, 2004:


		Options Outstanding						Options Exercisable

				Weighted-		Weighted-		Number		Weighted-
		Number		Average		Average		Exercisable		Average
	Range of	Outstanding		Remaining		Exercise		at		Exercise
Class of Common Stock	Exercise Prices	at 12/31/04		Contractual Life		Price		12/31/04		Price

A	$1.73 to 1.91		620,358		0.3 years	$	1.77		620,358	$	1.77
A	$1.92 to 3.83		1,533,561		4.3 years		3.19		469,150		3.71
A	$3.84 to 6.70		1,347,449		3.4 years		4.94		1,345,947		4.94
A	$6.71 to 9.36		1,897,377		7.6 years		8.00		108,416		8.03
A	$9.37 to 18.20		776,100		9.5 years		18.20		35,000		18.20

			6,174,845		5.4 years	$	6.79		2,578,871	$	4.28

The following table summarizes information about BankAtlantic Bancorp fixed stock options outstanding at December 31, 2003:

Options Outstanding

Options Exercisable

Weighted-

Number

Weighted-

Number

Average

Exercisable

Average

Range of

Outstanding

Remaining

Exercise

Class of Common Stock

Exercise Prices

at 12/31/03

Contractual Life

Price

12/31/03

Price

$1.73 to 1.91

1,673,384

0.9 years

1.77

1,281,013

1.77

$1.92 to 3.83

1,563,844

5.3 years

3.19

368,829

3.71

$3.84 to 6.70

1,752,835

4.5 years

4.89

725,370

5.00

$6.71 to 9.36

1,948,157

8.7 years

8.00

82,995

8.38

6,938,220

5.0 years

4.62

2,458,207

3.23

The following table summarizes information about BankAtlantic Bancorp fixed stock options outstanding at December 31, 2002:

Options Outstanding

Options Exercisable

Weighted-

Number

Weighted-

Number

Average

Exercisable

Average

Range of

Outstanding

Remaining

Exercise

Class of Common Stock

Exercise Prices

at 12/31/02

Contractual Life

Price

12/31/02

Price

$1.73 to 1.91

1,985,110

1.8 years

1.77

1,985,110

1.77

$1.92 to 3.83

1,749,837

6.1 years

3.22

618,093

3.71

$3.84 to 6.70

2,659,407

5.5 years

4.88

985,046

4.87

$6.71 to 9.36

1,054,994

8.5 years

8.47

120,202

7.99

7,449,348

5.1 years

4.17

3,708,451

3.11


	Ryan Beck Stock Option Plan:

Ryan Beck’s Board of Directors adopted the RB Holdings, Inc. Option Plan (the “Plan”) effective March 29, 2002. In April 2004, Ryan Beck’s Board of Directors declared a 3 for 1 stock split increasing Ryan Beck’s outstanding shares from 8,125,000 to 24,375,000, all of which is owned by the Company. Ryan Beck adjusted the exercise price and number of options granted for all options then outstanding in order to restore the option holder’s intrinsic value. Additionally, shares authorized under the Plan were adjusted from 510,000 shares to 1,530,000 shares. In April 2004, the Plan was amended to increase the number of shares of

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Ryan Beck stock authorized for issuance under the Plan from 1,530,000 to 2,437,500. All shares and exercise prices below have been adjusted for the stock split.

The following is a summary of Ryan Beck’s common stock option activity:


	Ryan Beck
	Outstanding
	Options

Outstanding at December 31, 2001		—
Issued		1,477,500

Outstanding at December 31, 2002		1,477,500
Exercised		—
Forfeited		(22,500	)
Issued		75,000

Outstanding at December 31, 2003		1,530,000
Exercised		(90,000	)
Forfeited		(15,000	)
Issued		820,500

Outstanding at December 31, 2004		2,245,500

Available for grant at December 31, 2004		102,000

In March 2002, pursuant to the Plan, Ryan Beck’s Board of Directors granted to certain executives, options to acquire an aggregate of 1,155,000 shares of Ryan Beck common stock at an exercise price of $1.60. The exercise price was below the $1.68 fair value at the date of grant. All of the options issued under this grant vested immediately. BankAtlantic Bancorp recorded $92,000 of compensation expense associated with the issuance of these options in 2002. Additionally, in June 2002, 322,500 options were granted with an exercise price equal to the fair value at the date of grant ($1.68), all of which vest four years from the grant date. During 2003, 75,000 options were granted with an exercise price equal to the fair value at the date of grant ($3.36), all of which vest four years from the grant date. During 2003, 22,500 options issued during 2002 were forfeited at an exercise price of $1.68. In March 2004, options were granted to acquire an aggregate of 798,500 shares of Ryan Beck common stock at an exercise price equal to fair value at the date of grant ($5.26), and in July 2004, 22,000 options were granted to acquire shares of Ryan Beck common stock at an exercise price equal to fair value at the date of grant ($5.28), all of which vest four years from the grant date and expire ten years from the grant date. In June 2004, options to acquire 90,000 shares of Ryan Beck common stock were exercised at a price of $1.60 per share.

Upon exercise of the options, BankAtlantic Bancorp or Ryan Beck has the right under certain defined circumstances, starting six months plus one day after the exercise date, to repurchase the common stock at fair value as determined by an independent appraiser. BankAtlantic Bancorp and Ryan Beck also have the right of first refusal on any sale of Ryan Beck common stock issued as a result of the exercise of an option, and BankAtlantic Bancorp has the right to require any common stockholder to sell its shares in the event that BankAtlantic Bancorp sells its interest in Ryan Beck. The 90,000 shares of Ryan Beck common stock issued in June 2004 upon the exercise of Ryan Beck stock options were repurchased by Ryan Beck in January 2005 at $5.46 per share, the fair value of Ryan Beck common stock at the repurchase date.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Levitt Stock Incentive Plan


	*Stock Incentive Plan*

On May 11, 2004, Levitt’s Shareholders approved the 2003 Levitt Corporation Stock Incentive Plan (“Levitt Stock Incentive Plan”), which had been adopted by Levitt’s board of directors on December 15, 2003. The maximum number of shares with respect to which awards may be granted is 1,500,000 under this plan. Activity under the Plan for the year ended December 31, 2004 follows.


	2004

				Weighted
				Average
	Number of			Exercise
	Options			Price

Options outstanding at beginning of year		—		$	—
Granted		757,500		$	20.52
Exercised		—		$	—
Forfeited		(32,250	)	$	20.15

Options outstanding at end of year		725,250		$	20.54
Options exercisable at end of year		45,000		$	20.15

Options available for grant at end of year		774,750

Weighted average fair market value per share of options granted during the year under SFAS No. 123	$	11.94

The following table summarizes information about stock options outstanding as of December 31, 2004:


		Options Outstanding				Options Exercisable

				Remaining				Exercise
Exercise Price		Options		Contractual Life		Options		Price

$	20.15		642,000		9.00 years		45,000	$	20.15
$	23.40		25,000		9.64 years		—		—
$	23.53		50,000		9.57 years		—		—
$	24.15		8,250		9.22 years		—		—

No options were issued or outstanding in 2003 or 2002.

401(k) Plan

Levitt has a defined contribution plan established pursuant to Section 401(k) of the Internal Revenue Code. Employees who have completed three months of service and have reached the age of 18 are eligible to participate. During the years ended December 31, 2003 and 2002, Levitt’s employees participated the BankAtlantic Security Plus Plan and Levitt’s contributions amounted to $495,000 and $344,000 respectively. During the year ended December 31, 2004, Levitt’s employees participated in the Levitt Corporation Security Plus Plan and Levitt’s contributions amounted to $857,000.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


11.	Deposits

The weighted average nominal interest rate payable on deposit accounts at December 31, 2004 and 2003 was 0.87% and 0.94%, respectively. The stated rates and balances on deposits were (dollars in thousands):


		December 31,

		2004						2003

		Amount			Percent			Amount			Percent

Interest free checking		$	890,398			25.75	%	$	645,036			21.09	%
Insured money fund savings
	1.05% at December 31, 2004
	0.83% at December 31, 2003		875,422			25.32			865,590			28.31
NOW accounts
	0.30% at December 31, 2004
	0.30% at December 31, 2003		658,137			19.04			533,888			17.46
Savings accounts
	0.28% at December 31, 2004
	0.28% at December 31, 2003		270,001			7.81			208,966			6.83

Total non-certificate accounts			2,693,958			77.92			2,253,480			73.69

Certificate accounts:
	Less than 2.00%		302,319			8.74			455,709			14.90
	2.01% to 3.00%		327,958			9.49			147,446			4.82
	3.01% to 4.00%		74,439			2.15			45,546			1.49
	4.01% to 5.00%		21,357			0.62			51,379			1.68
	5.01% and greater		34,988			1.01			102,382			3.35

Total certificate accounts			761,061			22.01			802,462			26.24

Total deposit accounts			3,455,019			99.93			3,055,942			99.93

Premium on brokered deposits			(308	)		(0.01	)		(798	)		(0.03	)
Fair value adjustment related to acquisitions			16			0.00			472			0.02
Interest earned not credited to deposit accounts			2,475			0.08			2,526			0.08

Total		$	3,457,202			100.00	%	$	3,058,142			100.00	%

Interest expense by deposit category was (in thousands):


		For the Years Ended December 31,

		2004			2003			2002

Money fund savings and NOW accounts		$	10,860		$	11,142		$	15,338
Savings accounts			652			856			1,362
Certificate accounts — below $100,000			8,126			10,914			24,177
Certificate accounts, $100,000 and above			8,873			13,457			22,140
Less early withdrawal penalty			(156	)		(180	)		(240	)

	Total	$	28,355		$	36,189		$	62,777

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

At December 31, 2004, the amounts of scheduled maturities of certificate accounts were (in thousands):


		For the Years Ending December 31,

		2005		2006		2007		2008		2009		Thereafter

0.00% to 2.00%		$	288,852	$	10,462	$	2,348	$	276	$	369	$	13
2.01% to 3.00%			215,061		90,250		18,025		3,444		1,179		—
3.01% to 4.00%			19,589		3,192		23,442		18,982		8,819		415
4.01% to 5.00%			2,977		7,655		3,901		638		6,183		2
5.01% and greater			29,625		3,073		1,988		298		—		3

	Total	$	556,104	$	114,632	$	49,704	$	23,638	$	16,550	$	433

Time deposits of $100,000 and over had the following maturities (in thousands):


		December 31,
		2004

3 months or less		$	71,277
4 to 6 months			90,051
7 to 12 months			138,019
More than 12 months			97,872

	Total	$	397,219

Included in certificate accounts at December 31 was (in thousands):


		2004		2003

Brokered deposits		$	140,116	$	145,559
Public deposits			114,052		180,241

	Total institutional deposits	$	254,168	$	325,800

Ryan Beck acted as principal dealer in obtaining $20.6 million and $20.7 million of the brokered deposits outstanding as of December 31, 2004 and 2003, respectively. BankAtlantic has various relationships for obtaining brokered deposits. These relationships are considered as an alternative source of borrowings, when and if needed.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


12.	Advances from Federal Home Loan Bank and Federal Funds Purchased


	*Advances from Federal Home Loan Bank (“FHLB”) (dollars in thousands):*


						December 31,
Payable During Year		Year
Ending December 31,		Callable		Interest Rate		2004		2003

	2004				2.80% to 5.68%	$	—	$	6,250
	2005				1.86%		7,500		17,500
	2006				1.89%		10,417		18,750
	2007				5.68%		—		25,000
	2008				5.14% to 5.67%		409,000		492,000
	2010				5.84% to 6.34%		32,000		32,000
	2011				4.50% to 4.90%		50,000		—

Total fixed rate advances							508,917		591,500

	2008		2004		1.31%		—		25,000
	2011		2004		4.50% to 4.90%		—		50,000
	2011		2005		5.05%		30,000		30,000

Total callable fixed rate advances — European							30,000		105,000

	2009		2004		5.06%		—		10,000
	2009		2005		4.46%		10,000		—

Total callable fixed rate advances — Bermuda							10,000		10,000

Adjustable rate advances
	2004				1.17% to 1.40%		—		50,000
	2005				2.13% to 2.57%		870,000		—
	2006				1.18% to 2.39%		125,000		25,000

Total adjustable rate advances							995,000		75,000

Purchase accounting fair value adjustments							580		705

Total FHLB advances						$	1,544,497	$	782,205

Average cost during period							3.93%		4.79	%

Average cost end of period							3.41%		4.67	%

European callable advances give the FHLB the option to reprice the advance at a specific future date. Bermuda callable advances give the FHLB the option to reprice the advance anytime from the call date until the payable date. Once the FHLB exercises its call option, BankAtlantic has the option to convert to a three month LIBOR-based floating rate advance, pay off the advance or convert to another fixed rate advance.

At December 31, 2004, $2.1 billion of 1-4 family residential loans, $285.9 million of commercial real estate loans and $450.3 million of consumer loans were pledged against FHLB advances. In addition, FHLB stock is pledged as collateral for outstanding FHLB advances.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

BankAtlantic’s line of credit with the FHLB is limited to 30% of assets, subject to available collateral, with a maximum term of 10 years.

On December 31, 2004, BankAtlantic pledged $9.7 million of consumer loans to the Federal Reserve Bank of Atlanta (“FRB”) as collateral for potential advances of $8.0 million. The FRB line of credit has not yet been utilized by BankAtlantic.

During the year ended December 31, 2004, BankAtlantic prepaid $108 million of fixed rate advances. Of this amount, $25 million had an average interest rate of 5.68% and was scheduled to mature in 2007, and the remaining $83 million had an average interest rate of 5.51% and was scheduled to mature in 2008. As a result of the prepayments, BankAtlantic incurred prepayment penalties of $11.7 million.

During the year ended December 31, 2003, BankAtlantic repaid $325 million of fixed rate FHLB advances that would have matured within 24 months and incurred a prepayment penalty of $10.9 million. The weighted average rate of FHLB advances repaid was 5.57%.


