##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly period ended March 31, 2008.
 o
    
    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 000-24478.
 DEARBORN BANCORP, INC.
  Michigan
    
    38-3073622(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)1360 Porter Street, Dearborn, MI
    
    48124(Address of principal executive office)
    
    (Zip Code)
 (Registrants telephone number, including area code)
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ
  Class
    
    Shares OutstandingCommon Stock
    
    8,082,913




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##### 



PagePart I.
    
    Financial Information:Item 1.
    
    Financial StatementsThe following consolidated financial statements of Dearborn
Bancorp, Inc. and its subsidiary included in this report are:Report of Independent Registered Public Accounting Firm
    
    3Consolidated Condensed Balance Sheets  March 31, 2008,
December 31, 2007 and March 31, 2007
    
    4Consolidated Condensed Statements of Income  For the Three
Months Ended March 31, 2008 and 2007
    
    5Consolidated Condensed Statements of Comprehensive Income  For
the Three Months Ended March 31, 2008 and 2007
    
    6Consolidated Condensed Statements of Cash Flows  For the
Three Months Ended March 31, 2008 and 2007
    
    7Notes to Consolidated Financial Statements
    
    9-16Item 2.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    17-32Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    33-35Item 4.
    
    Controls and Procedures
    
    36Part II.
    
    Other Information:Pursuant to SEC rules and regulations, the following item(s) are
included with the Form 10-Q Report:Item 6. Exhibits and Reports on Form 8-K
    
    37Pursuant to SEC rules and regulations, the following items are omitted
from this Form 10-Q as inapplicable or to which the answer is negative:Item 1.    Legal ProceedingsItem 1A. Risk FactorsItem 2.    Changes in Securities and Use of ProceedsItem 3.    Defaults upon Senior SecuritiesItem 4.    Submission of Matters to a Vote of Security HoldersItem 5.    Other InformationSIGNATURES
    
    38
  2




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##### 



3




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##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 
 CONSOLIDATED CONDENSED BALANCE SHEETS
 (Unaudited)
    
    
    
    
    
    
    (Unaudited)(Dollars, in thousands)
    
    03/31/08
    
    
    12/31/07
    
    
    03/31/07ASSETSCash and cash equivalentsCash and due from banks
    
    $
    12,736
    
    
    $
    7,869
    
    
    $
    15,720Federal funds sold
    
    
    1,958
    
    
    
    1,495
    
    
    
    8,956Interest bearing deposits with banks
    
    
    105
    
    
    
    118
    
    
    
    59Total cash and cash equivalents
    
    
    14,799
    
    
    
    9,482
    
    
    
    24,735Mortgage loans held for sale
    
    
    282
    
    
    
    1,316
    
    
    
    582Securities, available for sale
    
    
    8,921
    
    
    
    8,902
    
    
    
    10,554Federal Home Loan Bank stock
    
    
    3,540
    
    
    
    2,072
    
    
    
    1,927LoansLoans
    
    
    947,927
    
    
    
    952,084
    
    
    
    938,510Allowance for loan loss
    
    
    (10,749
    )
    
    
    (10,617
    )
    
    
    (9,647
    )Net loans
    
    
    937,178
    
    
    
    941,467
    
    
    
    928,863Premises and equipment, net
    
    
    22,546
    
    
    
    22,782
    
    
    
    23,376Real estate owned
    
    
    6,183
    
    
    
    6,319
    
    
    
    3,157Goodwill
    
    
    34,028
    
    
    
    34,028
    
    
    
    32,133Other intangible assets
    
    
    10,810
    
    
    
    11,133
    
    
    
    14,033Accrued interest receivable
    
    
    4,134
    
    
    
    3,816
    
    
    
    4,019Other assets
    
    
    5,208
    
    
    
    5,664
    
    
    
    2,500Total assets
    
    $
    1,047,629
    
    
    $
    1,046,981
    
    
    $
    1,045,879LIABILITIESDepositsNon-interest bearing deposits
    
    $
    80,725
    
    
    $
    83,594
    
    
    $
    99,923Interest bearing deposits
    
    
    688,492
    
    
    
    739,033
    
    
    
    748,113Total deposits
    
    
    769,217
    
    
    
    822,627
    
    
    
    848,036Other liabilitiesFederal funds purchased
    
    
    56,480
    
    
    
    30,100
    
    
    
    Securities sold under agreements to repurchase
    
    
    275
    
    
    
    480
    
    
    
    355Federal Home Loan Bank advances
    
    
    70,795
    
    
    
    41,370
    
    
    
    37,241Accrued interest payable
    
    
    2,548
    
    
    
    3,168
    
    
    
    4,627Other liabilities
    
    
    1,017
    
    
    
    1,688
    
    
    
    650Subordinated debentures
    
    
    10,000
    
    
    
    10,000
    
    
    
    10,000Total liabilities
    
    
    910,332
    
    
    
    909,433
    
    
    
    900,909STOCKHOLDERS EQUITYCommon stock - 20,000,000 shares authorized,
8,106,413 shares at 03/31/08, 8,237,413
shares at
12/31/07; and 8,876,368 shares at 03/31/07
    
    
    133,332
    
    
    
    134,278
    
    
    
    143,263Retained earnings
    
    
    3,926
    
    
    
    3,250
    
    
    
    1,702Accumulated other comprehensive income
    
    
    39
    
    
    
    20
    
    
    
    5Total stockholders equity
    
    
    137,297
    
    
    
    137,548
    
    
    
    144,970Total liabilities and stockholders equity
    
    $
    1,047,629
    
    
    $
    1,046,981
    
    
    $
    1,045,879
  4




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##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 
 CONSOLIDATED CONDENSED STATEMENTS OF INCOME (unaudited)
 Three Months Ended
    
    
    Three Months Ended(In thousands, except share and per share data)
    
    03/31/08
    
    
    03/31/07Interest incomeInterest on loans
    
    $
    16,174
    
    
    $
    17,125Interest on securities, available for sale
    
    
    108
    
    
    
    178Interest on federal funds
    
    
    16
    
    
    
    166Interest on deposits with banks
    
    
    1
    
    
    
    2Total interest income
    
    
    16,299
    
    
    
    17,471Interest expenseInterest on deposits
    
    
    7,028
    
    
    
    7,778Interest on other borrowings
    
    
    993
    
    
    
