Exhibit 13
 
  
 2009
ANNUAL REPORT




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##### 



Dearborn Bancorp, Inc.
 and its subsidiary
 Fidelity Bank
  Corporate Information
    
    
    3Chairmans and Presidents Letter to Stockholders
    
    
    4Summary of Selected Financial Data
    
    
    6Report of Independent Registered Public Accounting Firm
    
    
    8Managements Report on Internal Control Over Financial Reporting
    
    
    9Consolidated Balance Sheets.
    
    
    10Consolidated Statements of Income
    
    
    11Consolidated Statements of Changes in Stockholders Equity
    
    
    12Consolidated Statements of Cash Flows
    
    
    14Notes to Consolidated Financial Statements
    
    
    16Managements Discussion and Analysis
    
    
    53Dearborn Bancorp, Inc. Directors and Officers
    
    
    79Fidelity Bank Directors and Executive Officers
    
    
    80Fidelity Bank Officers
    
    
    81Fidelity Bank Subsidiaries
    
    
    82Investor Information
    
    
    84
 2




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##### 



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




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4




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5




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##### 



SUMMARY OF SELECTED FINANCIAL DATA
  (In thousands, except share and per share data)
    
    2009
    
    2008
    
    2007
    
    2006
    
    2005OPERATIONSInterest income
    
    $
    54,253
    
    
    $
    61,126
    
    
    $
    70,110
    
    
    $
    53,886
    
    
    $
    43,855Interest expense
    
    
    23,367
    
    
    
    28,995
    
    
    
    36,491
    
    
    
    25,884
    
    
    
    16,403Net interest income
    
    
    30,886
    
    
    
    32,131
    
    
    
    33,619
    
    
    
    28,002
    
    
    
    27,452Provision for loan losses
    
    
    50,863
    
    
    
    14,606
    
    
    
    5,821
    
    
    
    943
    
    
    
    1,081Net interest income after provision for loan losses
    
    
    (19,977
    )
    
    
    17,525
    
    
    
    27,798
    
    
    
    27,059
    
    
    
    26,371Total non-interest income
    
    
    (469
    )
    
    
    (930
    )
    
    
    1,020
    
    
    
    925
    
    
    
    505Total non-interest expense
    
    
    32,720
    
    
    
    65,007
    
    
    
    23,796
    
    
    
    16,225
    
    
    
    15,499Net income (loss) before federal income tax expense
    
    
    (53,166
    )
    
    
    (48,412
    )
    
    
    5,022
    
    
    
    11,759
    
    
    
    11,377Income tax expense (benefit)
    
    
    8,009
    
    
    
    (16,487
    )
    
    
    1,856
    
    
    
    3,940
    
    
    
    3,867Net income (loss)
    
    
    ($61,175
    )
    
    
    ($31,925
    )
    
    $
    3,166
    
    
    $
    7,819
    
    
    $
    7,510FINANCIAL CONDITIONTotal assets
    
    $
    986,486
    
    
    $
    1,121,918
    
    
    $
    1,046,981
    
    
    $
    855,931
    
    
    $
    706,497Mortgage loans held for sale
    
    
    1,129
    
    
    
    1,834
    
    
    
    1,316
    
    
    
    1,823
    
    
    
    1,041Securities, available for sale
    
    
    45,964
    
    
    
    84,148
    
    
    
    8,902
    
    
    
    5,878
    
    
    
    17,153Securities, held to maturity
    
    
    336
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Federal Home Loan Bank stock
    
    
    3,698
    
    
    
    3,614
    
    
    
    2,072
    
    
    
    1,288
    
    
    
    1,293Loans
    
    
    833,136
    
    
    
    933,269
    
    
    
    952,084
    
    
    
    756,420
    
    
    
    657,037Allowance for loan losses
    
    
    (35,125
    )
    
    
    (14,452
    )
    
    
    (10,617
    )
    
    
    (7,775
    )
    
    
    (6,808
    )Other assets
    
    
    137,348
    
    
    
    113,505
    
    
    
    93,224
    
    
    
    98,297
    
    
    
    36,781Deposits
    
    
    867,955
    
    
    
    938,395
    
    
    
    822,627
    
    
    
    633,216
    
    
    
    582,438Federal Home Loan Bank advances
    
    
    63,855
    
    
    
    65,019
    
    
    
    41,370
    
    
    
    25,561
    
    
    
    25,588Subordinated debentures
    
    
    10,000
    
    
    
    10,000
    
    
    
    10,000
    
    
    
    10,000
    
    
    
    10,000Other borrowings
    
    
    
    
    
    
    2,461
    
    
    
    30,580
    
    
    
    37,919
    
    
    
    1,615Other liabilities
    
    
    2,731
    
    
    
    2,732
    
    
    
    4,856
    
    
    
    4,250
    
    
    
    2,643Stockholders equity
    
    
    41,945
    
    
    
    103,311
    
    
    
    137,548
    
    
    
    144,985
    
    
    
    84,213PER SHARE INFORMATION (1)Net income (loss) per common share  basic
    
    
    ($8.00
    )
    
    
    ($3.99
    )
    
    $
    0.37
    
    
    $
    1.23
    
    
    $
    1.27Net income (loss) per common share  diluted
    
    
    ($8.00
    )
    
    
    ($3.99
    )
    
    $
    0.36
    
    
    $
    1.17
    
    
    $
    1.20Book value per common share
    
    $
    5.46
    
    
    $
    13.42
    
    
    $
    16.70
    
    
    $
    16.15
    
    
    $
    14.11Average shares outstanding   basic
    
    
    7,645,076
    
    
    
    8,007,345
    
    
    
    8,602,704
    
    
    
    6,372,471
    
    
    
    5,899,281Average shares outstanding  diluted
    
    
    7,645,076
    
    
    
    8,007,345
    
    
    
    8,827,531
    
    
    
    6,672,319
    
    
    
    6,274,404Shares outstanding at end of period
    
    
    7,687,470
    
    
    
    7,696,204
    
    
    
    8,237,413
    
    
    
    8,975,085
    
    
    
    5,967,190OTHER DATAReturn on average assets
    
    
    -5.79
    %
    
    
    -3.02
    %
    
    
    0.30
    %
    
    
    1.02
    %
    
    
    1.08
    %Return on average equity
    
    
    -71.83
    %
    
    
    -23.51
    %
    
    
    2.21
    %
    
    
    8.20
    %
    
    
    9.44
    %Net interest margin
    
    
    3.07
    %
    
    
    3.29
    %
    
    
    3.48
    %
    
    
    3.80
    %
    
    
    4.14
    %Net interest spread
    
    
    2.77
    %
    
    
    2.79
    %
    
    
    2.74
    %
    
    
    3.06
    %
    
    
    3.62
    %Allowance for loan losses to total loans
    
    
    4.22
    %
    
    
    1.55
    %
    
    
    1.12
    %
    
    
    1.03
    %
    
    
    1.04
    %Nonperforming assets to total assets
    
    
    13.40
    %
    
    
    5.51
    %
    
    
    2.42
    %
    
    
    0.90
    %
    
    
    0.26
    %Stockholders equity to total assets
    
    
    4.25
    %
    
    
    9.21
    %
    
    
    13.14
    %
    
    
    16.94
    %
    
    
    11.92
    %Total interest expense to gross interest income
    
    
    43.07
    %
    
    
    47.43
    %
    
    
    52.05
    %
    
    
    48.03
    %
    
    
    37.40
    %Number of Offices
    
    
    17
    
    
    
    18
    
    
    
    19
    
    
    
    12
    
    
    
    12
 
 (1)
    
    All share and per share amounts have been adjusted to reflect the issuance of stock dividends. 6




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COMMITMENT TO COMMUNITY
  
 7




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Report of Independent Registered Public Accounting Firm
 
     BKD, LLP
 
 8




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/s/ Michael J. RossMichael J. RossPresident and Chief Executive Officer /s/ Jeffrey L. KarafaJeffery L. KarafaVice President, Treasurer and Secretary 9




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DEARBORN BANCORP, INC. AND SUBSIDIARY  CONSOLIDATED BALANCE SHEETS
 December 31,(Dollars, in thousands)
    
    2009
    
    
    2008ASSETSCash and cash equivalentsCash and due from banks
    
    $
    7,803
    
    
    $
    11,671Federal funds sold
    
    
    156
    
    
    
    4,455Interest bearing deposits with banks
    
    
    69,538
    
    
    
    36,876Total cash and cash equivalents
    
    
    77,497
    
    
    
    53,002Mortgage loans held for sale
    
    
    1,129
    
    
    
    1,834Securities available for sale
    
    
    45,964
    
    
    
    84,148Securities held to maturity
    
    
    336
    
    
    
    Federal Home Loan Bank stock
    
    
    3,698
    
    
    
    3,614LoansLoans
    
    
    833,136
    
    
    
    933,269Allowance for loan losses
    
    
    (35,125
    )
    
    
    (14,452
    )Net loans
    
    
    798,011
    
    
    
    918,817Premises and equipment, net
    
    
    20,194
    
    
    
    21,272Real estate owned
    
    
    23,435
    
    
    
    9,657Other intangible assets
    
    
    
    
    
    
    4,592Accrued interest receivable
    
    
    3,562
    
    
    
    3,499Other assets
    
    
    12,660
    
    
    
    21,483Total assets
    
    $
    986,486
    
    
    $
    1,121,918LIABILITIESDepositsNon-interest bearing deposits
    
    $
    83,873
    
    
    $
    81,317Interest bearing deposits
    
    
    784,082
    
    
    
    857,078Total deposits
    
    
    867,955
    
    
    
    938,395Other liabilitiesSecurities sold under agreements to repurchase
    
    
    
    
    
    
    2,461Federal Home Loan Bank advances
    
    
    63,855
    
    
    
    65,019Accrued interest payable
    
    
    1,046
    
    
    
