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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the Quarterly period ended June 30, 2003.
-------------
Commission file number 000-24478.
DEARBORN BANCORP, INC.
----------------------
(Exact name of registrant as specified in its charter)
Michigan 38-3073622
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
22290 Michigan Avenue, Dearborn, MI 48123-2247
----------------------------------------------
(Address of principal executive office) (Zip Code)
(313) 274-1000
--------------
(Registrant's telephone number, including area code)
N/A
---
(Former name, former address and former fiscal year,
if changed since last report)
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
----- -----
Indicate the number of shares outstanding for each of the issuer's classes of
common stock, as of July 31, 2003.
Class Shares Outstanding
----- -------------------
Common Stock 2,785,384
Indicate by check mark whether the registrant is an accelerated filer (as
defined in rule 12b-2 of the 1934 Securities and Exchange Act).
Yes No X
----- -----
DEARBORN BANCORP, INC.
INDEX
Part I. Financial Information:
Item 1. Financial Statements
The following consolidated financial statements of Dearborn
Bancorp, Inc. and its subsidiary included in this report are: Page
----
Independent Accountants' Report 3
Consolidated Balance Sheets - June 30, 2003, December 31, 2002
and June 30, 2002 4
Consolidated Statements of Income - For the Three
And Six Months Ended June 30, 2003 and 2002 5
Consolidated Statements of Comprehensive Income - For
the Three and Six Months Ended June 30, 2003 and 2002 6
Consolidated Statements of Cash Flows - For the
Six Months Ended June 30, 2003 and 2002 7
Notes to Consolidated Financial Statements 8-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations, Liquidity and Capital 12-24
Item 3. Quantitative and Qualitative Disclosures about Market Risk 25-26
Item 4. Controls and Procedures 27
Part II. Other Information:
Pursuant to SEC rules and regulations, the following item(s) are
included with the Form 10-Q Report:
Item 4. Submission of Matters to a Vote of Security Holders 28
Item 5 Other Information
Item 6. Exhibits and Reports on Form 8-K
Pursuant to SEC rules and regulations, the following items are omitted
from this Form 10-Q as inapplicable or to which the answer is negative:
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults upon Senior Securities
SIGNATURES 30
2
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors and Shareholders
Dearborn Bancorp, Inc.
Dearborn, Michigan
We have reviewed the consolidated balance sheets of Dearborn Bancorp, Inc. as of
June 30, 2003 and 2002, the related consolidated statements of income and
comprehensive income for the three and six month periods then ended, and the
related consolidated statements of cash flows for the six month periods then
ended. These financial statements are the responsibility of the Corporation's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Crowe Chizek and Company LLC
Grand Rapids, Michigan
July 21, 2003
3
DEARBORN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars, in thousands) (unaudited) (audited) (unaudited)
06/30/03 12/31/02 06/30/02
--------- --------- ---------
ASSETS
Cash and cash equivalents
Cash and due from banks $ 9,393 $ 5,903 $ 3,726
Federal funds sold 6,162 8,572 8,779
Interest bearing deposits with banks 3,425 4,975 2,645
--------- --------- ---------
Total cash and cash equivalents 18,980 19,450 15,150
Mortgage loans held for sale 13,053 9,852 406
Securities, available for sale 27,411 22,216 41,713
Federal Home Loan Bank stock 1,047 1,033 1,000
Loans
Loans 327,383 267,522 226,800
Allowance for loan losses (3,514) (2,875) (2,313)
--------- --------- ---------
Net loans 323,869 264,647 224,487
Premises and equipment, net 5,680 5,276 4,739
Accrued interest receivable 1,329 1,260 1,329
Other assets 1,691 1,366 716
--------- --------- ---------
Total assets $ 393,060 $ 325,100 $ 289,540
========= ========= =========
LIABILITIES
Deposits
Non-interest bearing deposits $ 42,008 $ 32,457 $ 28,785
Interest bearing deposits 286,489 229,629 210,742
--------- --------- ---------
Total deposits 328,497 262,086 239,527
Other liabilities
Federal Home Loan Bank advances 20,660 20,660 20,000
Trust preferred securities 10,000 10,000 --
Accrued interest payable 617 609 604
Other liabilities 1,002 1,054 418
--------- --------- ---------
Total liabilities 360,776 294,409 260,549
STOCKHOLDERS' EQUITY
Common stock - 5,000,000 shares authorized,
2,782,831 shares at 06/30/03, 2,614,587
12/31/02; and 2,726,006 shares at 06/30/02 32,229 30,611 28,636
Accumulated earnings 14 -- 210
Accumulated other comprehensive income 41 80 145
--------- --------- ---------
Total stockholders' equity 32,284 30,691 28,991
--------- --------- ---------
Total liabilities and stockholders' equity $ 393,060 $ 325,100 $ 289,540
========= ========= =========
The accompanying notes are an integral part of these consolidated financial
statements
4
DEARBORN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Six Months Ended
06/30/03 06/30/02 06/30/03 06/30/02
---------- ---------- ---------- ----------
Interest income
Interest on loans $ 5,452 $ 4,030 $ 10,452 $ 7,680
Interest on securities, available for sale 189 329 388 574
Interest on deposits with banks 52 37 130 58
Interest on federal funds 39 53 79 130
---------- ---------- ---------- ----------
Total interest income 5,732 4,449 11,049 8,442
Interest expense
Interest on deposits 1,890 1,705 3,843 3,204
Interest on other borrowings 353 224 705 449
---------- ---------- ---------- ----------
Total interest expense 2,243 1,929 4,548 3,653
---------- ---------- ---------- ----------
Net interest income 3,489 2,520 6,501 4,789
Provision for loan losses 511 263 739 488
---------- ---------- ---------- ----------
Net interest income after provision for loan losses 2,978 2,257 5,762 4,301
---------- ---------- ---------- ----------
Non-interest income
Service charges on deposit accounts 110 88 213 164
Fees for other services to customers 6 8 15 16
Gain on the sale of loans 675 133 1,301 355
Gain on the sale of securities, available for sale 79 -- 79 --
Other income 36 9 49 16
---------- ---------- ---------- ----------
Total non-interest income 906 238 1,657 551
