BBX Capital Corp
Annual Report 2015

Plain-text annual report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Year Ended December 31, 2015 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 001-13133 BBX Capital Corporation (Exact name of registrant as specified in its charter) 01 Florida (State or other jurisdiction of incorporation or organization) 401 East Las Olas Boulevard Suite 800 Ft. Lauderdale, Florida (Address of principal executive offices) 65-0507804 (I.R.S. Employer Identification No.) 33301 (Zip Code) (954) 940-4000 (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: Title of Each Class Class A Common Stock, Par Value $0.01 Per Share Preferred Share Purchase Rights Name of Each Exchange on Which Registered New York Stock Exchange New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES [ ] NO [ X ] 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 [ ] NO [X ] Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [ X ] NO [ ] Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ X ] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) 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. [ ] 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 [ ] Non-accelerated filer [ ] (Do not check if a smaller reporting company) company [X] Accelerated filer [ ] Smaller reporting Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES [ ] NO [ X ] The aggregate market value of the voting common equity held by non-affiliates was $48.2 million, computed by reference to the closing price of the registrant’s Class A Common Stock on June 30, 2015. The registrant does not have any non-voting common equity. The number of shares of the registrant’s Class A Common Stock outstanding on March 7, 2016 was 16,199,145. The number of shares of the registrant’s Class B Common Stock outstanding on March 7, 2016 was 195,045. Portions of the registrant’s Definitive Proxy Statement relating to its 2015 Annual Meeting of Shareholders are incorporated by reference in Part III of this Form 10-K. ITEM I. BUSINESS PART I BBX Capital Corporation is referred to in this report together with its subsidiaries as “BBX Capital” “we,” “us,” or “our”, and is referred to in this report without its subsidiaries as the “Parent Company” or “BBX Capital Corporation”. BBX Capital is a Florida-based company, involved in the acquisition, development, ownership and management of and investments in real estate and real estate development projects as well as investments in operating businesses. Prior to the sale of BankAtlantic to BB&T Corporation (“BB&T”) on July 31, 2012 BBX Capital was a bank holding company and its principal asset was the ownership of BankAtlantic. The principal assets of BBX Capital currently consist of its 46% equity interest in Woodbridge Holdings, LLC (“Woodbridge”) and its ownership interests in Florida Asset Resolution Group, LLC (“FAR”), BBX Capital Asset Management, LLC (“CAM”), BBX Partners, Inc., Renin Holdings, LLC, BBX Sweet Holdings, LLC and its acquired businesses and investments in eleven real estate joint ventures. In April 2013, BBX Capital acquired a 46% equity interest in Woodbridge. Woodbridge’s principal asset is its ownership of Bluegreen Corporation and its subsidiaries (“Bluegreen”). Bluegreen is a vacation ownership company with over 190,000 owners and over 60 owned or managed resorts. BFC Financial Corporation (“BFC”), the controlling shareholder of BBX Capital, owns the remaining 54% of Woodbridge. Bluegreen’s net income attributable to Woodbridge was $70.3 million, $57.5 million and $37.6 million for the years ended December 31, 2015, 2014 and 2013, respectively. loans and CAM, which was formed in connection with the sale of BankAtlantic to BB&T and BBX Partners are wholly owned subsidiaries and their primary assets are investments in real estate joint ventures, non-performing commercial formerly held by BankAtlantic. FAR, which was also formed in connection with the sale of BankAtlantic to BB&T, was a special purpose limited liability company whose membership interests were initially held by both BB&T, which held 95% of FAR’s preferred interests and BBX Capital Corporation, which held the remaining 5% of the preferred interests and all of the residual common equity interests in FAR. On May 6, 2015, BB&T’s preferred interest in FAR was repaid in full and redeemed and FAR became a wholly-owned subsidiary of BBX Capital Corporation. FAR’s primary assets are loans and foreclosed real estate formerly held by BankAtlantic. real estate foreclosed On October 30, 2013, a newly formed joint venture entity, Renin Holdings, LLC (“Renin”), owned 81% by BBX Capital Corporation and 19% by BFC, acquired substantially all of the assets and certain liabilities of Renin Corp for approximately $12.8 million (“the Renin Transaction”). Renin had $24 million of total assets as of October 30, 2013 and manufactures interior closet doors, wall décor, hardware and fabricated glass products and operates through headquarters in Canada and two manufacturing, assembly and distribution facilities in Canada and the United States as well as a sales facility in the United Kingdom. In December 2013, a wholly-owned subsidiary of BBX Capital, BBX Sweet Holdings, LLC, acquired Hoffman’s Chocolates (“Hoffman’s”). Hoffman’s had total assets of $5.3 million as of the acquisition date and aggregate revenues of $5.2 million for the year ended December 31, 2015. Hoffman’s is a manufacturer of gourmet chocolates, with retail locations in South Florida. Subsequent to January 2014, BBX Sweet Holdings acquired manufacturers in the chocolate and candy industries serving wholesalers such as boutique retailer, big box chains, department stores, national resort properties, corporate customers and private label brands. The companies acquired were Williams and Bennett, Helen Grace Chocolates (“Helen Grace”), Jer’s Chocolates (“Jer’s”), Anastasia Confections (“Anastasia”) and Kencraft Confections, LLC (“Kencraft”). The wholesale manufacturing companies acquired had aggregate total assets at acquisition of $8.0 million and total aggregate revenues during the year ended December 31, 2015 of $22.5 million. On April 30, 2015, BFC purchased 4,771,221 shares of BBX Capital’s Class A common stock through a tender offer and in September 2015, BFC acquired an additional 221,821 shares of BBX Capital’s Class A common 1 stock from its executive officers upon the vesting of restricted stock units. These share acquisitions increased BFC’s ownership percentage to approximately 81% of the issued and outstanding shares of BBX Capital’s Class A common stock, which together with the shares of BBX Capital’s Class B common stock owned by BFC, represented an approximate 81% equity interest and 90% voting interest in BBX Capital Corporation. BFC owns 100% of BBX Capital’s Class B common stock. As of December 31, 2015, BBX Capital had consolidated total assets of approximately $393.5 million, liabilities of $57.6 million and total equity of $336.0 million. This document contains forward-looking statements based on current expectations that involve a number of risks and uncertainties. All opinions, forecasts, projections, future plans or other statements, other than statements of historical fact, are forward-looking statements and may include words or phrases such as “plans,” “believes,” “will,” “expects,” “anticipates,” “intends,” “estimates,” “our view,” “we see,” “would” and words and phrases of similar import. The forward looking statements in this document are also 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”), and involve substantial risks and uncertainties. There is no assurance that such expectations will prove to be correct. Future results could differ materially as a result of a variety of risks and uncertainties, many of which are outside of management’s control. These risks and uncertainties include, but are not limited to: · · · · · the impact of economic, competitive and other factors affecting BBX Capital and its assets, including the impact of decreases in real estate values on BBX Capital’s business generally, the value of BBX Capital’s assets, the ability of BBX Capital’s borrowers to service their obligations and the value of collateral securing BBX Capital’s loans; the risk that loan losses will continue and the risks of additional charge-offs, impairments and required increases in BBX Capital’s allowance for loan losses and trade receivables; the adverse impact of and expenses associated with litigation including the risk that BBX Capital’s insurance carrier seeks to obtain reimbursement of the amounts it previously advanced to BBX Capital in connection with the action brought by the SEC against BBX Capital and Alan B. Levan and that the decision, verdict or remedy ordered by the court in the SEC action against BBX Capital and Mr. Levan will not be reversed on appeal; adverse conditions in the stock market, the public debt market and other financial and credit markets and the impact of such conditions on BBX Capital’s activities; the risk that the assets retained by BBX Capital in CAM, BBX Partners and FAR may not be monetized at the values currently ascribed to them and the risks associated with the impact of periodic valuation of BBX Capital’s assets for impairment. In addition, this document contains forward looking statements relating to BBX Capital’s ability to successfully implement its currently anticipated business plans, which may not be realized as anticipated, if at all, and BBX Capital’s current and anticipated investments i n operating businesses may not achieve the returns anticipated or may not be profitable, including the risks associated with: · · · BBX Capital’s investment in Bluegreen (through Woodbridge), the BBX Sweet Holdings’ investments in Hoffman’s, Williams & Bennett, Jer’s Chocolates, Helen Grace Chocolates, Anastasia Confections and Kencraft, and BBX Capital’s investment with BFC in Renin. This document also contains forward looking statements relating to BBX Capital’s investments in real estate developments, either directly or through joint ventures. These risks include: · · · · · exposure to downturns in the real estate and housing markets; exposure to risks associated with real estate development activities; risks associated with obtaining necessary zoning and entitlements; risks that BBX Capital’s joint venture partners may not fulfill its obligations, and risks that the projects will not be developed as anticipated or be profitable. 2 BBX Capital’s investment in Woodbridge, which owns Bluegreen Corporation, exposes BBX Capital to: · risks relating to Bluegreen’s business and Bluegreen’s ability to pay dividends to Woodbridge and in turn Woodbridge’s ability to pay dividends to BBX Capital, and risks inherent in the vacation ownership industry, including risks associated with regulatory compliance and customer complaints and other risks which are identified in BFC’s Annual Report on Form 10-K filed on March 1 5, 2016 with the SEC and available on the SEC’s website at www.sec.gov. · BBX Sweet Holdings acquisitions and BBX Capital’s acquisition of the assets of Renin Corp exposes BBX Capital to the risks of its respective businesses, which include: · · · · · · the amount and terms of indebtedness associated with the acquisitions which may impact BBX Capital’s financial condition and results of operations and limit BBX Capital’s activities; the failure of the companies to meet financial covenants and that BBX Capital may be required to make further capital contributions or advances to the acquired companies; the risk that the businesses acquired by BBX Capital may not be profitable; the risk that the integration of these operating businesses may not be completed effectively or on a timely basis; the risk that BBX Capital may not realize any anticipated benefits or profits; and Renin’s operations expose BBX Capital to foreign currency exchange risk of the U.S. dollar compared to the Canadian dollar and Great Britain pound. Past performance and perceived trends may not be indicative of future results. In addition to the risks and factors identified above, reference is also made to other risks and factors detailed in this Annual Report on Form 10-K, including Item 1A. Risk Factors. BBX Capital cautions that the foregoing factors are not exclusive. Operating financial information shown by segment is included in Note 22 to BBX Capital’s Consolidated Financial Statements. BBX Capital reports its operations through three business segments –BBX, Renin and Sweet Holdings. BBX Capital’s internet website address is www.bbxcapital.com. BBX Capital’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 BBX Capital’s website, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). BBX Capital’s internet website and the information contained in or connected to BBX Capital’s website are not incorporated into, and are not part of this Annual Report on Form 10-K. BBX Capital’s Business Strategy Since the sale of BankAtlantic in July 2012, BBX Capital has been repositioning its business, monetizing its legacy portfolios of loans and real estate, and pursuing its goal of transitioning into a growth business by focusing on real estate opportunities and acquiring operating businesses. The majority of BBX Capital’s assets do not generate income on a regular or predictable basis. Recognizing the nature of BBX Capital’s assets, BBX Capital’s goal is to build long-term value as opposed to focusing on quarterly or annual earnings. While capital markets generally encourage short term results, BBX Capital’s objective continues to be long term growth as measured by increases in book value per share over time. Further, BBX Capital does not expect to generate significant revenue from the legacy BankAtlantic assets until the assets are monetized through repayments or transactions involving the sale, joint venture or development of the underlying real estate. BBX Capital is currently utilizing the cash flow from the monetization of its assets and dividends from Woodbridge to pay operating expenses and to invest in income producing real estate, real estate developments, real estate joint ventures and operating businesses. While there is no assurance it will be successful, BBX Capital is seeking to manage its cash needs and the timing of monetizing its existing assets with new investments to maximize its returns. In some cases, this may involve immediate sale and in other cases a longer term 3 hold or development (either directly or through a joint venture). BBX Capital may also consider transactions involving its investments in operating businesses, including Renin and Sweet Holdings, and BBX Capital may in connection with BBX Capital’s investment with BFC in Woodbridge pursue transactions involving Bluegreen, either directly or indirectly through a transaction involving Woodbridge, to monetize all or a portion of BBX Capital’s investment in Woodbridge. Such transactions may include pursuing a future sale or spin-off of a company or other transactions involving public or private issuances of a company’s debt or equity securities which might result in the ownership of less than 100% of an entity. BBX Capital is also engaged in land entitlement activities and land development projects on certain properties that BBX Capital acquired through foreclosure. These projects have included or may include in the future selling or leasing the improved properties to third parties or entering into joint ventures with developers for the development of residential and commercial real estate projects involving the contribution of properties by BBX Capital as well as potential cash investments in projects. BBX Capital has also pursed potential investments in joint venture real estate projects that include real estate held by a joint venture partner or property acquired from unrelated parties. As a result of the substantial decline in real estate values during the recession, the majority of BBX Capital’s non-performing commercial real estate loans and foreclosed real estate were written down in prior periods to the then prevailing estimated fair values of the collateral less costs to sell. BBX Capital has seen significant improvements generally in real estate markets and believes that the prior estimated fair values of the underlying collateral securing certain of BBX Capital’s commercial real estate loans and BBX Capital’s real estate carrying values may be below current market values. Additionally, the recovery in the real estate market has favorably affected the financial condition of BBX Capital’s borrowers and BBX Capital is aggressively pursuing its borrowers and/or guarantors in order to maximize recoveries through cash settlements, loan workout arrangements or participation interests in the development or performance of the collateral. If BBX Capital is successful in its efforts, BBX Capital expect to recognize gains to the extent that the amounts it collects exceed the carrying value of its commercial loans and foreclosed real estate and expect that these gains will be reflected in an increase in BBX Capital’s shareholders’ equity in the long term. Due to the nature of these activities however, BBX Capital does not expect to generate revenues or earnings on a predictable or consistent basis. Accordingly, BBX Capital expects the results of its operations to vary significantly on a quarterly basis and BBX Capital may experience losses in future periods. Legacy Assets Loans On July 31, 2012, BBX Capital completed the sale of BankAtlantic to BB&T. BBX Capital retained through CAM, BBX Partners and FAR certain loans, tax certificates and foreclosed real estate and liabilities related to these retained assets which had been held by BankAtlantic. These retained loans were grouped in five loan segments as follows: residential loans, commercial real estate loans, consumer loans, small business loans and commercial non-mortgage loans. CAM holds loans from the commercial real estate and the commercial non-mortgage loan segments. BBX Partners holds loans from the commercial real estate segment and FAR holds loans from all five segments. Residential: The majority of BBX Capital’s residential loans were originally acquired in the secondary markets and were originated by financial institutions. These loans, which are serviced by independent servicers, are secured by properties located throughout the United States. Residential loans were typically purchased in bulk and were generally non-conforming loans under agency guidelines due primarily to the size of the individual loans (“jumbo loans”). A portfolio of residential loans which were made primarily to “low to moderate income” borrowers in accordance with the Community Reinvestment Act were also retained but were sold during the year ended December 31, 2014. BBX Capital’s residential loans serviced by independent servicers were classified as loans held-for-sale as of December 31, 2015. Commercial Real Estate: Commercial real estate loans were originated in connection with the borrowers’ acquisition, development and construction of various types of properties including office buildings, non-residential properties. Commercial real estate loans were also originated in connection with borrowers’ acquisition or refinance of existing income-producing properties. These loans were primarily secured by property located in Florida. construction residential shopping centers, other retail and 4 Commercial non-mortgage loans: These loans are generally business loans secured by the receivables, inventory, equipment, and/or general corporate assets of the borrowers. Consumer: Consumer loans consist primarily of loans to individuals originated through BankAtlantic’s retail network. The majority of consumer loans are home equity lines of credit secured by a first or second mortgage on the primary residence of the borrower, substantially all of which are located in Florida. Small Business: BankAtlantic originated small business loans to companies located primarily in markets within BankAtlantic’s branch network. Small business loans were originated primarily on a secured basis and do not generally exceed $2.0 million individually. These loans were originated with maturities ranging generally from one to three years or due upon demand. Lines of credit extended to small businesses are due upon demand. Small business loans have either fixed or variable prime-based interest rates. Real Estate Real estate was generally acquired through foreclosure or contractual settlements with borrowers. Real estate is classified into two categories: real estate held-for-sale or real estate held-for- investment. Real estate held-for-sale: Real estate is classified as held-for-sale when the property is available for immediate sale in its present condition, management commits to a plan to sell the property, an active program to locate a buyer has been initiated, the property is being marketed at a price that is reasonable in relation to its current fair value and it is likely that a sale will be completed within one year. Real estate held-for-investment: Real estate is classified as held-for-investment when the property is not available for immediate sale due to anticipated renovations and potential improvements in operating performance before sale, management pursuing joint venture opportunities, potential development, or management’s decision to retain the property in anticipation of appreciation in market value in subsequent periods. BBX Capital Business Segments BBX Capital operates through three reportable business segments – BBX, Renin and Sweet Holdings. BBX Reportable Segment - The BBX reportable segment consists of the activities associated with managing the commercial loan portfolio, real estate properties of BBX Capital and its consolidated subsidiaries, including BBX Partners, CAM and FAR and the portfolio of BankAtlantic’s previously charged off loans, BBX Capital’s investment in Woodbridge and investments in real estate developments and joint ventures. Renin Reportable Segment – The Renin reportable segment consists of the activities of Renin Holdings, LLC and its subsidiaries (“Renin”). Renin manufactures interior closet doors, wall décor, hardware and fabricated glass products and its distribution channels include big box and independent home improvement retailers, builders, other manufacturers and specialty retail outlets primarily in North America. Renin is headquartered in Brampton, Ontario and has two manufacturing, assembly and distribution facilities located in Brampton, Ontario and Tupelo, Mississippi and a sales office in the United Kingdom. BBX Capital owns 81% of Renin and BFC owns the remaining 19%. Sweet Holdings Reportable Segment - The Sweet Holdings reportable segment consists of the activities of BBX Capital’s acquired operating businesses in the confection industry. The Sweet Holdings reportable segment companies manufacture chocolate and hard candy products which are sold through wholesale and retail distribution channels. In periods prior to June 30, 2015, FAR was reported as a separate business segment as its activities were restricted by FAR’s operating agreement to the monetization of FAR’s assets in order to repay BB&T’s preferred membership interest in FAR. As a result of the redemption of BB&T’s preferred interest in FAR during May 2015, 5 FAR activities are no longer restricted to the monetization of FAR’s assets. As a consequence, management changed BBX Capital’s internal reporting, combining the operations of FAR into BBX and the FAR reportable segment was consolidated with the BBX reportable segment for all periods presented. BBX Business Segment The BBX business segment includes the assets and related liabilities of CAM, FAR and BBX Partners and BBX Capital’s investment in Woodbridge and investments in real estate joint ventures. CAM was formed prior to the closing of the BB&T Transaction when BankAtlantic contributed to CAM cash and certain non-performing commercial loans, commercial real estate and previously written-off assets. CAM assumed the liabilities related to these assets. FAR was formed prior to the closing of BB&T Transaction and until May 2015 its operations consisted of overseeing the management and monetization of its assets and, where appropriate, orderly liquidations with a view to repaying its preferred membership interests and maximizing the cash flows of any remaining assets. FAR’s assets consist primarily of loans receivable and foreclosed real estate . Subsequent to May 2015, FAR became a wholly-owned subsidiary of BBX Capital managed by the BBX business segment. The BBX business segment’s primary assets are loans receivable, real estate held-for-sale and real estate held-for-investment, investments in real estate joint ventures and rights to BankAtlantic’s previously charged off loan portfolio and related judgments as well as its 46% equity interest in Woodbridge. BBX Capital acquired a 46% interest in Woodbridge in April 2013. Woodbridge’s principal asset is its ownership of Bluegreen. Bluegreen is a sales, marketing and management company focused on the vacation ownership industry. Bluegreen markets, sells and manages vacation ownership interests (“VOIs”) in resorts, which are generally located in popular, high-volume, “drive-to” vacation destinations, and were either developed or acquired by Bluegreen or developed and owned by others, in which case Bluegreen earns fees for providing such services. Bluegreen utilizes a points-based system, known as the Bluegreen Vacation Club, where purchasers of VOIs are allotted points that represent their ownership and beneficial use rights in perpetuity in the Bluegreen Vacation Club and can be used to reserve occupancy at participating resorts. Bluegreen Vacation Club members may use their points to stay in any of Bluegreen Vacation Club resorts or take advantage of other vacation options, including an exchange program offered by a third-party world-wide vacation ownership exchange network of over 4,000 resorts and other vacation experiences such as cruises and hotel stays. Bluegreen also provides property association management services, mortgage servicing, VOI title services, reservation services, and construction design and development services. In addition, Bluegreen provides financing to individual purchasers of VOIs, which provides significant interest income to Bluegreen. Bluegreen had total assets of $1.1 billion as of December 31, 2015 and net income attributable to Woodbridge of $70.3 million, $57.5 million and $37.6 million for the years ended December 31, 2015, 2014 and 2013 respectively. BBX Capital had investments in unconsolidated real estate joint ventures of approximately $43.0 million as of December 31, 2015. BBX Capital anticipates actively pursuing additional joint venture investments with real estate developers which may involve BBX Capital’s contribution of held- for-investment real estate acquired through foreclosure or real estate purchased with BBX Capital’s own funds for joint venture development. BBX Capital may also invest funds in developments identified by joint venture partners. BBX Capital currently expects that in most cases, BBX Capital’s joint venture partners will be responsible for the management of the project and BBX Capital will participate in major decisions and monitor the development’s progress. These joint venture real estate developments are anticipated to include multifamily and single family housing, commercial retail complexes, office buildings and land entitlement projects. To a lesser extent, BBX Capital may engage in land entitlement and development activities without joint venture partners. BBX Capital’s real estate investments will in most instances be multi-year projects and it is not expected that earnings from these activities will be generated in the near term. BBX Capital’s goal is to produce earnings from these projects over time. 6 BBX reportable segment had investments in the following real estate joint ventures as of December 31, 2015 and 2014 (in thousands): Investment in unconsolidated real estate joint ventures Altis at Kendall Square, LLC $ Altis at Lakeline - Austin Investors LLC New Urban/BBX Development, LLC Sunrise and Bayview Partners, LLC Hialeah Communities, LLC PGA Design Center Holdings, LLC CCB Miramar, LLC Centra Falls, LLC The Addison on Millenia Investment, LLC BBX/S Millenia Blvd Investments, LLC Altis at Bonterra - Hialeah, LLC Investments in unconsolidated real estate joint ventures Investment in consolidated real estate joint venture Investment in consolidated joint venture JRG/BBX Development, LLC $ $ Altis at Kendall Square, LLC (“Kendall Commons”) December 31, 2015 2014 764 5,210 864 1,577 4,569 1,911 875 727 5,778 4,905 15,782 42,962 1,264 5,000 996 1,723 5,091 1,991 - - - - - 16,065 - 964 In March 2013, BBX Capital sold land to Altman Development (“Altman”), a third party real estate developer, for net proceeds of $8.0 million. Altman is developing on that land a multifamily rental community comprised of 12 three-story apartment buildings, one mixed-use building and one clubhouse totaling 321 apartment units. BBX Capital has invested $1.3 million of cash in the project as one of a number of investors. The twelve three-story apartment buildings, clubhouse and mixed-use building have been completed. After all members (including BBX Capital) receive a preferred return of 10% and all contributed capital is returned, BBX Capital is entitled to receive 13% of venture distributions until a 15% internal rate of return has been attained. Thereafter, BBX Capital will be entitled to receive 9.75% of any venture distributions. Altis at Lakeline – Austin Investor, LLC In December 2014, BBX Capital invested $5.0 million as one of a number of investors in a planned multi-family development – Altis at Lakeline – being developed by Altman. Located on an approximate 23 acre parcel in the northwest area of Austin, Texas, Altis at Lakeline is planned for 19, two and three story, residential apartment buildings with 354 apartment units, 38 enclosed garages, and a private resort style 5,500 square foot clubhouse. Construction commenced in the first quarter of 2015 and the facility is anticipated to be substantially completed during the fourth quarter of 2016. After all investors receive a preferred return of 9% and all contributed capital is returned, BBX Capital is entitled to receive 26.3% of venture distributions until an 18% internal rate of return has been attained and thereafter BBX Capital will be entitled to receive 18.8% of any venture distributions. New Urban/BBX Development, LLC (“Village at Victoria Park”) Village at Victoria Park consists of approximately 2 acres of vacant land previously owned by BBX Capital that is located near downtown Fort Lauderdale, Florida. In December 2013, BBX Capital invested in a joint venture 7 with New Urban Communities to develop the project as 30 single-family homes. The project is a 50% - 50% joint venture with New Urban Communities serving as the developer and manager of the joint venture. The project commenced construction and sales during the third quarter of 2014. Closings are projected to begin during the first quarter of 2016. Bayview (Sunrise and Bayview Partners, LLC) In June 2014, BBX Capital invested in a joint venture with an affiliate of Procacci Development Corporation. The joint venture acquired for $8.0 million approximately three acres of real estate located at Bayview Drive and Sunrise Boulevard in Fort Lauderdale, Florida. The joint venture entity, Sunrise and Bayview Partners, LLC, is a 50% - 50% joint venture between BBX Capital and an affiliate of Procacci Development. The property is currently improved with an approximate 84,000 square foot office building along with a convenience store and gas station, and located minutes from the Fort Lauderdale beaches and directly across from the Galleria at Ft. Lauderdale. BBX Capital anticipates that the property will be redeveloped into a mixed-use project at some point in the future. Hialeah Communities, LLC (Bonterra – CC Homes) During the third quarter of 2014, BBX Capital invested in a joint venture agreement with CC Homes, a Codina-Carr Company, to develop homes in a portion of Bonterra Communities (formerly called the Hialeah Communities) in Hialeah, Florida. As the developer and manager of the joint venture, CC Homes currently plans to build approximately 394 single-family homes. BBX Capital transferred approximately 50 acres of land at an agreed upon value of approximately $15.6 million subject to an $8.3 million mortgage which was assumed by the joint venture. In exchange, BBX Capital received its joint venture interest and $2.2 million of cash. Anticipated project profits resulting from the joint venture after receipt of aggregate capital contributions and the preferred return will be distributed to CC Homes and BBX Capital on a 55% and 45% basis, respectively. Any necessary additional capital for the joint venture is required to be contributed by CC Homes and BBX Capital on a 43% and 57% basis, respectively. BBX Capital is a guarantor of 26.3% of the joint venture’s $31.0 million acquisition and development loan. The project commenced land development activities in October 2015. PGA Design Center Holdings, LLC In December 2013, BBX Capital purchased for $6.1 million a commercial property in Palm Beach Gardens, Florida, with three existing buildings consisting of 145,000 square feet of mainly furniture retail space. The property, which is located in a larger mixed use property now known as PGA Station (formerly PGA Place), was substantially vacant at the date of acquisition. Subsequent to the acquisition of the property, BBX Capital entered into a joint venture with Stiles Development which acquired a 60% interest in the joint venture for $2.9 million in cash. BBX Capital contributed the property (excluding certain residential development entitlements having an estimated value of $1.2 million) to the joint venture in exchange for $2.9 million in cash and the remaining 40% interest in the joint venture. BBX Capital transferred the retained residential development entitlements to adjacent parcels owned by it in the PGA mixed use property now known as PGA Station (see below for a discussion of the other parcels owned by BBX Capital in PGA Station). The joint venture intends to seek governmental approvals to change the use of a portion of the property from retail to office and subsequently sell or lease the property. CCB Miramar, LLC In May 2015, BBX Capital invested in a joint venture with two separate unaffiliated developers relating to the acquisition of real estate in Miramar, Florida for the construction of single-family homes. BBX Capital contributed $875,000 for an approximate 35% interest in the joint venture and one of the developers contributed to the joint venture a contract to purchase the real estate. The purchase of the real estate is subject to certain closing conditions, including receipt of all necessary entitlements and completion of due diligence by the joint venture. 8 Centra Falls, LLC In August 2015, BBX Capital invested as one of a number of investors in a joint venture with an unaffiliated developer for the development and sale of 89 townhomes in Pembroke Pines, Florida. BBX Capital contributed $750,000 and is entitled to receive 7.143% of the joint venture distributions until a 12% return on its investment has been attained. Thereafter, BBX Capital will be entitled to 3.175% of the joint venture distributions thereafter. The project commenced construction and sales during the third quarter of 2015. Closings are projected to begin in 2016. The Addison on Millenia Investment, LLC In December 2015, BBX Capital invested as one of a number of investors in a joint venture to develop 11.8 acres in the Gardens at Millenia site located in Orlando, Florida into nine retail apartment buildings containing approximately 292 units. The joint venture intends to hold the property and operate the apartment project as an income producing business. BBX Capital transferred property with an agreed upon value of $5.8 million and $0.3 million of cash for its initial joint venture contribution. BBX Capital is entitled to receive 48% of the joint venture distributions until it receives its aggregate capital contributions plus a 10% per annum return on capital. Any distributions thereafter are shared based on its earnings with the managing member receiving an increasing percentage of distributions based on the joint venture’s internal rate of return. Construction is expected to commence in the first quarter of 2016. BBX/S Millenia Blvd Investments, LLC In October 2015, BBX Capital and an unaffiliated developer invested in a joint venture to develop a retail center on the Gardens of Millenia site in Orlando, Florida. The joint venture intends to obtain all necessary approvals, secure financing, construct all improvements, lease the premises and sell the property. BBX Capital transferred property with an agreed upon value of $7.0 million to the joint venture and received $0.7 million in cash and a 90% interest in the joint venture. BBX Capital is entitled to receive 90% of joint venture distributions until it receives its aggregate capital contributions plus an 8% per annum return on capital. Any distributions thereafter will be shared 54% to BBX Capital and 46% to the developer. Construction is expected to commence in the first quarter of 2016. Altis at Bonterra – Hialeah, LLC In December 2015, BBX Capital invested in a joint venture with Altman to develop approximately 314 apartment homes in a portion of Bonterra communities in Hialeah, Florida. BBX Capital transferred approximately 14 acres of land at an agreed upon value of approximately $9.4 million and cash of $7.5 million to the joint venture. BBX Capital is entitled to receive 95% of the joint venture distributions until it receives its aggregate capital contributions plus a 9% per annum return on Any distributions thereafter will be shared 85% by BBX Capital and 15% by capital. Altman. Construction is expected to commence in the first quarter of 2016. JRG/BBX Development, LLC (“North Flagler”) In October 2013, BBX Capital invested in a joint venture with JRG USA pursuant to which JRG USA assigned to the joint venture a contract to purchase for $10.8 million a 4.5 acre parcel overlooking the Intracoastal Waterway in West Palm Beach, Florida and BBX Capital contributed $0.5 million of cash. During 2015, the zoning district surrounding this property was changed to permit up to 15 stories in building height from 4 stories in building height. BBX Capital also owned a 2.7 acre parcel located adjacent to the 4.5 acre parcel which was the subject of the contract held by the North Flagler joint venture with JRG USA. The 2.7 acre parcel was acquired by BBX Capital through foreclosure. 9 In May 2015, the joint venture acquired the 4.5 acre parcel and sold the parcel to a third party developer for $20.0 million and BBX Capital sold the 2.7 acre parcel which had a carrying value of $3.2 million on the date of sale to the same developer for $11.0 million. BBX Capital recognized an aggregate $15.5 million gain on the sale of both parcels PGA Station BBX Capital owns land located in the newly named PGA Station, in the city of Palm Beach Gardens, Florida, with carrying values aggregating $8.4 million as of December 31, 2015. The property held by the PGA Design Center Holdings joint venture described above is adjacent to PGA Station. BBX Capital believes this property presents a variety of development opportunities, some of which are currently in the planning stages and remain subject to receipt of government approvals. BBX Capital is currently seeking governmental approvals for a 111 room limited-service suite hotel and approximately 190,000 square feet of office buildings on vacant tracts of land. The composition of the legacy loans transferred to CAM, BBX Partners and FAR in the BB&T was (in thousands): Loans held-for-investment: Loans receivable: Commercial non-real estate Commercial real estate Small business Consumer Residential Total loans held-for- investment Loans held-for-sale As of December 31, 2015 As of December 31, 2014 Unpaid Principal Balance Carrying Amount Unpaid Principal Balance Carrying Amount $ $ $ 12,985 23,188 5,890 4,687 117 11,250 16,294 4,054 2,368 69 3,061 40,270 - 3,868 - 1,326 24,189 - 2,306 - 46,867 34,035 47,199 27,821 34,342 21,354 56,887 35,423 10 The composition of the BBX reportable segment’s legacy real estate held-for-sale and held-for-investment was (in thousands): Real estate held-for-sale Land Rental properties Residential single-family Other Total real estate held-for-sale Real estate held-for-investment Land Rental properties Other Total real estate held-for-investment Renin Business Segment As of December 31, 2015 2014 25,994 17,162 2,924 258 46,338 As of December 31, 2015 2014 30,369 - 921 31,290 33,505 1,748 4,385 2,095 41,733 60,356 15,234 962 76,552 $ $ $ $ BBX Capital acquired the assets of Renin Corp. on October 30, 2013. Renin is headquartered in Brampton, Ontario and has two manufacturing, assembly and distribution facilities located in Brampton, Ontario a n d Tupelo, Mississippi and a sales and distribution office in the U.K. Renin manufactures interior closet doors, wall décor, hardware and fabricated glass products and its distribution channels include big box and independent home improvement retailers, builders, other manufacturers and specialty retail outlets primarily in North America. Renin had total revenues for the year ended December 31, 2015 and 2014 of $56.5 million and $57.8 million, respectively and total assets as of December 31, 2015 of $22.8 million. Renin’s net loss for the years ended December 31, 2015 and 2014 was $2.1 million and $2.1 million, respectively. Sweet Holdings Segment The Sweet Holding business segment activities consist of the operations of its acquired businesses in the candy and confections industry. Revenues from these acquisitions included in BBX Capital’s Consolidated Statement of Operations for the year ended December 31, 2015 and 2014 aggregated $27.8 million and $16.3 million, respectively. These business acquisitions had total assets as of December 31, 2015 of $36.9 million. Sweet Holdings’ net loss for the year ended December 31, 2015 was $8.4 million compared to net income of $3.1 million for the year ended December 31, 2014. Employees BBX Capital currently maintains comprehensive employee benefit programs that are considered by management to be generally competitive with programs provided by other employers in its markets. 11 The number of employees at the indicated dates was: December 31, 2015 December 31, 2014 Full- time Part- time Full- time Part- time 44 232 238 514 29 - 108 137 39 217 157 413 26 4 63 93 BBX Capital Renin Sweet Holdings Total Competition The industries in which BBX Capital conducts business are very competitive and BBX Capital faces substantial competition from real estate developers and building construction companies, and for investments from private equity funds, family offices and hedge funds. BBX Capital may compete with institutions and entities that are larger and have greater resources than the resources available to BBX Capital. Four companies in the candy and confections industry currently account for approximately 71% of the industry’s revenues reflecting significant consolidation in the industry in which Sweet Holdings operates. Renin operations include the manufacturing of wall décor, hardware, and fabricated glass. Renin’s products are sold mainly to large retailers as well as to housing and building construction companies. The industry in which Renin operates experiences intense competition from foreign importers and producers. 12 ITEM 1A. RISK FACTORS BBX Capital’s business and operations and the mix of its assets significantly changed as a result of the sale of BankAtlantic to BB&T during July 2012, and its financial condition and results of operations depend on the monetization of its assets at or near their current book values and its results of operations will depend on the success of its investments. As a result of the BB&T transaction, BBX Capital’s business and operations significantly changed from its business and operations prior to the sale of BankAtlantic. As a consequence, BBX Capital’s financial condition and results of operations will be dependent on its ability to successfully manage and monetize legacy assets and on the results of operations of Bluegreen and Bluegreen’s ability to continue to pay dividends to Woodbridge and in turn Woodbridge’s payment of dividends to BBX Capital. Further, BBX Capital’s loan portfolio and real estate may not be easily salable in the event BBX Capital decides to liquidate an asset through a sale transaction. BBX Capital’s financial condition and results of operations will be dependent in the long term on the success of its investments. If the legacy assets are not monetized at or near the current book values ascribed to them, or if these assets are liquidated for amounts less than book value, BBX Capital’s financial condition and results of operations would be adversely affected, and its ability to successfully pursue its business goals could be adversely affected. Because a majority of its assets do not generate income on a regular basis, BBX Capital does not expect to generate significant revenue or income with respect to these assets until such time as an asset is monetized through repayments or it consummates transactions involving the sale, joint venture or development of the underlying real estate or investments. Accordingly, BBX Capital expects its revenues and results of operations to vary significantly on a quarterly basis and from year to year. BBX Capital’s substantial investment in Woodbridge and BBX Capital’s indirect interest in Bluegreen exposes BBX Capital to the risks associated with Bluegreen and the vacation ownership industry. As previously described, BBX Capital invested $71.75 million in Woodbridge in April 2013 in exchange for a 46% equity interest in Woodbridge. Woodbridge owns all of the shares of Bluegreen’s common stock which constitute Woodbridge’s primary asset. While Woodbridge and Bluegreen are not consolidated into BBX Capital’s financial statements, its investment in Woodbridge is significant and its operating results and financial condition, including its liquidity, is dependent in part on Bluegreen’s performance and Bluegreen’s ability to pay dividends. Bluegreen is subject to various risks and uncertainties which may impact its business and results, including, but not limited to, the following: · · · Bluegreen’s business and operations, including its ability to market Vacation Ownership Interests (“VOIs”), is subject to risks related to general economic conditions and the availability of financing; The vacation ownership and hospitality industries are highly competitive, and Bluegreen may not be able to compete successfully; Bluegreen would incur substantial losses and Bluegreen’s liquidity position could be adversely impacted if the customers to whom Bluegreen provides financing default on their obligations; · While Bluegreen has attempted to restructure its business to reduce its need for and reliance on financing for liquidity in the short term, there is no assurance that Bluegreen’s business and profitability will not be impacted by its ability to obtain financing, which may not be available on favorable terms, or at all; · · · · Bluegreen's indebtedness may impact its financial condition and results of operations, and the terms of Bluegreen's indebtedness may limit its activities and its ability to pay dividends; The ratings of third-party rating agencies could adversely impact Bluegreen’s ability to obtain, renew or extend credit facilities, or otherwise raise funds; Bluegreen’s future success depends on its ability to market its products and services successfully and efficiently and Bluegreen’s marketing expenses may increase; Bluegreen may not be successful in increasing or expanding its capital-light business relationships, and its capital-light activities, including fee based, sales and marketing, just-in- time VOI arrangements, and secondary market sales activities, and such activities may not be profitable, which may have an adverse impact on Bluegreen’s results of operations and financial condition; 13  · · · · · · · · · Bluegreen’s results of operations and financial condition may be materially and adversely impacted if Bluegreen does not continue to participate in exchange networks and other strategic alliances with third parties or if Bluegreen’s customers are not satisfied with the networks in which Bluegreen participates or Bluegreen’s strategic alliances; The resale market for VOIs could adversely affect Bluegreen’s business; Bluegreen is subject to the risks of the real estate market and the risks associated with real estate development, including a decline in real estate values and a deterioration of other conditions relating to the real estate market and real estate development; Adverse outcomes in legal or other regulatory proceedings, including claims for development- related defects or consumer complaints to regulatory authorities, could adversely affect Bluegreen’s financial condition and operating results; Bluegreen may be adversely affected by extensive federal, state and local laws and regulations and changes in applicable laws and regulations, including with respect to the imposition of additional taxes on operations. In addition, results of audits of Bluegreen’s tax returns or those of Bluegreen’s subsidiaries may have a material and adverse impact on Bluegreen’s financial condition; Environmental liabilities, including claims with respect to mold or hazardous or toxic substances, could have a material adverse impact on Bluegreen’s financial condition and operating results; A failure to maintain the integrity of internal or customer data could result in damage to Bluegreen's reputation and/or subject Bluegreen to costs, fines, or lawsuits; Bluegreen’s technology requires updating and the failure to keep pace with developments in technology could impair Bluegreen's operations or competitive position; and The loss of the services of Bluegreen’s key management and personnel could adversely affect its business. For more detailed information regarding Bluegreen’s business, the risks set forth above and other risks which Bluegreen faces, see BFC’s Annual Report on Form 10-K for the year ended December 31, 2015, which is available free of charge on the SEC’s website at www.sec.gov, including the “Risk Factors – Risks Related to Bluegreen” section thereof. During the year ended December 31, 2015 and 2014 and the nine months ended December 31, 2013, BBX Capital received dividends totaling $ 76.0 million from Woodbridge following its receipt of dividends from Bluegreen. As indicated above, Bluegreen’s debt instruments contain restrictions on its ability to pay dividends. In addition, dividend payments by Bluegreen are subject to declaration by Bluegreen’s board of directors, and subsequent dividends by Woodbridge are subject to the approval of the board of directors of BFC as well as BBX Capital’s board of directors. Dividend decisions outside of BBX Capital’s control may not be made in BBX Capital’s best interest. If Bluegreen is unable to pay dividends or Bluegreen or Woodbridge does not otherwise pay dividends, BBX Capital’s liquidity would be materially and adversely impacted. See “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity” for additional information. BBX Capital’s future acquisitions may reduce earnings, require it to obtain additional financing and expose it to additional risks. BBX Capital’s business strategy includes investments in or acquisitions of operating companies, such as its acquisitions of Renin Corp. and the acquisitions of businesses by BBX Sweet Holdings in the candy and confections industry. Some of these investments and acquisitions may be material. While BBX Capital is seeking investments and acquisitions primarily in companies that provide opportunities for growth, it may not be successful in identifying these opportunities. Investments or acquisitions that it completes may not prove to be successful or even if successful may not initially generate income, or may generate income on an irregular basis or over a long time period. Accordingly BBX Capital’s results of operations may vary significantly on a quarterly basis and from year to year. Acquisitions may result in additional risks and may have a material adverse effect on BBX Capital’s results of operations. Acquisitions entail numerous risks, including: · · · · Difficulties in integrating and assimilating acquired management and operations; Risks associated with achieving profitability; The incurrence of significant due diligence expenses relating to acquisitions that are not completed; Unforeseen expenses and losses; 14  · · · Risks associated with entering new markets in which it has no or limited prior experience; The potential loss of key employees or founders of acquired organizations; and Risks associated with transferred assets and liabilities. BBX Capital may not be able to acquire or profitably manage additional businesses, or to integrate successfully any acquired businesses, including Renin and the businesses BBX Sweet Holdings acquired, without substantial costs, delays or other operational or financial difficulties, including difficulties in integrating information systems and personnel and establishing control environment processes across acquired businesses. The failure to do so could have a material adverse effect on its business, financial condition and results of operations. In addition, to the extent that operating businesses are acquired outside the United States or the State of Florida, there will be additional risks related to compliance with foreign regulations and laws including tax laws, labor laws, currency fluctuations and geography economic conditions. In addition, BBX Capital faces competition in making investments or acquisitions which could increase the costs associated with the investment or acquisition. Further, investments or acquisitions may rely on additional debt or equity financing. The issuance of debt will result in additional leverage which could limit its operating flexibility, and the issuance of equity could result in additional dilution t o its shareholders. In addition, such financing could consist of equity securities which have rights, preferences or privileges senior to BBX Capital’s Class A Common Stock. If BBX Capital requires additional financing in the future, the financing may not be available when needed or on favorable terms, if at all. Additionally, shareholder approval will not be sought in connection with any investments or acquisitions unless required by law or regulation. Some of BBX Capital’s operations are through unconsolidated joint ventures with unaffiliated third parties and BBX Capital may be adversely impacted by a joint venture partner’s failure to fulfill its obligations. By entering into joint ventures, BBX Capital can reduce the amount invest ed in the ownership and development of real estate properties. However, joint venture partners may become financially unable or unwilling to fulfill their obligations under the joint venture agreements. Most joint ventures borrow money to help finance their activities, and although recourse on the loans is generally limited to the managing members, joint ventures and their properties, BBX Capital has in some cases and may in the future provide ongoing financial support or guarantees. If joint venture partners do not meet their obligations to the joint venture, BBX Capital may be required to make significant expenditures which may have an adverse effect on its operating results or financial condition. Investments in real estate developments directly or through joint ventures expose it to market and economic risks inherent in the real estate construction and development industry. The real estate construction and development industry is highly competitive and subject to numerous risks which in many cases are beyond management’s control. The success of BBX Capital’s investments in real estate developments is dependent on many factors, including: · · · · · · · · · · Demand for or oversupply of new homes, rental apartments and commercial real estate; Demand for commercial real estate tenants; Real estate market values; Changes in capitalization rates impacting real estate values; Inventory of foreclosed homes negatively impacting selling prices; Availability and reasonable pricing of skilled labor; Availability and reasonable pricing of construction materials such as lumber, framing, concrete and other building materials; Changes in laws and regulations for new construction and land entitlements, including environmental and zoning laws and regulations; Natural disasters and severe weather conditions increasing costs, delaying construction, causing uninsured losses or reducing demand for new homes; Availability and cost of mortgage financing for potential purchasers; 15 · Mortgage loan interest rates; · Availability, delays and costs associated with obtaining permits, approvals or licenses necessary to develop property; Construction defects and product liability claims and; General economic conditions. · · Any of these factors could give rise to delays in the start or completion of a project, or increase the cost of developing a project, or could result in reduced prices and values for BBX Capital’s developments, including developments underlying its joint venture investments. A significant portion of BBX Capital’s assets are located in Florida and economic conditions in the Florida real estate market could adversely affect, BBX Capital’s earnings and financial condition. The legacy assets retained by BBX Capital in the BB&T Transaction and the real estate investments made by BBX Capital are primarily in the Florida market, and adverse changes to the Florida economy or the real estate market may negatively impact BBX Capital’s earnings and financial condition. BBX Capital’s business, the primary source of repayment for loans and the real estate collateralizing loans and real estate acquired through foreclosure or settlements with borrowers and its investments in real estate joint ventures are primarily concentrated in Florida. As a result, BBX Capital is exposed to geographic risks of high unemployment rates, declines in the housing industry and declines in the real estate market in Florida. Adverse changes in laws and regulations in Florida would have a negative impact on BBX Capital’s revenues, financial condition and business. Declines in the Florida housing markets may negatively impact the credit performance of BBX Capital’s loans and result in significant asset impairments. Further, the State of Florida is subject to the risks of natural disasters such as tropical storms and hurricanes, which may disrupt BBX Capital’s operations, adversely impact the ability of its borrowers to timely repay their loans, adversely impact the value of any collateral securing loans and BBX Capital’s portfolio of real estate (both held-for-sale and held-for- investment), or otherwise have an adverse effect on BBX Capital’s results of operations. The severity and impact of tropical storms, hurricanes and other weather related events are unpredictable. An increase in BBX Capital’s allowance for loan losses will result in reduced earnings. BBX Capital continues to be exposed to the risk that borrowers will be unable to repay their loans according to their terms and that any collateral securing the payment of these loans will not be sufficient to assure full repayment. Management evaluates the collectability of the 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; delinquency trends; estimated fair value of the collateral; and current economic conditions. Many of these factors are difficult to predict or estimate accurately, particularly in a changing economic environment. The process of determining the estimated losses inherent in the loan