    1,695Other liabilities
    
    
    1,685
    
    
    
    1,037Subordinated debentures
    
    
    10,000
    
    
    
    10,000Total liabilities
    
    
    944,541
    
    
    
    1,018,607STOCKHOLDERS EQUITYCommon stock  no par value 20,000,000 shares
authorized, 7,687,470 and 7,696,204 shares
outstanding in 2009 and 2008, respectively
    
    
    131,929
    
    
    
    131,784Retained earnings
    
    
    (89,850
    )
    
    
    (28,675
    )Accumulated other comprehensive income (loss)
    
    
    (134
    )
    
    
    202Total stockholders equity
    
    
    41,945
    
    
    
    103,311Total liabilities and stockholders equity
    
    $
    986,486
    
    
    $
    1,121,918
  10




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##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY  CONSOLIDATED STATEMENTS OF OPERATIONS
 Years Ended December 31,(In thousands, except share data)
    
    2009
    
    
    2008Interest incomeInterest on loans
    
    $
    53,273
    
    
    $
    60,533Interest on securities, available for sale
    
    
    589
    
    
    
    464Interest on deposits with banks
    
    
    374
    
    
    
    86Interest on federal funds
    
    
    17
    
    
    
    43Total interest income
    
    
    54,253
    
    
    
    61,126Interest expenseInterest on deposits
    
    
    20,993
    
    
    
    25,106Interest on other liabilities
    
    
    2,374
    
    
    
    3,889Total interest expense
    
    
    23,367
    
    
    
    28,995Net interest income
    
    
    30,886
    
    
    
    32,131Provision for loan losses
    
    
    50,863
    
    
    
    14,606Net interest income (loss) after provision for loan losses
    
    
    (19,977
    )
    
    
    17,525Non-interest incomeService charges on deposit accounts
    
    
    1,499
    
    
    
    1,538Fees for other services to customers
    
    
    126
    
    
    
    128Gain on the sale of loans
    
    
    352
    
    
    
    165Gain (loss) on the sale of securities
    
    
    490
    
    
    
    17Other than temporary impairment on securities, held to maturity Portion of loss recognized in other comprehensive loss before taxes
    
    
    414
    
    
    
    Net impairment losses recognized in earnings
    
    
    (414
    )
    
    
    Gain (loss) on the sale of real estate owned
    
    
    (139
    )
    
    
    (745
    )Loss on the write-down of real estate owned
    
    
    (2,766
    )
    
    
    (2,292
    )Other income
    
    
    383
    
    
    
    259Total non-interest income
    
    
    (469
    )
    
    
    (930
    )Non-interest expenseSalaries and employee benefits
    
    
    12,974
    
    
    
    13,142Occupancy and equipment expense
    
    
    3,623
    
    
    
    3,752Amortization of intangible expense
    
    
    595
    
    
    
    968Impairment of goodwill
    
    
    
    
    
    
    34,028Impairment of other intangible assets
    
    
    3,997
    
    
    
    5,573FDIC assessment
    
    
    2,843
    
    
    
    696Advertising and marketing
    
    
    237
    
    
    
    550Stationery and supplies
    
    
    429
    
    
    
    592Professional services
    
    
    807
    
    
    
    1,063Data processing
    
    
    905
    
    
    
    848Defaulted loan expense
    
    
    4,624
    
    
    
    2,078Other operating expenses
    
    
    1,686
    
    
    
    1,717Total non-interest expense
    
    
    32,720
    
    
    
    65,007Income before federal income tax expense
    
    
    (53,166
    )
    
    
    (48,412
    )Income tax expense (benefit)
    
    
    8,009
    
    
    
    (16,487
    )Net loss
    
    
    ($61,175
    )
    
    
    ($31,925
    )Per share data:Net loss  basic
    
    
    (8.00
    )
    
    
    (3.99
    )Net loss  diluted
    
    
    (8.00
    )
    
    
    (3.99
    )Weighted average number of shares outstanding  basic
    
    
    7,645,076
    
    
    
    8,007,345Weighted average number of shares outstanding  diluted
    
    
    7,645,076
    
    
    
    8,007,345
  11




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##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (Continued)
  AccumulatedOther
    
    
    TotalCommon
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersStock
    
    
    Earnings
    
    
    Income (loss)
    
    
    EquityBalance, January 1, 2008
    
    $
    134,278
    
    
    $
    3,250
    
    
    $
    20
    
    
    $
    137,548Purchase of common stock (575,500 shares)
    
    
    (2,627
    )
    
    
    
    
    
    
    
    
    
    
    (2,627
    )Stock awards earned
(43,883 shares granted, 9,592 shares forfeited)
    
    
    71
    
    
    
    
    
    
    
    
    
    
    
    71Stock option expense
    
    
    62
    
    
    
    
    
    
    
    
    
    
    
    62Net loss
    
    
    
    
    
    
    (31,925
    )
    
    
    
    
    
    
    (31,925
    )Other comprehensive income (loss)Changes 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 income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,743
    )Balance, December 31, 2008
    
    $
    131,784
    
    
    
    ($28,675
    )
    
    $
    202
    
    
    $
    103,311
  12




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##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (Continued)
  AccumulatedOther
    
    
    TotalCommon
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersStock
    
    
    Earnings
    
    
    Income (loss)
    
    
    EquityBalance, December 31, 2008
    
    $
    131,784
    
    
    
    ($28,675
    )
    
    $
    202
    
    
    $
    103,311Stock awards earned
    
    
    76
    
    
    
    
    
    
    
    
    
    
    
    76Stock option expense
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    69Net loss
    
    
    
    
    
    
    (61,175
    )
    
    
    
    
    
    
    (61,175
    )Other comprehensive income (loss)Changes in net unrealized loss on
securities available for sale
    
    
    
    
    
    
    
    
    
    
    (21
    )
    
    
    (21
    )Reclassification adjustment for gain
included in net income
    
    
    
    
    
    
    
    
    
    
    (490
    )
    
    
    (490
    )Net change in net unrealized loss
on securities available for sale
    
    
    
    
    
    
    
    
    
    
    (511
    )
    
    
    (511
    )Deferred tax effects
    
    
    
    
    
    
    
    
    
    
    175
    
    
    
    175Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    (336
    )
    
    
    (336
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (61,511
    )Balance, December 31, 2009
    
    $
    131,929
    
    
    
    ($89,850
    )
    
    
    ($134
    )
    
    $
    41,945
 13




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##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY  CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended December 31,(In thousands)
    
    2009
    
    
    2008Cash flows from operating activitiesInterest and fees received
    
    $
    54,190
    
    
    $
    61,443Interest paid
    
    
    (24,016
    )
    
    
    (30,468
    )Proceeds from sale of mortgages held for sale
    
    
    34,291
    
    
    
    19,817Origination of mortgages held for sale
    
    
    (33,234
    )
    
    
    (20,041
    )Taxes refunded
    
    
    700
    
    
    
    1,118Loss on sale of real estate owned
    
    
    (139
    )
    
    
    (840
    )Gain on sale of securities
    
    
    490
    
    
    
    17Cash paid to suppliers and employees
    
    
    (23,286
    )
    
    
    (21,706
    )Net cash provided by operating activities
    
    
    8,996
    
    
    
    9,340Cash flows from investing activitiesSale of securities available for sale
    
    
    54,208
    
    
    
    7,276Proceeds from calls, maturities and repayments of
of securities available for sale
    
    
    53,078
    
    
    
    11,826Purchases of securities available for sale
    
    
    (70,641
    )
    
    
    (93,935
    )Purchase of Federal Home Loan Bank stock
    
    
    (84
    )
    
    
    (1,542
    )(Increase) decrease in loans, net of payments received
    
    
    48,381
    
    
    
    (3,748
    )Proceeds from the sale of real estate owned
    
    
    4,879
    
    
    
    6,162Purchases of property and equipment
    
    
    (257
    )
    
    
    (530
    )Net cash provided by (used in) investing activities
    
    
    89,564
    
    
    
    (74,491
    )Cash flows from financing activitiesNet decrease in non-interest bearing deposits
    
    
    2,556
    
    
    
    (2,277
    )Net increase in interest bearing deposits
    
    
    (72,996
    )
    
    
    118,045Increase (decrease) in repurchase agreements
    
    
    (2,461
    )
    
    
    1,981Net increase in federal funds purchased
    
    
    0
    
    
    
    (30,100
    )Proceeds from Federal Home Loan Bank advances
    
    
    48,000
    
    
    
    36,500Repayments on Federal Home Loan Bank advances
    
    
    (49164
    )
    
    
    (12,851
    )Purchase of common stock
    
    
    
    
    
    
    (2,627
    )Net cash provided by (used in) financing activities
    
    
    (74,065
    )
    
    
    108,671Increase (decrease) in cash and cash equivalents
    
    
    24,495
    
    
    
    43,520Cash and cash equivalents at the beginning of year
    
    
    53,002
    
    
    
    9,482Cash and cash equivalents at the end of year
    
    $
    77,497
    
    
    $
    53,002
  14




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##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY  CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
 Years Ended December 31,(In thousands)
    
    2009
    
    
    2008Reconciliation of net income to net cash provided by operating activitiesNet income
    
    
    ($61,175
    )
    
    
    ($31,925
    )Adjustments to reconcile net income to net cash
provided by operating activitiesProvision for loan losses
    
    
    50,863
    
    
    
    14,606Depreciation and amortization expense
    
    
    1,335
    
    
    
    1,356(Increase) decrease in deferred tax asset
    
    
    16,794
    
    
    
    (14,117
    )Restricted stock award expense
    
    
    69
    
    
    
    62Stock option expense
    
    
    76
    
    
    
    71Accretion of discount on investment securities
    
    
    (52
    )
    
    
    (162
    )Amortization of premium on investment securities
    
    
    331
    
    
    
    25Write-down of real estate owned
    
    
    2,766
    
    
    
