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BFC FINANCIAL CORP CL A 10-K 2008
BFC Financial Corp.
Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
     
þ   Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Year Ended December 31, 2007
     
o   Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number
001-09071
BFC Financial Corporation
(Exact name of registrant as specified in its charter)
     
Florida   59-2022148
     
(State or other jurisdiction of
incorporation or organization)
  (I.R.S Employer Identification No.)
     
2100 West Cypress Creek Road
Fort Lauderdale, Florida
  33309
     
(Address of principal executive office)   (Zip Code)
(954) 940-4900
 
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
     
Class A Common Stock, $.01 par Value   NYSE Arca
     
(Title of Class)   (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
     
Class B Common Stock, $.01 par Value   OTC BB
     
(Title of Class)   (Name of each exchange on which registered)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES o NO þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES o NO þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o   Accelerated filer þ   Non-accelerated filer o   Smaller reporting company þ
        (Do not check if a smaller reporting company)    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES o NO þ
The aggregate market value of the registrant’s common stock held by non-affiliates was $65.6 million computed by reference to the closing price of the registrant’s Class A Common Stock on June 30, 2007.
The number of shares outstanding of each of the registrant’s classes of common stock, as of March 10, 2008, is as follows:
Class A Common Stock, $.01 par value, 38,232,932 shares outstanding.
Class B Common Stock, $.01 par value, 6,876,081 shares outstanding.
 
 

 


Table of Contents

Documents Incorporated by Reference
Portions of the registrant’s Proxy Statement relating to the Annual Meeting of Shareholders are incorporated as Part III of this report.
The financial statements of Bluegreen Corporation (“Bluegreen”) are incorporated in Part II of this report and are filed as an exhibit to this report.

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BFC Financial Corporation
Annual Report on Form 10-K for the year ended December 31, 2007
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 EX-3.3 Amended and Restated By-laws
 EX-10.2 Executive Services Agreement
 EX-12.1 Ratio of Earnings to Fixed Charges
 EX-14.1 Code of Business Conduct and Ethics
 EX-21.1 Subsidiaries of the Registrant
 EX-23.1 Consent of PricewaterhouseCoopers LLP
 EX-23.2 Consent of Ernst & Young LLP
 EX-31.1 Section 302 Certification of CEO
 EX-31.2 Section 302 Certification of CFO
 EX-31.3 Section 302 Certification of CAO
 EX-32.1 Section 906 Certification of CEO
 EX-32.2 Section 906 Certification of CFO
 EX-32.3 Section 906 Certification of CAO
 EX-99.1 Audited Financial Statements of Bluegreen Corp.

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PART I
          Except for historical information contained herein, the matters discussed in this document contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve substantial risks and uncertainties. When used in this document and in any documents incorporated by reference herein, the words “anticipate,” “believe,” “estimate,” “may,” “intend,” “expect” and similar expressions identify certain of such forward-looking statements. Actual results, performance, or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements contained herein. These forward-looking statements are based largely on the expectations of BFC Financial Corporation (the “Company” or “BFC”) and are subject to a number of risks and uncertainties that are subject to change based on factors which are, in many instances, beyond the Company’s control. When considering those forward-looking statements, the reader should keep in mind the risks, uncertainties and other cautionary statements made in this report, including, but not limited to, those identified under Item 1A – Risk Factors.
          This document also contains information regarding the past performance of our investments and the reader should note that prior or current performance of investments and acquisitions is not a guarantee or indication of future performance. Some factors which may affect the accuracy of the forward-looking statements apply generally to the financial services, real estate development, resort development and vacation ownership, and restaurant industries, while other factors apply directly to us. Risks and uncertainties associated with BFC include, but are not limited to:
    the impact of economic, competitive and other factors affecting the Company and its subsidiaries, and their operations, markets, products and services;
 
    that the performance of those entities in which investments are made may not be as anticipated;
 
    that BFC will be subject to the unique business and industry risks and characteristics of each entity in which an investment is made;
 
    that BFC may not have sufficient available cash to make desired investments;
 
    that appropriate investment opportunities on reasonable terms and at reasonable prices may not be available; and
 
    that BFC shareholders’ interests may be diluted in transactions utilizing BFC stock for consideration.
          With respect to BFC’s subsidiary, BankAtlantic Bancorp, Inc. (“BankAtlantic Bancorp”), and its subsidiary, BankAtlantic, the risks and uncertainties include:
    the impact of economic, competitive and other factors affecting BankAtlantic Bancorp and its operations, markets, products and services;
 
    credit risks and loan losses, and the related sufficiency of the allowance for loan losses, including the impact on the performance of BankAtlantic’s loan portfolio of a sustained downturn in the real estate and credit markets where BankAtlantic’s borrowers and collateral are located;
 
    the quality of BankAtlantic’s residential land acquisition and development loans (including “Builder land bank loans”) and home equity loans, and conditions in that market sector;
 
    the risks of additional charge-offs, impairments and required increases in BankAtlantic’s allowance for loan losses;
 
    changes in interest rates and the effects of, and changes in, trade, monetary and fiscal policies and laws, including their impact on the bank’s net interest margin;
 
    adverse conditions in the stock market, the public debt market and other capital markets and the impact of such conditions on our activities,
 
    the value of BankAtlantic Bancorp’s assets and the ability of BankAtlantic’s borrowers to service their debt obligations;
 
    BankAtlantic’s seven-day banking initiatives and other growth, marketing or advertising initiatives not resulting in continued growth of core deposits or results which justify their costs;
 
    the success of BankAtlantic Bancorp’s expense discipline initiative and the ability to achieve additional cost savings;
 
    the success of BankAtlantic’s new stores in achieving growth and profitability in the time frames anticipated, if at all;

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    the impact of periodic testing of goodwill, deferred tax assets, and other intangible assets for impairment;
 
    past performance, actual or estimated new account openings and growth rate may not be achieved of;
 
    BankAtlantic Bancorp holds a significant investment in the equity securities of Stifel Financial Corp. (“Stifel”) as a result of the sale of Ryan Beck Holdings, Inc. subjecting it to the risks associated with the value of Stifel shares and warrants, and the risk that no gain on these securities may be realized. The earn-out amounts payable under the agreement with Stifel are contingent upon the performance of individuals and divisions of Ryan Beck which are now under the exclusive control and direction of Stifel, and there is no assurance that BankAtlantic Bancorp will be entitled to receive any earn-out payments; and
 
    BankAtlantic Bancorp’s success at managing the risks involved in the foregoing.
     With respect to BFC’s subsidiary, Levitt Corporation, the risks and uncertainties include:
    the impact of economic, competitive and other factors affecting Levitt and its operations;
 
    the market for real estate in the areas where Levitt has developments, including the impact of market conditions on Levitt’s margins and the fair value of its real estate inventory;
 
    the risk that the value of the property held by Core Communities may decline, including as a result of a sustained downturn in the residential real estate and homebuilding industries;
 
    the impact of market conditions for commercial property and whether the factors negatively impacting the homebuilding and residential real estate industries will impact the market for commercial property;
 
    the risk that the development of parcels and master-planned communities will not be completed as anticipated; continued declines in the estimated fair value of Levitt’s real estate inventory and the potential for write-downs or impairment charges;
 
    continued declines in the estimated fair value of Levitt’s real estate inventory and the potential for further write-downs or impairment charges;
 
    the effects of increases in interest rates and availability of credit to buyers of Levitt’s inventory;
 
    accelerated principal payments of Levitt’s debt obligations due to re-margining or curtailment payment requirements;
 
    the ability to obtain financing and to renew existing credit facilities on acceptable terms, if at all;
 
    Levitt’s ability to access additional capital on acceptable terms, if at all;
 
    the risks and uncertainties inherent in bankruptcy proceedings and the inability to predict the possible effect of Levitt and Sons’ reorganization and/or liquidation process on Levitt Corporation and its results of operation and financial condition;
 
    the risk that creditors of Levitt and Sons may be successful in asserting claims against Levitt Corporation and the risk that any of Levitt Corporation’s assets may become subject to or included in Levitt and Sons’ bankruptcy case;
 
    that Levitt Corporation’s administrative expense claims and secured and unsecured claims will not be recovered from Levitt and Sons in the bankruptcy proceedings and that Levitt Corporation will continue to pay for additional services for the benefit of the bankrupt estate;
 
    Levitt’s success at managing the risks involved in the foregoing.
     In addition to the risks and factors identified above, reference is also made to other risks and factors detailed in reports filed by the Company, BankAtlantic Bancorp and Levitt with the Securities and Exchange Commission. The Company cautions that the foregoing factors are not exclusive.

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ITEM 1. BUSINESS
The Company
          We are a holding company whose ownership interests include direct and indirect interests in businesses in a variety of sectors, including consumer and commercial banking, master-planned community development, time-share and vacation ownership, Asian-themed restaurant chains and various real estate and venture capital investments. Our principal holdings consist of direct controlling interests in BankAtlantic Bancorp, Inc. (“BankAtlantic Bancorp”) and Levitt Corporation (“Levitt”), and our primary activities currently relate to these investments. We also own a direct investment in the convertible preferred stock of Benihana, Inc. (“Benihana”) which operates Asian-themed restaurant chains in the United States. Additionally, our wholly owned subsidiary, Cypress Creek Capital, Inc. (“CCC”), that invests in existing commercial income producing properties. As a result of the Company’s position as the controlling stockholder of BankAtlantic Bancorp, the Company is a “unitary savings bank holding company” regulated by the Office of Thrift Supervision (“OTS”).
          BFC itself has no significant operations other than activities relating to the monitoring of existing investments. BFC has no independent sources of cash-flow from operations except to the extent dividends, advisory fees and similar cash payments are made to BFC by its subsidiaries and investment holdings. BFC’s fees and dividends from BankAtlantic Bancorp, Levitt and Benihana do not currently cover BFC’s ongoing operating expenses. Therefore, BFC’s stand-alone activities currently generate a loss. Historically, BFC’s business strategy has been to invest in and acquire businesses in diverse industries either directly or through controlled subsidiaries with the intent to hold the investments for the long term. Recently, BFC determined that the best potential for growth is likely through the growth of the companies it controls. Rather than actively making investments directly for BFC, the Company intends to provide overall support and guidance for its controlled subsidiaries with a focus on the improved performance of the organization as a whole. The Company is currently reviewing its operations with a view to aligning its staffing with its contemplated activities. Upon completion of the review, the Company may seek to transfer certain employees currently within the holding company or its wholly owned subsidiaries to controlled entities where management believes their services would provide potentially greater value to the overall organization.
          As a holding company with controlling positions in BankAtlantic Bancorp and Levitt, generally accepted accounting principles (“GAAP”) requires the consolidation of the financial results of both entities. As a consequence, the assets and liabilities of both entities are presented on a consolidated basis in BFC’s financial statements. However, except as otherwise noted, the debts and obligations of the consolidated entities are not direct obligations of BFC and are non-recourse to BFC. Similarly, the assets of those entities are not available to BFC absent a dividend or distribution. The recognition by BFC of income from controlled entities is determined based on the total percent of economic ownership in those entities as shown in the table below.
          BFC’s ownership in BankAtlantic Bancorp and Levitt as of December 31, 2007 was as follows:
                         
                    Percent
    Shares   Percent of   of
    Owned   Ownership   Vote
BankAtlantic Bancorp
                       
Class A Common Stock
    8,329,236       16.27 %     8.62 %
Class B Common Stock
    4,876,124       100.00 %     47.00 %
Total
    13,205,360       23.55 %     55.62 %
 
                       
Levitt
                       
Class A Common Stock
    18,676,955 (1)     19.65 %     6.99 %(1)
Class B Common Stock
    1,219,031       100.00 %     47.00 %
Total
    19,895,986 (1)     20.67 %     53.99 %(1)
 
(1)   Our ownership interest includes, but our voting interest excludes, 6,145,582 shares of Levitt’s Class A Common Stock which, subject to certain exceptions, BFC has agreed not to vote, as discussed in further details below under “Key Developments — Levitt’s Rights Offering.”

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          For both BankAtlantic Bancorp and Levitt, the Class A Common Stock is entitled to one vote per share, which in the aggregate represents 53% of the combined voting power. The Class B Common Stock, all of which is owned by BFC, represents the remaining 47% of the combined vote of the two classes. Because BFC controls more than 50% of the vote of BankAtlantic Bancorp and Levitt, they are consolidated in our financial statements instead of carried on an equity basis.
          The Company’s Internet website address is www.bfcfinancial.com. The Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports are available free of charge through our website, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). The Company’s Internet website and the information contained on or connected to it are not incorporated into this Annual Report on Form 10-K.
Key Developments in 2007
Public Offering
          In July 2007, the Company sold 11,500,000 shares of its Class A Common Stock at $3.40 per share pursuant to a registered underwritten public offering. Net proceeds from the sale of the 11,500,000 shares by the Company totaled approximately $36.2 million, after deducting underwriting discounts, commissions and offering expenses. The Company primarily used the proceeds of this offering to purchase approximately 16.6 million shares of Levitt’s Class A common stock for an aggregate purchase price of $33.2 million, and for general corporate purposes, including working capital.
Levitt’s Rights Offering
          Levitt distributed to each holder of record of Levitt’s Class A common stock and Class B common stock 5.0414 subscription rights for each share of such stock owned on August 27, 2007 (the “Rights Offering”). Each whole subscription right entitled the holder to purchase one share of Levitt’s Class A common stock at a purchase price of $2.00 per share. The Rights Offering was completed on October 1, 2007. Levitt received approximately $152.8 million in the Rights Offering and issued an aggregate of 76,424,066 shares of its Class A common stock in connection with the exercise of rights by its shareholders. BFC purchased an aggregate of 16,602,712 of Levitt’s Class A common stock in the Rights Offering for an aggregate purchase price of $33.2 million.
          By letter dated September 27, 2007 (“Letter Agreement”), BFC agreed, subject to certain limited exceptions, not to vote 6,145,582 shares of Levitt’s Class A common stock that were acquired by BFC in the Rights Offering associated with subscription rights relating to our holdings in Levitt’s Class B common stock. The Letter Agreement provides that any future sale of shares of Levitt’s Class A common stock by BFC will reduce, on a share for share basis, the number of shares of Levitt’s Class A common stock that BFC has agreed not to vote. BFC’s acquisition of the 16,602,712 shares of Levitt’s Class A common stock upon its exercise of its subscription rights increased BFC’s ownership interest in Levitt by approximately 4.1% to 20.7% from 16.6% and increased BFC’s voting interest in Levitt, excluding the 6,145,582 shares subject to the Letter Agreement, by approximately 1.1% to 54.0% from 52.9%.
          The acquisition of additional shares of Levitt is being accounted for as a step acquisition under the purchase method of accounting. See Note 5 to our consolidated financial statements for further details.
Termination of Proposed BFC and Levitt Corporation Merger
          As previously reported, the Company, on January 30, 2007, entered into a merger agreement with Levitt Corporation. On August 14, 2007, BFC terminated the merger agreement based on its conclusion that the conditions to closing the merger could not be met and its view that it was in Levitt’s best interest to immediately proceed with its Rights Offering.

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I.R.E. RAG Merger
          On November 19, 2007, BFC’s shareholders approved the merger of I.R.E Realty Advisory Group, Inc. (‘I.R.E. RAG”), a 45.5% subsidiary of BFC, with and into BFC. I.R.E. RAG’s sole assets were 4,764,285 shares of BFC Class A Common Stock and 500,000 shares of BFC Class B Common Stock. In connection with the merger, the shareholders of I.R.E. RAG, other than BFC, received an aggregate of approximately 2,601,300 shares of BFC Class A Common Stock and 273,000 shares of BFC Class B Common Stock, representing their respective pro rata beneficial ownership interests in I.R.E. RAG’s BFC shares, and the 4,764,285 shares of BFC Class A Common Stock and 500,000 shares of BFC Class B Common Stock that were held by I.R.E. RAG were canceled. The shareholders of I.R.E. RAG, other than BFC, were Levan Enterprises, Ltd. and I.R.E. Properties, Inc., each of which is an affiliate of Alan B. Levan, Chief Executive Officer, President and Chairman of the Board of Directors of BFC. The transaction was consummated on November 30, 2007.
BankAtlantic Bancorp and Levitt
          Developments relating to our subsidiaries, BankAtlantic Bancorp and Levitt, are discussed below in our discussion on Financial Services and Real Estate Development. Of specific importance was the November 9, 2007 filing by Levitt and Sons and its subsidiaries of Petitions for relief under Chapter 11 of the Bankruptcy Code which resulted in the deconsolidation of Levitt and Sons from our consolidated results of operations.
Recent Developments
     In 2007, the Company did not generate sufficient taxable income to utilize the Net Operating Loss (“NOLs”) carryforwards of approximately $4.6 million that expired on December 31, 2007. As the Company is not expected to generate taxable income from operations in the foreseeable future, the Company anticipates implementing a planning strategy in 2008 to utilize NOLs that are scheduled to expire. The Company anticipates that it will begin selling shares of BankAtlantic Bancorp Class A Common Stock in order to generate sufficient taxable income to utilize the $3.3 million of NOLs expected to expire in 2008. The Company intends to repurchase a sufficient number of shares to substantially maintain its ownership of BankAtlantic Bancorp. If the stock price on sale is lower than its book basis, a loss will be recognized even though a taxable gain is realized. The net result with respect to the newly purchased shares will be a higher tax basis in the shares going forward. The Company plans to continue this planning strategy in the future to ensure that NOLs are utilized before they expire.

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Business Segments
          We report our results of operations through six reportable segments, BFC Activities, Financial Services and four reportable segments within our Real Estate Development Division. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 3 to our consolidated financial statements for further discussion of the results of operations and other information relating to each segment.
BFC Activities Segment
          The BFC Activities segment includes all of the operations and all of the assets owned by BFC other than BankAtlantic Bancorp and its subsidiaries and Levitt and its subsidiaries. This segment includes dividends from our investment in Benihana’s convertible preferred stock and other securities and investments, advisory fee income and operating expenses of CCC, interest income from loans receivable and income and expenses from the arrangement between BFC, BankAtlantic Bancorp, Levitt and Bluegreen Corporation (“Bluegreen”) for shared service operations in the areas of human resources, risk management, investor relations and executive office administration. The BFC Activities segment also includes BFC’s overhead and interest expense, the financial results of venture partnerships that BFC controls and BFC’s provision (benefit) for income taxes, including the tax provision (benefit) related to the Company’s interest in the earnings or losses of BankAtlantic Bancorp and Levitt. BankAtlantic Bancorp and Levitt are consolidated in our financial statements, as described herein. The Company’s earnings or losses in BankAtlantic Bancorp are included in the Financial Services segment and the Company’s earnings and losses in Levitt are included in four reportable segments, consisting of Primary Homebuilding, Tennessee Homebuilding, Land Division and Levitt Other Operations within our Real Estate Development Division.
          BFC’s equity investments include its investment in shares of the Series B Convertible Preferred Stock of Benihana and securities in the technology sector owned by a partnership that is included in the consolidated financial statements of BFC pursuant to BFC’s status as a general partner.
          Benihana
          Benihana is a NASDAQ-listed company with two listed classes of common shares: Common Stock (BNHN) and Class A Common Stock (BNHNA). Benihana has operated teppanyaki-style restaurants in the United States for more than 42 years and has exclusive rights to own, develop and license Benihana and Benihana Grill restaurants in the United States, Central and South America and the islands of the Caribbean.
          The Company owns 800,000 shares of Benihana Series B Convertible Preferred Stock (“Convertible Preferred Stock”). The Convertible Preferred Stock is convertible into an aggregate of 1,578,943 shares of Benihana’s Common Stock at a conversion price of $12.6667, subject to adjustment from time to time upon certain defined events. Based on the number of currently outstanding shares of Benihana’s capital stock, the Convertible Preferred Stock, if converted, would represent an approximately 18% voting interest and an approximately 10% economic interest in Benihana. The Company’s investment in Benihana’s Convertible Preferred Stock is classified as investment securities and is carried at historical cost.
          The Convertible Preferred Stock was acquired pursuant to an agreement with Benihana to purchase an aggregate of 800,000 shares of Convertible Preferred Stock for $25.00 per share. On July 1, 2004, the Company funded the first tranche of Convertible Preferred Stock in the amount of $10.0 million for the purchase of 400,000 shares and, on August 4, 2005, the Company purchased the remaining 400,000 shares of Convertible Preferred Stock in the amount of $10.0 million. The shares of the Convertible Preferred Stock have voting rights on an “as if converted” basis together with Benihana’s Common Stock on all matters put to a vote of the holders of Benihana’s Common Stock. The approval of a majority of the holders of the Convertible Preferred Stock then outstanding, voting as a single class, are required for certain events outside the ordinary course of business. Holders of the Convertible Preferred Stock are entitled to receive cumulative quarterly dividends at an annual rate equal to $1.25 per share, payable on the last day of each calendar quarter. The Convertible Preferred Stock is subject to mandatory redemption at the original issue price plus accumulated dividends on July 2, 2014 unless the holders of a majority of the outstanding Convertible Preferred Stock elect to extend the mandatory redemption date to a later date not to

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extend beyond July 2, 2024. In addition, the Convertible Preferred Stock may be redeemed by Benihana for a limited period beginning three years from the date of issue if the price of Benihana’s Common Stock is at least $38.00 for sixty consecutive trading days. At December 31, 2007, the closing price of Benihana’s Common Stock was $12.61 per share. The market value of the Convertible Preferred Stock on an “as if converted” basis at December 31, 2007 would have been approximately $19.9 million.
          John E. Abdo, Vice Chairman of the Company’s Board of Directors, is a member of Benihana’s Board of Directors. Further, Darwin Dornbush, a member of Levitt’s Board of Directors, is the Corporate Secretary of Benihana and a member of Benihana’s Board of Directors.
Employees
          Management believes that its relations with its employees are satisfactory. The Company currently maintains employee benefit programs that are considered by management to be generally competitive with programs provided by other major employers in its markets.
          The number of employees at the indicated dates was:
                                 
    December 31, 2007   December 31, 2006
 
  Full-time   Part-time   Full-time   Part-time
BFC
    47       1       41       1  
          Of the forty eight BFC employees at December 31, 2007, thirty six were employed in the Company’s executive, administrative, finance and business development offices, and in our shared services operations in the areas of investor relations, human resources, risk management and executive office administration. These shared service employees are utilized by the affiliated entities and their costs are allocated to the companies based upon their usage of services. The remaining twelve were employed by CCC, four of whom were part of a work force reduction after December 31, 2007.

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Financial Services
Financial Services Segment
          Our Financial Services segment consists of BankAtlantic Bancorp, which is consolidated with BFC Financial Corporation. The only assets available to BFC Financial Corporation from BankAtlantic Bancorp are dividends when and if declared and paid by BankAtlantic Bancorp. BankAtlantic Bancorp is a separate public company and its management prepared the following Item 1. Business regarding BankAtlantic Bancorp which was included in BankAtlantic Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission. Accordingly, references to the “Company”, “we”, “us” , “our” or “Parent Company” in the following discussion under the caption “Financial Services” are references to BankAtlantic Bancorp and its subsidiaries, and are not references to BFC Financial Corporation.
BankAtlantic Bancorp – the Company
          We are a Florida-based bank company and own BankAtlantic and its subsidiaries. BankAtlantic provides a full line of products and services encompassing retail and business banking. We report our operations through two business segments consisting of BankAtlantic and BankAtlantic Bancorp, the parent company. Detailed operating financial information by segment is included in Note 29 to the Company’s consolidated financial statements. On February 28, 2007, the Company completed the sale to Stifel Financial Corp. (“Stifel”) of Ryan Beck Holdings, Inc. (“Ryan Beck”), a subsidiary engaged in retail and institutional brokerage and investment banking.  As a consequence, the Company exited this line of business and the results of operations of Ryan Beck are presented as “Discontinued Operations” in the Company’s consolidated financial statements for all periods presented.
          Our Internet website address is www.bankatlanticbancorp.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports are available free of charge through our website, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. Our Internet website and the information contained in or connected to our website are not incorporated into, and are not part of this Annual Report on Form 10-K.
          As of December 31, 2007, we had total consolidated assets of approximately $6.4 billion and stockholders’ equity of approximately $459 million.
BankAtlantic
          BankAtlantic is a federally-chartered, federally-insured savings bank organized in 1952. It is one of the largest financial institutions headquartered in Florida and provides traditional retail banking services and a wide range of business banking products and related financial services through a network of more than 100 branches or “stores” in southeast and central Florida and the Tampa Bay area, primarily in the metropolitan areas surrounding the cities of Miami, Ft. Lauderdale, West Palm Beach and Tampa, which are located in the heavily-populated Florida counties of Miami-Dade, Broward, Palm Beach, Hillsborough and Pinellas.
          BankAtlantic’s primary business activities include:
    attracting checking and savings deposits from individuals and business customers,
 
    originating commercial real estate, business, consumer and small business loans,
 
    purchasing wholesale residential loans, and
 
    investing in mortgage-backed securities, tax certificates and other securities.
          BankAtlantic’s business strategy focuses on the following key areas:
    Continuing its “Florida’s Most Convenient Bank” Initiative. BankAtlantic began its “Florida’s Most Convenient Bank” initiative in 2002, when it introduced seven-day banking and its free checking and free gift program in Florida. In addition to the seven-day strategy and extended lobby hours, BankAtlantic developed products, promotions and services that are an integral part of BankAtlantic’s strategy of customer convenience and “WOW!” customer service, both intended to increase its core deposit accounts. BankAtlantic defines its core deposits as its demand deposit accounts, NOW checking accounts and savings accounts.

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    Increasing Core Deposits. From April, 2002, when the “Florida’s Most Convenient Bank” initiative was launched, to December 31, 2007, BankAtlantic’s core deposits increased 284% from approximately $600 million to approximately $2.3 billion. These core deposits represented 58% of BankAtlantic’s total deposits at December 31, 2007, compared to 26% of total deposits at December 31, 2001. However, the growth of core deposits for the year ending December 31, 2007 has slowed as core deposits increased $64.5 million or 3% from their December 31, 2006 levels. We believe the slower growth was largely a result of current economic conditions and competition. In response to changes in market and economic conditions, BankAtlantic reduced its advertising expenditures and in December 2007, shortened its lobby and customer service hours. Even with the reduced hours, BankAtlantic’s stores remain open seven days a week and are generally open more hours than its competitors. BankAtlantic anticipates a decline in short term interest rates during 2008 which it hopes will result in core deposit growth during 2008; however, increased competition, general economic conditions and the overall economy in Florida, in particular, may offset any favorable impact that declining interest rates may have on deposit growth.
 
    Improving Operational Efficiencies in our Stores and Support Functions. Management is focused on improving its operating efficiencies during 2008. We anticipate consolidating back-office support facilities and reducing costs by subleasing or terminating lease contracts. We are also evaluating store and back-office support staffing levels with a view toward reducing costs which do not impact the quality of customer service. Additionally, we are seeking to implement technologies that we believe will reduce our customer service expenses. Based on the current economic environment, BankAtlantic decided in the fourth quarter of 2007 to delay its previously announced store expansion initiatives. As part of this decision, BankAtlantic has entered into an agreement with an unrelated financial institution to sell its five Orlando stores, is terminating certain lease agreements, seeking to sublease certain properties, and is attempting to sell land acquired for its store expansion program in all its markets. The sale of the Orlando stores is subject to regulatory approval.
 
    Conservative and Targeted Growth in Loan Portfolio. BankAtlantic is focused on growth of its retail banking business with an emphasis on generating small business and consumer loans as well as measured growth in commercial loans collateralized by income producing commercial real estate properties. The commercial real estate loan portfolio declined during 2007 as a result of the significant deterioration in the Florida residential real estate market. BankAtlantic continues to refine its underwriting criteria across all loan categories in response to the deterioration of the real estate market and overall slowing economic conditions.
 
    Managing Credit Risk. BankAtlantic strives to maintain strong underwriting standards and has developed underwriting policies and procedures which it believes will enable it to offer products and services to its customers while minimizing its exposure to unnecessary credit risk. However, the residential real estate market in Florida is currently in a period of substantial decline and this has had an adverse impact on the credit quality of our commercial real estate and home equity loan portfolios. In response, BankAtlantic continues to refine its underwriting criteria across all loan categories. Additionally, our loan portfolio monitoring processes have been refined to include the following:
  o   A specialized land acquisition, development and construction loan committee to monitor developments affecting the collateral of commercial residential development loans;
 
  o   Additional resources to negotiate loan work-outs and if necessary supervise the collection process; and
 
  o   Additional loan review resources to support increased frequency of targeted loan reviews.

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    Maintaining and Strengthening our Capital Position. BankAtlantic exceeded all applicable regulatory capital requirements and was considered a “well capitalized” financial institution at December 31, 2007. See “Regulation and Supervision” – Capital Requirements” for an explanation of capital standards. Management has implemented initiatives to preserve capital in response to the current unfavorable economic environment. These initiatives include decreasing the amount of cash dividends, consolidating back-office facilities, reducing staffing levels, selling its Orlando stores and slowing our retail network expansion. Additionally, BankAtlantic Bancorp has $180.6 million of financial assets that may be used to contribute capital to BankAtlantic.
          BankAtlantic offers a number of lending products to its customers. Its primary lending products include commercial real estate loans, commercial business loans, standby letters of credit and commitments, consumer loans, small business loans and residential loans.
          Residential: BankAtlantic purchases residential loans in the secondary markets that have been originated by other institutions. These loans, which are serviced by independent servicers, are secured by properties located throughout the United States. When BankAtlantic purchases residential loans, it evaluates the originator’s underwriting of the loans and, for most individual loans, performs confirming credit analyses. Residential loans are typically purchased in bulk and are generally non-conforming loans to agency guidelines due to the size of the individual loans. BankAtlantic sets general guidelines for loan purchases relating to loan amount, type of property, state of residence, loan-to-value ratios, the borrower’s sources of funds, appraised amounts and loan documentation, but actual purchases will generally reflect availability and market conditions, and may vary from BankAtlantic’s general guidelines. The weighted average FICO credit scores and loan-to-value ratios (calculated at the time of origination) of purchased loans outstanding as of December 31, 2007 was 741 and 67%, respectively. Included in these purchased residential loans are interest-only loans. These loans result in possible future increases in a borrower’s loan payments when the contractually required repayments increase due to interest rate adjustments and when required amortization of the principal amount commences. These payment increases could affect a borrower’s ability to repay the loan and lead to increased defaults and losses. At December 31, 2007, BankAtlantic’s residential loan portfolio included $1.1 billion of interest-only loans. The credit scores and loan-to-value ratios for interest-only loans are similar to amortizing loans. BankAtlantic attempts to manage the credit risk associated with these loans by purchasing interest-only loans originated to borrowers that it believes to be credit worthy, with loan-to-value and total debt to income ratios within agency guidelines. BankAtlantic does not purchase sub-prime or negative amortizing residential loans and loans in the purchased residential loan portfolio generally do not have prepayment penalties.
          BankAtlantic originates residential loans to customers that are then sold on a servicing released basis to a correspondent. It also originates and holds certain residential loans, which are primarily made to “low to moderate income” borrowers in accordance with requirements of the Community Reinvestment Act. The underwriting of these loans generally follows government agency guidelines with independent appraisers typically performing on-site inspections and valuations of the collateral. The outstanding balance of these loans at December 31, 2007 was $57 million.
          Commercial Real Estate: BankAtlantic provides commercial real estate loans for acquisition, development and construction of various property types, as well as the refinancing and acquisition of existing income-producing properties. These loans are primarily secured by property located in Florida. Commercial real estate loans are originated in amounts based upon the appraised value of the collateral or estimated cost that generally have a loan to value ratio at the time of origination of less than 80%, and generally require that one or more of the principals of the borrowing entity guarantee these loans. Most of these loans have variable interest rates and are indexed to either prime or LIBOR rates.
          There are three categories of loans in BankAtlantic’s commercial residential development loan portfolio that we believe have significant exposure to declines in the Florida residential real estate market. The loan balance in these categories aggregated $503.1 million at December 31, 2007. These categories are builder land bank loans, land acquisition and development loans, and land acquisition, development and construction loans. The builder land loan category consists of land loans to borrowers who have or had land purchase option agreements with regional and/or national builders.  These loans were originally underwritten based on projected sales of the developed lots to the builders/option holders, and timely repayment of the loans is primarily dependent upon the sale of the property

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pursuant to the options.  If the lots are not sold as originally anticipated, BankAtlantic anticipates that the borrower may not be in a position to service the loan, with the likely result being an increase in nonperforming loans and loan losses in this category.  The land acquisition and development loan category consists of loans secured by residential land which is intended to be developed by the borrower and sold to homebuilders.  These loans are generally underwritten more stringently than builder land bank loans, as an option agreement with a regional or national builder did not exist at the origination date. The land acquisition, development and construction loans are secured by residential land which is intended to be fully developed by the borrower who may also construct homes on the property.  These loans generally involve property with a longer investment and development horizon, are guaranteed by the borrower or individuals and/or are secured by additional collateral or equity such that it is expected that the borrower will have the ability to service the debt for a longer period of time. 
          Additionally, BankAtlantic sells participations in commercial real estate loans that it originates and administers the loan and provides to participants periodic reports on the progress of the project for which the loan was made. Major decisions regarding the loan are made by the participants on either a majority or unanimous basis. As a result, BankAtlantic generally cannot significantly modify the loan without either majority or unanimous consent of the participants. BankAtlantic’s sale of loan participations reduces its exposure on individual projects and may be required in order to stay within the regulatory “loans to one borrower” limitations. BankAtlantic’s internal policies generally limit loans to a maximum of $20 million and single borrower loan concentrations are generally limited to $40 million. BankAtlantic also purchases commercial real estate loan participations from other financial institutions and in such cases BankAtlantic may not be in a position to control decisions made with respect to the loans.
          Consumer: Consumer loans are primarily loans to individuals originated through BankAtlantic’s retail network and sales force. The majority of its originations are home equity lines of credit secured by a first or second mortgage on the primary residence of the borrower. Home equity lines of credit have prime-based interest rates and generally mature in 15 years. Other consumer loans generally have fixed interest rates with terms ranging from one to five years. At origination, the home equity lines of credit portfolio had a weighted average loan-to-value, inclusive of first mortgages, of 67.0%, and a weighted average Beacon score of 706. Additionally, 70.0% of the portfolio balances were with borrowers who had Beacon scores of 700 or greater at the time of origination.
          Small Business: BankAtlantic makes small business loans to companies located primarily in markets located in its store network areas. Small business loans are primarily originated on a secured basis and do not generally exceed $1.0 million for non-real estate secured loans and $2.0 million for real estate secured loans. These loans are generally originated with maturities ranging primarily from one to three years or upon demand; however, loans collateralized by real estate could have terms of up to fifteen years. Lines of credit extended to small businesses are due upon demand. Small business loans typically have either fixed or variable prime-based interest rates.
          Commercial Business: BankAtlantic generally makes commercial business loans to medium sized companies in Florida. It lends on both a secured and unsecured basis, although the majority of its loans are secured. Commercial business loans are typically secured by the accounts receivable, inventory, equipment, real estate, and/or general corporate assets of the borrowers. Commercial business loans generally have variable interest rates that are prime or LIBOR-based. These loans typically are originated for terms ranging from one to five years.
          Standby Letters of Credit and Commitments: Standby letters of credit are conditional commitments issued by BankAtlantic to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is the same as extending loans to customers. BankAtlantic may hold certificates of deposit, liens on corporate assets and liens on residential and commercial property as collateral for letters of credit. BankAtlantic issues commitments for commercial real estate and commercial business loans.

