##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 
 FORM 10Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2004 OR o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from _______ to _______ Commission file number 34-027228 BankAtlantic Bancorp, Inc.  Florida
(State or other jurisdiction of
incorporation or organization)
    
    65-0507804
(I.R.S. Employer
Identification No.)1750 East Sunrise Boulevard
Ft. Lauderdale, Florida
(Address of principal executive offices)
    
    33304
(Zip Code)
 (954) 760-5000
(Registrants telephone number, including area code) Not Applicable
(Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes   x   No   
o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the
Exchange Act) Yes   x   No   
o Indicate the number of shares outstanding of each of the issuers classes of
common stock as of the latest practicable date. Outstanding atTitle of Each Class
    
    November 1, 2004Class A Common Stock, par value $0.01 per share
    
    
    55,001,716Class B Common Stock, par value $0.01 per share
    
    
    4,876,124




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TABLE OF CONTENTS  Section 302 Certification of CFOSection 302 Certification of CEOSection 906 Certification of CEOSection 906 Certification of CFO    Table of Contents  TABLE OF CONTENTS PageReferencePart I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    1-28Consolidated Statements of Financial Condition  September 30, 2004 and 2003 and December 31, 2003   Unaudited
    
    
    4Consolidated Statements of Operations  For the Three and Nine Months Ended September 30, 2004 and 2003  Unaudited
    
    
    5-6Consolidated Statements of Stockholders Equity and Comprehensive Income  For the Nine Months Ended September 30, 2004 and 2003  Unaudited
    
    
    7Consolidated Statements of Cash Flows  For the Nine Months Ended September 30, 2004 and 2003  Unaudited
    
    
    8-9Notes to Consolidated Financial Statements  Unaudited
    
    
    10-28Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    29-46Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    47-50Item 4.
    
    Controls and Procedures
    
    
    51Part II.
    
    OTHER INFORMATIONItem 2.
    
    Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
    
    
    52Item 6.
    
    Exhibits
    
    
    52Signatures
    
    
    53




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Part I. FINANCIAL INFORMATION BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION  UNAUDITED
 
 Item 1. Financial Statements September 30,
    
    December 31,
    
    September 30,(In thousands, except share data)
    
    2004
    
    2003
    
    2003ASSETSCash and due from depository institutions
    
    $
    119,606
    
    
    $
    119,882
    
    
    $
    139,096Short-term investments
    
    
    26,015
    
    
    
    
    
    
    
    4,212Securities owned (at fair value)
    
    
    111,944
    
    
    
    124,565
    
    
    
    87,837Securities available for sale (at fair value)
    
    
    679,644
    
    
    
    358,511
    
    
    
    354,101Investment securities and tax certificates (approximate fair value: $159,944,
$192,706 and $159,762)
    
    
    159,944
    
    
    
    192,706
    
    
    
    155,550Federal Home Loan Bank stock, at cost which approximates fair value
    
    
    62,425
    
    
    
    40,325
    
    
    
    56,987Loans receivable, net of allowance for loan losses of $48,778, $45,595 and $48,202
    
    
    4,176,571
    
    
    
    3,686,153
    
    
    
    3,739,638Accrued interest receivable
    
    
    30,126
    
    
    
    27,866
    
    
    
    29,109Real estate held for development and sale
    
    
    25,521
    
    
    
    21,803
    
    
    
    256,920Investments and advances to unconsolidated subsidiaries
    
    
    7,910
    
    
    
    7,910
    
    
    
    102,590Office properties and equipment, net
    
    
    115,809
    
    
    
    93,577
    
    
    
    93,334Deferred tax asset, net
    
    
    18,413
    
    
    
    22,999
    
    
    
    33,684Goodwill
    
    
    76,674
    
    
    
    76,674
    
    
    
    76,674Core deposit intangible asset
    
    
    10,695
    
    
    
    11,985
    
    
    
    12,424Due from clearing agent
    
    
    14,478
    
    
    
    
    
    
    
    Other assets
    
    
    42,837
    
    
    
    46,593
    
    
    
    54,904Total assets
    
    $
    5,678,612
    
    
    $
    4,831,549
    
    
    $
    5,197,060LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:DepositsInterest free checking
    
    $
    781,916
    
    
    $
    645,036
    
    
    $
    594,685NOW accounts
    
    
    590,051
    
    
    
    533,888
    
    
    
    480,837Savings accounts
    
    
    252,408
    
    
    
    208,966
    
    
    
    202,355Insured money fund savings
    
    
    893,315
    
    
    
    865,590
    
    
    
    878,281Certificate accounts
    
    
    724,601
    
    
    
    804,662
    
    
    
    826,045Total deposits
    
    
    3,242,291
    
    
    
    3,058,142
    
    
    
    2,982,203Advances from FHLB
    
    
    1,249,112
    
    
    
    782,205
    
    
    
    956,820Securities sold under agreements to repurchase
    
    
    200,550
    
    
    
    138,809
    
    
    
    143,230Federal funds purchased
    
    
    86,300
    
    
    
    
    
    
    
    Subordinated debentures, notes and bonds payable
    
    
    36,780
    
    
    
    36,595
    
    
    
    146,696Junior subordinated debentures
    
    
    263,266
    
    
    
    263,266
    
    
    
    263,218Securities sold but not yet purchased
    
    
    31,760
    
    
    
    37,813
    
    
    
    15,089Due to clearing agent
    
    
    
    
    
    
    8,583
    
    
    
    6,086Other liabilities
    
    
    109,064
    
    
    
    92,684
    
    
    
    170,049Total liabilities
    
    
    5,219,123
    
    
    
    4,418,097
    
    
    
    4,683,391Stockholders equity:Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued
and outstanding
    
    
    
    
    
    
    
    
    
    
    Class A common stock, $.01 par value, authorized 80,000,000 shares;
issued and outstanding 54,997,960, 54,396,824 and 54,064,076 shares
    
    
    550
    
    
    
    544
    
    
    
    541Class B common stock, $.01 par value, authorized 45,000,000 shares;
issued and outstanding 4,876,124, 4,876,124 and 4,876,124 shares
    
    
    49
    
    
    
    49
    
    
    
    49Additional paid-in capital
    
    
    258,980
    
    
    
    259,770
    
    
    
    256,782Unearned compensation - restricted stock grants
    
    
    (1,046
    )
    
    
    (1,178
    )
    
    
    (1,223
    )Retained earnings
    
    
    195,765
    
    
    
    148,311
    
    
    
    258,197Total stockholders equity before accumulated other comprehensive
income (loss)
    
    
    454,298
    
    
    
    407,496
    
    
    
    514,346Accumulated other comprehensive income (loss)
    
    
    5,191
    
    
    
    5,956
    
    
    
    (677
    )Total stockholders equity
    
    
    459,489
    
    
    
    413,452
    
    
    
    513,669Total liabilities and stockholders equity
    
    $
    5,678,612
    
    
    $
    4,831,549
    
    
    $
    5,197,060
 See Notes to Consolidated Financial Statements  Unaudited 4




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BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF OPERATIONS  UNAUDITED
 For the Three Months
    
    For the Nine Months(In thousands, except share and per share data)
    
    Ended September 30,
    
    Ended September 30,2004
    
    2003
    
    2004
    
    2003Interest income:Interest and fees on loans and leases
    
    $
    52,661
    
    
    $
    50,668
    
    
    $
    149,631
    
    
    $
    157,799Interest and dividends on securities available for sale
    
    
    4,974
    
    
    
    4,598
    
    
    
    13,178
    
    
    
    20,941Interest on tax exempt securities
    
    
    1,329
    
    
    
    
    
    
    
    1,972
    
    
    
    Interest and dividends on other investment securities
    
    
    4,560
    
    
    
    4,653
    
    
    
    12,817
    
    
    
    14,867Broker dealer interest
    
    
    2,849
    
    
    
    2,892
    
    
    
    8,511
    
    
    
    7,390Total interest income
    
    
    66,373
    
    
    
    62,811
    
    
    
    186,109
    
    
    
    200,997Interest expense:Interest on deposits
    
    
    7,060
    
    
    
    7,758
    
    
    
    20,821
    
    
    
    28,685Interest on advances from FHLB
    
    
    9,364
    
    
    
    15,025
    
    
    
    26,231
    
    
    
    45,632Interest on securities sold under agreements to
repurchase and federal funds purchased
    
    
    953
    
    
    
    558
    
    
    
    1,835
    
    
    
    2,625Interest on subordinated debentures, notes and
bonds payable and junior subordinated debentures
    
    
    5,034
    
    
    
    4,257
    
    
    
    14,773
    
    
    
    12,609Capitalized interest on real estate development
    
    
    (355
    )
    
    
    (286
    )
    
    
    (1,008
    )
    
    
    (881
    )Total interest expense
    
    
    22,056
    
    
    
    27,312
    
    
    
    62,652
    
    
    
    88,670Net interest income
    
    
    44,317
    
    
    
    35,499
    
    
    
    123,457
    
    
    
    112,327Provision for (recovery from) loan losses
    
    
    1,717
    
    
    
    (1,076
    )
    
    
    (1,105
    )
    
    
    1,264Net interest income after provision for
(recovery from) loan losses
    
    
    42,600
    
    
    
    36,575
    
    
    
    124,562
    
    
    
    111,063Non-interest income:Investment banking income
    
    
    51,792
    
    
    
    49,992
    
    
    
    176,162
    
    
    
    152,222Service charges on deposits
    
    
    13,493
    
    
    
    10,925
    
    
    
    37,798
    
    
    
    29,088Other service charges and fees
    
    
    5,819
    
    
    
    4,625
    
    
    
    16,887
    
    
    
    14,614Income from real estate operations
    
    
    900
    
    
    
    66
    
    
    
    1,888
    
    
    
    5,288Income from unconsolidated subsidiaries
    
    
    123
    
    
    
    106
    
    
    
    359
    
    
    
    306Securities activities, net
    
    
    2
    
    
    
    (336
    )
    
    
    77
    
    
    
    29Litigation settlement
    
    
    
    
    
    
    
    
    
    
    22,840
    
    
    
    Other
    
    
    3,045
    
    
    
    2,415
    
    
    
    8,873
    
    
    
    6,925Total non-interest income
    
    
    75,174
    
    
    
    67,793
    
    
    
    264,884
    
    
    
    208,472Non-interest expense:Employee compensation and benefits
    
    
    58,992
    
    
    
    55,318
    
    
    
    189,710
    
    
    
    170,145Occupancy and equipment
    
    
    12,097
    
    
    
    10,161
    
    
    
    33,393
    
    
    
    29,514Advertising and promotion
    
    
    4,757
    
    
    
    2,988
    
    
    
    15,081
    
    
    
    9,614Amortization of intangible assets
    
    
    425
    
    
    
    439
    
    
    
    1,289
    
    
    
    1,332Cost associated with debt redemption
    
    
    
    
    
    
    2,040
    
    
    
    11,741
    
    
    
    3,688Professional fees
    
    
    4,356
    
    
    
    4,238
    
    
    
    9,703
    
    
    
    11,068Communications
    
    
    2,867
    
    
    
    2,822
    
    
    
    9,226
    
    
    
    10,867Floor broker and clearing fees
    
    
    2,143
    
    
    
    2,328
    
    
    
    7,383
    
    
    
    6,722Other
    
    
    8,980
    
    
    
    8,149
    
    
    
    27,007
    
    
    
    28,583Total non-interest expense
    
    
    94,617
    
    
    
    88,483
    
    
    
    304,533
    
    
    
    271,533Income from continuing operations before income taxes
    
    
    23,157
    
    
    
    15,885
    
    
    
    84,913
    
    
    
    48,002Provision for income taxes
    
    
    8,466
    
    
    
    5,741
    
    
    
    31,438
    
    
    
    17,231Income from continuing operations
    
    
    14,691
    
    
    
    10,144
    
    
    
    53,475
    
    
    
    30,771Discontinued operations, net of tax of $5.0 million
and $10.8 million
    
    
    
    
    
    
    8,364
    
    
    
    
    
    
    
    19,304Net income
    
    $
    14,691
    
    
    $
    18,508
    
    
    $
    53,475
    
    
    $
    50,075
 See Notes to Consolidated
Financial Statements  Unaudited (Continued) 5




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BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS  UNAUDITED
 For the Three Months
    
    For the Nine MonthsEnded September 30,
    
    Ended September 30,2004
    
    2003
    
    2004
    
    2003Earnings per shareBasic earnings per share from continuing operations
    
    $
    0.25
    
    
    $
    0.17
    
    
    $
    0.90
    
    
    $
    0.53Basic earnings per share from discontinued operations
    
    
    
    
    
    
    0.15
    
    
    
    
    
    
    
    0.33Basic earnings per share
    
    $
    0.25
    
    
    $
    0.32
    
    
    $
    0.90
    
    
    $
    0.86Diluted earnings per share from continuing operations
    
    $
    0.23
    
    
    $
    0.16
    
    
    $
    0.84
    
    
    $
    0.50Diluted earnings per share from discontinued operations
    
    
    
    
    
    
    0.14
    
    
    
    
    
    
    
    0.30Diluted earnings per share
    
    $
    0.23
    
    
    $
    0.30
    
    
    $
    0.84
    
    
    $
    0.80Basic weighted average number of common shares outstanding
    
    
    59,687,354
    
    
    
    58,646,254
    
    
    
    59,430,463
    
    
    
    58,381,370Diluted weighted average number of common and common
equivalent shares outstanding
    
    
    63,109,757
    
    
    
    61,343,946
    
    
    
    63,026,141
    
    
    
    62,475,859Cash dividends per Class A share
    
    $
    0.035
    
    
    $
    0.033
    
    
    $
    0.101
    
    
    $
    0.095Cash dividends per Class B share
    
    $
    0.035
    
    
    $
    0.033
    
    
    $
    0.101
    
    
    $
    0.095
 See Notes to Consolidated Financial Statements  Unaudited 6




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BANKATLANTIC BANCORP, INC. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME
 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2004  UNAUDITED
 Unearned
    
    Accumul-Compen-
    
    atedAddi-
    
    
    
    
    
    sation
    
    OtherCompre-
    
    
    
    
    
    tional
    
    
    
    
    
    Restricted
    
    Compre-hensive
    
    Common
    
    Paid-in
    
    Retained
    
    Stock
    
    hensive(In thousands)
    
    Income
    
    Stock
    
    Capital
    
    Earnings
    
    Grants
    
    Income (loss)
    
    TotalBALANCE, DECEMBER 31, 2002
    
    
    
    
    
    $
    583
    
    
    $
    252,699
    
    
    $
    213,692
    
    
    $
    (1,209
    )
    
    $
    3,569
    
    
    $
    469,334Net income
    
    $
    50,075
    
    
    
    
    
    
    
    
    
    
    
    50,075
    
    
    
    
    
    
    
    
    
    
    
    50,075Other comprehensive income, net of tax:Unrealized loss on securities available for
sale (less income tax benefit of $4,596)
    
    
    (8,118
    )Minimum pension liability (less income tax
benefit of $1,436)
    
    
    2,552Unrealized loss associated with investment
in Bluegreen Corporation
(less income tax provision of $484)
    
    
    769Gain associated with cash flow hedges
(less income tax benefit of $353)
    
    
    180Reclassification adjustment for cash
flow hedges
    
    
    390Reclassification adjustment for net gain
included in net income
    
    
    (19
    )Other comprehensive loss
    
    
    (4,246
    )Comprehensive income
    
    $
    45,829Dividends on Class A Common Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,109
    )
    
    
    
    
    
    
    
    
    
    
    (5,109
    )Dividends on Class B Common Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (461
    )
    
    
    
    
    
    
    
    
    
    
    (461
    )Issuance of Class A common stock
upon conversion of subordinated debentures
    
    
    
    
    
    
    
    
    
    
    211
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    211Issuance of Class A common stock
    
    
    
    
    
    
    7
    
    
    
    2,602
    
    
    
    
    
    
    
    (134
    )
    
    
    
    
    
    
    2,475Issuance of subsidiary common stock
    
    
    
    
    
    
    
    
    
    
    (20
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20
    )Tax effect relating to the exercise of
stock options
    
    
    
    
    
    
    
    
    
    
    1,290
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,290Amortization of unearned compensation -
restricted stock grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    120
    
    
    
    
    
    
    
    120Net change in accumulated other
comprehensive income, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,246
    )
    
    
    (4,246
    )BALANCE, September 30, 2003
    
    
    
    
    
    $
    590
    
    
    $
    256,782
    
    
    $
    258,197
    
    
    $
    (1,223
    )
    
    $
    (677
    )
    
    $
    513,669BALANCE, DECEMBER 31, 2003
    
    
    
    
    
    $
    593
    
    
    $
    259,770
    
    
    $
    148,311
    
    
    $
    (1,178
    )
    
    $
    5,956
    
    
    $
    413,452Net income
    
    $
    53,475
    
    
    
    
    
    
    
    
    
    
    
    53,475
    
    
    
    
    
    
    
    
    
    
    
    53,475Other comprehensive income (loss), net of tax:Unrealized losses on securities available
for sale
(less income tax benefit of $442,000)
    
    
    (716
    )Reclassification adjustment for net gain
included in net income
    
    
    (49
    )Other comprehensive income (loss)
    
    
    (765
    )Comprehensive income
    
    $
    52,710Dividends on Class A Common Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,528
    )
    
    
    
    
    
    
    
    
    
    
    (5,528
    )Dividends on Class B Common Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (493
    )
    
    
    
    
    
    
    
    
    
    
    (493
    )Issuance of Class A common stock
    
    
    
    
    
    
    12
    
    
    
    3,054
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,066Tax effect relating to the exercise of
stock options
    
    
    
    
    
    
    
    
    
    
    4,924
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,924Retirement of Class A Common Stock relating
to exercise of stock options
    
    
    
    
    
    
    (2
    )
    
    
    (2,714
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,716
    )Retirement of Class A Common Stock
    
    
    
    
    
    
    (4
    )
    
    
    (6,054
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,058
    )Amortization of unearned compensation -
restricted stock grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    132
    
    
    
    
    
    
    
    132Net change in accumulated other comprehensive
income, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (765
    )
    
    
    (765
    )BALANCE, September 30, 2004
    
    
    
    
    
    $
    599
    
    
    $
    258,980
    
    
    $
    195,765
    
    
    $
    (1,046
    )
    
    $
    5,191
    
    
    $
    459,489
 See Notes to Consolidated Financial Statements  Unaudited 7




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BankAtlantic Bancorp, Inc. 
 CONSOLIDATED STATEMENTS OF CASH FLOWS  UNAUDITED For the Nine Months(In thousands)
    
    Ended September 30,2004
    
    2003Income from continuing operations
    
    $
    53,475
    
    
    $
    30,771Income from discontinued operations
    
    
    
    
    
    
    19,304Adjustments to reconcile net income to net cash provided
in operating activities:Provision (recovery) for credit losses *
    
    
    (496
    )
    
    
    2,919Depreciation, amortization and accretion, net
    
    
    12,304
    
    
    
    14,512Amortization of intangible assets
    
    
    1,289
    
    
    
    1,332Change in real estate inventory
    
    
    (3,718
    )
    
    
    (32,651
    )Securities owned activities, net
    
    
    12,621
    
    
    
    (6,466
    )Cost associated with debt redemption
    
    
    11,741
    
    
    
    3,688Decrease in securities sold but not yet purchased
    
    
    (6,053
    )
    
    
    (19,133
    )Equity in earnings of unconsolidated subsidiaries
    
    
    (359
    )
    
    
    (6,525
    )Repayments from unconsolidated subsidiaries, net
    
    
    359
    
    
    