Non-interest expenses
Salaries and employee benefits 1,829 1,096 3,606 2,104
Occupancy and equipment expense 349 225 671 443
Advertising and marketing 62 57 144 119
Stationery and supplies 84 49 185 113
Professional services 114 69 212 122
Data processing 71 68 135 122
Other operating expenses 226 135 439 311
---------- ---------- ---------- ----------
Total non-interest expenses 2,735 1,699 5,392 3,334
---------- ---------- ---------- ----------
Income before income tax provision 1,149 796 2,027 1,518
Income tax provision 390 270 688 515
---------- ---------- ---------- ----------
Net income $ 759 $ 526 $ 1,339 $ 1,003
========== ========== ========== ==========
Per share data:
Net income - basic $ 0.27 $ 0.19 $ 0.48 $ 0.37
Net income - diluted $ 0.25 $ 0.18 $ 0.45 $ 0.35
Weighted average number of shares outstanding - basic 2,772,012 2,726,006 2,761,150 2,726,297
Weighted average number of shares outstanding - diluted 3,014,805 2,869,334 2,985,306 2,850,306
The accompanying notes are an integral part of these consolidated financial
statements
5
DEARBORN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(In thousands)
Three Months Ended Six Months Ended
06/30/03 06/30/02 06/30/03 06/30/02
----------- ----------- ----------- -----------
Net income $ 759 $ 526 $ 1,339 $ 1,003
Other comprehensive income, net of tax
Unrealized gains on securities
Unrealized holding gains arising during period 35 261 20 129
Less: reclassification adjustment for gains
included in net income (79) -- (79) --
Tax effects 15 (89) 20 (44)
----------- ----------- ----------- -----------
Other comprehensive income (loss) (29) 172 (39) 85
----------- ----------- ----------- -----------
Comprehensive income $ 730 $ 698 $ 1,300 $ 1,088
=========== =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
6
DEARBORN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
6/30/03 6/30/02
-------- --------
Cash flows from operating activities
Interest and fees received $ 10,980 $ 8,198
Interest paid (4,540) (3,853)
Taxes paid (1,000) (709)
Proceeds from sale of mortgages held for sale 81,158 23,471
Origination of mortgages held for sale (83,058) (20,607)
Cash paid to suppliers and employees (4,892) (3,062)
-------- --------
Net cash provided by (used in) in operating activities (1,352) 3,438
Cash flows from investing activities
Proceeds from maturities of securities available for sale 7,500 10,782
Proceeds from sales of securities available for sale 3,079 --
Proceeds from repayments of securities available for sale 612 253
Purchases of securities available for sale (16,412) (31,050)
Purchases of Federal Home Loan Bank stock (14) --
Increase in loans, net of payments received (59,961) (46,005)
Purchases of property and equipment (626) (188)
-------- --------
Net cash used in investing activities (65,822) (66,208)
Cash flows from financing activities
Net increase in non-interest bearing deposits 9,551 7,344
Net increase in interest bearing deposits 56,860 54,702
Stock option exercise 293 --
-------- --------
Net cash provided by financing activities 66,704 62,046
Increase in cash and cash equivalents (470) (724)
Cash and cash equivalents at the beginning of the period 19,450 15,874
-------- --------
Cash and cash equivalents at the end of the period $ 18,980 $ 15,150
======== ========
Reconciliation of net income to net cash provided by
(used in) operating activities
Net income $ 1,339 $ 1,003
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Provision for loan losses 739 488
Depreciation and amortization expense 222 193
Accretion of discount on securities, available for sale (4) (4)
Amortization of premium on securities, available for sale 50 87
Gain on the sale of securities, available for sale (79) --
(Increase) decrease in mortgages held for sale (3,201) 2,509
Increase in interest receivable (69) (244)
Increase (decrease) in interest payable 8 (259)
Increase in other assets (305) (135)
Decrease in other liabilities (52) (200)
-------- --------
Net cash provided by (used in) operating activities ($ 1,352) $ 3,438
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
7
DEARBORN BANCORP, INC.
FORM 10-Q (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Accounting and Reporting Policies
The consolidated financial statements of Dearborn Bancorp, Inc. (the
"Corporation") include the consolidation of its only subsidiary,
Community Bank of Dearborn (the "Bank"). The accounting and reporting
policies of the Corporation are in accordance with generally accepted
accounting principles and conform to practice within the banking
industry.
The consolidated financial statements of the Corporation as of June 30,
2003 and 2002, and December 31, 2002 and for the three and six month
periods ended June 30, 2003 and 2002 reflect all adjustments,
consisting of normal recurring items which are in the opinion of
management, necessary for a fair presentation of the results for the
interim period. The operating results for the quarter are not
necessarily indicative of results of operations for the entire year.
The consolidated financial statements as of June 30, 2003 and 2002, and
for the three and six months ended June 30, 2003 and 2002 included
herein have been prepared by the Corporation, without an audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in interim financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. These financial statements
should be read in conjunction with the financial statements and notes
thereon included in the Corporation's 2002 Annual Report to
Stockholders on Form 10-K.
Certain of the Corporation's accounting policies are important to the
portrayal of the Corporation's financial condition, since they require
management to make difficult, complex or subjective judgments, some of
which may relate to matters that are inherently uncertain. Estimates
associated with these policies are susceptible to material changes as a
result of changes in facts and circumstances. Facts and circumstances
which could affect these material judgments include, but without
limitation, changes in interest rates, in the performance of the
economy or in the financial condition of borrowers. Management believes
that its critical accounting policies include determining the allowance
for loan losses and determining the fair value of securities and other
financial instruments.