    2,292Amortization of intangible assets
    
    
    595
    
    
    
    968Impairment of goodwill
    
    
    0
    
    
    
    34,028Impairment of other intangible assets
    
    
    3,997
    
    
    
    5,573Impairment of securities, held to maturity
    
    
    414
    
    
    
    0(Increase) decrease in mortgages held for sale
    
    
    705
    
    
    
    (518
    )Increase in interest receivable
    
    
    (63
    )
    
    
    317Increase (decrease) in interest payable
    
    
    (649
    )
    
    
    (1,473
    )(Increase) decrease in other assets
    
    
    (7,658
    )
    
    
    (1,112
    )Increase (decrease) in other liabilities
    
    
    648
    
    
    
    (651
    )Net cash provided by operating activities
    
    $
    8,996
    
    
    $
    9,340Supplemental noncash disclosures:Transfers from loans to real estate owned
    
    $
    21,547
    
    
    $
    11,792
  15




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 December 31, 2009 and 2008
   Nature of Operations and Principals of Consolidation
     Use of Estimates
  16




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
  Cash and Cash Equivalents
    Restrictions on Cash
  Securities
   17




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
   Loans
    Loans Held for Sale
  Allowance for Loan Losses
  18




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
    Foreclosed Assets Held for Sale
  Premises and Equipment
  
 Long-Term Assets
  Federal Home Loan Bank (FHLB) Stock
  19




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
  Goodwill and Other Intangible Assets
    Stock Compensation
  Loan Commitments and Related Financial Instruments
  Stock Dividends
  20




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
  Income Taxes
  Accounting for Uncertainty in Income Taxes
  Reclassifications
  Loss Contingencies
  Earnings (Loss) Per Share
  Comprehensive Income (loss)
  21




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
  Dividend Restrictions
  Fair Value of Financial Instruments
  Valuation Measurements
  Adoption of New Accounting Standards
 Fair Value Measurements and Disclosures
(Topic 820): Improving Disclosures about Fair Value Measurements.
    22




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
     Generally Accepted Accounting Principles -
FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles
  Determining Whether Instruments
Granted in Shared-Based Payment Transaction are Participating Securities.
  , Measuring Liabilities at Fair Value
  Generally Accepted Accounting Principles 
FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles
  23




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
  Amendments to
FASB Interpretation No. 46(R)
   Consent Order
  
    
    Completion of a senior management study by an independent consultant
    
    Plans for the reduction of delinquencies and classified assets
    
    Plans for lending and collection policies
    
    Plans for the reduction of loan concentrations
    
    The revision and implementation of a comprehensive strategic plan
    
    The revision of its Liquidity Plan and the submission of weekly liquidity
reports to the FDIC and OFIR
     24




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
  Going Concern
    25




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
   December 31, 2009Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueUS Government sponsored entity securities
    
    $
    12,759
    
    
    $
    20
    
    
    
    ($30
    )
    
    $
    12,749Corporate bonds
    
    
    33,308
    
    
    
    
    
    
    
    (197
    )
    
    
    33,111Mortgage backed securities
    
    
    101
    
    
    
    3
    
    
    
    
    
    
    
    104Totals
    
    $
    46,168
    
    
    $
    23
    
    
    
    ($227
    )
    
    $
    45,964
 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
  Amortized
    
    
    FairCost
    
    
    ValueDue in one year through five years
    
    $
    46,067
    
    
    $
    45,860Mortgage backed securities
    
    
    101
    
    
    
    104Totals
    
    $
    46,168
    
    
    $
    45,964
 26




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
   2009
    
    2008Proceeds
    
    $
    54,208
    
    
    $
    7,276Gross gains
    
    
    492
    
    
    
    17Gross losses
    
    
    2
    
    
    
    
   December 31, 2009Less than one year
    
    
    One year or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedInvestment category
    
    Value
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossUS Government sponsored
entity securities
    
    $
    6,657
    
    
    
    ($30
    )
    
    $
    
    
    
    $
    
    
    
    $
    6,657
    
    
    
    ($30
    )Corporate bonds
    
    
    33,111
    
    
    
    (197
    )
    
    
    
    
    
    
    
    
    
    
    33,111
    
    
    
    (197
    )Total temporarily impaired
    
    $
    39,768
    
    
    
    ($227
    )
    
    $
    
    
    
    $
    
    
    
    $
    39,768
    
    
    
    ($227
    )
 December 31, 2008Less than one year
    
    
    One year or more
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedInvestment category
    
    Value
    
    
    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
    )
 27




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
    December 31, 2009Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueTrust preferred securities
    
    $
    336
    
    
    $
    
    
    
    $
    
    
    
    $
    336Totals
    
    $
    336
    
    
    $
    
    
    
    $
    
    
    
    $
    336
     Credit losses on debt securities held
    
    AmountBalance, January 1, 2009
    
    $
    Additions related to other than temporary
losses not previously recognized
    
    
    414Balance, December 31, 2009
    
    $
    414
 28




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
   Percent2009
    
    
    2008
    
    
    Incr(decr)Consumer loans
    
    $
    29,386
    
    
    $
    31,864
    
    
    
    (7.78
    %)Commercial, financial, & other
    
    
    144,630
    
    
    
    164,740
    
    
    
    (12.21
    %)Construction and land development loans
    
    
    83,464
    
    
    
    113,035
    
    
    
    (26.16
    %)Commercial real estate mortgages
    
    
    531,156
    
    
    
    571,204
    
    
    
    (7.01
    %)Residential real estate mortgages
    
    
    44,500
    
    
    
    52,426
    
    
    
    (15.12
    %)Total loans
    
    
    833,136
    
    
    
    933,269
    
    
    
    (10.73
    %)Allowance for loan losses
    
    
    (35,125
    )
    
    
    (14,452
    )Loans, net
    
    $
    798,011
    
    
    $
    918,817
  2009
    
    
    2008Balance, beginning of year
    
    $
    2,042
    
    
    $
    2,494New loans during period
    
    
    
    
    
    
    9Repayments made during period
    
    
    (946
    )
    
    
    (461
    )Balance, end of period
    
    $
    1,096
    
    
    $
    2,042
 29




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
   2009
    
    
    2008Balance, beginning of year
    
    $
    14,452
    
    
    $
    10,617Less charge-offs:Consumer loans
    
    
    1,154
    
    
    
    318Commercial, financial & other
    
    
    4,878
    
    
    
    4,304Construction and land development loans
    
    
    17,257
    
    
    
    3,604Commercial real estate mortgages
    
    
    6,919
    
    
    
    2,446Residential loans
    
    
    701
    
    
    
    296Plus recoveries:Consumer loans
    
    
    176
    
    
    
    19Commercial, financial & other
    
    
    339
    
    
    
    117Construction and land development loans
    
    
    107
    
    
    
    36Commercial real estate mortgages
    
    
    61
    
    
    
    21Residential loans
    
    
    36
    
    
    
    4Net charge-offs (recoveries)
    
    
    30,190
    
    
    
    10,771Provision for loan losses
    
    
    50,863
    
    
    
    14,606Balance at end of period
    
    $
    35,125
    
    
    $
    14,452Allowance to total loans
    
    
    4.22
    %
    
    
    1.55
    %Net charge-offs to average loans
    
    
    3.41
    %
    
    
    1.14
    %
 30




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
   2009
    
    
    2008Impaired loans with no allocated allowance for loan
losses
    
    $
    83,226
    
    
    $
    71,961Impaired loans with allocated allowance for loan losses
    
    
    43,553
    
    
    
    26,908Total
    
    $
    126,779
    
    
    $
    98,869Amount of the allowance for loan loss
allocated to impaired loans
    
    $
    10,715
    
    
    $
    5,273Average of impaired loans during the year
    
    $
    102,550
    
    
    $
    82,436Interest income recognized during impairment
    
    $
    2,349
    
    
    $
    1,460Cash-basis interest income recognized
    
    $
    2,149
    
    
    $
    
  2009
    
    
    2008Troubled debt restructuring and still accruing
    
    $
    59,420
    
    
    $
    17,765Over 90 days past due and still accruing
    
    
    
    
    
    
    450Non-accrual loans
    
    
    49,341
    
    
    
    51,708Total non performing loans
    
    
    108,761
    
    
    
    69,923Real estate owned
    
    
    23,435
    
    
    
    9,657Other repossessed assets
    
    
    
    
    
    
    Other non performing assets
    
    
    23,435
    
    
    
    9,657Total nonperforming assets
    
    $
    132,196
    
    
    $
    79,580
   31




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
   2009
    
    
    2008Land and improvements
    
    $
    7,728
    
    
    $
    7,728Building and improvements
    
    
    14,553
    
    
    
    14,553Furniture and equipment
    
    
    6,988
    
    
    
    6,77129,269
    
    
    
    29,052Less accumulated depreciation
    
    
    9,075
    
    
    
    7,780$
    20,194
    
    
    $
    21,272
   2010
    
    $
    6492011
    
    
    4392012
    
    
    482013
    
    
    24Total
    
    $
    1,160
    32




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
  2009Gross Carrying
    
    
    Accumulated
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Impairment ChargeCore deposit intangible
    
    $
    7,792
    
    
    $
    2,389
    
    
    $
    5,403Borrower relationship intangible
    
    
    5,178
    
    
    
    2,023
    
    
    
    3,155Total intangible assets
    
    $
    12,970
    
    
    $
    4,412
    
    
    $
    8,558
 2008Gross Carrying
    
    
    Accumulated
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Impairment ChargeCore deposit intangible
    
    $
    7,792
    
    
    $
    2,044
    
    
    $
    2,991Borrower relationship intangible
    
    
    5,178
    
    
    
    1,773
    
    
    
