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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, 2010
 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
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller Reporting Company þ(Do not check if a smaller reporting Company)
 o þ
  Class
    
    Shares OutstandingCommon Stock
    
    7,687,470




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##### 



PagePart I.
    
    Financial Information:Item 1.
    
    Financial StatementsThe following condensed consolidated financial statements of
Dearborn Bancorp, Inc. and its subsidiary are included in this report:Report of Independent Registered Public Accounting Firm
    
    
    3Condensed Consolidated Balance Sheets  March 31, 2010,
December 31, 2009 and March 31, 2009
    
    
    4Condensed
Consolidated Statements of Operations  For the Three
Months Ended March 31, 2010 and 2009
    
    
    5Condensed Consolidated Statements of Comprehensive Loss  For the
Three Months Ended March 31, 2010 and 2009
    
    
    6Condensed Consolidated Statements of Cash Flows  For the Three
Months Ended March 31, 2010 and 2009
    
    7-8Notes to Condensed Consolidated Financial Statements
    
    9-26Item 2.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    27-43Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    44-47Item 4.
    
    Controls and Procedures
    
    
    48Part II.
    
    Other Information:Pursuant to SEC rules and regulations, the following item(s) are
included with the Form 10-Q Report:Item 6. Exhibits
    
    
    49Pursuant 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. Unregistered Sales of Equity Securities and Use of ProceedsItem 3. Defaults upon Senior SecuritiesItem 4. Submission of Matters to a Vote of Security HoldersItem 5. Other InformationSIGNATURES
    
    
    
    
    50EX-31.1EX-31.2EX-32.1EX-32.2
  2




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3




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PART I  FINANCIAL INFORMATION
 
 ITEM 1.
    
    FINANCIAL STATEMENTS
 DEARBORN BANCORP, INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited)
    
    
    
    
    
    
    (Unaudited)(Dollars, in thousands)
    
    3/31/2010
    
    
    12/31/2009
    
    
    3/31/2009ASSETSCash and cash equivalentsCash and due from banks
    
    $
    8,047
    
    
    $
    7,803
    
    
    $
    11,881Federal funds sold
    
    
    57
    
    
    
    156
    
    
    
    6,841Interest bearing deposits with banks
    
    
    70,898
    
    
    
    69,538
    
    
    
    53,262Total cash and cash equivalents
    
    
    79,002
    
    
    
    77,497
    
    
    
    71,984Mortgage loans held for sale
    
    
    758
    
    
    
    1,129
    
    
    
    3,009Securities available for sale
    
    
    45,931
    
    
    
    45,964
    
    
    
    45,368Securities held to maturity
    
    
    336
    
    
    
    336
    
    
    
    0Federal Home Loan Bank stock
    
    
    3,698
    
    
    
    3,698
    
    
    
    3,614LoansLoans
    
    
    813,961
    
    
    
    833,136
    
    
    
    900,055Allowance for loan losses
    
    
    (30,288
    )
    
    
    (35,125
    )
    
    
    (18,632
    )Net loans
    
    
    783,673
    
    
    
    798,011
    
    
    
    881,423Premises and equipment, net
    
    
    19,973
    
    
    
    20,194
    
    
    
    21,001Real estate owned
    
    
    24,467
    
    
    
    23,435
    
    
    
    14,624Other intangible assets
    
    
    
    
    
    
    
    
    
    
    4,394Accrued interest receivable
    
    
    3,595
    
    
    
    3,562
    
    
    
    3,920Other assets
    
    
    9,266
    
    
    
    12,660
    
    
    
    24,407Total assets
    
    $
    970,699
    
    
    $
    986,486
    
    
    $
    1,073,744LIABILITIESDepositsNon-interest bearing deposits
    
    $
    86,407
    
    
    $
    83,873
    
    
    $
    80,624Interest bearing deposits
    
    
    765,610
    
    
    
    784,082
    
    
    
    826,955Total deposits
    
    
    852,017
    
    
    
    867,955
    
    
    
    907,579Other liabilitiesSecurities sold under agreements to repurchase
    
    
    
    
    
    
    
    
    
    
    2,268Federal Home Loan Bank advances
    
    
    63,799
    
    
    
    63,855
    
    
    
    54,955Accrued interest payable
    
    
    956
    
    
    
    1,046
    
    
    
    1,372Other liabilities
    
    
    747
    
    
    
    1,685
    
    
    
    606Subordinated debentures
    
    
    10,000
    
    
    
    10,000
    
    
    
    10,000Total liabilities
    
    
    927,519
    
    
    
    944,541
    
    
    
    976,780COMMITMENT AND CONTINGENT LIABILITIES
    
    
    
    
    
    
    
    
    
    
    STOCKHOLDERS EQUITYCommon stock  no par value 20,000,000 shares
authorized, 7,687,470 at 3/31/10, 7,687,470
shares at 12/31/09 and 7,696, 204 shares at 3/31/09
    
    
    131,960
    
    
    
    131,929
    
    
    
    131,825Accumulated deficit
    
    
    (88,721
    )
    
    
    (89,850
    )
    
    
    (34,923
    )Accumulated other comprehensive income (loss)
    
    
    (59
    )
    
    
    (134
    )
    
    
    62Total stockholders equity
    
    
    43,180
    
    
    
    41,945
    
    
    
    96,964Total liabilities and stockholders equity
    
    $
    970,699
    
    
    $
    986,486
    
    
    $
    1,073,744
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DEARBORN BANCORP, INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
 Three Months Ended
    
    
    Three Months Ended(In thousands, except share data)
    
    3/31/2010
    
    
    3/31/2009Interest incomeInterest on loans
    
    $
    11,778
    
    
    $
    13,810Interest on securities, available for sale
    
    
    168
    
    
    
    256Interest on deposits with banks
    
    
    37
    
    
    
    94Interest on federal funds
    
    
    1
    
    
    
    6Total interest income
    
    
    11,984
    
    
    
    14,166Interest expenseInterest on deposits
    
    
    3,543
    
    
    
    5,998Interest on other liabilities
    
    
    386
    
    
    
    651Total interest expense
    
    
    3,929
    
    
    
    6,649Net interest income
    
    
    8,055
    
    
    
    7,517Provision for loan losses
    
    
    100
    
    
    
    10,727Net interest income (loss) after provision for loan losses
    
    
    7,955
    
    
    
    (3,210
    )Non-interest incomeService charges on deposit accounts
    
    
    343
    
    
    
    355Fees for other services to customers
    
    
    36
    
    
    
    25Gain on the sale of loans
    
    
    58
    
    
    
    56Gain on the sale of securities
    
    
    69
    
    
    
    195Other than temporary impairment on securities, held to maturityPortion of loss recognized in other comprehensive income before taxesNet impairment losses recognized in earnings
    
    
    
    
    
    
    Gain (loss) on the sale of real estate owned
    
    
    (11
    )
    
    
    29Loss on the write-down of real estate owned
    
    
    (656
    )
    
    
    (354
    )Other income
    
    
    102
    
    
    
    22Total non-interest income (loss)
    
    
    (59
    )
    
    
    328Non-interest expenseSalaries and employee benefits
    
    
    3,119
    
    
    
    3,290Occupancy and equipment expense
    
    
    854
    
    
    
    934Amortization of intangible expense
    
    
    
    
    
    
    198FDIC assessment
    
    
    950
    
    
    
    348Advertising and marketing
    
    
    27
    
    
    
    70Stationery and supplies
    
    
    72
    
    
    
    111Professional services
    
    
    166
    
    
    
    191Data processing
    
    
    186
    
    
    
    228Defaulted loan expense
    
    
    1,035
    
    
    
    761Other operating expenses
    
    
    359
    
    
    
    380Total non-interest expense
    
    
    6,768
    
    
    
    6,511Income (loss) before federal income tax expense
    
    
    1,128
    
    
    
    (9,393
    )Income tax expense (benefit)
    
    
    
    
    
    
    (3,144
    )Net income (loss)
    
    $
    1,128
    
    
    
    ($6,249
    )Per share data:Net income (loss)  basic
    
    
    0.15
    
    
    
    (0.81
    )Net income (loss)  diluted
    
    
    0.15
    
    
    
    (0.81
    )Weighted average number of shares outstanding  basic
    
    
    7,687,470
    
    
    
