10-Q 1 k71111e10vq.txt QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 2002. OR [_] Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the Transition Period From _______ to _______ COMMISSION FILE NUMBER 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.) 260 East Brown Street Suite 200 Birmingham, Michigan 48009 (Address of Principal Executive Offices, Including Zip Code) (248) 644-8838 (Registrant's telephone number, including area code) 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 [ ] Number of shares of Common Stock, no par value, outstanding as of July 31, 2002: 2,476,321 BINGHAM FINANCIAL SERVICES CORPORATION INDEX

2 As the context requires, references made in this quarterly report to "we", "us", "our", the "Company" and similar references refer to Bingham Financial Services Corporation and its subsidiaries, including Origen Financial, L.L.C., and its subsidiaries. PART I - FINANCIAL INFORMATION ITEM I - FINANCIAL STATEMENTS 3 BINGHAM FINANCIAL SERVICES CORPORATION CONSOLIDATED BALANCE SHEET JUNE 30, 2002 AND DECEMBER 31, 2001

The accompanying notes are an integral part of the financial statements. 4 BINGHAM FINANCIAL SERVICES CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001

The accompanying notes are an integral part of the financial statements. 5 BINGHAM FINANCIAL SERVICES CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001

The accompanying notes are an integral part of the financial statements. 6 BINGHAM FINANCIAL SERVICES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION: The unaudited consolidated financial statements reflect all adjustments, consisting only of normal recurring items, which are necessary to present fairly the Company's financial condition and results of operations on a basis consistent with that of the Company's prior audited consolidated financial statements. Pursuant to rules and regulations of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("GAAP") have been condensed or omitted. These unaudited consolidated financial statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in the Company's Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2001. Results for interim periods are not necessarily indicative of the results that may be expected for a full year. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts and transactions of the Company and its subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation. In July 2001, the Company entered into an investment agreement with three investors - SUI TRS, Inc., Shiffman Family LLC and Woodward Holding, LLC - under which the Company agreed to recapitalize its operating subsidiaries. Under the investment agreement and a merger agreement entered into on December 18, 2001, SUI TRS, Shiffman Family LLC and Woodward Holding made capital contributions totaling $40 million in Origen Financial, LLC ("Origen LLC"), a newly formed limited liability company. The Company merged Origen Financial, Inc. ("Origen Inc.") and its other wholly-owned operating subsidiaries into Origen LLC and its subsidiaries. The mergers were completed April 25, 2002. The Company retained an initial 20% ownership interest in Origen LLC and the three investors received an initial 80% aggregate interest in Origen LLC. These interests are subject to dilution resulting from (a) grants of up to 11.5% of the membership interests to key employees of the recapitalized subsidiaries, and (b) potential future issuance of additional membership interests in the recapitalized subsidiaries in connection with the raising of additional capital. The above transactions have been accounted for as a recapitalization of the Company's operating subsidiaries and, accordingly, there is no adjustment to the historical cost basis carrying amounts of the assets and liabilities transferred to Origen LLC by the Company. Although the Company retains only a 20% interest (33.33% voting interest) in Origen LLC, the recapitalization has not resulted in a change in control of Origen LLC for accounting purposes and the financial position and results of operations of Origen LLC continue to be presented on a consolidated basis in the accompanying financial statements. An allocation of income or losses attributable to the non-controlling members under the provisions of the Origen LLC operating agreement is accounted for in a manner similar to the minority interest. RECLASSIFICATIONS Certain prior period amounts have been reclassified to conform to the current period's presentation. 2. EARNINGS PER SHARE: Basic earnings (loss) per share is computed by dividing net income (loss) available to common shareholders by the number of weighted average common shares outstanding. At June 30, 2002 and 2001 there were approximately 0 and 908,100 potential shares of common stock from stock options and warrants outstanding, respectively. 7 BINGHAM FINANCIAL SERVICES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents a reconciliation of the numerator (income (loss) available to common shareholders) and denominator (weighted average common shares outstanding) for the basic and diluted income (loss) per share calculation:

3. OTHER COMPREHENSIVE INCOME: Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income," establishes standards for reporting comprehensive income. Other comprehensive income refers to revenues, expenses, gains and losses that under GAAP have previously been reported as separate components of equity in the Company's consolidated financial statements.