portfolio requires subjective and complex judgments and the level of uncertainty concerning economic conditions may adversely affect the ability to estimate the losses which may be incurred in the loan portfolio. If such evaluation is incorrect and borrowers’ defaults result in losses exceeding the portion of the allowance for loan losses allocated to those loans, or if perceived adverse trends requires significant increases in the allowance for loan losses in the future, BBX Capital’s earnings could be significantly and adversely affected. Non-accrual loans take significant time to resolve and adversely affect BBX Capital’s results of operations and financial condition, and could result in further losses in the future. At December 31, 2015, non-accrual loans totaled approximately $17.4 million or 72% of BBX Capital’s total loan portfolio. Non-accrual loans adversely affect net income through foreclosure costs, operating expenses and 16 taxes. Until these loans are monetized, BBX Capital may incur additional losses relating to these non-accrual loans. BBX Capital records interest income on non-accrual loans on a cash basis. When BBX Capital receives the collateral in foreclosures or similar proceedings, BBX Capital is required to mark the related collateral to the then fair market value, generally based on appraisals of the property. These loans also increase BBX Capital’s risk profile, and increases in the level of non-accrual loans adversely affect BBX Capital’s results of operations and financial condition. While BBX Capital seeks to manage non-accrual loans, decreases in the value of these loans or deterioration in the financial condition of borrowers, which is often impacted by economic and market conditions beyond BBX Capital’s control, could adversely affect BBX Capital’s business, results of operations and financial condition. In addition, the resolution of non-accrual loans requires significant commitments of management time. BBX Capital’s consumer loan portfolio is concentrated in home equity loans collateralized by properties located in South Florida. Financial institutions and other lenders have tightened underwriting standards which has limited the ability of borrowers to refinance. The majority of BBX Capital’s home equity loans are residential second mortgages that exhibit higher loss severity than residential first mortgages. If home prices decline, BBX Capital may experience higher credit losses from this loan portfolio. Since the collateral for this portfolio consists primarily of second mortgages, it is unlikely that BBX Capital will be successful in recovering all or any portion of BBX Capital’s loan proceeds in the event of a default unless BBX Capital is prepared to repay the first mortgage and such repayment and the costs associated with a foreclosure are justified by the value of the property. The cost and outcome of pending legal proceedings may impact BBX Capital’s results of operations. BBX Capital is involved in ongoing litigation which has resulted in significant selling, general and administrative expenses relating to legal and other professional fees. Pending proceedings include litigation brought by the SEC, litigation arising out of workouts and foreclosures, and legal proceedings associated with BankAtlantic’s tax certificate business. As discussed under Item 3. Legal Proceeding s, the jury in the SEC action found that BBX Capital and BBX Capital’s Chairman and Chief Executive Officer, Alan B. Levan had engaged in an act of fraud or deceit toward shareholders or prospective investors by making materially false statements knowingly or with severe recklessness (1) with respect to three statements in a July 25, 2007 conference call and (2) failing to classify certain loans as held-for sale in the 2007 Annual Report on Form 10-K. The jury also found that Mr. Levan made or caused to be made false statements to the independent accountants regarding the held for sale issue. BBX Capital and Mr. Levan have appealed the adverse judgment to the Eleventh Circuit Court of Appeals. While the results of appellate review are uncertain legal and related costs are being incurred in connection with the appeal. BBX Capital received legal fee and cost reimbursements from its insurance carrier in connection with the SEC action of approximately $5.8 million as of December 31, 2015 and the insurance carrier has indicated it may seek reimbursement for costs, charges and expenses advanced in connection with this matter. If BBX Capital is required to reimburse the insurance carrier, such reimbursements would adversely impact BBX Capital’s financial condition and results of operations. See Item 3. Legal Proceedings. Adverse market conditions may affect BBX Capital’s business and results of operations. BBX Capital’s financial condition and results of operations may be adversely impacted as a result of any downturn in the U.S. housing and commercial real estate markets and general economic conditions. Negative market and economic developments may cause increases in delinquencies and default rates of BBX Capital’s loans and may impact charge-offs and provisions for loan losses and the value of BBX Capital’s real estate and other real estate related assets. Renin sales are concentrated with two significant customers and there is significant competition in the industry. A significant amount of Renin’s sales are to big-box home centers. These home centers in many instances have significant negotiating leverage with their vendors, and are able to affect the prices Renin receives for its products and the terms and conditions on which Renin conducts its business with them. These home centers may also reduce the number of vendors they purchase from or make significant changes in their volume of purchases. Although homebuilders, dealers and other retailers represent other channels of distribution for Renin’s products, the 17 loss of a home center customer or reduced sales volume from any of these home centers would have a material adverse effect on Renin’s business. Further, Renin has substantial competition from overseas manufacturers of products similar to those sold by Renin. A significant portion of Renin’s business relies on home improvement and new home construction activity, both of which are cyclical and outside of management’s control. A significant portion of Renin’s business in Canada and the United States is dependent on the levels of home improvement activity, including spending on repair and remodeling projects, and new home construction activity. Macroeconomic conditions including consumer confidence levels, fluctuations in home prices, unemployment and underemployment levels, interest rates, regulatory initiatives, and the availability of home equity loans and mortgage financing affect both discretionary spending on home improvement projects as well as new home construction activity. Adverse changes in these factors or uncertainty regarding these macroeconomic conditions could result in a decline in spending on home improvement projects and a decline in demand for new home construction, both of which could adversely affect Renin’s results of operations. The operating results of Renin and BBX Sweet Holdings would be negatively impacted if they experience increased commodity costs or a limited availability of commodities. BBX Capital’s operating businesses purchase various commodities to manufacture products, including steel, aluminum, glass and mirror in the case of Renin, and sugar and cocoa in the case of BBX Sweet Holdings. Fluctuations in the availability and prices of these commodities could increase the cost to manufacture products. Further, increases in energy costs could increase production costs as well as transportation costs, each of which could negatively affect these businesses operating results. Renin’s and BBX Sweet Holdings’ existing arrangements with customers, competitive considerations and the relative negotiating power and resistance of home center customers and big-box retailers to price increases make it difficult to increase selling prices to absorb increased production costs. If Renin and BBX Sweet Holdings are not able to increase the prices of its products or achieve other cost savings or productivity improvements to offset any increased commodity and production costs, BBX Capital’s operating results could be negatively impacted. Unexpected events, such as natural disasters, severe weather and terrorist activities may disrupt Renin’s operations and increase its production costs. The occurrence of one or more unexpected events, including tsunamis, hurricanes, earthquakes, floods and other forms of severe weather or terrorist activities in countries or regions in which Renin’s suppliers are located could adversely affect Renin’s operations and financial performance. Natural disasters, acts or threats of war or terrorism, or other unexpected events could result in temporary or long-term disruption in the delivery or supply of necessary raw materials and component products from Renin’s suppliers, which would disrupt Renin’s production capabilities and likely increase its cost of doing business. Market demand for chocolate and candy products could decline. BBX Sweet Holdings and its acquired businesses operate in highly competitive markets and compete with larger companies that have greater resources. The success of these businesses is impacted by many factors, including the following: · · · · · · · Effective retail execution; Effective and cost efficient advertising campaigns and marketing programs; Adequate supply of commodities at a reasonable cost; Oversight of product safety; Ability to sell manufactured products at competitive prices; Response to changes in consumer preferences and tastes; and Changes in consumer health concerns, including obesity and the consumption of certain ingredients. A decline in market demand for chocolate and candy products could negatively affect operating results. 18 BBX Sweet Holdings product recall or product liability claims could have a material and adverse effect. Selling products for human consumption involves inherent legal and other risks, including product contamination, spoilage, product tampering, allergens, or other adulteration. BBX Sweet Holdings could decide or be required to destroy inventory, recall products or lose sales in connection with contamination, tampering, adulteration or other deficiencies. These events could result in significant losses and may damage BBX Sweet Holdings’ reputation, and discourage consumers from buying products, or cause production and delivery disruptions which would adversely affect BBX Sweet Holdings’ financial condition and results of operations. BBX Sweet Holdings may also incur losses if products cause injury, illness or death. A significant product liability claim may adversely affect both reputation and profitability, even if the claim is unsuccessful. BBX Capital’s financial performance may adversely affect its ability to access capital and may have a material adverse effect on its business, financial condition and results of operations. BBX Capital’s ability to fund operations and investment opportunities may depend on its ability to raise capital in the secondary markets and on its ability to monetize its portfolio of non-accruing loans and foreclosed real estate. Its ability to raise additional capital will depend on, among other things, conditions in the financial markets at the time, which are outside of BBX Capital’s control, as well as litigation and its financial condition, results of operations and prospects. The failure to obtain capital may have a material adverse effect on our results of operation and financial condition. BBX Capital is controlled by BFC and its controlling shareholders, and this control position may adversely affect the market price of BBX Capital’s Class A Common Stock. BFC currently owns 13,321,441 shares of BBX Capital’s Class A Common Stock, representing approximately 81% of the outstanding shares of such stock and all 195,045 outstanding shares of BBX Capital’s Class B Common Stock representing approximately 90% of BBX Capital’s total voting power. Additionally, Alan B. Levan and John E. Abdo, Vice Chairman of BBX Capital and BFC, collectively beneficially own shares of BFC’s Class A Common Stock and Class B Common Stock representing approximately 63% of BFC’s total voting power. BBX Capital’s Class A Common Stock and Class B Common Stock vote as a single group on most matters. Accordingly, BFC, directly, and Messrs. Levan and Abdo, indirectly through BFC, are in a position to control BBX Capital, elect BBX Capital’s board of directors and significantly influence the outcome of any shareholder vote. This control position may have an adverse effect on the market price of BBX Capital’s Class A Common Stock. BFC can reduce its economic interest in BBX Capital and still maintain voting control. BBX Capital’s Class A Common Stock and Class B Common Stock generally vote together as a single class, with the Class A Common Stock possessing a fixed 53% of the aggregate voting power of BBX Capital, and the Class B Common Stock possessing a fixed 47% of such aggregate voting power. BBX Capital’s Class B Common Stock currently represents less than 1% of BBX Capital’s total common equity and 47% of BBX Capital’s total voting power. As a result, the voting power of BBX Capital’s Class B Common Stock does not bear a direct relationship to the economic interest represented by the shares. Any issuance of shares of Class A Common Stock will further dilute the relative economic interest of the Class B Common Stock, but will not decrease the voting power represented by the Class B Common Stock. Further, BBX Capital’s Restated Articles of Incorporation provide that these relative voting percentages will remain fixed until such time as BFC and its affiliates own less than 97,253 shares of the Class B Common Stock, which is approximately 50% of the number of shares of Class B Common Stock that BFC now owns, even if additional shares of Class A Common Stock are issued. Therefore, BFC may sell up to approximately 50% of its shares of Class B Common Stock (after converting those shares to shares of Class A Common Stock), and significantly reduce its economic interest in BBX Capital, while still maintaining its voting power. If BFC were to take this action, it would widen the disparity between the equity interest represented by the Class B Common Stock and its voting power. Any conversion of shares of Class B Common Stock into shares of Class A Common Stock would further dilute the voting interests of the holders of the Class A Common Stock. 19 Provisions in BBX Capital’s Restated Articles of Incorporation and Amended and Restated Bylaws, and recently adopted shareholder rights plan, may make it difficult for a third party to acquire BBX Capital and could depress the price of BBX Capital’s Class A Common Stock. BBX Capital’s Restated Articles of Incorporation and Amended and Restated Bylaws contain provisions that could delay, defer or prevent a change of control of BBX Capital or its management. These provisions could make it more difficult for shareholders to elect directors and take other corporate actions. As a result, these provisions could limit the price that investors are willing to pay in the future for shares of BBX Capital’s Class A Common Stock. These provisions include: · · · the provisions in the Restated Articles of Incorporation regarding the voting rights of Class B Common Stock; the authority of the board of directors to issue additional shares of common or preferred stock and to fix the relative rights and preferences of the preferred stock without additional shareholder approval; and advance notice procedures to be complied with by shareholders in order to make shareholder proposals or nominate directors. In addition, on February 7, 2013, BBX Capital adopted a shareholder rights plan which is designed to preserve certain tax benefits available to BBX Capital. However, because the rights plan provides a deterrent to investors from acquiring a 5% or greater ownership interest in Class A Common Stock, it may have an anti-takeover effect. The loss of key personnel or the failure to attract and retain highly qualified personnel could adversely affect BBX Capital’s operations. BBX Capital’s performance is largely dependent on the talents and efforts of skilled individuals. BBX Capital’s business operations could be adversely affected if BBX Capital is unable to retain and motivate BBX Capital’s existing employees and attract new employees as needed. In addition, as previously described, the jury in the SEC action found that BBX Capital and Alan B. Levan committed violations of federal securities laws. While BBX Capital and Mr. Levan appealed the adverse judgment to the Eleventh Circuit Court of Appeals, the results of appellate review are uncertain . Mr. Alan Levan resigned as BBX Capital’s Chairman and Chief Executive Officer on December 23, 2015. BBX Capital believes that Mr. Abdo, who serves as a director and Vice Chairman of BBX Capital and Jarett Levan, the Board appointed acting Chairman and Chief Executive Officer will mitigate the loss of Mr. Alan Levan as Chairman and Chief Executive Officer. Information technology failures and data security breaches could harm BBX Capital’s business. BBX Capital relies on information technology (IT) systems, including Internet sites, data hosting facilities and other hardware and platforms, some of which are hosted by third parties. These IT systems, like those of most companies, may be vulnerable to a variety of interruptions, including, but not limited to, natural disasters, telecommunications failures, hackers, and other security issues. Moreover, BBX Capital’s computer systems, like those of most companies, are subjected to computer viruses or other malicious codes, and to cyber or phishing-attacks. Although administrative and technical controls have been implemented which attempt to minimize the risk of cyber incidents, computer intrusion efforts are becoming increasingly sophisticated, and any enhanced controls installed might be breached. If the IT systems cease to function properly, BBX Capital could suffer interruptions in its operations. If the cyber-security is breached, unauthorized persons may gain access to proprietary or confidential information, including information about borrowers, employees or investments. This could require BBX Capital to incur significant costs to repair or restore the security of its systems. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 20 ITEM 2. PROPERTIES BBX Capital leases its principal executive offices which are located at 401 East Las Olas Blvd, Fort Lauderdale, Florida, 33301. The office lease expiration date is June 30, 2021. BBX Capital has the right to renew the terms of the lease for two additional five year terms. Renin leases its executive offices located at 110 Walker Drive, Brampton, Ontario. The office lease expiration date is December 31, 2024. Renin leases two manufacturing facilities in the United States and Canada which have lease expiration dates of December 31, 2022 and December 31, 2024. Hoffman’s owns its chocolate manufacturing facility located at 5190 Lake Worth Road, Greenacres, Florida. The facility is comprised of a 4,000 square foot office and store front area and a 11,526 square foot manufacturing area. Hoffman’s also owns two warehouse facilities in Riviera Beach, Florida and leases a warehouse in Greenacres, Florida which expires June 30, 2017. Hoffman’s leases three of its retail locations in West Palm Beach, Florida with lease expiration dates ranging from March 5, 2017 to December 31, 2019. Hoffman’s leases four retail locations in Broward County, Florida with lease expiration dates ranging from June 30, 2019 to December 31, 2020. Williams and Bennett leases its chocolate manufacturing facility located at 2045 High Ridge Road, Boynton Beach, Florida with an expiration date of January 31, 2020. The facility is comprised of 30,000 square feet of office, manufacturing, warehousing and food storage areas. Anastasia leases its chocolate manufacturing facility located at 1815 Cypress Lake Drive, Orlando, Florida with an expiration date of September 30, 2019 with three additional option terms of five years each commencing as of the expiration date. The facility is comprised of 80,000 square feet of office, manufacturing, warehousing and food storage areas. Kencraft leases a manufacturing, storage and distribution facility located at 680 South 500 East, American Fork, Utah, with a lease expiration date of May 31, 2023. 21 ITEM 3. LEGAL PROCEEDINGS Securities and Exchange Commission v. BankAtlantic Bancorp, Inc. and Alan B. Levan, Case No. 12-60082-CV-SCOLA, United States District Court, Southern District of Florida On January 18, 2012, the SEC brought an action in the United States District Court for the Southern District of Florida against BBX Capital and Alan B. Levan, BBX Capital’s Chairman and Chief Executive Officer, alleging that they violated securities laws by not timely disclosing known adverse trends in BBX Capital’s commercial real estate loans, selectively disclosing problem loans and engaging in improper accounting treatment of certain specific loans which may have resulted in a material understatement of its net loss in BBX Capital’s Annual Report on Form 10-K for the year ended December 31, 2007. Further, the complaint alleged that Mr. Alan B. Levan intentionally misled investors in related earnings calls. The Court denied summary judgment as to most issues, but granted the SEC’s motion for partial summary judgment that certain statements in one of Alan Levan’s answers on a July 25, 2007 investor conference call were false. On December 15, 2014, after a six-week trial, the jury found in favor of BBX Capital and Alan B. Levan with respect to the disclosures made during an April 2007 earnings conference call and in BBX Capital’s quarterly reports on Form 10-Q for the 2007 first and second quarters, but found that they had engaged in an act of fraud or deceit toward shareholders or prospective investors by making materially false statements knowingly or with severe recklessness (1) with respect to three statements in the July 25, 2007 conference call referenced above, and (2) failing to classify certain loans as held-for sale in the 2007 Annual Report on Form 10-K. The jury also found that Mr. Levan made or caused to be made false statements to the independent accountants regarding the held for sale issue. The SEC sought a final judgment: (i) permanently barring Alan B. Levan from serving as an officer or director of any SEC reporting company; (ii) imposing civil penalties of $5.2 million against BBX Capital and $1.56 million against Alan B. Levan; and (iii) permanently restraining BBX Capital and Alan B. Levan from violating securities laws. On September 24, 2015, the court entered a final judgment denying the SEC’s request for a permanent bar from Mr. Levan serving as an officer or director of any public company, but instead ordered Mr. Levan barred from serving as an officer or director of any public company for a period of two years commencing on December 23, 2015. As a result of the court's decision, on December 23, 2015 Mr. Levan resigned as Chairman and Chief Executive Officer of BBX Capital, as Chairman, Chief Executive Officer and President of BFC, and as a director of BBX Capital and BFC. The court also imposed monetary penalties against BBX Capital in the amount of $4,550,000 and monetary penalties against Mr. Levan in the amount of $1,300,000. BBX Capital and Mr. Levan are appealing the final judgment to the Eleventh Circuit Court of Appeals. On January 14, 2015, BBX Capital received notice from its insurance carrier that, based upon its interpretation of the jury verdict in this action, the carrier does not believe it is obligated to advance further payments towards fees and costs incurred in connection with this action and that it reserves its right to obtain reimbursement of the amounts it previously advanced with respect to this action. BBX Capital has received legal fee and cost reimbursements from its insurance carrier in connection with this action of approximately $5.8 million. In re: New Jersey Tax Sales Certificates Antitrust Litigation v. BBX Capital Corporation f/k/a BankAtlantic Bancorp, Inc., Fidelity Tax, LLC, Gary I. Branse, Michael Deluca and BB&T Corporation, and multiple other individuals and entities who purchased New Jersey tax certificates between 1998 to February 2009, Case No.12-CV-01893-MAS-TJB, United States District Court, District of New Jersey (Trenton) On December 21, 2012, plaintiffs filed an Amended Complaint in an existing purported class action filed in Federal District Court in New Jersey adding BBX Capital and Fidelity Tax, LLC, a wholly owned subsidiary of CAM, among others as defendants. The class action complaint was brought on behalf of a class defined as “all persons who owned real property in the State of New Jersey and who had a Tax Certificate issued with respect to their property that was purchased by a Defendant during the Class Period at a public auction in the State of New Jersey at an interest rate above 0%.” Plaintiffs alleged that beginning in January 1998 and at least through February 22 2009, the Defendants were part of a statewide conspiracy to manipulate interest rates associated with tax certificates sold at public auction from at least January 1, 1998, through February 28, 2009. During this period, Fidelity Tax was a subsidiary of BankAtlantic. Fidelity Tax was contributed to CAM in connection with the sale of BankAtlantic in the BB&T Transaction. While BBX Capital believed the claims to be without merit, BBX Capital reached an agreement to settle the action, subject to court approval. The settlement has been preliminarily approved by the court and the final approval hearing is currently scheduled for the second quarter of 2016. ITEM 4. Mine Safety Disclosures. Not Applicable 23 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES PART II Market Information BBX Capital’s Class A Common Stock is traded on the New York Stock Exchange under the symbol “BBX.” BFC Financial Corporation (“BFC”) is the sole holder of BBX Capital’s Class B Common Stock and there is no trading market for BBX Capital’s Class B Common Stock. The Class B Common Stock may only be owned by BFC or its affiliates and is convertible into Class A Common Stock on a share for share basis. On March 8, 2016, there were approximately 236 record holders and 16,199,145 shares of the Class A Common Stock issued and outstanding. In addition, there were 195,045 shares of Class B Common Stock outstanding at March 8, 2016. The following table sets forth, for the periods indicated, the high and low sale prices of the Class A Common Stock as reported by the New York Stock Exchange: Calendar Year 2014 First quarter Second quarter Third quarter Fourth quarter For the year ended December 31, 2014 Calendar Year 2015 First quarter Second quarter Third quarter Fourth quarter For the year ended December 31, 2015 Dividends $ $ Class A Common Stock Low High 22.54 $ 20.50 19.95 18.50 22.54 18.79 $ 19.18 16.56 18.44 19.18 14.18 17.06 17.25 11.80 11.80 13.26 15.39 15.32 14.45 13.26 There were no cash dividends paid by BBX Capital during the years ended December 31, 2015, and 2014. While BBX Capital currently expects to continue to utilize its available cash to pursue opportunities in accordance with its business strategies, it may consider the payment of dividends in the future depending upon its results of operations, liquidity needs and other factors. Issuer Purchases of Equity Securities In September 2014 BBX Capital’s Board of Directors approved a share repurchase program which authorizes the repurchase of up to $20.0 million of Class A Common Stock. BBX Capital announced the share repurchase program on November 10, 2014 and have yet to make any repurchases under the program. 24 Securities Available Under Equity Compensation Plan The following table lists all securities authorized for issuance under the Company’s equ ity compensation plans at December 31, 2015: Number of securities to be issued upon exercise Plan category of outstanding options Number of securities remaining available for future issuance under equity compensation plans Weighted-average exercise price of excluding outstanding outstanding options options Equity compensation plans approved by security holders 7,016 $ 108.24 177,410 Total 7,016 $ 108.24 177,410 In March 2015 BBX Capital’s Board of Directors approved an amendment to both the BBX Capital Corporation 2014 Stock Incentive Plan and the 2005 Restricted Stock and Option Plan. The amendment to each Plan authorizes the Compensation Committee to issue restricted stock awards in the form of restricted stock units rather than just restricted stock. Following the amendment, BBX Capital and its executive officers agreed to retire any shares of BBX Capital’s outstanding Class A restricted common stock awards (“RSAs”) previously issued in the name of the Compensation Committee and subject to forfeiture until vested in exchange for BBX Capital issuing to the executive officers restricted Class A common stock units (“RSUs”) resulting in the retirement of 1,391,282 Class A common shares. Pursuant to the terms of the RSUs, BBX Capital promises to issue Class A common stock only at the time the underlying units vest. The RSUs issued have the same terms, and cover the same number of underlying shares of Class A common stock, as the RSAs that were retired. 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, the Standard and Poor’s 500 Stock Index and the Standard and Poor’s 500 Small-Cap Stock Index and assumes $100 is invested on December 31, 2010. BBX Capital Corporation Standard and Poor's Small-Cap Stock Index Standard and Poor's 500 Stock Index 12/31/2010 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015 272.17 116.52 286.09 271.30 100.00 58.78 100.00 99.752 114.06 159.38 166.58 160.81 100.00 99.997 113.40 146.97 163.71 162.52 25 BBX Capital has focused on repositioning its business since the sale of BankAtlantic to BB&T in July 2012, and BBX Capital is not able to identify a group of peer companies or industry or line-of- business index which it believes is comparable to BBX Capital and its current operations. Accordingly, the Standard and Poor’s Small-Cap Stock Index was selected based on BBX Capital’s market capitalization. The performance graph should not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference into any filing of BBX Capital under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. 26 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA The following tables present a summary of selected historical consolidated financial data as of and for the periods indicated below. The selected historical consolidated statements of operations for fiscal years 2015, 2014 and 2013 and the selected consolidated statements of financial condition as of December 31, 2015 and 2014 are derived from BBX Capital’s consolidated financial statements included in Item 8 of this report. The selected historical consolidated statement s of operations for fiscal years 2012 and 2011 and the selected consolidated statements of financial condition as of December 31, 2013, 2012 and 2011 are derived from BBX Capital’s previously filed audited consolidated financial statements and have been updated to conform to the current presentation. (In thousands except per share data) Statements of Operations Data: Total revenues Recoveries from (provision for) for loan losses Asset impairments, net Other costs and expenses Total costs and expenses Equity in earnings of Woodbridge Holdings, LLC Equity in losses of unconsolidated real estate joint ventures Income (loss) from continuing operations before income taxes Provision (benefit) for income taxes (5) Income (loss) from continuing operations Discontinued operations, net of tax (4) Net income (loss) Less: net (earnings) loss attributable to noncontrolling interest Net income (loss) attributable to BBX Capital Corporation (In thousands except per share data) Per Common Share Data (1): Basic earnings (loss) per share (5)(6) Diluted earnings (loss) per share (5)(6) Book value per share (2) Weighted Average Number of Common Shares Outstanding: Basic weighted average number of common shares outstanding Diluted weighted average number of common shares outstanding $ $ $ $ $ 27 For the Years Ended December 31, 2013 2012 2014 2015 2011 131,483 13,457 (287) 92,645 7,155 (7,015) (134,780) (116,305) (121,610) (116,165) 25,282 14,974 48,658 43,865 (4,708) (53,596) (14,439) 13,461 33,285 (2,405) (9,931) (68,169) (80,505) - 45,682 (37,874) (14,666) (72,134) (124,674) - (1,565) (559) - - - 23,282 (245) 23,527 - 23,527 1,203 (3,101) 4,304 - 4,304 47,680 20 47,660 - 47,660 (47,220) (18,744) (28,476) 264,238 235,762 (78,992) (19,480) (59,512) 30,771 (28,741) (1,753) 391 179 - (336) 21,774 4,695 47,839 235,762 (29,077) For the Years Ended December 31, 2013 2014 2012 2015 2011 1.34 1.30 20.42 0.29 0.28 19.16 3.02 2.94 18.93 15.00 15.00 15.24 (2.04) (2.04) (1.08) 16,229 16,043 15,843 15,720 14,227 16,805 16,678 16,278 15,720 14,227 (In thousands except share and per share data) Statements of Financial Condition Data (at period end): Loans held-for-sale Loans receivable, net of allowance for loan losses Total assets Deposits Other borrowings (3) Total equity 2015 As of December 31, 2013 2014 2012 2011 $ 21,354 34,035 393,541 - 21,421 335,979 35,423 26,844 392,936 - 42,021 311,280 53,846 72,226 431,147 - 99,213 303,566 24,748 55,601 292,562 2,448,203 470,703 3,678,119 - 3,280,083 359,114 (16,926) 207,178 240,324 1. No cash dividends have been declared or paid during each of the years in the five year period ended December 2. 31, 2015. The denominator of book value per share for all periods was computed by combining the number of Class A and Class B shares outstanding at year end. 3. Other borrowings consisted of notes payable for the year ended December 31, 2015. Other borrowings consisted of BB&T’s preferred interest in FAR, notes payable to related parties and notes payable as of December 31, 2014, 2013 and 2012. Other borrowings were primarily FHLB advances, subordinated debentures, and junior subordinated debentures as of December 31, 2011. 4. Discontinued operations include the results of operations of BankAtlantic’s Community Banking, Investments, Tax Certificates and Capital Services reporting units for each of the years in the two year per period ended December 31, 2012. 5. During each of the years in the five year period ended December 31, 201 5, BBX Capital maintained a deferred tax valuation allowance for its entire net deferred tax asset. During the years ended December 31, 2015 and 2014, BBX Capital recognized a tax benefit of $0.3 million and $3.1 million from the reduction in the deferred tax valuation allowance for taxable temporary differences recognized in connection with certain BBX Sweet Holdings acquisitions. During the years ended December 31, 2012 and 2011, BBX Capital recognized a tax benefit of $18.7 million and $19.2 million, respectively, from the reduction in the deferred tax asset valuation allowance associated with income from discontinued operations. For the years ended December 31, 201 2 and 2011, basic and diluted earnings per share from discontinued operations was $ 16.81 and $2.17 per share, respectively. 6. 28 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction BBX Capital Corporation was organized under the laws of the State of Florida in 1994. BBX Capital Corporation’s principal asset until July 31, 2012 was its ownership of BankAtlantic and its subsidiaries. BankAtlantic was a federal savings bank headquartered in Fort Lauderdale, Florida and provided traditional retail banking services and a wide range of commercial banking products and related financial services through a broad network of community branches located in Florida. On July 31, 2012, BBX Capital completed the sale to BB&T of all of the issued and outstanding shares of capital stock of BankAtlantic (the “BB&T Transaction”). BBX Capital’s activities subsequent to the consummation of the BB&T Transaction involve the ownership, acquisition, investment and management of real estate and real estate development projects as well as its investments in operating businesses. BBX Capital’s investments in real estate joint ventures generally were arrangements with developers for residential and commercial development projects in which BBX Capital has funded its equity investment in joint ventures through cash investments or by contributing real estate properties. Consolidated Results of Operations BBX Capital reports its consolidated results of operations in three reportable segments, BBX , Renin and Sweet Holdings. Income (loss) from each of BBX Capital’s reportable segments was as follows (in thousands): BBX Renin Sweet Holdings Reconciling item (1) Income before income taxes (Benefit) provision for income taxes Net income $ $ For the Years Ended December 31, 2015 2014 2013 33,334 (2,058) (8,767) 773 23,282 (245) 23,527 3,224 (2,044) 23 - 1,203 (3,101) 4,304 48,659 (941) (38) - 47,680 20 47,660 (1) Represents capitalized interest on real estate development and joint venture activities in excess of interest expense incurred in the BBX reportable segment. Overview BBX Reportable Segment The increase in BBX reportable segment income for the year ended December 31, 2015 compared to the same 2014 period resulted primarily from a $25.6 million increase in net gains on the sales of assets, $6.3 million of higher recoveries from loan losses and a $6.7 million reduction in asset impairments. The above improvements in BBX reportable segment income were partially offset by $10.3 million of lower equity in earnings from BBX Capital’s investment in Woodbridge. Gains on sales of assets for the year ended December 31, 2015 were $31.1 million compared to $5.5 million during the comparable 2014 period. The gains on the sales of assets during the year ended December 31, 29 2015 resulted primarily from the sales of four properties. Two of the properties were located in West Palm Beach, Florida, a third property was located in the Bonterra master-planned community and the fourth property was acquired through a loan participation and sold by the lead bank. BBX recognized aggregate gains of $31.4 million in connection with sales of these four properties. Recoveries for loan losses for the year ended December 31, 2015 were $13.5 million compared to $7.2 million during the comparable 2014 period. The improvement in recoveries during 2015 was mainly due to lower charge-offs and higher recoveries from the charged off loan portfolio. During the year ended December 31, 2015 charge-offs were $1.0 million compared to $7.2 million during the same 2014 period. The lower asset impairments for the year ended December 31, 2015 compared to the same 2014 period resulted primarily from $8.6 million of impairments on two student housing rental facilities in Tallahassee, Florida during the year ended December 31, 2014 compared to a $1.8 million additional impairment on one of the student housing rental facilities in Tallahassee, Florida during the year ended December 31, 2015. The $10.3 million decline in the equity in earnings of Woodbridge resulted primarily from Woodbridge’s $36.5 million settlement of litigation brought by Bluegreen’s former shareholders related to Woodbridge’s April 2013 acquisition of Bluegreen as described in further detail under “Liquidity and Capital Resources”. As BBX has a 46% ownership interest in Woodbridge, the $36.5 million settlement reduced BBX’s equity in earnings of Woodbridge by $16.8 million for the year ended December 31, 2015. The reduction in BBX’s equity in earnings of Woodbridge as a consequence of the litigation settlement was partially offset by improved earnings at Bluegreen. Bluegreen’s net income attributable to shareholder was $68.0 million for the year ended December 31, 2015 compared to $54.5 million during the comparable 2014 period. The decline in BBX reportable segment income for the year ended December 31, 2014 compared to the same 2013 period resulted primarily from $36.7 million of lower recoveries from loan losses and a $18.9 million decline in interest income recoveries associated with the repayment of non- accrual loans. The above declines in BBX reportable segment income were partially offset by $11.8 million of higher equity earnings from BBX Capital’s investment in Woodbridge and lower interest expense associated with BB&T’s preferred interest in FAR. Recoveries from loan losses and interest income recognized on non-accrual loans were $7.2 million and $5.4 million, respectively, for the year ended December 31, 2014 compared to $43.9 million and $24.3 million during the same 2013 period, respectively. T h e significant loan loss recoveries and interest income for the year ended December 31, 2013 resulted primarily from a settlement with a borrower which resulted in reversals of previously charged-off commercial loans of $20.1 million and interest income recoveries of $13.6 million. BBX Capital’s equity in earnings of Woodbridge was $25.3 million for the year ended December 31, 2014 compared to $13.5 million during the same 2013 period. Equity in earnings of Woodbridge for the year ended December 31, 2013 were from the date of the investment (April 2, 2013) through December 31, 2013. Renin Reportable Segment Renin’s reportable segment loss during the year ended December 31, 2015 resulted primarily from $1.0 million of foreign exchange losses and expenses associated with the hiring of additional sales representatives and advertising expenditures for sales initiatives during 2015 as well as consulting expenditures to achieve product development and manufacturing efficiencies. Renin’s new members of management include its CEO hired in June 2015 and a Vice President of Sales hired in September 2015. Renin incurred severance costs associated with the reorganization of its marketing and corporate personnel during the year ended December 31, 2015. Renin improved its gross margin and gross margin percentage for the year ended December 31, 2015 compared to the same 2014 period as a greater proportion of Renin’s trade sales were higher margin hardware products. Renin’s interest expense was lower during the year ended December 31, 2015 compared to the same 2014 period as Renin refinanced its notes payable in June 2014 at lower interest rates. 30 Renin’s reportable segment loss during the year ended December 31, 2014 resulted primarily from a $0.7 million loss on foreign currency exchange and $0.9 million of costs associated with the consolidation of manufacturing facilities in Canada. Renin’s reportable segment loss for the two months ended December 31, 2013 included $1.0 million of acquisition related costs offset by a $1.0 million bargain purchase gain. Management believes that it was able to acquire Renin for a bargain purchase gain because Renin Corp. was a distressed company. Sweet Holdings Reportable Segment The higher Sweet Holdings reportable segment loss for the year ended December 31, 2015 compared to the same 2014 period resulted primarily from increases in selling, general and administrative expenses, inventory markdowns as well as lower acquisition bargain purchase gains partially offset by an increase in trade sales associated with acquired companies. The higher selling, general and administrative expenses of $9.1 million for the year ended December 31, 2015 compared to 2014 reflects operating expenses associated with companies acquired and costs to integrate these companies as well as increased compensation expense related to the hiring of industry professionals and fees to consultants. Executives hired during the first quarter of 2015 included a President for BBX Sweet Holdings and a President for Hoffman’s. Also contributing to higher selling, general and administrative expenses were costs associated with relocating the Helen Grace California manufacturing facilities to Kencraft’s manufacturing facilities in Utah and costs associated with Hoffman’s retail store expansion initiatives. Hoffman’s opened one retail location during the third quarter of 2014 as well as three retail locations during the year ended December 31, 2015 and anticipates opening additional retail locations in 2016. Included in selling, general and administrative expenses for the year ended December 31, 2015 were $1.3 million of employee severance expenses and costs to relocate the Helen Grace manufacturing facilities to Utah. The gross margin was adversely affected for the year ended December 31, 2015 by $600,000 of inventory markdowns and the relocation of Helen Grace’s manufacturing facilities from California to Utah in September 2015. The bargain purchase gain of $254,000 for the year ended December 31, 2015 was associated with the Kencraft acquisition and the bargain purchase gain of $1.2 million for the year ended December 31, 2014 was associated with the Helen Grace acquisition. Benefit for Income Taxes The benefit for income taxes of $0.3 million for the year ended December 31, 2015 resulted from acquisition re-measurement adjustments and a reduction in BBX Capital’s deferred tax valuation allowance as a result of net taxable temporary differences that Sweet Holdings recognized in connection with the Kencraft acquisition. The $3.1 million benefit for income taxes represents the reduction in BBX Capital’s deferred tax valuation allowance as a result of net taxable temporary differences that Sweet Holdings recognized in connection with its 2014 acquisitions. 31 BBX Reportable Segment Results of Operations The following table is a condensed income statement summarizing the results of operations of the BBX reportable segment (“BBX”) (in thousands): $ For the Years Ended Ended December 31, 2015 2014 2013 10,286 31,092 3,887 2,585 47,850 5,422 5,527 5,516 2,533 18,998 72 - 775 815 4,773 6,296 24,337 6,728 4,161 3,375 38,601 3,397 1,774 5,807 (13,457) 287 (7,155) 7,015 (43,865) 4,708 36,250 27,925 32,751 40,497 31,582 3,403 14,974 25,282 13,461 (1,565) 33,334 88 33,246 (559) 3,224 - 3,224 - 48,659 20 48,639 $ Change 2015 vs 2014 Change 2014 vs 2013 4,864 25,565 (1,629) 52 28,852 (703) (815) (1,523) (6,302) (6,728) 3,499 (12,572) (10,308) (1,006) 30,110 88 30,022 (18,915) (1,201) 1,355 (842) (19,603) (2,622) (959) 489 36,710 2,307 1,169 37,094 11,821 (559) (45,435) (20) (45,415) Interest income Net gains on sales of assets Income from real estate operations Other revenues Total revenues BB&T's priority return in FAR distributions Interest expense Real estate operating expenses Recoveries from loan losses, net Asset impairments, net Selling, general and administrative expenses Total costs and expenses Equity in earnings of Woodbridge Equity in losses of unconsolidated real estate joint ventures Income before income taxes Provision for income taxes BBX segment income Interest Income The increase in interest income for the year ended December 31, 2015 compared to 2014 reflects higher interest income recognized on a cash basis from the payoffs of nonaccrual loans partially offset by lower interest income recognized on accruing loans associated with declining accruing loan balances due primarily to loan repayments and loan sales. Accruing loan balances declined from $23.0 million as of December 31, 2013 to $6.7 million at December 31, 2015. During the year ended December 31, 2015, $5.8 million of interest income was recognized on the payoff of two commercial loans. The decline in interest income for the year ended December 31, 2014 compared to 2013 resulted primarily from lower interest income recognized on a cash basis from the settlement of non- accrual loans and secondarily from lower interest income recognized on accruing loans due primarily to lower accruing loan balances. During the year ended December 31, 2013, $13.6 million of interest income was recovered in connection with the repayment of non-accrual loans pursuant to a settlement agreement with respect to litigation between CAM and Daniel S. Catalfumo and certain members of his family and affiliated entities. 32 Net Gains on the Sales of Assets The net gains on the sales of assets during the years ended December 31, 2015, 2014 and 2013 were primarily gains on the sales of real estate properties. Gains on the sales of assets during the year ended December 31, 2015 resulted primarily from the sales of four properties. Two of the properties were located in West Palm Beach, Florida. One of the properties, which was purchased by the JRG/BBX Development joint venture for $10.8 million, was sold to a third party developer for $20.0 million. A second property, which had a $3.2 million carrying value at the date of sale, was acquired by BBX through foreclosure and sold for $11.0 million. A third property was located in the Bonterra master-planned community in Hialeah, Florida, had a carrying value of $13.9 million and sold for $26.2 million. The fourth property was acquired through foreclosure in Las Vegas, Nevada, had a carrying value of $2.6 million and sold for $6.0 million. BBX recognized gains of $31.4 million in the aggregate in connection with these four property sales. Included in net gains on the sales of assets during the year ended December 31, 2014 was a $2.5 million gain on the sale of one property, the sale of first lien consumer and residential loans for a $0.6 million gain and gains of $1.3 million on the sales of various real estate properties. Included in net gains on the sales of assets during the year ended December 31, 2013 was a $1.5 million gain from the sale of rental property, $0.9 million of gains associated with the sale of tax certificates, a $1.0 million gain on the sale of a storage facility and a $0.6 million gain on the sale of a held-for-sale commercial real estate loan. Income from Real Estate Operations Income from real estate operations consists of rental income from foreclosed properties. The lower income from real estate operations during the year ended December 31, 2015 compared to the same 2014 period resulted primarily from the sales of rental properties and one operating property during the fourth quarter of 2014. The increase in income from real estate operations during the year ended December 31, 2014 compared to the same 2013 period reflects an increase in the number of income producing foreclosed properties which resulted in higher rental income during 2014 compared to 2013. The additional foreclosed properties included two student housing facilities that BBX acquired through settlements with borrowers in September 2013 and January 2014. Other Revenues Other revenues during the year ended December 31, 2015 consisted mainly of $1.5 million of rental income from a public storage operating facility that was acquired through foreclosure in April 2013, $0.4 million of office facilities revenues paid by BFC for use of its office space and $0.4 million of management fees recognized from Sweet Holdings. The Sweet Holdings management fees were eliminated in consolidation. Other revenues during the year ended December 31, 2014 consisted mainly of $1.2 million of rental income associated with a public storage operating facility, $0.6 million of income associated with a foreclosed loan, $0.4 million of office facilities revenues from BFC and $0.2 million of management fees from Sweet Holdings. Other revenues during the year ended December 31, 2013 consisted mainly of $0.7 million of rental income associated with the public storage operating facility, $0.9 million of income associated with a foreclosed loan, $0.7 million of recoveries on loans in excess of contractual principal, $0.2 million of deposit overdraft recoveries associated with the charged off deposit overdraft portfolio retained in the BB&T Transaction and $0.4 million of office facilities revenues from BFC. 33 BB&Ts Priority Return in FAR Distributions BB&T’s priority return in FAR distributions during the year ended December 31, 2015, 2014 and 2013 represented the priority return paid to BB&T pursuant to its preferred membership interests in FAR. The required priority return was set at LIBOR + 200 basis points per annum on the unpaid preferred membership interest preference amount. The preferred membership interest preference amount was reduced from $196.9 million as of December 31, 2012 to $72.1 million as of December 31, 2013 to $12.3 million as of December 31, 2014 and was paid in full in May 2015. FAR utilized cash receipts primarily from loan repayments and the sales of assets to repay the preference amount and fund the priority return. Interest Expense For the year ended December 31, 2015 $0.4 million of BBX reportable segment interest expense was capitalized in connection with real estate development and joint venture activities. The capitalized interest expense for year ended December 31, 2015 was incurred in connection with the Woodbridge promissory note. The Woodbridge promissory note was repaid in full during September 2015. Interest expense for the year ended December 31, 2014 resulted from $0.6 million of interest expense recognized on the Woodbridge promissory note and $0.2 million of interest expense recognized on the Florida Community Bank mortgage. The $8.3 million Florida Community Bank mortgage was assumed by the Hialeah Communities joint venture in June 2014. Interest expense for the year ended December 31, 2013 resulted from two notes payable aggregating $10.3 million issued as of December 31, 2012. The notes were issued to two third party participants in loans for which BBX Capital was the lead lender in connection with BBX Capital’s acquisition of the participants’ interest in a loan and certain real estate property. One note payable in the amount of $2.5 million was repaid in December 2013. Real Estate Operating Expenses Real estate operating expenses for the years ended December 31, 2015, 2014 and 2013 represent real estate holding costs, including taxes and insurance, associated with real estate acquired through foreclosure. The decline in real estate operating expenses for the year ended December 31, 2015 compared to 2014 reflects the sale of properties and the transfer of properties to real estate joint ventures. The increase in real estate operating expenses for the year ended December 31, 2014 compared to 2013 resulted primarily from loan foreclosures. Recoveries from Loan Losses Changes in the allowance for loan losses were as follows (in thousands): Allowance for Loan Losses: Balance, beginning of period Charge-offs Recoveries Recoveries from loan losses Balance, end of period For the Years Ended December 31, 2013 2014 2015 977 (1,037) 13,517 (13,457) - 2,713 (7,189) 12,608 (7,155) 977 5,311 (10,867) 52,134 (43,865) 2,713 $ $ Loan charge-offs for the year ended December 31, 2015 were mainly second-lien consumer loans. 34 Loan charge-offs for the year ended December 31, 2014 consisted of a charge-off of a $1.9 million commercial non-mortgage business loan, $2.7 million of charge-offs associated with the transfer of performing second lien consumer loans to loans held-for-sale and $0.7 million of charge-offs due to initial charge downs on loans past due greater than 120 days and first lien foreclosures. The remaining charge-offs during the year ended December 31, 2014 related primarily to updated valuations on collateral dependent loans. Loan charge-offs during the year ended December 31, 2013 consisted primarily of consumer and residential loan charge-offs of $3.3 million and charge-offs of $0.7 million upon the transfer of the loans to loans held-for-sale. The remaining charge-offs reflect updated valuations on non-accrual loans and initial charge downs on loans past due greater than 120 days. Recoveries for the year ended December 31, 2015 related primarily to settlements on charged off commercial loans of $5.3 million and recoveries from the charged off loan portfolio. Recoveries for the year ended December 31, 2014 related primarily to $6.1 million of cash collected on certain previously charged-off commercial loans and related judgments which were transferred from BankAtlantic to CAM in connection with the BB&T Transaction, $1.6 million of recoveries from non-accrual loan payoffs, $1.4 million of property tax refunds on a charged off commercial land loan and a $1.9 million recovery from the transfer of a commercial land loan to real estate held-for-investment. Recoveries for the year ended December 31, 2013 related primarily to the repayment of non- accrual commercial loans including two nonaccrual loans that were previously charged down by $9.5 million and the Catalfumo settlement agreement which resulted in reversals of previously charged-off commercial real estate and commercial non-real estate loans of $10.2 million and $9.9 million, respectively. Additionally, BBX foreclosed on a residential commercial real estate property resulting in an $11.0 million recovery as the fair value of the collateral based on an updated valuation was greater than the recorded investment in the loan. The remaining recoveries during the year ended December 31, 2013 related primarily to cash collected on certain previously charged-off loans and related judgments and recoveries from foreclosures as the fair value of the underlying collateral less cost to sell was greater than the recorded investment on certain loans. The allowance for loan losses at December 31, 2013 consisted primarily of a $1.0 million specific valuation allowances on two commercial non-real estate loans with an aggregate recorded investment of $3.0 million and $1.5 million allowance on consumer loans. The allowance for loan losses as of December 31, 2014, consisted primarily of consumer second-lien loans greater than 120 days past due and $0.1 million on commercial real estate loans. The majority of BBX’s commercial loans receivable were collateral dependent and charged down to the fair value of the collateral less cost to sell. There was no allowance for loan losses as of December 31, 2015 as the consumer second-lien loans greater than 120 days past due were deemed uncollectible and charged-off. Asset Impairments Asset impairments during the year ended December 31, 2015 resulted primarily from valuation allowance adjustments of $3.6 million on foreclosed real estate properties to reflect updated valuations partially offset by recoveries of previously written down loans in connection with short sales and payoffs of residential loans held-for-sale. Asset impairments for the year ended December 31, 2014 were primarily the result of $8.6 million of impairments on two student housing rental facilities in Tallahassee, Florida. The impairments reflected a decline in occupancy rates and rents per unit. The student housing impairments were partially offset by $1.6 million of loans held-for-sale valuation allowance recoveries associated with loan repayments, short sales and updated valuations. Asset impairments during the year ended December 31, 2013 consisted of $2.7 million of net impairments on real estate to reflect updated valuations, a $1.6 million increase in the loans held-for- sale valuation allowance and a $0.2 million increase in the provision for tax certificate losses. The real estate impairments were primarily associated with a $2.0 million impairment on an office warehouse property based on an updated valuation. The increase in the valuation allowance for loans held-for-sale resulted from a decline in small business loan valuations. 