    7,696,204Weighted average number of shares outstanding  diluted
    
    
    7,687,470
    
    
    
    7,696,204
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DEARBORN BANCORP, INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)
 Three Months Ended
    
    
    Three Months Ended(In thousands)
    
    03/31/10
    
    
    03/31/09Net income (loss)
    
    $
    1,128
    
    
    
    ($6,249
    )Other comprehensive income , net of taxUnrealized gains on securitiesUnrealized holding gains (losses) arising during period
    
    
    45
    
    
    
    (407
    )Less: reclassification adjustment for gains included
in net income
    
    
    69
    
    
    
    195Tax effects
    
    
    39
    
    
    
    72Other comprehensive income (loss)
    
    
    75
    
    
    
    (140
    )Comprehensive income (loss)
    
    $
    1,203
    
    
    
    ($6,389
    )
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DEARBORN BANCORP, INC. AND SUBSIDIARY
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 Three Months Ended(In thousands)
    
    3/31/2010
    
    
    3/31/2009Cash flows from operating activitiesInterest and fees received
    
    $
    11,951
    
    
    $
    13,745Interest paid
    
    
    (4,019
    )
    
    
    (6,972
    )Proceeds from sale of mortgages held for sale
    
    
    4,654
    
    
    
    6,990Origination of mortgages held for sale
    
    
    (4,225
    )
    
    
    (8,062
    )Taxes refunded
    
    
    4,074
    
    
    
    Loss on sale of real estate owned
    
    
    (11
    )
    
    
    29Gain on sale of securities
    
    
    (69
    )
    
    
    (195
    )Cash paid to suppliers and employees
    
    
    (7,331
    )
    
    
    (5,090
    )Net cash provided by operating activities
    
    
    5,024
    
    
    
    445Cash flows from investing activitiesSale of securities available for sale
    
    
    8,289
    
    
    
    10,230Proceeds from calls, maturities and repayments of securities available for sale
    
    
    2,514
    
    
    
    49,014Purchases of securities available for sale
    
    
    (10,689
    )
    
    
    (20,709
    )(Increase) decrease in loans, net of payments received
    
    
    11,666
    
    
    
    20,211Proceeds from the sale of real estate owned
    
    
    742
    
    
    
    928Purchases of property and equipment
    
    
    (47
    )
    
    
    (64
    )Net cash provided by investing activities
    
    
    12,475
    
    
    
    59,610Cash flows from financing activitiesNet decrease in non-interest bearing deposits
    
    
    2,534
    
    
    
    (693
    )Net increase in interest bearing deposits
    
    
    (18,472
    )
    
    
    (30,123
    )Increase (decrease) in repurchase agreements
    
    
    
    
    
    
    (193
    )Repayments on Federal Home Loan Bank advances
    
    
    (56
    )
    
    
    (10,064
    )Net cash used in financing activities
    
    
    (15,994
    )
    
    
    (41,073
    )Increase in cash and cash equivalents
    
    
    1,505
    
    
    
    18,982Cash and cash equivalents at the beginning of period
    
    
    77,497
    
    
    
    53,002Cash and cash equivalents at the end of period
    
    $
    79,002
    
    
    $
    71,984
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DEARBORN BANCORP, INC. AND SUBSIDIARY  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Continued)
 Three Months Ended(In thousands)
    
    3/31/2010
    
    
    3/31/2009Reconciliation of net income to net cash provided by operating activitiesNet income (loss)
    
    $
    1,128
    
    
    
    ($6,249
    )Adjustments to reconcile net income to net cashProvided by operating activitiesProvision for loan losses
    
    
    100
    
    
    
    10,727Depreciation and amortization expense
    
    
    268
    
    
    
    335Restricted stock award expense
    
    
    16
    
    
    
    22Stock option expense
    
    
    16
    
    
    
    19Accretion of discount on investment securities
    
    
    (41
    )
    
    
    33Amortization of premium on investment securities
    
    
    105
    
    
    
    Write-down of real estate owned
    
    
    798
    
    
    
    561Amortization of intangible assets
    
    
    
    
    
    
    198(Increase) decrease in mortgages held for sale
    
    
    371
    
    
    
    (1,175
    )Increase in interest receivable
    
    
    (33
    )
    
    
    (421
    )Decrease in interest payable
    
    
    (90
    )
    
    
    (323
    )(Increase) decrease in other assets
    
    
    3,324
    
    
    
    (2,851
    )Increase (decrease) in other liabilities
    
    
    (938
    )
    
    
    (431
    )Net cash provided by operating activities
    
    $
    5,024
    
    
    $
    445Supplemental noncash disclosures:Transfers from loans to real estate owned
    
    $
    2,572
    
    
    $
    6,456
  8




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A.
    
    Accounting and Reporting PoliciesThe condensed consolidated 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 condensed consolidated financial statements of the Corporation as of March 31, 2010 and
2009, and December 31, 2009 and for the three month period ended March 31, 2010 and 2009
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
condensed consolidated balance sheet of the Corporation as of December 31, 2009 has been
derived from the audited consolidated balance sheet as of that date. The operating results
for the three month periods ended March 31, 2010 are not necessarily indicative of results
of operations for the entire year.The condensed consolidated financial statements as of March 31, 2010 and 2009, and for the
three month period ended March 31, 2010 and 2009 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 2009 Annual Report 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.
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A.
    
    Accounting and Reporting Policies (cont)Income (Loss) Per ShareBasic income (loss) per share is net income (loss) divided by the weighted average number of
common shares outstanding during the period. Diluted income (loss) per share includes the
dilutive effect of additional potential common shares issuable under stock options. Income
(loss) per share is restated for all stock splits and dividends through the date of issue of
the financial statements.Factors in the basic and diluted income (loss) per share calculation follow (in thousands,
except share and per share data):
 Three Months Ended3/31/2010
    
    
    3/31/2009BasicNet income (loss)
    
    $
    1,128
    
    
    
    ($6,249
    )Weighted average common shares
    
    
    7,687,470
    
    
    
    7,696,204Basic earnings per common share
    
    $
    0.15
    
    
    
    ($0.81
    )DilutedNet income (loss)
    
    $
    1,128
    
    
    
    ($6,249
    )Weighted average common shares outstanding
for basic earnings per common share
    
    
    7,687,470
    
    
    
    7,696,204Add: Dilutive effects of assumed exercise
of stock options
    
    
    
    
    
    
    Average shares and dilutive potential common shares
    
    
    7,687,470
    
    
    
    7,696,204Dilutive earnings per common share
    
    $
    0.15
    
    
    
    ($0.81
    )
 Stock options for 511,717 and 619,742 shares of common stock were not considered in
computing diluted earnings per common share for the three months ended March 31, 2010 and
2009, respectively, because they were antidilutive. All share and per share amounts have
been adjusted for stock dividends.
 10




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A.
    
    Accounting and Reporting Policies (cont)Effect of Newly Issued Accounting StandardsFASB ASC Topic 860-10, Accounting for Transfers of Financial Assets (SFAS 166), and No.
167, Amendments toFASB ASC 810-10 (SFAS 167).In June 2009, the Financial Accounting
Standards Board (FASB) issued FASB ASC Topic 860-10 and FASB ASC 810-10, which change the
way entities account for securitizations and special-purpose entities, and will have a
material effect on how banking organizations account for off-balance sheet vehicles. The new
standards amend Statement of FASB ASC 860-10, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, and FASB ASC 810-10, Consolidation of
Variable Interest Entities. Both FASB ASC Topic 860-10 and FASB ASC Topic 810-10 were
effective January 1, 2010 for companies reporting earnings on a calendar-year basis.On January 21, 2010, the Board of Governors of the Federal Reserve System issued final
risk-based capital rules related to the adoption of these accounting standards by financial
institutions. FAS 166 and FAS 167 make substantive changes to how banking organizations
account for many items, including securitized assets, that had been previously excluded from
their balance sheets. Banking organizations affected by FAS 166 and FAS 167 generally will
be subject to higher risk-based regulatory capital requirements intended to better align
risk-based capital requirements with the actual risks of certain exposures.The Corporation has adopted these standards, and takes into account in our internal capital
planning processes the impact of these standards. We continue to assess whether additional
capital may be necessary to support the risks associated with off-balance-sheet vehicles
affected by the new accounting standards. The implementation of these standards did not
have a material impact on the Corporations financial statements.FASB ASU 2010-09, Subsequent Event  Amendments to Certain Recognition and Disclosure
Requirements. On February 24, 2010, FASB issued Accounting Standards Update (ASU) 2010-09,
Subsequent Event  Amendments to Certain Recognition and Disclosure Requirements. The ASU
establishes separate subsequent event recognition criteria and disclosure requirements for
U.S. Securities and Exchange Commission (SEC) filers. Effective with the release date, the
financial statements of SEC filers will no longer disclose either the date through which
subsequent events were reviewed or that subsequent events were evaluated through the date
financial statements were issued. The requirement to evaluate subsequent events through the
date of issuance is still in place. Only the disclosure is affected.The ASU also removes the requirement to make those disclosures in financial statements
revised for either a correction of an error or a retrospective application of an accounting
change. SEC filers are defined in the update as entities required to file or to furnish
their financial statements with either the SEC or another appropriate agency (such as the
Federal Deposit Insurance Corporation or Office of Thrift Supervision) under Section 12(i)
of the Securities and Exchange Act of 1934, as amended.
 11




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B.
    