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     The composition of the loan portfolio was (in millions):
                                                                                 
    As of December 31,
    2007   2006   2005   2004   2003
    Amount   Pct   Amount   Pct   Amount   Pct   Amount   Pct   Amount   Pct
Loans receivable:
                                                                               
Real estate loans:
                                                                               
Residential
  $ 2,156       47.66       2,151       46.81       2,030       43.92       2,057       45.16       1,343       36.99 %
Consumer — home equity
    676       14.94       562       12.23       514       11.12       457       10.03       334       9.20  
Construction and development
    416       9.20       475       10.34       785       16.99       766       16.82       685       18.87  
Commercial
    882       19.49       973       21.17       979       21.18       1,004       22.04       997       27.46  
Small business
    212       4.69       187       4.07       152       3.29       124       2.72       108       2.97  
Loans to Levitt Corporation
          0.00             0.00             0.00       9       0.20       18       0.50  
Other loans:
                                                                               
Commercial business
    131       2.90       157       3.42       88       1.90       93       2.04       116       3.19  
Small business — non-mortgage
    106       2.34       98       2.13       83       1.80       67       1.47       52       1.43  
Consumer
    31       0.68       26       0.57       27       0.59       18       0.40       22       0.61  
Residential loans held for sale
    4       0.09       9       0.20       3       0.06       5       0.11       2       0.05  
     
Total
    4,614       101.99       4,638       100.94       4,661       100.85       4,600       100.99       3,677       101.27  
     
Adjustments:
                                                                               
Unearned discounts (premiums)
    (4 )     -0.09       (1 )     -0.02       (2 )     -0.04       (1 )     -0.02             0.00  
Allowance for loan losses
    94       2.08       44       0.96       41       0.89       46       1.01       46       1.27  
     
Total loans receivable, net
  $ 4,524       100.00       4,595       100.00       4,622       100.00       4,555       100.00       3,631       100.00 %
     
          BankAtlantic’s real estate construction and development and commercial loans outstanding balances as of December 31, 2007 by loan category were as follows (in millions):
         
    Outstanding  
    Balances  
Land acquisition, development and construction loans
  $ 151  
Construction loans collateralized by income producing properties
    79  
Nonresidential construction loans
    186  
 
     
Total construction and development
  $ 416  
 
     
 
       
Builder land bank loans
  $ 150  
Land acquisition and development loans
    202  
Non-residential land loans
    102  
Permanent commercial loans
    428  
 
     
Total commercial
  $ 882  
 
     
          In addition to its lending activities, BankAtlantic also invests in securities as described below:
          Securities Available for Sale: BankAtlantic invests in obligations of the U.S. government or its agencies, such as mortgage-backed securities, real estate mortgage investment conduits (REMICs) and tax exempt municipal bonds, which are accounted for as securities available for sale. BankAtlantic sold its entire portfolio of tax exempt municipal bonds during 2007 as the tax-free returns on these securities were not currently as beneficial to the Company as in prior periods. BankAtlantic’s securities available for sale portfolio at December 31, 2007 was of high credit quality and guaranteed by government sponsored enterprises reflecting BankAtlantic’s attempts to the extent possible to minimize credit risk in its investment portfolio. The available for sale securities portfolio serves as a source of liquidity while at the same time providing a means to moderate the effects of interest rate changes. The

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decision to purchase and sell securities is based upon a current assessment of the economy, the interest rate environment and our liquidity requirements.
          Tax Certificates: Tax certificates are evidences of tax obligations that are sold through auctions or bulk sales by various state and local taxing authorities. The tax obligation arises when the property owner fails to timely pay the real estate taxes on the property. Tax certificates represent a priority lien against the real property for the delinquent real estate taxes. The minimum repayment to satisfy the lien is the certificate amount plus the interest accrued through the redemption date, plus applicable penalties, fees and costs. Tax certificates have no payment schedule or stated maturity. If the certificate holder does not file for the deed within established time frames, the certificate may become null and void and lose its value. BankAtlantic’s experience with this type of investment has generally been favorable because the rates earned are generally higher than many alternative investments and substantial repayments typically occur over a one-year period.
          Derivative Investments: From time to time, based on market conditions, BankAtlantic writes call options on recently purchased agency securities (“covered calls”). Management believes that this periodic investment strategy may result in the generation of non-interest income or alternatively, the acquisition of agency securities on desirable terms. BankAtlantic had no derivative investments outstanding as of December 31, 2007.
          The composition, yields and maturities of BankAtlantic’s securities available for sale, investment securities and tax certificates were as follows (dollars in thousands):
                                                         
    Treasury                   Mortgage-   Bond           Weighted
    and   Tax   Tax-Exempt   Backed   And           Average
    Agencies   Certificates   Securities   Securities   Other   Total   Yield
December 31, 2007
                                                       
Maturity: (1)
                                                       
One year or less
  $       188,401                   410       188,811       8.43 %
After one through five years
                      135,479       271       135,750       4.74  
After five through ten years
                      1,947             1,947       5.89  
After ten years
                      651,035             651,035       5.41  
     
Fair values (2)
  $       188,401             788,461       681       977,543       5.90 %
     
Amortized cost (2)
  $       188,401             785,682       685       974,768       6.06 %
     
Weighted average yield based on fair values
          8.43             5.30       3.54       5.90          
Weighted average maturity (yrs)
          1.0             19.63       1.22       16.01          
 
                                                       
December 31, 2006
                                                       
Fair values (2)
  $       195,391       397,244       361,750       675       955,060       6.17 %
     
Amortized cost (2)
  $       195,391       397,469       365,565       685       959,110       6.05 %
     
 
                                                       
December 31, 2005
                                                       
Fair values (2)
  $ 1,000       163,726       388,566       381,540       585       935,417       5.45 %
     
Amortized cost (2)
  $ 998       163,726       392,130       387,178       585       944,617       5.20 %
     
 
(1)   Except for tax certificates, maturities are based upon contractual maturities. Tax certificates do not have stated maturities, and estimates in the above table are based upon historical repayment experience (generally 1 to 2 years).
 
(2)   Equity and tax exempt securities held by the parent company with a cost of $162.6, $88.6 million, and $95.1 million and a fair value of $179.5 million, $99.9 million, and $103.2 million, at December 31, 2007, 2006 and 2005, respectively, were excluded from the above table. At December 31, 2007, equities held by BankAtlantic with a cost of $750,000 and a fair value of $1.4 million were excluded from the above table.

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          A summary of the amortized cost and gross unrealized appreciation or depreciation of estimated fair value of tax certificates and investment securities and available for sale securities follows (in thousands):
                                 
    December 31, 2007 (1)
            Gross   Gross    
    Amortized   Unrealized   Unrealized   Estimated
    Cost   Appreciation   Depreciation   Fair Value
Tax certificates and investment securities:
                               
Tax certificates:
                               
Cost equals market
  $ 188,401                   188,401  
Securities available for sale:
                               
Investment securities:
                               
Cost equals market
    235                   235  
Market over cost
    450             4       446  
Mortgage-backed securities :
                               
Cost equals market
    18,959                   18,959  
Market over cost
    612,539       5,737             618,276  
Cost over market
    154,184             2,958       151,226  
     
Total
  $ 974,768       5,737       2,962       977,543  
     
 
1)   The above table excludes Parent Company equity securities with a cost of $162.6 million and a fair value of $179.5 million at December 31, 2007.
 
2)   At December 31, 2007, equities held by BankAtlantic with a cost of $750,000 and a fair value of $1.4 million was excluded from the above table.
          Commencing in September 2006, BankAtlantic has from time to time invested in rental real estate and lending joint ventures where the joint venture partner is the managing partner. We account for these joint ventures under the equity method of accounting.
          Income-Producing Real Estate Joint Venture Investments: These joint ventures acquire income-producing real estate properties that generally do not require extensive management with the strategy of re-selling the properties in a relatively short period of time, generally within one year. BankAtlantic had an investment of $1.7 million in one of these joint ventures as of December 31, 2007. The joint venture was liquidated in January 2008 and BankAtlantic has no current intention to invest in rental real estate joint ventures in 2008.
          Lending Joint Venture: We have invested in a joint venture involved in the factoring of accounts receivable. At this time, BankAtlantic does not currently anticipate funding in excess of $5 million into this venture.
          BankAtlantic utilizes deposits, secured advances and other borrowed funds to fund its lending and other activities.
          Deposits: BankAtlantic offers checking and savings accounts to individuals and business customers. These include commercial demand deposit accounts, retail demand deposit accounts, savings accounts, money market accounts, certificates of deposit, various NOW accounts and IRA and Keogh retirement accounts. BankAtlantic also obtains deposits from brokers and municipalities. BankAtlantic solicits deposits from customers in its geographic market through advertising and relationship banking activities primarily conducted through its sales force and store network. BankAtlantic primarily solicits deposits at its branches (or stores) through its “Florida’s Most Convenient Bank” initiatives, which includes extended lobby and customer service hours, free online banking and bill pay, and locations open seven days a week. While BankAtlantic’s core deposits have historically produced solid results our products and pricing promotions may change in light of economic and market conditions. See Note 12 to the “Notes to Consolidated Financial Statements” for more information regarding BankAtlantic’s deposit accounts.
          Federal Home Loan Bank (“FHLB”) Advances: BankAtlantic is a member of the FHLB and can obtain secured advances from the FHLB of Atlanta. These advances can be collateralized by a security lien against its residential loans, certain commercial loans and its securities. In addition, BankAtlantic must maintain certain levels

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of FHLB stock based upon outstanding advances. See Note 13 to the “Notes to Consolidated Financial Statements” for more information regarding BankAtlantic’s FHLB Advances.
          Other Short-Term Borrowings: BankAtlantic’s short-term borrowings consist of securities sold under agreements to repurchase, treasury tax and loan borrowings and federal funds.
    Securities sold under agreements to repurchase include a sale of a portion of its current investment portfolio (usually mortgage-backed securities and REMICs) at a negotiated rate and an agreement to repurchase the same assets on a specified future date. BankAtlantic issues repurchase agreements to institutions and to its customers. These transactions are collateralized by securities in its investment portfolio but are not insured by the FDIC. See Note 15 to the “Notes to Consolidated Financial Statements” for more information regarding BankAtlantic’s Securities sold under agreements to repurchase borrowings.
 
    Treasury tax and loan borrowings represent BankAtlantic’s participation in the Federal Reserve Treasury Investment Program. Under this program the Federal Reserve places funds with BankAtlantic obtained from treasury tax and loan payments received by financial institutions. See Note 14 to the “Notes to Consolidated Financial Statements” for more information regarding BankAtlantic’s Treasury tax and loan borrowings.
 
    Federal funds borrowings occur under established facilities with various federally-insured banking institutions to purchase federal funds. We also have a borrowing facility with various federal agencies which may place funds with us at overnight rates. BankAtlantic uses these facilities on an overnight basis to assist in managing its cash flow requirements. BankAtlantic also has a facility with the Federal Reserve Bank of Atlanta for secured advances. These advances are collateralized by a security lien against its consumer loans. See Note 14 to the “Notes to Consolidated Financial Statements” for more information regarding BankAtlantic’s federal funds borrowings.
 
    BankAtlantic’s other borrowings have floating interest rates and consist of a mortgage-backed bond and subordinated debentures. See Note 16 to the “Notes to Consolidated Financial Statements” for more information regarding BankAtlantic’s other borrowings.
Parent Company
          The Parent Company (“Parent”) operations are limited and primarily include the financing of the capital needs of BankAtlantic Bancorp and its subsidiaries and management of its subsidiaries and other investments. The Parent also has arrangements with BFC Financial Corporation (“BFC”) for BFC to provide certain human resources, insurance management, investor relations services, and other administrative services to the Parent and its subsidiaries and affiliates. The Parent obtains its funds from subsidiary dividends, issuances of equity and debt securities, proceeds from sales of investment securities and returns on portfolio investments. The Parent provides funds to its subsidiaries for capital, the financing of acquisitions and other general corporate purposes. The largest expense of the Parent Company is interest expense on debt, and the amount of this expense could increase or decrease significantly as much of its debt is indexed to floating rates. As a consequence of the sale of Ryan Beck to Stifel, the Parent’s equity investments now include a concentration in Stifel equity securities. Stifel’s common stock is publicly traded on the NYSE. In January 2008, we sold to Stifel 250,000 shares of Stifel common stock for a gain of $18,000 and received net proceeds of $10.6 million. We currently hold 2,127,354 shares of Stifel common stock, of which 542,452 shares are freely saleable and an additional 792,451 will be freely saleable after August 28, 2008 with all contractual sale restrictions lapsing on August 28, 2009. In March 2008, the Company offered for sale 1.6 million shares of its Stifel common stock in an underwritten public offering of shares of Stifel common stock. The Company may also provide the underwriters with an option to purchase additional shares of its Stifel common stock for thirty days after the initial closing solely to cover over-allotments. The sale price of the shares will be determined at the time a definitive underwriting agreement is entered into. Following the sale of the shares in the offering, Stifel has agreed to release any continuing sale restrictions on the remaining shares of Stifel common stock and warrants to acquire 481,724 shares of Stifel commons stock held by the Company. There is no assurance that the offering will be consummated or that the shares will be sold.

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          A summary of the carrying value and gross unrealized appreciation or depreciation of estimated fair value of the Parent’s securities follows (in thousands):
                                 
    December 31, 2007
            Gross   Gross    
    Carrying   Unrealized   Unrealized   Estimated
    Value   Appreciation   Depreciation   Fair Value
Securities available for sale:
                               
Equity securities
  $ 122,997       12,449             135,446  
Investment securities:
                               
Investment securities (1)
    39,617       4,468             44,085  
     
Total
  $ 162,614       16,917             179,531  
     
                                 
    December 31, 2006
            Gross   Gross    
    Carrying   Unrealized   Unrealized   Estimated
    Value   Appreciation   Depreciation   Fair Value
Securities available for sale:
                               
Equity securities
  $ 82,134       9,554             91,688  
Investment securities:
                               
Investment securities (1)
    6,500       1,714             8,214  
     
Total
  $ 88,634       11,268             99,902  
     
 
(1)   Investment securities in 2007 consist of Stifel common stock that is subject to restrictions for more than one year and are accounted for as investment securities at cost. Also included in investment securities at December 31, 2007 and 2006 were equity instruments purchased through private placements and are accounted for at historical cost adjusted for other-than-temporary declines in value.
Employees
          Management believes that its relations with its employees are satisfactory. The Company currently maintains comprehensive employee benefit programs that are considered by management to be generally competitive with programs provided by other major employers in its markets.
          The number of employees at the indicated dates was:
                                 
    December 31, 2007   December 31, 2006
    Full-   Part-   Full-   Part-
    Time   time   time   time
BankAtlantic Bancorp
    7             8        
BankAtlantic
    2,207       355       2,425       386  
 
                               
Total
    2,214       355       2,433       386  
 
                               
Competition
          The banking and financial services industry is very competitive. Legal and regulatory developments have made it easier for new and sometimes unregulated entities to compete with us. Consolidation among financial service providers has resulted in very large national and regional banking and financial institutions holding a large accumulation of assets. These institutions generally have significantly greater resources, a wider geographic presence or greater market accessibility than we have, thus creating increased competition. As consolidation continues among large banks, we expect additional smaller institutions to try to exploit our market. Our primary

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method of competition is emphasis on customer service and convenience, including our Florida’s Most Convenient Bank initiatives.
          We face substantial competition for both loans and deposits. Competition for loans comes principally from other banks, savings institutions and other lenders. This competition could decrease the number and size of loans that we make and the interest rates and fees that we receive on these loans.
          We compete for deposits with banks, savings institutions and credit unions, as well as institutions offering uninsured investment alternatives, including money market funds and mutual funds. These competitors may offer higher interest rates than we do, which could decrease the deposits that we attract or require us to increase our rates to attract new deposits. Increased competition for deposits could increase our cost of funds, reduce our net interest margin and adversely affect our ability to generate the funds necessary for our lending operations.
Regulation and Supervision
Holding Company
          We are a unitary savings and loan holding company within the meaning of the Home Owners’ Loan Act, as amended, or HOLA. As such, we are registered with the Office of Thrift Supervision, or OTS, and are subject to OTS regulations, examinations, supervision and reporting requirements. In addition, the OTS has enforcement authority over us. Among other things, this authority permits the OTS to restrict or prohibit activities that are determined to be a serious risk to the financial safety, soundness or stability of a subsidiary savings bank.
          HOLA prohibits a savings bank holding company, directly or indirectly, or through one or more subsidiaries, from:
    acquiring another savings institution or its holding company without prior written approval of the OTS;
 
    acquiring or retaining, with certain exceptions, more than 5% of a non-subsidiary savings institution, a non-subsidiary holding company, or a non-subsidiary company engaged in activities other than those permitted by HOLA; or
 
    acquiring or retaining control of a depository institution that is not insured by the FDIC.
          In evaluating an application by a holding company to acquire a savings institution, the OTS must consider the financial and managerial resources and future prospects of the company and savings institution involved, the effect of the acquisition on the risk to the insurance funds, the convenience and needs of the community and competitive factors.
          As a unitary savings and loan holding company, we generally are not restricted under existing laws as to the types of business activities in which we may engage, provided that BankAtlantic continues to satisfy the Qualified Thrift Lender, or QTL, test. See “Regulation of Federal Savings Banks — QTL Test” for a discussion of the QTL requirements. If we were to make a non-supervisory acquisition of another savings institution or of a savings institution that meets the QTL test and is deemed to be a savings institution by the OTS and that will be held as a separate subsidiary, then we would become a multiple savings and loan holding company within the meaning of HOLA and would be subject to limitations on the types of business activities in which we can engage. HOLA limits the activities of a multiple savings institution holding company and its non-insured institution subsidiaries primarily to activities permissible for bank holding companies under Section 4(c) of the Bank Holding Company Act, subject to the prior approval of the OTS, and to other activities authorized by OTS regulation.
          Transactions between BankAtlantic, including any of BankAtlantic’s subsidiaries, and us or any of BankAtlantic’s affiliates, are subject to various conditions and limitations. See “Regulation of Federal Savings Banks — Transactions with Related Parties.” BankAtlantic must seek approval from the OTS prior to any declaration of the payment of any dividends or other capital distributions to us. See “Regulation of Federal Savings Banks — Limitation on Capital Distributions.”

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BankAtlantic
          BankAtlantic is a federal savings association and is subject to extensive regulation, examination, and supervision by the OTS, as its chartering agency and primary regulator, and the FDIC, as its deposit insurer. BankAtlantic’s deposit accounts are insured up to applicable limits by the Deposit Insurance Fund, which is administered by the FDIC. BankAtlantic must file reports with the OTS and the FDIC concerning its activities and financial condition. Additionally, BankAtlantic must obtain regulatory approvals prior to entering into certain transactions, such as mergers with, or acquisitions of, other depository institutions, and sales of stores and must submit applications or notices prior to forming certain types of subsidiaries or engaging in certain activities through its subsidiaries. The OTS and the FDIC conduct periodic examinations to assess BankAtlantic’s safety and soundness and compliance with various regulatory requirements. This regulation and supervision establishes a comprehensive framework of activities in which a savings bank can engage and is intended primarily for the protection of the insurance fund and depositors. The OTS and the FDIC have significant discretion in connection with their supervisory and enforcement activities and examination policies. Any change in such applicable activities or policies, whether by the OTS, the FDIC or the Congress, could have a material adverse impact on us, BankAtlantic, and our operations.
          The following discussion is intended to be a summary of the material banking statutes and regulations applicable to BankAtlantic, and it does not purport to be a comprehensive description of such statutes and regulations, nor does it include every federal and state statute and regulation applicable to BankAtlantic.
Regulation of Federal Savings Banks
          Business Activities. BankAtlantic derives its lending and investment powers from HOLA and the regulations of the OTS thereunder. Under these laws and regulations, BankAtlantic may invest in:
    mortgage loans secured by residential and commercial real estate;
 
    commercial and consumer loans;
 
    certain types of debt securities; and
 
    certain other assets.
          BankAtlantic may also establish service corporations to engage in activities not otherwise permissible for BankAtlantic, including certain real estate equity investments and securities and insurance brokerage. These investment powers are subject to limitations, including, among others, limitations that require debt securities acquired by BankAtlantic to meet certain rating criteria and that limit BankAtlantic’s aggregate investment in various types of loans to certain percentages of capital and/or assets.
          Loans to One Borrower. Under HOLA, savings banks are generally subject to the same limits on loans to one borrower as are imposed on national banks. Generally, under these limits, the total amount of loans and extensions of credit made by a savings bank to one borrower or related group of borrowers outstanding at one time and not fully secured by collateral may not exceed 15% of the savings bank’s unimpaired capital and unimpaired surplus. In addition to, and separate from, the 15% limitation, the total amount of loans and extensions of credit made by a savings bank to one borrower or related group of borrowers outstanding at one time and fully secured by readily-marketable collateral may not exceed 10% of the savings bank’s unimpaired capital and unimpaired surplus. Readily-marketable collateral includes certain debt and equity securities and bullion, but generally does not include real estate. At December 31, 2007, BankAtlantic’s limit on loans to one borrower was approximately $84.5 million. At December 31, 2007, BankAtlantic’s largest aggregate amount of loans to one borrower was approximately $42.7 million and the second largest borrower had an aggregate balance of approximately $28.9 million.
          QTL Test. HOLA requires a savings bank to meet a QTL test by maintaining at least 65% of its “portfolio assets” in certain “qualified thrift investments” on a monthly average basis in at least nine months out of every twelve months. A savings bank that fails the QTL test must either operate under certain restrictions on its activities or convert to a bank charter. At December 31, 2007, BankAtlantic maintained approximately 82.2% of its portfolio assets in qualified thrift investments. BankAtlantic had also satisfied the QTL test in each of the nine months prior to December 2007 and, therefore, was a QTL.

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          Capital Requirements. The OTS regulations require savings banks to meet three minimum capital standards:
    a tangible capital requirement for savings banks to have tangible capital in an amount equal to at least 1.5% of adjusted total assets;
 
    a leverage ratio requirement:
  o   for savings banks assigned the highest composite rating of 1, to have core capital in an amount equal to at least 3% of adjusted total assets; or
 
  o   for savings banks assigned any other composite rating, to have core capital in an amount equal to at least 4% of adjusted total assets, or a higher percentage if warranted by the particular circumstances or risk profile of the savings bank; and
    a risk-based capital requirement for savings banks to have capital in an amount equal to at least 8% of risk-weighted assets.
          In determining the amount of risk-weighted assets for purposes of the risk-based capital requirement, a savings bank must compute its risk-based assets by multiplying its assets and certain off-balance sheet items by risk-weights assigned by the OTS capital regulations. The OTS monitors the interest rate risk management of individual institutions. The OTS may impose an individual minimum capital requirement on institutions that exhibit a high degree of interest rate risk.
          At December 31, 2007, BankAtlantic exceeded all applicable regulatory capital requirements. See Note 21 to the “Notes to the Consolidated Financial Statements” for actual capital amounts and ratios.
          There currently are no regulatory capital requirements directly applicable to us as a unitary savings and loan holding company apart from the regulatory capital requirements for savings banks that are applicable to BankAtlantic.
          Limitation on Capital Distributions. The OTS regulations impose limitations upon certain capital distributions by savings banks, such as certain cash dividends, payments to repurchase or otherwise acquire its shares, payments to shareholders of another institution in a cash-out merger and other distributions charged against capital.
          The OTS regulates all capital distributions by BankAtlantic directly or indirectly to us, including dividend payments. BankAtlantic currently must file an application to receive the approval of the OTS for a proposed capital distribution as the total amount of all of BankAtlantic’s capital distributions (including any proposed capital distribution) for the applicable calendar year exceeds BankAtlantic’s net income for that year-to-date period plus BankAtlantic’s retained net income for the preceding two years.
          BankAtlantic may not pay dividends to us if, after paying those dividends, it would fail to meet the required minimum levels under risk-based capital guidelines and the minimum leverage and tangible capital ratio requirements or the OTS notified BankAtlantic that it was in need of more than normal supervision. Under the Federal Deposit Insurance Act, or FDIA, an insured depository institution such as BankAtlantic is prohibited from making capital distributions, including the payment of dividends, if, after making such distribution, the institution would become “undercapitalized.” Payment of dividends by BankAtlantic also may be restricted at any time at the discretion of the appropriate regulator if it deems the payment to constitute an unsafe and unsound banking practice.
          Liquidity. BankAtlantic is required to maintain sufficient liquidity to ensure its safe and sound operation, in accordance with OTS regulations.
          Assessments. The OTS charges assessments to recover the costs of examining savings banks and their affiliates, processing applications and other filings, and covering direct and indirect expenses in regulating savings banks and their affiliates. These assessments are based on three components:
    the size of the savings bank, on which the basic assessment is based;
 
    the savings bank’s supervisory condition, which results in an additional assessment based on a percentage of the basic assessment for any savings bank with a composite rating of 3, 4 or 5 in its most recent safety and soundness examination; and

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    the complexity of the savings bank’s operations, which results in an additional assessment based on a percentage of the basic assessment for any savings bank that has more than $1 billion in trust assets that it administers, loans that it services for others or assets covered by its recourse obligations or direct credit substitutes.
          These assessments are paid semi-annually. BankAtlantic’s assessment expense during the year ended December 31, 2007 was approximately $1.0 million.
          Branching. Subject to certain limitations, HOLA and the OTS regulations permit federally chartered savings banks to establish branches in any state or territory of the United States.
          Community Reinvestment. Under the Community Reinvestment Act, or CRA, a savings institution has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRA requires the OTS to assess the institution’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications by the institution. This assessment focuses on three tests:
    a lending test, to evaluate the institution’s record of making loans in its designated assessment areas;
 
    an investment test, to evaluate the institution’s record of investing in community development projects, affordable housing, and programs benefiting low or moderate income individuals and businesses; and
 
    a service test, to evaluate the institution’s delivery of banking services throughout its designated assessment area.
          The OTS assigns institutions a rating of “outstanding,” “satisfactory,” “needs to improve,” or “substantial non-compliance.” The CRA requires all institutions to disclose their CRA ratings to the public. BankAtlantic received a “Satisfactory” rating in its most recent CRA evaluation. Regulations also require all institutions to disclose certain agreements that are in fulfillment of the CRA. BankAtlantic has no such agreements in place at this time.
          Transactions with Related Parties. BankAtlantic’s authority to engage in transactions with its “affiliates” is limited by Sections 23A and 23B of the Federal Reserve Act, or FRA, by Regulation W of the Federal Reserve Board, or FRB, implementing Sections 23A and 23B of the FRA, and by OTS regulations. The applicable OTS regulations for savings banks regarding transactions with affiliates generally conform to the requirements of Regulation W, which is applicable to national banks. In general, an affiliate of a savings bank is any company that controls, is controlled by, or is under common control with, the savings bank, other than the savings bank’s subsidiaries. For instance, we are deemed an affiliate of BankAtlantic under these regulations.
          Generally, Section 23A limits the extent to which a savings bank may engage in “covered transactions” with any one affiliate to an amount equal to 10% of the savings bank’s capital stock and surplus, and contains an aggregate limit on all such transactions with all affiliates to an amount equal to 20% of the savings bank’s capital stock and surplus. A covered transaction generally includes:
    making or renewing a loan or other extension of credit to an affiliate;
 
    purchasing, or investing in, a security issued by an affiliate;
 
    purchasing an asset from an affiliate;
 
    accepting a security issued by an affiliate as collateral for a loan or other extension of credit to any person or entity; and
 
    issuing a guarantee, acceptance or letter of credit on behalf of an affiliate.