    1,570Total intangible assets
    
    $
    12,970
    
    
    $
    3,817
    
    
    $
    4,561
    AmountBalance, January 1, 2008
    
    $
    34,028Impairment loss during 2008
    
    
    (34,028
    )Balance, December 31, 2008
    
    $
    
  33




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
    $100,000 and over
    
    
    Less than $100,000
    
    
    Total2010
    
    $
    277,729
    
    
    $
    274,181
    
    
    $
    551,9102011
    
    
    24,367
    
    
    
    26,534
    
    
    
    50,9012012
    
    
    802
    
    
    
    587
    
    
    
    1,3892013
    
    
    
    
    
    
    187
    
    
    
    1872014 and thereafter
    
    
    513
    
    
    
    340
    
    
    
    853Totals
    
    $
    303,411
    
    
    $
    301,829
    
    
    $
    605,240
     2009
    
    2008Balance at year-end
    
    $
    
    
    
    $
    2,461Average daily balance during the year
    
    $
    1,966
    
    
    $
    778Average interest rate during the year
    
    
    1.25
    %
    
    
    1.25
    %Maximum month-end balance during year
    
    $
    2,539
    
    
    $
    2,461Weighted average interest rate at year-end
    
    
    1.25
    %
    
    
    1.25
    %
 34




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
   At December 31, 2009WeightedMaturing in:
    
    Amount
    
    
    Average Rate2010
    
    $
    49,084
    
    
    
    2.19
    %2011
    
    
    4,500
    
    
    
    3.20
    %2012
    
    
    271
    
    
    
    5.27
    %2013
    
    
    10,000
    
    
    
    2.58
    %Total
    
    $
    63,855
    
    
    
    2.33
    %
 At December 31, 2008WeightedMaturing in:
    
    Amount
    
    
    Average 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
    %
   Amount2010
    
    $
    49,1392011
    
    
    4,5482012
    
    
    1682013
    
    
    10,000Total
    
    $
    63,855
 35




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
        2009
    
    
    2008Current
    
    
    ($8,785
    )
    
    
    ($2,370
    )Deferred
    
    
    16,794
    
    
    
    (14,117
    )$
    8,009
    
    
    
    ($16,487
    )
 36




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
   2009
    
    
    2008Deferred tax assetsAllowance for loan losses
    
    $
    11,943
    
    
    $
    4,913Net operating loss carryforward
    
    
    734
    
    
    
    Goodwill and other intangibles
    
    
    12,505
    
    
    
    11,877Capital loss carryforward
    
    
    251
    
    
    
    251Non accrual interest income
    
    
    14
    
    
    
    92Writedowns on other real estate owned
    
    
    1,070
    
    
    
    462Amortization of deferred issue costs
    
    
    263
    
    
    
    81Other
    
    
    11
    
    
    
    63Total deferred tax assets
    
    
    26,791
    
    
    
    17,739Deferred tax liabilitiesPremises and equipment
    
    
    (423
    )
    
    
    (300
    )Prepaid expenses
    
    
    (283
    )
    
    
    (259
    )Unrealized losses on securities available for sale
    
    
    
    
    
    
    (104
    )Deferred loan fees and costs
    
    
    (130
    )
    
    
    (73
    )Other
    
    
    (104
    )
    
    
    (66
    )Total deferred tax liabilities
    
    
    (940
    )
    
    
    (802
    )Less: valuation allowance
    
    
    (25,851
    )
    
    
    (251
    )Net deferred tax asset
    
    $
    
    
    
    $
    16,686
 37




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
     2009
    
    2008Federal income tax rate
    
    
    34
    %
    
    
    34
    %Effect of capital loss carryback valuation allowance
    
    
    (48
    %)
    
    
    
    %Other, net
    
    
    (1
    %)
    
    
    
    %Effective tax rate
    
    
    (15
    %)
    
    
    34
    %
  Fair Value of Financial Instruments
  Cash and Cash Equivalents, Securities Sold Under Agreements to Repurchase,
Interest-bearing Deposits and Federal Home Loan Bank Stock
  Held-to-maturity Securities
  Loans Held for Sale
  Loans
  38




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
  Deposits
  Interest Receivable and Interest Payable
  Federal Home Loan Bank Advances
  Subordinated Debentures
  Commitments to Originate Loans, Forward Sale Commitments, Letters of Credit and Lines of
Credit
  39




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
   At December 31, 2009
    
    At December 31, 2008Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    ValueAssets:Cash and cash equivalents
    
    $
    77,497
    
    
    $
    77,497
    
    
    $
    53,002
    
    
    $
    53,002Mortgage loans held for sale
    
    
    1,129
    
    
    
    1,146
    
    
    
    1,834
    
    
    
    1,858Securities available for sale
    
    
    45,964
    
    
    
    45,964
    
    
    
    84,148
    
    
    
    84,148Federal Home Loan Bank Stock
    
    
    3,698
    
    
    
    3,698
    
    
    
    3,614
    
    
    
    3,614Loans, net
    
    
    833,136
    
    
    
    829,122
    
    
    
    933,269
    
    
    
    934,826Accrued interest receivable
    
    
    3,562
    
    
    
    3,562
    
    
    
    3,499
    
    
    
    3,499Liabilities:Deposits
    
    
    867,955
    
    
    
    871,177
    
    
    
    938,395
    
    
    
    945,017Securities sold under
agreements to repurchase
    
    
    
    
    
    
    
    
    
    
    2,461
    
    
    
    2,461Federal Home Loan Bank advances
    
    
    63,855
    
    
    
    64,275
    
    
    
    65,019
    
    
    
    66,390Subordinated debentures
    
    
    10,000
    
    
    
    4,081
    
    
    
    10,000
    
    
    
    10,028Accrued interest payable
    
    
    1,046
    
    
    
    1,046
    
    
    
    1,695
    
    
    
    1,695
      40




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
    Securities available for sale
    QuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    InputsAt 12/31/2009
    
    Fair Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)US Government sponsored
entity securities
    
    $
    12,749
    
    
    $
    
    
    
    $
    12,749
    
    
    $
    Corporate bonds
    
    
    33,111
    
    
    
    
    
    
    
    33,111
    
    
    
    Mortgage backed securities
    
    
    104
    
    
    
    
    
    
    
    104
    
    
    
    Total securities, available for sale
    
    $
    45,964
    
    
    $
    
    
    
    $
    45,964
    
    
    $
    
 41




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
  QuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    InputsAt 12/31/2008
    
    Fair Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)US Government sponsored
entity securities
    
    $
    21,399
    
    
    $
    
    
    
    $
    21,399
    
    
    $
    Corporate bonds
    
    
    13,235
    
    
    
    
    
    
    
    13,235
    
    
    
    Municipal securities
    
    
    1,331
    
    
    
    
    
    
    
    1,331
    
    
    
    Mortgage backed securities
    
    
    183
    
    
    
    
    
    
    
    183
    
    
    
    Money market mutual funds
    
    
    48,000
    
    
    
    48,000
    
    
    
    
    
    
    
    Total securities,
available for sale
    
    $
    84,148
    
    
    $
    48,000
    
    
    $
    36,148
    
    
    $
    
  Impaired Loans (Collateral Dependent)
   Real Estate Owned
  42




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
   QuotedPrices inActive
    
    SignificantMarkets for
    
    Other
    
    SignificantIdentical
    
    Observable
    
    UnobservableAssets
    
    Inputs
    
    InputsAt 12/31/2009
    
    Fair Value
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Loans
    
    $
    60,905
    
    
    $
    
    
    
    $
    
    
    
    $
    60,905Other real estate
    
    
    7,601
    
    
    
    
    
    
    
    
    
    
    
    7,601
 QuotedPrices inActive
    
    SignificantMarkets for
    
    Other
    
    SignificantIdentical
    
    Observable
    
    UnobservableAssets
    
    Inputs
    
    InputsAt 12/31/2008
    
    Fair Value
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Loans
    
    $
    41,907
    
    
    $
    
    
    
    $
    
    
    
    $
    41,907Other real estate
    
    
    4,833
    
    
    
    
    
    
    
    
    
    
    
    4,833
  Loan Commitments
  43




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
   Commitment PeriodLessthan 1
    
    
    1 - 3
    
    
    3 - 5
    
    
    Over 5At December 31, 2009
    
    year
    
    
    years
    
    
    years
    
    
    years
    
    
    TotalsHome equity lines of credit
    
    $
    355
    
    
    $
    3,073
    
    
    $
    4,208
    
    
    $
    8,695
    
    
    $
    16,331Residential loan commitments
    
    
    132
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    132Standby letters of credit
    
    
    770
    
    
    
    1,932
    
    
    
    
    
    
    
    
    
    
    
    2,702Lines of credit  commercial
    
    
    29,527
    
    
    
    2,709
    
    
    
    731
    
    
    
    27
    
    
    
    32,994Commercial construction 
residential
land development and
construction
    
    
    5,134
    
    
    
    286
    
    
    
    735
    
    
    
    
    
    
    
    6,155Other commercial commitments
    
    
    16,668
    
    
    
    1,693
    
    
    
    1,244
    
    
    
    
    
    
    
    19,605Totals
    
    $
    52,586
    
    
    $
    9,693
    
    
    $
    6,918
    
    
    $
    8,722
    
    
    $
    77,919
 Commitment PeriodLessthan 1
    
    
    1 - 3
    
    
    3 - 5
    
    
    Over 5At December 31, 2008
    
    year
    
    
    years
    
    
    years
    
    
    years
    
    
    TotalsHome equity lines of credit
    
    $
    158
    
    
    $
    1,058
    
    
    $
    5,920
    
    
    $
    10,461
    
    
    $
    17,597Residential loan commitments
    
    
    5,477
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,477Standby 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
    
    $
    77,563
    
    
    $
    11,276
    
    
    $
    12,539
    
    
    $
    12,490
    
    
    $
    113,868
  44




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
       45




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
   MinimumMinimum
    
    To Be Well Capitalizedfor Capital
    
    Under Prompt CorrectiveActual
    
    Adequacy Purposes
    
    Action RegulationsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs of December 31, 2009Total capital
(to risk weighted assets)Consolidated
    