    2,029Originations and repayments of loans held for sale, net
    
    
    (85,099
    )
    
    
    8,703Proceeds from sales of loans held for sale
    
    
    94,812
    
    
    
    12,859Gains on securities activities
    
    
    (77
    )
    
    
    (29
    )Litigation settlement
    
    
    (22,840
    )
    
    
    Decrease in deferred tax asset, net
    
    
    5,028
    
    
    
    3,955Decrease (increase) in accrued interest receivable
    
    
    (2,260
    )
    
    
    4,875Increase in other assets
    
    
    (2,366
    )
    
    
    (7,087
    )Increase (decrease) in due to clearing agent
    
    
    (23,061
    )
    
    
    7,856Increase in other liabilities
    
    
    9,755
    
    
    
    56,894Net cash provided in operating activities
    
    
    55,055
    
    
    
    97,806Investing activities:Proceeds from redemption and maturities of investment
securities and tax certificates
    
    
    172,609
    
    
    
    162,681Purchase of investment securities and tax certificates
    
    
    (140,298
    )
    
    
    (124,757
    )Purchases of securities available for sale
    
    
    (539,238
    )
    
    
    (193,400
    )Proceeds from sales and maturities of securities available for sale
    
    
    244,608
    
    
    
    551,238(Purchases) redemptions of FHLB stock, net
    
    
    (22,100
    )
    
    
    7,956Net purchases and originations of loans and leases
    
    
    (498,795
    )
    
    
    (379,754
    )Net proceeds from sales of real estate owned
    
    
    2,460
    
    
    
    2,292Net additions to office property and equipment
    
    
    (30,526
    )
    
    
    (9,695
    )Net cash proceeds from the sale of Cumberland
    
    
    
    
    
    
    9,955Net cash (used) provided in investing activities
    
    
    (811,280
    )
    
    
    26,516Financing activities:Net increase in deposits
    
    
    184,149
    
    
    
    61,648Repayments of FHLB advances
    
    
    (314,740
    )
    
    
    (616,692
    )Proceeds from FHLB advances
    
    
    770,000
    
    
    
    275,000Net increase in securities sold under agreements
to repurchase
    
    
    61,741
    
    
    
    27,123Net increase in federal funds purchased
    
    
    86,300
    
    
    
    Repayment of notes and bonds payable
    
    
    (1,512
    )
    
    
    (148,718
    )Proceeds from notes and bonds payable
    
    
    1,697
    
    
    
    97,784Issuance of common stock
    
    
    2,160
    
    
    
    2,666Retirement of Class A common stock accepted as consideration
for the payment of the minimum withholding tax upon the
exercise of stock options
    
    
    (1,810
    )
    
    
    Issuance of junior subordinated debentures
    
    
    
    
    
    
    75,000Common stock dividends paid
    
    
    (6,021
    )
    
    
    (5,570
    )Net cash provided (used) in financing activities
    
    
    781,964
    
    
    
    (231,759
    )Increase (decrease) in cash and cash equivalents
    
    
    25,739
    
    
    
    (107,437
    )Cash and cash equivalents at beginning of period
    
    
    119,882
    
    
    
    250,745Cash and cash equivalents at end of period
    
    $
    145,621
    
    
    $
    143,308
 See Notes to Consolidated Financial Statements  Unaudited (Continued) 8




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BankAtlantic Bancorp, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS  UNAUDITED For the Nine Months(In thousands)
    
    Ended September 30,2004
    
    2003Cash paid for:Interest paid
    
    $
    63,653
    
    
    $
    98,479Income taxes paid
    
    
    26,275
    
    
    
    11,237Supplementary disclosure of non-cash investing and financing activities:Loans transferred to real estate owned
    
    
    1,106
    
    
    
    2,064Securities held to maturity transferred to available for sale
    
    
    
    
    
    
    14,505Net loan recoveries (charge-offs)
    
    
    4,288
    
    
    
    (350
    )Tax certificate net recoveries (charge-offs)
    
    
    311
    
    
    
    (158
    )Reduction in stockholders equity from the retirement of Class A
Common Stock obtained from litigation settlement
    
    
    6,058
    
    
    
    Decreases in current income taxes payable from the tax effect of fair value
of employee stock options
    
    
    4,924
    
    
    
    1,290Acquisition goodwill adjustments
    
    
    
    
    
    
    (734
    )Transfer of relocated branch to real estate held for sale
    
    
    
    
    
    
    1,000Issuance and retirement of Class A common stock accepted as
consideration for the exercise price of stock options
    
    
    906
    
    
    
    Change in accumulated other comprehensive income
    
    
    (765
    )
    
    
    (4,246
    )Change in deferred taxes on other comprehensive income
    
    
    (442
    )
    
    
    2,323Increase in investments in unconsolidated subsidiaries related to
deconsolidation of trusts formed to issue trust preferred securities
    
    
    
    
    
    
    7,843Increase in junior subordinated debentures related to trust deconsolidation
    
    
    
    
    
    
    7,843Transfer of guaranteed preferred beneficial interest in Companys Junior
subordinated debentures to junior subordinated debentures
    
    
    
    
    
    
    180,375Securities purchased pending settlement
    
    
    11,549
    
    
    
    Issuance of Class A Common Stock upon conversion of
subordinated debentures
    
    
    
    
    
    
    211
  *
    
    Provision for credit losses represents provision for loan losses, REO and tax certificates. See Notes to Consolidated Financial Statements  Unaudited 9




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##### Table of Contents



BankAtlantic Bancorp, Inc. 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  UNAUDITED 1. Presentation of Interim Financial Statements BankAtlantic Bancorp, Inc. (the Company) is a Florida-based financial
services holding company that offers a wide range of banking and investment
products and services through its subsidiaries. The Companys principal assets
include the capital stock of its subsidiaries: BankAtlantic, its banking
subsidiary; and RB Holdings, Inc., a holding company that wholly owns Ryan Beck
& Co., Inc. (Ryan Beck), a federally registered broker-dealer. BankAtlantic
is a federal savings bank headquartered in Fort Lauderdale, Florida, which
provides traditional retail banking services and a wide range of commercial
banking products and related financial services. Ryan Beck is a full service
broker-dealer headquartered in Florham Park, New Jersey which offers a wide
range of investment and insurance products for retail and institutional
clients. On December 31, 2003, the Company completed the spin-off of its wholly
owned real estate development subsidiary, Levitt Corporation (Levitt), and
during the year ended December 31, 2003, Ryan Beck sold two of its
subsidiaries, The GMS Group, LLC (GMS) and Cumberland Advisors
(Cumberland). Accordingly, the financial information of Levitt, GMS and
Cumberland is not included in the Consolidated Statements of Operations for the
three and nine months ended September 30, 2004 nor in the Consolidated
Statements of Financial Condition at September 30, 2004 and December 31, 2003.
For the comparable periods ended September 30, 2003, the financial information
of the above companies is included in the Consolidated Statement of Financial
Condition, Consolidated Statement of Stockholders Equity and Comprehensive
Income and Consolidated Statement of Cash Flows; but the information is
excluded from the revenues and expenses in the Consolidated Statements of
Operations and is instead included as discontinued operations. All significant inter-company balances and transactions have been
eliminated in consolidation. In managements opinion, the accompanying consolidated financial
statements contain such adjustments as are necessary to present fairly the
Companys consolidated financial condition at September 30, 2004, December 31,
2003 and September 30, 2003, the consolidated results of operations for the
three and nine months ended September 30, 2004 and 2003, the consolidated
stockholders equity and comprehensive income for the nine months ended
September 30, 2004 and 2003 and the consolidated cash flows for the nine months
ended September 30, 2004 and 2003. Such adjustments consisted only of normal
recurring items except for the litigation settlement gain during the nine
months ended September 30, 2004. The results of operations for the three and
nine months ended September 30, 2004 are not necessarily indicative of results
of operations that may be expected for the year ended December 31, 2004. The
consolidated financial statements and related notes are presented as permitted
by Form 10-Q and should be read in conjunction with the notes to the
consolidated financial statements appearing in the Companys Annual Report on
Form 10-K for the year ended December 31, 2003 and in the Companys Form 10-Q/A
and Form 10-Q for the three months ended March 31, 2004 and June 30, 2004,
respectively. Certain amounts for prior periods have been reclassified to conform to the
statement presentation for 2004. 2. Stock Based Compensation Under the provisions of SFAS No. 123, Accounting for Stock-Based
Compensation, there are two methods of accounting for stock options, the
intrinsic value method and the fair value method. The Company elects to value
its options under the intrinsic value method. As a consequence, the Company
accounts for its stock based compensation plans under the recognition and
measurement principles of Accounting Principles Board (APB) Opinion No. 25
and related interpretations. 10




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##### Table of Contents



BankAtlantic Bancorp, Inc. The following table illustrates the effect on net income and earnings per
share if the Company had applied the fair value recognition provisions of SFAS
No. 123 to stock-based employee compensation. For the Three Months
    
    For the Nine MonthsEnded September 30,
    
    Ended September 30,(In thousands, except share data)
    
    2004
    
    2003
    
    2004
    
    2003Pro forma net incomeNet income, as reported
    
    $
    14,691
    
    
    $
    18,508
    
    
    $
    53,475
    
    
    $
    50,075Add: Stock-based employee compensation
expense included in reported net
income, net of related income tax effects
    
    
    44
    
    
    
    44
    
    
    
    132
    
    
    
    186Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related income tax effects
    
    
    (566
    )
    
    
    (454
    )
    
    
    (1,248
    )
    
    
    (1,416
    )Pro forma net income
    
    
    14,169
    
    
    
    18,098
    
    
    
    52,359
    
    
    
    48,845Earnings per share:Basic as reported
    
    $
    0.25
    
    
    $
    0.32
    
    
    $
    0.90
    
    
    $
    0.86Basic pro forma
    
    
    0.24
    
    
    
    0.31
    
    
    
    0.88
    
    
    
    0.84Diluted as reported
    
    $
    0.23
    
    
    $
    0.30
    
    
    $
    0.84
    
    
    $
    0.80Diluted pro forma
    
    
    0.22
    
    
    
    0.29
    
    
    
    0.82
    
    
    
    0.78
 3. Litigation Settlement In March 2004, the Company recorded a $22.8 million litigation gain
pursuant to a settlement between the Company and its affiliates and a
technology company. In accordance with the terms of the settlement, the
Company sold its stock in the technology company to a third party investor
group for its original cost of $15 million and received from the investor group
and the technology company additional compensation for legal expenses and
damages consisting of $1.7 million in cash and 378,160 shares of the Companys
Class A common stock with a $6.1 million fair value that had been owned by the
technology company. The Company retired the Class A common stock on the
settlement date. 4. Advances from the Federal Home Loan Bank During the nine months ended September 30, 2004 and 2003,BankAtlantic
prepaid $108 million and $185 million of Federal Home Loan Bank (FHLB)
advances incurring prepayment penalties of $11.7 million and $2.0 million,
respectively. Of the $1.2 billion of FHLB advances outstanding at September 30, 2004,
$531 million mature between 2008 and 2011 and have a weighted average interest
rate of 5.41%, and $718 million mature between 2004 and 2006 and have a
weighted average interest rate of 1.83%. 11




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##### Table of Contents



BankAtlantic Bancorp, Inc. 5. Defined Benefit Pension Plan Under BankAtlantics Retirement Plan for the Employees of BankAtlantic
(the Plan), net periodic pension expense (benefit) incurred includes the
following components (in thousands): For the Three Months
    
    For the Nine MonthsEnded September 30,
    
    Ended September 30,2004
    
    2003
    
    2004
    
    2003Service cost benefits earned during the period
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest cost on projected benefit obligation
    
    
    383
    
    
    
    369
    
    
    
    1,149
    
    
    
    1,108Expected return on plan assets
    
    
    (500
    )
    
    
    (371
    )
    
    
    (1,500
    )
    
    
    (1,113
    )Amortization of unrecognized net gains and losses
    
    
    111
    
    
    
    294
    
    
    
    331
    
    
    
    883Net periodic pension expense (benefit)
    
    $
    (6
    )
    
    $
    292
    
    
    $
    (20
    )
    
    $
    878
 BankAtlantic did not contribute to the Plan during the nine months ended
September 30, 2004 and 2003. BankAtlantic is not required to contribute to the
Plan for the year ending December 31, 2004. 6. Securities Owned Ryan Becks securities owned activities were associated with sales and
trading activities conducted both as principal and as agent on behalf of
individual and institutional investor clients of Ryan Beck. Transactions as
principal involve making markets in securities which are held in inventory to
facilitate sales to and purchases from customers. Ryan Beck also realizes
gains and losses from proprietary trading activities. Ryan Becks securities owned (at fair value) consisted of the following
(in thousands): September 30,
    
    December 31,
    
    September 30,2004
    
    2003
    
    2003States and municipalities
    
    $
    13,334
    
    
    $
    9,903
    
    
    $
    18,308Corporations
    
    
    6,874
    
    
    
    5,159
    
    
    
    3,506U.S. Government and agencies
    
    
    45,781
    
    
    
    62,229
    
    
    
    25,394Corporate equities
    
    
    14,138
    
    
    
    15,072
    
    
    
    16,068Mutual funds
    
    
    26,900
    
    
    
    24,639
    
    
    
    22,467Certificates of deposit
    
    
    4,917
    
    
    
    7,563
    
    
    
    2,094$
    111,944
    
    
    $
    124,565
    
    
    $
    87,837
 In the ordinary course of business, Ryan Beck borrows or carries excess
funds under an agreement with its clearing broker. Securities owned are pledged
as collateral for clearing broker borrowings. As of September 30, 2004,
balances due from the clearing broker were $14.5 million. As of December 31,
2003 and September 30, 2003, balances due to the clearing broker were $8.6
million and $6.1 million, respectively. Ryan Becks securities sold but not yet purchased (at fair value)
consisted of the following (in thousands): September 30,
    
    December 31,
    
    September 30,2004
    
    2003
    
    2003States and municipalities
    
    $
    234
    
    
    $
    67
    
    
    $
    262Corporations
    
    
    6,083
    
    
    
    1,963
    
    
    
    1,707U.S. Government and agencies
    
    
    21,360
    
    
    
    32,231
    
    
    
    8,771Corporate equities
    
    
    4,015
    
    
    
    3,544
    
    
    
    4,341Certificates of deposit
    
    
    68
    
    
    
    8
    
    
    
    8$
    31,760
    
    
    $
    37,813
    
    
    $
    15,089
 12




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##### Table of Contents



BankAtlantic Bancorp, Inc. Securities sold, but not yet purchased, are a part of Ryan Becks normal
activities as a broker and dealer in securities and are subject to off-balance
sheet risk should Ryan Beck be unable to acquire the securities for delivery to
the purchaser at prices equal to or less than the current recorded amounts. 7. Loans Receivable The loan and lease portfolio consisted of the following components (in
thousands): September 30,
    
    December 31,
    
    September 30,2004
    
    2003
    
    2003Real estate loans:Residential
    
    $
    1,721,784
    
    
    $
    1,343,657
    
    
    $
    1,493,419Construction and development
    
    
    1,533,227
    
    
    
    1,345,449
    
    
    
    1,151,080Commercial
    
    
    957,777
    
    
    
    1,064,043
    
    
    
    1,142,011Small business
    
    
    117,559
    
    
    
    107,835
    
    
    
    103,272Loans to Levitt Corporation
    
    
    11,128
    
    
    
    18,118
    
    
    
    Other loans:Second mortgages  direct
    
    
    429,477
    
    
    
    333,655
    
    
    
    306,037Commercial business
    
    
    107,450
    
    
    
    91,724
    
    
    
    101,186Small business  non-mortgage
    
    
    63,984
    
    
    
    51,898
    
    
    
    46,610Loans to Levitt Corporation
    
    
    38,000
    
    
    
    43,500
    
    
    
    Consumer loans  other direct
    
    
    15,280
    
    
    
    17,892
    
    
    
    19,104Deposit overdrafts
    
    
    4,511
    
    
    
    4,036
    
    
    
    3,636Residential loans held for sale
    
    
    1,655
    
    
    
    2,254
    
    
    
    3,022Discontinued loan products
    
    
    17,131
    
    
    
    35,544
    
    
    
    37,958Total gross loans
    
    
    5,018,963
    
    
    
    4,459,605
    
    
    
    4,407,335Adjustments:Undisbursed portion of loans in process
    
    
    (789,086
    )
    
    
    (728,100
    )
    
    
    (621,674
    )Net premiums related to purchased loans
    
    
    923
    
    
    
    6,898
    
    
    
    8,172Deferred fees
    
    
    (5,451
    )
    
    
    (6,655
    )
    
    
    (5,993
    )Allowance for loan and lease losses
    
    
    (48,778
    )
    
    
    (45,595
    )
    
    
    (48,202
    )Loans receivable  net
    
    $
    4,176,571
    
    
    $
    3,686,153
    
    
    $
    3,739,638
 The Companys loans to Levitt had an outstanding balance of $49.1 million
and $61.6 million at September 30, 2004 and December 31, 2003, respectively.
The Company also had loans to Levitt joint ventures that had an outstanding
balance of $0 and $23.2 million at September 30, 2004 and December 31, 2003,
respectively. Included in interest income in the Companys statement of
operations for the three and nine months ended September 30, 2004 was $584,000
and $2.0 million, respectively, of interest income related to loans to Levitt
and its joint ventures. During the three and nine months ended September 30,
2003, $545,000 and $1.7 million, respectively, of interest income related to
loans to Levitt were not included in the Companys statements of operations as
those amounts were eliminated in consolidation. At September 30, 2004 and
December 31, 2003, the Company had $14.8 million and $13.4 million,
respectively, of undisbursed loans in process to Levitt. 13




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##### Table of Contents



BankAtlantic Bancorp, Inc. 8. Real Estate Held for Development and Sale Real estate held for development and sale consisted of the following (in
thousands): September 30,
    
    December 31,
    
    September 30,2004
    
    2003
    
    2003Land and land
development costs
    
    $
    10,304
    
    
    $
    9,705
    
    
    $
    175,691Construction costs
    
    
    10,676
    
    
    
    7,192
    
    
    
    63,377Other costs
    
    
    2,074
    
    
    
    1,859
    
    
    
    14,805Other
    
    
    2,467
    
    
    
    3,047
    
    
    
    3,047Total
    
    $
    25,521
    
    
    $
    21,803
    
    
    $
    256,920
 Income from real estate operations was as follows (in thousands): For the Three Months
    
    For the Nine MonthsEnded September 30,
    
    Ended September 30,2004
    
    2003
    
    2004
    
    2003Sales of real estate
    
    $
    3,388
    
    
    $
    2,467
    
    
    $
    7,813
    
    
    $
    15,879Cost of sales on real estate
    
    
    2,488
    
    
    
    2,401
    
    
    
    5,925
    
    
    
    10,591Gains on sales of real estate
    
    $
    900
    
    
    $
    66
    
    
    $
    1,888
    
    
    $
    5,288
 In 2002, BankAtlantic acquired Community Savings Bankshares, Inc.
(Community). Real estate held for development and sale at September 30, 2004
and December 31, 2003 consisted of real estate held by a joint venture that was
acquired in connection with the Community acquisition and $2.5 million and $3.0
million, respectively, of real estate held for sale associated with
BankAtlantic branch banking facilities and properties acquired in connection
with the Community acquisition. The joint venture was consolidated in the
Companys financial statements as of January 1, 2003. Included in gains on
sales of real estate during the three and nine months ended September 30, 2004
was a $274,000 gain on the sale of land acquired in connection with the
Community acquisition. Real estate held for development and sale at September 30, 2003 consisted
of $19.0 million of real estate inventory of the joint venture acquired in the
Community acquisition, $3.0 million of real estate held for sale associated
with BankAtlantic branch banking facilities, and $234.9 million of real estate
inventory of Levitt. 9. Investments and advances to unconsolidated subsidiaries The consolidated statements of financial condition and consolidated
statements of operations include the following amounts for investments and
advances to unconsolidated subsidiaries (in thousands): September 30,
    
