Exhibit 13
 
  
 2010
ANNUAL REPORT




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Dearborn Bancorp, Inc.
 and its subsidiary
 Fidelity Bank
 CONTENTSCorporate Information
    
    
    2Chairmans and Presidents Letter to Stockholders
    
    
    3Summary of Selected Financial Data
    
    
    5Report of Independent Registered Public Accounting Firm
    
    
    7Managements Report on Internal Control Over Financial Reporting
    
    
    8Consolidated Balance Sheets
    
    
    9Consolidated Statements of Operations
    
    
    10Consolidated Statements of Changes in Stockholders Equity
    
    
    11Consolidated Statements of Cash Flows
    
    
    13Notes to Consolidated Financial Statements
    
    
    15Managements Discussion and Analysis
    
    
    56Dearborn Bancorp, Inc. Directors and Officers
    
    
    84Fidelity Bank Directors and Executive Officers
    
    
    85Fidelity Bank Officers
    
    
    86Fidelity Bank Subsidiaries
    
    
    87Investor Information
    
    
    89
 1




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DESCRIPTION OF BUSINESS
 Dearborn Bancorp, Inc.
  Fidelity Bank
   www.fidbank.com
 Community Bank Insurance Agency, Inc.
  Community Bank Audit Services, Inc.
  2




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3




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4




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SUMMARY OF SELECTED FINANCIAL DATA
  (In thousands, except share and per share data)
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006OPERATIONSInterest income
    
    $
    46,973
    
    
    $
    54,253
    
    
    $
    61,126
    
    
    $
    70,110
    
    
    $
    53,886Interest expense
    
    
    12,894
    
    
    
    23,367
    
    
    
    28,995
    
    
    
    36,491
    
    
    
    25,884Net interest income
    
    
    34,079
    
    
    
    30,886
    
    
    
    32,131
    
    
    
    33,619
    
    
    
    28,002Provision for loan losses
    
    
    15,978
    
    
    
    50,863
    
    
    
    14,606
    
    
    
    5,821
    
    
    
    943Net interest income after provision for loan losses
    
    
    18,101
    
    
    
    (19,977
    )
    
    
    17,525
    
    
    
    27,798
    
    
    
    27,059Total non-interest income
    
    
    (4,006
    )
    
    
    (469
    )
    
    
    (930
    )
    
    
    1,020
    
    
    
    925Total non-interest expense
    
    
    28,532
    
    
    
    32,720
    
    
    
    65,007
    
    
    
    23,796
    
    
    
    16,225Net income before federal income tax expense
    
    
    (14,437
    )
    
    
    (53,166
    )
    
    
    (48,412
    )
    
    
    5,022
    
    
    
    11,759Income tax expense (benefit)
    
    
    (188
    )
    
    
    8,009
    
    
    
    (16,487
    )
    
    
    1,856
    
    
    
    3,940Net income (loss)
    
    
    ($14,249
    )
    
    
    ($61,175
    )
    
    
    ($31,925
    )
    
    $
    3,166
    
    
    $
    7,819FINANCIAL CONDITIONTotal assets
    
    $
    915,684
    
    
    $
    986,486
    
    
    $
    1,121,918
    
    
    $
    1,046,981
    
    
    $
    855,931Mortgage loans held for sale
    
    
    353
    
    
    
    1,129
    
    
    
    1,834
    
    
    
    1,316
    
    
    
    1,823Securities, available for sale
    
    
    54,811
    
    
    
    46,300
    
    
    
    84,148
    
    
    
    8,902
    
    
    
    5,878Federal Home Loan Bank stock
    
    
    3,605
    
    
    
    3,698
    
    
    
    3,614
    
    
    
    2,072
    
    
    
    1,288Loans
    
    
    735,851
    
    
    
    833,136
    
    
    
    933,269
    
    
    
    952,084
    
    
    
    756,420Allowance for loan losses
    
    
    (27,971
    )
    
    
    (35,125
    )
    
    
    (14,452
    )
    
    
    (10,617
    )
    
    
    (7,775
    )Other assets
    
    
    149,035
    
    
    
    137,348
    
    
    
    113,505
    
    
    
    93,224
    
    
    
    98,297Deposits
    
    
    812,101
    
    
    
    867,955
    
    
    
    938,395
    
    
    
    822,627
    
    
    
    633,216Federal Home Loan Bank advances
    
    
    63,716
    
    
    
    63,855
    
    
    
    65,019
    
    
    
    41,370
    
    
    
    25,561Subordinated debentures
    
    
    10,000
    
    
    
    10,000
    
    
    
    10,000
    
    
    
    10,000
    
    
    
    10,000Other borrowings
    
    
    
    
    
    
    
    
    
    
    2,461
    
    
    
    30,580
    
    
    
    37,919Other liabilities
    
    
    2,908
    
    
    
    2,731
    
    
    
    2,732
    
    
    
    4,856
    
    
    
    4,250Stockholders equity
    
    
    26,959
    
    
    
    41,945
    
    
    
    103,311
    
    
    
    137,548
    
    
    
    144,985PER SHARE INFORMATION (1)Net income (loss) per common share  basic
    
    
    ($1.86
    )
    
    
    ($8.00
    )
    
    
    ($3.99
    )
    
    $
    0.37
    
    
    $
    1.23Net income (loss) per common share  diluted
    
    
    ($1.86
    )
    
    
    ($8.00
    )
    
    
    ($3.99
    )
    
    $
    0.36
    
    
    $
    1.17Book value per common share
    
    $
    3.51
    
    
    $
    5.46
    
    
    $
    13.42
    
    
    $
    16.70
    
    
    $
    16.15Average shares outstanding   basic
    
    
    7,645,940
    
    
    
    7,645,076
    
    
    
    8,007,345
    
    
    
    8,602,704
    
    
    
    6,372,471Average shares outstanding  diluted
    
    
    7,645,940
    
    
    
    7,645,076
    
    
    
    8,007,345
    
    
    
    8,827,531
    
    
    
    6,672,319Shares outstanding at end of period
    
    
    7,685,705
    
    
    
    7,687,470
    
    
    
    7,696,204
    
    
    
    8,237,413
    
    
    
    8,975,085OTHER DATAReturn on average assets
    
    
    -1.50
    %
    
    
    -5.79
    %
    
    
    -3.02
    %
    
    
    0.30
    %
    
    
    1.02
    %Return on average equity
    
    
    -37.82
    %
    
    
    -71.83
    %
    
    
    -23.51
    %
    
    
    2.21
    %
    
    
    8.20
    %Net interest margin
    
    
    3.75
    %
    
    
    3.07
    %
    
    
    3.29
    %
    
    
    3.48
    %
    
    
    3.80
    %Net interest spread
    
    
    3.60
    %
    
    
    2.77
    %
    
    
    2.79
    %
    
    
    2.74
    %
    
    
    3.06
    %Allowance for loan losses to total loans
    
    
    3.80
    %
    
    
    4.22
    %
    
    
    1.55
    %
    
    
    1.12
    %
    
    
    1.03
    %Nonperforming assets to total assets
    
    
    14.92
    %
    
    
    13.40
    %
    
    
    5.51
    %
    
    
    2.42
    %
    
    
    0.90
    %Stockholders equity to total assets
    
    
    2.94
    %
    
    
    4.25
    %
    
    
    9.21
    %
    
    
    13.14
    %
    
    
    16.94
    %Total interest expense to gross interest income
    
    
    27.45
    %
    
    
    43.07
    %
    
    
    47.43
    %
    
    
    52.05
    %
    
    
    48.03
    %Number of Offices
    
    
    17
    
    
    
    17
    
    
    
    18
    
    
    
    19
    
    
    
    12
 
 (1)
    
    All share and per share amounts have been adjusted to reflect the issuance of stock
dividends. 5




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COMMITMENT TO COMMUNITY
  American Arab Chamber of CommerceAnn Arbor/Ypsilanti Regional Chamber of CommerceAuburn Hills Chamber of CommerceBirmingham Area Seniors (BASCC)Birmingham Bloomfield Chamber of CommerceBirmingham Optimist ClubBoy Scouts of AmericaCanton Chamber of CommerceCanton Community FoundationCanton Senior CenterCentral Macomb Chamber of CommerceClinton Township Community Blood DriveClinton Township Senior ExpoDearborn BaseballDearborn Board of RealtorsDearborn Chamber of CommerceDearborn Exchange ClubDearborn GoodfellowsDearborn Heights Chamber of CommerceDearborn Heights Parks and RecreationDearborn Heights Spirit FestivalDearborn KiwanisDearborn Police Officers CharityDearborn Public LibraryDearborn Rotary ClubDearborn Senior CenterDearborn Symphony OrchestraDivine Child SchoolDownriver Family YMCAEaster Seals of MichiganGarden Club of DearbornGoodwill Industries of Greater DetroitHabitat for HumanityHenry Ford Community College FoundationKiwanis Club of DearbornMike Adray Memorial FoundationNAACP (Detroit Branch)Oakwood Health Care FoundationPerry Nursing SchoolPlymouth Chamber of CommerceRochester Regional Chamber of CommerceSaline 4-H FarmersSaline Area Chamber of CommerceShowcase PlymouthSouthern Wayne County Chamber of CommerceSouthgate Senior CenterWashtenaw County 4-H FairWayne County Treasurers AssociationWest Washtenaw Business AssociationYWCA of Western Wayne County
 6




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Report of Independent Registered Public Accounting Firm
 
      
 7




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/s/ Michael J. RossMichael J. RossPresident and Chief Executive Officer/s/ Jeffrey L. KarafaJeffery L. KarafaVice President, Treasurer and Secretary 8




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DEARBORN BANCORP, INC. AND SUBSIDIARY  CONSOLIDATED BALANCE SHEETS
 December 31,(Dollars, in thousands)
    
    2010
    
    
    2009ASSETSCash and cash equivalentsCash and due from banks
    
    $
    6,645
    
    
    $
    7,803Federal funds sold
    
    
    55
    
    
    
    156Interest bearing deposits with banks
    
    
    87,075
    
    
    
    69,538Total cash and cash equivalents
    
    
    93,775
    
    
    
    77,497Mortgage loans held for sale
    
    
    353
    
    
    
    1,129Securities available for sale
    
    
    54,811
    
    
    
    46,300Federal Home Loan Bank stock
    
    
    3,605
    
    
    
    3,698LoansLoans
    
    
    735,851
    
    
    
    833,136Allowance for loan losses
    
    
    (27,971
    )
    
    
    (35,125
    )Net loans
    
    
    707,880
    
    
    
    798,011Premises and equipment, net
    
    
    19,195
    
    
    
    20,194Real estate owned
    
    
    21,502
    
    
    
    23,435Accrued interest receivable
    
    
    3,286
    
    
    
    3,562Other assets
    
    
    11,277
    
    
    
    12,660Total assets
    
    $
    915,684
    
    
    $
    986,486LIABILITIESDepositsNon-interest bearing deposits
    
    $
    88,266
    
    
    $
    83,873Interest bearing deposits
    
    
    723,835
    
    
    
    784,082Total deposits
    
    
    812,101
    
    
    
    867,955Other liabilitiesFederal Home Loan Bank advances
    
    
    63,716
    
    
    
    63,855Accrued interest payable
    
    
    1,056
    
    
    
    1,046Other liabilities
    
    
    1,852
    
    
    
    1,685Subordinated debentures
    
    
    10,000
    
    
    
    10,000Total liabilities
    
    
    888,725
    
    
    
    944,541STOCKHOLDERS EQUITYCommon stock  no par value 100,000,000 shares
authorized, 7,685,706 and 7,687,470 shares
outstanding in 2010 and 2009, respectively
    
    
    132,083
    
    
    
    131,929Accumulated deficit
    
    
    (104,099
    )
    
    
    (89,850
    )Accumulated other comprehensive income (loss)
    
    
    (1,025
    )
    
    
    (134
    )Total stockholders equity
    
    
    26,959
    
    
    
    41,945Total liabilities and stockholders equity
    
    $
    915,684
    
    
    $
    986,486
  9




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DEARBORN BANCORP, INC. AND SUBSIDIARY  CONSOLIDATED STATEMENTS OF OPERATIONS
 Years Ended December 31,(In thousands, except share data)
    
    2010
    
    
    2009Interest incomeInterest on loans
    
    $
    45,668
    
    
    $
    53,273Interest on securities, available for sale
    
    
    967
    
    
    
    589Interest on deposits with banks
    
    
    337
    
    
    
    374Interest on federal funds
    
    
    1
    
    
    
    17Total interest income
    
    
    46,973
    
    
    
    54,253Interest expenseInterest on deposits
    
    
    11,427
    
    
    
    20,993Interest on other liabilities
    
    
    1,467
    
    
    
    2,374Total interest expense
    
    
    12,894
    
    
    
    23,367Net interest income
    
    
    34,079
    
    
    
