Bluegreen Vacations Holding Corp - Annual Report: 2005 (Form 10-K)

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

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

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

BFC Financial Corporation

(Exact name of registrant as specified in its Charter)

Florida		59-2022148
(State of Organization)		(IRS Employer Identification Number)
2100 West Cypress Creek Road
Ft. Lauderdale, Florida		33309
(Address of Principal Executive Office)		(Zip Code)

(954) 940-4900

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:

Class A Common Stock $.01 par Value		NASDAQ National Market
Class B Common Stock $.01 par Value		OTC BB
(Title of Class)		(Name of Exchange on Which Registered)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES o NO þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES o NO þ

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 a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o

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

The aggregate market value of the voting common equity held by non-affiliates was $129.8 million computed by reference to the closing price of the Registrant’s Class A Common Stock on June 30, 2005.

          Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of March 7, 2006

Class A Common Stock of $.01 par value, 28,679,766 shares outstanding.
Class B Common Stock of $.01 par value, 7,136,375 shares outstanding.

 

 

Documents Incorporated by Reference

          Portions of the Proxy Statement of the Registrant relating to the Annual Meeting of Shareholders are incorporated as Part III of this report.

PART I

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

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

	•		the impact of economic, competitive and other factors affecting the Company and its subsidiaries, and their operations, markets, products and services;
	•		that BFC may not have sufficient available cash to make desired investments;
	•		that BFC shareholders’ interests may be diluted in transactions utilizing BFC stock for consideration;
	•		that appropriate investment opportunities on reasonable terms and at reasonable prices may not be available;
	•		that the performance of those entities in which investments are made may not be as anticipated; and
	•		that BFC will be subject to the unique business and industry risks and characteristics of each entity in which an investment is made.

          With respect to BankAtlantic Bancorp, a BFC subsidiary, and BankAtlantic, a BankAtlantic Bancorp subsidiary, the risks and uncertainties that may affect BFC are:

	•		the impact of economic, competitive and other factors affecting BankAtlantic Bancorp and BankAtlantic’s and their operations, markets, products and services;
	•		credit risks and loan losses and the related sufficiency of the allowance for loan losses;
	•		changes in interest rates and the effects of, and changes in, trade, monetary and fiscal policies and laws including the impact on the Bank’s net interest margin;
	•		adverse conditions in the stock market, the public debt market and other capital markets and the impact of such conditions on our activities and the value of our assets;
	•		BankAtlantic’s seven-day banking initiative, marketing initiatives, branch expansion, branch renovation and other growth initiatives not resulting in continued growth of low cost deposits or otherwise not producing results which justify their costs;
	•		the impact of periodic testing of goodwill and other intangible assets for impairment as well as the $10 million reserve established during the 2005 fourth quarter may not be sufficient to cover the fines, penalties or expenses associated with any resolution of AML-BSA compliance matters;
	•		the results or performance derived or implied, directly or indirectly from the estimates and assumptions, are based on our beliefs and may not be accurate; and
	•		past performance, actual or estimated new account openings and growth rates may not be indicative of future results.

          Further, this document contains forward-looking statements with respect to Ryan Beck & Co., a BankAtlantic Bancorp subsidiary, which are subject to a number of risks and uncertainties including, but not limited to the risks and uncertainties associated with:

	•		its operations, products and services, changes in economic or regulatory policies,
	•		its ability to recruit and retain financial consultants,
	•		the volatility of the stock market and fixed income markets and its effects on the volume of its business and the value of its securities positions and portfolio, as well as its revenue mix, and the success of new lines of business; and
	•		additional risks and uncertainties that are subject to change and may be outside of Ryan Beck’s control.

          With respect to Levitt Corporation (“Levitt”), the risks and uncertainties that may affect BFC are:

	•		the impact of economic, competitive and other factors affecting Levitt and its operations, including the impact of hurricanes and tropical storms in the areas in which it operates;
	•		the market for real estate generally and in the areas where Levitt has developments, including the impact of market conditions on the Levitt’s margins;
	•		delays in opening planned new communities;
	•		the availability and price of land suitable for development in our current markets and in markets where we intend to expand;
	•		shortages and increased costs of construction materials and labor;
	•		the effects of increases in interest rates;
	•		our ability to successfully complete land acquisitions necessary to meet our growth objectives;
	•		our ability to obtain financing for planned acquisitions;
	•		our ability to successfully expand into new markets and the demand in those markets meeting the Levitt’s estimates;
	•		Levitt’s ability to realize the expected benefits of its expanded platform organizational, infrastructure and growth initiatives and strategic objectives;
	•		environmental factors, the impact of governmental regulations and requirements (including delays in obtaining necessary permits and approvals as a result of the reallocation of government resources based on hurricane related issues in the areas in which Levitt operates);
	•		Levitt’s ability to timely deliver homes from backlog and successfully manage growth; and
	•		Levitt’s success at managing the risks involved in the foregoing.

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

ITEM 1. BUSINESS

The Company

          We are a holding company that invests in and acquires businesses in diverse industries. Our ownership interests include direct and indirect interests in businesses in a variety of sectors, including consumer and commercial banking, brokerage and investment banking, home building and master-planned community development, time-share and vacation ownership, an Asian themed restaurant chain and various real estate and venture capital investments. Our principal holdings consist of direct controlling interests in BankAtlantic Bancorp, Inc. (“BankAtlantic Bancorp”) and Levitt Corporation (“Levitt”) and our primary activities currently relate to considering new investment and the operations of our two largest current investments, BankAtlantic Bancorp and Levitt. We own a direct investment in the convertible preferred stock of Benihana, one of the oldest Asian themed restaurant chains in the United States.

          BFC itself has no operations other than activities relating to identifying, analyzing and in appropriate cases, acquiring new investments, as well as the monitoring of existing investments. BFC has no independent sources of cash-flow from operations except to the extent dividends, management fees and similar cash payments are made to BFC by its subsidiaries and investment holdings. Other than direct reimbursement of actual expenditures made on behalf of subsidiaries, BFC does not currently collect management or other fees and the dividends paid to BFC do not currently cover BFC’s ongoing operating expenses. Therefore, BFC’ stand-alone activities currently generate a loss.

          The Company’s website address is www.bfcfinancial.com. The Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports are available free of charge through our website, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The Company’s Internet website and the information contained on or connected to it are not incorporated into this Annual Report on Form 10-K.

          We have controlled more than 50% of the vote of BankAtlantic Bancorp since 2000, and accordingly, BankAtlantic Bancorp is consolidated in our financial statements instead of carried on the equity basis. We own 8,329,236 shares of BankAtlantic Bancorp Class A Common Stock and 4,876,124 shares of BankAtlantic Bancorp Class B Common Stock. BankAtlantic Bancorp’s Class A shareholders are entitled to one vote per share, which in the aggregate represent 53% of the combined voting power of BankAtlantic Bancorp’s Class A Common Stock and BankAtlantic Bancorp’s Class B Common Stock. BankAtlantic Bancorp’s Class B Common Stock, all of which is owned by the Company, represents the remaining 47% of the combined vote. 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.

          Through December 31, 2003, Levitt was a wholly-owned subsidiary of BankAtlantic Bancorp. On December 31, 2003, Levitt was spun off to the shareholders of BankAtlantic Bancorp by declaring a stock dividend of all of BankAtlantic Bancorp’s shares of Levitt. As a consequence of the spin-off, our ownership position in Levitt on December 31, 2003 was initially identical to our ownership position in BankAtlantic Bancorp, including our control of more than 50% of the vote of these companies. Subsequently, Levitt completed a public offering and as a result our ownership position in Levitt was reduced. At December 31, 2005, we owned 16.6% of its total equity and a 52.9% voting interest. Accordingly, Levitt continues to be consolidated in the Company’s financial statements.

          BFC’s ownership in BankAtlantic Bancorp and Levitt as of December 31, 2005 was as follows:

										Percent
		Shares				Percent of				of
		Owned				Ownership				Vote
BankAtlantic Bancorp
Class A Common Stock			8,329,236				14.90	%			7.90	%
Class B Common Stock			4,876,124				100.00	%			47.00	%
Total			13,205,360				21.71	%			54.90	%
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	%

          We report our results of operations through three segments: BFC Activities, Financial Services and Homebuilding & Real Estate Development.

BFC Activities Segment

          BFC Activities includes all of the operations and all of the assets owned by BFC other than BankAtlantic Bancorp and its subsidiaries and Levitt and its subsidiaries. BFC owns and manages real estate and the unsold land at Center Port, an industrial office park developed in Florida. BFC also holds mortgage notes receivable that were received in connection with the sale of properties previously owned. The BFC Activities segment also includes the operations of a wholly-owned subsidiary, Cypress Creek Capital, corporate overhead and interest expense. Cypress Creek Capital is a real estate investment banking and investment company that provides equity capital, debt placement and a broad array of advisory services for developers that are active in the residential and commercial markets. Commencing in 2006, BFC will provide certain “shared services’ such as investor relations, human resources, risk management and executive office administration to its subsidiaries and will be reimbursed for such services by its subsidiaries. BFC’s interest expense is related to indebtedness and other borrowings, primarily utilized for the acquisition of real estate. BFC’s equity investments include its investment in Series B Convertible Preferred Stock of Benihana and securities in the technology sector owned by partnerships that are included in the consolidated financial statements of BFC because BFC serves as general partner of those partnerships.

          Benihana

          On July 1, 2004, the Company purchased 400,000 shares and on August 4, 2005, the Company purchased an additional 400,000 shares of Series B Convertible Preferred Stock (“Convertible Preferred Stock”) pursuant to an agreement entered into with Benihana Inc. in June 2004. The agreement provided for the purchase of an aggregate of 800,000 shares of Convertible Preferred Stock for $25.00 per share. The convertible preferred stock is convertible into Benihana Common the Stock at a conversion price of $19.00 per share, subject to adjustment from time to time upon certain defined events. We are entitled to receive cumulative quarterly dividends on the convertible preferred stock at an annual rate equal to $1.25 per share, payable on the last day of each calendar quarter commencing September 30, 2004. Based upon Benihana’s currently outstanding capital stock, the Convertible Preferred Stock if converted would represent approximately 23% of Benihana voting and 10% of Benihana economic interest. The Company’s investment in Benihana’s Convertible Preferred Stock is classified as investment securities and is carried at historical cost.

          Benihana has operated teppanyaki-style dining restaurants in the United States for 40 years and 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.

Employees

          Management believes that its relations with its employees are satisfactory. The Company currently maintains employee benefit programs that are considered by management to be generally competitive with programs provided by other major employers in its markets.

The number of employees at the indicated dates was:

		December 31, 2005								December 31, 2004								December 31, 2003
		Full-time				Part-time				Full-time				Part-time				Full-time				Part-time
BFC			20				1				16				1				7				1
BankAtlantic Bancorp			2,921				423				2,492				325				2,312				235
Levitt			639				22				526				32				353				34
Total			3,580				452				3,034				358				2,672				270

Of the 21 BFC employees at December 31, 2005, nine are employed by Cypress Creek Capital and 12 are employed in the Company’s administrative and business development offices. On January 1, 2006, 20 employees of BankAtlantic Bancorp were transferred to BFC to staff BFC’s shared services operations in the areas of investor relations, human resources, risk management and executive office administration. These employees will be utilized by the affiliated entities and their costs will be allocated to the companies based upon their usage of services.

Financial Services Segment

          Our Financial Services segment consists of BankAtlantic Bancorp, which is consolidated with BFC Financial Corporation. The only assets available to BFC Financial Corporation from BankAtlantic Bancorp are dividends when and if declared and paid by BankAtlantic Bancorp. BankAtlantic Bancorp is a separate public company and its management prepared the following Item 1. Business regarding BankAtlantic Bancorp which was included in BankAtlantic Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2005 filed with the Securities and Exchange Commission. Accordingly, references to the “Company”, “we”, “us” , “our” or “Parent Company” in the following discussion under the caption “Financial Services” are references to BankAtlantic Bancorp and its subsidiaries, and are not references to BFC Financial Corporation.

“The Company

          We are a Florida-based financial services holding company and own BankAtlantic and RB Holdings, Inc. (“Ryan Beck”), the parent company of Ryan Beck & Co., Inc. Through these subsidiaries, we provide a full line of products and services encompassing consumer and commercial banking, wealth management and investment banking. We report our operations through three business segments consisting of BankAtlantic, Ryan Beck and BankAtlantic Bancorp, the parent company. Detailed operating financial information by segment is included in Note 24 to the Company’s consolidated financial statements.

          Our Internet website address is www.bankatlanticbancorp.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports are available free of charge through our website, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. Our Internet website and the information contained in or connected to our website are not incorporated into this Annual Report on Form 10-K.

          As of December 31, 2005, we had total consolidated assets of approximately $6.5 billion and stockholders’ equity of approximately $516 million.

BankAtlantic

          BankAtlantic is a federally-chartered, federally-insured savings bank organized in 1952. It is one of the largest financial institutions headquartered in Florida and provides traditional retail banking services and a wide range of commercial banking products and related financial services through 78 branches or “stores” in southeast Florida and the Tampa Bay area, primarily in the metropolitan areas surrounding the cities of Miami, Ft. Lauderdale, West Palm Beach and Tampa, which are located in the heavily-populated Florida counties of Miami-Dade, Broward, Palm Beach, Hillsborough and Pinellas.

          BankAtlantic’s primary business activities include:

	•		attracting checking and savings deposits from individuals and business customers,
	•		originating commercial real estate, business, consumer and small business loans,
	•		purchasing wholesale residential loans from third parties,
	•		investing in mortgage-backed securities, tax certificates and other securities.

          BankAtlantic’s business strategy focuses on the following key areas:

•

Continuing the “Florida’s Most Convenient Bank” Initiative. BankAtlantic began its “Florida’s Most Convenient Bank” initiative in 2002. This initiative includes offering free checking, seven-day banking, extended lobby hours, including some stores open from 7:30am until midnight, a 24-hour customer service center and other new products and services that are an integral part of BankAtlantic’s strategy to position itself as a customer-oriented bank and increase its low cost deposit accounts. BankAtlantic continues to implement marketing programs in its stores that include sales training programs, outbound telemarketing and incentive programs that reward banking personnel who produce profitable business.

	•		Increasing Low Cost Deposits. BankAtlantic’s low cost deposits are comprised of demand deposit accounts, NOW checking accounts and savings accounts. From December 31, 2001, when the initiative was launched, to December 31, 2005, the balances of BankAtlantic’s low cost deposits increased 250% from approximately $600 million to approximately $2.1 billion. These low cost deposits represented 56% of BankAtlantic’s total deposits at December 31, 2005, compared to 26% of total deposits at December 31, 2001. BankAtlantic intends to continue to seek to increase its low cost deposits through strong sales and marketing efforts, new product offerings, commitment to customer service and the “Florida’s Most Convenient Bank” initiative.
	•		Growing the Loan Portfolio while Concentrating on Core Lending Competencies. BankAtlantic intends to grow its core commercial and retail banking business with an emphasis on generating commercial real estate, small business, and consumer loans. BankAtlantic attributes its success in these lending areas to several key factors, including disciplined underwriting and expertise in its markets. Loan balances and total earning assets are down from mid -2005 resulting from our strategy of limiting earning asset growth. The decline in loans is the result of a decision to delay purchases of residential real estate mortgages in light of the relative flatness of the yield curve and the run-off in the high rise condominium portfolio where we decided to reduce our exposure. BankAtlantic intends to continue this strategy of limiting earning asset growth in a flat to inverted yield curve environment. BankAtlantic intends to continue to limit activities in non-core lending areas, such as credit card, international, non-mortgage syndication and indirect lending.
	•		Expanding the Retail Network. BankAtlantic intends to grow its retail network both internally, through a branding initiative and de novo expansion, and externally through acquisitions which are consistent with BankAtlantic’s growth strategy. BankAtlantic generally seeks to expand into relatively fast growing and high deposit level markets within Florida. We anticipate opening approximately 14 stores in 2006 while completing the renovation of the interior of all existing stores to provide a consistent design.
	•		Maintaining its Strong Credit Culture. BankAtlantic believes it has put in place stringent underwriting standards and has developed and instituted credit training programs for its banking officers which emphasize underwriting and credit analysis. It has also developed systems and programs which it believes will enable it to offer sophisticated products and services without exposing BankAtlantic to unnecessary credit risk.

