2008
ANNUAL REPORT




---



##### 



Dearborn Bancorp, Inc.
 and its subsidiary
 Fidelity Bank
  Corporate Information
    
    
    3Chairmans and Presidents Letter to Stockholders
    
    
    4Summary of Selected Financial Data
    
    
    7Report of Independent Registered Public Accounting Firm
    
    
    9Managements Report on Internal Control Over Financial Reporting
    
    
    11Consolidated Balance Sheets
    
    
    12Consolidated Statements of Income
    
    
    13Consolidated Statements of Changes in Stockholders Equity
    
    
    14Consolidated Statements of Cash Flows
    
    
    17Notes to Consolidated Financial Statements
    
    
    19Managements Discussion and Analysis
    
    
    55Dearborn Bancorp, Inc. Directors and Officers
    
    
    80Fidelity Bank Directors and Executive Officers
    
    
    81Fidelity Bank Officers
    
    
    82Fidelity Bank Subsidiaries
    
    
    83Investor Information
    
    
    85
 2




---



##### 



DESCRIPTION OF BUSINESS
 Dearborn Bancorp, Inc.
  Fidelity Bank
   www.fidbank.com
 Community Bank Insurance Agency, Inc.
  Community Bank Mortgage, Inc.
  Community Bank Audit Services, Inc.
  3




---



##### 



4




---



##### 



5




---



##### 



6




---



##### 



SUMMARY OF SELECTED FINANCIAL DATA
  (In thousands, except share and per share data)
    

2008
    
    2007
    
    2006
    
    2005
    
    2004OPERATIONSInterest income
    
    $
    61,126
    
    
    $
    70,110
    
    
    $
    53,886
    
    
    $
    43,855
    
    
    $
    29,790Interest expense
    
    
    28,995
    
    
    
    36,491
    
    
    
    25,884
    
    
    
    16,403
    
    
    
    9,409Net interest income
    
    
    32,131
    
    
    
    33,619
    
    
    
    28,002
    
    
    
    27,452
    
    
    
    20,381Provision for loan losses
    
    
    14,606
    
    
    
    5,821
    
    
    
    943
    
    
    
    1,081
    
    
    
    1,400Net interest income after provision for loan losses
    
    
    17,525
    
    
    
    27,798
    
    
    
    27,059
    
    
    
    26,371
    
    
    
    18,981Total non-interest income
    
    
    (930
    )
    
    
    1,020
    
    
    
    925
    
    
    
    505
    
    
    
    1,065Total non-interest expense
    
    
    65,007
    
    
    
    23,796
    
    
    
    16,225
    
    
    
    15,499
    
    
    
    11,700Net income before federal income tax expense
    
    
    (48,412
    )
    
    
    5,022
    
    
    
    11,759
    
    
    
    11,377
    
    
    
    8,346Income tax expense (benefit)
    
    
    (16,487
    )
    
    
    1,856
    
    
    
    3,940
    
    
    
    3,867
    
    
    
    2,837Net income (loss)
    
    
    ($31,925
    )
    
    $
    3,166
    
    
    $
    7,819
    
    
    $
    7,510
    
    
    $
    5,509FINANCIAL CONDITIONTotal assets
    
    $
    1,121,918
    
    
    $
    1,046,981
    
    
    $
    855,931
    
    
    $
    706,497
    
    
    $
    652,662Mortgage loans held for sale
    
    
    1,834
    
    
    
    1,316
    
    
    
    1,823
    
    
    
    1,041
    
    
    
    1,692Investment securities, available for sale
    
    
    84,148
    
    
    
    8,902
    
    
    
    5,878
    
    
    
    17,153
    
    
    
    21,075Federal Home Loan Bank stock
    
    
    3,614
    
    
    
    2,072
    
    
    
    1,288
    
    
    
    1,293
    
    
    
    1,122Loans
    
    
    933,269
    
    
    
    952,084
    
    
    
    756,420
    
    
    
    657,037
    
    
    
    587,562Allowance for loan losses
    
    
    (14,452
    )
    
    
    (10,617
    )
    
    
    (7,775
    )
    
    
    (6,808
    )
    
    
    (5,884
    )Other assets
    
    
    113,505
    
    
    
    93,224
    
    
    
    98,297
    
    
    
    36,781
    
    
    
    26,226Deposits
    
    
    938,395
    
    
    
    822,627
    
    
    
    633,216
    
    
    
    582,438
    
    
    
    540,880Federal Home Loan Bank advances
    
    
    65,019
    
    
    
    41,370
    
    
    
    25,561
    
    
    
    25,588
    
    
    
    20,614Subordinated debentures
    
    
    10,000
    
    
    
    10,000
    
    
    
    10,000
    
    
    
    10,000
    
    
    
    10,000Other borrowings
    
    
    2,461
    
    
    
    30,580
    
    
    
    37,919
    
    
    
    1,615
    
    
    
    4,115Other liabilities
    
    
    2,732
    
    
    
    4,856
    
    
    
    4,250
    
    
    
    2,643
    
    
    
    2,449Stockholders equity
    
    
    103,311
    
    
    
    137,548
    
    
    
    144,985
    
    
    
    84,213
    
    
    
    74,604PER SHARE INFORMATION (1)Net income (loss) per common share  basic
    
    
    ($3.99
    )
    
    $
    0.37
    
    
    $
    1.23
    
    
    $
    1.27
    
    
    $
    1.16Net income (loss) per common share  diluted
    
    
    ($3.99
    )
    
    $
    0.36
    
    
    $
    1.17
    
    
    $
    1.20
    
    
    $
    1.06Book value per common share
    
    $
    12.54
    
    
    $
    16.70
    
    
    $
    16.15
    
    
    $
    14.11
    
    
    $
    12.80Average shares outstanding   basic
    
    
    8,007,345
    
    
    
    8,602,704
    
    
    
    6,372,471
    
    
    
    5,899,281
    
    
    
    4,767,907Average shares outstanding  diluted
    
    
    8,007,345
    
    
    
    8,827,531
    
    
    
    6,672,319
    
    
    
    6,274,404
    
    
    
    5,217,001Shares outstanding at end of period
    
    
    7,696,204
    
    
    
    8,237,413
    
    
    
    8,975,085
    
    
    
    5,967,190
    
    
    
    5,827,368OTHER DATAReturn on average assets
    
    
    -3.02
    %
    
    
    0.30
    %
    
    
    1.02
    %
    
    
    1.08
    %
    
    
    1.05
    %Return on average equity
    
    
    -23.51
    %
    
    
    2.21
    %
    
    
    8.20
    %
    
    
    9.44
    %
    
    
    10.56
    %Net interest margin
    
    
    3.29
    %
    
    
    3.48
    %
    
    
    3.80
    %
    
    
    4.14
    %
    
    
    4.04
    %Net interest spread
    
    
    2.79
    %
    
    
    2.74
    %
    
    
    3.06
    %
    
    
    3.62
    %
    
    
    3.69
    %Allowance for loan losses to total loans
    
    
    1.55
    %
    
    
    1.12
    %
    
    
    1.03
    %
    
    
    1.04
    %
    
    
    1.00
    %Nonperforming assets to total assets
    
    
    5.51
    %
    
    
    2.42
    %
    
    
    0.90
    %
    
    
    0.26
    %
    
    
    0.47
    %Stockholders equity to total assets
    
    
    9.21
    %
    
    
    13.14
    %
    
    
    16.94
    %
    
    
    11.92
    %
    
    
    11.43
    %Total interest expense to gross interest income
    
    
    47.43
    %
    
    
    52.05
    %
    
    
    48.03
    %
    
    
    37.40
    %
    
    
    31.58
    %Number of Offices
    
    
    18
    
    
    
    19
    
    
    
    12
    
    
    
    12
    
    
    
    12
 
 (1)
    
    All share and per share amounts have been adjusted to reflect the issuance of stock dividends. 7




---



##### 



COMMITMENT TO COMMUNITY
  
 8




---



##### 



Report of Independent Registered Public Accounting Firm
 
     /s/ BKD, LLPIndianapolis, IndianaMarch 20, 2009 9




---



##### 



/s/ Crowe Horwath LLP 
 10




---



##### 



Dearborn Bancorp, Inc. and Subsidiary/s/ Michael J. RossMichael J. RossPresident and Chief Executive Officer/s/ Jeffrey L. KarafaJeffery L. KarafaVice President, Treasurer and Secretary 11




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 CONSOLIDATED BALANCE SHEETS
 (Dollars, in thousands)
    
    December 31,2008
    
    
    2007ASSETSCash and cash equivalentsCash and due from banks
    
    $
    11,671
    
    
    $
    7,869Federal funds sold
    
    
    4,455
    
    
    
    1,495Interest bearing deposits with banks
    
    
    36,876
    
    
    
    118Total cash and cash equivalents
    
    
    53,002
    
    
    
    9,482Mortgage loans held for sale
    
    
    1,834
    
    
    
    1,316Securities available for sale
    
    
    84,148
    
    
    
    8,902Federal Home Loan Bank stock
    
    
    3,614
    
    
    
    2,072LoansLoans
    
    
    933,269
    
    
    
    952,084Allowance for loan losses
    
    
    (14,452
    )
    
    
    (10,617
    )Net loans
    
    
    918,817
    
    
    
    941,467Premises and equipment, net
    
    
    21,272
    
    
    
    22,782Real estate owned
    
    
    9,657
    
    
    
    6,319Goodwill
    
    
    
    
    
    
    34,028Other intangible assets
    
    
    4,592
    
    
    
    11,133Accrued interest receivable
    
    
    3,499
    
    
    
    3,816Other assets
    
    
    21,483
    
    
    
    5,664Total assets
    
    $
    1,121,918
    
    
    $
    1,046,981LIABILITIESDepositsNon-interest bearing deposits
    
    $
    81,317
    
    
    $
    83,594Interest bearing deposits
    
    
    857,078
    
    
    
    739,033Total deposits
    
    
    938,395
    
    
    
    822,627Other liabilitiesFederal funds purchased
    
    
    
    
    
    
    30,100Securities sold under agreements to repurchase
    
    
    2,461
    
    
    
    480Federal Home Loan Bank advances
    
    
    65,019
    
    
    
    41,370Accrued interest payable
    
    
    1,695
    
    
    
    3,168Other liabilities
    
    
    1,037
    
    
    
    1,688Subordinated debentures
    
    
    10,000
    
    
    
    10,000Total liabilities
    
    
    1,018,607
    
    
    
    909,433STOCKHOLDERS EQUITYCommon stock  no par value 20,000,000 shares
authorized, 7,696,204 and 8,237,413 shares
outstanding in 2008 and 2007, respectively
    
    
    131,784
    
    
    
    134,278Retained earnings
    
    
    (28,675
    )
    
    
    3,250Accumulated other comprehensive income
    
    
    202
    
    
    
    20Total stockholders equity
    
    
    103,311
    
    
    
    137,548Total liabilities and stockholders equity
    
    $
    1,121,918
    
    
    $
    1,046,981
  12




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF INCOME
 Years Ended December 31,(In thousands, except share data)
    
    2008
    
    
    2007
    
    
    2006Interest incomeInterest on loans
    
    $
    60,533
    
    
    $
    68,947
    
    
    $
    52,321Interest on securities, available for sale
    
    
    464
    
    
    
    603
    
    
    
    834Interest on deposits with banks
    
    
    86
    
    
    
    127
    
    
    
    158Interest on federal funds
    
    
    43
    
    
    
    433
    
    
    
    573Total interest income
    
    
    61,126
    
    
    
    70,110
    
    
    
    53,886Interest expenseInterest on deposits
    
    
    25,106
    
    
    
    33,303
    
    
    
    23,447Interest on other liabilities
    
    
    3,889
    
    
    
    3,188
    
    
    