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          Section 23A also establishes specific collateral requirements for loans or extensions of credit to, or guarantees, or acceptances of letters of credit issued on behalf of, an affiliate. Section 23B requires covered transactions and certain other transactions to be on terms and under circumstances, including credit standards, that are substantially the same, or at least as favorable to the savings bank, as those prevailing at the time for transactions with or involving non-affiliates. Additionally, under the OTS regulations, a savings bank is prohibited from:
    making a loan or other extension of credit to an affiliate that is engaged in any non-bank holding company activity; and
 
    purchasing, or investing in, securities issued by an affiliate that is not a subsidiary.
          Sections 22(g) and 22(h) of the FRA, Regulation O of the FRB, Section 402 of the Sarbanes-Oxley Act of 2002, and OTS regulations impose limitations on loans and extensions of credit from BankAtlantic and us to its and our executive officers, directors, controlling shareholders and their related interests. The applicable OTS regulations for savings banks regarding loans by a savings bank to its executive officers, directors and principal, shareholders generally conform to the requirements of Regulation O, which is applicable to national banks.
          Enforcement. Under the FDIA, the OTS has primary enforcement responsibility over savings banks and has the authority to bring enforcement action against all “institution-affiliated parties,” including any controlling stockholder or any shareholder, attorney, appraiser and accountant who knowingly or recklessly participates in any violation of applicable law or regulation, breach of fiduciary duty, or certain other wrongful actions that have, or are likely to have, a significant adverse effect on an insured savings bank or cause it more than minimal loss. In addition, the FDIC has back-up authority to take enforcement action for unsafe and unsound practices. Formal enforcement action can include the issuance of a capital directive, cease and desist order, removal of officers and/or directors, institution of proceedings for receivership or conservatorship and termination of deposit insurance.
          Examination. A savings institution must demonstrate to the OTS its ability to manage its compliance responsibilities by establishing an effective and comprehensive oversight and monitoring program. The degree of compliance oversight and monitoring by the institution’s management determines the scope and intensity of the OTS’ examinations of the institution. Institutions with significant management oversight and monitoring of compliance will receive less intrusive OTS examinations than institutions with less oversight.
          Standards for Safety and Soundness. Pursuant to the requirements of the FDIA, the OTS, together with the other federal bank regulatory agencies, has adopted the Interagency Guidelines Establishing Standards for Safety and Soundness, or the Guidelines. The Guidelines establish general safety and soundness standards relating to internal controls, information and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, asset quality, earnings and compensation, fees and benefits. In general, the Guidelines require, among other things, appropriate systems and practices to identify and manage the risks and exposures specified in the Guidelines. If the OTS determines that a savings bank fails to meet any standard established by the Guidelines, then the OTS may require the savings bank to submit to the OTS an acceptable plan to achieve compliance. If a savings bank fails to comply, the OTS may seek an enforcement order in judicial proceedings and impose civil monetary penalties.
          Shared National Credit Program. The Shared National Credit Program is an interagency program, established in 1977, to provide a periodic credit risk assessment of the largest and most complex syndicated loans held or agented by financial institutions subject to supervision by a federal bank regulatory agency. The Shared National Credit Program is administered by the FRB, FDIC, OTS and the Office of the Comptroller of the Currency. The Shared National Credit Program covers any loan or loan commitment of at least $20 million (i) which is shared under a formal lending agreement by three or more unaffiliated financial institutions or (ii) a portion of which is sold to two or more unaffiliated financial institutions with the purchasing financial institutions assuming their pro rata share of the credit risk. The Shared National Credit Program is designed to provide uniformity and efficiency in the federal banking agencies’ analysis and rating of the largest and most complex credit facilities in the country by avoiding duplicate credit reviews and ensuring consistency in rating determinations. The federal banking agencies use a combination of statistical and judgmental sampling techniques to select borrowers for review each year. The selected borrowers are reviewed and the credit quality rating assigned by the applicable federal banking agency’s examination team will be reported to each financial institution that participates in the loan as of the examination date. The assigned ratings are used during examinations of the other financial institutions to avoid duplicate reviews

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and ensure consistent treatment of these loans. BankAtlantic has entered into participations with respect to its loans and has acquired participations in the loans of other financial institutions which are subject to this program and accordingly these loans may be subject to this additional review.
          Real Estate Lending Standards. The OTS and the other federal banking agencies adopted regulations to prescribe standards for extensions of credit that are secured by liens on or interests in real estate or are made for the purpose of financing the construction of improvements on real estate. The OTS regulations require each savings bank to establish and maintain written internal real estate lending standards that are consistent with OTS guidelines and with safe and sound banking practices and which are appropriate to the size of the savings bank and the nature and scope of its real estate lending activities.
          Prompt Corrective Regulatory Action. Under the OTS Prompt Corrective Action Regulations, the OTS is required to take certain, and is authorized to take other, supervisory actions against undercapitalized savings banks, such as requiring compliance with a capital restoration plan, restricting asset growth, acquisitions, branching and new lines of business and, in extreme cases, appointment of a receiver or conservator. The severity of the action required or authorized to be taken increases as a savings bank’s capital deteriorates. Savings banks are classified into five categories of capitalization as “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” and “critically undercapitalized.” Generally, a savings bank is categorized as “well capitalized” if:
    its total capital is at least 10% of its risk-weighted assets;
 
    its core capital is at least 6% of its risk-weighted assets;
 
    its core capital is at least 5% of its adjusted total assets; and
 
    it is not subject to any written agreement, order, capital directive or prompt corrective action directive issued by the OTS, or certain regulations, to meet or maintain a specific capital level for any capital measure.
          The most recent examination from the OTS categorized BankAtlantic as “well capitalized.”
          Insurance of Deposit Accounts. Savings banks are subject to a risk-based assessment system for determining the deposit insurance assessments to be paid by them.
          Until December 31, 2006, the FDIC had assigned each savings institution to one of three capital categories based on the savings institution’s financial information as of its most recent quarterly financial report filed with the applicable bank regulatory agency prior to the assessment period. The FDIC had also assigned each savings institution to one of three supervisory subcategories within each capital category based upon a supervisory evaluation provided to the FDIC by the savings institution’s primary federal regulator and information that the FDIC determined to be relevant to the savings institution’s financial condition and the risk posed to the previously existing deposit insurance funds. A savings institution’s deposit insurance assessment rate depended on the capital category and supervisory subcategory to which it was assigned. Insurance assessment rates ranged from 0.00% of deposits for a savings institution in the highest category (i.e., well capitalized and financially sound, with no more than a few minor weaknesses) to 0.27% of deposits for a savings institution in the lowest category (i.e., undercapitalized and substantial supervisory concern).
          In an effort to improve the federal deposit insurance system, on January 1, 2007, the Federal Deposit Insurance Reform Act of 2005, or the Reform Act, became effective. The Reform Act, among other things, merged the Bank Insurance Fund and the Savings Association Insurance Fund, both of which were administered by the FDIC, into a new fund administered by the FDIC known as the Deposit Insurance Fund, or DIF, and increased the coverage limit for certain retirement plan deposits to $250,000, but maintained the basic insurance coverage limit of $100,000 for other depositors.
          As a result of the Reform Act, the FDIC now assigns each savings institution to one of four risk categories based upon the savings institution’s capital evaluation and supervisory evaluation. The capital evaluation is based upon financial information as of the savings institution’s most recent quarterly financial report filed with the applicable bank regulatory agency at the end of each quarterly assessment period. The supervisory evaluation is based upon the results of examination findings by the savings institution’s primary federal regulator and information

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that the FDIC has determined to be relevant to the savings institution’s financial condition and the risk posed to the DIF. A savings institution’s deposit insurance assessment rate depends on the risk category to which it is assigned. Insurance assessment rates now range from 5 cents per $100 in assessable deposits for a savings institution in the least risk category (i.e., well capitalized and financially sound with only a few minor weaknesses) to 43 cents per $100 in assessable deposits for a savings institution in the most risk category (i.e., undercapitalized and poses a substantial probability of loss to the DIF unless effective corrective action is taken).
          The FDIC is authorized to raise the assessment rates in certain circumstances, which would affect savings institutions in all risk categories. The FDIC has exercised this authority several times in the past and could raise rates in the future. Increases in deposit insurance premiums could have an adverse effect on our earnings.
          Privacy and Security Protection. BankAtlantic is subject to the OTS regulations implementing the privacy and security protection provisions of the Gramm-Leach-Bliley Act, or GLBA. These regulations require a savings bank to disclose to its customers and consumers its policy and practices with respect to the privacy, and sharing with nonaffiliated third parties, of its customers and consumers’ “nonpublic personal information.” Additionally, in certain instances, BankAtlantic is required to provide its customers and consumers with the ability to “opt-out” of having BankAtlantic share their nonpublic personal information with nonaffiliated third parties. These regulations also require savings banks to maintain policies and procedures to safeguard their customers and consumers’ nonpublic personal information. BankAtlantic has policies and procedures designed to comply with GLBA and applicable privacy and security regulations.
          Insurance Activities. BankAtlantic is generally permitted to engage in certain insurance activities through its subsidiaries. The OTS regulations implemented pursuant to GLBA prohibit, among other things, depository institutions from conditioning the extension of credit to individuals upon either the purchase of an insurance product or annuity or an agreement by the consumer not to purchase an insurance product or annuity from an entity that is not affiliated with the depository institution. The regulations also require prior disclosure of this prohibition to potential insurance product or annuity customers.
          Federal Home Loan Bank System. BankAtlantic is a member of the Federal Home Loan Bank, or FHLB, of Atlanta, which is one of the twelve regional FHLB’s composing the FHLB system. Each FHLB provides a central credit facility primarily for its member institutions as well as other entities involved in home mortgage lending. Any advances from a FHLB must be secured by specified types of collateral, and all long-term advances may be obtained only for the purpose of providing funds for residential housing finance. As a member of the FHLB of Atlanta, BankAtlantic is required to acquire and hold shares of capital stock in the FHLB. BankAtlantic was in compliance with this requirement with an investment in FHLB stock at December 31, 2007 of approximately $74.0 million. During the year ended December 31, 2007, the FHLB of Atlanta paid dividends of approximately $4.4 million on the capital stock held by BankAtlantic. If dividends were reduced or interest on future FHLB advances increased, BankAtlantic’s net interest income would likely also be reduced.
          Federal Reserve System. BankAtlantic is subject to provisions of the FRA and the FRB’s regulations, pursuant to which depository institutions may be required to maintain non-interest-earning reserves against their deposit accounts and certain other liabilities. Currently, federal savings banks must maintain reserves against transaction accounts (primarily NOW and regular interest and non-interest bearing checking accounts). The FRB regulations establish the specific rates of reserves that must be maintained, which are subject to adjustment by the FRB. BankAtlantic is currently in compliance with those reserve requirements. The required reserves must be maintained in the form of vault cash, a non-interest-bearing account at a Federal Reserve Bank, or a pass-through account as defined by the FRB. The effect of this reserve requirement is to reduce interest-earning assets. FHLB system members are also authorized to borrow from the Federal Reserve “discount window,” but FRB regulations require such institutions to exhaust all FHLB sources before borrowing from a Federal Reserve Bank.
          Anti-Terrorism and Anti-Money Laundering Regulations. The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, or the USA PATRIOT Act, provides the federal government with additional powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements. By way of amendments to the Bank Secrecy Act, or BSA, the USA PATRIOT Act puts in place measures intended to encourage information sharing among bank regulatory and law enforcement agencies. In

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addition, certain provisions of the USA PATRIOT Act impose affirmative obligations on a broad range of financial institutions, including savings banks.
          Among other requirements, the USA PATRIOT Act and the related OTS regulations require savings banks to establish anti-money laundering programs that include, at a minimum:
    internal policies, procedures and controls designed to implement and maintain the savings bank’s compliance with all of the requirements of the USA PATRIOT Act, the BSA and related laws and regulations;
 
    systems and procedures for monitoring and reporting of suspicious transactions and activities;
 
    a designated compliance officer;
 
    employee training;
 
    an independent audit function to test the anti-money laundering program;
 
    procedures to verify the identity of each customer upon the opening of accounts; and
 
    heightened due diligence policies, procedures and controls applicable to certain foreign accounts and relationships.
          Additionally, the USA PATRIOT Act requires each financial institution to develop a customer identification program, or CIP, as part of its anti-money laundering program. The key components of the CIP are identification, verification, government list comparison, notice and record retention. The purpose of the CIP is to enable the financial institution to determine the true identity and anticipated account activity of each customer. To make this determination, among other things, the financial institution must collect certain information from customers at the time they enter into the customer relationship with the financial institution. This information must be verified within a reasonable time through documentary and non-documentary methods. Furthermore, all customers must be screened against any CIP-related government lists of known or suspected terrorists. In 2004, deficiencies were identified in BankAtlantic’s compliance with anti-terrorism and anti-money laundering laws and regulations and BankAtlantic entered into agreements regarding its ongoing compliance and was required to pay fines associated with its past deficiencies. In November 2007, the Office of Thrift Supervision terminated the April 2006 Cease and Desist Order entered into by BankAtlantic as a result of previous deficiencies in its compliance with the Bank Secrecy Act. The OTS determined that it was appropriate to terminate the Cease and Desist Order after its examinations of BankAtlantic indicated BankAtlantic’s significant compliance with the terms of the Cease and Desist Order (see “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operation – BankAtlantic Liquidity and Capital Resources”).
          Consumer Protection. BankAtlantic is subject to federal and state consumer protection statutes and regulations, including the Fair Credit Reporting Act, the Fair and Accurate Credit Transactions Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Truth in Lending Act, the Truth in Savings Act, the Real Estate Settlement Procedures Act and the Home Mortgage Disclosure Act. Among other things, these acts:
    require lenders to disclose credit terms in meaningful and consistent ways;
 
    require financial institutions to establish policies and procedures regarding identity theft and notify customers of certain information concerning their credit reporting;
 
    prohibit discrimination against an applicant in any consumer or business credit transaction;
 
    prohibit discrimination in housing-related lending activities;
 
    require certain lender banks to collect and report applicant and borrower data regarding loans for home purchase or improvement projects;
 
    require lenders to provide borrowers with information regarding the nature and cost of real estate settlements;
 
    prohibit certain lending practices and limit escrow account amounts with respect to real estate transactions; and
 
    prescribe penalties for violations of the requirements of consumer protection statutes and regulations.

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Real Estate Development
Real Estate Division Segments
     Our Real Estate Development activities are comprised of the operations of Levitt Corporation. Levitt presents its results in four reportable segments and its results of operations are consolidated with BFC Financial Corporation. The only assets available to BFC Financial Corporation are dividends when and if declared and paid by Levitt. Levitt is a separate public company and its management prepared the following Item 1. Business regarding Levitt which was included in Levitt’s Annual Report on Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission. Accordingly, references to the “Company”, “we”, “us”, “our” or “Parent Company” in the following discussion under the caption “Real Estate Development” are references to Levitt and its subsidiaries, and are not references to BFC Financial Corporation.
General Description of Business
          Levitt Corporation (“Levitt Corporation,”, “we” or the “Company”), directly and through its wholly owned subsidiaries, historically has been a real estate development company with activities in the Southeastern United States. We were organized in December 1982 under the laws of the State of Florida.
          In 2007, Levitt Corporation engaged in real estate activities through Core Communities, LLC (“Core Communities” or “Core”), and other operations, which included Levitt Commercial, LLC (“Levitt Commercial”), an investment in Bluegreen Corporation (“Bluegreen” NYSE: BXG), a development of a homebuilding community in South Carolina, Carolina Oak Homes, LLC (“Carolina Oak”) and other investments in real estate projects through subsidiaries and joint ventures. During 2007, Levitt Corporation also conducted homebuilding operations through Levitt and Sons, LLC (“Levitt and Sons”).
Core Communities
          Core Communities was founded in May 1996 to develop a master–planned community in Port St. Lucie, Florida now known as St. Lucie West. It is currently developing master-planned communities in Port St. Lucie, Florida called Tradition, Florida and in a community outside of Hardeeville, South Carolina called Tradition Hilton Head (formerly known as Tradition, South Carolina). Tradition, Florida has been in active development for several years, while Tradition Hilton Head is in the early stage of development.  As a master-planned community developer, Core Communities engages in four primary activities: (i) the acquisition of large tracts of raw land; (ii) planning, entitlement and infrastructure development; (iii) the sale of entitled land and/or developed lots to homebuilders and commercial, industrial and institutional end-users; and (iv) the development and leasing of commercial space to commercial, industrial and institutional end-users.
          St. Lucie West is a 4,600 acre master-planned community located in St. Lucie County, Florida. It is bordered by Interstate 95 to the west and Florida’s Turnpike to the east. The community blends residential, commercial and industrial developments where residents have access to commerce, recreation, entertainment, religious and educational facilities all within the community. St. Lucie West is completely sold out and substantially built out and consists of a residential community, two college campuses and numerous recreational amenities and facilities. PGA of America owns and operates a golf course and a country club on an adjacent parcel. The community’s baseball stadium, Tradition Field, serves as the spring training headquarters for the New York Mets professional baseball team and a minor league affiliate. There are more than 6,000 homes in St. Lucie West housing nearly 15,000 residents.
          Tradition, Florida encompasses more than 8,200 total acres, including approximately 3,900 remaining net saleable acres.  Approximately 1,800 acres have been sold to date and 259 acres were subject to firm sales contracts with various purchasers as of December 31, 2007. Community Development District special assessment bonds are being utilized to provide financing for certain infrastructure developments. Tradition, Florida is planned to include a 4.5-mile long employment corridor along I-95, educational and health care facilities, commercial properties, residential developments and other uses in a series of mixed-use parcels.  As part of the employment corridor, a 120-acre research park is being marketed as the Florida Center for Innovation at Tradition (“FCI”), within which the Torrey Pines Institute for Molecular Studies (TPIMS) is building its new headquarters.   FCI is planned to consist of approximately two million square feet of research and development space, a 300 bed Martin Memorial Health

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Systems hospital, a 27-acre lake with a 1-mile fitness trail and recreational amenities, state-of-the-art fiber optic cabling, underground electrical power and proximity to high-quality housing, restaurants, hotels and shopping. Mann Research Center  also recently purchased a 22.4 acre parcel within the FCI on which it intends to build a 400,000-square-foot life sciences complex.   Oregon Health & Science University’s Vaccine and Gene Therapy Institute also recently announced plans to locate a 120,000-square-foot facility within FCI.
          Tradition Hilton Head encompasses almost 5,400 total acres, including approximately 2,800 remaining net saleable acres and 150 acres owned and being developed by Carolina Oak, a subsidiary of the Company currently included under Other Operations below. The community is currently entitled for up to 9,500 residential units and 1.5 million square feet of commercial space, in addition to recreational areas, educational facilities and emergency services. There were no firm sales contracts as of December 31, 2007.
          Our Land Division recorded $16.6 million in sales in 2007 compared to $69.8 million in 2006 as demand for residential inventory by homebuilders in Florida substantially decreased. In response, the Land Division has concentrated on seeking buyers for commercial property. In addition to sales of parcels to developers, the Land Division plans to continue to internally develop certain projects for leasing to third parties based on market demand. It is expected that a higher percentage of revenue in the near term will come from sales and development of commercial property in Florida, provided that the market for commercial property remains stable. In addition, the Land Division expects to realize increased revenues in the future arising from residential and commercial land sales in South Carolina as development on Tradition Hilton Head progresses. However revenues from land sales in South Carolina would be negatively affected if the real estate market in South Carolina sustains a downturn similar to that experienced in Florida. Core generated higher revenues from services in 2007 compared to 2006 due to increased rental income associated with leasing of certain commercial properties and increased revenues relating to irrigation services provided to homebuilders, commercial users, and the residents of Tradition, Florida. Retailers at Tradition, Florida include nationally branded retail stores such as Target, Babies R Us, Bed, Bath and Beyond, Office Max, The Sports Authority, TJ Maxx, Petsmart, LA Fitness and Old Navy.
          In June 2007, Core Communities began soliciting bids from several potential buyers to purchase assets associated with two of Core’s commercial leasing projects. Management determined it is probable that Core will sell these projects in 2008 and, while Core may retain an equity interest in the properties and provide ongoing management services to a potential buyer, the anticipated level of continuing involvement is not expected to be significant. The assets are available for immediate sale in their present condition. There is no assurance that these sales will be completed in the timeframe expected by management or at all. Due to this decision, the projects and assets that are for sale have been classified as a discontinued operation for all periods presented in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”), and its revenue and expenses are not included in the results of continuing operations for any periods presented in this Annual Report on Form 10-K. The assets have been reclassified to assets held for sale and the related liabilities associated with these assets held for sale were also reclassified in the audited consolidated statements of financial condition. Prior period amounts have been reclassified to conform to the current year presentation. As of December 31, 2007, the carrying value of the subject net assets for sale was $16.1 million. This amount is comprised of total assets of $96.2 million less total liabilities of $80.1 million. While the commercial real estate market has generally been stronger than the residential real estate market, interest in commercial property is weakening and financing is not as readily available in the current market, which may adversely impact the profitability of our commercial property. Management has reviewed the net asset value and estimated the fair market value of the assets based on the bids received related to these assets and determined that the assets were appropriately recorded at the lower of cost or fair value less the costs to sell at December 31, 2007.

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Other Operations
          During 2007, we were also engaged in commercial real estate activities through our wholly owned subsidiary, Levitt Commercial, LLC (“Levitt Commercial”), and we also have investments in other real estate projects through subsidiaries and various joint ventures. We own approximately 31% of the outstanding common stock of Bluegreen, which acquires, develops, markets and sells vacation ownership interests in “drive-to” vacation resorts, as well as residential home sites around golf courses or other amenities.
          In addition, we are engaged in limited homebuilding activities in Tradition Hilton Head through our wholly owned subsidiary, Carolina Oak, which is a direct subsidiary of Levitt Corporation which was acquired from Levitt and Sons during October 2007. See Recent Developments - Acquisition of Carolina Oak. Levitt Corporation had a previous financial commitment associated with this community, which is located in Tradition Hilton Head, and management determined that it was in the best interest of the Company to continue to develop the community. The results of operations and financial condition of Carolina Oak as of and for the three year period ended December 31, 2007 are included in the Primary Homebuilding segment in this Annual Report on Form 10-K because it is engaged in homebuilding activities and because the financial metrics from this company are similar in nature to the other homebuilding projects within this segment that existed during these periods.
Levitt and Sons
          Acquired in December 1999, Levitt and Sons was a developer of single family homes and townhome communities for active adults and families in Florida, Georgia, Tennessee and South Carolina. Levitt and Sons operated in two reportable segments, Primary Homebuilding and Tennessee Homebuilding. On November 9, 2007 (the “Petition Date”), Levitt and Sons and substantially all of its subsidiaries (collectively, the “Debtors”) filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the Southern District of Florida ( the “Bankruptcy Court”). See Recent Developments - Bankruptcy of Levitt and Sons for the current status of the Chapter 11 Cases.
          The homebuilding environment continued to deteriorate throughout 2007 as increased inventory levels combined with weakened consumer demand for housing and tightened credit requirements negatively affected sales, deliveries and margins throughout the industry. In both Homebuilding segments, Levitt and Sons experienced decreased orders, decreased margins and increased cancellation rates on homes in backlog. Excess supply, particularly in previously strong markets like Florida, in combination with a reduction in demand resulting from tightened credit requirements and reductions in credit availability, as well as buyers’ fears about the direction of the market exerted a continuous cycle of downward pricing pressure for residential homes.
          Levitt and Sons engaged in discussions with its five principal lenders in an effort to obtain agreements to restructure its outstanding indebtedness. No substantive agreements were received that addressed either the short term or longer term cash flow requirements of Levitt and Sons or debt repayment. Due to the uncertainty regarding Levitt and Sons’ indebtedness and the continued deterioration of the homebuilding industry and Levitt and Sons’ operations in particular, Levitt Corporation, which had previously loaned Levitt and Sons approximately $84.3 million, stopped funding the cash flow needs of this subsidiary in the third quarter of 2007. Levitt Corporation was unwilling to commit additional material loans and advances to Levitt and Sons unless Levitt and Sons’ debt was restructured in a way which increased the likelihood that Levitt and Sons could generate sufficient cash to meet its future obligations and be positioned to address the long term issues it faced. Levitt and Sons ceased development at its projects at September 30, 2007 due to a lack of funding.
          On November 9, 2007, the Debtors filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. Under Section 362 of the Bankruptcy Code, the filing of a bankruptcy petition automatically stays most actions against the Debtors, including most actions to collect pre-petition indebtedness or to exercise control of the property of the Debtors.
          Based on the loss of control over Levitt and Sons as a result of the Chapter 11 Cases and the uncertainties surrounding the nature, timing and specifics of the bankruptcy proceedings, Levitt Corporation deconsolidated Levitt and Sons as of November 9, 2007, eliminating all future operations from its financial results. We are

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prospectively accounting for any remaining investment in Levitt and Sons, net of any outstanding advances due from Levitt and Sons, as a cost method investment. Under cost method accounting, income would only be recognized to the extent of cash received in the future or when Levitt Corporation is discharged from the bankruptcy, at which time, the balance of the “loss in excess of investment in subsidiary” can be recognized into income. As of November 9, 2007, Levitt Corporation had a negative investment in Levitt and Sons of $123.0 million and there were outstanding advances due from Levitt and Sons of $67.8 million at Levitt Corporation resulting in a net negative investment of $55.2 million. Included in the negative investment was approximately $15.8 million associated with deferred revenue related to intra-segment sales between Levitt and Sons and Core Communities. Since the Chapter 11 Cases were filed, Levitt Corporation has also incurred certain administrative costs in the amount of $1.4 million relating to certain services and benefits provided by the Company in favor of the Debtors. These costs include, but are not limited to, the cost of maintaining employee benefit plans, providing accounting services, human resources expenses, general liability and property insurance premiums, payroll processing expenses, licensing and third-party professional fees (collectively, the “Post Petition Services”).
Recent Developments
Bankruptcy of Levitt and Sons
          On November 9, 2007, the Debtors filed voluntary petitions for relief under the Chapter 11 Cases in the Bankruptcy Court. The Debtors commenced the Chapter 11 Cases in order to preserve the value of their assets and to facilitate an orderly wind-down of their businesses and disposition of their assets in a manner intended to maximize the recoveries of all constituents.
          On November 27, 2007, the Office of the United States Trustee (the “U.S. Trustee), appointed an official committee of unsecured creditors in the Chapter 11 Cases (the “Creditors’ Committee”). On January 22, 2008, the U.S. Trustee appointed a Joint Home Purchase Deposit Creditors Committee of Creditors Holding Unsecured Claims (the “Deposit Holders Committee”, and together with the Creditors Committee, the “Committees”). The Committees have a right to appear and be heard in the Chapter 11 Cases.
          On November 27, 2007, the Bankruptcy Court granted the Debtors’ Motion for Authority to Incur Chapter 11 Administrative Expense Claim (“Chapter 11 Admin. Expense Motion”) thereby authorizing the Debtors to incur a post petition administrative expense claim in favor of the Company for Post Petition Services. While the Bankruptcy Court approved the incurrence of the amounts as unsecured post petition administrative expense claims, the cash payments of such claims is subject to additional court approval. In addition to the unsecured administrative expense claims, the Company has pre-petition secured and unsecured claims against the Debtors. The Debtors have scheduled the amounts due to the Company in the Chapter 11 Cases. The unsecured pre-petition claims of the Company scheduled by Levitt and Sons are approximately $67.3 million and the secured pre-petition claim scheduled by Levitt and Sons is approximately $460,000. The Company has also filed contingent claims with respect to any liability it may have arising out of disputed indemnification obligations under certain surety bonds. Lastly, the Company implemented an employee severance fund in favor of certain employees of the Debtors. Employees who received funds as part of this program as of December 31, 2007, which totaled approximately $600,000 paid as of that date, have assigned their unsecured claims to the Company. There is no assurance that there will be any funds available to pay the Company these or any other amounts associated with the Company’s claims against the Debtors.
          At December 31, 2007, the Company had a federal income tax receivable of $27.4 million as a result of losses incurred, which is anticipated to be collected upon filing the 2007 consolidated U.S. federal income tax return. The Creditors Committee has advised the Company that they believe the creditors are entitled to share in an unstated amount of the refund.
          Pursuant to the Bankruptcy Code, the Debtors have for a limited period subject to extension, the exclusive right to file a plan of reorganization or liquidation (the “Plan”).

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Rights Offering
          On August 29, 2007, Levitt Corporation distributed to each holder of record of its Class A common stock and Class B common stock as of August 27, 2007 5.0414 subscription rights for each share of such stock owned on that date (the “Rights Offering”), or an aggregate of rights to purchase 100 million shares of Class A common stock. The Rights Offering was priced at $2.00 per share, commenced on August 29, 2007 and was completed on October 1, 2007. Levitt Corporation received $152.8 million of proceeds in connection with the exercise of rights by its shareholders. In connection with the offering, Levitt Corporation issued an aggregate of 76,424,066 shares of Class A common stock on October 1, 2007. The stock price on the October 1, 2007 closing date was $2.05 per share. As a result, there is a bonus element adjustment of 1.97% for all shareholders of record on August 29, 2007 and accordingly the number of weighted average shares of Class A common stock outstanding for basic and diluted (loss) earnings per share was retroactively increased by 1.97% for all prior periods presented in this Annual Report on Form 10-K.
Reductions in Force
          In the third and fourth quarters of 2007, substantially all of Levitt and Sons’ employees were terminated and 22 employees were terminated at Levitt Corporation primarily as a result of the Chapter 11 Cases. On November 9, 2007, Levitt Corporation implemented an employee fund and indicated that it would pay up to $5 million of severance benefits to terminated Levitt and Sons employees to supplement the limited termination benefits which could be paid by Levitt and Sons to those employees. Levitt and Sons is restricted in the amount of termination benefits it can pay to its former employees by virtue of the Chapter 11 Cases. For the year ended December 31, 2007, the Company paid approximately $600,000 in severance and termination charges related to the above fund which is reflected in the Other Operations segment and paid $2.3 million in severance to the employees of the Homebuilding Division prior to deconsolidation. Employees entitled to participate in the fund either received a payment stream, which in certain cases extended over two years, or a lump sum payment, dependent on a variety of factors. For any amounts paid related to this fund from the Other Operations segment, these payments were in exchange for an assignment to the Company by those employees of their unsecured claims against Levitt and Sons. At December 31, 2007 there was $2.0 million accrued to be paid related to this fund as well as severance for employees other than Levitt and Sons employees. In addition to these amounts, we expect additional severance related obligations associated with the fund mentioned above of $1.7 million in 2008 as employees assign their unsecured claims to the Company.
          In addition to the severance benefits, Levitt Corporation entered into two independent contractor agreements in December 2007 with two former Levitt and Sons employees. The agreements are for past and future consulting services. The total commitment related to these agreements is $1.6 million and will be paid monthly through 2009.
Acquisition of Carolina Oak Homes, LLC
          On October 23, 2007, Levitt Corporation acquired from Levitt and Sons all of the outstanding membership interests in Carolina Oak, a South Carolina limited liability company (formerly known as Levitt and Sons of Jasper County, LLC) for the following consideration: (i) assumption of the outstanding principal balance of a loan in the amount of $34.1 million which is secured by a 150 acre parcel of land owned by Carolina Oak located in Tradition Hilton Head , (ii) execution of a promissory note in the amount of $400,000 to serve as a deposit under a purchase agreement between Carolina Oak and Core Communities of South Carolina, LLC and (iii) the assumption of specified payables in the amount of approximately $5.3 million. The principal asset in Carolina Oak is a 150 acre parcel of partially developed land currently under development and located in Tradition Hilton Head. As of December 31, 2007, Carolina Oak had 14 units under current development with no units in backlog. Carolina Oak has an additional 91 lots that are currently available for home construction.
Acquisition of common stock
          As of March 17, 2008, the Company, together with, Woodbridge Equity Fund LLLP, a newly formed limited liability limited partnership, wholly-owned by the Company, had purchased 3,000,200 shares of Office Depot, Inc. (“Office Depot”) common stock, which represents approximately one percent of Office Depot’s outstanding stock, at a cost of approximately $34.0 million. In connection with the acquisition of this ownership interest, on March 17, 2008, the Company delivered notice to Office Depot of the Company’s intent to nominate two nominees to stand for election to Office Depot’s Board of Directors. One of the nominees, Mark D Begelman, was the President and Chief Operating Officer of Office Depot from 1991 to 1995 and is currently an officer of BankAtlantic. Also on March 17, 2008, the Company, together with Woodbridge Equity Fund LLLP and other participants in the proxy solicitation, filed a preliminary proxy statement with the SEC in connection with the solicitation of proxies in support of the election of the two nominees. The Company has agreed to indemnify each nominee against certain losses and expenses which such nominees may incur in connection with the proxy solicitation and their efforts to gain election to the Office Depot board. In addition, the Company has filed a complaint in the Delaware Court of Chancery seeking, among other things, a court order declaring that the nomination of the two nominees at the Office Depot annual meeting is valid.

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Business Strategy
          Our business strategy involves the following principal goals:
          Pursue investment opportunities. We intend to pursue acquisitions and investments opportunistically, using a combination of our cash and third party equity and debt financing. These investments may be within or outside of the real estate industry. We also intend to explore a variety of funding structures which might leverage and capitalize on our available cash and other assets currently owned by us. We may acquire entire businesses, majority interests in companies or minority, non-controlling interests. Investing on this basis will present additional risks, including the risks inherent in the industries in which we invest and potential integration risks if we seek to integrate the acquired operations into our operations.
          Continue to develop master-planned communities. The Land Division is actively developing and marketing its master-planned communities in Florida and South Carolina. In addition to the marketing of parcels to homebuilders, the Land Division continues to expand its commercial operations through sales to developers and through its efforts to internally develop projects for leasing to third parties. Core is committed to developing communities that will responsibly serve its residents and business in the long-term. The goal of its developments is to facilitate a regional roadway network and establish model communities that will set an example for future development. Core has established a series of community design standards which have been incorporated into the overall planning effort of master-planned communities including: utilizing a mix of housing types, including single-family neighborhoods and a variety of higher density communities; and having a neighborhood Town Center, Community School parcels, a workplace environment and community parks. The intent is to establish well-planned, innovative communities that are sustainable for the long-term.
          We view our commercial projects opportunistically and intend to periodically evaluate the short and long term benefits of retention or disposition. In 2007, we announced the intention to sell the commercial leasing projects owned by Core and provide ongoing management services to a potential buyer. Historically, land sale revenues have been sporadic and fluctuate dramatically by quarter and land sale transactions have resulted in 40% to 60% margins. However, margins on land sales and the many factors which impact the margin may not remain at these levels given the current downturn in the real estate markets where we own properties. Recent trends in home sales may require us to hold our land inventory longer than originally projected. We intend to review each parcel ready for development to determine whether to market the parcel to third parties, to internally develop the parcel for leasing, or hold the parcel and determine later whether to pursue third party sales or internal development opportunities. Our decision will be based, in part, on the condition of the commercial real estate market and our evaluation of future prospects Our land development activities in our master-planned communities offer a source of land for future homebuilding by others. Much of our master-planned community acreage is under varying development orders and is not immediately available for construction or sale to third parties at prices that maximize value. Third-party homebuilder sales remain an important part of our ongoing strategy to generate cash flow, maximize returns and diversify risk, as well as to create appropriate housing alternatives for different market segments in our master-planned communities.
          Operate efficiently and effectively. We have recently taken steps which we believe strengthen our company. We raised a significant amount of capital through a Rights Offering and have implemented significant reductions in workforce levels. We intend to continue our focus on aligning our staffing levels with business goals

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and current and anticipated future market conditions. We also intend to continue to focus on expense management initiatives throughout the organization.
          Utilize community development districts to fund development costs. We establish community development districts to access tax exempt bond financing to fund infrastructure development at our master-planned communities, which is a common practice among land developers in Florida. The ultimate owners of the property within the district are responsible for amounts owed on these bonds, which are funded through annual assessments. Generally, in Florida, no payments under the bonds are required from property owners during the first two to three years after issuance as a result of capitalized interest built into the bond proceeds. While we are responsible for any assessed amounts until the underlying property is sold, this strategy allows us to more effectively manage the cash required to fund infrastructure at the project in the short term. If the property is not sold prior to the assessment date we will be required to pay the full amount of the annual assessment on the property owned by us. However, there have recently been significant disruptions in credit markets, including downward trends in the municipal bond markets which may impact the availability and pricing of this type of financing in the future. We may not be able to access tax exempt bond financing or any other financing through community development districts if market conditions do not improve.
Business Segments
          Through 2007, management reported results of operations through four segments: Land Division, Other Operations, Primary Homebuilding and Tennessee Homebuilding. The results of operations of Primary Homebuilding, with the exception of Carolina Oak, and Tennessee Homebuilding are only included as separate segments through November 9, 2007, the date of Levitt Corporation’s deconsolidation of Levitt and Sons. The presentation and allocation of the assets, liabilities and results of operations of each segment may not reflect the actual economic costs of the segment as a stand-alone business. If a different basis of allocation were utilized, the relative contributions of the segment might differ but, in management’s view, the relative trends in segments would not likely be impacted. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”, “Item 8. Financial Statements and Supplementary Data” and Note 23 to our audited consolidated financial statements for a discussion of trends, results of operations and other relevant information on each segment.
Land Division
          The Land Division, which operates through Core Communities, generates revenue primarily from land sales from master-planned communities and also generates revenue from leasing commercial properties which it has developed. At December 31, 2007, our Land Division owned approximately 6,500 gross acres in Tradition, Florida including approximately 3,900 saleable acres. Through December 31, 2007, Core Communities had entered into contracts for the sale of a total of approximately 2,100 acres in the first phase development at Tradition, Florida of which approximately 1,800 acres had been delivered at December 31, 2007. Our backlog contains contracts for the sale of 259 acres, although there is no assurance that the consummation of those transactions will occur. Delivery of these acres is expected to be completed in 2009. At December 31, 2007, our Land Division also owned approximately 5,200 gross acres in Tradition Hilton Head, including approximately 2,800 remaining net saleable acres and 150 acres owned and being developed by Carolina Oak, a subsidiary of the Company, currently included under Other Operations below.
          Our Land Division’s land in development and relevant data as of December 31, 2007 were as follows:
                                                                 
                                                    Third    
                    Closed           Non-           Party    
    Date   Acres   Acres   Current   Saleable   Saleable   Backlog   Acres
    Acquired   Acquired   (a)   Inventory   Acres (b)   Acres (b)   (c)   Available
Currently in Development
                                                               
Tradition, Florida
    1998 – 2004       8,246       1,794       6,452       2,583       3,869       259       3,610  
Tradition Hilton Head
    2005       5,390       163       5,227       2,417       2,810             2,810  
 
                                                               
Total Currently in Development
            13,636       1,957       11,679       5,000       6,679       259       6,420  
 
                                                               
 
(a)   Closed acres for Tradition Hilton Head include 150 acres owned by Carolina Oak, a wholly owned subsidiary of Levitt Corporation. The revenue from this sale was eliminated in consolidation.
 
