<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
This report also includes the Registrant's Use of Proceeds Report
Pursuant to ss.229.701(f).
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998.
OR
[ ] Transition pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
COMMISSION FILE NUMBER 0-23381
BINGHAM FINANCIAL SERVICES CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Michigan 38-3313951
(State of Incorporation) (I.R.S. Employer Identification No.)
31700 Middlebelt Road 48334
Suite 125 (Zip Code)
Farmington Hills, Michigan
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (248) 932-9656
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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
1,576,818 shares of Common Stock, no par value as of April 30, 1998
Page 1 of 15
<PAGE> 2
BINGHAM FINANCIAL SERVICES CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGES
-----
PART I
<S> <C> <C>
Item 1. Financial Statements:
Balance Sheets as of March 31, 1998 and
September 30, 1997 3
Statement of Income for the Three Months and Six Months 4
Ended March 31, 1998
Statement of Cash Flows for the Six Months
Ended March 31, 1998 5
Statement of Changes in Stockholders' Equity for the
Six Months Ended March 31, 1998 6
Notes to Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-11
PART II
Item 5. Other Events 12
Item 6.(a) Exhibits Required by Item 601 of Regulation S-K 12
Item 6.(b) Reports on Form 8-K 12
Item 701.(f) Use of Proceeds 12-13
Signatures 14
Exhibit Index 15
</TABLE>
2
<PAGE> 3
BINGHAM FINANCIAL SERVICES CORPORATION
BALANCE SHEETS
MARCH 31, 1998 AND SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
MAR 31 SEP 30
1998 1997
---------------- ----------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 231,000 $ --
Restricted cash 2,745,100 --
Installment contracts receivable 19,456,800 9,541,100
Interest only securities 391,400 --
Servicing rights 702,700 --
Other assets 1,982,900 111,100
---------------- ----------------
Total assets $ 25,509,900 $ 9,652,200
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Advances by mortgagors $ 2,739,200 $ --
Accounts payable and accrued expenses 719,600 14,800
Servicing liability 101,000 --
Subordinated debt, net of debt discount
of $548,800 3,451,200 --
Note payable - Sun Communities 3,940,700 9,747,500
---------------- ----------------
Total liabilities 10,951,700 9,762,300
---------------- ----------------
Minority Interest 300,000 --
---------------- ----------------
Stockholders' equity (deficiency):
Preferred stock, no par value, 10,000,000 shares
authorized; no shares issued and outstanding -- --
Common stock, no par value, 10,000,000 shares
authorized; 1,576,818 and 100 shares issued
and outstanding at Mar and Sept, respectively 13,617,900 100
Paid-in capital 608,500 --
Retained earnings (deficit) 31,800 (110,200)
---------------- ----------------
Total stockholders' equity (deficiency) 14,258,200 (110,100)
---------------- ----------------
Total liabilities and stockholders'
equity (deficiency) $ 25,509,900 $ 9,652,200
================ ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
BINGHAM FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
March 31 March 31
------------ -------------
<S> <C> <C>
Revenues:
Interest income - installment contracts $ 423,600 $ 739,400
Mortgage origination and servicing fees 166,500 166,500
Other income 40,700 40,700
------------ -------------
Total revenues $ 630,800 $ 946,600
============ =============
Costs and expenses:
Interest expense 135,300 286,400
Provision for credit losses 30,000 50,500
General and administrative 240,200 328,400
Other operating expenses 45,600 67,200
------------ -------------
Total costs and expenses 451,100 732,500
------------ -------------
Income before taxes 179,700 214,100
Provision for income taxes 60,100 72,100
------------ -------------
Net income $ 119,600 $ 142,000
============ =============
Weighted average common shares outstanding 1,379,545 969,500
============ =============
Weighted average common shares outstanding,
fully diluted 1,548,595 1,092,108
============ =============
Earnings per share:
Basic $ 0.09 $ 0.15
============ =============
Fully diluted $ 0.08 $ 0.13
============ =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
BINGHAM FINANCIAL SERVICES CORPORATION
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1998