    Securities
  March 31, 2010Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueUS Government sponsored
agency securities
    
    $
    2,009
    
    
    $
    
    
    
    
    ($6
    )
    
    $
    2,003Corporate bonds
    
    
    43,895
    
    
    
    11
    
    
    
    (67
    )
    
    
    43,839Mortgage backed securities
    
    
    86
    
    
    
    3
    
    
    
    
    
    
    
    89Totals
    
    $
    45,990
    
    
    $
    14
    
    
    
    ($73
    )
    
    $
    45,931
 December 31, 2009Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueUS Government sponsored
agency securities
    
    $
    12,759
    
    
    $
    20
    
    
    
    ($30
    )
    
    $
    12,749Corporate bonds
    
    
    33,308
    
    
    
    
    
    
    
    (197
    )
    
    
    33,111Mortgage backed securities
    
    
    101
    
    
    
    3
    
    
    
    
    
    
    
    104Totals
    
    $
    46,168
    
    
    $
    23
    
    
    
    ($227
    )
    
    $
    45,964
  Amortized
    
    
    FairCost
    
    
    ValueDue in one year through five years
    
    $
    45,904
    
    
    $
    45,842Mortgage backed securities
    
    
    86
    
    
    
    89Totals
    
    $
    45,990
    
    
    $
    45,931
  12




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B.
    
    Securities (cont)
  March 31, 2010Investment category
    
    Less than one year
    
    
    One year or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossUS Government sponsored
entity securities
    
    $
    2,003
    
    
    
    ($6
    )
    
    $
    
    
    
    $
    
    
    
    $
    2,003
    
    
    
    ($6
    )Corporate bonds
    
    
    35,188
    
    
    
    (67
    )
    
    
    
    
    
    
    
    
    
    
    35,188
    
    
    
    (67
    )Total temporarily impaired
    
    $
    37,191
    
    
    
    ($73
    )
    
    $
    
    
    
    $
    
    
    
    $
    37,191
    
    
    
    ($73
    )
 December 31, 2009Investment category
    
    Less than one year
    
    
    One year or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossUS Government sponsored
entity securities
    
    $
    6,657
    
    
    
    ($30
    )
    
    $
    
    
    
    $
    
    
    
    $
    6,657
    
    
    
    ($30
    )Corporate bonds
    
    
    33,111
    
    
    
    (197
    )
    
    
    
    
    
    
    
    
    
    
    33,111
    
    
    
    (197
    )Total temporarily impaired
    
    $
    39,768
    
    
    
    ($227
    )
    
    $
    
    
    
    $
    
    
    
    $
    39,768
    
    
    
    ($227
    )
  For the three months ended3/31/2010
    
    
    3/31/2009Gross Gains
    
    $
    69
    
    
    $
    195Gross Losses
    
    
    
    
    
    
    
  13




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##### Table of Contents



B.
    
    Securities (cont)
  March 31, 2010Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueTrust preferred securities
    
    $
    336
    
    
    $
    21
    
    
    $
    
    
    
    $
    357Totals
    
    $
    336
    
    
    $
    21
    
    
    $
    
    
    
    $
    357
 December 31, 2009Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueTrust preferred securities
    
    $
    336
    
    
    $
    
    
    
    $
    
    
    
    $
    336Totals
    
    $
    336
    
    
    $
    
    
    
    $
    
    
    
    $
    336
    Credit losses on debt securities held
    
    AmountBalance, January 1, 2010
    
    $
    414Additions related to other than temporaryLosses not previously recognized
    
    
    Balance, March 31, 2010
    
    $
    414
 14




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##### Table of Contents



C.
    
    Loans and Allowance for Loan Losses
  03/31/10
    
    
    12/31/09
    
    
    03/31/09Consumer loans
    
    $
    28,623
    
    
    $
    29,386
    
    
    $
    31,000Commercial, financial, & other
    
    
    141,338
    
    
    
    144,630
    
    
    
    161,138Land development loans  residential property
    
    
    36,089
    
    
    
    38,472
    
    
    
    50,028Land development loans  non residential property
    
    
    9,711
    
    
    
    11,644
    
    
    
    15,914Commercial real estate construction  residential property
    
    
    12,164
    
    
    
    13,287
    
    
    
    15,687Commercial real estate construction  non residential
property
    
    
    20,813
    
    
    
    20,061
    
    
    
    25,716Commercial real estate mortgages
    
    
    521,701
    
    
    
    531,156
    
    
    
    548,692Residential real estate mortgages
    
    
    43,522
    
    
    
    44,500
    
    
    
    51,880813,961
    
    
    
    833,136
    
    
    
    900,055Allowance for loan losses
    
    
    (30,288
    )
    
    
    (35,125
    )
    
    
    (18,632
    )$
    783,673
    
    
    $
    798,011
    
    
    $
    881,423
  3/31/10
    
    
    12/31/09
    
    
    03/31/09Troubled debt restructuring, accruing
    
    $
    31,737
    
    
    $
    59,420
    
    
    $
    19,506Over 90 days past due and still accruing
    
    
    1,127
    
    
    
    
    
    
    
    Non-accrual loans
    
    
    81,163
    
    
    
    49,341
    
    
    
    55,148Total non-performing loans
    
    
    114,027
    
    
    
    108,761
    
    
    
    74,654Real estate owned
    
    
    24,467
    
    
    
    23,435
    
    
    
    14,624Other repossessed assets
    
    
    
    
    
    
    
    
    
    
    Other non-performing assets
    
    
    24,467
    
    
    
    23,435
    
    
    
    14,624Total non-performing assets
    
    $
    138,494
    
    
    $
    132,196
    
    
    $
    89,278
   15




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##### Table of Contents



C.
    
    Loans and Allowance for Loan Losses (cont)
 Number ofLoans
    
    
    BalanceConsumer loans
    
    
    16
    
    
    $
    924Commercial, financial, & other
    
    
    43
    
    
    
    12,749Land development loans  residential property
    
    
    21
    
    
    
    23,260Land development loans  non residential property
    
    
    2
    
    
    
    1,558Commercial real estate construction  residential property
    
    
    15
    
    
    
    9,573Commercial real estate construction  non residential property
    
    
    2
    
    
    
    2,870Commercial real estate mortgages
    
    
    55
    
    
    
    27,863Residential real estate mortgages
    
    
    14
    
    
    
    2,366Total non-accrual loans
    
    
    168
    
    
    $
    81,163
 The increase in non-accrual loans during the period was primarily due to the
downgrading of 34 loans to non-accrual status for $32,315,000 and partially offset by net
charge-offs of $4,937,000 and the transfer of 6 loans to other real estate for $2,572,000.
This increase was primarily due to the migration of previously identified classified loans.
Of this increase, all but approximately $2,600,000 were identified at December 31, 2009 as
classified loans with reserves for losses established accordingly.The following is an analysis of the allowance for loan losses (in thousands):
 Three Months
    
    
    
    
    
    
    Three MonthsEnded
    
    
    Year Ended
    
    
    Ended03/31/10
    
    
    12/31/09
    
    
    03/31/09Balance, beginning of year
    
    $
    35,125
    
    
    $
    14,452
    
    
    $
    14,452Charge-offs:Consumer loans
    
    
    342
    
    
    