    
    63,043
    
    
    
    7.39
    %
    
    
    68,264
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    61,169
    
    
    
    7.19
    %
    
    
    68,105
    
    
    
    8.00
    %
    
    
    85,132
    
    
    
    10.00
    %Tier 1 capital
(to risk weighted assets)Consolidated
    
    
    52,080
    
    
    
    6.10
    %
    
    
    34,132
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    50,225
    
    
    
    5.90
    %
    
    
    34,053
    
    
    
    4.00
    %
    
    
    51,079
    
    
    
    6.00
    %Tier 1 capital
(to average assets)Consolidated
    
    
    52,080
    
    
    
    4.98
    %
    
    
    41,838
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/ABank
    
    
    50,225
    
    
    
    4.81
    %
    
    
    41,776
    
    
    
    4.00
    %
    
    
    52,220
    
    
    
    5.00
    %As 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
    %
  46




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
    WeightedAverageOptions
    
    
    ExerciseOutstanding
    
    
    PriceOutstanding at January 1, 2009
    
    
    360,398
    
    
    $
    8.65Exercised
    
    
    
    
    
    $
    0.00Forfeited
    
    
    
    
    
    $
    0.00Outstanding At December 31, 2009
    
    
    360,398
    
    
    $
    8.65
      2008Risk-free interest rate
    
    
    2.92
    %Expected option life
    
    7.0 yearsDividend yield
    
    
    0.00
    %Expected volatility of stock price
    
    
    28.39
    %
 47




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
   WeightedNumber
    
    
    Exerciseof Shares
    
    
    PriceOutstanding at January 1, 2009
    
    
    205,662
    
    
    $
    5.89Shares Forfeited  Stock Options
    
    
    (14,816
    )
    
    $
    13.06Outstanding at December 31, 2009
    
    
    190,846
    
    
    $
    5.33
   Numberof SharesOutstanding at January 1, 2009
    
    
    52,016Restricted Shares Forfeited
    
    
    (8,734
    )Restricted Shares Transferred to Common Shares
    
    
    (1,752
    )Outstanding at December 31, 2009
    
    
    41,530
  48




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
   2009
    
    2008BasicNet loss
    
    
    ($61,175
    )
    
    
    ($31,925
    )Weighted average common shares
    
    
    7,645,076
    
    
    
    8,007,345Basic earnings per common share
    
    
    ($8.00
    )
    
    
    ($3.99
    )DilutedNet loss
    
    
    ($61,175
    )
    
    
    ($31,925
    )Weighted average common shares
outstanding for basic earnings per
common share
    
    
    7,645,076
    
    
    
    8,007,345Average shares and dilutive potential
common shares
    
    
    7,645,076
    
    
    
    8,007,345Dilutive earnings per common share
    
    
    ($8.00
    )
    
    
    ($3.99
    )
  49




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
    December 31,(In thousands)
    
    2009
    
    
    2008ASSETSCash and cash equivalents
    
    $
    116
    
    
    $
    635Investment in subsidiary
    
    
    50,090
    
    
    
    111,148Other assets
    
    
    1,994
    
    
    
    1,631Total assets
    
    $
    52,200
    
    
    $
    113,414LIABILITIES AND
STOCKHOLDERS EQUITYOther liabilities
    
    $
    255
    
    
    $
    103Subordinated debentures
    
    
    10,000
    
    
    
    10,000Total liabilities
    
    
    10,255
    
    
    
    10,103Stockholders equity
    
    
    41,945
    
    
    
    103,311Total liabilities and stockholders equity
    
    $
    52,200
    
    
    $
    113,414
  Years Ended December 31,(In thousands)
    
    2009
    
    
    2008Interest income
    
    $
    
    
    
    $
    7Dividends from Bank
    
    
    
    
    
    
    3,500Interest expense
    
    
    411
    
    
    
    740Other operating expenses
    
    
    291
    
    
    
    1,104Net loss before income tax and equity
in undistributed income of subsidiary
    
    
    (702
    )
    
    
    1,663Income tax benefit
    
    
    43
    
    
    
    702Net loss before equity in undistributed
income of subsidiary
    
    
    (659
    )
    
    
    2,365Equity in undistributed income
of subsidiary (dividends in excess of earnings)
    
    
    (60,516
    )
    
    
    (34,290
    )Net loss
    
    
    ($61,175
    )
    
    
    ($31,925
    )
 50




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
   Years Ended December 31,(In thousands)
    
    2009
    
    
    2008Cash flows from operating activitiesNet loss
    
    
    ($61,175
    )
    
    
    ($31,925
    )Adjustments to reconcile net income
to net cash provided by operating activities
(Equity in undistributed income of
subsidiary) dividends in excess of earnings
    
    
    60,516
    
    
    
    34,290Other, net
    
    
    140
    
    
    
    181Net cash flows provided by (used in) operating activities
    
    
    (519
    )
    
    
    2,546Cash flows from the repurchase of common stock
    
    
    
    
    
    
    (2,627
    )Decrease in cash and cash equivalents
    
    
    (519
    )
    
    
    (81
    )Cash and cash equivalents at the beginning of year
    
    
    635
    
    
    
    716Cash and cash equivalents at end of year
    
    $
    116
    
    
    $
    635
   Interest
    
    Net Interest
    
    Net
    
    Earnings per shareIncome
    
    Income
    
    Income
    
    Basic
    
    Fully diluted2009First quarter
    
    $
    14,166
    
    
    $
    7,517
    
    
    
    ($6,249
    )
    
    
    ($0.81
    )
    
    
    ($0.81
    )Second quarter
    
    
    13,573
    
    
    
    7,537
    
    
    
    (9,075
    )
    
    
    (1.19
    )
    
    
    (1.19
    )Third quarter
    
    
    13,246
    
    
    
    7,826
    
    
    
    (40,045
    )
    
    
    (5.24
    )
    
    
    (5.24
    )Fourth quarter
    
    
    13,268
    
    
    
    8,006
    
    
    
    (5,806
    )
    
    
    (0.76
    )
    
    
    (0.76
    )2008First 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
    )
 51




---



##### 



DEARBORN BANCORP, INC. AND SUBSIDIARY
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  CONTINUED
 December 31, 2009 and 2008
  Current Economic Conditions
     Loan Concentrations
   52




---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
 Company Overview and Executive Summary
          53




---



##### 



54




---



##### 



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
  Date Opened
    
    Location
    
    Type of officeFebruary 1994
    
    22290 Michigan Avenue
Dearborn, Michigan 48123
    
    Full service retail branch with ATMDecember 1995
    
    24935 West Warren Avenue
Dearborn Heights, Michigan 48127
    
    Full service retail branchAugust 1997
    
    44623 Five Mile Road
Plymouth, Michigan 48170
    
    Full service retail branch with ATMMay 2001
    
    1325 North Canton Center Road
Canton, Michigan 48187
    
    Full service retail branch with ATMDecember 2001
    
    45000 River Ridge Drive
Clinton Township, Michigan 48038
    
    Regional lending centerNovember 2002
    
    19100 Hall Road
Clinton Township, Michigan 48038
    
    Full service retail branch with ATMFebruary 2003
    
    12820 Fort Street
Southgate, Michigan 48195
    
    Full service retail branch with ATMMay 2003
    
    3201 University Drive, Suite 180
Auburn Hills, Michigan 48326
    
    Full service retail branchOctober 2004
    
    450 East Michigan Avenue
Saline, MI 48176
    
    Full service retail branch with ATMOctober 2004
    
    250 West Eisenhower Parkway
Ann Arbor, MI 48103
    
    Full service retail branch
Regional lending centerDecember 2004
    
    1360 Porter Street
Dearborn, MI 48123
    
    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
Bloomfield Township, MI 48301
    
    Full service retail branch with ATMJanuary 2007
    
    30700 Telegraph, Suite
Bingham Farms, MI 48025
    
    Full service retail branch with ATMJanuary 2007
    
    20000 Twelve Mile Road
Southfield, MI 48076
    
    Full service retail branch with ATMJanuary 2007
    
    200 Galleria Office Center, Suite 141
Southfield, MI 48134
    
    Full service retail branch with ATMApril 2007
    
    7755 23 Mile Road
Shelby Township, Mi 48316
    
    Full service retail branch with ATM
 55




---



##### 



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.
  56




---



##### 



Results of Operations
 2009 Compared to 2008.
     2008 Compared to 2007.
 57




---



##### 



Net Interest Income
 2009 Compared to 2008.
  2008 Compared to 2007.
 Average Balances, Interest Rates and Yields.
  58




---



##### 



Year Ended December 31, 2009
    
    
    Year Ended December 31, 2008Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average(In thousands)
    
    Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateAssetsInterest-bearing deposits with banks
    
    $
    73,057
    
    
    $
    374
    
    
    
    0.51
    %
    
    $
    6,591
    
    
    $
    43
    
    
    
    0.65
    %Federal funds sold
    
    
    5,873
    
    
    
    17
    
    
    
    0.29
    %
    
    
    8,316
    
    
    
    86
    
    
    
    1.04
    %Securities, available for sale
    
    
    40,245
    
    
    
    589
    
    
    
    1.46
    %
    
    
    15,681
    
    
    
    464
    
    
    
    2.97
    %Loans
    
    
    886,743
    
    
    
    53,273
    
    
    
    6.01
    %
    
    
    944,749
    
    
    
    60,533
    
    
    
    6.42
    %Sub-total earning assets
    
    
    1,005,918
    
    
    
    54,253
    
    
    
    5.39
    %
    
    
    975,337
    
    
    
    61,126
    
    
    
    6.27
    %Other assets
    
    
    51,333
    
    
    
    
    
    
    
    
    
    
    
    81,377Total assets
    
    $
    1,057,251
    
    
    
    
    
    
    