          BankAtlantic offers a number of lending products to its customers. Its primary lending products include commercial real estate loans, commercial business loans, standby letters of credit and commitments, consumer loans, small business loans and residential loans.

          Commercial Real Estate: BankAtlantic provides commercial real estate loans for the acquisition, development and construction of various property types, as well as the refinancing and acquisition of existing income-producing properties. These loans are primarily secured by property located in Florida. Commercial real estate loans are originated in amounts based upon the appraised value of the collateral or estimated cost that generally have a loan to value ratio of less than 80%, and generally require that one or more of the principals of the borrowing entity guarantee these loans. Most of these loans have variable interest rates and are indexed to either prime or LIBOR rates.

          Additionally, BankAtlantic purchases participations in commercial real estate loans that are originated by other financial institutions, typically known as “lead” banks. These transactions are underwritten as if we were originating the loan, applying all normal underwriting standards. The lead bank administers the loan and provides periodic reports on the progress of the project for which the loan was made. Major decisions regarding the loan are made by the participants on either a majority or unanimous basis. As a result, the lead bank generally can not significantly modify the loan without either majority or unanimous consent of the participants. BankAtlantic sometimes acts as a lead bank and sells participations in its loans to other lenders. This reduces its exposure on projects and may be required in order to stay within the regulatory “loans to one borrower” limitations. These participations meet the contractual requirements necessary to constitute a sale of the loan as the agreements transfer the credit risk to the transferee; however, certain participations place limitations on the transferee’s ability to pledge or exchange the participation and give BankAtlantic the ability to repurchase the participation. As a consequence, certain participations are classified as secured borrowings for accounting purposes.

          Commercial Business: BankAtlantic makes commercial business loans generally to medium size companies located throughout Florida, but primarily in the South Florida and the Tampa Bay areas. It lends on both a secured and unsecured basis, although the majority of its loans are secured. Commercial business loans are typically secured by the accounts receivable, inventory, equipment, real estate, and/or general corporate assets of the borrowers. Commercial business loans generally have variable interest rates that are prime or LIBOR-based. These loans typically are originated for terms ranging from one to five years.

          Standby Letters of Credit and Commitments: Standby letters of credit are conditional commitments issued by BankAtlantic to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is the same as extending loans to customers. BankAtlantic may hold certificates of deposit, liens on corporate assets and liens on residential and commercial property as collateral for letters of credit. BankAtlantic issues commitments for commercial real estate and commercial business loans.

          Consumer: Consumer loans are primarily loans to individuals originated through BankAtlantic’s retail network and sales force. The majority of its originations are home equity lines of credit secured by a first or second mortgage on the primary residence of the borrower. Home equity lines of credit have prime-based interest rates and generally mature in 15 years. All other consumer loans generally have fixed interest rates with terms ranging from one to five years.

          Small Business: BankAtlantic makes small business loans to companies located primarily in South Florida, along the Treasure Coast of East Florida and in the Tampa Bay area. Small business loans are primarily originated on a secured basis and do not exceed $1.0 million for non-real estate secured loans and $1.5 million for real estate secured loans. These loans are originated with maturities ranging primarily from one to three years or upon demand; however, loans collateralized by real estate could have terms of up to fifteen years. Lines of credit extended to small businesses are due upon demand. Small business loans typically have either fixed or variable prime-based interest rates.

          Residential: BankAtlantic purchases residential loans in the secondary markets that have been originated by other institutions. These loans, which are serviced by independent servicers, are secured by properties located throughout the United States. When BankAtlantic purchases residential loans, it evaluates the originator’s underwriting of the loans and, for most individual loans, performs confirming credit analysis. Residential loans are typically purchased in bulk and are generally non-conforming loans due to the size and characteristics of the individual loans. BankAtlantic sets guidelines for loan purchases relating to loan amount, type of property, state of residence, loan-to-value ratios, the borrower’s sources of funds, appraised amounts and loan documentation. BankAtlantic purchases interest-only loans originated to the most credit worthy borrowers with loan-to-value ratios within agency guidelines. BankAtlantic does not purchase either “sub-prime” (lower credit quality loans) or negative amortization loans.

          BankAtlantic originates residential loans to customers that are then sold on a servicing released basis to a correspondent. It also originates certain residential loans, which are primarily made to “low to moderate income” borrowers in accordance with requirements of the Community Reinvestment Act. The underwriting of these loans generally follows government agency guidelines with independent appraisers typically performing on-site inspections and valuations of the collateral.

          The composition of the loan portfolio was (in millions):

		As of December 31,
		2005								2004								2003								2002								2001
		Amount				Pct				Amount				Pct				Amount				Pct				Amount				Pct				Amount				Pct
Loans receivable:
Real estate loans:
Residential		$	2,043				44.20				2,066				45.35				1,344				37.00				1,378				40.30				1,112				39.76	%
Home Equity			514				11.12				457				10.03				334				9.19				262				7.65				167				5.96
Construction and development			1,340				28.99				1,454				31.92				1,345				37.05				1,266				37.00				1,144				40.93
Commercial			1,060				22.93				1,075				23.61				1,064				29.30				755				22.09				522				18.67
Small business			152				3.29				124				2.72				108				2.97				94				2.76				36				1.28
Loans to Levitt Corporation			—				0.00				9				0.19				18				0.50				—				—				—				—
Other loans:
Commercial business			87				1.88				85				1.88				81				2.22				82				2.40				76				2.72
Small business — non-mortgage			83				1.80				67				1.46				52				1.43				49				1.45				34				1.23
Due from foreign banks			—				0.00				—				0.00				—				—				—				—				1				0.05
Consumer			27				0.59				18				0.41				22				0.60				25				0.73				26				0.92
Residential loans held for sale			3				0.07				5				0.10				2				0.06				—				—				5				0.17
Discontinued loan products			1				0.02				8				0.18				35				0.98				71				2.08				153				5.48
Total			5,310				114.89				5,368				117.85				4,405				121.30				3,982				116.46				3,276				117.17
Adjustments:
Undisbursed portion of loans in process			649				14.04				768				16.86				728				20.05				512				14.97				434				15.53
Unearned discounts (premiums)			(2	)			-0.04				(1	)			(0.02	)			—				(0.01	)			3				0.09				1				0.05
Allowance for loan losses			41				0.89				46				1.01				46				1.26				48				1.40				45				1.59
Total loans receivable, net		$	4,622				100.00				4,555				100.00				3,631				100.00				3,419				100.00				2,796				100.00	%

          In addition to its lending activities, BankAtlantic also invests in securities as described below:

          Securities Available for Sale: BankAtlantic invests in securities available for sale, consisting of investments in obligations of the U.S. government or its agencies, such as mortgage-backed securities and real estate mortgage investment conduits (REMICs). Also included in securities available for sale are tax exempt municipal bonds. The available for sale securities portfolio serves as a source of liquidity while at the same time providing a means to moderate the effects of interest rate changes. The decision to purchase and sell securities is based upon a current assessment of the economy, the interest rate environment and our liquidity requirements.

          Investment Securities and Tax Certificates: BankAtlantic’s portfolio of investment securities held to maturity at December 31, 2005 consisted of tax exempt municipal bonds and tax certificates. Tax certificates are evidences of tax obligations that are sold through auctions or bulk sales by various state and local taxing authorities on an annual basis. The tax obligation arises when the property owner fails to timely pay the real estate taxes on the property. Tax certificates represent a priority lien against the real property for the delinquent real estate taxes. The minimum repayment to satisfy the lien is the certificate amount plus the interest accrued through the redemption date, plus applicable penalties, fees and costs. Tax certificates have no payment schedule or stated maturity. If the certificate holder does not file for the deed within established time frames, the certificate may become null and void. BankAtlantic’s experience with this type of investment has been favorable because the rates earned are generally higher than many alternative investments and substantial repayments typically occur over a one-year period.

          The composition, yields and maturities of BankAtlantic’s securities available for sale and investment securities and tax certificates were as follows (dollars in thousands):

		U.S.																Corporate
		Treasury												Mortgage-				Bond								Weighted
		and				Tax				Tax-Exempt				Backed				and								Average
		Agencies				Certificates				Securities				Securities				Other				Total				Yield
December 31, 2005
Maturity: (1)
One year or less		$	—			$	163,726			$	—			$	—			$	100			$	163,826				7.91	%
After one through five years			1,000				—				8,161				79,665				485				89,311				4.33
After five through ten years			—				—				121,072				508				—				121,580				4.09
After ten years			—				—				259,333				301,367				—				560,700				5.20
Fair values (2)		$	1,000			$	163,726			$	388,566			$	381,540			$	585			$	935,417				5.45	%
Amortized cost (2)		$	998			$	163,726			$	392,130			$	387,178			$	585			$	944,617				5.20	%
Weighted average yield based on fair values			2.11	%			7.91	%			5.15	%			4.71	%			3.83	%			5.45	%
Weighted average maturity (yrs)			4.2				1.0				11.93				20.05				3.04				13.34
December 31, 2004
Fair values (2)		$	—			$	166,731			$	332,605			$	500,517			$	585			$	1,000,438				5.37	%
Amortized cost (2)		$	—			$	166,731			$	332,024			$	498,504			$	585			$	997,844				5.50	%
December 31, 2003
Fair values (2)		$	—			$	190,906			$	—			$	338,751			$	585			$	530,242				5.90	%
Amortized cost (2)		$	—			$	190,906			$	—			$	332,898			$	585			$	524,389				6.40	%

          A summary of the amortized cost and gross unrealized appreciation or depreciation of estimated fair value of tax certificates and investment securities and available for sale securities follows (in thousands):

		December 31, 2005 (1)
						Gross				Gross
		Amortized				Unrealized				Unrealized				Estimated
		Cost				Appreciation				Depreciation				Fair Value
Tax certificates and investment securities:
Tax certificates:
Cost equals market		$	163,726			$	—			$	—			$	163,726
Investment securities:
Cost equals market			6,183				—				—				6,183
Market over cost			57,932				313				—				58,245
Cost over market			129,803				—				1,428				128,375
Securities available for sale:
Investment securities:
Cost equals market			585				—				—				585
Market over cost			46,327				327				—				46,654
Cost over market			152,883								2,774				150,109
Mortgage-backed securities :
Market over cost			74,215				1,547				—				75,762
Cost over market			312,963				—				7,185				305,778
Total		$	944,617			$	2,187			$	11,387			$	935,417

          BankAtlantic utilizes deposits, secured advances and other borrowed funds to fund its lending and other activities.

          Deposits: BankAtlantic offers checking and savings accounts to individuals and business customers. These include commercial demand deposit accounts, retail demand deposit accounts, savings accounts, money market accounts, certificates of deposit, various NOW accounts and IRA and Keogh retirement accounts. BankAtlantic also obtains deposits from brokers and municipalities. BankAtlantic solicits deposits from customers in its geographic market through advertising and relationship banking activities primarily conducted through its sales force and store network. BankAtlantic primarily solicits deposits through its “Florida’s Most Convenient Bank” initiatives, which include midnight hours at selected branches, free online banking and bill pay, 24/7 customer service center and the opening of all locations seven days a week as well as aggressive media advertising. Products such as Totally Free Checking, Totally Free Savings and Totally Free Online Banking and Billpay are the lead programs of its marketing strategy to obtain new customers. See note #7 to the “Notes to Consolidated Financial Statements” for more information regarding BankAtlantic’s deposit accounts.

          Federal Home Loan Bank (“FHLB”) Advances: BankAtlantic is a member of the FHLB and can obtain secured advances from the FHLB of Atlanta. These advances can be collateralized by a security lien against its residential loans, certain commercial loans and its securities. In addition, BankAtlantic must maintain certain levels of FHLB stock based upon outstanding advances. See note #8 to the “Notes to Consolidated Financial Statements” for more information regarding BankAtlantic’s FHLB Advances.

          Other Short-Term Borrowings: BankAtlantic’s short-term borrowings consist of securities sold under agreements to repurchase, federal funds and treasury tax and loan borrowings. Securities sold under agreements to repurchase include a sale of a portion of its current investment portfolio (usually mortgage-backed securities and REMICs) at a negotiated rate and an agreement 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 securities in its investment portfolio but are not insured by the FDIC. Federal funds borrowings occur under established facilities with various federally-insured banking institutions to purchase federal funds. We also have a borrowing facility with various federal agencies which may place funds with us at overnight rates. BankAtlantic uses these facilities on an overnight basis to assist in managing its cash flow requirements. These lines are subject to periodic review, may be terminated at any time by the issuer institution and are unsecured. BankAtlantic also has a facility with the Federal Reserve Bank of Atlanta for secured advances. These advances are collateralized by a security lien against its consumer loans. See note #9 to the “Notes to Consolidated Financial Statements” for more information regarding BankAtlantic’s short term borrowings.

          Secured borrowings: At December 31, 2005, BankAtlantic’s secured borrowings consisted of $138.3 million of commercial real estate loan participations that were legal loan sales but constrained the transferee from pledging or exchanging the participation and therefore were accounted for as secured borrowings.

          Other borrowings: At December 31, 2005, BankAtlantic’s other borrowings consisted of a $22.0 million floating rate subordinated debentures, a floating rate mortgage-backed bond with an outstanding balance of $9.0 million and $8.1 million of floating rate development notes associated with a real estate joint venture.

Ryan Beck

          Ryan Beck operates interdependent wealth management, investment banking and capital markets businesses which share the same corporate infrastructure. The approximately 400 financial consultants in the firm’s wealth management arm utilize the syndicate, trading and research capabilities imbedded in the firm’s capital markets and investment banking departments. Similarly, the firm’s investment banking clients benefit from the distribution capabilities of the firm’s wealth management and capital markets groups. The firm’s capital market business includes institutional customer activities and research and trading activities in equity, fixed income and municipal finance products.

          Ryan Beck is a full service broker-dealer headquartered in Florham Park, New Jersey. Ryan Beck operates on a nationwide basis through a network of 42 offices in 14 states. In addition to offering traditional wealth management products to individual investors, Ryan Beck is engaged in sector-oriented investment banking and capital markets activities.

          Ryan Beck intends to focus on the following key areas:

•

Investment Banking. Ryan Beck has a well established investment banking group primarily focused on financial institutions. Recently, Ryan Beck’s strategy has been to diversify its operations through the addition of investment bankers and capital markets expertise focused on other sectors, such as consumer products and services, real estate

investment trusts and business services. Ryan Beck’s investment banking activities include managing underwritten public offerings, serving as placement agent on institutional private financings and acting as an advisor on mergers and acquisitions.

•

Private Client Group. In April 2002, Ryan Beck acquired certain of the assets and assumed certain of the liabilities of Gruntal & Co., LLC. This transaction enabled Ryan Beck to significantly increase its private client group revenues. The table below shows Ryan Beck’s private client group statistics before the Gruntal transaction and at December 31, 2005.

		December 31, 2005				December 31, 2001
Financial Consultants			407				80
Customer Accounts			135,000				27,000
Customer Assets		$18.2 billion				$4.0 billion

•

Capital Markets. Ryan Beck has both equity and fixed income capital markets groups. Both groups incorporate trading, institutional sales and syndicate activities. Ryan Beck makes a market in over 500 equity securities, principally financial institution shares. Equity capital markets group also incorporates a research department with 13 publishing analysts covering 38 closed end funds and 178 companies in eight industry sectors.

