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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
X Annual report pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934 for the fiscal year ended DECEMBER 31, 2002 or
Transition report pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934 for the transition period from _______ to _______
Commission file number 000-24478.
DEARBORN BANCORP, INC.
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(Exact name of registrant as specified in its charter)
Michigan 38-3073622
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(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
22290 Michigan Avenue, Dearborn, MI 48124
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(Address of principal executive office) (Zip code)
(313) 274-1000
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(Registrant's telephone number, including area code)
Securities registered pursuant to section 12(d) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ----------------
None None
Securities registered pursuant to section 12(g) of the Act:
Common Stock
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2) Yes [ ] No [X]
The aggregate market value of the common equity held by non-affiliates of the
registrant computed by reference to the average bid and asked price of such
common equity, as of the last business day of the registrant's most recently
completed second quarter, was approximately $30,297,555.
As of March 1, 2003, 2,620,626 shares of common stock of the registrant were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 2002 Annual Report to Stockholders of the Registrant are
incorporated in Parts I, II and IV of this report. Portions of the definitive
Proxy Statement of the Registrant dated April 18, 2003, to be filed pursuant to
Regulation 14A, are incorporated by reference in Part III of this report.
DEARBORN BANCORP, INC.
FORM 10-K
PART I
FORWARD LOOKING STATEMENTS
The following discussion contains forward-looking statements that are
based on management's beliefs, assumptions, current expectations, estimates and
projections about the financial services industry, the economy, and about the
Corporation and Bank. Words such as "anticipates", "believes", "estimates",
"expects", "forecasts", "intends", "is likely", "plans", "projects", variations
of such words and similar expressions are intended to identify such forward-
looking statements. These statements are not guarantees of future performance
and involve certain risks, uncertainties and assumptions ("Future Factors") that
are difficult to predict with regard to timing, extent, likelihood and degree of
occurrence. Therefore, actual results and outcomes may materially differ from
what may be expressed or forecasted in such forward-looking statements. The
Corporation undertakes no obligation to update, amend or clarify forward-looking
statements, whether as a result of new information, future events (whether
anticipated or unanticipated), or otherwise.
Future Factors include changes in interest rates and interest rate
relationships; demand for products and services; the degree of competition by
traditional and non-traditional competitors; changes in banking regulation;
changes in tax laws; changes in prices, levies and assessments; the impact of
technological advances; governmental and regulatory policy changes; the outcomes
of contingencies; trends in customer behavior as well as their ability to repay
loans; and changes in the national and local economy. These are representative
of the Future Factors that could cause a difference between an ultimate actual
outcome and a preceding forward-looking statement.
Item 1. Business
Dearborn Bancorp, Inc. (the "Corporation"), a Michigan corporation, is
a bank holding corporation owning all the common stock of the Community Bank of
Dearborn (the "Bank"), a Michigan banking corporation which commenced business
on February 28, 1994. The Bank is the only commercial bank headquartered in
Dearborn, Michigan and conducts business primarily in Wayne and Macomb Counties,
Michigan.
BACKGROUND
The liberalization of Michigan's branch banking laws, together with the
expansion of interstate banking, has led to substantial consolidation of the
banking industry in Michigan, including within the county in which the Bank has
its executive offices. In the past, several of the financial institutions within
the primary market area of the Bank have either been acquired by or merged with
larger financial institutions or out-of-state financial institutions. In some
cases, when these consolidations occurred, local boards of directors were
dissolved and local management relocated or in some cases terminated and has, in
some cases, resulted in policy and credit decisions being centralized away from
local management.
In the opinion of the Corporation's management, this situation has
created a favorable opportunity for a local commercial bank with local
management and directors. Management of the Corporation believes that such a
bank attracts those customers who wish to conduct business with a locally
managed institution that demonstrates an active interest in their business and
personal financial affairs. The Corporation believes that a locally managed
institution, in many cases, will be able to deliver more timely responses to
customer requests, provide customized financial products and services and offer
customers the personal attention of the Bank's senior banking officers. The Bank
seeks to take advantage of this opportunity by emphasizing in its marketing plan
the Bank's local management and the Bank's ties and commitment to its market
area.
The Corporation was incorporated as a Michigan business corporation on
September 30, 1992. The Corporation was formed to acquire all of the Bank's
issued and outstanding stock and to engage in the business of a bank holding
corporation under the Bank Holding Company Act of 1956, as amended (the "Act").
The executive offices of the Corporation and the Bank are located at
22290 Michigan Avenue, Dearborn, Michigan 48124, telephone number (313)
274-1000.
2
BUSINESS OF THE CORPORATION
The primary purpose of the Corporation is the ownership of the Bank. In
the future, the Corporation may form or acquire other subsidiaries as permitted
under the Act and the regulations of the Federal Reserve. There are no plans,
agreements, understandings or negotiations, either written or oral, at the
present time for any acquisitions by the Corporation.