    December 31,
    
    September 30,2004
    
    2003
    
    2003Statement of Financial ConditionInvestment in Bluegreen Corporation
    
    $
    
    
    
    $
    
    
    
    $
    68,265Investments and advances to real estate joint ventures
    
    
    
    
    
    
    
    
    
    
    26,415Investment in statutory business trusts
    
    
    7,910
    
    
    
    7,910
    
    
    
    7,910Total
    
    $
    7,910
    
    
    $
    7,910
    
    
    $
    102,590
 As of September 30, 2004 and December 31, 2003, investments and advances
to unconsolidated subsidiaries consisted of the Companys investments in eleven
statutory business trusts that were formed to issue trust preferred securities.
Prior to January 1, 2003, these trusts were consolidated in the Companys
financial statements. At September 30, 2003, investments and advances to unconsolidated
subsidiaries consisted of the Companys and Levitts investment in Bluegreen
Corporation (which consisted of aggregate holdings of approximately 38% of
Bluegreens outstanding common stock), Levitts investments in real estate
joint ventures and the Companys investments in eleven statutory business
trusts. 14




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##### Table of Contents



BankAtlantic Bancorp, Inc. 10. 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 deciding how to allocate resources and in
assessing performance. Reportable segments consist of one or more operating
segments with similar economic characteristics, products and services,
production processes, type of customer, distribution system and regulatory
environment. The activities of reportable segments exclude discontinued
operations, extraordinary gains (losses) and income (loss) from changes in
accounting principles. The accounting policies of these reportable segments
are the same as those of the Company. As of January 1, 2004, Ryan Beck changed the composition of its reportable
segments, creating three reportable segments. As a result of Ryan Becks
change, the Companys results of operations are now reported through seven
reportable segments instead of five reportable segments reported by the Company
in prior periods. Additionally, the Company implemented a new internal
reporting methodology for evaluating operating segment performance for
BankAtlantics reportable segments. As a consequence, segment reporting for
the three and nine months ended September 30, 2003 was restated to conform to
the new methodology. The following summarizes the aggregation of the Companys operating
segments into reportable segments: Reportable Segment
    
    Operating Segments AggregatedBankAtlanticBankInvestments
    
    Investments, tax certificates, residential loans purchased, CRA
lending and real estate capital servicesCommercial Banking
    
    Commercial lending and commercial depositsCommunity Banking
    
    Consumer lending, small business lending, ATM operations,
branch banking and trade finance lendingRyan BeckPrivate Client Group (PCG)
    
    Retail branch offices, retail branch administration, product
marketing and supportInvestment Banking
    
    Financial institutions group, middle markets group, public
finance, and underwriting activitiesCapital Markets
    
    Equity and fixed income trading departments, unit trust and
institutional salesBankAtlantic BancorpParent Company
    
    BankAtlantic Bancorps operations, costs of acquisitions and financing
activities
 15




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##### Table of Contents



BankAtlantic Bancorp, Inc. Results of BankAtlantics Reportable Segments The Company evaluates BankAtlantics segment performance based on segment
profits after tax. BankAtlantic has three reportable segments. Information
regarding Treasury and Other is provided following the tables. The table
below is segment information for the three months ended September 30, 2004 and
2003 associated with the three BankAtlantic reportable segments (in thousands): BankAtlantic Reportable SegmentsBank
    
    Commercial
    
    Community
    
    
    
    
    
    
    
    
    
    BankAtlanticInvestments
    
    Banking
    
    Banking
    
    Treasury
    
    Other
    
    Total2004Interest income
    
    $
    29,515
    
    
    
    27,726
    
    
    
    29,858
    
    
    
    (24,688
    )
    
    
    519
    
    
    
    62,930Interest expense
    
    
    (19,825
    )
    
    
    (11,523
    )
    
    
    (9,076
    )
    
    
    23,106
    
    
    
    (149
    )
    
    
    (17,467
    )Net interest income
    
    
    9,690
    
    
    
    16,203
    
    
    
    20,782
    
    
    
    (1,582
    )
    
    
    370
    
    
    
    45,463Charge-offs/(recoveries)
    
    
    (13
    )
    
    
    (7
    )
    
    
    (45
    )
    
    
    
    
    
    
    (372
    )
    
    
    (437
    )Net interest income after
net charge-offs
(recoveries)
    
    
    9,703
    
    
    
    16,210
    
    
    
    20,827
    
    
    
    (1,582
    )
    
    
    742
    
    
    
    45,900Non-interest income
    
    
    86
    
    
    
    904
    
    
    
    20,100
    
    
    
    
    
    
    
    342
    
    
    
    21,432Non-interest expense
    
    
    (931
    )
    
    
    (3,151
    )
    
    
    (28,150
    )
    
    
    
    
    
    
    (11,951
    )
    
    
    (44,183
    )Segments profits and
losses before tax
    
    
    8,858
    
    
    
    13,963
    
    
    
    12,777
    
    
    
    (1,582
    )
    
    
    (10,867
    )
    
    
    23,149Taxes
    
    
    (3,189
    )
    
    
    (5,027
    )
    
    
    (4,600
    )
    
    
    570
    
    
    
    3,913
    
    
    
    (8,333
    )Segment net income
    
    $
    5,669
    
    
    
    8,936
    
    
    
    8,177
    
    
    
    (1,012
    )
    
    
    (6,954
    )
    
    
    14,816Segment assets
    
    
    2,587,801
    
    
    
    1,806,755
    
    
    
    636,381
    
    
    
    
    
    
    
    354,737
    
    
    
    5,385,6742003Interest income
    
    $
    26,795
    
    
    
    26,978
    
    
    
    22,017
    
    
    
    (16,758
    )
    
    
    1,101
    
    
    
    60,133Interest expense
    
    
    (17,282
    )
    
    
    (10,489
    )
    
    
    (7,941
    )
    
    
    12,612
    
    
    
    (301
    )
    
    
    (23,401
    )Net interest income
    
    
    9,513
    
    
    
    16,489
    
    
    
    14,076
    
    
    
    (4,146
    )
    
    
    800
    
    
    
    36,732Charge-offs/(recoveries)
    
    
    (322
    )
    
    
    50
    
    
    
    1,592
    
    
    
    
    
    
    
    (1,071
    )
    
    
    249Net interest income after
net charge-offs
(recoveries)
    
    
    9,835
    
    
    
    16,439
    
    
    
    12,484
    
    
    
    (4,146
    )
    
    
    1,871
    
    
    
    36,483Non-interest income
    
    
    62
    
    
    
    632
    
    
    
    16,087
    
    
    
    
    
    
    
    299
    
    
    
    17,080Non-interest expense
    
    
    (1,416
    )
    
    
    (3,107
    )
    
    
    (23,346
    )
    
    
    
    
    
    
    (8,431
    )
    
    
    (36,300
    )Segments profits and
losses before tax
    
    
    8,481
    
    
    
    13,964
    
    
    
    5,225
    
    
    
    (4,146
    )
    
    
    (6,261
    )
    
    
    17,263Taxes
    
    
    (3,053
    )
    
    
    (5,027
    )
    
    
    (1,881
    )
    
    
    1,493
    
    
    
    2,254
    
    
    
    (6,214
    )Segment net income
    
    $
    5,428
    
    
    
    8,937
    
    
    
    3,344
    
    
    
    (2,653
    )
    
    
    (4,007
    )
    
    
    11,049Segment assets
    
    
    2,053,638
    
    
    
    1,791,160
    
    
    
    483,311
    
    
    
    
    
    
    
    358,831
    
    
    
    4,686,940
 16




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##### Table of Contents



BankAtlantic Bancorp, Inc. The table below is segment information for the nine months ended September
30, 2004 and 2003 associated with the three BankAtlantic reportable segments
(in thousands): BankAtlantic Reportable SegmentsBank
    
    Commercial
    
    Community
    
    
    
    
    
    
    
    
    
    BankAtlanticInvestments
    
    Banking
    
    Banking
    
    Treasury
    
    Other
    
    Total2004Interest income
    
    $
    77,824
    
    
    
    80,641
    
    
    
    81,248
    
    
    
    (65,664
    )
    
    
    1,986
    
    
    
    176,035Interest expense
    
    
    (49,507
    )
    
    
    (30,697
    )
    
    
    (24,726
    )
    
    
    56,148
    
    
    
    (523
    )
    
    
    (49,305
    )Net interest income
    
    
    28,317
    
    
    
    49,944
    
    
    
    56,522
    
    
    
    (9,516
    )
    
    
    1,463
    
    
    
    126,730Charge-offs/(recoveries)
    
    
    237
    
    
    
    (2,308
    )
    
    
    (125
    )
    
    
    
    
    
    
    (2,074
    )
    
    
    (4,270
    )Net interest income after
net charge-offs
(recoveries)
    
    
    28,080
    
    
    
    52,252
    
    
    
    56,647
    
    
    
    (9,516
    )
    
    
    3,537
    
    
    
    131,000Non-interest income
    
    
    289
    
    
    
    2,762
    
    
    
    56,421
    
    
    
    
    
    
    
    889
    
    
    
    60,361Non-interest expense
    
    
    (3,765
    )
    
    
    (9,004
    )
    
    
    (82,371
    )
    
    
    
    
    
    
    (31,498
    )
    
    
    (126,638
    )Segments profits and
losses before tax
    
    
    24,604
    
    
    
    46,010
    
    
    
    30,697
    
    
    
    (9,516
    )
    
    
    (27,072
    )
    
    
    64,723Taxes
    
    
    (8,841
    )
    
    
    (16,564
    )
    
    
    (11,052
    )
    
    
    3,427
    
    
    
    9,748
    
    
    
    (23,282
    )Segment net income
    
    $
    15,763
    
    
    
    29,446
    
    
    
    19,645
    
    
    
    (6,089
    )
    
    
    (17,324
    )
    
    
    41,4412003Interest income
    
    $
    95,925
    
    
    
    78,574
    
    
    
    63,627
    
    
    
    (47,695
    )
    
    
    3,968
    
    
    
    194,399Interest expense
    
    
    (60,982
    )
    
    
    (32,806
    )
    
    
    (28,535
    )
    
    
    46,047
    
    
    
    (1,119
    )
    
    
    (77,395
    )Net interest income
    
    
    34,943
    
    
    
    45,768
    
    
    
    35,092
    
    
    
    (1,648
    )
    
    
    2,849
    
    
    
    117,004Charge-offs/(recoveries)
    
    
    29
    
    
    
    (1
    )
    
    
    2,604
    
    
    
    
    
    
    
    (2,043
    )
    
    
    589Net interest income after
net charge-offs
(recoveries)
    
    
    34,914
    
    
    
    45,769
    
    
    
    32,488
    
    
    
    (1,648
    )
    
    
    4,892
    
    
    
    116,415Non-interest income
    
    
    212
    
    
    
    2,939
    
    
    
    44,047
    
    
    
    
    
    
    
    841
    
    
    
    48,039Non-interest expense
    
    
    (3,876
    )
    
    
    (9,380
    )
    
    
    (68,692
    )
    
    
    
    
    
    
    (27,079
    )
    
    
    (109,027
    )Segments profits and
losses before tax
    
    
    31,250
    
    
    
    39,328
    
    
    
    7,843
    
    
    
    (1,648
    )
    
    
    (21,346
    )
    
    
    55,427Taxes
    
    
    (11,249
    )
    
    
    (14,158
    )
    
    
    (2,823
    )
    
    
    593
    
    
    
    7,722
    
    
    
    (19,915
    )Segment net income
    
    $
    20,001
    
    
    
    25,170
    
    
    
    5,020
    
    
    
    (1,055
    )
    
    
    (13,624
    )
    
    
    35,512
 The amounts included in the three BankAtlantic reportable segments are
derived using a management reporting model that includes funds transfer pricing
and activity based costing methodologies. Exposure to interest rate risk is
managed centrally and reflected in BankAtlantics segment reporting under the
heading entitled Treasury. In each segment the funds transfer pricing model
charges each interest earning asset with a duration-matched cost of funds at
the date of origination for the life of the asset or until a variable rate
asset reprices. This matching of durations between interest earning assets and
rate-bearing liabilities attempts to isolate the net interest income of each
banking operating segment from interest rate risk and places the gains and
losses from BankAtlantics management of interest rate risk in Treasury. The
duration on savings and transaction account deposit products that do not have
maturities were estimated based on a deposit duration analysis performed by a
third party consultant. The activity based costing model allocates costs to
the activities and processes that create the expenses and transfers costs for
services provided by one segment to another. Net charge-offs or recoveries are allocated to the BankAtlantic reportable
segment that generated the loss or recovery. Non-interest income and expenses are credited to the reportable segment
that generated the revenues or costs. Intersegment costs are allocated to the
operating segments based on an activity based costing model. Income tax expense is allocated based on a standard tax rate of 36% for
BankAtlantics reportable segments. 17




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##### Table of Contents



BankAtlantic Bancorp, Inc. The Treasury net contribution represents the difference between the actual
net interest income earned by BankAtlantic and the aggregate net interest
income allocated to the reportable segments calculated using funds transfer
pricing methodologies. Other includes discontinued loan products and unallocated corporate
overhead. Discontinued loan products represent the net interest income and net
recoveries from our discontinued loan products (small business loans originated
before January 1, 2001, consumer indirect, syndication and lease financing.)
Unallocated corporate overhead represents expenses that were not assigned to
bank reportable segments through the activity based costing model. These
overhead costs cannot be broken down and attributed directly to the activities
of specific reportable segments, and therefore allocation of costs would have
to be based on subjective measures that could distort the performance of the
reportable segments. As a consequence, management has decided not to allocate
these overhead costs. These overhead costs are primarily back office costs,
such as human resources, accounting, finance, auditing, and data processing. 18




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##### Table of Contents



BankAtlantic Bancorp, Inc. Results of Ryan Becks Reportable Segments The Company evaluates Ryan Becks segment performance based on pre-tax
contribution. The table below is segment information for the three months
ended September 30, 2004 and 2003 associated with the three Ryan Beck
reportable segments (in thousands): Investment
    
    CapitalPCG
    
    Banking
    
    Markets
    
    Total2004Net interest income:Broker dealer interest
    
    $
    2,404
    
    
    $
    6
    
    
    $
    439
    
    
    $
    2,849Interest expense
    
    
    (63
    )
    
    
    
    
    
    
    (167
    )
    
    
    (230
    )Net interest income
    
    
    2,341
    
    
    
    6
    
    
    
    272
    
    
    
    2,619Non-interest income:Principal transactions
    
    
    15,163
    
    
    
    
    
    
    
    4,230
    
    
    
    19,393Investment banking
    
    
    
    
    
    
    13,542
    
    
    
    293
    
    
    
    13,835Commissions
    
    
    17,283
    
    
    
    
    
    
    
    1,281
    
    
    
    18,564Other
    
    
    778
    
    
    
    
    
    
    
    100
    
    
    
    878Non-interest income
    
    
    33,224
    
    
    
    13,542
    
    
    
    5,904
    
    
    
    52,670Non-interest expense
    
    
    (37,819
    )
    
    
    (3,999
    )
    
    
    (6,287
    )
    
    
    (48,105
    )Pre-tax contribution
    
    $
    (2,254
    )
    
    $
    9,549
    
    
    $
    (111
    )
    
    $
    7,1842003Net interest income:Broker dealer interest
    
    $
    2,372
    
    
    $
    136
    
    
    $
    384
    
    
    $
    2,892Interest expense
    
    
    (131
    )
    
    
    (27
    )
    
    
    (119
    )
    
    
    (277
    )Net interest income
    
    
    2,241
    
    
    
    109
    
    
    
    265
    
    
    
    2,615Non-interest income:Principal transactions
    
    
    15,593
    
    
    
    73
    
    
    
    5,427
    
    
    
    21,093Investment banking
    
    
    
    
    
    
    6,631
    
    
    
    1,011
    
    
    
    7,642Commissions
    
    
    19,760
    
    
    
    46
    
    
    
    1,451
    
    
    
    21,257Other
    
    
    470
    
    
    
    
    
    
    
    89
    
    
    
    559Non-interest income
    
    
    35,823
    
    
    
    6,750
    
    
    
    7,978
    
    
    
    50,551Non-interest expense
    
    
    (37,953
    )
    
    
    (3,987
    )
    
    
    (6,808
    )
    
    
    (48,748
    )Pre-tax contribution
    
    $
    111
    
    
    $
    2,872
    
    
    $
    1,435
    
    
    $
    4,418
 19




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##### Table of Contents



BankAtlantic Bancorp, Inc. The table below is segment information for the nine months ended September
30, 2004 and 2003 associated with the three Ryan Beck reportable segments (in
thousands): Investment
    
    CapitalPCG
    
    Banking
    
    Markets
    
    Total2004Net interest income:Broker dealer interest
    
    $
    7,211
    
    
    $
    79
    
    
    $
    1,221
    
    
    $
    8,511Interest expense
    
    
    (159
    )
    
    
    (9
    )
    
    
    (546
    )
    
    
    (714
    )Net interest income
    
    
    7,052
    
    
    
    70
    
    
    
    675
    
    
    
    7,797Non-interest income:Principal transactions
    
    
    53,279
    
    
    
    124
    
    
    
    12,087
    
    
    
    65,490Investment banking
    
    
    96
    
    
    
    41,982
    
    
    
    2,414
    
    
    
    44,492Commissions
    
    
    61,491
    
    
    
    
    
    
    
    4,689
    
    
    
    66,180Other
    
    
    2,367
    
    
    
    
    
    
    
    214
    
    
    
    2,581Non-interest income
    
    
    117,233
    
    
    
    42,106
    
    
    
    19,404
    
    
    
    178,743Non-interest expense
    
    
    (121,885
    )
    
    
    (17,873
    )
    
    
    (18,861
    )
    
    
    (158,619
    )Pre-tax contribution
    
    $
    2,400
    
    
    $
    24,303
    
    
    $
    1,218
    
    
    $
    27,9212003Net interest income:Broker dealer interest
    
    $
    6,394
    
    
    $
    214
    
    
    $
    782
    
    
    $
    7,390Interest expense
    
    
    (646
    )
    
    
    (35
    )
    
    
    (337
    )
    
    
    (1,018
    )Net interest income
    
    
    5,748
    
    
    
    179
    
    
    
    445
    
    
    
    6,372Non-interest income:Principal transactions
    
    
    45,335
    
    
    
    6,182
    
    
    
    18,717
    
    
    
    70,234Investment banking
    
    
    
    
    
    
    17,686
    
    
    
    2,724
    
    
    
    20,410Commissions
    
    
    56,695
    
    
    
    167
    
    
    
    5,350
    
    
    
    62,212Other
    
    
    1,739
    
    
    
    
    
    
    
    141
    
    
    
    1,880Non-interest income
    
    
    103,769
    
    
    
    24,035
    
    
    
    26,932
    
    
    
    154,736Non-interest expense
    
    
    (116,132
    )
    
    
    (13,767
    )
    
    
    (22,200
    )
    
    
    (152,099
    )Pre-tax contribution
    
    $
    (6,615
    )
    