    804Interest on subordinated debentures
    
    
    225
    
    
    
    240Total interest expense
    
    
    8,246
    
    
    
    8,822Net interest income
    
    
    8,053
    
    
    
    8,649Provision for loan losses
    
    
    886
    
    
    
    617Net interest income after provision for loan losses
    
    
    7,167
    
    
    
    8,032Non-interest incomeService charges on deposit accounts
    
    
    380
    
    
    
    318Fees for other services to customers
    
    
    39
    
    
    
    54Gain on the sale of loans
    
    
    53
    
    
    
    54Loss on the sale of other real estate owned
    
    
    (235
    )
    
    
    Write-down on real estate owned
    
    
    (200
    )
    
    
    Other income
    
    
    74
    
    
    
    19Total non-interest income
    
    
    111
    
    
    
    445Non-interest expensesSalaries and employee benefits
    
    
    3,209
    
    
    
    3,552Occupancy and equipment expense
    
    
    913
    
    
    
    958Intangible expense
    
    
    323
    
    
    
    336Advertising and marketing
    
    
    123
    
    
    
    77Stationery and supplies
    
    
    133
    
    
    
    124Professional services
    
    
    226
    
    
    
    264Data processing
    
    
    225
    
    
    
    124Defaulted loan expense
    
    
    435
    
    
    
    130Other operating expenses
    
    
    651
    
    
    
    422Total non-interest expenses
    
    
    6,238
    
    
    
    5,987Income before income tax provision
    
    
    1,040
    
    
    
    2,490Income tax provision
    
    
    364
    
    
    
    872Net income
    
    $
    676
    
    
    $
    1,618Per share data:Net income  basic
    
    $
    0.08
    
    
    $
    0.18Net income  diluted
    
    $
    0.08
    
    
    $
    0.18Weighted average number of shares outstanding  basic
    
    
    8,139,721
    
    
    
    8,898,058Weighted average number of shares outstanding -
diluted
    
    
    8,198,676
    
    
    
    9,159,855
  5




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##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 
 CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
 Three Months Ended
    
    
    Three Months Ended(In thousands)
    
    03/31/08
    
    
    03/31/07Net income
    
    $
    676
    
    
    $
    1,618Other comprehensive income , net of taxUnrealized gains on securitiesUnrealized holding gains arising during period
    
    
    29
    
    
    
    15Less: reclassification adjustment for gains
included
in net income
    
    
    
    
    
    
    Tax effects
    
    
    (10
    )
    
    
    (4
    )Other comprehensive income
    
    
    19
    
    
    
    11Comprehensive income
    
    $
    695
    
    
    $
    1,629
  6




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##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 
 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 Three Months Ended(In thousands)
    
    3/31/2008
    
    
    3/31/2007Cash flows from operating activitiesInterest and fees received
    
    $
    15,981
    
    
    $
    16,789Interest paid
    
    
    (8,866
    )
    
    
    (7,929
    )Proceeds from sale of mortgages held for sale
    
    
    5,526
    
    
    
    6,991Origination of mortgages held for sale
    
    
    (5,135
    )
    
    
    (5,666
    )Taxes paid (refunded)
    
    
    219
    
    
    
    (100
    )Proceeds from the sale of real estate owned
    
    
    2,891
    
    
    
    Cash paid to suppliers and employees
    
    
    (5,620
    )
    
    
    (8,194
    )Net cash provided by operating activities
    
    
    4,996
    
    
    
    1,891Cash flows from investing activitiesProceeds from the sale of securities available for sale
    
    
    3,850
    
    
    
    18,007Proceeds from calls, maturities and repayments of
of securities available for sale
    
    
    23
    
    
    
    108Purchases of securities available for sale
    
    
    (3,807
    )
    
    
    (22,741
    )Purchase of Federal Home Loan Bank stock
    
    
    (1,468
    )
    
    
    (639
    )Increase in loans, net of payments received
    
    
    613
    
    
    
    (2,986
    )Purchases of property and equipment
    
    
    (113
    )
    
    
    (4,708
    )Net cash paid in Fidelity acquisition
    
    
    
    
    
    
    (32,134
    )Net cash used in investing activities
    
    
    (902
    )
    
    
    (45,093
    )Cash flows from financing activitiesNet increase (decrease) in non-interest bearing deposits
    
    
    (2,869
    )
    
    
    850Net increase (decrease) in interest bearing deposits
    
    
    (50,541
    )
    
    
    26,423Decrease in other borrowings
    
    
    (205
    )
    
    
    (264
    )Net increase (decrease) in federal funds payable
    
    
    26,380
    
    
    
    (37,300
    )Proceeds from Federal Home Loan Bank advances
    
    
    29,425
    
    
    
    9,913Purchase of common stock
    
    
    (967
    )
    
    
    (1,929
    )Exercise of stock options
    
    
    
    
    
    
    31Tax benefit of stock options exercised
    
    
    
    
    
    
    183Net cash provided by (used in) financing activities
    
    
    1,223
    
    
    
    (2,093
    )Increase (decrease) in cash and cash equivalents
    
    
    5,317
    
    
    
    (45,295
    )Cash and cash equivalents at the beginning of the period
    
    
    9,482
    
    
    
    70,030Cash and cash equivalents at the end of the period
    
    $
    14,799
    
    
    $
    24,735
  7




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##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued)
 Three Months Ended(In thousands)
    
    3/31/2008
    
    
    3/31/2007Reconciliation of net income to net cash provided by operating activitiesNet income
    
    $
    676
    
    
    $
    1,618Adjustments to reconcile net income to net cash
provided by operating activitiesProvision for loan losses
    
    
    886
    
    
    
    617Depreciation and amortization expense
    
    
    349
    
    
    
    337Restricted stock award expense
    
    
    14
    
    
    
    49Stock option expense
    
    
    6
    
    
    
    22Accretion of discount on investment securities
    
    
    (55
    )
    
    
    (35
    )Amortization of premium on investment securities
    
    
    
    
    
    
    Amortization of intangible assets
    
    
    323
    
    
    
    336Decrease in mortgages held for sale
    
    
    1,034
    
    
    
    1,241(Increase) decrease in interest receivable
    
    
    (318
    )
    
    
    562Increase (decrease) in interest payable
    
    
    (639
    )
    
    
    556(Increase) decrease in real estate owned
    
    
    2,926
    
    
    
    (Increase) decrease in other assets
    
    
    465
    
    
    
    (1,589
    )Decrease in other liabilities
    
    
    (671
    )
    
    
    (1,823
    )Net cash provided by operating activities
    
    $
    4,996
    
    
    $
    1,891Supplemental noncash disclosures:Transfers from loans to real estate owned
    
    $
    2,790
    
    
    $
    2,525Noncash investing activities:Fidelity Bank acquisition:Loans acquired
    
    
    
    
    
    
    178,052Bank premises and equipment
    
    
    
    
    
    
    9,214Acquisition intangibles recorded
    
    
    
    
    
    
    34,195Other assets acquired
    
    
    
    
    
    
    2,194Deposits assumed
    
    
    
    
    
    
    (187,459
    )Borrowings assumed
    
    
    
    
    
    
    (1,767
    )Other liabilities assumed
    
    
    
    
    
    
    (2,295
    )$
    32,134
  8




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##### 



A.
    