          As a registered broker-dealer with the SEC, Ryan Beck operates on a fully-disclosed basis through its clearing firm, Pershing LLC. Clients consist primarily of:

	•		high net worth individuals,
	•		financial institutions,
	•		institutional clients,
	•		governmental and other issuers of non-taxable securities, and
	•		other corporate clients.

Parent Company

          The Parent Company (“Parent”) is comprised of the activities of the holding company. Its operations are limited and primarily include the financing of the capital needs of its subsidiaries and management of investments. The Parent also provides human resources, investor relations and executive management services to its subsidiaries and affiliates. The Parent obtains its funds from dividends from its subsidiaries, issuances of equity and debt securities, and returns on portfolio investments, as well as borrowings from unrelated financial institutions and amounts received from subsidiaries and affiliates for services provided. During 2005, the Parent also obtained funds from the repayment of notes receivable from Levitt Corporation, a subsidiary of the Parent that was spun-off to shareholders on December 31, 2003. The proceeds from these note receivable repayments were invested in tax exempt securities and managed equity portfolios. The Parent provides funds to its subsidiaries for capital, the financing of acquisitions and other general corporate purposes. The largest expense is interest expense on debt, and depending on interest rates, this expense could increase or decrease significantly as much of its debt is indexed to floating rates.

          A summary of the carrying value and gross unrealized appreciation or depreciation of estimated fair value of the Parent’s securities follows (in thousands):

		December 31, 2005
						Gross				Gross
		Carrying				Unrealized				Unrealized				Estimated
		Value				Appreciation				Depreciation				Fair Value
Securities available for sale:
Tax exempt securities		$	6,229			$	—			$	21			$	6,208
Equity securities			82,113				7,307				—				89,420
Investment securities:
Investment securities (1)			6,800				793				—				7,593
Total		$	95,142			$	8,100			$	21			$	103,221

										December 31, 2004
						Gross				Gross
		Carrying				Unrealized				Unrealized				Estimated
		Value				Appreciation				Depreciation				Fair Value
Securities available for sale:
Tax exempt securities		$	20,860			$				$	24			$	20,836
Equity securities			23,025				2,679				—				25,704
Investment securities:
Investment securities (1)			6,800				345				—				7,145
Total		$	50,685			$	3,024			$	24			$	53,685

Employees

          Management believes that its relations with its employees are satisfactory. The Company currently maintains comprehensive employee benefit programs that are considered by management to be generally competitive with programs provided by other major employers in its markets.

          The Company’s number of employees at the indicated dates were:

		December 31, 2005								December 31, 2004
		Full-				Part-				Full-				Part-
		Time				time				time				time
BankAtlantic Bancorp			18				—				7				—
BankAtlantic			1,882				390				1,507				286
Ryan Beck			1,021				33				985				39
Total			2,921				423				2,499				325

Competition

          The banking and financial services industry is very competitive. Legal and regulatory developments have made it easier for new and sometimes unregulated entities to compete with us. Consolidation among financial service providers has resulted in fewer very large national and regional banking and financial institutions holding a large accumulation of assets. These institutions generally have significantly greater resources, a wider geographic presence or greater accessibility than we have. As consolidation continues among large banks, we expect additional smaller institutions to try to exploit our market. Our primary method of competition is emphasis on customer service and convenience, including our Florida’s Most Convenient Bank initiatives.

          We face substantial competition for both loans and deposits. Competition for loans comes principally from other banks, savings institutions and other lenders. This competition could decrease the number and size of loans that we make and the interest rates and fees that we receive on these loans.

          We compete for deposits with banks, savings institutions and credit unions, as well as institutions offering uninsured investment alternatives, including money market funds and mutual funds. These competitors may offer higher interest rates than we do, which could decrease the deposits that we attract or require us to increase our rates to attract new deposits. Increased competition for deposits could increase our cost of funds and adversely affect our ability to generate the funds necessary for our lending operations.

          Ryan Beck is engaged in investment banking, securities brokerage and asset management activities, all of which are extremely competitive businesses. Competitors include all of the member organizations of the New York Stock Exchange and NASD, banks, insurance companies, investment companies and financial consultants. Like other firms, Ryan Beck’s business has been affected by consolidation within the financial services industry and the entry of non-traditional competitors, including banks and online financial services providers. The firm competes with other trading, investment banking, brokerage and financial advisory firms for clients, market share and personnel.

          Ryan Beck competes for individual and institutional clients on the strength of the range of products it offers, the quality of its services, its financial resources and fair pricing. The firm’s competitive position depends, to some extent, on existing economic conditions and government policies.

          The ability to attract, retain and motivate qualified employees for all areas of the firm’s business, including financial consultants, investment bankers, trading professionals and other personnel, affects Ryan Beck’s ability to compete effectively. Another critical element influencing Ryan Beck’s ability to compete is a strong infrastructure, including financial control, accounting and other data processing systems.

Regulation and Supervision

Holding Company

          We are a unitary savings and loan holding company within the meaning of the Home Owners’ Loan Act, as amended, or HOLA. As such, we are registered with the Office of Thrift Supervision, or OTS, and are subject to OTS regulations, examinations, supervision and reporting requirements. In addition, the OTS has enforcement authority over us. Among other things, this authority permits the OTS to restrict or prohibit activities that are determined to be a serious risk to the financial safety, soundness or stability of a subsidiary savings bank.

          HOLA prohibits a savings bank holding company, directly or indirectly, or through one or more subsidiaries, from:

	•		acquiring another savings institution or its holding company without prior written approval of the OTS;
	•		acquiring or retaining, with certain exceptions, more than 5% of a non-subsidiary savings institution, a non-subsidiary holding company, or a non-subsidiary company engaged in activities other than those permitted by HOLA; or
	•		acquiring or retaining control of a depository institution that is not insured by the FDIC.

          In evaluating an application by a holding company to acquire a savings institution, the OTS must consider the financial and managerial resources and future prospects of the company and savings institution involved, the effect of the acquisition on the risk to the insurance funds, the convenience and needs of the community and competitive factors.

          As a unitary savings and loan holding company, we generally are not restricted under existing laws as to the types of business activities in which we may engage, provided that BankAltantic continues to satisfy the Qualified Thrift Lender, or QTL, test. See “Regulation of Federal Savings Banks — QTL Test” for a discussion of the QTL requirements. If we were to make a non-supervisory acquisition of another savings institution or of a savings institution that meets the QTL test and is deemed to be a savings institution by the OTS and that will be held as a separate subsidiary, then we would become a multiple savings and loan holding company within the meaning of HOLA and would be subject to limitations on the types of business activities in which we can engage. HOLA limits the activities of a multiple savings institution holding company and its non-insured institution subsidiaries primarily to activities permissible for bank holding companies under Section 4(c) of the Bank Holding Company Act, subject to the prior approval of the OTS, and to other activities authorized by OTS regulation.

          Transactions between BankAtlantic, including any of BankAtlantic’s subsidiaries, and us or any of BankAtlantic’s affiliates, are subject to various conditions and limitations. See “Regulation of Federal Savings Banks — Transactions with Related Parties.” BankAtlantic must file a notice with the OTS prior to any declaration of the payment of any dividends or other capital distributions to us. See “Regulation of Federal Savings Banks — Limitation on Capital Distributions.”

BankAtlantic

          BankAtlantic is a federal savings association and is subject to extensive regulation, examination, and supervision by the OTS, as its chartering agency and primary regulator, and the FDIC, as its deposit insurer. BankAtlantic’s deposit accounts are insured up to applicable limits by the Bank Insurance Fund, or BIF, and the Savings Association Insurance Fund, SAIF, both of which are administered by the FDIC. BankAtlantic must file reports with the OTS and the FDIC concerning its activities and financial condition. Additionally, BankAtlantic must obtain regulatory approvals prior to entering into certain transactions, such as mergers with, or acquisitions of, other depository institutions and must submit applications or notices prior to forming certain types of subsidiaries or engaging in certain activities through its subsidiaries. The OTS and the FDIC conduct periodic examinations to assess BankAtlantic’s safety and soundness and compliance with various regulatory requirements. This regulation and supervision establishes a comprehensive framework of activities in

which a savings bank can engage and is intended primarily for the protection of the insurance fund and depositors. The OTS and the FDIC have significant discretion in connection with their supervisory and enforcement activities and examination policies. Any change in such applicable activities or policies, whether by the OTS, the FDIC or the Congress, could have a material adverse impact on us, BankAtlantic, and our operations.

          The following discussion is intended to be a summary of the material banking statutes and regulations applicable to BankAtlantic, and it does not purport to be a comprehensive description of such statutes and regulations, nor does it include every federal and state statute and regulation applicable to BankAtlantic.

Regulation of Federal Savings Banks

          Business Activities. BankAtlantic derives its lending and investment powers from HOLA and the regulations of the OTS thereunder. Under these laws and regulations, BankAtlantic may invest in:

	•		mortgage loans secured by residential and commercial real estate;
	•		commercial and consumer loans;
	•		certain types of debt securities; and
	•		certain other assets.

          BankAtlantic may also establish service corporations to engage in activities not otherwise permissible for the Bank, including certain real estate equity investments and securities and insurance brokerage. These investment powers are subject to limitations, including, among others, limitations that require debt securities acquired by BankAtlantic to meet certain rating criteria and that limit BankAtlantic’s aggregate investment in various types of loans to certain percentages of capital and/or assets.

          Loans to One Borrower. Under HOLA, savings banks are generally subject to the same limits on loans to one borrower as are imposed on national banks. Generally, under these limits, the total amount of loans and extensions of credit made by a savings bank to one borrower or related group of borrowers outstanding at one time and not fully secured by collateral may not exceed 15% of the savings bank’s unimpaired capital and unimpaired surplus. In addition to, and separate from, the 15% limitation, the total amount of loans and extensions of credit made by a savings bank to one borrower or related group of borrowers outstanding at one time and fully secured by readily-marketable collateral may not exceed 10% of the savings bank’s unimpaired capital and unimpaired surplus. Readily-marketable collateral includes certain debt and equity securities and bullion, but generally does not include real estate. At December 31, 2005, BankAtlantic’s limit on loans to one borrower was approximately $80.6 million. At December 31, 2005, BankAtlantic’s largest aggregate amount of loans to one borrower was approximately $52.1 million and the second largest borrower had an aggregate balance of approximately $51.4 million.

          QTL Test. HOLA requires a savings bank to meet a QTL test by maintaining at least 65% of its “portfolio assets” in certain “qualified thrift investments” on a monthly average basis in at least nine months out of every twelve months. A savings bank that fails the QTL test must either operate under certain restrictions on its activities or convert to a bank charter. At December 31, 2005, BankAtlantic maintained approximately 74% of its portfolio assets in qualified thrift investments. BankAtlantic had also satisfied the QTL test in each of the eleven months prior to December 2005 and, therefore, was a QTL.

          Capital Requirements. The OTS regulations require savings banks to meet three minimum capital standards:

	•		a tangible capital requirement for savings banks to have tangible capital in an amount equal to at least 1.5% of adjusted total assets;
	•		a leverage ratio requirement:

	o		for savings banks assigned the highest composite rating of 1, to have core capital in an amount equal to at least 3% of adjusted total assets; or
	o		for savings banks assigned any other composite rating, to have core capital in an amount equal to at least 4% of adjusted total assets, or a higher percentage if warranted by the particular circumstances or risk profile of the savings bank; and

•

a risk-based capital requirement for savings banks to have capital in an amount equal to at least 8% of risk-weighted assets.

          In determining the amount of risk-weighted assets for purposes of the risk-based capital requirement, a savings bank must compute its risk-based assets by multiplying its assets and certain off-balance sheet items by risk-weights assigned by

16

the OTS capital regulations. The OTS monitors the interest rate risk management of individual institutions. The OTS may impose an individual minimum capital requirement on institutions that exhibit a high degree of interest rate risk.

          At December 31, 2005, BankAtlantic exceeded all applicable regulatory capital requirements. See note #15 to the “Notes to the Consolidated Financial Statements” for actual capital amounts and ratios.

          There currently are no regulatory capital requirements directly applicable to us as a unitary savings and loan holding company apart from the regulatory capital requirements for savings banks that are applicable to BankAtlantic.

          Limitation on Capital Distributions. The OTS regulations impose limitations upon certain capital distributions by savings banks, such as certain cash dividends, payments to repurchase or otherwise acquire its shares, payments to shareholders of another institution in a cash-out merger and other distributions charged against capital.

          The OTS regulates all capital distributions by BankAtlantic directly or indirectly to us, including dividend payments. BankAtlantic currently must file a notice with the OTS at least 30 days prior to each capital distribution. However, if the total amount of all of BankAtlantic’s capital distributions (including any proposed capital distribution) for the applicable calendar year exceeds BankAtlantic’s net income for that year-to-date period plus BankAtlantic’s retained net income for the preceding two years, then BankAtlantic must file an application to receive the approval of the OTS for a proposed capital distribution.

          BankAtlantic may not pay dividends to us if, after paying those dividends, it would fail to meet the required minimum levels under risk-based capital guidelines and the minimum leverage and tangible capital ratio requirements or the OTS notified BankAtlantic that it was in need of more than normal supervision. Under the Federal Deposit Insurance Act, or FDIA, an insured depository institution such as BankAtlantic is prohibited from making capital distributions, including the payment of dividends, if, after making such distribution, the institution would become “undercapitalized.” Payment of dividends by BankAtlantic also may be restricted at any time at the discretion of the appropriate regulator if it deems the payment to constitute an unsafe and unsound banking practice.

          Liquidity. BankAtlantic is required to maintain sufficient liquidity to ensure its safe and sound operation, in accordance with OTS regulations.

          Assessments. The OTS charges assessments to recover the costs of examining savings banks and their affiliates, processing applications and other filings, and covering direct and indirect expenses in regulating savings banks and their affiliates. These assessments are based on three components:

	•		the size of the savings bank, on which the basic assessment is based;
	•		the savings bank’s supervisory condition, which results in an additional assessment based on a percentage of the basic assessment for any savings bank with a composite rating of 3, 4 or 5 in its most recent safety and soundness examination; and
	•		the complexity of the savings bank’s operations, which results in an additional assessment based on a percentage of the basic assessment for any savings bank that has more than $1 billion in trust assets that it administers, loans that it services for others or assets covered by its recourse obligations or direct credit substitutes.

          These assessments are paid semi-annually. BankAtlantic’s assessment expense during the year ended December 31, 2005 was approximately $897,000.

          Branching. Subject to certain limitations, HOLA and the OTS regulations permit federally chartered savings banks to establish branches in any state or territory of the United States.

          Community Reinvestment. Under the Community Reinvestment Act, or CRA, a savings institution has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA requires the OTS to assess the institution’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by the institution. This assessment focuses on three tests:

	•		a lending test, to evaluate the institution’s record of making loans in its designated assessment areas;
	•		an investment test, to evaluate the institution’s record of investing in community development projects, affordable housing, and programs benefiting low or moderate income individuals and businesses; and
	•		a service test, to evaluate the institution’s delivery of banking services throughout its designated assessment area.

          The OTS assigns institutions a rating of “outstanding,” “satisfactory,” “needs to improve,” or “substantial non-compliance.” The CRA requires all institutions to disclose their CRA ratings to the public. BankAtlantic received a “Satisfactory” rating in its most recent CRA evaluation. Regulations also require all institutions to disclose certain agreements that are in fulfillment of the CRA. BankAtlantic has no such agreements in place at this time.

          Transactions with Related Parties. BankAtlantic’s authority to engage in transactions with its “affiliates” is limited by Sections 23A and 23B of the Federal Reserve Act, or FRA, by Regulation W of the Federal Reserve Board, or FRB, implementing Sections 23A and 23B of the FRA, and by OTS regulations. The applicable OTS regulations for savings banks regarding transactions with affiliates generally conform to the requirements of Regulation W, which is applicable to national banks. In general, an affiliate of a savings bank is any company that controls, is controlled by, or is under common control with, the savings bank, other than the savings bank’s subsidiaries. For instance, we are deemed an affiliate of BankAtlantic under these regulations.