BUSINESS OF THE BANK
Principal operations of the Bank commenced on February 28, 1994 when
the Bank opened for business at its main office, located at 22290 Michigan
Avenue, Dearborn, Michigan. On December 20, 1995, the Bank opened its second
office, located at 24935 West Warren Avenue, Dearborn Heights, Michigan. On
August 11, 1997, the Bank opened its third office, located at 44623 Five Mile
Road, Plymouth Township, Michigan. On May 14, 2001, the Bank opened its fourth
office, located at 1325 N. Canton Center Road, Canton Township, Michigan. On
December 19, 2001, the Bank opened its fifth office, located at 45000 River
Ridge Drive, Suite 110, Clinton Township, Michigan. On December 19, 2002, the
Bank relocated its fifth office to 19100 Hall Road in Clinton Township. This
office is adjacent to the office at 45000 River Ridge Drive, which will continue
to serve as a regional lending center. On February 13, 2003, the Bank opened its
sixth office at 12820 Fort Street in Southgate, Michigan. The Bank, through its
main and branch offices, emphasizes and offers highly personalized service to
its customers.
The customer service officers are well-trained, experienced bank
officers who fill the needs of the customers and handle the requests of their
customers in a professional manner. The management of the Corporation and the
Bank believe that it is important to the success of the Bank's strategy to
create long-term relationships between customers and Bank employees. The Bank's
senior management holds regular staff information meetings so that all employees
are given information regarding the Bank's plans and objectives, and employees
are offered the opportunity to make suggestions to improve the Bank's
performance. The management of the Bank believes that this approach creates a
commitment by all employees to the Bank's success.
The Bank offers a wide range of financial products and services. These
include checking accounts, savings accounts, money market accounts, certificates
of deposit, business checking, direct deposit, loan services (commercial,
consumer, real estate mortgages), travelers' checks, cashiers' checks, wire
transfers, safety deposit boxes, collection services, and night depository
services. The Bank deployed an automated teller machine in October of 2000 in
Dearborn, a machine in January of 2001 in Plymouth Township, a machine in May of
2001 in Canton Township, a machine in December of 2002 in Clinton Township and a
machine in Southgate in February of 2003. In July of 2001, the Bank began
operation of a voice response, automated telephone banking service, available 24
hours a day. In August 2001, the Bank installed a new proof of deposit and check
imaging system and began offering check imaging options including statements on
CD ROM in January of 2003. The Bank does not have a trust department or internet
banking.
On August 19, 1997, the Bank purchased a shell insurance agency from
the Burnham Insurance Group, Battle Creek, Michigan. Upon purchase, the Bank
renamed the agency to Community Bank Insurance Agency, Inc. Community Bank
Insurance Agency's primary functions are to act as the sales agent for the
Corporation's own insurance policies and to hold a minority interest in Michigan
Bankers Title Company of East Michigan, LLC, a title insurance company.
On May 1, 2001, the Bank formed Community Bank Mortgage, Inc., a
mortgage company that originates, holds and sells commercial and residential
mortgages.
On March 26, 2002, the Bank formed Community Bank Audit Services, Inc.,
a company that provides internal audit and compliance consulting to other small
community banks.
3
BUSINESS STRATEGY
Growth Through Branch Expansion. Since commencing operations, the
Bank's growth has been accomplished through internal growth. The internal growth
of the Bank has been aided by creating a network of six branch offices and one
regional lending center. The Bank currently has four offices in western Wayne
County, one in the Downriver area of Wayne County and one office in Macomb
County. The Bank also added a regional lending center in Macomb County during
2001 and expects to open a regional lending center in Oakland County during the
second quarter of 2003.
Emphasize Community Banking. The Bank strives to maintain a strong
commitment to community banking. The Bank's goal is to attract small to
medium-sized businesses and individuals as customers who wish to conduct
business with a local commercial bank that demonstrates an active interest in
their business and personal affairs. Management believes that the Bank is better
able than its larger competitors to deliver more timely responses to customer
requests, provide customized financial products and services and offer customers
the personal attention of senior banking officers.
Expand Lending in the Bank's Primary Market. The Bank's loan portfolio
currently consists of residential mortgage loans, commercial real estate loans,
small business commercial loans and other consumer loans. Management intends to
maintain its emphasis on these loan products.
Grow Through Selected Acquisitions. Although the Corporation will
continue to pursue internal growth at the Bank, management believes that growth
opportunities may be found in acquisitions of community banks or branches in
Michigan to enhance the Corporation's markets. As part of its normal business
operations, management maintains contact with financial institutions to discuss
various acquisition possibilities. However, the Corporation has made no bank or
branch acquisitions to date, and it presently has no agreements, commitments,
understandings or arrangements to acquire any other banks or branches, and there
is no assurance that the Corporation will be successful in its acquisition
strategy.
