Bluegreen Vacations Holding Corp - Quarter Report: 2016 March (Form 10-Q)





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION



Washington, DC  20549



FORM 10-Q



[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



For the Quarter Ended March 31, 2016



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



Commission File Number

001-09071



BFC Financial Corporation

(Exact name of registrant as specified in its charter)













Not Applicable

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



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (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 [X]NO [   ]



Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).



YES [X]NO [   ]



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





Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



YES [   ]NO [ X ]



The number of shares outstanding of each of the registrant’s classes of common stock as of May 3, 2016 is as follows:

 

Class A Common Stock of $.01 par value,  74,492,819 shares outstanding.
Class B Common Stock of $.01 par value, 13,718,928 shares outstanding.



 

---

 

























(i)



 

---

 

PART I – FINANCIAL INFORMATION



Item 1.  FINANCIAL STATEMENTS





---

 

 













 

---

 

 

















---

 



 





---

 









 

---

 

BFC Financial Corporation

Notes to Condensed Consolidated Financial Statements - Unaudited





1.    Presentation of Interim Financial Statements



Basis of Financial Statement Presentation



The accompanying unaudited condensed consolidated financial statements of BFC Financial Corporation (“BFC” or, unless otherwise indicated or the context otherwise requires, “we,” “us,” “our,” or the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information.  Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. In management’s opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, which include normal recurring adjustments, as are necessary for a fair statement of the consolidated financial condition of BFC at March 31, 2016; the consolidated results of operations and comprehensive income of BFC for the three months ended March 31, 2016 and 2015; changes in consolidated equity of BFC for the three months ended March 31, 2016 and 2015; and the condensed consolidated cash flows of BFC for the three months ended March 31, 2016 and 2015. Operating results for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016 or any other future period. 



These unaudited condensed consolidated financial statements and related notes are presented as permitted by Form 10-Q and should be read in conjunction with the Company’s audited condensed consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 (the “2015 Annual Report”).  All significant inter-company balances and transactions have been eliminated in consolidation.  As used throughout this document, the term “fair value” reflects the Company’s estimate of fair value as discussed herein.  Certain amounts for prior periods have been reclassified to conform to the current period’s presentation.



BFC consolidates the financial results of the entities in which it has controlling financial interests, including BBX Capital Corporation and its subsidiaries (“BBX Capital”), Woodbridge Holdings, LLC (“Woodbridge”) and Bluegreen Corporation and its subsidiaries (“Bluegreen”).  As a consequence, the assets and liabilities of all such entities are presented on a consolidated basis in BFC’s financial statements. However, except as otherwise noted, the debts and obligations of the consolidated entities, including BBX Capital, Woodbridge, and Bluegreen, are not direct obligations of BFC and are non-recourse to BFC.  Similarly, the assets of those entities are not available to BFC absent a dividend or distribution from those entities (and, in the case of Bluegreen, a subsequent dividend or distribution by Woodbridge, Bluegreen’s parent company). 



BFC is a Florida-based holding company whose principal holdings include an approximately 81% equity interest in BBX Capital  and a direct 54% equity interest in Woodbridge. BBX Capital holds the remaining 46% equity interest in Woodbridge. Woodbridge owns 100% of Bluegreen. 



BBX Capital is a Florida-based company involved in the ownership, financing, acquisition, development and management of real estate, including through real estate joint ventures, and investments in middle market operating businesses. BBX Capital’s principal asset until July 31, 2012 was its ownership of BankAtlantic.  BankAtlantic was a federal savings bank headquartered in Fort Lauderdale, Florida.  On July 31, 2012, BBX Capital completed the sale to BB&T Corporation (“BB&T”) of all of the issued and outstanding shares of capital stock of BankAtlantic (the stock sale and related transactions described herein are collectively referred to as the “BankAtlantic Sale” or the “BB&T Transaction”).  The principal assets of BBX Capital currently consist of its 46% interest in Woodbridge, investments in real estate joint ventures, legacy loans and real estate transferred to BBX Capital in connection with the BB&T Transaction.



Bluegreen is a sales, marketing and management company focused on the vacation ownership industry. Bluegreen markets, sells and manages VOIs in resorts, which are generally located in popular, high-volume, “drive-to” vacation destinations, and were either developed or acquired by Bluegreen or developed and owned by others in

---

 

which case Bluegreen earns fees for providing these services. Bluegreen also provides other fee-based services, including property association management services, mortgage servicing, VOI title services, reservation services, and construction design and development services.



BFC Share Repurchase Program



On September 21, 2009, BFC’s board of directors approved a share repurchase program which authorized the repurchase of up to 20,000,000 shares of the Company’s Class A Common Stock and Class B Common Stock at an aggregate cost of up to $10 million, subject to market conditions and other factors.  



On March 29, 2016, the Company entered into a Rule 10b5-1 Repurchase Plan (the “Repurchase Plan”) which authorized the Company’s designated broker to repurchase up to 1.0 million shares of the Company’s Class A Common Stock in the open market or through privately negotiated transactions in accordance with the terms, and subject to the limitations, specified in the Repurchase Plan.  In April 2016, the Company repurchased 1.0 million shares of its Class A Common Stock under the Repurchase Plan for approximately $3.0 million. Repurchases under the Repurchase Plan were subject to applicable securities laws and regulations, including Rule 10b-18 under the Securities Exchange Act of 1934, as amended, as well as certain price and other limitations specified by the Company in the Repurchase Plan.



 Recently Adopted Accounting Pronouncements



In February 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-02, “Consolidation (Topic 810) – Amendments to the Consolidation Analysis” (“ASU 2015-02”).  This guidance changed the manner in which a reporting entity assesses one of the five characteristics that determines if an entity is a variable interest entity.  In particular, the update changes how a reporting entity assesses if the equity holders at risk lack decision making rights when decision-making over the entity’s most significant activities has been outsourced.  The update also introduces a separate analysis specific to limited partnerships and similar entities for assessing if the equity holders at risk lack decision making rights.  This standard became effective for the Company on January 1, 2016.  The adoption of ASU 2015-02 had no effect on the Company’s condensed consolidated financial statements.