(b)   Actual saleable and non-saleable acres may vary over time due to changes in zoning, project design, or other factors. Non-saleable acres include, but are not limited to, areas set aside for roads, parks, schools, utilities, wetlands and other public purposes.
 
(c)   Acres under contract to third parties.

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Other Operations
          Other operations consist of Levitt Commercial, our investment in Bluegreen Corporation, investments in joint ventures and holding company operations.
Levitt Commercial
          Levitt Commercial was formed in 2001 to develop industrial, commercial, retail and residential properties. Revenues for the year ended December 31, 2007 amounted to $6.6 million which reflect sales of warehouse properties. Levitt Commercial delivered 17 flex warehouse units at its remaining development project. Levitt Commercial completed the sale of all flex warehouse units in inventory in 2007 and we have no current plans for future sales from Levitt Commercial.
Investment in Bluegreen Corporation
          We own approximately 9.5 million shares of the outstanding common stock of Bluegreen, which represents approximately 31% of that company’s issued and outstanding common stock. Bluegreen is a leading provider of vacation and residential lifestyle choices through its resorts and residential community businesses. Bluegreen is organized into two divisions: Bluegreen Resorts and Bluegreen Communities.
          Bluegreen Resorts acquires, develops and markets vacation ownership interests (“VOIs”) in resorts generally located in popular high-volume, “drive-to” vacation destinations. Bluegreen Communities acquires, develops and subdivides property and markets residential land homesites, the majority of which are sold directly to retail customers who seek to build a home in a high quality residential setting, in some cases on properties featuring a golf course and related amenities.
          Bluegreen also generates significant interest income through its financing of individual purchasers of VOIs and, to a nominal extent, homesites sold by its Bluegreen Communities division.
          We evaluated our investment in Bluegreen at December 31, 2007 and noted that the current $116.0 million book value of the investment was greater than the market value of $68.4 million (based upon a December 31, 2007 closing price of $7.19). We performed an impairment review in accordance with Emerging Issues Task Force 03-1 (“EITF 03-1”), Accounting Principles Board Opinion No. 18 (“APB No. 18”), and Securities and Exchange Commission Staff Accounting Bulletin 59 (“SAB 59”) to analyze various quantitative and qualitative factors and determine if an impairment adjustment was needed. Based on our evaluation and the review of various qualitative and quantitative factors relating to the performance of Bluegreen, the current value of the stock price, and management’s intention with regards to this investment, management determined that the impairment associated with the investment in Bluegreen was not an other than temporary decline and, accordingly, no adjustment to the carrying value was recorded at December 31, 2007.
          Bluegreen recently announced its intention to pursue a rights offering to its shareholders of up to $100 million of its common stock. Bluegreen intends to file a registration statement relating to the rights offering in March 2008. We own approximately 31% of Bluegreen’s outstanding common stock and we currently intend to participate in this rights offering and to support the efforts of Bluegreen’s management to maximize shareholder value through organic and acquisition-driven growth initiatives and then exploring strategic alternatives.
Corporate Operations Headquarters
          In October 2004, we acquired an 80,000 square foot office building to serve as our home office in Fort Lauderdale, Florida for $16.2 million. The building was fully leased and occupied during the year ended December 31, 2005 and generated rental income. On November 9, 2005 the lease was modified and two floors of the building were vacated in January 2006. The building now serves as the Corporate Headquarters for Levitt Corporation. We are planning to seek to lease to third parties this space in 2008 and relocate to a smaller space due to the number of employees we have remaining at this facility.

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Other Investments and Joint Ventures
          In the past we have sought to mitigate the risks associated with certain real estate projects by entering into joint ventures. Our investments in joint ventures and the earnings recorded on these investments were not significant for the year ended December 31, 2007.
          We entered into an indemnity agreement in April 2004 with a joint venture partner at Altman Longleaf relating to, among other obligations, that partner’s guarantee of the joint venture’s indebtedness. Our liability under the indemnity agreement is limited to the amount of any distributions from the joint venture which exceeds our original capital and other contributions. Levitt Commercial owns a 20% interest in Altman Longleaf, LLC, which owns a 20% interest in this joint venture. This joint venture is developing a 298-unit apartment complex in Melbourne, Florida. An affiliate of our joint venture partner is the general contractor. Construction commenced on the development in 2004 and was completed in 2006. Our original capital contributions totaled approximately $585,000 and we have received approximately $1.2 million in distributions since 2004. Accordingly, our potential obligation of indemnity at December 31, 2007 is approximately $664,000. The book value of this investment as of December 31, 2007 was zero due to the losses this joint venture has incurred. Based on the joint venture assets that secure the indebtedness, we do not currently believe it is likely that any payment will be required under the indemnity agreement.
Homebuilding Division
          The Primary and Tennessee Homebuilding segments were deconsolidated from our results of operations on November 9, 2007 due to the Chapter 11 Cases. The results of operations for the three year period ended December 31, 2007 include the results of operations for the Debtors through November 9, 2007. However, we continue to be engaged in limited homebuilding activities in Tradition Hilton Head through Carolina Oak, which was acquired by Levitt Corporation from Levitt and Sons during 2007. The results of operations and financial condition of Carolina Oak as of and for the three year period ended December 31, 2007 are included in the Primary Homebuilding segment in this Form 10-K because it is engaged in homebuilding activities and because the financial metrics from this company are similar in nature to the other homebuilding projects within this segment that existed during these periods.
          As of December 31, 2007, Carolina Oak had 14 units under current development with no units in backlog. Carolina Oak has an additional 91 lots that are currently available for home construction. We may decide to continue to build the remainder of the community which is planned to consist of approximately 403 additional units if the sales of the existing units are successful.
Information Technologies
          We continue to seek to improve the efficiency of our field and corporate operations in an effort to plan appropriately for the construction of our master-planned communities, perform limited homebuilding activities and to plan for future investments or acquisitions. In the fourth quarter of 2006, we implemented a fully integrated operating and financial system in order to have all operating entities on one platform. These systems have enabled information to be shared and utilized throughout our company and have enabled us to better manage, optimize and leverage our employees and management. During 2007, we further implemented the property management module associated with this financial system for use in our Land Division to assist with our expansion and management of our commercial leasing business.
Seasonality
          We have historically experienced volatility but not necessarily seasonality, in our results of operations from quarter-to-quarter due to the nature of the real estate business. Historically, land sale revenues have been sporadic and have fluctuated dramatically. In addition, margins on land sales and the many factors which impact the margin may not remain at historical levels given the current downturn in the real estate markets where we own properties. We are focusing on maximizing our sales efforts with homebuilders at our master-planned communities. However,

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Real Estate Development (Continued)
due to the uncertainty in the real estate market, we expect to continue to experience high volatility in our Land Division revenues throughout 2008.
Competition
          The real estate development industry is highly competitive and fragmented. We compete with third parties in our efforts to sell land to homebuilders. We compete with other local, regional and national real estate companies and homebuilders, often within larger subdivisions designed, planned and developed by such competitors. Some of our competitors have greater financial, marketing, sales and other resources than we do.
          In addition, there are relatively low barriers to entry into our business. There are no required technologies that would preclude or inhibit competitors from entering our markets. Our competitors may independently develop land. A substantial portion of our operations are in Florida and South Carolina, and we expect to continue to face additional competition from new entrants into our markets.
Employees
          As of December 31, 2007, we employed a total of 117 full-time employees and 8 part-time employees. The breakdown of employees by segment was as follows:
                 
    Full   Part
    Time   Time
Primary Homebuilding
    3        
Land
    67       8  
Other Operations
    47        
     
Total
    117       8  
     
          Primary Homebuilding employee count includes those employees working at Carolina Oak. They are Levitt Corporation employees but the salaries and expenses related to these individuals are included in the results of operations of Primary Homebuilding for the three year period ended December 31, 2007. In addition to the employees listed in the preceding table, Levitt and Sons had 38 employees as of December 31, 2007 who were providing post-bankruptcy services. These employees are being phased out as projects are abandoned or transferred to the lenders. Levitt Corporation is not paying for the salaries or benefits of these remaining Levitt and Sons’ employees.
          Our employees are not represented by any collective bargaining agreements and we have never experienced a work stoppage. We believe our employee relations are satisfactory.
Additional Information
          Our Internet website address is www.levittcorporation.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports are available free of charge through our website, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. Our Internet website and the information contained in or connected to our website are not incorporated into this Annual Report on Form 10-K.
          Our website also includes printable versions of our Corporate Governance Guidelines, our Code of Business Conduct and Ethics and the charters for each of the Audit, Compensation and Nominating/Corporate Governance Committees of our Board of Directors.

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ITEM 1A. RISK FACTORS
Regulatory restrictions, bank performance and the terms of indebtedness limit BankAtlantic Bancorp’s ability to pay dividends which may impact our cash flow.
          At December 31, 2007, we held approximately 23.6% of the outstanding common stock of BankAtlantic Bancorp. Dividends by BankAtlantic Bancorp are subject to a number of conditions, including the cash flow and profitability of BankAtlantic Bancorp, declaration of dividends by BankAtlantic Bancorp’s Board of Directors, compliance with the terms of outstanding indebtedness, and regulatory restrictions applicable to BankAtlantic.
          BankAtlantic Bancorp is a separate publicly traded company whose Board of Directors includes a majority of independent directors as required by the listing standards of the New York Stock Exchange. Decisions made by BankAtlantic Bancorp’s Board are not within our control and may not be made in our best interests.
          BankAtlantic Bancorp is a holding company and dividends from BankAtlantic represent a significant portion of its cash flows. BankAtlantic Bancorp uses dividends from BankAtlantic to service its debt obligations and to pay dividends on its capital stock. BankAtlantic’s ability to pay dividends or make other capital distributions to BankAtlantic Bancorp is subject to regulatory limitations and the authority of the OTS and the FDIC. Generally, BankAtlantic may make a capital distribution without prior OTS approval in an amount equal to BankAtlantic’s net income for the current calendar year to date, plus retained net income for the previous two years, provided that BankAtlantic does not become under-capitalized as a result of the distribution. At December 31, 2007, BankAtlantic’s retained net deficit for the previous two years was $23.7 million and accordingly, BankAtlantic is required to obtain approval from the OTS in order to make capital distributions to BankAtlantic Bancorp. There is no assurance that the OTS will approve future capital distributions to BankAtlantic Bancorp. The OTS may object to any capital distribution if it believes the distribution will be unsafe and unsound. The OTS is not likely to approve any distribution that would cause BankAtlantic to fail to meet its capital requirements on a pro forma basis after giving effect to the proposed distribution. The FDIC has backup authority to take enforcement action if it believes that a capital distribution by BankAtlantic constitutes an unsafe or unsound action or practice, even if the OTS has cleared the distribution.
          During 2007, we received $1.7 million in dividends from BankAtlantic Bancorp. However, in December 2007, BankAtlantic Bancorp reduced its quarterly dividend to $0.005 from $0.038 per share on its Class A and Class B Common Stock, which reduced the Company’s cash flow from dividends from BankAtlantic Bancorp. Based on BankAtlantic Bancorp’s current quarterly dividend payment of $0.005 per share, the Company’s dividend from BankAtlantic Bancorp is approximately $69,000 per quarter.
Restrictions, operating performance and the terms of indebtedness limit the ability for Levitt to pay dividends, which may impact our cash flow.
          Levitt commenced paying a quarterly dividend to its shareholders in August 2004. Levitt paid a quarterly dividend in the first quarter of 2007 of $0.02 per share on its Class A and Class B common stock. This resulted in the Company receiving approximately $66,000 during the three months ended March 31, 2007. However, Levitt has not paid any dividends on its Class A or Class B common stock since the first quarter of 2007, and the Company does not anticipate that it will be receiving additional dividends from Levitt for the foreseeable future based on Levitt and Sons’ bankruptcy and the current real estate market. Future dividends from Levitt are subject to approval by Levitt’s Board of Directors (a majority of whom are independent directors) and will depend upon, among other factors, Levitt’s results of operations and financial condition. Levitt may also be limited contractually from paying dividends by the terms of its outstanding indebtedness.

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We have in the past incurred operating cash flow deficits that we expect will continue in the future.
          BFC itself has no revenue generating operating activities and is a holding company engaged in making investments in operating businesses. Accordingly, we have in the past incurred operating cash flow deficits at the BFC parent company level and expect to continue to do so in the foreseeable future. We incurred operating cash flow deficits of $5.0 million during the year ended December 31, 2007. We have financed these operating cash flow deficits with the proceeds of equity or debt financings. At December 31, 2007, BFC’s cash and cash equivalents balance was approximately $18.9 million. Since our acquisition strategy involves primarily long-term investments in growth oriented businesses, the investments made are not expected to generate cash flow to BFC in the near term. As a result, if cash flow from our subsidiaries is not sufficient to fund our operating expenses in the future, we may be forced to reduce operating expenses, to liquidate some of our investments or to seek to fund the expenses from the proceeds of additional equity or debt financing. There is no assurance that any such financing would be available on commercially reasonable terms, if at all, or that we would not be forced to liquidate our investments at depressed prices.
Conditions and events where our investments are currently concentrated, could adversely impact our results and future growth.
          BankAtlantic’s business, the location of its branches and the real estate collateralizing its commercial real estate loans are concentrated in Florida. Further, Levitt’s operations are concentrated in Florida and South Carolina and each of the states is subject to the risks of natural disasters, such as tropical storms and hurricanes. Natural disasters or the occurrence of an economic downturn or adverse changes in laws or regulations could impact the credit quality of BankAtlantic’s assets, the desirability of Levitt’s properties, the financial wherewithal of Levitt’s and BankAtlantic’s customers and the overall success of Levitt and BankAtlantic.
Our future acquisitions may reduce our earnings, require us to obtain additional financing and expose us to additional risks.
          Our business strategy includes investing in and acquiring diverse operating companies and some of these investments and acquisitions may be material. While we will seek investments and acquisitions primarily in companies that provide opportunities for growth with seasoned and experienced management teams, we may not be successful in identifying these opportunities. Further, investments or acquisitions that we do complete may not prove to be successful. Acquisitions may expose us to additional risks and may have a material adverse effect on our results of operations. Any acquisitions we make may:
    fail to accomplish our strategic objectives;
 
    not perform as expected; and/or
 
    expose us to the risks of the business that we acquire.
          Investments or acquisitions could initially reduce our per share earnings and add significant amortization expense or intangible asset charges. Since we have not historically generated significant excess cash flow from operations, we may rely on additional debt or equity financing to implement our acquisition strategy. The issuance of debt will result in additional leverage which could limit our operating flexibility, and the issuance of equity could result in additional dilution to our shareholders. In addition, such financing could consist of equity securities which have rights, preferences or privileges senior to our Class A and Class B Common Stock. If we do require additional financing in the future, there is no assurance that it will be available on favorable terms, if at all. If we fail to obtain the required financing, we would be required to curtail or delay our acquisition plans or to liquidate certain of our assets. Additionally, we do not intend to seek shareholder approval of any investments or acquisitions unless required by law or regulation.

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Our activities and our subsidiaries’ activities are subject to a wide range of bank regulatory requirements that could have a material adverse effect on our business.
          The Company and BankAtlantic Bancorp are each grandfathered unitary savings and loan holding companies and have broad authority to engage in various types of business activities. However, the OTS can stop either of us from engaging in activities or limit those activities if it determines that there is reasonable cause to believe that the continuation of any particular activity constitutes a serious risk to the financial safety, soundness or stability of BankAtlantic. The OTS may also:
    limit the payment of dividends by BankAtlantic to BankAtlantic Bancorp;
 
    limit transactions between us, BankAtlantic, BankAtlantic Bancorp and the subsidiaries or affiliates of either;
 
    limit the activities of BankAtlantic, BankAtlantic Bancorp or us; or
 
    impose capital requirements on us or BankAtlantic Bancorp.
          In addition, unlike bank holding companies, as a unitary savings and loan holding company, we and BankAtlantic Bancorp are not subject to capital requirements. However, the OTS has indicated that it may in the future impose capital requirements on savings and loan holding companies. The OTS may in the future adopt regulations that would affect our operations or those of BankAtlantic Bancorp, including our and BankAtlantic Bancorp’s ability to pay dividends or to engage in certain transactions or activities.
We have many competitors who may have greater financial resources or operate under fewer regulatory constraints than us.
          BFC will face competition in identifying and completing investments, including from strategic buyers, business development companies, private equity funds and other financial sponsors. Many of these competitors have substantially greater financial resources than us. This competition may make acquisitions more costly and may make it more difficult for us to identify attractive investments and successfully complete any desired transaction.
Certain members of our Board of Directors and certain of our executive officers are also directors and executive officers of our affiliates.
          Alan B. Levan, our Chairman and Chief Executive Officer, and John E. Abdo, our Vice Chairman, are also members of the Boards of Directors and/or executive officers of BankAtlantic Bancorp, BankAtlantic, Levitt, Bluegreen and Benihana. Neither Mr. Levan nor Mr. Abdo is obligated to allocate a specific amount of time to the management of the Company, and they may devote more time and attention to the operations of our affiliates than they devote directly to our operations. Additionally, D. Keith Cobb, a member of our Board of Directors is a member of the Board of Directors of BankAtlantic Bancorp and BankAtlantic.
Recent changes in accounting standards regarding the treatment of stock options could harm our ability to attract and retain employees and negatively impacts our results of operations.
          The Company’s net impact of adopting Statement of Financial Accounting Standards (“SFAS”) No. 123R “Share-Based Payment” (“SFAS 123R”) on the amount recognized in non-cash compensation expense was approximately $6.7 million and $7.8 million for 2007 and 2006, respectively, and approximately $1.1 million and $1.2 million, net of noncontrolling interests and income taxes, in the Company’s consolidated statement of operations for the years ended December 31, 2007 and 2006, respectively. Stock options have historically been an important employee recruitment and retention tool, and BFC, BankAtlantic Bancorp and Levitt’s ability to attract and retain key personnel may be impacted if the scope of employee stock option programs is significantly reduced. In any event, if we continue to grant stock options, our future results of operations will be negatively impacted due to SFAS 123R.

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Failure to achieve and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.
          We are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. This Act requires annual management assessments of the effectiveness of our internal control over financial reporting and annual reports by our independent auditors addressing these assessments. While management was able to certify in connection with the Company’s audited financial statements for the year ended December 31, 2007 that our internal control over financial reporting was effective and the Company’s auditors issued their report attesting to such certification, we cannot assure the reader that we will maintain the adequacy of our internal control. If we fail to maintain the adequacy of our internal control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Absolute assurance also cannot be provided that testing will reveal all material weaknesses or significant deficiencies in internal control over financial reporting. In addition, since BankAtlantic Bancorp and Levitt are entities consolidated in our financial statements, our ability to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act will be dependent, in part, on the ability of each of BankAtlantic Bancorp and Levitt to satisfy those requirements. Further, we may acquire privately-held businesses that are not then subject to the same stringent requirements for internal control as public companies. While we intend to address any material weaknesses at acquired consolidated companies, there is no assurance that this will be accomplished. If we fail to strengthen the effectiveness of acquired companies’ internal control, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Failure to achieve and maintain an effective internal control environment could have a material adverse effect on our stock price.
Risks Associated with Our Investment in Benihana and the Restaurant Industry
          We have an investment in preferred shares of Benihana which are convertible to shares of Benihana’s Common Stock. As such, the value of our investment will be influenced by the market performance of Benihana’s Common Stock. Some of the risk factors common to the restaurant industry which might affect the performance of Benihana are as follows:
    Changes in consumer preferences and discretionary spending;
 
    Ability to compete with many food service businesses;
 
    The availability and quality of ingredients and changes in food and supply costs could adversely affect results of operations;
 
    The food service industry is affected by litigation and publicity concerning food quality, health and other issues, which could cause customers to avoid a particular restaurant, result in significant liabilities or litigation costs or damage reputation or brand recognition;
 
    Health concerns relating to the consumption of food products could affect consumer preferences and could negatively impact results of operations;
 
    Increased labor costs or labor shortages could adversely affect results of operations;
 
    The ability to obtain and maintain licenses and permits necessary to operate restaurants and compliance with laws could adversely affect operating results;
 
    Seasonal fluctuations in business could adversely impact stock price;
 
    The need for additional capital in the future which might not be available; and
 
    The loss of key management personnel.
Issuance of Additional Securities In The Future.
          There is generally no restriction on our ability to issue debt or equity securities which are pari passu or have a preference over our Class A Common Stock. Likewise, there is also no restriction on the ability of BankAtlantic Bancorp to issue additional capital stock or incur additional indebtedness. Authorized but unissued shares of our capital stock are available for issuance from time to time at the discretion of our Board of Directors, including issuances in connection with acquisitions. Any such issuances may be dilutive to our earnings per share or to our shareholders’ ownership position.

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Our portfolio of equity securities subjects us to equity pricing risks.
          We maintain a portfolio of publicly traded and privately held equity securities that subject us to equity pricing risks arising in connection with changes in the relative values due to changing market and economic conditions. Volatility or a decline in the financial markets can negatively impact our net income as a result of devaluation of these investments. No market is available for our investment in Benihana Series B Convertible Preferred Stock. The 800,000 shares of Benihana Series B Convertible Preferred Stock owned by the Company are convertible into 1,578,943 shares of Benihana Common Stock. At December 31, 2007, the aggregate market value of such shares would have been $19.9 million. See “Quantitative and Qualitative Disclosures About Market Risk.”
Our control position may adversely affect the market price of BankAtlantic Bancorp’s and Levitt’s Class A Common Stock.
          As of December 31, 2007, we owned all of BankAtlantic Bancorp’s issued and outstanding Class B Common Stock and 8,329,236 shares, or approximately 16.3%, of BankAtlantic Bancorp’s issued and outstanding Class A Common Stock, and we owned all of Levitt’s issued and outstanding Class B Common Stock and 18,676,955 shares, or approximately 19.7%, of Levitt’s issued and outstanding Class A Common Stock. Our share holdings in BankAtlantic Bancorp represent approximately 55.6% of its total voting power, and our share holdings in Levitt represent approximately 54% of its total voting power (excluding the 6,145,582 shares of Levitt’s Class A common stock that we have agreed, subject to certain exceptions, not to vote under the NYSE Letter Agreement.). Since the Class A Common Stock and Class B Common Stock of each of BankAtlantic Bancorp and Levitt vote as a single group on most matters, we are in a position to control BankAtlantic Bancorp and Levitt and elect BankAtlantic Bancorp’s and Levitt’s Boards of Directors. As a consequence, we have the voting power to significantly influence the outcome of any shareholder vote of BankAtlantic Bancorp and Levitt, except in those limited circumstances where Florida law mandates separate class votes. Our control position may have an adverse effect on the market prices of BankAtlantic Bancorp’s and Levitt’s Class A Common Stock.
Alan B. Levan And John E. Abdo’s Control Position May Adversely Affect The Market Price Of Our Common Stock.
          Alan B. Levan, our Chairman of the Board of Directors and Chief Executive Officer, and John E. Abdo, our Vice Chairman of the Board of Directors, may be deemed to have beneficially owned, at December 31, 2007, approximately 22.6% and 14.0%, respectively, of the outstanding shares of our total common stock. Collectively, these shares represented approximately 73.2% of our total voting power at December 31, 2007. Additionally, Alan B. Levan and John E. Abdo have agreed to vote their shares of our Class B common stock in favor of the election of the other to our Board of Directors for so long as they are willing and able to serve as directors of the Company. Further, John E. Abdo has agreed, subject to certain exceptions, not to transfer certain of his shares of our Class B Common Stock and to obtain the consent of Alan B. Levan prior to the conversion of certain of his shares of our Class B common stock into shares of our Class A Common Stock. Since our Class A Common Stock and Class B Common Stock vote as a single class on most matters, Alan B. Levan and John E. Abdo effectively have the voting power to control the outcome of any shareholder vote and elect the members of our Board of Directors. Alan B. Levan and John E. Abdo’s control position may have an adverse effect on the market price of our common stock, except in those limited circumstances where Florida law mandates that the holders of our Class A common stock vote as a separate class. Alan B. Levan’s and John E. Abdo’s interests may conflict with the interests of our other shareholders.
The terms of our articles of incorporation, which establish fixed relative voting percentages between our Class A Common Stock and Class B Common Stock, may not be well accepted by the market.
          Our Class A Common Stock and Class B Common Stock generally vote together as a single class. The Class A Common Stock possesses in the aggregate 22% of the total voting power of all our common stock and the Class B Common Stock possess in the aggregate the remaining 78% of the total voting power. These relative voting percentages will remain fixed unless the number of shares of Class B Common Stock outstanding decreases to 1,800,000 shares, at which time the Class A Common Stock aggregate voting power will change to 40% and the Class B Common Stock will have the remaining 60%. If the number of shares of Class B Common Stock

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

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Financial Services
Financial Services Segment Risk Factors
          Our Financial Services segment consists of BankAtlantic Bancorp, which is consolidated with BFC Financial Corporation. The only assets available to BFC Financial Corporation from BankAtlantic Bancorp are dividends when and if declared and paid by BankAtlantic Bancorp. BankAtlantic Bancorp is a separate public company and its management prepared the following Item 1A. Risk Factors regarding BankAtlantic Bancorp which was included in BankAtlantic Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission. Accordingly, references to the “Company”, “we”, “us” , “our” or “Parent Company” in the following discussion under the caption “Financial Services” are references to BankAtlantic Bancorp and its subsidiaries, and are not references to BFC Financial Corporation.
BankAtlantic
A decline in the Florida real estate market has and may continue to adversely affect our earnings and financial condition.
          The deterioration of economic conditions in the Florida residential real estate market during 2007, and the continued decline in home sales and median home prices year-over-year in all major metropolitan areas in Florida, resulted in a substantial increase in non-performing assets and our provision for loan losses. The housing industry is experiencing what many consider to be its worst downturn in 16 years and market conditions have continued to worsen throughout 2007 and into 2008 reflecting, in part, decreased availability of mortgage financing for residential home buyers, reduced demand for new construction resulting in a significant over-supply of housing inventory and increased foreclosure rates. Additionally, certain national and regional home builders have sought or indicated that they may seek bankruptcy protection. If these market conditions do not improve during 2008 or deteriorate further, or if these market conditions and slowing economy negatively impact the commercial non-residential real estate market, our earnings and financial condition may be adversely impacted because a significant portion of our loans are secured by real estate in Florida, and the level of business deposits from customers dependent on the Florida real estate market and the Florida economy in general may decline. BankAtlantic’s loan portfolio included $2.6 billion of loans concentrated in Florida, which represented approximately 60% of its loan portfolio.
BankAtlantic’s loan portfolio is concentrated in real estate lending which makes its loan portfolio more susceptible to credit losses in the current depressed real estate market.
          The national real estate market declined significantly during 2007, particularly in Florida, our primary lending area. Our loan portfolio is concentrated in commercial real estate loans (virtually all of which are located in Florida and many of which involve residential land development), residential mortgages (nationwide), and consumer home-equity loans (throughout our markets in Florida). We have a heightened exposure to credit losses that may arise from this concentration as a result of the significant downturn in the real estate sector.
          We have identified three categories of loans in our commercial residential development loan portfolio that we believe have significant exposure to the declines in the Florida residential real estate market. These categories are as follows:
          The “builder land bank loan” category consists of 12 loans and aggregates $149.6 million. This category consists of land loans to borrowers who have or had land purchase option agreements with regional and/or national builders. These loans were originally underwritten based on projected sales of the developed lots to the builders/option holders, and timely repayment of the loans is primarily dependent upon the sale of the property pursuant to the options. If the lots are not sold as originally anticipated, BankAtlantic anticipates that the borrower may not be in a position to service the loan, with the likely result being an increase in nonperforming loans and loan losses in this category. The number of homebuilders who have publicly announced that they are, or are contemplating, terminating these options or seeking bankruptcy protection substantially increases the risk that the lots will not be acquired as contemplated. Six loans in this category totaling $86.5 million were on non-accrual at December 31, 2007.

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Financial Services (Continued)
          The “land acquisition and development loan” category consists of 34 loans and aggregates $202.2 million and generally consists of loans secured by residential land which is intended to be developed by the borrower and sold to homebuilders. These loans are generally underwritten more stringently than builder land bank loans, as an option agreement with a regional or national builder did not exist at the origination date. Two loans in this category totaling $7.3 million were on non-accrual at December 31, 2007.
          The “land acquisition, development and construction loan” category consists of 29 loans and aggregates $151.3 million. This category generally consists of loans secured by residential land which will be fully developed by the borrower who may also construct homes on the property. These loans generally involve property with a longer investment and development horizon, are guaranteed by the borrower or individuals and/or are secured by additional collateral or equity such that it is expected that the borrower will have the ability to service the debt for a longer period of time. Seven loans in this category totaling $57.2 million were on non-accrual at December 31, 2007.
          Market conditions may result in BankAtlantic’s commercial real estate borrowers having difficulty selling lots or homes in their developments for an extended period, which in turn could result in an increase in residential construction loan delinquencies and non-accrual balances. Additionally, if the current economic environment continues for a prolonged period of time or deteriorates further, collateral values may further decline and are likely to result in increased credit losses in these loans.
          Included in the commercial real estate loans are approximately $102 million of commercial non-residential land development loans. Our commercial mortgage non-residential loan portfolio has performed better than our commercial residential development loan portfolio in the current real estate market environment. However, this portfolio could be susceptible to extended maturities or borrower default, and we could experience higher credit losses and non-performing loans in this portfolio as the Florida economy is showing signs of a slow down, capital markets involving commercial real estate loans have recently deteriorated, broader non residential real estate market conditions have begun to show signs of weakness and lenders have begun to tighten credit standards and limit availability of financing.
          BankAtlantic’s commercial real estate loan portfolio includes large lending relationships, including relationships with unaffiliated borrowers involving lending commitments in each case in excess of $30 million. These relationships represented eight borrowers with an aggregate outstanding balance of $240 million as of December 31, 2007. Defaults by any of these borrowers could have a material adverse effect on BankAtlantic’s results.
BankAtlantic’s consumer loan portfolio is concentrated in home equity loans collateralized by Florida properties primarily located in the markets where we operate our store network.
          The decline in residential real estate prices and residential home sales throughout Florida has resulted in an increase in mortgage delinquencies and higher foreclosure rates. Additionally, in response to the turmoil in the credit markets, financial institutions have tightened underwriting standards which has limited borrowers’ ability to refinance. These conditions have adversely impacted delinquencies and credit loss trends in our home equity loan portfolio and it does not currently appear that these conditions will improve in the near term. Approximately 80% of the loans in our home equity portfolio are residential second mortgages and if current economic conditions deteriorate for borrowers and their home prices continue to fall, we may experience higher credit losses from this loan portfolio. Since the collateral for this portfolio primarily consists of second mortgages, it is unlikely that we will be successful in recovering all or any portion of our loan proceeds in the event of a default unless we are prepared to repay the first mortgage and such repayment and the costs associated with a foreclosure are justified by the value of the property.
BankAtlantic’s loan portfolio subjects it to high levels of credit risk.
          BankAtlantic is exposed to the risk that its borrowers or counter-parties may default on their obligations. Credit risk arises through the extension of loans, certain securities, letters of credit, financial guarantees and through counter-party exposure on trading and wholesale loan transactions. In an attempt to manage this risk, BankAtlantic

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Financial Services (Continued)
seeks to establish policies and procedures to manage both on and off-balance sheet (primarily loan commitments) credit risk.
          BankAtlantic attempts to manage credit exposure to individual borrowers and counter-parties on an aggregate basis including loans, securities, letters of credit, derivatives and unfunded commitments. While credit personnel analyze the creditworthiness of individual borrowers or counter-parties, and limits are established for the total credit exposure to any one borrower or counter-party, such limits may not have the effect of adequately limiting credit exposure. BankAtlantic also enters into participation agreements with or acquires participation interests from other lenders to limit its credit risk, but will be subject to risks with respect to its interest in the loan and will not be in a position to make independent determinations in its sole discretion with respect to its interests.
BankAtlantic’s interest-only residential loans expose it to greater credit risks.
          Approximately 50% of our purchased residential loan portfolio (approximately $1.1 billion) consists of interest-only loans. While these loans are not considered sub-prime or negative amortizing loans, they are non-traditional loans due to reduced initial loan payments with the potential for significant increases in monthly loan payments in subsequent periods, even if interest rates do not rise, as required amortization of the principal commences. Monthly loan payments will also increase as interest rates increase. This presents a potential repayment risk if the borrower is unable to meet the higher debt service obligations or refinance the loan. As previously noted, current economic conditions in the residential real estate markets and the mortgage finance markets have made it more difficult for borrowers to refinance their mortgages.
Increase in the Allowance for Loan Losses will result in reduced earnings.
          As a lender, BankAtlantic is exposed to the risk that its customers will be unable to repay their loans according to their terms and that any collateral securing the payment of their loans will not be sufficient to assure full repayment. BankAtlantic evaluates the collectibility of its loan portfolio and provides an allowance for loan losses that it believes is adequate based upon such factors as:
    the risk characteristics of various classifications of loans;
 
    Previous loan loss experience;
 
    specific loans that have loss potential;
 
    delinquency trends;
 
    estimated fair value of the collateral;
 
    current economic conditions;
 
    the views of its regulators; and
 
    geographic and industry loan concentrations.
          Many of these factors are difficult to predict or estimate accurately, particularly in a changing economic environment. If BankAtlantic’s evaluation is incorrect and borrower defaults cause losses exceeding the portion of the allowance for loan losses allocated to those loans, our earnings could be significantly and adversely affected. BankAtlantic may experience losses in its loan portfolios or perceive adverse trends that require it to significantly increase its allowance for loan losses in the future, which would reduce future earnings. In addition, BankAtlantic’s regulators may require it to increase or decrease its allowance for loan losses even if BankAtlantic thinks such change is unjustified.