    30,886Provision for loan losses
    
    
    15,978
    
    
    
    50,863Net interest income (loss) after provision for loan losses
    
    
    18,101
    
    
    
    (19,977
    )Non-interest income (loss)Service charges on deposit accounts
    
    
    1,448
    
    
    
    1,499Fees for other services to customers
    
    
    89
    
    
    
    126Gain on the sale of loans
    
    
    279
    
    
    
    352Gain (loss) on the sale of securities
    
    
    539
    
    
    
    490Other than
temporary impairment on securities, held to maturity
Portion of loss recognized in other comprehensive income before taxesNet impairment losses recognized in earnings
    
    
    
    
    
    
    (414
    )Loss on the sale of real estate owned
    
    
    (476
    )
    
    
    (139
    )Loss on the write-down of real estate owned
    
    
    (6,338
    )
    
    
    (2,766
    )Other income
    
    
    453
    
    
    
    383Total non-interest loss
    
    
    (4,006
    )
    
    
    (469
    )Non-interest expenseSalaries and employee benefits
    
    
    12,436
    
    
    
    12,974Occupancy and equipment expense
    
    
    3,255
    
    
    
    3,623Amortization of intangible expense
    
    
    
    
    
    
    595Impairment of other intangible assets
    
    
    
    
    
    
    3,997FDIC assessment
    
    
    4,125
    
    
    
    2,843Advertising and marketing
    
    
    146
    
    
    
    237Stationery and supplies
    
    
    292
    
    
    
    429Professional services
    
    
    1,172
    
    
    
    807Data processing
    
    
    722
    
    
    
    905Defaulted loan expense
    
    
    4,372
    
    
    
    4,624Other operating expenses
    
    
    2,012
    
    
    
    1,686Total non-interest expense
    
    
    28,532
    
    
    
    32,720Income before federal income tax expense
    
    
    (14,437
    )
    
    
    (53,166
    )Income tax expense (benefit)
    
    
    (188
    )
    
    
    8,009Net loss
    
    
    ($14,249
    )
    
    
    ($61,175
    )Per share data:Net loss  basic
    
    
    ($1.86
    )
    
    
    ($8.00
    )Net loss  diluted
    
    
    ($1.86
    )
    
    
    ($8.00
    )Weighted average number of shares outstanding  basic
    
    
    7,645,940
    
    
    
    7,645,076Weighted average number of shares outstanding  diluted
    
    
    7,645,940
    
    
    
    7,645,076
  10




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DEARBORN BANCORP, INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
  AccumulatedOther
    
    
    TotalCommon
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersStock
    
    
    Earnings
    
    
    Income
    
    
    EquityBalance, January 1, 2009
    
    $
    131,784
    
    
    $
    (28,675
    )
    
    $
    202
    
    
    $
    103,311Stock awards earned
    
    
    76
    
    
    
    
    
    
    
    
    
    
    
    76Stock option expense
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    69Net loss
    
    
    
    
    
    
    (61,175
    )
    
    
    
    
    
    
    (61,175
    )Other comprehensive incomeChanges in net unrealized gain on
securities available for sale
    
    
    
    
    
    
    
    
    
    
    (21
    )
    
    
    (21
    )Reclassification adjustment for gain
included in net income
    
    
    
    
    
    
    
    
    
    
    (490
    )
    
    
    (490
    )Net change in net unrealized gain
on securities available for sale
    
    
    
    
    
    
    
    
    
    
    (511
    )
    
    
    (511
    )Deferred tax effects
    
    
    
    
    
    
    
    
    
    
    175
    
    
    
    175Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    (336
    )
    
    
    (336
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (61,511
    )Balance, December 31, 2009
    
    $
    131,929
    
    
    $
    (89,850
    )
    
    $
    (134
    )
    
    $
    41,945
  11




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DEARBORN BANCORP, INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (Continued)
  AccumulatedOther
    
    
    TotalCommon
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersStock
    
    
    Earnings
    
    
    Income
    
    
    EquityBalance, December 31, 2009
    
    $
    131,929
    
    
    $
    (89,850
    )
    
    $
    (134
    )
    
    $
    41,945Stock awards earned
    
    
    85
    
    
    
    
    
    
    
    
    
    
    
    85Stock option expense
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    69Net loss
    
    
    
    
    
    
    (14,249
    )
    
    
    
    
    
    
    (14,249
    )Other comprehensive incomeChanges in net unrealized loss on
securities available for sale
    
    
    
    
    
    
    
    
    
    
    (282
    )
    
    
    (282
    )Reclassification adjustment for gain
included in net income
    
    
    
    
    
    
    
    
    
    
    (539
    )
    
    
    (539
    )Net change in net unrealized loss
on securities available for sale
    
    
    
    
    
    
    
    
    
    
    (821
    )
    
    
    (821
    )Deferred tax effects
    
    
    
    
    
    
    
    
    
    
    (70
    )
    
    
    (70
    )Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    (891
    )
    
    
    (891
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,140
    )Balance, December 31, 2010
    
    $
    132,083
    
    
    $
    (104,099
    )
    
    $
    (1,025
    )
    
    $
    26,959
  12




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DEARBORN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended December 31,(In thousands)
    
    2010
    
    
    2009Cash flows from operating activitiesInterest and fees received
    
    $
    47,249
    
    
    $
    54,190Interest paid
    
    
    (12,724
    )
    
    
    (24,016
    )Proceeds from sale of mortgages held for sale
    
    
    25,217
    
    
    
    34,291Origination of mortgages held for sale
    
    
    (24,162
    )
    
    
    (33,234
    )Taxes refunded
    
    
    4,074
    
    
    
    700Loss on sale of real estate owned
    
    
    (476
    )
    
    
    (139
    )Gain on sale of securities
    
    
    539
    
    
    
    490Cash paid to suppliers and employees
    
    
    (27,574
    )
    
    
    (23,286
    )Net cash provided by operating activities
    
    
    12,143
    
    
    
    8,996Cash flows from investing activitiesSale of securities available for sale
    
    
    52,116
    
    
    
    54,208Proceeds from calls, maturities and repayments of securities available for sale
    
    
    5,996
    
    
    
    53,078Purchases of securities available for sale
    
    
    (67,502
    )
    
    
    (70,641
    )Redemption (purchase) of Federal Home Loan Bank stock
    
    
    93
    
    
    
    (84
    )Decrease in loans, net of payments received
    
    
    57,922
    
    
    
    48,381Proceeds from the sale of real estate owned
    
    
    11,615
    
    
    
    4,879Purchases of property and equipment
    
    
    (112
    )
    
    
    (257
    )Net cash used in investing activities
    
    
    60,128
    
    
    
    89,564Cash flows from financing activitiesNet increase in non-interest bearing deposits
    
    
    4,393
    
    
    
    2,556Net decrease in interest bearing deposits
    
    
    (60,247
    )
    
    
    (72,996
    )Decrease in repurchase agreements
    
    
    
    
    
    
    (2,461
    )Proceeds from Federal Home Loan Bank advances
    
    
    
    
    
    
    29,000Repayments on Federal Home Loan Bank advances
    
    
    (139
    )
    
    
    (30,164
    )Net cash used in financing activities
    
    
    (55,993
    )
    
    
    (74,065
    )Increase in cash and cash equivalents
    
    
    16,278
    
    
    
    24,495Cash and cash equivalents at the beginning of year
    
    
    77,497
    
    
    
    53,002Cash and cash equivalents at the end of year
    
    $
    93,775
    
    
    $
    77,497
  13




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##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
 Years Ended December 31,(In thousands)
    
    2010
    
    
    2009Reconciliation of net loss to net cash provided by operating activities
Net loss
    
    $
    (14,249
    )
    
    $
    (61,175
    )Adjustments to reconcile net income to net cash
provided by operating activitiesProvision for loan losses
    
    
    15,978
    
    
    
    50,863Depreciation expense
    
    
    1,111
    
    
    
    1,335Decrease in deferred tax asset
    
    
    
    
    
    
    16,794Restricted stock award expense
    
    
    85
    
    
    
    69Stock option expense
    
    
    68
    
    
    
    76Accretion of discount on investment securities
    
    
    (243
    )
    
    
    (52
    )Amortization of premium on investment securities
    
    
    301
    
    
    
    331Write-down of real estate owned
    
    
    6,338
    
    
    
    2,766Amortization of intangible assets
    
    
    
    
    
    
    595Impairment of other intangible assets
    
    
    
    
    
    
    3,997Impairment of securities, held to maturity
    
    
    
    
    
    
    414Decrease in mortgages held for sale
    
    
    776
    
    
    
    705(Increase) decrease in interest receivable
    
    
    276
    
    
    
    (63
    )Increase (decrease) in interest payable
    
    
    10
    
    
    
    (649
    )(Increase) decrease in other assets
    
    
    1,525
    
    
    
    (7,658
    )Increase in other liabilities
    
    
    167
    
    
    
    648Net cash provided by operating activities
    
    $
    12,143
    
    
    $
    8,996Supplemental noncash disclosures:Transfers from loans to real estate owned
    
    $
    16,231
    
    
    $
    21,547
  14




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 December 31, 2010 and 2009
   Nature of Operations and Principals of Consolidation
     Use of Estimates
  15




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  Cash and Cash Equivalents
    Restrictions on Cash
  Securities
   16




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
   Loans
    Loans Held for Sale
  Allowance for Loan Losses
   17




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
    Foreclosed Assets Held for Sale
  Premises and Equipment
    Federal Home Loan Bank (FHLB) Stock
  18




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  Long-Term Assets
  Stock Compensation
  Loan Commitments and Related Financial Instruments
  Stock Dividends
  Income Taxes
    Reclassifications
  19




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  Loss Contingencies
  Earnings (Loss) Per Share
  Comprehensive Income (Loss)
  Dividend Restrictions
  Fair Value of Financial Instruments
  Valuation Measurements
  20




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  Adoption of New Accounting Standards
 FASB ASU 2009-16, Transfers and Servicing (Topic 860); Accounting for Transfers of Financial
Assets 
    21




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  Adoption of New Accounting Standards
     22




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  Consent Order
  
    
    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
    Written Order
   23




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
 NOTE B  CONSENT ORDER, WRITTEN ORDER AND GOING CONCERN CONSIDERATIONS Cont)
 Going Concern
    24




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
   December 31, 2010Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueGovernment sponsored
enterprises (GSE) 
mortgage backed securities
    
    $
    55,586
    
    
    $
    1
    
    
    
    ($1,026
    )
    
    $
    54,561Other securities
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    250Totals
    
    $
    55,836
    
    
    $
    1
    
    
    
    ($1,026
    )
    
    $
    54,811
 December 31, 2009Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueUS Government sponsored
agency securities
    
    $
    12,759
    
    
    $
    20
    
    
    
    ($30
    )
    
    $
    12,749Corporate bonds
    
    
    33,308
    
    
    
    
    
    
    
    (197
    )
    
    
    33,111Government sponsored
enterprises (GSE) 
mortgage backed securities
    
    
    101
    
    
    
    3
    
    
    
    
    
    
    
    104Other securities
    
    
    336
    
    
    
    
    
    
    
    
    
    
    
    336Totals
    
    $
    46,504
    
    
    $
    23
    
    
    
    ($227
    )
    
    $
    46,300
  25




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  Amortized
    
    
    FairCost
    
    
    ValueDue in over ten years
    
    $
    250
    
    
    $
    250GSE  mortgage backed securities
    
    
    55,586
    
    
    
    54,561Totals
    
    $
    55,836
    
    
    $
    54,811
  2010
    
    
    2009Proceeds
    
    $
    52,116
    
    
    $
    54,208Gross gains
    
    
    539
    
    
    
    492Gross losses
    
    
    
    
    
    
    2
   December 31, 2010Less than one year
    
    
    One year or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedInvestment category
    
    Value
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossGSE  mortgage backed securities
    
    $
    54,526
    
    
    $
    (1,026
    )
    
    $
    
    
    
    $
    
    
    
    $
    54,526
    
    
    $
    (1,026
    )Total temporarily impaired
    
    $
    54,526
    
    
    $
    (1,026
    )
    
    $
    
    
    
    $
    
    
    
    $
    54,526
    
    
    $
    (1,026
    )
 December 31, 2009Less than one year
    
    
    One year or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedInvestment category
    
    Value
    
    
    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
    )
 26




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
     Percent2010
    
    
    2009
    
    
    Incr(decr)Consumer loans
    
    $
    25,871
    
    
    $
    29,386
    
    
    
    (11.96
    %)Commercial, financial, & other
    
    
    121,015
    
    
    
    144,630
    
    
    
    (16.33
    %)Construction and land development
loans
    
    
    55,126
    
    
    
    83,464
    
    
    
    (33.95
    %)Commercial real estate mortgages
    
    
    495,501
    
    
    