	*Federal Funds Purchased:*

BankAtlantic established $235.0 million of lines of credit with other banking institutions for the purchase of federal funds. The following table provides information on federal funds purchased at December 31, (dollars in thousands):


	2004			2003			2002

Ending balance	$	105,000		$	—		$	—
Maximum outstanding at any month end within period	$	105,000		$	180,000		$	85,000
Average amount outstanding during period	$	47,661		$	60,179		$	47,704
Average cost during period		2.47	%		1.29	%		1.85	%


13.	Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase represent transactions whereby BankAtlantic sells a portion of its current investment portfolio (usually MBS’s and REMIC’s) at a negotiated rate and agrees to repurchase the same assets on a specified future date. BankAtlantic issues repurchase agreements to institutions and to its customers. These transactions are collateralized by investment securities. Customer repurchase agreements are not insured by the FDIC. At December 31, 2004 and 2003, the outstanding balances of customer repurchase agreements were $99.6 million and $138.8 million, respectively. Repurchase agreements outstanding to institutions at December 31, 2004 and 2003 were $197.0 million and $0, respectively.

The following table provides information on the agreements to repurchase (dollars in thousands):


	For the Years Ended December 31,

	2004			2003			2002

Maximum borrowing at any month-end within the period	$	374,824		$	365,042		$	540,880
Average borrowing during the period	$	189,398		$	193,068		$	327,001
Average interest cost during the period		1.26	%		1.11	%		1.73	%
Average interest cost at end of the period		2.16	%		0.73	%		1.08	%

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table lists the amortized cost and estimated fair value of securities sold under repurchase agreements, and the repurchase liability associated with such transactions (dollars in thousands):


								Weighted
								Average
		Amortized		Estimated		Repurchase		Interest
		Cost		Fair Value		Balance		Rate

December 31, 2004(1)
Mortgage-backed securities		$	213,824	$	215,904	$	175,316		2.09	%
REMIC			96,644		96,267		81,686		2.30

	Total	$	310,468	$	312,171	$	257,002		2.16	%

December 31, 2003(1)
Mortgage-backed securities		$	124,759	$	128,118	$	106,813		0.73	%
REMIC			16,846		16,866		14,061		0.73

	Total	$	141,605	$	144,984	$	120,874		0.73	%


(1)	At December 31, 2004 and 2003, all securities were classified as available for sale and were recorded at fair value in the consolidated statements of financial condition.

All repurchase agreements existing at December 31, 2004 matured and were repaid in January 2005. These securities were held by unrelated broker dealers.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


14.	Subordinated Debentures, Notes and Bonds Payable and Trust Preferred Securities

The Company had the following subordinated debentures, notes and bonds payable outstanding at December 31, 2004 and 2003 (dollars in thousands):

December 31,

Issue

Interest

Maturity

Date

2004

2003

Rate

Date

BankAtlantic Bancorp Borrowings

Bank line of credit

8/24/2000

100

$100

Prime -.50%

March 1, 2005

BankAtlantic Borrowings

Subordinated debentures

10/29/2002

22,000

LIBOR + 3.45%

November 7, 2012

Development notes

3/22/2002

1,036

856

Prime + 1.00%

August 28, 2006

Development notes

3/22/2002

4,647

1,883

Prime + 0.75%

May 1, 2006

Mortgage-backed bond

3/22/2002

9,958

10,954

(2)

September 30, 2013

Total BankAtlantic Borrowings

37,641

35,693

Levitt Borrowings

Homebuilding

Various

141,697

84,346

From Prime — 0.50% to Prime + 1.00%

Range from January 2005 to November 2009

Homebuilding borrowings to BankAtlantic(1)

8,621

18,118

Prime

Range from October 2005 to March 2006

Land development

Various

52,475

13,983

From LIBOR +2.00% to LIBOR + 2.80%

Range from May 2007 to June 2011

Land development

Various

254

341

Fixed from 5.99% to 7.00%

Range from March 2007 to April 2007

Development bonds

Various

—

850

Various

Other operations land acquisition and construction

Various

7,447

11,646

LIBOR + 3.00% and prime +.50%

Range from April 2005 to February 2006

Other operations promissory note payable

16,500

—

LIBOR + 1.50%

March 2005

Other operations borrowings to BankAtlantic Bancorp(1)

38,000

43,500

Prime + 0.25% escalation every six months

December 2008

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31,

Issue

Interest

Maturity

Date

2004

2003

Rate

Date

Subordinated investment notes

3,232

1,309

Fixed from 6.50% to 8.75%

Range from October 2005 to February 2008

Total Levitt borrowings

268,226

174,093

RB Holdings, Inc. Borrowings

Notes Payable

4/26/2002

—

802

LIBOR + 2.65

May 1, 2004

BFC Borrowings

Revolving Line of Credit

Various

10,483

6,015

LIBOR +2.80

May 3, 2005

Mortgage payables

Various

8,776

9,015

Fixed from 6.00% to 9.20%

May 2007 — December 2010

Total BFC borrowings

19,259

15,030

Inter-company borrowings eliminated(1)

(46,621

)

(61,618)

Total

278,605

$164,100


(1)	Loans between Levitt and BankAtlantic amounting to $46.6 and $61.6 million at December 31, 2004 and 2003, respectively were eliminated in consolidation.

(2)	The bonds adjust semi-annually to the ten year treasury constant maturity rate minus 23 basis points.

BankAtlantic Bancorp had the following junior subordinated debentures outstanding at December 31, 2004 and 2003 (in thousands):

Beginning

Optional

Outstanding

Interest

Redemption

Junior Subordinated Debentures

Issue Date

Amount

Rate

Maturity Date

Date

Subordinated Debentures Trust II

3/5/2002

57,088

8.50

3/31/2032

3/31/2007

Subordinated Debentures Trust III

6/26/2002

25,774

LIBOR + 3.45

6/26/2032

6/26/2007

Subordinated Debentures Trust IV

9/26/2002

25,774

LIBOR + 3.40

9/26/2032

9/26/2007

Subordinated Debentures Trust V

9/27/2002

10,310

LIBOR + 3.40

9/30/2032

9/27/2007

Subordinated Debentures Trust VI

12/10/2002

15,450

LIBOR + 3.35

12/10/2032

12/10/2007

Subordinated Debentures Trust VII

12/19/2002

25,774

LIBOR + 3.25

12/19/2032

12/19/2007

Subordinated Debentures Trust VIII

12/19/2002

15,464

LIBOR + 3.35

1/07/2033

12/19/2007

Subordinated Debentures Trust IX

12/19/2002

10,310

LIBOR + 3.35

1/07/2033

12/19/2007

Subordinated Debentures Trust X

3/26/2003

51,548

6.40

%(2)

3/26/2033

3/26/2008

Subordinated Debentures Trust XI

4/10/2003

10,310

6.45

%(2)

4/24/2033

4/24/2008

Subordinated Debentures Trust XII

3/27/2003

15,464

6.65

%(2)

4/07/2033

4/07/2008

Total Subordinated Debentures(1)

263,266

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


(1)	LIBOR interest rates are indexed to 3-month LIBOR and adjust quarterly.

(2)	Adjusts to floating LIBOR rate five years from the issue date.

At December 31, 2004, the approximate minimum aggregate required principal payment of the Notes, Mortgage Notes and Bonds Payable and Junior Subordinated Debentures in each of the next five years is approximately as follows (in thousands):


Year Ending December 31,	Amount

2005	$	64,576
2006		12,986
2007		62,172
2008		27,985
2009		38,846
Thereafter		335,306

	$	541,871

At December 31, 2004 and 2003, $6.7 million and $7.6 million, respectively, of unamortized underwriting discounts and costs associated with the issuance of subordinated debentures and junior subordinated debentures were included in other assets in the Company’s statements of financial condition.


	*Junior Subordinated Debentures:*

BankAtlantic Bancorp has formed eleven statutory business trusts (“Trusts”) for the purpose of issuing Trust Preferred Securities (“trust preferred securities”) and investing the proceeds thereof in junior subordinated debentures of BankAtlantic Bancorp. The trust preferred securities are fully and unconditionally guaranteed by BankAtlantic Bancorp. The Trusts used the proceeds from issuing trust preferred securities and the issuance of its common securities BankAtlantic Bancorp to purchase junior subordinated debentures from BankAtlantic Bancorp. Interest on the junior subordinated debentures and distributions on the trust preferred securities are payable quarterly in arrears. Distributions on the trust preferred securities are cumulative and are based upon the liquidation value of the trust preferred security. BankAtlantic Bancorp has the right, at any time, as long as there are no continuing events of default, to defer payments of interest on the junior subordinated debentures for a period not exceeding 20 consecutive quarters; but not beyond the stated maturity of the junior subordinated debentures. To date no interest has been deferred. The trust preferred securities are subject to mandatory redemption, in whole or in part, upon repayment of the junior subordinated debentures at maturity or their earlier redemption. BankAtlantic Bancorp has the right to redeem the junior subordinated debentures five years from the issue date and also has the right to redeem the junior subordinated debentures in whole (but not in part) within 180 days following certain events, as defined, whether occurring before or after the redemption date and therefore cause a mandatory redemption of the trust preferred securities. The exercise of such right is subject to BankAtlantic Bancorp having received regulatory approval, if required under applicable capital guidelines or regulatory policies. In addition, BankAtlantic Bancorp has the right, at any time, to shorten the maturity of the junior subordinated debentures to a date not earlier than the redemption date. Exercise of this right is also subject to BankAtlantic Bancorp having received regulatory approval, if required under applicable capital guidelines or regulatory policies.

A portion of the net proceeds from issuance of junior subordinated debenture during the years ended December 31, 2003 and 2002 were used to redeem BankAtlantic Bancorp’s $45.8 million of 5.625% Convertible Subordinated Debentures, retire $74.8 million of 9.5% trust preferred securities, $21 million of 9% subordinated debentures and pay down $16 million of borrowings under BankAtlantic Bancorp’s credit facility with an

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

unrelated financial institution. BankAtlantic Bancorp incurred costs associated with the above debt redemptions of $1.6 million and $3.1 million during the years ended December 31, 2003 and 2002, respectively.


	*BankAtlantic Bancorp:*


	Revolving Credit Facility:

BankAtlantic Bancorp maintained a revolving credit facility of $30 million from an independent financial institution. The credit facility contained customary financial covenants relating to regulatory capital and maintenance of certain loan loss reserves and is secured by the common stock of BankAtlantic. BankAtlantic Bancorp was in compliance with all loan covenants at December 31, 2004. The facility was repaid in March 2005.


	*BankAtlantic:*

In connection with the acquisition of Community, BankAtlantic assumed a $15.9 million mortgage-backed bond, valued at $14.3 million at the acquisition date. The bond had a $10.0 million outstanding balance at December 31, 2004. BankAtlantic had pledged $15.2 million of residential loans as collateral for this bond at December 31, 2004.

In October 2002, BankAtlantic issued $22 million of floating rate subordinated debentures due 2012. The Subordinated Debentures pay interest quarterly at a floating rate equal to 3-month LIBOR plus 345 basis points and are redeemable after October 2007 at a price based upon then prevailing market interest rates. The net proceeds have been used by BankAtlantic for general corporate purposes. The subordinated debentures were issued by BankAtlantic in a private transaction as part of a larger pooled securities offering. The subordinated debentures currently qualify for inclusion in BankAtlantic’s total risk based capital.

The development notes are the obligation of a real estate joint venture that was acquired in connection with the acquisition of Community. The notes are secured by construction of specific homes. The notes are with unrelated financial institutions with interest rates ranging from prime plus 0.75% to prime plus 1% with interest rate floors ranging from 5.00% to 5.75%. These notes mature in 2006. BankAtlantic’s wholly-owned subsidiary has a 50% interest in the real estate joint venture and effective January 1, 2003, the joint venture was included in the Company’s consolidated financial statements upon the implementation of FIN No. 46.


	*Indentures*

The Indentures relating to all of the Debentures (including those related to the junior subordinated debentures) contain certain customary covenants found in Indentures under the Trust Indenture Act, including covenants with respect to the payment of principal and interest, maintenance of an office or agency for administering the Debentures, holding of funds for payments on the Debentures in trust, payment by BankAtlantic Bancorp of taxes and other claims, maintenance by BankAtlantic Bancorp of its properties and its corporate existence and delivery of annual certifications to the Trustee.


	*Levitt:*

Levitt acquisition and development loan obligations at December 31, 2004 are secured by land acquisitions, construction and development of various communities located in Florida. These notes are with unrelated financial institutions and a total of $194.2 million are indexed to the prime rate or LIBOR rate of interest. Interest rates range from prime less 0.50% to prime plus 1.00% and LIBOR plus 2.00% to LIBOR plus 2.80%, and maturity dates ranging from January 2005 to June 2011.

Levitt Corporation entered into a six month bridge loan agreement with a financial institution in October 2004 to temporarily fund Levitt’s purchase of an office building in Fort Lauderdale, Florida that Levitt

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

currently intends to utilize as its principal executive offices upon expiration or termination of the lease of the existing tenant. The promissory note is interest only, payable monthly at Libor plus 1.50% and matures in March 2005.

Levitt and Sons has a credit agreement with a financial institution to provide a $15.0 million line of credit. At December 31, 2004, Levitt and Sons had available credit of $15.0 million and had no amounts outstanding. The credit facility currently matures September 2006. On or before June 30th of each calendar year, the financial institution may at its sole discretion offer the option to extend the term of the loan for a one-year period. Levitt has pledged a first priority security interest on Levitt’s equity interest in Levitt and Sons to secure the loan.

In connection with the development of certain of Levitt projects, community development or improvement districts have been established and may utilize bond financing to fund construction or acquisition of certain on-site and off-site infrastructure improvements performed by Levitt near or at these communities. The obligation to pay principal and interest on the bonds issued by the districts is assigned to each parcel within the district and a priority assessment lien may be placed on benefited parcels to provide security for the debt service. The bonds, including interest and redemption premiums, if any, and the associated priority lien on the property are typically payable, secured and satisfied by revenues, fees, or assessments levied on the property benefited. Levitt pays a portion of the revenues, fees, and assessments levied by the districts on the properties Levitt still owns that are benefited by the improvements. Levitt may also agree to pay down a specified portion of the bonds at the time of each unit or parcel closing.

In accordance with Emerging Issues Task Force Issue 91-10 (“EITF 91-10”), Accounting for Special Assessments and Tax Increment Financing, Levitt records a liability, net of cash held by the districts available to offset the particular bond obligation, for the estimated developer obligations that are fixed and determinable and user fees that are required to be paid or transferred at the time the parcel or unit is sold to an end user. Levitt reduces this liability by the corresponding assessment assumed by property purchasers and the amounts paid by Levitt at the time of closing and transfer of the property. Interest is calculated and paid based upon the gross bond obligation.