8
A. Accounting and Reporting Policies (continued)
Employee compensation expense under stock option plans is reported
using the intrinsic value method. No stock-based compensation cost is
reflected in net income, as all options granted had an exercise price
equal to or greater than the market price of the underlying common
stock at date of grant. The following table illustrates the effect on
net income and earnings per share if expense was measured using the
fair value recognition provisions of FASB Statement No. 123, Accounting
for Stock-based Compensation (in thousands, except share and per share
data).
Three Months ended Six Months Ended
06/30/03 06/30/02 06/30/03 06/30/02
----------- ----------- ----------- -----------
Net income
As reported $ 759 $ 526 $ 1,339 $ 1,003
Less: stock-based compensation expense
determined under fair value based method 353 290 698 553
----------- ----------- ----------- -----------
Pro forma $ 406 $ 236 $ 641 $ 450
=========== =========== =========== ===========
Basic income per share
As reported $ 0.27 $ 0.19 $ 0.48 $ 0.37
Pro forma 0.15 0.09 0.23 0.17
Diluted income per share
As reported $ 0.25 $ 0.18 $ 0.45 $ 0.35
Pro forma 0.13 0.08 0.21 0.16
9
B. Securities Available For Sale
The amortized cost and estimated market value of securities available
for sale are as follows (in thousands):
June 30, 2003
----------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
------- ------- ------- -------
US Treasury securities $ 2,032 $ 7 $ -- $ 2,039
Mortgage backed securities 1,603 57 -- 1,660
Corporate debt securities 8,605 -- -- 8,605
Municipal securities 11,109 5 (7) 11,107
FHLMC preferred stock 4,000 -- -- 4,000
------- ------- ------- -------
Totals $27,349 $ 69 ($7) $27,411
======= ======= ======= =======
December 31, 2002
---------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-------------- -------------- -------------- --------------
US Treasury securities $ 2,005 $ 2 $ -- $ 2,007
Mortgage backed securities 2,202 90 -- 2,292
Corporate debt securities 2,500 -- -- 2,500
Municipal securities 11,388 39 (10) 11,417
FHLMC preferred stock 4,000 -- -- 4,000
-------------- -------------- -------------- --------------
Totals $ 22,095 $ 131 ($ 10) $ 22,216
============== ============== ============== ==============
The amortized cost and estimated market value of securities available
for sale at June 30, 2003 by contractual maturity are shown below (in
thousands):
Estimated
Amortized Market
Cost Value
---------- ----------
Due in three months through one year $ 4,032 $ 4,039
Due in one year through five years 12,344 12,342
Due in over ten years 5,370 5,370
Mortgage backed securities 1,603 1,660
FHLMC preferred stock 4,000 4,000
---------- ----------
Totals $ 27,349 $ 27,411
========== ==========
10
C. Stock Option Plan
Options to buy common stock are granted to officers and employees under
a Stock Option Plan which provides for issue of up to 638,142 shares.
Exercise price is the market price at date of grant. The maximum option
term is ten years, and options vest fully after six months from the
date of grant. If an option expires or terminates without having been
exercised, such option becomes available for future grant under the
Plan.
A summary of the option activity for the six months ended June 30, 2003
is as follows:
Weighted
Weighted Average Fair
Available Average Value of
For Options Exercise Options
Grant Outstanding Price Granted
----- ----------- ----- -------
Outstanding at January 1, 2003 108,754 484,745 $ 8.52
Granted (108,754) 108,754 17.52 $ 6.33
Exercised -- (37,696) 7.84
Forfeited 4,200 (4,200) 17.52
-------- ------- ---------
Outstanding at June 30, 2003 4,200 551,603 $ 10.27
For the options outstanding at June 30, 2003, the range of exercise
prices was $5.34 to $17.52 per share with a weighted-average remaining
contractual term of 7.5 years. At June 30, 2003, 447,049 options were
exercisable at weighted average exercise price of $8.58 per share.
Stock options for 104,554 shares of common stock were not considered in
computing diluted earnings per share for the six months ended June 30,
2003 because they were antidilutive.
D. Employment and Change in Control Agreements
During the second quarter of 2003, the Corporation entered into an
Employment Agreement with its Chief Executive Officer and Change in
Control Agreements with several of its executive officers. Under the
terms of these agreements, certain events leading to termination of
employment with the Corporation could result in cash payments
aggregating approximately $1,737,000 at June 30, 2003.
11
PART I - FINANCIAL INFORMATION
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis are intended to address significant
factors affecting the financial condition and results of operations of the
Corporation. The discussion provides a more comprehensive review of the
financial position and operating results than can be obtained from a reading of
the financial statements and footnotes presented elsewhere in this report.
Management's Discussion and Analysis of Financial Condition and Results of
Operations 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.
12
GENERAL
The Corporation was formed in 1992 and the Bank was formed in 1993. Principal
operations of the Bank commenced on February 28, 1994 when the Bank opened for
business at its main office. Subsequently, branch offices were opened in
Dearborn Heights and Plymouth Township. During 2001, the Bank opened its fourth
and fifth offices in Canton Township, Michigan and Clinton Township, Michigan,
respectively. Additionally, Community Bank Mortgage, Inc., a mortgage company,
was formed and began operations in 2001. The Bank formed Community Bank Audit
Services, Inc., a subsidiary that offers internal audit and compliance services
during 2002. The Bank also moved the Clinton Township retail branch operations
to 19100 Hall Road during the fourth quarter of 2002. The branch office is
adjacent to the office at 45000 River Ridge, which will continue to serve as a
regional lending center.
During the first quarter of 2003, the Bank opened its sixth branch office,
located at 12820 Fort Street in Southgate, Michigan. During the second quarter
of 2003, the Bank opened a regional lending center at 3201 University Drive in
Auburn Hills, Michigan.