In April 2015, the FASB issued ASU 2015-03, ”Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs” as amended by ASU 2015-15, which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount.  However, ASU 2015-03 also permits presentation of debt issuance costs on line-of-credit arrangements as assets. This standard became effective for the Company on January 1, 2016.  The Company’s adoption of ASU 2015-03 is reflected in the accompanying balance sheets as of March 31, 2016 and December 31, 2015 and in the tables included in Note 9.  As further displayed in the table below, pursuant to the adoption of ASU 2015-03, the Company has reclassified certain unamortized debt issuance costs as a direct deduction from the carrying value of the associated debt liability previously reported in the Company’s Consolidated Balance Sheets as of December 31, 2015 as follows (in thousands):





New Accounting Pronouncements



The FASB has issued the following accounting pronouncements and guidance which may be applicable to the Company but have not yet become effective. (See the Company’s Annual Report on Form 10-K for the year ended

---

 

December 31, 2015 for accounting pronouncements issued prior to March 15, 2016 which may be applicable to the Company.) 



Accounting Standards Update Number 2016-09 – Compensation – Stock Compensation (Topic 718).  The amendments in this update affect all entities that issue share-based payment awards to their employees. The areas for simplification in this update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  The guidance will be effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.  Early adoption is permitted in any interim or annual period.  The Company is currently evaluating the requirements of this update and has not yet determined its impact on the Company’s condensed consolidated financial statements.



Accounting Standards Update Number 2016-07 – Investments – Equity Method and Joint Ventures (Topic 323) – Simplifying the Transition to the Equity Method of Accounting.  This update addresses the use of the equity method of accounting as a result of an increase in the level of ownership interest or degree of influence.  The amendments in this update eliminate the requirement to retroactively adopt the equity method of accounting.  The guidance will be effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.  Early adoption is permitted.  The Company is currently evaluating the requirements of this update and has not yet determined its impact on the Company’s condensed consolidated financial statements.



Accounting Standards Update Number 2014-09 –  Revenue Recognition (Topic 606): Revenue from Contracts with Customers. This guidance is intended to improve the financial reporting requirements for revenue from contracts with customers by providing a principle based approach.  It also requires disclosures designed to enable readers of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.  Further, in March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting Revenue Gross versus Net), and in April 2016, the FASB issued ASU 2016-10 Revenue from Contracts with Customers – Identifying Performance Obligations and Licensing (Topic 606). These updates clarify implementation guidance on the related topic.  The accounting guidance updates will replace most existing revenue recognition guidance in GAAP.  The standard was to be effective for annual and interim reporting periods beginning after December 15, 2016.  ASU 2015-14 deferred the effective date of this update for all entities by one year.  Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.  The Company is currently evaluating the requirements of theses updates and has not yet determined its impact on the Company's condensed consolidated financial statements. 





2.    Variable Interest Entities



Bluegreen



Bluegreen sells VOI notes receivable through special purpose finance entities. These transactions are generally structured as non-recourse to Bluegreen, and are designed to provide liquidity for Bluegreen and to transfer the economic risks and certain benefits of the notes receivable to third-parties.  In a securitization, various classes of debt securities are issued by the special purpose finance entities that are generally collateralized by a single tranche of transferred assets, which consist of VOI notes receivable.  Bluegreen services the securitized notes receivable for a fee pursuant to servicing agreements negotiated with third parties based on market conditions at the time of the securitization.



With each securitization, Bluegreen generally retains a portion of the securities and continues to service the securitized notes receivable.  Under these arrangements, the cash payments received from obligors on the receivables sold are generally applied monthly to pay fees to service providers, make interest and principal payments to investors, and fund required reserves, if any, with the remaining balance of such cash retained by Bluegreen; however, to the extent the portfolio of receivables fails to satisfy specified performance criteria (as may occur due to, among other things, an increase in default rates or credit loss severity) or other trigger events occur, the funds received from obligors are distributed on an accelerated basis to investors.  Depending on the circumstances and the transaction, the application of the accelerated payment formula may be permanent or temporary until the trigger

---

 

event is cured.  As of March 31, 2016, Bluegreen was in compliance with all applicable terms under its securitization transactions, and no triggering events had occurred.



In accordance with applicable accounting guidance for the consolidation of VIEs, Bluegreen analyzes its variable interests, which may consist of loans, servicing rights, guarantees, and equity investments, to determine if an entity in which Bluegreen has a variable interest is a variable interest entity with Bluegreen as its primary beneficiary.  Bluegreen’s analysis includes a review of both quantitative and qualitative factors.  Bluegreen bases its quantitative analysis on the forecasted cash flows of the entity, and bases its qualitative analysis on the design of the entity, its organizational structure, including decision-making ability, and relevant financial agreements.  Bluegreen also uses its qualitative analysis to determine if Bluegreen must consolidate a variable interest entity as the primary beneficiary.  In accordance with applicable accounting guidance, Bluegreen has determined these securitization entities to be VIEs of which Bluegreen is the primary beneficiary and, therefore, Bluegreen consolidates the entities into its financial statements.  As previously described, BFC consolidates Bluegreen and its consolidated subsidiaries and VIEs into BFC’s financial statements.



Under the terms of certain of Bluegreen’s timeshare note sales, Bluegreen has the right to repurchase or substitute a limited amount of defaulted mortgage notes receivable for new notes receivable at the outstanding principal balance plus accrued interest.  Voluntary repurchases and substitutions by Bluegreen of defaulted notes receivable during the three months ended March 31, 2016 and 2015 were $1.2 million and $1.1 million, respectively.  Bluegreen’s maximum exposure to loss relating to its non-recourse securitization entities is the difference between the outstanding VOI notes receivable and the notes payable, plus cash reserves and any additional residual interest in future cash flows from collateral.