35 Selling, general and administrative expenses (“SG&A”) consisted of the following (in thousands): For the Years Ended December 31, 2015 2014 2013 Change Change 2015 vs 2014 2014 vs 2013 Employee compensation and benefits $ 18,490 15,951 14,437 2,539 1,514 Occupancy and equipment Professional fees SEC Civil Penalty Other Asset servicing expenses Total selling, general and administrative expenses 2,315 8,331 3,550 2,964 600 2,063 7,578 1,000 4,396 1,763 1,690 7,172 - 5,518 2,765 252 753 2,550 (1,432) (1,163) 373 406 1,000 (1,122) (1,002) $ 36,250 32,751 31,582 3,499 1,169 Employee Compensation and Benefits The increase in employee compensation and benefits expense in each of the years in the three year period ended December 31, 2015 was primarily the result of higher share based compensation associated with the issuance of restricted stock awards and higher salaries and bonuses. Share based compensation increased $1.8 million during the year ended December 31, 2015 compared to 2014 and $1.2 million during the year ended December 31, 2014 compared to 2013 primarily as a result of the granting of 419,492, 396,082 and 430,000 shares of Class A restricted common stock awards in September 2015, October 2014 and October 2013, respectively. The higher salaries and bonuses were mainly due to new hires and annual salary increases. Occupancy and Equipment The increase in occupancy and equipment for the year ended December 31, 2015 compared to 2014 was primarily the result of increased rent associated with leasing additional corporate office space. The increase in occupancy and equipment for the year ended December 31, 2014 compared to 2013 relate primarily to the operations of a public storage rental facility that was acquired through foreclosure in April 2013. Professional Fees The increase in professional fees during the year ended December 31, 2015 compared to 2014 resulted primarily from higher accounting and consulting fees. During the year ended December 31, 2014, the insurance carrier reimbursed $1.7 million of legal fees in connection with the SEC civil action compared to no reimbursements of legal fees during the year ended December 31, 2015. The higher professional and accounting fees were mainly due to the BFC tender offer and higher audit fees associated with acquired businesses, real estate joint venture investments and the SEC civil action. The increase in professional fees during the year ended December 31, 2014 compared to 2013 resulted primarily from higher legal and consulting fees associated with the termination of the merger agreement with BFC and the SEC civil action. The SEC civil action trial commenced on November 3, 2014 and lasted six weeks. SEC Civil Penalty The SEC civil penalty assessed against BBX Capital in connection with the SEC action was $4.6 million. While the penalty is being appealed, BBX Capital recognized $1.0 million of the civil penalty as an accrual during 36 the year ended December 31, 2014 with the balance of the civil penalty of $3.6 million recognized during the year ended December 31, 2015. Other The decrease in other expenses during the year ended December 31, 2015 compared to 2014 reflects $1.1 million of lower foreclosure costs. Foreclosure expenses consisted primarily of real estate taxes on delinquent collateral dependent loans in foreclosure. The decline in foreclosure expenses resulted primarily from a significant decrease in the number of loans in BBX’s loan portfolio. The decrease in other expenses during the year ended December 31, 2014 compared to 2013 resulted primarily from lower foreclosure expenses. The significant decline in foreclosure expense for the year ended December 31, 2014 compared to 2013 reflects $0.8 million of bankruptcy trustee and accounting fees associated with the foreclosure of two related properties during 2013 and a decision to pay delinquent real estate taxes on residential loans during 2013. Asset Servicing Expense Asset servicing expenses for the years ended December 31, 2015, 2014 and 2013 were fees to third party management companies who service loans and real estate. The significant decline in asset servicing costs reflects loan repayments and sales, real estate liquidations and the renegotiation of the servicing contract at lower rates as well as BBX taking back the servicing of certain commercial loans and real estate from a third party servicer. Equity in Earnings of Woodbridge BBX recognized equity in earnings of Woodbridge during the years ended December 31, 2015, 2014 and 2013 of $15.0 million, $25.3 million and $13.5 million, respectively. Woodbridge’s earnings for year ended December 31, 2015 included a $36.5 million settlement of litigation brought by Bluegreen’s former shareholders related to Woodbridge’s April 2013 acquisition of Bluegreen as described in further detail under “Liquidity and Capital Resources”. As BBX has a 46% ownership interest in Woodbridge, the $36.5 million liability reduced BBX’s equity in earnings of Woodbridge by $16.8 million for the year ended December 31, 2015. Equity in earnings of Woodbridge for the year ended December 31, 2013 were from the date of the investment (April 2, 2013) through December 31, 2013. Woodbridge’s earnings consisted primarily of the operations of Bluegreen. Bluegreen Corporation is a sales, marketing, and management company focused on the vacation ownership industry. Bluegreen Vacations markets, sells and manages vacation ownership interests in resorts, which are generally located in popular, high-volume, “drive-to” vacation destinations. The resorts in which Bluegreen Vacations markets, sells or manages VOIs were either developed or acquired by Bluegreen, or were developed and are owned by third parties. Bluegreen Vacations earns third party for providing sales and marketing services developers. Bluegreen Vacations also earns fees by providing management services to the Bluegreen Vacation Club and property owners’ associations, mortgage servicing, VOI title services, reservation services, and construction design and development services. In addition, Bluegreen Vacations provides financing to FICO score-qualified individual purchasers of VOIs, which generates significant interest income. these fees to ® In addition to Bluegreen’s traditional vacation ownership operations, Bluegreen has in recent years pursued a business strategy, referred to herein as the “capital-light” business strategy, involving activities that typically do not require the significant costs and capital investments generally incurred in connection with the acquisition and development of VOIs under Bluegreen’s traditional vacation ownership business. Bluegreen believes its capital-light business strategy enables it to leverage its expertise and existing infrastructure in resort management, sales and marketing, mortgage servicing, title services, and construction management third parties. Bluegreen’s goal is for its capital-light business activities to become an increasing portion of its business over time; however, these efforts may not be successful. As of December 31, 2015, Bluegreen’s capital-light business activities consisted of the following: fee-based sales and marketing arrangements; just-in-time to generate recurring revenues from 37 inventory acquisition arrangements; secondary market arrangements; and other fee-based services. Each of these categories is described below. Fee-Based Sales and Marketing Arrangements In 2009, Bluegreen began offering sales and marketing services to third-party developers for a fee. Under these arrangements, Bluegreen sells third-party VOIs as Bluegreen Vacation Club interests through its distribution network of sales offices, typically on a non-committed basis. Bluegreen seeks to structure its fee for these services to cover its selling and marketing costs, plus an operating profit. Because the completed VOI was built by a third-party, Bluegreen is not at risk for the development financing of these projects and Bluegreen has little to no capital requirements. Notes receivable originated in connection with Bluegreen’s sale of third party VOIs under commission-based arrangements are held by the third party developer, and in certain cases are serviced by Bluegreen for a fee. Bluegreen refers to sales made on behalf of third-party developers as “FBS Sales”. Just-In-Time Arrangements In 2013, Bluegreen began entering into agreements with third-party developers that allow Bluegreen to buy VOI inventory from time to time in close proximity to the timing of when Bluegreen intends to sell such VOIs. Bluegreen strives to enter into such arrangements on a non-committed basis, although Bluegreen may engage in committed arrangements under certain circumstances. Because the completed VOI was built by a third-party, Bluegreen is not at risk for the development financing of these projects. Unlike FBS Sales, receivables originated in connection with sales of just-in-time inventory are held by Bluegreen. Bluegreen refers to sales of inventory acquired through these arrangements as “Just-In-Time Sales”. Secondary Market Arrangements In 2012, Bluegreen began a program to acquire VOI inventory from POAs and other third parties on a non-committed basis, in close proximity to the timing of when Bluegreen intends to sell such VOIs. Such VOIs are typically obtained by the POAs through foreclosure in connection with maintenance fee defaults, and are generally acquired by Bluegreen at a significant discount. Bluegreen refers to sales of inventory acquired through these arrangements as “Secondary Market Sales”. Other Fee-Based Services Bluegreen also earns fees for providing management services to the Bluegreen Vacation Club and to certain POAs. In connection with the management services provided to the Bluegreen Vacation Club, Bluegreen manages the club reservation system and provides owner services as well as billing and collection services. In connection with Bluegreen’s management of POAs, Bluegreen provides day-to- day management services, including oversight of housekeeping services, maintenance, and certain accounting and administrative services. As of December 31, 2015, Bluegreen provided management services to 46 timeshare resort properties and hotels. Other fee-based services also include the processing of sales of VOIs through Bluegreen’s wholly-owned title company subsidiary, which earns title fees in connection with the closing of the VOI transactions. Bluegreen’s Operating Results Bluegreen’s net income attributable to Woodbridge was $70.3 million, $57.5 million and $37.6 million for the years ended December 31, 2015, 2014 and 2013, respectively. The higher Bluegreen net income in each year during the three year period ended December 31, 2015 resulted primarily from increased sales of VOIs sold on behalf of third parties on a commission basis and higher commissions earned on these commission based sales. The increase in VOI sales primarily reflected the results of an increased number of tours. Bluegreen’s management believes that the increase in tours mainly resulted from efforts to expand marketing initiatives to new sales prospects as well as expanded marketing programs targeting existing owners. The increase in sales was partially offset by higher selling and marketing expenses associated with these marketing initiatives. Sales to existing owners 38 generally involve lower marketing expenses than sales to new prospects. Bluegreen expects to continue to increase its focus on sales to new prospects and, as a result, sales and marketing expenses may continue to increase. Equity in Losses of Unconsolidated Real Estate Joint Ventures BBX recognized equity in losses of unconsolidated joint ventures of $1.6 million and $0.6 million during the years ended December 31, 2015 and 2014, respectively. The unconsolidated real estate joint ventures are generally real estate joint ventures that develop properties for residential and commercial use. The joint ventures are currently in the entitlement and construction phases and the losses during the year ended December 31, 2015 and 2014 mainly represent marketing and management fees. Renin Reportable Segment Results of Operations For the Years Ended Ended December 31, 2014 2015 For the Two Months Ended December 31, 2013 Trade sales Cost of goods sold Gross margin Interest expense Selling, general and administrative expenses Bargain purchase gain Foreign exchange loss Total costs and expenses Loss before income taxes Benefit for income taxes Net loss Gross margin percentage SG&A as a percent of trade sales $ $ % % 56,461 (42,122) 14,339 308 15,051 - 1,038 16,397 (2,058) (4) (2,054) 25.40 26.66 57,839 (43,888) 13,951 551 14,729 - 715 15,995 (2,044) 6 (2,050) 24.12 25.47 9,300 (7,227) 2,073 144 3,515 (1,001) 356 3,014 (941) - (941) 22.29 37.80 Trade sales declined for the year ended December 31, 2015 compared to the same 2014 period due to the discontinuation by a major customer of the wall décor product partially offset by increased sales of newly designed hardware products. The improvement in the gross margin percentage for the year ended December 31 2015 compared to the same 2014 period reflects increased sales of higher margin hardware products and lower sales of lower margin wall décor products. Also contributing to the improved gross margin percentage was the consolidation of manufacturing facilities during the second half of 2014. Renin’s interest expense for the year ended December 31, 2014 resulted primarily from the Bluegreen notes payable. Renin refinanced the Bluegreen notes payable with a financial institution in June 2014 under a facility with lower interest rates and outstanding balances. The decline in average notes payable balances was the result of BBX Capital and BFC contributing $2.0 million and $0.5 million of capital, respectively, to repay a portion of the Bluegreen notes payable in connection with the refinancing transaction. Included in Renin’s selling, general and administrative expenses for year ended December 31, 2015 were salaries and recruitment fees associated with the hiring of additional sales representatives and advertising expenditures for sales initiatives as well as consulting expenditures associated with identifying ways to enhance 39 product development and improve manufacturing efficiencies. Renin’s new members of management include its CEO hired in June 2015 and a Vice President of Sales hired in September 2015. Also included in selling, general and administrative expenses for the year ended December 31, 2015 was severance associated with the reorganization of Renin’s marketing and corporate personnel. Included in Renin’s selling, general and administrative expenses for year ended December 31, 2014 was $0.9 million of costs associated with the consolidation of manufacturing facilities in Canada. Renin also incurred $0.1 million of acquisition related expenses and $0.2 million of process improvement professional fees during the year ended December 31, 2014. The loss on foreign currency exchange for the year ended December 31, 2015, 2014 and 2013 resulted from the decrease in value of the Canadian dollar compared to the U.S. dollar. The Canadian dollar to U.S. dollar exchange rate declined from 94.02 as of December 31, 2013 to 86.2 as of December 31, 2014 to 72.09 at December 31, 2015. Renin’s trade sales and gross margin as a percent of trade sales for the year ended December 31, 2014 were consistent with prior quarters during 2014. The improvement in the gross margin from 22.29% during the two months end December 31, 2013 to 24.12% during the year ended December 31, 2014 reflects the consolidation of the Concord manufacturing facility into the Brampton facility and higher average trade sales volume during the year ended December 31, 2014 compared to the two months ended December 31, 2013. Renin’s interest expense for the year ended December 31, 2014 included $0.3 million of interest expense associated with the Bluegreen notes payable. Renin refinanced the Bluegreen notes payable with a financial institution in June 2014 at lower interest rates and outstanding balances. Included in selling, general and administrative expenses during the two months ended December 31, 2013 were $1.0 million of acquisition related costs incurred in connection with the Renin acquisition. Sweet Holdings Reportable Segment Results of Operations For the Years Ended Ended December 31, 2014 2015 For the One Month Ended December 31, 2013 27,837 (20,585) 7,252 949 (254) 15,324 16,019 (8,767) (329) (8,438) 26.05 55.05 16,257 (10,794) 5,463 440 (1,237) 6,237 5,440 23 (3,107) 3,130 33.60 38.37 966 (633) 333 24 - 347 371 (38) - (38) 34.47 35.92 Trade sales Cost of goods sold Gross margin Interest expense Bargain purchase gain Selling, general and administrative expenses Total costs and expenses (Loss) income before income taxes Benefit for income taxes Net (loss) income Gross margin percentage SG&A as a percent of trade sales $ $ % % 40 The Sweet Holdings results of operations for the year ended December 31, 2015 consisted of the activities of Hoffman’s, Williams & Bennett, Helen Grace Chocolates, Jer’s Chocolates and Anastasia Confections for the entire year and the operations of Kencraft for the nine months ended December 31, 2015. Sweet Holdings results of operation for the year ended December 31, 2014 includes the activities of Hoffman’s and Williams and Bennett for the year ended December 31, 2014, and the activities of Jer’s, Helen Grace and Anastasia from their respective dates of acquisition, July 1, 2014, July 21, 2014 and October 1, 2014. Sweet Holdings results of operations for the year ended December 31, 2013 include the activities of Hoffman’s for the month of December 2013. The lower gross margin percentage for the year ended December 31, 2015 compared to 2014 was primarily the result of a higher percent of wholesale trade sales compared to retail trade sales and secondarily from approximately $725,000 of inventory markdowns related to Helen Grace and Williams & Bennett obsolete inventory. The majority of Sweet Holdings acquisitions subsequent to September 30, 2014 were acquisitions of manufacturers selling to wholesale customers. Trade sales to wholesale customers typically have lower gross margins than trade sales to retail customers. The increase in interest expense for each of the years in the three year period ended December 31, 2015 resulted primarily from additional borrowings for working capital lines-of-credit and acquisition promissory notes. The bargain purchase gain for the year ended December 31, 2015 was associated with the Kencraft acquisition and the bargain purchase gain for the year ended December 31, 2014 was associated with the Helen Grace acquisition. The bargain purchase gain represents the amount by purchase net which consideration. Management believes that it was able to acquire Kencraft and Helen Grace for bargain purchase gains because Kencraft and Helen Grace were distressed companies. identifiable exceeded acquired assets value fair the the of The higher selling, general and administrative expenses for the year ended December 31, 2015 compared to 2014 reflects operating expenses associated with companies acquired and costs to integrate these companies as well as increased compensation expense related to the hiring of industry professionals and fees to consultants. Executives hired during the first quarter of 2015 included a President for BBX Sweet Holdings and a President for Hoffman’s. Also contributing to higher selling, general and administrative expenses were costs associated with relocating the Helen Grace California manufacturing facilities to Kencraft’s manufacturing facilities in Utah and costs associated with Hoffman’s retail store expansion initiatives. Hoffman’s opened one retail location during the third quarter of 2014 as well as three retail locations during the year ended December 31, 2015 and anticipates opening additional retail locations in 2016. Included in selling, general and administrative expenses for the year ended December 31, 2015 were $1.3 million of employee severance expenses and costs to relocate the Helen Grace manufacturing facilities to Utah. 41 BBX Capital Corporation Consolidated Financial Condition BBX Capital’s total assets as of December 31, 2015 were $393.5 million compared to $392.9 million as of December 31, 2014. The changes in the components of total assets from December 31, 2014 to December 31, 2015 are summarized below: · · · · · · · · · · Increase in cash resulting primarily from sales of real estate and dividends from Woodbridge partially offset by land development and improvement costs, repayment of BB&T’s preferred interest in FAR, notes payable scheduled payments, repayment of the Woodbridge note payable, investments in unconsolidated real estate joint ventures, additional investment in Woodbridge and operating expenses. Increase in trade receivables due to acquisitions by BBX Sweet Holdings partially offset by $0.8 million of lower Renin trade receivables, Decrease in real estate held-for-investment due primarily to the transfer of $41.8 million of real estate held-for-investment to real estate held-for-sale and the contribution of $19.4 million of real estate to joint ventures partially offset by $16.0 million of property improvements, Increase in real estate held-for-sale due primarily to $41.8 million of properties transferred from real estate held-for-investment, $13.9 million of real estate purchases and property improvements and $3.2 million of real estate acquired through foreclosure partially offset by $51.0 million of real estate sales and $3.2 million in impairments, Increase in investments in unconsolidated real estate joint ventures reflecting $8.0 million of cash investments in real estate joint ventures and $19.4 million of property contributed to joint ventures in exchange for joint venture membership interests, Increase investment in Woodbridge reflecting an additional investment in Woodbridge of $11.4 million and the recognition of $15.0 million of equity in Woodbridge’s earnings partially offset by $23.8 million of dividends received from Woodbridge, Increase in properties and equipment associated with the opening of Hoffman stores and corporate headquarter renovations partially offset by $2.1 million of depreciation expense, Increase in inventory resulting primarily from acquisitions by BBX Sweet Holdings, Increase in goodwill and other intangible assets resulting from acquisitions by BBX Sweet Holdings, and Increase in other asset balances resulting primarily from $1.2 million of investments in securities and a $1.1 million escrow balance associated with land sales. BBX Capital's total liabilities at December 31, 2015 were $57.6 million compared to $81.7 million at December 31, 2014. The changes in the components of total liabilities from December 31, 2014 to December 31, 2015 are summarized below: · · · · Higher accounts payable balances due primarily to an increase in trade accounts payable at Renin and BBX Sweet Holdings, Payment in full of BB&T’s preferred interest in FAR using proceeds from the monetization of FAR’s assets, Decrease in note payable to Woodbridge as the note was paid-in-full in September 2015, and Increase in notes payable reflecting $1.4 million of promissory notes issued in connection with the Kencraft acquisition, a $5.0 million line-of-credit from a financial institution issued to fund BBX Sweet Holdings working capital, partially offset by $3.6 million of notes payable scheduled principal repayments. Liquidity and Capital Resources BBX Capital’s current assets at December 31, 2015 consisted of cash, inventory and trade receivables aggregating $81.3 million. This does not include $18.0 million of current assets held in Renin. BBX Capital had $19.8 million of current liabilities as of December 31, 2015. This does not include $7.5 million of current liabilities of Renin. BBX Capital’s principal sources of liquidity are its cash holdings, funds obtained from scheduled 42 payments on loans, loan recoveries, sales of its loans, loan payoffs, sales of real estate, income from income producing real estate, revenues from BBX Sweet Holdings’ operations and distributions received from Woodbridge. Management believes that BBX Capital has sufficient liquidity to fund future operations. Bluegreen’s former public shareholders brought an action against Bluegreen, the directors of Bluegreen, BFC, Woodbridge, certain directors and officers of BFC and others, challenging the terms of the merger pursuant to which Bluegreen merged into a wholly owned subsidiary of Woodbridge and Bluegreen’s shareholders (other than Woodbridge) were paid $10.00 in cash for each share of Bluegreen’s common stock that they held immediately prior to the effective time of the merger, and on June 5, 2015 the plaintiffs and defendants agreed to a settlement of the litigation. Pursuant to the settlement, Woodbridge paid $36.5 million, which amounts to approximately $2.50 per share, into a settlement fund for the benefit of former shareholders of Bluegreen whose shares were acquired in connection with the merger. The amount to be received by such former Bluegreen shareholders will be reduced by administrative costs and attorneys’ fees and costs. In connection with the settlement, BBX Capital repaid its $11.75 million promissory note to Woodbridge and BBX Capital and BFC made additional capital contributions to Woodbridge of $11.4 million and $13.4 million, respectively, based on their respective 46% and 54% ownership interests in Woodbridge. BBX Capital expects that it will receive dividends from time to time from its 46% ownership interest in Woodbridge. Distributions must be declared by Woodbridge and approved in advance by both BFC and BBX Capital. Dividends from Woodbridge will be dependent on and subject to Bluegreen’s results of operations, cash flows and business of Bluegreen, as well as restrictions contained in Bluegreen’s debt facilities. Additionally, in April 2015, BFC borrowed $80 million from Bluegreen to finance the purchase of 4,771,221 shares of BBX Capital’s Class A common stock in BFC’s completed tender offer. As a consequence, BBX Capital may not receive dividends from Woodbridge consistent with prior periods or in the time frames or amounts anticipated, or at all. BBX Capital may also receive funds from BFC in connection with its tax sharing agreement to the extent BFC utilizes BBX Capital’s tax benefits in BFC’s consolidated tax return. BBX Capital also expects to obtain funds in subsequent periods from cash flows on its loans, real estate and investments in unconsolidated real estate joint ventures. BBX Capital also may seek to obtain funds through borrowings or the issuance of equity securities. BBX Capital anticipates utilizing these funds for general corporate purposes, including selling, general and administrative expenses, loan servicing costs, real estate operating expenses, Renin and BBX Sweet Holdings operating expenses and, to the extent of available liquidity, to pursue its business strategy of investing, directly or through joint ventures, in real estate (which may include the acquisition and/or development of real estate) and operating businesses. BBX Sweet Holdings currently intends to continue to pursue acquisitions in the candy and confections industry. A significant source of BBX Capital’s liquidity is proceeds from the liquidation of loans and real estate, recoveries from the charged off loan portfolio, cash proceeds from the contribution of properties to real estate joint ventures and dividends from Woodbridge. During the year ended December 31, 2015, proceeds from principal repayments of loans and sales of real estate were approximately $30.2 million and $72.2 million, respectively. During the year ended December 31, 2015, BBX Capital received $23.8 million of dividends from Woodbridge. There is no assurance that BBX Capital will realize proceeds from these sources in future periods in similar amounts or on similar timeframes. BBX Capital’s real estate activities include hiring property managers to operate income producing properties, making protective expenditures (including the payment of property taxes) in an effort to maintain the value of properties and undertaking the zoning and entitlement, development or improvement of properties joint venture arrangements. There is no assurance that BBX Capital will realize proceeds from these sources in future periods in similar amounts or on similar timeframes. the properties for sale or potential to position 43 Notes payable as of December 31, 2015 consisted of a term loan and revolving credit advances issued by Renin with an aggregate balance of $8.1 million, $6.7 million of promissory notes and holdback amounts owed by BBX Sweet Holdings in connection with its acquisitions, $5.0 million revolving line of credit to BBX Sweet Holdings and a $1.6 million note payable issued by a subsidiary of BBX Sweet Holdings. See Note 15, Notes Payable to the “Notes to Consolidated Financial Statements”, for a discussion of the notes payable terms and covenants. BBX Capital guarantees certain obligations of its wholly-owned subsidiaries and unconsolidated real estate joint ventures. See Note 17 Commitments and Contingencies and Note 15, Notes Payable to the “Notes to Consolidated Financial Statements”, for a discussion of BBX Capital’s guarantees. BBX Capital’s Contractual Obligations and Off Balance Arrangements as of December 31, 2015 were (in thousands): Contractual Obligations Operating lease obligation (1) Notes payable Other obligations Total contractual cash obligations Payments Due by Period Total 18,990 21,591 340 40,921 $ $ Less than 1 year 3,065 2,315 120 5,500 1-3 years 4-5 years 5,069 6,031 10,492 220 16,743 7,171 - 12,240 After 5 years 4,825 1,613 - 6,438 (1) Amounts represent scheduled principal payments and do not include interest payments. The operating lease obligations represent minimum future lease payments on executed leases for BBX Capital’s headquarters, BBX Sweet Holdings and subsidiaries’ manufacturing facilities, office space and retail stores and Renin’s manufacturing, equipment leases and office facilities. BBX Capital Corporation and its subsidiaries are parties to lawsuits as plaintiff or defendant involving its collections, lending and prior period tax certificate activities. Although BBX Capital believes it has meritorious defenses in all current legal actions, the outcome and the ultimate resolution of litigation are inherently difficult to predict and uncertain. Reserves are accrued for matters in which it is probable that a loss will be incurred and the amount of such loss can be reasonably estimated. The actual costs of resolving these legal claims may be substantially higher or lower than the amounts anticipated for these claims. There were no reserves accrued as of December 31, 2015. See Item 3. Legal Proceedings and Note 17 Commitments and Contingencies to the “Notes to Consolidated Financial Statements” for more information regarding BBX Capital’s legal matters. BBX Capital had no commitments to fund loans as of December 31, 2015. 44 Consolidated Cash Flows A summary of BBX Capital’s consolidated cash flows follows (in thousands): For the Years Ended December 31, 2014 2015 2013 Net cash provided by (used in): Operating activities Investing activities Financing activities Increase (decrease) in cash and cash equivalents $ $ (16,045) 53,722 (27,456) 10,221 2,835 71,852 (59,006) 15,681 (190) 104,076 (123,125) (19,239) The decrease in cash flows from operating activities during 2015 compared to 2014 resulted primarily from higher operating losses at Renin and BBX Sweet Holdings and an increase in selling, general and administrative expenses. The increase in cash flows from operating activities during 2014 compared to 2013 resulted primarily from lower operating expenses associated with a decline in loan servicing fees, foreclosure expenses and collection fees associated with a declining loan portfolio. The decline in cash flows from investing activities during 2015 compared to 2014 resulted primarily from higher investments in real estate and real estate joint ventures as well as an additional $11.4 million investment in Woodbridge partially offset by a $38.9 million increase in proceeds from the sales of real estate. The decline in cash flows from investing activities during 2014 compared to 2013 resulted primarily from lower loan payments partially offset by a $60.4 million investment in Woodbridge in April 2013. The decrease in cash outflows from financing activities during 2015 compared to 2014 resulted primarily from lower distributions to BB&T from FAR on account of the payoff of BB&T’s preferred interest in FAR in May 2015 partially offset by the repayment of the Woodbridge notes payable. The decrease in cash outflows from financing activities during 2014 compared to 2013 resulted primarily from lower distributions to BB&T from FAR. Critical Accounting Policies Management views critical accounting policies as accounting policies that are important to the understanding of BBX Capital’s 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 Statements of Operations for the periods presented. Actual results could differ significantly from those estimates. Significant estimates that are particularly susceptible to significant change in subsequent periods relate to the determination of the allowance for loan losses, including the valuation of collateral dependent loans, the valuation of loans held-for-sale, the impairment of long-lived assets including amortizable intangible assets, real estate held-for-sale and held-for-investment , the determination of lower of cost or market for inventories, the valuation of assets acquired and liabilities assumed in the acquisition of a business, the amount of the deferred tax asset valuation allowance, accounting for uncertain tax positions and accounting for contingencies. T h e three accounting policies that BBX Capital has identified as critical accounting policies are allowance for loan losses, inventory reserves and impairment of long-lived assets. See Note 2, Summary of Significant Accounting 45 Policies to the “Notes to Consolidated Financial Statements”, for a detailed discussion of BBX Capital’s significant accounting policies. Allowance for loan losses, valuation of collateral dependent loans and loans-held-for-sale The allowance for loan losses is maintained at an amount that is believed by its management to be a reasonable estimate of probable losses inherent in BBX Capital’s loan portfolio as of the date of the financial statements presented. BBX Capital has developed policies and procedures for evaluating the allowance for loan losses which considers all available information. However, BBX Capital relies on estimates and judgments regarding issues where the outcome is unknown. As a consequence, if circumstances differ from BBX Capital’s estimates and judgments, the allowance for loan losses may decrease or increase significantly and the amount of losses actually realized in BBX Capital’s loan portfolio could be significantly higher or lower. There was no allowance for loan losses as of December 31, 2015. BBX Capital’s loans receivable as of December 31, 2015 was $34.0 million and were primarily collateralized by real estate. Declines in real estate market condition in geographical areas where BBX Capital’s collateral is located may result in material changes to BBX Capital’s allowance for loan losses. In June 2015, BBX Capital transferred its small business, residential and second-lien consumer loans from loans held-for-sale to loans receivable measured at the lower of cost or fair value at the transfer date. The difference between the carrying amount of the loans and the fair value was recognized as a discount. The discount on the transferred loans was greater than the calculated allowance for loan loss. As a consequence there was no allowance for loan losses assigned to these loans as of December 31, 2015. Commercial loans were evaluated individually and were either written down to the fair value of the collateral or based on the primary source of repayment and pier group analysis management determined no allowance for loan losses should be assigned to the commercial loan portfolio. Valuation allowances or charge downs on collateral dependent loans and the fair value of loans held-for-sale are established using management estimates of the fair value of collateral or based on valuation models that present value estimated expected future cash flows. The outstanding balance of collateral dependent loans and loans held-for-sale was $9.6 million and $21.4 million, respectively, as of December 31, 2015. These valuations are based on available information and require estimates and subjective judgments about fair values of the collateral or expected future cash flows. Most of BBX Capital’s loans do not have an observable market price, and an estimate of the collection of contractual cash flows is based on the judgment of management. BBX Capital generally utilizes broker price opinions and third party appraisals to assist us in determining the fair value of collateral. The appraisers or brokers use professional judgment in determining the fair value of the collateral. It is likely that the results would materially differ if different assumptions or conditions were to prevail. As a consequence of the estimates and assumptions required to calculate the valuation allowance, charge downs on collateral dependent loans or the fair value of loans held-for-sale, a change in these highly uncertain estimates could have a materially favorable or unfavorable impact on BBX Capital’s financial condition and results of operations. BBX Capital analyzes its loan portfolio quarterly by monitoring credit quality, loan-to-value ratios, delinquency trends, collateral valuations and economic conditions. As a consequence, BBX Capital’s allowance for loan losses and fair value estimates will change from period to period. BBX Capital believes that its performance in subsequent periods will be highly sensitive to changes in the Florida real estate market and availability of mortgage financing in Florida. If real estate and economic conditions deteriorate, BBX Capital is likely to experience increased credit losses and valuation allowance adjustments. Inventory lower of cost or market Inventories consisted of $8.4 million at Renin and $7.9 million at BBX Sweet Holdings as of December 31, 2015. Inventories are stated at the lower of cost (first-in, first-out) or market. Fluctuations in the market price of raw materials and labor costs may affect the value of inventory and may have a favorable or unfavorable effect on 46 costs of goods sold and gross margin. For the Renin inventory, when expected market sales prices move below costs, or when BBX Capital identifies slow moving or obsolete inventory, BBX Capital records adjustments to write down the carrying values of inventories. Renin recognized $0.1 million of inventory adjustment write downs during the year ended December 31, 2015. BBX Sweet Holdings evaluates its inventory periodically and recognized $1.7 million of inventory adjustments during the year ended December 31, 2015. Renin and BBX Sweet Holdings maintain inventories of bulk raw materials and included in BBX Sweet Holdings inventory was paper goods and packaging material. For Renin, quantities were determined based upon its inventory systems and are subject to periodic verification techniques including observation, weighing and other methods. For BBX Sweet Holdings inventory quantities were determined by period-end observation and weighing. The quantities and costs are generally subject to change in estimates based on market sales prices and general economic conditions in the industry. As a consequence, if raw material or labor costs increase or if market sales prices decline, BBX Capital will likely experience higher amounts of obsolete inventory, higher inventory reserves with a corresponding increase cost of goods sold and lower gross margins. Impairment of long lived assets including amortizable intangible assets Long-lived assets such as properties and equipment, amortizable intangible assets and real estate held-for-investment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When testing a long-lived asset for recoverability, it may be necessary to review estimated lives and adjust the depreciation or amortization period. Changes in circumstances and the estimates of future cash flows, as well as evaluating estimated lives of long-lived assets, are subjective and involve a significant amount of judgment. A change in the estimated life of a long-lived asset may substantially change depreciation and amortization expense in subsequent periods. Real estate held-for-sale is reviewed for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Fair values are not available for many of BBX Capital’s long-lived assets, and estimates must be based on available information, including prices of similar assets and present value valuation techniques. During the years ended December 31, 2015 and 2014, BBX Capital recognized impairments on real estate of $3.6 million and $8.9 million, respectively. BBX Capital generally utilizes broker price opinions and third party appraisals to assist in determining the fair value of real estate. The appraisers or brokers use professional judgment in determining the fair value of the properties and BBX Capital may also adjust these values for changes in market conditions subsequent to the valuation date when current appraisals are not available. The assumptions used to calculate the fair values are highly subjective and extremely sensitive to changes in market conditions. The assumptions used are representative of assumptions that BBX Capital believes market participants would use in fair valuing these assets, but different assumptions may result in significantly different results. BBX Capital validates assumptions by comparing completed transactions with prior period fair value estimates and BBX Capital may check its assumptions against multiple valuation sources. The outstanding balance of real estate held-for-sale, real estate held-for-investment, amortizable intangible assets and properties and equipment was $46.3 million, $31.3 million, $8.2 million and $18.1 million, respectively, as of December 31, 201 5. The amount ultimately realized upon the sale or operation of these properties may be significantly different than the recorded amounts. Future events, including volatility in real estate values, may result in additional impairments or recoveries of long-lived assets in the foreseeable future. Dividends BBX Capital has historically not paid dividends. While BBX Capital currently expects to continue to utilize its available cash to pursue opportunities in accordance with its business strategies, it may consider the payment of dividends in the future depending upon its results of operations, liquidity needs and other factors considered by its board of directors. 47 Impact of Inflation The financial statements and related financial data and notes presented herein have been prepared in accordance accounting principles generally accepted in the United States of America , 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. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Consolidated Market Risk Market risk is defined as the risk of loss arising from adverse changes in market valuations which arise from interest rate risk, foreign currency exchange rate risk, commodity price risk and equity price risk. BBX Capital’s market risk consists primarily of equity pricing risk and secondarily interest rate risk of real estate assets. The majority of BBX Capital’s assets are investments in unconsolidated real estate companies, real estate held-for-investment or held-for-sale and loans secured by real estate. BBX Capital’s financial condition and earnings are significantly affected by changes in real estate values in the markets where the real estate or real estate collateral is located and changes in interest rates which affects the affordability of real estate. As a result, BBX Capital is exposed to equity pricing and interest rate risk in the real estate market. BBX Capital is also subject to foreign currency exchange risk of the U.S. dollar compared to the Canadian dollar and Great Britain Pound as a result of the operations of Renin. The assets, liabilities, revenue and expenses that are denominated in foreign currencies will be affected by changes in the exchange rates between the U.S. dollar and the Canadian dollar or Great Britain Pound. As of December 31, 2015, BBX Capital has not entered into any foreign exchange forward contracts as hedges against foreign currency exchange risk. 48 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Management’s Report on Internal Control over Financial Reporting Reports of Independent Registered Public Accounting Firm – Grant Thornton LLP Report of Independent Registered Public Accounting Firm - PricewaterhouseCoopers LLP Consolidated Statements of Financial Condition as of December 31, 2015 and 2014 Consolidated Statements of Operations and Comprehensive Income for each of the years in the three year period ended December 31, 2015 Consolidated Statements of Total Equity (Deficit) for each of the years in the three period ended December 31, 2015 Consolidated Statements of Cash Flows for each of the years in the three year period ended December 31, 2015 Notes to Consolidated Financial Statements Page F-2 F-3 F-6 F-7 F-8 F-9 F-10 F-13 Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management, with the participation of our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness, as of December 31, 2015, of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on such evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2015. Grant Thornton, an independent registered certified public accounting firm, has audited the effectiveness of our internal control over financial reporting as of December 31, 2015, as stated in its report which appears herein. Management has excluded Kencraft Confections, LLC from its assessment of internal control over financial reporting as of December 31, 2015. We acquired this business during the second quarter of 2015 and our management has not conducted an assessment of the acquired business’ internal control over financial reporting. Total revenues and total assets of Kencraft Confections, LLC represent 5% and 2%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2015. /s/ Jarett S. Levan Jarett S. Levan Acting Chairman, and Chief Executive Officer /s/ Raymond S. Lopez Raymond S. Lopez Executive Vice President Chief Financial Officer March 15, 2016 F-2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Shareholders BBX Capital Corporation We have audited the accompanying consolidated balance sheet of BBX Capital Corporation (a Florida corporation) and subsidiaries (the “Company”) as of December 31, 2015, and the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows for the year ended December 31, 2015. Our audit of the basic consolidated financial statements included the financial statement schedules listed in the index appearing under Item 15(a)(2). These financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of BBX Capital Corporation and subsidiaries as of December 31, 2015, and the results of their operations and their cash flows for the year ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2015, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 15, 2016 expressed an unqualified opinion. /s/Grant Thornton LLP Fort Lauderdale, Florida March 15, 2016 F-3 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Shareholders BBX Capital Corporation We have audited the internal control over financial reporting of BBX Capital Corporation (a Florida corporation) and subsidiaries (the “Company”) as of December 31, 2015, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting (“Management’s Report”). Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of Kencraft Confections, LLC, a wholly-owned subsidiary, whose financial statements reflect total assets and revenues constituting 2 and 5 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2015. As indicated in Management’s Report, Kencraft Confections, LLC was acquired during 2015. Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of Kencraft Confections, LLC. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. F-4 In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in the 2013 Internal Control —Integrated Framework issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of the Company as of and for the year ended December 31, 2015, and our report dated March 15, 2016 expressed an unqualified opinion on those financial statements. /s/Grant Thornton LLP Fort Lauderdale, Florida March 15, 2016 F-5 Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of BBX Capital Corporation: In our opinion, the consolidated statement of financial condition as of December 31, 2014 and the related consolidated statements of operations and comprehensive income, consolidated statements of changes in equity, and consolidated statements of cash flows for each of two years in the period ended December 31, 2014 present fairly, in all material respects, the financial position of BBX Capital Corporation and its subsidiaries at December 31, 2014, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/PricewaterhouseCoopers LLP Fort Lauderdale, Florida March 16, 2015 F-6 BBX CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (In thousands, except share data) ASSETS Cash and cash equivalents ($0 and $4,993 in Variable Interest Entities ("VIEs")) Restricted cash and time deposits Loans held-for-sale ($0 and $35,423 in VIEs) Loans receivable, net of allowance for loan losses of $0 and $977 ($0 and $18,972, net of allowance of $0 and $977 in VIEs) Trade receivables, net of allowance for bad debts of $404 and $148 Real estate held-for-investment ($0 and $19,945 in VIEs) Real estate held-for-sale ($0 and $13,745 in VIEs) Investments in unconsolidated real estate joint ventures Investment in Woodbridge Holdings, LLC Properties and equipment ($0 and $7,561 in VIEs) Inventories Goodwill Other intangible assets Other assets ($0 and $1,017 in VIEs) Total assets LIABILITIES AND EQUITY Liabilities: Accounts payable BB&T preferred interest in FAR, LLC ($0 and $12,348 in VIE) Notes payable to Woodbridge Holdings, LLC Notes payable Principal and interest advances on residential loans ($0 and $11,171 in VIE) Other liabilities ($0 and $1,431 in VIE) Total liabilities Commitments and contingencies (Note 17) Equity: Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued and outstanding Class A common stock, $.01 par value, authorized 25,000,000 shares; issued and outstanding 16,199,145 and 15,977,322 shares Class B common stock, $.01 par value, authorized 1,800,000 shares; issued and outstanding 195,045 and 195,045 shares Additional paid-in capital Accumulated deficit Accumulated other comprehensive income Total BBX Capital Corporation shareholders' equity Noncontrolling interest Total equity Total liabilities and equity $ $ $ $ See Notes to Consolidated Financial Statements F-7 December 31, 2015 2014 69,040 2,651 21,354 34,035 13,732 31,290 46,338 42,962 75,545 18,083 16,347 7,601 8,211 6,352 393,541 11,059 - - 21,421 10,356 14,726 57,562 - 162 2 350,878 (16,622) 384 334,804 1,175 335,979 393,541 58,819 - 35,423 26,844 13,416 76,552 41,733 16,065 73,026 16,717 14,505 7,377 8,440 4,019 392,936 9,603 12,348 11,750 17,923 11,171 18,861 81,656 - 160 2 347,937 (38,396) 85 309,788 1,492 311,280 392,936 BBX CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (In thousands, except per share data) Revenues: Trade sales Interest income Net gains on the sales of assets Income from real estate operations Other Total revenues Costs and expenses: Cost of goods sold BB&T's priority return in FAR distributions Interest expense Real estate operating expenses Recoveries from loan losses, net Asset impairments, net Selling, general and administrative expenses Total costs and expenses Equity in earnings of Woodbridge Holdings, LLC Equity in losses of unconsolidated real estate joint ventures Foreign exchange loss Income before income taxes (Benefit) provision for income taxes Net income Net (earnings) loss attributable to noncontrolling interest Net income attributable to BBX Capital Corporation Basic earnings per share Diluted earnings per share Basic weighted average number of common shares outstanding Diluted weighted average number of common and common equivalent shares outstanding Net income Other comprehensive income, net of tax Foreign currency translation adjustments Unrealized gains on securities available for sale Other comprehensive income, net of tax Comprehensive income Less: net (earnings) loss attributable to noncontrolling interest Foreign currency translation adjustments attributable to noncontrolling interest Total comprehensive income attributable to BBX Capital Corporation For the Years Ended December 31, 2014 2015 2013 $ $ $ $ $ 84,284 10,056 31,092 3,887 2,164 131,483 62,707 68 258 4,773 (13,457) 287 65,936 120,572 14,974 (1,565) (1,038) 23,282 (245) 23,527 (1,753) 21,774 1.34 1.30 74,084 5,164 5,527 5,516 2,354 92,645 54,682 736 1,580 6,296 (7,155) 7,015 52,296 115,450 25,282 (559) (715) 1,203 (3,101) 4,304 391 4,695 0.29 0.28 10,243 24,158 6,728 4,161 3,368 48,658 7,860 3,227 1,933 5,807 (43,865) 4,708 34,412 14,082 13,461 - (357) 47,680 20 47,660 179 47,839 3.02 2.94 16,229 16,043 15,843 16,805 23,527 353 13 366 23,893 (1,753) (67) - 16,678 4,304 88 - 88 4,392 391 (16) 16,278 47,660 16 - 16 47,676 179 (3) $ 22,073 4,767 47,852 See Notes to Consolidated Financial Statements F-8 BBX CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR EACH OF THE YEARS IN THE THREE YEAR PERIOD ENDED DECEMBER 31, 2015 Shares of Class A Common Stock Additional Other BBX Capital Non- Accumulated Common Paid-in (AccumulatedComprehensiveCorporationControlling Total (In thousands) Outstanding Stock Capital Deficit) Income Equity Interest Equity Balance, December 31, 2012 Net income Noncontrolling interest contributions Other comprehensive income Investment in Woodbridge Holdings, LLC Retirement of Class A common shares to satisfy share-based compensation income tax withholding requirements Share based compensation expense 15,577 $ 157 - 331,097 - (90,930) 47,839 - - - - - 13,337 (114) (1) (1,646) 315 4 2,512 - - - - - - - - 13 - - - 240,324 47,839 - (179) 240,324 47,660 - 13 1,360 1,360 3 16 13,337 - 13,337 (1,647) 2,516 - - (1,647) 2,516 Balance, December 31, 2013 15,778 $ 160 345,300 (43,091) 13 302,382 1,184 303,566 Net income Noncontrolling interest distributions Noncontrolling interest contributions Other comprehensive income Woodbridge capital transactions - excess tax benefits Retirement of Class A common shares to satisfy share-based compensation income tax withholding requirements Share based compensation expense - - - - - - - - - 957 (116) (1) (2,020) 315 3 3,700 Balance, December 31, 2014 15,977 $ 162 347,937 Net income Noncontrolling interest distributions Noncontrolling interest contributions Other comprehensive income Retirement of Class A common shares to satisfy share-based compensation income tax withholding requirements Share based compensation expense Balance, December 31, 2015 - - - - - - - - (160) (2) (2,527) 382 16,199 $ 4 5,468 4,695 - - - - - - (38,396) 21,774 - - - - - - - - 72 - - - 4,695 (391) 4,304 - - 72 (157) (157) 840 16 840 88 957 - 957 (2,021) 3,703 - - (2,021) 3,703 85 309,788 1,492 311,280 21,774 1,753 23,527 - - (2,299) (2,299) 162 67 162 366 299 299 - - - - - (2,529) 5,472 - - (2,529) 5,472 164 350,878 (16,622) 384 334,804 1,175 335,979 See Notes to Consolidated Financial Statements F-9 BBX CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Operating activities: Net income Adjustment to reconcile net income to net cash (used in) provided by operating activities: Recoveries from loan losses and asset recoveries, net Depreciation, amortization and accretion, net Share-based compensation expense Net gains on sales of real estate, loans held-for-sale, properties and equipment and other assets Equity in losses of unconsolidated real estate joint ventures Bargain purchase gain from acquisitions Deferred income tax benefit Decrease in principal and interest advances on residential loans (Increase) decrease in trade receivables (Increase) decrease in inventories Decrease in accrued interest receivable (Increase) decrease in other assets (Decrease) increase in other liabilities Net cash (used in) provided by operating activities For the Years Ended December 31, 2015 2014 2013 $ 23,527 4,304 47,660 (13,233) 3,464 5,472 (1,470) 2,382 3,703 (39,157) 1,055 2,516 (31,048) (5,187) (6,728) 1,565 (254) (329) (815) (559) (899) 88 (1,148) (1,876) (16,045) 559 (1,237) (3,107) (81) (4,741) (22) 164 2,696 4,872 2,835 - (1,001) - (1,971) 3 703 1,269 (2,616) (1,923) (190) (CONTINUED) See Notes to Consolidated Financial Statements F-10 BBX CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Investing activities: Proceeds from redemptions of tax certificates Increase in restricted cash and time deposits Proceeds from maturities of interest bearing deposits Purchase of tax certificates Investments in securities Net repayments of loans receivable Proceeds from the sale of loans receivable Proceeds from the sale of tax certificates Additions to real estate held-for-investment Purchases of real estate held-for-sale Proceeds from sales of real estate held-for-sale Proceeds from the sale of properties and equipment Purchases of office properties and equipment, net Distributions from unconsolidated real estate joint ventures Proceeds from the contribution of real estate to unconsolidated real estate joint ventures Investment in unconsolidated real estate joint ventures Investment in Woodbridge Holdings, LLC Return of Woodbridge Holdings, LLC investment Cash outflows from acquisitions, net of cash acquired Net cash provided by investing activities Financing activities: Repayment of BB&T preferred interest in FAR, LLC Proceeds from notes payable to related parties Repayment of notes payable to related parties Proceeds from notes payable Repayment of notes payable Deferred financing fees Retirement of Class A Common Stock to satisfy share- based compensation withholding income tax requirements Noncontrolling interest contributions Noncontrolling interest distributions Net cash used in financing activities Increase (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of period Cash and cash equivalents at the end of period $ For the Years Ended December 31, 2013 2014 2015 438 (2,651) - - (1,240) 30,170 68 - (20,032) (10,667) 72,154 121 (3,634) 510 701 (9,687) (11,385) 8,866 (10) 53,722 (12,348) - (11,750) 4,997 (3,643) (46) (2,529) 162 (2,299) (27,456) 10,221 58,819 69,040 627 - - - - 42,298 9,497 - (4,242) - 33,240 164 (1,404) - 4,086 (10,074) - 6,504 (8,844) 71,852 (56,169) - (3,267) 3,033 (905) (360) (2,021) 840 (157) (59,006) 15,681 43,138 58,819 2,384 - 496 (31) - 136,136 3,490 928 (6,063) - 31,365 5,889 (265) - - (1,354) (60,404) 6,918 (15,413) 104,076 (128,360) 9,911 - - (4,389) - (1,647) 1,360 - (123,125) (19,239) 62,377 43,138 (CONTINUED) See Notes to Consolidated Financial Statements F-11 BBX CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Cash paid for: Interest on borrowings Income taxes payments, net Supplementary disclosure of non-cash investing and financing activities: Loans receivable and tax certificates transferred to real estate held-for-sale or real estate held-for-investment Loans receivable transferred to property and equipment Loans receivable transferred to loans held-for-sale Loans receivable transferred from loans held-for-sale Increase in loans receivable from the sale of real estate Notes payable issued in connection with the investment in Woodbridge Holdings, LLC Increase in additional paid-in-capital associated with the investment in Woodbridge Holdings, LLC Woodbridge capital transactions - excess tax benefits Change in accumulated other comprehensive income Refinance of notes payable to related parties Increase in notes payable associated with refinance of notes payable to related parties Issuance of notes payable to purchase properties and equipment Transfer of real estate-held-for-investment to real estate- held-for-sale Real estate held-for-investment transferred to investment in real estate joint ventures Increase in real estate held-for-sale from assumption of other liabilities For the Years Ended December 31, 2014 2013 2015 $ 1,423 84 2,053 6 5,013 20 3,215 - - 7,365 10,000 - - - 366 - - - 21,400 - 2,299 - - 82,177 12,834 42,398 1,312 - - 11,750 - 957 88 7,475 7,475 21 13,337 - 16 - - - - - - 41,751 28,018 19,448 - 1,920 2,879 See Notes to Consolidated Financial Statements F-12 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization BBX Capital Corporation (formerly BankAtlantic Bancorp, Inc.) and its subsidiaries may also be referred to as “BBX Capital”, “we”, “us,” or “our” in these notes to the consolidated financial statements. BBX Capital Corporation (excluding its subsidiaries, “BBX Capital Corporation”) was organized under the laws of the State of Florida in 1994. BBX Capital is involved in the ownership , acquisition, development and management of and investments in real estate and real estate related assets, and BBX Capital is also involved in the investment in or acquisition of operating businesses. In April 2013, BBX Capital Corporation acquired a 46% equity interest in Woodbridge Holdings, LLC (“Woodbridge”). Woodbridge’s principal asset is its ownership of Bluegreen Corporation and its subsidiaries (“Bluegreen”). Bluegreen manages, markets and sells the Bluegreen Vacation Club, a points-based, deeded vacation ownership plan with more than 190,000 owners. BFC Financial Corporation (“BFC”), the controlling shareholder of BBX Capital, owns the remaining 54% of Woodbridge (see Note 5 Investment in Woodbridge Holdings, LLC). BBX Capital Corporation’s principal asset until July 31, 2012 was its ownership of BankAtlantic and its subsidiaries (“BankAtlantic”). BankAtlantic was a federal savings bank headquartered in Fort Lauderdale, Florida. On July 31, 2012, BBX Capital Corporation completed the sale to BB&T Corporation (“BB&T”) of all of the issued and outstanding shares of capital stock of BankAtlantic (the stock sale and related transactions described herein are collectively referred to as the “BB&T Transaction”). Prior to the closing of the BB&T Transaction, BankAtlantic formed two wholly-owned subsidiaries, BBX Capital Asset Management, LLC (“CAM”) and Florida Asset Resolution Group, LLC (“FAR”). Prior to the closing of the BB&T Transaction, BankAtlantic contributed approximately $82 million in cash to CAM and certain non-performing commercial loans, commercial real estate and previously written-off assets that had an aggregate carrying value on BankAtlantic’s balance sheet of $125 million as of July 31, 2012. CAM assumed all liabilities related to these assets. Prior to the closing of the BB&T Transaction, BankAtlantic distributed all of the membership interests in CAM to BBX Capital. CAM remains a wholly- owned subsidiary of BBX Capital. BankAtlantic contributed to FAR certain performing and non-performing loans, tax certificates and real estate that had an aggregate carrying value on BankAtlantic’s balance sheet of approximately $346 million as of July 31, 2012. FAR assumed all liabilities related to these assets. BankAtlantic also contributed approximately $50 million in cash to FAR on July 31, 2012 and thereafter distributed all of the membership interests in FAR to BBX Capital. At the closing of the BB&T Transaction, BBX Capital transferred to BB&T 95% of the outstanding preferred membership interests in FAR in connection with BB&T’s assumption of BBX Capital’s $285.4 million in principal amount of outstanding trust preferred securities (“TruPS”) obligations. BBX Capital retained the remaining 5% of FAR’s preferred membership interests. Under the terms of the Amended and Restated Limited Liability Company agreement of FAR entered into by BBX Capital and BB&T at the closing, BB&T was entitled to hold its 95% preferred interest in the net cash flows of FAR until it recovered $285 million in preference amount plus a priority return of LIBOR + 200 basis points per annum on any unpaid preference amount. On May 6, 2015, BB&T’s preferred interest in FAR was repaid in full and redeemed and FAR became a wholly-owned subsidiary of BBX Capital. On April 30, 2015, BFC purchased 4,771,221 shares of BBX Capital’s Class A common stock through a tender offer and in September 2015, BFC acquired an additional 221,821 shares of BBX Capital’s Class A common stock from its executive officers upon the vesting of restricted stock units. These share acquisitions increased BFC’s ownership percentage to approximately 81% of the issued and outstanding shares of BBX Capital’s Class A common stock, which together with the shares of BBX Capital’s Class B common stock owned by BFC, represented an approximate 81% equity interest and 90% voting interest in BBX Capital. BFC owns 100% of BBX Capital’s Class B common stock. BBX Capital has two classes of common stock. Holders of the Class A common stock are entitled to one vote per share, which in the aggregate represents 53% of the combined voting power of the Class A common stock and the Class B common stock. Class B common stock represents the remaining 47% of the combined vote. The percentage of total common equity represented by Class A and Class B common stock was 99% and 1% at December 31, 2015, respectively. The fixed voting percentages will be eliminated, and shares of Class B common stock will be entitled to only one vote per share from and after the date that BFC or its affiliates no longer own in the aggregate at least 97,523 shares of Class B common stock (which is one-half of the number of shares it now owns). Class B common stock is convertible into Class A common stock on a share for share basis at any time at BFC’s discretion. F-13 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 2. Summary of Significant Accounting Policies The accounting policies applied by BBX Capital conform to accounting principles generally accepted in the United States of America. BBX Capital’s consolidated financial statements have been prepared on a going concern basis, which reflects the realization of assets and the repayments of liabilities in the normal course of business. Certain amounts for prior years have been reclassified to conform to the revised financial statement presentation for 2015. Use of Estimates - 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 statements of financial condition and operations for the periods presented. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, including the valuation of collateral dependent loans, the valuation of loans held-for-sale, the valuation of real estate held-for-sale and held-for-investment, the determination of lower of cost or market for inventories, the valuation of assets acquired and liabilities assumed in the acquisition of a business, the amount of the deferred tax asset valuation allowance, accounting for uncertain tax positions and accounting for contingencies. Consolidation Policy – The consolidated financial statements include the accounts of BBX Capital Corporation and its wholly-owned subsidiaries and majority-owned subsidiaries. All inter-company transactions and balances have been eliminated. Entities in which BBX Capital has a controlling financial interest are consolidated in BBX Capital’s consolidated financial statements. BBX Capital determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity (VIE). Voting interest entities are entities in which the total equity investment at risk is sufficient to enable the entity to finance itself independently and provides the equity holders with the obligation to absorb losses, the right to receive residual returns and the right to make decisions about the entity’s activities. BBX Capital consolidates voting interest entities in which it has all, or at least a majority of, the voting interest. VIEs are entities that lack one or more of the characteristics of a voting interest entity. A controlling financial interest in a VIE is present when an enterprise has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and an obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The enterprise with a controlling financial interest, known as the primary beneficiary, consolidates the VIE. BBX Capital consolidates all VIE’s in which it is the primary beneficiary. Cash Equivalents – Cash equivalents consist of cash, demand deposits at financial institutions, money market funds and other short-term investments with maturities of 90 days or less when originated. Cash maintained at financial institutions exceeds the $250,000 federally insured limit. Restricted Cash and Time Deposits - Cash and interest bearing deposits are segregated into restricted accounts for specific uses in accordance with the terms of certain land development agreements, loan servicing contracts and notes payable security agreements. Restricted funds are controlled by third-parties. Loans – Loans that management has the intent and ability to hold for the foreseeable future, or until maturity or payoff, are reported at their outstanding principal balances net of any unearned income, unamortized deferred fees or costs, premiums or discounts and an allowance for loan losses. Loans that management has the intent to sell are classified as loans held-for-sale and are reported at the lower of aggregate cost or estimated fair value. Loan origination fees, and related direct loan origination costs, premiums and discounts on loans held- for-sale are deferred until the related loan is sold and included in gains and losses upon sale. Loans are classified as loans held-for-sale when management originates loans for resale or when management decides to sell loans that were not originated or purchased for sale. Transfers of loans between classifications are recorded at the lower of aggregate cost or estimated fair value at the transfer date. Allowance for Loan Losses – The allowance for loan losses reflects management’s reasonable estimate of probable credit losses inherent in the loan portfolio based on management’s evaluation of credit risk as of period end. Loans are charged off against the allowance when management believes the loan is not collectible. Recoveries are credited to the allowance. F-14 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The allowance consists of two components. The first component of the allowance is for loans that are individually evaluated for impairment. Management evaluates commercial real estate and commercial non-real estate loans greater than $0.5 million for impairment quarterly. Once an individual loan is found to be impaired, an evaluation is performed to determine if a specific valuation allowance needs to be assigned to the loan based on the present value of expected future cash flows discounted at the loan’s effective interest rate, except that as a practical expedient, impairment may be measured based on the observable market price of the loan or the fair value of the collateral if the loan is collateral dependent. Loans determined to be collateral dependent are measured based on the fair value of the collateral less costs to sell. Consumer and residential loans past due 120 days or more were also evaluated individually for impairment and measured based on the lower of the estimated fair value of the collateral less cost to sell or the carrying amount of the loan. The second component of the allowance is for groups of loans with common characteristics that are evaluated in loan pools to estimate the inherent losses in the portfolio. Management segregates loans into segments with certain common characteristics so as to form a basis for estimating losses as it relates to the segment. The loan portfolio has the following loan segments: residential, consumer, commercial non-real estate, commercial real estate, and small business loans. The loss experience for each loan segment was derived by calculating a charge-off history by loan segment adjusted by an expected recovery rate. Based on the nature of each portfolio, a time frame is selected for the charge-off history in order to estimate the inherent loss in each segment. The loss factor that was calculated from the charge-off history by loan segment is adjusted by considering the following factors: delinquency and charge-off levels and trends, non-accrual levels and trends, credit scores of borrowers, collateral value and external factors. Based on an analysis of the above factors, management may adjust the historical loss experience up or down to reflect current conditions that differ from the conditions that existed during the historical loss experience time frame. Non-accrual and Past Due Loans – Loans are generally placed on non-accrual status at the earlier of the loan becoming past due 90 days as to either principal or interest or when the borrower has entered bankruptcy proceedings and the loan is delinquent. Commercial and small business loans may be placed on non- accrual status sooner due to material deterioration of conditions surrounding the repayment sources, which could include insufficient borrower capacity to service the debt, declines in the loan-to-value ratio of the loan’s collateral or other factors causing the full payment of the loan’s principal and interest to be in doubt. Accordingly, BBX Capital may place a loan on non-accrual status even when payments of principal or interest are not currently in default. When a loan is placed on non-accrual, all accrued interest is reversed against interest income. Loans may be restored to accrual status when there has been a satisfactory period of performance and the loan is expected to perform in the future according to its contractual terms. Commercial and small business loans are charged-down if the collection of principal or interest is considered doubtful. Consumer and residential real estate loans that are 120 days past due are charged down to the collateral’s fair value less estimated selling costs. Trade Receivables - Trade receivables are recorded at the invoiced amount and do not bear interest. BBX Capital maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. In establishing the required allowance, management considers historical losses adjusted to take into account current market conditions and the customers' financial condition, the amount of receivables in dispute, and the current receivables aging and current payment patterns. BBX Capital reviews its allowance for doubtful accounts quarterly. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Real Estate Held-for-Investment and Real Estate Held-for-Sale – Real estate held-for-investment and real estate held-for-sale represents real estate that BBX Capital has taken possession or ownership through foreclosure of the underlying loan collateral. At the time of foreclosure the real estate is measured at its estimated fair value less cost to sell and any impairments or recoveries are reflected in the allowance for loan losses. Real estate held-for-sale is subsequently measured at the lower of cost or estimated fair value and valuation allowance adjustments are made to reflect any subsequent declines in fair values. Recoveries are recognized for any subsequent increases in fair value but not in excess of cumulative losses recognized. Real estate held-for-investment is depreciated over its useful life using the straight line method, if applicable. Expenditures for capital improvements are generally capitalized. The costs of holding real estate are charged to real estate operating expenses as incurred. Changes in the real estate valuation allowance are recorded as asset (recoveries) impairments in BBX Capital’s Consolidated Statements of Operations. Investments in Unconsolidated Real Estate Joint Ventures and Investment in Woodbridge Holdings, LLC – BBX Capital follows the equity method of accounting to record its interests in companies in which it has the ability to significantly influence the decisions of the entity and to record its investment in variable interest entities in which it is not F-15  BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) the primary beneficiary. Under the equity method, an investment is shown on the Statement of Financial Condition of an investor as a single amount and an investor’s share of earnings or losses from its investment is shown in the Statement of Operations as a single amount. The investment is initially measured at cost and adjusted for the investor’s share of the earnings or losses of the investee as well as dividends received from the investee. The investor recognizes its share of the earnings or losses of the investee in the periods for which they are reported by the investee in its financial statements rather than in the period in which an investee declares a dividend. BBX Capital recognizes earnings or losses on certain equity method investments based on the hypothetical liquidation at book value (“HLBV”) method. Under the HLBV method, earnings or losses are recognized based on how an entity would allocate and distribute its cash if it were to sell all of its assets and settle its liabilities for their carrying amounts and liquidate at the reporting date. The HLBV method is used to calculate earnings or losses for equity method investments when the contractual cash disbursements are different than the investors’ equity interest. Interest expense is capitalized by the investor on investments, advances or loans to real estate equity method companies that began qualifying activities. Total capitalized interest expense cannot exceed interest expense incurred. Interest expense capitalization ceases when the investee completes its qualifying activities. BBX Capital evaluates its investments accounted for under the equity method of accounting for other- than-temporary declines in value on an on-going basis. The review for other-than-temporary declines takes into account the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the project or the investment and the intent and ability of BBX Capital to retain the investment for a period of time sufficient to allow for recovery. BBX Capital considers all available evidence to evaluate the fair value of BBX Capital’s equity method investments, including prior forecasts compared to actual performance, discounted forecasts of future distributions and economic trends in the real estate industry. If BBX Capital believes that the decline in the fair value of the equity investment is other-than- temporary, BBX Capital will record the investment at fair value and recognize impairment in BBX Capital’s consolidated statements of operations. Properties and Equipment– Land is carried at cost. Office properties, leasehold improvements, equipment and computer software are carried at cost less accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful lives of the assets which generally range up to 40 years for buildings and 3-10 years for equipment. The cost of leasehold improvements is amortized using the straight-line method over the shorter of the terms of the related leases or the useful lives of the assets. Expenditures for new properties, leasehold improvements, equipment and major renewals and betterments are capitalized. Expenditures for maintenance and repairs are expensed as incurred, and gains or losses on disposal of assets are reflected in current operations. Inventories – Inventories are measured at the lower of cost or market. Cost includes all costs of conversions, including materials, direct labor, production overhead, depreciation of equipment and shipping costs. Raw materials are stated at the lower of approximate cost, on a first-in, first-out basis, and market determined by reference to replacement cost. Raw materials are not written down unless the goods in which they are incorporated are expected to be sold for less than cost, in which case, they are written down by reference to replacement cost of the raw materials. Finished goods and work in progress are stated at the lower of approximate cost or market determined on a first-in, first-out basis for Renin’s finished goods inventory and on an approximate average cost basis for the Sweet Holdings’ finished goods inventory. Goodwill and other Intangible Assets – Other intangible assets consists of trade names, customer relationships, non-competition agreements and lease premiums that were initially recorded at fair value and are amortized on a straight-line basis over their respective estimated useful lives. Other intangible assets are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the intangible asset may not be recoverable. The carrying amount of an intangible asset is not considered recoverable when the carrying amount exceeds the sum of the undiscounted cash flows expected to result from the use of the intangible asset. The impairment is measured as the amount by which the carrying amount of the intangible asset exceeds its fair value. Goodwill is recorded at the acquisition date of a business. Annually, goodwill is assessed for qualitative factors to determine whether it is necessary to perform a goodwill impairment test. Goodwill testing is a two-step process. The first step of the goodwill impairment test is used to identify potential impairment. This step compares the fair value of a reporting unit with its carrying value. If the fair value of the reporting unit exceeds its carrying value, goodwill is considered not impaired and the second step of the impairment test is not necessary. If the fair value of the reporting unit is less than the carrying value, then the second step of the test is used to measure the amount of goodwill impairment, if any, in the reporting unit. This step compares the current implied goodwill in the reporting unit to its carrying amount. If the carrying F-16 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) amount of the goodwill exceeds the implied goodwill, impairment is recorded for the excess. The implied goodwill is determined in the same manner as the amount of goodwill recognized in a business combination is determined. Tax Certificates – Tax certificates included in other assets totaled $0.1 million and $0.2 million, net of allowance for tax certificate losses as of December 31, 2015 and 2014, respectively. Tax certificates represent a priority lien against real property for which assessed real estate taxes are delinquent. Tax certificates were acquired from municipalities generally through public auction. Income Taxes – BBX Capital as of May 1, 2015 files federal and state income tax returns as part of BFC’s consolidated income tax returns. In prior years, BBX Capital filed consolidated federal and state income tax returns. Renin’s Canadian and United Kingdom subsidiaries’ earnings are subject to taxation in Canada and the United Kingdom and these subsidiaries file separate income tax returns in those countries. BBX Capital’s provision for income taxes for the year ended December 31, 2015 was calculated based on the separate return method. Under the separate return method it is assumed that BBX Capital files a separate consolidated income tax return with the taxing authorities reporting its taxable income or loss and paying the applicable tax to or receiving the appropriate refund from BFC. BBX Capital’s provision for income taxes is based on income before taxes reported for financial statement purposes after adjustments for transactions that do not have tax consequences. Deferred tax assets and liabilities are realized according to the estimated future tax consequences attributable to differences between the carrying value of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted tax rates as of the date of the Consolidated Statements of Financial Condition. The effect of a change in tax rates on deferred tax assets and liabilities is reflected in the period that includes the statutory enactment date. A deferred tax asset valuation allowance is recorded when it has been determined that it is more-likely-than-not that deferred tax assets will not be realized. If a valuation allowance is needed, a subsequent change in circumstances in future periods that causes a change in judgment about the realization of tax valuation the allowance. Additionally, taxable temporary differences that originate from a business combination could result in deferred tax valuation allowance reversals. tax amount could related deferred the deferred reversal of result the in An uncertain tax position is defined as a position in a previously filed tax return or a position expected to be taken in a future tax return that is not based on clear and unambiguous tax law and which is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods. BBX Capital may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. BBX Capital measures the tax benefits recognized based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. BBX Capital recognizes interest and penalties related to unrecognized tax benefits in its provision for income taxes. Revenue Recognition – Gains and losses from the sales of real estate and the transfer of real estate to joint ventures are recognized when the sales are closed and title passes to the buyer, the buyer’s initial and continuing investment is adequate to demonstrate a commitment to pay for the property, the buyer’s receivable, if applicable, is not subject to future subordination and BBX Capital does not have substantial continuing involvement with the property. Revenues are recognized on trade sales when products are shipped and the customer takes ownership and assumes the risk of loss. Revenues from interest income are recognized on accruing loans when it is probable that all of the principal and interest will be collected in accordance with the loan’s contractual terms. Interest income is recognized on non-accrual loans on a cash basis. Revenues from real estate operations are generally rental income from properties under operating leases. Rental income is recognized as rents become due and rental payments received in advance are deferred until earned. Advertising Costs – Advertising costs are expensed as incurred. Accounting for Loss Contingencies – Loss contingencies, including those arising from legal actions, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Earnings Per Share – Basic earnings per share excludes dilution and is computed by dividing net income attributable to BBX Capital by the weighted average number of common shares outstanding for the period. Diluted earnings F-17 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) per share reflect the potential dilution that could occur if options to issue common shares or restricted common stock awards of BBX Capital were exercised or lapse. In calculating diluted earnings per share net income attributable to BBX Capital is divided by the weighted average number of common shares. Options and restricted stock awards are included in the weighted average number of common shares outstanding based on the treasury stock method, if dilutive. Stock-Based Compensation Plans – Compensation expense for stock options and non-vested restricted common stock awards is based on the fair value of the award on the measurement date, which is generally the grant date. BBX Capital recognizes these compensation costs on a straight-line basis over the requisite service period of the award, which is generally four years for non-vested restricted common stock awards and five years for stock options. The fair value of stock options is estimated using the Black-Scholes option-pricing model. The fair value of non-vested restricted common stock awards is generally the market price of BBX Capital’s common stock on the grant date. New Accounting Pronouncements: The FASB has issued the following accounting pronouncements and guidance relevant to BBX Capital’s operations: Accounting Standards Update Number 2016-02 – Leases (Topic 845). This update requires an entity to recognize a right-of-use asset and a lease liability for virtually all of its leases. The liability will be equal to the present value of lease payments. The asset will generally be based on the liability. For income statement purposes operating leases will result in straight-line expense and finance leases will result in expenses similar to current capital leases. The guidance also requires additional disclosures to enable users of financial statements to understand the amount, timing and uncertainty of cash flows arising from leases. The guidance will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. BBX Capital is currently evaluating the requirements of this update and has not yet determined its impact on BBX Capital’s consolidated financial statements. Accounting Standards Update Number 2016-01 –– Financial Instruments – Overall (Topic 825) – Recognition and Measurement of Financial Assets and Financial Liabilities. This update requires all equity investments in unconsolidated entities (other than those accounted for using the equity method of accounting) to generally be measured at fair value through earnings. There will no longer be an available-for-sale classification for equity securities with readily determinable fair values. The cost method is eliminated for equity investments without readily determinable fair values. However, entities will be able to elect to record equity investments without readily determinable fair values at cost, less impairment. This update also simplifies the impairment assessment for equity investments and requires the use of the exit price when measuring the fair value of financial instruments measured at amortized cost for disclosure purposes. The amendments in this update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. BBX Capital is currently evaluating the requirements of this update and has not yet determined its impact on BBX Capital's consolidated financial statements. Accounting Standards Update Number 2015-16 –– Business Combinations (Topic 805) – Simplifying the Accounting Measurement-Period Adjustments. This update requires an acquirer in a business combination to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The acquirer is required to record, in the same period’s financial statements, the effect on earnings, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The update requires that the acquirer disclose in the notes or on the face of the income statement the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The amendments in this update are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. This update should be applied prospectively to adjustments to provisional amounts that occur after the effective date of this update with earlier application permitted for financial statements that have not been issued. We do not expect the adoption of this update on January 1, 2016 to have a material impact on BBX Capital’s consolidated financial statements. Accounting Standards Update Number 2015-15 –– Interest – Imputation of Interest (Topic 835-30) – Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. This update amends ASU 2015-03 and permits presentation of debt issuance costs on line-of- credit arrangements as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line- of-credit arrangement. This update was effective upon the issuance of the F-18 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) standard and may be applied prospectively. We do not expect the adoption of this update on January 1, 2016 to have a material impact on BBX Capital’s consolidated financial statements. Accounting Standards Update Number 2015-11 –– Inventory (Topic 330) – Simplifying the Measurement of Inventory. This update requires that an entity should measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The update was intended to more clearly articulate the requirements for the measurement and disclosure of inventory and not to change current practices. The update is effective for annual and interim reporting periods beginning after December 15, 2016. The update should be applied prospectively with early application permitted at the beginning of an interim or annual reporting period. The adoption of this update is not expected to have a material impact on BBX Capital’s consolidated financial statements. Accounting Standards Update Number 2015-05 –– Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. This update provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The standard is effective for annual and interim reporting periods beginning after December 15, 2015. Early application is permitted. We do not expect the adoption of this update on January 1, 2016 to have a material impact on BBX Capital’s consolidated financial statements. Accounting Standards Update Number 2015-03 –– Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This update requires that debt issuance costs related to a recognized debt liability be presented in the Statement of Financial Condition as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The standard is effective for annual and interim reporting periods beginning after December 15, 2015. Early application is permitted. We do not expect the adoption of this update on January 1, 2016 to have a material impact on BBX Capital’s consolidated financial statements. Accounting Standards Update Number 2015-02 – Amendments to the Consolidation Analysis (Topic 810): This update changes the manner in which a reporting entity assesses one of the five characteristics that determines if an entity is a variable interest entity. In particular, when decision-making over the entity’s most significant activities has been outsourced, the update changes how a reporting entity assesses if the equity holders at risk lack decision making rights. The update also introduces a separate analysis specific to limited partnerships and similar entities for assessing if the equity holders at risk lack decision making rights. The standard is effective for annual reporting periods beginning after December 15, 2015. Early application is permitted. We do not expect the adoption of this update on January 1, 2016 to have a material impact on BBX Capital’s consolidated financial statements. Accounting Standards Update Number 2014-15 – Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This update provides guidance regarding management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The guidance requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in United States auditing standards. The standard is effective for annual and interim reporting periods beginning after December 15, 2016. Early application is permitted. BBX Capital is currently evaluating the requirements of this update and has not yet determined its impact on the Company's consolidated financial statements. Accounting Standards Update Number 2014-09 – Revenue from Contracts with Customers – (Topic 606). Accounting Standards Update Number 2014-09 – Revenue Recognition (Topic 606): Revenue from Contracts with Customers. This guidance is intended to improve the financial reporting requirements for revenue from contracts with customers by providing a principle based approach. It also requires disclosures designed to enable readers of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. This accounting guidance update will replace most existing revenue recognition guidance in U.S. GAAP. The standard was effective for annual and interim reporting periods beginning after December 15, 2016. AU 2015-14 deferred the effective date of this update for all entities by one year. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. BBX Capital F-19 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) is currently evaluating the requirements of this update and has not yet determined its adoption date, adoption method or the impact it may have on BBX Capital's consolidated financial statements. 3. Acquisitions In April 2015, BBX Sweet Holdings, LLC (“BBX Sweet Holdings”), a wholly owned subsidiary of BBX Capital Corporation, acquired the assets of Kencraft Confections, LLC (“Kencraft”) for $1.4 million. The purchase consideration was funded by a $995,000 notes payable to a financial institution and a $400,000 promissory note to the seller. Kencraft is a Utah based manufacturer of hard candies and icing decorations. Business combination disclosures required by Topic 805-10-50 for the Kencraft asset acquisition are not included in BBX Capital’s notes to the consolidated financial statements as the Kencraft asset acquisition was not considered material to BBX Capital’s Consolidated Financial Statements. BBX Capital recognized a $254,000 bargain gain from the acquisition of Kencraft and incurred $0.1 million of acquisition related costs. 2014 Acquisitions In October 2014, BBX Sweet Holdings acquired the outstanding common shares of Anastasia Confections (“Anastasia”) for $11.4 million. Founded in 1984 and headquartered in an 80,000 square foot production facility in Orlando, Florida, Anastasia manufactures gourmet coconut and chocolate candy, salt water taffy, and other chocolate gift products. The purchase consideration included cash of $4.2 million and a $7.5 million promissory note. The promissory note was recorded at a $0.3 million discount to reflect the fair value of the promissory note at the acquisition date . In July 2014, BBX Sweet Holdings acquired Helen Grace Chocolates (“Helen Grace”), a California based manufacturer of premium chocolate confections, chocolate bars, chocolate candies and truffles and in a separate transaction during July 2014 BBX Sweet Holdings acquired Jer’s Chocolates (“Jer’s”), a California based distributor of peanut butter chocolate products internationally and in the United States. In January 2014, BBX Sweet Holdings acquired Williams and Bennett, including its brand Big Chocolate Dipper. Williams and Bennett is headquartered in Boynton Beach, Florida and is a manufacturer of chocolate products serving boutique retailers, big box chains, department stores, national resort properties, corporate customers, and private label brands. The purchase consideration for the Williams and Bennett, Helen Grace, and Jer’s acquisitions included cash of $4.6 million and holdback amounts of $0.7 million. The holdback amounts serve to satisfy any indemnification claims made by BBX Sweet Holdings against a seller pursuant to the purchase agreements. The following tables summarize the fair value of the assets acquired and liabilities assumed from Anastasia at the acquisition date (in thousands): Fair value of identifiable assets acquired and liabilities assumed: Trade receivables Inventories Properties and equipment Identifiable intangible assets (1) Deferred tax liabilities Other liabilities Fair value of identifiable net assets Goodwill Purchase consideration $ $ 483 1,338 1,873 3,410 (1,589) (421) 5,094 6,337 11,431 (1) Identifiable intangible assets consisted primarily of $1.9 million and $1.5 million of trademarks and customer relationships, respectively. BBX Capital incurred $0.1 million of acquisition related costs in connection with the Anastasia acquisition. The acquisition related costs are included in selling, general and administrative expenses in BBX Capital’s Consolidated Statements of Operations for the year ended December 31, 2014. F-20 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The amount of revenues and net income from Anastasia included in BBX Capital’s Consolidated Statements of Operations for the year ended December 31, 2014 was $2.1 million and $268,000, respectively. The Anastasia net income excludes acquisition related costs and is from the date of acquisition (October 1, 2014) through December 31, 2014. The supplemental pro forma amount of BBX Capital’s revenues and net income had the Anastasia acquisition been as of January 1, 2013 was as follows (in thousands): (unaudited) Pro forma from 1/1/2014 -12/31/2014 Pro forma from 1/1/2013 -12/31/2013 Revenue Income (1) $ $ 98,022 54,828 4,540 48,305 (1) Amounts represent income from continuing operations. The following tables summarize the fair value of the assets acquired and liabilities assumed from Williams and Bennett, Jer’s and Helen Grace at the respective acquisition dates (in thousands): Fair value of identifiable assets acquired and liabilities assumed: Trade receivables Inventories Properties and equipment Identifiable intangible assets Other assets Notes payable Deferred tax liabilities Other liabilities Fair value of identifiable net assets Goodwill Purchase consideration Bargain purchase gain $ $ 49 3,284 1,329 2,738 416 (186) (1,742) (602) 5,286 1,264 (5,313) 1,237 (1) Identifiable intangible assets consisted primarily of $1.2 million and $1.1 million of trademarks and customer relationships intangible assets, respectively. BBX Capital incurred $0.4 million of acquisition related costs in connection with these acquisitions. The acquisition related costs are included in selling, general and administrative expenses in BBX Capital’s Consolidated Statements of Operations for the year ended December 31, 2014. The bargain purchase gain of $1.2 million from the Helen Grace acquisition represents the amount by which the fair value of identifiable net assets acquired exceeded the purchase consideration. Management believes that it was able to acquire Helen Grace for a bargain purchase gain because Helen Grace was a division of a larger company that made a strategic decision to divest chocolate manufacturing activities. The amount of revenues and net loss from these acquisitions included in BBX Capital’s Consolidated Statements of Operations for the year ended December 31, 2014 was $9.7 million and $0.3 million, respectively. The net loss from the date of these acquisitions through December 31, 2014 excludes $0.4 million of acquisition related costs and the $1.2 million Helen Grace bargain purchase gain. F-21 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The supplemental pro forma amount of BBX Capital’s revenues and net income had these acquisitions been consummated as of January 1, 2013 was as follows (in thousands): (unaudited) Pro forma from 1/1/2014 -12/31/2014 Pro forma from 1/1/2013 -12/31/2013 Revenue Income (1) $ $ 97,148 64,496 3,289 46,941 (1) Amounts represent income from continuing operations. The net cash outflows from the Williams and Bennett, Jer’s, Helen Grace and Anastasia acquisitions (collectively, “2014 Acquisitions”) was as follows (in thousands): Total purchase consideration Notes payable Other liabilities Net cash outflow from acquisitions 2013 Acquisitions $ $ 16,744 (7,750) (150) 8,844 On October 30, 2013, Renin Holdings, LLC (“Renin”) a newly formed joint venture owned 81% by BBX Capital and 19% by BFC acquired through two subsidiaries substantially all of the assets and certain liabilities of Renin Corp for approximately $14.5 million (the “Renin Transaction Consideration”). Renin manufactures interior closet doors, wall décor, hardware and fabricated glass products and operates through headquarters in Canada and two manufacturing, assembly and distribution facilities in Canada and the United States and a sales facility in the United Kingdom. Renin funded approximately $9.4 million of the Renin Transaction Consideration through proceeds from a loan and revolver facility to Renin provided by Bluegreen. The remainder of the Renin Transaction Consideration was funded $4.2 million by BBX Capital and $1.0 million by BFC pro rata in accordance with their percentage equity interests in Renin. At closing, $1.7 million of the Renin Transaction Consideration was placed in an escrow account pending final determination of the working capital adjustment (if any) and final resolution of any indemnification obligations of Renin Corp. In January 2014, the working capital and indemnification obligations of the sellers were finalized and the entire escrow balance was distributed to Renin. As a result, the Renin Transaction Consideration was reduced to $12.8 million. In December 2013, BBX Sweet Holdings acquired the outstanding equity interests in Hoffman’s Chocolates and its subsidiaries Boca Bons, LLC and S&F Good Fortunes, LLC (collectively, “Hoffman’s”). Hoffman’s is a manufacturer of gourmet chocolates, with retail locations in South Florida. The purchase consideration included a $500,000 holdback (“Holdback”) that was payable on the second anniversary of the closing date and accrued interest at 1.93% per annum. The Holdback served as security for the Hoffman’s sellers’ obligations under the Hoffman’s stock purchase and sale agreement including the indemnity obligations and performance under each of such seller’s non-competition agreements. The Holdback was recorded at a $46,000 premium to reflect the fair value of the Holdback at the acquisition date. The obligation of BBX Sweet Holdings to pay to the Hoffman’s sellers all or any portion of the Holdback was guaranteed by BBX Capital. F-22 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The following tables summarize the purchase consideration for the Hoffman’s acquisition and for the Renin Transaction and the fair value of the assets acquired and liabilities assumed and the net cash outflows from the acquisitions at the acquisition dates (in thousands): Fair value of identifiable assets acquired and liabilities assumed: Cash Trade receivables Inventories Properties and equipment Identifiable intangible assets Other assets Note payable Other liabilities Fair value of identifiable net assets Purchase consideration Bargain purchase gain Purchase consideration Working capital adjustment receivable Holdback Amounts Discount on Holdback Amount Cash acquired Net cash outflows from acquisitions $ $ $ $ 1,033 7,523 9,858 6,134 2,686 477 (2,493) (9,011) 16,207 (15,206) 1,001 15,206 1,694 (500) 46 (1,033) 15,413 BBX Capital the incurred $1.1 million of acquisition related costs acquisitions. The bargain purchase gain of $1.0 million from the Renin Transaction represents the amount by which the fair value of identifiable net assets acquired exceeded the Renin Transaction Consideration. Management believes that it was able to acquire Renin Corp. for a bargain purchase gain because Renin Corp. was a distressed company. The acquisition related costs are included in selling, general and administrative expenses in BBX Capital’s Consolidated Statements of Operations for the year ended December 31, 2013. in connection with The amount of revenues and net loss from the Renin Transaction included in BBX Capital’s Consolidated Statements of Operations for the year ended December 31, 2013 was $9.3 million and a net loss of $0.9 million, respectively. Actual net loss from October 30, 2013 through December 31, 2013 excludes acquisition costs and the bargain purchase gain. F-23 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The supplemental pro forma amount of BBX Capital’s revenues and net income (loss) had the Renin Transaction been consummated as of January 1, 2012 was as follows (in thousands): (unaudited) Revenue Income (1) Pro forma from 1/1/2013 - 12/31/2013 $ 104,987 43,639 (1) Amounts represent income from continuing operations The methodology utilized to fair value the assets acquired for the acquisitions was as follows: Trade Receivables Trade receivables were recorded at fair value using the cost approach with level 3 inputs based on the percentage of gross receivables collected in a trailing eighteen month period ending in October 2013 for Renin. The inputs used were trade receivable balances, allowances, charge-offs, sales discounts and volume of returned merchandise. The fair value of the trade receivables acquired from the BBX Sweet Holdings acquisitions were recorded at the invoiced amounts. Inventories Raw materials were fair valued using the cost approach. Raw material items replaced on a regular basis were recorded at fair value based on historical costs. Raw material items acquired in the Renin transaction with greater than 180 days of usage on hand were recorded at fair value based on discounts relative to historical cost amounts. Finished goods inventory was recorded at fair value using the cost approach. A gross margin was added to the finished goods historical cost amounts in order to estimate a reasonable profit margin for selling finished goods. Finished goods on hand acquired in the Renin Transaction greater than 180 days of sales were recorded at fair value with discounts relative to historical costs. Properties and Equipment Properties and equipment acquired consisted primarily of machinery and equipment used in manufacturing operations. The machinery and equipment was recorded at fair value using the market approach with level 2 inputs as market comparable data. The cost approach was used to estimate the contributing installation costs to fair value and the electrical distribution system in certain manufacturing facilities. The inputs were obtained from market data collected from used equipment dealers that purchase and sell comparable equipment, quotations from new machinery dealers and manufacturers, historical installation cost information and searches on the internet. Identifiable Intangible Assets The identifiable intangible assets acquired primarily consisted of trade names and customer relationships. The relief from royalty valuation method, a form of the income approach, was used to estimate the fair value of the trade names. The fair value was determined by present valuing the expected future estimated royalty payments that would have to be paid if the trade names were not owned. The fair value of the net royalties saved was estimated based on discounted cash flows at a risk adjusted discount rate. The multi- period excess earnings method, a form of the income approach, was used to estimate the fair value of the customer relationships. The multi-period excess earnings method isolates the expected cash flows attributable to the customer relationship intangible asset and discounts these cash flows at a risk adjusted discount rate. F-24 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 4. Goodwill and Other Intangible Assets Included in BBX Capital’s Consolidated Statements of Financial Condition as of December 31, 2015 and 2014 was $7.6 million and $7.4 million of goodwill, respectively. The goodwill was recognized in connection with BBX Sweet Holdings acquisitions and is part of the Sweet Holdings reportable segment. The Anastasia acquisition goodwill was adjusted based on additional information obtained concerning the tax basis of properties and equipment acquired. The adjustment to the tax basis increased the taxable temporary differences established in connection with the Anastasia acquisition resulting in a $0.2 million increase in Goodwill during the year ended December 31, 2015. BBX Capital tests goodwill for potential impairment annually on December 31 or during interim periods if impairment indicators exist. BBX Capital first assesses qualitatively whether it is necessary to perform the two-step goodwill impairment test. The two-step test is performed when it is more-likely-than-not that the reporting unit’s goodwill fair value is less than its carrying amount. BBX Capital evaluates the following factors in its qualitative assessment: macroeconomic conditions, market considerations, cost factors, financial performance and events affecting the reporting unit. If BBX Capital concludes from the qualitative assessment that further testing is required, BBX Capital performs the two-step goodwill impairment test. Step one involves the determination of the fair value of BBX Capital’s reporting unit. If the fair value of the reporting unit exceeds the carrying amount, the reporting unit’s goodwill is not considered impaired. If the fair value of the reporting unit is less than the carrying amount BBX Capital performs step two of the goodwill impairment test which calculates the reporting units goodwill. If the carrying amount of the reporting unit’s goodwill is greater than the implied fair value of the reporting unit’s goodwill, an impairment loss is recognized. Inherent in such fair value determinations are certain judgments and estimates relating to future cash flows, including BBX Capital’ s assessment of current economic indicators and market valuations, and assumptions about BBX Capital’s strategic plans with regard to its operations. BBX Capital generally establishes fair value using the discounted cash flow methodology. The discounted cash flow methodology establishes fair value by estimating the present value of the projected future cash flows to be generated from the reporting unit. The discount rate applied to the projected future cash flows to arrive at the present value is intended to reflect all risks of ownership and the associated risks of realizing the stream of projected future cash flows. BBX Capital generally used a five year period in computing discounted cash flow values. The most significant assumptions used in the discounted cash flow methodology are the discount rate, the terminal value and the forecast of future cash flows. Major classes of other intangible assets was as follows (in thousands): Class Trademarks Customer Relationships Other Accumulated amortization Total other intangible assets December 31, 2015 2014 $ $ 5,965 2,691 601 9,257 (1,046) 8,211 5,715 2,631 490 8,836 (396) 8,440 The amortization expense of other intangible assets included in selling general and administrative expenses for the years ended December 31, 2015 and 2014 was $0.6 million and $0.4 million, respectively. F-25 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The estimated aggregate amortization expense of other intangible assets for each of the five succeeding years was as follows: Years Ending December 31, 2016 2017 2018 2019 2020 $ Total 649 621 597 583 536 Trademarks, customer relationships and non-competition agreements are amortized using the straight- line method over their expected useful lives of 20 years, 12 years and 4 years, respectively. The lease premium is amortized using the straight-line method over the lease term of 73 months. Included in other liabilities was a $306,000 lease discount intangible liability associated with the Anastasia acquisition. The lease discount is amortized using the straight-line method over the lease term of five years. 