    Accounting and Reporting PoliciesThe consolidated condensed financial statements of Dearborn Bancorp, Inc. (the
Corporation) include the consolidation of its only subsidiary, Fidelity Bank (the
Bank). The accounting and reporting policies of the Corporation are in accordance with
accounting principles generally accepted in the United States of America and conform to
practice within the banking industry.The consolidated condensed financial statements of the Corporation as of March 31, 2008 and
2007, and December 31, 2007 and for the three month periods ended March 31, 2008 and 2007
reflect all adjustments, consisting of normal recurring items which are in the opinion of
management, necessary for a fair presentation of the results for the interim period. The
consolidated condensed balance sheet of the Corporation as of December 31, 2007 has been
derived from the audited consolidated balance sheet as of that date. The operating results
for the quarter are not necessarily indicative of results of operations for the entire
year.The consolidated condensed financial statements as of March 31, 2008 and 2007, and for the
three months ended March 31, 2008 and 2007 included herein have been prepared by the
Corporation, without an audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally included in
interim financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted pursuant to such
rules and regulations. These financial statements should be read in conjunction with the
financial statements and notes thereon included in the Corporations 2007 Annual Report to
Stockholders on Form 10-K.Certain of the Corporations accounting policies are important to the portrayal of the
Corporations financial condition, since they require management to make difficult, complex
or subjective judgments, some of which may relate to matters that are inherently uncertain.
Estimates associated with these policies are susceptible to material changes as a result
of changes in facts and circumstances. Facts and circumstances which could affect these
material judgments include, but without limitation, changes in interest rates, in the
performance of the economy or in the financial condition of borrowers. Management believes
that its critical accounting policies include determining the allowance for loan losses and
determining the fair value of securities and other financial instruments and assessing
other than temporary impairments of securities.
 9




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A.
    
    Accounting and Reporting Policies (cont)Income Per ShareBasic income per share is net income divided by the weighted average number of common shares
outstanding during the period. Diluted income per share includes the dilutive effect of
additional potential common shares issuable under stock options. Income per share is
restated for all stock splits and dividends through the date of issue of the financial
statements.Stock options for 292,923 and 35,244 shares of common stock were not considered in computing
diluted earnings per common share for the three months ended March 31, 2008 and 2007,
respectively, because they were antidilutive. All share and per share amounts have been
adjusted for stock dividends.Effect of Newly Issued Accounting StandardsIn September 2006, the FASB issued Statement No. 157, Fair Value Measurements. This
statement defines fair value, establishes a framework for measuring fair value and expands
disclosures about fair value measurements. This Statement establishes a fair value
hierarchy about the assumptions used to measure fair value and clarifies assumptions about
risk and the effect of a restriction on the sale or use of an asset. The standard is
effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB
issued Staff Position (FSP) 157-2, Effective Date of FASB Statement No. 157. This FSP
delays the effective date of FAS 157 for all nonfinancial assets and nonfinancial
liabilities, except those that are recognized or disclosed at fair value on a recurring
basis (at least annually) to fiscal years beginning after November 15, 2008, and interim
periods within those fiscal years. The adoption of this statement did not have a material
impact on the Corporations consolidated financial statements.In February 2006, FASB issued Statement No. 159, The Fair Value Option for Financial Assets
and Liabilities (SFAS 159). Adoption of SFAS 159 is required for January 1, 2008. This
statement allows, but does not require, companies to record certain assets and liabilities
at their fair value. The fair value determination is made at the instrument level, so
similar assets or liabilities could be partially accounted for using the historical cost
method, while other similar assets or liabilities are accounted for using the fair value
method. Changes in fair value are recorded through the income statement in subsequent
periods. The statement provides for a one time opportunity to transfer existing assets and
liabilities to fair value at the point of adoption with a cumulative effect adjustment
recorded against equity. After adoption, the election to report assets or liabilities at
fair value must be made at the point of their inception. The adoption of this statement did
not have a material impact on the Corporations consolidated financial statements.
 10




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##### 



A.
    
    Accounting and Reporting Policies (cont)Future Accounting MattersFinancial Accounting Standards Board Statement No. 141 (SFAS 141R), Business Combinations
(Revised 2007), was issued in December 2007 and replaces SFAS 141 which applies to all
transactions and other events in which one entity obtains control over one or more other
businesses. SFAS 141R requires an acquirer, upon initially obtaining control of another
entity, to recognize the assets, liabilities and any non-controlling interest in the
acquiree at fair value as of the acquisition date. Contingent consideration is required to
be recognized and measured at fair value on the date of acquisition rather than at a later
date when the amount of that consideration may be determinable beyond a reasonable doubt.
This fair value approach replaces the cost allocation process required under SFAS 141
whereby the cost of an acquisition was allocated to the individual asset acquired and
liabilities assumed based on their estimated fair value. SFAS 141R requires acquirers to
expense acquisition-related costs as incurred rather than allocating such costs to the
assets acquired and liabilities assumed.Under SFAS 141R, the requirements of SFAS 146, Accounting for Costs Associated with Exit or
Disposal Activities, would have to be met in order to accrue for a restructuring plan in
purchase accounting. Pre-acquisition contingencies are to be recognized at fair value,
unless it is a non-contractual contingency that is not likely to materialize, in which case,
nothing should be recognized in purchase accounting. Instead, that contingency would be
subject to the probable and estimable recognition criteria under SFAS 5, Accounting for
Contingencies. The Corporation is evaluating the requirements of SFAS 141R to determine if
it will have a significant impact on the Corporations financial condition or results of
operations.Financial Accounting Standards Board Statement No. 160 (SFAS 160), Noncontrolling Interest
in Consolidated Financial Statements, an amendment of ARB Statement No. 51,was issued in
December 2007 and establishes accounting and reporting standards for the non-controlling
interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 clarifies
that a non-controlling interest in a subsidiary, which is sometimes referred to as a
minority interest, is an ownership interest in the consolidated entity that should be
reported as a component of equity in the consolidated financial statements. Among other
requirements, SFAS 160 requires consolidated net income to be reported at amounts that are
attributable to both the parent and the non-controlling interest. It also requires
disclosure, on the face of the consolidated income statement, of the amounts of consolidated
net income attributable to the parent and to the non-controlling interest. SFAS 160 is
effective for the Corporation on January 1, 2009 and is not expected to have a significant
impact on the Corporations financial statements.
 11




