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 Registrants Use of Proceeds Report Pursuant
to Section 229.701(f).
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997.
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
Suite 125
Farmington Hills, Michigan 48334
(Address of Principal Executive Offices) (Zip Code)
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 [ ] No [x]
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:
1,295,000 shares of Common Stock, no par value as of January 31, 1998
Page 1 of 13
2
BINGHAM FINANCIAL SERVICES CORPORATION
INDEX
-----
PAGES
PART I
Item 1. Financial Statements:
Balance Sheets as of December 31, 1997 and
September 30, 1997 3
Statement of Income for the Three Months
Ended December 31, 1997 4
Statement of Cash Flows for the Three Months
Ended December 31, 1997 5
Statement of Changes in Stockholders' Equity
for the Three Months Ended
December 31, 1997 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-10
PART II
Item 6.(a) Exhibits Required by Item 601 of Regulation S-K 11
Item 6.(b) Reports on Form 8-K 11
Item 701.(f) Use of Proceeds 11-12
Signatures 13
Exhibit Index 14
2
3
BINGHAM FINANCIAL SERVICES CORPORATION
BALANCE SHEETS
DECEMBER 31, 1997 AND SEPTEMBER 30, 1997
-----
DEC 31 SEPT 30
ASSETS 1997 1997
--------- --------
Cash and cash equivalents $ 2,003,400 $ --
Installment contracts receivable, net 14,088,500 9,541,100
Other assets 166,500 111,100
----------- ----------
Total assets $16,258,400 $9,652,200
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable, affiliates $ 273,500 $ --
Accounts payable and accrued expenses 469,600 14,800
Subordinated debt, net of debt discount
of $568,100 3,431,900
Note payable, Sun Communities -- 9,747,500
----------- ----------
Total liabilities 4,175,000 9,762,300
----------- ----------
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; 1,295,000 and 100 shares issued
and outstanding at Dec and Sept, respectively 11,584,300 100
Paid-in capital 586,900 --
Deficit (87,800) (110,200)
----------- ----------
Total stockholders' equity (deficiency) 12,083,400 (110,100)
----------- ----------
Total liabilities and stockholders'
equity (deficiency) $16,258,400 $9,652,200
=========== ==========
The accompanying notes are an integral part
of the financial statements.
3
4
BINGHAM FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997
-----
Revenues, interest income $315,800
--------
Costs and expenses:
Interest expense 151,100
Provision for credit loss 20,500
General and administrative 88,200
Other operating expenses 21,600
--------
Total costs and expenses 281,400
--------
Income before taxes 34,400
Provision for income taxes 12,000
--------
Net income $ 22,400
========
Income per share of common stock $ .04
========
Weighted average common shares outstanding 568,400
========
The accompanying notes are an integral part
of the financial statements.
4
5
BINGHAM FINANCIAL SERVICES CORPORATION
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997
-----
Cash flows from operating activities:
Net income $ 22,400
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for credit losses 20,500
Amortization 36,400
Increase in other assets (73,000)
Increase in accounts payable and accrued expenses 728,300
-----------
Net cash provided by operating activities 734,600
-----------
Cash flows from investing activities:
Installment contracts receivable originated (4,820,000)
Collections on installment contracts receivable 252,100
-----------
Net cash used in investing activities (4,567,900)
-----------
Cash flows from financing activities:
Issuance of common stock 11,584,200
Issuance of subordinated debt, including discount 4,000,000
Repayment of note payable, Sun Communities (9,747,500)
-----------
Net cash provided from financing sources 5,836,700
-----------
Net change in cash and cash equivalents 2,003,400
Cash and cash equivalents, beginning of period --
-----------
Cash and cash equivalents, end of period $ 2,003,400
===========
The accompanying notes are an integral part
of the financial statements
5
6
BINGHAM FINANCIAL SERVICES CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997
TOTAL
COMMON PAID-IN RETAINED STOCKHOLDER'S
STOCK CAPITAL EARNINGS EQUITY
----------- --------- --------- -------------
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 400,000 warrants
with subordinated debt $577,000 577,000
Amortization deferred
service costs 9,900 9,900
Net income 22,400 22,400
----------- -------- --------- -----------
Balance, December 31, 1997 $11,584,300 $586,900 $ (87,800) $12,083,400
=========== ======== ========= ===========
The accompanying notes are an integral part
of the financial statements
6
7
BINGHAM FINANCIAL SERVICES CORPORATION
NOTES TO FINANCIAL STATEMENTS
-----
1. BASIS OF PRESENTATION:
These unaudited condensed 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 $4,820,000. The net balance at December 31, 1997,
is after deduction of a provision for credit losses of .75% of principal
balance computed on an annual basis. At December 31, 1997, 1.45% were 60 or
more days delinquent and two loans had been foreclosed.
7
8
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 December 31, 1997
During the three month period, the Company earned a profit of $34,400 before
income taxes on revenues of $315,800 and expenses of $281,400. The primary
component of revenues was interest income earned on the Company's portfolio of
Contracts which had a balance of $14,028,000 at December 31, 1997. The
principal components of expenses were interest of $151,100 and general and
administrative expenses of $88,200. Credit losses of $20,500 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.
8
9
BINGHAM FINANCIAL SERVICES CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
-----
LOAN PORTFOLIO
At December 31, 1997, the average balance was approximately $28,100 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 December
31, 1997, the Company had 9 contracts that were delinquent over 60 days.
Contracts past due 30-60 days totaled $200,600 or 1.43% 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.
December 31, 1997
-----------------
Outstanding Contract Receivable $14,028,000
Total Number Contracts Outstanding 499
Average Loan Balance $28,100
Weighted Average Loan Yield 10.8%
Weighted Average Initial Term 23 years
The contracts are secured by manufactured homes which range in age from 1963 to
1997, with approximately 55% of the manufactured homes built since 1996. As of
December 31, 1997, the Company's Contracts in its portfolio were concentrated
in Michigan (50%), Indiana (23%), Texas (14%) and Florida (9%). The following
table sets forth the number and value of loans for various terms, as of
December 31, 1997.
Term of Loan Number of Loans Value of Loans
------------ --------------- --------------
5 or less 14 $ 87,600
6-10 45 543,500
11-12 4 57,800
13-15 73 1,154,300
16-20 102 2,475,200
21-25 260 9,301,100
26-30 8 408,500
9
10
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.
10
11
BINGHAM FINANCIAL SERVICES CORPORATION
PART II
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 did not file any reports on Form 8-K during the period covered by
this Form 10-Q.
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.
(v) Underwriting discounts and commissions: $ 859,000
Attorneys' fees: 219,000
Printing Costs: 99,800 *
Accounting Fees: 100,000 *
Miscellaneous: 88,000 *
----------
$1,365,800
*Estimated ==========
(B) These payments were direct or indirect payments to
others.
(vi) Net Offering Proceeds = $11,334,200
11
12
BINGHAM FINANCIAL SERVICES CORPORATION
ITEM 701.
(f) USE OF PROCEEDS, CONTINUED
(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.
12
13
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: February 12, 1998
BINGHAM FINANCIAL SERVICES CORPORATION
BY:/s/ Jeffrey P. Jorissen
-----------------------------------------------
Jeffrey P. Jorissen, President, Chief
Executive Officer, Chief Financial Officer
13
14
EXHIBIT INDEX
PAGE
FILED NUMBER
EXHIBIT NO. DESCRIPTION HEREWITH HEREIN
- ----------- ----------- -------- ------
27 Financial Data Schedule X