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Adverse events in Florida, where our business is currently concentrated, could adversely impact our results and future growth.
          BankAtlantic’s business, the location of its stores and the real estate collateralizing its commercial real estate loans and its home equity loans are primarily concentrated in Florida. As a result, we are exposed to geographic risks, and any economic downturn in Florida, including unemployment, declines in tourism, the declining real estate market, or adverse changes in laws and regulations in Florida would have a negative impact on our revenues, financial condition and business. Further, the State of Florida is subject to the risks of natural disasters such as tropical storms and hurricanes. The occurrence of an economic downturn in Florida, adverse changes in laws or regulations in Florida or natural disasters could impact the credit quality of BankAtlantic’s assets, growth, the level of deposits our customers maintain with BankAtlantic, the success of BankAtlantic’s customers’ business activities, and the ability of BankAtlantic to operate profitably.
Changes in interest rates could adversely affect our net interest income and profitability.
          The majority of BankAtlantic’s assets and liabilities are monetary in nature. As a result, the earnings and growth of BankAtlantic are significantly affected by interest rates, which are subject to the influence of economic conditions generally, both domestic and foreign, events in the capital markets and also to the monetary and fiscal policies of the United States and its agencies, particularly the Federal Reserve Board. The nature and timing of any changes in such policies or general economic conditions and their effect on BankAtlantic cannot be controlled and are extremely difficult to predict. Changes in interest rates can impact BankAtlantic’s net interest income as well as the valuation of its assets and liabilities.
          Banking is an industry that depends to a large extent on its net interest income. Net interest income is the difference between:
    interest income on interest-earning assets, such as loans; and
 
    interest expense on interest-bearing liabilities, such as deposits.
          Changes in interest rates can have differing effects on BankAtlantic’s net interest income. In particular, changes in market interest rates, changes in the relationships between short-term and long-term market interest rates, or the yield curve, or changes in the relationships between different interest rate indices can affect the interest rates charged on interest-earning assets differently than the interest rates paid on interest-bearing liabilities. This difference could result in an increase in interest expense relative to interest income and therefore reduce BankAtlantic’s net interest income. While BankAtlantic has attempted to structure its asset and liability management strategies to mitigate the impact on net interest income of changes in market interest rates, we cannot provide assurances that BankAtlantic will be successful in doing so.
          Loan and mortgage-backed securities prepayment decisions are also affected by interest rates. Loan and securities prepayments generally accelerate as interest rates fall. Prepayments in a declining interest rate environment reduce BankAtlantic’s net interest income and adversely affect its earnings because:
    it amortizes premiums on acquired loans and securities, and if loans are prepaid, the unamortized premium will be charged off; and
 
    the yields it earns on the investment of funds that it receives from prepaid loans and securities are generally less than the yields that it earned on the prepaid loans.
          Significant loan prepayments in BankAtlantic’s mortgage and investment portfolios in the future could have an adverse effect on BankAtlantic’s earnings. Additionally, increased prepayments associated with purchased residential loans may result in increased amortization of premiums on acquired loans, which would reduce BankAtlantic’s interest income.

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          In a rising interest rate environment, loan and securities prepayments generally decline, resulting in loan yields that are less than the current market yields. In addition, the credit risks of loans with adjustable rate mortgages may worsen as interest rates rise and debt service obligations increase.
          BankAtlantic uses a computer model using standard industry software to quantify its interest rate risk, in support of its Asset/Liability Committee. This model measures the potential impact of gradual and abrupt changes in interest rates on BankAtlantic’s net interest income. While management would attempt to respond to the projected impact on net interest income, there is no assurance that management’s efforts will be successful.
          During most of 2007, the short term interest rates were approximately equal to longer term rates. This is referred to as a “flat yield curve.” BankAtlantic’s net interest income is largely derived from a combination of two factors: the level of core deposits, such as demand savings and NOW deposits, and the ability of banks to raise short term deposits and other borrowings and invest them at longer maturities. The flat yield curve during 2007 significantly impacted the ability of BankAtlantic to profitably raise short term funds for longer term investment as the interest rate spread between short term and long term maturities was negligible. While the recent decline in interest rates and the widening of interest rate spreads between long-term and short term interest rates could lessen the negative impact of a flat yield curve on our net interest income, future patterns of interest rates, including the relationship between short term and long term rates, and its overall impact on our net interest income is very difficult to predict.
BankAtlantic’s “Florida’s Most Convenient Bank” initiative and related infrastructure expansion to support a larger organization has resulted in higher operating expenses, which has had an adverse impact on our earnings.
          BankAtlantic’s “Florida’s Most Convenient Bank” initiative, the opening of 32 stores since January 2005 and the related expansion of our infrastructure and operations have required us to provide additional management resources, hire additional personnel, increase compensation, occupancy and marketing expenditures, and take steps to enhance and expand our operational and management information systems. Employee compensation, occupancy and equipment and advertising expenses have significantly increased since the inception of the initiative, during 2002, from $78.9 million during 2001 to $234.3 million during 2007.
          During the three years ended December 31, 2007, BankAtlantic opened 32 new stores. In 2007, in response to the current economic environment and its impact on BankAtlantic’s financial results, BankAtlantic slowed its retail network expansion and reduced its service hours in an effort to reduce operating expenses. Despite this decision to slow future store expansion, we will continue to incur increased operating expenses, compared to historical levels, resulting from the new stores opened during the last three years and the anticipated opening of four new stores during the first quarter of 2008. While BankAtlantic’s management is focused on reducing overall non interest expense, there is no assurance that BankAtlantic will be successful in its efforts to reduce operating expenses.
BankAtlantic’s new stores may not achieve profitability.
          Since January 2005, BankAtlantic has opened 32 stores and anticipates opening four stores during 2008. In the current adverse economic environment, the amount of time required for these new stores to become profitable is uncertain and the growth in deposits and loans at these stores may not meet management’s expectations. The new stores are located throughout Florida and represent a 51% increase, based on the number of stores, in BankAtlantic’s retail network. There is no assurance that BankAtlantic will be successful in managing this expanded retail network profitably.
BankAtlantic obtains a significant portion of its non-interest income through service charges on core deposit accounts.
          BankAtlantic’s core deposit account growth has generated a substantial amount of service charge income. The largest component of this service charge income is overdraft fees. Changes in customer behavior as well as increased competition from other financial institutions could result in declines in core deposit accounts or in overdraft frequency resulting in a decline in service charge income. Also, the downturn in the Florida economy could result in an increase in overdraft fee charge-offs and a corresponding increase in our overdraft fee reserves.

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Additionally, future changes in banking regulations, in particular limitations on retail customer fees, may impact this revenue source. Any of such changes could have a material adverse effect on BankAtlantic’s results.
Regulatory Compliance.
          The banking industry is an industry subject to multiple layers of regulation. A risk of doing business in the banking industry is that a failure to comply with any of these regulations can result in substantial penalties, significant restrictions on business activities and growth plans and/or limitations on dividend payments, depending upon the type of violation and various other factors. As a holding company, BankAtlantic Bancorp is also subject to significant regulation. For a description of the primary regulations applicable to BankAtlantic and BankAtlantic Bancorp see “Regulations and Supervision”.
Parent Company
BankAtlantic Bancorp services its debt and pays dividends primarily from dividends from BankAtlantic, which are subject to regulatory limits.
          BankAtlantic Bancorp is a holding company and dividends from BankAtlantic represent a significant portion of its cash flows. BankAtlantic Bancorp uses dividends from BankAtlantic to service its debt obligations and to pay dividends on its capital stock.
          BankAtlantic’s ability to pay dividends or make other capital distributions to BankAtlantic Bancorp is subject to regulatory limitations and the authority of the OTS and the FDIC.
          Generally, BankAtlantic may make a capital distribution without prior OTS approval in an amount equal to BankAtlantic’s net income for the current calendar year to date, plus retained net income for the previous two years, provided that BankAtlantic does not become under-capitalized as a result of the distribution. At December 31, 2007, BankAtlantic’s accumulated net deficit for the previous two years was $23.7 million and accordingly, BankAtlantic is required to obtain approval from the OTS in order to make capital distributions to BankAtlantic Bancorp. There is no assurance that the OTS will approve future capital distributions to BankAtlantic Bancorp.
          The OTS may object to any capital distribution if it believes the distribution will be unsafe and unsound. The OTS is not likely to approve any distribution that would cause BankAtlantic to fail to meet its capital requirements on a pro forma basis after giving effect to the proposed distribution. The FDIC has backup authority to take enforcement action if it believes that a capital distribution by BankAtlantic constitutes an unsafe or unsound action or practice, even if the OTS has cleared the distribution.
          At December 31, 2007, BankAtlantic Bancorp had approximately $294.2 million of indebtedness outstanding at the holding company level with maturities ranging from 2032 through 2037. The aggregate annual interest expense on this indebtedness is approximately $23.1 million based on interest rates at December 31, 2007 and is generally indexed to three-month LIBOR. During 2007, BankAtlantic Bancorp received $20 million of dividends from BankAtlantic. BankAtlantic Bancorp’s financial condition and results would be adversely affected if the amounts needed to satisfy its debt obligations, including any additional indebtedness incurred in the future, significantly exceed the amount of dividends it receives from its subsidiaries.
We are controlled by BFC Financial Corporation and its control position may adversely affect the market price of our Class A common stock.
          As of December 31, 2007, BFC Financial Corporation (“BFC”) owned all of the Company’s issued and outstanding Class B common stock and 8,329,236 shares, or approximately 15%, of the Company’s issued and outstanding Class A common stock. BFC’s holdings represent approximately 55% of the Company’s total voting power. Class A common stock and Class B common stock vote as a single group on most matters. Accordingly, BFC is in a position to control the Company, elect the Company’s Board of Directors and significantly influence the outcome of any shareholder vote, except in those limited circumstances where Florida law mandates that the holders

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of our Class A common stock vote as a separate class. BFC’s control position may have an adverse effect on the market price of the Company’s Class A common stock.
Our activities and our subsidiary’s activities are subject to regulatory requirements that could have a material adverse effect on our business.
          The Company is a “grandfathered” unitary savings and loan holding company and has broad authority to engage in various types of business activities. The OTS can prevent us from engaging in activities or limit those activities if it determines that there is reasonable cause to believe that the continuation of any particular activity constitutes a serious risk to the financial safety, soundness, or stability of BankAtlantic. The OTS may also:
    limit the payment of dividends by BankAtlantic to us;
 
    limit transactions between us, BankAtlantic and the subsidiaries or affiliates of either;
 
    limit our activities and the activities of BankAtlantic; or
 
    impose capital requirements on us.
          Unlike bank holding companies, as a unitary savings and loan holding company we are not subject to capital requirements. However, the OTS has indicated that it may, in the future, impose capital requirements on savings and loan holding companies. The OTS may in the future adopt regulations that would affect our operations including our ability to pay dividends or to engage in certain transactions or activities. See “Regulation and Supervision — Holding Company.”
Our portfolio of equity securities subjects us to equity pricing risks.
          We maintain a portfolio of equity securities in both publicly traded and privately held companies that subject us to equity pricing risks arising in connection with changes in the values due to changing market and economic conditions. Volatility or a decline in the financial markets can negatively impact our net income as a result of devaluation of these investments and the subsequent recognition of other-than-temporary declines in value. At December 31, 2007, we had equity securities with a book value of approximately $123.0 million. See “Quantitative and Qualitative Disclosures About Market Risk.”
          In connection with the sale of Ryan Beck to Stifel in February 2007, we received approximately 2,377,354 shares of Stifel common stock and warrants to acquire 481,724 shares of Stifel common stock at $36.00 per share. In addition to limitations imposed by federal securities laws, we are subject to contractual restrictions which limit the number of Stifel shares that we are permitted to sell in the open market during the 18 month period following the sale. Even after these restrictions lapse, the trading market for Stifel shares may not be sufficiently liquid to enable us to sell Stifel common stock that we own without significantly reducing the market price of these shares, if we are able to sell them at all. In January 2008, we sold 250,000 shares of Stifel common stock to Stifel for net proceeds of $10.6 million.

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Real Estate Development
Real Estate Development Segment Risk Factors
          Our Real Estate Development segment consists of Levitt Corporation, which is consolidated with BFC Financial Corporation. The only assets available to BFC Financial Corporation are dividends when and if declared and paid by Levitt. Levitt is a separate public company and its management prepared the following Item 1A. Risk Factors regarding Levitt which was included in Levitt’s Annual Report on Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission. Accordingly, references to the “Company”, “we”, “us”, “our” or “Parent Company” in the following discussion under the caption “Real Estate Development” are references to Levitt and its subsidiaries, and are not references to BFC Financial Corporation.
RISKS RELATING TO OUR BUSINESS AND THE REAL ESTATE BUSINESS GENERALLY
We engage in real estate activities which are speculative and involve a high degree of risk
          The real estate industry is highly cyclical by nature, the current market is experiencing a significant decline and future market conditions are uncertain. Factors which adversely affect the real estate industry, many of which are beyond our control, include:
    overbuilding or decreases in demand to acquire land;
 
    the availability and cost of financing;
 
    unfavorable interest rates and increases in inflation;
 
    changes in national, regional and local economic conditions;
 
    cost overruns, inclement weather, and labor and material shortages;
 
    the impact of present or future environmental legislation, zoning laws and other regulations;
 
    availability, delays and costs associated with obtaining permits, approvals or licenses necessary to develop property; and
 
    increases in real estate taxes, insurance and other local government fees.
There has been a decline in the homebuilding industry over the past two years and, if it continues, it could adversely affect land development activities at our Land Division.
          For the past two years, the homebuilding industry has experienced a significant decline in demand for new homes and a significant oversupply of lots and homes available for sale. The trends in the homebuilding industry continue to be unfavorable. Demand has slowed, as evidenced by fewer new orders and lower conversion rates, which has been exacerbated by increasing cancellation rates. The combination of the lower demand and higher inventories affects the amount of land that we are able to develop and sell in the future, as well as the prices at which we are able to sell the land. We cannot predict how long demand and other factors in the homebuilding industry will remain unfavorable, how active the market will be during the coming periods and how these factors will affect our Land Division. A substantial downturn or a further deterioration in the homebuilding industry will have an adverse effect on our results of operations and financial condition.
Because real estate investments are illiquid, a decline in the real estate market or in the economy in general could adversely impact our business and our cash flow.
          Real estate investments are generally illiquid. Companies that invest in real estate have a limited ability to vary their portfolio of real estate investments in response to changes in economic and other conditions. In addition, the market value of any or all of our properties or investments may decrease in the future. Moreover, we may not be able to timely dispose of an investment when we find dispositions advantageous or necessary, or complete the disposition of properties under contract to be sold, and any such dispositions may not provide proceeds in excess of the amount of our investment in the property or even in excess of the amount of any indebtedness secured by the property. Our inventory of real estate was $227.3 million at December 31, 2007. These land holdings subject us to a greater risk from declines in real estate values in our markets and are susceptible to impairment write-downs in the current real estate environment. Declines in real estate values or in the economy generally could have a material adverse impact on our financial condition and results of operations.

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Natural disasters could have an adverse effect on our real estate operations.
          The Florida and South Carolina markets in which we operate are subject to the risks of natural disasters such as hurricanes and tropical storms. These natural disasters could have a material adverse effect on our business by causing the incurrence of uninsured losses, increased homebuyer insurance rates, delays in construction, and shortages and increased costs of labor and building materials.
          In addition to property damage, hurricanes may cause disruptions to our business operations. Approaching storms may require that operations be suspended in favor of storm preparation activities. After a storm has passed, construction-related resources such as sub-contracted labor and building materials are likely to be redeployed to hurricane recovery efforts. Governmental permitting and inspection activities may similarly be focused primarily on returning displaced residents to homes damaged by the storms rather than on new construction activity. Depending on the severity of the damage caused by the storms, disruptions such as these could last for several months.
A portion of our revenues from land sales in our master-planned communities are recognized for accounting purposes under the percentage of completion method, therefore, if our actual results differ from our assumptions, our profitability may be reduced.
          Under the percentage of completion method of accounting for recognizing revenue, we record revenue and cost of sales as work on the project progresses based on the percentage of actual work incurred compared to the total estimated costs. This method relies on estimates of total expected project costs. Revenue and cost estimates are reviewed and revised periodically as the work progresses. Adjustments are reflected in sales of real estate and cost of sales in the period when such estimates are revised. Variation of actual results compared to our estimated costs in these large master-planned communities could cause material changes to our net margins.
Product liability litigation and claims that arise in the ordinary course of business may be costly which could adversely affect our business.
          Our commercial development business is subject to construction defect and product liability claims arising in the ordinary course of business. These claims are common in the commercial real estate industries and can be costly. We have, and many of our subcontractors have, general liability, property, errors and omissions, workers compensation and other business insurance. However, these insurance policies only protect us against a portion of our risk of loss from claims. In addition, because of the uncertainties inherent in these matters, we cannot provide reasonable assurance that our insurance coverage or our subcontractor arrangements will be adequate to address all warranty, construction defect and liability claims in the future. In addition, the costs of insuring against construction defect and product liability claims, if applicable, are high and the amount of coverage offered by insurance companies is also currently limited. There can be no assurance that this coverage will not be further restricted and become more costly. If we are not able to obtain adequate insurance against these claims, we may experience losses that could negatively impact our operating results.
We are subject to governmental regulations that may limit our operations, increase our expenses or subject us to liability.
          We are subject to laws, ordinances and regulations of various federal, state and local governmental entities and agencies concerning, among other things:
    environmental matters, including the presence of hazardous or toxic substances;
 
    wetland preservation;
 
    health and safety;
 
    zoning, land use and other entitlements;
 
    building design, and
 
    density levels.

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          In developing a project and building commercial properties, we may be required to obtain the approval of numerous governmental authorities regulating matters such as:
    installation of utility services such as gas, electric, water and waste disposal;
 
    the dedication of acreage for open space, parks and schools;
 
    permitted land uses, and
 
    the construction design, methods and materials used.
          These laws or regulations could, among other things:
    establish building moratoriums;
 
    limit the number of commercial properties that may be built;
 
    change building codes and construction requirements affecting property under construction;
 
    increase the cost of development and construction, and
 
    delay development and construction.
          We may also, at times, not be in compliance with all regulatory requirements. If we are not in compliance with regulatory requirements, we may be subject to penalties or we may be forced to incur significant expenses to cure any noncompliance. In addition, some of our land and some of the land that we may acquire have not yet received planning approvals or entitlements necessary for planned or future development. Failure to obtain entitlements necessary for further development of this land on a timely basis or to the extent desired may adversely affect our future results.
          Several governmental authorities have also imposed impact fees as a means of defraying the cost of providing governmental services to developing areas, and many of these fees have increased significantly during recent years.
Building moratoriums and changes in governmental regulations may subject us to delays or increased costs of construction or prohibit development of our properties
          We may be subject to delays or may be precluded from developing in certain communities because of building moratoriums or changes in statutes or rules that could be imposed in the future. The State of Florida and various counties have, in the past, and may, in the future, continue to declare moratoriums on the issuance of building permits and impose restrictions in areas where the infrastructure, such as roads, schools, parks, water and sewage treatment facilities and other public facilities, do not reach minimum standards. Additionally, certain counties in Florida, including counties where we are developing projects, have enacted more stringent building codes which have resulted in increased costs of construction. As a consequence, we may incur significant expenses in connection with complying with new regulatory requirements that we may not be able to pass on to buyers.
We are subject to environmental laws and the cost of compliance could adversely affect our business.
          As a current or previous owner or operator of real property, we may be liable under federal, state, and local environmental laws, ordinances and regulations for the costs of removal or remediation of hazardous or toxic substances on, under or in the property. These laws often impose liability whether or not we knew of, or were responsible for, the presence of such hazardous or toxic substances. The cost of investigating, remediating or removing such hazardous or toxic substances may be substantial. The presence of any such substance, or the failure promptly to remediate any such substance, may adversely affect our ability to sell or lease the property, to use the property for our intended purpose, or to borrow funds using the property as collateral.
Increased insurance risk could negatively affect our business.
          Insurance and surety companies may take actions that could negatively affect our business, including increasing insurance premiums, requiring higher self-insured retentions and deductibles, requiring additional collateral or covenants on surety bonds, reducing limits, restricting coverages, imposing exclusions, and refusing to

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underwrite certain risks and classes of business. Any of these actions may adversely affect our ability to obtain appropriate insurance coverage at reasonable costs which could have a material adverse effect on our business.
We utilize community development district and special assessment district bonds to fund development costs and we will be responsible for assessments until the underlying property is sold.
          We establish community development district and special assessment district bonds to access tax-exempt bond financing to fund infrastructure development at our master-planned communities. We are responsible for any assessed amounts until the underlying property is sold. We will continue to be responsible for the annual assessments if the property is never sold. Accordingly, if recent negative trends in the homebuilding industry do not improve, and we are forced to hold our land inventory longer than originally projected, we would be forced to pay a higher portion of annual assessments on property which is subject to assessments. We could be required to pay down a portion of the bonds in the event our entitlements were to decrease as to the number of residential units and/or commercial space that can be built on a parcel(s) encumbered by the bonds. In addition, Core Communities has guaranteed payments for assessments under the district bonds in Tradition, Florida which would require funding if future assessments to be allocated to property owners are insufficient to repay the bonds.
          The availability of tax-exempt bond financing to fund infrastructure development at our master-planned communities may be affected by recent disruptions in credit markets, including the municipal bond market, by general economic conditions and by fluctuations in the real estate market. If we are not able to access this type of financing, we would be forced to obtain substitute financing, which may not be available on terms favorable to the Company, or at all. If we are not able to obtain financing for infrastructure development Core would be forced to use our own funds or delay development activity at the master-planned communities.
RISKS ASSOCIATED WITH LEVITT AND SONS’ BANKRUPTCY FILING
We cannot predict the effect that the Chapter 11 Cases will have on Levitt and Sons’ business and creditors or on Levitt Corporation
          There is no assurance that Levitt and Sons will be able to develop, prosecute, confirm and consummate the Plan and that the Plan will be accepted. Third parties may seek and obtain Bankruptcy Court approval to propose and confirm the Plan. As a result, there is no assurance that the creditors will not seek to assert claims against Levitt Corporation or any of its subsidiaries other than Levitt and Sons, whether or not such claims have any merit and the risk that Levitt Corporation’s or any such subsidiary’s assets become subject to or included in Levitt and Sons’ bankruptcy case. In addition, Levitt Corporation files a consolidated federal income tax return, which means that the taxable income or tax losses of Levitt and Sons were included in the Company’s federal income tax return. At December 31, 2007, Levitt Corporation had a federal income tax receivable of $27.4 million as a result of losses incurred, which is anticipated to be collected upon filing the 2007 consolidated U.S. federal income tax return. The Creditors’ Committee of the Chapter 11 Cases has advised that they believe that the creditors are entitled to share in an unstated amount of the refund. At this time, it is not possible to predict the effect that the Chapter 11 Cases will have on Levitt Corporation or whether it will adversely affect our results of operations and financial condition.
Levitt and Sons’ bankruptcy and the publicity surrounding its filing may adversely affect Levitt Corporation and its subsidiaries other than Levitt and Sons.
          The businesses and relationships we had at Levitt and Sons may also be relationships we have at our other subsidiaries. These relationships could be affected by the Chapter 11 Cases of Levitt and Sons and it could materially affect our ability to conduct business with customers, suppliers and employees in the future.
Levitt and Sons had surety bonds on most of their projects, some of which were subject to indemnity by Levitt Corporation.
          Levitt and Sons had $33.3 million in surety bonds relating to its ongoing projects at the time of the filing of the Chapter 11 Cases. In the event that these obligations are drawn and paid by the surety, Levitt Corporation could

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be responsible for up to $12.0 million plus costs and expenses in accordance with the surety indemnity agreement for these instruments. As of December 31, 2007, we recorded $1.8 million in surety bonds accrual at Levitt Corporation related to certain bonds where management considers it probable that the Company will be required to reimburse the surety under the indemnity agreement. It is unclear, given the uncertainty involved in the Chapter 11 Cases, whether and to what extent the outstanding surety bonds of Levitt and Sons will be drawn and the extent to which Levitt Corporation may be responsible for additional amounts beyond this accrual. It is unlikely that Levitt Corporation would have the ability to receive any repayment, assets or other consideration as recovery of any amount it is required to pay. If losses on additional surety bonds are identified, we will need to take additional charges associated with Levitt Corporation’s exposure under our indemnities, and this may have a material adverse effect on our results of operations and financial condition.
Levitt Corporation’s outstanding advances due from Levitt and Sons may not be repaid.
          Levitt Corporation has deconsolidated Levitt and Sons from its consolidated financial statements and reflects Levitt and Sons as a cost method investment as of December 31, 2007. At the time of deconsolidation, November 9, 2007, Levitt Corporation had a negative investment in Levitt and Sons of $123.0 million and there were outstanding advances due from Levitt and Sons of $67.8 million at Levitt Corporation, resulting in a net negative investment of $55.2 million. Since the Chapter 11 Cases were filed, Levitt Corporation has also incurred certain administrative costs in the amount of $1.4 million related to Post Petition Services. The payment by Levitt and Sons of its outstanding advances and the Post Petition Services expenses are subject to the risks inherent to creditors in the Chapter 11 Cases. Levitt and Sons may not have sufficient assets to repay Levitt Corporation for advances made to Levitt and Sons or the Post Petition Services and it is likely that some, if not all, of these amounts will not be recovered.
RISKS RELATING TO OUR COMPANY
Our outstanding debt instruments impose restrictions on our operations and activities and could adversely affect our financial condition
          At December 31, 2007, our consolidated debt was approximately $274.8 million of which $137.1 million relates to the Land Division. Debt associated with assets held for sale was $79.0 million. Certain loans which provide the primary financing for Tradition, Florida and Tradition Hilton Head have an annual appraisal and re-margining requirement. These provisions may require Core Communities, in circumstances where the value of its real estate securing these loans declines, to pay down a portion of the principal amount of the loan to bring the loan within specified minimum loan-to-value ratios. Accordingly, should land prices decline, reappraisals could result in significant future re-margining payments. In addition, all of our outstanding debt instruments require us to comply with certain financial covenants. Further, one of our debt instruments contains cross-default provisions, which could cause a default in this debt instrument if we default on other debt instruments. If we fail to comply with any of these restrictions or covenants, the holders of the applicable debt could cause our debt to become due and payable prior to maturity. These accelerations or significant re-margining payments could require us to dedicate a substantial portion of our cash and cash flow from operations to payment of or on our debt and reduce our ability to use our cash for other purposes.
          Certain of our borrowings require us to repay specified amounts upon a sale of a portion of the property securing the debt. The borrowings may require additional principal payments in the event that the timing and the amount of sales are below those agreed to at the inception of the borrowing. Our anticipated minimum debt payment obligations in 2008 total approximately $12.2 million, of which $8.9 million relates to assets held for sale. These amounts do not include any amounts due upon a sale of the collateral, amounts due as a result of sales below expectations or re-margining payments that could be required in the event that property serving as collateral becomes impaired. Core is subject to provisions in its borrowing agreement that require additional principal payments, known as curtailment payments, in the event that sales, within a specific timeframe, are below those agreed to at the inception of the borrowing. In the event that agreed upon sales targets are not met in Tradition Hilton Head, total curtailment payments during 2008 could amount to $34.2 million. In January 2008, a $14.9 million curtailment payment was paid and an additional $19.3 million would be due in June 2008 if actual sales continue to be below the contractual requirements of the development loan. Unfavorable current trends in the

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homebuilding industry could result in us holding property longer than projected which would increase the likelihood that sales of property would be below levels required by our lenders.
          Our business may not generate sufficient cash flow from operations, and future borrowings may not be available under our existing credit facilities or any other financing sources in an amount sufficient to enable us to service our indebtedness, or to fund our other liquidity needs. We may need to refinance all or a portion of our debt on or before maturity, which we may not be able to do on favorable terms or at all. Recent disruptions in the credit and capital markets could make it more difficult for us to obtain future financing.
          Our ability to meet our debt service and other obligations, to refinance our indebtedness or to fund planned capital expenditures will depend upon our future performance. We are engaged in businesses that are substantially affected by changes in economic cycles. Our revenues and earnings vary with the level of general economic activity in the real estate market and are, therefore, subject to many factors outside of our control. See risk factor below entitled “Our results may vary.”
Our current land development plans may require additional capital, which may not be available on favorable terms, if at all.
          We may need to obtain additional financing as we fund our current land development projects and pursue new investments. These funds may be obtained through public or private debt or equity financings, additional bank borrowings or from strategic alliances. We may not be successful in obtaining additional funds in a timely manner, on favorable terms or at all, especially in light of the current adverse conditions in the capital and credit markets and the adverse conditions in municipal bond markets which impact our ability to access tax-exempt bond financing. Moreover, certain of our bank financing agreements contain provisions that limit the type and amount of debt we may incur in the future without our lenders’ consent. If we do not have access to additional capital, we may be required to delay, scale back or abandon some or all of our land development activities and we may not be able to pursue new investments. In addition, we may need to reduce capital expenditures and the size of our operations. There is no assurance that we will have sufficient funds to continue to develop our master-planned communities or pursue new investments as currently contemplated without additional financing or equity investment.
Our results may vary.
          We historically have experienced, and expect to continue to experience, variability in operating results on a quarterly basis and from year to year. Factors expected to contribute to this variability include:
    the cyclical nature of the real estate industry,
 
    prevailing interest rates and the availability of mortgage financing,
 
    weather,
 
    cost and availability of materials and labor,
 
    competitive conditions,
 
    timing of sales of land,
 
    the timing of receipt of regulatory and other governmental approvals for land development projects, and
 
    the timing of the sale of our commercial leasing operations.
Margins in our Land Division are subject to significant volatility.
          Due to the nature and size of our individual land transactions, our Land Division results are subject to significant volatility. Historically, land sale revenues have been sporadic and have fluctuated dramatically and margins on land sales and the many factors which impact the margin may not remain at the current levels given the current downturn in the real estate markets where we own properties. Margins will fluctuate based upon changing sales prices and costs attributable to the land sold. Recent declines in the value of residential land, especially in Florida where Core’s Tradition, Florida community is located, could significantly adversely impact our margins. If the real estate markets deteriorate further or if the current downturn is prolonged, we may not be able to sell land at prices above our carrying cost or even in amounts necessary to repay our indebtedness. In addition to the impact of

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economic and market factors, the sales price and margin of land sold varies depending upon: the location; the parcel size; whether the parcel is sold as raw land, partially developed land or individually developed lots; the degree to which the land is entitled; and whether the designated use of land is residential or commercial.
          In addition, our ability to realize margins may be affected by circumstances beyond our control, including:
    shortages or increases in prices of construction materials;
 
    natural disasters in the areas in which we operate;
 
    lack of availability of adequate utility infrastructure and services; and
 
    our need to rely on local subcontractors who may not be adequately capitalized or insured.
          Any of these circumstances could give rise to delays in the start or completion of, or increase the cost of, developing our master-planned communities. We compete with other real estate developers, both regionally and nationally, for labor as well as raw materials, and the competition for materials has recently become global. Increased costs in labor and materials could cause increases in construction costs. In addition, the cost of sales of real estate is dependent upon the original cost of the land acquired, the timing of the acquisition of the land, and the amount of land development, interest and real estate tax costs capitalized to the particular land parcel during active development. Future margins will continue to vary based on these and other market factors.
When commercial leasing projects become available for sale, they may not yield anticipated returns, which could harm our operating results, reduce cash flow, or cause management to choose not to sell certain commercial assets.
          A component of our business strategy is the development of commercial properties and assets for sale. These developments may not be as successful as expected due to the commercial leasing related risks discussed below, as well as the risks associated with real estate development generally, and the timeline involved in development and leasing.
          Development of commercial projects involve the risk of the significant time lag between commencement and completion of the project which subjects us to greater risks due to fluctuation in the general economy, failure or inability to obtain construction or permanent financing on favorable terms, inability to achieve projected rental rates, anticipated space that we will be able to lease new tenants, higher than estimated construction costs, including labor and material costs, and possible delay in completion of the project because of a number of factors, including weather, labor disruptions, construction delays or delays in receipt of zoning or other regulatory approvals, or man-made or natural disasters.
          Significant changes in economic conditions could adversely affect prospective tenants and our ability to lease newly developed properties and could result in our being forced to hold these properties for a longer period of time.
We are dependent upon certain key tenants and decisions made by these tenants or adverse developments in the business of these tenants could have a negative impact on our financial condition.
          We own commercial real estate centers which are supported by “anchor” tenants which, due to size, reputation or other factors, are particularly responsible for drawing other tenants and shoppers to our centers in certain cases. We are subject to the risk that certain of these anchor tenants may be unable to make their lease payments or may decline to extend a lease upon its expiration.
          In addition, an anchor tenant may decide that a particular store is unprofitable and close its operations, and, while the tenant may continue to make rental payments, its failure to occupy its premises could have an adverse effect on the property. A lease termination by an anchor tenant or a failure by that anchor tenant to occupy the premises could result in lease terminations or reductions in rent by other tenants in the same shopping center. Vacated anchor tenant space also tends to adversely affect the entire shopping center because of the loss of the departed anchor tenant’s power to draw customers to the center. We may not be able to quickly re-lease vacant

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space on favorable terms, if at all. Any of these developments could adversely affect our financial condition or results of operations.
It may be difficult and costly to rent vacant space and space which may become vacant in future periods.
          Our goal is to improve the performance of our properties by leasing available space and re-leasing vacated space. However, we may not be able to maintain our overall occupancy levels. Our ability to continue to lease or re-lease vacant space in our commercial properties will be affected by many factors, including our properties’ locations, current market conditions and the provisions of the leases we enter into with the tenants at our properties. In fact, many of the factors which could cause our current tenants to vacate their space could also make it more difficult for us to release that space. The failure to lease or to re-lease vacant space on satisfactory terms could harm our operating results.
          If we are able to re-lease vacated space, there is no assurance that rental rates will be equal to or in excess of current rental rates. In addition, we may incur substantial costs in obtaining new tenants, including brokerage commission fees paid by us in connection with new leases or lease renewals, and the cost of making leasehold improvements.
The loss of the services of our key management and personnel could adversely affect our business
          Our ability to successfully implement our business strategy will depend on our ability to attract and retain experienced and knowledgeable management and other professional staff. We currently have an Acting Chief Financial Officer and are in the process of seeking to recruit a permanent replacement. There is no assurance that we will be successful in attracting and retaining an experienced and knowledgeable Chief Financial Officer or other key management personnel.
Our future acquisitions may reduce our earnings, require us to obtain additional financing and expose us to additional risks.
          Our business strategy includes investing in and acquiring diverse operating companies and some of these investments and acquisitions may be material. While we will seek investments and acquisitions primarily in companies that provide opportunities for growth with seasoned and experienced management teams, we may not be successful in identifying these opportunities. Further, investments or acquisitions that we do complete may not prove to be successful. Acquisitions may expose us to additional risks and may have a material adverse effect on our results of operations and may:
    fail to accomplish our strategic objectives;
 
    not perform as expected; and/or
 
    expose us to the risks of the business that we acquire.
          In addition, we will likely face competition in making investments or acquisitions which could increase the costs associated with the investment or acquisition. Our investments or acquisitions could initially reduce our per share earnings and add significant amortization expense or intangible asset charges. Since our acquisition strategy involves holding investments for the foreseeable future and because we do not expect to generate significant excess cash flow from operations, we may rely on additional debt or equity financing to implement our acquisition strategy. The issuance of debt will result in additional leverage which could limit our operating flexibility, and the issuance of equity could result in additional dilution to our then-current shareholders. In addition, such financing could consist of equity securities which have rights, preferences or privileges senior to our Class A common stock. If we do require additional financing in the future, there is no assurance that it will be available on favorable terms, if at all. If we fail to obtain the required financing, we would be required to curtail or delay our acquisition plans or to liquidate certain of our assets. Additionally, we do not intend to seek shareholder approval of any investments or acquisitions unless required by law or regulation.