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income $ 142,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for credit losses 52,200
Depreciation and amortization 89,700
Gain on sale of investment securities (13,500)
Increase in interest only securities (391,400)
Increase in net servicing rights (601,700)
Increase in other assets (1,975,200)
Increase in other liabilities 1,404,300
-------------
Net cash provided by operating activities (1,293,600)
-------------
Cash flows from investing activities:
Installment contracts receivable originated (10,661,200)
Collections on installment contracts receivable 703,300
Proceeds from the sale of investment securities 71,000
-------------
Net cash used in investing activities (9,886,900)
-------------
Cash flows from financing activities:
Issuance of common stock 13,617,800
Issuance of subordinated debt, including discount 4,000,000
Advances on note payable, Sun Communities 3,541,200
Repayment of note payable, Sun Communities (9,747,500)
-------------
Net cash used in financing activities 11,411,500
-------------
Net change in cash and cash equivalents 231,000
Cash and cash equivalents, beginning of period --
-------------
Cash and cash equivalents, end of period $ 231,000
=============
</TABLE>
The accompanying notes are an integral part of the financial statements
5
<PAGE> 6
BINGHAM FINANCIAL SERVICES CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE SIX MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
TOTAL
COMMON PAID-IN RETAINED STOCKHOLDER'S
STOCK CAPITAL EARNINGS EQUITY
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Balance, October 1, 1997 $ 100 $ (110,200) $ (110,100)
Issuance of 1,295,000 shares
of common stock 11,584,200 11,584,200
Issuance of 281,818 shares of
common stock in conjunction
with acquisition 2,033,600 2,033,600
Issuance of 400,000 warrants
with subordinated debt $ 577,000 577,000
Option amortization 31,500 31,500
Net income 142,000 142,000
-------------- ------------ ------------- --------------
Balance, March 31, 1998 $ 13,617,900 $ 608,500 $ 31,800 $ 14,258,200
============== ============ ============= ==============
</TABLE>
The accompanying notes are an integral part of the financial statements
6
<PAGE> 7
BINGHAM FINANCIAL SERVICES CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
These unaudited condensed consolidated financial statements of Bingham
Financial Services Corporation, a Michigan corporation (the "Company"),
have been prepared pursuant to the Securities and Exchange Commission
("SEC") rules and regulations and should be read in conjunction with the
Prospectus dated November 13, 1997, and related information provided in
conjunction with the Company's initial public offering. The following
notes to financial statements present interim disclosures as required by
the SEC. The accompanying financial statements reflect, in the opinion
of management, all adjustments necessary for a fair presentation of the
interim financial statements. All such adjustments are of a normal and
recurring nature.
2. FORMATION AND ORGANIZATION:
The Company commenced operations in January, 1997, for the primary
purpose of originating loans on manufactured homes in communities owned
by Sun Communities, Inc. ("Sun"). During the three months ended December
31, 1997, the Company issued 1,270,000 shares of common stock in an
initial public offering at $10 per share and 25,000 shares of common
stock to Sun in a private sale at $10 per share. Aggregate equity capital
raised including shares purchased by Sun and in conjunction with the
exercise of the underwriters over allotment option approximated net
proceeds of $11.6 million.
The Company also issued $4.0 million of subordinated debt to Sun which
has a seven-year term and an annual interest rate of 9.75%. The Company
may also borrow up to $6.0 million of additional subordinated debt on a
revolving basis through 2002. In connection therewith, Sun received
400,000 warrants to purchase stock of the Company at $10 per share for
seven years.
3. INSTALLMENT CONTRACTS RECEIVABLE:
During the quarter, the Company originated net installment contracts
receivable approximating $5,840,000. The net balance at March 31, 1998,
is after deduction of a provision for credit losses. At March 31, 1998,
1.59% were 60 or more days delinquent and four loans had been foreclosed.