    531,156
    
    
    
    (6.71
    %)Residential real estate mortgages
    
    
    38,338
    
    
    
    44,500
    
    
    
    (13.85
    %)Total loans
    
    
    735,851
    
    
    
    833,136
    
    
    
    (11.68
    %)Allowance for loan losses
    
    
    (27,971
    )
    
    
    (35,125
    )Loans, net
    
    $
    707,880
    
    
    $
    798,011
  2010
    
    
    2009Balance, beginning of year
    
    $
    1,096
    
    
    $
    2,042New loans during period
    
    
    
    
    
    
    Repayments made during period
    
    
    (480
    )
    
    
    (946
    )Balance, end of period
    
    $
    616
    
    
    $
    1,096
 27




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
    AverageUnpaid
    
    
    
    
    
    
    
    
    
    Investment
    
    
    InterestPrincipal
    
    
    Recorded
    
    
    Specific
    
    
    In Impaired
    
    
    IncomeLoans at December 31, 2010
    
    Balance
    
    
Investment
    
    
    Allowance
    
    
    Loans
    
    
    RecognizedWithout a specific valuation allowanceConsumer loans
    
    $
    1,886
    
    
    $
    1,533
    
    
    $
    
    
    
    $
    1,102
    
    
    $
    Commercial, financial and other
    
    
    22,412
    
    
    
    16,472
    
    
    
    
    
    
    
    17,827
    
    
    
    125Construction and land development
    
    
    31,156
    
    
    
    17,709
    
    
    
    
    
    
    
    22,530
    
    
    
    96Commercial real estate mortgages
    
    
    41,773
    
    
    
    36,818
    
    
    
    
    
    
    
    38,794
    
    
    
    927Residential real estate mortgages
    
    
    1,323
    
    
    
    1,166
    
    
    
    
    
    
    
    2,181
    
    
    
    Total
    
    $
    98,550
    
    
    $
    73,698
    
    
    $
    
    
    
    $
    82,434
    
    
    $
    1,148With a specific valuation allowanceConsumer loans
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Commercial, financial and other
    
    
    3,910
    
    
    
    3,910
    
    
    
    1,135
    
    
    
    3,933
    
    
    
    90Construction and land development
    
    
    18,364
    
    
    
    18,296
    
    
    
    5,280
    
    
    
    10,976
    
    
    
    240Commercial real estate mortgages
    
    
    22,174
    
    
    
    20,628
    
    
    
    4,310
    
    
    
    17,545
    
    
    
    497Residential real estate mortgages
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    44,448
    
    
    $
    42,834
    
    
    $
    10,725
    
    
    $
    32,454
    
    
    $
    827TotalConsumer loans
    
    $
    1,886
    
    
    $
    1,533
    
    
    $
    
    
    
    $
    1,102
    
    
    $
    Commercial, financial and other
    
    
    26,322
    
    
    
    20,382
    
    
    
    1,135
    
    
    
    21,760
    
    
    
    215Construction and land development
    
    
    49,520
    
    
    
    36,005
    
    
    
    5,280
    
    
    
    33,506
    
    
    
    336Commercial real estate mortgages
    
    
    63,947
    
    
    
    57,446
    
    
    
    4,310
    
    
    
    56,339
    
    
    
    1,424Residential real estate mortgages
    
    
    1,323
    
    
    
    1,166
    
    
    
    
    
    
    
    2,181
    
    
    
    Total Impaired Loans
    
    $
    142,998
    
    
    $
    116,532
    
    
    $
    10,725
    
    
    $
    114,888
    
    
    $
    1,975
 28




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  AverageUnpaid
    
    
    
    
    
    
    
    
    
    Investment
    
    
    InterestPrincipal
    
    
    Recorded
    
    
    Specific
    
    
    In Impaired
    
    
    IncomeLoans at December 31, 2009
    
    Balance
    
    
    Investment
    
    
    Allowance
    
    
    Loans
    
    
    RecognizedLoans without a specific valuation allowanceConsumer loans
    
    $
    881
    
    
    $
    881
    
    
    $
    
    
    
    $
    981
    
    
    $
    Commercial, financial and other
    
    
    14,478
    
    
    
    13,143
    
    
    
    
    
    
    
    10,737
    
    
    
    239Construction and land development
    
    
    32,996
    
    
    
    22,286
    
    
    
    
    
    
    
    22,002
    
    
    
    47Commercial real estate mortgages
    
    
    52,670
    
    
    
    45,418
    
    
    
    
    
    
    
    41,355
    
    
    
    1,336Residential real estate mortgages
    
    
    1,547
    
    
    
    1,498
    
    
    
    
    
    
    
    1,366
    
    
    
    Total
    
    $
    102,572
    
    
    $
    83,226
    
    
    $
    
    
    
    $
    76,441
    
    
    $
    1,622Loans with a specific valuation allowanceConsumer loans
    
    $
    358
    
    
    $
    358
    
    
    $
    282
    
    
    $
    179
    
    
    $
    Commercial, financial and other
    
    
    15,548
    
    
    
    15,548
    
    
    
    4,495
    
    
    
    7,893
    
    
    
    252Construction and land development
    
    
    10,048
    
    
    
    8,007
    
    
    
    2,384
    
    
    
    7,274
    
    
    
    Commercial real estate mortgages
    
    
    16,150
    
    
    
    18,834
    
    
    
    3,449
    
    
    
    10,334
    
    
    
    475Residential real estate mortgages
    
    
    855
    
    
    
    806
    
    
    
    105
    
    
    
    429
    
    
    
    Total
    
    $
    42,959
    
    
    $
    43,553
    
    
    $
    10,715
    
    
    $
    26,109
    
    
    $
    727TotalConsumer loans
    
    $
    1,239
    
    
    $
    1,239
    
    
    $
    282
    
    
    $
    1,160
    
    
    $
    Commercial, financial and other
    
    
    30,026
    
    
    
    28,691
    
    
    
    4,495
    
    
    
    18,630
    
    
    
    491Construction and land development
    
    
    43,044
    
    
    
    30,293
    
    
    
    2,384
    
    
    
    29,276
    
    
    
    47Commercial real estate mortgages
    
    
    68,820
    
    
    
    64,252
    
    
    
    3,449
    
    
    
    51,689
    
    
    
    1,811Residential real estate mortgages
    
    
    2,402
    
    
    
    2,304
    
    
    
    105
    
    
    
    1,795
    
    
    
    Total Impaired Loans
    
    $
    145,531
    
    
    $
    126,779
    
    
    $
    10,715
    
    
    $
    102,550
    
    
    $
    2,349
 2010
    
    
    2009
    
    
    2008Troubled debt restructuring and still accruing
    
    $
    48,527
    
    
    $
    59,420
    
    
    $
    17,765Over 90 days past due and still accruing
    
    
    
    
    
    
    
    
    
    
    450Non-accrual loans
    
    
    66,563
    
    
    
    49,341
    
    
    
    51,708Total non-performing loans
    
    
    115,090
    
    
    
    108,761
    
    
    
    69,923Real estate owned
    
    
    21,502
    
    
    
    23,435
    
    
    
    9,657Other non-performing assets
    
    
    21,502
    
    
    
    23,435
    
    
    
    9,657Total non-performing assets
    
    $
    136,592
    
    
    $
    132,196
    
    
    $
    79,580
 29




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
    90 Days30 - 59
    
    
    60 - 89
    
    
    or MoreDays
    
    
    Days
    
    
    Past Due or
    
    
    
    
    
    
    TotalAt December 31, 2010
    
    Past Due
    
    
    Past Due
    
    
    Non-Accrual
    
    
    Current
    
    
    LoansConsumer loans
    
    $
    47
    
    
    $
    168
    
    
    $
    1,533
    
    
    $
    24,123
    
    
    $
    25,871Commercial, financial and other
    
    
    951
    
    
    
    524
    
    
    
    15,729
    
    
    
    103,811
    
    
    
    121,015Construction and land development
    
    
    4,000
    
    
    
    
    
    
    
    18,925
    
    
    
    31,449
    
    
    
    55,126Commercial real estate mortgages
    
    
    4,478
    
    
    
    8,134
    
    
    
    29,210
    
    
    
    454,431
    
    
    
    495,501Residential real estate mortgages
    
    
    
    
    
    
    
    
    
    
    1,166
    
    
    
    37,172
    
    
    
    38,338Total Loans
    
    $
    9,476
    
    
    $
    8,826
    
    
    $
    66,563
    
    
    $
    650,986
    
    
    $
    735,851
 90 Days30 - 59
    
    
    60 - 89
    
    
    or MoreDays
    
    
    Days
    
    
    Past Due or
    
    
    
    
    
    
    TotalAt December 31, 2009
    
    Past Due
    
    
    Past Due
    
    
    Non-Accrual
    
    
    Current
    
    
    LoansConsumer loans
    
    $
    230
    
    
    $
    40
    
    
    $
    1,239
    
    
    $
    27,877
    
    
    $
    29,386Commercial, financial and other
    
    
    739
    
    
    
    1,279
    
    
    
    9,125
    
    
    
    133,487
    
    
    
    144,630Construction and land development
    
    
    
    
    
    
    596
    
    
    
    22,372
    
    
    
    60,496
    
    
    
    83,464Commercial real estate mortgages
    
    
    2,643
    
    
    
    3,807
    
    
    
    14,582
    
    
    
    510,124
    
    
    
    531,156Residential real estate mortgages
    
    
    369
    
    
    
    10
    
    
    
    2,023
    
    
    
    42,098
    
    
    
    44,500Total Loans
    
    $
    3,981
    
    
    $
    5,732
    
    
    $
    49,341
    
    
    $
    774,082
    
    
    $
    833,136
  30




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
   2010
    
    
    2009Consumer loans
    
    $
    1,533
    
    
    $
    1,239Commercial, financial and other
    
    
    15,729
    
    
    
    9,125Construction and land development
    
    
    19,677
    
    
    
    22,372Commercial real estate mortgages
    
    
    28,458
    
    
    
    14,582Residential real estate mortgages
    
    
    1,166
    
    
    
    2,023Total Loans
    
    $
    66,563
    
    
    $
    49,341
  At December 31, 2010
    
    Performing
    
    
    Non-performing
    
    
    Total LoansConsumer loans
    
    $
    24,338
    
    
    $
    1,533
    
    
    $
    25,871Commercial, financial and other
    
    
    100,679
    
    
    
    20,336
    
    
    
    121,015Construction and land development
    
    
    19,366
    
    
    
    35,760
    
    
    
    55,126Commercial real estate mortgages
    
    
    439,206
    
    
    
    56,295
    
    
    
    495,501Residential real estate mortgages
    
    
    37,172
    
    
    
    1,166
    
    
    
    38,338Total Loans
    
    $
    620,761
    
    
    $
    115,090
    
    
    $
    735,851
 At December 31, 2009
    
    Performing
    
    
    Non-performing
    
    
    Total LoansConsumer loans
    
    $
    28,147
    
    
    $
    1,239
    
    
    $
    29,386Commercial, financial and other
    
    
    119,908
    
    
    
    24,722
    
    
    
    144,630Construction and land development
    
    
    57,020
    
    
    
    26,444
    
    
    
    83,464Commercial real estate mortgages
    
    
    476,822
    
    
    
    54,334
    
    
    
    531,156Residential real estate mortgages
    
    
    42,477
    
    
    
    2,023
    
    
    
    44,500Total Loans
    
    $
    724,374
    
    
    $
    108,762
    
    
    $
    833,136
 31




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
   Excellent Quality (Pass)
  Good Quality (Pass)
  Satisfactory Quality (Pass)
  Acceptable Risk (Pass)
  Watch
  Special Mention
  32




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  Substandard
  Doubtful
  Loss
   Special
    
    
    
    
    
    
    
    
    
    
    TotalAt December 31, 2010
    
    Pass
    
    
    Mention
    
    
    Substandard
    
    
    Doubtful
    
    
    LoansConsumer loans
    
    $
    22,988
    
    
    $
    
    
    
    $
    2,798
    
    
    $
    85
    
    
    $
    25,871Commercial, financial and other
    
    
    77,076
    
    
    
    14,298
    
    
    
    29,641
    
    
    
    
    
    
    
    121,015Construction and land development
    
    
    13,355
    
    
    
    5,546
    
    
    
    36,225
    
    
    
    
    
    
    
    55,126Commercial real estate mortgages
    
    
    338,194
    
    
    
    56,410
    
    
    
    100,897
    
    
    
    
    
    
    
    495,501Residential real estate mortgages
    
    
    35,750
    
    
    
    771
    
    
    
    1,817
    
    
    
    
    
    
    
    38,338Total Loans
    
    $
    487,363
    
    
    $
    77,025
    
    
    $
    171,378
    
    
    $
    85
    
    
    $
    735,851
 Special
    
    
    