    
    
    
    $
    1,056,714Liabilities and stockholders equityInterest bearing deposits
    
    $
    809,905
    
    
    $
    20,993
    
    
    
    2.59
    %
    
    $
    740,520
    
    
    $
    25,106
    
    
    
    3.40
    %Other borrowings
    
    
    77,105
    
    
    
    2,374
    
    
    
    3.08
    %
    
    
    94,211
    
    
    
    3,889
    
    
    
    4.13
    %Sub-total interest bearing liabilities
    
    
    887,010
    
    
    
    23,367
    
    
    
    2.63
    %
    
    
    834,731
    
    
    
    28,995
    
    
    
    3.47
    %Non-interest bearing deposits
    
    
    82,915
    
    
    
    
    
    
    
    
    
    
    
    83,065Other liabilities
    
    
    2,157
    
    
    
    
    
    
    
    
    
    
    
    3,152Stockholders equity
    
    
    85,169
    
    
    
    
    
    
    
    
    
    
    
    135,766Total liabilities and stockholders
equity
    
    $
    1,057,251
    
    
    
    
    
    
    
    
    
    
    $
    1,056,714Net interest income
    
    
    
    
    
    $
    30,886
    
    
    
    
    
    
    
    
    
    
    $
    32,131Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    2.77
    %
    
    
    
    
    
    
    
    
    
    
    2.80
    %Net interest margin on earning assets
    
    
    
    
    
    
    
    
    
    
    3.07
    %
    
    
    
    
    
    
    
    
    
    
    3.29
    %
 59




---



##### 



Year Ended December 31, 2007Average
    
    
    
    
    
    
    Average(In thousands)
    
    Balance
    
    
    Interest
    
    
    RateAssetsInterest-bearing deposits with banks
    
    $
    2,795
    
    
    $
    127
    
    
    
    4.54
    %Federal funds sold
    
    
    7,964
    
    
    
    433
    
    
    
    5.44
    %Securities, available for sale
    
    
    10,772
    
    
    
    603
    
    
    
    5.60
    %Loans
    
    
    944,225
    
    
    
    68,947
    
    
    
    7.30
    %Sub-total earning assets
    
    
    965,756
    
    
    
    70,110
    
    
    
    7.26
    %Other assets
    
    
    83,691Total assets
    
    $
    1,049,447Liabilities and stockholders equityInterest bearing deposits
    
    $
    749,894
    
    
    $
    33,303
    
    
    
    4.44
    %Other borrowings
    
    
    56,526
    
    
    
    3,188
    
    
    
    5.64
    %Sub-total interest bearing liabilities
    
    
    806,420
    
    
    
    36,491
    
    
    
    4.53
    %Non-interest bearing deposits
    
    
    95,036Other liabilities
    
    
    4,736Stockholders equity
    
    
    143,255Total liabilities and stockholders equity
    
    $
    1,049,447Net interest income
    
    
    
    
    
    $
    33,619Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    2.73
    %Net interest margin on earning assets
    
    
    
    
    
    
    
    
    
    
    3.48
    %
 60




---



##### 



Rate/Volume Analysis.
 2009/2008
    
    
    
    
    
    
    
    
    
    
    2008/2007Change 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
    
    $
    340
    
    
    
    ($9
    )
    
    $
    331
    
    
    $
    25
    
    
    
    ($109
    )
    
    
    ($84
    )Federal funds sold
    
    
    (7
    )
    
    
    (62
    )
    
    
    (69
    )
    
    
    3
    
    
    
    (350
    )
    
    
    (347
    )Investment securities, available for sale
    
    
    361
    
    
    
    (236
    )
    
    
    125
    
    
    
    144
    
    
    
    (283
    )
    
    
    (139
    )Loans
    
    
    (3,319
    )
    
    
    (3,941
    )
    
    
    (7,260
    )
    
    
    (132
    )
    
    
    (8,282
    )
    
    
    (8,414
    )Total earning assets
    
    
    ($2,625
    )
    
    
    ($4,248
    )
    
    
    ($6,873
    )
    
    $
    40
    
    
    
    ($9,024
    )
    
    
    ($8,984
    )LiabilitiesInterest bearing deposits
    
    $
    1,867
    
    
    
    ($5,980
    )
    
    
    ($4,113
    )
    
    
    ($387
    )
    
    
    ($7,810
    )
    
    
    ($8,197
    )Other borrowings
    
    
    (527
    )
    
    
    (988
    )
    
    
    (1,515
    )
    
    
    1,556
    
    
    
    (855
    )
    
    
    701Total interest bearing liabilities
    
    $
    1,340
    
    
    
    ($6,968
    )
    
    
    ($5,628
    )
    
    $
    1,169
    
    
    
    ($8,665
    )
    
    
    ($7,496
    )Net interest income
    
    
    
    
    
    
    
    
    
    
    ($1,245
    )
    
    
    
    
    
    
    
    
    
    
    ($1,488
    )Net interest rate spread
    
    
    
    
    
    
    
    
    
    
    (0.03
    %)
    
    
    
    
    
    
    
    
    
    
    0.07
    %Net interest margin on earning assets
    
    
    
    
    
    
    
    
    
    
    (0.22
    %)
    
    
    
    
    
    
    
    
    
    
    (0.19
    %)
 61




---



##### 



Provision for Loan Losses
 2009 Compared to 2008.
   2008 Compared to 2007.
 Non-Interest Income
 2009 Compared to 2008.
 62




---



##### 



2008 Compared to 2007.
 Non-Interest Expense
 2009 Compared to 2008.
   2008 Compared to 2007.
  Income Tax Provision
 2009 Compared to 2008.
 2008 Compared to 2007.
 63




---



##### 



Comparison of Financial Condition at December 31, 2009 and December 31, 2008
 Assets.
 Securities Available for Sale.
 December 31, 2009Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueUS Government sponsored
agency securities
    
    $
    12,759
    
    
    $
    20
    
    
    
    ($30
    )
    
    $
    12,749Corporate bonds
    
    
    33,308
    
    
    
    
    
    
    
    (197
    )
    
    
    33,111Mortgage backed securities
    
    
    101
    
    
    
    3
    
    
    
    
    
    
    
    104Totals
    
    $
    46,168
    
    
    $
    23
    
    
    
    ($227
    )
    
    $
    45,964
  Estimated
    
    
    WeightedAmortized
    
    
    Market
    
    
    AveragePar Value
    
    
    Cost
    
    
    Value
    
    
    YieldUS Government sponsored
agency securities
    
    $
    12,500
    
    
    $
    12,759
    
    
    $
    12,749
    
    
    
    1.25
    %Corporate bonds
    
    
    33,000
    
    
    
    33,308
    
    
    
    33,111
    
    
    
    1.19
    %Mortgage backed securities
    
    
    101
    
    
    
    101
    
    
    
    104
    
    
    
    5.95
    %Totals
    
    $
    45,601
    
    
    $
    46,168
    
    
    $
    45,964
    
    
    
    1.22
    %
  64




---



##### 



Loans.
 2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Consumer loans
    
    $
    29,386
    
    
    $
    31,864
    
    
    $
    35,833
    
    
    $
    32,282
    
    
    $
    35,041Commercial, financial, & other
    
    
    144,630
    
    
    
    164,740
    
    
    
    174,958
    
    
    
    124,523
    
    
    
    106,900Land development loans  residential
    
    
    38,472
    
    
    
    54,323
    
    
    
    63,639
    
    
    
    65,460
    
    
    
    58,943Land development loans  non residential
    
    
    11,644
    
    
    
    16,094
    
    
    
    10,156
    
    
    
    14,633
    
    
    
    0Commercial construction loans  residential
    
    
    13,287
    
    
    
    17,296
    
    
    
    33,768
    
    
    
    30,988
    
    
    
    37,806Commercial construction loans  non
residential
    
    
    20,061
    
    
    
    25,322
    
    
    
    40,187
    
    
    
    38,662
    
    
    
    47,384Commercial real estate mortgages
    
    
    531,156
    
    
    
    571,204
    
    
    
    539,306
    
    
    
    401,924
    
    
    
    323,666Residential real estate mortgages
    
    
    44,500
    
    
    
    52,426
    
    
    
    54,237
    
    
    
    47,948
    
    
    
    47,297$
    833,136
    
    
    $
    933,269
    
    
    $
    952,084
    
    
    $
    756,420
    
    
    $
    657,037
   65




---



##### 



Within
    
    
    Three to
    
    
    One to
    
    
    AfterThree
    
    
    Twelve
    
    
    Five
    
    
    FiveMonths
    
    
    Months
    
    
    Years
    
    
    Years
    
    
    TotalConsumer loans
    
    $
    19,695
    
    
    $
    573
    
    
    $
    7,843
    
    
    $
    36
    
    
    $
    28,147Commercial, financial & other
    
    
    60,748
    
    
    
    12,067
    
    
    
    59,696
    
    
    
    3,031
    
    
    
    135,542Land development loans  residential
    
    
    23,409
    
    
    
    1,848
    
    
    
    3,280
    
    
    
    
    
    
    
    28,537Land development loans -
non-residential
    
    
    6,861
    
    
    
    
    
    
    
    1,791
    
    
    
    
    
    
    
    8,652Construction loans  residential
    
    
    5,507
    
    
    
    1,856
    
    
    
    
    
    
    
    
    
    
    
    7,363Construction loans  non-residential
    
    
    15,224
    
    
    
    228
    
    
    
    1,050
    
    
    
    
    
    
    
    16,502Commercial real estate mortgages
    
    
    35,438
    
    
    
    55,275
    
    
    
    404,312
    
    
    
    21,550
    
    
    
    516,575Residential real estate mortgages
    
    
    2,282
    
    
    
    17,321
    
    
    
    14,599
    
    
    
    8,275
    
    
    
    42,477$
    169,164
    
    
    $
    89,168
    
    
    $
    492,571
    
    
    $
    32,892
    
    
    