    1,154
    
    
    
    116Commercial, financial & other
    
    
    1,521
    
    
    
    4,878
    
    
    
    1,108Land development loans  residential property
    
    
    1,292
    
    
    
    9,441
    
    
    
    2,881Land development loans  non residential property
    
    
    229
    
    
    
    4,364
    
    
    
    197Commercial real estate construction  residential property
    
    
    906
    
    
    
    1,471
    
    
    
    64Commercial real estate construction  non residential
property
    
    
    36
    
    
    
    1,981
    
    
    
    176Commercial real estate mortgages
    
    
    558
    
    
    
    6,919
    
    
    
    2,113Residential real estate mortgages
    
    
    109
    
    
    
    701
    
    
    
    25Recoveries:Consumer loans
    
    
    23
    
    
    
    176
    
    
    
    3Commercial, financial & other
    
    
    15
    
    
    
    339
    
    
    
    105Land development loans  residential property
    
    
    9
    
    
    
    107
    
    
    
    Commercial real estate construction  residential property
    
    
    1
    
    
    
    
    
    
    
    Commercial real estate mortgages
    
    
    8
    
    
    
    61
    
    
    
    25Residential real estate mortgages
    
    
    
    
    
    
    36
    
    
    
    Net charge-offs (recoveries)
    
    
    4,937
    
    
    
    30,190
    
    
    
    6,547Provision for loan losses
    
    
    100
    
    
    
    50,863
    
    
    
    10,727Balance, end of period
    
    $
    30,288
    
    
    $
    35,125
    
    
    $
    18,632Allowance to total loans
    
    
    3.72
    %
    
    
    4.22
    %
    
    
    2.07
    %Allowance to nonperforming assets
    
    
    26.56
    %
    
    
    32.30
    %
    
    
    24.96
    %Net charge-offs to average loans
    
    
    0.60
    %
    
    
    3.41
    %
    
    
    0.71
    %
 16




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C.
    
    Loans and Allowance for Loan Losses (cont)The Bank recorded net charge-offs of $4,937,000 during the three months ended March 31,
2010. Specific allocations of $4,058,000 were recorded on these loans at December 31, 2009.
These specific allocations were assigned because most of the charge-offs recorded during
the first quarter of 2010 were based on information that was received in 2010 but where
deterioration of the credit related to events that occurred in 2009. The remaining net
charge-offs, which amount to $879,000 were on smaller balance loans that had a reserve for
loan losses allocated to the loan based on their respective risk grading at December 31,
2009. As a result of these allocation recognized at December 31, 2009, it was determined no
additional provision was needed related to these loans during the first quarter of 2010.
The reserves established for classified loans are based on the information currently
available to the Corporation. However, in these challenging economic conditions,
information could become known in the future that could materially alter our estimate.A primary factor in the continued decline in the underlying value of our collateral and the
decision to recognize these charge-offs was the continuing decline during the first three
months of 2010 in the economic environment in Southeastern Michigan. This decline in
economic conditions is heavily impacted by conditions and events that have recently impacted
the automotive industry during 2009 and continue to impact the local economy. These
conditions have had a negative impact on the residential real estate and commercial real
estate markets in the Banks market area and these loans represent 79% of the Banks loan
portfolio. These conditions have led to an increase in the Banks classified assets during
2010. Management has recognized this trend in our analysis of the allowance for loan losses
at March 31, 2010. The allowance for loan losses was based upon managements assessment of
relevant factors, including loan growth, types and amounts of non-performing loans,
historical and anticipated loss experience on such types of loans, and current economic
conditions. If collateral values continue to decline, additions to the allowance for loan
losses will be required and will have an adverse effect on the Corporations earnings
through increases to the provision for loan losses.The aggregate balance in impaired loans are as follows (in thousands):
 03/31/10
    
    
    12/31/09
    
    
    03/31/09Impaired loans with no allocated allowance for loan losses
    
    $
    88,079
    
    
    $
    83,226
    
    
    $
    95,499Impaired loans with allocated allowance for loan losses
    
    
    26,074
    
    
    
    43,553
    
    
    
    12,600Total
    
    $
    114,153
    
    
    $
    126,779
    
    
    $
    108,099Amount of the allowance for loan loss allocated
    
    $
    6,827
    
    
    $
    10,715
    
    
    $
    4,915
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##### Table of Contents



D.
    
    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.There were 24,000 shares forfeited during the three months ended March 31, 2010. There were
no options exercised during the three months ended March 31, 2010. For the options
outstanding at March 31, 2010, the range of exercise prices was $4.28 to $14.65 per share
with a weighted-average remaining contractual term of 1.9 years. At March 31, 2010, options
for 336,398 shares were exercisable at weighted average exercise price of $8.89 per share.
There was no intrinsic value at March 31, 2010.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, 2006 and 2008.
The awards have a term of ten years and typically vest fully three years from the grant
date. In order for vesting to occur with some grants, 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. The awards granted in 2005 and 2006 did have such performance criteria.
The awards granted in 2008 did not have performance criteria.Stock Options Granted  Stock options were awarded to officers in 2005, 2006 and 2008. The
incentive stock options were granted with exercise prices equal to market prices on the day
of grant. At March 31, 2010, there were stock options outstanding for 190,846 shares with a
weighted average exercise price of $5.33 per share.The Corporation recognized stock option compensation expense of $16,000 and $19,000 during
the three months ended March 31, 2010 and 2009, respectively. Compensation cost of $62,000
and $26,000 is expected to be recognized during 2010 and 2011, respectively.Restricted Stock Grants   Restricted stock was awarded to officers in 2005, 2006 and 2008.
The restricted stock is eligible to vest three years from grant date. Upon full
vesting, restricted shares are transferred to common shares. At March 31, 2010, there were
41,530 shares of restricted stock outstanding.
 18




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##### Table of Contents



D.
    
    Incentive Stock Plans (cont)The Corporation recognized restricted stock compensation expense of $16,000 and $22,000,
respectively during the three months ended March 31, 2010 and 2009, respectively.
Compensation cost of $62,000 and $26,000 is expected to be recognized during 2010 and 2011,
respectively.E.
    
    Fair Value of Assets and LiabilitiesThe Corporation has adopted fair value guidance which defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value measurements.Fair value is defined 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. A fair value hierarchy was also established 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 liabilities.Level 2 
    
    Observable inputs other than Level 1 prices, such as quoted prices for
similar assets or liabilities; quoted prices in 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 liabilities. Observable inputs may
include available credit information and bond terms and conditions of similar
securities, market spreads, cash flow analysis and market concensus prepayment speeds.Level 2 securities include U.S. agency and U.S. government sponsored
enterprise mortgage-backed securities. Level 2 securities are valued by a third
party pricing service commonly used in the banking industry utilizing observable
inputs. The pricing provider utilizes evaluated pricing models that vary based
on asset class. These models incorporate available market information including
quoted prices of securities with similar characteristics and, because many
fixed-income securities do not trade on a daily basis, apply available
information through processes such as benchmark curves, benchmarking of like
securities, sector grouping and matrix pricing. In addition, model processes,
such as an option adjusted spread model is used to develop prepayment and
interest rate scenarios for securities with prepayment features.Level 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.
 19




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##### Table of Contents



E.
    