During the fourth quarter of 2003, a development district for the Tradition master-planned community issued $62.8 million of long-term assessment bonds to refinance $28.9 million of previously issued and outstanding bond anticipation notes and to provide financing for Phase I infrastructure development. The development district assesses property owners to fund debt service and the ultimate repayment of the bonds. Levitt is assessed based on its pro-rata ownership of the property in the district. Levitt’s pro-rata share of the assessment transfers to third party purchasers upon property sales. The assessments are projected to be levied beginning in 2005. In accordance with EITF 91-10, Levitt will recognize an expense for it’s pro rata portion of assessments, based upon its ownership of benefited property. As of December 31, 2004, Levitt owned approximately 66% of the property in the district.

The Utility Revenue Refunding Bonds and Water Management Benefit Tax Bonds are other bonds of the development district that are not recorded on the books of Levitt. As an owner of property within the development district, Levitt is responsible until land parcels are sold for the payment of its pro rata share of tax assessments from the water management benefit tax bonds. Levitt recognized a tax assessment expense, based upon its pro rata share of taxes and assessments of approximately $241,000, $444,000 and $544,000 for the years ended December 31, 2004, 2003 and 2002, respectively. This expense is included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Inter-company loans to Levitt from BankAtlantic were $8.6 million and $18.1 million at December 31, 2004 and 2003, respectively. Inter-company loans to Levitt from BankAtlantic Bancorp were $38.0 million and $43.5 million at December 31, 2004 and 2003, respectively. The above inter-company loans were eliminated in consolidation.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Some of Levitt’s borrowings contain covenants that, among other things, require it to maintain financial ratios and a minimum net worth. These covenants may have the effect of limiting the amount of debt that Levitt can incur in the future and restricting the payment of dividends to Levitt from its subsidiaries. At December 31, 2004, Levitt was in compliance with all loan agreement financial covenants.


	*BFC*

All mortgage payables and other borrowings are from unaffiliated parties. At December 31, 2003, the Company had a line of credit in the amount of $8.0 million requiring only interest payments at prime plus 1%. The line of credit matured in May 2004. In May 2004 the line of credit was extended until May 2, 2005 and the interest rate changed to LIBOR plus 280 basis points. In December 2004 the amount of the line of credit was increased to $14.0 million. The outstanding balance at December 31, 2004 and 2003 was $10.5 million and $6.0 million, respectively. 1,187,687 shares of BankAtlantic Bancorp Class A common stock and 491,097 Levitt shares of Class A commons stock owned by BFC are pledged as collateral.

At December 31, 2004 and 2003, approximately $8.2 million and $8.4 million, respectively, of the mortgage payables related to real estate with an interest rate of 9.2% and maturity date in May 2007. At December 31, 2004 and 2003, approximately $544,000 and $625,000, respectively, of the mortgage payables related to mortgage receivables in connection with the sale of properties previously owned by the Company, with interest rates at 6% and maturity dates ranging from 2009 through 2010.

Included in other liabilities at December 31, 2004 and 2003 is approximately $4.8 million and $4.9 million, respectively, representing amounts due in connection with the settlement of a class action litigation that arose in connection with exchange transactions that the Company entered into in 1989 and 1991.


15.	Income Taxes

The provision for income taxes consisted of (in thousands):


		For the Years Ended December 31,

		2004		2003			2002

Continuing operations		$	83,997	$	44,166		$	17,993
Discontinued operations			—		(517	)		303
Extraordinary items			—		—			2,771
Cumulative effect of a change in accounting principle			—		—			(1,246	)

Total provision for income taxes		$	83,997	$	43,649		$	19,821

Continuing operations:
Current:
	Federal	$	56,616	$	27,200		$	18,934
	State		9,487		4,287			633

			66,103		31,487			19,567

Deferred:
	Federal		16,556		12,679			(878	)
	State		1,338		—			(696	)

			17,894		12,679			(1,574	)

Provision for income taxes		$	83,997	$	44,166		$	17,993

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company’s actual provision for income taxes from continuing operations differ from the Federal expected income tax provision as follows (dollars in thousands):


				For the Years Ended December 31,

				2004(1)					2003(1)					2002(1)

Income tax provision at expected federal income tax rate of 35%				$	70,777		35.00	%	$	35,428		35.00	%	$	17,605		35.00	%
	Increase (decrease) resulting from:
		Taxes related to subsidiaries not consolidated for income tax purposes			8,423		4.17	%		5,788		5.72	%		4,214		8.38	%
		Tax-exempt interest income			(1,817	)	(0.90	)%		(267	)	(0.26	)%		(275	)	(0.55	)%
		Provision (benefit) for state taxes, net of federal effect			7,074		3.50	%		3,991		3.94	%		(370	)	(0.74	)%
		Change in State tax valuation allowance			94		(0.05	)%		(1,168	)	(1.15	)%		1,071		2.13	%
		Change in valuation allowance for deferred tax assets			—		—			(418	)	(0.41	)%		(3,479	)	(6.92	)%
		Levitt spin-off nondeductible			90		0.04	%		1,275		1.26	%		—		—
		Low income housing tax credits			(468	)	(0.23	)%		(555	)	(0.55	)%		(416	)	(0.83	)%
		Other — net			(176	)	(0.09	)%		92		0.09	%		(357	)	(0.71	)%

			Provision for income taxes	$	83,997		41.54	%	$	44,166		43.63	%	$	17,993		35.76	%


(1)	Expected tax is computed based upon income (loss) before minority interest, discontinued operations, extraordinary items and cumulative effect of a change in accounting principle.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and tax liabilities were (in thousands):


			For the Years Ended December 31,

			2004			2003			2002

Deferred tax assets:
	Provision for restructuring charges and write-downs		$	267		$	294		$	191
	Allowance for loans, REO, tax certificate losses and other reserves, for financial statement purposes			20,899			27,539			29,884
	Federal and State net operating loss carry forward			22,621			9,277			10,498
	Compensation expensed for books and deferred for tax purposes			3,530			3,754			3,915
	Goodwill impairment for books in excess of tax amortization			—			—			1,086
		Real estate held for development and sale capitalized costs for tax purposes in excess of amounts capitalized for financial statement purposes		7,100			6,891			7,554
	Accumulated other comprehensive income			243			—			—
		Other		5,788			4,896			4,642

	Total gross deferred tax assets			60,448			52,651			57,770
	Less valuation allowance			2,564			2,470			4,369

	Total deferred tax assets			57,884			50,181			53,401

Deferred tax liabilities:
	Subsidiary not consolidated for income tax purposes			48,273			36,006			30,541
	Investment in Bluegreen			9,282			5,533			—
	Deferred loan income			1,190			885			918
	Change in investment of unconsolidated real estate subsidiary			—			—			1,762
	Purchase accounting adjustments for bank acquisitions			1,920			2,229			1,356
	Accumulated other comprehensive income			—			3,887			2,596
	Prepaid pension expense			2,517			2,607			2,713
	Depreciation for tax greater than book			2,278			—			—
	Other			879			1,929			1,396

	Total gross deferred tax liabilities			66,339			53,076			41,282

	Net deferred tax asset (liability)			(8,455	)		(2,895	)		12,119
	Plus (less) net deferred tax asset (liability) at beginning of period			2,895			(12,119	)		3,916
	Acquired net deferred tax asset, net of valuation allowance			595			—			(8,175	)
	Decrease in deferred tax liability from subsidiaries other capital transactions			3,650			776			(9	)
	(Decrease) increase in accumulated other comprehensive income			(369	)		416			(1,145	)
	Decrease in deferred tax liability from BFC’s tax effect relating to exercise stock option			(11,016	)		(550	)		—

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	For the Years Ended December 31,

	2004			2003			2002

Increase (decrease) in Levitt’s accumulated other comprehensive income		(1,291	)		361			—
Increase (decrease) in BankAtlantic Bancorp accumulated other comprehensive income		(3,903	)		1,019			(6,277	)

(Provision) benefit for deferred income taxes		(17,894	)		(12,993	)		429
(Provision) benefit for deferred income taxes — discontinued operations		—			—			(380	)
Reduction in deferred tax asset associated with GMS sale		—			314			—
Benefit for deferred income taxes — extraordinary item		—			—			2,771
Provision for deferred income taxes — cumulative effect of an accounting change		—			—			(1,246	)

(Provision) benefit for deferred income taxes — continuing operations	$	(17,894	)	$	(12,679	)	$	1,574

Activity in the deferred tax valuation allowance was (in thousands):


	For the Years Ended
	December 31,

	2004		2003			2002

Balance, beginning of period	$	2,470	$	4,369		$	7,682
Utilization of acquired tax benefits		—		(418	)		(2,638	)
Increase (reduction) in state deferred tax valuation allowance		94		(1,168	)		230
Other decreases and reclassifications		—		(313	)		(905	)

Balance, end of period	$	2,564	$	2,470		$	4,369

Except as discussed below, BankAtlantic Bancorp’s management believes that it will have sufficient taxable income of the appropriate character in future years to realize the net deferred income tax asset. In evaluating the expectation of sufficient future taxable income, management considered the future reversal of temporary differences and available tax planning strategies that could be implemented, if required. A valuation allowance was required at December 31, 2004, 2003 and 2002 as it was management’s assessment that, based on available information, it is more likely than not that certain State net operating loss carry forwards (“NOL”) included in the Company’s deferred tax assets will not be realized. A change in the valuation allowance occurs if there is a change in management’s assessment of the amount of the net deferred income tax asset that is expected to be realized.

At December 31, 2004, BankAtlantic Bancorp had NOL’s of $73 million for state tax purposes primarily associated with BankAtlantic Bancorp and Leasing Technology, Inc. BankAtlantic Bancorp files separate State income tax returns in each State jurisdiction. BankAtlantic Bancorp has incurred taxable losses during the past six years resulting from its debt obligations and Leasing Technology Inc. has incurred significant losses associated with its lease financing activities. As a consequence, BankAtlantic Bancorp’s management believes that it is more likely than not that the State NOL associated with these companies will not be realized.

Prior to December 31, 1996, BankAtlantic was permitted to deduct from taxable income an allowance for bad debts which was in excess of the provision for such losses charged to income. Accordingly, at December 31, 2004, BankAtlantic Bancorp had $21.5 million of excess allowance for bad debts for which no provision for income tax has been provided. If, in the future, this portion of retained earnings is distributed, or

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

BankAtlantic no longer qualifies as a bank for tax purposes, federal income tax of approximately $7.5 million would be owed.

BankAtlantic Bancorp is not included in the Company’s consolidated tax return. At December 31, 2003, the Company (excluding BankAtlantic Bancorp and Levitt, which is included in BankAtlantic Bancorp’s 2003 consolidated tax return) had estimated state and federal net operating loss carry forwards as follows (in thousands):


Expiration Year	State		Federal

2006	$	429	$	—
2007		4,235		4,557
2008		2,332		3,322
2011		1,662		1,831
2012		669		984
2021		806		1,422
2022		824		1,515
2023		2,008		3,792
2024		18,252		34,457

	$	31,217	$	51,880

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


16.	Employee Benefits Plan


	*BFC’s Stock Option Plan*

BFC’s Stock Option Plan provides for the grant of stock options to purchase shares of the Company’s Class B Common Stock. The plan provides for the grant of both incentive stock options and non-qualifying options. The exercise price of a stock option will not be less than the fair market value of the Common Stock on the date of the grant and the maximum term of the option is ten years. The following table sets forth information on all outstanding options:


		Class B
		Options
		Outstanding			Price per Share

Outstanding at December 31, 2001			8,656,402		$	0.41 to $3.68
	Issued		—
	Exercised		(137,575	)	$	0.41 to $1.45
	Forfeited		(14,040	)	$	2.14 to $2.14

Outstanding at December 31, 2002			8,504,787		$	0.43 to $3.68
	Issued		554,547		$	1.84 to $1.84
	Exercised		(605,222	)	$	0.43 to $0.47

Outstanding at December 31, 2003			8,454,112		$	0.44 to $3.68
	Issued		307,427		$	7.68 to $8.40
	Exercised		(3,521,419	)	$	0.44 to $3.68

Outstanding at December 31, 2004			5,240,120		$	1.45 to $8.40
Exercisable at December 31, 2004			4,445,266		$	1.45 to $8.40

Available for grant at December 31, 2004			—

The weighted average exercise price of options outstanding at December 31, 2004, December 31, 2003 and 2002 was $2.63, $1.54 and $1.44, respectively. The weighted average price of options exercised was $.51 during 2004, $0.47 during 2003 and $1.05 during 2002.

The adoption of FAS 123 under the fair value based method would have increased compensation expense by approximately $487,000, $355,000 and $177,000 for the years ended December 31, 2004, 2003 and 2002, respectively. The option model used to calculate the FAS 123 compensation adjustment was the Black-Scholes model with the following grant date fair values and assumptions:


	Number of								Risk Free			Expected					Expected
	Options		Grant Date		Type of		Exercise		Interest			Life		Expected			Dividend
Date of Grant	Granted		Fair Value		Grant		Price		Rate			(Years)		Volatility			Yield

07/01/97		473,801	$	0.58		*	$	1.45		5.80	%		6.0		27.40	%		0	%
07/01/97		2,105,718	$	0.53		NQ	$	1.59		5.80	%		6.0		27.40	%		0	%
01/13/98		1,474,018	$	2.09		*	$	3.68		5.53	%		7.5		44.46	%		0	%
04/06/99		505,394	$	1.78		*	$	2.14		5.28	%		7.5		92.21	%		0	%
02/07/03		547,525	$	1.29		*	$	1.84		4.50	%		7.0		72.36	%		0	%
01/05/04		29,301	$	4.68		*	$	7.68		4.40	%		7.5		53.36	%		0	%
07/28/04		262,501	$	6.02		*	$	8.40		4.61	%		10.0		57.63	%		0	%
10/04/04		12,500	$	4.32		*	$	8.40		3.44	%		5.0		56.06	%		0	%

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


*	Both non-qualified and incentive stock options were granted.

The employee turnover was considered to be none.