5. Investment in Woodbridge Holdings, LLC On April 2, 2013, BBX Capital invested $71.75 million in Woodbridge in exchange for a 46% equity interest in Woodbridge. The investment was made in connection with Woodbridge’s acquisition on April 2, 2013 of the publicly held shares of Bluegreen. BFC holds the remaining 54% of Woodbridge’s outstanding equity interests and is the managing member of Woodbridge. Since BFC is the majority owner of Woodbridge and the managing member, BBX Capital’s investment in Woodbridge is accounted for under the equity method. BBX Capital’s investment in Woodbridge consisted of $60.4 million in cash (including $0.4 million in transaction costs) and a promissory note in Woodbridge’s favor in the principal amount of $11.75 million. In connection with BBX Capital’s investment in Woodbridge, BBX Capital and BFC entered into an Amended and Restated Operating Agreement of Woodbridge, which sets forth BBX Capital’s and BFC’s respective rights as members of Woodbridge and provides, among other things, for unanimity on certain specified “major decisions” and for distributions to be made on a pro rata basis in accordance with BBX Capital’s and BFC’s percentage equity interests in Woodbridge. BBX Capital’s investment in Woodbridge was accounted for as a transaction between entities under common control as BFC is the controlling shareholder of BBX Capital and Woodbridge. As a consequence, the investment in Woodbridge was recorded by BBX Capital at BFC’s historical cost and the difference between 46% of BFC’s historical cost in Woodbridge ($85.1 million) and the amount BBX Capital invested in Woodbridge ($71.75 million) was recognized as an increase in additional paid-in capital ($13.3 million) in BBX Capital’s consolidated financial statements. Bluegreen’s former public shareholders brought an action against Bluegreen, the directors of Bluegreen, BFC, Woodbridge, certain directors and officers of BFC and others, challenging the terms of the merger pursuant to which Bluegreen merged into a wholly owned subsidiary of Woodbridge and Bluegreen’s shareholders (other than Woodbridge) were paid $10.00 in cash for each share of Bluegreen’s common stock that they held immediately prior to the effective time of the merger, and on June 5, 2015 the plaintiffs and defendants agreed to a settlement of the litigation. Pursuant to the settlement, which was finalized during September 2015, Woodbridge paid $36.5 million into a settlement fund for the benefit of former shareholders of Bluegreen whose shares were acquired in connection with the transaction. BBX Capital repaid in full its $11.75 million promissory note to Woodbridge and BFC and BBX Capital made additional capital contributions to Woodbridge of $13.4 million and $11.4 million, respectively (based on their respective 54% and 46% ownership interests in Woodbridge), to fund the settlement payment. F-26 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The following was the activity related to BBX Capital’s investment in Woodbridge under the equity method (in thousands): For the Years Ended December 31, Through 2015 2014 December 31, 2013 From April 2, 2013 Investment in Woodbridge Additional investment in Woodbridge Equity in earnings of Woodbridge Woodbridge capital transactions - excess tax benefits Dividends received from Woodbridge Investment in Woodbridge $ $ 73,026 11,385 14,974 - (23,840) 75,545 78,573 - 25,282 957 (31,786) 73,026 85,491 - 13,461 - (20,379) 78,573 The condensed Consolidated Statements of Financial Condition as of December 31, 2015 and 2014, and the condensed Consolidated Statements of Operations for the years ended December 31, 2015 and 2014 and from April 2, 2013 through December 31, 2013 of Woodbridge Holdings, LLC are as follows (in thousands): December 31, 2015 2014 Assets Cash and restricted cash Notes receivable, net Notes receivable from related parties Inventory of real estate Properties and equipment, net Intangible assets Other assets Total assets Liabilities and Equity Accounts payable, accrued liabilities and other Deferred tax liabilities, net Notes payable Junior subordinated debentures Total liabilities Total Woodbridge members' equity Noncontrolling interest Total equity Total liabilities and equity $ $ $ $ F-27 172,758 415,598 80,000 220,211 71,937 61,977 70,496 1,092,977 113,473 110,202 510,401 152,307 886,383 163,397 43,197 206,594 1,092,977 240,427 424,267 11,750 194,713 72,319 63,913 53,158 1,060,547 114,263 92,609 502,465 150,038 859,375 157,920 43,252 201,172 1,060,547 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) For the Years Ended December 31, From April 2, 2013 Through December 31, 2015 2014 2013 Total revenues Total costs and expenses Other income (expense) Income before taxes Provision for income taxes Net income Net income attributable to noncontrolling interest Net income attributable to Woodbridge BBX Capital 46% equity earnings in Woodbridge $ $ $ 614,765 533,260 3,410 84,915 40,658 44,257 (11,705) 32,552 580,328 477,507 3,872 106,693 40,321 66,372 (11,411) 54,961 14,974 25,282 399,708 341,938 (123) 57,647 18,409 39,238 (9,974) 29,264 13,461 6. Investments in Unconsolidated Real Estate Joint Ventures BBX Capital had the following investments in unconsolidated real estate joint ventures (in thousands): Investment in unconsolidated real estate joint ventures Altis at Kendall Square, LLC $ Altis at Lakeline - Austin Investors LLC New Urban/BBX Development, LLC Sunrise and Bayview Partners, LLC Hialeah Communities, LLC PGA Design Center Holdings, LLC CCB Miramar, LLC Centra Falls, LLC The Addison on Millenia Investment, LLC BBX/S Millenia Blvd Investments, LLC Altis at Bonterra - Hialeah, LLC Investments in unconsolidated real estate joint ventures $ December 31, 2015 2014 764 5,210 864 1,577 4,569 1,911 875 727 5,778 4,905 15,782 42,962 1,264 5,000 996 1,723 5,091 1,991 - - - - - 16,065 BBX Capital’s investments in unconsolidated real estate joint ventures are variable interest entities. See Note 7 for a listing of BBX Capital’s investments in consolidated variable interest entities. Information regarding BBX Capital’s investments in unconsolidated real estate joint ventures are listed below. Altis at Kendall Square, LLC (“Kendall Commons”) In March 2013, BBX Capital invested $1.3 million in a joint venture to develop 321 apartment units. BBX Capital is entitled to receive 13% of the joint venture distributions until a 15% internal rate of return has been attained and then BBX Capital will be entitled to receive 9.75% of any joint venture distributions thereafter. BBX Capital analyzed the operating agreement of Kendall Commons and determined that it is not the primary beneficiary and therefore the investment in the real estate joint venture is accounted for under the equity method of F-28 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) accounting. This conclusion was based primarily on the determination that BBX Capital only has limited protective rights under the operating agreement, is not the manager of the joint venture and BBX Capital does not have day-to-day decision making authority. BBX Capital’s maximum exposure to loss as a result of its involvement with the Altis at Kendall Square joint venture is its carrying amount of $0.8 million as of December 31, 2015. Altis at Lakeline – Austin Investors, LLC (“Altis at Lakeline”) In December 2014, BBX Capital invested $5.0 million in a joint venture to develop 354 apartment units in Austin, Texas. BBX Capital contributed 34% of the capital to the joint venture. After BBX Capital receives a preferred return of 9% and all of its capital is returned, BBX Capital is then entitled to receive 26.3% of the joint venture’s distributions until an 18% internal rate of return has been attained and thereafter BBX Capital will be entitled to receive 18.8% of any joint venture distributions. BBX Capital analyzed the operating agreement of Altis at Lakeline and determined that it is not the primary beneficiary and therefore the investment in the real estate joint venture is accounted for under the equity method of accounting. This conclusion was based on the determination that the joint venture has four members and the approval of an issue requires three of the four members to agree. Also, BBX Capital is not the managing member or the developer and the managing member guarantees the indebtedness of the joint venture. BBX Capital’s maximum exposure to loss as a result of its involvement with the Altis at Lakeline joint venture is its carrying amount of $5.2 million as of December 31, 2015. The amount of interest capitalized associated with the Altis at Lakeline joint venture land development activities for the year ended December 31, 2015 was $210,000. There was no capitalized interest in 2014. New Urban/BBX Development, LLC (“Village at Victoria Park”) In December 2013, BBX Capital invested in a joint venture with New Urban Communities to develop 2 acres of vacant land owned by BBX Capital located near downtown Fort Lauderdale, Florida as 30 single- family homes. BBX Capital and New Urban Communities each have a 50% membership interest in the joint venture and New Urban Communities serves as the developer and the manager. In April 2014, the joint venture obtained an acquisition, development and construction loan from a financial institution and BBX Capital and New Urban Communities each contributed $692,000 to the joint venture as a capital contribution. The joint venture purchased the two acre site from BBX Capital for $3.6 million consisting of $1.8 million in cash (less $0.2 million in selling expenses) and a $1.6 million promissory note. The promissory note bears interest at 8% per annum and is subordinated to the financial institution acquisition, development and construction loan. BBX Capital recognized a partial gain included in net gains on the sales of assets in BBX Capital’s Consolidated Statements of Operations of $188,000 for the year ended December 31, 2014 and recorded a deferred gain of $1.1 million included in other liabilities in the BBX Capital’s Consolidated Statements of Financial Condition as of December 31, 2015 and 2014 on the sale of the vacant land to the joint venture. The sale of appreciated property to the joint venture resulted in a joint venture basis difference as BBX Capital’s carrying value of the land was $1.1 million lower than the fair value. BBX Capital accounted for the sale of the vacant land to the joint venture using the cost recovery method. BBX Capital will recognize the deferred gain based on the repayments of the principal balance of the notes receivable. BBX Capital will recognize the joint venture basis adjustment as joint venture equity earnings upon the joint venture sale of single-family units. BBX Capital analyzed the Village at Victoria Park’s operating agreement and determined that it is not the primary beneficiary and therefore the investment in the real estate joint venture is accounted for under the equity method of accounting. This conclusion was based primarily on the determination that New Urban Communities has the power to direct activities of the joint venture that most significantly affect the joint venture’s performance as it is the developer and manager of the project. Additionally, New Urban Communities also receives significant benefits from the joint venture in excess of its 50% membership interest in the form of development and administrative fees. F-29 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) BBX Capital’s maximum exposure to loss as a result of its involvement with the New Urban/BBX Development joint venture is its carrying amount of $0.9 million as of December 31, 2015. The amount of interest capitalized associated with New Urban/BBX Development joint venture land development activities for the year ended December 31, 2015 was $44,000. There was no capitalized interest in 2014. Sunrise and Bayview Partners In June 2014, BBX Capital invested in a joint venture with an affiliate of Procacci Development Corporation (“PDC”) and BBX Capital and PDC each contributed $1.8 million to the Sunrise and Bayview Partners joint venture. BBX Capital and PDC each have a 50% interest in the joint venture. In July 2014, the joint venture borrowed $5.0 million from PDC and acquired for $8.0 million three acres of real estate in Fort Lauderdale, Florida from an unrelated third party. The property is improved with an approximate 84,000 square foot office building along with a convenience store and gas station. The joint venture refinanced the PDC borrowings with a financial institution and BBX Capital provided the financial institution with a guarantee of 50% of the outstanding balance of the joint venture’s $5.0 million loan. BBX Capital analyzed the Sunrise and Bayview Partners operating agreement and determined that it is not the primary beneficiary and therefore the investment in the real estate joint venture is accounted for under the equity method of accounting. This conclusion was based primarily on the determination that PDC has the power to direct activities of the joint venture that most significantly affect the joint venture’s performance as it is managing the property, including locating tenants, executing leases, collecting rent payments and conducting development activities. Additionally, PDC also receives significant benefits from the joint venture in excess of its 50% membership interest in the form of development and property management fees. BBX Capital’s maximum exposure to loss as a result of its involvement with the Sunrise and Bayview Partners as of December 31, 2015 is $4.1 million consisting of the joint venture carrying amount of $1.6 million and BBX Capital’s $2.5 million joint venture acquisition loan guarantee. Hialeah Communities, LLC In July 2014, BBX Capital invested in a joint venture with CC Bonterra to develop approximately 394 homes in a portion of Bonterra communities in Hialeah, Florida. BBX Capital transferred approximately 50 acres of land at an agreed upon value of approximately $15.6 million subject to an $8.3 million mortgage which was assumed by the joint venture. In exchange, BBX Capital received $2.2 million in cash and a joint venture interest with an agreed upon assigned initial capital contribution value of $4.9 million. BBX Capital is entitled to receive 57% of the joint venture distributions until it receives its aggregate capital contributions plus a 9% per annum return on capital. Any distributions thereafter are shared 45% by BBX Capital and 55% by CC Bonterra. BBX Capital contributes 57% of the capital and remains liable as a co-borrower on the $8.3 million mortgage that was assumed by the joint venture. The transfer of the land to the joint venture as an initial capital contribution resulted in a deferred gain of $1.6 million included in other liabilities in BBX Capital’s Consolidated Statements of Financial Condition as of December 31, 2015 and 2014 and a joint venture basis adjustment of $2.1 million. BBX Capital determined that the transfer of the land to the joint venture should be accounted for on the cost recovery method. The deferred gain of $1.6 million will be recognized upon the repayment of the principal balance of the $8.3 million mortgage. BBX Capital will recognize the joint venture basis adjustment as joint venture equity earnings upon the joint venture sale of single-family units. In March 2015, the joint venture refinanced the $8.3 million mortgage loan with proceeds from a $31.0 million acquisition and development loan. BBX Capital is a guarantor on 26.3% of the $31.0 million joint venture acquisition and development loan. BBX Capital analyzed the Hialeah Communities operating agreement and determined that it is not the primary beneficiary and therefore the investment in the real estate joint venture is accounted for under the equity method of accounting. This conclusion was based primarily on the determination that CC Bonterra as the managing member and developer of the homes has the power to direct activities of the joint venture that most significantly affect the joint venture’s performance. Additionally, CC Bonterra also receives significant benefits from the joint venture in excess of its 43% membership interest in the form of development and administrative fees as well as 55% of joint venture residual profits. In September 2014, BBX Capital contributed additional capital to the joint venture of $1.8 million with CC Bonterra contributing $1.4 million. The additional capital contributions funded the joint venture’s purchase of property adjacent to the project for $0.9 million. The joint venture advanced $2.3 million to a wholly-owned subsidiary of BBX F-30 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Capital and the wholly-owned subsidiary of BBX Capital used the funds received from the joint venture to purchase $2.3 million of additional property adjacent to the project. BBX Capital repaid the joint venture advance upon the sale of properties to a developer. BBX Capital’s maximum exposure to loss as a result of its involvement with the Hialeah Communities as of December 31, 2015 is $12.7 million consisting of the joint venture carrying amount of $4.6 million and BBX Capital’s $8.1 million joint venture acquisition and development loan guarantee. The amount of interest capitalized associated with Hialeah Communities joint venture land development activities for the year ended December 31, 2015 was $226,000. There was no capitalized interest in 2014. PGA Design Center Holdings, LLC (“PGA Design Center”) In December 2013, BBX Capital purchased for $6.1 million a commercial property with three existing buildings consisting of 145,000 square feet of mainly furniture retail space. In January 2014, BBX Capital invested in a joint venture with Stiles Development, and in connection with the formation of the joint venture, BBX Capital sold the commercial property to the joint venture in exchange for $2.9 million in cash and a 40% interest in the joint venture. The joint venture intends to seek governmental approvals to change the use of a portion of the property from retail to office and subsequently sell or lease the property. The property contributed to the joint venture excluded certain residential development entitlements with an estimated value of $1.2 million which were transferred to adjacent parcels owned by BBX Capital. BBX Capital analyzed the PGA Design Center’s operating agreement and determined that it is not the primary beneficiary and therefore the investment in the real estate joint venture is accounted for under the equity method of accounting. This conclusion was based primarily on the determination that Stiles Development has a 60% interest in the joint venture and is also the managing member. As such, Stiles Development is the joint venture member that has the majority of the power to direct the activities of the joint venture that most significantly impact its economic performance and through its 60% membership interest has the obligation to absorb the majority of the losses and the right to receive the majority of the benefits of the joint venture. BBX Capital’s maximum exposure to loss as a result of its involvement with the PGA Design Center Holdings joint venture is its carrying amount of $1.9 million as of December 31, 2015. CCB Miramar, LLC In May 2015, BBX Capital invested in a joint venture with two separate unaffiliated developers for the acquisition of real estate in Miramar, Florida to construct single-family homes. BBX Capital contributed $875,000 for a 35% interest in the joint venture and one of the developers contributed to the joint venture a contract to purchase real estate. The purchase of the real estate is subject to certain closing conditions, including receipt of all necessary entitlements and completion of due diligence by the joint venture. BBX Capital analyzed the CCB Miramar operating agreement and determined that it is not the primary beneficiary and therefore the investment in the real estate joint venture is accounted for under the equity method of accounting. This conclusion was based primarily on the determination that the developer members were managing the activities of obtaining entitlements for the potential purchase and development of the property. As a consequence, BBX Capital is not the member that has the most power to significantly impact the economic performance of the joint venture. BBX Capital’s maximum exposure to loss as a result of its involvement with the CCB Miramar joint venture is its carrying amount of $0.9 million as of December 31, 2015. Centra Falls, LLC In August 2015, BBX Capital and other investors invested in a joint venture with a developer for the development and sale of 89 townhomes in Pembroke Pines, Florida. BBX Capital contributed 7.143% of the total capital of the joint venture or $750,000 and is entitled to receive 7.143% of the joint venture distributions until a 12% return on its investment has been attained and then BBX Capital will be entitled to 3.175% of the joint venture distributions thereafter. F-31  BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) BBX Capital analyzed the joint venture operating agreement and determined that it is not the primary beneficiary and therefore the investment in the real estate joint venture is accounted for under the equity method of accounting. This conclusion was based primarily on the determination that the activities of the joint venture are controlled by the managing member with a 10% interest in the joint venture. The remaining 90% interest in the joint venture is controlled by nine investors including BBX Capital. The managing member can only be removed for cause and the investing members do not participate in the day-to-day operations of the joint venture. BBX Capital’s maximum exposure to loss as a result of its involvement with the Centra Falls joint venture is its carrying amount of $0.7 million as of December 31, 2015. The Addison on Millenia Investment, LLC In December 2015, BBX Capital and another investor invested in a joint venture to develop 11.8 acres in the Gardens at Millenia site located in Orlando, Florida into nine retail apartment buildings totaling approximately 292 units. The joint venture intends to operate the property as an income producing business. BBX Capital invested 48% of the joint ventures total capital by transferring property with an agreed upon value of $5.8 million and $0.3 million of cash. In exchange, BBX Capital is entitled to receive 48% of the joint venture distributions until it receives its aggregate capital contributions plus a 10% per annum return on capital. Any distributions thereafter are shared based on the project’s internal rate of return resulting in the managing member receiving an increasing percentage of distributions based on the joint venture’s internal rate of return. The transfer of the land to the joint venture as an initial capital contribution resulted in a deferred gain of $0.4 million included in other liabilities in BBX Capital’s Consolidated Statements of Financial Condition as of December 31, 2015 and a joint venture basis adjustment of $0.4 million. BBX Capital determined that the gain on the transfer of the land to the joint venture should be recorded on the cost recovery method as BBX Capital did not receive cash. The deferred gain of $0.4 million will be recognized upon the receipt of cash distributions from the joint venture. BBX Capital will recognize the joint venture basis adjustment as joint venture equity earnings upon the joint venture sale of the apartment units. BBX Capital analyzed the Addison on Millenia Investment operating agreement and determined that it is not the primary beneficiary and therefore the investment in the real estate joint venture is accounted for under the equity method of accounting. This conclusion was based primarily on the determination that ContraVest, the managing member, has the authority to make all decisions concerning the day-to-day operations of the joint venture and manages the construction, leasing and property management of the joint venture. Additionally, ContraVest receives significant benefits from the joint venture in excess of its 3.75% membership interest in the form of development and administrative fees as well as up to 37.5% of the joint venture residual profits upon achievement of IRR hurdles. ContraVest is also exposed to significant joint venture losses from construction cost overruns and construction loan guarantees. BBX Capital’s maximum exposure to loss as a result of its involvement with the Addison on Millenia Investment joint venture is its carrying amount of $5.8 million as of December 31, 2015. BBX/S Millenia Blvd Investments, LLC In October 2015, BBX Capital and a developer invested in a joint venture to develop a retail center on the Gardens of Millenia site in Orlando, Florida. The joint venture intends to obtain all necessary approvals, secure financing, construct all improvements, lease the premises and sell the property. BBX Capital transferred property with at an agreed upon value of $7.0 million to the joint venture and received $0.7 million in cash and a 90% interest in the joint venture. BBX Capital is entitled to receive 90% of the joint venture distributions until it receives its aggregate capital contributions plus an 8% per annum return on capital. Any distributions thereafter are shared 54% to BBX Capital and 46% to the developer. The transfer of the land to the joint venture as an initial capital contribution resulted in a recognized gain of $0.1 million included in gains on sales of assets in BBX Capital’ s Consolidated Statements of Operations and a joint venture basis adjustment of $0.9 million that will be recognized as joint venture equity earnings upon the sale of the retail center. BBX Capital analyzed the BBX/S Millenia Blvd Investments operating agreement and determined that it is not the primary beneficiary and therefore the investment in the real estate joint venture is accounted for under the equity method of F-32 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) accounting. This conclusion was based primarily on the determination that the developer makes all decisions concerning the operations of the joint venture and is managing the construction, leasing, property management, accounting, tenant improvements and disposition of the property. Additionally, the developer receives significant benefits from the joint venture in excess of its 10% membership interest in the form of development, construction and other fees as well as up to 45% of the joint venture residual profits. The developer is also exposed to significant joint venture losses from construction loan guarantees. BBX Capital’s maximum exposure to loss as a result of its involvement with the BBX/S Millenia Blvd Investments joint venture is its carrying amount of $4.9 million as of December 31, 2015. Altis at Bonterra - Hialeah, LLC I n December 2015, BBX Capital invested in a joint venture with Altman Companies to develop approximately 314 apartment homes in a portion of Bonterra communities in Hialeah, Florida. BBX Capital transferred approximately 14 acres of land at an agreed upon value of approximately $9.4 million and cash of $7.5 million to the joint venture. In exchange, BBX Capital is entitled to receive 95% of the joint venture distributions until it receives its aggregate capital contributions plus a 9% per annum return on capital. Any distributions thereafter are shared 85% by BBX Capital and 15% by Altman Companies. BBX Capital contributed 95% of the capital and the Altman Companies contributed the remaining 5% of capital, guaranteed the construction loan and is liable for construction cost overruns. The transfer of the land to the joint venture as an initial capital contribution resulted in a joint venture basis adjustment of $4.1 million. BBX Capital will recognize the joint venture basis adjustment as joint venture equity earnings upon the joint venture sale of the multi-family apartment complex. BBX Capital analyzed the Altis at Bonterra - Hialeah operating agreement and determined that it is not the primary beneficiary and therefore the investment in the real estate joint venture was accounted for under the equity method of accounting. This conclusion was based primarily on the determination that the Altman Companies as the managing member makes all decisions concerning the operations of joint venture and is managing the construction, leasing, property management, accounting, tenant improvements and disposition of the property. The managing member, Altman Companies, can only be removed by BBX Capital for cause. Altman Companies receives significant benefits from the joint venture in excess of its membership interest in the form of development, construction and other fees as well as up to 15% of the joint venture’s residual profits. The Altman Companies is also exposed to significant joint venture losses from construction loan and cost overrun guarantees. BBX Capital’s maximum exposure to loss as a result of its involvement with the Altis at Bonterra joint venture is its carrying amount of $15.8 million as of December 31, 2015. F-33 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The condensed Statements of Financial Condition as of December 31, 2015 and 2014, and the condensed Statements of Operations for the year s ended December 31, 2015, 2014 and 2013 for the above equity method joint ventures in the aggregate was as follows (in thousands): Assets Cash Real estate inventory Properties and equipment Other assets Total assets Notes payable Other liabilities Total liabilities Liabilities and Equity Total equity Total liabilities and equity December 31, 2015 2014 $ $ $ $ 25,139 154,334 3,960 8,872 192,305 68,275 20,422 88,697 103,608 192,305 1,375 75,395 3,996 4,423 85,189 34,951 9,333 44,284 40,905 85,189 For the Years Ended December 31, 2014 2013 2015 Total revenues Total costs and expenses Net loss $ $ 4,147 (8,594) (4,447) 635 (1,841) (1,206) - - - 7. Consolidated Variable Interest Entities FAR In consideration for BB&T assuming BBX Capital’s $ 285.4 million in principal amount of TruPS in connection with the sale of BankAtlantic, BB&T received from BBX Capital at the closing of the BB&T Transaction a 95% preferred membership interest in the net cash flows of FAR (Class A Units in FAR) which it held until it recovered $285 million in preference amount plus a priority return of LIBOR + 200 basis points per annum. On May 6, 2015, BB&T’s preferred membership interest in FAR was repaid in full and at that time, BB&T’s interest in FAR terminate d, and BBX Capital, which held the remaining 5% of the Class A Units and 100% of the Class R units, is entitled to any and all residual proceeds. Upon the termination of BB&T’s interest in FAR, BBX Capital became the sole member of FAR. BBX Capital analyzed FAR’s amended and restated limited liability agreement and determined that it was the primary beneficiary and therefore should consolidate FAR in its financial statements. The activities of FAR are governed by an amended and restated limited liability company agreement which grants the Board of Managers decision-making authority over FAR. Prior to May 6, 2015, the Board had four members, two members elected by BBX Capital and two members elected by BB&T. Upon redemption of BB&T’s preferred interest in FAR on May 6, 2015, FAR became a wholly-owned subsidiary of BBX Capital and the two Board members designated by BB&T resigned. FAR was no longer a variable interest entity as of May 6, 2015. F-34 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The carrying amount of the assets and liabilities of FAR and the classification of these assets and liabilities in BBX Capital’s Consolidated Statements of Financial Condition was as follows (in thousands): Cash and cash equivalents Loans held-for-sale Loans receivable, net Real estate held-for-investment Real estate held-for-sale Properties and equipment, net Other assets Total assets BB&T preferred interest in FAR, LLC Principal and interest advances on residential loans Other liabilities Total liabilities JRG/BBX Development, LLC (“North Flagler”) December 31, 2014 4,976 35,423 18,972 19,129 13,745 7,561 638 100,444 12,348 11,171 1,315 24,834 $ $ $ $ In October 2013, an indirect wholly-owned subsidiary of BBX Capital entered into the North Flagler joint venture with JRG USA, and in connection with the formation of the joint venture JRG USA assigned to the joint venture a contract to purchase for $10.8 million a 4.5 acre real estate parcel overlooking the Intracoastal Waterway in West Palm Beach, Florida . BBX Capital is entitled to receive 80% of any joint venture distributions until it receives the return of its capital investment and 70% of any joint venture distributions thereafter. BBX Capital is the managing member and has control of all aspects of the operations of the joint venture. BBX Capital analyzed North Flagler’s operating agreement and determined that it was the primary beneficiary of the joint venture and therefore should consolidate North Flagler in BBX Capital’s financial statements. This conclusion was based primarily on the determination that BBX Capital absorbs 80% of the losses, is entitled to 70% of the profits and controls all aspects of North Flagler’s operations. In May 2015, the North Flagler joint venture purchased the 4.5 acre parcel for $10.8 million and on the same day sold the property to a third party developer for $20.0 million. Included in BBX Capital’s Consolidated Statements of Operation in net gains on sales of assets for the year ended December 31, 2015 is a $7.8 million gain on the property sale. Net sales proceeds in the amount of $2.3 million were distributed to the noncontrolling member. The carrying amount of the assets and liabilities of North Flagler and the classification of these assets and liabilities in BBX Capital’s Consolidated Statements of Financial Condition was as follows (in thousands): Cash and cash equivalents Real estate held-for-investment Other assets Total assets Other liabilities Noncontrolling interest F-35 December 31, 2014 17 816 379 1,212 116 132 $ $ $ $ BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 8. Inventories Inventories as of December 31, 2015 and 2014 were as follows (in thousands): Raw materials Paper goods and packaging materials Finished goods Total December 31, 2015 2014 $ $ 5,822 4,504 6,021 16,347 4,628 3,834 6,043 14,505 Inventories consisted of $8.4 million for Renin and $7.9 million for BBX Sweet Holdings as of December 31, 2015, respectively. Inventories consisted of $8.6 million for Renin and $5.9 million for BBX Sweet Holdings as of December 31, 2014, respectively. Shipping and handling fees billed to the customers were recorded as trade sales and shipping and handling fees paid by BBX Capital were recorded as selling, general, and administrative expenses. Included in BBX Capital’s Consolidated Statements of Operations as selling, general, and administrative expenses for the years ended December 31, 2015, 2014 and 2013 were $5.5 million, $5.5 million and $1.0 million, respectively, of costs associated with shipping goods to customers. 9. Loans Held-for-Sale Loans-held-for-sale were as follows (in thousands): Residential Second-lien consumer Small business Total loans held-for-sale December 31, 2015 2014 $ $ 21,354 - - 21,354 27,331 2,351 5,741 35,423 Loans held-for-sale are reported at the lower of cost or fair value and measured on an aggregate basis. As of December 31, 2015 and 2014 the lower of cost or fair value adjustment on loans held-for-sale was $1.6 million and $6.4 million, respectively. BBX Capital transfers loans to held-for-sale when, based on the current economic environment and related market conditions, it does not have the intent to hold those loans for the foreseeable future. BBX Capital transfers loans previously held-for-sale to loans held-for-investment at the lower of cost or fair value on the transfer date. In September 2014, BBX Capital, based on market conditions at that time, decided to sell performing second-lien consumer loans. BBX Capital charged down these loans $2.7 million to fair value and transferred the loans to held-for-sale in the aggregate amount of $2.3 million. During the 2013 fourth quarter, management evaluated its residential loan portfolio in light of the general appreciation of residential real estate values during 2013 and decided to transfer first lien residential and consumer loans to loans held-for-sale as of December 31, 2013. BBX Capital charged down its first lien residential and consumer loan portfolio by $4.1 million and reduced its allowance for loan losses by $1.4 million upon the transfer of first lien residential and consumer loans to loans held-for-sale. In June 2015, BBX Capital transferred its small business, residential and second-lien consumer loans from loans held-for-sale to loans held-for-investment based on its decision to hold these loans for the foreseeable future as a result of the recent appreciation of real estate values and the improving economic environment. As a consequence, $2.4 million, $70,000 and $4.9 million of second-lien consumer, residential and small business loans, respectively, were transferred from loans held-for-sale to loans receivable measured at the lower of cost or fair value on the transfer date. Any difference between the carrying amount of the loan and its outstanding principal balance was recognized as a discount. Such loans are F-36 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) included in loans receivable, net of the discount on BBX Capital’s Consolidated S tatements of Financial Condition as of December 31, 2015. In July 2014, BBX Capital received net proceeds from the sales of its first-lien consumer loan portfolio and certain residential loans of approximately $3.2 million and $6.3 million, respectively. Included in net gains on the sales of assets for the year ended December 31, 2014 was a $0.6 million gain from the sale of these loans. As of December 31, 2015, foreclosure proceedings were in-process on $14.1 million principal balance of residential loans held-for-sale. 10. Loans Receivable The loans receivable portfolio consisted of the following components (in thousands): Commercial non-real estate Commercial real estate Small business Consumer Residential Total loans, net of discount Allowance for loan losses Loans receivable -- net December 31, 2015 2014 $ $ 11,250 16,294 4,054 2,368 69 34,035 - 34,035 1,326 24,189 - 2,306 - 27,821 (977) 26,844 The underlying collateral for BBX Capital ’s real estate loan portfolio was primarily located in Florida at December 31, 2015 and 2014. As of December 31, 2015, foreclosure proceedings were in process on $0.5 million of consumer loans. The total discount on loans receivable was $3.3 million and $0 as of December 31, 2015 and 2014, respectively. BBX Capital segregates its loan portfolio into five segments. BBX Capital’s loan segments are: residential loans, commercial real estate loans, commercial non-real estate loans, consumer loans, and small business loans. BBX Capital’s loan segments are described below: Commercial non-real estate - represents a $10.0 million unsecured loan made in connection with the sale of land to a developer and loans secured by general corporate assets of the borrowers’ business. Commercial real estate - represents loans for acquisition, development and construction of various types of properties including residential, office buildings, retail shopping centers, and other non-residential properties. Small business – consists of loans originated to businesses in principal amounts that do not generally exceed $2.0 million. The principal source of repayment for these loans is generally from the cash flow of a business. Consumer - consists of loans to individuals originated through BankAtlantic’s branch network. Consumer loans are generally home equity lines of credit secured by a second mortgage on the primary residence of the borrower. All collateral secured consumer loans are located in Florida. First-lien consumer loans were transferred to loans held-for-sale as of December 31, 2013 and sold during the year ended December 31, 2014. Residential – represents loans secured by one to four dwelling units. F-37 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Credit Quality Information BBX Capital monitors delinquency trends, current loan to value ratios, credit scores and general economic conditions in an effort to assess loan credit quality. BBX Capital assesses loan credit quality through accrual and non-accrual loan classifications. The recorded investment (unpaid principal balance less charge-offs and discounts) of non-accrual loans receivable was (in thousands): Loan Class Commercial non-real estate Commercial real estate Small business Consumer Residential Total nonaccrual loans December 31, 2015 2014 $ $ 1,250 9,639 4,054 2,368 69 17,380 1,326 14,464 - 1,990 - 17,780 An age analysis of the past due recorded investment in loans receivable as of December 31, 2015 and December 31, 2014 was as follows (in thousands): 31-59 Days 60-89 Days 90 Days Total Total Loans December 31, 2015 Past Due Past Due or More (1) Past Due Current Receivable Commercial non-real estate Commercial real estate Small business Consumer Residential Total $ $ - - - 316 - 316 - - 205 138 24 367 329 3,986 - 562 42 4,919 329 3,986 205 1,016 66 5,602 10,921 12,308 3,849 1,352 3 11,250 16,294 4,054 2,368 69 28,433 34,035 31-59 Days 60-89 Days 90 Days Total Total Loans December 31, 2014 Past Due Past Due or More (1) Past Due Current Receivable Commercial non-real estate Commercial real estate Consumer Residential Total $ $ - - - - - - - 227 - 227 330 5,458 1,703 - 7,491 330 5,458 1,930 - 996 18,731 376 - 1,326 24,189 2,306 - 7,718 20,103 27,821 (1) BBX Capital had no loans that were past due greater than 90 days and still accruing as of December 31, 2015 or 2014. F-38 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The activity in the allowance for loan losses for the year s ended December 31, 2015, 2014 and 2013 was as follows (in thousands): Allowance for Loan Losses: Beginning balance Charge-offs : Recoveries : Provision: Ending balance Ending balance individually evaluated for impairment Ending balance collectively evaluated for impairment Total Loans receivable: Ending balance individually evaluated for impairment Ending balance collectively evaluated for impairment Total Proceeds from loan sales Transfer to loans held-for-sale Transfer from loans held-for-sale For the Years Ended December 31, 2013 2014 2015 $ $ $ $ $ $ $ $ $ 977 (1,037) 13,517 (13,457) - - - - 12,849 21,186 34,035 68 - 7,365 2,713 (7,189) 12,608 (7,155) 977 - 977 977 17,045 10,776 27,821 9,497 2,299 - 5,311 (10,867) 52,134 (43,865) 2,713 954 1,759 2,713 51,131 23,808 74,939 3,490 42,398 1,312 Impaired Loans - Loans are considered impaired when, based on current information and events, BBX Capital believes it is probable that it will be unable to collect all amounts due according to the contractual terms of the loan agreement. For a loan that has been restructured, the actual terms of the loan agreement refer to the contractual terms specified by the original loan agreement, not the contractual terms specified by the restructured agreement. Impairment is evaluated based on past due status for consumer and residential loans. Impairment is evaluated for commercial and small business loans based on payment history, financial strength of the borrower or guarantors and cash flow associated with the collateral or business. If a loan is impaired, a specific valuation allowance is established, if necessary, based on the present value of estimated future cash flows using the loan’s existing interest rate or based on the fair value of the loan. Collateral dependent impaired loans are charged down to the fair value of collateral less cost to sell. Interest payments on impaired loans are recognized on a cash basis as interest income. Impaired loans, or portions thereof, are charged off when deemed uncollectible. Individually impaired loans as of December 31, 2015 and 2014 were as follows (in thousands): As of December 31, 2015 As of December 31, 2014 Unpaid Unpaid Recorded Principal Related Recorded Principal Related Investment Balance Allowance Investment Balance Allowance Total with allowance recorded Total with no allowance recorded Total $ $ - 17,380 17,380 - 30,212 30,212 - - - 735 17,361 18,096 1,664 35,812 37,476 735 - 735 F-39 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Average recorded investment and interest income recognized on individually impaired loans as of December 31, 2015 and 2014 were (in thousands): For the Years Ended December 31, 2015 2014 Average Recorded Interest Income Average Recorded Interest Income Investment Recognized Investment Recognized Total with allowance recorded Total with no allowance recorded Total $ $ - 22,186 22,186 - 1,299 1,299 837 23,161 23,998 7 1,111 1,118 Individually impaired loans and the average recorded investment and interest income recognized on impaired loans as of December 31, 2013 (in thousands): As of December 31, 2013 For the Year Ended December 31, 2013 Unpaid Average Recorded Principal Related Recorded Interest Investment Balance Allowance Investment Income Total with allowance recorded Total with no allowance recorded Total $ $ 3,921 53,088 57,009 6,700 88,739 95,439 1,874 - 1,874 4,055 55,027 59,082 121 1,478 1,599 Impaired loans without specific valuation allowances represent loans that were written-down to the fair value of the collateral less cost to sell, loans in which the collateral value less cost to sell was greater than the carrying value of the loan, loans in which the present value of the cash flows discounted at the loans’ effective interest rate were equal to or greater than the carrying value of the loans, or were collectively measured for impairment. BBX Capital had no commitments to lend additional funds on impaired loans as of December 31, 2015. 11. Real Estate Held-for-Investment and Real Estate Held-for-Sale Although BBX Capital has purchased certain property, substantially all of BBX Capital’s real estate has been acquired through foreclosures, settlements, or deeds in lieu of foreclosure. Upon acquisition, real estate is classified as real estate held-for-sale or real estate held-for-investment. Real estate is classified as held- for-sale when the property is available for immediate sale in its present condition, management commits to a plan to sell the property, an active program to locate a buyer has been initiated, the property is being marketed at a price that is reasonable in relation to its current fair value and it is likely that a sale will be completed within one year. When the property does not meet the real estate held-for-sale criteria, the real estate is classified as held-for-investment. F-40 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The following table presents real estate held-for-sale grouped in the following classifications (in thousands): Real estate held-for-sale Land Rental properties Residential single-family Other Total real estate held-for-sale As of December 31, 2015 2014 $ $ 25,994 17,162 2,924 258 46,338 33,505 1,748 4,385 2,095 41,733 The following table presents real estate held-for-investment grouped in the following classifications (in thousands): Real estate held-for-investment Land Rental properties Other Total real estate held-for-investment As of December 31, 2015 2014 $ $ 30,369 - 921 31,290 60,356 15,234 962 76,552 The amount of interest capitalized in land held-for-investment associated with real estate development improvements for the year ended December 31, 2015 was $706,000. There was no capitalized interest in 2014. The following table presents the activity in real estate held-for-sale and held-for-investment for the years ended December 31, 2015 and 2014 (in thousands): For the Years Ended December 31, 2015 2014 Real Estate Real Estate Beginning of period, net Acquired through foreclosure Transfers Purchases Improvements Accumulated depreciation Sales Property contributed to joint ventures Impairments, net End of period, net $ $ Held-for-Sale 41,733 3,215 41,751 10,667 3,261 - (51,040) - (3,249) 46,338 F-41 Held-for- Investment 76,552 - (41,751) - 16,771 (468) - (19,448) (366) 31,290 Held-for-Sale 33,971 5,300 28,018 2,313 - - (26,973) - (896) 41,733 Held-for- Investment 107,336 16,100 (28,018) 1,977 3,824 (462) (16,200) - (8,005) 76,552 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The following table presents the real estate held-for-sale valuation allowance activity for the years ended December 31, 2015, 2014 and 2013 (in thousands): Beginning of period Transfer to held-for-investment Impairments, net (1) Sales End of period For the Years Ended December 31, 2014 2015 2013 $ $ 2,940 (93) 3,089 (1,536) 4,400 4,818 - 896 (2,774) 2,940 3,729 - 3,893 (2,804) 4,818 (1) Tax certificate impairments are not included. Net real estate income (losses) included in the BBX Capital’s Consolidated Statements of Operations were as follows (in thousands): For the Years Ended December 31, 2014 2015 2013 Real estate acquired in settlement of loans and tax certificates: Income from real estate operations Real estate operating expenses Impairment of real estate Net gains on the sales of real estate Net real estate income (losses) 12. Properties and Equipment $ $ 3,887 (4,773) (3,615) 31,114 26,613 5,516 (6,296) (8,901) 4,677 (5,004) 4,161 (5,807) (3,342) 4,155 (833) Properties and equipment was comprised of (in thousands): Land Buildings and leasehold improvements Office equipment and furniture Transportation and equipment Accumulated depreciation Property and equipment, net December 31, 2015 2014 $ $ 2,270 10,204 9,235 91 21,800 (3,717) 18,083 2,270 9,868 6,536 44 18,718 (2,001) 16,717 Included in selling, general and administrative expenses on BBX Capital’s Consolidated Statements of Operations was $2.2 million, $2.0 million and $0.7 million of depreciation expense for the years ended December 31, 2015, 2014 and 2013, respectively. During the year ended December 31, 2013, the Company sold a public storage operating facility with a carrying value of $4.9 million for a $1.0 million gain. F-42 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 13. Income Taxes U.S. and foreign components of income (loss) before income taxes were as follows (in thousands): U.S. Foreign Income before income taxes $ $ 25,871 (2,589) 23,282 4,378 (3,175) 1,203 48,643 (963) 47,680 For the Years Ended December 31, 2015 2014 2013 The (benefit) provision for income taxes consisted of (in thousands): Current: Federal State Total current Deferred: Federal State Total deferred (Benefit) provision for income $ $ For the Years Ended December 31, 2015 2014 2013 - 84 84 (282) (47) (329) (245) 6 - 6 (2,605) (502) (3,107) (3,101) - 20 20 - - - 20 BBX Capital's actual (benefit) provision for income taxes differs from the Federal expected income tax (benefit) provision as follows (in thousands): Income tax (benefit) provision at federal statutory rate of 35% (Decrease) increase resulting from: (Benefit) provision for state taxes net of federal benefit Taxes related to subsidiaries not consolidated for income taxes Sale of BankAtlantic Nondeductible executive compensation Change in valuation allowance Penalties Other - net (Benefit) provision for income taxes $ For the Years Ended December 31, 2014 2015 2013 $ 8,149 35.00% 421 35.00% 16,688 35.00% 673 2.89% (369) -30.67% 2,003 4.20% - (6,963) -578.80% 0.00% 1,883 156.52% 1,407 116.96% 29.09% 14.13% (3,101) -257.77% 350 170 (6,054) -12.70% 5,884 12.34% 4.66% 2,223 (22,584) -47.36% 0.00% 3.90% 0.04% - 1,860 20 (3,699) - 1,107 (7,678) 1,243 (40) (245) -15.89% 0.00% 4.75% -32.98% 5.34% -0.17% -1.05% F-43 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and tax liabilities were (in thousands): Deferred tax assets: Allowance for loans and impairments for financial statement purposes Federal and State NOL and tax credit carryforward Real estate held for development and sale capitalized costs for tax purposes in excess of amounts capitalized for financial statement purposes Share based compensation Other Total gross deferred tax assets Less valuation allowance Total deferred tax assets Deferred tax Liabilities: Intangible assets Properties and equipment Other Total gross deferred tax liabilities Net deferred tax (liability) asset Less net deferred tax asset at beginning of period Net deferred tax liabilities from acquisitions Benefit from deferred income taxes For the Years Ended December 31, 2014 2015 2013 $ 1,960 60,708 2,658 64,132 2,955 63,781 14,729 1,879 1,000 80,276 (76,292) 3,984 1,866 2,053 65 3,984 - - 329 329 18,849 1,302 - 86,941 (83,970) 2,971 15,536 691 - 82,963 (82,563) 400 1,912 1,043 16 2,971 - - 3,107 3,107 - - 400 400 - - - - Activity in the deferred tax valuation allowance was (in thousands): Balance, beginning of period (Decrease) increase in deferred tax valuation allowance Acquisitions Balance, end of period $ $ 83,970 (7,678) - 76,292 82,563 1,407 - 83,970 2013 105,548 (22,584) (401) 82,563 For the Years Ended December 31, 2015 2014 On April 30, 2015, BFC purchased 4,771,221 shares of BBX Capital’s Class A common stock through a tender offer increasing BFC’s ownership percent to 81% of the issued and outstanding shares of BBX Capital. As a consequence, BBX Capital as of May 1, 2015 will file federal and state income tax returns as part of BFC’s consolidated income tax returns. On May 8, 2015, BFC, BBX Capital Corporation, Woodbridge, Bluegreen and their respective subsidiaries entered into an “Agreement to Allocate Consolidated Income Tax Liability and Benefits” . The parties will calculate their respective income tax liabilities and attributes as if each of them were a separate filer. If any tax attributes are used by another party to the agreement to offset its tax liability, the party providing the benefit will receive an amount for the tax benefits realized. As such income taxes will continue to be recognized by BBX Capital on a separate return basis and any taxable income or loss will be settled with BFC under the tax allocation agreement. The computation of taxable income or refunds, including the effects of AMT, is the same as if BBX Capital was filing its federal tax return with the IRS. As such, BBX Capital will only consider its operations as sources of taxable income in determining the need for a deferred tax valuation allowance for its deferred tax assets. BBX Capital evaluates its deferred tax assets to determine if valuation allowances are required. In its evaluation, management considers taxable loss carry-back availability, expectations of sufficient future taxable income, trends in earnings, existence of taxable income in recent years, the future reversal of temporary differences, and available tax planning strategies that could be implemented, if required. Valuation allowances are established based on the consideration of all available evidence using a more-likely-than-not standard. BBX Capital had taxable income during the year ended December F-44 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 31, 2015 from the sale of real estate acquired through foreclosure and significant recoveries on loans charged off in prior periods. BBX Capital’s operations including its acquired businesses do not generate taxable income on a regular basis. BBX Capital had a taxable loss during the year ended December 31, 2014. BBX Capital concluded that it was more-likely-than-not that it would not generate sufficient taxable income in subsequent periods in order to recognize the deferred tax assets as of December 31, 2015. Based on BBX Capital’s evaluation, a deferred tax valuation allowance of $76.3 million, $84.0 million, a n d $82.6 million was maintained against its net deferred tax assets as of December 31, 2015, 2014 and 2013, respectively. BBX Capital’s deferred tax assets as of December 31, 201 5 for which it has not established a valuation allowance relate to amounts that can be realized through future reversals of existing taxable temporary differences. As a consequence, BBX Capital will continue to maintain a full deferred tax valuation allowance for its net deferred tax assets The majority of the benefits of BBX Capital’s net deferred tax assets can be carried forward for 20 years and applied to offset future taxable income. BBX Capital’s deferred tax asset valuation allowance would be reversed if and when it becomes more-likely-than-not that BBX Capital will generate sufficient taxable income in the future to utilize the tax benefits of the related deferred tax assets. In connection with BBX Sweet Holdings’ acquisitions during 2015 and 2014, BBX Capital established net taxable temporary differences as a result of recording for financial reporting purposes identifiable intangible assets and properties and equipment in excess of amounts recognized for tax purposes. After considering the taxable temporary differences established in connection with the acquisitions, BBX Capital reduced its deferred tax asset valuation allowance and recognized a $329,000 and $3.1 million benefit for income taxes. Included in BBX Capital’s deferred tax assets as of December 31, 201 5 was $110.5 million of federal income tax NOL carry-forwards which expire from 2029 to 2034. BBX Capital’s federal tax credit carry- forwards were $2.1 million at December 31, 2015 and expire from 2025 to 2031. BBX Capital filed separate state income tax returns for years ending prior to December 31, 2011. BBX Capital’s state NOL carry-forwards were $ 533.5 million as of December 31, 2015 and expire from 2023 through 2033. Renin’s Canadian subsidiaries’ earnings are subject to taxation in Canada and the United Kingdom. Renin had taxable losses in these tax jurisdictions during the years ended December 31, 2015 and 2014 and two months ended December 31, 2013. BBX Capital’s foreign income tax NOL carryforwards were $3.8 million and expire from 2033 to 2035. BBX Capital’s income tax returns for all years subsequent to the 2011 tax year are subject to examination. Various state jurisdiction tax years remain open to examination. There were no income tax filings under examination as of December 31, 2015. 14. Notes Payable to Related Parties BBX Capital issued an $11.75 million promissory note in Woodbridge’s favor as part of BBX Capital’s consideration for its investment in Woodbridge. The note ha d a term of five years maturing in April 2018, accrued interest at a rate of 5% per annum and required BBX Capital to make payments of interest only on a quarterly basis during the term of the note, with all outstanding amounts being due and payable at the end of the five-year term. During September 2015, in connection with settlement of the Bluegreen shareholder litigation, the $11.75 million Woodbridge note payable was paid-in-full. F-45 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 15. Notes Payable The following notes payable were outstanding as of December 31, 2015 or 2014 (in thousands): Wells Fargo Capital Finance Anastasia Note Iberia Line of Credit Centennial Bank - Hoffman's Centennial Bank - Kencraft Holdback notes Other Total Notes Payable December 31, 2015 December 31, 2014 Debt Balance 8,071 5,330 4,997 1,613 995 400 15 21,421 $ $ Interest Rate various 5.00% 3.18% 5.25% 2.35% 6.00% 0.90% Debt Balance 8,028 7,214 - 1,645 - 1,016 20 17,923 Interest Rate various 5.00% - 5.25% - various 0.90% The aggregate notes payable discount recorded in BBX Capital’s Consolidated Statements of Financial Condition as of December 31, 2015 and 2014 was $170,000 and $320,000, respectively. Wells Fargo Capital Finance. On June 11, 2014, Renin entered into a credit agreement (the “WF Credit Agreement”) with Wells Fargo Capital Finance Corporation (“Wells Fargo”). Under the terms and conditions of the WF Credit Agreement, Wells Fargo made a $1.5 million term loan to Renin. The WF Credit Agreement also includes a revolving advance facility pursuant to which Wells Fargo agreed to make loans to Renin on a revolving basis up to a maximum of approximately $18 million or, if lower, the Borrowing Base (as defined in the WF Credit Agreement), subject to Renin’s compliance with the terms and conditions of the WF Credit Agreement, including certain specific financial covenants as discussed below. Amounts outstanding under the term loan and loans made under the revolving advance facility bear interest at the Canadian Prime Rate or the daily three month LIBOR rate plus a margin specified in the WF Credit Agreement at various rates between 0.5% per annum and 3.25% per annum. The revolving advance facility also includes a 0.25% per annum fee charged on the amount of unused commitment. The term loan and borrowings under the revolving advance facility require monthly interest payments. In addition, beginning on October 1, 2014, the term loan requires quarterly principal repayments of $75,000. The maturity date under the WF Credit Agreement with respect to the term loan and all loans made pursuant to the revolving advance facility is June 11, 2019. The amount outstanding under the term loan and revolving advance facility were $1.1 million and $7.0 million as of December 31, 2015. The amounts outstanding under the term loan and revolving advance facility were $1.4 million and $6.6 million as of December 31, 2014. Under the terms and conditions of the WF Credit Agreement, Renin was originally required to comply with certain financial covenants from June 30, 2014 to November 30, 2014, including limits on monthly capital expenditures and the achievement of monthly EBITDA (as defined in the WF Credit Agreement) in amounts equal to or greater than specific amounts set forth in the WF Credit Agreement. However, the WF Credit Agreement was amended in October 2014 replacing the EBITDA financial covenants requirements for each month ended during the period from September 2014 through November 2014 with a Fixed Charge Coverage Ratio (as defined in the amended WF Credit Agreement). In addition, beginning on December 1, 2014, Renin is required to maintain as of the end of each month a certain specified Fixed Charge Coverage Ratio (as defined in the WF Credit Agreement) measured on a trailing twelve-month basis. The WF Credit Agreement also contains customary affirmative and negative covenants, including those that, among other things, limit the ability of Renin to incur liens or engage in certain asset dispositions, mergers or consolidations, dissolutions, liquidations or winding up of its businesses. The loans are collateralized by all of Renin’s assets. Renin was in compliance with the WF Credit Agreement financial covenants as of December 31, 2015. Anastasia Note. In October 2014, BBX Sweet Holdings acquired the outstanding common shares of Anastasia. A portion of the purchase consideration was a $7.5 million promissory note. The promissory note bears interest at 5% per annum and $2.0 million of the promissory note plus accrued interest was repaid on October 1, 2015. The remaining balance of the promissory note is payable in three annual payments of principal and accrued interest as follows: $2.0 million plus accrued interest on October 1, 2016, $2.0 million plus accrued interest on October 1, 2017 and the final payment of $1.5 F-46 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) million plus accrued interest on October 1, 2018. The repayment of the promissory note is guaranteed by BBX Capital Corporation and secured by the common stock of Anastasia. The Anastasia note payable was recorded at a $0.3 million discount to reflect the fair value of the note payable at the acquisition date. Iberia Line of Credit. On August 7, 2015, BBX Sweet Holdings entered into a Loan and Security Agreement and related agreements with Iberiabank, which provides for borrowings by BBX Sweet Holdings of up to $5.0 million on a revolving basis. Amounts borrowed under this facility accrue interest at a floating rate of thirty day LIBOR plus 2.75% or 3.18% as of December 31, 2015. Payments of interest only are payable monthly. The facility matures, and all outstanding principal and interest will be payable, on July 31, 2017, with one twelve month renewal option at BBX Sweet Holdings’ request, subject to satisfaction of certain conditions. The loan documents include a number of covenants, including financial covenants relating to BBX Sweet Holdings’ debt service coverage ratio. The facility is secured by the assets of BBX Sweet Holdings and its subsidiaries and is guaranteed by BBX Capital. BBX Sweet Holdings is using the proceeds of the facility for general corporate purposes. BBX Sweet Holdings was in compliance with the Iberiabank loan financial covenants as of December 31, 2015. Centennial Bank – Hoffman’s. In October 2014, a wholly-owned subsidiary of BBX Sweet Holdings borrowed $1.7 million from Centennial Bank in the form of a ten year promissory note for working capital. The note bears interest at a fixed rate of 5.25% per annum for the first five years and adjusts to the 5-year US Treasury SWAP Rate in effect on the change date plus 345 basis points for the remaining five year term of the note. The note requires monthly principal and interest payments based upon a 25 year amortization schedule and is due and payable in October 2024. BBX Sweet Holdings and BBX Capital are guarantors of the note and the note is collateralized by land and buildings with a carrying value of $2.1 million as of December 31, 2015. Centennial Bank – Kencraft. In April 2015, a wholly-owned subsidiary of BBX Sweet Holdings borrowed $995,000 from Centennial Bank in the form of a promissory note in order to partially fund the Kencraft asset acquisition. The promissory note bears interest at 2.35% per annum and the principal balance is payable on April 1, 2017 or sooner upon demand. Interest is payable monthly. The promissory note is secured by a $995,000 certificate of deposit and a blanket lien on the Kencraft assets acquired. The $995,000 time deposit account is included in restricted cash in BBX Capital’s Consolidated Statements of Financial Condition as of December 31, 2015. BBX Sweet Holdings was in compliance with the debt financial covenants of the loan as of December 31, 2015. Holdback Notes. The Holdback Notes relate to purchase consideration payable in connection with the Hoffman’s, Williams and Bennett and Kencraft acquisitions. The Hoffman and William and Bennett Holdback Notes had an aggregate balance at origination of $1.1 million, bear interest at interest rates ranging from 1.65% to 1.93% and matured from January 2015 through December 31, 2015. The Hoffman and William and Bennett Holdback Notes were recorded at an $82,000 premium to reflect the fair value of the Holdback Notes at the acquisition dates. The Hoffman and William and Bennett Holdback Notes were paid-in-full as of December 31, 2015. The Kencraft $400,000 Holdback Note bears interest at 6% per annum payable quarterly beginning on July 1, 2015 and matures on April 1, 2017. The Holdback Notes serve as security for the sellers’ obligations under the respective purchase and sale agreements, including the sellers’ indemnity obligations and performance under each of the seller’s respective non-competition agreements and provide BBX Sweet Holdings with a set-off right. BBX Capital is the guarantor on the remaining BBX Sweet Holdings’ Holdback Note. F-47 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The annual contractual principal repayments of notes payable as of December 31, 2015 was as follows (in thousands): Year Ending December 31, 2016 2017 2018 2019 2020 Thereafter Total Notes Payable 2,315 8,692 1,800 7,171 - 1,613 21,591 $ $ 16. Employee Benefit Plans The table below outlines the terms of the Security Plus 401(k) Plan and the associated employer costs (dollars in thousands): For the Years Ended December 31, 2014 2015 2013 Employee salary contribution Limit (1) Percentage of salary limitation Total match contribution (2) $ % $ 18.0 75 322 17.5 75 150 17.5 75 - (1) For the years ended December 31, 2015, 2014 and 2013 employees over 50 were entitled to contribute $24,000, $23,000 and $23,000, respectively. (2) The employer match vests immediately. BBX Capital did not offer an employer match for the year ended December 31, 2013. 