    Fair Value of Assets and Liabilities ( cont)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 ASC 820 fair value hierarchy in which the fair
value measurements fall at March 31, 2010, December 31, 2009 and March 31, 2009 (in
thousands):
 Quoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsAt 3/31/2010
    
    Fair Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)US Government sponsored agency
securities
    
    $
    2,003
    
    
    $
    
    
    
    $
    2,003
    
    
    $
    Corporate bonds
    
    
    43,839
    
    
    
    
    
    
    
    43,839
    
    
    
    Mortgage backed securities
    
    
    89
    
    
    
    
    
    
    
    89
    
    
    
    Total securities, available for sale
    
    $
    45,931
    
    
    $
    
    
    
    $
    45,931
    
    
    $
    
 Quoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsAt 12/31/2009
    
    Fair Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)US Government sponsored agency
securities
    
    $
    12,749
    
    
    $
    
    
    
    $
    12,749
    
    
    $
    Corporate bonds
    
    
    33,111
    
    
    
    
    
    
    
    33,111
    
    
    
    Mortgage backed securities
    
    
    104
    
    
    
    
    
    
    
    104
    
    
    
    Total securities, available for sale
    
    $
    45,964
    
    
    $
    
    
    
    $
    45,964
    
    
    $
    
 Quoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsAt 3/31/2009
    
    Fair Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)US Government sponsored agency
securities
    
    $
    28,657
    
    
    $
    
    
    
    $
    28,657
    
    
    $
    Corporate bonds
    
    
    15,205
    
    
    
    
    
    
    
    15,205
    
    
    
    Municipal securities
    
    
    1,335
    
    
    
    
    
    
    
    1,335
    
    
    
    Mortgage backed securities
    
    
    171
    
    
    
    
    
    
    
    171
    
    
    
    Total securities, available for sale
    
    $
    45,368
    
    
    $
    
    
    
    $
    45,368
    
    
    $
    
 20




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##### Table of Contents



E.
    
    Fair Value of Assets and Liabilities ( cont)Impaired loans and other real estate ownedFair value adjustments for impaired and non-accrual loans typically occur when there is
evidence of impairment. Loans are designated as impaired when, in the judgment of
management based on current information and events, it is probable that all amounts due
according to the contractual terms of the loan agreement will not be collected. The
measurement of loss associated with impaired loans can be based on either the observable
market price of the loan or the fair value of the collateral. The Company measures fair
value based on the value of the collateral securing the loans. Collateral may be in the form
of real estate or personal property including equipment and inventory. The value of the
collateral is determined based on internal estimates as well as third party appraisals or
non-binding broker quotes. These measurements were classified as Level 3. The fair value of
the Companys other real estate owned is determined using Level 3 inputs, which include
current and prior appraisals and estimated costs to sell.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 fair value hierarchy in which the fair value
measurements fall at March 31, 2010, December 31, 2009 and March 31, 2009 (in thousands):
 SignificantQuoted Prices in
    
    Other
    
    SignificantActive Markets for
    
    Observable
    
    UnobservableIdentical Assets
    
    Inputs
    
    InputsAt 3/31/2010
    
    Fair Value
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Loans
    
    $
    58,280
    
    
    $
    
    
    
    $
    
    
    
    $
    58,280Other real estate
    
    $
    9,490
    
    
    $
    
    
    
    $
    
    
    
    $
    9,490
 SignificantQuoted Prices in
    
    Other
    
    SignificantActive Markets for
    
    Observable
    
    UnobservableIdentical Assets
    
    Inputs
    
    InputsAt 12/31/2009
    
    Fair Value
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Loans
    
    $
    60,905
    
    
    $
    
    
    
    $
    
    
    
    $
    60,905Other real estate
    
    $
    7,601
    
    
    $
    
    
    
    $
    
    
    
    $
    7,601
 SignificantQuoted Prices in
    
    Other
    
    SignificantActive Markets for
    
    Observable
    
    UnobservableIdentical Assets
    
    Inputs
    
    InputsAt 3/31/2009
    
    Fair Value
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Loans
    
    $
    11,461
    
    
    $
    
    
    
    $
    
    
    
    $
    11,461Other real estate
    
    $
    2,094
    
    
    $
    
    
    
    $
    
    
    
    $
    2,094
 21




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E.
    
    Fair Value of Assets and Liabilities ( cont)The carrying amounts and estimated fair value of principal financial assets and liabilities
were as follows:
 At March 31, 2010
    
    At December 31, 2009Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    ValueAssets:Cash and cash equivalents
    
    $
    79,002
    
    
    $
    79,002
    
    
    $
    77,497
    
    
    $
    77,497Mortgage loans held for sale
    
    
    758
    
    
    
    769
    
    
    
    1,129
    
    
    
    1,146Securities available for sale
    
    
    45,931
    
    
    
    45,931
    
    
    
    45,964
    
    
    
    45,964Federal Home Loan Bank Stock
    
    
    3,698
    
    
    
    3,698
    
    
    
    3,698
    
    
    
    3,698Loans, net
    
    
    813,961
    
    
    
    829,122
    
    
    
    833,136
    
    
    
    829,122Accrued interest receivable
    
    
    3,595
    
    
    
    3,595
    
    
    
    3,562
    
    
    
    3,562Liabilities:Deposits
    
    
    852,017
    
    
    
    856,075
    
    
    
    867,955
    
    
    
    871,177Federal Home Loan Bank advances
    
    
    63,799
    
    
    
    64,291
    
    
    
    63,855
    
    
    
    64,275Subordinated debentures
    
    
    10,000
    
    
    
    4,081
    
    
    
    10,000
    
    
    
    4,081Accrued interest payable
    
    
    956
    
    
    
    956
    
    
    
    1,046
    
    
    
    1,046
 Fair Value of Financial InstrumentsThe following methods and assumptions were used by the Corporation in estimating its fair
value disclosure for financial instruments:Cash and Cash Equivalents, Securities Sold Under Agreements to Repurchase,
Interest-bearing Deposits and Federal Home Loan Bank StockThe carrying amount approximates fair value.Held-to-maturity SecuritiesFair value is based on quoted market prices, if available. If a quoted market price is not
available, fair value is estimated using quoted market prices for similar securities.Loans Held for SaleFair value is based upon the quoted price for the sale of those loans.LoansThe fair value of loans is estimated by discounting the future cash flows using the market
rates at which similar loans would be made to borrowers with similar credit ratings and for
the same remaining maturities. Loans with similar characteristics were aggregated for
purposes of the calculations. The carrying amount of accrued interest approximates its fair
value.
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##### Table of Contents



E.
    
    Fair Value of Assets and Liabilities ( cont)DepositsDeposits include demand deposits, savings accounts, NOW accounts and certain money market
deposits. The carrying amount approximates fair value. The fair value of fixed-maturity
time deposits is estimated using a discounted cash flow calculation that applies the rates
currently offered for deposits of similar remaining maturities.Interest Receivable and Interest PayableThe carrying amount approximates fair value.Federal Home Loan Bank AdvancesRates currently available to the Corporation for debt with similar terms and remaining
maturities are used to estimate the fair value of existing debt. Fair value of long-term
debt is based on quoted market prices or dealer quotes for the identical liability when
traded as an asset in an active market. If a quoted market price is not available, an
expected present value technique is used to estimate fair value.Subordinated DebenturesRates currently available to the Corporation for debt with similar terms and remaining
maturities are used to estimate the fair value of existing debt.Commitments to Originate Loans, Forward Sale Commitments, Letters of Credit and Lines of
CreditThe fair value of commitments to originate loans is estimated using the fees currently
charged to enter into similar agreements, taking into account the remaining terms of the
agreements and the present creditworthiness of the counterparties. For fixed-rate loan
commitments, fair value also considers the difference between current levels of interest
rates and the committed rates. The fair value of forward sale commitments is estimated
based on current market prices for loans of similar terms and credit quality. The fair
values of letters of credit and lines of credit are based on fees currently charged for
similar agreements or on the estimated cost to terminate or otherwise settle the obligations
with the counterparties at the reporting date. The fair value of such arrangements are not
considered material to this presentation.
 F.
    
    Capital and Operating MattersStockholders equity at March 31, 3010 was $43,180,000 compared to $41,945,000 as of
December 31, 2009, an increase of $1,235,000 or 3%. The increase was due to net income
during the period.
 23




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##### Table of Contents



F.
    