MARKETING PLAN
The Bank's marketing plan focuses on the concepts of corporate
citizenship and personal interaction within the communities the Bank serves
through promotion of, and active participation in, a number of civic
organizations and ongoing community activities. Management believes that these
efforts establish the identity and philosophy of the Bank within the communities
it serves and allow Bank officers and employees to personally interact with
local business leaders and members of the public. The marketing plan also
emphasizes direct sales calls by Bank officers and specific telemarketing
programs involving the Bank's branch managers and customer service
representatives.
The Bank has two primary target markets: consumer financial services,
with an emphasis on individual deposit accounts and single family residential
lending; and business financial services, with an emphasis on deposit and loan
products designed for small- to medium-sized businesses.
Community Club. At inception, the Bank established a "Community Club"
which has become an important marketing tool to increase the Bank's total
deposits. The Community Club is targeted at individuals over the age of 50. As
of December 31, 2002, the Community Club had over 3,800 members who accounted
for total deposits of $146.2 million, or 56% of the Bank's total deposits.
Among other things, membership in the Community Club entitles the
customer to increased personal attention and service by Bank staff and a 1/4%
premium on new certificate of deposit accounts with a minimum $1,000 balance and
one year maturity. The Bank also hosts local community events, educational
seminars and travel programs which have been well received by the Community Club
members. Management believes that the success of the Community Club and the
Bank's continued efforts to expand the benefits of the program will foster an
increase in the number of Community Club members and deposit accounts.
4
Business Financial Services. The Bank's business marketing efforts are
directed by senior management, including Michael J. Ross, William T. LaRosa,
Warren R. Musson, H. Kristene Rautio, Stephen C. Tarczy and Jeffrey J. Wolber
with Mr. Wolber assigned as sales manager, whose duties include administering
and coordinating the business development efforts of the Bank.
Each Bank officer, in addition to each branch manager, is responsible
for creating new business opportunities for the Bank. The targeted list of new
business customers represents a mix of industrial, manufacturing, professional
and retail clients with an emphasis on businesses with annual sales of $10
million or less.
The Bank has developed an aggressive telemarketing program for new
business. Businesses are identified through listings provided by the various
Chambers of Commerce, local phone directories and other sources targeted to the
communities the Bank serves. Initial sales calls are introductory in nature with
follow-up calls made to determine whether a meeting can be arranged with the
targeted company to discuss the Bank's products and services. The Bank believes
this strategy has been, and will continue to be, successful in generating new
business for the Bank.
In addition to its telemarketing program, the Bank's officers maintain
contact with local attorneys, accountants and other representatives in the local
community that may be in a position to refer business to the Bank. The Bank also
encourages and supports its officers and employees to join and participate in
various community organizations and events.
Through their many years of business and community leadership, each of
the Corporation's Directors has been, and will continue to be, a strong source
of referrals for the Bank.
Consumer Financial Services. The Bank originates residential real
estate loans primarily through its retail branch facilities. Branch managers and
mortgage loan originators develop new residential mortgage applications from
several sources including real estate brokers, insurance agents, accountants,
attorneys, existing residential mortgage customers and other customers of the
Bank. An extensive telemarketing effort generates potential customers as a
result of these contacts. Additionally, the Bank has developed targeted real
estate newsletters that are mailed to an existing database composed of those
referral sources. The Bank also maintains an active role in several local real
estate boards offering product training to members.
The Bank, as a result of its secondary market operations, is able to
offer a variety of loan products that serve the needs of first time home buyers.
Customers desiring to construct new homes are able to obtain financing as a
result of the Bank's construction loan program that is offered in addition to
the permanent loan. Non-conforming loans, which include larger residential
loans, are also provided through the Bank's secondary marketing efforts. The
Bank also provides loans that it holds in its own portfolio on those
transactions that evidence satisfactory credit quality and income but are unable
to be sold in the secondary market for various reasons.
Management believes that cross-selling of the Bank's products and
services to its existing customers is vital to expanding account relationships,
generating additional sales opportunities and increasing fee income.
LOAN POLICY
As a routine part of the Bank's business, the Bank makes loans to
individuals and businesses located within the Bank's market area. The loan
policy of the Bank states that the function of the lending operation is
two-fold: to provide a means for the investment of funds at a profitable rate of
return with an acceptable degree of risk, and to meet the credit needs of the
responsible businesses and individuals who are customers of the Bank. However,
the Board of Directors of the Bank recognizes that in the normal business of
lending, some losses on loans will be inevitable and should be considered a part
of the normal cost of doing business. Under the loan policy, lending authority
is granted to a limited number of executive officers, each of whom has over 20
years of banking experience. Currently this group includes Michael J. Ross,
Daniel P. Brophy, William T. LaRosa, Sam A. Locricchio, Warren R. Musson and
Stephen C. Tarczy.