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##### 



A.
    
    Accounting and Reporting Policies (cont)Financial Accounting Standards Board Statement No. 161 (SFAS 161), Disclosures About
Derivative Instruments and Hedging Activities, an Amendment of FASB Statement No. 133,was
issued in March 2008 and amends and expands the disclosure requirements of SFAS 133 to
provide greater transparency about (i) how and why an entity uses derivative instruments,
(ii) how derivative instruments and related hedge items are accounted for under SFAS 133 and
its related interpretations, and (iii) how derivative instruments and related hedged items
affect an entitys financial position, results of operations and cash flows. To meet those
objectives, SFAS 161 requires qualitative disclosures about objectives and strategies for
using derivatives, quantitative disclosures about fair value amounts of gains and losses on
derivative instruments and disclosures about credit-risk-related contingent features in
derivative agreements. SFAS 161 is effective for the Corporation on January 1, 2009 and is
not expected to have a significant impact on the Corporations financial statements.B.
    
    Securities Available For SaleThe amortized cost and fair value of securities available for sale are as follows (in
thousands):
 March 31, 2008Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueUS Treasury securities
    
    $
    6,815
    
    
    $
    15
    
    
    $
    
    
    
    $
    6,830US Government sponsored
equity securities
    
    
    1,006
    
    
    
    14
    
    
    
    
    
    
    
    1,020Municipal securities
    
    
    758
    
    
    
    24
    
    
    
    
    
    
    
    782Mortgage backed securities
    
    
    283
    
    
    
    6
    
    
    
    
    
    
    
    289Totals
    
    $
    8,862
    
    
    $
    59
    
    
    $
    
    
    
    $
    8,921
 December 31, 2007Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueUS Treasury securities
    
    $
    6,800
    
    
    
    15
    
    
    
    ($10
    )
    
    $
    6,805US Government sponsored
equity securities
    
    
    1,009
    
    
    
    4
    
    
    
    
    
    
    
    1,013Municipal securities
    
    
    758
    
    
    
    16
    
    
    
    
    
    
    
    774Mortgage backed securities
    
    
    305
    
    
    
    5
    
    
    
    
    
    
    
    310Totals
    
    $
    8,872
    
    
    $
    40
    
    
    
    ($10
    )
    
    $
    8,902
 12




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##### 



B.
    
    Securities Available for Sale (cont)The amortized cost and fair value of securities available for sale at March 31, 2008 by
contractual maturity are shown below (in thousands):
 Amortized
    
    
    FairCost
    
    
    ValueDue in less than one year
    
    
    7,821
    
    
    
    7,850Due in one year through five years
    
    
    758
    
    
    
    782Mortgage backed securities
    
    
    283
    
    
    
    289Totals
    
    $
    8,862
    
    
    $
    8,921
 The entire portfolio has a net unrealized gain of $59,000 at March 31, 2008. There were no
securities with unrealized losses at March 31, 2008The Corporation does not hold any securities in the Held to Maturity category nor does the
Corporation hold or utilize derivatives.C.
    
    Incentive Stock PlansIncentive stock awards have been granted to officers and employees under two Incentive Stock
Plans. The first plan is the 1994 Stock Option Plan. Options to buy common stock have been
granted to officers and employees under the 1994 Stock Option Plan, which provides for issue
of up to 738,729 shares. Exercise price is the market price at date of grant. The maximum
option term is ten years, and options vest fully after six months from the date of grant.A summary of the option activity in the 1994 Plan follows:
 WeightedAvailable
    
    
    
    
    
    
    Averagefor
    
    
    Options
    
    
    ExerciseGrant
    
    
    Outstanding
    
    
    PriceOutstanding at January 1, 2008
    
    
    
    
    
    
    453,682
    
    
    $
    8.29Forfeited
    
    
    
    
    
    
    (20,149
    )
    
    
    7.45Outstanding at March 31, 2008
    
    
    
    
    
    
    433,533
    
    
    $
    8.33
 For the options outstanding at March 31, 2008, the range of exercise prices was $4.18 to
$14.65 per share with a weighted-average remaining contractual term of 3.4 years. At March
31, 2008, 433,533 options were exercisable at weighted average exercise price of $8.33 per
share. There were no options exercised during the quarter. The options outstanding at
March 31, 2008 have no intrinsic value.
 13




---



##### 



During 2005, the Corporation initiated the 2005 Long-Term Incentive Plan. Under this plan,
up to 347,248 shares may be granted to officers and employees of the Bank. This plan
provides that stock awards may take the form of any combination of options, restricted
shares, restricted share units or performance awards.The administration of the plan, including the granting of awards and the nature of those
awards is determined by the Corporations Compensation Committee. The Corporations Board
of Directors approved grants of stock options and restricted stock in 2005 and 2006. The
awards have a term of ten years and typically vest fully three years from the grant date.
In order for vesting to occur, the Corporation must meet certain performance criteria over
the vesting period. The expected compensation cost of the 2005 plan is being calculated
assuming the Corporations attainment of target performance goals over the vesting period
of the awards. The actual cost of these awards could range from zero to 100% of the
currently recorded compensation cost, depending on the Corporations actual performance.Stock Options Granted  The incentive stock options were granted with exercise prices equal
to market prices on the day of grant. At March 31, 2008, there were 35,251 stock options
outstanding with a weighted average exercise price of $13.06. These options are eligible to
vest fully three years from grant date.The Corporation recognized stock option compensation expense of $7,000 during the three
months ended March 31, 2008. Compensation cost of $14,000 and $7,000 is expected to be
recognized during 2008 and 2009, respectively.Restricted Stock Grants   Restricted stock was awarded to officers in 2005 and 2006. The
restricted stock is eligible to vest three years from grant date. At March 31, 2008, there
were 23,956 shares of restricted stock outstanding.The Corporation recognized restricted stock compensation expense of $14,000 during the three
months ended March 31, 2008. Compensation cost of $27,000 and $13,000 is expected to be
recognized during 2008 and 2009, respectively.
 14




---



##### 



D.
    