Information related to the assets and liabilities of Bluegreen’s consolidated VIEs included in the Company’s condensed consolidated statements of financial condition is set forth below (in thousands):









The restricted cash and securitized notes receivable balances disclosed above are restricted to satisfy obligations of the VIEs.







---

 

3.     Investments in Unconsolidated Real Estate Joint Ventures 



BBX Capital had the following investments in unconsolidated real estate joint ventures (in thousands):









BBX Capital’s investments in unconsolidated real estate joint ventures are unconsolidated variable interest entities. 



The amount of interest capitalized in investments in unconsolidated real estate joint ventures associated with joint venture real estate development activities for the three months ended March 31, 2016 and 2015 was  $121,000 and  $96,000, respectively.   



The condensed statements of operations for the three months ended March 31, 2016 and 2015 for all of the above listed equity method joint ventures in the aggregate were as follows (in thousands):









See Note 10 to the Consolidated Financial Statements included in the 2015 Annual Report for additional information on BBX Capital’s investments in unconsolidated real estate joint ventures.  

 





---

 

4.  BBX Capital’s Loans Held-For-Sale



BBX Capital’s loans-held-for-sale are as follows (in thousands):









Loans held-for-sale are reported at the lower of cost or fair value measured on an aggregate basis.   As of March 31, 2016 and December 31, 2015 the lower of cost or fair value adjustment on loans held-for-sale was $1.6 million. BBX Capital transfers loans to held-for-sale when, based on the current economic environment and related market conditions, it does not have the intent to hold those loans for the foreseeable future. 



As of March 31, 2016, foreclosure proceedings were in-process on $12.5 million of BBX Capital’s residential loans held-for-sale.

 



5.    BBX Capital’s Loans Receivable 



BBX Capital’s loans receivable portfolio consisted of the following (in thousands):







As of March 31, 2016, foreclosure proceedings were in process on $0.3 million of BBX Capital’s consumer loans.



The total discount on loans receivable was $3.2 million and $3.3 million as of March 31, 2016 and December 31, 2015, respectively.



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





---

 

An age analysis of the past due recorded investment in BBX Capital’s loans receivable as of March 31, 2016 and December 31, 2015 was as follows (in thousands):



















---

 

The activity in BBX Capital’s allowance for loan losses for the three months ended March 31, 2016 and 2015 was as follows (in thousands): 







Impaired Loans – BBX Capital’s loans are considered impaired when, based on current information and events, BBX Capital believes it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan agreement.  For a loan that has been restructured, the contractual terms of the loan agreement refer to the contractual terms specified by the original loan agreement, not the contractual terms specified by the restructured agreement.  Impairment is evaluated based on past due status for consumer and residential loans.  Impairment is evaluated by BBX Capital for commercial and small business loans based on-past payment history, financial strength of the borrower or guarantors, and cash flow associated with the collateral or business.  If a loan is impaired, a specific valuation allowance is established, if necessary, based on the present value of estimated future cash flows using the loan’s existing interest rate or based on the fair value of the loan.    Collateral dependent impaired loans are charged down to the fair value of collateral less cost to sell.  Interest payments on impaired loans are recognized on a cash basis as interest income.   Impaired loans, or portions thereof, are charged off when deemed uncollectible.    



BBX Capital’s impaired loans as of March 31, 2016 and December 31, 2015 were as follows (in thousands):







---

 

Average recorded investment and interest income recognized on BBX Capital’s impaired loans for the three months ended March 31, 2016 and 2015 were as follows (in thousands):









BBX Capital’s impaired loans without valuation allowances represent loans that were written-down to the fair value of the collateral less cost to sell, loans in which the collateral value less cost to sell was greater than the carrying value of the loan, loans in which the present value of the cash flows discounted at the loans’ effective interest rate were equal to or greater than the carrying value of the loans, or loans that were collectively measured for impairment.



BBX Capital had no commitments to lend additional funds on impaired loans as of March 31, 2016.







---

 



6.    Bluegreen’s Notes Receivable



The table below sets forth information relating to Bluegreen’s notes receivable and Bluegreen’s allowance for credit losses (in thousands):









The table above includes notes receivable deemed to have been acquired by BFC, indirectly through Woodbridge, in connection with Woodbridge’s November 2009 acquisition of approximately 7.4 million additional shares of Bluegreen’s Common Stock, which resulted in BFC, indirectly through Woodbridge, holding a controlling interest in Bluegreen.  In accordance with applicable accounting guidance, “Loans and Debt Securities Acquired with Deteriorated Credit Quality”, BFC elected to recognize interest income on these notes receivable using the expected cash flows method.  BFC treated expected prepayments consistently in determining cash flows expected to be collected, such that the non-accretable difference was not affected and the difference between actual prepayments and expected prepayments will not affect the non-accretable difference.  The assumption for prepayment rates was derived from Bluegreen’s historical performance information for its off-balance sheet securitizations and ranges from 4% to 9%.  As of March 31, 2016 and December 31, 2015, the outstanding contractual unpaid principal balance of the acquired notes was  $41.2 million and $47.8 million, respectively. As of March 31, 2016 and December 31, 2015, the carrying amount of the acquired notes was $37.8 million and $43.6 million, respectively,  and the acquired notes are included in the amounts of notes receivable in the condensed consolidated statements of financial condition at March 31, 2016 and December 31, 2015.  

---

 

The following is a reconciliation of accretable yield for the three months ended March 31, 2016 and 2015 (in thousands):









The weighted-average interest rate on Bluegreen’s notes receivable was 15.9%  as of March 31, 2016 and December 31, 2015.  All of Bluegreen’s VOI notes receivable bear interest at fixed rates.  The weighted-average interest rate charged on notes receivable secured by VOIs was 16.0% as of March 31, 2016 and December 31, 2015. 