    2,437Total interest expense
    
    
    28,995
    
    
    
    36,491
    
    
    
    25,884Net interest income
    
    
    32,131
    
    
    
    33,619
    
    
    
    28,002Provision for loan losses
    
    
    14,606
    
    
    
    5,821
    
    
    
    943Net interest income after provision for loan losses
    
    
    17,525
    
    
    
    27,798
    
    
    
    27,059Non-interest incomeService charges on deposit accounts
    
    
    1,538
    
    
    
    1,267
    
    
    
    699Fees for other services to customers
    
    
    128
    
    
    
    141
    
    
    
    48Gain on the sale of loans
    
    
    165
    
    
    
    163
    
    
    
    145Gain on the sale of securities
    
    
    17
    
    
    
    
    
    
    
    9Loss on the sale of real estate owned
    
    
    (745
    )
    
    
    (26
    )
    
    
    (103
    )Loss on the write-down of real estate owned
    
    
    (2,292
    )
    
    
    (701
    )
    
    
    Other income
    
    
    259
    
    
    
    176
    
    
    
    127Total non-interest income
    
    
    (930
    )
    
    
    1,020
    
    
    
    925Non-interest expenseSalaries and employee benefits
    
    
    13,142
    
    
    
    13,109
    
    
    
    10,288Occupancy and equipment expense
    
    
    3,752
    
    
    
    3,663
    
    
    
    2,420Amortization of intangible assets
    
    
    968
    
    
    
    1,328
    
    
    
    250Impairment of goodwill
    
    
    34,028
    
    
    
    
    
    
    
    Impairment of other intangible assets
    
    
    5,573
    
    
    
    
    
    
    
    FDIC assessment
    
    
    696
    
    
    
    424
    
    
    
    75Advertising and marketing
    
    
    550
    
    
    
    468
    
    
    
    385Stationery and supplies
    
    
    592
    
    
    
    617
    
    
    
    402Professional services
    
    
    1,063
    
    
    
    1,042
    
    
    
    768Data processing
    
    
    848
    
    
    
    716
    
    
    
    531Defaulted loan expense
    
    
    2,078
    
    
    
    685
    
    
    
    78Other operating expenses
    
    
    1,717
    
    
    
    1,744
    
    
    
    1,028Total non-interest expense
    
    
    65,007
    
    
    
    23,796
    
    
    
    16,225Income (loss) before federal income tax expense
    
    
    (48,412
    )
    
    
    5,022
    
    
    
    11,759Income tax expense (benefit)
    
    
    (16,487
    )
    
    
    1,856
    
    
    
    3,940Net income (loss)
    
    
    ($31,925
    )
    
    $
    3,166
    
    
    $
    7,819Per share data:Net income (loss)  basic
    
    
    ($3.99
    )
    
    $
    0.37
    
    
    $
    1.23Net income (loss)  diluted
    
    
    ($3.99
    )
    
    $
    0.36
    
    
    $
    1.17Weighted average number of shares outstanding  basic
    
    
    8,007,345
    
    
    
    8,602,704
    
    
    
    6,372,471Weighted average number of shares outstanding  diluted
    
    
    8,007,345
    
    
    
    8,827,531
    
    
    
    6,672,319
  13




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
  AccumulatedOther
    
    
    TotalCommon
    
    
    Retained
    
    
    Comprehensive
    
    
    Stockholders'(In thousands, except shares)
    
    Stock
    
    
    Earnings
    
    
    Income (Loss)
    
    
    EquityBalance, January 1, 2006
    
    $
    83,684
    
    
    $
    573
    
    
    
    ($44
    )
    
    $
    84,213Issuance of common stock (2,918,250 shares)
    
    
    55,131
    
    
    
    
    
    
    
    
    
    
    
    55,131Purchase of common stock (122,700 shares)
    
    
    (2,824
    )
    
    
    
    
    
    
    
    
    
    
    (2,824
    )Stock awards earned (11,164 shares)
    
    
    151
    
    
    
    
    
    
    
    
    
    
    
    151Stock options expense
    
    
    67
    
    
    
    
    
    
    
    
    
    
    
    67Exercise of stock options (44,833 shares)
    
    
    292
    
    
    
    
    
    
    
    
    
    
    
    292Tax benefit from exercise of stock options
    
    
    98
    
    
    
    
    
    
    
    
    
    
    
    98Stock dividend #1 (272,754 shares)
    
    
    4,115
    
    
    
    (4,115
    )
    
    
    
    
    
    
    Stock dividend #2 (427,228 shares)
    
    
    4,193
    
    
    
    (4,193
    )
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    7,819
    
    
    
    
    
    
    
    7,819Other comprehensive incomeChanges in net unrealized loss on
securities available for sale
    
    
    
    
    
    
    
    
    
    
    68
    
    
    
    68Reclassification adjustment for gain
included in net income
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    (9
    )Net change in net unrealized loss
on securities available for sale
    
    
    
    
    
    
    
    
    
    
    59
    
    
    
    59Deferred tax effects
    
    
    
    
    
    
    
    
    
    
    (21
    )
    
    
    (21
    )Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    38
    
    
    
    38Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,857Balance, December 31, 2006
    
    $
    144,907
    
    
    $
    84
    
    
    
    ($6
    )
    
    $
    144,985
  14




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (Continued)
  AccumulatedOther
    
    
    TotalCommon
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersStock
    
    
    Earnings
    
    
    Income
    
    
    EquityBalance, December 31, 2006
    
    $
    144,907
    
    
    $
    84
    
    
    
    ($6
    )
    
    $
    144,985Purchase of common stock (751,800 shares)
    
    
    (10,801
    )
    
    
    
    
    
    
    
    
    
    
    (10,801
    )Stock awards earned (613 shares forfeited)
    
    
    (70
    )
    
    
    
    
    
    
    
    
    
    
    (70
    )Stock options earned
    
    
    (30
    )
    
    
    
    
    
    
    
    
    
    
    (30
    )Exercise of stock options (14,741 shares)
    
    
    62
    
    
    
    
    
    
    
    
    
    
    
    62Tax benefit from exercise of stock options
    
    
    210
    
    
    
    
    
    
    
    
    
    
    
    210Net income
    
    
    
    
    
    
    3,166
    
    
    
    
    
    
    
    3,166Other comprehensive incomeChanges in net unrealized loss on
securities available for sale
    
    
    
    
    
    
    
    
    
    
    38
    
    
    
    38Reclassification adjustment for gain
included in net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net change in net unrealized loss
on securities available for sale
    
    
    
    
    
    
    
    
    
    
    38
    
    
    
    38Deferred tax effects
    
    
    
    
    
    
    
    
    
    
    (12
    )
    
    
    (12
    )Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    26
    
    
    
    26Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,192Balance, December 31, 2007
    
    $
    134,278
    
    
    $
    3,250
    
    
    $
    20
    
    
    $
    137,548
  15




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (Continued)
  AccumulatedOther
    
    
    TotalCommon
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersStock
    
    
    Earnings
    
    
    Income
    
    
    EquityBalance, December 31, 2007
    
    $
    134,278
    
    
    $
    3,250
    
    
    $
    20
    
    
    $
    137,548Purchase of common stock (575,500 shares)
    
    
    (2,627
    )
    
    
    
    
    
    
    
    
    
    
    (2,627
    )Stock awards earned
    
    
    71
    
    
    
    
    
    
    
    
    
    
    
    71(43,883 shares granted, 9,592 shares forfeited)Stock option expense
    
    
    62
    
    
    
    
    
    
    
    
    
    
    
    62Net loss
    
    
    
    
    
    
    (31,925
    )
    
    
    
    
    
    
    (31,925
    )Other comprehensive incomeChanges in net unrealized gain on
securities available for sale
    
    
    
    
    
    
    
    
    
    
    293
    
    
    
    293Reclassification adjustment for gain
included in net income
    
    
    
    
    
    
    
    
    
    
    (17
    )
    
    
    (17
    )Net change in net unrealized gain
on securities available for sale
    
    
    
    
    
    
    
    
    
    
    276
    
    
    
    276Deferred tax effects
    
    
    
    
    
    
    
    
    
    
    (94
    )
    
    
    (94
    )Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    182
    
    
    
    182Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,743
    )Balance, December 31, 2008
    
    $
    131,784
    
    
    
    ($28,675
    )
    
    $
    202
    
    
    $
    103,311
  16




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended December 31,(In thousands)
    
    2008
    
    
    2007
    
    
    2006Cash flows from operating activitiesInterest and fees received
    
    $
    61,443
    
    
    $
    69,631
    
    
    $
    53,135Interest paid
    
    
    (30,468
    )
    
    
    (37,057
    )
    
    
    (23,833
    )Proceeds from sale of mortgages held for sale
    
    
    19,817
    
    
    
    20,841
    
    
    
    22,339Origination of mortgages held for sale
    
    
    (20,041
    )
    
    
    (20,171
    )
    
    
    (22,789
    )Taxes paid
    
    
    1,118
    
    
    
    (3,529
    )
    
    
    (4,590
    )Gain (loss) on sale of real estate owned
    
    
    (745
    )
    
    
    (26
    )
    
    
    (103
    )Cash paid to suppliers and employees
    
    
    (15,622
    )
    
    
    (20,232
    )
    
    
    (14,146
    )Net cash provided by operating activities
    
    
    15,502
    
    
    
    9,457
    
    
    
    10,013Cash flows from investing activitiesSale of securities available for sale
    
    
    7,276
    
    
    
    18,007
    
    
    
    96,704Proceeds from calls, maturities and repayments of
of securities available for sale
    
    
    11,826
    
    
    
    12,432
    
    
    
    12,848Purchases of securities available for sale
    
    
    (93,935
    )
    
    
    (12,219
    )
    
    
    (97,941
    )(Purchase) sale of Federal Home Loan Bank stock
    
    
    (1,542
    )
    
    
    (145
    )
    
    
    5Increase in loans, net of payments received
    
    
    (3,748
    )
    
    
    (27,004
    )
    
    
    (99,359
    )Purchases of property and equipment
    
    
    (530
    )
    
    
    (999
    )
    
    
    (1,447
    )Net cash paid in Fidelity acquisition
    
    
    
    
    
    
    (58,027
    )
    
    
    Net cash used in investing activities
    
    
    (80,653
    )
    
    
    (67,955
    )
    
    
    (89,190
    )Cash flows from financing activitiesNet decrease in non-interest bearing deposits
    
    
    (2,277
    )
    
    
    (15,477
    )
    
    
    (6,587
    )Net increase in interest bearing deposits
    
    
    118,045
    
    
    
    17,253
    
    
    
    57,365Increase (decrease) in repurchase agreements
    
    
    1,981
    
    
    
    (139
    )
    
    
    (996
    )Net change in federal funds purchased
    
    
    (30,100
    )
    
    
    (7,200
    )
    
    
    37,300Federal Home Loan Bank advances
    
    
    36,500
    
    
    
    20,000
    
    
    
    Repayments on Federal Home Loan Bank advances
    
    
    (12,851
    )
    
    
    (5,958
    )
    
    
    (27
    )Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    55,131Purchase of common stock
    
    
    (2,627
    )
    
    
    (10,801
    )
    
    
    (2,824
    )Exercise of stock options
    
    
    
    
    
    
    62
    
    
    
    292Tax benefit from the exercise of stock options
    
    
    
    
    
    
    210
    
    
    
    98Net cash provided by (used in) financing activities
    
    
    108,671
    
    
    
    (2,050
    )
    
    
    139,752Increase (decrease) in cash and cash equivalents
    
    
    43,520
    
    
    
    (60,548
    )
    
    
    60,575Cash and cash equivalents at the beginning of year
    
    
    9,482
    
    
    
    70,030
    
    
    
    9,455Cash and cash equivalents at the end of year
    
    $
    53,002
    
    
    $
    9,482
    
    
    $
    70,030
  17




---



##### 



Years Ended December 31,(In thousands)
    