RESULTS OF OPERATIONS
The Corporation reported net income of $759,000 and $1,339,000 for the three and
six month periods ended June 30, 2003, compared to net income of $526,000 and
$1,003,000 for the three and six month periods ended June 30, 2002. The increase
in net income was primarily due to the improvements in net interest income and
the increase in gain on the sale of loans. The improvement in net interest
income was primarily due to the increase in the commercial real estate loan and
other commercial loan portfolios and the decreasing cost of deposits during the
period. Management expects net interest income to continue to increase during
2003 due to planned deployment of funds currently invested in federal funds sold
into loans and the repricing of time deposits. The gain on sale of loans, which
is based on the level of residential real estate mortgage originations are
expected to continue at current levels during the third quarter of 2003.
13
NET INTEREST INCOME
2003 Compared to 2002. As noted on the two charts on the following pages, net
interest income for the three and six month periods ended June 30, 2003, was
$3,489,000 and $6,501,000, compared to $2,520,000 and $4,789,000 for the same
periods ended June 30, 2002, an increase of $969,000 or 38% and $1,712,000 or
36%, respectively. This increase was caused primarily by an increase in the
volume of interest earning assets and interest bearing liabilities. The
Corporation's interest rate spread was 3.32% and 3.15%, respectively, for the
three and six month periods ended June 30, 2003, compared to 3.11% and 3.19% for
the same periods in 2002. The Corporation's interest rate margin was 3.70% and
3.59%, respectively, for the three and six month periods ended June 30, 2003,
compared to 3.68% and 3.76% for the same periods in 2002.
The Corporation's decrease in interest rate spread and net interest margin
during the six months ended June 30, 2003 was primarily the result of the
relatively large amount of the Bank's funds that are temporarily invested in
interest bearing deposits with banks and federal funds sold. As these funds are
deployed into loans, the Bank's interest rate spread and net interest rate
margin are expected to improve. Management expects that both the net interest
margin on earning assets and the net interest rate spread will increase during
2003 as the Bank converts funds currently held in federal funds and interest
bearing deposits with banks into loans and the cost of deposits continue to
decrease. Planned deposit growth for the remainder of 2003 is expected to slow
considerably in comparison to the first half of 2003.
Average Balances, Interest Rates and Yields. Net interest income is affected by
the difference ("interest rate spread") between rates of interest earned on
interest-earning assets and rates of interest paid on interest-bearing
liabilities and the relative amounts of interest-bearing liabilities and
interest-earning assets. When the total of interest-earning assets approximates
or exceeds the total of interest-bearing liabilities, any positive interest rate
spread will generate net interest income. Financial institutions have
traditionally used interest rate spreads as a measure of net interest income.
Another indication of an institution's net interest income is its "net yield on
interest-earning assets" or "net interest margin," which is net interest income
divided by average interest-earning assets.
14
The following table sets forth certain information relating to the Corporation's
consolidated average interest-earning assets and interest-bearing liabilities
and reflects the average yield on assets and average cost of liabilities for the
periods indicated. Such yields and costs are derived by dividing income or
expense by the average daily balance of assets or liabilities, respectively, for
the periods presented. During the periods indicated, non-accruing loans, if any,
are included in the loan category.
Three months ended Three months ended
June 30, 2003 June 30, 2002
------------------------------- -----------------------------
Average Average Average Average
(In thousands) Balance Interest Rate Balance Interest Rate
-------- -------- ------- -------- -------- -------
Assets
Interest-bearing deposits with banks $ 16,957 $ 52 1.23% $ 8,910 $ 37 1.67%
Federal funds sold 13,370 39 1.17% 13,292 53 1.60%
Securities, available for sale 29,390 189 2.59% 36,215 329 3.65%
Loans 319,084 5,452 6.87% 217,306 4,030 7.46%
-------- -------- ------- -------- -------- -------
Sub-total earning assets 378,801 5,732 6.09% 275,723 4,449 6.49%
Other assets 13,440 9,313
-------- --------
Total assets $392,241 $285,036
======== ========
Liabilities and stockholders' equity
Interest bearing deposits $295,443 $ 1,890 2.57% $209,762 $ 1,705 3.27%
Other borrowings 30,660 353 4.63% 20,000 224 4.50%
-------- -------- ------- -------- -------- -------
Sub-total interest bearing liabilities 326,103 2,243 2.77% 229,762 1,929 3.38%
Non-interest bearing deposits 32,708 25,554
Other liabilities 1,391 958
Stockholders' equity 32,039 28,762
-------- --------
Total liabilities and stockholders' equity $392,241 $285,036
======== ========
Net interest income $ 3,489 $ 2,520
======== ========
Net interest rate spread 3.32% 3.11%
======= =======
Net interest margin on earning assets 3.70% 3.68%
======= =======
15
Six Months Ended Six Months Ended
June 30, 2003 June 30, 2002
------------------------------- ------------------------------
Average Average Average Average
(In thousands) Balance Interest Rate Balance Interest Rate
-------- -------- ------- -------- -------- -------
Assets
Interest-bearing deposits with banks $ 21,961 $ 130 1.20% $ 7,931 $ 58 1.48%
Federal funds sold 13,611 79 1.17% 14,832 130 1.77%
Securities, available for sale 27,293 388 2.87% 30,303 574 3.83%
Loans 303,214 10,452 6.97% 204,507 7,680 7.59%
-------- -------- ------- -------- -------- -------
Sub-total earning assets 366,079 11,049 6.10% 257,573 8,442 6.63%
Other assets 13,405 10,408
-------- --------
Total assets $379,484 $267,981
======== ========
Liabilities and stockholders' equity
Interest bearing deposits $281,144 $ 3,843 2.76% $194,584 $ 3,204 3.33%
Other borrowings 30,660 705 4.65% 20,000 449 4.54%
-------- -------- ------- -------- -------- -------
Sub-total interest bearing liabilities 311,804 4,548 2.95% 214,584 3,653 3.44%
Non-interest bearing deposits 34,663 23,809
Other liabilities 1,434 1,078
Stockholders' equity 31,583 28,510
-------- --------
Total liabilities and stockholders' equity $379,484 $267,981
======== ========
Net interest income $ 6,501 $ 4,789
======== ========
Net interest rate spread 3.15% 3.19%
======= =======
Net interest margin on earning assets 3.59% 3.76%
======= =======
16
Rate/Volume Analysis. The following table analyzes net interest income in terms
of changes in the volume of interest-earning assets and interest-bearing
liabilities and changes in yields and rates. The table reflects the extent to
which changes in the interest income and interest expense are attributable to
changes in volume (changes in volume multiplied by prior year rate) and changes
in rate (changes in rate multiplied by prior year volume). Changes attributable
to the combined impact of volume and rate have been allocated proportionately to
changes due to volume and changes due to rate.