Bluegreen’s notes receivable are carried at amortized cost less an allowance for credit losses.  Interest income is suspended, and previously accrued but unpaid interest income is reversed, on all delinquent notes receivable when principal or interest payments are more than three months contractually past due and not resumed until such loans are less than three months past due.  As of March 31, 2016 and December 31, 2015,  $10.3 million and $10.4 million, respectively, of Bluegreen’s VOI notes receivable were more than 90 days past due, and accordingly, consistent with Bluegreen’s policy, were not accruing interest income.  After 120 days, Bluegreen’s VOI notes receivable are generally written off against the allowance for credit loss.



Credit Quality for Financed Receivables and the Allowance for Credit Losses



Bluegreen holds large amounts of homogeneous VOI notes receivable and assesses uncollectibility based on pools of receivables.  In estimating future credit losses, Bluegreen’s management does not use a single primary indicator of credit quality but instead evaluates its VOI notes receivable based upon a combination of factors, including a static pool analysis, the aging of the respective receivables, current default trends and prepayment rates by origination year, as well as the FICO® scores of the borrowers.



The activity in Bluegreen’s allowance for loan losses (including with respect to notes receivable secured by homesites) was as follows (in thousands):









---

 

The following table shows the delinquency status of Bluegreen’s VOI notes receivable as of March 31, 2016 and December 31, 2015 (in thousands):









   



7.     Inventory



Inventory consisted of the following (in thousands):







Inventory is primarily comprised of Bluegreen’s completed VOIs, VOIs under construction and land held by Bluegreen for future vacation ownership development.  Bluegreen reviews real estate held for future vacation ownership development for impairment under applicable accounting guidelines, which require that such properties be reviewed for impairment when events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable.  No impairment charges were recorded with respect to Bluegreen’s inventory during the three months ended March 31, 2016 or 2015.



Interest capitalized to VOI inventory during the three months ended March 31, 2016 and 2015 was insignificant. The interest expense reflected in the Company’s consolidated statements of operations is net of capitalized interest.



In addition, included in “other assets” in the Company’s condensed consolidated statements of financial condition as of March 31, 2016 and December 31, 2015 was $17.4 million and $16.3 million, respectively, of inventory held at Renin and BBX Sweet Holdings.  

   



8.    Real Estate Held-For-Sale and Real Estate Held-For-Investment at BBX Capital



BBX Capital’s real estate has been acquired through foreclosures, settlements, or deeds in lieu of foreclosure.  Upon acquisition by BBX Capital, real estate is classified as real estate held-for-sale or real estate held-for investment.  Real estate is classified as held-for-sale when the property is available for immediate sale in its present condition, BBX Capital’s management commits to a plan to sell the property, an active program to locate a buyer has been initiated, the property is being marketed at a price that is reasonable in relation to its current fair value and it is likely that a sale will be completed within one year.  When the property does not meet the real estate held-for-sale criteria, the real estate is classified as held-for-investment.

---

 



The following table presents real estate held-for-sale at BBX Capital grouped in the following classifications (in thousands):









The following table presents real estate held-for-investment grouped in the following classifications (in thousands):







The amount of interest capitalized to land held for investment associated with real estate development improvements for the three months ended March 31, 2015 was $186,000.  There was no interest capitalized to land held for investment for the three months ended March 31, 2016. 



The following table presents the activity in real estate held-for-sale and held-for-investment for the three months ended March 31, 2016 and 2015 (in thousands):









---

 

The following table presents the real estate held-for-sale valuation allowance activity for the three months ended March 31, 2016 and 2015 (in thousands):





(1)  Tax certificate impairments are not included.





9.     Debt



Notes Payable and Other Borrowings



BFC Financial



During July 2015, BFC entered into a Loan and Security Agreement and related agreements, including a Pledge Agreement (as amended in March 2016), with Stifel Bank & Trust, which allows for borrowings by the Company of up to $10.0 million on a revolving basis. Amounts borrowed under the facility will accrue interest at the lender’s prime rate plus 5.0% or one-month LIBOR plus 7.5%, at the option of the Company upon a drawdown of the facility. Payments of interest for prime rate advances are payable quarterly in arrears and for LIBOR advances are payable at the end of each one-month LIBOR interest period. Additional fees include an annual 0.5% fee on any unused portion of the facility. Borrowings under the facility will be secured by shares of Class A Common Stock of BBX Capital held by BFC in an amount such that the principal balance outstanding under the facility will not exceed 40% of the fair market value of the pledged BBX Capital shares based on the closing price of BBX Capital’s Class A Common Stock on the New York Stock Exchange. As of March 31, 2016, BFC had not drawn down any borrowings under the Loan and Security Agreement. 



---

 

The table below sets forth the balances of the lines-of-credit and notes payable facilities of Bluegreen (other than receivable-backed notes payable) and notes payable of BBX Capital as of March 31, 2016 and December 31, 2015 (dollars in thousands):











See Note 13 to the Company’s financial statements included in the 2015 Annual Report for additional information regarding each of the above listed lines of credit and notes payable.



Bluegreen  



Bluegreen has outstanding borrowings with various financial institutions and other lenders, which have been used to finance the acquisition and development of Bluegreen’s inventory and to fund Bluegreen’s operations.  There were no new debt issuances or significant changes related to Bluegreen’s non-receivable-backed notes payable or lines of credit during the three months ended March 31, 2016.



---

 

Receivable-Backed Notes Payable



The table below sets forth information regarding Bluegreen’s receivable-backed notes payable facilities as of March 31, 2016 and December 31, 2015 (dollars in thousands):







New debt issuances and significant changes related to Bluegreen’s receivable-backed notes payable facilities during 2016 are described below: 



Liberty Bank Facility.  In March 2016, Bluegreen repaid $24.2 million, including accrued interest, under the facility in connection with the 2016 Term Securitization described below.



BB&T/DZ Purchase Facility.  Bluegreen has a timeshare notes receivable purchase facility (the “BB&T/DZ Purchase Facility”) with Branch Banking and Trust Company (“BB&T”) and DZ Bank AG Deutsche Zentral- Genossenschaftsbank, Frankfurt AM Main (“DZ”).  All amounts outstanding under the facility were repaid in March 2016 in connection with the 2016 Term Securitization described below.  As of March 31, 2016, the facility was still available for use, subject to its terms and conditions.