The following table summarizes information about stock options outstanding at December 31, 2004:


			Options Outstanding				Options Exercisable

			Weighted-		Weighted-				Weighted-
			Average		Average				Average
	Number		Remaining		Exercise		Number		Exercise
Range of Exercise Prices	Outstanding		Contractual Life		Price		Exercisable		Price

$1.45 to $1.68		2,449,441		2.5 years	$	1.57		2,449,441	$	1.57
$1.68 to $2.52		1,030,294		6.3 years	$	1.97		517,867	$	2.11
$3.36 to $4.20		1,452,958		2.9 years	$	3.68		1,452,958	$	3.68
$7.68 to $8.40		307,427		9.4 years	$	8.33		25,000	$	8.40

		5,240,120		3.8 years	$	2.63		4,445,266	$	2.36

The following table summarizes information about stock options outstanding at December 31, 2003:


			Options Outstanding				Options Exercisable

			Weighted-		Weighted-				Weighted-
			Average		Average				Average
	Number		Remaining		Exercise		Number		Exercise
Range of Exercise Prices	Outstanding		Contractual Life		Price		Exercisable		Price

$0.44 to $.84		3,435,393		.7 years	$	0.45		3,435,393	$	0.45
$.84 to $1.68		2,470,718		3.5 years	$	1.57		2,470,718	$	1.57
$1.68 to $2.52		1,052,923		7.2 years	$	1.98		42,120	$	1.84
$3.36 to $3.68		1,495,078		3.9 years	$	3.68		1,495,078	$	3.68

		8,454,112		2.9 years	$	1.54		7,443,309	$	1.48

The following table summarizes information about stock options outstanding at December 31, 2002:


			Options Outstanding				Options Exercisable

			Weighted-		Weighted-				Weighted-
			Average		Average				Average
	Number		Remaining		Exercise		Number		Exercise
Range of Exercise Prices	Outstanding		Contractual Life		Price		Exercisable		Price

$0.43 to $.84		4,040,615		1.6 years	$	0.46		4,040,615	$	0.46
$.84 to $1.68		2,470,718		4.5 years	$	1.57		2,470,718	$	1.57
$1.68 to $2.52		498,376		6.2 years	$	2.14		—	$	—
$3.36 to $3.68		1,495,078		4.9 years	$	3.68		1,495,078	$	3.68

		8,504,787		3.3 years	$	1.44		8,006,411	$	1.40


	BFC Profit Sharing Plan

The Company has an employee’s profit sharing plan which provides for contributions to a fund of a defined amount, but not to exceed the amount permitted under the Internal Revenue Code as deductible expense. The provision charged to operations was approximately $50,000 for each of the years ended December 31, 2004, 2003 and 2002. Contributions are funded on a current basis.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	*BankAtlantic Pension Plan:*

At December 31, 1998, BankAtlantic Bancorp froze its defined benefit pension plan (the “Pension Plan”). All participants in the Pension Plan ceased accruing service benefits beyond that date and became vested. BankAtlantic Bancorp is subject to future pension expense or income based on future actual plan returns and actuarial values of the Pension Plan obligations to employees.

The following tables set forth the Pension Plan’s funded status and the minimum pension liability or prepaid pension cost included in the consolidated statements of financial condition at (in thousands):


	December 31,

	2004			2003

Projected benefit obligation at the beginning of the year	$	23,094		$	22,276
Interest cost		1,508			1,485
Actuarial loss		2,421			148
Benefits paid		(789	)		(815	)

Projected benefit obligation at end of year	$	26,234		$	23,094


	December 31,

	2004			2003

Fair value of the Pension Plan assets at the beginning of year	$	23,927		$	17,860
Actual return on the Pension Plan assets		1,959			6,132
Employer contribution		—			750
Benefits paid		(789	)		(815	)

Fair value of the Pension Plan assets as of actuarial date	$	25,097		$	23,927


	December 31,

	2004			2003

Actuarial present value of projected benefit obligation for service rendered to date	$	(26,234	)	$	(23,094	)
Pension Plan assets at fair value as of the actuarial date		25,097			23,927

(Unfunded) funded accumulated benefit obligation(1)		(1,137	)		833
Unrecognized net loss (gain) from past experience different from that assumed and effects of changes in assumptions		7,661			5,924

Prepaid pension cost(2)	$	6,524		$	6,757


(1)	The measurement date for the accumulated benefit obligation was December 31, 2004 and 2003. The December 31, 2004 unfunded accumulated benefit obligation was recorded in other liabilities in the Company’s consolidated statement of financial condition.

(2)	The December 31, 2003 prepaid pension cost was recorded in other assets in the Company’s consolidated statement of financial condition. In 2004, the prepaid pension cost was reversed into other comprehensive income and a minimum pension liability was recorded for the unfunded accumulated benefit obligation.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the year ended December 31, 2004, BankAtlantic Bancorp recorded a minimum pension liability in other comprehensive income associated with the unfunded accumulated benefit obligation as follows (in thousands):


	Amount

Change in prepaid pension cost in other assets	$	(6,524	)
Minimum pension liability in other liabilities		(1,137	)
Change in deferred tax assets		2,758

Decrease in other comprehensive income	$	(4,903	)

Net pension expense (benefit) includes the following components (in thousands):


	For the Years Ended December 31,

	2004			2003			2002

Service cost benefits earned during the period	$	—		$	—		$	—
Interest cost on projected benefit obligation		1,508			1,485			1,424
Expected return on plan assets		(1,998	)		(1,470	)		(1,989	)
Amortization of unrecognized net gains and losses		723			1,212			314
Net periodic pension expense (benefit)(1)	$	233		$	1,227		$	(251	)


(1)	Periodic pension expense (benefit) is included as an increase/decrease in compensation expense.

The actuarial assumptions used in accounting for the Pension Plan were:


	For the Years Ended
	December 31,

	2004			2003			2002

Weighted average discount rate		6.00	%		6.75	%		6.75	%
Rate of increase in future compensation levels		N/A			N/A			N/A
Expected long-term rate of return		8.50	%		8.50	%		9.00	%

Actuarial estimates and assumptions are based on various market factors and are evaluated on an annual basis, and changes in such assumptions may impact future pension costs. The discount rate assumption is based on rates of high quality corporate bonds, and the reduction in the discount rate at December 31, 2004 reflects historically low interest rate trends related to these bonds. Current participant data was used for the actuarial assumptions for each of the three years ended December 31, 2004. BankAtlantic Bancorp contributed $750,000 to the Pension Plan during the year ended December 31, 2003. BankAtlantic Bancorp did not make any contributions to the Pension Plan during the years ended December 31, 2004 and 2002. BankAtlantic Bancorp will not be required to contribute to the Pension Plan for the year ending December 31, 2005.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

BankAtlantic Bancorp’s pension plan weighted-average asset allocations at December 31, 2004 and 2003 by asset category are as follows:


	Pension Plan
	Allocation At
	December 31,

	2004			2003

Equity securities		76.62	%		57.45	%
Debt securities		21.57			38.13
Cash		1.81			4.42

Total		100.00	%		100.00	%

The Pension Plan’s investment policies and strategies are to invest in mutual funds that are rated with at least a 3-star rating awarded by Morningstar at the initial purchase. If a fund’s Morningstar rating falls below a 3-star rating after an initial purchase, it is closely monitored to ensure that its under-performance can be attributed to market conditions rather than fund management deficiencies. Fund manger changes or changes in fund objectives could be cause for replacement of any mutual fund. The Pension Plan also maintains an aggressive growth investment category which includes investments in equity securities and mutual funds. Both public and private securities are eligible for this category of investment, but no more than 5% of total Pension Plan assets at the time of the initial investment may be invested in any one company. Beyond the initial cost limitation (5% at time of purchase), there will be no limitation as to the percentage that any one investment can represent if it is achieved through growth. As a means to reduce negative market volatility, and to invoke a sell discipline for concentrated positions, the Pension Plan has a strategy of selling call options against certain stock positions within the portfolio when considered timely. At December 31, 2004, 9.6% of the Pension Plan’s assets were invested in the aggressive growth category.

The Pension Plan’s targeted asset allocation is 68% equity securities, 30% debt securities and 2% cash during the year ended December 31, 2005. A rebalancing of the portfolio takes place on a quarterly basis when there has been a 5% or greater change from the prevailing benchmark allocation.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid (in thousands):


	Pension
Expected Future Service	Benefits

2005	$	821
2006		895
2007		920
2008		989
2009		1,180
Years 2010-2014	$	7,297

There are large increases in annual benefit payouts expected in 2009 and 2010 when four key employees reach normal retirement age.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	*BankAtlantic 401(k) Plan:*

The table below outlines the terms of the Security Plus 401(k) Plan and the associated employer costs (dollars in thousands):


	For the Years Ended December 31,

	2004			2003			2002

Employee Salary Contribution Limit(1)	$	13		$	12		$	11
Percentage of Salary Limitation		75	%		75	%		75	%
Total Match Contribution(2)	$	1,790		$	1,558		$	1,800
Vesting of Employer Match		Immediate			Immediate			Immediate


(1)	For the 2004, 2003 and 2002 plan year, employees over the age of 50 were entitled to contribute $16,000, $14,000 and $12,000, respectively.

(2)	The employer matched 100% of the first 3% of employee contributions and 50% of the next 2% of employee contributions.


	*BankAtlantic Profit Sharing Plan*

At January 1, 2003, BankAtlantic established the BankAtlantic Profit Sharing Stretch Plan (the “Plan”) for all employees of BankAtlantic and its subsidiaries. The profit sharing awards are paid in cash quarterly and are based on achieving specific performance goals. Included in compensation expense during the years ended December 31, 2004 and 2003 was $5.7 million and $3.6 million, respectively, of expenses associated with the Plan.


	*Ryan Beck Plans:*


	Retirement Plans

As of December 31, 2004 and 2003, Ryan Beck maintains one retirement plan for eligible employees, the 401(k) Savings Plan. In 2002 Ryan Beck maintained two retirement plans for eligible employees, the 401(k) Savings Plan and the Money Purchase Pension Plan.

Ryan Beck maintained a nonvoluntary Money Purchase Pension Plan to which Ryan Beck contributed in 2002, 5% of an employee’s eligible earnings, subject to certain limitations. Contributions to the Ryan Beck Money Purchase Pension Plan totaled $729,000 during the year ended December 31, 2002. The Ryan Beck Money Purchase Pension Plan was liquidated into the Ryan Beck 401(k) Savings Plan during 2003.

Ryan Beck’s employees may contribute up to 25% of their eligible earnings, subject to certain limitations, to the 401(k) Savings Plan. In 2004 and 2003, Ryan Beck began an employer match of 50% on the first 6% of contributions for salaried employees. Additionally, Ryan Beck awarded an additional 2% and 1% of contributions for salaried employees as a discretionary match during 2004 and 2003, respectively. Included in employee compensation and benefits on the consolidated statement of operations was $1.6 million, $332,420 and $0 of expenses and employer contributions related to the 401(k) Savings Plan during the years ended December 31, 2004, 2003 and 2002, respectively.

Effective January 1, 2004, the RB Holdings, Inc. Supplemental Executive Retirement Plan was established. Retirement benefits of $2.3 million under the plan are payable in equal monthly installments over 120 months commencing at retirement. Normal retirement is at age 60. If the participant retires early or has an involuntary termination without cause, or for good reason or change in control the participant shall be entitled to receive an amount equal to his/her retirement benefit multiplied by 10% for each year of participation in the Plan not to exceed 10 years.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	Deferred Compensation Plans

During the year ended December 31, 2002, Ryan Beck established the Ryan Beck & Co., Inc. Voluntary Deferred Compensation Plan for certain employees whereby the employee may elect to defer a portion of his or her compensation for a minimum of 3 years or until retirement. These contributions are fully vested. The obligations under the terms of this plan are not required to be funded. The obligations are unsecured general obligations to pay, in the future, the value of the deferred compensation, adjusted to reflect the performance of selected measurement options chosen by each participant. Ryan Beck has elected to invest in the mutual fund options chosen by the participants to manage the market risk of this obligation. For the years ended December 31, 2004, 2003 and 2002 the deferred compensation obligation payable under this plan totaled $17.0 million, $13.8 million and $9.7 million, respectively. During the year ended December 31, 2004 and 2003, Ryan Beck realized compensation expense of $3.1 million and $3.0 million, respectively, associated with the increase in the deferred compensation plan obligations. During the year ended December 31, 2002, Ryan Beck realized a $1.5 million reduction in compensation expense associated with the decrease in the plan obligation.

During 2002, Ryan Beck amended the Ryan Beck & Co., Inc. Supplemental Bonus Plan whereby Ryan Beck may establish incentive deferred compensation which vests over multiple years. During the years ended December 31, 2004, 2003, and 2002, Ryan Beck awarded deferred bonuses under this Plan of $1.0 million, $0, and $1.5 million respectively. The 2002 awards vest and are payable 25% per year and the 2004 awards vest and are payable in three equal installments on the first business day in January 2006, 2007 and 2008.


	2002 Retention Program

In connection with the Gruntal transaction, a nonqualified deferred compensation plan was assumed by Ryan Beck covering select employees of Gruntal. Gruntal provided an annual contribution which would vest if the employee remained employed for ten years from the contribution date. All unvested amounts will vest no later than 2011. The Gruntal nonqualified deferred compensation plan was merged into the Ryan Beck & Co., Inc. Voluntary Deferred Compensation Plan during 2002.

In July 2002, Ryan Beck established a retention plan for certain financial consultants, key employees and others. During 2003 Ryan Beck expanded this plan to recruit financial consultants. Pursuant to this plan the participants received forgivable notes of $8.0 million, $6.3 million and $10.5 million during the years ended December 31, 2004, 2003 and 2002, respectively. Each forgivable note will have a term of five years. A pro-rata portion of the principal amount of the note is forgiven each month over the five or seven year term. If a participant terminates employment with Ryan Beck prior to the end of the term of the Note, the outstanding balance becomes immediately due to Ryan Beck. Ryan Beck acquired $15.1 million of forgivable notes in connection with the Gruntal transaction. Included in other assets at December 31, 2004 and 2003 were $16.7 million and $15.1 million, respectively, of forgivable notes. Included in compensation expense for the year ended December 31, 2004, 2003 and 2002 was $5.4 million, $4.9 million and $3.7 million, respectively, of forgivable note amortization.

Levitt Plans:


	*Performance-Based Annual Incentive Plan*

On May 11, 2004, Levitt’s shareholders approved the Levitt Corporation 2004 Performance-Based Annual Incentive Plan. The purpose of the plan is to advance the interests of Levitt and its shareholders by providing certain key executives with annual incentive compensation which is tied to the achievement of performance goals. The amount accrued as of December 31, 2004 for payment under the plan was approximately $731,000, which is included in other liabilities in the accompanying statement of financial condition.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	*401(k) Plan*

Levitt has a defined contribution plan established pursuant to Section 401(k) of the Internal Revenue Code. Employees that have completed three months of service and have reached the age of 18 are eligible to participate. During the years ended December 31, 2003 and 2002, Levitt’s employees participated the BankAtlantic Security Plus Plan and Levitt’s contributions amounted to $495,000 and $344,000 respectively. During the year ended December 31, 2004, Levitt’s employees participated in the Levitt Corporation Security Plus Plan and Levitt’s contributions amounted to $857,000. These amounts are included in selling, general and administrative expense in the accompanying consolidated statements of operations.