    2008
    
    
    2007
    
    
    2006Reconciliation of net income to net cash provided by operating
activitiesNet income (loss)
    
    
    ($31,925
    )
    
    $
    3,166
    
    
    $
    7,819Adjustments to reconcile net income to net cash
provided by operating activitiesProvision for loan losses
    
    
    14,606
    
    
    
    5,821
    
    
    
    943Depreciation and amortization expense
    
    
    1,356
    
    
    
    1,440
    
    
    
    946(Increase) decrease in deferred tax asset
    
    
    (14,117
    )
    
    
    (386
    )
    
    
    (320
    )Restricted stock award expense
    
    
    62
    
    
    
    (70
    )
    
    
    151Stock option expense
    
    
    71
    
    
    
    (30
    )
    
    
    67Accretion of discount on investment securities
    
    
    (162
    )
    
    
    (272
    )
    
    
    (277
    )Amortization of premium on investment securities
    
    
    25
    
    
    
    
    
    
    
    8Write-down of real estate owned
    
    
    2,292
    
    
    
    701
    
    
    
    Amortization of intangible assets
    
    
    968
    
    
    
    1,328
    
    
    
    250Impairment of goodwill
    
    
    34,028
    
    
    
    
    
    
    
    Impairment of other intangible assets
    
    
    5,573
    
    
    
    
    
    
    
    (Increase) decrease in mortgages held for sale
    
    
    (518
    )
    
    
    507
    
    
    
    (782
    )Increase in interest receivable
    
    
    317
    
    
    
    765
    
    
    
    (751
    )Increase (decrease) in interest payable
    
    
    (1,473
    )
    
    
    (903
    )
    
    
    2,051(Gain) loss on sale of securities available for sale
    
    
    
    
    
    
    
    
    
    
    (9
    )(Increase) decrease in real estate owned
    
    
    6,162
    
    
    
    25
    
    
    
    (Increase) decrease in other assets
    
    
    (1,112
    )
    
    
    (1,850
    )
    
    
    361Increase (decrease) in other liabilities
    
    
    (651
    )
    
    
    (785
    )
    
    
    (444
    )Net cash provided by operating activities
    
    $
    15,502
    
    
    $
    9,457
    
    
    $
    10,013Supplemental noncash disclosures:Transfers from loans to real estate owned
    
    $
    11,792
    
    
    $
    6,436
    
    
    $
    91Noncash investing activities:Fidelity Bank acquisition:Loans acquired
    
    
    
    
    
    
    178,052Securities available for sale acquired
    
    
    
    
    
    
    20,934Federal Home Loan Bank stock acquired
    
    
    
    
    
    
    639Bank premises and equipment acquired
    
    
    
    
    
    
    8,930Acquisition intangibles recorded
    
    
    
    
    
    
    38,975Other assets acquired
    
    
    
    
    
    
    2,194Deposits assumed
    
    
    
    
    
    
    (187,635
    )Federal Home Loan Bank advances assumed
    
    
    
    
    
    
    (1,767
    )Other liabilities assumed
    
    
    
    
    
    
    (2,295
    )$
    58,027
  18




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 December 31, 2008, 2007 and 2006
   Nature of Operations and Principals of Consolidation
     Use of Estimates
  19




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
  Cash Flows
  Mortgage Loans Held for Sale
  Securities
   Loans
    20




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
  Allowance for Loan Losses
    Transfers of Financial Assets
  Foreclosed Assets
  Premises and Equipment
  
 Long-Term Assets
  21




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
  Federal Home Loan Bank (FHLB) Stock
  Goodwill and Other Intangible Assets
    Stock Compensation
    Loan Commitments and Related Financial Instruments
  Stock Dividends
  22




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
  Income Taxes
  Accounting for Uncertainty in Income Taxes
  Reclassifications
  Loss Contingencies
  Earnings Per Share
  Comprehensive Income
  Restrictions on Cash
  23




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
  Dividend Restrictions
  Fair Value of Financial Instruments
  Valuation Measurements
  Adoption of New Accounting Standards
   24




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
  Effect of Newly Issued But Not Yet Effective Accounting Standards
   25




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
  Effect of Newly Issued But Not Yet Effective Accounting Standards
    26




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
      27




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
    Interest income
    
    $
    69,183Interest expense
    
    
    30,719Net interest income
    
    
    38,464Provision for loan losses
    
    
    1,343Net interest income after provision
for loan losses
    
    
    37,121Non-interest income
    
    
    2,139Non-interest expense
    
    
    24,930Income before income tax provision
    
    
    14,330Income tax provision
    
    
    4,814Net income
    
    $
    9,516Per share data:Net income  basic
    
    $
    1.07Net income  diluted
    
    $
    1.04Weighted average shares outstanding  basic
    
    
    8,882,966Weighted average shares outstanding  diluted
    
    
    9,182,814
 28




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
   December 31, 2008Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueUS Government sponsored entity securities
    
    $
    21,175
    
    
    $
    226
    
    
    
    ($2
    )
    
    $
    21,399Corporate bonds
    
    
    13,185
    
    
    
    54
    
    
    
    (4
    )
    
    
    13,235Municipal securities
    
    
    1,303
    
    
    
    28
    
    
    
    
    
    
    
    1,331Mortgage backed securities
    
    
    179
    
    
    
    4
    
    
    
    
    
    
    
    183Money market mutual funds
    
    
    48,000
    
    
    
    
    
    
    
    
    
    
    
    48,000Totals
    
    $
    83,842
    
    
    $
    312
    
    
    
    ($6
    )
    
    $
    84,148
 December 31, 2007Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueUS Treasury securities
    
    $
    6,800
    
    
    $
    15
    
    
    
    ($10
    )
    
    $
    6,805US Government sponsored entity securities
    
    
    1,009
    
    
    
    4
    
    
    
    
    
    
    
    1,013Municipal securities
    
    
    758
    
    
    
    16
    
    
    
    
    
    
    
    774Mortgage backed securities
    
    
    305
    
    
    
    5
    
    
    
    
    
    
    
    310Totals
    
    $
    8,872
    
    
    $
    40
    
    
    
    ($10
    )
    
    $
    8,902
  Amortized
    
    
    FairCost
    
    
    ValueDue in less than one year
    
    $
    5,073
    
    
    $
    5,089Due in one year through five years
    
    
    30,309
    
    
    
    30,592Due in greater than five years
    
    
    281
    
    
    
    284Mortgage backed securities
    
    
    179
    
    
    
    183Money market mutual funds
    
    
    48,000
    
    
    
    48,000Totals
    
    $
    83,842
    
    
    $
    84,148
 29




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
   2008
    
    2007
    
    2006Proceeds
    
    $
    7,276
    
    
    $
    18,007
    
    
    $
    96,704Gross gains
    
    
    17
    
    
    
    
    
    
    
    9Gross losses
    
    
    
    
    
    
    
    
    
    
    
   December 31, 2008Investment category
    
    Less than one year
    
    
    One year or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossUS Government sponsored entity securities
    
    $
    5,997
    
    
    
    ($2
    )
    
    $
    
    
    
    $
    
    
    
    $
    5,997
    
    
    
    ($2
    )Corporate bonds
    
    
    2,041
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    2,041
    
    
    
    (4
    )Total temporarily impaired
    
    $
    8,038
    
    
    
    ($6
    )
    
    $
    
    
    
    $
    
    
    
    $
    8,038
    
    
    
    ($6
    )
 December 31, 2007Investment category
    
    Less than one year
    
    
    One year or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossUS Treasury securities
    
    $
    2,330
    
    
    
    ($10
    )
    
    $
    
    
    
    $
    
    
    
    $
    2,330
    
    
    
    ($10
    )Total temporarily impaired
    
    $
    2,330
    
    
    
    ($10
    )
    
    $
    
    
    
    $
    
    
    
    $
    2,330
    
    
    
    ($10
    )
 30




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
     2008
    
    
    2007
    
    
    Incr(decr)Consumer loans
    
    $
    31,864
    
    
    $
    35,833
    
    
    
    (11.08
    %)Commercial, financial, & other
    
    
    164,740
    
    
    
    174,958
    
    
    
    (5.84
    %)Construction and land development loans
    
    
    113,035
    
    
    
    147,750
    
    
    
    (23.50
    %)Commercial real estate mortgages
    
    
    571,204
    
    
    
    539,306
    
    
    
    5.91
    %Residential real estate mortgages
    
    
    52,426
    
    
    
    54,237
    
    
    
    (3.34
    %)Total loans
    
    
    933,269
    
    
    
    952,084
    
    
    
    (1.98
    %)Allowance for loan losses
    
    
    (14,452
    )
    
    
    (10,617
    )Loans, net
    
    $
    918,817
    
    
    $
    941,467
  2008
    
    
    2007Balance, beginning of year
    
    $
    2,494
    
    
    $
    2,497New loans
during the year
    
    
    9
    
    
    
    181Repayments
made during the year
    
    
    (461
    )
    
    
    (184
    )Balance, end
of year
    
    $
    2,042
    
    
    $
    2,494
 31




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
   2008
    
    
    2007
    
    
    2006Balance, beginning of year
    
    $
    10,617
    
    
    $
    7,775
    
    
    $
    6,808Allowance on loans acquired
    
    
    
    
    
    $
    1,704
    
    
    
    Less charge-offs:Consumer loans
    
    
    318
    
    
    
    226
    
    
    
    24Commercial, financial & other
    
    
    4,304
    
    
    
    914
    
    
    
    139Construction and land development loans
    
    
    3,604
    
    
    
    2,956
    
    
    
    Commercial real estate mortgages
    
    
    2,446
    
    
    
    662
    
    
    
    36Residential loans
    
    
    296
    
    
    
    320
    
    
    
    38Plus recoveries:Consumer loans
    
    
    19
    
    
    
    25
    
    
    
    17Commercial, financial & other
    
    
    117
    
    
    
    224
    
    
    
    218Construction and land development loans
    
    
    36
    
    
    
    6
    
    
    
    Commercial real estate mortgages
    
    
    21
    
    
    
    140
    
    
    
    26Residential loans
    
    
    4
    
    
    
    
    
    
    
    Net charge-offs (recoveries)
    
    
    10,771
    
    
    
    4,683
    
    
    
    (24
    )Provision for loan losses
    
    
    14,606
    
    
    
    5,821
    
    
    
    943Balance at end of year
    
    $
    14,452
    
    
    $
    10,617
    
    
    $
    7,775Allowance to total loans
    
    
    1.55
    %
    
    
    1.12
    %
    
    
    1.03
    %Net Charge-offs to average loans
    
    
    1.14
    %
    
    
    0.50
    %
    
    
    0.00
    %
 32




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
   2008
    
    
    2007
    
    
    2006Impaired loans with no allocated allowance for loan
losses
    
    $
    71,961
    
    
    $
    27,817
    
    
    $
    1,306Impaired loans with allocated allowance for loan losses
    
    
    26,908
    
    
    
    10,816
    
    
    
    4,254Total (net of $3,405 in partial charge offs in 2007)
    
    $
    98,869
    
    
    $
    38,633
    
    
    $
    5,560Amount of the allowance for loan loss
allocated to impaired loans
    
    $
    5,273
    
    
    $
    879
    
    
    $
    911Average of impaired loans during the year
    
    $
    82,436
    
    
    $
    29,492
    
    
    $
    3,788Interest income recognized during impairment
    
    $
    1,460
    
    
    $
    1,086
    
    
    $
    Cash-basis interest income recognized
    
    $
    
    
    
    $
    
    
    
    $
    
  2008
    
    
    2007
    
    
    2006Troubled debt restructuring
    
    
    17,765
    
    
    $
    
    
    
    $
    Over 90 days past due and still accruing
    
    
    450
    
    
    