2007 Term Securitization.  In connection with the 2016 Term Securitization described below, during March 2016, Bluegreen repaid in full the notes payable issued as part of the 2007 Term Securitization with the issuance of the 2016 Term Securitization described below.  Accordingly, the related unamortized debt issuance costs of $0.3 million were written off during the first quarter of 2016.



---

 

2008 Term Securitization.    In April 2016, Bluegreen repaid in full the notes payable issued in connection with the 2008 Term Securitization.  Accordingly, the related unamortized debt issuance costs of $0.2 million were written off during the second quarter of 2016. 



2016 Term Securitization.    On March 17, 2016, Bluegreen completed a private offering and sale of $130.5 million of investment grade, timeshare receivable-backed notes (the “2016 Term Securitization”).  The 2016 Term Securitization consisted of the issuance of two tranches of timeshare receivable-backed notes (the “Notes”): $95.7 million of Class A and  $34.8 million of Class B notes with note interest rates of 3.17% and 3.86%, respectively, which blended to an overall weighted average note interest rate of 3.35%.  The gross advance rate for this transaction was 90%.  The Notes mature in July 2031.



The amount of the timeshare receivables sold or to be sold by the BXG Receivable Note Trust 2016 (the “2016 Trust”) is $145.0 million, $122.3 million of which was sold to the 2016 Trust at closing, $8.7 million of which was subsequently sold to the 2016 Trust during the three months ended March 31, 2016, and $14.0 million of which is expected to be sold to the Trust by July 26, 2016.  The gross proceeds of such sales to the 2016 Trust, including expected future sales, are $130.5 million.  A portion of the proceeds received to date were used to: repay the BB&T/DZ Purchase Facility a total of $49.0 million, representing all amounts outstanding (including accrued interest); repay $24.2 million under the Liberty Bank Facility, which includes accrued interest; capitalize a reserve fund; and pay fees and expenses associated with the transaction.  Prior to the closing of the 2016 Term Securitization, Bluegreen, as servicer, funded $11.3 million in connection with the servicer redemption of the notes related to BXG Receivables Note Trust 2007, and certain of the timeshare loans in such trust were sold to the 2016 Trust in connection with the 2016 Term Securitization.  The remainder of the gross proceeds from the 2016 Term Securitization of $42.1 million are expected to be used by Bluegreen for general corporate purposes. 



While ownership of the timeshare receivables included in the 2016 Term Securitization is transferred and sold for legal purposes, the transfer of these timeshare receivables is accounted for as a secured borrowing for financial accounting purposes.  Accordingly, no gain or loss was recognized as a result of this transaction.  Subject to the performance of the collateral, Bluegreen will receive any excess cash flows generated by the receivables transferred under the 2016 Term Securitization (excess meaning after payments of customary fees, interest, and principal under the 2016 Term Securitization) on a pro-rata basis as borrowers make payments on their timeshare loans.



See Note 13 to the Consolidated Financial Statements included in the 2015 Annual Report for additional information with respect to Bluegreen’s receivable backed notes payable.



As of March 31, 2016, Bluegreen was in compliance with all financial debt covenants under its debt instruments.



BBX Capital 



There were no new debt issuances or significant changes related to BBX Capital’s lines of credit or notes payable during the three months ended March 31, 2016. However, in February 2016, BBX Capital executed Addendum No. 1 to the Iberiabank Business Loan Agreement.  The addendum replaced the debt service coverage financial covenant in this $5.0 million line of credit with a working capital to debt ratio financial covenant.



Junior Subordinated Debentures 



Woodbridge and Bluegreen Junior Subordinated Debentures

Woodbridge and Bluegreen have each formed statutory business trusts which issued trust preferred securities and invested the proceeds thereof in junior subordinated debentures of Woodbridge and Bluegreen, respectively. These trusts are variable interest entities in which Woodbridge and Bluegreen, respectively, are not the primary beneficiaries as defined by the accounting guidance for the consolidation of variable interest entities. Accordingly, the Company and its subsidiaries do not consolidate the operations of these business trusts; instead, the trusts are accounted for under the equity method of accounting. Interest on the junior subordinated debentures and distributions on the trust preferred securities are payable quarterly in arrears at the same interest rate. There were no significant changes related to Woodbridge’s $83.3  million of junior subordinated debentures (net of $1.8 million of unamortized debt issuance costs) or Bluegreen’s $67.7 million of junior subordinated debentures (net of $40.8 million purchase accounting adjustment) during the three months ended March 31, 2016.   

---

 





10.    Income Taxes 



With the increase in BFC’s ownership interest in BBX Capital in connection with the purchase of additional shares of BBX Capital’s Class A Common Stock during April 2015, BFC files a consolidated group tax return which includes the operations of BBX Capital, Woodbridge and Bluegreen.   Prior to May 1, 2015, BFC, BBX Capital and Bluegreen filed separate tax returns with the Internal Revenue Service as BFC previously owned less than 80% of BBX Capital’s outstanding equity.



BFC’s combined effective income tax rate was approximately 41% for the three months ended March 31, 2016.  BFC’s effective tax rate was higher than the U.S. federal statutory rate primarily due to state income taxes, and non-deductible expenses partially offset by net income from noncontrolling interests in joint ventures.



Each of BFC and BBX Capital’s separate effective income tax rate was 0% for the three months ended March 31, 2015 as each company maintained a deferred tax valuation allowance against its net deferred tax assets.  Bluegreen’s separate effective income tax rate was 35% for the three months ended March 31, 2015.  Bluegreen’s effective tax rate differed from the U.S. federal statutory rate primarily due to state income taxes offset by net income from noncontrolling interests in joint ventures.