          Generally, Section 23A limits the extent to which a savings bank may engage in “covered transactions” with any one affiliate to an amount equal to 10% of the savings bank’s capital stock and surplus, and contains an aggregate limit on all such transactions with all affiliates to an amount equal to 20% of the savings bank’s capital stock and surplus. A covered transaction generally includes:

	•		making or renewing a loan or other extension of credit to an affiliate;
	•		purchasing, or investing in, a security issued by an affiliate;
	•		purchasing an asset from an affiliate;
	•		accepting a security issued by an affiliate as collateral for a loan or other extension of credit to any person or entity; and
	•		issuing a guarantee, acceptance or letter of credit on behalf of an affiliate.

          Section 23A also establishes specific collateral requirements for loans or extensions of credit to, or guarantees, or acceptances of letters of credit issued on behalf of, an affiliate. Section 23B requires covered transactions and certain other transactions to be on terms and under circumstances, including credit standards, that are substantially the same, or at least as favorable to the savings bank, as those prevailing at the time for transactions with or involving non-affiliates. Additionally, under the OTS regulations, a savings bank is prohibited from:

	•		making a loan or other extension of credit to an affiliate that is engaged in any non-bank holding company activity; and
	•		purchasing, or investing in, securities issued by an affiliate that is not a subsidiary.

          Sections 22(g) and 22(h) of the FRA, Regulation O of the FRB, Section 402 of the Sarbanes-Oxley Act of 2002, and OTS regulations impose limitations on loans and extensions of credit from BankAtlantic and us to its and our executive officers, directors, controlling shareholders and their related interests. The applicable OTS regulations for savings banks regarding loans by a savings bank to its executive officers, directors and principal, shareholders generally conform to the requirements of Regulation O, which is applicable to national banks.

          Enforcement. Under the FDIA, the OTS has primary enforcement responsibility over savings banks and has the authority to bring enforcement action against all “institution-affiliated parties,” including any controlling stockholder or any shareholder, attorney, appraiser and accountant who knowingly or recklessly participates in any violation of applicable law or regulation, breach of fiduciary duty, or certain other wrongful actions that have, or are likely to have, a significant adverse effect on an insured savings bank or cause it more than minimal loss. In addition, the FDIC has back-up authority to take enforcement action for unsafe and unsound practices. Formal enforcement action can include the issuance of a capital directive, cease and desist order, removal of officers and/or directors, institution of proceedings for receivership or conservatorship and termination of deposit insurance.

          Examination. A savings institution must demonstrate to the OTS its ability to manage its compliance responsibilities by establishing an effective and comprehensive oversight and monitoring program. The degree of compliance oversight and monitoring by the institution’s management determines the scope and intensity of the OTS’ examinations of the institution. Institutions with significant management oversight and monitoring of compliance will receive less intrusive OTS examinations than institutions with less oversight.

          Standards for Safety and Soundness. Pursuant to the requirements of the FDIA, the OTS, together with the other federal bank regulatory agencies, has adopted the Interagency Guidelines Prescribing Standards for Safety and Soundness, or

the Guidelines. The Guidelines establish general safety and soundness standards relating to internal controls, information and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, asset quality, earnings and compensation, fees and benefits. In general, the Guidelines require, among other things, appropriate systems and practices to identify and manage the risks and exposures specified in the Guidelines. If the OTS determines that a savings bank fails to meet any standard established by the Guidelines, then the OTS may require the savings bank to submit to the OTS an acceptable plan to achieve compliance. If a savings bank fails to comply, the OTS may seek an enforcement order in judicial proceedings and impose civil monetary penalties.

          Real Estate Lending Standards. The OTS and the other federal banking agencies adopted regulations to prescribe standards for extensions of credit that are secured by real estate or are made for the purpose of financing the construction of improvements on real estate. The OTS regulations require each savings bank to establish and maintain written internal real estate lending standards that are consistent with OTS guidelines and with safe and sound banking practices and which are appropriate to the size of the savings bank and the nature and scope of its real estate lending activities.

          Prompt Corrective Regulatory Action. Under the OTS Prompt Corrective Action Regulations, the OTS is required to take certain, and is authorized to take other, supervisory actions against undercapitalized savings banks, such as requiring compliance with a capital restoration plan, restricting asset growth, acquisitions, branching and new lines of business and, in extreme cases, appointment of a receiver or conservator. The severity of the action required or authorized to be taken increases as a savings bank’s capital deteriorates. Savings banks are classified into five categories of capitalization as “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” Generally, a savings bank is categorized as “well capitalized” if:

	•		its total capital is at least 10% of its risk-weighted assets;
	•		its core capital is at least 6% of its risk-weighted assets;
	•		its core capital is at least 5% of its adjusted total assets; and
	•		it is not subject to any written agreement, order, capital directive or prompt corrective action directive issued by the OTS, or certain regulations, to meet or maintain a specific capital level for any capital measure.

The most recent examination from the OTS categorized BankAtlantic as “Well Capitalized.”

          Insurance of Deposit Accounts. Savings banks are subject to a risk-based assessment system for determining the deposit insurance assessments to be paid by them. The FDIC assigns each savings institution to one of three capital categories – “well capitalized,” “adequately capitalized,” or “undercapitalized” – based on the savings institution’s financial information as of its most recent quarterly financial report filed with the applicable bank regulatory agency prior to the assessment period. The FDIC also assigns each savings institution to one of three supervisory subcategories within each capital category based upon a supervisory evaluation provided to the FDIC by the savings institution’s primary federal regulator and information that the FDIC determines to be relevant to the savings institution’s financial condition and the risk posed to the deposit insurance funds. A savings institution’s deposit insurance assessment rate depends on the capital category and supervisory subcategory to which it is assigned. Insurance assessment rates currently range from 0.00% of deposits for a savings institution in the highest category (i.e., well capitalized and financially sound, with no more than a few minor weaknesses) to 0.27% of deposits for a savings institution in the lowest category (i.e., undercapitalized and substantial supervisory concern). At December 31, 2005, BankAtlantic was assigned to the “Well Capitalized and Financially Sound” capital category. The FDIC is authorized to raise the assessment rates in certain circumstances, which would affect savings institutions in all risk categories. The FDIC has exercised this authority several times in the past and could raise rates in the future. Increases in deposit insurance premiums could have an adverse effect on our earnings.

          The Deposit Insurance Funds Act of 1996 recapitalized the SAIF and expanded the assessment base across all BIF- and SAIF-savings institutions for the payments of Financing Corporation, or FICO, bonds. FICO bonds were sold by the federal government in order to finance the recapitalization of the now defunct Federal Savings and Loan Insurance Corporation.

          Privacy and Security Protection. BankAtlantic is subject to the OTS regulations implementing the privacy and security protection provisions of the Gramm-Leach-Bliley Act, or GLBA. These regulations require a savings bank to disclose to its customers and consumers its policy and practices with respect to the privacy, and sharing with nonaffiliated third parties, of its customers and consumers’ “nonpublic personal information.” Additionally, in certain instances, BankAtlantic is required to provide its customers and consumers with the ability to “opt-out” of having BankAtlantic share their nonpublic personal information with nonaffiliated third parties. These regulations also require savings banks to maintain policies and procedures to safeguard their customers and consumers’ nonpublic personal information. BankAtlantic has policies and procedures designed to comply with GLBA and applicable privacy and security regulations.

          Insurance Activities. BankAtlantic is generally permitted to engage in certain insurance activities through its subsidiaries. The OTS regulations implemented pursuant to GLBA prohibit, among other things, depository institutions from conditioning the extension of credit to individuals upon either the purchase of an insurance product or annuity or an agreement by the consumer not to purchase an insurance product or annuity from an entity that is not affiliated with the depository institution. The regulations also require prior disclosure of this prohibition to potential insurance product or annuity customers.

          Federal Home Loan Bank System. BankAtlantic is a member of the Federal Home Loan Bank, or FHLB, of Atlanta, which is one of the twelve regional FHLB’s composing the FHLB system. Each FHLB provides a central credit facility primarily for its member institutions as well as other entities involved in home mortgage lending. Any advances from a FHLB must be secured by specified types of collateral, and all long-term advances may be obtained only for the purpose of providing funds for residential housing finance. As a member of the FHLB of Atlanta, BankAtlantic is required to acquire and hold shares of capital stock in the FHLB. BankAtlantic was in compliance with this requirement with an investment in FHLB stock at December 31, 2005 of approximately $69.9 million. During the year ended December 31, 2005, the FHLB of Atlanta paid dividends of approximately $3.3 million on the capital stock held by BankAtlantic. If dividends were reduced or interest on future FHLB advances increased, BankAtlantic’s net interest income would likely also be reduced.

          Federal Reserve System. BankAtlantic is subject to provisions of the FRA and the FRB’s regulations, pursuant to which depository institutions may be required to maintain non-interest-earning reserves against their deposit accounts and certain other liabilities. Currently, federal savings banks must maintain reserves against transaction accounts (primarily NOW and regular interest and non-interest bearing checking accounts). The FRB regulations establish the specific rates of reserves that must be maintained, which are subject to adjustment by the FRB. BankAtlantic is currently in compliance with those reserve requirements. The required reserves must be maintained in the form of vault cash, a non-interest-bearing account at a Federal Reserve Bank, or a pass-through account as defined by the FRB. The effect of this reserve requirement is to reduce interest-earning assets. FHLB system members are also authorized to borrow from the Federal Reserve “discount window,” but FRB regulations require such institutions to exhaust all FHLB sources before borrowing from a Federal Reserve Bank.

          Anti-Terrorism and Anti-Money Laundering Regulations. The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, or the USA PATRIOT Act, provides the federal government with additional powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements. By way of amendments to the Bank Secrecy Act, or BSA, the USA PATRIOT Act puts in place measures intended to encourage information sharing among bank regulatory and law enforcement agencies. In addition, certain provisions of the USA PATRIOT Act impose affirmative obligations on a broad range of financial institutions, including savings banks.

          Among other requirements, the USA PATRIOT Act and the related OTS regulations require savings banks to establish anti-money laundering programs that include, at a minimum:

	•		internal policies, procedures and controls designed to implement and maintain the savings bank’s compliance with all of the requirements of the USA PATRIOT Act, the BSA and related laws and regulations;
	•		systems and procedures for monitoring and reporting of suspicious transactions and activities;
	•		a designated compliance officer;
	•		employee training;
	•		an independent audit function to test the anti-money laundering program;
	•		procedures to verify the identity of each customer upon the opening of accounts; and
	•		heightened due diligence policies, procedures and controls applicable to certain foreign accounts and relationships.

          Additionally, the USA PATRIOT Act requires each financial institution to develop a customer identification program, or CIP, as part of its anti-money laundering program. The key components of the CIP are identification, verification, government list comparison, notice and record retention. The purpose of the CIP is to enable the financial institution to determine the true identity and anticipated account activity of each customer. To make this determination, among other things, the financial institution must collect certain information from customers at the time they enter into the customer relationship with the financial institution. This information must be verified within a reasonable time through documentary and non-documentary methods. Furthermore, all customers must be screened against any CIP-related government lists of known or suspected terrorists. In 2004, deficiencies were identified in BankAtlantic’s compliance with anti-terrorism and anti-money laundering laws and regulations (see “Management Discussion and Analysis of Results of Operation and Financial Condition – BankAtlantic Liquidity and Capital Resources”).

          Consumer Protection. BankAtlantic is subject to federal and state consumer protection statutes and regulations, including the Fair Credit Reporting Act, the Fair and Accurate Credit Transactions Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Truth in Lending Act, the Truth in Savings Act, the Real Estate Settlement Procedures Act and the Home Mortgage Disclosure Act. Among other things, these acts:

	•		require lenders to disclose credit terms in meaningful and consistent ways;
	•		require financial institutions to establish policies and procedures regarding identity theft and notify customers of certain information concerning their credit reporting;
	•		prohibit discrimination against an applicant in any consumer or business credit transaction;
	•		prohibit discrimination in housing-related lending activities;
	•		require certain lender banks to collect and report applicant and borrower data regarding loans for home purchase or improvement projects;
	•		require lenders to provide borrowers with information regarding the nature and cost of real estate settlements;
	•		prohibit certain lending practices and limit escrow account amounts with respect to real estate transactions; and
	•		prescribe penalties for violations of the requirements of consumer protection statutes and regulations.

Ryan Beck Regulation

          The securities industry in the United States is subject to extensive regulation under both federal and state laws. The SEC is the federal agency charged with administration of the federal securities laws. Much of the regulation of broker-dealers has been delegated to self-regulatory authorities, principally the NASD and, in the case of broker-dealers that are members of a securities exchange, the particular securities exchange. These self-regulatory organizations conduct periodic examinations of member broker-dealers in accordance with rules they have adopted and amended from time to time, subject to approval by the SEC.

          Securities firms are also subject to regulation by state securities commissions in those states in which they do business. As of December 31, 2005, Ryan Beck was registered as a broker-dealer in 50 states and the District of Columbia. The principal purpose of regulation and discipline of broker-dealers is the protection of clients and the securities markets, rather than protection of creditors and stockholders of broker-dealers. The regulations to which broker-dealers are subject cover all aspects of the securities business, including sales methods, trading practices among broker-dealers, uses and safekeeping of clients’ funds and securities, capital structure of securities firms, record-keeping and reporting, fee arrangements, disclosure to clients and the conduct of directors, officers and employees.

          Additionally, legislation, changes in rules promulgated by the SEC and self-regulatory authorities or changes in the interpretation or enforcement of existing laws and rules may directly affect the operations and profitability of broker-dealers. The SEC, self-regulatory authorities and state securities commissions may conduct administrative proceedings which can result in censure, fine, suspension or expulsion of a broker-dealer, its officers or employees. Such administrative proceedings, whether or not resulting in adverse findings, can require substantial expenditures. The profitability of broker-dealers could also be affected by rules and regulations that impact the business and financial communities in general, including changes to the laws governing taxation, antitrust regulation and electronic commerce.

          Securities held in custody by Pershing for Ryan Beck’s customer accounts are protected to an unlimited amount. The Securities Investors Protection Corporation (SIPC) provides $500,000 of coverage, including $100,000 for claims for cash. Pershing provides the remaining coverage through a commercial insurer. The account protection applies when a SIPC member firm fails financially and is unable to meet obligations to securities customers, but it does not protect against losses from the rise and fall in the market value of investments.

          Ryan Beck is also subject to anti-terrorism and anti-money laundering regulations, including those under the USA PATRIOT Act, similar to those applicable to BankAtlantic.

          Ryan Beck is subject to the net capital provision of Rule 15c3-1 under the Securities Exchange Act of 1934. The Net Capital Rule specifies minimum net capital requirements that are intended to ensure the general financial soundness and liquidity of broker-dealers. Failure to maintain the required net capital may subject a firm to suspension or expulsion by the NASD, certain punitive actions by the SEC and other regulatory bodies, and ultimately may require a firm’s liquidation. At December 31, 2005, Ryan Beck was in compliance with all applicable capital requirements.

          Ryan Beck operates under the provisions of paragraph (k)(2)(ii) of Rule 15c3-3 of the SEC as a fully disclosed broker and, accordingly, customer accounts are carried on the books of the clearing broker. However, Ryan Beck safe keeps 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, 2005.”

Homebuilding & Real Estate Development Segment

          Our Homebuilding & Real Estate Development segment consists of Levitt Corporation, which is consolidated with BFC Financial Corporation. The only assets available to BFC Financial Corporation are dividends when and if declared and paid by Levitt. Levitt is a separate public company and its management prepared the following Item 1. Business regarding Levitt which was included in Levitt’s Annual Report on Form 10-K for the year ended December 31, 2005 filed with the Securities and Exchange Commission. Accordingly, references to the “Company”, “we”, “us”, “our” or “Parent Company” in the following discussion under the caption “Homebuilding & Real Estate Development” are references to Levitt and its subsidiaries, and are not references to BFC Financial Corporation.