    
    
    
    
    
    
    
    TotalAt December 31, 2009
    
    Pass
    
    
    Mention
    
    
    Substandard
    
    
    Doubtful
    
    
    LoansConsumer loans
    
    $
    27,277
    
    
    $
    152
    
    
    $
    1,476
    
    
    $
    481
    
    
    $
    29,386Commercial, financial and other
    
    
    106,789
    
    
    
    7,620
    
    
    
    28,702
    
    
    
    1,519
    
    
    
    144,630Construction and land development
    
    
    28,364
    
    
    
    13,906
    
    
    
    37,870
    
    
    
    3,324
    
    
    
    83,464Commercial real estate mortgages
    
    
    424,256
    
    
    
    42,421
    
    
    
    64,106
    
    
    
    373
    
    
    
    531,156Residential real estate mortgages
    
    
    40,243
    
    
    
    888
    
    
    
    2,685
    
    
    
    684
    
    
    
    44,500Total Loans
    
    $
    626,929
    
    
    $
    64,987
    
    
    $
    134,839
    
    
    $
    6,381
    
    
    $
    833,136
 33




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
   Commercial ,
    
    
    Construction
    
    
    Commercial
    
    
    ResidentialFinancial
    
    
    and Land
    
    
    Real Estate
    
    
    Real EstateConsumer
    
    
    & Other
    
    
    Development
    
    
    Mortgages
    
    
    Mortgages
    
    
    TotalBalance at January 1, 2010
    
    $
    819
    
    
    $
    6,498
    
    
    $
    12,169
    
    
    $
    15,286
    
    
    $
    353
    
    
    $
    35,125Provision for loan
losses
    
    
    1,112
    
    
    
    6,128
    
    
    
    7,926
    
    
    
    649
    
    
    
    163
    
    
    
    15,978Charge-offs
    
    
    1,019
    
    
    
    6,385
    
    
    
    12,269
    
    
    
    4,455
    
    
    
    276
    
    
    
    24,404Recoveries
    
    
    203
    
    
    
    330
    
    
    
    44
    
    
    
    622
    
    
    
    73
    
    
    
    1,272Net Charge-offs
    
    
    816
    
    
    
    6,055
    
    
    
    12,225
    
    
    
    3,833
    
    
    
    203
    
    
    
    23,132Balance at December 31, 2010
    
    $
    1,115
    
    
    $
    6,571
    
    
    $
    7,870
    
    
    $
    12,102
    
    
    $
    313
    
    
    $
    27,971
 Allowance For Loan Losses Evaluated at December 31, 2010Commercial ,
    
    
    Construction
    
    
    Commercial
    
    
    ResidentialFinancial
    
    
    and Land
    
    
    Real Estate
    
    
    Real EstateConsumer
    
    
    & Other
    
    
    Development
    
    
    Mortgages
    
    
    Mortgages
    
    
    TotalIndividually
Evaluated For Impairment
    
    $
    
    
    
    $
    373
    
    
    $
    5,280
    
    
    $
    5,072
    
    
    $
    
    
    
    $
    10,725Collectively
Evaluated For Impairment
    
    
    1,136
    
    
    
    6,292
    
    
    
    2,036
    
    
    
    7,438
    
    
    
    344
    
    
    
    17,246Allowance forloan losses
    
    $
    1,136
    
    
    $
    6,665
    
    
    $
    7,316
    
    
    $
    12,510
    
    
    $
    344
    
    
    $
    27,971
 Loans Evaluated at December 31, 2010Commercial ,
    
    
    Construction
    
    
    Commercial
    
    
    ResidentialFinancial
    
    
    and Land
    
    
    Real Estate
    
    
    Real EstateConsumer
    
    
    & Other
    
    
    Development
    
    
    Mortgages
    
    
    Mortgages
    
    
    TotalIndividually
Evaluated For Impairment
    
    $
    1,533
    
    
    $
    20,382
    
    
    $
    36,005
    
    
    $
    57,446
    
    
    $
    1,166
    
    
    $
    116,532Collectively
Evaluated For Impairment
    
    
    24,338
    
    
    
    100,633
    
    
    
    19,121
    
    
    
    438,055
    
    
    
    37,172
    
    
    
    619,319Total loans
    
    $
    25,871
    
    
    $
    121,015
    
    
    $
    55,126
    
    
    $
    495,501
    
    
    $
    38,338
    
    
    $
    735,851
 34




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  Commercial ,
    
    
    Construction
    
    
    Commercial
    
    
    ResidentialFinancial
    
    
    and Land
    
    
    Real Estate
    
    
    Real EstateConsumer
    
    
    & Other
    
    
    Development
    
    
    Mortgages
    
    
    Mortgages
    
    
    TotalBalance at January 1, 2009
    
    $
    163
    
    
    $
    1,532
    
    
    $
    8,050
    
    
    $
    4,509
    
    
    $
    198
    
    
    $
    14,452Provision for loan
losses
    
    
    1,634
    
    
    
    9,505
    
    
    
    21,269
    
    
    
    17,635
    
    
    
    820
    
    
    
    50,863Charge-offs
    
    
    1,154
    
    
    
    4,878
    
    
    
    17,257
    
    
    
    6,919
    
    
    
    701
    
    
    
    30,909Recoveries
    
    
    176
    
    
    
    339
    
    
    
    107
    
    
    
    61
    
    
    
    36
    
    
    
    719Net Charge-offs
    
    
    978
    
    
    
    4,539
    
    
    
    17,150
    
    
    
    6,858
    
    
    
    665
    
    
    
    30,190Balance at December 31, 2009
    
    $
    819
    
    
    $
    6,498
    
    
    $
    12,169
    
    
    $
    15,286
    
    
    $
    353
    
    
    $
    35,125
 Allowance For Loan Losses Evaluated at December 31, 2009Commercial ,
    
    
    Construction
    
    
    Commercial
    
    
    ResidentialFinancial
    
    
    and Land
    
    
    Real Estate
    
    
    Real EstateConsumer
    
    
    & Other
    
    
    Development
    
    
    Mortgages
    
    
    Mortgages
    
    
    TotalIndividually
Evaluated For
Impairment
    
    $
    282
    
    
    $
    4,495
    
    
    $
    2,384
    
    
    $
    3,420
    
    
    $
    20
    
    
    $
    10,601Collectively
Evaluated For
Impairment
    
    
    537
    
    
    
    2,003
    
    
    
    9,785
    
    
    
    11,866
    
    
    
    333
    
    
    
    24,524Allowance for loan losses
    
    $
    819
    
    
    $
    6,498
    
    
    $
    12,169
    
    
    $
    15,286
    
    
    $
    353
    
    
    $
    35,125
 Loans Evaluated at December 31, 2009Commercial ,
    
    
    Construction
    
    
    Commercial
    
    
    ResidentialFinancial
    
    
    and Land
    
    
    Real Estate
    
    
    Real EstateConsumer
    
    
    & Other
    
    
    Development
    
    
    Mortgages
    
    
    Mortgages
    
    
    TotalIndividually
Evaluated For
Impairment
    
    $
    1,239
    
    
    $
    28,691
    
    
    $
    30,293
    
    
    $
    64,252
    
    
    $
    2,304
    
    
    $
    126,779Collectively
Evaluated For
Impairment
    
    
    28,147
    
    
    
    115,939
    
    
    
    53,171
    
    
    
    466,904
    
    
    
    42,196
    
    
    
    706,357Total loans
    
    $
    29,386
    
    
    $
    144,630
    
    
    $
    83,464
    
    
    $
    531,156
    
    
    $
    44,500
    
    
    $
    833,136
 35




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
   2010
    
    
    2009Land and improvements
    
    $
    7,561
    
    
    $
    7,728Building and improvements
    
    
    14,536
    
    
    
    14,553Furniture and equipment
    
    
    7,122
    
    
    
    6,98829,219
    
    
    
    29,269Less accumulated depreciation
    
    
    10,024
    
    
    
    9,075$
    19,195
    
    
    $
    20,194
   2011
    
    $
    6252012
    
    
    2362013
    
    
    2032014
    
    
    161Thereafter
    
    
    40Total
    
    $
    1,265
   36




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
   $100,000 and
    
    
    Less thanover
    
    
    $100,000
    
    
    Total2011
    
    $
    198,481
    
    
    $
    219,980
    
    
    $
    418,4612012
    
    
    59,846
    
    
    
    62,360
    
    
    
    122,2062013
    
    
    4,751
    
    
    
    5,901
    
    
    
    10,6522014
    
    
    454
    
    
    
    826
    
    
    
    1,2802015 and thereafter
    
    
    1,004
    
    
    
    2,411
    
    
    
    3,415Totals
    
    $
    264,536
    
    
    $
    291,478
    
    
    $
    556,014
    37




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  At December 31, 2010Maturing in:
    
    Amount
    
    
    Rate2011
    
    $
    53,500
    
    
    
    0.77
    %2012
    
    
    216
    
    
    
    5.27
    %2013
    
    
    10,000
    
    
    
    2.58
    %Total
    
    $
    63,716
    
    
    
    1.07
    %
 At December 31, 2009Maturing in:
    
    Amount
    
    
    Rate2010
    
    $
    49,084
    
    
    
    2.19
    %2011
    
    
    4,500
    
    
    
    3.20
    %2012
    
    
    271
    
    
    
    5.27
    %2013
    
    
    10,000
    
    
    
    2.58
    %Total
    
    $
    63,855
    
    
    
    2.33
    %
      38




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
     2010
    
    
    2009Current
    
    
    ($188
    )
    
    
    ($8,785
    )Deferred
    
    
    
    
    
    
    16,794($188
    )
    
    $
    8,009
  2010
    
    
    2009Beginning balance
    
    
    ($25,851
    )
    
    
    ($251
    )(Increase) decrease during period
    
    
    (3,922
    )
    
    
    ($25,600
    )Ending balance
    
    
    ($29,773
    )
    
    
    ($25,851
    )
 39




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  Deferred tax assets and liabilities are due to the following at December 31, (in thousands):
 2010
    
    
    2009Deferred tax assetsAllowance for loan losses
    
    $
    9,510
    
    
    $
    11,943Net operating loss carryforward
    
    
    6,202
    
    
    
    734Goodwill and other intangibles
    
    
    11,455
    
    
    
    12,505Capital loss carryforward
    
    
    
    
    
    
    251Non-accrual interest income
    
    
    343
    
    
    
    Writedowns on other real estate owned
    
    
    3,539
    
    
    
    1,070Amortization of deferred issue costs
    
    
    75
    
    
    
    263Other
    
    
    100
    
    
    
    25Total deferred tax assets
    
    
    31,224
    
    
    
    26,791Deferred tax liabilitiesPremises and equipment
    
    
    (368
    )
    
    
    (423
    )Prepaid expenses
    
    
    (455
    )
    
    
    (283
    )Deferred loan fees and costs
    
    
    (64
    )
    
    
    (130
    )Other
    
    
    (37
    )
    
    
    (104
    )Total deferred tax liabilities
    
    
    (924
    )
    
    
    (940
    )Less: valuation allowance
    
    
    (30,300
    )
    
    
    (25,851
    )Net deferred tax asset
    
    $
    
    
    
    $
    
 40




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  There were no unrecognized tax benefits at December 31, 2010, and the Corporation does not
expect the total amount of unrecognized tax benefits to significantly increase or decrease
in the next twelve months.
 The Corporation is no longer subject to examination by the Internal Revenue Service for
years before 2007.
 Effective tax rates differ from the federal statutory rate of 34% applied to income before
income taxes due to the following:
 2010
    
    
    2009Federal income tax rate
    
    
    34
    %
    
    
    34
    %Effect of capital loss carryforward
valuation allowance
    
    
    -31
    %
    
    
    -52
    %Other, net
    
    
    -2
    %
    
    
    -1
    %Effective tax rate
    
    
    1
    %
    
    
    -19
    %
  Fair Value of Financial Instruments
 The following methods and assumptions were used by the Corporation in estimating its fair
value disclosure for financial instruments:
 Cash and Cash Equivalents and Federal Home Loan Bank Stock
 The carrying amount approximates fair value.
 Mortgage Loans Held for Sale
 Fair value is based upon the quoted price for the sale of those loans.
 Loans
 The 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.
 41




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  Deposits
 Deposits 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 Payable
 The carrying amount approximates fair value.
 Federal Home Loan Bank Advances
 Rates 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 Debentures
 Rates 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
Credit
 The 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.
 42




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  The estimated fair value of the Corporations financial instruments at December 31 are as
follows (in thousands):
 At December 31, 2010
    
    
    At December 31, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueAssets:Cash and cash equivalents
    
    $
    93,775
    
    
    $
    93,775
    
    
    $
    77,497
    
    
    $
    77,497Mortgage loans held for sale
    
    
    353
    
    
    
    356
    
    
    