    Fair Value of Assets and LiabilitiesEffective January 1, 2008, the Corporation adopted Statement of Financial Accounting
Standards No. 157, Fair Value Measurements (SFAS 157). SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about fair value
measurements. SFAS 157 has been applied prospectively as of the beginning of 2008.SFAS 157 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. SFAS 157 also establishes a fair value hierarchy which requires an entity
to maximize the use of observable inputs when measuring fair value. The standard describes
three levels of inputs that may be used to measure fair value:
 Level 1 
    
    Quoted prices in active markets for identical assets or liabilitiesLevel 2 
    
    Observable inputs other than Level 1 prices, such as quoted prices for similar
similar assets or liabilities; quoted prices in active markets that are not active; or other
inputs that are observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilitiesLevel 3 
    
    Unobservable inputs that are supported by little or no market activity and that
are significant to the fair value of the assets or liabilities
 Following is a description of the valuation methodologies used for instruments measured at
fair value on a recurring basis and recognized in the accompanying balance sheet, as well as
the general classification of such instruments pursuant to our valuation hierarchy.Securities available for saleFair values of securities, available for sale are estimated by a third party using inputs
that are observable or that can be corroborated by observable market data and, therefore,
are classified within Level 2 of the valuation hierarchy.The following table presents the fair value measurements of the Corporations assets and
liabilities recognized in the accompanying balance sheet measured at fair value on a
recurring basis and the level within the SFAS 157 fair value hierarchy in which the fair
value measurements fall at March 31, 2008 (in thousands):
 SignificantQuoted Prices in
    
    Other
    
    SignificantActive Markets for
    
    Observable
    
    UnobservableIdentical Assets
    
    Inputs
    
    InputsFair Value
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Securities, available for sale
    
    $
    8,921
    
    
    $
    6,830
    
    
    $
    2,091
    
    
    $
    
 15




---



##### 



D
    
    Fair Value of Assets and Liabilities ( cont)The change in unrealized gains on securities, available for sale during the three months
ended March 31, 2008 was $29,000.Impaired LoansLoan impairment is reported when full payment under the loan terms is not expected.
Impaired loans are carried at the present value of estimated future cash flows using the
loans existing rate, or the fair value of collateral if the loan is collateral dependent.
A portion of the allowance for loan losses is allocated to impaired loans if the value of
such loans is deemed to be less than the unpaid balance. If these allocations cause the
allowance for loan losses to increase, such increase is reported as a component of the
provision for loan losses. Loan losses are charged against the allowance when management
believes the uncollectability of the loan is confirmed. During the first quarter of 2008,
certain impaired loans were partially charged-off or re-evaluated, This valuation would be
considered Level 3, consisting of appraisals of underlying collateral and discounted cash
flow analysis.The following table presents the fair value measurements of the Corporations assets and
liabilities recognized in the accompanying balance sheet measured at fair value on a
non-recurring basis and the level within the SFAS 157 fair value hierarchy in which the fair
value measurements fall at March 31, 2008 (in thousands):
 SignificantQuoted Prices in
    
    Other
    
    SignificantActive Markets for
    
    Observable
    
    UnobservableIdentical Assets
    
    Inputs
    
    InputsFair Value
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Loans
    
    $
    15,530
    
    
    $
    
    
    
    $
    15,530
    
    
    $
    
 16




---



##### 



PART I    FINANCIAL INFORMATION
 
 ITEM 2. -
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
    17




---



##### 



Company Overview
        Date Formed
    
    Name
    
    Services OfferedAugust 1997
    
    Community Bank Insurance Agency, Inc.
    
    Limited insurance related activitiesMarch 2002
    
    Community Bank Audit Services, Inc.
    
    Internal auditing and compliance
services for financial institutions
 18




---



##### 



19




---



##### 



Date Opened
    
    Location
    
    Type of officeFebruary 1994
    
    22290 Michigan Avenue
Dearborn, Michigan 48123
    
    Full service retail branch with ATM
Regional lending centerDecember 1995
    
    24935 West Warren Avenue
Dearborn Heights, Michigan 48127
    
    Full service retail branchAugust 1997
    
    44623 Five Mile Road
Plymouth, Michigan 48170
    
    Full service retail branch with ATMMay 2001
    
    1325 North Canton Center Road
Canton, Michigan 48187
    
    Full service retail branch with ATMDecember 2001
    
    45000 River Ridge Drive
Clinton Township, Michigan 48038
    
    Regional lending centerNovember 2002
    
    19100 Hall Road
Clinton Township, Michigan 48038
    
    Full service retail branch with ATMFebruary 2003
    
    12820 Fort Street
Southgate, Michigan 48195
    
    Full service retail branch with ATMMay 2003
    
    3201 University Drive, Suite 180
Auburn Hills, Michigan 48326
    
    Full service retail branchOctober 2004
    
    450 East Michigan Avenue
Saline, MI 48176
    
    Full service retail branch with ATMOctober 2004
    
    250 West Eisenhower Parkway
Ann Arbor, MI 48103
    
    Full service retail branch with ATM
Regional lending certerOctober 2004
    
    2180 West Stadium Blvd.
Ann Arbor, MI 48103
    
    Full service retail branch with ATMDecember 2004
    
    1360 Porter Street
Dearborn, MI 48123
    
    Loan production office
Regional lending centerJanuary 2007
    
    1040 E. Maple
Birmingham, MI 48009
    
    Full service retail branch with ATM
Regional lending certerJanuary 2007
    
    3681 W. Maple
Birmingham, MI 48301
    
    Full service retail branch with ATMJanuary 2007
    
    30700 Telegraph
Bingham Farms, MI 48025
    
    Full service retail branch with ATMJanuary 2007
    
    20000 Twelve Mile Road
Southfield, MI 48076
    
    Full service retail branch with ATMJanuary 2007
    
    26555 Evergreen
Southfield, MI 48076
    
    Full service retail branch with ATMJanuary 2007
    
    200 Galleria Officenter
Southfield, MI 48034
    
    Full service retail branch with ATMApril 2007
    
    7755 23 Mile Road
Shelby Township, MI 48075
    
    Full service retail branch with ATM
 20




---



##### 



Results of Operations
  Net Interest Income
 2008 Compared to 2007.
 Average Balances, Interest Rates and Yields.
 21