    $
    10,447
    
    
    $
    5,177
    
    
    $
    9,009
 The Private Client Group is Ryan Becks retail investment brokerage and
consulting group, which offers a full range of investment planning and related
services to its clients. The Investment Banking reportable segment provides consulting services
primarily in the financial services industry in connection with capital
raising, mergers and acquisitions, and similar transactions. Its investment
banking activities include financial institutions, middle market and municipal
finance groups. The Capital Markets reportable segment underwrites and trades in trust
preferred securities, U.S. government securities, agency bonds and zero coupon
bonds as well as equities and tax-exempt securities. Additionally, the Capital
Markets group distributes brokered deposits and other taxable fixed income
securities through other broker dealers. All revenue and expense items, with the exception of certain department
allocations, such as general and administrative, operations and research, are
identified and reported at each segment. Ryan Beck allocates certain common
income and expense items among business segments based upon various
methodologies and factors, including a percentage of income methodology for
certain revenue products, and a headcount factor for certain expense items. 20




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##### Table of Contents



BankAtlantic Bancorp, Inc. Segment Reporting Worksheets The table below is a consolidating worksheet for income from continuing
operations that reconciles the Companys segment reporting to the consolidated
financial statements for the three months ended September 30, 2004 and 2003 (in
thousands): Adjusting andParent
    
    Elimination
    
    SegmentsBankAtlantic
    
    Ryan Beck
    
    Company
    
    Entries
    
    Total2004Interest income
    
    $
    62,930
    
    
    $
    2,849
    
    
    $
    607
    
    
    $
    (13
    )
    
    $
    66,373Interest expense
    
    
    (17,550
    )
    
    
    (230
    )
    
    
    (4,289
    )
    
    
    13
    
    
    
    (22,056
    )Provision from loan losses
    
    
    (1,717
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,717
    )Non-interest income
    
    
    22,332
    
    
    
    52,670
    
    
    
    261
    
    
    
    (89
    )
    
    
    75,174Non-interest expense
    
    
    (45,530
    )
    
    
    (48,105
    )
    
    
    (1,071
    )
    
    
    89
    
    
    
    (94,617
    )Income before taxes
    
    
    20,465
    
    
    
    7,184
    
    
    
    (4,492
    )
    
    
    
    
    
    
    23,157Provision for income taxes
    
    
    (6,866
    )
    
    
    (3,083
    )
    
    
    1,483
    
    
    
    
    
    
    
    (8,466
    )Net income
    
    $
    13,599
    
    
    $
    4,101
    
    
    $
    (3,009
    )
    
    $
    
    
    
    $
    14,691Total assets
    
    $
    5,385,674
    
    
    
    175,458
    
    
    
    724,417
    
    
    
    (606,937
    )
    
    $
    5,678,6122003Interest income
    
    $
    60,133
    
    
    $
    2,892
    
    
    $
    437
    
    
    $
    (651
    )
    
    $
    62,811Interest expense
    
    
    (23,574
    )
    
    
    (277
    )
    
    
    (4,113
    )
    
    
    652
    
    
    
    (27,312
    )Provision for loan losses
    
    
    1,076
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,076Non-interest income
    
    
    17,146
    
    
    
    50,551
    
    
    
    106
    
    
    
    (10
    )
    
    
    67,793Non-interest expense
    
    
    (39,157
    )
    
    
    (48,748
    )
    
    
    (587
    )
    
    
    9
    
    
    
    (88,483
    )Income before taxes
    
    
    15,624
    
    
    
    4,418
    
    
    
    (4,157
    )
    
    
    
    
    
    
    15,885Provision for income taxes
    
    
    (5,675
    )
    
    
    (1,522
    )
    
    
    1,456
    
    
    
    
    
    
    
    (5,741
    )Net income
    
    $
    9,949
    
    
    $
    2,896
    
    
    $
    (2,701
    )
    
    $
    
    
    
    $
    10,144Total assets (1)
    
    $
    4,686,940
    
    
    
    142,921
    
    
    
    769,425
    
    
    
    (402,226
    )
    
    $
    5,197,060
  (1)
    
    The adjusting and elimination entries at September 30, 2003 include
the total assets of Levitt, GMS and Cumberland. The adjusting and elimination entries consist of intercompany
transactions relating to loan interest income and interest expense, management
fees, consulting fees and brokerage commissions. 21




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##### Table of Contents



BankAtlantic Bancorp, Inc. The table below is a consolidating worksheet for income from continuing
operations that reconciles the Companys segment reporting to the consolidated
financial statements for the nine months ended September 2004 and 2003 (in
thousands): Adjusting andParent
    
    Elimination
    
    SegmentsBankAtlantic
    
    Ryan Beck
    
    Company
    
    Entries
    
    Total2004Interest income
    
    $
    176,035
    
    
    $
    8,511
    
    
    $
    1,697
    
    
    $
    (134
    )
    
    $
    186,109Interest expense
    
    
    (49,516
    )
    
    
    (714
    )
    
    
    (12,556
    )
    
    
    134
    
    
    
    (62,652
    )Provision from loan losses
    
    
    1,105
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,105Non-interest income
    
    
    62,721
    
    
    
    178,743
    
    
    
    23,639
    
    
    
    (219
    )
    
    
    264,884Non-interest expense
    
    
    (141,958
    )
    
    
    (158,619
    )
    
    
    (4,175
    )
    
    
    219
    
    
    
    (304,533
    )Income before taxes
    
    
    48,387
    
    
    
    27,921
    
    
    
    8,605
    
    
    
    
    
    
    
    84,913Provision for income taxes
    
    
    (16,659
    )
    
    
    (11,678
    )
    
    
    (3,101
    )
    
    
    
    
    
    
    (31,438
    )Net income
    
    $
    31,728
    
    
    $
    16,243
    
    
    $
    5,504
    
    
    $
    
    
    
    $
    53,4752003Interest income
    
    $
    194,399
    
    
    $
    7,390
    
    
    $
    1,400
    
    
    $
    (2,192
    )
    
    $
    200,997Interest expense
    
    
    (77,627
    )
    
    
    (1,018
    )
    
    
    (12,218
    )
    
    
    2,193
    
    
    
    (88,670
    )Provision for loan losses
    
    
    (1,264
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,264
    )Non-interest income
    
    
    53,753
    
    
    
    154,736
    
    
    
    711
    
    
    
    (728
    )
    
    
    208,472Non-interest expense
    
    
    (116,142
    )
    
    
    (152,099
    )
    
    
    (4,019
    )
    
    
    727
    
    
    
    (271,533
    )Income before taxes
    
    
    53,119
    
    
    
    9,009
    
    
    
    (14,126
    )
    
    
    
    
    
    
    48,002Provision for income taxes
    
    
    (18,809
    )
    
    
    (3,365
    )
    
    
    4,943
    
    
    
    
    
    
    
    (17,231
    )Net income
    
    $
    34,310
    
    
    $
    5,644
    
    
    $
    (9,183
    )
    
    $
    
    
    
    $
    30,771
 22




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##### Table of Contents



BankAtlantic Bancorp, Inc. The differences between BankAtlantics statement of operations components
and the reportable segment information for income from continuing operations
for the three and nine months ended September 30, 2004 and 2003 consists of (in
thousands): For the Three Months Ended
    
    For the Nine Months EndedSeptember 30,
    
    September 30,2004
    
    2003
    
    2004
    
    2003Interest expenseSegment interest expense
    
    $
    17,467
    
    
    
    23,401
    
    
    $
    49,305
    
    
    
    77,395Joint venture interest expense
    
    
    83
    
    
    
    173
    
    
    
    211
    
    
    
    232BankAtlantic interest expense
    
    
    17,550
    
    
    
    23,574
    
    
    
    49,516
    
    
    
    77,627Non-interest incomeSegment non-interest income
    
    
    21,432
    
    
    
    17,080
    
    
    
    60,361
    
    
    
    48,039Income from real estate operations
    
    
    900
    
    
    
    66
    
    
    
    1,888
    
    
    
    5,288Other
    
    
    
    
    
    
    
    
    
    
    472
    
    
    
    426BankAtlantic non-interest income
    
    
    22,332
    
    
    
    17,146
    
    
    
    62,721
    
    
    
    53,753Non-interest expenseSegment non-interest expense
    
    
    44,183
    
    
    
    36,300
    
    
    
    126,638
    
    
    
    109,027Joint venture expenses
    
    
    1,047
    
    
    
    285
    
    
    
    2,316
    
    
    
    3,787Provision for tax certificates
    
    
    300
    
    
    
    300
    
    
    
    900
    
    
    
    900Cost associated with debt
redemption
    
    
    
    
    
    
    2,040
    
    
    
    11,741
    
    
    
    2,040Other
    
    
    
    
    
    
    232
    
    
    
    363
    
    
    
    388BankAtlantic non-interest expense
    
    
    45,530
    
    
    
    39,157
    
    
    
    141,958
    
    
    
    116,142TaxesSegment taxes
    
    
    8,333
    
    
    
    6,214
    
    
    
    23,282
    
    
    
    19,915Actual tax rate different than segment
assumed tax rate
    
    
    (501
    )
    
    
    52
    
    
    
    (743
    )
    
    
    (274
    )Segment earnings greater than
BankAtlantic earnings
    
    
    (966
    )
    
    
    (591
    )
    
    
    (5,880
    )
    
    
    (832
    )BankAtlantic taxes
    
    
    6,866
    
    
    
    5,675
    
    
    
    16,659
    
    
    
    18,809Net incomeSegment net income
    
    
    14,816
    
    
    
    11,049
    
    
    
    41,441
    
    
    
    35,512Provision for loan losses different
than net recoveries
    
    
    (1,379
    )
    
    
    848
    
    
    
    (2,025
    )
    
    
    (433
    )Provision for tax certificates
    
    
    (192
    )
    
    
    (192
    )
    
    
    (576
    )
    
    
    (576
    )Joint venture operation excluded from
segment reporting
    
    
    (147
    )
    
    
    (250
    )
    
    
    (340
    )
    
    
    985Cost associated with debt redemption
    
    
    
    
    
    
    (1,454
    )
    
    
    (7,515
    )
    
    
    (1,454
    )Tax rate difference
    
    
    501
    
    
    
    (52
    )
    
    
    743
    
    
    
    276BankAtlantic net income
    
    $
    13,599
    
    
    
    9,949
    
    
    $
    31,728
    
    
    
    34,310
 Segment charge-offs/ (recoveries) consists of loan and tax certificate net
charge-offs. The above segment reporting information is based on internal reports
utilized by management. The presentation and allocation of segment income and
the components of segment income calculated under the management approach may
not reflect the actual economic costs, contribution or results of operations of
the units as stand alone businesses. If a different basis of allocation were
utilized, the relative contributions of the segments might differ but the
relative trends in the segments likely would not, in managements view, be
impacted. 23




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##### Table of Contents



BankAtlantic Bancorp, Inc. 11. Financial instruments with off-balance sheet risk Financial instruments with off-balance sheet risk were (in thousands): September 30,
    
    December 31,
    
    September 30,2004
    
    2003
    
    2003Commitment to sell fixed rate residential loans
    
    $
    20,158
    
    
    $
    12,962
    
    
    $
    21,040Commitment to sell variable rate residential loans
    
    
    6,233
    
    
    
    3,740
    
    
    
    Forward contracts to purchase mortgage-backed securities
    
    
    4,988
    
    
    
    8,611
    
    
    
    12,697Commitments to purchase fixed rate residential loans
    
    
    
    
    
    
    40,242
    
    
    
    Commitments to purchase variable rate residential loans
    
    
    
    
    
    
    3,500
    
    
    
    1,768Commitments to originate loans held for sale
    
    
    24,617
    
    
    
    14,271
    
    
    
    18,019Commitments to originate loans held to maturity
    
    
    330,385
    
    
    
    370,071
    
    
    
    451,341Commitments to extend credit, including the undisbursed
portion of loans in process
    
    
    1,176,208
    
    
    
    1,048,738
    
    
    
    903,640Standby letters of credit
    
    
    43,939
    
    
    
    31,722
    
    
    
    22,680Commercial lines of credit
    
    
    85,647
    
    
    
    162,623
    
    
    
    145,228
 Standby letters of credit are conditional commitments issued by
BankAtlantic to guarantee the performance of a customer to a third party.
BankAtlantics standby letters of credit are generally issued to customers in
the construction industry guaranteeing project performance. These types of
standby letters of credit had a maximum exposure of $38.6 million at September
30, 2004. BankAtlantic also issues standby letters of credit to commercial
lending customers guaranteeing the payment of goods and services. These types
of standby letters of credit had a maximum exposure of $5.3 million at
September 30, 2004. These guarantees are primarily issued to support public
and private borrowing arrangements and have maturities of one year or less.
The credit risk involved in issuing letters of credit is essentially the same
as that involved in extending loan facilities to customers. BankAtlantic may
hold certificates of deposit and residential and commercial liens as collateral
for such commitments. Included in other liabilities at September 30, 2004 and
December 31, 2003 was $0 and $110,000, respectively, of unearned guarantee
fees. 24




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##### Table of Contents



BankAtlantic Bancorp, Inc. 12. Discontinued operations In December 2003, the Company completed the spin-off of its wholly-owned
subsidiary, Levitt, and transferred its investment in Bluegreen Corporation to
Levitt. During the year ended December 31, 2003, Ryan Beck sold two of its
subsidiaries, GMS and Cumberland. The above transactions were presented as
discontinued operations in our statement of operations for the three and nine
months ended September 30, 2003. The components of earnings from discontinued operations for the three and
nine months ended September 30, 2003 were as follows (in thousands): For the Three
    
    For the NineMonths Ended
    
    Months EndedSeptember 30, 2003
    
    September 30, 2003Net interest income
    
    $
    1,215
    
    
    $
    4,572Non-interest Income
    
    
    27,648
    
    
    
    78,107Non interest Expenses
    
    
    15,581
    
    
    
    52,603Income before taxes
    
    
    13,282
    
    
    
    30,076Provision for taxes
    
    
    4,918
    
    
    
    10,772Income from discontinued
operations, net of tax
    
    $
    8,364
    
    
    $
    19,304
 The assets and liabilities associated with discontinued operations
included in the Companys statement of financial condition as of September 30,
2003 consisted of the following: (in thousands) September 30,2003ASSETSCash
    
    $
    39,346Loans receivable
    
    
    5,163Real estate inventory
    
    
    234,854Investment in unconsolidated subsidiaries
    
    
    67,444Other assets
    
    
    9,716Total assets
    
    $
    356,523LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Notes payable
    
    $
    109,343Other liabilities
    
    
    68,244Total liabilities
    
    $
    177,587
 25




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##### Table of Contents



BankAtlantic Bancorp, Inc. 13. Earnings per Share The following reconciles the numerators and denominators of the basic and
diluted earnings per share computation for the three months ended September 30,
2004 and 2003: For the Three MonthsEnded September 30,(In thousands, except share data)
    
    2004
    
    2003Basic earnings per shareNumerator:Income from continuing operations
    
    $
    14,691
    
    
    $
    10,144Discontinued operations
    
    
    
    
    
    
    8,364Net income
    
    $
    14,691
    
    
    $
    18,508Denominator:Basic weighted average number of
common shares outstanding
    
    
    59,687,354
    
    
    
    58,646,254Basic earnings per share from:Continuing operations
    
    $
    0.25
    
    
    $
    0.17Discontinued operations
    
    
    
    
    
    
    0.15Basic earnings per share
    
    $
    0.25
    
    
    $
    0.32Diluted earnings per shareNumerator:Income from continuing operations
    
    $
    14,691
    
    
    $
    10,144Subsidiary stock options
    
    
    (152
    )
    
    
    (83
    )Income available after assumed conversion
from continuing operations
    
    
    14,539
    
    
    
    10,061Discontinued operations
    
    
    
    
    
    
    8,364Income available after assumed conversion
    
    $
    14,539
    
    
    $
    18,425Denominator:Basic weighted average number of
common shares outstanding
    
    
    59,687,354
    
    
    
    58,646,254Common stock equivalents resulting from:Stock-based compensation
    
    
    3,422,403
    
    
    
    2,697,692Diluted weighted average shares outstanding
    
    
    63,109,757
    
    
    
    61,343,946Diluted earnings per share from:Continuing operations
    
    $
    0.23
    
    
    $
    0.16Discontinued operations
    
    
    
    
    
    
    0.14Diluted earnings per share
    
    $
    0.23
    
    
    $
    0.30
 26




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##### Table of Contents



BankAtlantic Bancorp, Inc. The following reconciles the numerators and denominators of the basic and
diluted earnings per share computation for the nine months ended September 30,
2004 and 2003: For the Nine MonthsEnded September 30,(In thousands, except share data )
    
    2004
    
    2003Basic earnings per shareNumerator:Income from continuing operations
    
    $
    53,475
    
    
    $
    30,771Discontinued operations
    
    
    
    
    
    
    19,304Net income
    
    $
    53,475
    
    
    $
    50,075Denominator:Basic weighted average number of
common shares outstanding
    
    
    59,430,463
    
    
    
    58,381,370Basic earnings per share from:Continuing operations
    
    $
    0.90
    
    
    $
    0.53Discontinued operations
    
    
    
    
    
    
    0.33Basic earnings per share
    
    $
    0.90
    
    
    $
    0.86Diluted earnings per shareNumerator:Income from continuing operations
    
    $
    53,475
    
    
    $
    30,771Interest expense on convertible debentures
    
    
    
    
    
    
    569Subsidiary stock options
    
    
    (617
    )
    
    
    (157
    )Income available after assumed conversion
from continuing operations
    
    
    52,858
    
    
    
    31,183Discontinued operations
    
    
    
    
    
    
    19,304Income available after assumed conversion
    
    $
    52,858
    
    
    $
    50,487Denominator:Basic weighted average number of
common shares outstanding
    
    
    59,430,463
    
    
    
    58,381,370Common stock equivalents resulting from:Convertible debentures
    
    
    
    
    
    
    1,753,706Stock-based compensation
    
    
    3,595,678
    
    
    
    2,340,783Diluted weighted average shares
outstanding
    
    
    63,026,141
    
    
    
    62,475,859Diluted earnings per share from:Continuing operations
    
    $
    0.84
    
    
    $
    0.50Discontinued operations
    
    
    
    
    
    
    0.30Diluted earnings per share
    
    $
    0.84
    
    
    $
    0.80
 During the nine months ended September 30, 2004, 781,600 of options to
acquire the Companys Class A common stock that could potentially dilute
diluted earnings per share in the future were not included in the computation
of diluted earnings per share because to do so would have been antidilutive for
the period.There were no antidilutive options during the three months ended
September 30, 2004 and during the three and nine months ended September 30,
2003. 14. New Accounting Pronouncements: In March 2004, the Emerging Issues Task Force (EITF) reached a consensus
on EITF 03-1 The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments. The EITF provides guidance on the meaning
of other-than-temporary impairment and its application to investments
classified as either available for sale or held to maturity under FASB
Statement No. 115 and investments accounted for under the cost method of
accounting. The guidance of EITF 03-01 requires that the Company makes
evidence-based judgments about the recovery of the unrealized loss
(impairment), if any, on each security considering the severity and duration of
the impairment and the Companys ability and intent to hold the securities
until the forecasted recovery. 27