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Our controlling shareholders have the voting power to control the outcome of any shareholder vote, except in limited circumstances.
          As of December 31, 2007, BFC Financial Corporation (“BFC”) owned 1,219,031 shares of our Class B common stock, which represented all of our issued and outstanding Class B common stock, and 18,676,955 shares, or approximately 19.7%, of our issued and outstanding Class A common stock. In the aggregate these shares represent approximately 20.7% of our total equity and, excluding the 6,145,582 shares of our Class A common stock that BFC has agreed, subject to certain exceptions, not to vote in accordance with the Letter Agreement described in Item 8. — Financial Statements — Note 16, these shares represent approximately 54.0% of our total voting power. Since the Class A common stock and Class B common stock vote as a single group on most matters, BFC is in a position to control our company and elect a majority of our Board of Directors. Additionally, Alan B. Levan, our Chairman and Chief Executive Officer, and John E. Abdo, our Vice Chairman, beneficially own approximately 22.6% and 14.0% of the shares of BFC, respectively. Collectively, these shares represent approximately 73.2% of BFC’s total voting power. As a consequence, Alan B. Levan and John E. Abdo effectively have the voting power to control the outcome of any shareholder vote of Levitt Corporation, except in those limited circumstances where Florida law mandates that the holders of our Class A common stock vote as a separate class. BFC’s interests may conflict with the interests of our other shareholders.
RISKS ASSOCIATED WITH OUR OWNERSHIP STAKE IN BLUEGREEN CORPORATION
          We own approximately 31% of the outstanding common stock of Bluegreen Corporation, a publicly-traded corporation whose common stock is listed on the New York Stock Exchange under the symbol “BXG”. Although traded on the New York Stock Exchange, our shares of Bluegreen’s common stock may be deemed restricted stock, which would limit our ability to liquidate our investment if we chose to do so. While we have made a significant investment in Bluegreen Corporation, we do not expect to receive any dividends from the company for the foreseeable future.
          For the year ended December 31, 2007, our earnings from our investment in Bluegreen were $10.3 million, compared to $9.7 million in 2006, and $12.7 million in 2005. At December 31, 2007, the book value of our investment in Bluegreen was $116.0 million. A significant portion of our earnings and book value are dependent upon Bluegreen’s ability to continue to generate earnings and maintain its market value. Further, declines in the market value of Bluegreen’s shares or other events that could impair the value of our holdings would have an adverse impact on the value of our investment. We review our investment in Bluegreen for impairment on an annual basis or as events or circumstances warrant for other than temporary declines in value. Bluegreen recently announced its intention to pursue a rights offering to its shareholders of up to $100 million of its common stock and we currently intend to participate in the rights offering. We refer you to the public reports filed by Bluegreen with the Securities and Exchange Commission for information regarding Bluegreen.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
None

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ITEM 2. PROPERTIES
     The principal and executive offices of the Company are located at 2100 West Cypress Creek Road, Fort Lauderdale, Florida, 33309. The Company also maintains offices at 4150 SW 28th Way, Fort Lauderdale, Florida 33312, which it leases from BankAtlantic.
     The following table sets forth BankAtlantic owned and leased stores by region at December 31, 2007:
                                         
    Miami -           Palm   Tampa   Orlando /
    Dade   Broward   Beach   Bay   Jacksonville
Owned full-service stores
    9       12       25       7       2  
Leased full-service stores
    13       11       5       8       1  
Ground leased full-service stores (1)
    2       3       1       3       1  
 
                                       
Total full-service stores
    24       26       31       18       4  
 
                                       
 
                                       
Lease expiration dates
    2008-2026       2008-2015       2008-2012       2008-2026       2014  
 
                                       
Ground lease expiration dates
    2026-2027       2017-2072       2026       2026       2027  
 
                                       
 
(1)   Stores in which BankAtlantic owns the building and leases the land.
     The following table sets forth BankAtlantic’s leased drive-through facilities and leased loan production offices by region at December 31, 2007:
                                         
    Miami -           Palm   Tampa   Orlando /
    Dade   Broward   Beach   Bay   Jacksonville
Leased drive-through facilities
    1       2                    
 
                                       
Leased drive through expiration dates
    2010       2011-2014                    
 
                                       
Leased back-office facilities
          3             1       1  
 
                                       
Leased back-office expiration dates
          2009-2011             2011       2013  
 
                                       
Leased loan production facilities
    1                   1       2  
 
                                       
Leased loan production expiration dates
    2009                   2009       2009-2011  
 
                                       
     As of December 31, 2007, BankAtlantic had executed 16 operating leases for store expansion. Due to management’s decision to slow store expansion, BankAtlantic is currently seeking to sublease or terminate 12 of these operating leases. BankAtlantic has entered into an agreement with an unrelated financial institution for the sale of its Orlando stores, and is attempting to sell land originally acquired for store expansion. The following table sets forth BankAtlantic’s executed ground leases for store expansion or held for sublease as of December 31, 2007:
                                         
    Miami -           Palm   Tampa   Orlando /
    Dade   Broward   Beach   Bay   Jacksonville
Executed leases for expansion
    1       1             2        
 
                                       
Executed lease expiration dates
    2017       2029             2027-2028        
 
                                       
Executed leases held for sublease
          2       1       3       6  
 
                                       
Executed lease expiration dates
          2012-2029       2028       2027-2048       2027-2029  
 
                                       
Land held for sale
                1       1       6  
 
                                       
     Levitt owns their principal and executive offices which are located at their Corporate Headquarters at 2200 West Cypress Creek Road, Fort Lauderdale, Florida 33309. In 2008, Levitt is planning to seek to lease to third parties the space in their executive offices and relocate to smaller space due to the number of employees that they have remaining at their facility. Core Communities owns their executive office building in Port St. Lucie, Florida. Levitt also has various month to month leases on the trailers that they occupy in Tradition Hilton Head. In addition to Levitt’s properties used for offices, they additionally own commercial space in Florida that is leased to third parties. Because of the nature of Levitt’s real estate operations, significant amounts of property are held as inventory and property and equipment in the ordinary course of their business.

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ITEM 3. LEGAL PROCEEDINGS
Joseph C. Hubbard, individually and on behalf of all others similarly situated, vs. BankAtlantic Bancorp, Inc., James A. White, Valerie C. Toalson, Jarett S. Levan, and Alan B. Levan, No. 0:07-cv-61542-UU, United States District Court, Southern District of Florida
On October 29, 2007, Joseph C. Hubbard filed a purported class action in the United States District Court for the Southern District of Florida against BankAtlantic Bancorp and four of its current or former officers. The Complaint alleges that during the purported class period of November 9, 2005 through October 25, 2007, BankAtlantic Bancorp and the named officers knowingly and/or recklessly made misrepresentations of material fact regarding BankAtlantic and specifically BankAtlantic’s loan portfolio and allowance for loan losses. The Complaint seeks to assert claims for violations of the Exchange Act and Rule 10b-5 promulgated thereunder and seeks unspecified damages. On December 12, 2007, the Court consolidated a separately filed action captioned Alarm Specialties, Inc. v. BankAtlantic Bancorp, Inc., No. 0:07—cv-61623-WPD that attempted to assert similar claims on behalf of the same class into Hubbard. On February 5, 2008, the Court appointed State-Boston Retirement System lead plaintiff and Lubaton Sucharow LLP to serve as lead counsel pursuant to the provisions of the Private Securities Litigation Reform Act. BankAtlantic Bancorp management has stated that it believes the claims to be without merit and intends to vigorously defend the actions.
Separately, BankAtlantic Bancorp has received shareholder demands for an independent investigation and a derivative lawsuit to be brought on behalf of BankAtlantic Bancorp against those individuals determined to be responsible for substantially the same improper and illegal actions as are alleged in the Complaint. BankAtlantic Bancorp believes the claims to be without merit and intends to vigorously defend the Hubbard actions.
Wilmine Almonor, individually and on behalf of all others similarly situated, vs. BankAtlantic Bancorp, Inc., Steven M. Coldren, Mary E. Ginestra, Willis N. Holcombe, Jarett S. Levan, John E. Abdo, David A. Lieberman, Charlie C. Winningham II, D. Keith Cobb, Bruno L. DiGiulian, Alan B. Levan, James A. White, the Security Plus Plan Committee, and Unknown Fiduciary Defendants 1-50, No. 0:07-cv-61862-DMM, United States District Court, Southern District of Florida.
On December 20, 2007, Wilmine Almonor filed a purported class action in the United States District Court for the Southern District of Florida against BankAtlantic and the above-listed officers, directors, employees, and organizations. The Complaint alleges that during the purported class period of November 9, 2005 to present, BankAtlantic and the individual defendants violated the Employment Retirement Income Security Act (“ERISA”) by permitting company employees to choose to invest in BankAtlantic Bancorp’s Class A common stock in light of the facts alleged in the Hubbard securities lawsuit. The Complaint seeks to assert claims for breach of fiduciary duties, the duty to provide accurate information and the duty to avoid conflicts of interest under ERISA and seeks unspecified damages. BankAtlantic Bancorp believes the claims to be without merit and intends to vigorously defend the actions.
Levitt and Sons Bankruptcy
On November 9, 2007, Levitt and Sons and substantially all of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Florida.
It is not possible to predict the impact that the Chapter 11 Cases will have on Levitt and Sons’ business and creditors or on Levitt Corporation. See Item 1. — Business in Real Estate Development Recent Developments — Bankruptcy of Levitt and Sons.
Dance v Levitt Corp. et al., No. 08-CV-60111-DLG, United States District Court, Southern District of Florida
On January 25, 2008, plaintiff Robert D. Dance filed a purported class action complaint as a putative purchaser of our securities against us and certain of our officers and directors, asserting claims under the federal securities law and seeking damages. This action was filed in the United States District Court for the Southern District of Florida

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and is captioned Dance v. Levitt Corp. et al., No. 08-CV-60111-DLG. This complaint purports to be brought on behalf of all purchasers of our securities beginning on January 31, 2007 and ending on August 14, 2007. The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder by issuing a series of false and/or misleading statements concerning our financial results, prospects and condition. We intend to vigorously defend this action.
Other Litigation
In the ordinary course of business, the Company and its subsidiaries are also parties to lawsuits as plaintiff or defendant involving its bank operations, lending, tax certificates activities and real estate development activities. Although it is believed that there are meritorious defenses in all pending legal actions, the outcome of legal actions is uncertain. Management does not believe its results of operations or financial condition will be materially impacted by the resolution of matters which arise in the ordinary course of business.

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
     The Company held its Annual Meeting of Shareholders on November 19, 2007. At the meeting, the holders of the Company’s Class A and Class B Common Stock voting together as a single class elected the following two directors to a three year term by the following votes:
                 
Director
  For   Withheld
Alan B. Levan
    175,996,484       2,069,943  
Neil Sterling
    175,849,630       2,216,798  
     Also at the Annual Meeting of Shareholders, the holders of the Company’s Class A and Class B Common Stock voting together as a single class, as well as the holders of the Company’s Class B Common Stock voting separately, approved the merger of I.R.E. Realty Advisory Group, Inc. (“I.R.E. RAG”) with and into the Company by the following votes:
Vote of Class A and Class B Common Stock
                         
    Votes   Votes   Votes
    For   Against   Abstaining
I.R.E. RAG merger with and into the Company
    150,171,616       694,607       21,138  
Vote of Class B Common Stock
                         
    Votes   Votes   Votes
    For   Against   Abstaining
I.R.E. RAG merger with and into the Company
    126,412,361       93,427       3,991  

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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
     BFC’s Class A Common Stock and the Class B Common Stock have substantially identical terms except:
    Each share of Class A Common Stock is entitled to one vote for each share held, with all holders of Class A Common Stock possessing in the aggregate 22% of the total voting power. Holders of Class B Common Stock have the remaining 78% of the total voting power. If the number of shares of Class B Common Stock outstanding decreases to 1,800,000 shares, the Class A Common Stock aggregate voting power will change to 40% and the Class B Common Stock will have the remaining 60%. If the number of shares of Class B Common Stock outstanding decreases to 1,400,000 shares, the Class A Common Stock aggregate voting power will change to 53% and the Class B Common Stock will have the remaining 47%. If the number of shares of Class B Common Stock outstanding decreases to 500,000, the fixed voting percentages will be eliminated; and
 
    Each share of Class B Common Stock is convertible at the option of the holder thereof into one share of Class A Common Stock.
Market Information
     On June 20, 2006 the Company announced that its Class A Common Stock was approved for listing on NYSE Arca, Inc. (“NYSE Arca”) under the symbol “BFF” and, on June 22, 2006, the Company commenced trading on the NYSE Arca. From April 2003 through June 19, 2006, BFC’s Class A Common Stock was traded on the NASDAQ National Market. Our Class B Common Stock is quoted on the OTC Bulletin Board under the symbol “BFCFB.OB.”
     The following table sets forth, for the indicated periods, the high and low closing sale prices for our Class A Common Stock as reported by the NASDAQ National Market prior to June 22, 2006 and NYSE Arca on and after June 22, 2006 and for our Class B Common Stock as reported by the National Association of Securities Dealers Automated Quotation System. The stock prices do not include retail mark-ups, mark-downs or commissions and are adjusted for all stock splits and stock dividends.
                 
Class A Common Stock:   High   Low
2006
               
First Quarter
  $ 6.64     $ 5.35  
Second Quarter
    8.16       5.69  
Third Quarter
    7.10       4.35  
Fourth Quarter
    7.06       4.80  
 
               
2007
               
First Quarter
  $ 6.75     $ 4.31  
Second Quarter
    4.50       3.59  
Third Quarter
    4.04       2.22  
Fourth Quarter
    3.38       1.16  

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Class B Common Stock:   High   Low
2006
               
First Quarter
  $ 6.50     $ 5.25  
Second Quarter
    7.70       5.70  
Third Quarter
    8.25       5.00  
Fourth Quarter
    6.80       4.85  
 
               
2007
               
First Quarter
  $ 6.10     $ 5.00  
Second Quarter
    4.65       3.60  
Third Quarter
    3.50       2.25  
Fourth Quarter
    3.00       1.10  
Holders
     On March 3, 2008, there were approximately 3,620 holders of Class A Common Stock and approximately 740 holders of Class B Common Stock.
NYSE Arca Certification
     On November 21, 2007, the Company’s Chief Executive Officer submitted his Annual Section 5.3(m) Certification to the NYSE Arca. Pursuant to this filing, the Company’s Chief Executive Officer provided an unqualified certification that, as of the date of the certification, he was not aware of any violation by the Company of the Corporate Governance Listing Standards of the NYSE Arca. In addition, we have filed, as exhibits to this Annual Report on Form 10-K, the certifications of our principal executive officer, principal financial officer and principal accounting officer required under Sections 906 and 302 of the Sarbanes-Oxley Act of 2002 regarding the quality of our public disclosure.
Dividends
     While there are no restrictions on the payment of cash dividends by BFC, BFC has never paid cash dividends on its common stock.
     There are restrictions on the payment of dividends by BankAtlantic to BankAtlantic Bancorp and in certain circumstances on the payment of dividends by BankAtlantic Bancorp to holders of its common stock, including BFC. The primary source of funds for payment by BankAtlantic Bancorp of dividends to BFC is currently dividends received by BankAtlantic Bancorp from BankAtlantic, which is limited by applicable regulations. Subject to the results of operations and regulatory capital requirements, BankAtlantic Bancorp has indicated that it will seek to declare regular quarterly cash dividends on its common stock. The declaration and payment of dividends will depend upon, among other things, indenture restrictions, loan covenants, the results of operations, financial condition and cash requirements of BankAtlantic Bancorp and on the ability of BankAtlantic to pay dividends or otherwise advance funds to BankAtlantic Bancorp, which payments and distributions are subject to OTS approval and regulations and based upon BankAtlantic’s regulatory capital levels and net income.
     Levitt’s Board of Directors has not adopted a policy of regular dividend payments. The payment of dividends in the future is subject to approval by Levitt’s Board of Directors and will depend upon, among other factors, Levitt’s results of operations and financial condition. While Levitt declared one quarterly dividend in 2007, it is not anticipated that Levitt’s Board of Directors will declare cash dividends in the foreseeable future.

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Issuer Purchases of Equity Securities
     On October 21, 2006, the Company’s Board of Directors approved the repurchase of up to 1,750,000 shares of our Class A Common Stock through open market or private transactions at an aggregate cost of no more than $10 million. The timing and amount of repurchases, if any, will depend on market conditions, share price, trading volume and other factors, and there is no assurance that the Company will repurchase shares during any period. No termination date was set for the repurchase program. The shares purchased in this program will be retired. There were no repurchases of our equity securities during the years ended December 31, 2007 and 2006.
  Shareholder Return Performance Graph
     Set forth below is a graph comparing the cumulative total returns (assuming reinvestment of dividends) for the Class A Common Stock, DJ Wilshire 5000 Index and NASDAQ Bank Stocks and assumes $100 was invested on December 31, 2002.
                                                                 
 
        12/31/02     12/31/03     12/31/04     12/31/05     12/31/06     12/31/07  
 
BFC Financial Corporation
      100         343         499         263         321         73    
 
DJ Wilshire 5000 Index
      100         129         143         150         171         178    
 
Nasdaq Bank Index
      100         130         144         138         153         119    
 
 
(PERFORMANCE GRAPH)

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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
     The following table sets forth selected consolidated financial data as of and for the years ended December 31, 2003 through 2007. Certain selected financial data presented below is derived from our consolidated financial statements. This table is a summary and should be read in conjunction with the consolidated financial statements and related notes thereto which are included elsewhere in this report.
(Dollars in thousands, except for per share data, average price data, ratios, percentages, units and acres)
                                         
    For the Years Ended December 31,  
    2007     2006     2005     2004     2003  
Income Statement
                                       
Revenues
                                       
BFC Activities
  $ 6,109       3,682       3,129       5,683       1,073  
Financial Services
    520,793       507,746       445,537       358,703       320,534  
Real Estate Development
    426,955       581,371       574,601       558,838       288,686  
 
                             
 
    953,857       1,092,799       1,023,267       923,224       610,293  
 
                             
 
                                       
Costs and Expenses
                                       
BFC Activities
    15,015       12,370       9,665       7,452       7,019  
Financial Services
    579,458       474,311       381,916       280,431       275,507  
Real Estate Development
    696,058       604,841       498,283       481,618       253,169  
 
                             
 
    1,290,531       1,091,522       889,864       769,501       535,695  
 
                             
 
                                       
Equity in earnings from unconsolidated affiliates
    12,724       10,935       13,404       19,603       10,126  
 
                             
(Loss) income from continuing operations
    (323,950 )     12,212       146,807       173,326       84,724  
(Benefit) provision for income taxes
    (70,246 )     (515 )     59,672       70,920       36,466  
Noncontrolling interest
    (219,603 )     13,422       79,399       90,388       43,616  
 
                             
(Loss) income from continuing operations
    (34,101 )     (695 )     7,736       12,018       4,642  
(Loss) income from discontinued operations, net of noncontrolling interest and income taxes
    1,239       (1,526 )     5,038       2,212       2,380  
Extraordinary gain, net of income taxes
    2,403                          
 
                             
Net (loss) income
    (30,459 )     (2,221 )     12,774       14,230       7,022  
5% Preferred Stock dividends
    (750 )     (750 )     (750 )     (392 )      
 
                             
Net (loss) income allocable to common stock
  $ (31,209 )     (2,971 )     12,024       13,838       7,022  
 
                             
 
                                       
Common Share Data (a), (c), ( d)
                                       
Basic (loss) earnings per share:
                                       
Basic (loss) earnings per share from continuing operations
  $ (0.90 )     (0.04 )     0.24       0.48       0.21  
Discontinued operations
    0.03       (0.05 )     0.18       0.09       0.10  
Extraordinary items
    0.06                          
 
                             
Basic (loss) earnings per share of common stock
  $ (0.81 )     (0.09 )     0.42       0.57       0.31  
 
                             
 
                                       
Diluted (loss) earnings per share:
                                       
Diluted (loss) earnings per share from continuing operations
  $ (0.90 )     (0.05 )     0.22       0.40       0.16  
Discontinued operations
    0.03       (0.05 )     0.15       0.07       0.09  
Extraordinary items
    0.06                          
 
                             
Diluted (loss) earnings per share of common stock
  $ (0.81 )     (0.10 )     0.37       0.47       0.25  
 
                             
 
                                       
Basic weighted average number of common shares outstanding
    38,778       33,249       28,952       24,183       22,818  
Diluted weighted average number of common shares outstanding
    38,778       33,249       31,219       27,806       26,031  
Ratio of earnings to fixed charges (e)
                            0.28  
Dollar deficiency of earnings to fixed charges (e)
    5,618       5,196       5,248       4,145        
Continued

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Selected Consolidated Financial Data — continued
(Dollars in thousands, except for per share data, average price data, ratios, percentages, units and acres)
                                         
    December 31,  
    2007     2006     2005     2004     2003  
Balance Sheet (at period end)
                                       
Loans and leases and held for sale, net
  $ 4,529,538       4,603,505       4,628,744       4,561,073       3,611,612  
Securities
  $ 1,191,173       1,081,980       1,064,857       1,082,985       553,148  
Total assets
  $ 7,114,433       7,605,766       7,395,755       6,954,847       5,136,235  
Deposits
  $ 3,953,405       3,867,036       3,752,676       3,457,202       3,058,142  
Securities sold under agreements to repurchase and federal funds purchased
  $ 159,905       128,411       249,263       257,002       120,874  
Other borrowings (f)
  $ 1,992,718       2,398,662       2,121,315       2,083,109       1,209,571  
Shareholders’ equity
  $ 184,037       177,585       183,080       125,251       85,675  
Book value per share (d), (g)
  $ 3.73       4.84       5.25       4.25       3.68  
Return on average equity (b) (h)
    (16.94 )%     (1.24 )%     8.08 %     13.16 %     8.63 %
BankAtlantic Asset quality ratios
                                       
Non-performing assets, net of reserves as a percent of total loans, tax certificates and real estate owned
    4.10 %     0.55 %     0.17 %     0.19 %     0.36 %
Loan loss allowance as a percent of non-performing loans
    52.65 %     982.89 %     605.68 %     582.18 %     422.06 %
Loan loss allowance as a percentage of total loans
    2.04 %     0.94 %     0.88 %     1.00 %     1.24 %
Capital Ratios for BankAtlantic
                                       
Total risk based capital
    11.63 %     12.08 %     11.50 %     10.80 %     12.06 %
Tier I risk based capital
    9.85 %     10.50 %     10.02 %     9.19 %     10.22 %
Leverage
    6.94 %     7.55 %     7.42 %     6.83 %     8.52 %
Levitt Corporation
                                       
Consolidated:
                                       
Consolidated margin on sales of real estate (i)
  $ (163,126 )     83,125       150,030       143,378       73,627  
Consolidated Margin
    (39.8 )%     14.7 %     26.9 %     26.1 %     26.0 %
Homes delivered
    998       1,320       1,338       1,783       1,011  
Acres sold
    40       371       1,647       1,212       1,337  
Primary Homebuilding (m):
                                       
Revenues from sales of real estate
  $ 345,666       424,420       352,723       418,550       222,257  
Cost of sales of real estate (i)
    501,206       367,252       272,680       323,366       173,072  
 
                             
Margin (i)
  $ (155,540 )     57,168       80,043       95,184       49,185  
Margin percentage (j)
    -45.00 %     13.50 %     22.70 %     22.70 %     22.10 %
Construction starts
    558       1,445       1,212       1,893       1,593  
Homes delivered
    998       1,320       1,338       1,783       1,011  
Average selling price of homes delivered
  $ 338,000       322,000       264,000       235,000       220,000  
Net orders (units)
    383       847       1,289       1,378       2,240  
Net orders (value)
  $ 94,782       324,217       448,207       376,435       513,436  
Tennessee Homebuilding (m) :
                                       
Revenues from sales of real estate
  $ 42,042       76,299       85,644       53,746        
Cost of sales of real estate (i)
    51,360       72,807       74,328       47,731        
 
                             
Margin (i)
  $ (9,318 )     3,492       11,316       6,015        
Margin percentage (j)
    -22.20 %     4.60 %     13.20 %     11.20 %     %
Construction starts
    171       237       450       401        
Homes delivered
    146       340       451       343        
Average selling price of homes delivered
  $ 205,000       224,000       190,000       157,000        
Net orders (units)
    110       269       478       301        
Net orders (value)
  $ 20,621       57,776       98,838       51,481        
Land Division (l):
                                       
Revenues from sales of real estate
  $ 16,567       69,778       105,658       96,200       55,037  
Cost of sales of real estate
    7,447       42,662       50,706       42,838       31,362  
 
                             
Margin (i)
  $ 9,120       27,116       54,952       53,362       23,675  
Margin percentage (j)
    55.00 %     38.90 %     52.00 %     55.50 %     43.00 %
Acres sold
    40       371       1,647       1,212       1,337  
Inventory of real estate (acres) (k),
    6,679       6,871       7,287       5,965       6,837  
Inventory of real estate (book value)
  $ 189,903       176,356       150,686       122,056       43,906  
Acres subject to sales contracts — Third parties
    259       74       246       1,833       1,433  
Aggregate sales price of acres subject to sales contracts to third parties
  $ 77,888       21,124       39,283       121,095       103,174  
Continued

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(a)   Since its inception, BFC has not paid any cash dividends on its common stock.
 
(b)   Ratios were computed using quarterly averages.
 
(c)   While the Company has two classes of common stock outstanding, the two-class method is not presented because the Company’s capital structure does not provide for different dividend rates or other preferences, other than voting rights, between the two classes.
 
(d)   I.R.E. Realty Advisory Group, Inc.(“I.R.E. RAG”) owned 4,764,285 shares of BFC Class A Common Stock and 500,000 shares of BFC Class B Common Stock. Because the Company owned 45.5% of the outstanding common stock of I.R.E. RAG, 45.5% of the shares of BFC’s common stock previously held by I.R.E. RAG were eliminated from the number of shares outstanding for purposes of computing earnings (loss) per share and book value per share. In November 2007, I.R.E. RAG was merged with and into the Company. In connection with the merger, the shares of BFC’s common stock previously held by I.R.E. RAG were canceled and the shareholders of I.R.E. RAG, other than BFC, received an aggregate of approximately 2,601,300 shares of BFC Class A Common Stock and 273,000 shares of BFC Class B Common Stock, representing their respective pro rata beneficial ownership interests in I.R.E. RAG’s BFC shares. See Note 32 to our consolidated financial statements “Earnings (Loss) per Share.”
 
(e)   The operations, fixed charges and dividends of BankAtlantic Bancorp and Levitt are not included in the calculation because each of those subsidiaries are separate, publicly traded companies whose Board of Directors are comprised of individuals, a majority of whom are independent. Accordingly, decisions made by those Boards, including with respect to the payment of dividends, are not within our control.
 
(f)   Other borrowings consist of FHLB advances, subordinated debentures, notes, bonds payable, secured borrowings, and junior subordinated debentures. Secured borrowings were recognized on loan participation agreements that constituted a legal sale of a portion of the loan but that were not qualified to be accounted for as a loan sale.
 
(g)   Preferred stock redemption price is eliminated from shareholders’ equity for purposes of computing book value per share.
 
(h)   The return on average equity is equal to net income (loss) (numerator) divided by average consolidated shareholders’ equity (denominator) during the respective year.
 
(i)   Margin is calculated as sales of real estate minus cost of sales of real estate. Included in cost of sales of real estate for the years ended December 31, 2007 and 2006 are homebuilding inventory impairment charges and write-offs of deposits and pre-acquisition costs of $206.4 million and $31.1 million, respectively, in our Primary Homebuilding segment. In our Tennessee Homebuilding segment, impairment charges amounted to $11.2 million and $5.7 million in the years ended December 31, 2007 and 2006, respectively.
 
(j)   Margin percentage is calculated by dividing margin by sales of real estate.
 
(k)   Estimated net saleable acres (subject to final zoning, permitting, and other governmental regulations / approvals). Includes approximately 56 acres related to assets held for sale as of December 31, 2007.
 
(l)   Revenues and costs of sales of real estate include land sales to Levitt and Sons, if any. These inter-segment transactions are eliminated in consolidation. Included in total liabilities is a net receivable amount associated with intersegment loans. This amount eliminates fully in consolidation but has the effect of decreasing liabilities as shown on a stand alone basis. As of December 31, 2007, Levitt Other Operations had outstanding advances from Core Communities in the amount of $38.3 million which are generally subordinated to loans from third party lenders. These advances eliminate in consolidation.
 
(m)   Bowden Building Corporation was acquired in May 2004. Levitt had no homebuilding operations in Tennessee in 2003.

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BFC FINANCIAL CORPORATION
SELECTED PARENT COMPANY ONLY FINANCIAL DATA
(In thousand)
     The following table sets forth selected summary parent company only financial data.
                         