    783,795Non-accrual loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,341Total loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    833,136Loan at fixed interest rates
    
    $
    58,645
    
    
    $
    72,853
    
    
    $
    474,850
    
    
    $
    32,410
    
    
    $
    638,758Loan at variable interest rates
    
    
    110,519
    
    
    
    16,315
    
    
    
    17,721
    
    
    
    482
    
    
    
    145,037$
    169,164
    
    
    $
    89,168
    
    
    $
    492,571
    
    
    $
    32,892
    
    
    
    783,795Non-accrual loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,341Total loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    833,136
    2009
    
    
    2008Troubled debt restructuring and still accruing
    
    
    59,420
    
    
    
    17,765Over 90 days past due and still accruing
    
    
    
    
    
    
    450Non-accrual loans
    
    
    49,341
    
    
    
    51,708Total non performing loans
    
    $
    108,761
    
    
    $
    69,923
 66




---



##### 



Number ofLoans
    
    
    BalanceConsumer Loans
    
    
    12
    
    
    $
    787Commercial Loans
    
    
    31
    
    
    
    8,375Land Development  Residential
    
    
    10
    
    
    
    5,740Land Development  Non Residential
    
    
    2
    
    
    
    1,548Commercial Construction Loans  Residential
    
    
    9
    
    
    
    3,230Commercial Construction Loans  Non Residential
    
    
    3
    
    
    
    3,559Commercial Mortgage Loans
    
    
    25
    
    
    
    9,672Residential Mortgages Loans
    
    
    9
    
    
    
    1,784Totals
    
    
    101
    
    
    $
    34,695
  Number ofLoans
    
    
    BalanceConsumer loans
    
    
    17
    
    
    $
    1,239Commercial, financial, & other
    
    
    40
    
    
    
    9,088Commercial real estate construction  residential property
    
    
    14
    
    
    
    9,935Commercial real estate construction  non residential property
    
    
    3
    
    
    
    2,992Land development loans  residential property
    
    
    13
    
    
    
    5,924Land development loans  non residential property
    
    
    3
    
    
    
    3,559Commercial real estate mortgages
    
    
    38
    
    
    
    14,581Residential real estate mortgages
    
    
    11
    
    
    
    2,023Total non-accrual loans
    
    
    139
    
    
    $
    49,341
 67




---



##### 



Allowance for Loan Losses.
 2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Balance, beginning of year
    
    $
    14,452
    
    
    $
    10,617
    
    
    $
    7,775
    
    
    $
    6,808
    
    
    $
    5,884Allowance on loans acquired
    
    
    
    
    
    
    
    
    
    
    1,704
    
    
    
    
    
    
    
    Charge-offs:Consumer loans
    
    
    1,154
    
    
    
    318
    
    
    
    226
    
    
    
    24
    
    
    
    112Commercial, financial & other
    
    
    4,878
    
    
    
    4,304
    
    
    
    914
    
    
    
    139
    
    
    
    169Commercial construction loans  residential
    
    
    9,441
    
    
    
    1,635
    
    
    
    1,291
    
    
    
    
    
    
    
    Commercial construction loans  non-residential
    
    
    4,364
    
    
    
    192
    
    
    
    0
    
    
    
    
    
    
    
    Land development loans  residential
    
    
    1,471
    
    
    
    1,777
    
    
    
    1,665
    
    
    
    
    
    
    
    Land development loans  non-residential
    
    
    1,981
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Commercial real estate mortgages
    
    
    6,919
    
    
    
    2,446
    
    
    
    662
    
    
    
    36
    
    
    
    86Residential loans
    
    
    701
    
    
    
    296
    
    
    
    320
    
    
    
    38
    
    
    
    Recoveries:Consumer loans
    
    
    176
    
    
    
    19
    
    
    
    25
    
    
    
    17
    
    
    
    37Commercial, financial & other
    
    
    339
    
    
    
    117
    
    
    
    224
    
    
    
    218
    
    
    
    131Commercial construction loans  non-residential
    
    
    0
    
    
    
    3
    
    
    
    6
    
    
    
    
    
    
    
    Land development loans  residential
    
    
    107
    
    
    
    33
    
    
    
    
    
    
    
    
    
    
    
    Commercial real estate mortgages
    
    
    61
    
    
    
    21
    
    
    
    140
    
    
    
    26
    
    
    
    10Residential loans
    
    
    36
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    32Net charge-offs
    
    
    30,190
    
    
    
    10,771
    
    
    
    4,683
    
    
    
    (24
    )
    
    
    157Additions charged to operations
    
    
    50,863
    
    
    
    14,606
    
    
    
    5,821
    
    
    
    943
    
    
    
    1,081Balance at end of period
    
    $
    35,125
    
    
    $
    14,452
    
    
    $
    10,617
    
    
    $
    7,775
    
    
    $
    6,808Allowance to total loans
    
    
    4.22
    %
    
    
    1.55
    %
    
    
    1.12
    %
    
    
    1.03
    %
    
    
    1.04
    %Net Charge-offs to average loans
    
    
    3.41
    %
    
    
    1.14
    %
    
    
    0.50
    %
    
    
    0.00
    %
    
    
    0.02
    %
 68




---



##### 




    
    The period utilized for the consideration of net charge-offs was shortened from two
years to one year based on the nature of the economic environment in Southeastern
Michigan.
    
    The charge-off policy utilized by the Bank was also revised due to updated regulatory
guidance. The Bank is required to record charge-offs on any substandard collateral
dependent loan to reduce the loan balance to its fair value. Previously, the Bank would
include any collateral shortfall on substandard collateral dependent loans in the
allowance for loan losses.
    
    The loans that were individually analyzed for impairment was changed during 2009 to
include any loans over $500,000 that were on non-accrual status and any loans that were
classified as troubled debt restructuring. Previously, all substandard loans greater that
$150,000 were individually analyzed for impairment and loans classified as troubled debt
restructuring were not individually analyzed.
    
    The loss factors applied to those loans not individually analyzed was modified to more
accurately include the risk of charge-off by loan type.
  69




---



##### 



Total2009
    
    2008
    
    2007
    
    2006
    
    2005Consumer loans
    
    $
    819
    
    
    $
    141
    
    
    $
    453
    
    
    $
    470
    
    
    $
    512Commercial, financial, & other
    
    
    6,498
    
    
    
    1,298
    
    
    
    1,404
    
    
    
    1,462
    
    
    
    1,527Land development loans  residential
    
    
    5,909
    
    
    
    4,496
    
    
    
    2,215
    
    
    
    1,228
    
    
    
    566Land development loans  non-residential
    
    
    807
    
    
    
    2,086
    
    
    
    117
    
    
    
    146
    
    
    
    0Commercial construction loans  residential
    
    
    2,003
    
    
    
    1,739
    
    
    
    714
    
    
    
    366
    
    
    
    311Commercial construction loans 
non-residential
    
    
    3,450
    
    
    
    1,151
    
    
    
    553
    
    
    
    434
    
    
    
    517Commercial real estate mortgages
    
    
    15,286
    
    
    
    3,391
    
    
    
    4,671
    
    
    
    3,270
    
    
    
    3,065Residential real estate mortgages
    
    
    353
    
    
    
    150
    
    
    
    490
    
    
    
    398
    
    
    
    310$
    35,125
    
    
    $
    14,452
    
    
    $
    10,617
    
    
    $
    7,775
    
    
    $
    6,808
 Percent of allowance for loan losses in each categoryto total allowance for loan losses2009
    
    2008
    
    2007
    
    2006
    
    2005Consumer loans
    
    
    2.33
    %
    
    
    0.98
    %
    
    
    4.27
    %
    
    
    6.05
    %
    
    
    7.52
    %Commercial, financial, & other
    
    
    18.50
    %
    
    
    8.98
    %
    
    
    13.22
    %
    
    
    18.80
    %
    
    
    22.43
    %Land development loans  residential
    
    
    16.82
    %
    
    
    31.11
    %
    
    
    20.86
    %
    
    
    15.80
    %
    
    
    8.31
    %Land development loans  non-residential
    
    
    2.30
    %
    
    
    14.43
    %
    
    
    1.10
    %
    
    
    1.88
    %
    
    
    0.00
    %Commercial construction loans  residential
    
    
    5.70
    %
    
    
    12.03
    %
    
    
    6.73
    %
    
    
    4.71
    %
    
    
    4.57
    %Commercial construction loans 
non-residential
    
    
    9.82
    %
    
    
    7.96
    %
    
    
    5.21
    %
    
    
    5.58
    %
    
    
    7.59
    %Commercial real estate mortgages
    
    
    43.52
    %
    
    
    23.46
    %
    
    
    44.00
    %
    
    
    42.06
    %
    
    
    45.02
    %Residential real estate mortgages
    
    
    1.01
    %
    
    
    1.04
    %
    
    
    4.62
    %
    
    
    5.12
    %
    
    
    4.55
    %100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
 Percent of loans in each category to total loans2009
    
    2008
    
    2007
    
    2006
    
    2005Consumer loans
    
    
    3.53
    %
    
    
    3.41
    %
    
    
    3.76
    %
    
    
    4.27
    %
    
    
    5.33
    %Commercial, financial, & other
    
    
    17.36
    %
    
    
    17.65
    %
    
    
    18.38
    %
    
    
    16.46
    %
    
    
    16.27
    %Land development loans  residential
    
    
    4.62
    %
    
    
    5.82
    %
    
    
    6.68
    %
    
    
    8.65
    %
    
    
    8.97
    %Land development loans  non-residential
    
    
    1.40
    %
    
    
    1.72
    %
    
    
    1.07
    %
    
    
    1.93
    %
    
    
    0.00
    %Commercial construction loans  residential
    
    
    1.59
    %
    
    
    1.85
    %
    
    
    3.55
    %
    
    
    4.10
    %
    
    
    5.75
    %Commercial construction loans 
non-residential
    
    
    2.42
    %
    
    
    2.71
    %
    
    
    4.22
    %
    
    
    5.11
    %
    
    
    7.21
    %Commercial real estate mortgages
    
    
    63.75
    %
    
    
    61.20
    %
    
    
    56.64
    %
    
    
    53.14
    %
    
    
    49.26
    %Residential real estate mortgages
    
    
    5.34
    %
    
    
    5.62
    %
    
    
    5.70
    %
    
    
    6.34
    %
    
    
    7.20
    %100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
    
    
    100.00
    %
 70




---



##### 



Premises and Equipment.
 Real Estate Owned.
 Goodwill and Other Intangible Assets.
  2009Amortization of
    