 Bluegreen



In August 2015, Bluegreen received notice from the Internal Revenue Service that its Income Tax Return for the year ended December 31, 2013 was selected for examination.  In September 2015, the examination was extended to include the tax year ended December 31, 2012.  In October 2015, the examination was further extended to include payroll taxes for the year ended December 31, 2013.  In April 2016, Bluegreen received notification from the Internal Revenue Service that the 2013 payroll tax examination was closed with no adjustments.  In May 2016, Bluegreen received notification from the Internal Revenue Service that the examination for the tax years ended December 31, 2013 and 2012 was closed with no adjustments.



Certain of Bluegreen’s state filings are under routine examination.  While there is no assurance as to the results of these examinations, Bluegreen does not currently anticipate any material adjustments in connection with these examinations.





11.    Commitments and Contingencies 



BFC, Wholly-Owned Subsidiaries, and Woodbridge (Parent Company)



In the ordinary course of business, BFC and its subsidiaries are parties to lawsuits as plaintiff or defendant involving its operations and activities. Reserves are accrued for amounts in which it is probable that a loss will be incurred and the amount of such loss can be reasonably estimated.  As of December 31, 2015,  BFC accrued $0.1 million related to the Woodbridge appraisal rights litigation, which amount was paid during the three months ended March 31, 2016.  BFC did not have any accruals for legal proceedings as of March 31, 2016  



Liabilities arising from pending litigation matters discussed herein,  in excess of the amounts currently accrued, if any, are not expected to have a material impact on BFC’s financial statements. However, due to the significant uncertainties involved in legal matters, losses in excess of amounts accrued may be incurred and could be material to BFC’s financial statements.    



Bluegreen



In the ordinary course of business, Bluegreen becomes subject to claims or proceedings from time to time relating to the purchase, sale, marketing, or financing of VOIs or Bluegreen’s other business activities.  Bluegreen is also subject to certain matters relating to the Bluegreen Communities’ business, substantially all of the assets of which

---

 

were sold on May 4, 2012.  Additionally, from time to time, Bluegreen becomes involved in disputes with existing and former employees, vendors, taxing jurisdictions and various other parties.  From time to time in the ordinary course of business, Bluegreen also receives individual consumer complaints, as well as complaints received through regulatory and consumer agencies, including Offices of State Attorneys General.  Bluegreen takes these matters seriously and attempts to resolve any such issues as they arise.  Unless otherwise described herein, Bluegreen believes that these claims are proceedings incidental to and in the ordinary course of its business.



Reserves are accrued for matters in which Bluegreen’s management believes it is probable that a loss will be incurred and the amount of such loss can be reasonably estimated.  Bluegreen’s management does not believe that the aggregate liability relating to known contingencies in excess of the aggregate amounts accrued will have a material impact on its results of operations or financial condition.  However, litigation is inherently uncertain.  The actual costs of resolving legal claims may be substantially higher than the amounts accrued for these claims and may have a material adverse impact on Bluegreen’s results of operations or financial condition.



Bluegreen’s management is not at this time able to estimate a range of reasonably possible losses with respect to matters in which it is reasonably possible that a loss will occur.  In certain matters, Bluegreen’s management is unable to estimate the loss or reasonable range of loss until additional developments provide information sufficient to support an assessment of the loss or range of loss.  Frequently in these matters, the claims are broad and the plaintiffs have not quantified or factually supported their claim.



Commitment to Former Bluegreen CEO



In June 2015, Bluegreen entered into certain agreements with its former CEO, Mr. Maloney, who resigned from Bluegreen on May 27, 2015.  Under the terms of these agreements, Mr. Maloney received $3.8 million and will be paid an additional $2.9 million over a 2 year period in exchange for ongoing services during the term of the agreements. 



BBX Capital



BBX Capital and its consolidated subsidiaries are parties to lawsuits as plaintiff or defendant involving its collections, lending and prior period tax certificate activities.   Although BBX Capital believes it has meritorious defenses in all current legal actions, the outcome of litigation matters and the timing of ultimate resolution are uncertain and inherently difficult to predict.



BBX Capital accrues reserves for matters in which it is probable that a loss will be incurred and the amount of such loss can be reasonably estimated.  The actual costs of resolving these legal claims may be substantially higher or lower than the amounts accrued for these claims.    There were no reserves by BBX Capital for legal matters accrued as of March 31, 2016.



In certain matters BBX Capital is unable to estimate the loss or reasonable range of loss until additional developments in the case provide information sufficient to support an assessment of the loss or range of loss. Frequently in these matters, the claims are broad and the plaintiffs have not quantified or factually supported the claim.



Liabilities arising from BBX Capital’s litigation matters discussed below, in excess of the amounts currently accrued, if any, are not expected to have a material impact on BFC’s financial statements. However, due to the significant uncertainties involved in these legal matters, losses in excess of amounts accrued may be incurred and an adverse outcome in these matters could be material to BFC’s financial statements.    



The following is a description of certain ongoing or recently concluded litigation matters:



Securities and Exchange Commission Complaint



On January 18, 2012, the SEC brought an action in the United States District Court for the Southern District of Florida against BBX Capital and Alan B. Levan, BBX Capital’s Chairman and Chief Executive Officer, alleging that they violated securities laws by not timely disclosing known adverse trends in BBX Capital’s commercial real

---

 

estate loans, selectively disclosing problem loans and engaging in improper accounting treatment of certain specific loans which may have resulted in a material understatement of its net loss in BBX Capital’s Annual Report on Form 10-K for the year ended December 31, 2007.  Further, the complaint alleges that Mr. Alan B. Levan intentionally misled investors in related earnings calls.  The Court denied summary judgment as to most issues, but granted the SEC’s motion for partial summary judgment that certain statements in one of Alan Levan’s answers on a July 25, 2007 investor conference call were false. 