    December 31,  
    2007     2006     2005  
Balance Sheet Data:
                       
Assets
                       
Cash and cash equivalents
  $ 17,999       17,815       26,683  
Investment securities
    862       2,262       2,034  
Investment in Benihana
    20,000       20,000       20,000  
Investment in venture partnerships
    864       908       950  
Investment in BankAtlantic Bancorp, Inc.
    108,173       113,586       112,218  
Investment in Levitt Corporation
    54,637       57,009       58,111  
Investment in other subsidiaries
    1,578       1,525       1,631  
Loans receivable
    3,782       2,157       2,071  
Other assets
    906       2,261       960  
 
                 
Total assets
    208,801       217,523       224,658  
 
                 
Liabilities and Shareholders’ Equity
                       
Advances from and negative basis in wholly owned subsidiaries
    3,174       1,290       462  
Other liabilities
    7,722       7,351       7,417  
Deferred income taxes
    13,868       31,297       33,699  
 
                 
Total liabilities
    24,764       39,938       41,578  
 
                 
Total shareholders’ equity
    184,037       177,585       183,080  
 
                 
Total liabilities and shareholders’ equity
  $ 208,801       217,523       224,658  
 
                 
                         
    For the Years Ended December 31,  
    2007     2006     2005  
Statements of Operations Data:
                       
Revenues
  $ 3,977       2,232       1,775  
Expenses
    9,565       8,413       14,904  
 
                 
(Loss) before earnings (loss) from subsidiaries
    (5,588 )     (6,181 )     (13,129 )
Equity from earnings (loss) in BankAtlantic Bancorp
    (7,206 )     5,807       9,053  
Equity from earnings (loss) in Levitt
    (39,622 )     (1,519 )     9,151  
Equity from earnings (loss) in other subsidiaries
    (1,083 )     (658 )     6,671  
 
                 
(Loss) income before income taxes
    (53,499 )     (2,551 )     11,746  
(Benefit) provision for income taxes
    (19,398 )     (1,856 )     4,010  
 
                 
(Loss) income from continuing operations
    (34,101 )     (695 )     7,736  
Equity in subsidiaries’ discontinued operations, net of tax
    1,239       (1,526 )     5,038  
Extraordinary gain, net of tax
    2,403              
 
                 
Net (loss) income before preferred stock dividends
    (30,459 )     (2,221 )     12,774  
5% Preferred Stock dividends
    (750 )     (750 )     (750 )
 
                 
Net (loss) income
  $ (31,209 )     (2,971 )     12,024  
 
                 
 
                       
Statements of Cash Flow Data:
                       
Operating Activities:
                       
Net (loss) income
  $ (30,459 )     (2,221 )     12,774  
Other operating activities
    25,954       (820 )     (12,709 )
 
                 
Net cash (used in) provided by operating activities
    (4,505 )     (3,041 )     65  
Net cash used in investing activities
    (30,869 )     (923 )     (10,029 )
Net cash provided by (used in) financing activities
    35,558       (4,904 )     35,127  
 
                 
(Decrease) increase in cash and cash equivalents
    184       (8,868 )     25,163  
Cash at beginning of period
    17,815       26,683       1,520  
 
                 
Cash at end of period
  $ 17,999       17,815       26,683  
 
                 
     During the year ended December 31, 2005, expenses included the write-off of inter-company advances between our wholly-owned subsidiaries of approximately $6.6 million, and the equity from earnings in other subsidiaries included the earnings recognized by our wholly-owned subsidiaries in connection with this write-off. These inter-company advances were eliminated in consolidation.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
     BFC Financial Corporation (“BFC” or the “Company”) is a diversified holding company with investments in companies engaged in retail and commercial banking, master planned community development and time share and vacation ownership. The Company also owns an interest in a company which operates Asian-themed restaurant chains, as well as various real estate and venture capital investments. The Company’s principal holdings consist of direct controlling interests in BankAtlantic Bancorp, Inc. (“BankAtlantic Bancorp”) and Levitt Corporation (“Levitt”). Through its control of BankAtlantic Bancorp, BFC has indirect controlling interests in BankAtlantic and its subsidiaries (“BankAtlantic”). As a result of the Company’s position as the controlling stockholder of BankAtlantic Bancorp, the Company is a “unitary savings bank holding company” regulated by the Office of Thrift Supervision. Through its control of Levitt, BFC has an indirect controlling interest in Core Communities, LLC and its subsidiaries (“Core” or “Core Communities”) and an indirect non-controlling interest in Bluegreen Corporation (“Bluegreen”). BFC also holds a direct non-controlling investment in Benihana, Inc. (“Benihana”) and has a wholly-owned subsidiary, Cypress Creek Capital, Inc. (“CCC) which invests in existing commercial income producing properties.
     Historically, BFC’s business strategy has been to invest in and acquire businesses in diverse industries either directly or through controlled subsidiaries with the intent to hold the investments for the long term. Recently, BFC determined that the best potential for growth is likely through the growth of the companies it controls. Rather than actively making investments directly for BFC, the Company intends to provide overall support and guidance for its controlled subsidiaries with a focus on the improved performance of the organization as a whole. The Company is currently reviewing its operations with a view to aligning its staffing with its contemplated activities. Upon completion of the review, the Company may seek to transfer certain employees currently within the holding company or its wholly owned subsidiaries to controlled entities where management believes their services would provide potentially greater value to the overall organization.
     The Company’s primary activities presently relate to managing its current investments. As of December 31, 2007, BFC had total consolidated assets of approximately $7.1 billion, including the assets of its consolidated subsidiaries, noncontrolling interest of $559 million and shareholders’ equity of approximately $184 million. The Company operates through six reportable segments, BFC Activities, Financial Services and four segments within its Real Estate Development Division. The Financial Services segment includes the results of operations of BankAtlantic Bancorp. Our Real Estate Development Division includes Levitt’s results of operations and consists of four reportable segments — Primary Homebuilding, Tennessee Homebuilding, Land Division and Levitt Other Operations.
     As discussed in further detail throughout this report, on November 9, 2007, Levitt and Sons, LLC and substantially all of its subsidiaries (“Levitt and Sons”) filed voluntary petitions for relief under Chapter 11 of Tile 11 of the United States Code (the “Chapter 11 Cases”) in the United States Bankruptcy Court for the Southern District of Florida ( the” Bankruptcy Court”). Levitt and Sons results of operations were presented in two reportable segments within the Company’s real estate division, Primary Homebuilding and Tennessee Homebuilding. As a result of the loss of control associated with the Chapter 11 Cases and the uncertainties surrounding the nature, timing and specifics of the bankruptcy proceedings, Levitt Corporation deconsolidated Levitt and Sons as of November 9, 2007, eliminating all future operations of Levitt and Sons from its financial results. Levitt Corporation is prospectively accounting for any remaining investment in Levitt and Sons, net of outstanding advances due from Levitt and Sons, as a cost method investment.
     As a holding company with controlling positions in BankAtlantic Bancorp and Levitt, generally accepted accounting principles (“GAAP”) require the consolidation of the financial results of both entities. As a consequence, the assets and liabilities of both entities are presented on a consolidated basis in BFC’s financial statements. However, except as otherwise noted, the debts and obligations of the consolidated entities are not direct obligations of BFC and are non-recourse to BFC. Similarly, the assets of those entities are not available to BFC absent a dividend or distribution. The recognition by BFC of income from controlled entities is determined based on the total percent of economic ownership in those entities as shown in the table below.

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     BFC’s ownership in BankAtlantic Bancorp and Levitt as of December 31, 2007 was as follows:
                         
                    Percent
    Shares   Percent of   of
    Owned   Ownership   Vote
BankAtlantic Bancorp
                       
Class A Common Stock
    8,329,236       16.27 %     8.62 %
Class B Common Stock
    4,876,124       100.00 %     47.00 %
Total
    13,205,360       23.55 %     55.62 %
 
                       
Levitt
                       
Class A Common Stock
    18,676,955 (1)     19.65 %     6.99 %(1)
Class B Common Stock
    1,219,031       100.00 %     47.00 %
Total
    19,895,986 (1)     20.67 %     53.99 %(1)
 
(1)   BFC’s ownership interest includes, but BFC’s voting interest excludes, 6,145,582 shares of Levitt’s Class A Common Stock which, subject to certain exceptions, BFC has agreed not to vote, as discussed in further detail below under “Levitt’s Rights Offering and Step Acquisition”.
BFC Financial Corporation Summary of Consolidated Results of Operations
The table below sets forth the Company’s primary business results of operations (in thousands):
                         
    For the Years Ended December 31,  
    2007     2006     2005  
BFC Activities
  $ 12,693       (5,009 )     (10,460 )
Financial Services
    (30,012 )     26,879       42,526  
Real Estate Development
    (236,385 )     (9,143 )     55,069  
 
                 
 
    (253,704 )     12,727       87,135  
Noncontrolling interest
    (219,603 )     13,422       79,399  
 
                 
(Loss) income from continuing operations
    (34,101 )     (695 )     7,736  
Discontinued operations, less noncontrolling interest and income tax
    1,239       (1,526 )     5,038  
Extraordinary gain, less income tax
    2,403              
 
                 
Net (loss) income
  $ (30,459 )     (2,221 )     12,774  
 
                 
     The Company reported a net loss of $30.5 million in 2007 as compared to a net loss of $2.2 million in 2006 and net income of $12.8 million in 2005. Included in these totals for the years 2007, 2006 and 2005 is $1.2 million of income, a $1.5 million loss and $5.1 million of income from discontinued operations net of noncontrolling interest and income tax, respectively. Included in discontinued operations for 2007 is a $2.1 million gain relating to the sale of Ryan Beck by BankAtlantic Bancorp, a $1.1 million loss from operations of Ryan Beck and $0.2 million of income associated with two of Core Communities’ commercial leasing projects. Results from discontinued operations for 2006 and 2005 included a loss from operations of Ryan Beck of approximately $1.5 million and income of approximately $2.2 million, respectively. Also included in the Company’s discontinued operations in 2005 is $2.8 million in income associated with the transfer by I.R.E. BMOC, Inc. (“BMOC”), a wholly-owned subsidiary of BFC, of its real property in settlement of its obligations under a mortgage note payable, and a $16,000 loss associated with two of Core’s commercial leasing projects. The $2.8 million in income in the Company’s discontinued operations in 2005 includes the gain from the disposition of the BMOC property of approximately $3.2 million. There were no activities related to BMOC for the years ended December 31, 2007 and December 31, 2006. In 2007, the Company acquired additional shares of Levitt’s Class A Common Stock in Levitt’s Rights Offerings. The acquisition of these shares resulted in negative goodwill (excess of fair value of acquired net assets over purchase price of shares) of approximately $11 million. After ratably allocating this negative goodwill to non-current and non-financial assets, the Company recognized an extraordinary gain, net of tax, of $2.4 million.
     The results of operation of the Company’s six business segments and related matters are discussed below.

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Consolidated Financial Condition
Consolidated Assets and Liabilities
     Total assets at December 31, 2007 and 2006 were $7.1 billion and $7.6 billion, respectively. At December 31, 2006, $692.4 million of the assets were related to Levitt and Sons. As discussed herein, effective November 9, 2007, Levitt and Sons is no longer consolidated in Levitt’s financial results. The changes in components of total assets between December 31, 2007 and December 31, 2006 are summarized below:
    An increase in cash and due from depository institutions balances of approximately $131.1 million which resulted from: i) an approximately $146.8 million increase at Levitt primarily relating to proceeds received in Levitt’s Rights Offering to its shareholders; ii) higher cash balances at BFC of approximately $0.7 million primarily due to cash received from a public offering in the amount of $36.1 million and $1.7 million cash generated from other investing activities, offset by $33.2 million used to acquire additional shares of Levitt in Levitt’s Rights Offering, $3.3 million cash used in operations and $0.5 million cash used in other financing activities; and iii) lower cash balances at BankAtlantic Bancorp of approximately $14.2 million primarily due to lower cash and due from depository institution balances resulting from a decline in cash letter receivables;
 
    An increase in securities available for sale reflecting Stifel Common Stock received by BankAtlantic upon the sale of Ryan Beck and BankAtlantic’s decision to transfer $203 million of tax exempt securities from investments held-to-maturity to securities available for sale and the subsequent sale of BankAtlantic’s entire portfolio of tax exempt securities, replacing these securities with government agency mortgage-backed securities. These increases were partially offset by sales of BankAtlantic’s equity securities to fund its Class A Common Stock repurchase program;
 
    A decrease in investment securities at cost reflecting BankAtlantic’s transfer of $203 million of tax exempt securities to securities available for sale partially offset by Stifel equity securities received by BankAtlantic upon the sale of Ryan Beck which are subject to contractual restrictions limiting sales;
 
    A decrease in BankAtlantic’s tax certificate balances primarily due to redemptions of certificates outside of Florida;
 
    A decline in BankAtlantic’s FHLB stock at BankAtlantic related to lower FHLB advance borrowings;
 
    A decline in loan receivable balances associated with a $50.4 million increase in BankAtlantic’s allowance for loan losses and lower commercial loan balances partially offset by higher purchased residential, small business and home equity loan balances;
 
    A net decrease in inventory of real estate held for development and sale primarily associated with the deconsolidation of Levitt & Sons in 2007. This decrease was partially offset by a net increase in Levitt’s inventory of real estate of approximately $45.8 million, primarily related to Core’s development activities and an increase in BankAtlantic’s real estate inventory related to a decision to sell properties that BankAtlantic acquired for its store expansion program;
 
    Lower real estate owned balances associated with $7.2 million of write-downs as a result of BankAtlantic taking possession of the real estate securing a land development loan during the year ended December 31, 2006;
 
    The net increase in investments in unconsolidated affiliates was primarily driven by a net increase of approximately $4.3 million in Levitt’s investment in Bluegreen associated with $10.3 million of Levitt’s earnings from Bluegreen (net of purchase accounting), partially offset by a decrease of approximately $4.7 million in purchase accounting related to BFC’s step acquisition of Levitt in October 2007;
 
    A decrease in discontinued operations assets held for sale reflecting BankAtlantic’s sale of Ryan Beck to Stifel offset by an increase of approximately $11.0 million relating to two commercial projects currently held for sale at Levitt;
 
    An increase in office properties and equipment associated with BankAtlantic’s opening of 15 stores during 2007 partially offset by restructuring charges and impairments associated with BankAtlantic’s decision to delay its store expansion program;
 
    An increase in the net deferred tax asset primarily due to an increase in BankAtlantic Bancorp’s deferred tax assets resulting from the increase in the allowance for loan losses, and BFC’s equity losses in Levitt and BankAtlantic Bancorp; and

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    An increase in other assets primarily resulting from BankAtlantic’s federal income tax receivable associated with a taxable loss for the year ended December 31, 2007 and an increase in Levitt’s current tax asset of $22.8 million related to tax benefits incurred due to the net operating losses recorded in 2007.
     The Company’s total liabilities at December 31, 2007 and 2006 were $6.4 billion and $6.7 billion, respectively. At December 31, 2006, $511.5 million was related to Levitt and Sons. The changes in components of total liabilities between December 31, 2007 and December 31, 2006 are summarized below:
    Higher BankAtlantic interest-bearing deposit balances primarily associated with increased high yield savings, checking and certificates of deposit balances primarily reflecting transfers of customer deposit balances to higher yielding products;
 
    Lower BankAtlantic non-interest-bearing deposit balances reflecting the migration of deposits to higher yielding products as a result of a higher interest rate environment and competition;
 
    A decrease of $42.0 million in customer deposits at Levitt due to the deconsolidation of Levitt & Sons;
 
    A decrease in BankAtlantic FHLB advance borrowings due to higher deposit balances and an increase in short-term borrowings at BankAtlantic;
 
    A decrease in BankAtlantic development notes payable associated with the repayment of real estate development borrowings from third party lenders. A decrease in Levitt’s notes and mortgage notes payable primarily due to Levitt & Sons deconsolidation, offset by an increase in Levitt’s notes and mortgage notes payable of $156.0 million, primarily related to project debt associated with land development activities;
 
    An increase in BankAtlantic junior subordinated debentures primarily associated with BankAtlantic Bancorp’s issuance of $31 million of junior subordinated debentures;
 
    An increase of $55.2 million in the deficit in the Levitt and Sons’ investment at December 31, 2007 resulting from the deconsolidation of Levitt and Sons from Levitt’s financial results, which is being accounted for as a cost method investment;
 
    A decrease in BankAtlantic’s discontinued operations liabilities held for sale reflecting the sale of Ryan Beck to Stifel; and
 
    The decrease in other liabilities primarily due to Levitt and Sons’ deconsolidation offset by an increase in BankAtlantic other liabilities primarily resulting from $18.9 million of securities available for sale purchased in December 2007 which was settled in January 2008.
Noncontrolling Interest
     At December 31, 2007 and 2006, noncontrolling interest held by others in our subsidiaries was approximately $559.0 million and $698.3 million, respectively. The following table summarizes the noncontrolling interest held by others in our subsidiaries (in thousands):
                 
    December 31,     December 31,  
    2007     2006  
BankAtlantic Bancorp
  $ 351,148     $ 411,396  
Levitt
    207,138       286,230  
Joint Venture Partnerships
    664       697  
 
           
 
  $ 558,950     $ 698,323  
 
           

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BFC Impact of Inflation
     The financial statements and related financial data and notes presented herein have been prepared in accordance with generally accepted accounting principles, except as otherwise noted and in those instances reconciled to the generally accepted accounting treatment of the financial measurement under discussion, which require the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation.
     The majority of our assets and liabilities are monetary in nature by virtue of our ownership interest in BankAtlantic Bancorp. As a result, interest rates have a more significant impact on our performance than the effects of general price levels. Although interest rates generally move in the same direction as inflation, the magnitude of such change varies. The possible effect of fluctuating interest rates is discussed more fully under the section entitled “Consolidated Interest Rate Risk” In Item 7A below.
     Inflation could also have a long-term impact on our real estate activities because any increase in the cost of land, materials and labor would result in a need to increase the sales prices of land which may not be possible. In addition, inflation is often accompanied by higher interest rates which could have a negative impact on demand and financing costs. Rising interest rates as well as increased materials and labor costs may reduce margins. Our real estate activities, which primarily consist of the activities of Levitt, are discussed more fully below under the section entitled “Real Estate Division”.
Critical Accounting Policies
     Management views critical accounting policies as accounting policies that are important to the understanding of our financial statements and also involve estimates 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 consolidated statement of operations for the periods presented. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in subsequent periods 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 real estate held for development and sale and its impairment reserves, revenue and cost recognition on percent complete projects, estimated costs to complete construction, the valuation of investments in unconsolidated subsidiaries, the valuation of the fair value of assets and liabilities in the application of the purchase method of accounting, the amount of the deferred tax asset valuation allowance, accounting for uncertain tax positions, accounting for contingencies, and assumptions used in the valuation of stock based compensation. The ten accounting policies that we have identified as critical accounting policies are: (i) allowance for loan losses; (ii) valuation of securities as well as the determination of other-than-temporary declines in value; (iii) impairment of goodwill and other indefinite life intangible assets; (iv) impairment of long-lived assets; (v) accounting for business combinations; (vi) the valuation of real estate held for development and sale; (vii) the valuation of unconsolidated subsidiaries; (viii) accounting for uncertain tax positions; (ix) accounting for contingencies; and (x) accounting for share-based compensation.
     See Note 1, Summary of Significant Accounting Policies, for a detailed discussion of our significant accounting policies. These policies are also discussed below under the Company’s Financial Services segment and Real Estate Development segment.

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BFC Activities
BFC Activities
     The “BFC Activities” segment includes all of the operations and all of the assets owned by BFC other than BankAtlantic Bancorp and its subsidiaries and Levitt and its subsidiaries. This includes dividends from BFC’s investment in Benihana’s convertible preferred stock and other securities and investments, advisory fee income and operating expenses from Cypress Creek Capital, Inc. (“CCC”), interest income from loans receivable and income from the arrangement between BFC, BankAtlantic Bancorp, Levitt and Bluegreen for shared service operations in the areas of human resources, risk management, investor relations and executive office administration. The BFC Activities segment also includes BFC’s overhead and interest expense, the financial results of venture partnerships that BFC controls and BFC’s provision (benefit) for income taxes, including the tax provision (benefit) related to the Company’s interest in the earnings or losses of BankAtlantic Bancorp and Levitt. BankAtlantic Bancorp and Levitt are consolidated in BFC’s financial statements, as described earlier. The Company’s earnings or losses in BankAtlantic Bancorp are included in BFC’s Financial Services segment, and the Company’s earnings and losses in Levitt are included in four reportable segments, which are Primary Homebuilding, Tennessee Homebuilding, Land Division and Levitt Other Operations.
     The discussion that follows reflects the operations and related matters of the BFC Activities segment (in thousands).
                                         
                            Change     Change  
    For the Years Ended December 31,     2007 vs.     2006 vs.  
(In thousands)   2007     2006     2005     2006     2005  
Revenues
                                       
Interest and dividend income
  $ 2,374       2,292       1,623       82       669  
Securities activities
    1,295             58       1,295       (58 )
Other income, net
    4,977       3,680       1,692       1,297       1,988  
 
                             
 
    8,646       5,972       3,373       2,674       2,599  
 
                             
Cost and Expenses
                                       
Interest expense
    38       30       346       8       (316 )
Employee compensation and benefits
    10,932       9,407       6,245       1,525       3,162  
Other expenses, net
    4,302       3,398       3,505       904       (107 )
 
                             
 
    15,272       12,835       10,096       2,437       2,739  
 
                             
Equity in loss from unconsolidated affiliates
    (78 )                 (78 )      
 
                             
Loss before income taxes
    (6,704 )     (6,863 )     (6,723 )     159       (140 )
(Benefit) provision for income taxes
    (19,397 )     (1,854 )     3,737       (17,543 )     (5,591 )
Noncontrolling interest
    (34 )     (25 )     6       (9 )     (31 )
 
                             
Income (loss) from continuing operations
  $ 12,727       (4,984 )     (10,466 )     17,711       5,482  
 
                             
     The increase in interest and dividend income during the year ended December 31, 2006 as compared to 2005 is primarily due to interest income earned on higher average cash balances in 2006 as a consequence of our 2005 public offering.
     In 2007, BFC recognized a gain of $1.3 million upon the sale of securities.
     Other income increased in 2007 as compared to 2006 and 2005 primarily due to income from advisory fees earned at CCC and shared service income. In 2007, 2006 and 2005, CCC advisory fees were approximately $1.7 million, $929,000 and $773,000, respectively. In 2007 and 2006, shared service income was approximately $2.9 million and $2.5 million, respectively, with none in 2005. Effective January 1, 2006, BFC maintained arrangements with BankAtlantic Bancorp, Levitt and Bluegreen to provide certain shared service operations in the areas of human resources, risk management, investor relations and executive office administration. Pursuant to this arrangement, certain employees from BankAtlantic were transferred to BFC to staff BFC’s shared service operations. The costs of shared services are allocated based upon the usage of the respective services. Also, as part of the shared services arrangement, the Company reimburses BankAtlantic Bancorp and Bluegreen for office facilities costs relating to the Company and its shared service operations.

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BFC Activities
     Interest expense for the years ended December 31, 2007 and 2006 was primarily associated with loan amounts paid relating to maintaining the availability of the Company’s revolving line of credit. In December 2007, BFC’s revolving line of credit expired pursuant to its term. The decrease in interest expense for the year ended December 31, 2006 compared to 2005 was attributable to a $10.5 million reduction in BFC’s revolving line of credit in July 2005.
     The increase in employee compensation and benefits during the year ended December 31, 2007 as compared to 2006 was primarily due to increases in i) the level of compensation and additional employees in BFC’s shared service operations, ii) bonus expense of approximately $390,000 of which $200,000 related to the completion of certain projects at CCC and additional bonuses to executive officers, iii) stock compensation expense of approximately $308,000 and iv) a provision for severance in the amount of $250,000 due to a restructuring of Cypress Creek Capital operations. In 2007, employee compensation and benefits for employees dedicated to BFC operations, shared services and CCC totaled $5.8 million, $3.2 million and $2.0 million, respectively, compared with $5.6 million, $2.4 million and $1.5 million, respectively, in 2006.
     The increase in employee compensation and benefits during the year ended December 31, 2006 as compared to 2005 was due to increases in the number of employees at BFC primarily relating to the transfer of employees from BankAtlantic to BFC to staff shared service operations, stock compensation expense of approximately $774,000 in 2006 upon the adoption of the fair value recognition provision of SFAS No. 123R, using the modified prospective transition method and payroll taxes related to employer’s tax expense on the exercise of stock options during the first quarter of 2006. In September 2005, the Company recorded as compensation expense the present value of a retirement benefit payment in the amount of $482,444 granted to a key executive. The Company continues to recognize monthly the amortization of interest on the retirement benefit as compensation expense.
     Other expenses increased during the year ended December 31, 2007 as compared to 2006 primarily due a write-off of $619,000 related to the abandonment of a proposed merger with Levitt and increased legal fees and professional and consulting fees. Other expenses decreased during the year ended December 31, 2006 as compared to 2005 primarily due a decrease in intangible taxes.
     The BFC Activities segment includes BFC’s provision (benefit) for income taxes including the tax provision (benefit) relating to the Company’s earnings (loss) from BankAtlantic Bancorp and Levitt. BankAtlantic Bancorp and Levitt are consolidated in BFC’s financial statements but not in BFC’s tax return. The increase in BFC’s benefit for income taxes in 2007 as compared to 2006 and 2005 is primarily due to BFC’s equity losses at BankAtlantic Bancorp and Levitt. The table below presents a reconciliation of BFC’s (benefit) provision for income taxes (in thousands):
                         
    For the Years Ended December 31,  
    2007     2006     2005  
BFC operating loss, net of permanent differences
  $ (8,006 )     (9,094 )     (8,518 )
Expired Net Operating Loss (“NOLs”) carryforwards (1)
    4,557              
Equity from (loss) earnings in BankAtlantic Bancorp
    (7,206 )     5,807       9,053  
Equity from (loss) earnings in Levitt
    (39,622 )     (1,519 )     9,151  
 
                 
 
    (50,277 )     (4,806 )     9,686  
Income tax rate
    38.58 %     38.58 %     38.58 %
 
                 
(Benefit) provision for income tax
  $ (19,397 )     (1,854 )     3,737  
 
                 
 
(1)   See Liquidity and Capital Resources of BFC below.
Levitt’s Rights Offering and Step Acquisition
     On August 29, 2007, Levitt distributed to each holder of record of Levitt’s Class A Common Stock and Class B Common Stock on August 27, 2007 5.0414 subscription rights for each share of such stock owned on that date

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BFC Activities
(the “Rights Offering”). Each whole subscription right entitled the holder thereof to purchase one share of Levitt’s Class A Common Stock at a purchase price of $2.00 per share. The Rights Offering was completed on October 1, 2007. Levitt received $152.8 million in the Rights Offering and issued an aggregate of 76,424,066 shares of its Class A Common Stock on October 1, 2007 in connection with the exercise of rights by its shareholders. BFC purchased an aggregate of 16,602,712 of Levitt’s Class A Common Stock in the Rights Offering for an aggregate purchase price of $33.2 million.
     By letter dated September 27, 2007 (“Letter Agreement”), BFC agreed, subject to certain limited exceptions, not to vote the 6,145,582 shares of Levitt’s Class A Common Stock that BFC acquired in the Rights Offering upon its exercise of its subscription rights associated with BFC’s holdings of Levitt’s Class B Common Stock. The Letter Agreement provides that any future sale of shares of Levitt’s Class A Common Stock by BFC will reduce, on a share for share basis, the number of shares of Levitt’s Class A Common Stock that BFC has agreed not to vote. BFC’s acquisition of the 16,602,712 shares of Levitt’s Class A Common Stock upon its exercise of its subscription rights increased BFC’s ownership interest in Levitt by approximately 4.1% to 20.7% from 16.6% and increased BFC’s voting interest in Levitt (excluding the 6,145,582 shares subject to the Letter Agreement) by approximately 1.1% to 54.0% from 52.9%.
     The acquisition of additional shares of Levitt is being accounted for as a step acquisition under the purchase method of accounting. A step acquisition is the acquisition of two or more blocks of an entity’s shares at different dates. In a step acquisition, the acquiring entity identifies the cost of the investment, the fair value of the portion of the underlying net assets acquired, and the goodwill if any for each step acquisition. Accordingly, the net assets of Levitt will be recognized at estimated fair value to the extent of BFC’s increase in its ownership percentage of 4.1% at the acquisition date. BFC’s carrying amount of its investment in Levitt was approximately $3.2 million lower than the ownership percentage in the underlying equity in the net assets of Levitt at October 1, 2007, and the excess of the fair value over the purchase price (negative goodwill) has been allocated as a pro rata reduction of the amounts that would otherwise have been assigned ratably to all of the non-current and non-financial acquired assets excluding, assets to be disposed of by sale, deferred tax assets and any other current assets. After ratably allocating the negative goodwill of approximately $11 million to non-current and non-financial assets, the Company recognized an extraordinary gain, net of tax of $2.4 million.
     As required by SFAS 141, the Company determined the fair value of the portion of the net assets acquired as of the date of acquisition, October 1, 2007. In making that determination, the Company used information that was representative of the fair value at that time. However, this is not necessarily indicative of future values which can be influenced by a variety of factors, such as: prevailing market conditions, costs associated with maintaining the value of the assets and any other expenses that may be incurred in order to actually realize that value.

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BFC Activities
Liquidity and Capital Resources of BFC
     The following provides cash flow information for the BFC Activities segment (in thousands).
                         
    For the Years Ended December 31,  
    2007     2006     2005  
Net cash provided by (used in):
                       
Operating activities
  $ (3,267 )     (2,292 )     (236 )
Investing activities
    (31,548 )     (1,416 )     (9,775 )
Financing activities
    35,537       (4,922 )     34,590  
 
                 
Increase (decrease) in cash and cash equivalents
    722       (8,630 )     24,579  
Cash and cash equivalents at beginning of period
    18,176       26,806       2,227  
 
                 
Cash and cash equivalents at end of period
  $ 18,898       18,176       26,806  
 
                 
     The increase in cash flow used in operating activities during 2007 compared to 2006 primarily resulted from higher operating and general administrative expenses, net of revenues received from CCC advisory fees. The operating activities increase in 2006 compared to 2005 was primarily due to proceeds received from notes receivable in 2005 of approximately $1.8 million.
     The increase in cash used in investing activities during 2007 compared to 2006 primarily resulted from BFC’s purchase of an aggregate of 16,602,712 shares of Levitt’s Class A Common Stock in the Rights Offering for approximately $33.2 million. This increase in cash used in investing activities in 2007 was partially offset with cash provided by the proceeds received from the sale of equity securities of approximately $1.3 million and the sale of a real estate investment for approximately $1.0 million. The decrease in cash used in investing activities in 2006 compared to 2005 was primarily due to BFC’s $10.0 million investment in Benihana convertible preferred stock in 2005. Additionally, in 2006, cash was used for joint venture investments in the aggregate amount of approximately $1.8 million.
     The increase in cash flows provided by financing activities in 2007 resulted from net proceeds of approximately $36.2 million from the sale of 11,500,000 shares of the Company’s Class A Common Stock in a public offering, partially offset by the payment of dividends on the Company’s 5% Cumulative Convertible Preferred Stock of $750,000. In 2006, the decrease in cash flows in financing activities resulted from the payment of approximately $4.2 million of optionees’ minimum withholding tax upon the exercise of stock options and the payment of dividends on the Company’s 5% Cumulative Convertible Preferred Stock of $750,000. BFC accepted shares of Class B Common Stock as consideration for the exercise price of stock options and for the payment of optionees’ minimum withholding taxes related to options exercised. The decrease in cash flows provided by financing activities in 2006 related to net proceeds of approximately $46.2 million from the sale of 5,957,555 shares of the Company’s Class A Common Stock in 2005, partially offset by the repayment of notes payable of approximately $12.0 million and the payment of dividends on the Company’s 5% Convertible Preferred Stock of $750,000.
     As discussed in Note 23 to our consolidated financial statements, the Company anticipates that it will implement a planning strategy beginning in 2008, under which the Company will begin selling shares of BankAtlantic Bancorp Class A Common Stock in order to generate sufficient taxable income to utilize expiring net operating loss carryforwards (“NOLs”). The Company intends to repurchase a sufficient number of shares to substantially maintain its ownership of BankAtlantic Bancorp. While the Company does not anticipate any substantial overall change in liquidity as a result of implementing this strategy, there may be some short term fluctuations.
     BFC during most of 2007, maintained a $14.0 million revolving line of credit that was available to be utilized for working capital as needed. The interest rate on this facility was based on LIBOR plus 280 basis points. In September 2007, the loan was extended to a maturity date of December 15, 2007 and pursuant to its terms, the line of credit expired on December 15, 2007.