4. ACQUISITIONS:
In March 1998, the Company acquired 100% of the outstanding stock of
Bloomfield Acceptance Company, L.L.C. ("BAC") and Bloomfield Servicing
Company, L.L.C. ("BSC") for 281,818 shares of the Company's common stock
valued at $2.1 million. BAC is engaged in the business of the
origination of mortgages and real estate lending. Loans originated by
BAC primarily consist of fixed rate loans secured by mortgages on
commercial property. All loans originated by BAC are immediately sold to
permanent investors. BSC was formed to service the loans originated by
BAC.
In addition to the shares of common stock issued to the shareholders of
BAC and BSC additional consideration of up to $500,000, in the form of
the Company's common stock, will be paid to the shareholders subject to
the performance of the merged entities over the two year period following
the date of merger.
The excess of the purchase price over the book value of the net assets
acquired for BAC and BSC has been allocated to the tangible and
intangible assets based on the Company's estimate of the fair market
value of the net assets acquired.
7
<PAGE> 8
BINGHAM FINANCIAL SERVICES CORPORATION
NOTES TO FINANCIAL STATEMENTS
5. EARNINGS PER SHARE:
-------------------
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
March 31 March 31
------------ -----------
<S> <C> <C>
Earnings used for basic and diluted earnings per
share calculation $ 119,600 $ 142,000
============ ============
Total shares used for basic earnings per share 1,379,545 969,500
Dilutive securities:
Stock options 21,017 15,324
Warrants 148,033 107,284
------------ ------------
169,050 122,608
------------ ------------
Total shares used for diluted earnings per share
calculation 1,548,595 1,092,108
============ ============
</TABLE>
8
<PAGE> 9
BINGHAM FINANCIAL SERVICES CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company commenced operations in January, 1997, for the primary purpose of
originating loans on manufactured homes "Contracts" located within the
communities owned by Sun. The Company expects to extend its business to include
the sale of insurance products, other installment loans or engage in other
related businesses in the future through the initiation of new businesses or
through acquisitions of existing businesses.
The following should be read in conjunction with the financial statements and
the notes thereto.
RESULTS OF OPERATIONS
For the three months ended March 31, 1998
During the three month period, the Company earned a profit of $179,700 before
income taxes on revenues of $630,800 and expenses of $451,100. The primary
component of revenues was interest income of $423,600 earned on the Company's
portfolio of Contracts which had a balance of $19,457,000 at March 31, 1998.
Mortgage origination and servicing revenues for the month of March were
$166,500. These revenues were the result of the Company's March 1998
acquisition of Bloomfield Acceptance Company, L.L.C. ("BAC"), an originator of
primarily fixed rate loans secured by commercial property and Bloomfield
Servicing Company, L.L.C. ("BSC"), a company that was formed to service the
loans originated by BAC. The principal components of expense were interest of
$135,300 and general and administrative expenses of $240,200. BAC and BSC were
responsible for $145,000 of the total general and administrative expenses.
Credit losses of $30,000 were reserved at the annual rate of .75% of the average
loan balances. In connection with the Participants Support Agreement, the
Company has granted Sun 330,000 Participants Options. The Participants Options
will vest in eight equal annual installments beginning in January, 2001, if, and
only if, Sun is a party to and in compliance with the terms of the Participants
Support Agreement on the vesting date and on December 31st of the previous year.
The value of the Participants Options will be amortized to expense over the
period benefitted.
It is the intention of the Company to generate larger business volume from the
Sun portfolio as well as from the portfolios of other community owners.