“General Description of Business

          We are a homebuilding and real estate development company with activities throughout the Southeastern United States. We were organized in December 1982 under the laws of the State of Florida. Until December 31, 2003, we were a wholly owned subsidiary of BankAtlantic Bancorp, Inc, a diversified financial services holding company (“BankAtlantic Bancorp”). We refer you to the discussion below for a description of our spin-off on December 31, 2003 from BankAtlantic Bancorp.

          Our Internet website address is www.levittcorporation.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports are available free of charge through our website, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. Our Internet website and the information contained in or connected to our website are not incorporated into this Annual Report on Form 10-K.

          We primarily develop single-family homes and master-planned communities, and we also develop commercial and industrial properties and multi-family complexes. In our single-family home communities, we specialize in serving active adults and families. The standard base price for the homes we sell varies by geography and is between $110,000 and $500,000, but the final closing price is usually higher than the base price due to design modifications, customizations and lot premiums. For 2005, the average closing price of the homes we delivered was $245,000. In our master-planned communities, we historically generated substantial revenue from large acreage and finished lot sales to third-party residential, commercial and industrial developers. We also sell land to our Homebuilding Division, which develops both active adult and family communities in our master-planned communities.

          Our principal real estate activities are conducted through our Homebuilding and Land Divisions. Our Homebuilding Division consists of the operations of Levitt and Sons, LLC, (“Levitt and Sons”) our wholly-owned homebuilding subsidiary. Our Land Division consists of the operations of Core Communities, LLC, our wholly-owned master-planned community development subsidiary (“Core Communities”). Historically, we also engaged in commercial real estate activities through our wholly owned subsidiary, Levitt Commercial, LLC (“Levitt Commercial”), and we invest in other real estate projects through subsidiaries and various joint ventures. In addition, we own approximately 31% of the outstanding common stock of Bluegreen Corporation (“Bluegreen”, NYSE: BXG), which acquires, develops, markets and sells vacation ownership interests in “drive-to” vacation resorts as well as residential home sites around golf courses or other amenities.

          Levitt and Sons is a real estate developer and residential homebuilder specializing in both active adult and family communities. Levitt and Sons and its predecessors have built more than 200,000 homes since 1929. It has strong brand awareness as America’s oldest homebuilder and is recognized nationally for having built the Levittown communities in New York, New Jersey and Pennsylvania. Levitt and Sons was acquired in December 1999. Levitt and Sons includes the operations of Bowden Building Corporation, a builder of single family homes based in Tennessee, which was acquired in April 2004 and has established itself over the last 30 years as one of the leading homebuilders in Memphis and Northern Mississippi.

          Core Communities develops master-planned communities in South Florida and most recently South Carolina. Our original and best-known community is St Lucie West, a 4,600-acre community located in Port St. Lucie, Florida, with approximately 6,000 built and occupied homes, numerous businesses, a university campus and the New York Mets’ spring training facility. Our second master-planned community, Tradition™, Florida also located in Port St. Lucie, Florida, is planned to ultimately cover more than 8,000 total acres, including approximately five miles of frontage on Interstate 95 and will have approximately 18,000 residential units and 8.5 million square feet of commercial space. Additionally, in 2005 Core Communities purchased two parcels of land in Jasper County, South Carolina for the development of our third master-

planned community, named Tradition™, South Carolina. This new community encompasses more than 5,300 acres, and is entitled for up to 9,500 residential units and 1.5 million square feet of commercial space, in addition to recreational areas, educational facilities and emergency services.

Business Strategy

          Our business strategy involves the following principal elements:

          Sell and build homes profitably in strong growth markets throughout Florida and other markets in the Southeastern United States. Currently, we sell homes throughout Florida, Tennessee, Georgia and South Carolina. Our markets are expected to continue to experience higher than average growth due to favorable demographic and economic trends, such as retiring “Baby Boomers” and continuing new employment opportunities. As we complete existing developments in these markets, we expect to acquire new land in these markets as well as expand into new markets, offering both active adult and family products.

          Continue to acquire land and to develop master-planned communities in desirable markets. We intend to acquire land parcels in desirable markets that are suited for developing large master-planned communities. Historically, land sale revenues have tended to be sporadic and fluctuate on a quantity basis more than home sale revenues, but land sale transactions resulted in higher margins, which typically varied between 40% and 60%. Our land development activities in our master-planned communities complement our homebuilding activities by offering a source of land for future homebuilding. At the same time, our homebuilding activities have complemented our master-planned community development activities since we believe the Homebuilding Division’s strong merchandising and quality developments have tended to support future land sales in our master-planned communities. Much of our master-planned community acreage is under varying development orders and is not immediately available for construction or sale to third parties at prices that maximize value. As these parcels become available for sale, our strategy provides for our Homebuilding Division to have first opportunity to acquire and develop any of the parcels. However, third-party homebuilder sales remain an important part of our ongoing strategy to generate cash flow, maximize returns and diversify risk, as well as to create appropriate housing alternatives for different market segments in our master-planned communities. Therefore, we will review each parcel as it is ready for development to determine if it should be developed by the Homebuilding Division or sold to a third party.

          Explore joint ventures and/or acquisitions to expand our penetration throughout the United States. We believe that our brand and our core competence as a homebuilder and real estate developer can be extended to new markets both inside and outside of Florida and the Southeastern United States. We plan to attempt to supplement our growth through selective acquisitions and joint ventures in both new and existing markets to enable us to more rapidly extend our competencies in active adult communities and land development.

          Maintain a conservative risk profile. We attempt to apply a disciplined risk management approach to our business activities. Other than our model homes, the majority of our homes are pre-sold before construction begins. We generally require customer deposits of 5% to 10% of the base sales price of our homes, and we require a higher percentage deposit for design customizations and upgrades. As a result, we believe we strengthen our backlog and lower our risk of cancellation. We seek to maintain our homebuilding land inventory at levels that can be absorbed within five to six years and acquire our land from third parties as well as from our Land Division. While we have traditionally structured our land acquisitions as purchases financed with debt, we are exploring alternative strategies, including joint ventures and land option programs to give us additional flexibility. Our master planned communities are long term projects with development cycles in excess of 10 years. We mitigate the risk inherent in these investments through careful site selection and market research in collaboration with our Homebuilding Division, and in addition to the aforementioned inter-company sales to our Homebuilding Division, we periodically sell both raw and developed parcels to other commercial and residential developers. Sales early in the project life cycle establish market credibility for the project and provide us with liquidity to pay down debt and provide flexibility for future land acquisitions. We also periodically discuss joint venture opportunities with various third parties.

          Utilize community development districts to fund development costs. We establish community development or improvement districts to access bond financing to fund infrastructure and other projects at our master-planned community developments. The ultimate owners of the property within the district are responsible for amounts owed on these bonds which are funded through annual assessments. Generally, in Florida, no payments under the bonds are required from property owners during the first two years after issuance. While we are responsible for any assessed amounts until the underlying property is sold, this strategy allows us to more effectively manage the cash required to fund infrastructure at the project.

          Pursue other strategic real estate opportunities. We own approximately 31% of the outstanding common stock of Bluegreen. Bluegreen is an independently operated company that primarily acquires, develops, markets and sells vacation ownership interests in “drive-to” resorts and develops and sells residential home sites around golf courses or other amenities. We believe that our investment in Bluegreen will be beneficial because the investment diversifies our real estate activities. In the future, we may pursue strategic investments in other real estate related businesses.

Business Segments

          Management reports results of operations through three segments: Homebuilding, Land and Other Operations. The presentation and allocation of the assets, liabilities and results of operations of each segment may not reflect the actual economic costs of the segment as a stand-alone business. If a different basis of allocation were utilized, the relative contributions of the segment might differ but, in management’s view, the relative trends in segments would not likely be impacted. See Note 19 to our audited financial statements.

Homebuilding Division

          Our Homebuilding Division develops planned communities featuring homes with closing prices ranging from $110,000 to $500,000. Our average contract price for new home orders in 2005 was approximately $310,000. Our communities are designed to serve both active adult homeowners, aged 55 and older, and families. The communities currently under development or under contract and relevant data as of December 31, 2005 are as follows:

		Number of				Planned				Closed								Sold				Net Units
		Communities				Units (a)				Units				Inventory				Backlog				Available
Active Adult Communities
Current Developments (includes optioned lots)			14				9,763				3,119				6,644				825				5,819
Properties Under Contract to be Acquired (b)			2				1,469				—				1,469				—				1,469
Total Active Adult			16				11,232				3,119				8,113				825				7,288
Family Communities
Current Developments (includes optioned lots)			37				7,152				3,298				3,854				967				2,877
Properties Under Contract to be Acquired (b)			12				2,604				—				2,604				—				2,604
Total Family			49				9,756				3,298				6,458				967				4,073
TOTAL HOMEBUILDING
Current Developments (includes optioned lots)			51				16,915				6,417				10,498				1,792				8,706
Properties Under Contract to be Acquired (b)			14				4,073				—				4,073				—				4,073
TOTAL HOMEBUILDING			65				20,988				6,417				14,571				1,792				12,779

          The properties under contract listed above represent properties for which due diligence has been completed as of December 31, 2005 which our Homebuilding Division has the right to acquire at an aggregate purchase price of $154.0 million. While financing is not yet finalized for these properties, these transactions are expected to close by the end of 2007. At December 31, 2005, our Homebuilding Division also had contracts to acquire five additional properties for which due diligence had not been completed. These additional properties, which are not included in the above table, would add approximately 989 units for an aggregate purchase price of approximately $32 million.

          At December 31, 2005, our homebuilding backlog was 1,792 units, or $557 million. Backlog represents the number of units subject to pending sales contracts. Homes in backlog include homes that have been completed, but on which title has not been transferred, homes not yet completed and homes on which construction has not begun.

Land Division

          Core Communities was founded in May 1996 to develop a master-planned community in Port St. Lucie, Florida now known as St. Lucie West. It is currently developing master-planned communities in Florida and in South Carolina. As a master-planned community developer, Core Communities engages in three primary activities: (i) the acquisition of large

tracts of raw land; (ii) planning, entitlement and infrastructure development; and (iii) the sale of entitled land and/or developed lots to homebuilders (including Levitt and Sons) and commercial, industrial and institutional end-users. Core Communities also has begun developing commercial properties itself within its communities and may lease such commercial land and improvements to third parties in the future.

          St. Lucie West is a 4,600 acre master-planned community located in St. Lucie County, Florida. It is bordered by Interstate 95 to the west and Florida’s Turnpike to the east. St. Lucie West contains residential, commercial and industrial developments. Within the community, residents are close to recreational and entertainment facilities, houses of worship, retail businesses, medical facilities and schools. PGA of America owns and operates a golf course and a country club on an adjacent parcel. The community’s baseball stadium, Tradition Field^®, serves as the spring training headquarters for the New York Mets and a minor league affiliate. There are more than 6,000 homes in St. Lucie West housing nearly 15,000 residents. Development activity in St. Lucie West is substantially complete, with only 4 acres of inventory remaining at December 31, 2005, all of which was subject to sales contracts as of that date.

          Tradition™, Florida, located approximately two miles south of St. Lucie West, includes approximately five miles of frontage on I-95, and will cover more than 8,000 total acres (with approximately 5,900 saleable acres). Tradition, Florida will include a corporate park, educational and health care facilities, commercial properties, residential homes and other uses in a series of mixed-use parcels. Community Development District special assessment bonds are being utilized to provide financing for certain infrastructure developments when applicable.

          In September 2005, Core Communities completed its acquisition of two parcels totaling 5,300-acres near Hilton Head, South Carolina. Entitled for up to 9,500 residential units and up to 1.5 million feet of commercial space, Tradition™, South Carolina will include recreational areas, educational facilities and emergency services. The property is strategically located between Savannah, Georgia, and Hilton Head, with three miles of frontage on Interstate 95 and with access and exposure on Highway 278. Development activities began in the fourth quarter of 2005.

          At December 31, 2005, our Land Division owned approximately 6,700 gross acres in Tradition, Florida including approximately 4,300 saleable acres. Through December 31, 2005, Core Communities had entered into contracts with nine homebuilders for the sale of a total of 1,782 acres in the first phase residential development at Tradition, Florida of which 1,548 acres had been delivered at year-end 2005. Contracts for the sale of 234 acres are in our backlog, although there is no assurance that the sale of all of these acres will occur. Delivery of these acres is expected to be complete in 2007.

          Our Land Division’s land in development and relevant data as of December 31, 2005 were as follows:

						Acres				Closed				Current				Non-Saleable				Saleable				Sold				Acres
		Acquired				Acquired				Acres				Inventory				Acres (a)				Acres (a)				Backlog				Available
Currently in Development
St. Lucie West			1997 (b)				1,964				1,960				4				—				4				4				—
Tradition™, Florida			1998 – 2004				8,246				1,548				6,698				2,388				4,310				234				4,077
Tradition™, South Carolina			2005				5,390				—				5,390				2,417				2,973				—				2,973
Total Currently in Development							15,600				3,508				12,092				4,805				7,287				238				7,050

Other Operations

          Other operations consist of Levitt Commercial, our investment in Bluegreen Corporation, investments in joint ventures, other real estate interests, and holding company operations.

Levitt Commercial

          Levitt Commercial was formed in 2001 to develop industrial, commercial, retail and residential properties. Levitt Commercial currently has two flex warehouse projects under development which were in various stages of completion as of December 31, 2005. Both projects currently in development are expected to be completed during 2006.

          Levitt Commercial also owns a 20% partnership interest in Altman Longleaf, LLC, which owns a 20% interest in a joint venture known as The Preserve at Longleaf Apartments, LLLP. This venture is developing a 298-unit apartment complex in Melbourne, Florida. An affiliate of our joint venture partner is the general contractor. Construction commenced on the development in 2004 and is expected to be completed in 2006. In 2005, the joint venture entered into an agreement to sell the entire apartment complex to a third party.

          Levitt Commercial’s projects currently under development and relevant data as of December 31, 2005 are as follows:

		Number of				Total				Closed								Sold				Units
		Projects				Units				Units				Inventory				Backlog				Available
Currently in Development
Flex Commercial Developments			2				46				—				46				37				9
Total Currently in Development			2				46				—				46				37				9

Bluegreen Corporation

          We own approximately 9.5 million shares of the outstanding common stock of Bluegreen, which represents approximately 31% of that company’s issued and outstanding common stock. Bluegreen is a leading provider of vacation and residential lifestyle choices through its resorts and residential community businesses. Bluegreen is organized into two divisions: Bluegreen Resorts and Bluegreen Communities.

          Bluegreen Resorts acquires, develops and markets vacation ownership interests (“VOIs”) in resorts generally located in popular high-volume, “drive-to” vacation destinations. Bluegreen Communities acquires, develops and subdivides property and markets residential land homesites, the majority of which are sold directly to retail customers who seek to build a home in a high quality residential setting, in some cases on properties featuring a golf course and related amenities

          Bluegreen also generates significant interest income through its financing of individual purchasers of VOIs and, to a nominal extent, homesites sold by its Bluegreen Communities division.

Other Investments and Joint Ventures

          In October 2004, we acquired an 80,000 square foot office building in Fort Lauderdale, Florida for $16.2 million. The building was fully leased and occupied during the year ended December 31, 2005 and generated rental income. On November 9, 2005 the lease was modified and two floors of the building were being vacated beginning in January 2006. The Company intends to utilize these two floors as its corporate headquarters after renovations are completed in late 2006.