5
The Bank's loan policy anticipates that priorities in extending loans
will change from time to time as interest rates, market conditions and
competitive factors change. The policy sets forth guidelines on a
nondiscriminatory basis for lending in accordance with applicable laws and
regulations. The policy describes various criteria in granting loans, including
the ability to pay; the character of the customer; evidence of financial
responsibility; purpose of the loan; knowledge of collateral and its value;
terms of repayment; source of repayment; payment history; and economic
conditions.
The loan policy specifies individual lending limits for certain
officers up to a maximum of $50,000 for unsecured loans and $100,000 for secured
loans, with loans from $100,000 to $2,000,000 requiring approval by a loan
committee. Larger loans up to the legal maximum authorized by law require the
approval of the Board of Directors of the Bank.
The loan policy also limits the amount of funds that may be loaned
against specified types of collateral including: listed securities - 90% loan to
value; U.S. Government securities - 90% loan to value; and insured bank deposits
- - 100% loan to value. As to loans secured principally by real estate, the policy
complies with the FIRREA Act of 1989 regarding appraisals of the property
offered as collateral by licensed independent appraisers. The loan policy also
provides general guidelines as to collateral, provides for environmental
reviews, contains specific limitations with respect to loans to employees,
executive officers and directors, provides for problem loan identification,
establishes a policy for the maintenance of a loan loss reserve, provides for
loan reviews and sets forth policies for mortgage lending and other matters
relating to the Bank's lending business.
LENDING PRACTICES
Commercial loans. The Bank's commercial lending group originates
commercial loans primarily in Wayne, Oakland and Macomb Counties in southeastern
Michigan. Commercial loans are originated by a group of lending officers with
the assistance of Michael J. Ross and Warren R. Musson. Loans are originated for
general business purposes, including working capital, accounts receivable
financing, machinery and equipment acquisition, and commercial real estate
financing including new construction and land development.
Working capital loans are often structured as a line of credit and are
reviewed periodically in connection with the borrower's year-end financial
reporting. These loans generally are secured by all of the assets of the
borrower, a personal guaranty of the owners and have an interest rate plus a
margin tied to the national prime rate. Loans for machinery and equipment
purposes typically have a maturity of five to seven years and are fully
amortizing. Commercial real estate loans are usually written with a five-year
maturity and are amortized over a twenty-year period. Commercial real estate
loans may have an interest rate that is fixed to maturity or float with a margin
over the prime rate or another index.
The Bank evaluates all aspects of a commercial loan transaction in
order to minimize credit and interest rate risk. Underwriting includes an
assessment of management, products, markets, cash flow, capital, income and
collateral. The analysis includes a review of historical and projected financial
results. Appraisals are obtained by licensed independent appraisers who are well
known to the Bank on transactions involving real estate and, in some cases,
equipment.
Commercial real estate lending involves more risk than residential
lending, because loan balances are greater and repayment is dependent upon the
borrower's operations. The Bank attempts to minimize risk associated with these
transactions by limiting its exposure to existing well-known customers and new
customers with an established profitable history. Risk is further reduced by
limiting the concentration of credit to any one borrower as well as the type of
commercial real estate financed.
Single-Family Residential Real Estate Loans. The Bank's subsidiary,
Community Bank Mortgage, Inc. originates residential real estate loans in its
market area according to secondary market underwriting standards. These loans
provide borrowers with a fixed interest rate with terms up to thirty years.
Loans are sold on a servicing released basis in the secondary market with all
interest rate risk and credit risk passed to the purchaser. Community Bank
Mortgage, Inc. from time to time may elect to underwrite certain residential
real estate loans to be held in it's own loan portfolio. These loans are
generally underwritten with the same standards that apply to the secondary
market. The majority of the portfolio loans have an interest rate that is
indexed to the one-year treasury rate and adjusts annually.
6
Consumer Loans. The Bank originates consumer loans for a wide variety
of personal financial requirements. Consumer loans include home equity lines of
credit, and loans secured by new and used automobiles, boats, savings accounts
as well as overdraft protection for checking account customers. The Bank also
purchases retail installment loans from a select list of automobile dealerships
located primarily in the Bank's market.