Three Months Ended Six Months Ended
June 30, 2003/2002 June 30, 2003/2002
Change in Interest Due to: Change in Interest Due to:
------------------------------------- -----------------------------------
Average Average Net Average Average Net
(In thousands) Balance Rate Change Balance Rate Change
--------- --------- --------- --------- --------- ---------
Assets
Interest bearing deposits with banks $ 25 ($10) $ 15 $ 83 ($11) $ 72
Federal funds sold -- (14) (14) (7) (44) (51)
Investment securities, available for sale (43) (97) (140) (44) (142) (186)
Loans 1,741 (319) 1,422 3,408 (636) 2,772
--------- --------- --------- --------- --------- ---------
Total earning assets $ 1,723 ($440) $ 1,283 $ 3,440 ($833) $ 2,607
========= ========= ========= ========= ========= =========
Liabilities
Interest bearing deposits $ 550 ($365) $ 185 $ 1,189 ($550) $ 639
Other borrowings 123 6 129 245 11 256
--------- --------- --------- --------- --------- ---------
Total interest bearing liabilities $ 673 ($359) $ 314 $ 1,434 ($539) $ 895
========= ========= ========= ========= ========= =========
Net interest income $ 969 $ 1,712
========= =========
Net interest rate spread 0.21% (0.04%)
========= =========
Net interest margin on earning assets 0.02% (0.17%)
========= =========
PROVISION FOR LOAN LOSSES
2003 Compared to 2002. The provision for loan losses was $511,000 and $739,000
for the three and six month periods ended June 30, 2003, compared to $263,000
and $488,000 for the same periods in 2002, an increase of $248,000 or 94% for
the three month period and $251,000 or 51% for the six month period. The
provision for loan losses for the three and six month periods ended June 30,
2003 is based on the internal analysis of the adequacy of the allowance for loan
losses. The provision for loan losses was based upon management's assessment of
relevant factors, including types and amounts of non-performing loans,
historical and anticipated loss experience on such types of loans, and current
and projected economic conditions.
17
NON-INTEREST INCOME
2003 Compared to 2002. Non-interest income was $906,000 and $1,657,000 for the
three and six month periods ended June 30, 2003, compared to $238,000 and
$551,000 for the same periods in 2002, an increase of $668,000 or 281% for the
three month period and $1,106,000 or 201% for the six month period. The increase
was primarily due to the increase in the gain on the sale of loans during the
period. The volume of mortgage loans sold increased during the period primarily
due to the addition of five mortgage loan originators during 2002 and two
mortgage loan originators during 2003. Management expects the gain on sale of
loans to continue at the same level during the third quarter of 2003.
NON-INTEREST EXPENSE
2003 Compared to 2002. Non-interest expense was $2,735,000 and $5,392,000 for
the three and six month periods ended June 30, 2003, compared to $1,699,000 and
$3,334,000 for the same periods in 2002, an increase of $1,036,000 or 61% for
the three month period and $2,058,000 or 62% for the six month period. The
largest component of non-interest expense was salaries and employee benefits
which amounted to $1,829,000 and $3,606,000 for the three and six month periods
ended June 30, 2003, compared to $1,096,000 and $2,104,000 for the same period
in 2002, an increase of $733,000 or 67% for the three month period and
$1,502,000 or 71% for the six month period. The primary factor in the increase
in salaries and benefits expense was the addition of two branch offices during
2002 and the expansion of the commercial lending and residential lending
departments. As of June 30, 2003, the number of full time equivalent employees
was 113 compared to 80 as of June 30, 2002. Salaries and employee benefits will
continue to increase as a result of general staff increases.
INCOME TAX PROVISION
2003 Compared to 2002. The income tax expense was $390,000 and $688,000 for the
three and six month periods ended June 30, 2003, compared to $270,000 and
$515,000 for the same period in 2002, an increase of $120,000 or 44% for the
three month period and $173,000 or 34% for the six month period. The increase
was primarily a result of increased pre-tax income.
18
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2003 AND DECEMBER 31, 2002
Assets. Total assets at June 30, 2003 were $393,060,000 compared to $325,100,000
at December 31, 2002, an increase of $67,960,000 or 21%. The increase was
primarily due to the increase in loans during the period.
Federal Funds Sold. Total federal funds sold at June 30, 2003 were $6,162,000
compared to $8,572,000 at December 31, 2002, a decrease of $2,410,000 or 28%.
The decrease was primarily due to the utilization of federal funds sold to fund
loans. Available funds are deployed into federal funds sold until they can be
utilized to fund loan volume.
Interest bearing deposits with banks. Total interest bearing deposits with banks
at June 30, 2003 were $3,425,000 compared to $4,975,000 at December 31, 2002, a
decrease of $1,550,000 or 31%. These funds are deployed into interest bearing
deposits with banks until they can be utilized to fund loan volume. This
investment was established to provide the Corporation with an alternate short
term investment option. This short term investment is a variable-rate
certificate of deposit with the Federal Home Loan Bank of Indianapolis that
carries a similar rate of return to federal funds sold.