    884
    
    
    
    2,101Non-accrual loans
    
    
    51,708
    
    
    
    18,117
    
    
    
    5,560Total non performing loans
    
    
    69,923
    
    
    
    19,001
    
    
    
    7,661Real estate owned
    
    
    9,657
    
    
    
    6,319
    
    
    
    52Other repossessed assets
    
    
    
    
    
    
    
    
    
    
    2Other non performing assets
    
    
    9,657
    
    
    
    6,319
    
    
    
    54Total nonperforming assets
    
    $
    79,580
    
    
    $
    25,320
    
    
    $
    7,715
  33




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
   2008
    
    
    2007Land and improvements
    
    $
    7,728
    
    
    $
    7,853Buildings and improvements
    
    
    14,553
    
    
    
    15,119Furniture and equipment
    
    
    6,771
    
    
    
    6,27729,052
    
    
    
    29,249Less accumulated depreciation
    
    
    7,780
    
    
    
    6,467$
    21,272
    
    
    $
    22,782
   2009
    
    $
    7832010
    
    
    6312011
    
    
    4492012
    
    
    482013
    
    
    25Thereafter
    
    
    Total
    
    $
    1,936
 34




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
      35




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
  2008GrossCarrying
    
    
    AccumulatedAmount
    
    
    AmortizationAmortized intangible assetsCore deposit intangible
    
    $
    2,757
    
    
    $
    Borrower relationship intangible
    
    
    1,835
    
    
    
    Total
    
    $
    4,592
    
    
    $
    
 2007GrossCarrying
    
    
    AccumulatedAmount
    
    
    AmortizationAmortized intangible assetsCore deposit intangible
    
    $
    7,792
    
    
    $
    1,180Borrower relationship intangible
    
    
    5,178
    
    
    
    657Total
    
    $
    12,970
    
    
    $
    1,837
  Amortization2009
    
    $
    7932010
    
    
    7182011
    
    
    6432012
    
    
    5682013
    
    
    493
 36




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
    $100,000 and over
    
    
    Less than $100,000
    
    
    Total2009
    
    $
    242,882
    
    
    $
    111,284
    
    
    $
    354,1662010
    
    
    72,969
    
    
    
    92,541
    
    
    
    165,5102011
    
    
    7,856
    
    
    
    6,627
    
    
    
    14,4832012
    
    
    612
    
    
    
    330
    
    
    
    9422013 and thereafter
    
    
    101
    
    
    
    327
    
    
    
    428Totals
    
    $
    324,420
    
    
    $
    211,109
    
    
    $
    535,529
     2008
    
    2007Balance at year-end
    
    $
    2,461
    
    
    $
    481Average daily balance during the year
    
    $
    778
    
    
    $
    433Average interest rate during the year
    
    
    1.25
    %
    
    
    1.25
    %Maximum month-end balance during year
    
    $
    2,461
    
    
    $
    841Weighted average interest rate at year-end
    
    
    1.25
    %
    
    
    1.25
    %
 37




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
   At December 31, 2008Maturing in:
    
    Amount
    
    
    Rate2009
    
    $
    20,000
    
    
    
    4.76
    %2010
    
    
    30,184
    
    
    
    3.27
    %2011
    
    
    4,500
    
    
    
    3.20
    %2012
    
    
    335
    
    
    
    5.27
    %2013
    
    
    10,000
    
    
    
    2.58
    %Total
    
    $
    65,019
    
    
    
    3.63
    %
 At December 31, 2007Maturing in:
    
    Amount
    
    
    Rate2008
    
    $
    20,658
    
    
    
    4.79
    %2009
    
    
    20,000
    
    
    
    4.76
    %2010
    
    
    302
    
    
    
    4.05
    %2012
    
    
    410
    
    
    
    5.27
    %Total
    
    $
    41,370
    
    
    
    4.77
    %
   Amount2009
    
    $
    20,1642010
    
    
    30,1392011
    
    
    4,5482012
    
    
    1682013
    
    
    10,000Total
    
    $
    65,019
 38




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
       2008
    
    
    2007
    
    
    2006Current
    
    
    ($2,370
    )
    
    $
    1,991
    
    
    $
    4,260Deferred
    
    
    (14,117
    )
    
    
    (386
    )
    
    
    (320
    )Change in valuation allowance
    
    
    
    
    
    
    251
    
    
    
    ($16,487
    )
    
    $
    1,856
    
    
    $
    3,940
 39




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
   2008
    
    
    2007Deferred tax assetsAllowance for loan losses
    
    $
    4,913
    
    
    $
    3,326Deferred loan fees and costs
    
    
    
    
    
    
    49Goodwill and other intangibles
    
    
    11,877
    
    
    
    Capital loss carryforward
    
    
    251
    
    
    
    251Valuation allowance on capital loss carryforward
    
    
    (251
    )
    
    
    (251
    )Non accrual interest income
    
    
    92
    
    
    
    241Writedowns on other real estate owned
    
    
    462
    
    
    
    255Amortization of deferred issue costs
    
    
    81
    
    
    
    Other
    
    
    63
    
    
    
    41Total deferred tax assets
    
    
    17,488
    
    
    
    3,912Deferred tax liabilitiesPremises and equipment
    
    
    (300
    )
    
    
    (183
    )Goodwill and other intangibles
    
    
    
    
    
    
    (841
    )Prepaid expenses
    
    
    (259
    )
    
    
    (131
    )Unrealized gains on securities available for sale
    
    
    (104
    )
    
    
    (10
    )Deferred loan fees and costs
    
    
    (73
    )
    
    
    Other
    
    
    (66
    )
    
    
    (84
    )Total deferred tax liabilities
    
    
    (802
    )
    
    
    (1,249
    )Net deferred tax asset (liability)
    
    $
    16,686
    
    
    $
    2,663
     40




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
   2008
    
    2007
    
    2006Federal income tax rate
    
    
    34
    %
    
    
    34
    %
    
    
    34
    %Effect of capital loss carryforward
valuation allowance
    
    
    
    %
    
    
    5
    %
    
    
    
    %Other, net
    
    
    
    %
    
    
    (2
    %)
    
    
    
    %Effective tax rate
    
    
    34
    %
    
    
    37
    %
    
    
    34
    %
  Fair Value of Financial Instruments
  2008
    
    2007Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    ValueAssets:Cash and cash equivalents
    
    $
    53,002
    
    
    $
    53,002
    
    
    $
    9,482
    
    
    $
    9,482Mortgage loans held for sale
    
    
    1,834
    
    
    
    1,861
    
    
    
    1,316
    
    
    
    1,334Securities available for sale
    
    
    84,148
    
    
    
    84,148
    
    
    
    8,902
    
    
    
    8,902Federal Home Loan Bank Stock
    
    
    3,614
    
    
    
    3,614
    
    
    
    2,072
    
    
    
    2,072Loans, net
    
    
    933,269
    
    
    
    934,826
    
    
    
    952,084
    
    
    
    962,383Accrued interest receivable
    
    
    3,499
    
    
    
    3,499
    
    
    
    3,816
    
    
    
    3,816Liabilities:Deposits
    
    
    938,395
    
    
    
    945,017
    
    
    
    822,627
    
    
    
    824,649Federal funds purchased
    
    
    
    
    
    
    
    
    
    
    30,100
    
    
    
    30,100Securities sold under
agreements to repurchase
    
    
    2,461
    
    
    
    2,461
    
    
    
    480
    
    
    
    480Federal Home Loan Bank advances
    
    
    65,019
    
    
    
    66,390
    
    
    
    41,370
    
    
    
    41,736Subordinated debentures
    
    
    10,000
    
    
    
    10,028
    
    
    
    10,000
    
    
    
    10,000Accrued interest payable
    
    
    1,695
    
    
    
    1,695
    
    
    
    3,168
    
    
    
    3,168
  41




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
         Securities available for sale
   42




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
  Quoted Prices in
    
    Significant Other
    
    SignificantActive Markets for
    
    Observable
    
    UnobservableIdentical Assets
    
    Inputs
    
    InputsFair Value
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Securities, available for sale
    
    $
    84,148
    
    
    $
    48,000
    
    
    $
    36,148
    
    
    $
    
  Impaired Loans
   Quoted Prices in
    
    Significant Other
    
    SignificantActive Markets for
    
    Observable
    
    UnobservableIdentical Assets
    
    Inputs
    
    InputsFair Value
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Loans
    
    $
    41,907
    
    
    $
    
    
    
    $
    
    
    
    $
    41,907
 Loan Committments
  43




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
    Commitment PeriodLessthan one
    
    
    1-3
    
    
    3-5
    
    
    Over 5year
    
    
    years
    
    
    years
    
    
    years
    
    
    TotalsHome equity lines of credit
    
    $
    158
    
    
    $
    1,058
    
    
    $
    5,920
    
    
    $
    10,461
    
    
    $
    17,597Residential loan commitments
    
    
    136
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136Standby letters of credit
    
    
    2,945
    
    
    
    27
    
    
    
    2,000
    
    
    
    
    
    
    
    4,972Lines of credit  commercial
    
    
    42,723
    
    
    
    4,253
    
    
    
    1,016
    
    
    
    538
    
    
    
    48,530Commercial construction  residential
land development and construction
    
    
    10,486
    
    
    
    3,180
    
    
    
    115
    
    
    
    
    
    
    
    13,781Other commercial commitments
    
    
    15,774
    
    
    
    2,758
    
    
    
    3,488
    
    
    
    1,491
    
    
    
    23,511Totals
    
    $
    72,222
    
    
    $
    11,276
    
    
    $
    12,539
    
    
    $
    12,490
    
    
    $
    108,527
  Commitment PeriodLessthan
    
    
    1 - 3
    
    
    3 - 5
    
    
    Over 51 year
    
    
    years
    
    
    years
    
    
    years
    
    
    TotalsHome equity lines of credit
    
    $
    179
    
    
    $
    670
    
    
    $
    3,921
    
    
    $
    12,898
    
    
    $
    17,668Residential loan commitments
    
    
    3,907
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,907Standby letters of credit
    
    
    3,536
    
    
    
    1,879
    
    
    
    2,000
    
    
    
    
    
    
    
    7,415Lines of credit  commercial
    
    
    64,717
    
    
    
    3,772
    
    
    
    807
    
    
    
    1,165
    
    
    
    70,461Commercial construction  residential
land development and construction
    
    
    19,487
    
    
    
    8,009
    
    
    
    35
    
    
    
    
    
    
    
    27,531Other commercial commitments
    
    
    24,431
    
    
    
    3,988
    
    
    
    2,837
    
    
    
    2,213
    
    
    
    33,469Totals
    
    $
    116,257
    
    
    $
    18,318
    
    
    $
    9,600
    
    
    $
    16,276
    
    
    $
    160,451
  44




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
      45




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
   MinimumMinimum
    
    To Be Well Capitalizedfor Capital
    
    Under Prompt CorrectiveActual
    
    Adequacy Purposes
    
    Action RegulationsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs of December 31, 2008Total
capital
(to risk weighted assets)Consolidated
    
    
    107,962
    
    
    
    10.69
    %
    
    
    80,832
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    105,568
    
    
    
    10.47
    %
    
    
    80,667
    
    
    
    8.00
    %
    
    
    100,834
    
    
    
    10.00
    %Tier 1
capital
(to risk weighted assets)Consolidated
    
    
    95,310
    
    
    
    9.43
    %
    
    
    40,416
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    92,941
    
    
    
    9.22
    %
    
    
    40,334
    
    
    
    4.00
    %
    
    
    60,501
    
    
    
    6.00
    %Tier 1
capital
(to average assets)Consolidated
    
    
    95,310
    
    
    
    8.88
    %
    
    
    42,933
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    92,941
    
    
    
    8.69
    %
    
    
    42,781
    
    
    