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##### Table of Contents



BankAtlantic Bancorp, Inc. In September 2004 the Financial Accounting Standards Board (FASB) issued
a proposed FASB Staff Position (FSP) which determined that minor impairments
caused by interest rate increases associated with securities that could not be
settled in such a way that that the investor would not recover substantially
all of its costs were considered temporary; therefore not requiring an entity
to assess its ability and intent to hold an investment until a forecasted
recovery. This minor impairment determination did not apply to equity and debt
securities that can be contractually prepaid or otherwise settled in such a way
that an entity would not recover substantially all of its cost. The
recognition and measurement provisions of the EITF were originally effective
for periods beginning after June 15, 2004. On September 30, 2004 the FASB
issued a final FSP that delayed the effective date for the measurement and
recognition guidance for the meaning of other-than-temporary impairment. The
disclosure requirements were not deferred. At September 30, 2004, the
securities portfolios were evaluated for other-than-temporary declines in value
based on existing guidance contained in FASB No. 115, SAB Topic 5-M and FASB
Staff Implementation Guide to FASB No. 115 resulting in no other-than-temporary
impairment of the securities portfolios. 28




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##### Table of Contents



BankAtlantic Bancorp, Inc. 
 Item 2. Managementa Discussion and Analysis of Financial Condition and Results of Operations The objective of the following discussion is to provide an understanding
of the financial condition and results of operations of BankAtlantic Bancorp,
Inc. (the Company, which may also be referred to as we, us, or our) and
its subsidiaries for the three and nine months ended September 30, 2004 and
2003. The principal assets of the Company consist of its ownership of these
subsidiaries, which include BankAtlantic, a federal savings bank headquartered
in Fort Lauderdale, Florida and its subsidiaries (BankAtlantic or Bank) and
RB Holdings, Inc., the holding company for Ryan Beck & Co., Inc., a brokerage
and investment banking firm, and its subsidiaries (Ryan Beck). 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 such forward-looking statements. These
forward-looking statements are based largely on the expectations of the Company
and are subject to a number of risks and uncertainties that may change based on
factors which are, in many instances, beyond the Companys control. These
include, but are not limited to, risks and uncertainties associated with: the
impact of economic, competitive and other factors affecting the Company and its
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; increases in costs associated with regulatory compliance; that our
internal controls over financial reporting are found not to be effective as
required under Section 404 of the Sarbanes-Oxley Act of 2002; 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, extended midnight
branch banking hours initiative, and other growth initiatives not producing
results consistent with historic growth rates or results which justify their
costs; the impact of regulatory or accounting issues, including the impact of
and compliance with the USA Patriot Act, Bank Secrecy Act and Anti-Money
Laundering laws; periodic testing of goodwill and other intangible assets for
impairment; and BankAtlantics achieving the benefits of its prepayment of
certain Federal Home Loan Bank (FHLB) advances. Further, this document
contains forward-looking statements relating to BankAtlantics de novo branch
expansion strategy, existing branch renovation plans and branch branding
initiative which are subject to a number of risks and uncertainties, including
that the number of new branches may be less than anticipated, that required
regulatory approvals for the new branches may not be timely obtained, if at
all, that required capital expenditures or operating costs will be higher than
anticipated and that the de novo branch expansion strategy, existing branch
renovation plans and branch branding initiative will not be successful or
will not produce results which justify their costs. Further, this document
contains forward-looking statements with respect to Ryan Beck, 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; the volatility of the
stock market and fixed income markets; announced or anticipated transactions,
including mergers and acquisitions, or capital financing transactions not being
completed or producing results which do not justify their costs; the success or
profitability of Ryan Becks newly launched products; the effectiveness of Ryan
Becks advertising and brand awareness campaigns; and additional risks and
uncertainties that are subject to change and outside of Ryan Becks control.
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 with the
Securities and Exchange Commission. The Company cautions that the foregoing
factors are not exclusive. Critical Accounting Policies Management views critical accounting policies as accounting policies that
are important to the understanding of our financial statements and that involve
estimates, assumptions and judgments about inherently uncertain matters. In
preparing the financial statements, management is required to make: estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities, as of the date of the
consolidated statements of financial condition; and assumptions that affect the
recognition of income and expenses on the statement of operations for the
periods presented. Actual results could differ significantly from estimates.
Material estimates that are particularly susceptible to differing significantly
from actual results relate to the determination of the allowance for loan
losses, evaluation of goodwill and other intangible assets for impairment, the
valuation of real estate acquired in connection with foreclosure or in
satisfaction of loans, the valuation of the fair value of assets and
liabilities in the application of the purchase method of accounting, the
valuation of securities, the amount of the deferred tax asset 29




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##### Table of Contents



BankAtlantic Bancorp, Inc. valuation allowance, and accounting for contingencies. The six accounting
policies that we have identified as critical accounting policies are: (i)
allowance for loan losses; (ii) valuation of securities; (iii) impairment of
goodwill and other intangible assets; (iv) impairment of long-lived assets; (v)
accounting for business combinations; and (vi) accounting for contingencies.
For a more detailed discussion of these critical accounting policies see
Critical Accounting Policies appearing in the Companys Annual Report on Form
10-K for the year ended December 31, 2003. Summary Consolidated Results of Operations For the Three Months Ended September 30,
    
    For the Nine Months Ended September 30,(In thousands)
    
    2004
    
    2003
    
    Change
    
    2004
    
    2003
    
    ChangeBankAtlantic
    
    $
    13,599
    
    
    $
    9,949
    
    
    $
    3,650
    
    
    $
    31,728
    
    
    $
    34,310
    
    
    $
    (2,582
    )Ryan Beck
    
    
    4,101
    
    
    
    2,896
    
    
    
    1,205
    
    
    
    16,243
    
    
    
    5,644
    
    
    
    10,599Parent Company
    
    
    (3,009
    )
    
    
    (2,701
    )
    
    
    (308
    )
    
    
    5,504
    
    
    
    (9,183
    )
    
    
    14,687Income from continuing
operations
    
    
    14,691
    
    
    
    10,144
    
    
    
    4,547
    
    
    
    53,475
    
    
    
    30,771
    
    
    
    22,704Discontinued operations,
net of tax
    
    
    
    
    
    
    8,364
    
    
    
    (8,364
    )
    
    
    
    
    
    
    19,304
    
    
    
    (19,304
    )Net income
    
    $
    14,691
    
    
    $
    18,508
    
    
    $
    (3,817
    )
    
    $
    53,475
    
    
    $
    50,075
    
    
    $
    3,400
 For the Three Months Ended September 30, 2004 Compared to the Same 2003 Period: Income from continuing operations increased 45% from the same 2003 period.
This increase was primarily related to a 37% increase in earnings at
BankAtlantic and a 42% increase in earnings at Ryan Beck. The increase in Ryan Beck earnings was primarily attributable to increased
advisory fees generated during the quarter as a result of increased merger and
acquisition activity transactions by its investment banking segment. The
higher investment banking revenues were partially offset by lower revenues from
commissions and principal transactions reflecting decreased activity by
individual customers due to market conditions during the period. The increased earnings at BankAtlantic were primarily the result of a
substantial improvement in its net interest income associated with higher
yields on interest earning assets and lower interest expense related to a
substantial increase in low cost deposits and the repayment of high yielding
FHLB advances during prior periods. The increased deposit accounts also
contributed to a significant increase in customer fee income during the period.
The above improvements in earnings were partially offset by an increase in the
provision for loan losses and higher non-interest expenses. The additional
expenses were primarily associated with the Floridas Most Convenient Bank
growth initiatives, and regulatory compliance costs, including costs associated
with Sarbanes-Oxley compliance and fees paid to consultants to assist
BankAtlantic with achieving full compliance with the USA Patriot Act, the Bank
Secrecy Act and Anti-Money Laundering laws. In December 2003, the Company completed the spin-off of its wholly-owned
subsidiary, Levitt Corporation (Levitt), and transferred its investment in
Bluegreen Corporation to Levitt. During the year ended December 31, 2003, Ryan
Beck sold two of its subsidiaries, The GMS Group, Inc. and Cumberland Advisors.
The above transactions were presented as discontinued operations in our
statement of operations for the three months and nine months ended September
30, 2003. During August and September, 2004, Florida experienced an unprecedented
level of hurricane and tropical storm activity. Four major storms crossed the
State in those months. Three of the storms affected BankAtlantics markets but
physical damage to branches was minimal. The branch network remained fully
operational, including weekend and late evening operations, subsequent to the
storms other than closures of branches located in evacuation zones, or where
utilities became temporarily unavailable. BankAtlantic has reviewed its loan
portfolio for possible adverse impact on credit quality resulting from the
storms, and has not identified any commercial or real estate customers or
projects with any significant uninsured damage. Additionally, BankAtlantics
review of delinquency and other data on the consumer and small business
portfolios also does not indicate that the storms had any significant impact to
date. However, BankAtlantic did establish an unallocated provision of the
allowance for loan losses of approximately $500,000 to cover 30




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##### Table of Contents



BankAtlantic Bancorp, Inc. probable losses arising from the consumer and small business portfolios
which may have occurred during the third quarter from hurricane activity but
which might not become known until the fourth quarter. For the Nine Months Ended September 30, 2004 Compared to the Same 2003 Period: Income from continuing operations increased 74% from the same 2003 period.
This increase was primarily related to a 188% increase in earnings at Ryan
Beck and a $14.8 million litigation settlement gain (net of taxes) at the
parent company. The above improvement in earnings was partially offset by an
8% decline in BankAtlantic earnings. The increase in Ryan Beck earnings was primarily due to the increase in
advisory fees noted above. The litigation settlement was entered into in March
2004 and was with a technology company in which the Company was an investor.
The decline in BankAtlantic earnings was due to $7.6 million (net of tax) of
prepayment penalties that BankAtlantic incurred by prepaying high fixed
interest rate FHLB advances totaling $108 million in March 2004. Excluding
the impact of the FHLB advance prepayment penalties, BankAtlantics earnings
would have increased by 11% over the 2003 period. 31




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##### Table of Contents



BankAtlantic Bancorp, Inc. BankAtlantic Results of Operations Net interest income Average Balance Sheet - Yield / Rate AnalysisFor the Three Months EndedSeptember 30, 2004
    
    September 30, 2003Average
    
    Revenue/
    
    Yield/
    
    Average
    
    Revenue/
    
    Yield/(Dollars in thousands)
    
    Balance
    
    Expense
    
    Rate
    
    Balance
    
    Expense
    
    RateInterest earning assetsLoans:Residential real estate
    
    $
    1,583,353
    
    
    
    18,636
    
    
    
    4.71
    %
    
    $
    1,714,774
    
    
    $
    18,186
    
    
    
    4.24
    %Commercial real estate
    
    
    1,662,978
    
    
    
    23,737
    
    
    
    5.71
    
    
    
    1,666,209
    
    
    
    24,011
    
    
    
    5.76Consumer
    
    
    438,205
    
    
    
    4,609
    
    
    
    4.21
    
    
    
    319,269
    
    
    
    3,548
    
    
    
    4.45Lease financing
    
    
    9,738
    
    
    
    235
    
    
    
    9.65
    
    
    
    18,935
    
    
    
    538
    
    
    
    11.37Commercial business
    
    
    104,022
    
    
    
    1,636
    
    
    
    6.29
    
    
    
    110,236
    
    
    
    1,618
    
    
    
    5.87Small business
    
    
    187,536
    
    
    
    3,372
    
    
    
    7.19
    
    
    
    159,025
    
    
    
    3,022
    
    
    
    7.60Total loans
    
    
    3,985,832
    
    
    
    52,225
    
    
    
    5.24
    
    
    
    3,988,448
    
    
    
    50,923
    
    
    
    5.11Investments  tax exempt
    
    
    144,126
    
    
    
    1,948
    (1)
    
    
    5.41
    
    
    
    
    
    
    
    
    
    
    
    Investments  taxable
    
    
    713,670
    
    
    
    9,439
    
    
    
    5.29
    
    
    
    718,528
    
    
    
    9,210
    
    
    
    5.13Total interest earning assets
    
    
    4,843,628
    
    
    
    63,612
    
    
    
    5.25
    %
    
    
    4,706,976
    
    
    
    60,133
    
    
    
    5.11
    %Goodwill and core deposit intangibles
    
    
    81,406
    
    
    
    
    
    
    
    
    
    
    
    83,143Other non-interest earning assets
    
    
    246,868
    
    
    
    
    
    
    
    
    
    
    
    229,398Total Assets
    
    $
    5,171,902
    
    
    
    
    
    
    
    
    
    
    $
    5,019,517Interest bearing liabilitiesDeposits:Savings
    
    $
    250,286
    
    
    
    169
    
    
    
    0.27
    %
    
    $
    197,778
    
    
    $
    137
    
    
    
    0.27
    %NOW
    
    
    590,787
    
    
    
    555
    
    
    
    0.37
    
    
    
    473,741
    
    
    
    438
    
    
    
    0.37Money funds
    
    
    931,596
    
    
    
    2,283
    
    
    
    0.97
    
    
    
    874,789
    
    
    
    1,935
    
    
    
    0.88Certificate accounts
    
    
    718,826
    
    
    
    4,053
    
    
    
    2.24
    
    
    
    837,221
    
    
    
    5,248
    
    
    
    2.49Total interest bearing deposits
    
    
    2,491,495
    
    
    
    7,060
    
    
    
    1.13
    
    
    
    2,383,529
    
    
    
    7,758
    
    
    
    1.29Short-term borrowed funds
    
    
    287,011
    
    
    
    966
    
    
    
    1.34
    
    
    
    256,826
    
    
    
    588
    
    
    
    0.91Advances from FHLB
    
    
    1,036,651
    
    
    
    9,364
    
    
    
    3.59
    
    
    
    1,249,074
    
    
    
    15,025
    
    
    
    4.77Long-term debt
    
    
    36,231
    
    
    
    515
    
    
    
    5.65
    
    
    
    34,863
    
    
    
    489
    
    
    
    5.56Total interest bearing liabilities
    
    
    3,851,388
    
    
    
    17,905
    
    
    
    1.85
    
    
    
    3,924,292
    
    
    
    23,860
    
    
    
    2.41Non-interest bearing deposits
    
    
    792,227
    
    
    
    
    
    
    
    
    
    
    
    568,333Non-interest bearing other liabilities
    
    
    22,626
    
    
    
    
    
    
    
    
    
    
    
    44,637Total Liabilities
    
    
    4,666,241
    
    
    
    
    
    
    
    
    
    
    
    4,537,262Stockholders equity
    
    
    505,661
    
    
    
    
    
    
    
    
    
    
    
    482,255Total liabilities and stockholders equity
    
    $
    5,171,902
    
    
    
    
    
    
    
    
    
    
    $
    5,019,517Net interest income/ net interest spread
    
    
    
    
    
    $
    45,707
    
    
    
    3.40
    %
    
    
    
    
    
    $
    36,273
    
    
    
    2.70
    %Tax Equivalent adjustment
    
    
    
    
    
    
    (682
    )
    
    
    
    
    
    
    
    
    
    
    Capitalized interest from real estate operations
    
    
    
    
    
    
    355
    
    
    
    
    
    
    
    
    
    
    
    286Net interest income
    
    
    
    
    
    
    45,380
    
    
    
    
    
    
    
    
    
    
    
    36,559MarginInterest income/interest earning assets
    
    
    
    
    
    
    
    
    
    
    5.25
    %
    
    
    
    
    
    
    
    
    
    
    5.11
    %Interest expense/interest earning assets
    
    
    
    
    
    
    
    
    
    
    1.47
    
    
    
    
    
    
    
    
    
    
    
    2.01Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.78
    %
    
    
    
    
    
    
    
    
    
    
    3.10
    %
  (1)
    
    The tax equivalent basis is computed using a 35% tax rate. 32




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##### Table of Contents



BankAtlantic Bancorp, Inc. For the Three Months Ended September 30, 2004 Compared to the Same 2003 Period: The increase in net interest income primarily resulted from an improvement
in the net interest margin associated with higher yields on residential loans
and investments as well as a significant increase in low cost deposits. While
further margin improvement will largely depend on the future pattern of
interest rates, we believe our level of low cost deposits, coupled with the
positioning of our balance sheet for rising interest rates, should position
BankAtlantics net interest margin to benefit from a higher interest rate
environment. The significant factors resulting in the improvement in the net interest
margin were a substantial reduction in our deposit interest expense due to low
cost deposit growth, the repayment of high rate FHLB advances and purchase of
residential loans and investments during 2004 at higher yields than the
existing portfolio. These factors were partially offset by higher short term
borrowing rates during the current quarter. Low cost deposits comprised approximately 50% of all deposits at September
30, 2004, versus 42% at September 30, 2003. Higher rate certificate of deposit
accounts declined from 28% of total deposits at September 30, 2003 to 22% at
September 30, 2004. Growth in BankAtlantics low cost deposit accounts is
primarily attributable to its Floridas Most Convenient Bank initiatives. The rate of low cost deposit account openings slowed in September 2004,
with deposit balances up 27% from the previous Septembers deposit balances,
compared to low cost deposit balance growth rates of 30% or more for each of
the eight previous quarters. BankAtlantic attributes this slower growth to the
four hurricanes in August and September. Data regarding low cost deposit
balances from July and August 2004 were consistent with historic trends. Other borrowing costs were slightly higher during the quarter reflecting
three increases in the prime interest rate beginning in June 2004. Each
increase was 0.25%, and the prime interest rate increased from 4.0% to 4.75%. BankAtlantics average interest earning asset balances increased slightly,
primarily due to our purchase of investments and origination of home equity
loans (included in Consumer loans on table above.) During 2004 BankAtlantic
purchased $1,079 million of residential loans and $550 million of securities,
respectively, and originated $303.5 million of home equity loans. These
acquisitions were partially offset by refinancing and prepayment of residential
loans originated or purchased by BankAtlantic during the latter half of 2003
and the first quarter of 2004. This reduced the balances in both its
residential mortgage loan portfolio and its taxable investment securities
portfolio. As of September 30, 2004, approximately 65% of BankAtlantics interest
earning assets is anticipated to reprice within one year in response to changes
in interest rates. Similarly, approximately 51% of BankAtlantics interest
bearing liabilities is anticipated to reprice during the same period. 33




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##### Table of Contents



BankAtlantic Bancorp, Inc. Average Balance Sheet - Yield / Rate AnalysisFor the Nine Months EndedSeptember 30, 2004
    
    September 30, 2003Average
    
    Revenue/
    
    Yield/
    
    Average
    
    Revenue/
    
    Yield/(Dollars in thousands)
    
    Balance
    
    Expense
    
    Rate
    
    Balance
    
    Expense
    
    RateInterest earning assetsLoans:Residential real estate
    
    $
    1,432,518
    
    
    
    50,358
    
    
    
    4.69
    %
    
    $
    1,718,974
    
    
    $
    62,329
    
    
    
    4.83
    %Commercial real estate
    
    
    1,664,786
    
    
    
    70,101
    
    
    
    5.61
    
    
    
    1,584,284
    
    
    
    70,249
    
    
    
    5.91Consumer
    
    
    405,537
    
    
    
    12,577
    
    
    
    4.14
    
    
    
    307,644
    
    
    
    10,535
    
    
    
    4.57Lease financing
    
    
    11,628
    
    
    
    933
    
    
    
    10.70
    
    
    
    23,830
    
    
    
    2,020
    
    
    
    11.30Commercial business
    
    
    102,260
    
    
    
    4,725
    
    
    
    6.16
    
    
    
    105,806
    
    
    
    4,564
    
    
    
    5.75Small business
    
    
    181,222
    
    
    
    9,679
    
    
    
    7.12
    
    
    
    160,589
    
    
    
    8,955
    
    
    
    7.44Total loans
    
    
    3,797,951
    
    
    
    148,373
    
    
    
    5.21
    
    
    
    3,901,127
    
    
    
    158,652
    
    
    
    5.42Investments  tax exempt
    
    
    73,646
    
    
    
    2,937
    (1)
    
    
    5.32
    
    
    