Mortgage Loans Held for Sale. Total mortgage loans held for sale at June 30,
2003 were $13,053,000 compared to $9,852,000 at December 31, 2002, an increase
of $3,201,000 or 32%. This increase was a result of the increased level of
residential real estate mortgage loans waiting to be purchased by mortgage
correspondents.
Securities - Available for Sale. Total securities, available for sale, at June
30, 2003 were $27,411,000 compared to $22,216,000 at December 31, 2002, an
increase of $5,195,000 or 23%. The increase was due to the purchase of
securities, available for sale during the period. These securities were
purchased in order to increase the Bank's earning asset yield.
The entire portfolio has a unrealized gain of $62,000 at June 30, 2003. The
Corporation does not hold any securities in the "Held to Maturity" category nor
does the Corporation hold or utilize derivatives.
Please refer to Note B of the Notes to Consolidated Financial Statements for the
amortized cost and estimated market value of securities, available for sale.
Federal Home Loan Bank Stock. Federal Home Loan Bank stock was valued at
$1,047,000 at June 30, 2003, compared to $1,033,000 at December 31, 2002, an
increase of $14,000 or 1%.
19
Loans. Total loans at June 30, 2003 were $327,383,000 compared to $267,522,000
at December 31, 2002, an increase of $59,861,000 or 22%. The increase was
primarily due to the continued expansion of the commercial lending department
during 2003. This expansion included the addition of seven experienced loan
officers during the last twelve months. Three of these loan officers are located
at our regional lending center in Auburn Hills, Michigan and will continue to
focus their efforts on developing commercial lending relationships in Oakland
County. Major categories of loans included in the loan portfolio are as follows
(in thousands):
06/30/03 12/31/02 06/30/02
--------- --------- ---------
Consumer loans $ 21,521 $ 22,170 $ 20,363
Commercial, financial, & other 59,623 46,187 39,344
Commercial real estate construction 41,698 30,083 21,402
Commercial real estate mortgages 172,205 139,243 113,147
Residential real estate mortgages 32,336 29,839 32,544
--------- --------- ---------
327,383 267,522 226,800
Allowance for loan losses (3,514) (2,875) (2,313)
--------- --------- ---------
$ 323,869 $ 264,647 $ 224,487
========= ========= =========
The following is a summary of non-performing assets and problems loans (in
thousands):
06/30/03 12/31/02 06/30/02
--------- --------- ---------
Over 90 days past due and still accruing $ 34 $ 32 $ 20
Non-accrual loans 2,564 2,641 760
--------- --------- ---------
$ 2,598 $ 2,673 $ 780
========= ========= =========
Non-accrual loans at June 30, 2003 were $2,564,000, of which, $1,818,000 was
related to one commercial loan relationship that is well secured. The remaining
non-accrual loans consisted of one residential loan in bankruptcy proceedings
with a balance of $287,000 and three slow paying commercial loans with balances
of $228,000, $176,000 and $55,000.
Allowance for Loan Losses. The allowance for loan losses was $3,514,000 at June
30, 2003 compared to $2,875,000 at December 31, 2002, an increase of $639,000 or
22%. The increase was primarily due to growth in the loan portfolio during the
six months ended June 30, 2003. The allowance for loan losses was based upon
management's assessment of relevant factors, including loan growth, types and
amounts of non-performing loans, historical and anticipated loss experience on
such types of loans, and current economic conditions.
20
The following is an analysis of the allowance for loan losses (in thousands):
Six Months Ended Year Ended Six Months Ended
06/30/03 12/31/02 06/30/02
--------------- --------------- ---------------
Balance, beginning of year $ 2,875 $ 1,922 $ 1,922
Charge-offs:
Consumer loans (16) (32) (21)
Commercial loans (100) (141) (82)
Recoveries:
Consumer loans 4 9 3
Commercial loans 12 65 3
--------------- --------------- ---------------
Net charge-offs (100) (99) (97)
Additions charged to operations 739 1,052 488
--------------- --------------- ---------------
Balance, end of period $ 3,514 $ 2,875 $ 2,313
=============== =============== ===============
Allowance to total loans 1.07% 1.07% 1.02%
=============== =============== ===============
Allowance to nonperforming assets 136.20% 107.56% 296.54%
=============== =============== ===============
Net charge-offs to average loans 0.04% 0.17% 0.05%
=============== =============== ===============
Premises and Equipment. Bank premises and equipment at June 30, 2003 was
$5,680,000 compared to $5,276,000 at December 31, 2002, an increase of $404,000
or 8%. The increase in premises and equipment was primarily due to the cost of
the renovation of the Bank's branch office in Southgate, Michigan.
Accrued Interest Receivable. Accrued interest receivable at June 30, 2003 was
$1,329,000 compared to $1,260,000 at December 31, 2002, an increase of $69,000
or 5%. The increase was primarily due to the increase in the Bank's loan
portfolio.
Other Assets. Other assets at June 30, 2003 were $1,691,000 compared to
$1,366,000 at December 31, 2002, an increase of $325,000 or 24%. The increase
was primarily due to changes in deferred tax assets.
21
Deposits. Total deposits at June 30, 2003 were $328,497,000 compared to
$262,086,000 at December 31, 2002, an increase of $66,411,000 or 25%. The
following is a summary of the distribution of deposits (in thousands):
06/30/03 12/31/02 06/30/02
------------------ ------------------ -------------------
Non-interest bearing:
Demand $ 42,008 $ 32,457 $ 28,785
------------------ ------------------ -------------------
Interest bearing:
Checking $ 25,417 $ 25,083 $ 12,999
Money market 14,587 13,490 18,542
Savings 99,666 63,677 51,844
Time, under $100,000 66,571 61,331 61,082
Time, $100,000 and over 80,248 66,048 66,275
------------------ ------------------ -------------------
286,489 229,629 210,742
------------------ ------------------ -------------------
Total deposits $ 328,497 $ 262,086 $ 239,527
================== ================== ===================
The increase in deposits was primarily due to normal business development,
marketing, telemarketing, referral programs and growth strategies which included
a grand opening promotion for the Bank's retail branch office in Clinton
Township, Michigan during February 2003, which targeted time deposit growth and
an annual birthday celebration and marketing campaign in March 2003. Management
continues to implement a strategy during 2003 to change the mix of the deposit
portfolio by focusing more heavily on demand, interest bearing checking, savings
and money market, while reducing its reliance on time deposits. Management
expects deposits to grow at a more moderate rate during the remainder of 2003.