    4.00
    %
    
    
    53,476
    
    
    
    5.00
    %As of December 31, 2007Total
capital
(to risk weighted assets)Consolidated
    
    
    112,984
    
    
    
    11.57
    %
    
    
    78,108
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    110,486
    
    
    
    11.34
    %
    
    
    77,972
    
    
    
    8.00
    %
    
    
    97,465
    
    
    
    10.00
    %Tier 1
capital
(to risk weighted assets)Consolidated
    
    
    102,367
    
    
    
    10.48
    %
    
    
    39,054
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    99,869
    
    
    
    10.25
    %
    
    
    38,986
    
    
    
    4.00
    %
    
    
    58,479
    
    
    
    6.00
    %Tier 1
capital
(to average assets)Consolidated
    
    
    102,367
    
    
    
    10.15
    %
    
    
    40,334
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    99,869
    
    
    
    9.99
    %
    
    
    39,989
    
    
    
    4.00
    %
    
    
    49,987
    
    
    
    5.00
    %
  46




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
    WeightedAverageOptions
    
    
    ExerciseOutstanding
    
    
    PriceOutstanding at January 1, 2006
    
    
    517,140
    
    
    $
    8.00Exercised
    
    
    (48,717
    )
    
    $
    6.40Outstanding at December 31, 2006
    
    
    468,423
    
    
    $
    8.16Exercised
    
    
    (14,741
    )
    
    $
    4.41Outstanding at December 31, 2007
    
    
    453,682
    
    
    $
    8.29Forfeited
    
    
    (93,284
    )
    
    $
    6.88Outstanding at December 31, 2008
    
    
    360,398
    
    
    $
    8.65
      47




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
   Modified in 2007Originally Granted2006
    
    2005Risk-free interest rate
    
    
    4.31
    %
    
    
    4.23
    %Expected option life
    
    5.5 years
    
    4.5 yearsDividend yield
    
    
    0.00
    %
    
    
    0.00
    %Expected volatility of stock price
    
    
    26.26
    %
    
    
    26.79
    %
    2008Risk-free interest rate
    
    
    2.92
    %Expected option life
    
    7.0 yearsDividend yield
    
    
    0.00
    %Expected volatility of stock price
    
    
    28.39
    %
 48




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
   AverageModifiedNumber
    
    
    Exerciseof Shares
    
    
    PriceOutstanding at January 31, 2006
    
    
    17,467
    
    
    $
    13.06Shares Granted  Stock Options
    
    
    17,784
    
    
    $
    13.06Outstanding at December 31, 2006
    
    
    35,251
    
    
    $
    13.06Shares Granted  Stock Options
    
    
    
    
    
    $
    Outstanding at December 31, 2007
    
    
    35,251
    
    
    $
    13.06Shares Granted  Stock Options
    
    
    179,144
    
    
    $
    4.83Shares Forfeited  Stock Options
    
    
    (8,733
    )
    
    $
    13.06Outstanding at December 31, 2008
    
    
    205,662
    
    
    $
    5.89Options exercisable
    
    
    67,877
   Numberof SharesOutstanding at December 31, 2005
    
    
    12,843Restricted Shares Granted
    
    
    12,239Restricted Shares Forfeited
    
    
    (513
    )Outstanding at December 31, 2006
    
    
    24,569Restricted Shares Forfeited
    
    
    (613
    )Outstanding at December 31, 2007
    
    
    23,956Restricted Shares Forfeited
    
    
    (9,592
    )Restricted Shares Transferred to Common Shares
    
    
    (6,231
    )Restricted Shares Granted
    
    
    43,883Outstanding at December 31, 2008
    
    
    52,016
  49




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
   2008
    
    
    2007
    
    
    2006BasicNet income (loss)
    
    
    ($31,925
    )
    
    $
    3,166
    
    
    $
    7,819Weighted average common shares
    
    
    8,007,345
    
    
    
    8,602,704
    
    
    
    6,372,471Basic earnings per common share
    
    
    ($3.99
    )
    
    $
    0.37
    
    
    $
    1.23DilutedNet income (loss)
    
    
    ($31,925
    )
    
    $
    3,166
    
    
    $
    7,819Weighted average common shares
outstanding for basic earnings per
common share
    
    
    8,007,345
    
    
    
    8,602,704
    
    
    
    6,372,471Add: Dilutive effects of assumed
exercise of stock options
    
    
    
    
    
    
    224,827
    
    
    
    299,848Average shares and dilutive potential
common shares
    
    
    8,007,345
    
    
    
    8,827,531
    
    
    
    6,672,319Dilutive earnings per common share
    
    
    ($3.99
    )
    
    $
    0.36
    
    
    $
    1.17
  50




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
    December 31,(In thousands)
    
    2008
    
    
    2007ASSETSCash and cash equivalents
    
    $
    635
    
    
    $
    715Investment in subsidiary
    
    
    105,675
    
    
    
    145,050Other assets
    
    
    1,631
    
    
    
    1,978Total assets
    
    $
    107,941
    
    
    $
    147,743LIABILITIES AND
STOCKHOLDERS EQUITYOther liabilities
    
    $
    103
    
    
    $
    195Subordinated debentures
    
    
    10,000
    
    
    
    10,000Total liabilities
    
    
    10,103
    
    
    
    10,195Stockholders equity
    
    
    97,838
    
    
    
    137,548Total liabilities and stockholders equity
    
    $
    107,941
    
    
    $
    147,743
  Years Ended December 31,(In thousands)
    
    2008
    
    
    2007
    
    
    2006Interest income
    
    $
    7
    
    
    $
    197
    
    
    $
    948Dividends from Bank
    
    
    3,500
    
    
    
    15,000
    
    
    
    Interest expense
    
    
    740
    
    
    
    872
    
    
    
    870Other operating expenses
    
    
    1,104
    
    
    
    1,149
    
    
    
    921Net income (loss) before income tax and equity
in undistributed income of subsidiary
    
    
    1,663
    
    
    
    13,176
    
    
    
    (843
    )Income tax benefit
    
    
    702
    
    
    
    665
    
    
    
    345Net income (loss) before equity in undistributed
income of subsidiary
    
    
    2,365
    
    
    
    13,841
    
    
    
    (498
    )Equity in undistributed income
of subsidiary (dividends in excess of earnings)
    
    
    (34,290
    )
    
    
    (10,675
    )
    
    
    8,317Net income (loss)
    
    
    ($31,925
    )
    
    $
    3,166
    
    
    $
    7,819
 51




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
   Years Ended December 31,(In thousands)
    
    2008
    
    
    2007
    
    
    2006Cash flows from operating activitiesNet income (loss)
    
    
    ($31,925
    )
    
    $
    3,166
    
    
    $
    7,819Adjustments to reconcile net income
to net cash provided by operating activities(Equity in undistributed income of
subsidiary) dividends in excess of earnings
    
    
    34,290
    
    
    
    10,675
    
    
    
    (8,317
    )Other, net
    
    
    181
    
    
    
    426
    
    
    
    81Net cash flows from operating activities
    
    
    2,546
    
    
    
    14,267
    
    
    
    (417
    )Cash flows from investing activitiesInvestment in subsidiary
    
    
    
    
    
    
    (70,516
    )
    
    
    Purchases of securities, available for sale
    
    
    
    
    
    
    
    
    
    
    (77,920
    )Proceeds from the sale of securities available for sale
    
    
    
    
    
    
    
    
    
    
    77,840Proceeds from calls, maturities and repayments
of securities available for sale
    
    
    
    
    
    
    4,077
    
    
    
    8,700Property and equipment acquired
    
    
    
    
    
    
    
    
    
    
    Net cash flows from investing activities
    
    
    
    
    
    
    (66,439
    )
    
    
    8,620Cash flows from financing activitiesProceeds from exercise of stock options
    
    
    
    
    
    
    62
    
    
    
    292Repurchase of common stock
    
    
    (2,627
    )
    
    
    (10,801
    )
    
    
    (2,824
    )Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    55,131Tax benefit of stock options exercised
    
    
    
    
    
    
    210
    
    
    
    98Net cash flows from financing activities
    
    
    (2,627
    )
    
    
    (10,529
    )
    
    
    52,697Increase (decrease) in cash and cash equivalents
    
    
    (81
    )
    
    
    (62,701
    )
    
    
    60,900Cash and cash equivalents at the beginning of year
    
    
    716
    
    
    
    63,416
    
    
    
    2,516Cash and cash equivalents at end of year
    
    $
    635
    
    
    $
    715
    
    
    $
    63,416
 52




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
  Interest
    
    Net Interest
    
    Net
    
    Earnings (loss) per share(In thousands, except per share data)
    
    Income
    
    Income
    
    Income (loss)
    
    Basic
    
    Fully diluted2008First quarter
    
    $
    16,299
    
    
    $
    8,053
    
    
    $
    676
    
    
    $
    0.08
    
    
    $
    0.08Second quarter
    
    
    15,125
    
    
    
    8,284
    
    
    
    (4,614
    )
    
    
    (0.57
    )
    
    
    (0.57
    )Third quarter
    
    
    14,863
    
    
    
    8,250
    
    
    
    1,420
    
    
    
    0.18
    
    
    
    0.18Fourth quarter
    
    
    14,839
    
    
    
    7,544
    
    
    
    (29,407
    )
    
    
    (3.77
    )
    
    
    (3.77
    )2007First quarter
    
    $
    17,471
    
    
    $
    8,649
    
    
    $
    1,618
    
    
    $
    0.18
    
    
    $
    0.18Second quarter
    
    
    17,573
    
    
    
    8,595
    
    
    
    2,005
    
    
    
    0.23
    
    
    
    0.22Third quarter
    
    
    17,851
    
    
    
    8,501
    
    
    
    (855
    )
    
    
    (0.10
    )
    
    
    (0.10
    )Fourth quarter
    
    
    17,215
    
    
    
    7,874
    
    
    
    398
    
    
    
    0.05
    
    
    
    0.05
   Current Economic Conditions
    53




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2008, 2007 and 2006
       54




---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
 Company Overview and Executive Summary
         55




---



##### 



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
 56




---



##### 



Date Opened
    
    Location
    
    Type of officeFebruary 1994
    
    22290 Michigan Avenue
    
    Full service retail branch with ATMDearborn, Michigan  48123December 1995
    
    24935 West Warren Avenue
    
    Full service retail branchDearborn Heights, Michigan  48127August 1997
    
    44623 Five Mile Road
    
    Full service retail branch with ATMPlymouth, Michigan  48170May 2001
    
    1325 North Canton Center Road
    
    Full service retail branch with ATMCanton, Michigan  48187December 2001
    
    45000 River Ridge Drive
    
    Regional lending centerClinton Township, Michigan 48038November 2002
    
    19100 Hall Road
    
    Full service retail branch with ATMClinton Township, Michigan 48038February 2003
    
    12820 Fort Street
    
    Full service retail branch with ATMSouthgate, Michigan  48195May 2003
    
    3201 University Drive, Suite 180
    
    Full service retail branchAuburn Hills, Michigan  48326October 2004
    
    450 East Michigan Avenue
    
    Full service retail branch with ATMSaline, MI 48176October 2004
    
    250 West Eisenhower Parkway
    
    Full service retail branch Regional lending centerAnn Arbor, MI 48103October 2004
    