4. ALLOWANCE FOR CREDIT LOSSES: The allowance for possible credit losses is maintained at a level believed to be adequate by management to absorb potential losses in the Company's loan portfolio. The Company's loan portfolio is comprised of homogenous manufactured home loans with average loan balances of less than $50,000. The allowance for credit losses is determined at a portfolio level and computed by applying loss rate factors to the loan portfolio on a stratified basis using current portfolio performance and delinquency levels (0-30 days, 31-60 days, 61-90 days and more than 90 days delinquent). The Company's loss rate factors are based on the Company's historical loan loss experience and are adjusted for economic conditions and other trends affecting borrowers' ability to repay and estimated collateral value. The allowance for credit losses represents an unallocated allowance. There are no elements of the allowance allocated to specific individual loans or to impaired loans. 8 BINGHAM FINANCIAL SERVICES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Changes in the allowance for credit losses are summarized as follows:

The Company periodically sells portions of its manufactured home loan portfolio with recourse whereby it is required to repurchase loans that meet certain delinquency or default criteria. The Company maintains a separate liability to absorb potential losses on these loans. As of June 30, 2002, the outstanding principal balance on manufactured home loans the Company had sold with recourse totaled $113.8 million. During the three and six months ended June 30, 2002, there were approximately $2.3 million and $3.5 million in charges against the recourse liability, respectively. The balance of that liability was approximately $4.8 million at June 30, 2002. 5. DEBT: Origen LLC currently has a line of credit extended by Sun Communities Operating Limited Partnership. On June 18, 2002 the agreement was amended, increasing the borrowing limit from $21.25 million to $23.125 million. On August 12, 2002 the agreement was further amended, increasing the borrowing limit from $23.125 million to $35.0 million. The line of credit will terminate on December 31, 2002 and the outstanding balance bears interest at a rate of LIBOR plus 700 basis points, with a minimum interest rate of 11% and a maximum interest rate of 15%. The line of credit is secured by a security interest in substantially all of Origen LLC's assets. Sun Communities Operating Limited Partnership and Woodward Holding, a member of Origen LLC, have entered into a participation agreement under which Sun Communities Operating Limited Partnership will loan up to approximately 57% of the borrowing limit (or $20.0 million) and Woodward Holding will loan up to approximately 43% of the borrowing limit (or $15.0 million) under the line of credit. Sun Communities Operating Limited Partnership and Woodward Holding jointly administer the line of credit. Bingham has guaranteed the obligations of Origen LLC under the line of credit and has granted the lenders a security interest in substantially all of its assets as security for the guaranty. At June 30, 2002, the outstanding balance on the line of credit was approximately $23.1 million and at August 1, 2002, the outstanding balance on the line of credit was $28.4 million. Bingham and Origen LLC were borrowers under a revolving credit facility with Standard Federal Bank (as successor to Michigan National Bank). Under this facility, Bingham and Origen LLC could borrow up to $10.0 million. Interest at a rate of 30-day LIBOR plus a spread was payable on the outstanding balance. The facility was terminated on June 30, 2002. The outstanding principal balance on the facility was $4.5 million at June 30, 2002 and was paid in full as of July 10, 2002. As of July 25, 2002 Origen LLC entered into a revolving credit facility with Bank One, NA to replace the terminated facility with Standard Federal Bank. Under this facility Origen LLC can borrow up to $8.0 million for the purpose of funding required principal, interest, taxes and insurance advances on manufactured home loans that are serviced for outside investors. Borrowings under the facility are repaid upon the collection by Origen LLC of monthly payments made by borrowers under such manufactured home loans. A negotiated interest rate is payable on the outstanding balance. To secure the loan from Bank One, Origen LLC has granted Bank One a security interest in substantially all its assets. Bingham has guaranteed the obligations of Origen LLC under the line of credit and has granted the lenders a security interest in substantially all of its assets as security for the guaranty. The facility has a termination date of May 31, 2003. 9 BINGHAM FINANCIAL SERVICES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In December 2001, Credit Suisse First Boston Mortgage Capital and Origen LLC, through its special purpose subsidiary Origen Special Holdings, LLC entered into a master repurchase agreement. Under the agreement, Origen LLC contributes manufactured home loans it originates or purchases to Origen Special Holdings, Origen Special Holdings then transfers the manufactured home loans to Credit Suisse First Boston against the transfer of funds from Credit Suisse First Boston and Origen Special Holdings transfers the funds to Origen LLC for operations. Bingham guaranteed the obligations of Origen Special Holdings under this agreement. The maximum financing limit on the facility is $150.0 million. The annual interest rate on the facility is a variable rate equal to LIBOR plus a spread. The loans are financed on the facility at varying advance rates on the lesser of the then current face value or market value of the loans. The advance rates depend on the characteristics of the loans financed. The facility was set to terminate on May 28, 2002, but was extended and will now terminate on May 27, 2003. At June 30, 2002, the aggregate amount advanced by Credit Suisse First Boston under the facility was $43.9 million. At June 30, 2002 and December 31, 2001 total debt outstanding was as follows:

6. RESIDUAL INTEREST IN LOANS SOLD AND SECURITIZED: The Company through Origen LLC securitizes manufactured home loans. Under the current legal structure of the securitization program, the Company sells manufactured home loans it originates and purchases to a trust for cash. The trust sells asset-backed bonds secured by the loans to investors. The Company records certain assets and income based upon the difference between all principal and interest received from the loans sold and the following factors: (i) all principal and interest required to be passed through to the asset-backed bond investors, (ii) all excess contractual servicing fees, (iii) other recurring fees and (iv) an estimate of losses on loans. The Company continues to service the securitized loans. The Company retains the right to service the loans it securitizes. Fees for servicing the loans are based on a contractual percentage per annum of the unpaid principal balance of the associated loans. The Company recognizes a servicing asset in addition to its gain on sale of loans. The servicing asset is calculated as the present value of the expected future net servicing income in excess of adequate compensation for a substitute servicer, based on common industry assumptions and the company's historical experience. These factors include default and prepayment speeds. The Company follows the provisions of SFAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities in the valuation of its residual interests. The key economic assumptions used in measuring the retained interests resulting from the securitization completed in the quarter ended March 31, 2002 were as follows: Prepayment speed 175.00% MHP Weighted average life (months) 311 Discount rate 15.00% Expected credit losses 8.25%