LIQUIDITY AND CAPITAL RESOURCES
The Company completed an initial public offering of 1,270,000 shares of common
stock and sold 25,000 shares of common stock to Sun in a private transaction
during the three months ended December 31, 1997 resulting in net proceeds of
approximately $11.6 million. This was used to repay advances from Sun and to
provide working capital for additional loans. Sun has provided a Subordinated
Debt facility, consisting of a $4 million term loan and a five-year revolving
line of credit up to $6 million.
The Company expects to meet its short term liquidity requirements through
working capital provided by operating activities and proceeds under a warehouse
line of credit which is currently being negotiated. The Company expects to meet
its long term liquidity requirements through additional equity offerings, draws
on its revolving line of credit of $6 million, and possible future periodic
securitizations of its loan portfolio.
9
<PAGE> 10
BINGHAM FINANCIAL SERVICES CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LOAN PORTFOLIO
At March 31, 1998, the average balance was approximately $28,400 and had a
weighted average interest rate of approximately 10.8%. The Company is currently
operating with an annual loan loss reserve of 0.75%. As of March 31, 1998, the
Company had 15 contracts that were delinquent over 60 days. Contracts past due
30-60 days totaled $393,000 or 2.03% of the outstanding Contracts receivable.
The Company sends a notice of default after 30 days and sends a final demand
letter after 60 days. If the loan is not brought current pursuant to the terms
of the demand letter, the Company commences collection and repossession
procedures. To the extent that the repossession and resale of the collateral
results in a loss, the reserve account will be charged. If the Company
experiences losses in excess of its loan loss reserve it will incur additional
charges to the reserve account which would adversely affect its profitability.
All loans made by the Company are fully amortizing and provide for equal payment
over the term of the Contract (typically 5 to 25 years). The portions of such
payments allocable to principal and interest are, for payoff and deficiency
purposes, determined in accordance with the terms of the Contract. The following
table sets forth, at the date shown, the average loan balance, weighted average
loan yield and weighted average initial term.
<TABLE>
<CAPTION>
March 31, 1998
--------------
<S> <C>
Outstanding Contract Receivable $ 19,457,000
Total Number Contracts Outstanding 684
Average Loan Balance $28,400
Weighted Average Loan Yield 10.8%
Weighted Average Initial Term 22.5 years
</TABLE>
The contracts are secured by manufactured homes which range in age from 1963 to
1998, with approximately 57% of the manufactured homes built since 1996. As of
March 31, 1998, the Company's Contracts in its portfolio were concentrated in
Michigan (48%), Indiana (25%), Texas (14%) and Florida (10%). The following
table sets forth the number and value of loans for various terms, as of March
31, 1998.
<TABLE>
<CAPTION>
Term of Loan Number of Loans Value of Loans
------------ --------------- --------------
<S> <C> <C>
5 or less 21 $ 180,800
6-10 59 730,500
11-12 6 84,100
13-15 89 1,508,000
16-20 171 4,536,700
21-25 331 12,046,400
26-30 7 370,500
</TABLE>
10
<PAGE> 11
BINGHAM FINANCIAL SERVICES CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CREDIT LOSS AND FORECLOSURE EXPERIENCE
The Company's profitability depends in large part upon its ability to
effectively monitor and control credit losses. The Company provides for a
reserve for credit losses at an annual rate of 0.75% of loan balances. To the
extent the Company experiences loss rates or foreclosure rates in excess of
those estimated, the Company may experience an adverse material effect.
IMPACT OF INFLATION
Increases in the inflation rate generally result in increased interest rates and
increases in the Company's operating expenses. As the Company expects to borrow
funds at variable rates, increased interest rates will increase the borrowing
costs of the Company, and such increased borrowing costs may not be offset by
increases in the rates of the Company's Contracts.
SEASONALITY
Higher sales of manufactured homes during the Spring and Summer seasons result
in a greater volume of new Contracts during those periods.
11
<PAGE> 12
BINGHAM FINANCIAL SERVICES CORPORATION
PART II
ITEM 5. - OTHER EVENTS
On March 18, 1998 the Board of Directors of Bingham Financial Services
Corporation resolved to increase the size of the board from six to eight
members. The Board further resolved to fill the vacancies created by the
appointment of Daniel E. Bober and Creighton J. Weber.