    Capital and Operating Matters (cont)The Corporation has experienced large net losses during 2008 and 2009 due to the continued
decline in economic conditions in Southeastern Michigan. The recent bankruptcy of two major
automotive manufacturers and resulting shut down of production and layoffs of employees have
negatively affected the operating results even though the Corporation does not have any
direct exposure to the automotive industry. Additionally, economic conditions have
continued to erode the value of residential real estate and commercial real estate in the
Banks market area causing write-downs in the real estate owned portfolio further
contributing to net losses. The impact of these net losses to the regulatory capital ratios
is shown below.Based on the respective regulatory capital ratios, the Bank is considered to be
undercapitalized at March 31, 2010 and December 31, 2009.The following is a presentation of the Corporations and Banks regulatory capital ratios
(in thousands):
 MinimumTo Be Well CapitalizedMinimum for Capital
    
    Under Prompt CorrectiveActual

    
    Adequacy Purposes
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs of March 31, 2010Total capital
(to risk weighted assets)Consolidated
    
    
    63,839
    
    
    
    7.69
    %
    
    
    66,418
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    62,120
    
    
    
    7.50
    %
    
    
    66,262
    
    
    
    8.00
    %
    
    
    82,828
    
    
    
    10.00
    %Tier 1 capital
(to risk weighted assets)Consolidated
    
    
    53,239
    
    
    
    6.41
    %
    
    
    33,209
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    51,520
    
    
    
    6.22
    %
    
    
    33,131
    
    
    
    4.00
    %
    
    
    49,697
    
    
    
    6.00
    %Tier 1 capital
(to average assets)Consolidated
    
    
    53,239
    
    
    
    5.47
    %
    
    
    38,956
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    51,520
    
    
    
    5.30
    %
    
    
    38,878
    
    
    
    4.00
    %
    
    
    48,598
    
    
    
    5.00
    %As of December 31, 2009Total capital
(to risk weighted assets)Consolidated
    
    
    63,043
    
    
    
    7.39
    %
    
    
    68,264
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    61,169
    
    
    
    7.19
    %
    
    
    68,105
    
    
    
    8.00
    %
    
    
    85,132
    
    
    
    10.00
    %Tier 1 capital
(to risk weighted assets)Consolidated
    
    
    52,080
    
    
    
    6.10
    %
    
    
    34,132
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    50,225
    
    
    
    5.90
    %
    
    
    34,053
    
    
    
    4.00
    %
    
    
    51,079
    
    
    
    6.00
    %Tier 1 capital
(to average assets)Consolidated
    
    
    52,080
    
    
    
    4.98
    %
    
    
    41,838
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    50,225
    
    
    
    4.81
    %
    
    
    41,776
    
    
    
    4.00
    %
    
    
    52,220
    
    
    
    5.00
    %
 24




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##### Table of Contents



F.
    
    Capital and Operating Matters (cont)The capital ratios disclosed in the middle column of the table above are minimum
requirements. Due to our financial condition, the Bank entered into a formal enforcement
action (Consent Order) with the Federal Deposit Insurance Corporation (FDIC) and the
Office of Financial and Insurance Regulation for the State of Michigan (OFIR)
which conveys specific actions needed to address certain findings from their
examination and to address our current financial condition. We entered into the Consent
Order on February 12, 2010 that includes a capital directive, which requires the Bank to
have and maintain its level of tier 1 capital as a percentage of total assets (capital
ratio) at a minimum of 9% and its level of qualifying total capital as a percentage of
risk-weighted assets (total risk-based capital ratio) at a minimum of 12%. These ratios are
in excess of the statutory minimums to be well-capitalized.Applicable federal prompt corrective action regulations provide five classifications,
including well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized. Based on its regulatory capital ratios,
the Bank is undercapitalized at March 31, 2010. Undercapitalized institutions are subject
to close monitoring by their federal bank regulator, restrictions on asset growth and
expansion, and other significantly greater regulatory restrictions than apply to
well-capitalized or adequately capitalized institutions.The Corporation needs to raise sufficient capital during 2010 to return the Bank to
well-capitalized status. Management is considering various sources of capital and estimates
the need to raise approximately $40 million to be in compliance with its Consent Order with
the FDIC and OFIR. Given the current economic environment, there can be no assurance the
Corporation will be able to raise the estimated capital needed. Additionally, if real
estate values in the Corporations market area continue to decline, this will negatively
impact the loan portfolio and values of other real estate owned. Additional declines in
real estate values would result in the need for additional provision expense resulting in
increased losses and further reducing the Corporations and the Banks capital.Failure to meet minimum capital requirements can initiate certain mandatory, and possibly
discretionary, action by the regulators that, if undertaken, could have a direct material
effect on the Corporations financial statements and raise substantial doubt about the
Corporations ability to continue as a going concern.
 25




---



##### Table of Contents



G.
    
    Consent OrderDue to our financial condition, the Federal Deposit Insurance Corporation (FDIC) and the
Office of Financial and Insurance Regulation for the State of Michigan (OFIR) required
that our Board of Directors sign a formal enforcement action (Consent Order) with the FDIC
and OFIR which conveys specific actions needed to address certain findings from their
examination and to address our current financial condition. We entered into the Consent
Order on February 12, 2010, which contains a list of requirements that are to be met by
specific dates. Certain requirements are listed below:



    Completion of a senior management study by an independent consultant
    Plans for the reduction of delinquencies and classified assets
    Plans for lending and collection policies
    Plans for the reduction of loan concentrations
    The revision and implementation of a comprehensive strategic plan
    The revision of its Liquidity Plan and the submission of weekly liquidity reports to the
FDIC and OFIR
 The Consent Order also includes a capital directive, which requires the Bank to have and
maintain its level of tier 1 capital as a percentage of total assets (capital ratio) at a
minimum of 9% and its level of qualifying total capital as a percentage of risk-weighted
assets (total risk-based capital ratio) at a minimum of 12% . These ratios are in excess of
the statutory minimums to be well-capitalized. At March 31, 2010, the Banks capital ratio
was 5.30% and the Banks total risk-based capital ratio was 7.50%.Additionally, the Bank is prohibited from declaring or paying any cash dividends without
prior written consent of the FDIC.The Bank submitted a Capital Restoration Plan (CRP) to the FDIC and OFIR on December 15,
2009, due to our undercapitalized status based on our September 30, 2009 regulatory report
of condition and income. The CRP addresses, among other things, the steps management will
take to cause our capital levels to return to the minimum level to be adequately
capitalized.The Bank is currently undercapitalized. Failure to meet the minimum ratios set forth in the
Consent Order could result in regulators taking additional enforcement action against us.
 26




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##### Table of Contents



ITEM 2.
    
      MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
    27




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##### Table of Contents



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
 28




---



##### Table of Contents



Date Opened
    
    Location
    
    Type of officeFebruary 1994
    
    22290 Michigan Avenue
    
    Full service retail branch with ATMDearborn, Michigan 48123
    
    Regional lending centerDecember 1995
    
    24935 West Warren Avenue
    
    Full service retail branchDearborn Heights, Michigan 48127August 1997
    
    44623 Five Mile Road
    
    Full service retail branch with ATMPlymouth, Michigan 48170May 2001
    
    1325 North Canton Center Road
    
    Full service retail branch with ATMCanton, Michigan 48187December 2001
    
    45000 River Ridge Drive
    
    Regional lending centerClinton Township, Michigan 48038November 2002
    
    19100 Hall Road
    
    Full service retail branch with ATMClinton Township, Michigan 48038February 2003
    
    12820 Fort Street
    
    Full service retail branch with ATMSouthgate, Michigan 48195May 2003
    
    3201 University Drive, Suite 180
    
    Full service retail branchAuburn Hills, Michigan 48326October 2004
    
    450 East Michigan Avenue
    
    Full service retail branch with ATMSaline, Michigan 48176October 2004
    
    250 West Eisenhower Parkway
    
    Full service retail branch with ATMAnn Arbor, Michigan 48103
    
    Regional lending centerDecember 2004
    
    1360 Porter Street
    
    Loan production officeDearborn, Michigan 48123
    
    Regional lending centerJanuary 2007
    
    1040 E. Maple
    
    Full service retail branch with ATMBirmingham, Michigan 48009
    
    Regional lending centerJanuary 2007
    
    3681 W. Maple
    
    Full service retail branch with ATMBloomfield Township, Michigan 48301January 2007
    
    30700 Telegraph
    
    Full service retail branch with ATMBingham Farms, Michigan 48025January 2007
    
    20000 Twelve Mile Road
    
    Full service retail branch with ATMSouthfield, Michigan 48076January 2007
    
    200 Galleria Officenter
    
    Full service retail branch with ATMSouthfield, MI 48076April 2007
    
    7755 23 Mile Road
    
    Full service retail branch with ATMShelby Township, Michigan 48075
 29




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##### Table of Contents



30




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##### Table of Contents



Net Interest Income
 2010 Compared to 2009.
 Average Balances, Interest Rates and Yields.
  31