17.	Commitments and Contingencies

The Company is a lessee under various operating leases for real estate and equipment extending to the year 2072. The approximate minimum future rentals under such leases, at December 31, 2004, for the periods shown are (in thousands):


Year Ending
December 31,	Amount

2005	$	14,227
2006		12,595
2007		10,565
2008		8,511
2009		6,932
Thereafter		22,786

Total	$	75,616


	For the Years Ended December 31,

	2004		2003		2002

	(In thousands)
BFC rent expense	$	46	$	31	$	31

BankAtlantic Bancorp rental expense for premises and equipment	$	18,885	$	17,697	$	16,327

Levitt rent expense	$	1,281	$	875	$	435

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Financial instruments with off-balance sheet risk were (in thousands):


	December 31,

	2004		2003

Commitments to sell fixed rate residential loans	$	19,537	$	12,962
Commitments to sell variable rate residential loans		6,588		3,740
Forward contract to purchase mortgage-backed securities		3,947		8,611
Commitments to purchase fixed rate residential loans		—		40,242
Commitments to purchase variable rate residential loans		40,015		3,500
Commitments to originate loans held for sale		21,367		14,271
Commitments to originate loans held to maturity		238,429		370,071
Commitments to extend credit, including the undisbursed portion of loans in process		1,170,191		1,034,467
Standby letters of credit		55,605		31,722
Commercial lines of credit		121,688		162,623
Commitment to acquire Benihana Preferred Stock		10,000		—

Other than the Benihana Preferred Stock commitment, BFC did not directly have any financial instruments with off-balance sheet risk and the remaining instruments indicated above are those of our controlled entities, BankAtlantic Bancorp and Levitt and their affiliates and are all non-recourse to BFC.

In the normal course of its business, BankAtlantic is a party to financial instruments with off-balance-sheet risk. These financial instruments include commitments to extend credit and to issue standby and documentary letters of credit. Those instruments involve, to varying degrees, elements of credit risk. BankAtlantic’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit written is represented by the contractual amount of those instruments. BankAtlantic uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

Commitments to extend credit are agreements to lend funds to a customer as long as there is no violation of any condition established in the commitment. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. BankAtlantic has $28.5 million of commitments to extend credit at a fixed interest rate and $1.4 billion of commitments to extend credit at a variable rate. BankAtlantic evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral required by BankAtlantic in connection with an extension of credit is based on management’s credit evaluation of the counter-party.

Standby letters of credit are conditional commitments issued by BankAtlantic to guarantee the performance of a customer to a third party. BankAtlantic standby letters of credit are generally issued to customers in the construction industry guaranteeing project performance. These types of standby letters of credit had a maximum exposure of $36.7 million at December 31, 2004. BankAtlantic also issues standby letters of credit to commercial lending customers guaranteeing the payment of goods and services. These types of standby letters of credit had a maximum exposure of $18.9 million at December 31, 2004. Those guarantees are primarily issued to support public and private borrowing arrangements and generally have maturities of one year or less. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. BankAtlantic may hold certificates of deposit and residential and commercial liens as collateral for such commitments, which are collateralized, similar to other types of borrowings. Included in other liabilities at December 31, 2004 was $114,000 of unearned guarantee fees. There were no obligations recorded in the financial statements associated with these guarantees.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

BankAtlantic is required to maintain reserve balances with the Federal Reserve Bank. Such reserves consisted of cash and amounts due from banks of $51.3 million and $50.1 million at December 31, 2004 and 2003, respectively.

As a member of the FHLB system, BankAtlantic is required to purchase and hold stock in the FHLB of Atlanta. As of December 31, 2004 BankAtlantic was in compliance with this requirement, with an investment of approximately $78.6 million in stock of the FHLB of Atlanta.

BankAtlantic is taking steps to correct identified deficiencies in its compliance with the USA PATRIOT Act, anti-money laundering laws and the Bank Secrecy Act, and has been cooperating with regulators and other federal agencies concerning those deficiencies. BankAtlantic cannot predict whether or to what extent monetary or other penalties will be imposed by its regulators or other federal agencies relating to these compliance deficiencies. No amount has been recorded at December 31, 2004 in the accompanying financial statements relating to possible penalties from federal agencies.

BankAtlantic Bancorp through its ownership of Ryan Beck, is subject to the risks of investment banking. Ryan Beck’s customers’ securities transactions are introduced on a fully disclosed basis to its clearing broker. The clearing broker carries all of the accounts of the customers of Ryan Beck and is responsible for execution, collection and payment of funds, and receipt and delivery of securities relative to customer transactions. Customers’ securities activities are transacted on a cash and margin basis. These transactions may expose Ryan Beck to off-balance-sheet risk, wherein the clearing broker may charge Ryan Beck for any losses it incurs in the event that customers may be unable to fulfill their contractual commitments and margin requirements are not sufficient to fully cover losses. As the right to charge Ryan Beck has no maximum amount and applies to all trades executed through the clearing broker. Ryan Beck believes there is no maximum amount assignable to this right. At December 31, 2004, Ryan Beck recorded liabilities of approximately $188,000 with regard to this right. Ryan beck has the right to pursue collection or performance from the counter parties who do not perform under their contractual obligations. Ryan Beck seeks to minimize this risk through procedures designed to monitor the creditworthiness of its customers and ensure that customer transactions are executed properly by the clearing broker.

Ryan Beck, in its capacity as a market-maker and dealer in corporate and municipal fixed-income and equity securities, may enter into transactions in a variety of cash and derivative financial instruments in order to facilitate customer order flow and hedge market risk exposures. These financial instruments include securities sold, but not yet purchased and future contracts. Securities sold, but not yet purchased represent obligations of BankAtlantic Bancorp to deliver specified financial instruments at contracted prices, thereby creating a liability to purchase the financial instrument in the market at prevailing prices. Accordingly, these transactions result in off-balance-sheet risk as BankAtlantic Bancorp’s ultimate obligation may exceed the amount recognized in the Consolidated Statement of Financial Condition.

Levitt is subject to obligations associated with entering into contracts for the purchase, development and sale of real estate in the routine conduct of its business. At December 31, 2004, Levitt had commitments to purchase properties for development of $208.3 million, of which approximately $107.6 million is subject to due diligence and satisfaction of certain requirements and conditions, as well as the obtaining of financing. At December 31, 2004, cash deposits of approximately $5.2 million secured Levitt’s commitments under these contracts.

Levitt is obligated to fund homeowner association operating deficits incurred by its communities under development. This obligation ends upon turnover of the association to the residents of the community.

At December 31, 2004, Levitt had outstanding surety bonds and letters of credit of approximately $43.3 million related primarily to its obligations to various governmental entities to construct improvements in the Levitt’s various communities. Levitt estimates that approximately $20.7 million of work remains to

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

complete these improvements. Levitt does not believe that any outstanding bonds or letters of credit will likely be drawn upon.


18.	Regulatory Matters

The Company is a unitary savings bank holding company that owns approximately 15% and 100%, respectively of the outstanding BankAtlantic Bancorp Class A and Class B Common Stock, in the aggregate representing approximately 22% of all the outstanding BankAtlantic Bancorp Common Stock. BankAtlantic Bancorp is the holding company for BankAtlantic Bank by virtue of its ownership of 100% of the outstanding BankAtlantic common stock. BFC is subject to regulatory oversight and examination by the OTS as discussed herein with respect to BankAtlantic Bancorp. BankAtlantic Bancorp is a unitary savings bank holding company subject to regulatory oversight and examination by the OTS, including normal supervision and reporting requirements. The Company is subject to the reporting and other requirements of the Securities Exchange Act of 1934 (the “Exchange Act”). BankAtlantic Bancorp is also subject to the reporting and other requirements of the Exchange Act.

BankAtlantic’s deposits are insured by the FDIC for up to $100,000 for each insured account holder, the maximum amount currently permitted by law. BankAtlantic is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can cause regulators to initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on BankAtlantic’s financial statements. At December 31, 2004, BankAtlantic met all capital adequacy requirements to which it is subject and was considered a well capitalized institution.

The OTS imposes limits applicable to the payment of cash dividends by BankAtlantic to BankAtlantic Bancorp, which are based on an institution’s regulatory capital levels and its net income. BankAtlantic is permitted to pay capital distributions during a calendar year that do not exceed its net income for the year plus its retained net income for the prior two years, without notice to, or the approval of, the OTS. At December 31, 2004, this capital distribution limitation was $78.8 million. During the years ended December 31, 2004, 2003 and 2002, BankAtlantic paid $15 million, $20 million and $22 million, respectively, of dividends to the BankAtlantic Bancorp.

Ryan Beck paid $5 million in dividends to the Company during 2004. Future dividend payments by Ryan Beck will depend upon the results of operations, financial condition and capital requirements of Ryan Beck.

Bank Atlantic’s actual capital amounts and ratios are presented in the table (dollars in thousands):


						For Capital					To Be Considered
	Actual					Adequacy Purposes					Well Capitalized

	Amount		Ratio			Amount		Ratio			Amount		Ratio

As of December 31, 2004:
Total risk-based capital	$	476,600		10.80	%	$	352,886		8.00	%	$	441,107		10.00	%
Tier I risk-based capital	$	405,482		9.19	%	$	176,443		4.00	%	$	264,664		6.00	%
Tangible capital	$	405,482		6.83	%	$	89,030		1.50	%	$	89,030		1.50	%
Core capital	$	405,482		6.83	%	$	237,413		4.00	%	$	296,766		5.00	%
As of December 31, 2003:
Total risk-based capital	$	447,967		12.06	%	$	297,208		8.00	%	$	371,509		10.00	%
Tier I risk-based capital	$	379,505		10.22	%	$	148,604		4.00	%	$	222,906		6.00	%
Tangible capital	$	379,505		8.52	%	$	66,802		1.50	%	$	66,802		1.50	%
Core capital	$	379,505		8.52	%	$	178,138		4.00	%	$	222,673		5.00	%

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Ryan Beck is subject to the net capital provision of Rule 15c3-1 under the Securities Exchange Act of 1934, which requires the maintenance of minimum net capital. Additionally, Ryan Beck, as a market maker, is subject to supplemental requirements of Rule 15c3-1(a)4, which provides for the computation of net capital to be based on the number of and price of issues in which markets are made by Ryan Beck, not to exceed $1.0 million. Ryan Beck’s regulatory net capital was approximately $35.3 million, which was $34.3 million in excess of its required net capital of $1.0 million at December 31, 2004.

Ryan Beck operates under the provisions of paragraph (k)(2)(ii) of Rule 15c3-3 of the Securities and Exchange Commission as a fully disclosed introducing broker and, accordingly, customer accounts are carried on the books of the clearing broker. However, Ryan Beck safekeeps and redeems municipal bond coupons for the benefit of its customers. Accordingly, Ryan Beck is subject to the provisions of SEC Rule 15c3-3 relating to possession or control and customer reserve requirements and was in compliance with such provisions at December 31, 2004.


19.	Legal Proceedings

Benihana of Tokyo, Inc., Individually and on behalf of Benihana, Inc., v. Benihana, Inc., et.al., Civil Action 550-N, In the Court of Chancery in the State of Delaware in and for New Castle County. On July 2, 2004, Benihana of Tokyo, Inc. a major shareholder of Benihana filed suit against Benihana, Inc., the members of the Benihana Board of Directors and BFC Financial Corporation, seeking to rescind BFC’s transaction with Benihana. Benihana of Tokyo, a major shareholder of Benihana, Inc., claims the transaction was created for the sole or primary purpose of diluting the stock interest of Benihana of Tokyo. It further claims that, in light of the relationship of certain members of the Benihana Board with BFC, the Benihana Board breached the fiduciary duties owed to the Benihana shareholders. The Complaint also alleges that through John Abdo, as a member of the Benihana Board and BFC’s Vice-Chairman, and Darwin Dornbush, as a member of the Benihana Board and a member of Levitt’s Board, BFC has aided and abetted in the Board’s breaches of fiduciary duty. Benihana has indicated it intends to vigorously contest the allegations. The terms of the agreement pursuant to which BFC acquired its interest in Benihana provides that Benihana is obligated to indemnify BFC against any losses, including attorneys’ fees, incurred by BFC including litigation arising out of its purchase.