ITEM 6.(A) - EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K
EXHIBIT NO. DESCRIPTION
----------- -----------
27 Financial Data Schedule
ITEM 6.(B) - REPORTS ON FORM 8-K
The Company filed a report on Form 8-K, dated March 5, 1998, reporting the
acquisition of Bloomfield Acceptance Company, L.L.C., and Bloomfield Servicing
Company, L.L.C. for 281,818 shares of the Company's common stock. As disclosed
in the Form 8-K, financial statements were not included in the initial report
and will be filed by an amendment to the Form 8-K to be filed no later than 60
days after the date the initial report on Form 8-K was required to be filed.
ITEM 701.
(f) USE OF PROCEEDS
1. The effective date of the Securities Act registration
statement for Bingham Financial Services Corporation is
November 12, 1997. The Commission file number is 0-23381.
2. The offering of the shares of common stock of Bingham
commenced on November 13, 1997.
3. The offering did not terminate before any securities were
sold.
4. (i) Pursuant to the Underwriting Agreement, the
underwriters were granted an option to purchase the
optional shares within 30 days of the date of the
Underwriting Agreement. On December 12, 1997, the
underwriters exercised the option to purchase the
optional shares with respect to 70,000 shares of
common stock of Bingham. All the securities registered
were sold prior to the termination of the offering.
(ii) The managing underwriter is Roney & Co., L.L.C., One
Griswold, Detroit, Michigan 48226.
(iii) Common stock, no par value was registered.
(iv) 1,270,000 shares of common stock were registered and
sold for an aggregate offering price of $12,700,000.
12
<PAGE> 13
BINGHAM FINANCIAL SERVICES CORPORATION
ITEM 701.
(f) USE OF PROCEEDS, CONTINUED
(v) Underwriting discounts and commissions: $ 859,000
Attorneys' fees: 219,000
Printing Costs: 99,800
Accounting Fees: 100,000
Miscellaneous: 80,200
-------------
$ 1,358,000
=============
(B) These payments were direct or indirect payments to
others.
(vi) Net Offering Proceeds = $11,342,000
(vii) Repayment of Demand Note to Sun Communities, Inc.:
$9,747,500. The remaining $1,586,700 will be used for
funding loans and working capital.
(A) Sun Communities, Inc. is an affiliate of the issuer.
(viii) The amount of proceeds used to repay the Demand Note to
Sun Communities, Inc. is greater than the amount that
was indicated in the Prospectus, as the Company
continued to draw funds from June 30, 1997 to September
30, 1997 to provide the Company with working capital.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: April 30, 1998
BINGHAM FINANCIAL SERVICES CORPORATION
BY: /s/ Jeffrey P. Jorissen
------------------------------------
Jeffrey P. Jorissen, President,
Chief Executive Officer,
Chief Financial Officer
14
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE
FILED NUMBER
EXHIBIT NO. DESCRIPTION HEREWITH HEREIN
- ---------- ----------- -------- -------
<S> <C> <C> <C>
27 Financial Data Schedule X
</TABLE>
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 25,509,900
<CURRENT-LIABILITIES> 11,251,700
<BONDS> 0
0
0
<COMMON> 13,617,900
<OTHER-SE> 640,300
<TOTAL-LIABILITY-AND-EQUITY> 25,509,900
<SALES> 0
<TOTAL-REVENUES> 630,800
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 285,800
<LOSS-PROVISION> 30,000
<INTEREST-EXPENSE> 135,300
<INCOME-PRETAX> 179,700
<INCOME-TAX> 60,100
<INCOME-CONTINUING> 119,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 119,600
<EPS-PRIMARY> .09
<EPS-DILUTED> .08
</TABLE>