          From time to time, we seek to defray a portion of the risk associated with certain real estate projects by entering into joint ventures. Our investments in joint ventures and the earnings recorded on these investments were not significant for the year ended December 31, 2005 and all joint ventures in which the Company has an interest are winding down or have ceased operations.

Competition

          The real estate development and homebuilding industries are highly competitive and fragmented. Overbuilding in local markets, among other competitive factors, could materially adversely affect homebuilders in the affected market. Homebuilders compete for financing, raw materials and skilled labor, as well as for the sale of homes. Additionally, competition for prime properties is intense and the acquisition of such properties may become more expensive in the future to the extent demand and competition increase. We compete with other local, regional and national real estate companies and homebuilders, often within larger subdivisions designed, planned and developed by such competitors. Some of our competitors have greater financial, marketing, sales and other resources than we do.

          In addition, there are relatively low barriers to entry into our business. There are no required technologies that would preclude or inhibit competitors from entering our markets. Our competitors may independently develop land and construct products that are superior or substantially similar to our products. A substantial portion of our operations are in Florida, where some of the most attractive markets in the nation are located, and therefore we expect to continue to face additional competition from new entrants into our markets.

Employees

          As of December 31, 2005, we employed a total of 640 full-time employees and 28 part-time employees. The breakdown of employees by division is as follows:

		Full				Part
		Time				Time
Homebuilding			552				22
Land			43				5
Other Operations			45				1
Total			640				28

          Our employees are not represented by any collective bargaining agreements and we have never experienced a work stoppage. We believe our employee relations are satisfactory.

          Our future success is heavily dependent upon our ability to hire and retain qualified marketing, sales and management personnel. Currently, the competition for such personnel is intense in the real estate industry. There can be no assurance that we will be able to continue to attract and retain qualified management and other personnel.”

ITEM 1A. RISK FACTORS

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

          At December 31, 2005, we held approximately 21.7% of the outstanding common stock of BankAtlantic Bancorp and 16.6% of the outstanding common stock of Levitt, representing in the aggregate approximately 75.8% of our total assets. Dividends by each of BankAtlantic Bancorp and Levitt are subject to a number of conditions, including the cash flow and profitability of each company, declaration by each company’s Board of Directors, compliance with the terms of each company’s outstanding indebtedness, and in the case of BankAtlantic Bancorp, regulatory restrictions applicable to BankAtlantic.

          BankAtlantic Bancorp and Levitt are separate publicly traded companies whose Boards of Directors include a majority of independent directors as required by the listing standards of the New York Stock Exchange. Decisions made by these Boards are not within our control and may not be made in our best interests.

          BankAtlantic Bancorp is the holding company for BankAtlantic and owns 100% of BankAtlantic’s outstanding capital stock. We depend upon dividends from BankAtlantic Bancorp for a significant portion of our cash flow. In turn, BankAtlantic Bancorp depends upon dividends from BankAtlantic for a significant portion of its cash flow. BankAtlantic’s ability to pay dividends or make other capital distributions to BankAtlantic Bancorp is subject to the regulatory authority of the Office of Thrift Supervision, or the OTS, and the Federal Deposit Insurance Corporation, or the FDIC. In general, BankAtlantic may make a capital distribution without prior OTS approval in an amount equal to BankAtlantic’s net income for the current calendar year to date, plus retained net income for the previous two years, provided that BankAtlantic does not become under-capitalized as a result of the distribution and BankAtlantic maintains eligibility for “expedited treatment” under applicable OTS regulations. Expedited treatment is generally available as long as BankAtlantic, among other things, maintains specified minimum levels of regulatory ratings and capital. BankAtlantic currently qualifies for expedited treatment, but there can be no assurance that it will maintain its current status. Although no prior OTS approval may be necessary, BankAtlantic is required to give the OTS thirty days notice before making any capital distribution to BankAtlantic Bancorp. The OTS may object to any capital distribution if it believes the distribution will be unsafe and unsound. While additional capital distributions above the limit for an expedited status institution are possible, such distributions would require the prior approval of the OTS. The OTS is not likely to approve any distribution that would cause BankAtlantic to fail its capital requirements on a pro forma basis after giving effect to the proposed distribution. Further, the FDIC has authority to take enforcement action if it believes that a dividend or capital distribution by BankAtlantic constitutes an unsafe or unsound action or practice, even if the OTS has cleared the distribution.

          We also depend on dividends from Levitt. Levitt commenced paying a quarterly dividend in August 2004. Future dividends are subject to Levitt’s results and dividends from its subsidiaries and declaration by Levitt’s Board of Directors. Levitt may also be limited contractually from paying dividends by the terms of its outstanding indebtedness. Levitt’s subsidiaries currently have outstanding indebtedness, and may in the future incur additional indebtedness, the terms of which limit the payment of dividends by the subsidiaries to Levitt.

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

          BFC itself has no revenue generating operating activities and is a holding company engaged in making investments in operating businesses. Accordingly, we have in the past incurred operating cash flow deficits at the BFC parent company level and expect to continue to do so in the foreseeable future. We incurred operating cash flow deficits of $6.1 million during the year ended December 31, 2004 and $2.2 million during the year ended December 31, 2005. We have financed these operating cash flow deficits with the proceeds of equity or debt financings. We have used and intend to continue to use a portion of the proceeds from the June 2005 equity offering to fund BFC operating expenses. Since our acquisition strategy involves primarily long-term investments in growth oriented businesses, the investments made are not likely to generate cash flow to BFC in the near term. As a result, if cash flow from our subsidiaries is not sufficient to fund parent company operating expenses in the future, we may be forced to reduce operating expenses, to liquidate some of our investments or to seek to fund the expenses from the proceeds of additional equity or debt financing. There is no assurance that any such financing would be available on commercially reasonable terms, if at all, or that we would not be forced to liquidate our investments at depressed prices.

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

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

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

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

	•		fail to accomplish our strategic objectives;
	•		not perform as expected; and
	•		expose us to the risks of the business that we acquire.

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

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

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

	•		limit the payment of dividends by BankAtlantic to BankAtlantic Bancorp;
	•		limit transactions between us, BankAtlantic, BankAtlantic Bancorp and the subsidiaries or affiliates of either;
	•		limit the activities of BankAtlantic, BankAtlantic Bancorp or us; or
	•		impose capital requirements on us or BankAtlantic Bancorp.

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

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

          BFC will face competition in identifying and completing investments, including from strategic buyers, business development companies, private equity funds and other financial sponsors. Many of these competitors have substantially greater financial resources than us. This competition may make acquisitions more costly and may make it more difficult for us to identify attractive investments and successfully complete any desired transaction.

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

          Our future success depends largely upon the continued efforts and abilities of key management employees, including Alan B. Levan, our Chairman and Chief Executive Officer, John E. Abdo, our Vice Chairman, Glen R. Gilbert, our Executive Vice President and Chief Financial Officer, and Phil Bakes, our Managing Director and Executive Vice President. The loss of the services of one or more of our key employees or our failure to attract, retain and motivate qualified personnel could have a material adverse effect on our business, financial condition and results of operations.

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

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

Recent changes in accounting standards could limit the desirability of granting stock options, which could harm our ability to attract and retain employees, and could also negatively impact our results of operations.

          The Financial Accounting Standards Board is requiring all companies to treat the fair value of stock options granted to employees as an expense effective for the first interim or annual reporting period of a company’s first fiscal year that begins on or after June 15, 2005. Accordingly, we and other companies are now required to record a compensation expense equal to the fair value of each stock option granted. Since we are required to expense the fair value of stock option grants, it may reduce the attractiveness of granting stock options because of the additional expense associated with these grants, which would negatively impact our results of operations. For example, had BFC, BankAtlantic Bancorp and Levitt been required to expense stock option grants during 2005 by applying the measurement provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation,” our recorded net income available to commons shareholders for the year ended December 31, 2005 of approximately $12.0 million would have been reduced to approximately $10.8 million. Stock options have historically been an important employee recruitment and retention tool, and BFC, BankAtlantic Bancorp and Levitt’s ability to attract and retain key personnel may be impacted if the scope of employee stock option programs is significantly reduced. In any event, if we continue to grant stock options, our future results of operations will be negatively impacted due to Statement of Financial Accounting Standards No. 123.

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

          We are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. This Act requires annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent auditors addressing these assessments. While management was able to certify in connection with the Company’s audited financial statements for the year ended December 31, 2004 that our internal controls over financial reporting were effective and the Company’s auditors issued their attestation of such report, we cannot assure the reader that we will maintain the adequacy of our internal controls. If we fail to maintain the adequacy of our internal controls, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Absolute assurance also cannot be provided that testing will reveal all material weaknesses or significant deficiencies in internal control over financial reporting. In addition, since BankAtlantic Bancorp and Levitt are entities consolidated in our financial statements, our ability to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act will be dependent, in part, on the ability of each of BankAtlantic Bancorp and Levitt to satisfy those requirements. Further, we may acquire privately-held businesses that are not then subject to the same stringent requirements for internal controls as public companies. While we intend to address any material weaknesses at acquired consolidated companies, there is no assurance that this will be

accomplished. If we fail to strengthen the effectiveness of acquired companies’ internal controls, we may not be able to conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Failure to achieve and maintain an effective internal control environment could have a material adverse effect on our stock price.

Risks Associated with Our Investment in Benihana, Inc. and the Restaurant Industry

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

	•		Need for additional capital in the future which might not be available;
	•		Changes in consumer preferences and discretionary spending;
	•		Ability to compete with many food service businesses;
	•		The availability and quality of ingredients and changes in food and supply costs could adversely affect results of operations;
	•		Food service industry is affected by litigation and publicity concerning food quality, health and other issues, which could cause customers to avoid a particular restaurant result in significant liabilities or litigation costs or damage reputation or brand recognition;
	•		Health concerns relating to the consumption of food products could affect consumer preferences and could negatively impact results of operation;
	•		Increased labor costs or labor shortages could adversely affect results of operations;
	•		The ability to obtain and maintain licenses and permits necessary to operate restaurants and compliance with laws could adversely affect operating results;
	•		Seasonal fluctuations in business could adversely impact stock price; and
	•		The loss of key management personnel.

We May Issue Additional Securities In The Future.

          There is generally no restriction on our ability to issue debt or equity securities which are pari passu or have a preference over our Class A Common Stock. Likewise, there is also no restriction on the ability of BankAtlantic Bancorp or Levitt to issue additional capital stock or incur additional indebtedness. Authorized but unissued shares of our capital stock are available for issuance from time to time in the discretion of our Board of Directors, including issuances in connection with acquisitions. Any such issuances may be dilutive to our earnings per share or to our shareholders’ ownership position.

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

Alan B. Levan And John E. Abdo’s Control Position May Adversely Affect The Market Price Of Our Common Stock.

          Alan B. Levan, our Chairman of the Board of Directors and Chief Executive Officer, and John E. Abdo, our Vice Chairman of the Board of Directors, may be deemed to have beneficially owned at December 31, 2005 approximately 47.2% of our Class A Common Stock and 88.02% of our Class B Common Stock. These shares represented approximately 55.2% of our total common stock and 79.0% of our total voting power at December 31, 2005. Since our Class A Common Stock and Class B Common Stock vote as a single class on most matters, Alan B. Levan and John E. Abdo effectively have the voting power to control the outcome of any shareholder vote and elect the members of our Board of Directors. Alan B. Levan and John E. Abdo’s control position may have an adverse effect on the market price of our common stock.

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

          As of December 31, 2005, we owned all of BankAtlantic Bancorp’s issued and outstanding Class B Common Stock and 8,329,236 shares, or approximately 14.9%, of BankAtlantic Bancorp’s issued and outstanding Class A Common Stock. As of December 31, 2005, we owned all of Levitt’s issued and outstanding Class B Common Stock and 2,074,243 shares, or approximately 11.2%, of Levitt’s issued and outstanding Class A Common Stock. Our share holdings in BankAtlantic Bancorp represent approximately 54.9% of its total voting power, and our share holdings in Levitt represent approximately 52.9% of its total voting power. Since the Class A Common Stock and Class B Common Stock of each of BankAtlantic Bancorp and Levitt vote as a single group on most matters, we are in a position to control BankAtlantic Bancorp and Levitt and elect BankAtlantic Bancorp’s and Levitt’s Board of Directors. As a consequence, we have the voting power to significantly influence the outcome of any shareholder vote of BankAtlantic Bancorp and Levitt, except in those limited circumstances where Florida law mandates that the holders of our Class A Common Stock vote as a separate class. Our control position may have an adverse effect on the market prices of BankAtlantic Bancorp’s and Levitt’s Class A Common Stock. Additionally, Alan B. Levan, our Chief Executive Officer and Chairman of the Board of Directors, and John E. Abdo, our Vice Chairman of the Board of Directors, may be deemed under SEC Rules to have an aggregate beneficial ownership of shares of our outstanding common stock representing in the aggregate 55.2% of our total common stock and 79.0% of the total voting power of all of our common stock at December 31, 2005.

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

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

We have enacted a shareholder rights plan that may have anti-takeover effects and could result in substantial dilution to holders of Class A Common Stock.

          We have in place a shareholder rights plan similar to that adopted by other public companies under which we issued preferred stock purchase rights to holders of our Class B Common Stock. As a result of the plan, each share of our Class B Common Stock carries with it one preferred stock purchase right. Each purchase right, which will become exercisable only upon the occurrence of certain events, including the acquisition of shares representing 20% or more of the voting power of our common stock (other than by our existing control shareholders and their affiliates) or the Company being acquired in a merger or other business combination or through the sale of assets under hostile circumstances, will generally entitle the registered holder to purchase either Class B Common Stock or shares in the acquiring entity at half the market price of such shares. The purchase rights are intended to cause substantial dilution to a person or group who attempts to acquire us on terms that our board of directors has not approved. However, since shares of Class A Common Stock do not carry these purchase rights, the exercise of these purchase rights would result in substantial dilution to holders of Class A Common Stock as well. The existence of the purchase rights would make it more difficult for a third party to acquire a controlling position in our common stock. The rights plan was adopted on January 10, 1997 and the purchase rights will expire on January 10, 2007.

Financial Services Segment

          Our Financial Services segment consists of BankAtlantic Bancorp, which is consolidated with BFC Financial Corporation. The only assets available to BFC Financial Corporation from BankAtlantic Bancorp are dividends when and if declared and paid by BankAtlantic Bancorp. BankAtlantic Bancorp is a separate public company and its management prepared the following Item 1A. Risk Factors regarding BankAtlantic Bancorp which was included in BankAtlantic Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2005 filed with the Securities and Exchange Commission. Accordingly, references to the “Company”, “we”, “us” , “our” or “Parent Company” in the following discussion under the caption “Financial Services” are references to BankAtlantic Bancorp and its subsidiaries, and are not references to BFC Financial Corporation.

“BankAtlantic

          BankAtlantic’s primary risk factors are: changes in interest rates, success of BankAtlantic’s Florida Most Convenient Bank initiatives, loan portfolio credit risk, inadequate allowance for loan loss reserves and regulatory compliance.

Changes in interest rates could adversely affect our net interest income and profitability.

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

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

	•		interest income on interest-earning assets, such as loans; and
	•		interest expense on interest-bearing liabilities, such as deposits.

          Changes in interest rates can have differing effects on BankAtlantic’s net interest income and the cost of purchasing residential mortgage loans in the secondary market. In particular, changes in market interest rates, changes in the relationships between short-term and long-term market interest rates, or the yield curve, or changes in the relationships between different interest rate indices can affect the interest rates charged on interest-earning assets differently than the interest rates paid on interest-bearing liabilities. This difference could result in an increase in interest expense relative to interest income and therefore reduce BankAtlantic’s net interest income. While BankAtlantic has attempted to structure its asset and liability management strategies to mitigate the impact on net interest income of changes in market interest rates, we cannot provide assurances that BankAtlantic will be successful in doing so.