17. Commitments and Contingencies BBX Capital is a lessee under various operating leases for real estate and equipment. BBX Capital at the end of the initial lease terms generally has the right to renew its leases at market rental rates. The approximate minimum future rental payments under such leases, as of December 31, 2015, for the periods shown are (in thousands): Year Ending December 31, Amount 2016 2017 2018 2019 2020 Thereafter Total 3,065 3,041 2,990 2,849 2,220 4,825 18,990 $ $ F-48 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) BBX Capital incurred rent expense for the periods shown (in thousands): 2015 As of December 31, 2014 2013 Rental expense for premises and equipment $ 3,493 3,207 1,039 BBX Capital had no commitments to extend credit as of December 31, 2015. BBX Capital Corporation guarantees certain obligations of its unconsolidated real estate joint ventures and guarantees payment to third parties in connection with land development as follows: · · · During the year ended December 31, 2014, the Sunrise and Bayview Partners, LLC joint venture owned 50% by Procacci Bayview, LLC and 50% by a wholly-owned subsidiary of BBX Capital refinanced its land acquisition loan with a financial institution. BBX Capital Corporation provided the financial institution with a guarantee of 50% of the outstanding balance of the joint venture’s loan which had an outstanding balance of $5.0 million as of December 31, 2015. In July 2014, BBX Capital entered into a joint venture with CC Bonterra to develop approximately 394 homes in a portion of the master-planned development of Bonterra community in Hialeah Florida. BBX Capital transferred approximately 50 acres of land at an agreed upon value of approximately $15.6 million subject to an $8.3 million mortgage which was assumed by the joint venture. CAM remained liable as a co-borrower on the mortgage that was assumed by the joint venture. The mortgage was also guaranteed by BBX Capital Corporation. In March 2015, the joint venture refinanced the $8.3 million mortgage loan into a $31.0 million acquisition and development loan. BBX Capital is a guarantor for 26.3% of the joint venture’s $31.0 million acquisition and development loan. In March 2015, BBX Capital placed $1.3 million in a money market account with a financial institution in order to obtain an irrevocable letter of credit for a wholly-owned subsidiary of CAM. The letter of credit was to guarantee payment to a third party upon the third party obtaining wetlands permits in connection with a potential development project. The $1.3 million money market account is included in “Restricted Cash” in BBX Capital’s Consolidated Statement of Financial Condition at December 31, 2015. In January 2016, BBX Capital paid the third party for the wetlands permits and the letter of credit was cancelled. BBX Capital Corporation and its subsidiaries are parties to lawsuits as plaintiff or defendant involving its collections, lending and prior period tax certificate activities. Although BBX Capital believes it has meritorious defenses in all current legal actions, the outcome of litigation and the ultimate resolution are uncertain and inherently difficult to predict. Reserves are accrued for matters in which it is probable that a loss will be incurred and the amount of such loss can be reasonably estimated. The actual costs of resolving these legal claims may be substantially higher or lower than the amounts anticipated for these claims. There were no reserves accrued as of December 31, 2015. In certain matters we are unable to estimate the loss or reasonable range of loss until additional developments in the case provide information sufficient to support an assessment of the loss or range of loss. Frequently in these matters the claims are broad and the plaintiffs have not quantified or factually supported the claim. BBX Capital believes that liabilities arising from litigation discussed below will not have a material impact to BBX Capital’s consolidated financial statements. However, due to the significant uncertainties involved in these legal matters, BBX Capital may incur losses in excess of accrued amounts and an adverse outcome in these matters could be material to BBX Capital’s consolidated financial statements. The discussion below does not include litigation relating to companies which are not consolidated into BBX Capital’s financial statements, including Woodbridge and Bluegreen. BBX Capital has received notices from BB&T regarding a series of claims asserted against BB&T’s subsidiary, Branch Banking and Trust Company, as successor to BankAtlantic, by certain individuals who purport to have had accounts in their names with BankAtlantic prior to consummation of the sale of BankAtlantic to BB&T. These third party claims allege wrongful conduct by BankAtlantic in connection with certain alleged unauthorized transactions associated with their F-49 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) accounts. BB&T’s notices assert its belief that it may be entitled to indemnification under the BankAtlantic stock purchase agreement with respect to such claims as well as another third party claim relating to an action which was settled by BB&T. On July 31, 2014, BBX Capital and BB&T entered into a tolling agreement with respect to the time period within which BB&T may assert a claim for indemnity under the stock purchase agreement with respect to such claims. The following is a description of certain ongoing or recently concluded litigation matters: Securities and Exchange Commission Complaint On January 18, 2012, the SEC brought an action in the United States District Court for the Southern District of Florida against BBX Capital and Alan B. Levan, BBX Capital’s Chairman and Chief Executive Officer, alleging that they violated securities laws by not timely disclosing known adverse trends in BBX Capital’s commercial real estate loans, selectively disclosing problem loans and engaging in improper accounting treatment of certain specific loans which may have resulted in a material understatement of its net loss in BBX Capital’s Annual Report on Form 10-K for the year ended December 31, 2007. Further, the complaint alleged that Mr. Alan B. Levan intentionally misled investors in related earnings calls. The Court denied summary judgment as to most issues, but granted the SEC’s motion for partial summary judgment that certain statements in one of Alan Levan’s answers on a July 25, 2007 investor conference call were false. On December 15, 2014, after a six-week trial, the jury found in favor of BBX Capital and Alan B. Levan with respect to the disclosures made during an April 2007 earnings conference call and in BBX Capital’s quarterly reports on Form 10-Q for the 2007 first and second quarters, but found that they had engaged in an act of fraud or deceit toward shareholders or prospective investors by making materially false statements knowingly or with severe recklessness (1) with respect to three statements in the July 25, 2007 conference call referenced above, and (2) by failing to classify certain loans as held-for sale in the 2007 Annual Report on Form 10- K. The jury also found that Mr. Levan made or caused to be made false statements to the independent accountants regarding the held for sale issue. The SEC sought a final judgment: (i) permanently barring Alan B. Levan from serving as an officer or director of any SEC reporting company; (ii) imposing civil penalties of $5.2 million against BBX Capital and $1.56 million against Alan B. Levan; and (iii) permanently restraining BBX Capital and Alan B. Levan from violating securities laws. On September 24, 2015, the court entered a final judgment denying the SEC’s request for a permanent bar from Mr. Levan serving as an officer or director of any public company, but instead ordered Mr. Levan barred from serving as an officer or director of any public company for a period of two years commencing on December 23, 2015. The court also imposed monetary penalties against BBX Capital in the amount of $4,550,000 and monetary penalties against Mr. Levan in the amount of $1,300,000. BBX Capital and Mr. Levan are appealing the final judgment to the Eleventh Circuit Court of Appeals. As a result of the court's decision, on December 23, 2015 Mr. Levan resigned as Chairman and Chief Executive Officer of BBX Capital, as Chairman, Chief Executive Officer and President of BFC, and as a director of BBX Capital and BFC. On January 14, 2015, BBX Capital received notice from its insurance carrier that, based upon its interpretation of the jury verdict in this action, the carrier does not believe it is obligated to advance further payments towards fees and costs incurred in connection with this action and that it reserves its right to obtain reimbursement of the amounts it previously advanced with respect to this action. BBX Capital has received legal fee and cost reimbursements from the insurance carrier in connection with this action of approximately $5.8 million. New Jersey Tax Sales Certificates Antitrust Litigation On December 21, 2012, plaintiffs filed an Amended Complaint in an existing purported class action filed in Federal District Court in New Jersey adding BBX Capital and Fidelity Tax, LLC, a wholly owned subsidiary of CAM, among others as defendants. The class action complaint is brought on behalf of a class defined as “all persons who owned real property in the State of New Jersey and who had a Tax Certificate issued with respect to their property that was purchased by a Defendant during the Class Period at a public auction in the State of New Jersey at an interest rate above 0%.” Plaintiffs allege that beginning in January 1998 and at least through February 2009, the Defendants were part of a statewide conspiracy to manipulate interest rates associated with tax certificates sold at public auction from at least January 1, 1998, through February 28, 2009. During this period, Fidelity Tax was a subsidiary of BankAtlantic. Fidelity Tax was contributed to CAM in connection with the sale of BankAtlantic in the BB&T Transaction. BBX Capital and Fidelity Tax filed a Motion to Dismiss in March 2013 and on October 23, 2013, the Court granted the Motion to Dismiss and dismissed the Amended Complaint with prejudice as to certain claims, but without prejudice as to plaintiffs’ main antitrust F-50 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) claim. Plaintiffs filed a Consolidated Amended Complaint on January 6, 2014. While BBX Capital believed the claims to be without merit, BBX Capital reached an agreement to settle the action, subject to court approval. The settlement has been preliminarily approved by the court and the final approval hearing is currently scheduled for the second quarter of 2016. 18. Common Stock and Restricted Stock and Common Stock Option Plans Class A Common Stock Share Repurchase Program In September 2014, BBX Capital’s Board of Directors approved a share repurchase program and authorized management, at its discretion, to repurchase up to $20 million of BBX Capital’s Class A Common Stock from time to time, subject to market conditions and other factors considered by management to be appropriate at the time of repurchase. There were no common shares repurchased during the years ended December 31, 2015 and 2014. BBX Capital Corporation Restricted Stock and Stock Option Plans: BBX Capital has two share-based compensation plans: the 2005 Restricted Stock and Option Plan and the BBX Capital Corporation 2014 Stock Incentive Plan. The maximum term of incentive stock options and non-qualifying stock options issuable under each of these plans is ten years. Vesting is established by the Compensation Committee of the Board of Directors (the “Compensation Committee”) in connection with each grant of options or restricted stock award. All directors’ stock options vest immediately. The 2005 Restricted Stock and Option Plan provides that up to 1,875,000 shares of Class A common stock may be issued for restricted stock awards and upon the exercise of options granted under the Plan, and at December 31, 2015 no shares remained available for grants of awards under the 2005 Plan. The 2014 Stock Incentive Plan provides that up to 1,000,000 shares of Class A common stock may be issued for restricted stock awards and upon the exercise of options granted under the Plan, and at December 31, 2015, 184,426 shares remained available for grants of awards under the 2014 Stock Incentive Plan. In March 2015, BBX Capital’s Board of Directors approved an amendment to both the BBX Capital Corporation 2014 Stock Incentive Plan and the 2005 Restricted Stock and Option Plan. The amendment to each Plan authorizes the Compensation Committee to issue restricted stock awards in the form of restricted stock units rather than directly in restricted stock. Following the amendment, BBX Capital and its executive officers agreed to retire any shares of BBX Capital’s outstanding restricted Class A common stock awards (“RSAs”) previously issued in the name of the Compensation Committee and subject to forfeiture until vested, in exchange for BBX Capital’s issuing to the executive officers restricted Class A common stock units (“RSUs”). This exchange resulted in the retirement of 1,391,282 Class A common shares. Pursuant to the terms of the RSUs, BBX Capital promises to issue Class A common stock at the time the underlying units vest. The RSUs issued have the same terms, and cover the same number of underlying shares of Class A common stock, as the RSAs that were retired. F-51 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The following is a summary of BBX Capital’s non-vested restricted Class A common stock units activity: Class A Non-vested Restricted Stock Weighted Average Grant date Fair Value Outstanding at December 31, 2012 Vested Forfeited Granted Outstanding at December 31, 2013 Vested Forfeited Granted Outstanding at December 31, 2014 Vested Forfeited Granted Outstanding at December 31, 2015 $ 1,195,406 $ (315,104) - 430,000 1,310,302 (315,102) - 396,082 1,391,282 (381,622) - 419,492 1,429,152 $ $ 6.53 6.52 - 13.33 8.76 6.52 - 16.58 11.50 9.13 - 15.60 13.33 In September 2015, BBX Capital’s Compensation Committee of the Board of Directors’ granted 419,492 Class A common stock units (“RSUs”) to its executive officers under the BBX Capital’s 2014 Stock Incentive Plan. These RSUs had a $6.5 million fair value on the grant date and vest ratably each year over the 4 year service period beginning in October 2016. The grant date fair value was calculated based on the closing price of BBX Capital’s Class A common stock on the grant date. BBX Capital recognizes the compensation costs based on the straight-line method over the vesting period. On September 30, 2015, 381,622 shares of restricted Class A common stock units granted to executive officers in September 2012 and September 2014 vested. BBX Capital repurchased and retired 159,801 shares of the executive officers’ Class A common stock to satisfy the $2.5 million withholding tax obligations associated with the vesting of these shares in connection with these grants. In October 2014, the Board of Directors granted in the aggregate 396,082 shares of restricted Class A common stock awards (“RSAs”) under the 2014 Stock Incentive Plan to certain of its executive officers. The grant date fair value was calculated based on the closing price of BBX Capital’s Class A common stock on the grant date. The RSAs vest pro-rata over a four year period beginning September 30, 2015 and had a fair value of $16.58 per share at the grant date. I n October 2013, the Board of Directors granted in the aggregate 430,000 RSAs under the 2005 Restricted Stock and Option Plan to certain of its executive officers. The grant date fair value was calculated based on the closing price of BBX Capital’s Class A common stock on the grant date. The RSAs vest four years from the grant date or October 8, 2017. The RSAs had a fair value of $13.33 per share at the grant date. As of December 31, 2015, the total unrecognized compensation cost related to non-vested RSUs was approximately $14.5 million. The cost of these non-vested RS Us is expected to be recognized over a weighted- average period of approximately 17 months. The fair value of RSUs vested during the years ended December 31, 2015, 2014 and 2013 was $6.0 million, $5.5 million and $4.3 million, respectively. BBX Capital recognizes stock based compensation costs based on the grant date fair value. The grant date fair value for stock options is calculated using the Black-Scholes option pricing model incorporating an estimated forfeiture rate and recognizes the compensation costs for those shares expected to vest on a straight- line basis over the requisite service period of the award, which is generally the option vesting term of five years. F-52 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The following is a summary of BBX Capital’s Class A common stock option activity: Outstanding at December 31, 2012 Exercised Forfeited Expired Granted Outstanding at December 31, 2013 Exercised Forfeited Expired Granted Outstanding at December 31, 2014 Exercised Forfeited Expired Granted Outstanding at December 31, 2015 Exercisable at December 31, 2015 Class A Outstanding Options 36,804 $ - (7,559) (7,963) - 21,282 $ - - (5,801) - 15,481 $ - (3,307) (5,158) - 7,016 $ 7,016 $ Weighted Average Exercise Price 233.00 - 124.57 185.82 - 289.17 - 455.00 - 227.03 92.09 475.12 108.24 108.24 Weighted Average Remaining Contractual Term Aggregate Intrinsic Value ($000) 3.1 2.5 2.3 1.6 $ 1.6 $ - - There were no options granted or exercised during each of the years in the three year period ended December 31, 2015. Included in BBX Capital’s Consolidated Statements of Operations in compensation expense was $5.5 million, $3.7 million and $2.5 million of share-based compensation expense for the years ended December 31, 2015, 2014 and 2013, respectively. There was no recognized tax benefit associated with the compensation expense for the years ended December 31, 2015, 2014 and 2013 as it was not more-likely-than-not that BBX Capital would realize the tax benefits associated with the share based compensation expense. F-53 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 19. Earnings per Share The following reconciles the numerators and denominators of the basic and diluted earnings per share computation for the years ended December 31, 2015, 2014 and 2013 (in thousands, except per share data). Basic earnings per share Numerator: Net income Less: net (earnings) loss attributable to noncontrolling interest Net income available to common shareholders Denominator: Basic weighted average number of common shares outstanding Basic earnings per share Diluted earnings per share Numerator: Net income Less: net (earnings) loss attributable to noncontrolling interest Net income available to common shareholders Denominator: Basic weighted average number of common shares outstanding Stock-based compensation Diluted weighted average shares outstanding Diluted earnings per share $ $ $ $ $ $ For The Years Ended December 31, 2014 2015 2013 23,527 (1,753) 21,774 4,304 391 4,695 47,660 179 47,839 16,229 16,043 15,843 1.34 0.29 3.02 For the Years Ended December 31, 2014 2015 2013 23,527 (1,753) 21,774 16,229 576 16,805 1.30 4,304 391 4,695 16,043 635 16,678 0.28 47,660 179 47,839 15,843 435 16,278 2.94 Options to acquire 7,016, 15,481 and 21,282 shares of Class A common stock were anti-dilutive for the years ended December 31, 2015, 2014 and 2013, respectively. There were no anti-dilutive RSUs for the years ended December 31, 2015, 2014, or 2013. 20. Fair Value Measurement Fair value is defined as the price that would be received on the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There are three main valuation techniques to measure the fair value of assets and liabilities: the market approach, the income approach and the cost approach. The accounting literature defines an input fair value hierarchy that has three broad levels and gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The valuation techniques are summarized below: The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. F-54 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) The income approach uses financial models to convert future amounts to a single present amount. These valuation techniques include present value and option-pricing models. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset. This technique is often referred to as current replacement cost. The input fair value hierarchy is summarized below: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that BBX Capital has the ability to access at each reporting date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. A quoted price in an active market provides the most reliable evidence of fair value and is used to measure fair value whenever available. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 2 inputs include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active, that is, markets in which there are few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers (for example, some brokered markets), or in which little information is released publicly (for example, a principal- to-principal market); inputs other than quoted prices that are observable for the asset or liability (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs are only used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. Assets and Liabilities on a Recurring Basis There were no assets or liabilities measured at fair value on a recurring basis in BBX Capital’s consolidated financial statements as of December 31, 2015 and 2014. Assets on a Non-Recurring Basis The following table presents major categories of assets measured at fair value on a non-recurring basis as of December 31, 2015 (in thousands): Fair Value Measurements Using Quoted prices in Significant Total Active Markets Other Significant Impairments (1) As of for Identical Observable Unobservable For the December 31, Assets Inputs Inputs Year Ended 2015 (Level 1) (Level 2) (Level 3) December 31, 2015 Description Loans measured for impairment using the fair value of the underlying collateral $ 186 Impaired real estate held-for-sale and held-for-investment Impaired loans held-for-sale Total $ 13,257 5,856 19,299 - - - - - - 186 13,257 5,856 19,299 120 3,000 740 3,860 F-55 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) (1) Total impairments represent the amount of losses recognized during the year ended December 31, 201 5 on assets that were held and measured at fair value as of December 31, 2015. Quantitative information about significant unobservable inputs within Level 3 on major categories of assets measured at fair value on a non-recurring basis is as follows (dollars in thousands): As of December 31, 2015 Fair Valuation Unobservable Description Value Technique Inputs Range (Average) (1)(2) Loans measured for impairment using the fair value Fair Value of Discount Rates and Appraised of the underlying collateral $ 186 Collateral Value less Cost to Sell Impaired real estate Fair Value of held-for-sale 13,257 Property Fair Value of Discount Rates and Appraised Value less Cost to Sell Discount Rates and Appraised Impaired loans held-for-sale 5,856 Collateral Value less Cost to Sell Total $ 19,299 $0.2 - $0.4 million ( $0.3 million) $0.3 - $11.0 million ( $2.0 million) $0.1 - $0.5 million ( $0.2 million) (1) Range and average appraised values were reduced by costs to sell. (2) Average was computed by dividing the aggregate appraisal amounts by the number of appraisals. The following table presents major categories of assets measured at fair value on a non-recurring basis as of December 31, 2014 (in thousands): Fair Value Measurements Using Quoted prices in Significant Total Active Markets Other Significant Impairments (1) As of for Identical Observable Unobservable For the Nine December 31, Assets Inputs Inputs Months Ended Description 2014 (Level 1) (Level 2) (Level 3) December 31, 2014 Loans measured for impairment using the fair value of the underlying collateral Impaired real estate held-for-sale and held-for-investment Total $ $ 2,648 20,701 23,349 - - - - - - 2,648 2,161 20,701 23,349 8,756 10,917 (1) Total impairments represent the amount of losses recognized during the year ended December 31, 201 4 on assets that were held and measured at fair value as of December 31, 2014. F-56 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Quantitative information about significant unobservable inputs within Level 3 on major categories of assets measured on a non-recurring basis is as follows (dollars in thousands): As of December 31, 2014 Description Fair Value Valuation Technique Unobservable Inputs Range (Average) (1)(2) Loans measured for impairment using the fair value of the underlying collateral Impaired real estate held-for- sale Fair Value of Discount Rates and Appraised $ 2,648 Collateral Fair Value of Value less Cost to Sell Discount Rates and Appraised $0.1 - $2.6 million ( $0.5 million) and held-for-investment Total 20,701 23,349 $ Property Value less Cost to Sell $0.3 - $8.4 million ( $1.7 million) (1) Range and average appraised values were reduced by costs to sell. (2) Average was computed by dividing the aggregate appraisal amounts by the number of appraisals. Liabilities on a Non-Recurring Basis There were no material liabilities measured at fair value on a non-recurring basis in BBX Capital’s consolidated financial statements as of December 31, 2015 and December 31, 2014. Loans Measured For Impairment Impaired loans are generally valued based on the fair value of the underlying collateral less cost to sell as the majority of BBX Capital’s loan s are collateral dependent. The fair value of BBX Capital’s loans may significantly increase or decrease based on changes in property values as BBX Capital’s loans are primarily secured by real estate. BBX Capital primarily uses third party appraisals to assist in measuring non- homogenous impaired loans and broker price opinions to assist in measuring homogenous impaired loans. These appraisals generally use the market or income approach valuation techniques and use market observable data to formulate an estimate of the fair value of the loan’s collateral. However, the appraiser uses professional judgment in determining the fair value of the collateral, and BBX Capital may also adjust these values for changes in market conditions subsequent to the appraisal date. When current appraisals are not available for certain loans, BBX Capital uses its judgment on market conditions to adjust the most current appraisal. As a consequence, the calculation of the fair value of the collateral is considered a Level 3 input. BBX Capital generally recognizes impairment losses based on third party broker price opinions when impaired homogenous loans become 120 days delinquent. These third party valuations from real estate professionals also use Level 3 inputs in determining fair values. The observable market inputs used to fair value loans include comparable property sales, rent rolls, market capitalization rates on income producing properties, risk adjusted discounts rates and foreclosure timeframes and exposure periods. Real Estate Held-for-Sale and Held-for-Investment Real estate is generally valued using third party appraisals or broker price opinions. These appraisals generally use the market or income approach valuation techniques and use market observable data to formulate an estimate of the fair value of the properties. The market observable data typically consists of comparable property sales, rent rolls, market capitalization rates on income producing properties and risk adjusted discount rates. The above inputs are considered Level 3 inputs as the appraiser uses professional judgement in the calculation of the fair value of the properties. Loans Held-for-Sale Loans held-for-sale are valued using an income approach with Level 3 inputs as market quotes or sale transactions of similar loans are generally not available. The fair value is estimated by discounting forecasted cash flows, using a discount rate that reflects the risks inherent in the loans held-for-sale portfolio. For non- performing loans held-for-sale, the forecasted cash flows are based on the estimated fair value of the collateral less cost to sell adjusted for foreclosure expenses and other operating expenses of the underlying collateral until foreclosure or sale. F-57 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Financial Disclosures about Fair Value of Financial Instruments The following table presents the fair value of BBX Capital’s consolidated financial statements as of December 31, 2015 and 2014 (in thousands): Fair Value Measurements Using Carrying Quoted prices in Amount Fair Value Active Markets Significant Other Significant As of As of for Identical Observable Unobservable December 31, December 31, Assets Inputs Inputs 2015 2015 (Level 1) (Level 2) (Level 3) $ 69,040 69,040 69,040 55,389 63,668 - 2,651 2,651 2,651 21,421 21,856 10,356 9,630 - - - - - - - - 63,668 - 21,856 9,630 (in thousands) Description Financial assets: Cash and cash equivalents Loans receivable including loans held-for-sale, net Restricted cash and time deposits at financial institutions Financial liabilities: Notes payable Principal and interest advances on residential loans Fair Value Measurements Using Carrying Quoted prices in Amount Fair Value Active Markets Significant Other Significant As of As of for Identical Observable Unobservable December 31, December 31, Assets Inputs Inputs 2014 2014 (Level 1) (Level 2) (Level 3) $ 58,819 58,819 58,819 62,267 73,423 17,923 11,750 18,196 11,615 12,348 12,383 11,171 10,125 - - - - - - - - - - 73,423 18,196 11,615 12,383 10,125 (in thousands) Description Financial assets: Cash and cash equivalents Loans receivable including loans held-for-sale, net Financial liabilities: Notes payable Note payable to Woodbridge BB&T preferred interest in FAR Principal and interest advances on residential loans Management has made estimates of fair value that it believes to be reasonable. However, because there is no active market for many of these financial instruments, management has derived the fair value of the majority of these financial instruments using the income approach technique with Level 3 unobservable inputs. Management estimates used in its net present value financial models rely on assumptions and judgments regarding issues where the outcome is unknown and actual results or values may differ significantly from these estimates. BBX Capital’s fair value estimates do not consider the tax effect that would be associated with the disposition of the assets or liabilities at their fair value estimates. As such, BBX Capital may not receive the estimated value upon sale or disposition of the asset or pay the estimated value upon disposition of the liability in advance of its scheduled maturity. F-58 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) Fair values are estimated for loan portfolios with similar financial characteristics. Loans are segregated by category, and each loan category is further segmented by accruing and non-accrual categories. The fair value of accruing loans is calculated by using an income approach with Level 3 inputs. The fair value of accruing loans is estimated by discounting forecasted cash flows using estimated market discount rates that reflect the interest rate and credit risk inherent in the loan portfolio. Management assigns a credit risk premium and an illiquidity adjustment to these loans based on delinquency status. The fair value of non-accrual collateral dependent loans is estimated using an income approach with Level 3 inputs utilizing the fair value of the collateral adjusted for operating and selling expenses and discounted over the estimated holding period based on the market risk inherent in the property. The fair value of notes payables, including to related parties, and principal and interest advances on residential loans were measured using the income approach with Level 3 inputs obtained by discounting the forecasted cash flows based on estimated market rates. BB&T’s preferred interest in FAR was considered an adjustable rate debt security. The fair value of this security was calculated using the income approach with Level 3 inputs. The fair value was obtained by discounting forecasted cash flows by risk adjusted market interest rate spreads to the LIBOR swap curve. The market spreads were obtained from reference data in the secondary institutional market place. 21. Related Parties BBX Capital, BFC and Bluegreen are entities under common control. The controlling shareholder of BBX Capital and Bluegreen is BFC. Shares of BFC’s capital stock representing a majority of the voting power are owned or controlled by Alan Levan, BBX Capital’s Chairman until December 23, 2015 and Jack Abdo, BBX Capital’s Vice Chairman. Alan Levan was also the Chairman of BFC until December 23, 2015. Mr. Abdo currently serves as Vice-Chairman of both BFC and Bluegreen. Alan Levan is currently an employee of BBX Capital and BFC. BBX Capital, BFC and Bluegreen share certain office premises and employee services, pursuant to the agreements described below. Effective December 1, 2012, BBX Capital entered into an agreement with BFC under which BBX Capital provides office facilities and is reimbursed by BFC, based on an agreed upon amount. BFC also provides risk management services to BBX Capital and BFC is reimbursed by BBX Capital based on an agreed upon amount. BBX Capital’s employees are provided health insurance under policies maintained by Bluegreen for which Bluegreen is reimbursed based on an agreed upon amount. The table below shows the effect of these related party agreements and arrangements on BBX Capital’s consolidated statements of operations for the years ended December 31, 2015, 2014 and 2013 (in thousands): Other revenues Expenses: Employee benefits Other - back-office support Net effect of affiliate transactions before income taxes $ $ For the Years Ended 2015 2014 2013 419 (1,150) (180) (911) 448 (524) (185) (261) 431 (225) (200) 6 On October 30, 2013, Renin, a joint venture entity owned 81% by BBX Capital and 19% by BFC, completed the Renin Transaction. Bluegreen funded approximately $9.4 million of the Renin Transaction consideration in the form of a loan and revolver facility and the remaining funds necessary to complete the Renin Transaction were funded by BBX Capital and BFC pro rata in accordance with their percentage equity interests in Renin. The Bluegreen loan was paid-in-full in June 2014 from the proceeds received from a financing with a financial institution and pro rata capital contributions to Renin from BBX Capital and BFC of $2.0 million and $0.5 million, respectively. Renin recognized $0.3 million and $0.1 million, respectively, of interest expense under the Bluegreen loan for the years ended December 31, 2014 and 2013. F-59 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) As disclosed in Note 5, on April 2, 2013, BBX Capital invested $71.75 million in Woodbridge in exchange for a 46% equity interest in Woodbridge. The investment was made in connection with Woodbridge’s acquisition of the publicly held shares of Bluegreen. BFC holds the remaining 54% of Woodbridge. BBX Capital contributed $60 million in cash and issued to Woodbridge an $11.75 million note payable in connection with BBX Capital’s acquisition of its 46% equity interest in Woodbridge. During the years ended December 31, 2015, 2014 and 2013, BBX Capital recognized $0.4 million, $0.6 million and $0.4 million, respectively, of interest expense in connection with the Woodbridge note pa yable. During September 2015, in connection with settlement of the Bluegreen shareholder litigation, the $11.75 million Woodbridge note payable was paid-in-full and BBX Capital made an additional investment in Woodbridge of $11.4 million. On May 8, 2015, BFC, BBX, Woodbridge, Bluegreen and their respective subsidiaries entered into an “Agreement to Allocate Consolidated Income Tax Liability and Benefits” pursuant to which, among other customary terms and conditions, the parties agreed to file consolidated federal tax returns. The parties will calculate their respective income tax liabilities and attributes as if each of them were a separate filer. If any tax attributes are used by another party to the agreement to offset its tax liability, the party providing the benefit will receive an amount for the tax benefits realized. 22. Segment Reporting The information provided for segment reporting internal reports utilized by management. Net income (loss) is reported through three reportable segments: BBX, Renin and Sweet Holdings. is based on In prior periods, FAR was reported as a separate business segment as its activities were restricted by FAR’s operating agreement to the monetization of FAR’s assets in order to repay BB&T’s preferred membership interest in FAR. As a result of the redemption of BB&T’s preferred interest in FAR during May 2015, FAR activities are no longer restricted to the monetization of FAR’s assets. As a consequence, management changed BBX Capital’s internal reporting, combining the operations of FAR into BBX and the FAR reportable segment was consolidated with the BBX reportable segment for the year ended December 31, 2015. The BBX reportable segment for the year ended December 31, 2015 includes the results of operations of CAM, FAR and BBX Partners, a wholly owned subsidiary of BBX Capital Corporation, and BBX Capital’s equity interest in Woodbridge. BBX’s activities consisted of the activities associated with managing its commercial loan portfolio, real estate properties, and portfolio of charged off loans as well as its investment in Woodbridge and investments in real estate joint ventures. The activities of managing the commercial loan portfolios included renewing, modifying, collecting, increasing, extending, refinancing and making protective advances on these loans, as well as managing and liquidating real estate properties acquired through foreclosure. FAR was a separate reportable segment for the years ended December 31, 2014 and 2013 as the activities of FAR were restricted to the management and monetization of FAR’s assets with a view to the repayment of BB&T’s preferred membership interest and maximizing the cash flows of any remaining assets. The Renin reportable segment consists of the activities of Renin which commenced operations in October 2013 upon the asset acquisition of Renin Corp. Therefore, the Renin reportable segment includes the results of operations of Renin for the two months ended December 31, 2013 and years ended December 31, 2014 and 2015. During 2015, total revenues for the Renin reportable segment include $14.5 million of trade sales to one major customer and its affiliates. Renin’s revenues and properties and equipment located outside of the United States totaled $22.1 million and $1.2 million, respectively. The Sweet Holdings reportable segment consists of the activities of Hoffman’s, Williams and Bennett, Jer’s, Helen Grace and Anastasia for the year ended December 31, 2015, and the activities of Kencraft from the date of acquisition, April 1, 2015 through December 31, 2015. For 2014, this reportable segment consists of the activities of Hoffman’s and Williams & Bennett for the year ended December 31, 2014, and the activities of Jer’s, Helen Grace and Anastasia from their respective dates of acquisition, July 1, 2014, July 21, 2014 and October 1, 2014 through December 31, 2014. In 2013, the activities of Hoffman’s were included for the month of December 2013. The accounting policies of the segments are generally the same as those described in the summary of significant accounting policies. Intersegment transactions are eliminated in consolidation. F-60 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) During the years ended December 31, 2015 and 2014, acquisition due diligence costs of $0.3 million a n d $0.6 million, respectively, incurred in connection with the Sweet Holdings reportable segment were included in the results of operations of the BBX reportable segment in costs and expenses. During the year ended December 31, 2013, acquisition related costs o f $1.0 million incurred in connection with the Renin Transaction were included in the Renin reportable segment and $0.1 million of acquisition related costs incurred in connection with the Hoffman’s acquisition were included in the Sweet Holdings reportable segment in costs and expenses. The Sweet Holding reportable segment benefit for income taxes for the years ended December 31, 2015 and 2014 resulted from the reduction in BBX Capital’s deferred tax valuation allowance in connection with deferred tax liabilities recognized in connection with the Sweet Holdings acquisitions. Depreciation and amortization consist of: depreciation on properties and equipment, amortization of leasehold improvements, intangible assets and discounts on notes payable. BBX Capital evaluates segment performance based on segment net income (loss). The tables below contain segment information for segment net income (loss) for the years ended December 31, 2015, 2014 and 2013 (in thousands): For the Year Ended: December 31, 2015: Revenues Recoveries from loan losses, net Asset impairments Other costs and expenses Total costs and expenses Equity in earnings of unconsolidated companies Foreign exchange loss Segment income (loss) before income taxes Provision (benefit) for income tax Net income (loss) Total assets Equity method investments included in total assets Expenditures for segment assets Depreciation and amortization BBX Renin Sweet Holdings Reconciling Items and Elimination Entries $ 47,850 56,461 27,837 (665) 13,457 (287) (41,095) (27,925) 13,409 - 33,334 88 33,246 645,817 118,507 1,429 1,058 $ $ $ $ $ - - (57,481) (57,481) - - (36,604) (36,604) - - 1,438 1,438 (1) - (1,038) (2,058) (4) (2,054) 22,778 - 92 643 - - (8,767) (329) (8,438) 36,884 - 2,113 1,763 - - 773 - 773 (311,938) - - - Segment Total 131,483 13,457 (287) (133,742) (120,572) 13,409 (1,038) 23,282 (245) 23,527 393,541 118,507 3,634 3,464 (1) Includes a reconciling item of $773,000 associated with capitalized interest on real estate development and joint venture activities in excess of interest expense incurred by BBX reportable segment. F-61 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) For the Year Ended: December 31, 2014: Revenues Recoveries from (provision for) loan losses Asset impairments Costs and expenses Total costs and expenses Equity earnings in unconsolidated companies Foreign currency loss Segment income (loss) before income taxes Provision for income tax Net income (loss) Total assets Equity method investments included in total assets Expenditures for segment assets Depreciation and amortization Adjusting and Elimination Entries Sweet Holdings Total BBX FAR Renin $ 8,773 10,225 57,839 16,257 (449) 92,645 10,169 (266) (31,515) (3,014) (6,749) (9,122) - - (59,168) (21,612) (18,885) (59,168) 24,723 - - - - (715) 11,884 (8,660) (2,044) - 11,884 $ $ 550,993 - (8,660) 97,024 6 (2,050) 24,061 $ $ $ 89,091 277 176 - 792 772 - 93 602 - - (16,234) (16,234) - - 23 (3,107) 3,130 31,645 - 263 832 - - 449 449 7,155 (7,015) (115,590) (115,450) - - - - - (310,787) 24,723 (715) 1,203 (3,101) 4,304 392,936 - - - 89,091 1,425 2,382 For the Year Ended: December 31, 2013: Revenues Recoveries from loan losses Asset impairments Costs and expenses Total costs and expenses Equity earnings in Woodbridge Foreign currency loss Segment income (loss) before income taxes Provision for income tax Net income (loss) Total assets Equity method investments included in total assets Real estate operating expenses Depreciation and amortization BBX FAR Renin Sweet Holdings Elimination Segment Entries Total Adjusting and $ 22,062 34,128 (219) (28,906) 5,003 13,461 - 40,526 - 40,526 $ $ 476,947 78,573 33 462 $ $ 9,300 - - (9,884) (9,884) - (357) (941) - (941) 23,809 - - - 16,539 9,737 (4,489) (13,654) (8,406) - - 8,133 20 8,113 166,114 - 232 476 F-62 966 - - (1,004) (1,004) - - (38) - (38) 5,383 - - 117 (209) - - 209 209 - - - - - (241,106) - - - 48,658 43,865 (4,708) (53,239) (14,082) 13,461 (357) 47,680 20 47,660 431,147 7,873 265 1,055 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) 23. Selected Quarterly Results (Unaudited) The following tables summarize BBX Capital’s quarterly results of operations for the years ended December 31, 2015 and 2014 (in thousands except per share data). 2015 Revenues Recoveries from (provision for) loan losses Asset recoveries (impairments), net Other costs and expenses Total costs and expenses Equity in earnings (losses) of Woodbridge Holdings, LLC Equity in losses of unconsolidated real estate joint ventures Foreign exchange (loss) gain Income before income taxes Net income Net income attributable to BBX Capital Corporation Basic earnings per share Basic weighted average number of common shares outstanding Diluted earnings per share Diluted weighted average number of common shares outstanding First Quarter Second Quarter Third Quarter Fourth Quarter $ 21,709 38,615 25,535 45,624 3,821 1,063 (30,743) (25,859) 6,608 810 (29,546) (22,128) 4,427 (274) (36,592) (32,439) (1,399) (1,886) (36,861) (40,146) Total 131,483 13,457 (287) (133,742) (120,572) 5,803 (10,168) 10,306 9,033 14,974 (304) (469) 880 877 1,034 0.06 (291) 70 6,098 6,320 4,138 0.26 (158) (236) 3,008 3,039 (812) (403) 13,296 13,291 (1,565) (1,038) 23,282 23,527 3,116 13,486 21,774 0.19 0.82 1.34 16,172 16,172 16,175 16,394 16,229 0.06 0.25 0.18 0.79 1.30 16,725 16,885 16,852 17,001 16,805 $ $ $ The first quarter of 2015 performance was favorably impacted by recoveries from loan losses primarily from the charged off residential loan portfolio and secondarily from charged off commercial loans as well as impairment recoveries associated with foreclosures. Other costs and expenses were unfavorably impacted by higher professional fees and an increase in selling, general and administrative expenses. The increased professional fees resulted primarily from the SEC civil action and the BFC tender offer. The higher selling, general and administrative expenses reflected increased compensation and consulting fees at acquired companies. The second quarter of 2015 net income was favorably impacted by a $15.5 million gain on the sale of two properties located in West Palm Beach, Florida and recoveries from loan losses associated with commercial loans and the charged off loan portfolio. Woodbridge equity earnings were unfavorably impacted by a $36.5 million litigation settlement with Bluegreen’s former shareholders related to Woodbridge’s April 2013 acquisition of the publicly held shares of Bluegreen. The Woodbridge litigation settlement reduced BBX Capital’s equity in earnings of Woodbridge by $16.8 million. The third quarter of 2015 net income was favorably impacted by $10.3 million of Woodbridge equity earnings and $4.4 million of recoveries from loan losses partially offset by higher costs and expenses. The Woodbridge equity earnings resulted from higher net income at Bluegreen. The recoveries from loan losses reflects recoveries from commercial loan settlements and from the charged off loan portfolio. Other costs and expenses were unfavorably impacted by the recognition of an additional $3.6 million of civil penalties and higher legal costs associated with the SEC civil action. The fourth quarter of 2015 net income was favorably impacted by $15.9 million of gains on the sale of real estate and $9.0 million of Woodbridge equity earnings. The gains on the sale of real estate resulted primarily from a $12.3 gain on a land sale in the master-planned development of Bonterra Communities. The fourth quarter of 2015 cost and expense was F-63 BBX CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued) unfavorably impacted by a substantial increase in BBX Sweet Holdings cost of goods sold associated with seasonal trade sales. 2014 Revenues Recoveries from (provision for) loan losses Asset (impairments) recoveries, net Other costs and expenses Total costs and expenses Equity in earnings of Woodbridge Holdings, LLC Equity in losses of unconsolidated real estate joint ventures Foreign exchange (loss) gain Income (loss) before income taxes Net income (loss) Net income (loss) attributable to BBX Capital Corporation Basic (loss) earnings per share Basic weighted average number of common shares outstanding Diluted (loss) earnings per share Diluted weighted average number of common shares outstanding First Quarter Second Quarter Third Quarter Fourth Quarter Total $ 20,816 22,650 21,906 27,273 92,645 1,248 (1,319) (25,363) (25,434) 2,046 94 (25,850) (23,710) (656) (5,926) (24,399) (30,981) 4,517 136 (39,978) (35,325) 7,155 (7,015) (115,590) (115,450) 6,222 8,108 7,635 3,317 25,282 (6) (307) 1,291 1,291 (26) 141 7,163 7,157 (205) (319) (1,964) (1,964) (322) (230) (5,287) (2,180) (559) (715) 1,203 4,304 1,358 7,291 (1,898) (2,056) 4,695 0.08 0.46 (0.12) (0.13) 0.29 15,986 16,006 16,007 16,172 16,043 0.08 0.43 (0.12) (0.13) 0.28 16,699 16,791 16,007 16,172 16,678 $ $ $ The first quarter of 2014 performance was favorably impacted by $6.2 million of Woodbridge equity earnings and $0.9 million of insurance reimbursements of expenses associated with the SEC civil action against BBX Capital and its Chairman discussed in Note 17 – Commitments and Contingencies. The second quarter of 2014 net income was favorably impacted by $2.0 million recover ies from loan losses, a gain on the sale of real estate for $2.5 million and $8.1 million of Woodbridge equity earnings. The recoveries for loan losses primarily resulted from payoffs of non-accrual loans. The third quarter of 2014 net loss was significantly impacted by $5.9 million of asset impairments primarily relating to two real estate properties partially offset by a $1.2 million bargain purchase gain arising from the Helen Grace acquisition. The fourth quarter of 2014 net income was favorably impacted by a $3.1 million benefit for income taxes from the reduction in BBX Capital’s deferred tax valuation allowance in connection with deferred tax liabilities recognized in the 2014 acquisitions. Included in the $3.1 million benefit for income taxes was $0.6 million and $0.8 million of benefits associated with the Williams and Bennett and Helen Grace acquisitions which should have been corrected during the first quarter and third quarter of 2014, respectively. The benefit for income taxes was partially offset by $4.3 million of legal fees and accruals associated primarily with the SEC civil trial which commenced in November 2014, lower equity earnings from Woodbridge and higher BBX Sweet Holdings cost of goods sold and compensation associated with seasonal revenues and the 2014 acquisitions. The recoveries from loan losses and asset impairments resulted primarily from charged off loan recoveries and updated valuations. F-64 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures BBX Capital has established disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)) to make known material information concerning the Company, including its subsidiaries, to those officers who certify BBX Capital’s financial reports and to other members of our senior management. As of December 31, 2015, BBX Capital’s management carried out an evaluation, with the participation of the principal executive officer and principal financial officer, of the effectiveness of their disclosure controls and procedures. Based on that evaluation, BBX Capital’s principal executive officer and principal financial officer concluded that, as of December 31, 2015, their disclosure controls and procedures were effective to ensure that information required to be disclosed by BBX Capital in the reports that it files or submits under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and was accumulated and communicated to BBX Capital’s management, including BBX Capital’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. BBX Capital’s management, including the principal executive officer and principal financial officer, does not expect that their disclosure controls and procedures and internal control over financial reporting will prevent all errors and all improper conduct. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of improper conduct, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Further, the design of any control system is based in part upon assumptions about the likelihood of future events, and there can be no assurance that any such design will succeed in achieving its stated goals under all potential future conditions. Management’s Report on Internal Control Over Financial Reporting Management’s Report on Internal Control Over Financial Reporting is included in Item 8 immediately preceding Report of Independent Registered Certified Public Accounting Firm, which includes an attestation report of BBX Capital’s independent registered certified public accounting firm regarding BBX Capital’s internal control over financial reporting. Scope of Management’s Report on Internal Control Over Financial Reporting Management has excluded Kencraft Confections, LLC from its assessment of internal control over financial reporting as of December 31, 2015. We acquired this business during the second quarter of 2015 and our management has not conducted an assessment of the acquired business’ internal control over financial reporting. Total revenues and total assets of Kencraft Confections, LLC represent 5% and 2%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2015. Changes in Internal Control Over Financial Reporting There was no change in BBX Capital’s internal control over financial reporting that occurred during the quarter ended December 31, 2015 that has materially affected, or is reasonably likely to materially affect, BBX Capital’s internal control over financial reporting. ITEM 9B. OTHER INFORMATION None PART III The information required by Items 10 through 14 will be provided by incorporating the information required under such items by reference to BBX Capital’s definitive proxy statement to be filed with the Securities and Exchange Commission no later than 120 days after the end of the year covered by this Form 10- K or, alternatively, by amendment to this Form 10-K under cover of 10-K/A no later than the end of such 120 day period. ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES PART IV (a) Documents Filed as Part of this Report: (1) Financial Statements The following consolidated financial statements of BBX Capital Corporation. and its subsidiaries are included herein under Part II, Item 8 of this Form 10-K. Reports of Independent Registered Public Accounting Firms. Consolidated Statements of Financial Condition as of December 31, 2015 and 2014. Consolidated Statements of Operations and Comprehensive Income for each of the years in the three year period ended December 31, 2015. Consolidated Statements of Changes in Equity for each of the years in the three year period ended December 31, 2015. Consolidated Statements of Cash Flows for each of the years in the three year period ended December 31, 2015. Notes to Consolidated Financial Statements. (2) Financial Statement Schedules Schedule III – Real estate and accumulated depreciation Schedule IV – Mortgage loans on real estate All schedules not listed above are omitted as the required information is either not applicable or presented in the financial statements or related notes. (3) Exhibits The following exhibits are either filed as a part of this Form 10-K or are incorporated herein by reference to documents previously filed as indicated below: Exhibit Number 2.1 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 4.1 4.2 Description Purchase Agreement, dated April 2, 2013 by and among Woodbridge Holdings, LLC, BBX Capital Corporation and BFC Financial Corporation Restated Articles of Incorporation Articles of Amendment to the Restated Articles of Incorporation, effective May 20, 2008 Reference Exhibit 2.1 to the Registrant’s Current Report on Form 8-K, filed on April 5, 2013. Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, filed on August 14, 2001. Appendix A to the Registrant’s Definitive Proxy Statement on Schedule 14A, filed on May 5, 2008. Articles of Amendment to the Restated Articles of Incorporation, effective September 24, 2008 Appendix A to the Registrant’s Definitive Information Statement on Schedule 14C, filed on September 4, 2008. Articles of Amendment to the Restated Articles of Incorporation, effective September 26, 2008 Articles of Amendment to the Restated Articles of Incorporation, effective May 19, 2009 Articles of Amendment to the Restated Articles of Incorporation of BankAtlantic Bancorp, Inc. Articles of Amendment to the Restated Articles of Incorporation, effective July 31, 2012 Exhibit 3.4 to the Registrant’s Current Report on Form 8-K, filed on September 26, 2008. Appendix A to the Registrant’s Definitive Proxy Statement on Schedule 14A, filed on April 29, 2009. Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on October 11, 2011. Appendix D to the Registrant’s Definitive Information Statement on Schedule 14C, filed on April 12, 2012 Articles of Amendment to the Restated Articles of Incorporation, effective February 7, 2013 Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on February 7, 2013. Amended and Restated Bylaws of BBX Capital Corporation Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on February 12, 2015. Rights Agreement, dated February 7, 2013, between BBX Capital Corporation and American Stock Transfer & Trust Company, LLC Amendment No. 1 to Rights Agreement, dated as of May 7, 2013, between the Company and American Stock Transfer & Trust Company, LLC Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on February 7, 2013. Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed on May 13, 2013.  4.3 10.2 10.21 10.30 10.31 Amendment No. 2 to Rights Agreement, dated as of April 2, 2015, between the Company and American Stock Transfer & Trust Company, LLC 2005 Restricted Stock and Option Plan First Amendment to the BankAtlantic Bancorp, Inc. 2005 Restricted Stock and Option Plan Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed on April 2, 2015. Appendix B to the Registrant’s Proxy Statement on Schedule 14A, filed on April 29, 2009 Form 10-K for the year ended December 31, 2014 filed on March 16, 2015. BBX Capital Corporation 2014 Stock Incentive Plan * Appendix A to the Registrant’s Definitive Proxy Statement filed on April 30, 2014. First Amendment to the BankAtlantic Bancorp, Inc. 2014 Restricted Stock and Option Plan Form 10-K for the year ended December 31, 2014 filed on March 16, 2015. 