In the ordinary course of business, the Company and its subsidiaries are parties to other lawsuits as plaintiff or defendant involving its bank operations lending, tax certificates, securities sales, brokerage and underwriting, acquisitions and real estate development activities. Although the Company believes it has meritorious defenses in all current legal actions, the outcome of the various legal actions is uncertain. Management, based on discussions with legal counsel, believes results of operations or financial position will not be significantly impacted by the resolution of these matters.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


20.	Parent Company Financial Information

BFC’s Condensed Statements of Financial Condition at December 31, 2004 and 2003, Condensed Statements of Operations and Condensed Statements of Cash Flows for each of the years in the three-year period ended December 31, 2004 are shown below:

Condensed Statements of Financial Condition

December 31, 2004 and 2003


		December 31,

		2004		2003

		(In thousands except
		share data)
ASSETS
Cash and cash equivalents		$	1,520	$	1,536
Securities available for sale, at market value			11,800		1,218
Investment in venture partnerships			971		626
Investment in BankAtlantic Bancorp, Inc.			103,125		91,869
Investment in Levitt Corporation			48,983		27,885
Investment in other subsidiaries			14,219		13,680
Loans receivable			3,364		4,175
Other assets			2,596		484

	Total assets	$	186,578	$	141,473

LIABILITIES AND SHAREHOLDERS’ EQUITY
Mortgages payable and other borrowings		$	10,483	$	6,015
Other liabilities			23,816		23,234
Deferred income taxes			27,028		26,549

	Total liabilities		61,327		55,798

Total shareholders’ equity			125,251		85,675

	Total liabilities and shareholders’ equity	$	186,578	$	141,473

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Statements of Operations

For Each of the Years in the Three Year Period Ended December 31, 2004


	For the Years Ended December 31,

	2004			2003			2002

	(In thousands)
Revenues	$	3,514		$	1,051		$	763
Expenses		6,717			3,954			3,898

(Loss) before undistributed earnings from subsidiaries		(3,203	)		(2,903	)		(3,135	)
Equity from earnings in BankAtlantic Bancorp		15,694			15,222			11,380
Equity from earnings in Levitt		10,265			—			—
Equity from loss in other subsidiaries		(311	)		(1,583	)		(633	)

Income before income taxes		22,445			10,736			7,612
Provision for income taxes		8,215			3,714			2,420

Net income		14,230			7,022			5,192
5% Preferred Stock dividends		392			—			—

Net Income available to common shareholders	$	13,838		$	7,022		$	5,192

Condensed Statements of Cash Flows

For Each of the Years in the Three Year Period Ended December 31, 2004


	For the Years Ended December 31,

	2004			2003			2002

	(In thousands)
Operating Activities:
Income (loss) from continuing operations	$	14,230		$	5,879		$	(5,986	)
Income from discontinued operations, net of tax		—			1,143			2,536
Income from extraordinary item, net of tax		—			—			23,749
Loss from cumulative effect of a change in accounting principle, net of tax		—			—			(15,107	)
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Equity from earnings in BankAtlantic Bancorp		(15,694	)		(15,222	)		(11,380	)
Equity from earnings in Levitt		(10,265	)		—			—
Equity from (earnings) loss in other subsidiaries		(1,981	)		1,583			633
Depreciation		50			10			24
Provision for deferred income taxes		8,216			3,646			2,556
Loss on investment securities		72			—			499
Gain from securities activities, net		—			(270	)		—
Advances from other subsidiaries		208			444			503
(Increase) decrease in loans receivable		737			—			(2,991	)
(Increase) decrease in other assets		(2,032	)		274			49
Increase other liabilities		372			155			213

Net cash used in operating activities	$	(6,087	)	$	(2,358	)	$	(4,702	)

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	For the Years Ended December 31,

	2004			2003			2002

	(In thousands)
Investing Activities:
Common stock dividends received from BankAtlantic Bancorp		1,924			1,686			1,581
Capital contribution to subsidiaries		(1,000	)		—			—
Dividends from other subsidiaries		150			—			—
Distributions from venture partnerships		1,423			344			—
Decrease (increase) in securities available for sale		(10,000	)		785			(173	)

Net cash (used in) provided by investing activities		(7,503	)		2,815			1,408

Financing Activities:
Borrowings		4,468			—			1,500
Issuance of preferred stock		14,988			—			—
Exercise stock options		1,791			—			—
Retirement of common stock		(7,281	)		—			(319	)
Issuance of common stock		—			282			204
Preferred stock dividends paid		(392	)		—			—

Net cash provided by financing activities		13,574			282			1,385

Increase (decrease) in cash and cash equivalents		(16	)		739			(1,909	)
Cash and cash equivalents at beginning of period		1,536			797			2,706

Cash and cash equivalents at end of period	$	1,520		$	1,536		$	797

Supplementary disclosure of non-cash investing and financing activities
Interest paid on borrowings	$	357		$	333		$	302
Increase in securities available for sale resulting from venture partnerships distribution of its securities investment		—			—			506
Change in shareholders’ equity resulting from net change in other comprehensive income, net of taxes		(588	)		662			(1,824	)
Net increase (decrease) in shareholders’ equity from the effect of subsidiaries’ capital transactions, net of income taxes		5,812			(252	)		(15	)
Increase in shareholders’ equity for the tax effect related to the exercise of stock options		11,017			550			60
Levitt investment transfer from BankAtlantic Bancorp resulting from the spin-off transaction		—			27,885			—

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


21.	Selected Quarterly Results (Unaudited)

The following tables summarize the quarterly results of operations for the years ended December 31, 2004 and 2003 (in thousands except for per share data):


	First		Second		Third		Fourth
2004	Quarter		Quarter		Quarter		Quarter		Total

Revenues	$	264,696	$	289,684	$	280,160	$	332,061	$	1,166,601
Costs and expenses		217,306		243,933		238,984		283,760		983,983

Income before income taxes and equity in earnings from unconsolidated subsidiaries		47,390		45,751		41,176		48,301		182,618
Equity in earnings from unconsolidated subsidiaries		5,811		5,023		5,888		2,881		19,603

Income before income taxes and minority interest		53,201		50,774		47,064		51,182		202,221
Provision for income taxes		22,207		21,938		19,113		20,739		83,997
Minority interest in income of consolidated subsidiaries		26,622		25,575		24,291		27,506		103,994

Net income	$	4,372	$	3,261	$	3,660	$	2,937	$	14,230

Basic earnings per share from continuing operations	$	0.18	$	0.13	$	0.14	$	0.11	$	0.57

Diluted earnings per share from continuing operations	$	0.15	$	0.11	$	0.12	$	0.09	$	0.47

Basic weighted average number of common shares outstanding		23,824		24,195		24,215		24,507		24,183

Diluted weighted average number of common shares outstanding		27,706		27,795		27,761		27,892		27,806

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The first quarter net income reflects the Company’s gain from the technology company litigation settlement. The litigation gain was partially offset by BankAtlantic Bancorp prepaying $108 million of FHLB advances.


	First			Second		Third		Fourth
2003	Quarter			Quarter		Quarter		Quarter		Total

Revenues	$	191,693		$	210,188	$	197,034	$	233,389	$	832,304
Costs and expenses		169,387			187,885		172,786		211,234		741,292

Income before income taxes and equity in earnings from unconsolidated subsidiaries		22,306			22,303		24,248		22,155		91,012
Equity in (loss) earnings from unconsolidated subsidiaries		(114	)		2,719		4,054		3,467		10,126

Income before income taxes, minority interest and discontinued operations		22,192			25,022		28,302		25,622		101,138
Provision for income taxes		9,190			10,588		11,995		12,393		44,166
Minority interest in income of consolidated subsidiaries		11,185			13,318		14,352		12,238		51,093

Income from continuing operations		1,817			1,116		1,955		991		5,879
Discontinued operations, net of taxes		83			754		306		—		1,143

Net income	$	1,900		$	1,870	$	2,261	$	991	$	7,022

Basic earnings per share from continuing operations	$	0.08		$	0.05	$	0.09	$	0.04	$	0.26
Basic earnings per share from discontinued operations		0.00			0.03		0.01		—		0.05

Basic earnings per share	$	0.08		$	0.08	$	0.10	$	0.04	$	0.31
Diluted earnings per share from continuing operations	$	0.07		$	0.04	$	0.07	$	0.03	$	0.21
Diluted earnings per share from discontinued operations		—			0.03		0.01		—		0.04

Diluted earnings per share	$	0.07		$	0.07	$	0.08	$	0.03	$	0.25

Basic weighted average number of common shares outstanding		22,419			22,842		22,979		23,023		22,818

Diluted weighted average number of common shares outstanding		24,677			25,688		26,195		27,019		26,031

The third and fourth quarter earnings were impacted by BankAtlantic Bancorp prepaying $185 million of FHLB advances in the third quarter and $140 million of FHLB advances in the fourth quarter incurring prepayment penalties of $2.0 million and $8.9 million, respectively. The discontinued operations reflect the operations of GMS. (See Note 2.)

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


22.	Estimated Fair Value of Financial Instruments

The information set forth below provides disclosure of the estimated fair value of the Company’s financial instruments presented in accordance with the requirements of Statement of Financial Accounting Standards No. 107, “Disclosures about Fair Value of Financial Instruments” (“FAS 107”).

Management has made estimates of fair value that it believes to be reasonable. However, because there is no market for many of these financial instruments, management has no basis to determine whether the fair value presented would be indicative of the value negotiated in an actual sale. 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.

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

The fair value of performing loans, except residential mortgage and adjustable rate loans is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan. The estimate of average maturity is based on BankAtlantic’s historical experience with prepayments for each loan classification, modified, as required, by an estimate of the effect of current economic and lending conditions. For performing residential mortgage loans, fair value is estimated by discounting contractual cash flows, which are adjusted for national historical prepayment estimates. The discount rate is based on secondary market sources and is adjusted to reflect differences in servicing and credit costs.

Fair values of non-performing loans are based on the assumption that the loans are on a non-accrual status, discounted at market rates during a 24 month work-out period. Assumptions regarding credit risk are determined using available market information and specific borrower information.

The book value of tax certificates approximates market value. The fair value of mortgage-backed and investment securities are estimated based upon a price matrix obtained from a third party or market price quotes.

Under FAS 107, the fair value of deposits with no stated maturity, such as non-interest bearing demand deposits, savings and NOW accounts, and money market and checking accounts, is considered the same as book value. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using current rates offered by BankAtlantic for similar remaining maturities.

The fair value of Federal Home Loan Bank stock is its carrying amount.

The book value of securities sold under agreements to repurchase and federal funds purchased approximates fair value.

The fair value of FHLB advances is based on discounted cash flows using rates offered for debt with comparable terms to maturity and issuer credit standing.

The fair value of securities owned and securities sold but not yet purchased was based on dealer price quotations or price quotations from similar instruments traded.

The fair values of subordinated debentures, junior subordinated debentures, trust preferred securities and notes payable were based on discounted value of contractual cash flows at a market. Carrying amounts of notes and mortgage notes payable that provide for variable interest rates approximate fair value, as the terms of the credit facilities require periodic market adjustment of interest rates. The fair value of the Company’s fixed rate indebtedness, including development bonds payable, was estimated using discounted cash flow analyses, based on the Company’s current borrowing rates for similar types of borrowing arrangements.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table presents information for the Company’s financial instruments at December 31, 2004 and 2003 (in thousands):


		December 31, 2004				December 31, 2003

		Carrying		Fair		Carrying		Fair
		Amount		Value		Amount		Value

Financial assets:
	Cash and cash equivalents	$	224,720	$	224,720	$	143,542	$	143,542
	Securities available for sale		749,001		749,001		360,442		360,442
	Securities owned		125,443		125,443		124,565		124,565
	Investment securities		317,891		317,416		192,706		192,706
	Federal Home Loan Bank stock		78,619		78,619		40,325		40,325
	Loans receivable including loans held for sale, net		4,561,073		4,568,883		3,611,612		3,620,487
Financial liabilities:
	Deposits	$	3,457,202	$	3,451,853	$	3,058,142	$	3,062,565
	Short term borrowings		362,002		362,002		120,874		120,874
	Advances from FHLB		1,544,497		1,564,188		782,205		830,939
	Securities sold but not yet purchased		39,462		39,462		37,813		37,813
	Subordinated debentures, notes, mortgage notes and bonds payable		278,605		277,998		164,100		163,827
	Junior subordinated debentures		263,266		265,955		263,266		257,647

The carrying amount and fair values of BankAtlantic’s commitments to extend credit, standby letters of credit, financial guarantees and forward FHLB commitments are not significant. (See Note 17 for the contractual amounts of BankAtlantic’s financial instrument commitments).

Derivatives

During the year ended December 31, 2000, BankAtlantic Bancorp entered into a forward contract to purchase the underlying collateral from a government agency pool of securities in May 2005. The underlying collateral is $8.6 million of five-year hybrid adjustable rate mortgage loans that will adjust annually after May 2005. The hybrid adjustable rate mortgage loans are loans in which the rate at inception remains fixed for five years and then adjusts to a spread over the U.S. Treasury note annually thereafter. The forward contract was held for trading purposes and recorded at fair value with changes in fair value included in earnings.

During the year ended December 31, 2002, BankAtlantic Bancorp utilized interest rate swaps to manage its interest rate risk. The Company entered into callable time deposits with its customers and entered into callable interest rate swaps. BankAtlantic Bancorp designated these callable interest rate swaps as fair value hedges. During the year ended December 31, 2003, interest rate swap contracts with a notional amount of $33 million were called by the counter-party, resulting in BankAtlantic Bancorp redeeming $33 million of fixed rate time deposits. BankAtlantic Bancorp’s loss on the termination of the interest rate swaps was offset by a corresponding gain on the call of the time deposits. There were no interest rate swaps outstanding at December 31, 2004 and 2003.

BankAtlantic Bancorp also created cash flow hedges by entering into interest rate swap contracts to hedge the variable cash flows relating to forecasted interest payments on certain variable rate FHLB advances. The changes in fair value of the interest rate swap contracts designated as cash flow hedges were recorded in other comprehensive income and the receivables and payables from the swap contracts were recorded as an adjustment to interest expense in the Company’s statement of operations for the year ended December 31,

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2002. BankAtlantic Bancorp terminated the above mentioned interest rate swap contracts with a notional amount of $75 million during the year ended December 31, 2003 and recognized a $1.9 million loss included in other income in the Company’s statement of operations.

Commitments to originate residential loans held for sale and to sell residential loans are derivatives. The fair value of these derivatives was not included in the Company’s financial statements as the amount was not considered significant. These derivatives relate to a loan origination program with an independent mortgage company whereby, the mortgage company purchases the originated loans from BankAtlantic 14 days after the funding date at a price negotiated quarterly for all loans sold during the quarter.


23.	Earnings (Loss) per Share

The Board of Directors of the Company declared stock splits effected in the form of a 15% stock dividend to holders of record on June 3, 2003 and a 25% stock dividend to each holders of record on November 17, 2003, February 20, 2004, May 17, 2004 and March 7, 2005, payable in shares of the Company’s Class A Common Stock for each share of the outstanding Class A and Class B Common Stock. Where appropriate, amounts throughout this report have been adjusted to reflect the stock splits.

The Company has two classes of common stock outstanding. The two-class method is not presented because the Company’s capital structure does not provide for different dividend rates or other preferences, other than voting rights, between the two classes. The number of options considered outstanding shares for diluted earnings per share is based upon application of the treasury stock method to the options outstanding as of the end of the period. I.R.E. Realty Advisory Group, Inc. (“RAG”) owns 4,764,282 to confirm of BFC Financial Corporation’s Class A Common Stock and 500,000 shares of BFC Financial Corporation Class B Common Stock. Because the Company owns 45.5% of the outstanding common stock of RAG, 2,165,367 shares of Class A Common Stock and 227,250 shares of Class B Common Stock are eliminated from the number of shares outstanding for purposes of computing earnings per share.

The following reconciles the numerators and denominators of the basic and diluted earnings per share computation for the years ended December 31, 2004, 2003 and 2002.