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

	•		it amortizes premiums on acquired loans, and if loans are prepaid, the unamortized premium will be charged off; and
	•		the yields it earns on the investment of funds that it receives from prepaid loans are generally less than the yields that it earned on the prepaid loans.

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

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

          BankAtlantic has developed a computer model using standard industry software to quantify its interest rate risk, referred to as an “ALCO model” in support of its Asset/Liability Committee. This model measures the potential impact of gradual and abrupt changes in interest rates on BankAtlantic’s net interest income. While management would attempt to respond to the projected impact on net interest income, there is no assurance that management’s efforts will be successful.

BankAtlantic has disclosed issues regarding its compliance with the USA PATRIOT Act, anti-money laundering laws and the Bank Secrecy Act which may subject it to fines and regulatory actions, including restrictions on its ability to pay dividends.

          As previously disclosed BankAtlantic has identified deficiencies in its compliance with the USA PATRIOT Act, anti-money laundering laws and the Bank Secrecy Act (“AML-BSA”) and has been cooperating with regulators and other federal agencies concerning these deficiencies. The deficiencies may subject BankAtlantic to additional fines and regulatory actions, including restrictions on its ability to pay dividends.

          BankAtlantic has taken steps to correct identified deficiencies and has incurred substantial costs to improve its compliance systems and procedures, including costs associated with engaging attorneys and compliance consultants, acquiring new software and hiring additional compliance staff. Following the review and recommendations of our compliance consultants, BankAtlantic internally created a separate AML-BSA department which resulted in a staff increase of approximately 30 employees and significant improvements to our systems, processes, and training programs were put in place. The on-going financial impact of those changes and additions was to increase recurring expenses by approximately $3.5 million annually. Notwithstanding that we believe we are currently in compliance with applicable laws, many financial institutions have been the subject of proceedings based on past AML-BSA deficiencies which have resulted in substantial fines and penalties and have been required to enter into cease and desist orders with their primary regulators. Under these circumstances, we determined during the 2005 fourth quarter that it was appropriate to establish a $10 million reserve with respect to these matters, and we anticipate that BankAtlantic may be required to enter into a supervisory agreement with respect to the maintenance of satisfactory compliance status.

          BankAtlantic’s ability to obtain regulatory approvals necessary to proceed with certain aspects of its business plan, including its branch expansion and other acquisition plans, and its ability to pay dividends, could be adversely affected by a cease and desist order or any other actions taken by regulators or other federal agencies. There is no assurance that the $10 million reserve will be sufficient to cover the fines, penalties or additional expenses associated with these compliance matters, and additional fines, penalties or expenses will negatively impact our results.

BankAtlantic’s “Florida’s Most Convenient Bank” initiative has created increased operating expenses, which may have an adverse impact on our earnings.

          BankAtlantic’s “Florida’s Most Convenient Bank” initiative and its associated expanded operations have required it to provide additional management resources, hire additional personnel, increase occupancy and marketing expenditures and take steps to enhance and expand its operational and management information systems. Employee compensation, occupancy and advertising expenses have significantly increased since the inception, during 2002, of the initiative from $78.9 million during 2001 to $141.9 million during 2004 and $182.0 million during 2005. Additionally, BankAtlantic has instituted a program to renovate the interior of all of its existing branches and has committed to a program to expand its branch network.

          As a result of these growth initiatives, BankAtlantic has incurred and will continue to incur increased operating expenses. In the event that the “Florida’s Most Convenient Bank” initiative does not produce the results anticipated, BankAtlantic’s increased operating expenses will not be adequately offset by the benefits of the initiative and our earnings will be adversely impacted.

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

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

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

          The majority of BankAtlantic’s loan portfolio consists of loans secured by real estate. BankAtlantic’s loan portfolio included $2.0 billion of loans secured by residential real estate and $2.4 billion of commercial real estate, construction and development loans at December 31, 2005. At December 31, 2005, BankAtlantic’s commercial real estate, construction and development loans, which are concentrated mainly in South Florida, represented approximately 45.2% of its loan portfolio. Accordingly, declines in real estate values, particularly in South Florida, could have a material adverse impact on the credit quality of BankAtlantic’s loan portfolio and on its results. Real estate values are affected by various factors, including changes in general and/or regional economic conditions, governmental rules and policies and natural disasters such as hurricanes.

          BankAtlantic’s commercial real estate loan portfolio includes large lending relationships, including relationships with unaffiliated borrowers involving lending commitments in each case in excess of $30 million. These relationships represented an aggregate outstanding balance of $633 million as of December 31, 2005. Defaults by any of these borrowers could have a material adverse effect on BankAtlantic’s results.

BankAtlantic may be impacted by a concentration in interest-only residential loans.

          Approximately 38% of our residential loan portfolio consists of interest-only loans. These loans have reduced initial loan payments with the potential for monthly loan payments to increase significantly in subsequent periods, even if interest rates do not rise. Monthly loan payments will also increase as interest rates increase. This presents a potential repayment risk if the borrower is unable to meet the higher debt service obligations or refinance the loan.

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

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

	•		the risk characteristics of various classifications of loans;
	•		previous loan loss experience;
	•		specific loans that have loss potential;
	•		delinquency trends;
	•		estimated fair value of the collateral;
	•		current economic conditions;
	•		the views of its regulators; and
	•		geographic and industry loan concentrations.

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

BankAtlantic Bancorp’s ability to service its debt and pay dividends depends on dividends from BankAtlantic, which are subject to regulatory limits.

          BankAtlantic Bancorp is a holding company and it depends upon dividends from BankAtlantic for a significant portion of its cash flow. BankAtlantic Bancorp uses dividends from BankAtlantic to service its debt obligations and to pay dividends on its capital stock. BankAtlantic Bancorp’s ability to service its debt and pay dividends is further subject to restrictions under its indentures and loan covenants.

          BankAtlantic’s ability to pay dividends or make other capital distributions to BankAtlantic Bancorp is subject to the regulatory authority of the OTS and the FDIC.

          BankAtlantic’s ability to make capital distributions is subject to regulatory limitations. Generally, BankAtlantic may make a capital distribution without prior OTS approval in an amount equal to BankAtlantic’s net income for the current calendar year to date, plus retained net income for the previous two years, provided that BankAtlantic does not become under-capitalized as a result of the distribution. BankAtlantic’s ability to make such distributions depends on maintaining eligibility for “expedited treatment.” BankAtlantic currently qualifies for expedited treatment, but there can be no assurance that it will maintain its current status.

          Additionally, although no prior OTS approval may be necessary, BankAtlantic is required to give the OTS thirty (30) days notice before making any capital distribution to BankAtlantic Bancorp. The OTS may object to any capital distribution if it believes the distribution will be unsafe and unsound. Additional capital distributions above the limit for an expedited treatment institution are possible but require the prior approval of the OTS. The OTS is not likely to approve any distribution that would cause BankAtlantic to fail to meet is capital requirements on a pro forma basis after giving effect to the proposed distribution. The FDIC has backup authority to take enforcement action if it believes that a capital distribution by BankAtlantic constitutes an unsafe or unsound action or practice, even if the OTS has cleared the distribution. See also “Item 1A. Risk Factors” – “BankAtlantic has disclosed issues regarding its compliance with the USA Patriot Act, anti-money laundering laws and the Bank Secrecy Act which may subject it to fines and regulatory actions, including restrictions on its ability to pay dividends.”

          At December 31, 2005, BankAtlantic had approximately $263.3 million of indebtedness outstanding at the holding company level with maturities in 2032 and 2033. The aggregate annual interest expense on this indebtedness is approximately $19.3 million. During 2005, BankAtlantic Bancorp received $20 million of dividends from BankAtlantic. BankAtlantic Bancorp’s financial condition and results would be adversely affected if the amounts needed to satisfy its debt obligations, including any additional indebtedness incurred in the future, exceeded the amount of dividends it receives from its subsidiaries.

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

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

Regulatory Compliance.

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

Ryan Beck

We engage in the securities business through Ryan Beck, which subjects us to the risks of its business.

          The securities business is, by its nature, subject to various risks, particularly in volatile or illiquid markets, including the risk of losses resulting from the underwriting or ownership of securities, customer fraud, employee errors and misconduct, failures in connection with the processing of securities transactions and litigation. Ryan Beck’s business and its profitability are affected by many factors including:

	•		the volatility and price levels of the securities markets,
	•		the volume, size and timing of securities transactions,
	•		the demand for investment banking services,
	•		the level and volatility of interest rates,
	•		the availability of credit,
	•		legislation affecting the business and financial communities,
	•		the economy in general,
	•		the volatility of equity and debt securities held in inventory, and
	•		attraction and retention of key personnel.

          Markets characterized by low trading volumes and depressed prices generally result in reduced commissions and investment banking revenues as well as losses from declines in the market value of securities positions. Moreover, Ryan Beck is likely to be adversely affected by negative economic developments in the mid-Atlantic region or the financial services industry in general. Volatility in either the stock or fixed-income markets could have an adverse impact on Ryan Beck’s operations.

          A major portion of Ryan Beck’s assets and liabilities are securities owned or securities sold but not yet purchased. Securities owned and securities sold but not yet purchased are associated with trading activities conducted both as principal and as agent on behalf of individual and institutional investor clients of Ryan Beck and are accounted for at fair value in our financial statements. 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 or management’s estimates of amounts to be realized on settlement. As a consequence, volatility in either the stock or fixed-income markets could result in adverse changes in our financial results. Trading transactions as principal involve making markets in securities, which are held in inventory to facilitate sales to and purchases from customers. As a result of this activity, Ryan Beck may be required to hold securities during declining markets.

Parent Company

We are controlled by BFC Corporation and its control position may adversely affect the market price of our Class A common stock.

          As of December 31, 2005, BFC Financial Corporation (“BFC”) owned all of the Company’s issued and outstanding Class B common stock and 8,329,236 shares, or approximately 15.0%, of the Company’s issued and outstanding Class A common stock. BFC’s holdings represent approximately 54.9% of the Company’s total voting power. Class A common stock and Class B common stock vote as a single group on most matters. BFC is in a position to control the Company and elect the Company’s Board of Directors. As a consequence, BFC has the voting power to significantly influence the outcome of any shareholder vote, except in those limited circumstances where Florida law mandates that the holders of our Class A common stock vote as a separate class. BFC’s control position may have an adverse effect on the market price of the Company’s Class A common stock.

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

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

	•		limit the payment of dividends by BankAtlantic to us;
	•		limit transactions between us, BankAtlantic and the subsidiaries or affiliates of either;
	•		limit our activities and the activities of BankAtlantic; or
	•		impose capital requirements on us.

          Unlike bank holding companies, as a unitary savings and loan holding company we are not subject to capital requirements. However, the OTS has indicated that it may in the future impose capital requirements on savings and loan holding companies. The OTS may in the future adopt regulations that would affect our operations including our ability to pay dividends or to engage in certain transactions or activities. See “Regulation and Supervision – Holding Company.”

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

          We maintain a portfolio of publicly traded and privately held equity securities that subject us to equity pricing risks arising in connection with changes in the relative values due to changing market and economic conditions. Volatility or a decline in the financial markets can negatively impact our net income as a result of devaluation of these investments. At December 31, 2005 we had equity securities with a book value of approximately $82.1 million. See “Quantitative and Qualitative Disclosures About Market Risk.”

          The repayment of our subordinated debentures is dependent on the ability of our subsidiaries to pay dividends to us.”

Homebuilding & Real Estate Development Segment

          Our Homebuilding & Real Estate Development segment consists of Levitt Corporation, which is consolidated with BFC Financial Corporation. The only assets available to BFC Financial Corporation are dividends when and if declared and paid by Levitt. Levitt is a separate public company and its management prepared the following Item 1A. Risk Factors regarding Levitt which was included in Levitt’s Annual Report on Form 10-K for the year ended December 31, 2005 filed with the Securities and Exchange Commission. Accordingly, references to the “Company”, “we”, “us”, “our” or “Parent Company” in the following discussion under the caption “Homebuilding & Real Estate Development” are references to Levitt and its subsidiaries, and are not references to BFC Financial Corporation.

“RISKS RELATING TO OUR BUSINESS AND THE REAL ESTATE BUSINESS GENERALLY

We engage in real estate activities which are speculative and involve a high degree of risk

          The real estate industry is highly cyclical by nature and future market conditions are uncertain. Factors which adversely affect the real estate and homebuilding industries, many of which are beyond our control, include:

	•		the availability and cost of financing,
	•		unfavorable interest rates and increases in inflation,
	•		overbuilding or decreases in demand,
	•		changes in the general availability of land and competition for available land,
	•		construction defects and warranty claims arising in the ordinary course of business or otherwise, including mold related property damage and bodily injury claims and homeowner and homeowners’ association lawsuits,
	•		changes in national, regional and local economic conditions,
	•		cost overruns, inclement weather, and labor and material shortages,
	•		the impact of present or future environmental legislation, zoning laws and other regulations,
	•		availability, delays and costs associated with obtaining permits, approvals or licenses necessary to develop property, and
	•		increases in real estate taxes and other local government fees.

We continue to experience shortages of labor and supplies resulting mainly from circumstances beyond our control, and there could be delays and increased costs in developing our projects, which may adversely affect our operating results

          Our ability to develop our projects may be affected by circumstances beyond our control, including:

	•		shortages or increases in prices of construction materials,
	•		natural disasters in the areas in which we operate,
	•		work stoppages, labor disputes and shortages of qualified trades people, such as carpenters, roofers, electricians and plumbers,
	•		lack of availability of adequate utility infrastructure and services, and
	•		our need to rely on local subcontractors who may not be adequately capitalized or insured.

          Any of these circumstances could give rise to delays in the start or completion of, or increase the cost of, developing one or more of our projects or individual homes. We compete with other real estate developers, both regionally and nationally, for labor as well as raw materials, and the competition for materials has recently become global. Continued strength in the homebuilding industry and the commercial and condominium construction markets, as well as increases in fuel and commodity prices have resulted in significantly higher prices of most building materials, including lumber, drywall, steel, concrete, roofing materials, pipe and asphalt. We expect certain building materials to become more scarce and possibly subject to supply allocations in response to the rebuilding activities in the Gulf States and Florida following Hurricanes Katrina, Rita and Wilma. Demand in China for cement combined with supply bottlenecks have also contributed to regional shortages in cement. In addition, local materials suppliers periodically limit the allocation of their products to their customers, which slows our production process and forces us to obtain those materials from other suppliers, typically at higher prices. Although supplies of cement block in the Florida market have remained tight, we are not currently subject to allocations of deliveries in our Florida developments.

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

We have experienced significant growth in our homebuilding operations that may not be maintained and which may continue to cause production challenges in some of our homebuilding communities

          We experienced dramatic growth through 2004 with many of our communities selling out faster than originally anticipated. Due in large part to the stronger than expected sales of new homes during these prior periods, we experienced production challenges in some of our homebuilding communities that have led to extended delivery cycles beyond our 12-month target. Since the price of each home is generally set at the time of contract, any delays in delivery of the homes will affect the Company’s margins in a period of rising construction costs, such as that currently being experienced. In addition, the rapid sales in 2003 and the first half of 2004 depleted our inventory of houses available for sale. While from time to time we have experienced a decline in saleable inventory, we continue to expand our lot inventory in Florida, Georgia, South Carolina and Tennessee to replenish our homes available for sale. If we are not able to open new communities in a timely fashion and if we are unable to implement a successful strategy to revise our production and operational practices, our saleable inventory will remain below historical levels, our delivery cycles may extend beyond our 12-month target and our results of operations will be adversely impacted.