    2180 West Stadium Blvd.
    
    Full service retail branch with ATMAnn Arbor, MI 48103December 2004
    
    1360 Porter Street
    
    Loan production office Regional lending centerJanuary 2007
    
    1040 East Maple Birmingham, MI 48009
    
    Full service retail branch  with ATM Regional lending centerJanuary 2007
    
    3681 West Maple
    
    Full service retail branch with ATMBloomfield Township, MI 48301January 2007
    
    30700 Telegraph, Suite
    
    Full service retail branch with ATMBingham Farms, MI 48025January 2007
    
    20000 Twelve Mile Road
    
    Full service retail branch with ATMSouthfield, MI 48076January 2007
    
    200 Galleria Office Center, Suite 141
    
    Full service retail branch with ATMSouthfield, MI 48134April 2007
    
    7755 23 Mile Road
    
    Full service retail branch with ATMShelby Township, Mi 48316
 57




---



##### 



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.
  58




---



##### 



Critical Accounting Policies and Estimates (continued)
 Goodwill
  Deferred Tax Asset
  Results of Operations
 2008 Compared to 2007.
  2007 Compared to 2006.
 59




---



##### 



Net Interest Income
 2008 Compared to 2007.
  2007 Compared to 2006.
 Average Balances, Interest Rates and Yields.
  60




---



##### 



Year Ended December 31, 2008
    
    
    Year Ended December 31, 2007Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average(In thousands)
    
    Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateAssetsInterest-bearing deposits with banks
    
    $
    6,591
    
    
    $
    43
    
    
    
    0.65
    %
    
    $
    2,795
    
    
    $
    127
    
    
    
    4.54
    %Federal funds sold
    
    
    8,316
    
    
    
    86
    
    
    
    1.04
    %
    
    
    7,964
    
    
    
    433
    
    
    
    5.44
    %Investment securities, available for sale
    
    
    15,681
    
    
    
    464
    
    
    
    2.97
    %
    
    
    10,772
    
    
    
    603
    
    
    
    5.60
    %Loans
    
    
    944,749
    
    
    
    60,533
    
    
    
    6.42
    %
    
    
    944,225
    
    
    
    68,947
    
    
    
    7.30
    %Sub-total earning assets
    
    
    975,337
    
    
    
    61,126
    
    
    
    6.27
    %
    
    
    965,756
    
    
    
    70,110
    
    
    
    7.26
    %Other assets
    
    
    81,377
    
    
    
    
    
    
    
    
    
    
    
    83,691Total assets
    
    $
    1,056,714
    
    
    
    
    
    
    
    
    
    
    $
    1,049,447Liabilities and stockholders equityInterest bearing deposits
    
    $
    740,520
    
    
    $
    25,106
    
    
    
    3.40
    %
    
    $
    749,894
    
    
    $
    33,303
    
    
    
    4.44
    %Other borrowings
    
    
    94,211
    
    
    
    3,889
    
    
    
    4.13
    %
    
    
    56,526
    
    
    
    3,188
    
    
    
    5.64
    %Sub-total interest bearing liabilities
    
    
    834,731
    
    
    
    28,995
    
    
    
    3.47
    %
    
    
    806,420
    
    
    
    36,491
    
    
    
    4.53
    %Non-interest bearing deposits
    
    
    83,065
    
    
    
    
    
    
    
    
    
    
    
    95,036Other liabilities
    
    
    3,152
    
    
    
    
    
    
    
    
    
    
    
    4,736Stockholders equity
    
    
    135,766
    
    
    
    
    
    
    
    
    
    
    
    143,255Total liabilities and stockholders
equity
    
    $
    1,056,714
    
    
    
    
    
    
    
    
    
    
    $
    1,049,447Net interest income
    
    
    
    
    
    $
    32,131
    
    
    
    
    
    
    
    
    
    
    $
    33,619Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    2.80
    %
    
    
    
    
    
    
    
    
    
    
    2.73
    %Net interest margin on earning assets
    
    
    
    
    
    
    
    
    
    
    3.29
    %
    
    
    
    
    
    
    
    
    
    
    3.48
    %Tax equivalent adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Tax equivalent net interest income
    
    
    
    
    
    $
    32,131
    
    
    
    
    
    
    
    
    
    
    $
    33,619
 61




---



##### 



Year Ended December 31, 2006Average
    
    
    
    
    
    
    Average(In thousands)
    
    Balance
    
    
    Interest
    
    
    RateAssetsInterest-bearing deposits with banks
    
    $
    3,333
    
    
    $
    158
    
    
    
    4.74
    %Federal funds sold
    
    
    11,682
    
    
    
    573
    
    
    
    4.90
    %Investment securities, available for sale
    
    
    19,555
    
    
    
    893
    
    
    
    4.57
    %Loans
    
    
    703,590
    
    
    
    52,321
    
    
    
    7.44
    %Sub-total earning assets
    
    
    738,160
    
    
    
    53,945
    
    
    
    7.31
    %Other assets
    
    
    28,876Total assets
    
    $
    767,036Liabilities and stockholders equityInterest bearing deposits
    
    $
    568,095
    
    
    $
    23,447
    
    
    
    4.13
    %Other borrowings
    
    
    43,694
    
    
    
    2,437
    
    
    
    5.58
    %Sub-total interest bearing liabilities
    
    
    611,789
    
    
    
    25,884
    
    
    
    4.23
    %Non-interest bearing deposits
    
    
    57,647Other liabilities
    
    
    2,224Stockholders equity
    
    
    95,376Total liabilities and stockholders equity
    
    $
    767,036Net interest income
    
    
    
    
    
    $
    28,061Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    3.08
    %Net interest margin on earning assets
    
    
    
    
    
    
    
    
    
    
    3.80
    %Tax equivalent adjustment
    
    
    
    
    
    
    (59
    )Tax equivalent net interest income
    
    
    
    
    
    $
    28,002
 62




---



##### 



Rate/Volume Analysis.
 2008/2007
    
    
    2007/2006Change 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
    
    $
    25
    
    
    
    ($109
    )
    
    
    ($84
    )
    
    
    ($16
    )
    
    $
    63
    
    
    $
    47Federal funds sold
    
    
    3
    
    
    
    (350
    )
    
    
    (347
    )
    
    
    191
    
    
    
    140
    
    
    
    331Investment securities, available for sale
    
    
    144
    
    
    
    (283
    )
    
    
    (139
    )
    
    
    (5
    )
    
    
    300
    
    
    
    295Loans
    
    
    (132
    )
    
    
    (8,282
    )
    
    
    (8,414
    )
    
    
    5,361
    
    
    
    4,056
    
    
    
    9,417Total earning assets
    
    $
    40
    
    
    
    ($9,024
    )
    
    
    ($8,984
    )
    
    $
    5,531
    
    
    $
    4,559
    
    
    $
    10,090LiabilitiesInterest bearing deposits
    
    
    ($387
    )
    
    
    ($7,810
    )
    
    
    ($8,197
    )
    
    $
    2,553
    
    
    $
    6,467
    
    
    $
    9,020Other borrowings
    
    
    1,556
    
    
    
    (855
    )
    
    
    701
    
    
    
    119
    
    
    
    342
    
    
    
    461Total interest bearing liabilities
    
    $
    1,169
    
    
    
    ($8,665
    )
    
    
    ($7,496
    )
    
    $
    2,672
    
    
    $
    6,809
    
    
    $
    9,481Net interest income
    
    
    
    
    
    
    
    
    
    
    ($1,488
    )
    
    
    
    
    
    
    
    
    
    $
    609Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    0.07
    %
    
    
    
    
    
    
    
    
    
    
    (0.55
    %)Net interest margin on earning assets
    
    
    
    
    
    
    
    
    
    
    (0.19
    %)
    
    
    
    
    
    
    
    
    
    
    (0.34
    %)
 63




---



##### 



Provision for Loan Losses
 2008 Compared to 2007.
   2007 Compared to 2006.
 Non-Interest Income
 2008 Compared to 2007.
 2007 Compared to 2006.
 64




---



##### 



Non-Interest Expense
 2008 Compared to 2007.
   2007 Compared to 2006.
 Income Tax Provision
 2008 Compared to 2007.
 2007 Compared to 2006.
 65




---



##### 



Comparison of Financial Condition at December 31, 2008 and December 31, 2007
 Assets.
 Securities Available for Sale.
 December 31, 2008Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueUS Government sponsored entity securities
    
    $
    21,175
    
    
    $
    226
    
    
    
    ($2
    )
    
    $
    21,399Corporate bonds
    
    
    13,185
    
    
    
    54
    
    
    
    (4
    )
    
    
    13,235Municipal securities
    
    
    1,303
    
    
    
    28
    
    
    
    
    
    
    
    1,331Mortgage backed securities
    
    
    179
    
    
    
    4
    
    
    
    
    
    
    
    183Money market mutual funds
    
    
    48,000
    
    
    
    
    
    
    
    
    
    
    
    48,000Totals
    
    $
    83,842
    
    
    $
    312
    
    
    
    ($6
    )
    
    $
    84,148
  Less than one year
    
    
    One to five years
    
    
    Over five yearsWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageAmount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    Amount
    
    
    Yield
    
    
    TotalUS Government sponsored
entity securities
    
    $
    4,971
    
    
    
    2.17
    %
    
    $
    16,428
    
    
    
    2.38
    %
    
    $
    
    
    
    
    
    %
    
    $
    21,399Corporate bonds
    
    
    
    
    
    
    
    %
    
    
    13,235
    
    
    
    1.85
    %
    
    
    
    
    
    
    
    %
    
    
    13,235Municipal securities
    
    
    118
    
    
    
    4.51
    %
    
    
    929
    
    
    
    3.68
    %
    
    
    284
    
    
    
    3.05
    %
    
    
    1,331Mortgage backed securities
    
    
    
    
    
    
    
    %
    
    
    183
    
    
    
    5.93
    %
    
    
    
    
    
    
    
    %
    
    
    183Money market mutual funds
    
    
    48,000
    
    
    
    0.52
    %
    
    
    
    
    
    
    
    %
    
    
    
    
    
    
    
    %
    
    
    48,000Totals
    
    $
    53,089
    
    
    
    
    
    
    $
    30,775
    
    
    
    
    
    
    $
    284
    
    
    
    
    
    
    $
    84,148
  66




---



##### 



Loans.
 2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Consumer loans
    
    $
    31,864
    
    
    $
    35,833
    
    
    $
    32,282
    
    
    $
    35,041
    
    
    $
    42,149Commercial, financial, & other
    
    
    164,740
    
    
    
    174,958
    
    
    
    124,523
    
    
    
    106,900
    
    
    
    115,651Land development loans  residential
    
    
    54,323
    
    
    
    63,639
    
    
    
    65,460
    
    
    
    58,943
    
    
    
    26,198Land development loans  non residential
    
    
    16,094
    
    
    
    10,156
    
    
    
    14,633
    
    
    
    
    
    
    
    Commercial construction loans  residential
    
    
    17,296
    
    
    
    33,768
    
    
    
    30,988
    
    
    
    37,806
    
    
    
    28,269Commercial construction loans  non
residential
    
    
    25,322
    
    
    
    40,187
    
    
    
    38,662
    
    
    
    47,384
    
    
    
    29,176Commercial real estate mortgages
    
    
    571,204
    
    
    
    539,306
    
    
    
    401,924
    
    
    
    323,666
    
    
    
    296,934Residential real estate mortgages
    
    
    52,426
    
    
    
    54,237
    
    
    
    47,948
    
    
    
    47,297
    
    
    
    49,185$
    933,269
    
    
    $
    952,084
    
    
    $
    756,420
    
    
    $
    657,037
    
    
    $
    587,562
   67




---



##### 



Within
    
    
    Three to
    
    
    One to
    
    
    AfterThree
    
    
    Twelve
    
    
    Five
    
    
    FiveMonths
    
    
    Months
    
    
    Years
    
    
    Years
    
    
    TotalConsumer loans
    
    $
    21,186
    
    
    $
    466
    
    
    $
    9,080
    
    
    $
    47
    
    
    $
    30,779Commercial, financial & other
    
    
    77,846
    
    
    
    9,032
    
    
    
    68,433
    
    
    
    4,116
    
    
    
    159,427Land development loans  residential
    
    
    29,709
    
    
    