    
    
    
    
    
    
    
    
    0.00Investments  taxable
    
    
    625,136
    
    
    
    25,753
    
    
    
    5.49
    
    
    
    856,499
    
    
    
    35,747
    
    
    
    5.56Total interest earning assets
    
    
    4,496,733
    
    
    
    177,063
    
    
    
    5.25
    %
    
    
    4,757,626
    
    
    
    194,399
    
    
    
    5.45
    %Goodwill and core deposit intangibles
    
    
    81,838
    
    
    
    
    
    
    
    
    
    
    
    83,823Other non-interest earning assets
    
    
    246,235
    
    
    
    
    
    
    
    
    
    
    
    242,537Total Assets
    
    $
    4,824,806
    
    
    
    
    
    
    
    
    
    
    $
    5,083,986Interest bearing liabilitiesDeposits:Savings
    
    $
    237,646
    
    
    $
    473
    
    
    
    0.27
    %
    
    $
    185,432
    
    
    $
    721
    
    
    
    0.52
    %NOW
    
    
    573,617
    
    
    
    1,581
    
    
    
    0.37
    
    
    
    451,333
    
    
    
    1,540
    
    
    
    0.46Money funds
    
    
    903,579
    
    
    
    6,275
    
    
    
    0.93
    
    
    
    840,412
    
    
    
    7,213
    
    
    
    1.15Certificate accounts
    
    
    732,715
    
    
    
    12,492
    
    
    
    2.29
    
    
    
    905,409
    
    
    
    19,211
    
    
    
    2.85Total interest
bearing deposits
    
    
    2,447,557
    
    
    
    20,821
    
    
    
    1.14
    
    
    
    2,382,586
    
    
    
    28,685
    
    
    
    1.62Short-term borrowed funds
    
    
    246,218
    
    
    
    1,970
    
    
    
    1.07
    
    
    
    326,400
    
    
    
    2,762
    
    
    
    1.14Advances from FHLB
    
    
    832,177
    
    
    
    26,231
    
    
    
    4.23
    
    
    
    1,282,519
    
    
    
    45,633
    
    
    
    4.77Long-term debt
    
    
    36,168
    
    
    
    1,502
    
    
    
    5.57
    
    
    
    35,375
    
    
    
    1,428
    
    
    
    5.42Total interest bearing liabilities
    
    
    3,562,120
    
    
    
    50,524
    
    
    
    1.90
    
    
    
    4,026,880
    
    
    
    78,508
    
    
    
    2.62Non-interest bearing deposits
    
    
    737,738
    
    
    
    
    
    
    
    
    
    
    
    527,334Non-interest bearing other liabilities
    
    
    27,063
    
    
    
    
    
    
    
    
    
    
    
    58,885Total Liabilities
    
    
    4,326,921
    
    
    
    
    
    
    
    
    
    
    
    4,613,099Stockholders equity
    
    
    497,885
    
    
    
    
    
    
    
    
    
    
    
    470,887Total liabilities and stockholders equity
    
    $
    4,824,806
    
    
    
    
    
    
    
    
    
    
    $
    5,083,986Net interest income/ net interest spread
    
    
    
    
    
    
    126,539
    
    
    
    3.35
    %
    
    
    
    
    
    
    115,891
    
    
    
    2.83
    %Tax Equivalent adjustment
    
    
    
    
    
    
    (1,028
    )Capitalized interest from real estate operations
    
    
    
    
    
    
    1,008
    
    
    
    
    
    
    
    
    
    
    
    883Net interest income
    
    
    
    
    
    $
    126,519
    
    
    
    
    
    
    
    
    
    
    $
    116,774MarginInterest income/interest earning assets
    
    
    
    
    
    
    
    
    
    
    5.25
    %
    
    
    
    
    
    
    
    
    
    
    5.45
    %Interest expense/interest earning assets
    
    
    
    
    
    
    
    
    
    
    1.51
    
    
    
    
    
    
    
    
    
    
    
    2.21Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.74
    %
    
    
    
    
    
    
    
    
    
    
    3.24
    %
  (1)
    
    The tax equivalent basis is computed using a 35% tax rate. 34




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##### Table of Contents



BankAtlantic Bancorp, Inc. For the Nine Months Ended September 30, 2004 Compared to the Same 2003 Period: Net interest income for the nine month period increased from 2003
primarily due to the items discussed above for the three months ended September
30, 2004. The gross increase was partially offset by a decline in average
interest earning assets. The decline was primarily due to falling interest
rates during 2003 and the first quarter of 2004, that resulted in increased
refinancing and prepayment of many residential loans originated or purchased by
BankAtlantic. This reduced the balances in both our residential mortgage loan
portfolio and our taxable investment securities portfolio. Provision for Loan Losses For Three Months Ended
    
    For Nine Months Ended(in thousands)
    
    September 30,
    
    September 30,2004
    
    2003
    
    2004
    
    2003Balance, beginning of period
    
    $
    46,737
    
    
    $
    49,576
    
    
    $
    45,595
    
    
    $
    48,022Charge-offs:Small business
    
    
    (38
    )
    
    
    (132
    )
    
    
    (38
    )
    
    
    (549
    )Consumer loans
    
    
    (139
    )
    
    
    (152
    )
    
    
    (529
    )
    
    
    (697
    )Residential real estate loans
    
    
    (151
    )
    
    
    (150
    )
    
    
    (506
    )
    
    
    (362
    )Continuing loan products
    
    
    (328
    )
    
    
    (434
    )
    
    
    (1,073
    )
    
    
    (1,608
    )Discontinued loan products
    
    
    (570
    )
    
    
    (2,108
    )
    
    
    (1,216
    )
    
    
    (7,083
    )Total charge-offs
    
    
    (898
    )
    
    
    (2,542
    )
    
    
    (2,289
    )
    
    
    (8,691
    )Recoveries:Commercial business loans
    
    
    112
    
    
    
    15
    
    
    
    436
    
    
    
    64Commercial real estate loans
    
    
    
    
    
    
    1
    
    
    
    2,051
    
    
    
    2Small business
    
    
    61
    
    
    
    55
    
    
    
    303
    
    
    
    428Consumer loans
    
    
    55
    
    
    
    117
    
    
    
    209
    
    
    
    423Residential real estate loans
    
    
    53
    
    
    
    424
    
    
    
    296
    
    
    
    542Continuing loan products
    
    
    281
    
    
    
    612
    
    
    
    3,295
    
    
    
    1,459Discontinued loan products
    
    
    941
    
    
    
    1,632
    
    
    
    3,282
    
    
    
    6,882Total recoveries
    
    
    1,222
    
    
    
    2,244
    
    
    
    6,577
    
    
    
    8,341Net (charge-offs) recoveries
    
    
    324
    
    
    
    (298
    )
    
    
    4,288
    
    
    
    (350
    )Provision for loan losses
    
    
    1,717
    
    
    
    (1,076
    )
    
    
    (1,105
    )
    
    
    1,264Adjustments to acquired loan
losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (734
    )Balance, end of period
    
    $
    48,778
    
    
    $
    48,202
    
    
    $
    48,778
    
    
    $
    48,202
 For the Three Months Ended September 30, 2004 Compared to the Same 2003 Periods: BankAtlantics credit quality continued to improve as BankAtlantics
allowance for loan losses to total loans declined from 1.26% at September 30,
2003 to 1.17% at September 30, 2004. Continuing loan products charge-offs and
recoveries were nominal for the three months ended September 30, 2004 and 2003.
The decline in discontinued loan products charge-offs and recoveries resulted
from lower portfolio balances. The remaining balance of these discontinued loan
products declined to $17.1 million from $38.0 million a year earlier.
Discontinued loan products are lease financing, indirect consumer lending,
non-real estate syndication lending, and certain types of small business
lending. The increase in the provision for loan losses during the current quarter
resulted from additional reserves allocated to a $17.7 million hotel loan in
which the financial condition of the borrower deteriorated during the quarter
as well as additional reserves allocated to consumer loans in areas affected by
the four hurricanes which impacted Florida during August and September, 2004. For the Nine Months Ended September 30, 2004 Compared to the Same 2003 Periods: The substantial improvement in continuing loan products recoveries
primarily resulted from the items discussed above, as well as a $2.1 million
recovery in the 2004 second quarter of a residential construction loan that was
charged off in 2002. 35




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BankAtlantic Bancorp, Inc. The negative provision for loan losses during the 2004 period was due to
this $2.1 million residential construction loan recovery and discontinued
operation recoveries, partially offset by $2.1 million of specific reserves
relating to two commercial business loans and one aviation lease having an
aggregate outstanding balance of $4.7 million. The reserves were established
due to the weakened financial conditions of the borrowers. Adjustments in the 2003 allowance for loan losses were associated with
loans acquired in connection with the 2002 purchase of Community Savings
Bancshares, Inc. (Community or Community Savings). BankAtlantic reduced
its allowance for loan losses and reduced goodwill by $734,000 during the 2003
first quarter for those acquired loans which had been assigned a valuation
allowance at the acquisition date and which had either matured or were prepaid. At the indicated dates, BankAtlantics non-performing assets and potential
problem loans were (in thousands): September 30,
    
    December 31,2004
    
    2003NONPERFORMING ASSETSNonaccrual:Tax certificates
    
    $
    448
    
    
    $
    894Loans and leases
    
    
    11,352
    
    
    
    10,803Total nonaccrual
    
    
    11,800
    
    
    
    11,697Repossessed assets:Real estate owned, net of allowance
    
    
    1,059
    
    
    
    2,422Vehicles and equipment
    
    
    
    
    
    
    Total repossessed assets
    
    
    1,059
    
    
    
    2,422Total nonperforming assets
    
    
    12,859
    
    
    
    14,119Specific valuation allowances
    
    
    (2,095
    )
    
    
    Total nonperforming assets, net
    
    $
    10,764
    
    
    $
    14,119AllowancesAllowance for loan losses
    
    $
    48,778
    
    
    $
    45,595Allowance for tax certificate losses
    
    
    3,781
    
    
    
    2,870Total Allowances
    
    $
    52,559
    
    
    $
    48,465POTENTIAL PROBLEM LOANSContractually past due 90 days or more
    
    $
    
    
    
    $
    135Performing impaired loans
    
    
    167
    
    
    
    180Restructured loans
    
    
    28
    
    
    
    1,387TOTAL POTENTIAL PROBLEM LOANS
    
    $
    195
    
    
    $
    1,702
 The ratio of non-performing assets to total loans, tax certificates and
repossessed assets declined from 0.36% at December 31, 2003 to 0.30% at
September 30, 2004. During the 2004 period, non-performing assets were
unfavorably impacted by two loans and one aviation lease transferring to
non-accrual status as a result of the weakened financial conditions of the
borrowers. The aviation lease was included in restructured loans at December
31, 2003. Non-performing assets were favorably impacted by fewer residential
non-performing loans, partly due to increased efforts on the collection of
residential loans serviced by others. Non-accrual residential loans declined
from $8.5 million at December 31, 2003 to $5.4 million at September 30, 2004.
The decline in repossessed assets was primarily due to the runoff of
discontinued loan products, sale of real estate owned and strengthened credit
standards. 36




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BankAtlantic Bancorp, Inc. Non-Interest Income For Three Months
    
    For Nine MonthsBanking Operations
    
    Ended September 30,
    
    Ended September 30,(In thousands)
    
    2004
    
    2003
    
    Change
    
    2004
    
    2003
    
    ChangeOther service charges and fees
    
    $
    5,819
    
    
    $
    4,625
    
    
    $
    1,194
    
    
    $
    16,887
    
    
    $
    14,614
    
    
    $
    2,273Service charges on deposits
    
    
    13,493
    
    
    
    10,925
    
    
    
    2,568
    
    
    
    37,798
    
    
    
    29,088
    
    
    
    8,710Income from real estate
operations
    
    
    900
    
    
    
    66
    
    
    
    834
    
    
    
    1,888
    
    
    
    5,288
    
    
    
    (3,400
    )Securities activities, net
    
    
    
    
    
    
    (336
    )
    
    
    336
    
    
    
    (3
    )
    
    
    (376
    )
    
    
    373Other
    
    
    2,120
    
    
    
    1,866
    
    
    
    254
    
    
    
    6,151
    
    
    
    5,139
    
    
    
    1,012Non-interest income
    
    $
    22,332
    
    
    $
    17,146
    
    
    $
    5,186
    
    
    $
    62,721
    
    
    $
    53,753
    
    
    $
    8,968
 For the Three and Nine Months Ended September 30, 2004 Compared to the Same 2003 Periods: Higher non-interest income in 2004 was primarily due to increases in
service charges and fees resulting from a substantial increase in low cost
deposit balances, and an increase in income from real estate activities of a
joint venture that was acquired in connection with the Community acquisition. The increase in low cost deposit balances was primarily the result of
BankAtlantics Floridas Most Convenient Bank initiatives. Since launching
these initiatives, BankAtlantics low cost deposit balances have increased from
$894.6 million at March 31, 2002 to $1,625 million at September 30, 2004. The
Floridas Most Convenient Bank initiatives include seven-day branch banking,
extended weekday branch hours, 24/7 live customer service, Totally Free
Checking, free online banking, and various other products and services not
offered by BankAtlantic prior to January 2002. The increase in other service charges and fees resulted from a 27% and 23%
increase in fees received from check card and ATM usage for the three and nine
months ended September 30, 2004 compared to the same 2003 periods. This
increase was chiefly due to the higher number of deposit accounts, which
resulted in increased usage of check cards and ATMs, and an increase in debit
card interchange fees during 2004. Revenues from deposit service charges were up 24% and 30% over the
comparable three and nine month 2003 periods. The increase was primarily the
result of overdraft fees from transaction accounts. Overdraft fee income
increased from $9.8 million and $26.1 million during the three and nine months
ended September 30, 2003 to $12.3 million and $34.2 million during the same
2004 periods. The higher overdraft fees were due to both an increase in the
number of accounts and higher fees assessed on overdrafts. Real estate income reflects revenues associated with a joint venture
acquired as part of the Community acquisition and, during the 2004 third
quarter, the sale of land acquired in connection with the Community
acquisition for a gain of $274,000. Securities activities, net for the three and nine months ended September
30, 2003, represent the sale of agency securities for a $100,000 loss and the
settlement of an interest rate swap for a $234,000 loss. Other income reported for the three and nine months ended September 30,
2004 consists in part of a $75,000 and $320,000 increase in gains on loans held
for sale. This increase was associated with the origination and sale of
residential loans held for sale with an independent mortgage company, a program
which the Bank initiated in August 2003. Other income also included an increase
in fee income received for banking services provided to our deposit customers. 37




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BankAtlantic Bancorp, Inc. Non-Interest Expense For Three Months
    
    For Nine MonthsBanking Operations
    
    Ended September 30,
    
    Ended September 30,(In thousands)
    
    2004
    
    2003
    
    Change
    
    2004
    
    2003
    
    ChangeEmployee compensation and benefits
    
    $
    23,128
    
    
    $
    19,387
    
    
    $
    3,741
    
    
    $
    68,018
    
    
    $
    59,321
    
    
    $
    8,697Occupancy and equipment
    
    
    8,100
    
    
    
    6,874
    
    
    
    1,226
    
    
    
    23,055
    
    
    
    20,237
    
    
    
    2,818Advertising and promotion
    
    
    3,301
    
    
    
    2,444
    
    
    
    857
    
    
    
    10,925
    
    
    
    6,917
    
    
    
    4,008Amortization of intangible assets
    
    
    425
    
    
    
    439
    
    
    
    (14
    )
    
    
    1,289
    
    
    
    1,332
    
    
    
    (43
    )Cost associated with debt redemption
    
    
    
    
    
    
    2,040
    
    
    
    (2,040
    )
    
    
    11,741
    
    
    
    2,040
    
    
    
    9,701Professional fees
    
    
    3,312
    
    
    
    1,139
    
    
    
    2,173
    
    
    
    5,377
    
    
    
    3,260
    
    
    
    2,117Other
    
    
    7,264
    
    
    
    6,834
    
    
    
    430
    
    
    
    21,553
    
    
    
    23,036
    
    
    
    (1,483
    )Non-interest expense
    
    $
    45,530
    
    
    $
    39,157
    
    
    $
    6,373
    
    
    $
    141,958
    
    
    $
    116,143
    
    
    $
    25,815
 For the Three and Nine Months Ended September 30, 2004 Compared to the Same 2003 Periods: Compensation and benefit expenses increased 19% and 15% during the three
and nine months ended September 30, 2004, respectively, compared to the same
2003 periods. In addition to annual employee salary increases, the growth in
this expense category resulted in large part from an increase in the number of
BankAtlantic employees and higher employee benefit costs and training
expenses. The Floridas Most Convenient Bank initiatives, which include
extended branch business hours and services, and the resulting substantial
increase in deposit customers, required BankAtlantic to hire additional
employees to staff its branches and operations. The number of full time
equivalent BankAtlantic employees increased to 1,571 at September 30, 2004,
versus 1,244 at December 31, 2002. Occupancy and equipment expenses increased 18% and 14% during the three
and nine months ended September 30, 2004, respectively, compared to the same
2003 periods. The higher expenses resulted from additional depreciation
expense associated with branch fixed assets and leasehold improvements. In
June 2004, BankAtlantic initiated a program to renovate 68 branches.
Management anticipates that the renovation plan will be completed during 2006.
In connection with this program and in conjunction with this decision,
BankAtlantic shortened the estimated useful lives of branch fixed assets and
leasehold improvements affected by the renovation plans, causing an
acceleration in depreciation expense on $2.8 million of fixed assets and
leasehold improvements. The shortened asset lives increased depreciation
expense by approximately $669,000 and $1.1 million during the three and nine
months ended September 30, 2004, respectively. The remaining increase in
occupancy and equipment expenses for the three and nine months ended September
30, 2004 was due to the engagement of additional guard services to increase
security at BankAtlantics branches during extended business hours as well as
higher branch facilities maintenance costs also associated with extended
business hours. Advertising expenses during the three and nine months ended September 30,
2004 increased significantly as a direct result of an aggressive BankAtlantic
marketing campaign that commenced in early 2004 and included television and
radio advertising to promote the Floridas Most Convenient Bank initiatives.
The marketing campaign is ongoing, and BankAtlantic anticipates continued
higher advertising and promotion expenditures during 2004 compared to those
incurred during 2003. The cost associated with debt redemption related to a prepayment penalty
of $11.7 million incurred when BankAtlantic prepaid $108 million of FHLB
advances with an average interest rate of 5.55% originally maturing in
2007-2008. BankAtlantic expects to recover this expense in future periods
through the savings realized from lower borrowing costs. During September 2003
BankAtlantic prepaid $185 million of FHLB advances and incurred a prepayment
penalty of $2.0 million. Professional fees for the three and nine months ended September 30, 2004
increased primarily due to fees incurred during the 2004 periods in connection
with regulatory compliance. During the third quarter of 2004, BankAtlantic
spent approximately $2 million in connection with its efforts to fully comply
with the USA Patriot Act, Anti-Money Laundering laws and the Bank Secrecy Act,
which have imposed far-reaching and substantial requirements on financial
institutions. We expect these expenses, which were primarily paid to outside
professionals, to continue at approximately this level during the fourth
quarter. Although BankAtlantic added significant staff in the compliance area
that will be an on-going expense, much of the increased level of expenditures
for compliance in the 2004 third quarter and the anticipated expenditures
during the 2004 fourth quarter result from the identification of deficiencies
in the past, 38