The Company will assess the carrying value of the residual receivables for impairment on a monthly basis. There can be no assurance that the Company's estimates used to determine the residual receivable and the servicing asset valuations will remain appropriate for the life of the securitization. If actual loan prepayments or defaults exceed the Company's estimates, the carrying value of the Company's residual receivable and/or servicing asset may decrease through a charge against earnings in the period management recognizes the disparity. 10 BINGHAM FINANCIAL SERVICES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. RECENT ACCOUNTING PRONOUNCEMENTS: During July 2001, Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142") was issued. The statement provides the accounting and reporting standards for goodwill. SFAS 142 will not impact the Company's financial position or results of operations because the Company had no goodwill on its balance sheet at June 30, 2002. 11 BINGHAM FINANCIAL SERVICES CORPORATION ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis provides information on material factors affecting our results of operations and significant balance sheet changes. This discussion should be read in conjunction with the consolidated financial statements and notes included herein and our Annual Report on Form 10-K, as amended for the fiscal year ended December 31, 2001. Results of operations for the three-month period presented are not necessarily indicative of results which may be expected for the entire year. FORWARD-LOOKING STATEMENTS This quarterly report contains forward-looking statements based on our current expectations, estimates and projections about our industry, management's beliefs and certain assumptions made by us. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," "may," "will" and variations of these words or similar expressions are intended to identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Such statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those anticipated in any forward-looking statements as a result of numerous factors, many of which are described in the "Factors That May Affect Future Results" section in Item 1 of our Annual Report on Form 10-K, as amended for the year ended December 31, 2001. You should carefully consider those risks, in addition to the other information in this quarterly report and in our other filings with the SEC. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. CRITICAL ACCOUNTING POLICIES We have identified critical accounting policies that, as a result of the judgments, uncertainties, uniqueness and complexities of the underlying accounting standards and operations involved, could result in material changes to our financial condition or results of operations under different conditions or using different assumptions. We believe our most critical accounting policies are related to the following areas: allowance for credit losses, liability for loans sold with recourse, deferred taxes and accounting for securitizations. Details regarding our use of these policies and the related estimates are described fully in our 2001 Annual Report filed with the Securities and Exchange Commission on Form 10-K, as amended. During the second quarter of 2002, there have been no material changes to our critical accounting policies that impacted our financial condition or results of operations. RESULTS OF OPERATIONS Results for the quarter ended June 30, 2002 include the following: - Manufactured home loan originations for the quarter ended June 30, 2002 were $48.8 million versus $63.8 million in the quarter ended June 30, 2001, a decrease of 23.5%. Manufactured home shipments continued to be weak with shipments for the quarter ended June 30, 2002 down 9.6% compared to shipments for the quarter ended June 30, 2001. - Additions to the allowance for credit losses and provision for recourse liability were approximately $1.1 million for the quarter ended June 30, 2002, compared to $639,000 in the quarter ended June 30, 2001, an increase of 66.9%. The continued glut of repossessions continues to negatively impact recovery rates. We reported a pre-tax loss prior to the allocation of income to non-controlling members' interests of $4.1 million for the quarter ended June 30, 2002, compared to pre-tax loss of $1.1 million for the quarter ended June 30, 2001. For the six months ended June 30, 2002 we reported a pre-tax loss prior to the allocation of income to non-controlling members' interests of $3.9 million, compared to a pre-tax gain of $176,000 for the six months ended June 30, 2001. The pre-tax loss for the current quarter includes an approximate $1.1 million provision for credit losses and recourse liability. 12 BINGHAM FINANCIAL SERVICES CORPORATION Interest income on manufactured home loans was $769,000 for the quarter ended June 30, 2002 compared to $810,000 for the quarter ended June 30, 2001, a decrease of 5.1%. The decrease is primarily the result of a decrease in the average yield on the manufactured home portfolio, which was 9.10% for the quarter ended June 30, 2002 compared to 9.55% for the quarter ended June 30, 2001. The decrease in the average yield on the portfolio was slightly offset by an increase in the average outstanding receivable balance, which was $35.7 million for the quarter ended June 30, 2002 compared to $33.9 million for the quarter ended June 30, 2001, an increase of 5.3%. Interest income on other loan receivables totaled approximately $49,000 for the quarter ended June 30, 2002 compared to approximately $170,000 for the quarter ended June 30, 2001, a decrease of approximately 71.2%. The decrease was primarily the result of the sale of our commercial mortgage loan portfolio in June 2001. For the six months ended June 30, 2002 interest income on manufactured home loans was $3.9 million compared to $4.1 million for the six months ended June 30, 2001, a decrease of 4.9%. The decrease is primarily the result of a decrease in the average yield on the manufactured home portfolio, which was 10.60% for the six months ended June 30, 2002 compared to 11.64% for the six months ended June 30, 2001. Interest income on other loan receivables totaled approximately $97,000 for the six months ended June 30, 2002 compared to approximately $411,000 for the six months ended June 30, 2001, a decrease of 76.4%. Again, the significant decrease is primarily the result of the sale of the commercial loan portfolio in June 2001. Interest expense for the quarter ended June 30, 2002 was $865,000 compared to $1.2 million for the quarter ended June 30, 2001, a decrease of 27.9%. The decrease is primarily a result of the decrease in the average outstanding balance of debt used to finance the loan receivables and fund operations. Average outstanding debt was $43.6 million for the quarter ended June 30, 2002 compared to $59.6 million for the quarter ended June 30, 2001, a decrease of 26.8%. The average borrowing rate decreased approximately 30 basis points to 7.9% for the quarter ended June 30, 2002 compared to 8.2% for the quarter ended June 30, 2001. The decrease in the average borrowing rate is primarily related to a decrease in the average LIBOR rate of approximately 268 basis points for the three months ended June 30, 2002 as compared to the three months ended June 30, 2001. Our current financing sources are primarily variable rate facilities that use the 30 day LIBOR rate as an index. The decrease in the LIBOR based borrowing facilities was partially offset by the increase in the rate on our line of credit from Sun Communities Operating Limited Partnership which increased to 11.0% for the quarter ended June 30, 2002 compared to 6.9% for the three months ended June 30, 2001. The following tables set forth the extent to which our net interest income has been affected by changes in average interest rates and average balances of interest-earning assets and interest-bearing liabilities.