    1,129
    
    
    
    1,146Securities available for sale
    
    
    54,811
    
    
    
    54,811
    
    
    
    46,300
    
    
    
    46,300Federal Home Loan Bank Stock
    
    
    3,605
    
    
    
    3,605
    
    
    
    3,698
    
    
    
    3,698Loans
    
    
    735,851
    
    
    
    734,106
    
    
    
    833,136
    
    
    
    829,122Accrued interest receivable
    
    
    3,286
    
    
    
    3,286
    
    
    
    3,562
    
    
    
    3,562Liabilities:Deposits
    
    
    812,101
    
    
    
    815,582
    
    
    
    867,955
    
    
    
    871,177Federal Home Loan Bank advances
    
    
    63,716
    
    
    
    64,060
    
    
    
    63,855
    
    
    
    64,275Subordinated debentures
    
    
    10,000
    
    
    
    4,718
    
    
    
    10,000
    
    
    
    4,081Accrued interest payable
    
    
    1,056
    
    
    
    1,056
    
    
    
    1,046
    
    
    
    1,046
 ASC 820, Fair Value Measurements, 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. Topic 820 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 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.
 Level 2 securities are valued by a third party pricing service commonly used in the banking
industry, utilizing observable inputs. Observable inputs include dealer quotes, market
spreads, cash flow analysis, the U.S. Treasury curve, trade execution data, market consensus
prepayment spreads and available credit information. The pricing provided utilizes
evaluated pricing models that are 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 and matrix pricing.
 43




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  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.
 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 sale
 One component of the Corporations securities, available for sale are money market funds
that are based on quoted prices in active markets and are classified within Level 1 of the
valuation hierarchy. The values of all other 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.
 Level 2 securities are valued by a third party pricing service commonly used in the banking
industry, utilizing observable inputs. Observable inputs include dealer quotes, market
spreads, cash flow analysis, the U.S. Treasury curve, trade execution data, market consensus
prepayment spreads and available credit information. The pricing provided utilizes
evaluated pricing models that are 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 and matrix pricing. Level 2
securities include US Government sponsored mortgage-backed securities and other securities.
 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 fair value hierarchy in which the fair value
measurements fall at December 31, 2010 and 2009 (in thousands):
 Quoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableFair
    
    
    Identical Assets
    
    
    Inputs
    
    
    InputsAt 12/31/2010
    
    Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)GSE  mortgage backed securities
    
    $
    54,561
    
    
    $
    
    
    
    $
    54,561
    
    
    $
    Other securities
    
    
    250
    
    
    
    
    
    
    
    250
    
    
    
    Total securities, available for sale
    
    $
    54,811
    
    
    $
    
    
    
    $
    54,811
    
    
    $
    
 44




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  Quoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableFair
    
    
    Identical Assets
    
    
    Inputs
    
    
    InputsAt 12/31/2009
    
    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
    
    
    
    Other securities
    
    
    336
    
    
    
    
    
    
    
    336
    
    
    
    Total securities, available for sale
    
    $
    46,300
    
    
    $
    
    
    
    $
    46,300
    
    
    $
    
 Following is a description of the valuation methodology for assets and liabilities
measured at fair value on a non-recurring basis and recognized in the accompanying balance
sheet.
 Impaired Loans (Collateral Dependent)
 Loans for which it is probable that the Corporation will not collect all principal and
interest due according to contractual terms are measured for impairment. Allowable methods
for determining the amount of impairment include estimating fair value using the fair value
of the collateral for collateral-dependent loans.
 If the impaired loan is identified as collateral dependent, then the fair value method of
measuring the amount of impairment is utilized. This method requires obtaining a current
independent appraisal of the collateral and applying a discount factor to the value.
Impaired loans that are collateral dependent are classified within Level 3 of the fair value
hierarchy when impairment is determined using the fair value method.
 Real Estate Owned
 The fair value of other real estate owned is measured based on the value of the collateral
securing those loans/real estate and is determined using several methods. The fair value of
real estate is generally determined based on appraisals by qualified licensed appraisers.
The appraisers typically determine the value of the real estate by utilizing an income or
market valuation approach. If an appraisal is not available, the fair value may be
determined by using a cash flow analysis. Fair value on the collateral such as business
assets is typically calculated by using financial information such as financial statements
and aging reports provided by the borrower and is discounted as considered appropriate.
 45




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  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 ASC 820 fair value hierarchy in which the fair
value measurements fall at December 31, 2010 (in thousands):
 Quoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsAt 12/31/2010
    
    Fair Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Impaired loans (collateral dependent)
    
    $
    66,977
    
    
    $
    
    
    
    $
    
    
    
    $
    66,977Other real estate
    
    
    10,003
    
    
    
    
    
    
    
    
    
    
    
    10,003
 Quoted Prices in
    
    
    Significant Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsAt 12/31/2009
    
    Fair Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Impaired loans (collateral dependent)
    
    $
    60,905
    
    
    $
    
    
    
    $
    
    
    
    $
    60,905Other real estate
    
    
    7,601
    
    
    
    
    
    
    
    
    
    
    
    7,601
  Loan Commitments
 Some financial instruments, such as loan commitments, credit lines, letters of credit and
overdraft protection, are issued to meet customer financing needs. These are agreements to
provide credit or to support the credit of others, as long as conditions established in the
contract are met, and usually have expiration dates. Commitments may expire without being
used. Off-balance sheet risk to credit loss exists up to the face amount of these
instruments, although material losses are not anticipated. The same policies are used to
make such commitments as are used for loans, including obtaining collateral at exercise of
the commitment.
 46




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  The Corporation had outstanding loan commitments aggregating $50,694,000 and $77,919,000 at
December 31, 2010 and 2009, respectively. Loan commitments for variable rate loans were
$36,845,000 and $61,420,000 at December 31, 2010 and 2009, respectively. Loan commitments
for fixed rate loans were $13,849,000 and $16,499,000 at December 31, 2010 and 2009,
respectively. The fixed rate loan commitments at December 31, 2010 have interest rates
ranging from 1.00% to 10.00% and maturities ranging from one year to five years. A
distribution of outstanding loan commitments by contractual maturity is shown below (in
thousands):
 Commitment PeriodLessthan 1
    
    
    1 - 3
    
    
    3 - 5
    
    
    Over 5At December 31, 2010
    
    year
    
    
    years
    
    
    years
    
    
    years
    
    
    TotalsHome equity lines of credit
    
    $
    637
    
    
    $
    4,538
    
    
    $
    2,724
    
    
    $
    7,397
    
    
    $
    15,296Residential loan commitments
    
    
    375
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    375Standby letters of credit
    
    
    548
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    548Lines of credit  commercial
    
    
    19,534
    
    
    
    1,479
    
    
    
    
    
    
    
    37
    
    
    
    21,050Commercial construction -
residential land
development and construction
    
    
    1,438
    
    
    
    1,065
    
    
    
    319
    
    
    
    
    
    
    
    2,822Other commercial commitments
    
    
    8,439
    
    
    
    1,003
    
    
    
    1,161
    
    
    
    
    
    
    
    10,603Totals
    
    $
    30,971
    
    
    $
    8,085
    
    
    $
    4,204
    
    
    $
    7,434
    
    
    $
    50,694
 Commitment PeriodLessthan 1
    
    
    1 - 3
    
    
    3 - 5
    
    
    Over 5At December 31, 2009
    
    year
    
    
    years
    
    
    years
    
    
    years
    
    
    TotalsHome equity lines of credit
    
    $
    355
    
    
    $
    3,073
    
    
    $
    4,208
    
    
    $
    8,695
    
    
    $
    16,331Residential loan commitments
    
    
    132
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    132Standby letters of credit
    
    
    770
    
    
    
    1,932
    
    
    
    
    
    
    
    
    
    
    
    2,702Lines of credit  commercial
    
    
    29,527
    
    
    
    2,709
    
    
    
    731
    
    
    
    27
    
    
    
    32,994Commercial construction -
residential land
development and construction
    
    
    5,134
    
    
    
    286
    
    
    
    735
    
    
    
    
    
    
    
    6,155Other commercial commitments
    
    
    16,668
    
    
    
    1,693
    
    
    
    1,244
    
    
    
    
    
    
    
    19,605Totals
    
    $
    52,586
    
    
    $
    9,693
    
    
    $
    6,918
    
    
    $
    8,722
    
    
    $
    77,919
 Commitments to extend credit are agreements to lend to a customer as long as there are
no violations of any condition established in the contract. Commitments generally have
fixed expiration dates or other termination clauses and may require a payment of a fee.
Since portions of the commitments are expected to expire without being drawn upon, the total
commitments do not necessarily represent future cash requirements. The Corporation
evaluates each customers credit worthiness on a case by case basis. The
amount of collateral obtained upon extension of credit is based on managements credit
evaluation of the customer.
 47




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  The Bank maintains a 401(k) plan for its employees. All employees are eligible to
participate in the 401(k) plan after completion of age and service requirements. An
employee can be enrolled as a participant on the first Enrollment Date after reaching age
18 and completing six months of service.
 Contributions to the plan by the Bank are discretionary and are expensed as made.
Historically, the Bank had matched 50% of the first 6% of employee contributions to the
plan. Employer contributions vest 20% per year for five years. As of October 1, 2009, the
Bank discontinued the practice of matching employee contributions to the plan due to the
declining performance of the Bank during the recent economic downturn.
 During 2010 and 2009, employer contributions were $0 and $203,000, respectively.
  The Corporation and Bank are subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements can initiate
certain mandatory and possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the financial statements. Under capital
adequacy guidelines and, additionally for the Bank, the regulatory framework for prompt
corrective action, the Corporation and Bank must meet specific capital guidelines that
involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. The capital amounts and classifications
are also subject to qualitative judgments by the regulators about components, risk
weightings, and other factors. Under the Consent Order dated February 12, 2010, the Bank
is required to achieve and maintain tier 1 capital as a percentage of total assets of 9% or
higher and total capital as a percentage of risk-weighted assets of 12% or higher within 120
days from the effective date of the order. Failure to meet the minimum ratios set forth in
the Consent Order could result in regulators taking additional enforcement action against
us.
 Quantitative measures established by regulation require the Corporation and Bank to maintain
minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital
(as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital
(as defined) to average assets (as defined). The following is a presentation of the
Corporations and Banks regulatory capital ratios and amounts (in thousands):
 48




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  MinimumMinimum
    
    
    To Be Well Capitalizedfor Capital
    
    
    Under Prompt CorrectiveActual
    
    
    Adequacy Purposes
    
    
    Action RegulationsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioAs of December 31, 2010Total capital
(to risk weighted assets)Consolidated
    
    $
    47,591
    
    
    
    6.34
    %
    
    $
    60,012
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    46,169
    
    
    
    6.17
    %
    
    
    59,902
    
    
    
    8.00
    %
    
    
    74,877
    
    
    
    10.00
    %Tier 1 capital
(to risk weighted assets)Consolidated
    
    
    37,984
    
    
    
    5.06
    %
    
    
    30,006
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    36,580
    
    
    
    4.89
    %
    
    
    29,951
    
    
    
    4.00
    %
    
    
    44,926
    
    
    
    6.00
    %Tier 1 capital
(to average assets)Consolidated
    
    
    37,984
    
    
    
    4.09
    %
    
    
    37,135
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    36,580
    
    
    
    3.95
    %
    
    
    37,077
    
    
    
    4.00
    %
    
    
    46,346
    
    
    
    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
    %
 At December 31, 2010 and 2009, the Bank was undercapitalized. There are no conditions or
events since that notification that management believes have changed the institutions
category. Federal and state banking laws and regulations place certain restrictions on the
amount of dividends and loans a bank can pay to its parent company. No cash dividends have
been paid by the Corporation.
 49




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  Incentive 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 814,449 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.
No options are available for grant under this plan.
 A summary of the option activity in the 1994 Plan follows:
 WeightedAverageOptions
    
    
    ExerciseOutstanding
    
    
    PriceOutstanding at January 1, 2010
    
    
    360,398
    
    
    $
    8.65Forfeited
    
    
    117,407
    
    
    $
    5.34Outstanding at December 31, 2010
    
    
    242,991
    
    
    $
    10.25
 There were no options exercised during 2010 or 2009. The options outstanding at December
31, 2010 or 2009 had no intrinsic value.
 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, shares, 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 performance-based stock options and restricted stock in 2005
and 2006. The Corporations Board of Directors approved grants of stock options and
restricted stock without performance criteria in 2008. The awards have a term of ten years
and typically vest fully three years from the grant date.
 Stock Options Granted  The incentive stock options were granted with the exercise price
equal to market price on the day of grant. The weighted average fair value of the options
granted at grant date was $1.23. The following assumptions were used to determine the fair
value of the options granted in 2010:
 2010Risk-free interest rate
    