---



##### Table of Contents



Three months ended March 31, 2010
    
    
    Three months ended March 31, 2009Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average(In thousands)
    
    Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateAssetsInterest bearing deposits with banks
    
    $
    65,286
    
    
    $
    37
    
    
    
    0.23
    %
    
    $
    45,249
    
    
    $
    94
    
    
    
    0.84
    %Federal funds sold
    
    
    119
    
    
    
    1
    
    
    
    3.41
    %
    
    
    6,643
    
    
    
    6
    
    
    
    0.37
    %Securities, available for sale
    
    
    49,835
    
    
    
    168
    
    
    
    1.37
    %
    
    
    67,465
    
    
    
    256
    
    
    
    1.54
    %Loans
    
    
    826,719
    
    
    
    11,778
    
    
    
    5.78
    %
    
    
    920,254
    
    
    
    13,810
    
    
    
    6.09
    %Sub-total earning assets
    
    
    941,959
    
    
    
    11,984
    
    
    
    5.16
    %
    
    
    1,039,611
    
    
    
    14,166
    
    
    
    5.53
    %Other assets
    
    
    31,949
    
    
    
    
    
    
    
    
    
    
    
    59,947Total assets
    
    $
    973,908
    
    
    
    
    
    
    
    
    
    
    $
    1,099,558Liabilities and stockholders equityInterest bearing deposits
    
    $
    769,744
    
    
    $
    3,543
    
    
    
    1.87
    %
    
    $
    842,023
    
    
    $
    5,998
    
    
    
    2.89
    %Other borrowings
    
    
    73,828
    
    
    
    386
    
    
    
    2.12
    %
    
    
    73,326
    
    
    
    651
    
    
    
    3.60
    %Sub-total interest bearing liabilities
    
    
    843,572
    
    
    
    3,929
    
    
    
    1.89
    %
    
    
    915,349
    
    
    
    6,649
    
    
    
    2.95
    %Non-interest bearing deposits
    
    
    84,327
    
    
    
    
    
    
    
    
    
    
    
    78,090Other liabilities
    
    
    2,442
    
    
    
    
    
    
    
    
    
    
    
    1,821Stockholders equity
    
    
    43,567
    
    
    
    
    
    
    
    
    
    
    
    104,298Total liabilities and stockholders
equity
    
    $
    973,908
    
    
    
    
    
    
    
    
    
    
    $
    1,099,558Net interest income
    
    
    
    
    
    $
    8,055
    
    
    
    
    
    
    
    
    
    
    $
    7,517Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.27
    %
    
    
    
    
    
    
    
    
    
    
    2.58
    %Net interest margin on earning assets
    
    
    
    
    
    
    
    
    
    
    3.47
    %
    
    
    
    
    
    
    
    
    
    
    2.93
    %
 32




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##### Table of Contents



Rate/Volume Analysis.
 For the Three Months Ended March 31, 2010/2009Change in Interest Due to:Average
    
    
    Average
    
    
    Net(In thousands)
    
    Balance
    
    
    Rate
    
    
    ChangeAssetsInterest bearing deposits with banks
    
    $
    12
    
    
    
    ($69
    )
    
    
    ($57
    )Federal funds sold
    
    
    (55
    )
    
    
    50
    
    
    
    (5
    )Investment securities, available for sale
    
    
    (59
    )
    
    
    (29
    )
    
    
    (88
    )Loans
    
    
    (1,327
    )
    
    
    (705
    )
    
    
    (2,032
    )Total earning assets
    
    
    ($1,430
    )
    
    
    ($752
    )
    
    
    ($2,182
    )LiabilitiesInterest bearing deposits
    
    
    ($315
    )
    
    
    ($2,140
    )
    
    
    ($2,455
    )Other borrowings
    
    
    5
    
    
    
    (270
    )
    
    
    (265
    )Total interest bearing liabilities
    
    
    ($310
    )
    
    
    ($2,410
    )
    
    
    ($2,720
    )Net interest income
    
    
    
    
    
    
    
    
    
    $
    538Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    0.69
    %Net interest margin on earning assets
    
    
    
    
    
    
    
    
    
    
    0.54
    %
 Provision for Loan Losses
 2010 Compared to 2009.
 33




---



##### Table of Contents



Non-interest Income (Loss)
 2010 Compared to 2009.
  34




---



##### Table of Contents



Non-interest Expense
 2010 Compared to 2009.
    Income Tax Provision
 2010 Compared to 2009.
 35




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##### Table of Contents



Comparison of Financial Condition at March 31, 2010 and December 31, 2009
 Assets.
 Interest bearing deposits with banks.
 Mortgage Loans Held for Sale.
 Securities  Available for Sale.
  Federal Home Loan Bank Stock.
 Loans.
 36




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##### Table of Contents



03/31/10
    
    
    12/31/09
    
    
    03/31/09Consumer loans
    
    $
    28,623
    
    
    $
    29,386
    
    
    $
    31,000Commercial, financial, & other
    
    
    141,338
    
    
    
    144,630
    
    
    
    161,138Land development loans  residential property
    
    
    36,089
    
    
    
    38,472
    
    
    
    50,028Land development loans  non residential property
    
    
    9,711
    
    
    
    11,644
    
    
    
    15,914Commercial real estate construction  residential property
    
    
    12,164
    
    
    
    13,287
    
    
    
    15,687Commercial real estate construction  non residential property
    
    
    20,813
    
    
    
    20,061
    
    
    
    25,716Commercial real estate mortgages
    
    
    521,701
    
    
    
    531,156
    
    
    
    548,692Residential real estate mortgages
    
    
    43,522
    
    
    
    44,500
    
    
    
    51,880813,961
    
    
    
    833,136
    
    
    
    900,055Allowance for loan losses
    
    
    (30,288
    )
    
    
    (35,125
    )
    
    
    (18,632
    )$
    783,673
    
    
    $
    798,011
    
    
    $
    881,423
  3/31/10
    
    
    12/31/09
    
    
    03/31/09Troubled debt restructuring, accruing
    
    $
    31,737
    
    
    $
    59,420
    
    
    $
    19,506Over 90 days past due and still accruing
    
    
    1,127
    
    
    
    
    
    
    
    Non-accrual loans
    
    
    81,163
    
    
    
    49,341
    
    
    
    55,148Total non-performing loans
    
    
    114,027
    
    
    
    108,761
    
    
    
    74,654Real estate owned
    
    
    24,467
    
    
    
    23,435
    
    
    
    14,624Other repossessed assets
    
    
    
    
    
    
    
    
    
    
    Other non-performing assets
    
    
    24,467
    
    
    
    23,435
    
    
    
    14,624Total non-performing assets
    
    $
    138,494
    
    
    $
    132,196
    
    
    $
    89,278
  Number ofLoans
    
    
    BalanceConsumer Loans
    
    
    16
    
    
    $
    924Commercial Loans
    
    
    43
    
    
    
    12,749Land Development  Residential
    
    
    21
    
    
    
    23,260Land Development  Non Residential
    
    
    2
    
    
    
    1,558Commercial Construction Loans  Residential
    
    
    15
    
    
    
    9,573Commercial Construction Loans  Non Residential
    
    
    2
    
    
    
    2,870Commercial Mortgage Loans
    
    
    55
    
    
    
    27,863Residential Mortgages Loans
    
    
    14
    
    
    
    2,366Totals
    
    
    168
    
    
    $
    81,163
  37




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##### Table of Contents



Number of Loans
    
    
    BalanceConsumer Loans
    
    
    1
    
    
    $
    137Commercial Loans
    
    
    8
    
    
    
    3,381Land Development  Residential
    
    
    8
    
    
    
    14,239Land Development  Non Residential
    
    
    1
    
    
    
    240Commercial Construction Loans  Residential
    
    
    1
    
    
    
    3,875Commercial Mortgage Loans
    
    
    10
    
    
    
    9,870Residential Mortgages Loans
    
    
    5
    
    
    
    573Totals
    
    
    34
    
    
    $
    32,314
    Allowance for Loan Losses.
 38




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##### Table of Contents



Three Months
    
    
    
    
    
    
    Three MonthsEnded
    
    
    Year Ended
    
    
    Ended03/31/10
    
    
    12/31/09
    
    
    03/31/09Balance, beginning of year
    
    $
    35,125
    
    
    $
    14,452
    
    
    $
    14,452Charge-offs:Consumer loans
    
    
    342
    
    
    