			For the Year Ended December 31,

			2004		2003		2002

			(In thousands,
			except per share data)
Basic earnings per share
	Numerator:
		Income from continuing operations	$	14,230	$	5,879	$	(5,986	)
		Less: Preferred stock dividends		392		—		—

		Income available to common shareholders		13,838		5,879		(5,986	)
		Discontinued operations, net of taxes		—		1,143		2,536
		Extraordinary item, net of taxes		—		—		23,749
		Cumulative effect of a change in accounting principle, net of taxes		—		—		(15,107	)

		Net income available to common shareholders	$	13,838	$	7,022	$	5,192

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


			For the Year Ended December 31,

			2004			2003			2002

			(In thousands,
			except per share data)
	Denominator:
		Weighted average number of common shares outstanding		26,576			25,211			24,847
		Eliminate RAG weighted average number of common shares		(2,393	)		(2,393	)		(2,393	)

		Basic weighted average number of common shares outstanding		24,183			22,818			22,454

	Basic earnings per share:
		Earnings per share from continuing operations	$	0.57		$	0.26		$	(0.27	)
		Earnings per share from discontinued operations		—			0.05			0.11
		Earnings per share from extraordinary item		—			—			1.06
		(Loss) earnings per share from cumulative effect of a change in accounting principle		—			—			(0.67	)

		Basic earnings per share	$	0.57		$	0.31		$	0.23

Diluted earnings per share
	Numerator
		Income available to common shareholders	$	13,838		$	5,879		$	(5,986	)
		Effect of securities issuable by subsidiaries		(780	)		(505	)		(206	)

		Income available after assumed dilution	$	13,058		$	5,374		$	(6,192	)

		Discontinued operations, net of taxes	$	—		$	1,143		$	2,536
		Effect of securities issuable by subsidiaries		—			(17	)		(56	)

		Discontinued operations, net of taxes after assumed dilution	$	—		$	1,126		$	2,480

		Extraordinary items, net of taxes	$	—		$	—		$	23,749
		Effect of securities issuable by a subsidiary		—			—			(511	)

		Extraordinary items, net of taxes after assumed dilution	$	—		$	—		$	23,238

		Cumulative effect of a change in accounting principle, net of taxes	$	—		$	—		$	(15,107	)
		Effect of securities issuable by a subsidiary		—			—			325
		Cumulative effect of a change in accounting principle, net of taxes after assumed dilution	$	—		$	—		$	(14,782	)

		Net income available after assumed dilution	$	13,058		$	6,500		$	4,744

	Denominator
		Weighted average number of common shares outstanding		26,576			25,211			24,847
		Eliminate RAG weighted average number of common shares		(2,393	)		(2,393	)		(2,393	)
		Common stock equivalents resulting from stock-based compensation		3,623			3,213			—

		Diluted weighted average shares outstanding		27,806			26,031			22,454

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


		For the Year Ended December 31,

		2004		2003		2002

		(In thousands,
		except per share data)
Diluted earnings per share
	Earnings per share from continuing operations	$	0.47	$	0.21	$	(0.28	)
	Earnings per share from discontinued operations		—		0.04		0.11
	Earnings per share from extraordinary items		—		—		1.04
	Loss per share from cumulative effect of a change in accounting principle		—		—		(0.66	)

	Diluted earnings per share	$	0.47	$	0.25	$	0.21


24.	Certain Relationships and Related Party Transactions

Alan B. Levan, President and Chairman of the Board of the Company also serves as Chairman of the Board and Chief Executive Officer of BankAtlantic Bancorp and BankAtlantic. Alan B. Levan is also Chairman of the Board of Bluegreen and Levitt. John E. Abdo, Vice Chairman of the Board of the Company also serves as Vice Chairman of the Board of Directors of BankAtlantic Bancorp, BankAtlantic, Levitt and Bluegreen and is President of Levitt. Glen R. Gilbert, Executive Vice President of the Company also serves as Senior Executive Vice President and Secretary of Levitt.

These executive officers separately receive compensation from our affiliates for services rendered for such affiliates.

The BankAtlantic Bancorp, BFC, Levitt and Bluegreen share various office premises and employee services, pursuant to the arrangements described below.

During 2004, BankAtlantic Bancorp maintains service arrangements with BFC and Levitt, pursuant to which BankAtlantic Bancorp provided the following back-office support functions to Levitt and BFC: human resources, risk management, project planning, system support and investor and public relation services. BankAtlantic Bancorp received compensation for such services on a percentage of cost basis. Additionally, BankAtlantic Bancorp rents office space to Levitt and BFC on a month-to-month basis and receives rental payments based on market rates. These amounts were eliminated in the Company’s statement of operations.

The table below shows the service fees and rent payments from BFC and Levitt to BankAtlantic Bancorp for office space rent and back-office support functions for the year ended December 31, 2004 (in thousands):


	BFC		Levitt		Total

Service fees and rent to BankAtlantic Bancorp	$	127,327	$	499,000	$	627,327

The following table sets forth the Company’s management fees in connection with providing general and administrative services to Levitt for the years ended December 31, 2004, 2003 and 2002 consisted of (in thousands):


	For the Years Ended
	December 31,

	2004		2003		2002

Levitt	$	311	$	213	$	170

Other affiliates	$	10	$	10	$	41

In connection with the spin-off of Levitt as of December 31, 2003, BankAtlantic Bancorp converted an outstanding $30.0 million demand note owed by Levitt to BankAtlantic Bancorp to a five year term note with

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

interest only payable monthly initially at the prime rate and thereafter at a prime rate plus increments of an additional 0.25% every six months. Prior to the spin-off, BankAtlantic Bancorp transferred its 4.9% ownership interest in Bluegreen Corporation to Levitt in exchange for a $5.5 million note and additional shares of Levitt common stock (which additional shares were distributed as part of the spin-off transaction.) The note was repaid in May 2004. Additionally, prior to the spin-off, Levitt declared an $8.0 million dividend to BankAtlantic Bancorp payable in the form of a five year note with the same payment terms as the $30.0 million note described above. The outstanding balance of these notes at December 31, 2004 and 2003 was $38.0 million. BankAtlantic also has $8.6 million and $18.1 million of construction loans to Levitt secured by land and improvements at December 31, 2004 and 2003, respectively. The total interest income to BankAtlantic Bancorp and BankAtlantic for the year ended December 31, 2004 and 2003 was $2.4 million and $2.3 million related to loans to Levitt. The outstanding balance of these notes and related interest were not included in the Company’s financial statements as those amounts were eliminated in consolidation. At December 31, 2003, Levitt’s investment in real estate joint ventures included BankAtlantic’s loans of approximately $23.2 million at December 31, 2003. In January 2004, a joint venture loan due to BankAtlantic was repaid in connection with the sale of the joint venture project. During the year ended December 31, 2003, BankAtlantic paid a subsidiary of Levitt a $540,000 management fee to operate and sell a residential construction property acquired by BankAtlantic through foreclosure. The property was sold to an unrelated developer during the fourth quarter of 2003.

BFC, Levitt and several technology venture partnerships that BFC has controlling interests maintain cash balances at BankAtlantic amounting to $39.6 million as of December 31, 2004. The interest in connection with the above accounts of approximately $251,000 and the cash balances were not included in the Company’s financial statements as those amounts were eliminated in consolidation.

During 1999 and 2000, the Company (without consideration of BankAtlantic Bancorp) acquired interests in unaffiliated technology entities. During 2000 and 2001, the Company’s interests in the technology entities were transferred at the Company’s cost to specified asset limited partnerships. Subsidiaries of the Company are the controlling general partners of these venture partnerships, and therefore, they are consolidated in the Company’s financial statements. The general partners are limited liability companies of which the members are: BFC Financial Corporation — 57.5%, John E. Abdo — 13.75%; Alan B. Levan — 9.25%; Glen R. Gilbert — 2.0% and John E. Abdo, Jr. — 17.5%. At December 31, 2003, the Company’s net investment in these partnerships was $626,000.

In connection with the venture partnerships described above, Alan Levan and John Abdo each borrowed $500,000 from the Company on a recourse basis and Glen Gilbert, Executive Vice President, and Earl Pertnoy, a director of the Company each borrowed $50,000 on a non-recourse basis to make their investments. Subsequently, on July 16, 2002, John Abdo borrowed an additional $3.0 million from the Company on a recourse basis. All borrowings bear interest at the prime rate plus 1% and are, except for the Abdo borrowing, is payable interest only annually with the entire balance due in February 2006. The Abdo borrowing requires monthly interest payments, is due on demand and is secured by 2,127,470 shares of BFC Class A Common Stock and 370,750 shares of BFC Class B Common Stock. Amounts outstanding at December 31, 2004 are $0 from Mr. Levan, $3,282,758 from Mr. Abdo, $19,151 from Mr. Gilbert and $24,854 from Mr. Pertnoy.

An affiliated limited partnership, BankAtlantic Bancorp and affiliates of the Company were investors in a privately held technology company located in Boca Raton, Florida. The affiliated limited partnership invested $2 million in 219,300 shares in the technology company’s common stock, which shares were acquired in October 2000 at a price per share of $9.12. At December 31, 2001, the carrying value of this investment by the limited partnership had been written down to $4.95 per share and in 2002, based on its performance, the technology company was written off entirely by the Company and BankAtlantic Bancorp. BankAtlantic Bancorp invested $15 million in 3,033,386 shares of the technology company’s common stock in cash and by issuance to the technology company of 848,364 shares of BankAtlantic Bancorp Class A Common Stock.

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

BankAtlantic Bancorp’s shares in the technology company were acquired in October 1999 at an average price per share of $4.95. Both Alan B. Levan and John E. Abdo became directors of the technology company in connection with the investment. Alan B. Levan owned or controlled direct and indirect interests in an aggregate of 286,709 shares of the technology company common stock, purchased at an average price per share of $8.14 and Mr. John E. Abdo owned or controlled direct and indirect interests in an aggregate of 368,408 shares of the technology company common stock purchased at an average price per share of $7.69. Jarett Levan, a director of BankAtlantic Bancorp and Executive Vice President of BankAtlantic, and Bruno DiGiulian, a director of BankAtlantic Bancorp had a 0.15% and 0.7% ownership interest, respectively, in the limited partnership. BFC and its affiliates collectively owned approximately 7% of the technology company’s outstanding common stock at December 31, 2003. During 2001, Mr. Levan and Mr. Abdo resigned from the Board of Directors of the technology company and initiated a lawsuit on behalf of the Company and others against the founder of the technology company, personally, regarding his role. In early 2003, the technology company initiated a lawsuit against BankAtlantic Bancorp seeking to have a restrictive legend on its BankAtlantic Bancorp’s Class A Common Stock removed. In March 2004, the technology company settled the lawsuit with the Company and it affiliates resulting in the Company recognizing a $24 million litigation settlement gain.

BankAtlantic Bancorp and its subsidiaries utilized certain services of Ruden, McClosky, Smith, Schuster & Russell, P.A. (“Ruden, McClosky”), a law firm to which Bruno DiGiulian is of counsel. BankAtlantic paid fees aggregating $239,000 and $110,000 and $30,000 were paid by Ryan Beck to Ruden, McClosky in 2003 and none in 2004. In addition, fees aggregating $845,000 were paid to Ruden, McClosky by Levitt in 2003 prior to the spin off of Levitt from BankAtlantic Bancorp. In 2002, fees aggregating $1.0 million were paid to the law firm by BankAtlantic and Levitt Corporation. Ruden, McClosky also represents Alan B. Levan and John E. Abdo with respect to certain other business interests.

Since 2002, Levitt has utilized certain services of Conrad & Scherer, a law firm in which William R. Scherer, a member of the Levitt’s Board of Directors, is a member. Levitt paid fees aggregating $110,00, $79,000 and $364,000 to this firm during the years ended December 31, 2004, 2003 and 2002, respectively.

Certain of the Company’s affiliates, including its executive officers, have independently made investments with their own funds in both public and private entities in which the Company holds investments.

The Company has a 49.5% interest and affiliates and third parties have a 50.5% interest in a limited partnership formed in 1979, for which the Company’s Chairman serves as the individual General Partner. The partnership’s primary asset is real estate subject to net lease agreements. The Company’s cost for this investment, approximately $441,000, was written off in 1990 due to the bankruptcy of the entity leasing the real estate. During each of the years 2004 and 2003, the Company received distributions of approximately $25,000 from the partnership.

Florida Partners Corporation owns 133,314 shares of the Company’s Class B Common Stock and 1,270,294 confirm shares of the Company’s Class A Common Stock. Alan B. Levan may be deemed to beneficially be the principal shareholder and is a member of the Board of Florida Partners Corporation. Glen R. Gilbert, Executive Vice President and Secretary of the Company holds similar positions at Florida Partners Corporation.

Included in BFC’s other assets at December 31, 2004 and 2003 were approximately $101,000 and $138,000, respectively, due from affiliates.


25.	Segment Reporting

Operating segments are components of an enterprise about which separate financial information is available that is regularly reviewed by the chief operating decision maker in assessing performance and deciding how to allocate resources. Reportable segments consist of one or more operating segments with

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

similar economic characteristics, products and services, production processes, type of customer, distribution system and regulatory environment. The activities of reportable segments exclude discontinued operations, extraordinary gains (losses) and income (loss) from changes in accounting principles.

The information provided for Segment Reporting is based on internal reports utilized by management. The presentation and allocation of interest expense and overhead and the net contribution for the operating segments may not reflect the actual economic costs, contribution or results of operations of the segments as stand alone businesses. If a different basis of allocation were utilized, the relative contributions of the segments might differ but the relative trends in segments would, in management’s view, likely not be impacted.

As of January 1, 2004, the Company implemented a new internal reporting methodology for evaluating our reportable segment performance. As a result, the Company is currently organized into three reportable segments: Financial Services, Homebuilding and Real Estate Development and Other Operations.

The following summarizes the aggregation of the Company’s operating segments into reportable segments:


	*Financial Services*

Financial Services division consists of BankAtlantic Bancorp and its subsidiaries’ operations. Financial Services activities consist of a broad range of banking operations including investments, tax certificates, residential loans purchased, CRA lending, real estate capital services, commercial lending, commercial deposits, consumer and small business lending, ATM operations and branch banking. Also included in Financial Services is a broad range of investment banking and brokerage operations.


	*Homebuilding and Real Estate Development*

Homebuilding and Real Estate Development division consists of Levitt and its subsidiaries’ operations including Levitt’s investment in Bluegreen. Homebuilding and real estate development are centered around homebuilding, land development of master planned communities, commercial real estate development and investments in other real estate ventures.