    
    1.04
    %Expected option life
    
    4.0 yearsDividend yield
    
    
    0.00
    %Expected volatility of stock price
    
    
    113.02
    %
 50




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  A summary of the 2005 Plans option activity is as follows:
 WeightedNumber
    
    
    Exerciseof Shares
    
    
    PriceOutstanding at January 1, 2010
    
    
    190,846
    
    
    $
    5.33Shares Granted  Stock Options
    
    
    88,019
    
    
    $
    1.66Shares Forfeited  Stock Options
    
    
    (20,000
    )
    
    $
    4.25Outstanding at December 31, 2010
    
    
    258,865
    
    
    $
    4.17Options exercisable at December 31, 2010
    
    
    158,865
    
    
    $
    5.69
 During the year ended December 31, 2010, the Corporation recognized compensation expense of
$68,000 related to stock options. Compensation cost of $72,000 and $30,000 is expected to
be recognized during 2011 and 2012, respectively.
 Stock Grants   Stock awards are granted to officers. A summary of the plans stock award
activity is as follows:
 Numberof SharesOutstanding at December 31, 2009
    
    
    41,530Restricted Shares Forfeited
    
    
    (1,765
    )Outstanding at December 31, 2010
    
    
    39,765
 During the year ended December 31, 2010, the Corporation recognized compensation expense of
$85,000 related to restricted stock. Compensation cost of $176,000 is expected to be
recognized during 2011.
 51




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##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  Factors used in the basic and diluted earnings per share calculation follow (in thousands,
except share and per share data):
 2010
    
    
    2009BasicNet loss
    
    
    ($14,249
    )
    
    
    ($61,175
    )Weighted average common shares
    
    
    7,645,940
    
    
    
    7,645,076Basic earnings per common share
    
    
    ($1.86
    )
    
    
    ($8.00
    )DilutedNet loss
    
    
    ($14,249
    )
    
    
    ($61,175
    )Weighted average common shares
outstanding for basic earnings per
common share
    
    
    7,645,940
    
    
    
    7,645,076Average shares and dilutive potential
common shares
    
    
    7,645,940
    
    
    
    7,645,076Dilutive earnings per common share
    
    
    ($1.86
    )
    
    
    ($8.00
    )
 All stock options and unvested shares were excluded from the computation of diluted earnings
per share for 2010 and 2009 because they were antidilutive. All share and per share amounts
have been adjusted for stock dividends.
 52




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  The condensed financial information that follows presents the financial condition of the
parent company, Dearborn Bancorp, Inc., along with the results of its operations and its
cash flows.
  December 31,(In thousands)
    
    2010
    
    
    2009ASSETSCash and cash equivalents
    
    $
    292
    
    
    $
    116Investment in subsidiary
    
    
    35,555
    
    
    
    50,090Other assets
    
    
    1,863
    
    
    
    1,994Total assets
    
    $
    37,710
    
    
    $
    52,200LIABILITIES AND
STOCKHOLDERS EQUITYOther liabilities
    
    $
    751
    
    
    $
    255Subordinated debentures
    
    
    10,000
    
    
    
    10,000Total liabilities
    
    
    10,751
    
    
    
    10,255Stockholders equity
    
    
    26,959
    
    
    
    41,945Total liabilities and stockholders equity
    
    $
    37,710
    
    
    $
    52,200
  Years Ended December 31,(In thousands)
    
    2010
    
    
    2009Interest expense
    
    $
    399
    
    
    $
    411Other operating expenses
    
    
    225
    
    
    
    291Net loss before income tax and equity
in undistributed income of subsidiary
    
    
    (624
    )
    
    
    (702
    )Income tax benefit
    
    
    20
    
    
    
    43Net loss before equity in undistributed
income of subsidiary
    
    
    (604
    )
    
    
    (659
    )Equity in undistributed loss
of subsidiary
    
    
    (13,645
    )
    
    
    (60,516
    )Net loss
    
    
    ($14,249
    )
    
    
    ($61,175
    )
 53




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
   Years Ended December 31,(In thousands)
    
    2010
    
    
    2009Cash flows from operating activitiesNet loss
    
    
    ($14,249
    )
    
    
    ($61,175
    )Adjustments to reconcile net income
to net cash provided by operating activitiesEquity in undistributed loss of
Subsidiary
    
    
    13,645
    
    
    
    60,516Other, net
    
    
    780
    
    
    
    140Net cash flows provided by operating activities
    
    
    176
    
    
    
    (519
    )Increase (decrease) in cash and cash equivalents
    
    
    176
    
    
    
    (519
    )Cash and cash equivalents at the beginning of year
    
    
    116
    
    
    
    635Cash and cash equivalents at end of year
    
    $
    292
    
    
    $
    116
  Current Economic Conditions
 The current protracted economic decline presents financial institutions with unprecedented
circumstances and challenges which in some cases have resulted in large declines in the
fair values of investments and other assets, constraints on liquidity and significant
credit quality problems, including severe volatility in the valuation of real estate and
other collateral supporting loans. The financial statements have been prepared using
values and information currently available to the Corporation.
 The Corporation is further affected by the economic conditions specific to Southeastern
Michigan due in large part to the importance of the automobile industry to the local
economy. While the Corporation does not have significant exposure to automobile
manufacturers and suppliers, the downturn in the automotive industry has had an adverse
effect on many of the Corporations borrowers and the Corporations allowance for loan
losses.
 The Corporations allowance for loan losses contains certain assumptions on the value of
collateral dependent loans as well as certain economic and industry conditions which may
be subject to change within the next year. These changes could have an adverse impact on
the allowance for loan losses in the near term.
 Given the volatility of current economic conditions, the values of assets and liabilities
recorded in the financial statements could change rapidly, resulting in material future
adjustments in asset values, the allowance for loan losses and capital which could
negatively impact the Corporations ability to meet regulatory capital requirements and
maintain sufficient liquidity.
 54




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##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2010 and 2009
  Loan Concentrations
 Our lending operations may be subject to enhanced scrutiny by banking regulators based on
our concentration of commercial real estate loans (CRE). CRE loans generally include
land development, construction loans and loans secured by multifamily property, and
nonfarm, nonresidential real property where the primary source of repayment is derived
from rental income associated with the property.
 As of December 31, 2010, our concentration of construction, land development and other
land loans totaled 150.7% of Tier 1 capital and our CRE concentration, net of
owner-occupied loans, as a percentage of Tier 1 capital totaled 978.2%.
  The Company is subject to claims and lawsuits that arise primarily in the ordinary course
of business. It is the opinion of management that the disposition or ultimate resolution
of such claims and lawsuits will not have a material adverse effect on the consolidated
financial position, results of operations and cash flows of the Company.
 55




---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
 Company Overview and Executive Summary
         56




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##### 



57




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##### 



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
 58




---



##### 



59




---



##### 



Forward-Looking Statements
   Critical Accounting Policies and Estimates
  Allowance for Loan Losses
   1)
    
    The estimates are highly susceptible to change from period to period and require
management to make judgements concerning the quality of the loan portfolio and the impact
of current economic conditions on borrowers ability to repay their loans.2)
    
    The impact of recognizing an impairment or loan loss could have a material effect on
the financial statements of Dearborn Bancorp, Inc.
  60




---



##### 



Results of Operations
 2010 Compared to 2009.
     2009 Compared to 2008.
 61




---



##### 



Net Interest Income
 2010 Compared to 2009.
  2009 Compared to 2008.
 Average Balances, Interest Rates and Yields.
 62




---



##### 



Year Ended December 31, 2010
    
    
    Year Ended December 31, 2009Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average(In thousands)
    
    Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateAssetsInterest-bearing deposits with banks
    
    $
    75,577
    
    
    $
    337
    
    
    
    0.45
    %
    
    $
    73,057
    
    
    $
    374
    
    
    
    0.51
    %Federal funds sold
    
    
    72
    
    
    
    1
    
    
    
    1.39
    %
    
    
    5,873
    
    
    
    17
    
    
    
    0.29
    %Securities, available for sale
    
    
    46,064
    
    
    
    967
    
    
    
    2.10
    %
    
    
    40,245
    
    
    
    589
    
    
    
    1.46
    %Loans
    
    
    788,020
    
    
    
    45,668
    
    
    
    5.80
    %
    
    
    886,743
    
    
    
    53,273
    
    
    
    6.01
    %Sub-total earning assets
    
    
    909,733
    
    
    
    46,973
    
    
    
    5.16
    %
    
    
    1,005,918
    
    
    
    54,253
    
    
    
    5.39
    %Other assets
    
    
    38,288
    
    
    
    
    
    
    
    
    
    
    
    51,333Total assets
    
    $
    948,021
    
    
    
    
    
    
    
    
    
    
    $
    1,057,251Liabilities and stockholders equityInterest bearing deposits
    
    $
    744,385
    
    
    $
    11,427
    
    
    
    1.54
    %
    
    $
    809,905
    
    
    $
    20,993
    
    
    
    2.59
    %Other borrowings
    
    
    73,782
    
    
    
    1,467
    
    
    
    1.99
    %
    
    
    77,105
    
    
    
    2,374
    
    
    
    3.08
    %Sub-total interest bearing liabilities
    
    
    818,167
    
    
    
    12,894
    
    
    
    1.58
    %
    
    
    887,010
    
    
    
    23,367
    
    
    
    2.63
    %Non-interest bearing deposits
    
    
    89,832
    
    
    
    
    
    
    
    
    
    
    
    82,915Other liabilities
    
    
    2,346
    
    
    
    
    
    
    
    
    
    
    
    2,157Stockholders equity
    
    
    37,676
    
    
    
    
    
    
    
    
    
    
    
    85,169Total liabilities and stockholders
equity
    
    $
    948,021
    
    
    
    
    
    
    
    
    
    
    $
    1,057,251Net interest income
    
    
    
    
    
    $
    34,079
    
    
    
    
    
    
    
    
    
    
    $
    30,886Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.60
    %
    
    
    
    
    
    
    
    
    
    
    2.77
    %Net interest margin on earning assets
    
    
    
    
    
    
    
    
    
    
    3.75
    %
    
    
    
    
    
    
    
    
    
    
    3.07
    %
 63




---



##### 



Year Ended December 31, 2008Average
    
    
    
    
    
    
    Average(In thousands)
    
    Balance
    
    
    Interest
    
    
    RateAssetsInterest-bearing deposits with banks
    
    $
    6,591
    
    
    $
    43
    
    
    
    0.65
    %Federal funds sold
    
    
    8,316
    
    
    
    86
    
    
    
    1.04
    %Securities, available for sale
    
    
    15,681
    
    
    
    464
    
    
    
    2.97
    %Loans
    
    
    944,749
    
    
    
    60,533
    
    
    
    6.42
    %Sub-total earning assets
    
    
    975,337
    
    
    
    61,126
    
    
    
    6.27
    %Other assets
    
    
    81,377Total assets
    
    $
    1,056,714Liabilities and stockholders equityInterest bearing deposits
    
    $
    740,520
    
    
    $
    25,106
    
    
    
    3.40
    %Other borrowings
    
    
    94,211
    
    
    
    3,889
    
    
    
    4.13
    %Sub-total interest bearing liabilities
    
    
    834,731
    
    
    
    28,995
    
    
    
    3.47
    %Non-interest bearing deposits
    
    
    83,065Other liabilities
    
    
    3,152Stockholders equity
    
    
    135,766Total liabilities and stockholders equity
    
    $
    1,056,714Net interest income
    
    
    
    
    
    $
    32,131Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    2.80
    %Net interest margin on earning assets
    
    
    
    
    
    
    
    
    
    
    3.29
    %
 64




---



##### 



Rate/Volume Analysis.
 2010/2009
    
    
    2009/2008Change in Interest Due to:
    
    
    Change in Interest Due to:Average
    
    
    Average
    
    
    Net
    
    
    Average
    
    
    Average
    
    
    Net(In thousands)
    
    Balance
    
    
    Rate
    
    
    Change
    
    
    Balance
    
    
    Rate
    
    
    ChangeAssetsInterest bearing deposits with banks
    
    $
    11
    
    
    
    ($48
    )
    
    
    ($37
    )
    
    $
    340
    
    
    
    ($9
    )
    
    $
    331Federal funds sold
    
    
    (81
    )
    
    
    65
    
    
    
    (16
    )
    
    
    (7
    )
    
    
    (62
    )
    
    
    (69
    )Securities, available for sale
    
    
    122
    
    
    
    256
    
    
    
    378
    
    
    
    361
    
    
    
    (236
    )
    
    
    125Loans
    
    
    (5,721
    )
    
    
    (1,884
    )
    
    
    (7,605
    )
    
    
    (3,319
    )
    
    
    (3,941
    )
    
    
    (7,260
    )Total earning assets
    
    
    ($5,669
    )
    
    
    ($1,611
    )
    
    
    ($7,280
    )
    
    
    ($2,625
    )
    
    
    ($4,248
    )
    
    
    ($6,873
    )LiabilitiesInterest bearing deposits
    
    
    ($1,006
    )
    
    
    ($8,560
    )
    
    
    ($9,566
    )
    
    $
    1,867
    
    
    
    ($5,980
    )
    
    
    ($4,113
    )Other borrowings
    
    
    (66
    )
    
    
    (841
    )
    
    
    (907
    )
    
    
    (527
    )
    
    
    (988
    )
    
    
    (1,515
    )Total interest bearing liabilities
    
    
    ($1,072
    )
    
    
    ($9,401
    )
    
    
    ($10,473
    )
    
    $
    1,340
    
    
    
    ($6,968
    )
    
    
    ($5,628
    )Net interest income
    
    
    
    
    
    
    
    
    
    $
    3,193
    
    
    
    
    
    
    
    
    
    
    
    ($1,245
    )Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    0.83
    %
    
    
    
    
    
    
    
    
    
    
    (0.03
    %)Net interest margin on earning
assets
    
    
    
    
    
    
    
    
    
    
    0.68
    %
    
    
    
    
    
    
    
    
    
    
    (0.22
    %)
 65




---



##### 



Provision for Loan Losses
 2010 Compared to 2009.