On December 15, 2014, after a six-week trial, the jury found in favor of BBX Capital and Alan B. Levan with respect to the disclosures made during an April 2007 earnings conference call and in BBX Capital’s quarterly reports on Form 10-Q for the 2007 first and second quarters, but found that they had engaged in an act of fraud or deceit toward shareholders or prospective investors by making materially false statements knowingly or with severe recklessness (1) with respect to three statements in the July 25, 2007 conference call referenced above, and (2) by failing to classify certain loans as held-for sale in the 2007 Annual Report on Form 10-K.  The jury also found that Mr. Levan made or caused to be made false statements to the independent accountants regarding the held for sale issue.  



The SEC sought a final judgment: (i) permanently barring Alan B. Levan from serving as an officer or director of any SEC reporting company, (ii) imposing civil penalties of $5.2 million against BBX Capital and $1.56 million against Alan B. Levan; and (iii) permanently restraining BBX Capital and Alan B. Levan from violating securities laws.   On September 24, 2015, the court entered a final judgment denying the SEC’s request for a permanent bar from Mr. Levan serving as an officer or director of any public company, but instead ordered Mr. Levan barred from serving as an officer or director of any public company for a period of two years commencing on December 23, 2015.  The court also imposed monetary penalties against BBX Capital in the amount of $4,550,000 and monetary penalties against Mr. Levan in the amount of $1,300,000.  BBX Capital and Mr. Levan are appealing the final judgment to the Eleventh Circuit Court of Appeals.  Mr. Levan’s motion to the Eleventh Circuit Court of Appeals to stay the two year bar pending appeal of the court’s decision was denied.  As a result, effective December 22, 2015, Mr. Levan resigned as Chairman and Chief Executive Officer of BBX Capital, as Chairman, Chief Executive Officer and President of BFC, and as a director of BBX Capital and BFC. 



On January 14, 2015, BBX Capital received notice from its insurance carrier that, based upon its interpretation of the jury verdict in this action, the carrier does not believe it is obligated to advance further payments towards fees and costs incurred in connection with this action and that it reserves its right to obtain reimbursement of the amounts it previously advanced with respect to this action.  BBX Capital has received legal fee and cost reimbursements from its insurance carrier in connection with this action of approximately $5.8 million.    



BBX Capital guarantees certain obligations of its wholly-owned subsidiaries and unconsolidated real estate joint ventures as follows:









---

 









12.    Noncontrolling Interests



The following table summarizes the noncontrolling interests in the Company’s subsidiaries at ended March 31, 2016 and December 31, 2015 (in thousands):







The following table summarizes the income (loss) recognized with respect to the Company’s subsidiaries attributable to noncontrolling interests for the three months ended March 31, 2016 and 2015 (in thousands):









13.    Certain Relationships and Related Party Transactions



The Company may be deemed to be controlled by Alan B. Levan, the Company’s former Chairman, Chief Executive Officer and President, and John E. Abdo, who serves as Vice Chairman of the Company. Together, Mr. Alan Levan and Mr. Abdo may be deemed to beneficially own shares of the Company’s Class A Common Stock and Class B Common Stock representing approximately  76% of the Company’s total voting power.  Mr. Abdo is Vice Chairman of BBX Capital.  In addition, Mr. Abdo became Acting Chairman of Bluegreen during December 2015 following Mr. Alan Levan’s resignation from such position (as described below) after previously serving as Bluegreen’s Vice Chairman. In December 2015, Mr. Alan Levan resigned as Chairman, Chief Executive Officer and President of the Company, as Chairman and Chief Executive Officer of BBX Capital and as Chairman of Bluegreen.  Jarett S. Levan, Executive Vice President of BFC and President of BBX Capital and son of Alan B. Levan, was appointed Acting Chairman of the Board, Chief Executive Officer and President of the Company and Acting Chairman and Chief Executive Officer of BBX Capital upon Mr. Alan Levan’s resignation from such positions.  Further, Seth M. Wise, an executive officer and director of the Company, and Raymond S. Lopez, an executive

---

 

officer of the Company, are each executive officers of BBX Capital. The Company and BBX Capital own 54% and 46%, respectively, of the outstanding equity interests in Woodbridge, which is the sole shareholder of Bluegreen. 



On May 8, 2015, BFC, BBX Capital, Woodbridge, Bluegreen and their respective subsidiaries entered into an Agreement to Allocate Consolidated Income Tax Liability and Benefits pursuant to which, among other customary terms and conditions, the parties agreed to file consolidated federal tax returns.  The parties calculate their respective income tax liabilities and attributes as if each of them were a separate filer.  If any tax attributes are used by another party to the agreement to offset its tax liability, the party providing the benefit will receive an amount for the tax benefits realized.  Bluegreen paid BFC $5.4 million during the three months ended March 31, 2016 pursuant to the Agreement to Allocate Consolidated Income Tax Liability and Benefits.



For the three months ended March 31, 2016 and 2015, the Company paid Abdo Companies, Inc. approximately $77,000 in each period for certain management services. John E. Abdo, the Company’s Vice Chairman, is the principal shareholder and Chief Executive Officer of Abdo Companies, Inc.



Certain of BFC’s affiliates, including its executive officers, have independently made investments with their own funds in in investments that BFC has sponsored and in which BFC holds investments.





14.    Segment Reporting



Operating segments are defined as components of an enterprise about which separate financial information is available that is regularly reviewed by the chief operating decision maker in assessing performance and deciding how to allocate resources. Reportable segments consist of one or more operating segments with similar economic characteristics, products and services, production processes, type of customer, distribution system or regulatory environment. 



The information provided for segment reporting is based on internal reports utilized by management of the Company and its subsidiaries. The presentation and allocation of assets and results of operations may not reflect the actual economic costs of the segments as standalone businesses. If a different basis of allocation were utilized, the relative contributions of the segments might differ but the relative trends in the segments’ operating results would, in management's view, likely not be impacted.



The Company currently reports its results of operations through two reportable segments: Bluegreen and BBX Capital.     



The Company evaluates segment performance based on segment net income (loss).