Federal Home Loan Bank Advances. Federal Home Loan Bank advances were
$20,660,000 at June 30, 2003 and December 31, 2002.
Trust Preferred Securities. Trust preferred securities were $10,000,000 at June
30, 2003 and December 31, 2002. The Corporation issued $10,000,000 of floating
rate obligated mandatory redeemable securities through Dearborn Bancorp Trust I,
a special purpose entity as part of a pooled offering on December 19, 2002. The
interest rate is the three month LIBOR plus 3.35% and was 4.64% at June 30,
2003. The securities have a term of thirty years. The Corporation may redeem the
securities after five years, with regulatory approval, at face value. They are
presented in the liability section of the balance sheet, but are included as
Tier 1 capital for regulatory capital purposes. Debt issue costs of $300,000
have been capitalized and are being amortized over the term of the securities.
Unamortized debt issuance costs were $295,000 at June 30, 2003.
Accrued Interest Payable. Accrued interest payable at June 30, 2003 was $617,000
compared to $609,000 at December 31, 2001, an increase of $8,000 or 1%. The
increase was primarily due to the increasing amount of interest bearing deposits
during the period.
22
Other Liabilities. Other liabilities at June 30, 2003 were $1,002,000 compared
to $1,054,000 at December 31, 2002, a decrease of $52,000 or 5%. The decrease
was primarily due to the decrease in expenses payable during the period.
CAPITAL
Stockholders' equity at June 30, 2003 was $32,284,000 compared to $30,691,000 as
of December 31, 2002, an increase of $1,593,000 or 5%.
The following is a presentation of the Corporation's and Bank's regulatory
capital ratios (in thousands):
Minimum
To Be Well Capitalized
Minimum for Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
---------------------- ------------------------ ---------------------------
Amount Ratio Amount Ratio Amount Ratio
---------------------- ------------------------ ---------------------------
As of June 30, 2003
Total capital
(to risk weighted assets)
Consolidated 45,757 12.9% 28,338 8.0% 35,423 10.0%
Bank 36,526 10.5% 27,766 8.0% 34,708 10.0%
Tier 1 capital
(to risk weighted assets)
Consolidated 42,243 11.9% 14,169 4.0% 21,254 6.0%
Bank 33,012 9.5% 13,883 4.0% 20,825 6.0%
Tier 1 capital
(to average assets)
Consolidated 42,243 10.8% 15,690 4.0% 19,612 5.0%
Bank 33,012 8.7% 15,258 4.0% 19,073 5.0%
As of December 31, 2002
Total capital
(to risk weighted assets)
Consolidated 43,486 14.2% 23,075 8.0% 28,844 10.0%
Bank 29,819 10.1% 22,249 8.0% 27,811 10.0%
Tier 1 capital
(to risk weighted assets)
Consolidated 40,611 13.3% 11,538 4.0% 17,306 6.0%
Bank 26,944 9.1% 11,124 4.0% 16,687 6.0%
Tier 1 capital
(to average assets)
Consolidated 40,611 12.9% 12,318 4.0% 15,398 5.0%
Bank 26,944 8.9% 12,066 4.0% 15,082 5.0%
Based on the respective regulatory capital ratios at June 30, 2003 and December
31, 2002, the Corporation and Bank are considered well capitalized.
23
LIQUIDITY AND ASSET AND LIABILITY MANAGEMENT
Liquidity refers to readily available funds to meet the needs of borrowers and
depositors. Levels of liquidity are closely monitored in conjunction with loan
funding requirements and deposit outflows. Adequate liquidity protects
institutions from raising funds under duress at excessive expense and provides a
necessary cushion for occasional unpredictable aberrations in demand. While
adequate liquidity is imperative, excessive liquidity in lower yielding cash
investments or other easily marketable assets reduces potential interest income.
Thus, an appropriate balance must be maintained to protect the institution and
at the same time, prudently maximize income opportunities. Sources of liquidity
from both assets and liabilities include federal funds sold, securities
available for sale, loan repayments, core deposits and a federal funds purchase
credit facility.
24
PART I - FINANCIAL INFORMATION
ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Interest Rate Sensitivity Analysis. The Corporation has sought to manage its
exposure to changes in interest rates by matching the effective maturities or
repricing characteristics of the Corporation's interest-earning assets and
interest-bearing liabilities. The matching of the assets and liabilities may be
analyzed by examining the extent to which the assets and liabilities are
interest rate sensitive and by monitoring the expected effects of interest rate
changes on net interest income.
An asset or liability is interest rate sensitive within a specific time period
if it will mature or reprice within that time period. If the Corporation's
assets mature or reprice more quickly or to a greater extent that its
liabilities, the Corporation's net portfolio value and net interest income would
tend to increase during periods of rising interest rates but decrease during
periods of falling interest rates. If the Corporation's assets mature or reprice
more slowly or to a lesser extent than its liabilities, its net portfolio value
and net interest income would tend to decrease during periods of rising interest
rates but increase during periods of falling interest rates.
The matching of assets and liabilities may be analyzed by examining the extent
to which such assets and liabilities are "interest rate sensitive" and by
monitoring an institution's interest rate sensitivity "gap." An asset or
liability is said to be interest rate sensitive within a specific period if it
will mature or reprice within that period. The interest rate sensitivity "gap"
is the difference between the amount of interest-earning assets maturing or
repricing within a specific time period and the amount of interest-bearing
liabilities maturing or repricing within that time period. A gap is considered
positive when the amount of interest rate sensitive assets exceeds the amount of
interest rate sensitive liabilities, and is considered negative when the amount
of interest rate sensitive liabilities exceed the amount of interest rate
sensitive assets. During a period of rising interest rates, a negative gap would
be expected to adversely affect net interest income while a positive gap would
be expected to result in an increase in net interest income, while conversely
during a period of declining interest rates, a negative gap would be expected to
result in an increase in net interest income and a positive gap would be
expected to adversely affect net interest income.