Natural disasters could have an adverse effect on our real estate operations

          We currently develop and sell a significant portion of our properties in Florida. The Florida markets in which we operate are subject to the risks of natural disasters such as hurricanes and tropical storms. These natural disasters could have a material adverse effect on our business by causing the incurrence of uninsured losses, delays in construction, and shortages and increased costs of labor and building materials. In the months of August, September and October 2005, three hurricanes made landfall in the State of Florida—Hurricanes Katrina, Rita and Wilma. Our operations did not suffer material disruption as a result of the 2005 hurricane season, but future allocations or supply shortages as a result of rebuilding activities from these storms and storms in Texas, Louisiana and Mississippi could adversely impact our operations or restrict our ability to expand in certain markets. In addition, during the 2004 hurricane season, five named storms made landfall in the State causing property damage in several of our communities; however, our losses were primarily related to landscaping and claims based on water intrusion associated with the hurricanes, and we have attempted to address those issues. In May 2005, a purported class action was brought on behalf of owners of homes in a particular Central Florida Levitt and Sons’ subdivision in connection with damage suffered during certain of the hurricanes in 2004 as a result of alleged construction defects.

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

Because our business depends on the acquisition of new land, the unavailability of land could reduce our revenues or negatively impact our results of operations

          Our operations and revenues are highly dependent on our ability to acquire land for development at reasonable prices. We compete for available land with other homebuilders or developers that may possess significantly greater financial, marketing and other resources. This competition may ultimately reduce the amount of land available as well as increase the bargaining position of property owners seeking to sell. Changes in the general availability of land, competition for available land, availability of financing to acquire land, zoning regulations that limit density and other market conditions may hurt our ability to obtain land for new communities. If land appropriate for development becomes less available, the cost of land could increase, and our business, financial condition and results of operations would be adversely affected.

Because real estate investments are illiquid, a decline in the real estate market or in the economy in general could adversely impact our business

          Real estate investments are generally illiquid. Companies that invest in real estate have a limited ability to vary their portfolio of real estate investments in response to changes in economic and other conditions. In addition, the market value of any or all of our properties or investments may decrease in the future. Moreover, we may not be able to timely dispose of an investment when we find dispositions advantageous or necessary, and any such dispositions may not provide proceeds in excess of the amount of our investment in the property or even in excess of the amount of any indebtedness incurred to acquire the property. As part of our strategy for future growth, we significantly increased our land inventory during 2005, with our inventory of real estate increasing from $413.5 million at December 31, 2004 to $611.3 million at December 31, 2005. This substantial increase in our land holdings subjects us to a greater risk from declines in real estate values in our markets. Declines in real estate values or in the economy generally could have a material adverse impact on our results of operations.

Our ability to successfully develop communities could affect our financial condition

          It may take several years for a community development to achieve positive cash flow. Before a community development generates any revenues, material expenditures are required to acquire land, to obtain development approvals and to construct significant portions of project infrastructure, amenities, model homes and sales facilities. Further, we anticipate that a larger percentage of land in our master-planned communities may be used in the future for our homebuilding operations and our own commercial development. As a result, a portion of the real estate inventory held by Core Communities will in the future generally be held longer than our prior practice and revenue recognition and cash proceeds from land sales by Core Communities will be deferred for a longer period of time than in the past. If we are unable to develop and market our communities successfully and to generate positive cash flows from these operations in a timely manner, it will have a material adverse effect on our ability to meet our working capital requirements.

Our ability to sell lots and homes, and, accordingly, our operating results, will be affected by the availability of financing to potential purchasers

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

	•		increases in interest rates,
	•		decreases in the availability of mortgage financing,
	•		increasing housing costs,
	•		unemployment, and
	•		changes in federally sponsored financing programs.

          Increases in interest rates or decreases in the availability of mortgage financing could depress the market for new homes because of the increased monthly mortgage costs or the unavailability of financing to potential homebuyers. Even if potential customers do not need financing, increases in interest rates and decreased mortgage availability could make it harder for them to sell their homes. If demand for housing declines, land may remain in our inventory longer and our corresponding borrowing costs would increase. This could adversely affect our operating results and financial condition.

Product liability litigation and claims that arise in the ordinary course of business may be costly or negatively impact sales, which could adversely affect our business

          Our homebuilding and commercial development business is subject to construction defect and product liability claims arising in the ordinary course of business. These claims are common in the homebuilding and commercial real estate industries and can be costly. Among the claims for which developers and builders have financial exposure are mold-related property damage and bodily injury claims. Damages awarded under these suits may include the costs of remediation, loss of property and health-related bodily injury. In response to increased litigation, insurance underwriters have attempted to limit their risk by excluding coverage for certain claims associated with pollution and product and workmanship defects. As a consequence, some or all of the financial risk associated with mold claims may be the sole obligation of the insured party. As a developer and a homebuilder, we may be at risk of loss for mold-related property and bodily injury claims in amounts that exceed available limits on our comprehensive general liability policies.

In addition, the costs of insuring against construction defect and product liability claims, if applicable, are high and the amount of coverage offered by insurance companies is also currently limited. There can be no assurance that this coverage will not be further restricted and become more costly. If we are not able to obtain adequate insurance against these claims, we may experience losses that could negatively impact our operating results.

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

We are subject to governmental regulations that may limit our operations, increase our expenses or subject us to liability

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

	•		environmental matters, including the presence of hazardous or toxic substances,
	•		wetland preservation,
	•		health and safety,
	•		zoning, land use and other entitlements,
	•		building design, and
	•		density levels.

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

	•		installation of utility services such as gas, electric, water and waste disposal,
	•		the dedication of acreage for open space, parks and schools,
	•		permitted land uses, and
	•		the construction design, methods and materials used.

          These laws or regulations could, among other things:

	•		establish building moratoriums,
	•		limit the number of homes, apartments or commercial properties that may be built,
	•		change building codes and construction requirements affecting property under construction,
	•		increase the cost of development and construction, and
	•		delay development and construction.

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

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

Building moratoriums and changes in governmental regulations may subject us to delays or increased costs of construction or prohibit development of our properties

          We may be subject to delays or may be precluded from developing in certain communities because of building moratoriums or changes in statutes or rules that could be imposed in the future. The State of Florida and various counties have in the past and may in the future continue to declare moratoriums on the issuance of building permits and impose restrictions in areas where the infrastructure, such as roads, schools, parks, water and sewage treatment facilities and other public facilities, does not reach minimum standards. Additionally, certain counties in Florida, including counties where we are developing projects, have enacted more stringent building codes which have resulted in increased costs of construction.

As a consequence, we may incur significant expenses in connection with complying with new regulatory requirements that we may not be able to pass on to buyers.

We are subject to environmental laws and the cost of compliance could adversely affect our business

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

Increased insurance risk could negatively affect our business

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

RISKS RELATING TO OUR COMPANY

Our indebtedness and leverage could adversely affect our financial condition, restrict our ability to operate and prevent us from fulfilling our obligations

          We have a significant amount of debt. At December 31, 2005, our consolidated debt was approximately $408.0 million. The amount of our debt could:

	•		limit our ability to obtain future financing for working capital, capital expenditures, acquisitions, debt service requirements or other requirements,
	•		require us to dedicate a substantial portion of our cash flow from operations to payment of or on our debt and reduce our ability to use our cash flow for other purposes,
	•		impact our flexibility in planning for, or reacting to, the changes in our business,
	•		place us at a competitive disadvantage if we have more debt than our competitors, and
	•		make us more vulnerable in the event of a downturn in our business or in general economic conditions.

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

          Our anticipated debt payment obligations for the 12 months beginning December 31, 2005 total $59.2 million. Our business may not generate sufficient cash flow from operations, and future borrowings may not be available under our existing credit facilities or any other financing sources in an amount sufficient to enable us to service our indebtedness, or to fund our other liquidity needs. We may need to refinance all or a portion of our debt on or before maturity, which we may not be able to do on favorable terms or at all.

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

We have rapidly increased our operating expenses in response to our rapid growth and our results of operations may be adversely affected if there is a slowdown in sales generally or we are unable to increase revenues and effectively manage growth.

          In response to the significant growth in sales of new homes and to support and manage our expanding homebuilding operations, during 2005 we hired additional personnel, invested in technology and took other steps to enhance our operational and management information infrastructure. As a result, selling, general and administrative expenses increased 23.4% from $71.0 million in 2004 to $87.6 million in 2005. Included in selling, general and administrative expenses are an increase in employee compensation and benefits of 20.4% from $35.3 million in 2004 to $42.5 million in 2005. Our full-time employees have increased from 527 at December 31, 2004 to 640 at December 31, 2005. Rising expenses have had an adverse effect on our earnings, and if we are not able to efficiently and profitably manage our growth, then these added expenses may have an adverse effect on our future earnings.

Our future growth requires additional capital, which may not be available

          The real estate development industry is capital intensive and requires significant expenditures for land purchases, land development and construction. We intend to pursue a strategy of continued investment in additional real estate projects. We anticipate that we will need to obtain additional financing as we expand our operations. These funds may be obtained through public or private debt or equity financings, additional bank borrowings or from strategic alliances. We may not be successful in obtaining additional funds in a timely manner, on favorable terms or at all. Moreover, certain of our bank financing agreements contain provisions that limit the type and amount of debt we may incur in the future without our lenders’ consent. In addition, the availability of borrowed funds, especially for land acquisition and construction financing, may be greatly reduced, and lenders may require increased amounts of equity to be invested in a project by borrowers in connection with both new loans and the extension of existing loans. If we do not have access to additional capital, we may be required to delay, scale back or abandon some or all of our acquisition plans or growth strategies or reduce capital expenditures and the size of our operations.

Our results may vary

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

	•		the cyclical nature of the real estate and construction industries,
	•		prevailing interest rates and the availability of mortgage financing,
	•		the uncertain timing of closings,
	•		weather and the cost and availability of materials and labor,
	•		competitive variables, and
	•		the timing of receipt of regulatory and other governmental approvals for construction of projects.

          The volume of sales contracts and closings typically varies from quarter to quarter depending on the stages of development of our projects. In the early stages of a project’s development (two to three years depending on the project), we incur significant start-up costs associated with, among other things, project design, land acquisition and development, construction and marketing expenses. Since revenues from sales of properties are generally recognized only upon the transfer of title at the closing of a sale, no revenue is recognized during the early stages of a project unless land parcels or residential homesites are sold to other developers. Our costs and expenses were approximately $500.6 million and $484.9 million during the years ended December 31, 2005 and 2004, respectively. Periodic sales of properties and distributions from our joint venture investments may be insufficient to fund operating expenses. Further, if sales and other revenues are not adequate to cover costs and expenses, we will be required to seek a source of additional operating funds. Accordingly, our financial results will vary from community to community and from time to time.

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

          Our future success depends largely upon the continued efforts and abilities of key management employees, including John E. Abdo, our Vice Chairman, Alan B. Levan, our Chairman and Chief Executive Officer, Seth M. Wise, our President, George P. Scanlon, our Executive Vice President and Chief Financial Officer, Paul J. Hegener, President of Core Communities and Elliott Wiener, President of Levitt and Sons. In addition, our success will depend on our ongoing ability to attract, retain and motivate qualified personnel. The competition for such personnel is intense in the real estate industry. We cannot assure you that we will be able to continue to attract and retain qualified management and other personnel. The loss

of the services of one or more of our key employees or our failure to attract, retain and motivate qualified personnel could have a material adverse effect on our business, financial condition and results of operations.

We may not successfully integrate acquired businesses into ours

          As part of our business strategy, we have in the past and expect to continue to review acquisition prospects that would complement our existing business, or that might otherwise offer growth opportunities. Acquisitions entail numerous risks, including:

	•		difficulties in assimilating acquired management and operations,
	•		risks associated with achieving profitability,
	•		the incurrence of significant due diligence expenses relating to acquisitions that are not completed,
	•		unforeseen expenses,
	•		risks associated with entering new markets in which we have no or limited prior experience,
	•		the potential loss of key employees of acquired organizations, and
	•		risks associated with transferred assets and liabilities.

          We may not be able to acquire or profitably manage additional businesses, or to integrate successfully any acquired businesses, properties or personnel into our business, without substantial costs, delays or other operational or financial difficulties. Our failure to do so could have a material adverse effect on our business, financial condition and results of operations. In addition, we may incur debt or contingent liabilities in connection with future acquisitions, which could materially adversely affect our operating results.

Our controlling shareholders have the voting power to control the outcome of any shareholder vote, except in limited circumstances

          As of December 31, 2005, BFC Financial Corporation owned 1,219,031 shares of our Class B common stock, which represented all of our issued and outstanding Class B common stock, and 2,074,240 shares, or approximately 11% of our issued and outstanding Class A common stock. In the aggregate these shares represent approximately 53% of our total voting power and approximately 16.6% of our total equity. Since the Class A common stock and Class B common stock vote as a single group on most matters, BFC Financial Corporation is in a position to control our company and elect a majority of our Board of Directors. Additionally, Alan B. Levan, our Chairman and Chief Executive Officer, and John E. Abdo, our Vice Chairman, beneficially own approximately 35.2% and 17.7% of the shares of BFC Financial Corporation, respectively. As a consequence, Alan B. Levan and John E. Abdo effectively have the voting power to control the outcome of any shareholder vote of Levitt Corporation, except in those limited circumstances where Florida law mandates that the holders of our Class A common stock vote as a separate class. BFC Financial Corporation’s interests may conflict with the interests of our other shareholders.

RISKS ASSOCIATED WITH OUR OWNERSHIP STAKE IN BLUEGREEN CORPORATION

          We own approximately 31% of the outstanding common stock of Bluegreen Corporation, a publicly-traded corporation whose common stock is listed on the New York Stock Exchange under the symbol “BXG”. Although traded on the New York Stock Exchange, our shares may be deemed restricted stock, which would limit our ability to liquidate our investment if we chose to do so. While we have made a significant investment in Bluegreen Corporation, we do not expect to receive any dividends from the company for the foreseeable future.

          For the twelve months ended December 31, 2005 and 2004, our earnings from our investment in Bluegreen were $12.7 million and $13.1 million, respectively, representing approximately 14.4% and 14.0% of our pre-tax earnings for those periods, respectively. At December 31, 2005, the book value of our investment in Bluegreen was $95.8 million. Accordingly, a significant portion of our earnings and book value are dependent upon Bluegreen’s ability to continue to generate earnings and maintain its market value. Further, declines in the market value of Bluegreen’s shares or other events that could impair the value of our holdings would have an adverse impact on the value of our investment. We refer you to the public reports filed by Bluegreen with the Securities and Exchange Commission.

Item 1B. UNRESOLVED STAFF COMMENTS

None

ITEM 2. PROPERTIES

          The principal and executive offices of the Company, BankAtlantic Bancorp, BankAtlantic, and Levitt are located at 2100 West Cypress Creek Road, Fort Lauderdale, Florida, 33309. The Company also maintains executive offices at 4150 SW 28^th Way, Fort Lauderdale, Florida 33312, which it leases from BankAtlantic. Levitt occupies its offices pursuant to an agreement with BFC, which leases the property from BankAtlantic.

At December 31, 2005, BankAtlantic operated the following facilities:

		Miami-Dade				Broward				Palm Beach				Tampa Bay
Owned full-service branches			4				10				25				3
Leased full-service branches			9				14				6				7
Total full-service branches			13				24				31				10
Lease expiration dates			2006-2012				2006-2020				2006-2012				2006-2010

          BankAtlantic also maintains two ground leases in Broward County, with one expiring in 2006 and the other expiring in 2072.

          At December 31, 2005 Ryan Beck’s office space included leased facilities in the following states:

		Lease				Number of
Locations		Expiration				Offices
California			2009				1
Connecticut			2009 – 2010				2
Florida			2006 – 2015				3
Georgia			2006				1
Illinois			2008				1
Louisiana			2006				1
Maryland			2009				2
Massachusetts			2006 – 2008				4
New Jersey			2007 – 2019				7
New York			2006 – 2011				8
Ohio			2010				1
Pennsylvania			2006 – 2014				8
Texas			2006				1
Virginia			2007				1
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