    4,403
    
    
    
    6,775
    
    
    
    
    
    
    
    40,887Land development loans -
non-residential
    
    
    9,048
    
    
    
    1,314
    
    
    
    1,664
    
    
    
    
    
    
    
    12,026Construction loans  residential
    
    
    12,256
    
    
    
    268
    
    
    
    
    
    
    
    
    
    
    
    12,524Construction loans  non-residential
    
    
    22,795
    
    
    
    
    
    
    
    911
    
    
    
    
    
    
    
    23,706Commercial real estate mortgages
    
    
    51,341
    
    
    
    49,886
    
    
    
    418,901
    
    
    
    30,565
    
    
    
    550,693Residential real estate mortgages
    
    
    921
    
    
    
    16,095
    
    
    
    24,041
    
    
    
    10,462
    
    
    
    51,519$
    225,102
    
    
    $
    81,464
    
    
    $
    529,805
    
    
    $
    45,190
    
    
    
    881,561Non-accrual loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,708Total loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    933,269Loan at fixed interest rates
    
    $
    56,238
    
    
    $
    65,109
    
    
    $
    504,490
    
    
    $
    44,501
    
    
    $
    670,338Loan at variable interest rates
    
    
    168,864
    
    
    
    16,355
    
    
    
    25,315
    
    
    
    689
    
    
    
    211,223$
    225,102
    
    
    $
    81,464
    
    
    $
    529,805
    
    
    $
    45,190
    
    
    
    881,561Non-accrual loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,708Total loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    933,269
    2008
    
    
    2007
    
    
    2006Troubled debt restructuring
    
    $
    17,765
    
    
    $
    
    
    
    $
    Over 90 days past due and still accruing
    
    
    450
    
    
    
    884
    
    
    
    2,101Non-accrual loans
    
    
    51,708
    
    
    
    18,117
    
    
    
    5,560Total non performing loans
    
    $
    69,923
    
    
    $
    19,001
    
    
    $
    7,661
 68




---



##### 



Number ofLoans
    
    
    BalanceConsumer Loans
    
    
    9
    
    
    $
    953Commercial Loans
    
    
    39
    
    
    
    5,085Land Development  Residential
    
    
    7
    
    
    
    9,844Land Development  Non Residential
    
    
    2
    
    
    
    4,068Commercial Construction Loans  Residential
    
    
    7
    
    
    
    3,707Commercial Construction Loans  Non Residential
    
    
    1
    
    
    
    1,615Commercial Mortgage Loans
    
    
    35
    
    
    
    20,370Residential Mortgages Loans
    
    
    9
    
    
    
    468Totals
    
    
    109
    
    
    $
    46,110
  Number ofLoans
    
    
    BalanceConsumer Loans
    
    
    11
    
    
    $
    1,085Commercial Loans
    
    
    41
    
    
    
    5,313Land Development  Residential
    
    
    11
    
    
    
    13,436Land Development  Non Residential
    
    
    2
    
    
    
    4,068Commercial Construction Loans  Residential
    
    
    8
    
    
    
    4,772Commercial Construction Loans  Non Residential
    
    
    1
    
    
    
    1,616Commercial Mortgage Loans
    
    
    37
    
    
    
    20,511Residential Mortgages Loans
    
    
    13
    
    
    
    907Totals
    
    
    124
    
    
    $
    51,708
 69




---



##### 



Allowance for Loan Losses.
 2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Balance, beginning of year
    
    $
    10,617
    
    
    $
    7,775
    
    
    $
    6,808
    
    
    $
    5,884
    
    
    $
    4,314Allowance on loans acquired
    
    
    
    
    
    $
    1,704
    
    
    
    
    
    
    
    
    
    
    
    184Charge-offs:Consumer loans
    
    
    318
    
    
    
    226
    
    
    
    24
    
    
    
    112
    
    
    
    31Commercial, financial & other
    
    
    4,304
    
    
    
    914
    
    
    
    139
    
    
    
    169
    
    
    
    Commercial construction loans  residential
    
    
    1,635
    
    
    
    1,291
    
    
    
    
    
    
    
    
    
    
    
    Commercial construction loans 
non-residential
    
    
    192
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Land development loans  residential
    
    
    1,777
    
    
    
    1,665
    
    
    
    
    
    
    
    
    
    
    
    Commercial real estate mortgages
    
    
    2,446
    
    
    
    662
    
    
    
    36
    
    
    
    86
    
    
    
    Residential loans
    
    
    296
    
    
    
    320
    
    
    
    38
    
    
    
    
    
    
    
    100Recoveries:Consumer loans
    
    
    19
    
    
    
    25
    
    
    
    17
    
    
    
    37
    
    
    
    12Commercial, financial & other
    
    
    117
    
    
    
    224
    
    
    
    218
    
    
    
    131
    
    
    
    44Commercial construction loans 
non-residential
    
    
    3
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    Land development loans  residential
    
    
    33
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial real estate mortgages
    
    
    21
    
    
    
    140
    
    
    
    26
    
    
    
    10
    
    
    
    61Residential loans
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    32
    
    
    
    Net charge-offs
    
    
    10,771
    
    
    
    4,683
    
    
    
    (24
    )
    
    
    157
    
    
    
    14Additions charged to operations
    
    
    14,606
    
    
    
    5,821
    
    
    
    943
    
    
    
    1,081
    
    
    
    1,400Balance at end of period
    
    $
    14,452
    
    
    $
    10,617
    
    
    $
    7,775
    
    
    $
    6,808
    
    
    $
    5,884Allowance to total loans
    
    
    1.55
    %
    
    
    1.12
    %
    
    
    1.03
    %
    
    
    1.04
    %
    
    
    1.00
    %Net Charge-offs to average loans
    
    
    1.14
    %
    
    
    0.50
    %
    
    
    0.00
    %
    
    
    0.02
    %
    
    
    0.00
    %
  70




---



##### 



Total2008
    
    2007
    
    2006
    
    2005
    
    2004Consumer loans
    
    $
    141
    
    
    $
    453
    
    
    $
    470
    
    
    $
    512
    
    
    $
    551Commercial, financial, & other
    
    
    1,298
    
    
    
    1,404
    
    
    
    1,462
    
    
    
    1,527
    
    
    
    1,498Land development loans  residential
    
    
    4,496
    
    
    
    2,215
    
    
    
    1,228
    
    
    
    566
    
    
    
    347Land development loans  non-residential
    
    
    2,086
    
    
    
    117
    
    
    
    146
    
    
    
    
    
    
    
    Commercial construction loans  residential
    
    
    1,739
    
    
    
    714
    
    
    
    366
    
    
    
    311
    
    
    
    402Commercial construction loans 
non-residential
    
    
    1,151
    
    
    
    553
    
    
    
    434
    
    
    
    517
    
    
    
    382Commercial real estate mortgages
    
    
    3,391
    
    
    
    4,671
    
    
    
    3,270
    
    
    
    3,065
    
    
    
    2,302Residential real estate mortgages
    
    
    150
    
    
    
    490
    
    
    
    398
    
    
    
    310
    
    
    
    402$
    14,452
    
    
    $
    10,617
    
    
    $
    7,775
    
    
    $
    6,808
    
    
    $
    5,884
 Percent of allowance for loan losses in each categoryto total allowance for loan losses2008
    
    2007
    
    2006
    
    2005
    
    2004Consumer loans
    
    
    0.98
    %
    
    
    4.27
    %
    
    
    6.05
    %
    
    
    7.52
    %
    
    
    9.36
    %Commercial, financial, & other
    
    
    8.98
    %
    
    
    13.22
    %
    
    
    18.80
    %
    
    
    22.43
    %
    
    
    25.46
    %Land development loans  residential
    
    
    31.11
    %
    
    
    20.86
    %
    
    
    15.80
    %
    
    
    8.31
    %
    
    
    5.90
    %Land development loans  non-residential
    
    
    14.43
    %
    
    
    1.10
    %
    
    
    1.88
    %
    
    
    0.00
    %
    
    
    0.00
    %Commercial construction loans  residential
    
    
    12.03
    %
    
    
    6.73
    %
    
    
    4.71
    %
    
    
    4.57
    %
    
    
    6.83
    %Commercial construction loans 
non-residential
    
    
    7.96
    %
    
    
    5.21
    %
    
    
    5.58
    %
    
    
    7.59
    %
    
    
    6.49
    %Commercial real estate mortgages
    
    
    23.46
    %
    
    
    44.00
    %
    
    
    42.06
    %
    
    
    45.02
    %
    
    
    39.12
    %Residential real estate mortgages
    
    
    1.04
    %
    
    
    4.62
    %
    
    
    5.12
    %
    
    
    4.55
    %
    
    
    6.83
    %100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
 Percent of loans in each category to total loans2008
    
    2007
    
    2006
    
    2005
    
    2004Consumer loans
    
    
    3.41
    %
    
    
    3.76
    %
    
    
    4.27
    %
    
    
    5.33
    %
    
    
    7.17
    %Commercial, financial, & other
    
    
    17.65
    %
    
    
    18.38
    %
    
    
    16.46
    %
    
    
    16.27
    %
    
    
    19.68
    %Land development loans  residential
    
    
    5.82
    %
    
    
    6.68
    %
    
    
    8.65
    %
    
    
    8.97
    %
    
    
    4.46
    %Land development loans  non-residential
    
    
    1.72
    %
    
    
    1.07
    %
    
    
    1.93
    %
    
    
    0.00
    %
    
    
    0.00
    %Commercial construction loans  residential
    
    
    1.85
    %
    
    
    3.55
    %
    
    
    4.10
    %
    
    
    5.75
    %
    
    
    4.81
    %Commercial construction loans 
non-residential
    
    
    2.71
    %
    
    
    4.22
    %
    
    
    5.11
    %
    
    
    7.21
    %
    
    
    4.97
    %Commercial real estate mortgages
    
    
    61.20
    %
    
    
    56.64
    %
    
    
    53.14
    %
    
    
    49.26
    %
    
    
    50.54
    %Residential real estate mortgages
    
    
    5.62
    %
    
    
    5.70
    %
    
    
    6.34
    %
    
    
    7.20
    %
    
    
    8.37
    %100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
  71




---



##### 



Premises and Equipment.
 Real Estate Owned.
 Goodwill and Other Intangible Assets.
 GrossCarrying
    
    
    AccumulatedAmount
    
    
    AmortizationCore deposit intangible from acquisition of:Bank of Washtenaw
    
    $
    264
    
    
    $
    Fidelity Financial Corporation of Michigan
    
    
    2,493
    
    
    
    Total core deposit intangible
    
    $
    2,757
    
    
    $
    Borrower relationship intangible from acquisition of:Bank of Washtenaw
    
    $
    318
    
    
    $
    Fidelity Financial Corporation of Michigan
    
    
    1,517
    
    
    
    Total borrower relationship intangible
    
    $
    1,835
    
    
    $
    Total intangible assets
    
    $
    4,592
    
    
    $
    
  72




---



##### 



Accrued Interest Receivable.
 Other Assets
 Deposits.
 December 31, 2008
    
    
    December 31, 2007
    
    
    PercentBalance
    
    
    Percent
    
    
    Balance
    
    
    Percent
    
    
    Increase/(Decrease)Non-interest bearing:Demand
    
    $
    81,317
    
    
    
    8.67
    %
    
    $
    83,594
    
    
    
    10.16
    %
    
    
    (2.72
    %)Interest bearing:Checking
    
    $
    103,774
    
    
    
    11.06
    %
    
    $
    65,196
    
    
    
    7.93
    %
    
    
    59.17
    %Money market
    
    
    163,611
    
    
    
    17.44
    %
    
    
    106,145
    
    
    
    12.90
    %
    
    
    54.14
    %Savings
    
    
    54,164
    
    
    