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     In July 2007, the Company sold 11,500,000 shares of its Class A Common Stock at $3.40 per share pursuant to a registered underwritten public offering. Net proceeds from the sale of the 11,500,000 shares totaled approximately $36.2 million, after underwriting discounts, commissions and offering expenses. The Company used the proceeds of this offering to purchase 16,602,712 shares of Levitt’s Class A Common Stock in the Rights Offering as discussed above in “Levitt’s Rights Offering and Step Acquisition” and for general corporate purposes, including working capital.
     On October 24, 2006, the Company’s Board of Directors approved the repurchase of up to 1,750,000 shares of its Common Stock at an aggregate cost of no more than $10.0 million. The timing and amount of repurchases, if any, will depend on market conditions, share price, trading volume and other factors, and there is no assurance that the Company will repurchase shares during any period. No termination date was set for the repurchase program. The Company plans to fund the share repurchase program primarily through existing cash balances. No shares were repurchased during the year ended December 31, 2007.
     As previously reported, the Company, on January 30, 2007, entered into a definitive merger agreement with Levitt Corporation, pursuant to which Levitt Corporation would have become a wholly-owned subsidiary of the Company. On August 14, 2007, BFC terminated the merger agreement based on its conclusion that the conditions to closing the merger could not be met and that it was in Levitt’s best interest to pursue its Rights Offering.
     BFC expects to meet its short-term liquidity requirements generally through existing cash balances, cash dividends from Benihana, and its existing cash balances. The Company expects to meet its long-term liquidity requirements through the foregoing, as well as long-term secured and unsecured indebtedness, and future issuances of equity and/or debt securities.
     The payment of dividends by BankAtlantic Bancorp is subject to declaration by BankAtlantic Bancorp’s Board of Directors and applicable indenture restrictions and loan covenants and will also depend upon, among other things, the results of operations, financial condition and cash requirements of BankAtlantic Bancorp and the ability of BankAtlantic to pay dividends or otherwise advance funds to BankAtlantic Bancorp, which in turn is subject to OTS regulations and is based upon BankAtlantic’s regulatory capital levels and net income. At December 31, 2007, BankAtlantic met all applicable liquidity and regulatory capital requirements. The declaration and payment of dividends and the ability of BankAtlantic Bancorp to meet its debt service obligations will depend upon the results of operations, financial condition and cash requirements of BankAtlantic Bancorp, as well as the ability of BankAtlantic to pay dividends to BankAtlantic Bancorp. The ability of BankAtlantic to pay dividends or make other distributions to BankAtlantic Bancorp is subject to regulations and OTS approval and is based upon BankAtlantic’s regulatory capital levels and net income. Because, at December 31, 2007, BankAtlantic’s accumulated deficit for the previous two years was $23.7 million, BankAtlantic is now required to file an application to receive approval of the OTS in order to pay dividends to BankAtlantic Bancorp. While the OTS has approved dividends to date, the OTS would likely not approve any distribution that would cause BankAtlantic to fail to meet its capital requirements or if the OTS believes that a capital distribution by BankAtlantic constitutes an unsafe or unsound action or practice and there is no assurance that the OTS will approve future capital distributions from BankAtlantic. While there is no assurance that BankAtlantic Bancorp will pay dividends in the future, BankAtlantic Bancorp has paid a regular quarterly dividend to holders of its Common Stock since August 1993. During the year ended December 31, 2007, the Company received approximately $1.7 million in dividends from BankAtlantic Bancorp. However, in December 2007, BankAtlantic Bancorp reduced its quarterly dividend to $0.005 from $0.038 per share on its Class A and Class B Common Stock, which reduced the Company’s cash flow from dividends from BankAtlantic Bancorp. Based on BankAtlantic Bancorp’s current quarterly dividend payment of $0.005 per share, the Company’s dividend from BankAtlantic Bancorp is approximately $69,000 per quarter.
     Levitt began paying quarterly dividends to its shareholders in July 2004 and continued paying such dividends of $0.02 per share on its Class A and Class B Common Stock through the first quarter of 2007. The Company received approximately $66,000 during the three months ended March 31, 2007. Levitt has not paid any dividends since the first quarter of 2007, and the Company does not anticipate that it will be receiving additional dividends from Levitt for the foreseeable future. Future dividends are subject to approval by Levitt’s Board of Directors and will depend upon, among other factors, Levitt’s results of operations and financial condition.
     The Company owns 800,000 shares of Benihana Series B Convertible Preferred Stock that it purchased for $25.00 per share. The Company has the right to receive cumulative quarterly dividends at an annual rate equal to 5%

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or $1.25 per share, payable on the last day of each calendar quarter. It is anticipated that the Company will continue to receive approximately $250,000 per quarter. If the Company were to convert its investment in Benihana, it would represent 1,578,943 shares of Benihana’s Common Stock, and would represent an approximately 18% voting interest and an approximately 9.4% economic interest in Benihana. At December 31, 2007, the aggregate market value of such shares would have been $19.9 million.
     In 2005, BFC entered into guarantee agreements in connection with the purchase of two shopping centers in South Florida by two separate limited liability companies. A wholly-owned subsidiary of CCC has a one percent general partner interest in a limited partnership that in turn has a 15 percent interest in each of the limited liability companies. Pursuant to the guarantee agreements, BFC has guaranteed certain environmental indemnities and specific obligations on two non-recourse loans that are not related to the financial performance of the assets. BFC’s maximum exposure under the guarantee agreements is estimated to be approximately $21.1 million, the full amount of the indebtedness. Based on the assets securing the indebtedness and the limit of the specific obligations to non-financial matters, BFC does not believe that any payment will be required under the guarantee. Although it is the general partner of the limited partnership, the wholly-owned subsidiary of CCC does not have control and does not have the ability to make major decisions without the consent of other partners and members.
     A subsidiary of CCC has a 10% interest in a limited partnership as a non-managing general partner. The partnership owns an office building located in Boca Raton, Florida and in connection with the purchase of such office building, CCC guaranteed repayment of a portion of the non-recourse loan on the property on a joint and several basis with the managing general partner. CCC’s maximum exposure under this guarantee agreement is $8.0 million (which is shared on a joint and several basis with the managing general partner), representing approximately 36.6% of the current indebtedness of the property, with the guarantee to be reduced based upon the performance of the property. Based on the value of the limited partnership assets securing the indebtedness, CCC does not believe that any payment will be required under the guarantee. CCC also separately guaranteed (on a joint and several basis with the managing general partner) the payment of certain environmental indemnities and limited specific obligations of the partnership that are not related to the financial performance of the property.
     A wholly-owned subsidiary of CCC (“CCC East Tampa”) and an unaffiliated third party formed a limited liability company to purchase two commercial properties in Hillsborough County, Florida. CCC East Tampa has a 10% interest in the limited liability company and is the managing member with an initial contribution of approximately $765,500, and the unaffiliated member has a 90% interest in the limited liability company having contributed approximately $6,889,500. In November of 2006, the limited liability company purchased commercial properties for an aggregate purchase price of $29.8 million, and, in connection with the purchase, BFC and the unaffiliated member each guaranteed the payment up to a maximum of $5.0 million each for certain environmental indemnities and specific obligations that are not related to the financial performance of the assets. BFC and the unaffiliated member also entered into a cross indemnification agreement which limits BFC’s obligations under the guarantee to acts of BFC and its affiliates. The BFC guarantee represents approximately 21.3% of the current indebtedness secured by the commercial properties. Based on the assets securing the indebtedness, the indemnification from the unaffiliated member and the limit of the specific obligations to non-financial matters, BFC does not believe that any payment will be required under guarantee. Although CCC East Tampa is the managing member of the limited liability company, it does not have the ability to make major decisions without the consent of the unaffiliated member. At December 31, 2007, the CCC East Tampa investment of approximately $802,000 is included in investments in unconsolidated subsidiaries in the Company’s Consolidated Statements of Financial Condition. The Company accounts for its investment under the equity method of accounting.
In June 2007, a wholly-owned subsidiary of CCC (“CCC East Kennedy”), entered into an agreement with an unaffiliated third party, pursuant to which Cypress Creek Capital/Tampa, Ltd. (“CCC/Tampa”) was formed. CCC East Kennedy has a 50% general partner ownership interest and the unaffiliated third party has a 50% limited partner interest in CCC/Tampa. The purpose of CCC/Tampa was to acquire a 10% investment in a limited liability company that owns and operates an office building located in Tampa, Florida. CCC/Tampa has a 10% interest in the limited liability company with an initial contribution of $1.2 million and the unaffiliated members have a 90% interest having contributed approximately $10.4 million. The limited liability company purchased the office building in June 2007 for an aggregate purchase price of $48.0 million, and, in connection with the purchase, BFC guaranteed the payment of certain environmental indemnities and specific obligations that are not related to the financial performance of the asset up to a maximum of $15.0 million, or $25.0 million in the event of any petition or

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involuntary proceedings under the U.S. Bankruptcy Code or similar state insolvency laws or in the event of any transfers of interests not in accordance with the loan documents. BFC and the unaffiliated members also entered into a cross indemnification agreement which limits BFC’s obligations under the guarantee to acts of BFC and its affiliates. Based on the assets securing the indebtedness, the indemnification from the unaffiliated members and the limit of the specific obligations to non-financial matters, BFC does not believe that any payment will be required under the guarantee. Although CCC East Kennedy is the general partner of CCC/Tampa, which is the managing member of the limited liability company, it does not have control and does not have the ability to make major decisions without the consent of the other partners and members. At December 31, 2007, the CCC East Kennedy investment of approximately $550,000 is included in investments in unconsolidated subsidiaries in the Company’s Consolidated Statements of Financial Condition. The Company accounts for its investment under the equity method of accounting.
     On June 21, 2004, an investor group purchased 15,000 shares of the Company’s 5% Cumulative Convertible Preferred Stock for $15.0 million in a private offering. Holders of the 5% Cumulative Convertible Preferred Stock are entitled to receive, when and as declared by the Company’s Board of Directors, cumulative cash dividends on each share of 5% Cumulative Convertible Preferred Stock at a rate per annum of 5% of the stated value from the date of issuance, payable quarterly. Since June 2004, the Company has paid dividends on the 5% Cumulative Convertible Preferred Stock of $187,500 on a quarterly basis. During the year ended December 31, 2007, the Company paid $750,000 in dividends to the investor group.

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Financial Services
Financial Services
     The Financial Services segment of BFC consists of BankAtlantic Bancorp, which is consolidated with BFC Financial Corporation. The only assets available to BFC Financial Corporation from BankAtlantic Bancorp are dividends when and if paid by BankAtlantic Bancorp. BankAtlantic Bancorp is a separate public company and its management prepared the following discussion regarding BankAtlantic Bancorp which was included in BankAtlantic Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission. Accordingly, references to the “Company”, “we”, “us” or “our” in the following discussion under the caption “Financial Services” are references to BankAtlantic Bancorp and its subsidiaries, and are not references to BFC Financial Corporation.
Introduction
     BankAtlantic Bancorp, Inc. is a Florida-based financial services holding company offering a full range of products and services through BankAtlantic, our wholly-owned banking subsidiary. As of December 31, 2007, we had total consolidated assets of approximately $6.4 billion, deposits of approximately $4.0 billion and shareholders’ equity of approximately $459 million. We operate through two primary business segments: BankAtlantic and the Parent Company.
     On February 28, 2007 the Company completed the sale to Stifel Financial Corp. (“Stifel”) of Ryan Beck Holdings, Inc. (“Ryan Beck”), a subsidiary engaged in retail and institutional brokerage and investment banking. As a consequence of the sale of Ryan Beck to Stifel, the results of operations of Ryan Beck are presented as “Discontinued Operations” in the Company’s Consolidated Financial Statements.
Consolidated Results of Operations
     Income from continuing operations from each of the Company’s reportable business segments follows (in thousands):
                         
    For the Years Ended December 31,  
    2007     2006     2005  
BankAtlantic
  $ (19,440 )   $ 36,322     $ 55,820  
Parent Co.
    (10,572 )     (9,443 )     (13,294 )
 
                 
Net (loss) income
  $ (30,012 )   $ 26,879     $ 42,526  
 
                 
     The significant decline in BankAtlantic’s earnings during 2007 reflects $70.8 million of provisions for loan losses and $20.9 million of restructuring charges and long-lived asset impairments. The allowance for loan losses during 2007 was significantly increased in response to the rapid deterioration in the Florida residential real estate market and the associated rapid and substantial increase in non-performing loans and classified assets. Restructuring charges of $5.8 million relate to management’s decision to slow BankAtlantic’s retail network expansion and consolidate its call center operations. This restructuring includes selling its Orlando stores, selling properties and terminating or subleasing properties under executed lease contracts entered into for store expansion. BankAtlantic also incurred $2.5 million of restructuring charges associated with its March 2007 workforce reduction and impairment write-downs of $12.5 million in connection with a real estate development owned by the bank and a real estate owned property. Other factors contributing to the 2007 loss were net interest margin compression and costs associated with opening new stores. BankAtlantic’s 2007 net interest income declined by $20.1 million from 2006 reflecting an increase in its cost of funds due to growth in higher cost deposit products and lower yields on earning assets due to a change in the mix of loan products and increased nonperforming assets. BankAtlantic opened 15 new stores during 2007 and 13 new stores during 2006. The opening and operating costs of these new stores exceeded revenues of these stores during the 2007 periods which had a negative impact on earnings. BankAtlantic’s results during 2007 compared to the same 2006 period were favorably impacted by lower advertising costs of $15.0 million and higher retail banking service fees of $13.6 million. During the fourth quarter of 2006, management decided to reduce advertising expenditures in response to reduced deposit growth. The additional service fees primarily resulted from higher overdraft, interchange and surcharge income from increased volume of customer transactions.

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     The higher Parent Company net loss during 2007 compared to 2006 resulted from a $3.3 million other-than-temporary impairment charge associated with a private limited partnership and higher net interest expense due to the issuance of $30.9 million of junior subordinated debentures. The Parent Company did not recognize impairment charges during the year ended December 31, 2006. Parent Company segment operations were favorably impacted by a significant reduction of performance based bonuses during 2007 compared to 2006 due to a decline in the Company’s operating results for the year ended December 31, 2007.
     The decline in income from continuing operations during 2006 compared to 2005 was primarily due to lower earnings at BankAtlantic primarily as a result of a substantial increase in BankAtlantic’s non-interest expense, an $8.6 million provision for loan losses during 2006 compared to a negative provision for loan losses of ($6.6) million during 2005 and a decline in net interest income. The above declines in BankAtlantic’s 2006 segment net income were partially offset by an increase in non-interest income associated with higher revenue from customer service charges and transaction fees linked to growth in deposit accounts.
     The increase in BankAtlantic’s non-interest expense during 2006 compared to 2005 resulted from BankAtlantic’s growth initiatives and store expansion program as well as BankAtlantic’s “Florida’s Most Convenient Bank” program. These initiatives resulted in a substantial increase in compensation, occupancy and advertising costs.
     The Parent Company segment experienced lower losses during 2006 compared to 2005 as a result of gains realized on the sale of equity securities from managed funds. These securities’ gains were partially offset by an increase in interest expense on borrowings based on higher interest rates during 2006 compared to 2005.
     Results from discontinued operations relating to the Ryan Beck segment was income of $7.8 million during 2007 compared to a loss of $11.5 million during 2006 and earnings of $16.7 million during 2005. Ryan Beck’s 2007 income reflects a $16.4 million gain from the sale of Ryan Beck to Stifel partially offset by an $8.6 million loss from operations during the two months ended February 28, 2007, the closing date of the sale to Stifel. Ryan Beck’s 2006 loss resulted from declining retail brokerage revenues and a significant slow-down in investment banking activities. Ryan Beck’s 2005 earnings primarily resulted from investment banking revenues and sales credits directly related to large investment banking transactions.
BankAtlantic Results of Operations
Summary
     The following events over the past five years have had a significant impact on BankAtlantic’s business strategies and results of operations:
     In April 2002, BankAtlantic launched its “Florida’s Most Convenient Bank” imitative which resulted in significant demand deposit, NOW checking and savings account growth (we refer to these accounts as “core deposit” accounts). Since inception of this campaign, BankAtlantic has increased core deposit balances 284% from $600 million at December 31, 2001 to approximately $2.3 billion at December 31, 2007. These core deposits represented 58% of BankAtlantic’s total deposits at December 31, 2007, compared to 26% of total deposits at December 31, 2001. The growth in these core deposits was a significant reason for the improvement in BankAtlantic’s non-interest income. BankAtlantic’s non-interest income was $144.4 million during 2007 compared to $100.1 million during 2005.
     In 2004, BankAtlantic announced its de novo store expansion strategy and had opened 32 stores as of December 31, 2007 in connection with this strategy. BankAtlantic’s non-interest expenses substantially increased as a result of this strategy reflecting the hiring of additional personnel, increased marketing to support new stores, increased leasing and operating costs for the new stores and expenditures for back-office technologies to support a larger institution.
     During the fourth quarter of 2005 the growth in core deposits slowed reflecting rising short-term interest rates and increased competition among financial institutions. In response to these market conditions BankAtlantic

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significantly increased its marketing expenditures and continued its new store expansion program in an effort to sustain core deposit growth. The number of new core deposit accounts opened increased from 226,000 during 2005 to 270,000 during 2006 but core deposit balances only grew to $2.2 billion at December 31, 2006 from $2.1 billion at December 31, 2005. In response to adverse economic conditions and the slowed deposit growth, BankAtlantic significantly reduced its marketing expenditures beginning during the fourth quarter of 2006 in an effort to reduce its non-interest expenses. In spite of the reduced marketing expenditures BankAtlantic opened 257,000 new core deposit accounts during the year ended December 31, 2007.
     During 2007, the real estate markets deteriorated rapidly throughout the United States, and particularly in Florida where BankAtlantic’s commercial and consumer real estate loans are concentrated. In response to these market conditions, BankAtlantic established a significant allowance for loan losses for commercial loans collateralized by residential real estate property and to a lesser extent home equity consumer loans. BankAtlantic also continues to review its underwriting criteria and is closely monitoring real estate loans held in its loan portfolio. As a result of the current market trends, BankAtlantic has shifted its loan origination focus to the origination of small business loans and commercial loans collateralized by income producing properties.
     During the fourth quarter of 2007, management decided to slow BankAtlantic’s retail network expansion and consolidate certain back-office facilities in order to reduce the growth of non-interest expenses. Management expects to continue BankAtlantic’s retail network expansion when economic and market conditions improve.
     The following table is a condensed income statement summarizing BankAtlantic’s results of operations (in thousands):
                                         
    For the Years Ended   Change   Change
    Ended December 31,   2007 vs   2006 vs
    2007   2006   2005   2006   2005
     
Net interest income
  $ 199,510       219,605       221,075       (20,095 )     (1,470 )
(Provision for) recovery from loan losses
    (70,842 )     (8,574 )     6,615       (62,268 )     (15,189 )
     
Net income after provision for loan losses
    128,668       211,031       227,690       (82,363 )     (16,659 )
Non-interest income
    144,412       131,844       100,060       12,568       31,784  
Non-interest expense
    (313,898 )     (293,448 )     (241,092 )     (20,450 )     (52,356 )
     
BankAtlantic (loss) income before income taxes
    (40,818 )     49,427       86,658       (90,245 )     (37,231 )
Benefit (provision) for income taxes
    21,378       (13,105 )     (30,838 )     34,483       17,733  
     
BankAtlantic net (loss) contribution
  $ (19,440 )     36,322       55,820       (55,762 )     (19,498 )
     

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BankAtlantic’s Net Interest Income
The following table summarizes net interest income:
                                                                         
    For the Years Ended  
    December 31, 2007     December 31, 2006     December 31, 2005  
    Average     Revenue/     Yield/     Average     Revenue/     Yield/     Average     Revenue/     Yield/  
(Dollars are in thousands)   Balance     Expense     Rate     Balance     Expense     Rate     Balance     Expense     Rate  
Interest earning assets
                                                                       
Loans: (a)
                                                                       
Residential real estate
  $ 2,209,832       120,768       5.47 %   $ 2,099,664       109,103       5.20 %   $ 2,177,432       106,992       4.91 %
Commercial real estate
    1,367,095       108,931       7.97       1,530,282       128,420       8.39       1,828,557       130,379       7.13  
Consumer
    650,764       47,625       7.32       558,769       41,997       7.52       514,822       31,348       6.09  
Commercial business
    142,455       12,720       8.93       140,465       12,452       8.86       94,420       7,455       7.90  
Small business
    298,774       23,954       8.02       259,816       20,988       8.08       211,371       16,520       7.82  
             
Total loans
    4,668,920       313,998       6.73       4,588,996       312,960       6.82       4,826,602       292,694       6.06  
             
Tax exempt securities (c)
    328,583       19,272       5.87       396,539       23,162       5.84       368,807       21,391       5.80  
Taxable investment securities (b)
    689,263       42,849       6.22       618,913       36,912       5.96       698,279       37,184       5.33  
Federal funds sold
    3,638       195       5.36       1,824       22       1.21       4,275       17       0.40  
             
Total investment securities
    1,021,484       62,316       6.10       1,017,276       60,096       5.91       1,071,361       58,592       5.47  
             
Total interest earning assets
    5,690,404       376,314       6.61 %     5,606,272       373,056       6.65 %     5,897,963       351,286       5.96 %
             
Total non-interest earning assets
    510,173                       448,296                       389,186                  
 
                                                                 
Total assets
  $ 6,200,577                     $ 6,054,568                     $ 6,287,149                  
 
                                                                 
Interest bearing liabilities
                                                                       
Deposits:
                                                                       
Savings
  $ 584,542       12,559       2.15 %   $ 369,504       2,936       0.79 %   $ 298,867       909       0.30 %
NOW, money funds and checking
    1,450,960       26,031       1.79       1,502,058       20,413       1.36       1,582,182       16,593       1.05  
Certificate accounts
    992,043       45,886       4.63       868,777       35,610       4.10       784,525       22,582       2.88  
             
Total interest bearing deposits
    3,027,545       84,476       2.79       2,740,339       58,959       2.15       2,665,574       40,084       1.50  
             
Securities sold under agreements to repurchase and federal funds purchased
    194,222       9,829       5.06       304,635       15,309       5.03       314,782       9,760       3.10  
Advances from FHLB
    1,379,106       73,256       5.31       1,265,772       66,492       5.25       1,538,852       62,175       4.04  
Subordinated debentures and notes payable
    28,946       2,498       8.63       66,287       5,513       8.32       191,050       12,584       6.59  
             
Total interest bearing liabilities
    4,629,819       170,059       3.67       4,377,033       146,273       3.34       4,710,258       124,603       2.65  
             
Non-interest bearing liabilities
                                                                       
Demand deposit and escrow accounts
    946,356                       1,056,254                       979,075                  
Other liabilities
    55,683                       61,392                       53,150                  
 
                                                                 
Total non-interest bearing liabilities
    1,002,039                       1,117,646                       1,032,225                  
 
                                                                 
Stockholders’ equity
    568,719                       559,889                       544,666                  
 
                                                                 
Total liabilities and stockholders’ equity
  $ 6,200,577                     $ 6,054,568                     $ 6,287,149                  
 
                                                                 
Net interest income/net interest spread
            206,255       2.94 %             226,783       3.31 %             226,683       3.31 %
 
                                                                 
Tax equivalent adjustment
            (6,745 )                     (8,107 )                     (7,487 )        
Capitalized interest from real estate operations
                                  929                       1,879          
 
                                                                 
Net interest income
            199,510                       219,605                       221,075          
 
                                                                 
Margin
                                                                       
Interest income/interest earning assets
                    6.61 %                     6.65 %                     5.96 %
Interest expense/interest earning assets
                    2.99                       2.61                       2.11  
 
                                                                 
Tax equivalent net interest margin
                    3.62 %                     4.04 %                     3.85 %
 
                                                                 
 
(a)   Includes non-accruing loans
 
(b)   Average balances were based on amortized cost.
 
(c)   The tax equivalent basis is computed using a 35% tax rate.
For the Year Ended December 31, 2007 Compared to the Same 2006 Period
     The decrease in tax equivalent net interest income primarily resulted from a 42 basis point decline in the net interest margin and secondarily from higher interest-bearing liabilities partially offset by a slight increase in interest-earning assets.
     The significant decline in tax equivalent net interest margin reflects slowed core deposit growth, higher rates on deposit accounts and wholesale borrowings as well as lower loan yields during 2007 compared with 2006.
     The increase in deposit rates primarily resulted from competition in our markets for deposits which affected both our deposit pricing and deposit mix. Our deposit mix shifted unfavorably from lower cost demand and checking accounts to higher rate deposit products, and we experienced a gradual increase in certificate of deposit and money market rates resulting from the increasingly competitive markets. The balance of high yield savings and NOW accounts was $345.3 million at December 31, 2007 compared to $174.3 million at December 31. 2006.

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Additionally, the balances of public funds increased from $62.9 million at December 31, 2006 to $323.9 million at December 31, 2007. Public fund deposits generally have higher rates than retail deposits.
     Rates on wholesale borrowings during 2007 were higher than 2006 reflecting an inverted yield curve during the majority of 2007 and elevated federal funds borrowing rates during the third quarter of 2007 associated with the effect that the sub-prime liquidity crisis had on capital markets and interest rates. The Federal Reserve began reducing short term interest rates in September 2007 resulting in lower wholesale borrowings costs during the fourth quarter of 2007 compared to the same 2006 period.
     The decline in loan yields reflects a change in the loan product mix to lower yielding residential loans from higher yielding commercial real estate loans as well as a significant increase in non-accrual commercial real estate loans. Non-accrual commercial loans increased to $165.8 million at December 31, 2007 from zero at December 31, 2006. Additionally, yields on consumer and small business loans were lower during the 2007 period primarily resulting from more recent originations at lower yields than the average yields of the portfolio.
     BankAtlantic’s average interest earning assets increased primarily as a result of higher average loan balances. The increase in average loan balances was due to purchases of residential loans and the origination of home equity and small business loans to retail banking customers. These increases in average loan balances were partially offset by declines in average commercial real estate loan balances primarily resulting from lower loan originations due to the down-turn in the Florida real estate market. In response to the current economic environment BankAtlantic continues to review its underwriting criteria and anticipates lower growth in its home equity and commercial residential construction loan portfolios in subsequent periods.
     Management believes the recent 125 basis point decline in the federal funds rate in January 2008 may have a favorable impact on BankAtlantic’s net interest margin; however, the market trends noted above, increased competition among financial institutions in our markets and general economic conditions could offset any declines in wholesale borrowing rates.
For the Year Ended December 31, 2006 Compared to the Same 2005 Period
     Tax equivalent net interest income remained at the 2005 amount. The additional net interest income from higher yields on earning assets and lower volume on interest-bearing liabilities was offset by higher rates on interest-bearing liabilities and lower interest earning assets. The net interest margin improved by 19 basis points resulting in part from growth in non-interest bearing deposit accounts.
     BankAtlantic’s average interest earning asset balances declined as a result of lower investment securities, and lower residential and commercial real estate loan average balances. The decline in residential loan and investment securities average balances reflects a decision by management to not replace principal pay-downs on these loans and securities in response to a flat interest rate yield curve environment. The average balance declines were partially offset by higher consumer, commercial business and small business loan average balances relating to the origination of loans to retail and small business customers.
     The net interest spread was 3.31% during 2006 and 2005. Average interest-bearing deposits, which have lower rates than other borrowings, increased from 57% of total average interest-bearing liabilities during 2005 to 63% of total average interest-bearing liabilities during 2006. The increase in deposit balances mitigated the impact of increased rates on interest-bearing liabilities. As a result, the increase in yields on earning assets generally matched the increase in rates on interest-bearing liabilities. Commencing in the latter half of 2005, BankAtlantic used its growth in deposits to reduce borrowings in response to the flat yield curve environment. Average core deposit balances increased from $2.0 billion during 2005 to $2.2 billion during 2006. As a consequence of the growth in core deposits, BankAtlantic’s tax equivalent net interest income remained at 2005 amounts despite an unfavorable interest rate environment which began during the latter half of 2005.
     Capitalized interest represents interest capitalized on qualifying assets associated with a real estate development acquired as part of a 2002 financial institution acquisition.

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     The following table summarizes the changes in tax equivalent net interest income (in thousands):
                                                 
    Year Ended   Year Ended
    December 31, 2007   December 31, 2006
    Compared to Year Ended   Compared to Year Ended
    December 31, 2006   December 31, 2005
    Volume (a)   Rate   Total   Volume (a)   Rate   Total
         
Increase (decrease) due to:
                                               
 
                                               
Loans
  $ 5,375       (4,337 )     1,038       (16,204 )     36,470       20,266  
Tax exempt securities
    (3,986 )     96       (3,890 )     1,620       151       1,771  
Taxable investment securities (b)
    4,373       1,564       5,937       (4,733 )     4,461       (272 )
Federal funds sold
    97       76       173       (30 )     35       5  
         
Total earning assets
    5,859       (2,601 )     3,258       (19,347 )     41,117       21,770  
         
Deposits:
                                               
Savings
    4,620       5,003       9,623       561       1,466       2,027  
NOW, money funds, and checking
    (917 )     6,535       5,618       (1,089 )     4,909       3,820  
Certificate accounts
    5,702       4,574       10,276       3,453       9,575       13,028  
         
Total deposits
    9,405       16,112       25,517       2,925       15,950       18,875  
         
Securities sold under agreements to repurchase
    (5,588 )     108       (5,480 )     (510 )     6,059       5,549  
Advances from FHLB
    6,020       744       6,764       (14,345 )     18,662       4,317  
Subordinated debentures
    (3,222 )     207       (3,015 )     (10,376 )     3,305       (7,071 )
         
 
    (2,790 )     1,059       (1,731 )     (25,231 )     28,026       2,795  
         
Total interest bearing liabilities
    6,615       17,171       23,786       (22,306 )     43,976       21,670  
         
Change in tax equivalent interest income
  $ (756 )     (19,772 )     (20,528 )     2,959       (2,859 )     100  
         
 
(a)   Changes attributable to rate/volume have been allocated to volume.
 
(b)   Average balances were based on amortized cost.
     BankAtlantic experienced increases in both interest-earning assets and interest-bearing liabilities during 2007. The higher interest-earnings assets increased the tax equivalent interest income by $5.9 million which was more than offset by the increase in interest-bearing liabilities which increased interest expense by $6.6 million. The decrease in interest-earning asset yields reduced interest income by $2.6 million while the higher rates on interest-bearing liabilities increased interest expense by $17.2 million. As discussed above, the lower loan yields primarily reflect a change in the mix of loans from higher yielding loan products to lower yielding residential loans and the increase in deposit and borrowing rates were primarily due to competitive pricing in our markets, a change in the mix of deposits and higher short term borrowing rates during 2007 compared to 2006. The combination of increased cost of funds due to external factors and lower yields on interest-earnings assets due to declining average balances on higher yielding loan products had a significant unfavorable effect on our net interest income.
     BankAtlantic experienced declines in both interest-earning assets and interest-bearing liabilities during 2006 compared to the same 2005 period. The decline in interest-earnings assets reduced tax equivalent interest income by $19.3 million and the decline in interest-bearing liabilities reduced interest expense by $20.9 million. The increase in interest-earning asset yields increased interest income by $41.1 million while the higher rates on interest-bearing liabilities increased interest expense by $42.5 million. From January 1, 2005 through December 31, 2006, the prime interest rate increased from 5.25% to 8.25%. This increase favorably impacted the yields on earning assets, but the increase was offset by higher rates on short term borrowings, certificate accounts, money market deposits, LIBOR-based FHLB advances and long term debt. As a consequence, BankAtlantic’s interest rate spread has remained at the 2005 percentage.

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     BankAtlantic’s Allowance for Loan Losses
     Changes in the allowance for loan losses were as follows (in thousands):
                                         
    For the Years Ended December 31,
    2007   2006   2005   2004   2003
     
Balance, beginning of period
  $ 43,602       41,192       46,010       45,595       48,022  
Charge-offs:
                                       
Commercial business
                            (2,394 )
Commercial real estate
    (12,562 )     (7,000 )           (645 )      
Small business
    (2,554 )     (951 )     (764 )     (238 )     (771 )
Consumer — home equity
    (7,065 )     (681 )     (259 )     (585 )     (1,563 )
Residential real estate
    (461 )     (239 )     (453 )     (582 )     (681 )
     
Continuing loan products
    (22,642 )     (8,871 )     (1,476 )     (2,050 )     (5,409 )
Discontinued loan products
          (34 )     (1,218 )     (2,026 )     (6,314 )
     
Total charge-offs
    (22,642 )     (8,905 )     (2,694 )     (4,076 )     (11,723 )
     
Recoveries:
                                       
Commercial business
    96       291       18       536       95  
Commercial real estate
    304       419       1,471       4,052       3  
Small business
    417       566       899       418       559  
Consumer — home equity
    578       536       401       370       622  
Residential real estate loans
    15       348       65       486       726  
     
Continuing loan products
    1,410       2,160       2,854       5,862       2,005  
Discontinued loan products
    808       581       1,637       3,738       8,572  
     
Total recoveries
    2,218       2,741       4,491       9,600       10,577  
     
Net (charge-offs) recoveries
    (20,424 )     (6,164 )     1,797       5,524       (1,146 )
Provision for (recovery from) loan losses
    70,842       8,574       (6,615 )     (5,109 )     (547 )
Adjustments to acquired loan losses
                            (734 )
     
Balance, end of period
  $ 94,020       43,602       41,192       46,010       45,595  
     
     The significant increase in the provision for loan losses during 2007 primarily resulted from the rapid deterioration in the Florida real estate market and the associated rapid increase in non-performing loans. The $70.8 million provision for loan losses for the year ended December 31, 2007 includes certain specific reserves associated with 10 commercial development loans placed on non-accrual during the year ended December 31, 2007, established by estimating the fair value of the collateral less costs to sell. The remaining increase in the provision for loan losses during 2007 primarily resulted from an increase in the allowance for loan losses associated with the commercial residential development loan portfolio and to a lesser extent the consumer home equity loan portfolio. These increases were for estimated losses we believe to be inherent in the loan portfolio as of December 31, 2007 that have not yet been confirmed or specifically identified.
     The increase in the commercial residential development loan portfolio allowance was primarily based on the deterioration of economic conditions in the Florida residential real estate market. During 2007, home sales and median home prices declined substantially on a year-over-year basis in all major metropolitan areas in Florida, with conditions deteriorating rapidly during the summer of 2007. The housing industry is experiencing what many consider to be its worst downturn in 16 years and market conditions have continued to worsen throughout 2007 and into 2008 reflecting, in part, decreased availability of mortgage financing for residential home buyers, reduced demand for new construction resulting in a significant over- supply of housing inventory, and increased foreclosure rates. Additionally, certain national and regional home builders have sought or indicated that they may seek bankruptcy protection. In addition to our significant increase in non-performing and classified loans, we experienced $12.6 million of charge-offs related to three commercial residential development loans that we wrote-down to estimated fair value of the collateral less costs to sell.

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          The consumer loan portfolio allowance for loan losses increased by 23% at December 31, 2007 compared to December 31, 2006 based on unfavorable home equity loan delinquency trends, higher non-performing home equity loans and a significant increase in charge-offs during the fourth quarter of 2007. The recent decline in residential real estate prices and residential home sales in markets where many of the homes securing our home equity loans are located, subjects us to potentially higher charge-off amounts compared to historical trends. Management believes that these factors as well as the deteriorating economic conditions in Florida and the difficulty of homeowners to refinance their mortgage debt resulted in increased losses inherent in our home equity loan portfolio.
          Market conditions may result in BankAtlantic’s commercial real estate loan borrowers having difficulty selling lots for an extended period. Also market conditions may result in BankAtlantic’s home equity consumer loan customers being unable to sell or refinance their homes. These current market conditions would be expected to result in an increase in loan delinquencies and non-accrual loan balances.  A prolonged decline in the residential real estate market and collateral values will likely result in increased credit losses in these loan portfolios.    
          The provision for loan losses during the year ended December 31, 2006 primarily resulted from increases in the allowance for commercial real estate loans and a $7.0 million charge-off on one land development loan upon which BankAtlantic took possession of the real estate securing the loan during the fourth quarter of 2006. The qualitative component of the allowance for commercial real estate losses was increased during 2006 due to deteriorating economic conditions in the residential real estate market throughout 2006 and the concentration of land development loans in BankAtlantic’s loan portfolio.
          During 2005, our provision was a recovery due to decreased reserves associated with the commercial loan portfolio reflecting lower loan balances and a payoff of a large hotel loan. Loans to borrowers in the hospitality industry were allocated higher general reserves than other categories of loans in the portfolio. We also experienced a reduction in our classified loans during 2005.
          During prior periods we discontinued the origination of syndication, lease financings and indirect consumer loans and made major modifications to the underwriting process for small business loans (collectively, “discontinued loan products”.) We experienced net recoveries