66




---



##### 



2009 Compared to 2008.
  Non-Interest Loss
 2010 Compared to 2009.
 2009 Compared to 2008.
 67




---



##### 



Non-Interest Expense
 2010 Compared to 2009.
   2009 Compared to 2008.
  Income Tax Provision
 2010 Compared to 2009.
 2009 Compared to 2008.
 68




---



##### 



Comparison of Financial Condition at December 31, 2010 and December 31, 2009
 Assets.
 Securities Available for Sale.
 December 31, 2010Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueGovernment sponsored enterprises (GSE) 
mortgage backed securities
    
    $
    55,586
    
    
    $
    1
    
    
    
    ($1,026
    )
    
    $
    54,561Other securities
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    250Totals
    
    $
    55,836
    
    
    $
    1
    
    
    
    ($1,026
    )
    
    $
    54,811
 December 31, 2009Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueUS Government sponsored agency securities
    
    $
    12,759
    
    
    $
    20
    
    
    
    ($30
    )
    
    $
    12,749Corporate bonds
    
    
    33,308
    
    
    
    
    
    
    
    (197
    )
    
    
    33,111Government sponsored enterprises (GSE) 
mortgage backed securities
    
    
    101
    
    
    
    3
    
    
    
    
    
    
    
    104Other securities
    
    
    336
    
    
    
    
    
    
    
    
    
    
    
    336Totals
    
    $
    46,504
    
    
    $
    3
    
    
    
    ($227
    )
    
    $
    46,300
  WeightedAmortized
    
    
    Fair
    
    
    AveragePar Value
    
    
    Cost
    
    
    Value
    
    
    YieldGSE  mortgage backed securities
    
    $
    53,396
    
    
    $
    55,586
    
    
    $
    54,561
    
    
    
    2.53
    %Other securities
    
    
    250
    
    
    
    250
    
    
    
    250
    
    
    
    4.50
    %Totals
    
    $
    53,646
    
    
    $
    55,836
    
    
    $
    54,811
    
    
    
    2.54
    %
 69




---



##### 



Loans.
 2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Consumer loans
    
    $
    25,871
    
    
    $
    29,386
    
    
    $
    31,864
    
    
    $
    35,833
    
    
    $
    32,282Commercial, financial, & other
    
    
    121,015
    
    
    
    144,630
    
    
    
    164,740
    
    
    
    174,958
    
    
    
    124,523Land development loans  residential
    
    
    21,975
    
    
    
    38,472
    
    
    
    54,323
    
    
    
    63,639
    
    
    
    65,460Land development loans  non residential
    
    
    9,970
    
    
    
    11,644
    
    
    
    16,094
    
    
    
    10,156
    
    
    
    14,633Commercial construction loans  residential
    
    
    10,613
    
    
    
    13,287
    
    
    
    17,296
    
    
    
    33,768
    
    
    
    30,988Commercial construction loans  non
residential
    
    
    12,568
    
    
    
    20,061
    
    
    
    25,322
    
    
    
    40,187
    
    
    
    38,662Commercial real estate mortgages
    
    
    495,501
    
    
    
    531,156
    
    
    
    571,204
    
    
    
    539,306
    
    
    
    401,924Residential real estate mortgages
    
    
    38,338
    
    
    
    44,500
    
    
    
    52,426
    
    
    
    54,237
    
    
    
    47,948$
    735,851
    
    
    $
    833,136
    
    
    $
    933,269
    
    
    $
    952,084
    
    
    $
    756,420
   70




---



##### 



Within
    
    
    Three to
    
    
    One to
    
    
    AfterThree
    
    
    Twelve
    
    
    Five
    
    
    FiveMonths
    
    
    Months
    
    
    Years
    
    
    Years
    
    
    TotalConsumer loans
    
    $
    17,336
    
    
    $
    2,390
    
    
    $
    4,590
    
    
    $
    21
    
    
    $
    24,337Commercial, financial & other
    
    
    45,783
    
    
    
    28,014
    
    
    
    31,802
    
    
    
    1,728
    
    
    
    107,327Land development loans  residential
    
    
    3,091
    
    
    
    2,924
    
    
    
    4,056
    
    
    
    
    
    
    
    10,071Land development loans  non-residential
    
    
    625
    
    
    
    4,932
    
    
    
    2,680
    
    
    
    
    
    
    
    8,237Construction loans  residential
    
    
    732
    
    
    
    2,119
    
    
    
    
    
    
    
    
    
    
    
    2,851Construction loans  non-residential
    
    
    11,544
    
    
    
    
    
    
    
    707
    
    
    
    
    
    
    
    12,251Commercial real estate mortgages
    
    
    62,407
    
    
    
    87,011
    
    
    
    297,560
    
    
    
    20,065
    
    
    
    467,043Residential real estate mortgages
    
    
    1,007
    
    
    
    19,531
    
    
    
    8,934
    
    
    
    7,699
    
    
    
    37,171$
    142,525
    
    
    $
    146,921
    
    
    $
    350,329
    
    
    $
    29,513
    
    
    
    669,288Non-accrual loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66,563Total loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    735,851Loan at fixed interest rates
    
    $
    65,330
    
    
    $
    125,982
    
    
    $
    340,731
    
    
    $
    28,498
    
    
    $
    560,541Loan at variable interest rates
    
    
    77,195
    
    
    
    20,939
    
    
    
    9,598
    
    
    
    1,015
    
    
    
    108,747$
    142,525
    
    
    $
    146,921
    
    
    $
    350,329
    
    
    $
    29,513
    
    
    
    669,288Non-accrual loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66,563Total loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    735,851
    2010
    
    
    2009
    
    
    2008Troubled debt restructuring and still accruing
    
    
    48,527
    
    
    
    59,420
    
    
    
    17,765Over 90 days past due and still accruing
    
    
    
    
    
    
    
    
    
    
    450Non-accrual loans
    
    
    66,563
    
    
    
    49,341
    
    
    
    51,708Total non performing loans
    
    $
    115,090
    
    
    $
    108,761
    
    
    $
    69,923
 71




---



##### 



Number ofLoans
    
    
    BalanceConsumer loans
    
    
    15
    
    
    $
    1,497Commercial, financial, & other
    
    
    30
    
    
    
    8,912Commercial real estate construction  residential property
    
    
    10
    
    
    
    9,613Commercial real estate construction  non-residential property
    
    
    
    
    
    
    Land development loans  residential property
    
    
    4
    
    
    
    5,391Land development loans  non-residential property
    
    
    1
    
    
    
    317Commercial real estate mortgages
    
    
    41
    
    
    
    21,721Residential real estate mortgages
    
    
    9
    
    
    
    689Total loans downgraded to non-accrual status
    
    
    110
    
    
    $
    48,140
 72




---



##### 



Number ofLoans
    
    
    BalanceConsumer loans
    
    
    18
    
    
    $
    1,533Commercial, financial, & other
    
    
    42
    
    
    
    13,688Commercial real estate construction  residential property
    
    
    16
    
    
    
    11,904Commercial real estate construction  non-residential property
    
    
    2
    
    
    
    1,734Land development loans  residential property
    
    
    8
    
    
    
    7,763Land development loans  non-residential property
    
    
    1
    
    
    
    317Commercial real estate mortgages
    
    
    45
    
    
    
    28,458Residential real estate mortgages
    
    
    14
    
    
    
    1,166Total non-accrual loans
    
    
    146
    
    
    $
    66,563
 Allowance for Loan Losses.
  73




---



##### 



2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Balance, beginning of year
    
    $
    35,125
    
    
    $
    14,452
    
    
    $
    10,617
    
    
    $
    7,775
    
    
    $
    6,808Allowance on loans acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,704
    
    
    
    Charge-offs:Consumer loans
    
    
    1,019
    
    
    
    1,154
    
    
    
    318
    
    
    
    226
    
    
    
    24Commercial, financial & other
    
    
    6,385
    
    
    
    4,878
    
    
    
    4,304
    
    
    
    914
    
    
    
    139Commercial construction loans  residential
    
    
    1,887
    
    
    
    9,441
    
    
    
    1,635
    
    
    
    1,291
    
    
    
    Commercial construction loans 
non-residential
    
    
    36
    
    
    
    4,364
    
    
    
    192
    
    
    
    
    
    
    
    Land development loans  residential
    
    
    10,046
    
    
    
    1,471
    
    
    
    1,777
    
    
    
    1,665
    
    
    
    Land development loans  non-residential
    
    
    300
    
    
    
    1,981
    
    
    
    
    
    
    
    
    
    
    
    Commercial real estate mortgages
    
    
    4,455
    
    
    
    6,919
    
    
    
    2,446
    
    
    
    662
    
    
    
    36Residential loans
    
    
    276
    
    
    
    701
    
    
    
    296
    
    
    
    320
    
    
    
    38Recoveries:Consumer loans
    
    
    203
    
    
    
    176
    
    
    
    19
    
    
    
    25
    
    
    
    17Commercial, financial & other
    
    
    330
    
    
    
    339
    
    
    
    117
    
    
    
    224
    
    
    
    218Commercial construction loans  residential
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial construction loans 
non-residential
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    6
    
    
    
    Land development loans  residential
    
    
    43
    
    
    
    107
    
    
    
    33
    
    
    
    
    
    
    
    Commercial real estate mortgages
    
    
    622
    
    
    
    61
    
    
    
    21
    
    
    
    140
    
    
    
    26Residential loans
    
    
    73
    
    
    
    36
    
    
    
    4
    
    
    
    
    
    
    
    Net charge-offs
    
    
    23,132
    
    
    
    30,190
    
    
    
    10,771
    
    
    
    4,683
    
    
    
    (24
    )Additions charged to operations
    
    
    15,978
    
    
    
    50,863
    
    
    
    14,606
    
    
    
    5,821
    
    
    
    943Balance at end of period
    
    $
    27,971
    
    
    $
    35,125
    
    
    $
    14,452
    
    
    $
    10,617
    
    
    $
    7,775Allowance to total loans
    
    
    3.80
    %
    
    
    4.22
    %
    
    
    1.55
    %
    
    
    1.12
    %
    
    
    1.03
    %Net Charge-offs to average loans
    
    
    2.94
    %
    
    
    3.41
    %
    
    
    1.14
    %
    
    
    0.50
    %
    
    
    0.00
    %
  74




---



##### 



Total2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Consumer loans
    
    $
    1,115
    
    
    $
    819
    
    
    $
    141
    
    
    $
    453
    
    
    $
    470Commercial, financial, & other
    
    
    6,571
    
    
    
    6,498
    
    
    
    1,298
    
    
    
    1,404
    
    
    
    1,462Land development loans  residential
    
    
    1,757
    
    
    
    5,909
    
    
    
    4,496
    
    
    
    2,215
    
    
    
    1,228Land development loans  non-residential
    
    
    972
    
    
    
    807
    
    
    
    2,086
    
    
    
    117
    
    
    
    146Commercial construction loans  residential
    
    
    2,467
    
    
    
    2,003
    
    
    
    1,739
    
    
    
    714
    
    
    
    366Commercial construction loans  non-residential
    
    
    2,674
    
    
    
    3,450
    
    
    
    1,151
    
    
    
    553
    
    
    
    434Commercial real estate mortgages
    
    
    12,102
    
    
    
    15,286
    
    
    
    3,391
    
    
    
    4,671
    
    
    
    3,270Residential real estate mortgages
    
    
    313
    
    
    
    353
    
    
    
    150
    
    
    
    490
    
    
    