Consumer loans generally have shorter terms and higher interest rates
than residential mortgage loans and, except for home equity lines of credit,
usually involve more credit risk than mortgage loans because of the type and
nature of the collateral. While the Bank does not utilize a formal credit
scoring system, the Bank believes its loans are underwritten carefully, with a
strong emphasis on the amount of the down payment, credit quality, employment
stability, and monthly income. These loans are generally repaid on a monthly
repayment schedule with the source of repayment tied to the borrower's periodic
income. In addition, consumer lending collections are dependent on the
borrower's continuing financial stability, and are thus likely to be adversely
affected by job loss, illness and personal bankruptcy. In many cases,
repossessed collateral for a defaulted consumer loan will not provide an
adequate source of repayment of the outstanding loan balance because of
depreciation of the underlying collateral. The Bank believes that the generally
higher yields earned on consumer loans compensate for the increased credit risk
associated with such loans and that consumer loans are important to its efforts
to serve the credit needs of the communities and customers that it serves.
Allowance for Loan Losses. An allowance for loan losses is maintained
at a level that management of the Bank considers adequate to provide for losses
in the loan portfolio. Allowances for loan losses are based upon the Bank's
experience and estimates of the net realizable value of collateral in each loan
portfolio. The Board of Directors and senior management review the allowance
quarterly. The Bank's evaluation takes into consideration experience, the level
of classified assets, non-performing loans, the current level of the allowance
as it relates to the total loan portfolio, projected charge-offs, current
economic conditions, recent regulatory examinations and other factors.
EMPLOYEES
As of March 1, 2003, the Bank had 112 employees, including 34 officers
and 78 customer service, operations and other support persons. Management
believes that the Bank's relations with its employees are excellent.
COMPETITION
The Bank faces strong competition for deposits, loans and other
financial services from numerous banks, savings banks, thrifts, credit unions
and other financial institutions as well as other entities which provide
financial services, including consumer finance companies, securities brokerage
firms, mortgage brokers, insurance companies, mutual funds, and other lending
sources and investment alternatives. Some of the financial institutions and
financial services organizations with which the Bank competes are not subject to
the same degree of regulation as the Bank. Many of the financial institutions
and financial services organizations aggressively compete for business in the
Bank's market area. Most of these competitors have been in business for many
years, have established customer bases, are larger, have substantially higher
lending limits than the Bank, and are able to offer certain services that the
Bank does not currently provide, including more extensive branch networks, trust
services, and international banking services. In addition, most of these
entities have greater capital resources than the Bank, which, among other
things, may allow them to price their services at levels more favorable to the
customer and to provide larger credit facilities than could the Bank.
SUPERVISION AND REGULATION
The Corporation is a registered bank holding company and subject to the
supervision of the Federal Reserve System ("Federal Reserve"). The Corporation
is required to file with the Federal Reserve annual reports and such other
information as the Federal Reserve may require under the Bank Holding Company
Act of 1956, as amended (the "Act"). The Corporation and the Bank are each
subject to examination by the Federal Reserve.
7
The Act requires every bank holding company to obtain prior approval of
the Federal Reserve before it may merge with or consolidate into another bank
holding company, acquire substantially all assets of any bank, or acquire
ownership or control of any voting shares of any bank, if after such
acquisition, it would own or control, directly or indirectly, more than 5% of
the voting shares of such bank holding company or bank. The Federal Reserve may
in its discretion approve the acquisition by the Corporation of the voting
shares or substantially all assets of a bank located in Michigan and, subject to
certain restrictions, located in any other state.
The Act also prohibits a bank holding company, with certain exceptions,
from acquiring direct or indirect ownership or control of more than 5% of the
voting shares of any company that is not a bank, and from engaging in any
business other than that of banking, managing and controlling banks and their
subsidiaries. Holding companies may engage in, and may own shares of companies
engaged in, certain businesses found by the Federal Reserve to be closely
related to banking or the management or control of banks. Under current
regulations of the Federal Reserve, a holding company and its non-bank
subsidiaries are permitted to engage in investment management, sales and
consumer finance, equipment leasing, data processing, discount securities
brokerage, mortgage banking and brokerage, and other activities. These
activities are subject to certain limitation imposed by the regulations.
Transactions between the Corporation and the Bank are subject to
various restrictions imposed by state and federal law. Such transactions include
loans and other extensions of credit, purchases of securities, any payments of
fees and other distributions. Federal law places restrictions on the amount and
nature of loans to executive officers, directors and controlling persons of
banks insured by the Federal Deposit Insurance Corporation and holding companies
controlling such banks.
The Bank is a state chartered bank and subject to regulation and
examination by the Michigan Office of Financial and Insurance Services. The Bank
also is subject to certain provisions of the Federal Deposit Insurance Act and
regulations issued under that act. The regulations affect many activities of the
Bank, including the permissible types and amounts of loans, investments, capital
adequacy, branching, interest rates payable on deposits, required reserves, and
the safety and soundness of the Bank's practices. The Bank is not a member bank
of the Federal Reserve System and is regulated and examined by the Federal
Deposit Insurance Corporation.