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##### Table of Contents



BankAtlantic Bancorp, Inc. requiring a thorough review of previous compliance under these laws. We
are cooperating with federal agencies in connection with the past deficiencies.
We cannot provide assurance that monetary penalties will not be imposed or
that these compliance issues will not delay BankAtlantics ability to obtain
required regulatory approvals in connection with its business plan, including
its previously announced branch expansion strategy. The increase in other expenses during the three months ended September 30,
2004 compared to the same 2003 period primarily resulted from higher check
losses and operating expenses associated with a substantial increase in deposit
customer accounts. The decrease in other expenses during the nine months ended
September 30, 2004, compared to the same 2003 period, primarily resulted from a
$750,000 write-down of an REO property, a $257,000 impairment of a branch
facility and $635,000 of bankcard conversion expenses during 2003. 39




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##### Table of Contents



BankAtlantic Bancorp, Inc. RB Holdings, Inc. and Subsidiaries Results of Operations For the Three Months
    
    For the Nine MonthsEnded September 30,
    
    Ended September 30,(In thousands)
    
    2004
    
    2003
    
    Change
    
    2004
    
    2003
    
    ChangeNet interest income:Interest on trading securities
    
    $
    2,849
    
    
    $
    2,892
    
    
    $
    (43
    )
    
    $
    8,511
    
    
    $
    7,390
    
    
    $
    1,121Interest expense
    
    
    (230
    )
    
    
    (277
    )
    
    
    47
    
    
    
    (714
    )
    
    
    (1,018
    )
    
    
    304Net interest income
    
    
    2,619
    
    
    
    2,615
    
    
    
    4
    
    
    
    7,797
    
    
    
    6,372
    
    
    
    1,425Non-interest income:Principal transactions
    
    
    19,393
    
    
    
    21,093
    
    
    
    (1,700
    )
    
    
    65,490
    
    
    
    70,234
    
    
    
    (4,744
    )Investment banking
    
    
    13,835
    
    
    
    7,642
    
    
    
    6,193
    
    
    
    44,492
    
    
    
    20,410
    
    
    
    24,082Commissions
    
    
    18,564
    
    
    
    21,257
    
    
    
    (2,693
    )
    
    
    66,180
    
    
    
    62,212
    
    
    
    3,968Other
    
    
    878
    
    
    
    559
    
    
    
    319
    
    
    
    2,581
    
    
    
    1,880
    
    
    
    701Non-interest income
    
    
    52,670
    
    
    
    50,551
    
    
    
    2,119
    
    
    
    178,743
    
    
    
    154,736
    
    
    
    24,007Non-interest expense:Employee compensation and
benefits
    
    
    35,090
    
    
    
    35,925
    
    
    
    (835
    )
    
    
    119,429
    
    
    
    110,740
    
    
    
    8,689Occupancy and equipment
    
    
    3,680
    
    
    
    3,287
    
    
    
    393
    
    
    
    10,334
    
    
    
    9,277
    
    
    
    1,057Advertising and promotion
    
    
    1,389
    
    
    
    544
    
    
    
    845
    
    
    
    3,971
    
    
    
    2,697
    
    
    
    1,274Professional Fees
    
    
    1,063
    
    
    
    2,638
    
    
    
    (1,575
    )
    
    
    3,438
    
    
    
    6,692
    
    
    
    (3,254
    )Communications
    
    
    3,182
    
    
    
    2,822
    
    
    
    360
    
    
    
    9,226
    
    
    
    10,867
    
    
    
    (1,641
    )Floor broker and clearing fees
    
    
    2,143
    
    
    
    2,328
    
    
    
    (185
    )
    
    
    7,383
    
    
    
    6,722
    
    
    
    661Other
    
    
    1,558
    
    
    
    1,204
    
    
    
    354
    
    
    
    4,838
    
    
    
    5,104
    
    
    
    (266
    )Non-interest expense
    
    
    48,105
    
    
    
    48,748
    
    
    
    (643
    )
    
    
    158,619
    
    
    
    152,099
    
    
    
    6,520Income (loss) before income taxes
    
    
    7,184
    
    
    
    4,418
    
    
    
    2,766
    
    
    
    27,921
    
    
    
    9,009
    
    
    
    18,912Income taxes
    
    
    3,083
    
    
    
    1,522
    
    
    
    1,561
    
    
    
    11,678
    
    
    
    3,365
    
    
    
    8,313Income from continuing operations
    
    $
    4,101
    
    
    $
    2,896
    
    
    $
    1,205
    
    
    $
    16,243
    
    
    $
    5,644
    
    
    $
    10,599
 For the Three and Nine Months Ended September 30, 2004 Compared to the Same 2003 Periods: Income from continuing operations increased significantly for the three
and nine months ended September 30, 2004 primarily as a result of higher
investment banking activity associated with Ryan Becks Financial Institutions
Group. Net interest income was relatively flat for the three months ended and
increased 22% for the nine months ended September 30, 2004, as compared to the
same 2003 periods. The increase in net interest income for the comparable nine
month periods primarily resulted from $243 million of customer margin debit
balances and fees earned in connection with approximately $1.2 billion in
customer money market balances at September 30, 2004. Customer margin debit
balances and customer money market balances were $210 million and $1.3 billion,
respectively, at September 30, 2003. Further contributing to the increase in
net interest income for the nine months ended September 30, 2004 compared to
the same 2003 periods was Ryan Becks repayment of a subordinated loan from the
Company in the third quarter of 2003, eliminating current interest expense on
that loan. Principal transaction revenue decreased 8% and 7%, respectively, for the
three and nine months ended September 30, 2004, as compared to the same 2003
periods. The primary reason for the decrease was the decreased activity on the
part of individual investors due to current market conditions. Additionally,
Ryan Becks deferred compensation plan assets, which are marked to market, were
down 163% and 75%, respectively, for the three and nine months ended September
30, 2004. Investment banking revenue increased 81% and 118%, respectively, for the
three and nine months ended September 30, 2004, as compared to the same 2003
periods. Through the third quarter of 2004, Ryan Becks Financial Institutions
Group completed thirteen merger and acquisition transactions versus six through
September 30, 2003. Additionally, this group participated in raising over $1.2
billion of capital financing transactions through the third quarter of 2004,
versus $0.8 billion through September 30, 2003. Also, Ryan Becks Middle
Market Group contributed to revenue growth by completing thirteen transactions
through the third quarter of 2004, versus four through September 30, 2003. 40




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##### Table of Contents



BankAtlantic Bancorp, Inc. Commission revenue decreased 13% and increased 6%, respectively, for the
three and nine months ended September 30, 2004, as compared to the same 2003
periods. Commission revenue increased significantly during the first quarter
of 2004 as compared to the prior year, but deteriorated during the two
subsequent quarters of 2004, primarily due to decreased activity on the part of
individual investors as a result of market conditions. Employee compensation and benefits decreased 2% and increased 8%,
respectively, for the three and nine months ended September 30, 2004, as
compared to the same 2003 periods. The increase in the nine month period is
mainly attributable to an increase in bonus accruals necessitated by the
additional investment banking revenue for the nine months ended September 30,
2004. The decrease in the three month period is attributable to the decrease
in commission expense from the comparable 2003 period. Advertising and promotion expense increased 155% and 47%, respectively,
for the three and nine months ended September 30, 2004, as compared to the same
2003 periods. The increase is mainly attributable to expenses associated with
the launch of Ryan Becks first formal advertising campaign designed to expand
Ryan Becks exposure through print and television media. Professional fees decreased 60% and 49%, respectively, for the three and
nine months ended September 30, 2004, as compared to the same 2003 periods.
The decrease is primarily due to the reduced legal costs associated with the
Gruntal transaction. During the first quarter of 2004, the bankruptcy court
presiding over the Gruntal bankruptcy proceedings entered an order confirming a
plan of liquidation for Gruntal that included a third party release in favor of
Ryan Beck and the Company, and it is expected that the majority of the claims
against Ryan Beck associated with the Gruntal transaction will be permanently
stayed or dismissed by the arbitration panels and courts hearing such claims. Communication cost increased 13% and decreased 15%, respectively, for the
three and nine months ended September 30, 2004, as compared to the same 2003
periods. The increase for the three month period is primarily due to
additional communication costs incurred as a result of Ryan Becks
establishment of a new headquarters location. The decrease for the year to
date period is primarily due to the elimination, as part of the integration of
Gruntal operations into those of Ryan Beck, of duplicate services that were in
place in the nine months ended September 2003. 41




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##### Table of Contents



BankAtlantic Bancorp, Inc. Parent Company Results of Operations For the Three Months
    
    For the Nine Months(In thousands)
    
    Ended September 30,
    
    Ended September 30,2004
    
    2003
    
    Change
    
    2004
    
    2003
    
    ChangeNet interest income:Interest on loans and investments
    
    $
    607
    
    
    $
    437
    
    
    $
    170
    
    
    $
    1,697
    
    
    $
    1,400
    
    
    $
    297Interest on borrowings
    
    
    (4,289
    )
    
    
    (4,113
    )
    
    
    (176
    )
    
    
    (12,556
    )
    
    
    (12,218
    )
    
    
    (338
    )Net interest income
    
    
    (3,682
    )
    
    
    (3,676
    )
    
    
    (6
    )
    
    
    (10,859
    )
    
    
    (10,818
    )
    
    
    (41
    )Non-interest income:Income from unconsolidated
subsidiaries
    
    
    123
    
    
    
    106
    
    
    
    17
    
    
    
    359
    
    
    
    306
    
    
    
    53Securities activities, net
    
    
    2
    
    
    
    
    
    
    
    2
    
    
    
    80
    
    
    
    405
    
    
    
    (325
    )Litigation settlement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,840
    
    
    
    
    
    
    
    22,840Other
    
    
    136
    
    
    
    
    
    
    
    136
    
    
    
    360
    
    
    
    
    
    
    
    360Non-interest income
    
    
    261
    
    
    
    106
    
    
    
    155
    
    
    
    23,639
    
    
    
    711
    
    
    
    22,928Non-interest expense:Investment banking expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    635
    
    
    
    (635
    )Employee compensation and benefits
    
    
    774
    
    
    
    6
    
    
    
    768
    
    
    
    2,263
    
    
    
    87
    
    
    
    2,176Professional fees
    
    
    70
    
    
    
    461
    
    
    
    (391
    )
    
    
    1,107
    
    
    
    1,161
    
    
    
    (54
    )Cost associated with debt redemption
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,648
    
    
    
    (1,648
    )Other
    
    
    227
    
    
    
    120
    
    
    
    107
    
    
    
    805
    
    
    
    488
    
    
    
    317Non-interest expense
    
    
    1,071
    
    
    
    587
    
    
    
    484
    
    
    
    4,175
    
    
    
    4,019
    
    
    
    156Loss before income taxes
    
    
    (4,492
    )
    
    
    (4,157
    )
    
    
    (335
    )
    
    
    8,605
    
    
    
    (14,126
    )
    
    
    22,731Income taxes
    
    
    (1,483
    )
    
    
    (1,456
    )
    
    
    (27
    )
    
    
    3,101
    
    
    
    (4,943
    )
    
    
    8,044Income from continuing operations
    
    $
    (3,009
    )
    
    $
    (2,701
    )
    
    $
    (308
    )
    
    $
    5,504
    
    
    $
    (9,183
    )
    
    $
    14,687
 For the Three and Nine Months Ended September 30, 2004 Compared to the Same 2003 Periods: Interest income on loans and investments during the 2004 quarter and nine
month period represents interest income recognized by the Company on loans to
Levitt, a reverse repurchase account with BankAtlantic and securities
investments. Interest income on loans and investments during the comparable
2003 periods is interest income recognized by the Company on loans to Levitt
and Ryan Beck as well as interest income earned on the BankAtlantic reverse
repurchase account. Interest expense increased during the third quarter and nine months ended
September 30, 2004. The increase was primarily due to higher rates associated
with variable rate junior subordinated debentures during the periods.
Additionally, average junior subordinated debenture balances were $263.2
million and $238.1 million for the three and nine months ended September 30,
2003 compared to $263.3 million and $263.3 million during the same 2004 periods Income from unconsolidated subsidiaries represents the equity earnings
from trusts formed to issue trust preferred securities. The increase in
earnings during the nine months ended September 30, 2004, was primarily due to
earnings from three new trusts established in March and April 2003. The income from securities activities during the three and nine months
ended September 30, 2004 represents gains from sales of mutual funds and
investments. The Company sold mutual funds and investments to rebalance its
investment portfolio to benchmarked allocation percentages. The income from
securities activities during the nine months ended September 30, 2003
represented a gain realized from a liquidating dividend on an equity security. The litigation settlement reflects proceeds from the settlement of
litigation related to the Companys prior investment of $15 million in a
technology company. Pursuant to that settlement, the Company sold its stock in
the technology company to a third party investor group for $15 million in cash,
the Companys original cost, and the 42




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BankAtlantic Bancorp, Inc. Company received consideration from the technology company for legal expenses
and damages, which consisted of $1.7 million in cash and 378,160 shares of the
Companys Class A Common Stock returned by the technology company to the
Company. The Companys investment banking expense during the nine months ended
September 30, 2003 resulted from fees paid by it to Ryan Beck in connection
with Ryan Becks underwriting of offerings of trust preferred securities by the
Company in 2003. These fees are included in Ryan Becks investment banking
income in Ryan Becks business segment results of operations but were
eliminated in the Companys consolidated financial statements. The Company incurred compensation expense as a result of the transfer to
the Company effective January 1, 2004 of investor relations, corporate and risk
management staffs, who were formerly employed by BankAtlantic. This expense was
partially offset by fees received by the Company for investor relations and
risk management services provided by the Company to Levitt and BFC Financial
Corporation, which are included in other income during 2004. Compensation
expense during the 2003 periods primarily resulted from the issuance of Class A
restricted stock to BankAtlantic employees and the amortization of a forgivable
loan related to executive recruiting. Costs associated with debt redemption during the nine months ended
September 30, 2003 resulted from the Company redeeming its 5.625% convertible
debentures at a redemption price of 102% of the principal amount. The loss on
the redemption reflects a $732,000 write-off of deferred offering costs and a
$917,000 call premium. The decreased professional fees for the three and nine months ended
September 30, 2004 primarily resulted from lower fees incurred in connection
with the technology company litigation, which was settled in the first quarter
of 2004. The increase in other expenses was associated with costs for regulatory
compliance and risk management consulting services provided to the Company by
Bluegreen Corporation. Financial Condition Our total assets at September 30, 2004 were $5.7 billion, compared to $4.8
billion at December 31, 2003. The increase in total assets primarily resulted
from:  
    
    Higher loan balances related to BankAtlantics purchase of
residential loans as well as the origination of commercial and home
equity loans;
    
    Increases in securities available for sale balances associated
with BankAtlantics purchase of mortgage-backed securities and
municipal securities;
    
    Additions to property and equipment associated with the
construction of BankAtlantics new corporate headquarters and the
renovations of its branch facilities;
    
    A receivable from Ryan Becks clearing agent associated with
Ryan Becks trading activities;
    
    Higher real estate inventory related to increased construction
activity by a real estate joint venture acquired by BankAtlantic in
connection with the Community acquisition;
    
    Increases in accrued interest receivable due to higher loan
receivable and securities available for sale balances; and
    
    Higher FHLB stock investment due to increased FHLB advance
borrowings by BankAtlantic. The above increases in total assets were partially offset by:  
    
    Declines in investment securities and tax certificates
primarily associated with BankAtlantics repayments of tax
certificates;
    
    Lower deferred tax assets primarily due to the litigation settlement;
    
    Decreases in securities owned related to the trading activities of Ryan Beck; and
    
    Declines in other assets associated with lower real estate owned and Ryan Beck forgivable loan balances. 43




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BankAtlantic Bancorp, Inc. The Companys total liabilities at September 30, 2004 were $5.2 billion,
compared to $4.4 billion at December 31, 2003. The increase in total
liabilities primarily resulted from:  
    
    Higher low cost deposit balances and insured money fund savings
account balances;
    
    Increases in short-term borrowings and FHLB advances to fund
loan and securities available for sale growth; and
    
    Increases in other liabilities associated with BankAtlantics
purchases of securities available for sale awaiting settlement and
higher escrow balances. Stockholders equity at September 30, 2004 was $459.5 million compared to
$413.5 million at December 31, 2003. The increase was primarily attributable
to earnings of $53.5 million and $8.0 million of proceeds and tax benefits from
the issuance of common stock upon the exercise of stock options. The above
increases in stockholders equity were partially offset by the payment of $6.0
million of common stock dividends, a $6.1 million reduction in additional paid
in capital resulting from the retirement of 378,160 shares of the Companys
Class A Common Stock received as part of the private technology company
litigation settlement, $765,000 of unrealized losses on securities available
for sale, net of income tax benefits, and a $2.7 million reduction in
additional paid in capital related to the acceptance of Class A common stock as
consideration for the payment of withholding taxes and the exercise price which
were due upon the exercise of Class A stock options. Liquidity and Capital Resources BankAtlantic Bancorp, Inc. Liquidity and Capital Resources The Companys principal source of liquidity is dividends from BankAtlantic
and, to a lesser extent, Ryan Beck. The Company also obtains funds through the
issuance of equity and debt securities, borrowings from financial institutions,
liquidation of equity securities and other investments it holds, management
fees from subsidiaries and affiliates and principal and interest payments from
loans to Levitt Corporation. The Company also received $16.7 million in the
first quarter of 2004 as part of the private technology company litigation
settlement. The Company uses these funds to purchase debt and equity
investments, provide capital to its subsidiaries, pay dividends to its
shareholders, service its debt and to fund operations. The Companys annual
debt service associated with its junior subordinated debentures and other
borrowings is approximately $16.2 million. The Companys estimated current
annual dividends to common shareholders are approximately $8.4 million. During
2003, and during the nine months of 2004, the Company received $20.0 million
and $10.0 million, respectively, of dividends from BankAtlantic. The
declaration and payment of dividends and the ability of the Company to meet its
debt service obligations will depend upon the results of operations, financial
condition and cash requirements of the Company, indenture restrictions and loan
covenants, and the ability of BankAtlantic to pay dividends to the Company.
BankAtlantics dividends are subject to regulations and OTS approval and are
based upon BankAtlantics regulatory capital levels and net income. In
addition, Ryan Beck paid $5.0 million in dividends to the Company during the
first quarter of 2004. Future dividend payments by Ryan Beck will depend upon
the results of operations, financial condition and capital requirements of Ryan
Beck. During 2004, the Company transferred $18 million of exchange traded mutual
funds and invested an additional $35 million of funds with a third party money
manager subject to certain liquidity and concentration restrictions. It is
anticipated that these funds will be invested in this manner until needed to
fund the operations of the Company and its subsidiaries, which may include
acquisitions, BankAtlantics branch expansion and renovation strategy, or other
business purposes. Additionally, during 2004, the Company invested $5 million
in a hedge fund limited partnership which primarily invests in financial
services companies. The Company maintains a revolving credit facility of $30 million with an
independent financial institution. The credit facility contains customary
covenants, including financial covenants relating to regulatory capital and
maintenance of certain loan loss reserves, and is secured by the common stock
of BankAtlantic. The Company has used this credit facility to temporarily fund
acquisitions and asset purchases as well as for general corporate purposes.
The credit facility had an outstanding balance of $100,000 at September 30,
2004, and the Company was in compliance with all loan covenants. Amounts
outstanding accrue interest at the prime rate minus 50 basis points, and the
facility matures on March 1, 2005. BankAtlantic Liquidity and Capital Resources BankAtlantics liquidity depends on its ability to generate sufficient
cash to support loan demand, to meet deposit withdrawals, and to pay operating
expenses. BankAtlantics securities portfolio provides an internal source of 44