10.46 Non-employee Director Compensation Plan for 2005 Exhibit 10.1 to the Registrant’s Form 8-K Filed on May 23, 2005. 10.55 Employment agreement of Alan B. Levan 10.56 Employment agreement of John E. Abdo 10.57 10.58 10.59 10.60 10.61 10.62 10.63 10.64 Employment agreement of Jarett S. Levan Employment agreement of Seth M. Wise Employment agreement of Raymond S. Lopez Stock Purchase Agreement Dated as of November 1, 2011 Between BB&T Corporation and BankAtlantic Bancorp, Inc. Amendment to the BB&T Stock Purchase Agreement Amended and Restated Limited Liability Agreement of Florida Asset Resolution Group, LLC Omnibus Asset Servicing Agreement with Bayview Loan Servicing Inc. Promissory Note dated April 2, 2013 Form 10-Q for the quarter ended September 30, 2012 filed on November 15, 2012. Form 10-Q for the quarter ended September 30, 2012 filed on November 15, 2012. Form 10-Q for the quarter ended September 30, 2012 filed on November 15, 2012. Form 10-Q for the quarter ended September 30, 2012 filed on November 15, 2012. Exhibit 10.1 to the Registrant’s F orm 10- Q for the quarter ended March 31, 2015 filed on May 8, 2015. Exhibit 10.1 to the Registrant’s current report on Form 8-K dated November 1, 2012 filed on November 7, 2011. Exhibit 2.2 to the Registrant’s current report on Form 8-K dated March 13, 2012 and filed on March 16, 2012. Exhibit A to the Registrant’s Definitive Information Statement on Schedule 14C, filed on April 12, 2012 Form 10-K for the year ended December 31, 2012 filed on April 1, 2013. issued by BBX Capital Corporation in favor of Woodbridge Holdings, LLC Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on April 5, 2013. 10.65 10.66 Amended and Restated Operating Agreement of Woodbridge Holdings, LLC Agreement to Allocate Consolidated Income Tax Liabilities and Benefits 21.1 Subsidiaries of the Registrant Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on April 5, 2013. Exhibit 10.2 to the Registrant’s F orm 10- Q for the quarter ended March 31, 2015 filed on May 8, 2015. Filed with this Report 23.1 23.2 23.3 23.4 31.1 31.2 32.1 32.2 99.1 Consent of Grant Thornton LLP Filed with this Report Consent of PricewaterhouseCoopers LLP Filed with this Report Consent of Grant Thornton LLP – Woodbridge Holdings, LLC Filed with this Report Consent of PricewaterhouseCoopers LLP – Woodbridge Holdings, LLC Filed with this Report Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Filed with this Report Filed with this Report Furnished with this Report Furnished with this Report Audited Consolidated Financial Statements of Woodbridge Holding, LLC Filed with this Report 101 Interactive data files *Compensatory Plan SIGNATURES Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. BBX Capital Corporation March 15, 2016 By: /s/Jarett S. Levan Jarett S. Levan, Acting Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature /s/ Jarett S. Levan Jarett S. Levan /s/John E Abdo John E. Abdo /s/Raymond S. Lopez Raymond S. Lopez /s/David M. Friedman David M. Friedman /s/Seth M. Wise Seth M. Wise /s/Steven M. Coldren Steven M. Coldren /s/Charlie C. Winningham, II Charlie C. Winningham, II /s/Norman H. Becker Norman H. Becker /s/Willis N. Holcombe Willis N. Holcombe /s/Tony P. Segreto Tony P. Segreto Title Acting Chairman of the Board, President and Chief Executive Officer Date March 15, 2016 Vice Chairman of the Board March 15, 2016 Executive Vice President and Chief Financial Officer March 15, 2016 Managing Director, Chief Accounting Officer March 15, 2016 Executive Vice President Director Director Director Director Director March 15, 2016 March 15, 2016 March 15, 2016 March 15, 2016 March 15, 2016 March 15, 2016 Schedule III – Real Estate Investments and Accumulated Depreciation BBX Capital Corporation As of December 31, 201 5 (Dollars in thousands) Initial Costs Building and Capitalized Costs Subsequent to Property Land Improvements Acquisition Other Depreciable Year of Foreclosure Lives Total Accumulated Cost (1) Depreciation Construction Month/Year (Years) RoboVault $ 1,590 6,310 - - 7,900 840 2009 4/2013 40 (1) The aggregate cost for federal income tax purposes is $6.4 million. The following table presents the changes in the Company’s real estate investments for the year ended December 31, 2015 (in thousands): (in thousands) Balance at December 31, 2014 Depreciation Transfer to held-for-sale Balance at December 31, 2015 Total Costs 22,440 - (14,540) 7,900 Accumulated Depreciation 630 652 (442) 840 $ $ Schedule IV – Mortgage Loans on Real Estate BBX Capital Corporation As of December 31, 201 5 (Dollars in thousands) Principal Amount of Loans Subject to Delinquent Final Periodic Face Carrying Interest Maturity Payment Prior Amount of Amount of Principal Description Rate (1) Date (2) Terms Liens Loans Loans (3) or Interest Number of Loans 101 First-lien 1-4 Family (4) 5.71% 12/17/2033 Monthly $ - 34,432 21,354 27,450 Second lien -Consumer held-for- investment 45 3.21% 2/18/2017 Monthly 8,107 4,686 2,368 910 18 Small Business Real Estate 7.05% 7/14/2023 Monthly Commercial Real Estate held-for- investment 1 Large Balance Commercial Real Estate Loans 1 Retail 1 Marina 1 Apartment building 1 Residential 1 Land Total Mortgage Loans 5.00% 5/31/2016 Monthly 7.00% 6/20/2018 Monthly 2.08% 1/1/2018 Monthly 5.00% 6/1/2017 Monthly 5.75% 5/1/2016 Monthly 4.00% 12/31/2016 Maturity - - - - - 753 - 4,373 3,529 879 879 2,074 4,500 8,048 3,702 3,985 2,074 2,206 3,448 3,702 3,985 - - - - - - - $ 8,860 66,679 43,545 28,360 (1) Represents weighted average interest rates for mortgage loans grouped by category where there is more than one loan in the category. (2) Represents weighted average maturity dates for mortgage loans grouped by category where there is more than one loan in a category. (3) The aggregate cost for federal income tax purposes was $48.5 million. (4) The Company does not own the servicing on these loans. The following table presents the changes in the Company’s mortgage loans for the year ended December 31, 201 5 (in thousands): Balance at December 31, 2014 Advances on existing mortgages Collections of principal Foreclosures Costs of mortgages sold Balance at December 31, 2015 $ $ 61,230 - (14,470) (3,215) - 43,545 Date of State or Other Jurisdiction of Exhibit 21.1 Subsidiary Name Incorporation Incorporation or Organization Subsidiaries of BBX Capital Corporation BBX Partners, Inc. BBX Capital Asset Management, LLC Florida Asset Resolution Group, LLC BBX Capital Partners, LLC BBX Sweet Holdings, LLC Renin Holdings LLC Subsidiaries of Renin Holdings LLC Renin US LLC Renin Canada Corp Subsidiaries of Renin Canada Corp 3/26/1998 2/20/2012 4/13/2012 8/12/2013 10/2/2013 10/21/2013 Florida Florida Delaware Florida Florida Delaware 10/21/2013 10/21/2013 Delaware British Columbia, CA Renin UK Corp 10/21/2013 United Kingdom Subsidiaries of BBX Sweet Holdings, LLC The Hoffman Commercial Group, Inc. Good Fortunes East, LLC Boca Bons East, LLC B&B Bons, LLC Brea Enterprises, LLC S&F Good Fortunes, LLC Hoffchoc, LLC Hoffmans Chocolate, LLC Fantasy Chocolates, Inc. Chocolate Acquisition Sub, LLC Sweet Acquisitions CA1, LLC Sweet Acquisitions CA2, LLC Sweet Acquisitions CA3, LLC Sweet Acquisitions CA4, LLC dba Droga Chocolates Sweet Acquisitons UT1 dba Kencraft Candy Sweet Acquisitons UT2 Anastasia Confections, Inc. Subsidiaries of BBX Partners, Inc. Heartwood Partners 1, LLC Heartwood Partners 2, LLC Heartwood Partners 3, LLC Heartwood Partners 4, LLC 5/10/1993 9/15/2009 2/23/2010 2/23/2010 4/10/2007 9/9/2009 10/10/2005 2/23/2012 7/24/1994 5/2/2014 6/1/2014 6/1/2014 9/1/2014 3/6/2015 2/24/2015 2/24/2015 6/27/1984 3/13/2009 6/2/2009 10/2/2009 10/2/2009 Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida California California California California Utah Utah Florida Florida Florida Florida Florida Date of State or Other Jurisdiction of Exhibit 21.1 Subsidiary Name Incorporation Incorporation or Organization Heartwood Partners 2, LLC JRG/BBX Development, LLC 10/25/2013 Florida Subsidiaries of BBX Capital Asset Management, LLC BBX Austin, LLC BBX Hialeah Apartments, LLC' Hialeah Multifamily, LLC BBX Residential Victoria Park, LLC Premier Flagler, LLC Banc Servicing Center, LLC Fidelity Service, LLC Fidelity Tax, LLC Heartwood 3, LLC Heartwood 4, LLC Heartwood 7, LLC Heartwood 11, LLC Heartwood 14, LLC Heartwood 18, LLC Heartwood 19, LLC Heartwood 21, LLC Heartwood 23, LLC Heartwood 24, LLC Heartwood 40, LLC Heartwood 41, LLC Heartwood 42, LLC Heartwood 44, LLC Heartwood 47, LLC Heartwood 50, LLC Heartwood 88, LLC Heartwood 90, LLC Heartwood 91, LLC Heartwood 91-2, LLC Heartwood 91-3, LLC Heartwood 91-4, LLC Heartwood 92, LLC. Bonterra Single-family Holdings, LLC BBX Bonterra Multifamily Holdings, LLC BBX Gardens Multifamily, LLC BBX Miramar, LLC BBX Centra, LLC 12/15/2014 5/2/2014 2/18/2014 12/23/2013 6/5/2012 9/1/1995 10/1/1970 3/7/2000 2/5/1991 2/5/1991 5/23/1991 5/23/1991 5/23/1991 6/2/1992 6/2/1992 2/8/1991 7/23/2009 10/9/2009 4/28/2010 4/28/2010 4/28/2010 4/28/2010 4/28/2010 4/28/2010 5/9/1988 11/13/1990 1/8/1991 7/8/1987 12/4/1985 1/10/1986 5/26/2010 6/26/2014 6/26/2014 1/15/2015 4/24/2015 4/22/2015 Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Date of State or Other Jurisdiction of Exhibit 21.1 Subsidiary Name Incorporation Incorporation or Organization Subsidiaries of Bonterra Single-family Holdings, LLC Bonterra Single-family Management, LLC 6/26/2014 Florida Subsidiaries of Bonterra Single-family Management, LLC Bonterra Single-family Real Estate, LLC Bonterra Single-family TIC, LLC Subsidiaries of Florida Asset Resolution Group, LLC FAR Holdings Group, LLC Heartwood 58, LLC Subsidiaries of FAR Holdings Group, LLC Heartwood 2, LLC Heartwood 43, LLC Heartwood 55, LLC FAR 1, LLC FAR 2, LLC FAR 3, LLC FAR 4, LLC FAR 5, LLC FAR 6, LLC Subsidiaries of Heartwood 58, LLC FT Properties, LLC Sunrise Atlantic, LLC Heartwood 45, LLC Heartwood 56, LLC Heartwood 57, LLC 6/26/2014 6/26/2014 10/4/2013 5/26/2010 2/5/1991 4/28/2010 4/28/2010 10/18/2012 2/14/2013 2/14/2013 2/14/2013 4/9/2013 7/18/2013 2/5/1991 1/26/1990 4/28/2010 4/28/2010 5/26/2010 Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Florida Subsidiary of Heartwood 7, LLC Steeplechase Estates Community Association, Inc. 7/19/2005 Florida CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Exhibit 23.1 We have issued our reports dated March 15, 2016 with respect to internal control over financial repor(cid:29)ng, the consolidated financial statements as of and for the year ended December 31, 2015, and related schedules, included in the Annual Report of BBX Capital Corpora(cid:29)on on Form 10-K for the year ended December 31, 2015. We hereby consent to the incorpora(cid:29)on by reference of said reports in the Registra(cid:29)on Statements of BBX Capital Corpora(cid:29)on on Forms S-8 (File No. 333-127501, File No. 333-159808 and File No. 333-197357). /s/Grant Thornton LLP Fort Lauderdale, Florida March 15, 2016 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Exhibit 23.2 We have issued our report dated March 15, 2016, with respect to the consolidated financial statements of Woodbridge Holdings, LLC as of and for the year ended December 31, 2015, included as Exhibit 99.1 in the Annual Report of BBX Capital Corpora(cid:29)on on Form 10-K for the year ended December 31, 2015. We hereby consent to the incorpora(cid:29)on by reference of said report in the Registra(cid:29)on Statements of BBX Capital Corpora(cid:29)on on Forms S-8 (File No. 333- 127501, File No. 333-159808 and File No. 333-197357). /s/Grant Thornton LLP Fort Lauderdale, Florida March 15, 2016 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statement s on Form S-8 (No. 333-197357; 333-127501; 333-159808), of BBX Capital Corporation of our report dated March 16, 2015, relating to the financial statements, which appears in this Form 10-K. /s/PricewaterhouseCoopers LLP Fort Lauderdale, Florida March 15, 2016 Exhibit 23.4 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-197357; 333-127501; 333-159808) of BBX Capital Corporation of our report dated March 16, 2015 relating to the financial statements of Woodbridge Holdings, LLC, which appears in this Form 10‑K as Exhibit 99.1. /s/PricewaterhouseCoopers LLP Fort Lauderdale, Florida March 15, 2016 BBX Capital Corporation I, Jarett S. Levan, certify that: Exhibit 31.1 1. I have reviewed this annual report on Form 10-K of BBX Capital Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a. b. c. d. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. b. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 15, 2016 By:/s/Jarett S. Levan Jarett S. Levan, Acting Chief Executive Officer 21 BBX Capital Corporation I, Raymond S. Lopez, certify that: Exhibit 31.2 1. I have reviewed this annual report on Form 10-K of BBX Capital Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a. b. c. d. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. b. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 15, 2016 By:/s/Raymond S. Lopez Raymond S. Lopez, Chief Financial Officer 21 BBX Capital Corporation Exhibit 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Annual Report on Form 10- K of BBX Capital Corporation (the “Company”) for the year ended December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jarett S. Levan, Acting Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/Jarett S. Levan Jarett S. Levan By: Name: Title: Acting Chief Executive Officer Date: March 15, 2016 BBX Capital Corporation Exhibit 32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Annual Report on Form 10-K of BBX Capital Corporation (the “Company”) for the year ended December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Raymond S. Lopez, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/Raymond S. Lopez By: Name: Raymond S. Lopez Title: Chief Financial Officer Date: March 15, 2016 21 WOODBRIDGE HOLDINGS, LLC INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Certified Public Accountants – Grant Thornton LLP…….…………………………... Report of Independent Certified Public Accountants – PricewaterhouseCoopers LLP……………………... 1 3 Financial Statements: Consolidated Statements of Financial Condition as of December 31, 2015 and 2014 ………………… 4 Consolidated Statements of Operations for the years ended December 31, 2015 and 2014, and from April 2, 2013 through December 31, 2013 …………………………. 5 Consolidated Statements of Changes in Equity for the years ended December 31, 2015 and 2014, and from April 2, 2013 through December 31, 2013 ………………………….6 Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014 and from April 2, 2013 through December 31, 2013 ………………………… Notes to Consolidated Financial Statements …………………………………………………………… 7 8-34 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Managers Woodbridge Holdings, LLC We have audited the accompanying consolidated financial statements of Woodbridge Holdings, LLC (a Florida corporation) and subsidiaries, which comprise the consolidated balance sheet as of December 31, 2015, and the related consolidated statements of income and comprehensive income, changes in equity, and cash flows for the year then ended, and the related notes to the financial statements. Management’s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Woodbridge Holdings, LLC and subsidiaries as of December 31, 2015, and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. /s/Grant Thornton LLP Fort Lauderdale, Florida March 15, 2016 1 Report of Independent Certified Public Accountants To the Board of Managers of Woodbridge Holdings, LLC We have audited the accompanying consolidated financial statements of Woodbridge Holdings, LLC and its subsidiaries, which comprise the consolidated statement of financial position as of December 31, 2014, and the related results of their operations and their cash flows for the year then ended, and the nine month period ended December 31, 2013. Management's Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Certified Public Accountants’ Responsibility Our responsibility is to express an opinion on the consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Woodbridge Holdings, LLC and its subsidiaries at December 31, 2014, and the related results of their operations and their cash flows for the year then ended, and the nine month period ended December 31, 2013, in accordance with accounting principles generally accepted in the United States of America. /s/PricewaterhouseCoopers LLP Fort Lauderdale, Florida March 16, 2015 2 Woodbridge Holdings, LLC Consolidated Statements of Financial Condition (In thousands) ASSETS Cash and cash equivalents Restricted cash ($25,358 in 2015 and $31,554 in 2014 held by variable interest entities ("VIEs") Notes receivable, including net securitized notes of $280,841 in 2015 and $293,950 held by VIEs in 2014, net of allowance of $110,714 in 2015 and $102,566 in 2014 Loans to related parties Inventory Prepaid expenses and other assets Properties and equipment, net Intangible assets, net Total assets LIABILITIES AND EQUITY Liabilities: Accounts payable Accrued expenses and other liabilities Deferred revenue Deferred income taxes Notes and mortgage notes payable and other borrowings Receivable-backed notes payable - recourse Receivable-backed notes payable - non-recourse (held by VIEs) Junior subordinated debentures Total liabilities Commitments and contingencies (See Note 9) Paid-in capital Accumulated deficit Total Woodbridge Holdings, LLC ("Woodbridge") members' equity Noncontrolling interests Total equity Total liabilities and equity As of December 31, 2015 2014 116,044 185,807 56,714 54,620 415,598 80,000 220,211 70,496 71,937 61,977 1,092,977 14,848 69,778 28,847 110,202 101,584 89,888 318,929 152,307 886,383 374,561 (211,164) 163,397 43,197 206,594 1,092,977 424,267 11,750 194,713 53,158 72,319 63,913 1,060,547 10,059 79,147 25,057 92,609 90,061 92,129 320,275 150,038 859,375 349,811 (191,891) 157,920 43,252 201,172 1,060,547 $ $ $ $ See Notes to Consolidated Financial Statements. 3 Woodbridge Holdings, LLC Consolidated Statements of Income and Comprehensive Income (In thousands) Revenues Sales of VOIs Fee-based sales commission Other fee-based services revenue Interest income Other income Total revenues Costs and Expenses Cost of VOIs sold Cost of other resort fee-based operations Interest expense Litigation settlement Selling, general and administrative expenses Total costs and expenses Income before income taxes Less: Provision for income taxes Net income Less: Net income attributable to noncontrolling interests Net income attributable to Woodbridge Comprehensive income attributable to Woodbridge members For the Years Ended December 31, 2014 2015 259,236 173,659 97,539 84,331 3,410 618,175 262,334 144,239 92,089 81,666 4,088 584,416 From April 2, 2013 through December 31, 2013 204,155 72,994 60,840 61,719 - 399,708 22,884 30,766 26,046 60,942 39,311 36,500 373,623 533,260 84,915 40,658 44,257 11,705 32,552 56,941 44,909 - 344,891 477,507 106,909 40,537 66,372 11,411 54,961 40,032 33,749 - 242,429 342,256 57,452 18,214 39,238 9,974 29,264 32,552 54,961 29,264 $ $ $ See Notes to Consolidated Financial Statements. 4 Woodbridge Holdings, LLC Consolidated Statements of Changes in Equity From April 2, 2013 through December 31, 2013 and the Years Ended December 31, 2014 and 2015 (In thousands) Balance, April 2, 2013 Net income Distributions paid to subsidiairies' noncontrolling interest Distributions paid to members Balance, December 31, 2013 Net income Subsidiary's excess tax benefit from stock based compensation Distributions paid to subsidiairies' noncontrolling interest Distributions paid to members Balance, December 31, 2014 Net income Distributions paid to subsidiairies' noncontrolling interest Distributions paid to members, net of contributions received Balance, December 31, 2015 $ $ $ $ Paid-in Capital 347,731 - Accumulated Deficit (162,712) 29,264 Total Woodbridge Equity 185,019 29,264 Non- controlling Interest in Subsidiaries 36,322 9,974 Total Equity 221,341 39,238 (44,302) (44,302) - (44,302) (8,575) (8,575) 347,731 - (177,750) 54,961 169,981 54,961 37,721 11,411 207,702 66,372 2,080 2,080 2,080 (69,102) (69,102) - (69,102) (5,880) (5,880) 349,811 - (191,891) 32,552 157,920 32,552 43,252 11,705 201,172 44,257 (11,760) (11,760) 24,750 (51,825) (27,075) (27,075) 374,561 163,397 (211,164) See Notes to Consolidated Financial Statements. 43,197 206,594 5 Woodbridge Holdings, LLC Consolidated Statements of Cash Flows (In thousands) Operating activities: Net income Adjustment to reconcile net loss to net cash provided by operating activities: Provision for notes receivable allowances Depreciation, amortization and accretion, net Net activities from the disposal of assets Provision for deferred income taxes Changes in operating assets and liabilities: Inventory Notes receivable Restricted cash Other assets Accounts payable, accrued expenses and other liabilities, and deferred income Net cash provided by operating activities Investing activities: Proceeds from sale of property and equipment Purchases of office property and equipment (Loans to) proceeds from repayment of loans to related parties, net Net cash used in investing activities Financing activities: Proceeds from notes, mortgage notes payable and other borrowings Repayment of notes, mortgage notes payable and other borrowings Distributions paid to members, net of contributions received Distributions paid to subsidiaries' noncontrolling interests Payments for debt issuance costs Excess tax benefit from stock-based compensation Net cash used in financing activities (Decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Supplemental cash flow information Interest paid on borrowings, net of amounts capitalized Income taxes paid, net For the Year Ended December 31, 2014 2015 From April 2, 2013 through December 31, 2013 $ 44,257 66,372 39,238 40,164 7,001 473 15,883 19,137 (9,820) 10,665 (1,386) (3,427) 145,062 50,199 3,312 1,014 12,009 (4,429) (26,375) (6,860) 10,183 14,833 93,124 - - (18,049) 9,662 (8,387) 127,596 (162,919) (69,102) (5,880) (1,462) 2,080 (109,687) 26,988 158,819 185,807 39,612 26,077 (10,059) (9,662) (19,721) 140,941 (125,628) (44,302) (8,575) (4,115) - (41,679) 31,724 127,095 158,819 29,636 6,130 42,063 7,032 (163) 17,593 (15,641) (34,538) (2,094) (14,902) (1,507) 42,100 251 (9,176) (68,250) (77,175) 257,903 (249,972) (27,075) (11,760) (3,784) - (34,688) (69,763) 185,807 116,044 33,688 25,699 $ $ 6 Woodbridge Holdings, LLC Notes to Consolidated Financial Statements 1. Business and Summary of Significant Accounting Policies Basis of Financial Statement Presentation Woodbridge Holdings, LLC (“Woodbridge” or, unless otherwise indicated or the context otherwise requires, “we”, “us”, “our” or the “Company”) is a holding company whose principal holdings include a 100% controlling interest in Bluegreen Corporation and its subsidiaries (“Bluegreen”). Prior to the purchase agreement as described below, Woodbridge was a wholly-owned subsidiary of BFC Financial Corporation (“BFC”). Woodbridge’s reports its results through one operating segment, Bluegreen Vacations. One of Bluegreen’s wholly-owned subsidiaries has a joint venture arrangement with Big Cedar, LLC (“Big Cedar”), an affiliate of Bass Pro, Inc. relating to Bluegreen/Big Cedar Vacations. Bluegreen’s subsidiary owns 51% of Bluegreen/Big Cedar Vacations and Big Cedar owns the remaining 49%. Bluegreen/Big Cedar Vacations develops, markets and sells vacation ownership interests (“VOIs”) and timeshare interests. The results of operations of Big Cedar are included in our consolidated financial statements. Generally accepted accounting principles in the United States of America (“GAAP”) require that Woodbridge consolidate the financial results of the entities in which it has controlling interest. As a consequence, the assets and liabilities of all such entities are presented on a consolidated basis in Woodbridge’s financial statements. However, except as otherwise noted, the debts and obligations of the consolidated entities, including Bluegreen, are not direct obligations of Woodbridge and are non- recourse to Woodbridge. Similarly, the assets of those entities are not available to Woodbridge absent a dividend or distribution from those entities. The recognition by Woodbridge of income from controlled entities is determined based on the total percent of economic ownership in those entities. On April 2, 2013, Woodbridge acquired all of the shares of Bluegreen’s common stock not previously owned by Woodbridge in a cash merger transaction (sometimes hereinafter referred to as the “Bluegreen merger”). As a result of the merger, Bluegreen is a wholly-owned subsidiary of Woodbridge. Woodbridge is currently owned 54% by BFC Financial Corporation (OTCQB: BFCF; BFCFB) (“BFC”) and 46% by BBX Capital Corporation (NYSE: BBX) (“BBX Capital”). Summary of Significant Accounting Policies The accounting policies applied by the Company conform to GAAP. Consolidation Policy - The consolidated financial statements include the accounts of all the Company’s wholly-owned subsidiaries including Bluegreen, the Company’s controlled subsidiaries, and other entities in which the Company and its subsidiaries hold controlling financial interests, and variable interest entities (“VIEs”) if the Company or its consolidated subsidiary is deemed the primary beneficiary of the VIE. All significant inter-company accounts and transactions have been eliminated among consolidated entities. Use of Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, management evaluates its estimates, including those that relate to the estimated future sales value of inventory; the recognition of revenue, including revenue recognition under the percentage-of-completion method of accounting; allowance for credit losses; the recovery of the carrying value of real estate inventories; the fair value of assets measured at, or compared to, fair value on a non-recurring basis such as intangible assets and other long-lived assets; and the estimate of contingent liabilities related to litigation and other claims and assessments. Estimates are based on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different 7 assumptions and conditions. Cash and Cash Equivalents - Cash equivalents consist of cash, demand deposits at financial institutions, money market funds and other short-term investments with original maturities of three months or less. Cash and cash equivalents are held at various financial institutions located throughout the United States, Canada and Aruba. However, a significant portion of unrestricted cash is maintained with a single bank and, accordingly, is subject to credit risk. Periodic evaluations of the relative credit standing of financial institutions maintaining the Company’s deposits are performed to evaluate and, if necessary, take actions in an attempt to mitigate credit risk. Restricted Cash – Restricted cash consists primarily of customer deposits held in escrow accounts and cash collected on pledged/secured notes receivable not yet remitted to lenders. Notes Receivable (Bluegreen) - Bluegreen’s notes receivable are carried at amortized cost less an allowance for credit losses. Interest income is suspended, and previously accrued but unpaid interest income is reversed, on all delinquent notes receivable when principal or interest payments are more than 90 days contractually past due and not resumed until such loans are less than three months past due. As of December 31, 2015 and December 31, 2014, $10.4 million and $11.7 million, respectively, of Bluegreen’s VOI notes receivable were more than 90 days past due, and accordingly, consistent with Bluegreen’s policy, were not accruing interest income. After 120 days, Bluegreen’s VOI notes receivable are generally written off against the allowance for credit loss. Bluegreen records an estimate of expected uncollectible VOI notes receivable as a reduction of revenue at the time Bluegreen recognizes a VOI sale. Bluegreen estimates uncollectible VOI notes receivable in accordance with timeshare accounting rules. Under these rules, the estimate of uncollectibles is based on historical uncollectibles for similar VOI notes receivable. Bluegreen uses a static pool analysis, which tracks uncollectibles for each year’s sales over the entire life of the notes. Bluegreen also considers whether the historical economic conditions are comparable to current economic conditions, as well as variations in underwriting standards. Additionally, under timeshare accounting rules, no consideration is given for future recoveries of defaulted inventory in the estimate of uncollectible VOI notes receivable. Bluegreen reviews its allowance for credit losses on at least a quarterly basis. Loan origination costs are deferred and recognized over the life of the related notes receivable. Acquired Notes Receivable – During November 2009, Woodbridge acquired additional shares of Bluegreen’s common stock which resulted in Woodbridge having a controlling interest in Bluegreen. In connection with such transaction, Woodbridge was deemed under applicable accounting guidance to have acquired certain of Bluegreen’s assets, including a pool of notes receivable consisting principally of homogenous consumer timeshare loans originated by Bluegreen. Consistent with the accounting guidance, Woodbridge has elected an accounting policy based on expected cash flows, which includes guidance on maintaining the integrity of a pool of multiple loans accounted for as a single asset. The loans have common risk characteristics as defined in the accounting guidance, Loans and Debt Securities with Deteriorated Credit Quality, including similar risk ratings, as defined and monitored by risk rating agencies, term, purpose and similar collateral type (VOIs). The Company evaluates the pool of loans accounted for as a single asset for indications of impairment. Purchased loans are considered to be impaired if it is not expected that all contractually required cash flows will be received due to concerns about credit quality. The excess of the cash flows expected to be collected measured as of the acquisition date, over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan using a level yield methodology. The difference between contractually required payments as of the acquisition date and the cash flows expected to be collected is referred to as the nonaccretable difference. Subsequent decreases to expected cash flows result in a charge to provision for credit losses and a corresponding increase to a valuation allowance included in the allowance for loan losses. Subsequent increases in expected cash flows result in a recovery of any previously recorded allowance for loan losses, to the extent applicable, and a reclassification from nonaccretable difference to accretable yield for any remaining increase. Loan disposals, which may include receipt of payments in full from the borrower or foreclosure, result in the removal of the loan from the loan pool at its allocated carrying amount. Inventory (Bluegreen) - Bluegreen’s inventory consists of completed VOIs, VOIs under construction and land held for future vacation ownership development. Bluegreen carries its completed inventory at the lower of (i) cost, including costs of improvements and amenities incurred subsequent to acquisition, capitalized interest, real estate taxes and other costs incurred during construction, or (ii) estimated fair market value, less costs to sell. VOI 8 inventory and cost of sales are accounted for under timeshare accounting rules, which define a specific method of the relative sales value method for relieving VOI inventory and recording cost of sales. Under the relative sales value method required by timeshare accounting rules, cost of sales is calculated as a percentage of net sales using a cost-of-sales percentage - the ratio of total estimated development costs to total estimated VOI revenue, including the estimated incremental revenue from the resale of VOI inventory repossessed, generally as a result of the default of the related receivable. Also, pursuant to timeshare accounting rules, Bluegreen does not relieve inventory for VOI cost of sales related to anticipated credit losses. Accordingly, no adjustment is made when inventory is reacquired upon default of the related receivable. Bluegreen also periodically evaluates the recoverability of the carrying amount of its undeveloped or under development resort properties in accordance with ASC 360, Property, Plant and Equipment (“ASC 360”), which provides guidance relating to the accounting for the impairment or disposal of long-lived assets. No impairment charges were recorded with respect to VOI inventory during any of the periods presented. Impairment of Long Lived Assets - Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the full carrying amount of an asset may not be recoverable under the guidelines of ASC 360. In performing the review for impairment, the Company compares the expected undiscounted future cash flows to the carrying amount of the asset and records an impairment loss if the carrying amount exceeds the expected future cash flows based on the estimated discounted cash flows generated by the long-lived assets. The assumptions developed and used by management to evaluate impairment are subjective and involve significant estimates, and are subject to increased volatility due to the uncertainty of the market environment. Long-lived assets to be abandoned are considered held and used until disposed. The carrying value of a long-lived asset to be abandoned is depreciated over its shortened depreciable life when the Company commits to a plan to abandon the asset before the end of its previously estimated useful life. Properties and Equipment - Property and equipment is recorded at acquisition cost. Depreciation and amortization is recorded in a manner that recognizes the cost of its depreciable assets over their estimated useful lives using the straight-line method. Leasehold improvements are amortized over the shorter of the terms of the underlying leases or the estimated useful lives of the improvements. Interest expense associated with the construction of certain fixed assets is capitalized as incurred and relieved to expense through depreciation once the asset is put into use. The costs of software developed for internal use are capitalized in accordance with the guidance for accounting for costs of computer software developed or obtained for internal use. Capitalization of software developed for internal use commences during the development phase of the project. Software developed or obtained for internal use is generally amortized on a straight-line basis over 3 to 5 years. Expenditures for new properties, leasehold improvements and equipment and major renewals and betterments are capitalized. Expenditures for maintenance and repairs are expensed as incurred, and gains or losses on disposal of assets are reflected in current operations. Intangible Assets – Intangible assets consist of property management contracts which are now included in our financial statements as a result of the previously described acquisition of additional shares of Bluegreen’s common stock during November 2009 which gave us a controlling interest in Bluegreen. The property management contracts have indefinite useful lives and are not amortized, but instead are reviewed for impairment on at least an annual basis, or more frequently if events or changes in circumstances indicate that the related carrying amounts may not be recoverable. During the first quarter of 2015, the Company reduced the value of its property management contracts by $1.7 million as a result of the sale of one of its contracts. The company did not record any impairment charges during the year ended December 31, 2014 and from April 2, 2013 through December 31, 2013. The Company evaluates the recovery of the carrying amount of its long-lived assets under applicable accounting guidance which requires that intangible assets deemed to have indefinite lives not be amortized, but rather be tested for impairment on at least an annual basis, or more frequently if events and circumstances indicate that assets may be impaired, and when the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. The carrying value of these assets is dependent upon estimates of future earnings. If cash flows 9 decrease significantly, intangible assets may be impaired in which case they would be written down to their fair value. The estimates of useful lives and expected cash flows require the Company to make significant judgments regarding future periods that are subject to numerous factors, many of which may be beyond the Company’s control. Revenue Recognition (Bluegreen) – Revenue is recorded for the sale of VOIs, net of a provision for credit losses, in accordance with timeshare accounting guidance. In accordance with the requirements of ASC 978, Real Estate Time-sharing Activities (“ASC 978”), Bluegreen recognizes revenue on VOI sales and when a minimum of 10% of the sales price has been received in cash (demonstrating the buyer’s commitment), the legal rescission period has expired, collectibility of the receivable representing the remainder of the sales price is reasonably assured and Bluegreen has completed substantially all of its obligations with respect to any development related to the real estate sold. Bluegreen believes that it uses a reasonably reliable methodology to estimate the collectibility of the receivables representing the remainder of the sales price of real estate sold. Bluegreen’s policies regarding the estimation of credit losses on its notes receivable are discussed in further detail under “Notes Receivable” below. Under timeshare accounting rules, the calculation of the adequacy of a buyer’s commitment for the sale of VOIs requires that cash received towards the purchase of VOIs be reduced by the value of certain incentives provided to the buyer at the time of sale. If after considering the value of the incentives provided, the 10% requirement is not met, the VOI sale, and the related cost and direct selling expenses, are deferred until such time that sufficient cash is received from the customer, generally through receipt of mortgage payments, to meet the 10% threshold. Changes to the quantity, type, or value of sales incentives that Bluegreen provides to buyers of its VOIs may result in additional VOI sales being deferred or extend the period during which a sale is deferred. In cases where construction and development on Bluegreen-owned resorts has not been substantially completed, Bluegreen recognizes revenue in accordance with the percentage-of-completion method of accounting. Should Bluegreen’s estimates of the total anticipated cost of completing any of its projects increase, Bluegreen may be required to defer a greater amount of revenue or may be required to defer revenue for a longer period of time. Under timeshare accounting rules, rental operations, including accommodations provided through the use of Bluegreen’s sampler program, are accounted for as incidental operations whereby incremental carrying costs in excess of incremental revenues are expensed as incurred. Conversely, incremental revenues in excess of incremental carrying costs are recorded as a reduction to the carrying cost of VOI inventory. Incremental carrying costs include costs that have been incurred by Bluegreen during the holding period of unsold VOIs, such as developer subsidies and maintenance fees on unsold VOI inventory. During each of the years presented, all of Bluegreen’s rental revenue and sampler revenue earned was recorded as an offset to cost of other fee-based services, as such amounts were less than the incremental carrying cost. In addition to sales of VOIs, Bluegreen also generates revenue from the activities listed below. The table provides a brief description of the applicable revenue recognition policy: Activity Fee-based sales commissions Resort management and service fees Resort title fees 10 Revenue is recognized when: The sale transaction with the VOI purchaser is consummated in accordance with the terms of the agreement with the third-party developer and the related consumer rescission period has expired. Management services are rendered Escrow amounts are completed. title documents are released and (1) . Rental and sampler program Guests complete stays at the resorts. Rental and sampler program proceeds are classified as a reduction to “Cost of other fee-based services” in Bluegreen’s Consolidated Statements of Income and Comprehensive Income. (1) In connection with Bluegreen’s management of POAs, Bluegreen acts as agent for the property owners’ association to operate the resort as provided under the management agreements. In certain cases, personnel at the resorts are Bluegreen employees. The POAs bear all of the economic costs of such personnel and generally pays Bluegreen in advance of, or simultaneously with, the payment of payroll. In accordance with ASC 605-45, Overall Considerations of Reporting Revenues Gross as a Principal versus Net as an Agent, reimbursements from the POAs relating to direct pass-through costs are recorded net of the related expenses. Bluegreen’s cost of other fee-based services consists of the costs associated with the various activities described above, as well as developer subsidies and maintenance fees on Bluegreen’s unsold VOIs. Deferred Revenue (Bluegreen) - Bluegreen defers VOI revenue, net of direct incremental selling expenses, for sales for which the legal rescission period has expired, but the required revenue recognition criteria described above has not been met. Additionally, in connection with its sampler programs, Bluegreen defers revenue, net of direct incremental selling expenses, for guest stays not yet completed. Bluegreen’s deferred income was as follows (in thousands): Deferred sampler program income Deferred VOI sales revenue Other deferred income Total $ $ As of December 31, 2015 2014 10,024 15,095 3,728 28,847 9,497 12,211 3,349 25,057 Deferred Financing Costs - Deferred financing costs included in “prepaids and other assets” on the Company’s consolidated statements of financial condition are comprised of costs incurred in connection with obtaining financing from third-party lenders. These costs are capitalized and amortized to interest expense over the terms of the related financing arrangements. As of December 31, 2015 and 2014, unamortized deferred financing costs totaled $13.7 million and $13.3 million, respectively. Interest expense from the amortization of deferred financing costs for the years ended December 31, 2015 and 2014 was $3.6 million and $3.4 million, respectively, and $2.4 million for the period April 2, 2013 through December 31, 2013. Income Taxes – Through April 2, 2013, the Company and most of its wholly owned subsidiaries, operated as a limited liability company that is owned by a single corporate member. Accordingly, the Company was a single member LLC (“SMLLC”). As a SMLLC, the Company was disregarded for federal and state income tax purposes and was treated as a division of BFC. Income taxes attributed to the Company are included in the accompanying consolidated financial statements as if the Company was filing a separate company tax return. As the Company owned less than 80% of Bluegreen’s outstanding equity, Bluegreen and its subsidiaries filed income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions as a separate group. Pursuant to the terms of the Purchase Agreement, as described above, in which BBX Capital acquired a 46% equity interest in the Company, on April 3, 2013, the Company became a multi-member LLC. By default, as a multi-member LLC the Company is treated as a partnership for federal and state income tax purposes. As such, its partnership taxable income and losses are included in the income of its members. Additionally, as the Company owns 100% of Bluegreen’s equity, Bluegreen was taxed as a corporation and filed income tax returns. Effective on May 1, 2015, Woodbridge made an election to change is classification from a partnership to a corporation for income tax purposes. In addition, BFC increased its ownership interest in BBX Capital in connection with the cash tender offer completed on April 30, 2015 (as discussed in Note 14). As a consequence of these events, BFC will be filing a consolidated group tax return with BBX Capital, Woodbridge and Bluegreen, 11 which will include the operations Woodbridge and Bluegreen from May 1, 2015 forward. As a result of BFC, BBX, Bluegreen, Woodbridge and their respective subsidiaries becoming a consolidated group for income tax purposes, Bluegreen and its subsidiaries filed income tax returns in the U.S. federal jurisdiction for the four month period ended April 30, 2015. On May 8, 2015, BFC, BBX, Woodbridge and Bluegreen and their respective subsidiaries entered into an Agreement to Allocate Consolidated Income Tax Liability and Benefits pursuant to which, among other customary terms and conditions, the parties agreed to file consolidated federal tax returns. The parties will calculate their respective income tax liabilities and attributes as if each of them were a separate filer. If any tax attributes are used by another party to the agreement to offset its tax liability, the party providing the benefit will receive an amount for the tax benefits realized. Bluegreen paid BFC or its affiliated entities $19.2 million during 2015, pursuant to the Agreement to Allocate Consolidated Income Tax Liability and Benefits. The provision for income taxes is based on income before taxes reported for financial statement purposes after adjustment for transactions that do not have tax consequences. Deferred tax assets and liabilities are realized according to the estimated future tax consequences attributable to differences between the carrying value of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted tax rates as of the date of the statement of financial condition. The effect of a change in tax rates on deferred tax assets and liabilities is reflected in the period that includes the statutory enactment date. A deferred tax asset valuation allowance is recorded when it has been determined that it is more likely than not that deferred tax assets will not be realized. A subsequent change in circumstances that causes a change in judgment about the realization of the related deferred tax amount could result in the reversal of all or part of the deferred tax valuation allowance. An uncertain tax position is defined as a position taken or expected to be taken in a tax return that is not based on clear and unambiguous tax law and which is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods. The Company may recognize the tax benefit from an uncertain tax position only if it believes that it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company measures the tax benefits recognized based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The Company recognizes interest and penalties related to unrecognized tax benefits in its provision for income taxes. There were no uncertain tax positions at December 31, 2015 and 2014. Noncontrolling Interests – Noncontrolling interests reflect third parties’ ownership interests in entities that are consolidated in Woodbridge’s financial statements, but less than 100% owned by Woodbridge or its subsidiaries. GAAP require that a noncontrolling interest be recognized as equity in the consolidated financial statements and itemized separately from the parent’s equity. Accounting for Loss Contingencies – Loss contingencies, including those arising from legal actions, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Future Adoption of Accounting Pronouncements In March 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02 – “Leases (Topic 845) ”. This update requires an entity to recognize a right-of-use asset and a lease liability for virtually all of their leases. The liability will be equal to the present value of lease payments. The asset will generally be based on the liability. For income statement purposes operating leases will result in straight-line expense and finance leases will result in expenses similar to current capital leases. The guidance also requires additional disclosures to enable users of financial statements to understand the amount, timing and uncertainty of cash flows arising from leases. The guidance will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the requirements of this update and has not yet determined its impact on the Company’s consolidated financial statements. In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which specifies how and when to recognize revenue from contracts with customers. ASU 2014-09 also requires additional disclosures about the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. This standard will be effective for Bluegreen on January 1, 2018. Early adoption is permitted on January 1, 2017. The Company is currently evaluating the impact 12 that ASU 2014-09 may have on its consolidated financial statements. In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810) – Amendments to the Consolidation Analysis” (“ASU 2015-02”). This new guidance makes targeted amendments to the current consolidation guidance and ends the deferral granted to investment companies from applying the variable interest entity (“VIE”) guidance. This standard will be effective for Bluegreen on January 1, 2016. The Company’s adoption of ASU 2015-02 is not expected to have a material impact on its consolidated financial statements. In April 2015, the FASB issued ASU 2015-03, ”Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”), which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. This standard will be effective for Bluegreen on January 1, 2016. The Company’s adoption of ASU 2015-03 is not expected to have a material impact on its consolidated financial statements. 2. Liquidity Woodbridge, at its parent company level, had cash and cash equivalents totaling approximately $520,000 at December 31, 2015. Woodbridge’s principal sources of liquidity are its cash holdings and dividend distributions received from Bluegreen. During 2015, 2014 and 2013, Bluegreen paid a total of $54.4 million, $71.5 million and $47.0 million, respectively, in cash dividends to Woodbridge, and Woodbridge declared and paid cash dividends totaling $51.8 million, $69.1 million and $44.3 million, respectively, which were allocated pro rata among BFC and BBX Capital based on their percentage ownership interests in Woodbridge. Woodbridge On September 21, 2009, BFC consummated its merger with Woodbridge Holdings Corporation (“WHC”). Pursuant to the merger, WHC merged with and into Woodbridge, which was a wholly-owned subsidiary of BFC at that time. Dissenting shareholders, who collectively held approximately 4.2 million shares of WHC’s Class A Common Stock, rejected Woodbridge’s offer of $1.10 per share and requested payment for their shares based on their respective fair value estimates of WHC’s Class A Common Stock. On August 27, 2015, the Company made a payment of approximately $13.7 million to the dissenting shareholders for the fair value portion of the judgment and interest thereon, On January 7, 2016, Woodbridge filed a notice with the Florida Supreme Court to seek discretionary review of the matter. The Florida Supreme Court’s judgment with respect to this notice and the outcome of any review by the Florida Supreme Court is uncertain. See Note 9 for further information on this case. 13 3. Notes Receivable The table below sets forth information relating to Bluegreen’s notes receivable and Bluegreen’s allowance of credit losses (dollars in thousands): Notes receivable secured by VOIs: VOI notes receivable - non-securitized VOI notes receivable - securitized Purchase accounting adjustment Allowance for credit losses VOI notes receivable, net Allowance as a % of VOI notes receivable Notes receivable secured by homesites: (1) Homesite notes receivable Allowance for credit losses Homesite notes receivable, net Allowance as a % of homesite notes receivable Total notes receivable: Gross notes receivable Purchase accounting adjustment Allowance for credit losses Notes receivable, net Allowance as a % of gross notes receivable $ $ $ $ $ As of December 31, 2015 2014 166,040 357,845 - 523,885 (110,467) 413,418 162,001 361,930 (150) 523,781 (102,259) 421,522 21% 20% 2,427 (247) 2,180 10% 3,052 (307) 2,745 10% 526,312 - (110,714) 415,598 526,983 (150) (102,566) 424,267 21% 19% (1) Notes receivable secured by homesites were originated through a business, substantially all of the assets of which were sold by Bluegreen in 2012. The assets excluded from the sale and retained by Bluegreen consisted primarily of the notes receivable portfolio related to the business sold. As previously disclosed, the table above includes notes receivable deemed to be acquired by Woodbridge in connection with our November 2009 acquisition of approximately 7.4 million additional shares of Bluegreen’s Common Stock giving us a controlling interest in Bluegreen. In accordance with applicable accounting guidance “Loans and Debt Securities Acquired with Deteriorated Credit Quality”, the Company elected to recognize interest income on these notes receivable using the expected cash flows method. The Company treated expected prepayments consistently in determining cash flows expected to be collected, such that the non-accretable difference is not affected and the difference between actual prepayments and expected prepayments shall not affect the non-accretable difference. The assumption for prepayment rates was derived from Bluegreen’s historical performance information for its off-balance sheet securitizations and ranges from 4% to 9%. As of December 31, 2015 and 2014, the outstanding contractual unpaid principal balance of the acquired notes was $47.8 million and $78.2 million, respectively. As of December 31, 2015 and 2014, the carrying amount of the acquired notes was $43.6 million and $70.7 million, respectively. 14 The carrying amount of the acquired notes is included in the balance sheet amount of notes receivable at December 31, 2015 and 2014. The following is a reconciliation of accretable yield (in thousands): Balance, beginning of period Accretion Reclassification from (to) nonaccretable yield Balance, end of period $ $ For the Year Ended December 31, 2015 2014 16,857 (8,479) 655 9,033 31,678 (12,562) (2,259) 16,857 All of Bluegreen’s VOI notes receivable bear interest at fixed rates. The weighted-average interest rate on Bluegreen’s notes receivable was 15.9%, 16.0% and 15.8% at December 31, 2015, 2014 and 2013, respectively. All of Bluegreen’s VOI loans bear interest at fixed rates. The weighted-average interest rate charged on notes receivable secured by VOIs was 16.0%, 16.1% and 15.9% at December 31, 2015, 2014 and 2013, respectively. Bluegreen’s VOI notes receivables are generally secured by property located in Florida, Missouri, Nevada, South Carolina, Tennessee, and Wisconsin. Future principal payments due on Bluegreen’s notes receivable (including its homesite notes receivable) as of December 31, 2015 are as follows (in thousands): 2016 2017 2018 2019 2020 Thereafter Allowance for loan losses Notes receivable, net of allowance $ $ 76,918 71,775 60,616 53,696 54,141 209,166 526,312 (110,714) 415,598 Credit Quality for Financial Receivables and Allowance for Credit Losses Bluegreen holds large amounts of homogeneous VOI notes receivable and assesses uncollectibility based on pools of receivables. In estimating future credit losses, Bluegreen’s management does not use a single primary indicator of credit quality but instead evaluates its VOI notes receivable based upon a combination of factors, including a static pool analysis, the aging of the respective receivables, current default trends and prepayment rates by origination year, as well as the FICO scores of the borrowers. ® The table below sets forth the activity in the allowance for loan losses (including homesite notes receivable) as follows (in thousands): Balance, beginning of period Provision for credit losses Write-offs of uncollectible receivables Balance, end of period $ $ For the Year Ended December 31, 2015 2014 102,566 42,063 (33,915) 110,714 15 90,592 40,164 (28,190) 102,566 The following table shows the delinquency status of Bluegreen’s VOI notes receivable (in thousands): Current 31-60 days 61-90 days >90 days Purchase accounting adjustments Total (1) As of December 31, 2015 2014 $ $ 501,738 6,889 4,869 10,389 - 523,885 500,405 6,505 5,361 11,660 (150) 523,781 (1)Includes $5.2 million and $6.0 million as of December 31, 2015 and 2014, respectively, related to VOI notes receivable that, as of such date, had defaulted, but the related VOI note receivable balance had not yet been charged off in accordance with the provisions of certain of Bluegreen’s receivable-backed notes payable transactions. These VOI notes receivable have been reflected in the allowance for credit losses. 4. Variable Interest Entities Bluegreen Bluegreen sells VOI notes receivable through special purpose finance entities. These transactions are generally structured as non-recourse to Bluegreen and are designed to provide liquidity for Bluegreen and to transfer the economic risks and certain benefits of the notes receivable to third parties. In a securitization, various classes of debt securities are issued by the special purpose finance entities that are generally collateralized by a single tranche of transferred assets, which consist of VOI notes receivable. Bluegreen services the securitized notes receivable for a fee pursuant to servicing agreements negotiated with third parties based on market conditions at the time of the securitization. With each securitization, Bluegreen generally retains a portion of the securities and continues to service the securitized notes receivable. Under these arrangements, the cash payments received from obligors on the receivables sold are generally applied monthly to pay fees to service providers, make interest and principal payments to investors, and fund required reserves, if any, with the remaining balance of such cash retained by Bluegreen; however, to the extent the portfolio of receivables fails to satisfy specified performance criteria (as may occur due to, among other things, an increase in default rates or credit loss severity) or other trigger events occur, the funds received from obligors are distributed on an accelerated basis to investors. Depending on the circumstances and the transaction, the application of the accelerated payment formula may be permanent or temporary until the trigger event is cured. As of December 31, 2015, Bluegreen was in compliance with all applicable terms under its securitization transactions, and no trigger events had occurred. In accordance with applicable accounting guidance for the consolidation of VIEs, Bluegreen analyzes its variable interests, which may consist of loans, servicing rights, guarantees, and equity investments, to determine if an entity in which it has a variable interest is a VIE. The analysis includes a review of both quantitative and qualitative factors. Bluegreen bases its quantitative analysis on the forecasted cash flows of the entity, and bases its qualitative analysis on the design of the entity, its organizational structure, including decision-making ability, and relevant financial agreements. Bluegreen also uses its qualitative analysis to determine if Bluegreen must consolidate a VIE as the primary beneficiary. In accordance with applicable accounting guidance, Bluegreen has determined these securitization entities to be VIEs of which Bluegreen is the primary beneficiary and, therefore, Bluegreen consolidates the entities into its financial statements. Under the terms of certain of Bluegreen’s timeshare note sales, Bluegreen has the right to repurchase or substitute a limited amount of defaulted mortgage notes for new notes at the outstanding principal balance plus accrued interest. Voluntary repurchases and substitutions by Bluegreen of defaulted notes during 2015, 2014 and 2013 were $3.3 16 million, $4.9 million and $6.7 million, respectively. Bluegreen’s maximum exposure to loss relating to its non-recourse securitization entities is the difference between the outstanding VOI notes receivable and the notes payable, plus cash reserves and any additional residual interest in future cash flows from collateral. The assets and liabilities of Bluegreen’s consolidated VIEs are as follows (in thousands): As of December 31, 2015 2014 Restricted cash Securitized notes receivable, net Receivable backed notes payable - non- recourse $ 25,358 $ 280,841 318,929 31,554 293,950 320,275 The restricted cash and the securitized notes receivable balances disclosed above are restricted to satisfy obligations of the VIEs. 5. Inventory Inventory consists of the following (in thousands): As of December 31, 2015 2014 Completed VOI units Construction-in-progress Real estate held for future development Subtotal Purchase accounting adjustment Total $ $ 166,781 10,455 90,400 267,636 (47,425) 220,211 166,332 2,103 83,560 251,995 (57,282) 194,713 The interest expense reflected in Bluegreen’s Consolidated Statements of Income and Comprehensive Income is net of capitalized interest. Interest capitalized to VOI inventory was $0.7 million and $0.1 million during 2015 and 2014, respectively. 