A summary of consolidated net interest income, consolidated net
interest income volume / rate analysis, rate sensitivity analysis / gap analysis
and capital ratios is set forth under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the 2002 Annual
Report to Stockholders and is incorporated herein by reference.
Executive Officers of the Corporation and Bank
----------------------------------------------
Set forth below are the names and ages of the executive officers of the
Corporation and the Bank, positions held and the years from which held.
There are no family relationships among such persons.
JOHN E. DEMMER, 79
Chairman of the Board, Dearborn Bancorp, Inc. and Community Bank of
Dearborn
Chairman of the Board and Director of the Corporation since 1992.
Chairman of the Board and Director of the Bank since 1993. Chairman of
the Board and Chief Executive Officer of Jack Demmer Ford, Inc. since
1994. Chairman of the Board and Chief Executive Officer of Jack Demmer
Lincoln Mercury, Inc. since 1999.
RICHARD NORDSTROM, 75
Vice Chairman, Dearborn Bancorp, Inc.
Vice Chairman and Director of the Corporation since 1998. President and
Director of the Corporation from 1992 to 1997. Director of the Bank
since 1993. Chairman of the Board of Nordstrom Samson Associates from
1960 to 1996.
MICHAEL J. ROSS, 52
President, Dearborn Bancorp, Inc.
President and Chief Executive Officer, Community Bank of Dearborn
President and Director of the Corporation since 1998. Vice President
and Director of the Corporation from 1993 to 1997. President, Chief
Executive Officer, and Director of the Bank since 1993.
8
JEFFREY L. KARAFA, 38
Vice President, Treasurer and Secretary, Dearborn Bancorp, Inc.
Senior Vice President, CFO and Secretary, Community Bank of Dearborn
Vice President and Treasurer of the Corporation since 1998. Secretary
of the Corporation since 1999. Senior Vice President and CFO of the
Bank since 2000. Secretary of the Bank since 1999. Vice President of
the Bank from 1996 to 2000. Assistant Vice President of the Bank from
1994 to 1996.
DONALD G. KARCHER, 73
Vice President, Dearborn Bancorp, Inc.
Vice President and Director of the Corporation since 1992. Director of
the Bank since 1993. Chairman of the Board of Karcher Agency, Inc.
since 1994.
WILLIAM T. LAROSA, 54
Oakland Regional President, Community Bank of Dearborn
Oakland Regional President of the Bank since 2002. Market Executive of
Citizens Bank from 2000 to 2002. Community President of Citizens Bank
from 1996 to 2000. Chairman and CEO of National Bank of Royal Oak from
1993 to 1996.
SAM A. LOCRICCHIO, 53
Senior Vice President, Commercial Loan Officer, Community Bank of
Dearborn
Senior Vice President of the Bank since 2001. Executive Vice President
of Macomb Community Bank from 1996 to 2001.
WARREN R. MUSSON, 46
Senior Vice President, Head of Lending, Community Bank of Dearborn
Senior Vice President of the Bank since 2000. Vice President of the
Bank since 1999. Senior Vice President and Senior Loan Officer of
Peoples State Bank from 1993 to 1999.
STEPHEN C. TARCZY, 53
Northeast Regional President, Community Bank of Dearborn
Northeast Regional President of the Bank since 2001. President and CEO
of Macomb Community Bank from 1995 to 2001.
JEFFREY J. WOLBER, 47
Senior Vice President, Branch Operations, Community Bank of Dearborn
Senior Vice President of the Bank since 2000. Vice President of the
Bank from 1994 to 2000.
Item 2. Properties
The main office of the Corporation and the Bank is located in a single
story building containing 11,400 square feet at 22290 Michigan Avenue, Dearborn,
Michigan, which is owned by the Corporation and leased to the Bank.
The Bank's Dearborn Heights, Michigan branch office is located in a
single story commercial/retail office building at 24935 W. Warren Avenue at the
corner of Silvery Lane, which is also owned by the Corporation. Approximately
79% of the 3,240 square foot building is leased to the Bank and the remaining
space is leased to a non-affiliated tenant.
The Bank's Plymouth Township, Michigan branch office is located at
44623 Five Mile at the corner of Sheldon Road and contains 1,595 square feet of
leased space in a retail shopping center anchored by a regional grocery store.
The Bank's Canton Township, Michigan branch office is located in a
6,056 square foot single story commercial/retail office building at 1325 N.
Canton Center near the corner of Saltz Road and is owned by the Bank.
9
The Bank's Clinton Township, Michigan regional lending center is
located at 45000 River Ridge Drive, Suite 110, along Hall Road (M-59) near the
corner of Romeo Plank Road. The Bank leases 7,426 of space in the River Ridge
Corporate Office Center Building.
The Bank's Clinton Township, Michigan branch office is located at 19100
Hall Road near Romeo Plank Road. The Bank leases a 3,750 square foot single
story commercial/retail office building.