    1,154
    
    
    
    116Commercial, financial & other
    
    
    1,521
    
    
    
    4,878
    
    
    
    1,108Land development loans  residential property
    
    
    1,292
    
    
    
    9,441
    
    
    
    2,881Land development loans  non residential property
    
    
    229
    
    
    
    4,364
    
    
    
    197Commercial real estate construction  residential property
    
    
    906
    
    
    
    1,471
    
    
    
    64Commercial real estate construction  non residential
property
    
    
    36
    
    
    
    1,981
    
    
    
    176Commercial real estate mortgages
    
    
    558
    
    
    
    6,919
    
    
    
    2,113Residential real estate mortgages
    
    
    109
    
    
    
    701
    
    
    
    25Recoveries:Consumer loans
    
    
    23
    
    
    
    176
    
    
    
    3Commercial, financial & other
    
    
    15
    
    
    
    339
    
    
    
    105Land development loans  residential property
    
    
    9
    
    
    
    107
    
    
    
    Commercial real estate construction  residential property
    
    
    1
    
    
    
    0
    
    
    
    Commercial real estate mortgages
    
    
    8
    
    
    
    61
    
    
    
    25Residential real estate mortgages
    
    
    
    
    
    
    36
    
    
    
    Net charge-offs (recoveries)
    
    
    4,937
    
    
    
    30,190
    
    
    
    6,547Provision for loan losses
    
    
    100
    
    
    
    50,863
    
    
    
    10,727Balance, end of period
    
    $
    30,288
    
    
    $
    35,125
    
    
    $
    18,632Allowance to total loans
    
    
    3.72
    %
    
    
    4.22
    %
    
    
    2.07
    %Allowance to nonperforming assets
    
    
    26.56
    %
    
    
    32.30
    %
    
    
    24.96
    %Net charge-offs to average loans
    
    
    0.60
    %
    
    
    3.40
    %
    
    
    0.71
    %
 39




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##### Table of Contents



Premises and Equipment.
 Other Real Estate.
 Number ofProperty Type
    
    Properties
    
    
    AmountSingle Family Homes
    
    
    33
    
    
    $
    3,171Condominium
    
    
    1
    
    
    
    727Vacant Land
    
    
    19
    
    
    
    10,837Commercial
    
    
    7
    
    
    
    6,545Office/Retail
    
    
    6
    
    
    
    3,187Total
    
    
    66
    
    
    $
    24,467
  Accrued Interest Receivable.
 Other Assets
 Deposits.
 03/31/10
    
    
    12/31/09
    
    
    03/31/09Non-interest bearing:Demand
    
    $
    86,407
    
    
    $
    83,873
    
    
    $
    80,624Interest bearing:Checking
    
    $
    79,566
    
    
    $
    83,087
    
    
    $
    96,491Money market
    
    
    57,864
    
    
    
    52,412
    
    
    
    171,426Savings
    
    
    44,992
    
    
    
    43,343
    
    
    
    56,389Time, under $100,000
    
    
    296,370
    
    
    
    301,829
    
    
    
    215,508Time, $100,000 and over
    
    
    286,818
    
    
    
    303,411
    
    
    
    287,141765,610
    
    
    
    784,082
    
    
    
    826,955Total deposits
    
    $
    852,017
    
    
    $
    867,955
    
    
    $
    907,579
 40




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##### Table of Contents



03/31/10
    
    
    12/31/09
    
    
    03/31/09Interest bearing checking
    
    $
    2,485
    
    
    $
    2,715
    
    
    $
    3,990Time, $100,000 and over
    
    
    4,368
    
    
    
    4,366
    
    
    
    25,015Total municipal deposits
    
    $
    6,853
    
    
    $
    7,081
    
    
    $
    29,005
 Federal Home Loan Bank Advances
 Accrued Interest Payable
 Other Liabilities
 Subordinated Debentures .
 41




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Capital
        42




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##### Table of Contents



43




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##### Table of Contents



PART I    FINANCIAL INFORMATION
 
 ITEM 3.
    
      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Sensitivity Analysis.
    44




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##### Table of Contents



Interest Rate Sensitivity Period1-90
    
    
    91-365
    
    
    1-5
    
    
    Over(In thousands)
    
    Days
    
    
    Days
    
    
    Years
    
    
    5 Years
    
    
    TotalEarning assetsFederal funds sold
    
    $
    57
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    57Interest bearing deposits with Banks
    
    
    70,898
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70,898Mortgage loans held for sale
    
    
    758
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    758Securities available for sale
    
    
    
    
    
    
    
    
    
    
    46,267
    
    
    
    
    
    
    
    46,267Federal Home Loan Bank stock
    
    
    3,698
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,698Total loans, net of non-accrual
    
    
    149,286
    
    
    
    96,660
    
    
    
    454,115
    
    
    
    32,737
    
    
    
    732,798Total earning assets
    
    
    224,697
    
    
    
    96,660
    
    
    
    500,382
    
    
    
    32,737
    
    
    
    854,476Interest bearing liabilitiesTotal interest bearing deposits
    
    
    332,717
    
    
    
    302,634
    
    
    
    129,991
    
    
    
    268
    
    
    
    765,610Federal Home Loan Bank advances
    
    
    34,000
    
    
    
    19,584
    
    
    
    10,215
    
    
    
    
    
    
    
    63,799Other Borrowings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Subordinated debentures
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000Total interest bearing liabilities
    
    
    376,717
    
    
    
    322,218
    
    
    
    140,206
    
    
    
    268
    
    
    
    839,409Net asset (liability) funding gap
    
    
    (152,020
    )
    
    
    (225,558
    )
    
    
    360,176
    
    
    
    32,469
    
    
    $
    15,067Cumulative net asset (liability) funding gap
    
    
    ($152,020
    )
    
    
    ($377,578
    )
    
    
    ($17,402
    )
    
    $
    15,067
 45




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##### Table of Contents



Liquidity.
    46




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##### Table of Contents



Payments Due By PeriodLess Than
    
    
    
    
    
    
    3-5
    
    
    Over 51 Year
    
    
    1-3 Years
    
    
    Years
    
    
    Years
    
    
    TotalCertificates of deposit
    
    $
    452,930
    
    
    $
    128,699
    
    
    $
    1,291
    
    
    $
    268
    
    
    $
    583,188Long-term borrowings
    
    
    53,584
    
    
    
    10,215
    
    
    
    
    
    
    
    
    
    
    
    63,799Lease commitments
    
    
    702
    
    
    
    706
    
    
    
    334
    
    
    
    
    
    
    
    1,742Subordinated debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    10,000Totals
    
    $
    507,216
    
    
    $
    139,620
    
    
    $
    1,625
    
    
    $
    10,268
    
    
    $
    658,729
  Amount Of Commitment Expiration Per PeriodLess Than
    
    
    
    
    
    
    3-5
    
    
    Over 51 Year
    
    
    1-3 Years
    
    
    Years
    
    
    Years
    
    
    TotalUnused loan commitments
    
    $
    39,279
    
    
    $
    8,466
    
    
    $
    7,120
    
    
    $
    8,384
    
    
    $
    63,249Standby letters of credit
    
    
    877
    
    
    
    1,500
    
    
    
    
    
    
    
    
    
    
    
    2,377Totals
    
    $
    40,156
    
    
    $
    9,966
    
    
    $
    7,120
    
    
    $
    8,384
    
    
    $
    65,626
 47




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##### Table of Contents



Item 4. Controls and Procedures
 Disclosure Controls and Procedures 
 Internal Controls Over Financial Reporting
 48




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##### Table of Contents



PART II    OTHER INFORMATION
 
 ITEM 6.
    
    EXHIBITS
 Exhibit 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.
 49




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##### Table of Contents



SIGNATURES
  Dearborn Bancorp, Inc.
(Registrant)/s/ John E. DemmerJohn E. DemmerChairman/s/ Michael J. RossMichael J. RossPresident and Chief Executive Officer/s/ Jeffrey L. KarafaJeffrey L. KarafaTreasurer and Chief Financial Officer  50




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##### Table of Contents



Exhibit Index
 Exhibit
    
    Description31.1
    
    CEO Certification. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    CFO Certification. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 51