6. Properties and equipment Properties and equipment consists of the following (in thousands): Land, building, building improvements Leasehold improvements Office equipment, furniture and fixtures Transportation and equipment Accumulated depreciation Property and equipment, net $ $ As of December 31, 2015 2014 56,212 7,171 45,688 302 109,373 (37,054) 72,319 58,015 8,037 50,177 211 116,440 (44,503) 71,937 17 Included in selling, general and administrative expense in the Company’s consolidated statements of operations was $9.2 million, $8.5 million and $4.8 million of depreciation expense for the years ended December 31, 2015 and 2014, and from April 2, 2013 through December 31, 2013, respectively. 7. Debt Contractual minimum principal payments required on Bluegreen’s debt, net of unamortized discount, by type, for each of the five years subsequent to December 31, 2015 and thereafter are shown below (in thousands): Notes and Mortgage Notes Payable and Lines of Credit 31,246 7,157 22,011 30,134 7,694 3,342 101,584 Recourse Receivable Backed Notes Payable - - - 3,729 52,887 33,272 89,888 Non-recourse Receivable Backed Notes Payable - - - - 38,228 280,701 318,929 - - - 101,584 89,888 318,929 Junior Subordinated Debentures - - - - - 195,879 195,879 (43,572) 152,307 Total 31,246 7,157 22,011 33,863 98,809 513,194 706,280 (43,572) 662,708 2016 2017 2018 2019 2020 Thereafter Purchase accounting adjustments $ $ The minimum contractual payments set forth in the table above may differ from actual payments due to timing of principal payments required upon (1) the sale of real estate assets that serve as collateral on certain debt (release payments) and (2) cash collections of pledged or transferred notes receivable. Lines-of-Credit and Notes Payable Bluegreen has outstanding borrowings with various financial institutions and other lenders. Financial data related to Bluegreen’s lines of credit and notes payable (other than receivable-backed notes payable) was as follows (dollars in thousands): As of December 31, 2015 As of December 31, 2014 Recourse receivable- backed notes payable: 2013 Notes Payable Foundation Capital Pacific Western Term Loan Fifth Third Bank Note Payable NBA Line of Credit Fifth Third Syndicated LOC Total $ Debt Balance Interest Rate Principal Balance of Pledged/ Secured Receivables Debt Balance Interest Rate 58,500 — 3,791 4,572 9,721 25,000 101,584 8.05% — 5.68% 3.50% 5.50% 3.11% 30,411 — 64,500 7,010 10,868 2,945 9,336 24,246 54,312 129,173 4,817 789 10,000 90,061 8.05% 8.00% 5.91% 3.25% 5.50% 3.01% 18 Principal Balance of Pledged/ Secured Receivables 43,903 10,596 11,882 9,366 7,601 52,453 135,801 2013 Notes Payable. In March 2013, Bluegreen issued $75.0 million of senior secured notes (the “2013 Notes Payable”) in a private financing transaction. The 2013 Notes Payable are secured by certain of Bluegreen’s assets, including primarily the cash flows from the residual interests relating to term securitizations and the VOI inventory in the BG Club 36 resort in Las Vegas, Nevada. Pursuant to the terms of the 2013 Notes Payable, Bluegreen is required to periodically pledge reacquired VOI inventory in the BG Club 36 resort. Bluegreen may also pledge additional residual interests from its future term securitizations. The 2013 Notes Payable accrue interest at a fixed rate of 8.05%. The 2013 Notes Payable mature in March 2020, with certain required amortization during the seven-year term. The terms of the 2013 Notes Payable include certain covenants and events of default, which Bluegreen’s management considers to be customary for transactions of this type. The proceeds from the 2013 Notes Payable were used to fund a portion of the merger consideration paid to Bluegreen’s former shareholders in connection with the closing of the Bluegreen-Woodbridge Cash Merger during April 2013. Foundation Capital. In 2010, Bluegreen acquired a 109-acre development parcel, located in close proximity to the existing Wilderness Club at Big Cedar. A portion of the acquisition was financed with a note payable to Foundation Capital Resources, Inc. (“Foundation Capital”), totaling $13.2 million. The note payable to Foundation Capital was scheduled to mature in October 2015 and bore interest at a rate of 8%. Repayments of the note were based upon release payments from sales of VOIs located on the underlying property that served as collateral for the note payable, subject to minimum payments stipulated in the agreement. In February 2015, Bluegreen repaid in full the Foundation Capital note payable. Pacific Western Term Loan. Bluegreen has a non-revolving term loan (the “ Pacific Western Term Loan”) with Pacific Western Bank, as successor-by-merger to CapitalSource Bank, secured by unsold inventory and undeveloped land at the Bluegreen Odyssey Dells Resort . On June 25, 2015, the Pacific Western Term Loan was amended to increase its then outstanding balance from $2.4 million to $4.8 million, extend the maturity date from July 2016 to June 2019, and reduce the interest rate from 30-day LIBOR plus 5.75% to 30-day LIBOR plus 5.25% (5.68% at December 31, 2015). Interest payments are paid monthly. Principal payments are effected through release payments upon sales of the timeshare interests in the Bluegreen Odyssey Dells Resort that serve as collateral for the Pacific Western Term Loan, subject to mandatory principal reductions pursuant to the terms of the loan agreement. The Pacific Western Term Loan is cross-collateralized and is subject to cross-default with the Pacific Western Facility described below under “Receivable-Backed Notes Payable.” Fifth Third Bank Note Payable. In April 2008, Bluegreen entered into a note payable with Fifth Third Bank to finance an acquisition of real estate. In August 2014, the Fifth Third Bank Note Payable was amended to increase its then outstanding balance from $2.3 million to $4.9 million, and change the maturity date from April 2023 to August 2021. Principal and interest on amounts outstanding under the Fifth Third Bank Note Payable are payable monthly through maturity. The interest rate under the note equals the 30-day LIBOR plus 3.00%, with a 0.125% roundup provision (3.50% as of December 31, 2015). NBA Line of Credit. Since December 2013, Bluegreen/Big Cedar Vacations has had a revolving line of credit with National Bank of Arizona (the “NBA Line of Credit”). The NBA Line of Credit is secured by unsold inventory and VOIs under construction at Bluegreen/Big Cedar Vacation’s Paradise Point Resort. Pursuant to an amendment to the NBA Line of Credit on June 30, 2015, the NBA Line of Credit will be increased to $15.0 million, the revolving advance period was extended to June 2018 and the maturity date was extended to June 2020. In addition, the interest rate on borrowings under the NBA Line of Credit was reduced from 30-day LIBOR plus 4.50% (with an interest rate floor of 5.50%) to 30-day LIBOR plus 3.50% (with an interest rate floor of 5.00%) upon completion of construction of the building where the VOIs are located. Interest payments are paid monthly. Principal payments are effected through release payments upon sales of the timeshare interests in the Paradise Point Resort that serve as collateral for the NBA Line of Credit, subject to mandatory principal reductions. The NBA Line of Credit is cross-collateralized and is subject to cross-default with the NBA Receivables Facility described below under “Receivable-Backed Notes Payable.” Fifth Third Syndicated Line-of-Credit. In November 2014, Bluegreen entered into a $25.0 million revolving credit facility with Fifth Third Bank as administrative agent and lead arranger and Fifth Third Bank, Bank of America, N. 19 inventory and specified non-consumer receivables and A. and Branch Banking and Trust Company as initial lenders. The facility is secured by certain of Bluegreen’s sales centers, certain VOI is guaranteed by certain of Bluegreen’s subsidiaries. Amounts borrowed under the facility generally bear interest at LIBOR plus 2.75% (with other borrower elections). The facility matures in November 2016 subject to an annual clean up provision for at least 30 consecutive days, which occurred in July 2015, in accordance with the terms and conditions of the agreement. The facility contains covenants and conditions which Bluegreen considers to be customary for transactions of this type. Borrowings are used by Bluegreen for general corporate purposes. As of December 31, 2015, the interest rate under the note was 3.11% and $25.0 million was outstanding. Receivable-Backed Notes Payable Financial data related to Bluegreen’s receivable-backed notes payable facilities was as follows (dollars in thousands): As of December 31, 2014 As of December 31, 2015 Recourse receivable- backed notes payable: Liberty Bank Facility NBA Receivables Facility Pacific Western Facility Total Non-recourse receivable-backed notes payable: BB&T/DZ Purchase Facility Quorum Purchase Facility GE 2006 Facility 2006 Term Securitization 2007 Term Securitization 2008 Term Securitization 2010 Term Securitization 2012 Term Securitization 2013 Term Securitization 2015 Term Securitization Total Total receivable- backed debt $ $ $ $ $ Debt Balance Interest Rate 46,547 24,860 18,481 89,888 4.00% 4.00- 4.50% 4.93% 3.33% 4.75- 6.90% - - 7.32% 7.88% 5.54% 2.94% 3.20% 3.02% 38,228 28,500 - - 17,642 7,227 24,074 44,603 62,670 95,985 318,929 408,817 Principal Balance of Pledged/ Secured Receivables 56,815 29,947 23,596 110,358 50,224 32,303 - - 18,720 7,726 28,159 49,091 66,020 100,142 352,385 Debt Balance Interest Rate 38,088 29,058 24,983 92,129 42,818 26,447 18,008 12,366 30,126 11,846 37,048 59,377 82,239 - 320,275 4.25% 4.00- 4.50% 4.67% 3.88% 5.00- 6.90% 7.35% 6.16% 7.32% 7.88% 5.54% 2.94% 3.20% - 462,743 412,404 Principal Balance of Pledged/ Secured Receivables 49,976 35,296 32,397 117,669 56,406 30,158 19,881 12,881 33,094 13,089 44,092 65,827 86,503 - 361,931 479,600 Liberty Bank Facility. Since 2008, Bluegreen has maintained a revolving timeshare receivables hypothecation facility (the “Liberty Bank Facility”) with Liberty Bank which provides for advances on eligible receivables pledged under the Liberty Bank Facility, subject to specified terms and conditions, during a revolving credit period. Pursuant to the terms of the agreement, as amended in November 2015, the aggregate maximum outstanding borrowings are $50.0 million and the revolving credit period will expire in November 2017. The Liberty Bank Facility allows future advances of (i) 85% of the unpaid principal balance of Qualified Timeshare Loans assigned to agent, and (ii) 60% of the unpaid principal balance of Non- Conforming Qualified Timeshare Loans assigned to agent, all of which bear interest at the WSJ Prime Rate plus 0.50% per annum subject to a 4.00% floor. Principal and interest are required to be paid as cash is collected on the pledged receivables, with all outstanding amounts being due in November 2020. In January 2015, Bluegreen repaid $22.3 million under the facility in connection with the issuance of the 2015 Term Securitization described below. NBA Receivables Facility. Bluegreen/Big Cedar Vacations has a revolving timeshare hypothecation facility with National Bank of Arizona (the “NBA Receivables Facility”). On June 30, 2015, the NBA Receivables Facility was amended to extend the revolving advance period and the maturity date, and to reduce the interest rate on future borrowings. The NBA Receivables Facility provides for advances at a rate of 85% on eligible receivables pledged under the facility up to a maximum of $45.0 million of outstanding borrowings (inclusive of outstanding borrowings 20 under the NBA Line of Credit discussed above), subject to eligible collateral and specified terms and conditions, during a revolving credit period. Pursuant to the terms of the amendment to the NBA Receivables Facility, the revolving advance period expiration date was extended to June 2018. In addition, post-amendment borrowings under the NBA Receivables Facility will accrue interest at a rate equal to the 30-day LIBOR plus 3.25% (with an interest rate floor of 4.00%). Amounts outstanding under the NBA Receivables Facility for borrowings made prior to the amendment accrue interest at the previously prevailing rates, which for certain of such borrowings is 30-day LIBOR plus 3.25% (with an interest rate floor of 4.00%) and for the remainder of such borrowings is 30-day LIBOR plus 3.50% (with an interest rate floor of 4.50%). Principal repayments and interest on borrowings under the NBA Receivables Facility are paid as cash is collected on the pledged receivables, subject to future required decreases in the advance rates after the expiration of the revolving advance period, with the remaining outstanding balance maturing in December 2022. As of December 31, 2015, $17.2 million of the outstanding balance bears interest at 4.00% and $7.6 million of the outstanding balance bears interest at 4.50%. All principal and interest payments received on pledged receivables are applied to principal and interest due under the facility. The NBA Receivables Facility is cross-collateralized and is subject to cross-default with the NBA Line of Credit described above. the Pacific Western Facility. Bluegreen has a revolving timeshare receivables hypothecation facility (the “Pacific Western Facility”) with Pacific Western Bank, as successor-by-merger to CapitalSource Bank, which provides for advances on eligible receivables pledged under the facility, subject to specified terms and conditions, during a revolving credit period. On June 25, 2015, Bluegreen amended the Pacific Western Facility to extend the revolving advance period and the maturity date, increase interest rate on portions of certain future the advance rate for certain eligible receivables, and reduce borrowings. Maximum outstanding borrowings under the Pacific Western Facility are $40.0 million (inclusive of outstanding borrowings under the Pacific Western Term Loan discussed above), subject to eligible collateral and customary terms and conditions. Pursuant to the terms of the amendment to the Pacific Western Facility, the revolving advance period expiration date was extended to September 2018, subject to an additional 12 month extension at the option of Pacific Western Bank. Eligible “A” receivables that meet certain eligibility and FICO® score requirements, which Bluegreen’s management believes are typically consistent with loans originated under Bluegreen’s current credit underwriting standards, are subject to an 85% advance rate. The Pacific Western Facility also allows for certain eligible “B” receivables (which have less stringent FICO® score requirements) to be funded at a 53% advance rate as a result of the amendment, compared to a 45% advance rate prior to the amendment. Borrowings under the Pacific Western Facility accrue interest at 30-day LIBOR plus 4.50%, except that, pursuant to the amendment, the interest rate on a portion of borrowings under the Pacific Western Facility advanced after the date of the amendment, to the extent such borrowings are in excess of established debt minimums, accrue interest at 30- day LIBOR plus 4.00%. Principal repayments and interest on borrowings under the Pacific Western Facility are paid as cash is collected on the pledged receivables, subject to future required decreases in the advance rates after the end of the revolving advance period, with the remaining outstanding balance maturing in September 2021, subject to an additional 12 month extension at the option of Pacific Western Bank. The Pacific Western Facility is cross-collateralized and is subject to cross- default with the Pacific Western Term Loan described above. BB&T/DZ Purchase Facility. Bluegreen has a timeshare notes receivable purchase facility (the “BB&T/DZ Purchase Facility”) with Branch Banking and Trust Company (“BB&T”) and DZ Bank AG Deutsche Zentral-Genossenschaftsbank, Frankfurt AM Main (“DZ”), which permits maximum outstanding financings of $80.0 million. In December 2015, Bluegreen amended the BB&T/DZ Purchase Facility to extend the revolving advance period and the maturity date, and reduce the interest rate on portions of certain borrowings. Availability under the BB&T/DZ Purchase Facility is on a revolving basis through December 2017, and amounts financed are secured by timeshare receivables at an advance rate of 75%, subject to eligible collateral and other terms of the facility, which Bluegreen believes to be customary for financing arrangements of this type. The facility will mature and all outstanding amounts will become due thirty-six months after the expiration of the revolving advance period , or earlier under certain circumstances set forth in the facility. Interest on amounts outstanding under the facility is tied to an applicable index rate of the LIBOR rate, in the case of amounts funded by BB&T, and a cost of funds rate or commercial paper rates, in the case of amounts funded by or through DZ. The interest rate under the facility equals the applicable index rate plus 2.90% until the expiration of the revolving advance period and thereafter will equal the applicable index rate plus 4.9%. Subject to the terms of the facility, Bluegreen will receive the excess cash flows generated by the receivables sold (excess meaning after payments of customary fees, interest and principal under the facility) until the expiration of the receivables advance period, at which point all of the excess cash flow will be paid to the note holders until the outstanding balance is reduced to zero. While ownership of the timeshare receivables 21 included in the facility is transferred and sold for legal purposes, the transfer of these timeshare receivables is accounted for as a secured borrowing for financial reporting purposes. The facility is nonrecourse and is not guaranteed by Bluegreen. In January 2015, Bluegreen used a portion of the proceeds from the issuance of the 2015 Term Securitization described below to repay $42.3 million under the facility. Quorum Purchase Facility. Bluegreen and Bluegreen/Big Cedar Vacations have a timeshare notes receivable purchase facility (the “Quorum Purchase Facility”) with Quorum Federal Credit Union (“Quorum”). In October 2015, the Quorum Purchase Facility was amended. Pursuant to the amendment, which was effective as of July 1, 2015, Quorum agreed to purchase, on a revolving basis through June 30, 2017, eligible timeshare receivables in an amount of up to an aggregate outstanding $50.0 million purchase price, subject to certain conditions precedent and other terms of the facility. In addition, the amendment decreased the interest rate on advances made under the Quorum Purchase Facility from the July 1, 2015 effective date of the amendment until June 30, 2016 to 4.75% per annum, subject to specified terms and conditions. All amounts outstanding under the Quorum Purchase Facility prior to July 1, 2015 accrue interest at the previously prevailing rates (from 5.00% to 6.90% per annum). The Quorum Purchase Facility continues to provide for an 85% advance rate on eligible receivables sold under the facility and a program fee rate of 5.00% per annum with respect to any future advances after June 30, 2016. Future advances are also subject to a loan purchase fee of 0.50%. The Quorum Purchase Facility becomes due in December 2030. Eligibility requirements for receivables sold include, among others, that the obligors under the timeshare notes receivable sold be members of Quorum at the time of the note sale. Subject to performance of the collateral, Bluegreen or Bluegreen/Big Cedar Vacations, as applicable, will receive any excess cash flows generated by the receivables transferred to Quorum under the facility (excess meaning after payments of customary fees, interest, and principal under the facility) on a pro-rata basis as borrowers make payments on their timeshare loans. While ownership of the timeshare receivables included in the Quorum Purchase Facility is transferred and sold for legal purposes, the transfer of these timeshare receivables is accounted for as a secured borrowing for financial reporting purposes. The facility is nonrecourse and is not guaranteed by Bluegreen. 2015 Term Securitization. On January 29, 2015, Bluegreen completed a private offering and sale of $117.8 million of investment-grade, timeshare receivable-backed notes (the "2015 Term Securitization"). The 2015 Term Securitization consisted of the issuance of two tranches of timeshare receivable-backed notes (the “Notes”): $89.4 million of A rated and $28.4 million of BBB/BBB- rated notes with note interest rates of 2.88% and 3.47%, respectively, which blended to an overall weighted average note interest rate of 3.02%. The gross advance rate for this transaction was 94.25%. The Notes mature in May 2030. The amount of the timeshare receivables sold to BXG Receivables Note Trust 2015-A (the “2015 Trust”) was $125.0 million, $100.2 million of which was sold to the 2015 Trust at closing and $24.8 million of which was subsequently sold to the 2015 Trust during 2015. The gross proceeds of such sales to the 2015 Trust were $117.8 million. A portion of the proceeds were used to: repay the BB&T/DZ Purchase Facility a total of $42.3 million, representing all amounts then outstanding (including accrued interest); repay $22.3 million under the Liberty Bank Facility plus accrued interest; capitalize a reserve fund; and pay fees and expenses associated with the transaction. Prior to the closing of the 2015 Term Securitization, Bluegreen, as servicer, funded $9.5 million in connection with the servicer redemption of the notes related to BXG Receivables Note Trust 2006-B, and certain of the timeshare loans in such trust were sold to the 2015 Trust in connection with the 2015 Term Securitization. The remaining $40 million of proceeds from the 2015 Term Securitization were used by Bluegreen for general corporate purposes. While ownership of the timeshare receivables included in the 2015 Term Securitization is transferred and sold for legal purposes, the transfer of these timeshare receivables is accounted for as a secured borrowing for financial accounting purposes. Accordingly, no gain or loss was recognized as a result of this transaction . Subject to performance of the collateral, Bluegreen will receive any excess cash flows generated by the receivables transferred under the 2015 Term Securitization (excess meaning after payments of customary fees, interest, and principal under the 2015 Term Securitization) on a pro-rata basis as borrowers make payments on their timeshare loans. Other Non-Recourse Receivable-Backed Notes Payable. In addition to the above described facilities, Bluegreen has a number of other nonrecourse receivable-backed notes payable facilities, as set forth in the table above. During 2015, Bluegreen repaid $75.2 million under these additional receivable-backed notes payable facilities, including the payment in full of the GE 2006 Facility and the notes payable issued in connection with the 2006 Term Securitization. During 2015, Bluegreen wrote off the related unamortized GE 2006 Facility and 2006 Term 22 Securitization debt issuance costs totaling approximately $0.2 million. Junior Subordinated Debentures Junior subordinated debentures outstanding were as follows (in thousands): Junior Subordinated Debentures Issue Date Outstanding Amount Outstanding Amount Interest Rate (1) Maturity Date As of December 31, 2015 2014 Beginning Optional Redemption Date Levitt Capital Trust I ("LCT I") Levitt Capital Trust II ("LCT II") Levitt Capital Trust III ("LCT III") Levitt Capital Trust IV ("LCT IV") Total Woodbridge Holdings Bluegreen Statutory Trust I Bluegreen Statutory Trust II Bluegreen Statutory Trust III Bluegreen Statutory Trust IV Bluegreen Statutory Trust V Bluegreen Statutory Trust VI Total Bluegreen Corporation Purchase accounting adjustments 03/15/2005 $ 23,196 23,196 05/04/2005 30,928 30,928 06/01/2006 15,464 15,464 07/18/2006 15,464 15,464 85,052 85,052 03/15/2005 23,196 23,196 05/04/2005 25,774 25,774 05/10/2005 10,310 10,310 04/24/2006 15,464 15,464 07/21/2006 15,464 15,464 02/26/2007 20,619 20,619 110,827 110,827 (43,572) (45,841) Total Junior Subordinated Debentures $ 152,307 150,038 LIBOR + 3.85% LIBOR + 3.80% LIBOR + 3.80% LIBOR + 3.80% LIBOR + 4.90% LIBOR + 4.85% LIBOR + 4.85% LIBOR + 4.85% LIBOR + 4.85% LIBOR + 4.80% 03/01/2035 3/15/2010 06/30/2035 6/20/2010 06/30/2036 6/30/2011 09/30/2036 9/30/2011 03/30/2035 3/30/2010 07/30/2035 7/30/2010 07/30/2035 7/30/2010 06/30/2036 6/30/2011 09/30/2036 9/30/2011 04/30/2037 4/30/2012 (1) LIBOR interest rates are indexed to three-month LIBOR and adjust quarterly. These business trusts are variable interest entities in which Woodbridge and Bluegreen are not the primary beneficiaries as defined by the accounting guidance for the consolidation of variable interest entities. Accordingly, the Company and its subsidiaries do not consolidate the operations of these business trusts; instead, they are accounted for under the equity method of accounting. Woodbridge Junior Subordinated Debentures Woodbridge formed four statutory business trusts which issued trust preferred securities to third parties and trust common securities to Woodbridge and used the proceeds to purchase an identical amount of junior subordinated debentures from Woodbridge. Interest on the junior subordinated debentures and distributions on these trust preferred securities are payable quarterly in arrears at the floating rates specified in the above table until the corresponding scheduled maturity date. The trust preferred securities are subject to mandatory redemption, in whole or in part, upon repayment of the junior subordinated debentures at maturity or their earlier redemption. The junior subordinated debentures are redeemable, in whole or in part, at Woodbridge’s option at any time. There were no significant changes related to Woodbridge’s $85.0 million of junior subordinated debentures during the year ended December 31, 2015 and 2014. Bluegreen Junior Subordinated Debentures Bluegreen has formed statutory business trusts (collectively, the "Trusts"), each of which issued trust preferred securities as part of a larger pooled trust securities offering which was not registered under the Securities Act of 1933 and invested the proceeds thereof in its junior subordinated debentures. The Trusts are variable interest 23 entities in which Bluegreen is not the primary beneficiary as defined by ASC 810. Accordingly, Bluegreen does not consolidate the operations of the Trusts; instead, Bluegreen’s beneficial interests in the Trusts are accounted for under the equity method of accounting. Bluegreen’s maximum exposure to loss as a result of its involvement with the Trusts is limited to the carrying amount of Bluegreen’s equity method investment. Distributions on the trust preferred securities are cumulative and based upon the liquidation value of the trust preferred security. The trust preferred securities are subject to mandatory redemption, in whole or in part, upon repayment of the junior subordinated debentures at maturity or their earlier redemption. The junior subordinated debentures are redeemable in whole or in part at Bluegreen’s option at any time. In addition, Bluegreen made an initial equity contribution to each Trust in exchange for its common securities, all of which are owned by Bluegreen, and those proceeds were also used by the applicable Trust to purchase an identical amount of junior subordinated debentures from Bluegreen. The terms of each Trust’s common securities are nearly identical to the trust preferred securities. 8. Income Taxes The provision for income taxes consists of (in thousands): Federal: Current Deferred State and Other: Current Deferred Total For the Year Ended December 31, 2014 2015 $ $ 18,946 17,804 36,750 4,119 (211) 3,908 40,658 20,750 13,926 34,676 3,903 1,958 5,861 40,537 From April 2, 2013 through December 31, 2013 2,589 14,343 16,932 1,339 (57) 1,282 18,214 The Company's actual provision for income taxes differs from the expected Federal income tax provision as follows (dollars in thousands): For the Year Ended December 31, 2015 2014 From April 2, 2013 through December 31, 2013 Income tax provision at expected federal income tax rate of 35% Increase (decrease) resulting from: Benefit for state taxes, net of federal tax benefit Taxes related to subsidiaries not consolidated for income tax purposes Bluegreen settlement Loss attributed to member Change in valuation allowance Other - net Provision for income taxes $ $ 29,720 35.00 % $ 37,418 35.00 % $ 20,108 35.00 % 6,552 6.13 672 1.17 (3,994) (3.74) (3,592) (6.25) 904 (320) (23) 40,537 0.85 (0.30) (0.02) 37.92 735 7 284 18,214 1.28 0.01 0.49 31.70 % % $ % $ 2,588 (4,096) 12,820 315 (47) (642) 40,658 3.05 - (4.82) 15.10 0.37 (0.06) (0.76) 47.88 24 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and tax liabilities were (in thousands): Deferred tax assets: Allowance for loan losses Federal and State NOL and tax credit carryforward Real estate valuation Property and equipment Other Total gross deferred tax assets Valuation allowance Total deferred tax assets Deferred tax liabilities: Installment sales treat of notes Vacation ownership interest sales Intangible assets Junior subordinate notes Other Total gross deferred tax liabilities Net deferred tax liability Less: Net deferred tax liability at beginning of year Benefit (provision) for deferred income taxes As of December 31, 2015 2014 39,873 36,114 25,999 18,778 2,618 5,416 92,684 (2,716) 89,968 150,237 9,222 23,503 17,206 2 200,170 (110,202) 43,423 23,428 2,098 9,319 114,382 (2,763) 111,619 152,419 8,554 24,555 18,700 - 204,228 (92,609) 92,609 (17,593) 76,725 (15,884) Activity in the deferred tax asset valuation allowance was (in thousands): Balance, beginning of year Increase in def erred tax valuation allowance Balance, end of year As of December 31, 2015 2014 2,763 (47) 2,716 3,083 (320) 2,763 The Company and its subsidiaries evaluate their deferred tax assets to determine if valuation allowances are required. In the evaluation, management considers net operating losses (“NOLs”) carry-back availability, expectations of sufficient future taxable income, trends in earnings, existence of taxable income in recent years, the future reversal of temporary differences, and available tax planning strategies that could be implemented, if required. Valuation allowances are established based on the consideration of all available evidence using a more likely than not standard. The valuation allowance that has been established is primarily attributed to Bluegreen’s net operating losses from states in which it has determined that recoverability is not likely. Based on these evaluations, deferred tax valuation allowances decreased by $47,000 and $320,000 for the years ended December 31, 2015 and 2014, respectively, and increased by $7,000 from April 2, 2013 through December 31, 2013. 25 As a division of BFC prior to April 23, 2013, the Company was included in BFC’s Federal and Florida income tax returns. BFC is no longer subject to U.S. federal and state income tax examinations by tax authorities for tax years before 2012. As a partnership, the taxable income of the partnership is included in its members’ taxable income. All of the Company’s partnership returns that have been filed are subject to U.S. federal and state income tax examinations by tax authorities. Effective on May 1, 2015, Woodbridge made an election to change is classification from a partnership to a corporation for income tax purposes. In addition, BFC increased its ownership interest in BBX Capital in connection with the cash tender offer completed on April 30, 2015 (as discussed in Note 14). As a consequence of these events, BFC will be filing a consolidated group tax return with BBX Capital, Woodbridge and Bluegreen, which will include the operations Woodbridge and Bluegreen from May 1, 2015 forward. Prior to May 1, 2015, Bluegreen and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. With certain exceptions, Bluegreen is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2010. As of December 31, 2014, Bluegreen had utilized all remaining federal net operating loss carryforwards, including an equity net operating loss of $5.9 million. As of December 31, 2015, Bluegreen had alternative minimum tax credit carryforwards of $15.9 million, which never expire, and state operating loss carryforwards of $251.2 million, which expire from 2016 through 2034. Woodbridge evaluates its tax positions based upon guidelines of ASC 740-10, Income Tax, which clarifies the accounting for uncertainty in tax positions. Based on an evaluation of uncertain tax provisions, Woodbridge is required to measure tax benefits based on the largest amount of benefit that is greater than 50% likely of being realized upon settlement. In accordance with Woodbridge’s accounting policy, Woodbridge recognizes interest and penalties related to unrecognized taxes as a component of general and administrative expenses. Woodbridge does not expect the amount of unrecognized tax benefits to materially change within the next 12 months. In August 2015, Bluegreen received notice from the Internal Revenue Service that its Income Tax Return for the year ended December 31, 2013 was selected for examination. In September 2015, the examination was extended to include the tax year ended December 31, 2012. In October 2015, the examination was further extended to include payroll taxes for the year ended December 31, 2013. Bluegreen has complied with all examination requests to date. While there is no assurance as to the results of the examination, Bluegreen does not currently anticipate any material adjustments in connection with this examination. Certain of Bluegreen’s other state filings are under routine examination. While there is no assurance as to the results of these audits, Bluegreen does not currently anticipate any material adjustments in connection with these examinations. 9. Commitments and Contingencies The Company and its subsidiaries incurred rent expense, including rent expense related to Bluegreen’s operations of approximately $10.2 million and $9.7 million during the years ended December 31, 2015 and 2014, respectively and $5.3 million from April 2, 2013 through December 31, 2013. Lease commitments under these and Bluegreen’s various other non- cancelable operating leases for each of the five years subsequent to December 31, 2015 and thereafter are as follows (in thousands): 2016 2017 2018 2019 2020 Thereafter Total 9,426 8,795 7,498 1,280 1,304 14,510 42,813 26 Woodbridge In the ordinary course of business, Woodbridge and its subsidiaries are parties to lawsuits as plaintiff or defendant involving its operations and activities. Reserves are accrued for amounts in which it is probable that a loss will be incurred and the amount of such loss can be reasonably estimated. Woodbridge believes that it has meritorious defenses in the pending legal actions and that reasonably possible losses arising from these pending legal matters, in excess of the amounts currently accrued, if any, will not have a material impact on its financial statements. Woodbridge Holdings, LLC v. Prescott Group Aggressive Small Cap Master Fund, G.P., Cede & Co., William J. Maeck, Ravenswood Investments III, L.P., and The Ravenswood Investment Company, Circuit Court, 17 Judicial Circuit, Broward County, Florida th Under Florida law, holders of WHC’s Class A Common Stock who did not vote to approve BFC’s September 2009 merger with WHC and who properly asserted and exercised their appraisal rights with respect to their shares are entitled to receive a cash payment in an amount equal to the fair value of their shares (as determined in accordance with the provisions of Florida law) in lieu of the shares of BFC’s Class A Common Stock which they would otherwise have been entitled to receive. In accordance with Florida law, Woodbridge (the successor by merger to WHC) provided written notices and required forms to the dissenting shareholders setting forth, among other things, its determination that the fair value of WHC’s Class A Common Stock immediately prior to the effectiveness of the merger was $1.10 per share. Dissenting shareholders, who collectively held approximately 4.2 million shares of WHC’s Class A Common Stock, rejected Woodbridge’s offer of $1.10 per share and requested payment for their shares based on their respective fair value estimates of WHC’s Class A Common Stock. Under Florida law, Woodbridge thereafter commenced the appraisal rights action. In December 2009, a $4.6 million liability was recorded with a corresponding reduction to additional paid-in capital representing, in the aggregate, Woodbridge’s offer to the dissenting shareholders. On July 5, 2012, the presiding court determined the fair value of the dissenting shareholders’ shares of WHC’s Class A Common Stock to be $1.78 per share and awarded legal and other costs in favor of the dissenting shareholders. As a result, the $4.6 million liability was increased to approximately $7.5 million as of June 30, 2012 (with a corresponding reduction to additional paid in capital of $2.8 million) to account for the per share value awarded. On March 11, 2013, the court awarded legal fees and pre and post judgment interest to the dissenting shareholders for a total award of approximately $11.9 million (including the $7.5 million based on the $1.78 per share value determination). As a result, the liability was increased by approximately $4.4 million during the fourth quarter of 2012 to $11.9 million as of December 31, 2012. Woodbridge has appealed the court’s ruling with respect to the fair value determination and the award of legal fees and costs and posted a $13.4 million bond in connection with the appeal. On August 12, 2015, the appellate court issued its decision, in which it largely affirmed the trial court’s order, including the trial court’s fair value determination and the trial court’s award of attorneys’ fees and costs. On August 27, 2015, the Company made a payment of approximately $11.0 million to the dissenting shareholders for the fair value portion of the judgment and interest thereon, but reserved all rights on appeal, including the right to recover the amount paid if Woodbridge prevails. On October 2, 2015, Woodbridge filed a motion for rehearing. On December 8, 2015, the appellate court denied the motion for rehearing. On December 28, 2015, the Company made a payment of approximately $2.7 million to the dissenting shareholders for the fees and costs, and remaining interest, due under the judgment, but reserved all rights on appeal, including the right to recover the amount paid if Woodbridge prevails. On January 7, 2016, Woodbridge filed a notice with the Florida Supreme Court to seek discretionary review of the matter. The Florida Supreme Court’s judgment with respect to this notice and the outcome of any review by the Florida Supreme Court is uncertain. In re Bluegreen Corporation Shareholder Litigation Between November 16, 2011 and February 13, 2012, seven purported class action lawsuits related to the previously proposed stock-for-stock merger between BFC, which at that time was the sole member of Woodbridge, and Bluegreen were filed against Bluegreen, the members of Bluegreen’s board of directors, BFC and BXG Florida Corporation, a wholly owned subsidiary of Woodbridge (“Merger Sub”). Four of these lawsuits were consolidated into a single action in Florida, and the other three lawsuits were consolidated into a single action in Massachusetts and stayed in favor of the Florida action. 27 The four Florida lawsuits, captioned and styled Ronald Kirkland v. Bluegreen Corporation et al. (filed on November 16, 2011); Richard Harriman v. Bluegreen Corporation et al. (filed on November 22, 2011); Alfred Richner v. Bluegreen Corporation et al. (filed on December 2, 2011); and BHR Master Fund, LTD et al. v. Bluegreen Corporation et al. (filed on February 13, 2012) were consolidated into an action styled In Re Bluegreen Corporation Shareholder Litigation. On April 9, 2012, the plaintiffs filed a consolidated amended class action complaint which alleged that the individual director defendants breached their fiduciary duties by (i) agreeing to sell Bluegreen without first taking steps to ensure adequate, fair and maximum consideration, (ii) engineering a transaction to benefit themselves and not the shareholders, and (iii) failing to protect the interests of Bluegreen’s minority shareholders. In the complaint, the plaintiffs also alleged that BFC breached its fiduciary duties to Bluegreen’s minority shareholders and that Merger Sub aided and abetted the alleged breaches of fiduciary duties by Bluegreen’s directors and BFC. In addition, the complaint included allegations relating to claimed violations of Massachusetts law. The complaint sought declaratory and injunctive relief, along with damages and attorneys’ fees and costs. The three Massachusetts lawsuits were filed in the Superior Court for Suffolk County in the Commonwealth of Massachusetts and styled as follows: Gaetano Bellavista Caltagirone v. Bluegreen Corporation et al. (filed on November 16, 2011); Alan W. Weber and J.B. Capital Partners L.P. v. Bluegreen Corporation et al. ( filed on November 29, 2011); and Barry Fieldman, as Trustee for the Barry & Amy Fieldman Family Trust v. Bluegreen Corporation et al. (filed on December 6, 2011). In their respective complaints, the plaintiffs alleged that the individual director defendants breached their fiduciary duties by agreeing to sell Bluegreen without first taking steps to ensure adequate, fair and maximum consideration. The Fieldman and Weber actions contained the same claim against BFC. In addition, the complaints included claims that Merger Sub, in the case of the Fieldman action, BFC and Merger Sub, in the case of the Caltagirone action, and Bluegreen, in the case of the Weber action, aided and abetted the alleged breaches of fiduciary duties. On January 17, 2012, the three Massachusetts lawsuits were consolidated into a single action styled In Re Bluegreen Corp. Shareholder Litigation, which was stayed in favor of the Florida action. Following the public announcement of the termination of the stock-for-stock merger agreement and the entry into the Bluegreen-Woodbridge Cash Merger Agreement during November 2012, the plaintiffs in the Florida action filed a motion for leave to file a supplemental complaint in order to challenge the structure of, and consideration received by Bluegreen’s shareholders in, the Bluegreen-Woodbridge Cash Merger. On November 30, 2012, the Florida court granted the plaintiffs’ motion, and the supplemental complaint was deemed filed as of that date. The supplemental complaint alleged that the merger consideration remained inadequate and continued to be unfair to Bluegreen’s minority shareholders. On January 25, 2013, the plaintiffs in the Florida action filed a Second Amended Class Action Complaint that set forth more fully their challenge to the Bluegreen–Woodbridge Cash Merger. The Second Amended Class Action Complaint asserted claims for (i) breach of fiduciary duties against the individual director defendants, BFC, and Woodbridge, (ii) aiding and abetting breaches of fiduciary duties against Bluegreen, BFC, Woodbridge, and Merger Sub, and (iii) a violation of the section of the Massachusetts Business Corporation Act regarding the approval of conflict of interest transactions. Class action certification was granted to the plaintiffs in the Second Amended Class Action Complaint by Order dated December 18, 2013. On June 5, 2015, the parties in the action agreed to settle the litigation. Pursuant to the settlement agreement, which was finalized and approved by the court during September 2015, Woodbridge paid $36.5 million, which amounts to approximately $2.50 per share, into a gross settlement fund for the benefit of former Bluegreen shareholders whose shares were acquired in connection with the Bluegreen-Woodbridge Cash Merger. All litigation arising from or relating to the Merger was dismissed with prejudice, together with a full release of Bluegreen, BFC, Woodbridge, BBX Capital and others. Bluegreen, BFC, Woodbridge, BBX Capital and all of the defendants denied and continue to deny that any of them violated any laws or breached any duties to the plaintiffs or Bluegreen’s former shareholders. Bluegreen In the ordinary course of business, Bluegreen becomes subject to claims or proceedings from time to time relating to the purchase, sale, marketing, or financing of VOIs or Bluegreen’s other business activities. Bluegreen is also subject to certain matters relating to the Bluegreen Communities’ business, substantially all of the assets of which 28 were sold by Bluegreen on May 4, 2012. Additionally, from time to time, Bluegreen becomes involved in disputes with existing and former employees, vendors, taxing jurisdictions and various other parties. From time to time in the ordinary course of business, Bluegreen also receives individual consumer complaints, as well as complaints received through regulatory and consumer agencies, including Offices of State Attorneys General. Bluegreen takes these matters seriously and attempts to resolve any such issues as they arise. Unless otherwise described below, Bluegreen believes that these claims are routine proceedings incidental to its business. Reserves are accrued for matters in which Bluegreen’s management believes it is probable that a loss will be incurred and the amount of such loss can be reasonably estimated. Bluegreen’s management does not believe that the aggregate liability relating to known contingencies in excess of the aggregate amounts accrued will have a material impact on its results of operations or financial condition. However, litigation is inherently uncertain. The actual costs of resolving legal claims may be substantially higher than the amounts accrued for these claims and may have a material adverse impact on Bluegreen’s results of operations or financial condition. Bluegreen’s management is not at this time able to estimate a range of reasonably possible losses with respect to matters in which it is reasonably possible that a loss will occur. In certain matters, Bluegreen’s management is unable to estimate the loss or reasonable range of loss until additional developments provide information sufficient to support an assessment of the loss or range of loss. Frequently in these matters, the claims are broad and the plaintiffs have not quantified or factually supported their claim. In lieu of paying maintenance fees for unsold VOI inventory, Bluegreen provides subsidies to certain property owners’ associations to provide for funds necessary to operate and maintain vacation ownership properties in excess of assessments collected from owners of the VOIs. As of December 31, 2015, Bluegreen had no liability for such subsidies. As of December 31, 2014, Bluegreen had liabilities for such subsidies totaling $0.3 million, which was included in accrued liabilities and other on the Consolidated Balance Sheet. As of December 31, 2015, Bluegreen was providing subsidies to eight POAs. In October 2013, Bluegreen entered into an agreement to purchase from an unaffiliated third party completed VOI inventory at the Lake Eve Resort in Orlando, Florida over a five-year period. The total purchase commitment was $35.0 million, of which $5.0 million, $7.2 million and $4.0 million of inventory was purchased in 2015, 2014 and 2013, respectively. As of December 31, 2015, $18.9 million of the Lake Eve Resort purchase commitment remained. In June 2015, Bluegreen entered into certain agreements with its former CEO, John Maloney, who resigned from Bluegreen on May 27, 2015. Under the terms of these agreements, Mr. Maloney received $3.8 million at the time of resignation and is entitled to receive an additional $2.9 million over the 2 year period which will commence with the date of the agreements in exchange for ongoing consulting services during the term of the agreements. 10. Stock Option Plans Bluegreen Bluegreen Corporation 2008 Stock Incentive Plan The Bluegreen Corporation 2008 Stock Incentive Plan, as amended, provided for the issuance of restricted stock awards and for the grant of options to purchase shares of Bluegreen’s common stock. In connection with the closing of the Bluegreen-Woodbridge Cash Merger during April 2013, the Bluegreen Corporation 2008 Stock Incentive Plan was terminated and (i) all options outstanding at the effective time of the merger, whether vested or unvested, were cancelled in exchange for the holder’s right to receive the excess, if any, of the $10.00 per share merger consideration over the exercise price of the option, and (ii) all shares subject to restricted stock awards outstanding at the effective time of the merger, whether vested or unvested, were converted into the right to receive, with respect to each such share, the $10.00 per share merger consideration. 29 11. Employee Benefit Plans and Incentive Compensation Program Woodbridge Incentive Compensation Program On September 29, 2008, Woodbridge’s Board of Directors approved the terms of an incentive program for certain employees, including certain executive officers, pursuant to which a portion of their compensation may be based on the cash returns realized on investments held by individual limited partnerships or other legal entities. Certain of the participants in this incentive program are also employees and executive officers of BFC. This incentive program qualifies as a liability-based plan and, accordingly, the components of the program are required to be evaluated in order to determine the estimated fair value of the liability, if any, to be recorded. Based on the evaluation there was no liabilities recognized under the program at December 31, 2015 and 2014. Bluegreen Bluegreen’s Employee Retirement Plan (the “Retirement Plan”) is an Internal Revenue Code Section 401(k) Retirement Savings Plan. Historically, all U.S.-based employees at least 21 years of age with at least three months of employment with Bluegreen are eligible to participate in the Retirement Plan. The Retirement Plan provides for an annual employer discretionary matching contribution. In December 2013, Bluegreen approved a basic matching contribution effective January 1, 2014 equal to 100% of each participant’s contributions not exceeding 3% of each participant’s compensation, plus 50% of the participant’s contributions in excess of 3% but not in excess of 5% of the participant’s compensation. Further, Bluegreen may make additional discretionary matching contributions not to exceed 6% of each participant’s compensation. Bluegreen made contributions to the Retirement Plan totaling $4.8 million and $6.7 million during 2015 and 2014, respectively. During 2015 and 2014, Bluegreen recorded expenses for its contributions to the Retirement Plan of $4.8 million and $4.6 million, respectively. 13. Fair Value Measurement ASC 820 Fair Value Measurements and Disclosures (Topic 820) defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The inputs used to measure fair value are classified into the following hierarchy: Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities Level 2: Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability Level 3: Unobservable inputs for the asset or liability 30 The carrying amounts of financial instruments included in the consolidated financial statements and their estimated fair values are as follows (in thousands): Carrying Amount As of December 31 2015 Fair Value As of December 31 2015 Fair Value Measurements Using Quoted prices in Active Markets Significant Other for Identical Observable Significant Unobservable Assets (Level 1) Inputs (Level 2) Inputs (Level 3) Financial assets: Cash and interest bearing deposits in banks Restricted cash Notes receivable, net Financial liabilities: Receivable-backed notes payable Notes and mortgage notes payable and other borrowings Junior subordinated debentures $ 116,044 56,714 415,598 116,044 56,714 495,000 116,044 56,714 - - - - - - 495,000 $ 408,817 406,600 - - 406,600 101,584 152,307 102,600 116,500 - - - - 102,600 116,500 Carrying Amount As of December 31 2014 Fair Value As of December 31 2014 Fair Value Measurements Using Quoted prices in Active Markets for Identical Significant Other Observable Significant Unobservable Assets (Level 1) Inputs (Level 2) Inputs (Level 3) Financial assets: Cash and interest bearing deposits in banks $ 185,807 185,807 185,807 - - Restricted cash Notes receivable, net Financial liabilities: 54,620 424,267 54,620 520,000 54,620 - - - - 520,000 Receivable-backed notes payable $ 412,404 411,400 - - 411,400 Notes and mortgage notes payable and other borrowings Junior subordinated debentures 90,061 150,038 90,632 134,500 - - - - 90,632 134,500 Cash and cash equivalents. The amounts reported in the Consolidated Statements of Financial Condition for cash and cash equivalents approximate fair value. Restricted cash. The amounts reported in the Consolidated Statements of Financial Condition for restricted cash approximate fair value. Notes receivable, net. The fair value of Bluegreen’s notes receivable is estimated using Level 3 inputs and is based on estimated future cash flows considering contractual payments and estimates of prepayments and defaults, discounted at a market rate. 31 Lines-of-credit, notes payable, and receivable-backed notes payable. The amounts reported in the Consolidated Statements of Financial Condition approximate fair value for indebtedness that provides for variable interest rates. The fair value of Bluegreen’s fixed-rate, receivable-backed notes payable was determined using Level 3 inputs by discounting the net cash outflows estimated to be used to repay the debt. These obligations are to be satisfied using the proceeds from the consumer loans that secure the obligations. Junior subordinated debentures. The fair values of junior subordinated debentures are estimated using Level 3 inputs based on the contractual cash flows discounted at a market rate or based on market price quotes from the over-the-counter bond market. 14. Certain Relationships and Related Party Transactions BFC and BBX Capital own 54% and 46%, respectively, of the outstanding equity interests in Woodbridge, which is the sole shareholder of Bluegreen. BFC owns shares of BBX Capital’s Class A Common Stock and Class B Common Stock representing an 81% equity interest and a 90% voting interest in BBX Capital. BFC may be deemed to be controlled by Alan B. Levan, the Company’s former Chairman and Chief Executive Officer , and John E. Abdo, who serves as Vice Chairman of BFC. Together, Messrs. Levan and Abdo may be deemed to beneficially own shares of BFC’s Class A Common Stock and Class B Common Stock representing approximately 63% of BFC’s total voting power. Mr. Abdo is Vice Chairman of BBX Capital. In addition, Mr. Abdo became Chairman of Bluegreen during December 2015 following Mr. Alan Levan’s resignation from such position after previously serving as Bluegreen’s Vice Chairman. In December 2015, Mr. Alan Levan resigned as Chairman, Chief Executive Officer and President of BFC, as Chairman and Chief Executive Officer of BBX Capital and as chairman of Bluegreen. In October 2013, Renin Holdings LLC, a joint venture entity beneficially owned 81% by BBX Capital and 19% by BFC, through acquisition subsidiaries (Renin Holdings LLC and its acquisition subsidiaries are referred to collectively as the “Renin Purchasers”), acquired substantially all of the assets of Renin Corp. and its subsidiaries, manufacturers of interior closet doors, wall décor, hardware and fabricated glass products. Bluegreen, through its wholly owned subsidiary, Bluegreen Specialty Finance, LLC (“BSF”), funded $9.4 million of the transaction consideration in a term loan and revolver facility to the Renin Purchasers. The loan made by BSF to the Renin Purchasers included a $3.0 million term loan and provided for additional borrowings of up to $9.0 million on a revolving basis of which $10.5 million in the aggregate was borrowed by the Renin Purchasers. Amounts outstanding under the loan bore interest at a fixed rate of 7.25% per annum and were collateralized by substantially all of the assets of the Renin Purchasers. During 2014 and 2013, Bluegreen recognized $0.3 million and $0.1 million, respectively, of interest income on the loan to the Renin Purchasers. The loan was repaid in full during June 2014. Pursuant to the terms of a shared services agreement between the Company and BFC, certain administrative services, including human resources, risk management, and investor and public relations, are provided to the Bluegreen by BFC on a percentage of cost basis. The total amounts incurred for these services during the years ended December 31, 2015 and 2014, and from April 2, 2013 through December 31, 2014 were $0.4 million, $0.5 million and $0.3 million, respectively. Since 2013 until December 2015, BFC and BBX Capital’s employees have been provided health insurance under policies maintained by Bluegreen. BFC and BBX Capital reimbursed Bluegreen at cost, which was approximately $1.3 million, $0.8 million and $0.6 million during the years ended December 31, 2015, 2014 and 2013, respectively. In April 2015, pursuant to a Loan Agreement and Promissory Note, BSF provided an $80.0 million loan to BFC. The proceeds of the loan were used by BFC to fund its tender offer to purchase 4,771,221 shares of Class A Common Stock of BBX Capital at a cash purchase price of $20.00 per share. Amounts outstanding on the loan bear interest at a rate of 10% per annum. Payments of interest are required on a quarterly basis, with all outstanding amounts being due and payable at the end of five years. BFC will be permitted to prepay the loan in whole or in part at any time, and prepayments will be required, to the extent necessary, in order for Bluegreen or its subsidiaries to remain in compliance with covenants under their outstanding indebtedness. During the year ended December 31, 2015, Bluegreen recognized $5.6 million of interest income on the loan to BFC. 32 During the years ended December 31, 2015 and 2014, and from April 2, 2013 through December 31, 2013, Bluegreen paid a subsidiary of BFC approximately $0.6 million, $0.6 million and $0.4 million, respectively, for a variety of management advisory services. 15. Subsequent Events Subsequent events have been evaluated through March 15, 2016, the date the financial statements were available to be issued. 33 

Continue reading text version or see original annual report in PDF format above