---



##### 



Three months ended
    
    
    Three months endedMarch 31, 2008
    
    
    March 31, 2007Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average(In thousands)
    
    Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateAssetsInterest bearing deposits with banks
    
    $
    180
    
    
    $
    1
    
    
    
    2.23
    %
    
    $
    279
    
    
    $
    2
    
    
    
    2.88
    %Federal funds sold
    
    
    2,051
    
    
    
    16
    
    
    
    3.13
    %
    
    
    10,309
    
    
    
    166
    
    
    
    6.46
    %Securities, available for sale
    
    
    11,946
    
    
    
    108
    
    
    
    3.63
    %
    
    
    14,440
    
    
    
    178
    
    
    
    4.94
    %Loans
    
    
    947,407
    
    
    
    16,174
    
    
    
    6.85
    %
    
    
    936,288
    
    
    
    17,125
    
    
    
    7.34
    %Sub-total earning assets
    
    
    961,584
    
    
    
    16,299
    
    
    
    6.80
    %
    
    
    961,316
    
    
    
    17,471
    
    
    
    7.29
    %Other assets
    
    
    82,455
    
    
    
    
    
    
    
    
    
    
    
    79,387Total assets
    
    $
    1,044,039
    
    
    
    
    
    
    
    
    
    
    $
    1,040,703Liabilities and stockholders equityInterest bearing deposits
    
    $
    706,231
    
    
    $
    7,028
    
    
    
    3.99
    %
    
    $
    725,266
    
    
    $
    7,778
    
    
    
    4.30
    %Other borrowings
    
    
    112,593
    
    
    
    1,218
    
    
    
    4.34
    %
    
    
    71,114
    
    
    
    1,044
    
    
    
    5.89
    %Sub-total interest
bearing liabilities
    
    
    818,824
    
    
    
    8,246
    
    
    
    4.04
    %
    
    
    796,380
    
    
    
    8,822
    
    
    
    4.44
    %Non-interest bearing deposits
    
    
    82,856
    
    
    
    
    
    
    
    
    
    
    
    92,225Other liabilities
    
    
    4,283
    
    
    
    
    
    
    
    
    
    
    
    5,773Stockholders equity
    
    
    138,076
    
    
    
    
    
    
    
    
    
    
    
    146,325Total liabilities and
stockholders equity
    
    $
    1,044,039
    
    
    
    
    
    
    
    
    
    
    $
    1,040,703Net interest income
    
    
    
    
    
    $
    8,053
    
    
    
    
    
    
    
    
    
    
    $
    8,649Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    2.76
    %
    
    
    
    
    
    
    
    
    
    
    2.85
    %Net interest margin on
earning assets
    
    
    
    
    
    
    
    
    
    
    3.36
    %
    
    
    
    
    
    
    
    
    
    
    3.61
    %
 22




---



##### 



Rate/Volume Analysis.
 Three Months Ended March 31, 2008/2007Change in Interest Due to:Average
    
    
    Average
    
    
    Net(In thousands)
    
    Balance
    
    
    Rate
    
    
    ChangeAssetsInterest bearing deposits with banks
    
    ($
    1
    )
    
    $
    
    
    
    ($
    1
    )Federal funds sold
    
    
    (65
    )
    
    
    (85
    )
    
    
    (150
    )Investment securities, available for sale
    
    
    (23
    )
    
    
    (47
    )
    
    
    (70
    )Loans
    
    
    187
    
    
    
    (1,138
    )
    
    
    (951
    )Total earning assets
    
    $
    98
    
    
    ($
    1,270
    )
    
    ($
    1,172
    )LiabilitiesInterest bearing deposits
    
    ($
    191
    )
    
    ($
    559
    )
    
    ($
    750
    )Other borrowings
    
    
    448
    
    
    
    (274
    )
    
    
    174Total interest bearing liabilities
    
    $
    257
    
    
    ($
    833
    )
    
    ($
    576
    )Net interest income
    
    
    
    
    
    
    
    
    
    ($
    596
    )Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    (0.09
    %)Net interest margin on earning assets
    
    
    
    
    
    
    
    
    
    
    (0.25
    %)
 Provision for Loan Losses
 2008 Compared to 2007.
 23




---



##### 



Non-interest Income
 2008 Compared to 2007.
  Non-interest Expense
 2008 Compared to 2007.
   Income Tax Provision
 2008 Compared to 2007.
 24




---



##### 



Comparison of Financial Condition at March 31, 2008 and December 31, 2007
 Assets.
 Federal Funds Sold.
 Interest bearing deposits with banks.
 Mortgage Loans Held for Sale.
 Securities
- Available for Sale.
  Federal Home Loan Bank Stock.
 25




---



##### 



Loans.
 03/31/08
    
    
    12/31/07
    
    
    03/31/07Consumer loans
    
    $
    34,494
    
    
    $
    35,833
    
    
    $
    36,908Commercial, financial, & other
    
    
    169,659
    
    
    
    174,958
    
    
    
    186,783Commercial real estate construction  residential property
    
    
    61,638
    
    
    
    63,639
    
    
    
    67,472Commercial real estate construction  non residential
property
    
    
    16,372
    
    
    
    10,156
    
    
    
    11,818Land development loans  residential property
    
    
    26,004
    
    
    
    33,768
    
    
    
    30,701Land development loans  non residential property
    
    
    38,885
    
    
    
    40,187
    
    
    
    34,035Commercial real estate mortgages
    
    
    543,778
    
    
    
    539,306
    
    
    
    515,958Residential real estate mortgages
    
    
    57,097
    
    
    
    54,237
    
    
    
    54,835947,927
    
    
    
    952,084
    
    
    
    938,510Allowance for loan losses
    
    
    (10,749
    )
    