    398$
    27,971
    
    
    $
    35,125
    
    
    $
    14,452
    
    
    $
    10,617
    
    
    $
    7,775
 Percent of allowance for loan losses in each categoryto total allowance for loan losses2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Consumer loans
    
    
    3.99
    %
    
    
    2.33
    %
    
    
    0.98
    %
    
    
    4.27
    %
    
    
    6.05
    %Commercial, financial, & other
    
    
    23.49
    %
    
    
    18.50
    %
    
    
    8.98
    %
    
    
    13.22
    %
    
    
    18.80
    %Land development loans  residential
    
    
    6.28
    %
    
    
    16.82
    %
    
    
    31.11
    %
    
    
    20.86
    %
    
    
    15.80
    %Land development loans  non-residential
    
    
    3.48
    %
    
    
    2.30
    %
    
    
    14.43
    %
    
    
    1.10
    %
    
    
    1.88
    %Commercial construction loans  residential
    
    
    8.82
    %
    
    
    5.70
    %
    
    
    12.03
    %
    
    
    6.73
    %
    
    
    4.71
    %Commercial construction loans  non-residential
    
    
    9.56
    %
    
    
    9.82
    %
    
    
    7.96
    %
    
    
    5.21
    %
    
    
    5.58
    %Commercial real estate mortgages
    
    
    43.27
    %
    
    
    43.52
    %
    
    
    23.46
    %
    
    
    44.00
    %
    
    
    42.06
    %Residential real estate mortgages
    
    
    1.12
    %
    
    
    1.00
    %
    
    
    1.04
    %
    
    
    4.62
    %
    
    
    5.12
    %100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
 Percent of loans in each category to total loans2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Consumer loans
    
    
    3.52
    %
    
    
    3.53
    %
    
    
    3.41
    %
    
    
    3.76
    %
    
    
    4.27
    %Commercial, financial, & other
    
    
    16.45
    %
    
    
    17.36
    %
    
    
    17.65
    %
    
    
    18.38
    %
    
    
    16.46
    %Land development loans  residential
    
    
    2.99
    %
    
    
    4.62
    %
    
    
    5.82
    %
    
    
    6.68
    %
    
    
    8.65
    %Land development loans  non-residential
    
    
    1.35
    %
    
    
    1.40
    %
    
    
    1.72
    %
    
    
    1.07
    %
    
    
    1.93
    %Commercial construction loans  residential
    
    
    1.44
    %
    
    
    1.59
    %
    
    
    1.85
    %
    
    
    3.55
    %
    
    
    4.10
    %Commercial construction loans  non-residential
    
    
    1.71
    %
    
    
    2.41
    %
    
    
    2.71
    %
    
    
    4.22
    %
    
    
    5.11
    %Commercial real estate mortgages
    
    
    67.34
    %
    
    
    63.75
    %
    
    
    61.20
    %
    
    
    56.64
    %
    
    
    53.14
    %Residential real estate mortgages
    
    
    5.21
    %
    
    
    5.34
    %
    
    
    5.62
    %
    
    
    5.70
    %
    
    
    6.34
    %100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
 75




---



##### 



Premises and Equipment.
 Real Estate Owned.
 Number ofProperty Type
    
    Properties
    
    
    AmountSingle Family Homes
    
    
    22
    
    
    $
    1,815Condominium
    
    
    2
    
    
    
    1,297Vacant Land
    
    
    24
    
    
    
    10,368Commercial
    
    
    12
    
    
    
    3,761Office/Retail
    
    
    8
    
    
    
    4,261Total
    
    
    68
    
    
    $
    21,502
 Accrued Interest Receivable.
 Other Assets
 76




---



##### 



Deposits.
 December 31, 2010
    
    
    December 31, 2009
    
    
    PercentBalance
    
    
    Percent
    
    
    Balance
    
    
    Percent
    
    
    Increase/(Decrease)Non-interest bearing:Demand
    
    $
    88,267
    
    
    
    10.87
    %
    
    $
    83,873
    
    
    
    9.66
    %
    
    
    5.24
    %Interest bearing:Checking
    
    $
    73,107
    
    
    
    9.00
    %
    
    $
    83,087
    
    
    
    9.57
    %
    
    
    (12.01
    %)Money market
    
    
    53,499
    
    
    
    6.59
    %
    
    
    52,412
    
    
    
    6.04
    %
    
    
    2.07
    %Savings
    
    
    41,214
    
    
    
    5.07
    %
    
    
    43,343
    
    
    
    4.99
    %
    
    
    (4.91
    %)Time, under $100,000
    
    
    291,478
    
    
    
    35.89
    %
    
    
    301,829
    
    
    
    34.77
    %
    
    
    (3.43
    %)Time, $100,000 and
over
    
    
    264,536
    
    
    
    32.57
    %
    
    
    303,411
    
    
    
    34.96
    %
    
    
    (12.81
    %)723,834
    
    
    
    89.13
    %
    
    
    784,082
    
    
    
    90.34
    %
    
    
    (7.68
    %)$
    812,101
    
    
    
    100.00
    %
    
    $
    867,955
    
    
    
    100.00
    %
    
    
    (6.44
    %)
    77




---



##### 



$100,000 and over
    
    
    Less than $100,000
    
    
    Total2011
    
    $
    198,481
    
    
    $
    219,980
    
    
    $
    418,4612012
    
    
    59,846
    
    
    
    62,360
    
    
    
    122,2062013
    
    
    4,751
    
    
    
    5,901
    
    
    
    10,6522014
    
    
    454
    
    
    
    826
    
    
    
    1,2802015 and thereafter
    
    
    1,004
    
    
    
    2,411
    
    
    
    3,415Totals
    
    $
    264,536
    
    
    $
    291,478
    
    
    $
    556,014
  2010
    
    
    2009Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageAmount
    
    
    Rate
    
    
    Amount
    
    
    RateNon-interest bearing:Demand
    
    $
    88,267
    
    
    
    
    
    
    $
    83,873
    
    
    
    Interest bearing:Checking
    
    $
    73,107
    
    
    
    0.21
    %
    
    $
    83,087
    
    
    
    0.47
    %Money market
    
    
    53,499
    
    
    
    0.23
    %
    
    
    52,412
    
    
    
    0.64
    %Savings
    
    
    41,214
    
    
    
    0.21
    %
    
    
    43,343
    
    
    
    0.30
    %Time, under $100,000
    
    
    291,478
    
    
    
    1.60
    %
    
    
    301,829
    
    
    
    2.71
    %Time, $100,000 and over
    
    
    264,536
    
    
    
    1.58
    %
    
    
    303,411
    
    
    
    2.59
    %723,834
    
    
    
    
    
    
    
    784,082$
    812,101
    
    
    
    
    
    
    $
    867,955
  Federal Home Loan Bank Advances
  78




---



##### 



Accrued Interest Payable
 Other Liabilities.
 Subordinated Debentures.
 Capital
       Market Risk Analysis
  79




---



##### 



Interest Rate Sensitivity Analysis.
   80




---



##### 



Interest Rate Sensitivity Period1-90
    
    
    91-365
    
    
    1-5
    
    
    Over(In thousands)
    
    Days
    
    
    Days
    
    
    Years
    
    
    5 Years
    
    
    TotalEarning assetsFederal funds sold
    
    $
    55
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    55Interest bearing deposits with Banks
    
    
    48,621
    
    
    
    9,044
    
    
    
    29,410
    
    
    
    
    
    
    
    87,075Mortgage loans held for sale
    
    
    353
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    353Securities available for sale
    
    
    10
    
    
    
    25
    
    
    
    
    
    
    
    54,776
    
    
    
    54,811Federal Home Loan Bank stock
    
    
    3,605
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,605Total loans, net of non-accrual
    
    
    144,359
    
    
    
    145,291
    
    
    
    350,519
    
    
    
    29,119
    
    
    
    669,288Total earning assets
    
    
    197,003
    
    
    
    154,360
    
    
    
    379,929
    
    
    
    83,895
    
    
    
    815,187Interest bearing liabilitiesTotal interest bearing deposits
    
    
    285,716
    
    
    
    300,566
    
    
    
    137,290
    
    
    
    263
    
    
    
    723,835Federal Home Loan Bank advances
    
    
    53,500
    
    
    
    
    
    
    
    10,216
    
    
    
    
    
    
    
    63,716Other Borrowings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Subordinated debentures
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000Total interest bearing liabilities
    
    
    349,216
    
    
    
    300,566
    
    
    
    147,506
    
    
    
    263
    
    
    
    797,551Net asset (liability) funding gap
    
    
    (152,213
    )
    
    
    (146,206
    )
    
    
    232,423
    
    
    
    83,632
    
    
    $
    17,636Cumulative net asset (liability) funding gap
    
    
    ($152,213
    )
    
    
    ($298,419
    )
    
    
    ($65,996
    )
    
    $
    17,636
   Change in Net Interest IncomeInterest Rate Change
    
    Amount
    
    
    Percent+ 500 Basis Points
    
    $
    6,228
    
    
    
    18.66
    %+ 400 Basis Points
    
    
    5,048
    
    
    
    15.13
    %+ 300 Basis Points
    
    
    3,836
    
    
    
    11.49
    %+ 200 Basis Points
    
    
    2,751
    
    
    
    8.24
    %+ 100 Basis Points
    
    
    1,476
    
    
    
    4.42
    %- 100 Basis Points
    
    
    0
    
    
    
    0.00
    %
 81




---



##### 



Liquidity.
     Contractual
Obligations
 Payments Due By PeriodLess Than 1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    Over 5 Years
    
    
    TotalCertificates of deposit
    
    $
    418,461
    
    
    $
    132,858
    
    
    $
    4,433
    
    
    $
    262
    
    
    $
    556,014Long-term borrowings
    
    
    53,548
    
    
    
    10,168
    
    
    
    
    
    
    
    
    
    
    
    63,716Lease commitments
    
    
    626
    
    
    
    439
    
    
    
    201
    
    
    
    
    
    
    
    1,266Subordinated debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    10,000Totals
    
    $
    472,635
    
    
    $
    143,465
    
    
    $
    4,634
    
    
    $
    10,262
    
    
    $
    630,996
 Unused
Loan Commitments and Letters of Credit
 Amount Of Commitment Expiration Per PeriodLess Than 1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    Over 5 Years
    
    
    TotalUnused loan commitments
    
    $
    25,667
    
    
    $
    8,084
    
    
    $
    4,204
    
    
    $
    7,435
    
    
    $
    45,390Standby letters of credit
    
    
    548
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    548Totals
    
    $
    26,215
    
    
    $
    8,084
    
    
    $
    4,204
    
    
    $
    7,435
    
    
    $
    45,938
 82




---



##### 



Impact of Inflation and Changing Prices
  Technology
   
  83




---



##### 



DEARBORN BANCORP, INC.
 DIRECTORS AND OFFICERS
 DIRECTORS
 
 
 
 
 
 
 
 
 
 
 OFFICERS
 
 
 
 84




---



##### 



FIDELITY BANK
 DIRECTORS AND EXECUTIVE OFFICERS
 DIRECTORS
 
 
 
 
 
 
 
 
 
 
 EXECUTIVE OFFICERS
 
 
 
 
 85




---



##### 



FIDELITY BANK
OFFICERS
 FIRST VICE PRESIDENT
 
 VICE PRESIDENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 ASSISTANT VICE PRESIDENTS
       FIRST LEVEL OFFICERS
                         86




---



##### 



FIDELITY BANK
 SUBSIDIARIES
 
 
 87




---



##### 



FIDELITY BANK
LOCATIONS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 88




---



##### 



DEARBORN BANCORP, INC. COMMON STOCK
  INVESTOR RELATIONS AND FORM 10-K AVAILABLE
 
 ANNUAL MEETING
  INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
 
 STOCK TRANSFER AGENT AND REGISTRAR
  
 WEBSITE INFORMATION
  QUARTERLY COMMON STOCK PRICE INFORMATION
 High
    
    
    Low
    
    
    Close2010First quarter
    
    $
    2.48
    
    
    $
    0.41
    
    
    $
    1.11Second quarter
    
    
    5.47
    
    
    
    1.09
    
    
    
    1.87Third quarter
    
    
    3.16
    
    
    
    1.23
    
    
    
    1.79Fourth quarter
    
    
    2.40
    
    
    
    1.50
    
    
    
    1.652009First quarter
    
    $
    2.45
    
    
    $
    1.33
    
    
    $
    1.82Second quarter
    
    
    3.22
    
    
    
    1.75
    
    
    
    1.80Third quarter
    
    
    2.00
    
    
    
    0.80
    
    
    
    1.21Fourth quarter
    
    
    1.25
    
    
    
    0.35
    
    
    
    0.46
  89




---



##### 



PRINCIPAL NASDAQ MARKET MAKERS
 nd
 
 
 
 
 th
 
 
 
 
 
 
 th
 90




---



##### 



DEARBORN BANCORP, INC.