The Bank's Executive and Administrative Center is located at 1360
Porter Street, Suite 200 in Dearborn, Michigan. The Bank currently leases 4,420
square feet of this commercial office building.
The Bank's Southgate, Michigan branch office is located in a 2,035
square foot single story building, which is located at 12820 Fort Street and is
owned by the Bank.
The Bank's future Auburn Hills, Michigan regional lending center is
located at 3201 University Drive, Suite 180. The Bank currently leases 2,037
square feet of this commercial office building.
Item 3. Legal Proceedings
From time to time, the Corporation and its subsidiaries are parties to
legal proceedings incidental to their business. At December 31, 2002, there were
no legal proceedings which management anticipates would have a material adverse
effect on the Corporation.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
fourth quarter of 2002.
PART II
Item 5. Market for Registrant's Common Equity, and Related Stockholder Matters
The information required by this item appears in the Corporation's 2002
Annual Report to Stockholders under the caption "Dearborn Bancorp, Inc., Common
Stock" and is incorporated by reference herein.
Item 6. Selected Financial Data
The information required by this item appears in the Corporation's 2002
Annual Report to Stockholders under the caption "Summary of Selected Financial
Data" and is incorporated by reference herein.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by this item appears in the Corporation's 2002
Annual Report to Stockholders under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and is incorporated
by reference herein.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk
The Registrant is not required to provide this information as the
Registrant meets the definition of a small business issuer.
Item 8. Financial Statements and Supplementary Data
The financial statements included in the Corporation's 2002 Annual
Report to Stockholders are incorporated by reference herein.
10
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There are no changes in or disagreements with accountants on accounting
and financial disclosure.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information set forth under the caption "Information about
Directors and Nominees for Directors" in the definitive Proxy Statement of the
Corporation dated April 18, 2003 is incorporated by reference herein.
Reference is made to Part I of this report for information as to
executive officers of the Corporation and Bank.
Item 11. Executive Compensation
The information set forth under the caption "Executive Compensation" in
the definitive Proxy Statement of the Corporation dated April 18, 2003 is
incorporated by reference herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information set forth under the caption "Security Ownership" in the
definitive Proxy Statement of the Corporation dated April 18, 2003 is
incorporated by reference herein.
Equity Plan Compensation Information
The following table summarizes information, as of December 31, 2002,
relating to the registrant's compensation plans under which its equity
securities are authorized for issuance.
Number of securities
remaining available for
future issuance under
Number of Securities to Weighted average equity compensation
be issued upon exercise exercise price of plans (excluding
of outstanding options, outstanding options, securities reflected in
warrants and rights warrants and rights column (a))
Plan Category ( a ) ( b ) ( c )
- ------------------------- --------------------------- ------------------------- ----------------------------
Equity Compensation
Plans approved by 461,662 $8.95 103,576
security holders (1)
Equity Compensation
Plans not approved by 0 0 0
--------------------------- ------------------------- ----------------------------
security holders
Total 461,662 $8.95 103,576
=========================== ========================= ============================
(1) This plan is the registrant's Stock Option Plan.
On January 21, 2003, the final 103,576 option shares were granted.
11
Item 13. Certain Relationships and Related Transactions
The information set forth under the caption "Related Transactions" in
the definitive Proxy Statement of the Corporation dated April 18, 2003 is
incorporated by reference herein.
PART IV
Item 14. Controls and Procedures
As of December 31, 2002, an evaluation was performed under the
supervision of and with the participation of the registrant's management,
including the President and Chief Executive Officer and the Chief Financial
Officer, of the effectiveness of the design and operation of the registrant's
disclosure controls and procedures. Based on that evaluation, the registrant's
management, including the President and Chief Executive Officer and the Chief
Financial Officer, concluded that the registrant's disclosure controls and
procedures were effective as of December 31, 2002. There have been no
significant changes in the registrant's internal controls or in other factors
that could significantly affect internal controls subsequent to December 31,
2002.
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) Financial Statements
The following financial statements of the Corporation appear
in the Corporation's 2002 Annual Report to Stockholders and
are incorporated by reference in item 8.
Report of Independent Auditors
Consolidated Balance Sheets as of December 31, 2002 and 2001
Consolidated Statements of Income for the years ended December
31, 2002, 2001 and 2000
Consolidated Statements of Changes in Stockholders' Equity for
the years ended December 31, 2002, 2001 and 2000
Consolidated Statements of Cash Flows for the years ended
December 31, 2002, 2001 and 2000
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
No schedules are required under this item.