	*Other Operations*

Other Operations results includes of BFC’s real estate owned; loans receivable that relate to previously owned properties; other securities and investments; BFC’s overhead and interest expense and the financial results of venture partnerships which BFC controls. Segment results do not reflect the Company’s equity from earnings in BankAtlantic Bancorp or Levitt, but include the provision for income taxes relating to the tax effect of the Company’s earnings from BankAtlantic Bancorp and Levitt. BankAtlantic Bancorp and Levitt are consolidated in our financial statements, as described earlier.

The accounting policies of the segments are generally the same as those described in the summary of significant accounting policies. Inter-company loans, interest income and interest expense and management and consulting fees are eliminated for consolidated presentation. The Company evaluates segment perform-

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

ance based on net income after tax. The table below reflects the Company’s consolidated data of our business segments for the three years ended December 31, 2004 (in thousands):


					Homebuilding					Adjusting
		Financial			and Real Estate		Other			and
2004		Services			Development		Operations			Eliminations			Total

Revenues:
	Sales of real estate	$	—		$	549,652	$	—		$	—		$	549,652
	Interest and dividend income		260,555			1,338		680			(2,625	)		259,948
	Investment banking		227,949			—		—			(280	)		227,669
	Other income		116,355			8,078		5,837			(938	)		129,332

			604,859			559,068		6,517			(3,843	)		1,166,601

Costs and Expenses:
	Cost of sale of real estate		—			406,274		—			(2,374	)		403,900
	Interest expense, net		87,722			259		1,171			(251	)		88,901
	Recovery for loan losses		(5,109	)		—		—			—			(5,109	)
	Other expenses		412,053			78,269		7,187			(1,218	)		496,291

			494,666			484,802		8,358			(3,843	)		983,983

			110,193			74,266		(1,841	)		—			182,618
	Equity in earnings from unconsolidated Subsidiaries		485			19,118		—			—			19,603

	Income before income taxes		110,678			93,384		(1,841	)		—			202,221
	Provision for income taxes		39,910			36,022		8,065			—			83,997

	Income (loss) from continuing operations before minority interest		70,768			57,362		(9,906	)		—			118,224
	Minority interest in income of consolidated subsidiaries		55,074			47,098		1,822			—			103,994

	Income (loss) from continuing operations		15,694			10,264		(11,728	)		—			14,230

	Total assets at December 31, 2004	$	6,356,777		$	678,467	$	26,596		$	(106,993	)	$	6,954,847

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


					Homebuilding					Adjusting
		Financial			and Real Estate		Other			and
2003		Services			Development		Operations			Eliminations			Total

Revenues:
	Sales of real estate	$	—		$	283,058	$	—		$	—		$	283,058
	Interest and dividend income		261,849			863		390			(1,228	)		261,874
	Investment banking		207,788			—		—			—			207,788
	Other income		73,501			4,765		1,532			(214	)		79,584

			543,138			288,686		1,922			(1,442	)		832,304

Costs and Expenses:
	Cost of sale of real estate		—			209,431		—			—			209,431
	Interest expense, net		113,217			233		1,163			(1,228	)		113,385
	Recovery for loan losses		(547	)		—		—			—			(547	)
	Other expenses		368,872			43,718		6,646			(213	)		419,023

			481,542			253,382		7,809			(1,441	)		741,292

			61,596			35,304		(5,887	)		(1	)		91,012
	Equity in earnings from unconsolidated Subsidiaries		425			7,916		—			1,785			10,126

	Income before income taxes		62,021			43,220		(5,887	)		1,784			101,138
	Provision for income taxes		23,424			16,400		3,714			628			44,166

	Income (loss) from continuing operations before minority interest		38,597			26,820		(9,601	)		1,156			56,972
	Minority interest in income of consolidated subsidiaries		31,709			20,785		(1,401	)		—			51,093

	Income (loss) from continuing operations		6,888			6,035		(8,200	)		1,156			5,879

	Total assets at December 31, 2003	$	4,831,549		$	393,505	$	14,388		$	(103,207	)	$	5,136,235

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


					Homebuilding					Adjusting
		Financial			and Real Estate		Other			and
2002		Services			Development		Operations			Eliminations			Total

Revenues:
	Sales of real estate	$	—		$	207,808	$	—		$	—		$	207,808
	Interest and dividend income		303,387			1,259		354			(300	)		304,700
	Investment banking		130,738			—		—			—			130,738
	Other income		58,519			3,014		1,161			(179	)		62,515

			492,644			212,081		1,515			(479	)		705,761

Costs and Expenses:
	Cost of sale of real estate		—			159,675		—			—			159,675
	Interest expense, net		148,891			389		1,153			1,445			151,878
	Provision for loan losses		14,077			—		—			—			14,077
	Other expenses		302,768			31,670		4,791			(72	)		339,157

			465,736			191,734		5,944			1,373			664,787

			26,908			20,347		(4,429	)		(1,852	)		40,974
	Equity in earnings from unconsolidated Subsidiaries		1,293			5,419		—			2,615			9,327

	Income before income taxes		28,201			25,766		(4,429	)		763			50,301
	Provision for income taxes		9,051			6,254		2,420			268			17,993

	Income (loss) from continuing operations before minority interest		19,150			19,512		(6,849	)		495			32,308
	Minority interest in income of consolidated subsidiaries		23,853			15,102		(661	)		—			38,294

	Income (loss) from continuing operations		(4,703	)		4,410		(6,188	)		495			(5,986	)

	Total assets at December 31, 2002	$	5,125,550		$	295,461	$	18,118		$	(23,196	)	$	5,415,933

The changes in the carrying amount of goodwill for the year ended December 31, 2004 was as follows (in thousands):


			Homebuilding
	Financial		and Real Estate
	Services		Development		Total

Balance as of December 31, 2003	$	76,674	$	—	$	76,674
Bowden acquisition		—		1,307		1,307

Balance as of December 31, 2004	$	76,674	$	1,307	$	77,981


26.	Shareholders’ Equity

On February 7, 2005, the Company amended Article IV Article V and Article VI of its Articles of Incorporation to increase authorized number of shares of the Company’s Class A Common Stock, par value $.01 per share from 20 million shares to 70 million shares. The Amendment was approved by the written

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

consent of the holders of shares of the Company’s Class A Common Stock and Class B Common Stock representing a majority of the votes entitled to be cast by all shareholders on the Amendment.

The Company’s Articles of Incorporation authorize the Company to issue both a Class A Common Stock, par value $.01 per share, and a Class B Common Stock, par value $.01 per share. On May 22, 2002, the Company’s Articles of Incorporation were amended to, among other things, grant holders of the Company’s Class A Common Stock one vote for each share held, which previously had no voting rights except under limited circumstances provided by Florida law, with all holders of Class A Common Stock possessing in the aggregate 22% of the total voting power. Holders of Class B Common Stock have the remaining 78% of the total voting power. When the number of shares of Class B Common Stock outstanding decreases to 1,800,000 shares, the Class A Common Stock aggregate voting power will increase to 40% and the Class B Common Stock will have the remaining 60%. When the number of shares of Class B Common Stock outstanding decreases to 1,400,000 shares, the Class A Common Stock aggregate voting power will increase to 53% and the Class B Common Stock will have the remaining 47%. Also, each share of Class B Common Stock is convertible at the option of the holder thereof into one share of Class A Common Stock.

The Company’s Articles of Incorporation authorize the issuance of up to 10 million shares of $.01 par value preferred stock. The Board of Directors has the authority to divide the authorized preferred stock into series or classes having the relative rights, preferences and limitations as may be determined by the Board of Directors without the prior approval of shareholders. The Board of Directors has the power to issue this preferred stock on terms that would create a preference over the Company’s Common Stock with respect to dividends, liquidation and voting rights. No further vote of security holders would be required prior to the issuance of the shares. During 2004. 15,000 shares of 5% cumulative convertible preferred stock were issued with a stated valued of $1,000 per share.

On January 10, 1997, the Company’s Board of Directors adopted a Shareholder Rights Plan. As part of the Rights Plan, the Company declared a dividend distribution of one preferred stock purchase right (the “Right”) for each outstanding share of BFC’s Class B Common Stock to shareholders of record on January 21, 1997. Each Right will become exercisable only upon the occurrence of certain events, including the acquisition of 20% or more of BFC’s Class B Common Stock by persons other than the existing control shareholders (as specified in the Rights Plan), and will entitle the holder to purchase either BFC stock or shares in the acquiring entity at half the market price of such shares. The Rights may be redeemed by the Board of Directors at $.01 per Right until the tenth day following the acquisition of 20% or more of BFC’s Class B Common Stock by persons other than the existing controlling shareholders. The Board may also, in its discretion, extend the period for redemption. The Rights will expire on January 10, 2007.


27.	5% Cumulative Convertible Preferred Stock

The Company’s authorized capital stock includes 10 million shares of preferred stock at a par value of $.01 per share. On June 7, 2004 the Board of Directors of the Company designated 15,000 shares of the preferred stock as 5% Cumulative Convertible Preferred Stock (the “5% Preferred Stock”) and on June 21, 2004 sold the shares of the 5% Preferred Stock to an investor group in a private offering. The 5% Preferred Stock has a stated value of $1,000 per share, with conversion rights into the Company’s Class A Common Stock subject to and upon compliance with certain provisions. The shares of 5% Preferred Stock may be redeemed at the option of the Company, at any time and from time to time on or after April 30, 2005, at redemption prices (the “Redemption Price”) ranging from $1,050 per share for the year 2005 to $1,000 per share for the year 2015 and thereafter. The 5% Preferred Stock liquidation preference is equal to its stated value of $1,000 per share plus any accumulated and unpaid dividends or an amount equal to the Redemption Price in a voluntary liquidation or winding up of the Company. Holders of the 5% Preferred Stock are entitled to receive when and as declared by the Board of Directors, cumulative quarterly cash dividends on

BFC FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

each such share at a rate per annum of 5% of the stated value from the date of issuance, payable quarterly. The 5% Preferred Stock has no voting rights except as required by Florida law.

Holders of the 5% Preferred Stock have the option at any time on or after April 30, 2007 to convert the 5% Preferred Stock into shares of the Company’s Class A Common Stock, with the number of shares determined by dividing the stated value of $1,000 per share by the conversion price of $12 per share (“Conversion Price”). The Conversion Price is subject to customary anti-dilution adjustments. The holders may convert their shares of 5% Preferred Stock before April 30, 2007 if i) the Class A Common Stock has a closing price equal to 150% of the Conversion Price then in effect for the 20 consecutive trading days prior to the delivery of a conversion notice or ii) the Company has delivered a redemption notice on or after April 30, 2005.


28.	Subsequent Event

On February 18, 2005, the Company filed a registration statement on Form S-3 for a proposed underwritten public offering for 3,600,000 shares (4,140,000 shares including the underwriters over-allotment provision) of the Company’s Class A Common Stock.

ITEM 9A. CONTROLS AND PROCEDURES

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting; as such term is defined in Exchange Act Rule 13a-15(f). Our internal control system was designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of published financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Internal control over financial reporting also includes controls over the preparation of financial statements in accordance with the instructions to the Consolidated Financial Statements of Bank Holding Companies (Form FR Y-9C) to comply with the reporting requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA). Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control – Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2004. Our management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2004 has been audited by PricewaterhouseCoopers LLP, an independent registered certified public accounting firm, as stated in their report which is included herein.


/s/ Alan B. Levan Alan B. Levan Chief Executive Officer March 15, 2005		/s/ Glen R. Gilbert Glen R. Gilbert Chief Financial Officer March 15, 2005

PART IV


ITEM 15.	*EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K*


(a)	Documents Filed as Part of this Report:

(1) Financial Statements

The following consolidated financial statements of BFC Financial Corporation and its subsidiaries are included herein under Part II, Item 8 of this Report.


	Report of Independent Registered Certified Public Accounting Firm of PricewaterhouseCoopers LLP dated March 16, 2005.

	Report of Independent Registered Certified Public Accounting Firm of Ernst & Young LLP dated March 15, 2005

	Report of Independent Registered Public Accounting Firm of KPMG LLP dated February 3, 2003, except as to note 25 which is as of February 11, 2005.

	Consolidated Statements of Financial Condition as of December 31, 2004 and 2003.

	Consolidated Statements of Operations for each of the years in the three year period ended December 31, 2004.

	Consolidated Statements of Comprehensive Income for each of the years in the three year period ended December 31, 2004

	Consolidated Statements of Shareholders’ Equity for each of the years in the three year period ended December 31, 2004.

	Consolidated Statements of Cash Flows for each of the years in the three year period ended December 31, 2004.

	Notes to Consolidated Financial Statements for each of the years in the three year period ended December 31, 2004.

	(2) Financial Statement Schedules


	All schedules are omitted as the required information is either not applicable or presented in the financial statements or related notes.


	(3) Exhibits


	The following exhibits are either filed as a part of this Report or are incorporated herein by reference to documents previously filed as indicated below:


Exhibit
Number			Description	Reference

	23	.1	Consent of PricewaterhouseCoopers LLP	Filed with this Report
	23	.2	Consent of Ernst & Young LLP	Filed with this Report
	23	.3	Consent of KPMG LLP	Filed with this Report
	31	.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed with this Report
	31	.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed with this Report
	32	.1	Certification pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed with this Report
	32	.2	Certification pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed with this Report

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.


	BFC FINANCIAL CORPORATION


	By:	/s/ Alan B. Levan



	Alan B. Levan, Chairman of the Board,
	President and Chief Executive Officer

August 1, 2005

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.


Signature	Title	Date


/s/ Alan B. Levan Alan B. Levan	Chairman of the Board, President and Chief Executive Officer	August 1, 2005

/s/ Glen R. Gilbert Glen R. Gilbert	Executive Vice President and Chief Financial Officer	August 1, 2005

/s/ John E. Abdo John E. Abdo	Vice Chairman of the Board	August 1, 2005

/s/ D. Keith Cobb D. Keith Cobb	Director	August 1, 2005

/s/ Earl Pertnoy Earl Pertnoy	Director	August 1, 2005

/s/ Oscar J. Holzmann Oscar J. Holzmann	Director	August 1, 2005

/s/ Neil A. Sterling Neil A. Sterling	Director	August 1, 2005

INDEX TO EXHIBITS


Exhibit			Description

	23	.1	Consent of PricewaterhouseCoopers LLP
	23	.2	Consent of Ernst & Young LLP
	23	.3	Consent of KPMG LLP
	31	.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31	.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32	.1	Certification pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32	.2	Certification pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002