13 BINGHAM FINANCIAL SERVICES CORPORATION

Loan servicing fees, which are reported net of amortization of servicing assets, were $2.2 million for the three months ended June 30, 2002, compared to $2.8 million for the three months ended June 30, 2001, a decrease of 27.6%. The average principal balance of loans serviced for others was approximately $1.2 billion for the quarter ended June 30, 2002 compared to $2.2 billion for the quarter ended June 30, 2001. The large decrease is the result of the sale of the commercial loan portfolio serviced for others, which was sold along with certain of the other assets of our commercial origination and servicing subsidiaries in June 2001. The weighted average service fee rate on the manufactured home portfolio for the quarter ended June 30, 2002 was .72% compared to .82% for the quarter ended June 30, 2001 a decrease of 12.2%. For the six months ended June 30, 2002 net loan servicing fees were $4.1 million compared to $5.5 million for the six months ended June 30, 2001. Under the current legal structure of our securitization program we sell manufactured home loans we originate and purchase to a trust for cash. The trust sells asset-backed bonds secured by the loans to investors. We record certain assets and income based upon the difference between all principal and interest received from the loans sold and the following factors: (i) all principal and interest required to be passed through to the asset-backed bond investors, (ii) all excess contractual servicing fees, (iii) other recurring fees and (iv) an estimate of losses on loans. At the time of the securitization we estimate these amounts based upon a declining principal balance of the underlying loans, adjusted by an estimated prepayment and loss rate, and capitalize these amounts using a discount rate that market participants would use for similar financial instruments. These capitalized assets are recorded as residual receivables. We believe the assumptions we have used are appropriate and reasonable. We retain the right to service the loans we securitize. Fees for servicing the loans are based on a contractual percentage per annum of the unpaid principal balance of the associated loans. We recognize a servicing asset in addition to our gain on sale of loans. The servicing asset is calculated as the present value of the expected future net servicing income in excess of adequate compensation for a substitute servicer, based on common industry assumptions and our historical experience. These factors include default and prepayment speeds. 14 BINGHAM FINANCIAL SERVICES CORPORATION The key economic assumptions used in measuring the initial retained interests resulting from the securitization completed in the quarter ended March 31, 2002 were as follows: Prepayment speed 175.00% MHP Weighted average life (months) 311 Discount rate 15.00% Expected credit losses 8.25%

We periodically sell manufactured home loans on a whole-loan basis. At the time of such loan sales, we recognize recourse liabilities pursuant to our future obligations, if any, to the applicable loan purchasers under the provisions of the respective sale agreements. Under our existing recourse obligations, we are required to repurchase any loan contract that goes into default, as defined in the respective loan agreement, for the life of each loan sold, at an amount equal to the outstanding principal balance and accrued interest, and refund any purchase premiums. The loan purchasers have no recourse to our other assets for failure of debtors to pay when due. The loan pools subject to recourse provisions are comprised of homogenous manufactured home loans with an average loan balance of less than $50,000. The estimated recourse liability is calculated based on historical default rates and loss experience for pools of similar loans we originate and service. These loss rates are applied to each pool of loans subject to recourse provisions and the resulting estimated recourse liability represents the present value of the expected obligations under those recourse provisions. The loss rates are adjusted for economic conditions and other trends affecting borrowers' ability to repay and estimated collateral value. The recourse liability is calculated at a portfolio level and there are no elements of the estimated recourse liability allocated to specific loans. At June 30, 2002 we had principal balance of loans sold with recourse of $113.8 million and had recorded liability of $4.8 million compared to $135.9 million of principal balance of loans sold with recourse and recorded liability of $7.9 million at June 30, 2001. In January 2001, we repurchased loans with principal balances of approximately $15.0 million that had previously been sold with recourse and subsequently securitized those loans as part of our March 2001 securitization. As a result of the elimination of our recourse obligations associated with the repurchased loans, the related previously recognized recourse obligation of approximately $450,000 was derecognized at the time of the repurchase. Changes in the recorded recourse liability are summarized as follows:

Our loan portfolio is comprised of homogenous manufactured home loans with an average loan balance of less than $50,000. The allowance for credit losses is determined at a portfolio level and computed by applying loss rate factors to the loan portfolio on a stratified basis using current portfolio performance and delinquency levels (0-30 days, 31-60 days, 61-90 days and more than 90 days delinquent). Our loss rate factors are based on historical loan loss experience and are adjusted for economic conditions and other trends affecting borrowers' ability to repay and estimated collateral value. The allowance for loan losses represents an unallocated allowance; there are no elements of the allowance allocated to specific individual loans or to impaired loans. 15 BINGHAM FINANCIAL SERVICES CORPORATION For the quarter ended June 30, 2002 the provision for credit losses was approximately $667,000 compared to a reversal of $421,000 for the quarter ended June 30, 2001. The increase is primarily attributable to the increase in the principal balance of loans more than 60 days delinquent, which were $3.3 million at June 30, 2002 compared to $1.9 million at June 30, 2001. The allowance for credit losses as a percentage of gross manufactured home loans outstanding was 2.69% at June 30, 2002 compared to 1.67% at June 30, 2001, an increase of approximately 102 basis points. The increase is primarily the result of the March 2002 securitization and sale of the majority of our performing loans resulting in the remaining portfolio being made up of a disproportionate amount of non performing loans. Changes in the allowance for credit losses are summarized as follows:

General and administrative expenses totaled approximately $5.1 million for the quarter ended June 30, 2002 compared to $5.3 million for the quarter ended June 30, 2001, a decrease of 3.8%. Personnel costs, the largest component of general and administrative expenses, decreased to $3.7 million for the quarter ended June 30, 2002 versus $3.9 million for the quarter ended June 30, 2001, a 5.1% decrease. The decrease is principally due to a decrease in staff resulting from the sale of our commercial mortgage operations in June 2001 and a decrease in incentive commissions resulting from fewer manufactured home loan originations. LIQUIDITY AND CAPITAL RESOURCES Liquidity is the measurement of our ability to have adequate cash or access to cash at all times in order to meet financial obligations when due as well as to fund corporate expansion or other activities. We expect to meet our liquidity requirements through a combination of working capital provided by operating activities, draws on our lines of credit, advances under our master repurchase agreement, whole loan sales and periodic securitizations of our loan portfolio. We may also issue additional equity in Bingham or its subsidiaries when and if we believe existing shareholders are likely to benefit from such offerings. As of June 30, 2002 total borrowings were $71.6 million compared to $123.0 million at December 31, 2001, a decrease of 41.8%. The decreased borrowings were primarily the result of the securitization of approximately $135.0 million of manufactured home loans completed on March 27, 2002. Proceeds from the securitization totaled approximately $128.0 million which were used to pay down our existing lines of credit. The origination of new manufactured home loans also impacts total borrowings. Loan originations for the six months ended June 30, 2002 were $73.9 million compared to $135.6 million for the six months ended June 30, 2001, a decrease of 45.5% Our primary sources of liquidity include cash generated from operations, borrowing availability under our three credit facilities and our securitization program through which loans are sold into the asset backed securities market. 16 BINGHAM FINANCIAL SERVICES CORPORATION Origen LLC currently has a line of credit extended by Sun Communities Operating Limited Partnership. On June 18, 2002 the agreement was amended, increasing the borrowing limit from $21.25 million to $23.125 million. On August 12, 2002 the agreement was further amended, increasing the borrowing limit from $23.125 million to $35.0 million. The line of credit will terminate on December 31, 2002 and the outstanding balance bears interest at a rate of LIBOR plus 700 basis points, with a minimum interest rate of 11% and a maximum interest rate of 15%. The line of credit is secured by a security interest in substantially all of Origen LLC's assets. Sun Communities Operating Limited Partnership and Woodward Holding, a member of Origen LLC, have entered into a participation agreement under which Sun Communities Operating Limited Partnership will loan up to approximately 57% of the borrowing limit (or $20.0 million) and Woodward Holding will loan up to approximately 43% of the borrowing limit (or $15.0 million) under the line of credit. Sun Communities Operating Limited Partnership and Woodward Holding jointly administer the line of credit. Bingham has guaranteed the obligations of Origen LLC under the line of credit and has granted the lenders a security interest in substantially all of its assets as security for the guaranty. At June 30, 2002, the outstanding balance on the line of credit was approximately $23.1 million and at August 1, 2002, the outstanding balance on the line of credit was $28.4 million. Woodward Holding is a member of Origen LLC and Sun Communities Operating Limited Partnership is a beneficial owner of SUI TRS, Inc., another member of Origen LLC. In addition, Gary A. Shiffman, Bingham's Chairman of the Board, and Arthur A. Weiss, a Director of Bingham, are affiliates of Sun Communities Operating Limited Partnership. Please see Bingham's Annual Report on Form 10-K, as amended, for a discussion of the effect of their related party transactions on our liquidity and capital resources. Bingham and Origen LLC were borrowers under a revolving credit facility with Standard Federal Bank (as successor to Michigan National Bank). Under this facility, Bingham and Origen LLC could borrow up to $10.0 million. Interest at a rate of 30-day LIBOR plus a spread was payable on the outstanding balance. The facility was terminated on June 30, 2002. The outstanding principal balance on the facility was $4.5 million at June 30, 2002. The balance was paid in full as of July 10, 2002. As of July 25, 2002 Origen LLC entered into a revolving credit facility with Bank One, NA to replace the terminated facility with Standard Federal Bank. Under this facility Origen LLC can borrow up to $8.0 million for the purpose of funding required principal, interest, taxes and insurance advances on manufactured home loans that are serviced for outside investors. Borrowings under the facility are repaid upon the collection by Origen LLC of monthly payments made by borrowers under such manufactured home loans. A negotiated interest rate is payable on the outstanding balance. To secure the loan from Bank One, Origen LLC has granted Bank One a security interest in substantially all of its assets. Bingham has guaranteed the obligations of Origen LLC under the line of credit and has granted the lenders a security interest in substantially all of its assets as security for the guaranty. The facility has a termination date of May 31, 2003. At August 1, 2002, the outstanding balance on the Bank One line of credit was $4.0 million. Credit Suisse First Boston and Origen LLC's special purpose subsidiary Origen Special Holdings, LLC, are parties to a master repurchase agreement. Under this agreement, Origen LLC contributes manufactured home loans it originates or purchases to Origen Special Holdings. Origen Special Holdings then transfers the manufactured home loans to Credit Suisse First Boston against the transfer of funds from Credit Suisse First Boston and Origen Special Holdings transfers the funds to Origen LLC for operations. Bingham guarantees the obligations of Origen Special Holdings under this agreement. The maximum financing limit on the facility is $150.0 million. The annual interest rate on the facility is a variable rate equal to LIBOR plus a spread. The loans are financed on the facility at varying advance rates on the lesser of the then current face value or market value of the loans. The advance rates depend on the characteristics of the loans financed. In May 2002, the termination date of the facility was extended to May 27, 2003. At June 30, 2002, the aggregate amount advanced by Credit Suisse First Boston under the facility was $43.9 million and at August 1, 2002 the aggregate amount advanced under the facility was $63.7 million. 17 BINGHAM FINANCIAL SERVICES CORPORATION In addition to these borrowings, we have fixed contractual obligations under various lease agreements. Our contractual obligations were comprised of the following as of June 30, 2002:

(1) These repurchase obligations are owed by Origen LLC to Credit Suisse First Boston. (2) Origen LLC is the borrower under the Sun Communities Operating Limited Partnership line of credit and Origen LLC and Bingham are co-borrowers under the Standard Federal Bank line of credit. (3) Bingham is the guarantor of the obligations of Origen LLC under the Credit Suisse First Boston repurchase agreement and under the Sun Communities Operating Limited Partnership line of credit. Our future liquidity and capital requirements depend on numerous factors, many of which are outside of our control. Based on our business model and the nature of the capital markets, we expect we will need to raise additional capital before the end of 2002, even if we maintain our borrowing relationships with Credit Suisse First Boston and Sun Communities Operating Limited Partnership and Bank One. As a result, during that time we will need to obtain funding from sources such as operating activities, loan sales or securitizations, sales of debt or member interests by Origen LLC or additional debt financing arrangements. Our ability to obtain funding from operations may be adversely impacted by, among other things, market and economic conditions in the manufactured home financing markets generally, including decreased sales of manufactured homes. Our ability to obtain funding from loan sales and securitizations may be adversely impacted by, among other things, the price and credit quality of our loans, conditions in the securities markets generally (and specifically in the asset-backed securities), compliance of our loans with the eligibility requirements for a particular securitization and any material negative rating agency action pertaining to certificates issued in our securitizations. Our ability to obtain funding from sales of securities or debt financing arrangements may be adversely impacted by, among other things, market and economic conditions in the manufactured home financing markets generally and our financial condition and prospects. We will also need additional funds to meet our long-term capital needs. In order to meet these capital needs, in addition to the sources of capital referenced above, we believe we must raise additional capital or merge or enter into a joint venture or otherwise enter into a strategic business relationship that would provide access to low-cost funds. We may not be able to enter into such a relationship on favorable terms, or at all, if our business is adversely affected by any of the factors described in the preceding paragraph. While we continue to pursue these options with respect to meeting our long-term capital needs, there can be no assurance that these efforts will be successful. If these efforts are not successful, our ability to continue operations would be jeopardized. LOANS RECEIVABLE Net loans receivable were $63.3 million at June 30, 2002 compared to $126.6 million at December 31, 2001, a decrease of $63.3 million or 50.0%. For the three and six months ended June 30, 2002 manufactured home loan originations were $48.8 million and $73.9 million, respectively. New loan originations were offset by the securitization and sale of approximately $135.0 million of principal balance of manufactured home loans in March 2002. 18 BINGHAM FINANCIAL SERVICES CORPORATION The carrying amounts of loans receivable consisted of the following:

The following table sets forth the average loan balance, weighted average loan yield and weighted average initial term of the manufactured home loan portfolio:

Delinquency statistics for the manufactured home loan portfolio are as follows:

19 BINGHAM FINANCIAL SERVICES CORPORATION Non-performing loans as a percentage of the total portfolio of manufactured home loans available for sale increased to 4.6% at June 30, 2002 compared to 2.0% at December 31, 2001. The increase is primarily the result of the sale of the majority of our performing loans in the $135.0 million manufactured home loan securitization completed in March 2002. The gross principal balance of non-performing loans was approximately $3.0 million at June 30, 2002 compared to $2.6 million at December 31, 2001 an increase of 15.4%. We define non-performing loans as those loans that are 90 or more days delinquent in contractual principal payments. 20 BINGHAM FINANCIAL SERVICES CORPORATION ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the risk of loss arising from adverse changes in market prices and interest rates. Our market risk arises from interest rate risk inherent in our financial instruments. We are not currently subject to foreign currency exchange rate risk or commodity price risk. The following table shows the contractual maturity dates of our assets and liabilities. For each maturity category in the table the difference between interest-earning assets and interest-bearing liabilities reflects an imbalance between repricing opportunities for the two sides of the balance sheet. The consequences of a negative cumulative gap at the end of one year suggests that, if interest rates were to rise, liability costs would increase more quickly than asset yields, placing negative pressure on earnings.

21 BINGHAM FINANCIAL SERVICES CORPORATION Our operations may be directly affected by fluctuations in interest rates. While we monitor interest rates and have in the past employed strategies designed to hedge some of the risks associated with changes in interest rates, such as the use of forward interest rate swaps and Treasury rate locks, no assurance can be given that our results of operations and financial condition will not be adversely affected during periods of fluctuations in interest rates. We currently have no open hedge positions on our loans held for sale. Our present strategy is to securitize or sell all new production within three to nine months of origination. Because the interest rates on our lines of credit used to fund and acquire loans are variable and the rates charged on loans we originate are fixed, increases in the interest rates after the loans are originated but before they are sold may reduce the gain on loan sales. The following table shows our financial instruments that are sensitive to changes in interest rates, categorized by expected maturity, and the instruments' fair values at June 30, 2002.

22 BINGHAM FINANCIAL SERVICES CORPORATION PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is subject to various claims and legal proceedings arising out of the normal course of business, none of which in the opinion of management are expected to have a material effect on the Company's financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its annual meeting of shareholders on June 20, 2002. At the meeting, the Company's shareholders were asked to elect two directors to serve on the board of directors until the 2005 annual meeting or until their respective successors are elected and to ratify the appointment of the Company's independent auditors, Plante & Moran, LLP. Ronald A. Klein and Arthur A. Weiss were elected to the board of directors. Each of Messrs. Klein and Weiss received 1,831,506 votes for election to the board and 15,130 votes against election. The terms of office of the following directors continued after the meeting: Mark A. Gordon, Brian M. Hermelin, Robert H. Orley and Gary A. Shiffman. Mr. Gordon subsequently resigned as a director effective as of July 1, 2002. The appointment of Plante & Moran, LLP as the Company's independent auditors was ratified by the Company's shareholders. Votes for the ratification were 1,838,686, votes against were 7,100, and votes withheld were 850. ITEM 6.(A) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K

23 BINGHAM FINANCIAL SERVICES CORPORATION ITEM 6.(B) REPORTS ON FORM 8-K (1) Bingham filed a report on Form 8-K dated April 25, 2002 disclosing that it caused its wholly-owned subsidiary Origen Financial, Inc., a Virginia corporation ("Origen Inc."), to be merged with and into Origen Financial L.L.C. ("Origen LLC"). Origen Inc.'s operating subsidiaries were also merged into limited liability company subsidiaries of Origen. The report was filed on May 9, 2002. (2) Bingham filed a report on Form 8-K dated May 22, 2002 disclosing that the Company's stock was delisted from the Nasdaq SmallCap Market, effective with the opening of business on May 22, 2002, and that the Company expects that its stock will now trade on the Over the Counter Bulletin Board under the symbol BFSC.OB. The report was filed on May 31, 2002. 24 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: August 14, 2002 BINGHAM FINANCIAL SERVICES CORPORATION By: /s/ W. Anderson Geater, Jr. ----------------------- W. Anderson Geater, Jr. Chief Financial Officer (Duly authorized officer and principal financial officer) CERTIFICATION The undersigned officers hereby certify that: (a) this Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (b) the information contained in this Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the issuer. /s/ Ronald A. Klein Dated: August 14, 2002 ------------------------------------------------ Ronald A. Klein, Chief Executive Officer /s/ W. Anderson Geater, Jr. Dated: August 14, 2002 ------------------------------------------------ W. Anderson Geater, Jr., Chief Financial Officer 25 EXHIBIT INDEX

BINGHAM FINANCIAL SERVICES CORP 10-Q