    5.77
    %
    
    
    29,814
    
    
    
    3.62
    %
    
    
    81.67
    %Time, under $100,000
    
    
    211,109
    
    
    
    22.50
    %
    
    
    193,852
    
    
    
    23.56
    %
    
    
    8.90
    %Time, $100,000 and
over
    
    
    324,420
    
    
    
    34.57
    %
    
    
    344,026
    
    
    
    41.82
    %
    
    
    (5.70
    %)857,078
    
    
    
    91.33
    %
    
    
    739,033
    
    
    
    89.84
    %
    
    
    15.97
    %$
    938,395
    
    
    
    100.00
    %
    
    $
    822,627
    
    
    
    100.00
    %
    
    
    14.07
    %
   73




---



##### 



$100,000 and over
    
    
    Less than $100,000
    
    
    Total2009
    
    $
    242,882
    
    
    $
    111,284
    
    
    $
    354,1662010
    
    
    72,969
    
    
    
    92,541
    
    
    
    165,5102011
    
    
    7,856
    
    
    
    6,627
    
    
    
    14,4832012
    
    
    612
    
    
    
    330
    
    
    
    9422013
    
    
    101
    
    
    
    327
    
    
    
    428Totals
    
    $
    324,420
    
    
    $
    211,109
    
    
    $
    535,529
  2008
    
    
    2007Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageAmount
    
    
    Rate
    
    
    Amount
    
    
    RateNon-interest bearing:Demand
    
    $
    81,317
    
    
    
    
    
    
    $
    83,594
    
    
    
    Interest bearing:Checking
    
    $
    103,774
    
    
    
    1.75
    %
    
    $
    65,196
    
    
    
    1.01
    %Money market
    
    
    163,611
    
    
    
    2.19
    %
    
    
    106,145
    
    
    
    2.43
    %Savings
    
    
    54,164
    
    
    
    2.06
    %
    
    
    29,814
    
    
    
    1.90
    %Time, under $100,000
    
    
    211,109
    
    
    
    3.81
    %
    
    
    193,852
    
    
    
    4.95
    %Time, $100,000 and over
    
    
    324,420
    
    
    
    3.64
    %
    
    
    344,026
    
    
    
    4.89
    %857,078
    
    
    
    
    
    
    
    739,033$
    938,395
    
    
    
    
    
    
    $
    822,627
  Federal Funds Purchased
 Federal Home Loan Bank Advances
  74




---



##### 



Other Borrowings.
 Accrued Interest Payable
 Other Liabilities.
 Subordinated Debentures.
 75




---



##### 



Capital
   Market Risk Analysis
  Interest Rate Sensitivity Analysis.
   76




---



##### 



Interest Rate Sensitivity Period1-90
    
    
    91-365
    
    
    1-5
    
    
    Over(In thousands)
    
    Days
    
    
    Days
    
    
    Years
    
    
    5 Years
    
    
    TotalEarning assetsFederal funds sold
    
    $
    4,455
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    4,455Interest bearing deposits with Banks
    
    
    36,876
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,876Mortgage loans held for sale
    
    
    1,834
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,834Securities available for sale
    
    
    48,999
    
    
    
    4,090
    
    
    
    31,059
    
    
    
    
    
    
    
    84,148Federal Home Loan Bank stock
    
    
    3,614
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,614Total loans, net of non-accrual
    
    
    225,325
    
    
    
    80,315
    
    
    
    530,033
    
    
    
    45,888
    
    
    
    881,561Total earning assets
    
    
    321,103
    
    
    
    84,405
    
    
    
    561,092
    
    
    
    45,888
    
    
    
    1,012,488Interest bearing liabilitiesTotal interest bearing deposits
    
    
    440,871
    
    
    
    234,845
    
    
    
    181,104
    
    
    
    258
    
    
    
    857,078Federal Home Loan Bank advances
    
    
    10,000
    
    
    
    10,000
    
    
    
    45,019
    
    
    
    
    
    
    
    65,019Other Borrowings
    
    
    2,461
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,461Subordinated debentures
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000Total interest bearing liabilities
    
    
    463,332
    
    
    
    244,845
    
    
    
    226,123
    
    
    
    258
    
    
    
    934,558Net asset (liability) funding gap
    
    
    (142,229
    )
    
    
    (160,440
    )
    
    
    334,969
    
    
    
    45,630
    
    
    $
    77,930Cumulative net asset (liability) funding gap
    
    
    ($142,229
    )
    
    
    ($302,669
    )
    
    $
    32,300
    
    
    $
    77,930
   Change in Net Interest IncomeInterest Rate Change
    
    Amount
    
    Percent+ 300 Basis Points
    
    $
    2,030
    
    
    
    5.57
    %+ 200 Basis Points
    
    
    1,634
    
    
    
    4.49
    %+ 100 Basis Points
    
    
    869
    
    
    
    2.39
    %-  100 Basis Points
    
    
    (259
    )
    
    
    -0.71
    %
 77




---



##### 



Liquidity.
      Payments Due By PeriodLess Than
    
    
    
    
    
    
    3-5
    
    
    Over 51 Year
    
    
    1-3 Years
    
    
    Years
    
    
    Years
    
    
    TotalSecurities sold under agreements
to repurchase
    
    $
    2,461
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,461Certificates of deposit
    
    
    354,166
    
    
    
    179,993
    
    
    
    1,370
    
    
    
    
    
    
    
    535,529Long-term borrowings
    
    
    20,164
    
    
    
    34,687
    
    
    
    10,168
    
    
    
    
    
    
    
    65,019Lease commitments
    
    
    782
    
    
    
    1,080
    
    
    
    73
    
    
    
    
    
    
    
    1,935Subordinated debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    10,000Totals
    
    $
    377,573
    
    
    $
    215,760
    
    
    $
    11,611
    
    
    $
    10,000
    
    
    $
    614,944
  Amount Of Commitment Expiration Per PeriodLess Than
    
    
    
    
    
    
    3-5
    
    
    Over 51 Year
    
    
    1-3 Years
    
    
    Years
    
    
    Years
    
    
    TotalUnused loan commitments
    
    $
    72,222
    
    
    $
    11,276
    
    
    $
    12,539
    
    
    $
    12,490
    
    
    $
    108,527Standby letters of credit
    
    
    2,945
    
    
    
    27
    
    
    
    2,000
    
    
    
    
    
    
    
    4,972Totals
    
    $
    75,167
    
    
    $
    11,303
    
    
    $
    14,539
    
    
    $
    12,490
    
    
    $
    113,499
 78




---



##### 



Impact of Inflation and Changing Prices
  Technology
   
  
 79




---



##### 



DEARBORN BANCORP, INC.
 DIRECTORS AND OFFICERS
 DIRECTORS
 
 
 
 
 
 
 
 
 
 
 OFFICERS
 
 
 
 80




---



##### 



FIDELITY BANK
 DIRECTORS AND EXECUTIVE OFFICERS
 DIRECTORS
 
 
 
 
 
 
 
 
 
 
 EXECUTIVE OFFICERS
 
 
 
 
 
 
 81




---



##### 



FIDELITY BANK
OFFICERS
 FIRST VICE PRESIDENT
 
 VICE PRESIDENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 ASSISTANT VICE PRESIDENTS
          FIRST LEVEL OFFICERS
                  82




---



##### 



FIDELITY BANK
 SUBSIDIARIES
 
 
 NORTHEAST REGION
AUXILIARY BOARD OF DIRECTORS
 
 
 
 
 
 
 83




---



##### 



FIDELITY BANK
LOCATIONS
 Ann Arbor / Eisenhower Banking Center
    
    Dearborn Administrative and250 West Eisenhower Parkway, Suite 100
    
    Regional Lending CenterAnn Arbor, MI 48103
    
    1360 Porter StreetPhone: (734) 302-1481
    
    Dearborn, MI 48124Phone (313) 565-5700Ann Arbor / Stadium Banking Center2180 West Stadium Boulevard
    
    Dearborn Heights Banking CenterAnn Arbor, MI 48103
    
    24935 W. Warren AvenuePhone: (734) 302-9165
    
    Dearborn Heights, MI 48127Phone: (313) 724-0100Auburn Hills Banking Center3201 University Drive, Suite 180
    
    Plymouth Township Banking CenterAuburn Hills, MI 48326
    
    44623 Five MilePhone: (248) 364-9700
    
    Plymouth Township, MI 48170Phone: (734) 454-1000Bingham Farms Banking Center30700 Telegraph
    
    Saline Banking CenterBingham Farms, MI 48025
    
    450 E. Michigan AvenuePhone: (248) 642-6757
    
    Saline, MI 48176Phone: (734) 429-3828Birmingham Banking and Regional Lending Center1040 E. Maple
    
    Shelby Township Banking CenterBirmingham, MI 48009
    
    7755 23 Mile RoadPhone: (248) 642-1901
    
    Shelby Township, MI 48316Phone: (586) 254-8700Bloomfield Township Banking Center3681 W. Maple
    
    Southgate Banking CenterBloomfield Township, MI 48301
    
    12820 Fort StreetPhone: (248) 642-1903
    
    Southgate, MI 48195Phone: (734) 284-3300Canton Township Banking Center1325 N. Canton Center Road
    
    Southfield/Galleria Banking CenterCanton, MI 48187
    
    200 Galleria Office CenterPhone: (734) 981-0022
    
    Southfield, MI 48034Phone: (248) 352-1580Clinton Township Banking Center19100 Hall Road
    
    Southfield/Twelve Mile Banking CenterClinton Township, MI 48038
    
    20000 12 Mile RoadPhone: (586) 416-4400
    
    Southfield, MI 48034Phone: (248) 559-5779Clinton Township Regional Lending Center45000 River Ridge Drive, Suite 110
    
    Bank Operations CenterClinton Township, MI 48038
    
    4000 Allen RoadPhone: (586) 416-0200
    
    Allen Park, MI 48101Phone: (313) 381-3200Dearborn / Main Office Banking Center22290 Michigan AvenueDearborn, MI 48124Phone: (313) 274-1000
 84




---



##### 



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
    
    Close2008First quarter
    
    $
    8.72
    
    
    $
    5.38
    
    
    $
    7.60Second quarter
    
    
    7.70
    
    
    
    4.74
    
    
    
    4.86Third quarter
    
    
    10.00
    
    
    
    3.81
    
    
    
    4.99Fourth quarter
    
    
    6.99
    
    
    
    0.93
    
    
    
    1.662007First quarter
    
    $
    19.59
    
    
    $
    17.00
    
    
    $
    17.49Second quarter
    
    
    18.26
    
    
    
    15.03
    
    
    
    16.95Third quarter
    
    
    17.90
    
    
    
    12.20
    
    
    
    12.91Fourth quarter
    
    
    13.48
    
    
    
    7.10
    
    
    
    7.73
  85




---



##### 



CUMULATIVE STOCK PERFORMANCE GRAPH
  
 
 Dearborn Bancorp, Inc.
    
    Nasdaq Stock Market (U.S.)
    
    Nasdaq Bank12/31/2003
    
    $
    100.00
    
    
    $
    100.00
    
    
    $
    100.0012/31/2004
    
    $
    161.63
    
    
    $
    108.84
    
    
    $
    114.4412/31/2005
    
    $
    151.25
    
    
    $
    111.16
    
    
    $
    111.8012/31/2006
    
    $
    128.01
    
    
    $
    122.11
    
    
    $
    125.4712/31/2007
    
    $
    52.08
    
    
    $
    132.42
    
    
    $
    99.4512/31/2008
    
    $
    11.18
    
    
    $
    63.80
    
    
    $
    72.51
 86




---



##### 



PRINCIPAL MARKET MAKERS
 
 th
 nd
 th
 
 
 
 th
 
 th
 
 st
 
 th
 87




---



##### 



DEARBORN BANCORP, INC.
    88