Set forth below is summary information regarding the Company's reportable segments:



Bluegreen



Bluegreen markets, sells and manages real estate-based VOIs in resorts generally located in popular, high-volume, “drive-to” vacation destinations, which were developed or acquired by Bluegreen or are owned by others in which case Bluegreen earns fees for providing these services.  Bluegreen also earns fees by providing club and property owners’ association management services, mortgage servicing, VOI title services, reservation services, and construction design and development services. In addition, Bluegreen provides financing to credit-qualified individual purchasers of VOIs, which provides significant interest income.



BBX Capital



BBX Capital is involved in the acquisition, ownership and management of investments in real estate and real estate development projects, as well as investments in operating businesses. The BBX Capital reportable segment consists of the activities associated with managing the commercial loan portfolio, real estate properties and portfolio of charged off loans retained by BBX Capital as part of its sale of BankAtlantic to BB&T, as well as the activities of Renin Holdings, LLC and its subsidiaries (“Renin”) and BBX Sweet Holdings, LLC and its subsidiaries (“BBX

---

 

Sweet Holdings”). BBX Capital also holds a 46% equity interest in Woodbridge, which owns 100% of Bluegreen.  BBX Capital’s earnings attributable to its interest in Woodbridge are eliminated in consolidation.



The table below sets forth the Company’s segment information as of and for the three months ended March 31, 2016 (in thousands):









---

 

The table below sets forth the Company’s segment information as of and for the three months ended March 31, 2015 (in thousands):





  















---

 

15.    Fair Value Measurement 



Assets and liabilities on a recurring basis



There were no significant assets or liabilities measured at fair value on a recurring basis in the Company’s financial statements as of March 31, 2016 or December 31, 2015.  



Assets on a non-recurring basis



The following table presents major categories of assets measured at fair value on a non-recurring basis as of March 31, 2016 (in thousands):











Quantitative information about significant unobservable inputs within Level 3 on major categories of assets measured at fair-value on a non-recurring basis as of March 31, 2016 is as follows (Fair Value in thousands):











---

 

The following table presents major categories of assets measured at fair value on a non-recurring basis as of March 31, 2015 (in thousands):











Quantitative information about significant unobservable inputs within Level 3 on major categories of assets measured at fair value on a non-recurring basis as of March 31, 2015 was as follows (Fair Value in thousands):









Liabilities on a non-recurring basis



There were no significant liabilities measured at fair value on a non-recurring basis in the Company’s financial statements.  



Loans Measured For Impairment



Impaired loans are generally valued based on the fair value of the underlying collateral less cost to sell as the majority of BBX Capital’s loans are collateral dependent.  The fair value of BBX Capital’s loans may significantly increase or decrease based on changes in property values as its loans are primarily secured by real estate.  BBX Capital primarily uses third party appraisals to assist in measuring non-homogenous impaired loans and broker price opinions to assist in measuring homogenous impaired loans. The appraisals generally use the market or income approach valuation technique and use market observable data to formulate an estimate of the fair value of the loan’s collateral.  However, the appraiser uses professional judgment in determining the fair value of the collateral, and BBX Capital may also adjust these values for changes in market conditions subsequent to the appraisal date.  When

---

 

current appraisals are not available for certain loans, BBX Capital uses its judgment on market conditions to adjust the most current appraisal. As a consequence, the calculation of the fair value of the collateral is considered a Level 3 input.  BBX Capital generally recognizes impairment losses based on third party broker price opinions when impaired homogenous loans become 120 days delinquent. These third party valuations from real estate professionals also use Level 3 inputs in determining fair values.  The observable market inputs used to fair value loans include comparable property sales, rent rolls, market capitalization rates on income producing properties, risk adjusted discount rates and foreclosure time frames and exposure periods. 



Real Estate Held-for-Sale and Held-for-Investment



Real estate is generally valued using third party appraisals or broker price opinions.  These appraisals generally use the market or income approach valuation techniques and use market observable data to formulate an estimate of the fair value of the properties.  The market observable data typically consists of comparable property sales, rent rolls, market capitalization rates on income producing properties and risk adjusted discount rates.  The above inputs are considered Level 3 inputs as the appraiser uses professional judgement in the calculation of the fair value of the properties.   



Loans Held-for-Sale



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



---

 

Financial Disclosures about Fair Value of Financial Instruments



The following tables present information for financial instruments as of March 31, 2016 and December 31, 2015 (in thousands):





















---

 

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



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



The fair value of BBX Capital’s loans is calculated by using an income approach with Level 3 inputs.  The fair value of loans is estimated by discounting forecasted cash flows using estimated market discount rates that reflect the interest rate and credit risk inherent in the loan portfolio.  BBX Capital’s management assigns a credit risk premium and an illiquidity adjustment to these loans based on delinquency status.  The fair value of collateral dependent loans is estimated using an income approach with Level 3 inputs utilizing the fair value of the collateral adjusted for operating and selling expenses and discounted over the estimated holding period based on the market risk inherent in the property. 



The fair value of Bluegreen’s notes receivable and BFC’s notes receivable from preferred shareholders are estimated using Level 3 inputs and is based on estimated future cash flows considering contractual payments and estimates of prepayments and defaults, discounted at a market rate. 



The fair value of BFC’s shares subject to mandatory redemption is calculated using the income approach with Level 3 inputs discounting the estimated cash flows at a market discount rate.



The amounts reported in the condensed consolidated statements of financial condition relating to Bluegreen’s notes and mortgage notes payable and other borrowings, including receivable-backed notes payable, approximate fair value for indebtedness that provides for variable interest rates.  The fair value of Bluegreen’s fixed rate, receivable-backed notes payable was determined using Level 3 inputs by discounting the net cash outflows estimated to be used to repay the debt.  These obligations are to be satisfied using the proceeds from the consumer loans that secure the obligations.  The fair value of BBX Capital’s notes payable is measured using the income approach with Level 3 inputs obtained by discounting the forecasted cash flows based on estimated market rates.



The fair value of junior subordinated debentures is estimated using Level 3 inputs based on the contractual cash flows discounted at a market rate or based on market price quotes from the over-the-counter bond market.