    
    Impairment ofIntangible Assets
    
    
    Intangible AssetsCore deposit intangible from acquisition of:Bank of Washtenaw
    
    $
    33
    
    
    $
    231Fidelity Financial Corporation of Michigan
    
    
    312
    
    
    
    2,181Total core deposit intangible
    
    $
    345
    
    
    $
    2,412Borrower relationship intangible from
acquisition of:Bank of Washtenaw
    
    $
    43
    
    
    $
    275Fidelity Financial Corporation of Michigan
    
    
    207
    
    
    
    1,310Total borrower relationship intangible
    
    $
    250
    
    
    $
    1,585Total intangible assets
    
    $
    595
    
    
    $
    3,997
 Accrued Interest Receivable.
 Other Assets
 71




---



##### 



Deposits.
 December 31, 2009
    
    
    December 31, 2008
    
    
    PercentBalance
    
    
    Percent
    
    
    Balance
    
    
    Percent
    
    
    Increase/(Decrease)Non-interest bearing:Demand
    
    $
    83,873
    
    
    
    9.66
    %
    
    $
    81,317
    
    
    
    8.67
    %
    
    
    3.14
    %Interest bearing:Checking
    
    $
    83,087
    
    
    
    9.57
    %
    
    $
    103,774
    
    
    
    11.06
    %
    
    
    (19.93
    %)Money market
    
    
    52,412
    
    
    
    6.04
    %
    
    
    163,611
    
    
    
    17.44
    %
    
    
    (67.97
    %)Savings
    
    
    43,343
    
    
    
    4.99
    %
    
    
    54,164
    
    
    
    5.77
    %
    
    
    (19.98
    %)Time, under $100,000
    
    
    301,829
    
    
    
    34.77
    %
    
    
    211,109
    
    
    
    22.50
    %
    
    
    42.97
    %Time, $100,000 and
over
    
    
    303,411
    
    
    
    34.97
    %
    
    
    324,420
    
    
    
    34.56
    %
    
    
    (6.48
    %)784,082
    
    
    
    90.34
    %
    
    
    857,078
    
    
    
    91.33
    %
    
    
    (8.52
    %)$
    867,955
    
    
    
    100.00
    %
    
    $
    938,395
    
    
    
    100.00
    %
    
    
    (7.51
    %)
    72




---



##### 



$100,000 and over
    
    
    Less than $100,000
    
    
    Total2010
    
    $
    277,729
    
    
    $
    274,181
    
    
    $
    551,9102011
    
    
    24,367
    
    
    
    26,534
    
    
    
    50,9012012
    
    
    802
    
    
    
    587
    
    
    
    1,3892013
    
    
    
    
    
    
    187
    
    
    
    1872014 and thereafter
    
    
    513
    
    
    
    340
    
    
    
    853Totals
    
    $
    303,411
    
    
    $
    301,829
    
    
    $
    605,240
  2009
    
    
    2008Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageAmount
    
    
    Rate
    
    
    Amount
    
    
    RateNon-interest bearing:Demand
    
    $
    83,873
    
    
    
    
    
    
    $
    81,317
    
    
    
    Interest bearing:Checking
    
    $
    83,087
    
    
    
    0.47
    %
    
    $
    103,774
    
    
    
    1.75
    %Money market
    
    
    52,412
    
    
    
    0.64
    %
    
    
    163,611
    
    
    
    2.19
    %Savings
    
    
    43,343
    
    
    
    0.30
    %
    
    
    54,164
    
    
    
    2.06
    %Time, under $100,000
    
    
    301,829
    
    
    
    2.71
    %
    
    
    211,109
    
    
    
    3.81
    %Time, $100,000 and over
    
    
    303,411
    
    
    
    2.59
    %
    
    
    324,420
    
    
    
    3.64
    %784,082
    
    
    
    
    
    
    
    857,078$
    867,955
    
    
    
    
    
    
    $
    938,395
  Federal Home Loan Bank Advances
  73




---



##### 



Other Borrowings.
 Accrued Interest Payable
 Other Liabilities.
 Subordinated Debentures.
 Capital
      Market Risk Analysis
  74




---



##### 



Interest Rate Sensitivity Analysis.
   75




---



##### 



Interest Rate Sensitivity Period1-90
    
    
    91-365
    
    
    1-5
    
    
    Over(In thousands)
    
    Days
    
    
    Days
    
    
    Years
    
    
    5 Years
    
    
    TotalEarning assetsFederal funds sold
    
    $
    156
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    156Interest bearing deposits with Banks
    
    
    69,538
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69,538Mortgage loans held for sale
    
    
    1,129
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,129Securities available for sale
    
    
    
    
    
    
    
    
    
    
    45,964
    
    
    
    
    
    
    
    45,964Federal Home Loan Bank stock
    
    
    3,698
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,698Total loans, net of non-accrual
    
    
    169,163
    
    
    
    88,745
    
    
    
    492,995
    
    
    
    32,892
    
    
    
    783,795Total earning assets
    
    
    243,684
    
    
    
    88,745
    
    
    
    538,959
    
    
    
    32,892
    
    
    
    904,280Interest bearing liabilitiesTotal interest bearing deposits
    
    
    374,977
    
    
    
    355,773
    
    
    
    53,064
    
    
    
    268
    
    
    
    784,082Federal Home Loan Bank advances
    
    
    34,000
    
    
    
    15,084
    
    
    
    14,771
    
    
    
    
    
    
    
    63,855Other Borrowings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Subordinated debentures
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000Total interest bearing liabilities
    
    
    418,977
    
    
    
    370,857
    
    
    
    67,835
    
    
    
    268
    
    
    
    857,937Net asset (liability) funding gap
    
    
    (175,293
    )
    
    
    (282,112
    )
    
    
    471,124
    
    
    
    32,624
    
    
    $
    46,343Cumulative net asset (liability) funding gap
    
    
    ($175,293
    )
    
    
    ($457,405
    )
    
    $
    13,719
    
    
    $
    46,343
   Change in Net Interest IncomeInterest Rate Change
    
    Amount
    
    Percent+ 300 Basis Points
    
    $
    962
    
    
    
    2.64
    %+ 200 Basis Points
    
    
    714
    
    
    
    1.96
    %+ 100 Basis Points
    
    
    398
    
    
    
    1.09
    %- 100 Basis Points
    
    
    10
    
    
    
    0.03
    %
 76




---



##### 



Liquidity.
      Payments Due By PeriodLess Than 1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    Over 5 Years
    
    
    TotalCertificates of deposit
    
    $
    551,910
    
    
    $
    52,290
    
    
    $
    1,040
    
    
    $
    
    
    
    $
    605,240Long-term borrowings
    
    
    49,139
    
    
    
    4,716
    
    
    
    10,000
    
    
    
    
    
    
    
    63,855Lease commitments
    
    
    649
    
    
    
    487
    
    
    
    24
    
    
    
    
    
    
    
    1,160Subordinated debentures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    10,000Totals
    
    $
    601,698
    
    
    $
    57,493
    
    
    $
    11,064
    
    
    $
    10,000
    
    
    $
    680,255
  Amount Of Commitment Expiration Per PeriodLess Than 1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    Over 5 Years
    
    
    TotalUnused loan commitments
    
    $
    51,816
    
    
    $
    7,761
    
    
    $
    6,918
    
    
    $
    8,722
    
    
    $
    75,217Standby letters of credit
    
    
    770
    
    
    
    1,932
    
    
    
    
    
    
    
    
    
    
    
    2,702Totals
    
    $
    52,586
    
    
    $
    9,693
    
    
    $
    6,918
    
    
    $
    8,722
    
    
    $
    77,919
 77




---



##### 



Impact of Inflation and Changing Prices
  Technology
   
   78




---



##### 



DEARBORN BANCORP, INC.
 DIRECTORS AND OFFICERS
 DIRECTORS
 
 
 
 
 
 
 
 
 
 OFFICERS
 
 
 
 79




---



##### 



FIDELITY BANK
 DIRECTORS AND EXECUTIVE OFFICERS
 DIRECTORS
 
 
 
 
 
 
 
 
 
 
 EXECUTIVE OFFICERS
 
 
 
 
 80




---



##### 



OFFICERS
 FIRST VICE PRESIDENT
 
 VICE PRESIDENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 ASSISTANT VICE PRESIDENTS
          FIRST LEVEL OFFICERS
                       81




---



##### 



FIDELITY BANK
 SUBSIDIARIES
 
 
 82




---



##### 



FIDELITY BANK
 LOCATIONS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 83




---



##### 



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
    
    Close2009First quarter
    
    $
    2.45
    
    
    $
    1.33
    
    
    $
    1.82Second quarter
    
    
    3.22
    
    
    
    1.75
    
    
    
    1.80Third quarter
    
    
    2.00
    
    
    
    0.80
    
    
    
    1.21Fourth quarter
    
    
    1.25
    
    
    
    0.35
    
    
    
    0.462008First 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
    
    
    
    1.66
  84




---



##### 



PRINCIPAL MARKET MAKERS
 nd
 
 
 
 
 
 th
 
 
 
 
 th
 85




---



##### 



DEARBORN BANCORP, INC.