    
    (10,617
    )
    
    
    (9,647
    )$
    937,178
    
    
    $
    941,467
    
    
    $
    928,863
  03/31/08
    
    
    12/31/07
    
    
    03/31/07Troubled debt restructuring
    
    $
    8,710
    
    
    $
    21,077
    
    
    $
    Over 90 days past due and still accruing
    
    
    9,257
    
    
    
    884
    
    
    
    3,858Non-accrual loans
    
    
    17,406
    
    
    
    18,117
    
    
    
    9,274Total non-performing loans
    
    
    35,373
    
    
    
    40,078
    
    
    
    13,132Real estate owned
    
    
    6,183
    
    
    
    6,319
    
    
    
    3,157Other repossessed assets
    
    
    
    
    
    
    
    
    
    
    Other non-performing assets
    
    
    6,183
    
    
    
    6,319
    
    
    
    3,157Total non-performing assets
    
    $
    41,556
    
    
    $
    46,397
    
    
    $
    16,289
   26




---



##### 



Number ofLoans
    
    
    BalanceConsumer loans
    
    
    3
    
    
    $
    162Commercial, financial, & other
    
    
    15
    
    
    
    1,549Commercial real estate construction  residential property
    
    
    5
    
    
    
    2,650Commercial real estate construction  non residential
property
    
    
    
    
    
    
    Land development loans  residential property
    
    
    9
    
    
    
    8,256Land development loans  non residential property
    
    
    
    
    
    
    Commercial real estate mortgages
    
    
    7
    
    
    
    3,392Residential real estate mortgages
    
    
    7
    
    
    
    1,397Total non-accrual loans
    
    
    46
    
    
    $
    17,406
   Allowance for Loan Losses.
 27




---



##### 



Three Months
    
    
    
    
    
    
    Three MonthsEnded
    
    
    Year Ended
    
    
    Ended03/31/08
    
    
    12/31/06
    
    
    03/31/07Balance, beginning of year
    
    $
    10,617
    
    
    $
    7,775
    
    
    $
    7,775Allowance on loans acquired
    
    
    
    
    
    
    1,704
    
    
    
    Charge-offs:Consumer loans
    
    
    99
    
    
    
    226
    
    
    
    86Commercial, financial & other
    
    
    635
    
    
    
    914
    
    
    
    82Commercial real estate construction  residential property
    
    
    6
    
    
    
    1,291
    
    
    
    Commercial real estate construction  non residential
property
    
    
    
    
    
    
    
    
    
    
    Land development loans  residential property
    
    
    
    
    
    
    1,665
    
    
    
    143Land development loans  non residential property
    
    
    
    
    
    
    
    
    
    
    Commercial real estate mortgages
    
    
    
    
    
    
    662
    
    
    
    0Residential real estate mortgages
    
    
    26
    
    
    
    320
    
    
    
    320Recoveries:Consumer loans
    
    
    7
    
    
    
    25
    
    
    
    5Commercial, financial & other
    
    
    4
    
    
    
    224
    
    
    
    168Commercial real estate construction  residential property
    
    
    
    
    
    
    6
    
    
    
    Commercial real estate construction  non residential
property
    
    
    
    
    
    
    
    
    
    
    Land development loans  residential property
    
    
    
    
    
    
    
    
    
    
    Land development loans  non residential property
    
    
    
    
    
    
    
    
    
    
    Commercial real estate mortgages
    
    
    1
    
    
    
    140
    
    
    
    9Residential real estate mortgages
    
    
    
    
    
    
    
    
    
    
    Net charge-offs (recoveries)
    
    
    754
    
    
    
    4683
    
    
    
    449Provision for loan losses
    
    
    886
    
    
    
    5,821
    
    
    
    782Balance, end of period
    
    $
    10,749
    
    
    $
    10,617
    
    
    $
    8,108Allowance to total loans
    
    
    1.13
    %
    
    
    1.12
    %
    
    
    0.86
    %
 Premises and Equipment.
 Real estate owned.
 28




---



##### 



Goodwill and other intangible assets.
 GrossCarrying
    
    
    AccumulatedAmount
    
    
    AmortizationCore deposit intangible from acquisition of:Bank of Washtenaw
    
    $
    929
    
    
    $
    419Fidelity Financial Corporation of Michigan
    
    
    6,863
    
    
    
    980Total core deposit intangible
    
    $
    7,792
    
    
    $
    1,399Borrower relationship intangible from acquisition of :Bank of Washtenaw
    
    $
    1,620
    
    
    $
    410Fidelity Financial Corporation of Michigan
    
    
    3,558
    
    
    
    351Total borrower relationship intangible
    
    $
    5,178
    
    
    $
    761Total intangible assets
    
    $
    12,970
    
    
    $
    2,160
   Accrued Interest Receivable.
 Other Assets
 29




---



##### 



Deposits.
 03/31/08
    
    
    12/31/07
    
    
    03/31/07Non-interest bearing:Demand
    
    $
    80,725
    
    
    $
    83,594
    
    
    $
    99,923Interest bearing:Checking
    
    $
    66,782
    
    
    $
    65,196
    
    
    $
    78,825Money market
    
    
    98,733
    
    
    
    106,145
    
    
    
    106,119Savings
    
    
    53,986
    
    
    
    29,814
    
    
    
    35,495Time, under $100,000
    
    
    165,840
    
    
    
    193,852
    
    
    
    152,678Time, $100,000 and over
    
    
    303,151
    
    
    
    344,026
    
    
    
    374,996688,492
    
    
    
    739,033
    
    
    
    748,113Total deposits
    
    $
    769,217
    
    
    $
    822,627
    
    
    $
    848,036
   03/31/08
    
    
    12/31/07
    
    
    03/31/07Interest bearing checking
    
    $
    2,043
    
    
    $
    1,740
    
    
    $
    1,768Time, $100,000 and over
    
    
    116,772
    
    
    
    109,695
    
    
    
    112,947Total municipal deposits
    
    $
    118,815
    
    
    $
    111,435
    
    
    $
    114,715
  30




---



##### 



Federal Funds Purchased
 Securities Sold Under Agreement to Repurchase
 Federal Home Loan Bank Advances
 Accrued Interest Payable
 Other Liabilities
 Subordinated Debentures .
 31