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BankAtlantic Bancorp, Inc. liquidity through its short-term investments as well as scheduled maturities
and interest payments. Loan repayments and sales also provide an internal
source of liquidity. BankAtlantics primary sources of funds are deposits; principal
repayments of loans and tax certificates and securities available for sale;
proceeds from the sale of loans and securities; proceeds from securities sold
under agreements to repurchase; advances from the FHLB; and from operations.
These funds were utilized to fund loan disbursements and purchases; cover
deposit outflows; repay securities sold under agreements to repurchase; repay
advances from the FHLB; purchase tax certificates; pay maturing certificates
of deposit; renovate and construct bank facilities; pay operating expenses,
including increased costs associated with regulatory compliance; and pay
dividends to the Company. BankAtlantic has a $1.6 billion line of credit with
the FHLB, subject to available collateral, with a maximum term of ten years.
BankAtlantic has utilized its FHLB line of credit to borrow $1.2 billion. The
line of credit is secured by a blanket lien on BankAtlantics residential
mortgage loans and certain commercial real estate loans. BankAtlantics
available borrowings under this line of credit were approximately $367 million
at September 30, 2004. BankAtlantic has also established lines of credit for
up to $205 million with other banks to purchase federal funds. BankAtlantic
has various relationships to acquire brokered deposits. These relationships
may be utilized as an alternative source of borrowings, if needed. BankAtlantics commitments to originate and purchase loans at September
30, 2004 were $355.0 million and zero, respectively, compared to $469.4 million
and $1.8 million, respectively, at September 30, 2003. Additionally,
BankAtlantic had commitments to purchase securities of $5.0 million and $12.7
million, respectively, at September 30, 2004 and 2003. At September 30, 2004,
loan commitments represented approximately 12.1% of loans receivable, net. As of September 30, 2004, BankAtlantic had approximately $257 million in
investments and mortgage-backed securities pledged against securities sold
under agreements to repurchase and public deposits. During 2002, BankAtlantic paid $14.3 million to purchase a building to
consolidate its headquarters and back office operations into a centralized
facility. BankAtlantic has incurred approximately $17.1 million in renovation
costs on this building. The total estimated cost to complete renovation is
approximately $12.4 million. The costs to complete renovation will be funded
by cash flow from operations. In July 2004, BankAtlantic announced its new branch de novo expansion
strategy under which it plans to open between eight to ten branches subject to
required regulatory approvals. In view of recently identified issues concerning
BankAtlantics compliance with the USA Patriot Act, Bank Secrecy Act and
anti-money laundering laws, there is no assurance that BankAtlantic will not
face delays in obtaining the necessary approvals. It is anticipated that
delays, if any occur, would not alter the course or scope of BankAtlantics
branching strategy. The estimated cost of constructing these branches is
approximately $14 million. BankAtlantic expects to place these new branches
within its current geographic market. If the strategy is successful,
BankAtlantic anticipates expanding into other markets. During the current
quarter BankAtlantic purchased a branch facility in Tampa, Florida for
$700,000. The facility is under renovation and is scheduled to open during the
first quarter of 2005. In June 2004, BankAtlantics management finalized a plan to renovate the
interior of 68 BankAtlantic branches. The renovation of these branches is
projected to be completed during 2006, at an estimated cost of $23.5 million.
BankAtlantic has incurred approximately $1.1 million in renovation costs on
branch facilities as of September 30, 2004. 45




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BankAtlantic Bancorp, Inc. At September 30, 2004, BankAtlantic met all applicable liquidity and
regulatory capital requirements. BankAtlantics capital amounts and ratios were
(dollars in thousands): Minimum RatiosActual
    
    AdequatelyCapitalized
    
    WellCapitalizedAmount
    
    Ratio
    
    Ratio
    
    RatioAt September 30, 2004:Total risk-based capital
    
    $
    471,358
    
    
    
    11.47
    %
    
    
    8.00
    %
    
    
    10.00
    %Tier 1 risk-based capital
    
    $
    399,123
    
    
    
    9.71
    %
    
    
    4.00
    %
    
    
    6.00
    %Tangible capital
    
    $
    399,123
    
    
    
    7.55
    %
    
    
    1.50
    %
    
    
    1.50
    %Core capital
    
    $
    399,123
    
    
    
    7.55
    %
    
    
    4.00
    %
    
    
    5.00
    %At December 31, 2003:Total risk-based capital
    
    $
    447,967
    
    
    
    12.06
    %
    
    
    8.00
    %
    
    
    10.00
    %Tier 1 risk-based capital
    
    $
    379,505
    
    
    
    10.22
    %
    
    
    4.00
    %
    
    
    6.00
    %Tangible capital
    
    $
    379,505
    
    
    
    8.52
    %
    
    
    1.50
    %
    
    
    1.50
    %Core capital
    
    $
    379,505
    
    
    
    8.52
    %
    
    
    4.00
    %
    
    
    5.00
    %
 Savings institutions are also subject to the provisions of the Federal
Deposit Insurance Corporation Improvement Act of 1991 (FDICIA). Regulations
implementing the prompt corrective action provisions of FDICIA define specific
capital categories based on FDICIAs defined capital ratios, as discussed more
fully in our Annual Report on Form 10-K for the year ended December 31, 2003. Ryan Beck & Co., Inc. Liquidity and Capital Resources Ryan Becks primary source of funds during the nine months ended September
30, 2004 were clearing broker borrowings, proceeds from the sale of securities
owned, proceeds from securities sold but not yet purchased, loan repayments,
and fees from customers. These funds were primarily utilized to pay operating
expenses, pay dividends to the Company, fund the purchase of securities owned
and fund capital expenditures. In the ordinary course of business, Ryan Beck borrows under an agreement
with its clearing broker by pledging securities owned as collateral primarily
to finance its trading inventories. The amount and terms of the borrowings are
subject to the lending policies of the clearing broker and can be changed at
the clearing brokers discretion. Additionally, the amount financed is also
impacted by the market value of the securities owned which are pledged as
collateral. Ryan Beck is subject to the net capital provision of Rule 15c3-1 under the
Securities Exchange Act of 1934, which requires the maintenance of minimum net
capital and requires the ratio of aggregate indebtedness to net capital, both
as defined, not to exceed 15 to 1. Additionally, Ryan Beck, as a market maker,
is subject to supplemental requirements of Rule 15c3-1(a) 4, which provides for
the computation of net capital to be based on the number of and price of issues
in which markets are made by Ryan Beck, not to exceed $1.0 million. Ryan
Becks regulatory net capital was $44.9 million, which was $43.9 million in
excess of its required net capital of $1.0 million. Ryan Beck operates under the provisions of paragraph (k)(2)(ii) of Rule
15c3-3 of the Securities and Exchange Commission as a fully disclosed
introducing broker and, accordingly, customer accounts are carried on the books
of the clearing broker. However, Ryan Beck safekeeps and redeems municipal bond
coupons for the benefit of its customers. Accordingly, Ryan Beck is subject to
the provisions of SEC Rule 15c3-3 relating to possession or control and
customer reserve requirements and was in compliance with such provisions at
September 30, 2004. 46




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##### Table of Contents



BankAtlantic Bancorp, Inc. 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk Market risk is defined as the risk of loss arising from adverse changes in
market valuations that arise from interest rate risk, foreign currency exchange
rate risk, commodity price risk and equity price risk. Our primary market risk
is interest rate risk and our secondary market risk is equity price risk. Interest Rate Risk The majority of BankAtlantics assets and liabilities are monetary in
nature, subjecting us to significant interest rate risk in that their value
fluctuates with changes in interest rates. We have developed a model using
standard industry software to quantify our interest rate risk. A sensitivity
analysis was performed measuring our potential gains and losses in net
portfolio fair values of interest rate sensitive instruments at September 30,
2004 resulting from a change in interest rates. Interest rate sensitive
instruments included in the model are:  
    
    Loans,
    
    Debt securities available for sale,
    
    Investment securities,
    
    FHLB stock,
    
    Federal funds sold,
    
    Deposits,
    
    Advances from FHLB,
    
    Securities sold under agreements to repurchase,
    
    Federal funds purchased,
    
    Notes and bonds payable,
    
    Interest rate swaps,
    
    Forward contracts, and
    
    Subordinated debentures. The model calculates the net potential gains and losses in net portfolio
fair value by:  i.
    
    discounting anticipated cash flows from existing assets and
liabilities at market rates to determine fair values at September 30,
2004 and December 31, 2003,ii.
    
    discounting the above expected cash flows based on instantaneous and
parallel shifts in the yield curve to determine fair values; andiii.
    
    calculating the difference between the fair value calculated in (i)
and (ii). Management has made estimates of fair value discount rates that it
believes to be reasonable. However, because there is no quoted market for
many of these financial instruments, management has no basis to determine
whether the fair value presented would be indicative of the value that could
be attained in an actual sale. Our 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. Subordinated debentures and mortgage-backed bonds payable were valued for
this purpose based on their contractual maturities or redemption date. The
Companys interest rate risk policy has been approved by the Board of
Directors and establishes guidelines for tolerance levels for net portfolio
value changes based on interest rate volatility. Management has maintained
the portfolio within these established guidelines. Certain assumptions by the Company in assessing the interest rate risk
were utilized in preparing the following table. These assumptions related to:  
    
    Interest rates,
    
    Loan prepayment rates,
    
    Deposit runoff rates,
    
    Non-maturing deposit servicing rates,
    
    Market values of certain assets under various interest rate scenarios, and
    
    Re-pricing of certain borrowings. 47




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BankAtlantic Bancorp, Inc. The tables below measure changes in net portfolio value for instantaneous
and parallel shifts in the yield curve in 100 basis point increments up or
down. It also assumes that delinquency rates would not change as a result of
changes in interest rates, although there can be no assurance that this would
be the case. Even if interest rates change in the designated increments,
there can be no assurance that our assets and liabilities would perform as
indicated in the tables below. In addition, a change in U.S. Treasury rates
in the designated amounts accompanied by a change in the shape of the yield
curve could cause significantly different changes to the fair values than
indicated. Furthermore, the results of the calculations in the following
preceding table are subject to significant deviations based upon actual future
events, including anticipatory and reactive measures which we may take in the
future. Presented below is an analysis of the Companys interest rate risk at
September 30, 2004 and December 31, 2003 calculated utilizing the Companys
model. The table measures changes in net portfolio value for instantaneous and
parallel shifts in the yield curve in 100 basis point increments up or down. As of September 30, 2004Net PortfolioChanges
    
    Value
    
    Dollarin Rate
    
    Amount
    
    Change(dollars in thousands)+200 bp
    
    $
    500,598
    
    
    $
    (65,731
    )+100 bp
    
    $
    553,446
    
    
    $
    (12,883
    )0
    
    $
    566,329
    
    
    $
    -100 bp
    
    $
    557,306
    
    
    $
    (9,023
    )-200 bp
    
    $
    525,915
    
    
    $
    (40.414
    )
 As of December 31, 2003Net PortfolioChanges
    
    Value
    
    Dollarin Rate
    
    Amount
    
    Change(dollars in thousands)+200 bp
    
    $
    470,869
    
    
    $
    17,666+100 bp
    
    $
    482,543
    
    
    $
    29,3400
    
    $
    453,203
    
    
    $
    -100 bp
    
    $
    408,921
    
    
    $
    (44,282
    )-200 bp
    
    $
    391,156
    
    
    $
    (62,047
    )
 Our net interest margin has improved since the third quarter of 2003. The
improvement primarily resulted from the repayment of high fixed rate FHLB
advances during the last six months of 2003 and the first quarter of 2004 and
from a significant increase in low cost deposits. Our asset and liability
committee monitors BankAtlantics interest rate risk. Based on the committees
on-going review, we determined that the repayment of a portion of
BankAtlantics high fixed rate FHLB advances should have a positive impact on
BankAtlantics net interest margin. During the three months ended September
2003, December 2003, and March 2004, BankAtlantic prepaid $185 million, $140
million and $108 million, respectively, of FHLB advances and recognized losses
of $2.0 million, $8.9 million and $11.7 million, respectively. We expect
BankAtlantics net interest margin to improve in subsequent periods as a result
of these advance repayments and growth in low cost deposits; however, the
current flattening of the yield curve may slow the improvement in the net
interest margin in subsequent periods. 48




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##### Table of Contents



BankAtlantic Bancorp, Inc. Equity Price Risk BankAtlantic Bancorp BankAtlantic Bancorp maintains a portfolio of equity securities and
exchange traded mutual funds that subject it to equity pricing risks arising
in connection with changes in the relative values of its equity investments
due to changing market and economic conditions. The following are
hypothetical changes in the fair value of our available for sale securities at
September 30, 2004, based on hypothetical percentage changes in fair value.
Actual future price appreciation or depreciation may be different from the
changes identified in the table below (dollars in thousands). Available for SalePercentChange in
    
    Equity
    
    Mutual
    
    DollarFair Value
    
    Securities
    
    Funds
    
    Change20%
    
    $
    8,124
    
    
    $
    21,458
    
    
    $
    4,93010%
    
    $
    7,447
    
    
    $
    19,670
    
    
    $
    2,4650%
    
    $
    6,770
    
    
    $
    17,882
    
    
    $
    -10%
    
    $
    6,093
    
    
    $
    16,094
    
    
    $
    (2,465
    )-20%
    
    $
    5,416
    
    
    $
    14,306
    
    
    $
    (4,930
    )
 Excluded from the above table are $1.8 million of investments in other
financial institutions and $5.0 million invested in a limited partnership hedge
fund specializing in bank equities, for which no current liquid market exists.
The ability to realize on or liquidate these investments will depend on future
market conditions and is subject to significant risk. Ryan Beck Ryan Beck is exposed to the market risk that the financial instruments in
which it trades and makes a market will fluctuate in value. These value
fluctuations can be caused by changes in interest rates, equity prices, credit
spreads or other market forces. The Company, through Ryan Beck, is therefore
indirectly exposed to these market risks arising from Ryan Becks trading and
market making activities. Ryan Becks management monitors risk in its trading activities by
establishing limits and reviewing daily trading results, inventory aging,
pricing, concentration and securities ratings. Ryan Beck uses a variety of
tools, including aggregate and statistical methods. Value at Risk (VaR) is
the principal statistical method used by Ryan Beck to monitor its risk, and
this method measures the potential loss in the fair value of a portfolio due to
adverse movements in underlying risk factors. Ryan Beck uses an historical simulation approach to measuring VaR using a
99% confidence level, a one day holding period and the most recent three months
average volatility. The 99% VaR means that, on average, one would not expect
to exceed such loss amount more than one time every one hundred trading days if
the portfolio were held constant for a one-day period. The aggregate long and
short value represents the one day market value of securities owned (long) and
securities sold but not yet purchased (short) during the nine months ended
September 30, 2004. 49




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##### Table of Contents



BankAtlantic Bancorp, Inc. The following table sets forth the high, low and average VaR for Ryan Beck
during the period January 1, 2004 to September 30, 2004. (in thousands)
    
    High
    
    Low
    
    AverageVaR
    
    $
    1,747
    
    
    $
    11
    
    
    $
    382Aggregate Long Value
    
    
    112,494
    
    
    
    43,431
    
    
    
    72,305Aggregate Short
Value
    
    
    167,987
    
    
    
    23,851
    
    
    
    65,339
 The following table sets forth the high, low and average VaR for Ryan Beck
during the period January 31, 2003 to December 31, 2003, and adjusted for
discontinued operations. (dollars in thousands)High
    
    Low
    
    AverageVaR
    
    $
    1,285
    
    
    $
    16
    
    
    $
    531Aggregate Long Value
    
    
    68,995
    
    
    
    42,364
    
    
    
    66,809Aggregate Short Value
    
    
    19,570
    
    
    
    60,602
    
    
    
    36,495
 50




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##### Table of Contents



BankAtlantic Bancorp, Inc. 
 Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our principal
executive officer and principal financial officer, of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on this
evaluation, our principal executive officer and principal financial officer
concluded that our disclosure controls and procedures are effective in timely
alerting them to material information required to be included in our periodic
SEC reports. Changes in Internal Controls In addition, we reviewed our internal control over financial reporting,
and there have been no significant changes in our internal control over
financial reporting or in other factors that could significantly affect those
controls during the last fiscal quarter. Limitations on the Effectiveness of Controls Our management, including our principal executive officer and principal
financial officer, does not expect that our disclosure controls and procedures
and internal controls over financial reporting will prevent all errors and all
improper conduct. A control system, no matter how well conceived and operated,
can provide only reasonable, not absolute, assurance that the objectives of the
control system are met. Further, the design of a control system must reflect
the fact that there are resource constraints, and the benefits of controls must
be considered relative to their costs. Because of the inherent limitations in
all control systems, no evaluation of controls can provide absolute assurance
that all control issues and instances of improper conduct, if any, within the
Company have been detected. These inherent limitations include the realities
that judgments in decision-making can be faulty, and that breakdowns can occur
because of simple error or mistake. Additionally, controls can be circumvented
by the individual acts of some persons, by collusion of two or more people, or
by management override of the control. Further, the design of any system of controls also is based in part upon
assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions; over time, controls may become inadequate because
of changes in conditions, or the degree of compliance with the policies or
procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur
and not be detected. CEO and CFO Certifications Appearing as Exhibits 31.1 and 31.2 to this quarterly report are
Certifications of the principal executive officer and the principal financial
officer. The Certifications are required in accordance with Section 302 of the
Sarbanes-Oxley Act of 2002. This Item of this report, which you are currently
reading, is the information concerning the evaluation referred to in the
Section 302 Certifications and this information should be read in conjunction
with the Section 302 Certifications for a more complete understanding of the
topics presented. 51




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##### Table of Contents



BankAtlantic Bancorp, Inc. 
 PART II  OTHER INFORMATION 
 Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities (e) Purchases of equity securities by the issuer and affiliated purchasers Total Number of
    
    Maximum Number ofShares Purchased as
    
    shares thatPart of Publicly
    
    May Yet Be PurchasedTotal Number of
    
    Average price
    
    Announced Plans
    
    Under the Plans orPeriod
    
    Shares Purchased
    
    per share
    
    or Programs (2)
    
    ProgramsJuly 1, 2004 through
July 31, 2004
    
    
    3,134
    (1)
    
    $
    18.34
    
    
    
    
    
    
    
    August 1, 2004 through
August 31, 2004
    
    
    1,186
    (1)
    
    
    18.10
    
    
    
    
    
    
    
    September 1, 2004 through
September 30, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    4,320
    
    
    $
    18.27
    
    
    
    
    
    
    
    
  (1)
    
    The amount represents the number of shares of the Companys Class A Common
Stock redeemed by the Company as consideration for the payment of the exercise
price of stock options exercised during the period.(2)
    
    The Company currently has no plan or program to repurchase its equity
securities. 
 Item 6. Exhibits Exhibit 31.1
    
    CFO Certification pursuant to Regulation S-X Section 302Exhibit 31.2
    
    CEO Certification pursuant to Regulation S-X Section 302Exhibit 32.1
    
    CEO Certification pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 ofthe Sarbanes-Oxley Act
of 2002Exhibit 32.2
    
    CFO Certification pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 ofthe Sarbanes-Oxley Act
of 2002
 52




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##### Table of Contents



BankAtlantic Bancorp, Inc. 
 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. BANKATLANTIC BANCORP, INC.November 9, 2004
    By:
    /s/ Alan B. LevanAlan B. LevanChief Executive Officer/
Chairman/President November 9, 2004
    By:
    /s/ James A. WhiteJames A. WhiteExecutive Vice President,
Chief Financial Officer 53