25
Different types of assets and liabilities with the same or similar maturities
may react differently to changes in overall market rates or conditions, and thus
changes in interest rates may affect net interest income positively or
negatively even if an institution were perfectly matched in each maturity
category. Additionally, the gap analysis does not consider the many factors as
banking interest rates move. While the interest rate sensitivity gap is a useful
measurement and contributes toward effective asset and liability management, it
is difficult to predict the effect of changing interest rates solely on that
measure, without accounting for alterations in the maturity or repricing
characteristics of the balance sheet that occur during changes in market
interest rates. During periods of rising interest rates, the Corporation's
assets tend to have prepayments that are slower than those in an interest rate
sensitivity gap and would increase the negative gap position. Conversely, during
a period of declining interest rates, the Corporation's assets would tend to
prepay faster than originally expected thus decreasing the negative gap
position. In addition, some of the Corporation's assets, such as adjustable rate
mortgages, have caps on the amount by which their interest rates can change in
any single period, and therefore may not reprice as quickly as liabilities in
the same maturity category.
The following table sets forth the amounts of interest earning assets and
interest bearing liabilities outstanding at June 30, 2003, which are expected to
mature or reprice in each of the time periods shown below.
Interest Rate Sensitivity Period
------------------------------------------------------------
(In thousands) 1-90 91-365 1-5 Over
Days Days Years 5 Years Total
------------- ------------ ---------- ----------- ---------
Earning assets
Federal funds sold $ 6,162 $ --- $ --- $ --- $ 6,162
Interest bearing deposits with Banks 3,425 --- --- --- 3,425
Mortgage loans held for sale 13,053 --- --- --- 13,053
Securities, available for sale 11,105 6,040 8,807 1,459 27,411
Federal Home Loan Bank stock 1,047 --- --- --- 1,047
Total loans, net of non-accrual 121,669 17,860 174,592 10,698 324,819
--------- --------- --------- --------- ---------
Total earning assets 156,461 23,900 183,399 12,157 375,917
Interest bearing liabilities
Total interest bearing deposits 173,964 74,578 37,947 --- 286,489
Federal Home Loan Bank advances --- --- 15,660 5,000 20,660
Trust preferred securities 10,000 --- --- --- 10,000
--------- --------- --------- --------- ---------
Total interest bearing liabilities 183,964 74,578 53,607 5,000 317,149
Net asset (liability) funding gap (27,503) (50,678) 129,792 7,157 $ 58,768
--------- --------- --------- --------- =========
Cumulative net asset (liability) funding gap ($27,503) ($78,181) $ 51,611 $ 58,768
========= ========= ========= =========
26
DEARBORN BANCORP, INC. AND SUBSIDIARY
FORM 10-Q (continued)
Item 4. Controls and Procedures
As of June 30, 2003, 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 June 30, 2003. There have been no significant changes in the
registrant's internal controls or in other factors that could significantly
affect internal controls subsequent to June 30, 2003.
27
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
The corporation held its regular annual meeting on May 15, 2003. At
this meeting, four directors were re-elected to serve three-year terms
expiring in 2006. The voting results for each nominee were as follows:
Nominee Total For
------- ---------
David Himick 2,305,108
Jeffrey G. Longstreth 2,305,108
Michael J. Ross 2,305,108
Robert C. Schwyn 2,305,108
ITEM 5. OTHER INFORMATION - SEE ATTACHED
As of June 20, 2003, the Registrant entered into an Employment
Agreement with Michael J. Ross, the President and Chief Executive
Officer of the Registrant. A copy of the Employment Agreement is filed
with this Report as Exhibit 10 (a).
As of June 20, 2003, the Registrant also entered into Change in Control
Agreements with the following executive officers of the Registrant:
Jeffrey L. Karafa, William T. Larosa, Warren R. Musson, Stephen Tarczy
and Jeffrey J. Wolber. A copy of the form of the Change in Control
Agreement is filed with this Report as Exhibit 10 (b).
28
ITEM 6. EXHIBITS AND REPORTS IN FORM 8-K.
(a) Exhibits
Exhibit 10(a) Employment Agreement dated as of June 20, 2003
between the Registrant and Michael J. Ross.
Exhibit 10(b) Form of Change in Control Agreement dated as of June
20, 2003 between Registrant and five executive
officers.
Exhibit 31.1 CEO Certification. pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 31.2 CFO Certification. pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 32.1 CEO Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Exhibit 32.2 CFO Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) A Form 8-K Report, dated May 21, 2003 was filed during the quarter
ended June 30, 2003.
29
DEARBORN BANCORP, INC.
FORM 10-Q (continued)
SIGNATURES
Pursuant to the requirements 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.
Dearborn Bancorp, Inc.
(Registrant)
/s/ John E. Demmer
-------------------------------
John E. Demmer
Chairman
/s/ Michael J. Ross
-------------------------------
Michael J. Ross
President and Chief Executive Officer
/s/ Jeffrey L. Karafa
-------------------------------
Jeffrey L. Karafa
Treasurer and Chief Financial Officer
Date: August 10, 2003
30
Exhibit Index
Number Description
Exhibit 10(a) Employment Agreement dated as of June 20, 2003
between the Registrant and Michael J. Ross.
Exhibit 10(b) Form of Change in Control Agreement dated as of June
20, 2003 between Registrant and five executive
officers.
Exhibit 31.1 CEO Certification. pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 31.2 CFO Certification. pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 32.1 CEO Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Exhibit 32.2 CFO Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.