---



##### 



Capital
   MinimumTo Be Well CapitalizedMinimum for Capital
    
    Under Prompt CorrectiveActual
    
    Adequacy Purposes
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs of March 31, 2008Total capital
(to risk weighted assets)Consolidated
    
    
    113,150
    
    
    
    11.61
    %
    
    
    77,988
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    110,938
    
    
    
    11.40
    %
    
    
    77,855
    
    
    
    8.00
    %
    
    
    97,319
    
    
    
    10.00
    %Tier 1 capital
(to risk weighted assets)Consolidated
    
    
    102,401
    
    
    
    10.50
    %
    
    
    38,994
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    100,189
    
    
    
    10.29
    %
    
    
    38,928
    
    
    
    4.00
    %
    
    
    58,392
    
    
    
    6.00
    %Tier 1 capital
(to average assets)Consolidated
    
    
    102,401
    
    
    
    10.25
    %
    
    
    39,960
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    100,189
    
    
    
    10.09
    %
    
    
    39,720
    
    
    
    4.00
    %
    
    
    49,650
    
    
    
    5.00
    %As of December 31, 2007Total capital
(to risk weighted assets)Consolidated
    
    
    112,984
    
    
    
    11.57
    %
    
    
    78,108
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    110,486
    
    
    
    11.34
    %
    
    
    77,972
    
    
    
    8.00
    %
    
    
    97,465
    
    
    
    10.00
    %Tier 1 capital
(to risk weighted assets)Consolidated
    
    
    102,367
    
    
    
    10.48
    %
    
    
    39,054
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    99,869
    
    
    
    10.25
    %
    
    
    38,956
    
    
    
    4.00
    %
    
    
    58,479
    
    
    
    6.00
    %Tier 1 capital
(to average assets)Consolidated
    
    
    102,367
    
    
    
    10.15
    %
    
    
    40,334
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    99,869
    
    
    
    9.99
    %
    
    
    39,989
    
    
    
    4.00
    %
    
    
    49,987
    
    
    
    5.00
    %
  32




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##### 



PART I    FINANCIAL INFORMATION
 
  Interest Rate Sensitivity Analysis.
   33




---



##### 



Interest Rate Sensitivity Period1-90
    
    
    91-365
    
    
    1-5
    
    
    Over(In thousands)
    
    Days
    
    
    Days
    
    
    Years
    
    
    5 Years
    
    
    TotalEarning assetsFederal funds sold
    
    $
    1,958
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,958Interest bearing deposits with banks
    
    
    105
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    105Mortgage loans held for sale
    
    
    282
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    282Securities available for sale
    
    
    2,998
    
    
    
    4,852
    
    
    
    937
    
    
    
    134
    
    
    
    8,921Federal Home Loan Bank stock
    
    
    3,540
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,540Total loans, net of non-accrual
    
    
    277,956
    
    
    
    94,109
    
    
    
    500,908
    
    
    
    57,548
    
    
    
    930,521Total earning assets
    
    
    286,839
    
    
    
    98,961
    
    
    
    501,845
    
    
    
    57,682
    
    
    
    945,327Interest bearing liabilitiesTotal interest bearing deposits
    
    
    442,780
    
    
    
    210,845
    
    
    
    34,368
    
    
    
    499
    
    
    
    688,492Federal Home Loan Bank advances
    
    
    5,394
    
    
    
    25,264
    
    
    
    40,137
    
    
    
    
    
    
    
    70,795Other Borrowings
    
    
    56,755
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56,755Subordinated debentures
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000Total interest bearing liabilities
    
    
    514,929
    
    
    
    236,109
    
    
    
    74,505
    
    
    
    499
    
    
    
    826,042Net asset (liability) funding gap
    
    
    (228,090
    )
    
    
    (137,148
    )
    
    
    427,340
    
    
    
    57,183
    
    
    $
    119,285Cumulative net asset (liability) funding gap
    
    ($
    228,090
    )
    
    ($
    365,238
    )
    
    $
    62,102
    
    
    $
    119,285
 34




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##### 



Liquidity.
   Payments Due By PeriodLess Than
    
    
    1-3
    
    
    3-5
    
    
    Over 51 Year
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    TotalSecurities sold under
agreements
to repurchase
    
    $
    275
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    275Certificates of deposit
    
    
    434,123
    
    
    
    28,357
    
    
    
    6,011
    
    
    
    500
    
    
    
    468,991Long-term borrowings
    
    
    30,658
    
    
    
    29,802
    
    
    
    10,335
    
    
    
    
    
    
    
    70,795Lease commitments
    
    
    793
    
    
    
    1,336
    
    
    
    390
    
    
    
    12
    
    
    
    2,531Subordinated debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    10,000Totals
    
    $
    465,849
    
    
    $
    59,495
    
    
    $
    16,736
    
    
    $
    10,512
    
    
    $
    552,592
  Amount Of Commitment Expiration Per PeriodLess Than
    
    
    1-3
    
    
    3-5
    
    
    Over 51 Year
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    TotalUnused loan commitments
    
    $
    104,593
    
    
    $
    15,321
    
    
    $
    9,207
    
    
    $
    19,430
    
    
    $
    148,551Standby letters of credit
    
    
    6,582
    
    
    
    1,069
    
    
    
    
    
    
    
    
    
    
    
    7,651Totals
    
    $
    111,175
    
    
    $
    16,390
    
    
    $
    9,207
    
    
    $
    19,430
    
    
    $
    156,202
 35




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##### 



Item 4. Controls and Procedures
 Disclosure Controls and Procedures 
 Internal Controls Over Financial Reporting
 36




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##### 



PART II    OTHER INFORMATION
 
  (a)
    
    ExhibitsExhibit 31.1
    
    CEO Certification. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.Exhibit 31.2
    
    CFO Certification. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.Exhibit 32.1
    
    CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.Exhibit 32.2
    
    CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(b)
    
    A Form 8-K Report, dated January 15, 2008 was filed during the quarter ended March 31, 2008.A Form 8-K Report, dated January 15, 2008 was filed during the quarter ended March 31,
2008.
 37




---



##### 



SIGNATURES
  Dearborn Bancorp, Inc.
(Registrant)/s/ John E. Demmer
John E. DemmerChairman/s/ Michael J. Ross
Michael J. RossPresident and Chief Executive Officer/s/ Jeffrey L. Karafa
Jeffrey L. KarafaTreasurer and Chief Financial Officer
  38