12
(3) Exhibits
The Exhibits marked with one asterisk below were filed as
Exhibits to the Registration Statement of the Registrant on
Form S-18 (Registration Number 33-55808) are incorporated
herein by reference. The Exhibit marked with two asterisks
below was filed as an Exhibit to the Form 10-K Report of the
Registrant for the fiscal year ended December 31, 1993 is
incorporated herein by reference. The Exhibit marked with
three asterisks below was filed as an Exhibit to the Form 10-K
Report of the Registrant for the fiscal year ended December
31, 1995 is incorporated herein by reference. The Exhibit
marked with four asterisks below was filed as an Exhibit to
the Form 10-Q Report of the Registrant for the quarter ended
June 30, 1997 is incorporated herein by reference. The Exhibit
numbers in brackets being those in such Registration
Statements, Form 10-K or Form 10-Q Reports.
(3)(a)**** Articles of Incorporation of Registrant, As
Amended. [3(a)]
(3)(b)*** By-Laws of the Registrant, As Amended.
[3(b)]
(10)(a)* Letter re employment of Michael J. Ross by
Registrant. [10(a)]
(10)(b)**** 1994 Stock Option Plan, As Amended. [10(b)]
(X)
(13) 2002 Annual Report to Stockholders. [13]
(21)** Subsidiaries of the Registrant. [21]
Exhibit (99.1) CEO Certification pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
Exhibit (99.2) CFO Certification pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
(X) A compensatory plan required to be filed as an exhibit.
(b) Reports on Form 8-K
The Corporation filed two reports on Form 8-K during the
quarter ended December 31, 2002.
Form 8-K dated December 17, 2002, filing a press
release announcing Dearborn Bancorp, Inc.'s declaration of a
stock dividend.
Form 8-K dated December 19, 2002, filing a press
release announcing Dearborn Bancorp, Inc.'s agreement to issue
$10 million in Trust Preferred Securities.
13
FORM 10-K SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on March 26, 2003.
Dearborn Bancorp, Inc.
/s/ John E. Demmer
By __________________________________________________
(John E. Demmer, Chairman of the Board and Director)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities indicated on March 25, 2003.
/s/ Michael J. Ross
________________________ President, Chief Executive Officer and Director
(Michael J. Ross) (Principal Executive Officer)
/s/ Jeffrey L. Karafa
________________________ Vice President, Treasurer and Secretary
(Jeffrey L. Karafa) (Principal Financial and Accounting Officer)
/s/ Wilber M. Brucker, Jr. /s/ Bradley F. Keller
__________________________ Director __________________________ Director
(Wilber M. Brucker, Jr.) (Bradley F. Keller)
/s/ Margaret I. Campbell /s/ Jeffrey G. Longstreth
__________________________ Director __________________________ Director
(Margaret I. Campbell) (Jeffrey G. Longstreth)
/s/ Michael V. Dorian, Jr. /s/ Richard Nordstrom
__________________________ Director __________________________ Vice Chairman
(Michael V. Dorian, Jr.) (Richard Nordstrom) and Director
/s/ David Himick /s/ Robert C. Schwyn
__________________________ Director __________________________ Director
(David Himick) (Dr. Robert C. Schwyn)
/s/ Donald G. Karcher Vice President /s/ Ronnie J. Story
___________________________ and Director __________________________ Director
(Donald G.. Karcher (Ronnie J. Story)
14
DEARBORN BANCORP, INC.
FORM 10-K (continued)
CERTIFICATION
I, Michael J. Ross, certify that:
1. I have reviewed this annual report on Form 10-K of Dearborn Bancorp,
Inc. (the "registrant");
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date.
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: March 25, 2003
/s/ Michael J. Ross
-------------------------------------
Michael J. Ross
President and Chief Executive Officer
Dearborn Bancorp, Inc.
15
DEARBORN BANCORP, INC.
FORM 10-K (continued)
CERTIFICATION
I, Jeffrey L. Karafa, certify that:
1. I have reviewed this quarterly report on Form 10-K of Dearborn Bancorp,
Inc. (the "registrant");
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date.
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: March 25, 2002
/s/ Jeffrey L. Karafa
---------------------------------------
Jeffrey L. Karafa
Treasurer and Chief Financial Officer,
Dearborn Bancorp, Inc.
16
EXHIBIT NO. DESCRIPTION
- ----------- -----------
(3)(a)**** Articles of Incorporation of Registrant, As
Amended. [3(a)]
(3)(b)*** By-Laws of the Registrant, As Amended.
[3(b)]
(10)(a)* Letter re employment of Michael J. Ross by
Registrant. [10(a)]
(10)(b)**** 1994 Stock Option Plan, As Amended. [10(b)]
(X)
(13) 2002 Annual Report to Stockholders. [13]
(21)** Subsidiaries of the Registrant. [21]
Exhibit (99.1) CEO Certification pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
Exhibit (99.2) CFO Certification pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
(X) A compensatory plan required to be filed as an exhibit.
17