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, 1997.
--------------
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, 1996.
Class Shares Outstanding
----- ------------------
Common Stock 950,000
<PAGE>
<TABLE>
<CAPTION>
DEARBORN BANCORP, INC.
INDEX
<S> <C> <C>
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
----
Consolidated Balance Sheets - June 30, 1997,
December 31, 1996 and June 30, 1996 3
Consolidated Statements of Operations - For the Three and Six
Months Ended June 30, 1997 and 1996 4
Consolidated Statements of Cash Flows - For the Six
Months Ended June 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations, Liquidity, and Capital 6-13
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 14
Item 6. Exhibits and Reports on Form 8-K 14
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 the Rights of the Company's Security Holders
Item 3. Defaults by the Company on its Senior Securities
Item 5. Other Information
SIGNATURES 15
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
DEARBORN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands) 06/30/97 12/31/96 06/30/96
(unaudited) (audited) (unaudited)
------------- ------------- --------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents
Cash and due from banks $ 2,059 $ 2,126 $ 952
Federal funds sold 1,300 5,300 2,150
-------- -------- --------
Total cash and cash equivalents 3,359 7,426 3,102
Mortgage loans held for sale 61 303 170
Investment securities, available for sale 19,479 10,493 14,241
Loans
Loans 43,136 36,263 25,186
Allowance for possible credit losses (436) (366) (255)
-------- -------- --------
Net loans 42,700 35,897 24,931
Bank premises and equipment, net 2,098 2,080 2,118
Accrued interest receivable 549 306 374
Other assets 140 94 89
-------- -------- --------
Total assets $ 68,386 $ 56,599 $ 45,025
======== ======== ========
LIABILITIES
Deposits
Non-interest bearing deposits $ 9,711 $ 7,583 $ 8,276
Interest bearing deposits 49,362 39,880 30,704
-------- -------- --------
Total deposits 59,073 47,463 38,980
Other liabilities
Mortgage payable 545 554 562
Accrued interest payable 178 127 86
Other liabilities 155 265 95
-------- -------- --------
Total liabilities 59,951 48,409 39,723
STOCKHOLDERS' EQUITY
Common stock - 3,000,000 shares authorized,
950,000 shares outstanding in
1997 and 674,000 shares
outstanding in 1996 9,272 6,521 6,521
Common stock subscribed but unissued,
276,000 shares in 1996 -- 2,752 --
Accumulated deficit (807) (1,065) (1,184)
Net unrealized gain (loss) on securities
available for sale (30) (18) (35)
-------- -------- --------
Total stockholders' equity 8,435 8,190 5,302
Total liabilities and
stockholders' equity $ 68,386 $ 56,599 $ 45,025
======== ======== ========
<FN>
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
DEARBORN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(In thousands, except per share data) Three Months Ended Six Months Ended
06/30/97 06/30/96 06/30/97 06/30/96
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $958 $562 $1,827 $1,052
Interest on investment securities,
available for sale 302 190 531 334
Interest on federal funds and
deposits with banks 36 40 61 61
Total interest income 1,296 792 2,419 1,447
----- --- ----- -----
Interest expense
Interest on deposits 690 387 1,268 706
Interest on other liabilities 11 11 21 22
----- --- ----- -----
Total interest expense 701 398 1,289 728
Net interest income 595 394 1,130 719
Provision for possible credit losses 34 36 73 54
----- --- ----- -----
Net interest income after provision for
possible credit losses 561 358 1,057 665
----- --- ----- -----
Non-interest income
Service charges on deposit accounts 29 22 59 38
Fees for other services to customers 5 3 12 7
Gain on the sale of loans 34 26 68 72
Gain on the sale of investment
securities --- 4 --- 4
Other income 2 2 3 5
----- --- ----- -----
Total non-interest income 70 57 142 126
Non-interest expenses
Salaries and employee benefits 310 264 590 554
Occupancy and equipment expense 47 44 97 94
Advertising and marketing 26 28 56 58
Stationery and supplies 13 18 30 33
Professional services 26 16 43 31
Data processing 24 16 44 33
FDIC insurance premiums 3 1 3 1
Other operating expenses 72 33 138 79
----- --- ----- -----
Total non-interest expenses 521 420 1,001 883
Income (loss) before provision for income taxes 110 (5) 198 (92)
Income tax benefit (35) --- (60) ---
----- --- ----- -----
Net income (loss) $145 ($5) $258 ($92)
===== === ===== =====
Per share data:
Net income (loss) $0.15 ($0.01) $0.27 ($0.14)
Average number of shares outstanding 950,000 674,000 950,000 674,000
<FN>
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
DEARBORN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands) Six Months Ended
06/30/97 06/30/96
-------- --------
<S> <C> <C>
Cash flows from operating activities
Interest and fees received $ 2,250 $ 1,413
Interest paid (1,238) (734)
Proceeds from sale of mortgages held for
sale 4,720 3,760
Origination of mortgages held for sale (4,410) (3,450)
Cash paid to suppliers and employees (1,025) (758)
-------- --------
Net cash provided by operating activities 297 231
Cash flows from investing activities
Proceeds from maturities of securities
available for sale 5,000 2,000
Proceeds from sales of securities available
for sale 595 1,709
Purchases of securities available for sale (14,598) (8,020)
Increase in loans, net of payments received (6,876) (5,244)
Purchases of property and equipment (86) (167)
-------- --------
Net cash used in investing activities (15,965) (9,722)
Cash flows from financing activities
Net increase in non-interest bearing
deposits 2,128 4,203
Net increase in interest bearing deposits 9,482 5,855
Principal payments on mortgage payable (9) (7)
-------- --------
Net cash provided by financing activities 11,601 10,051
Increase (decrease) in cash and cash equivalents (4,067) 560
Cash and cash equivalents at the beginning of the
period 7,426 2,542
-------- --------
Cash and cash equivalents at the end of the period $ 3,359 $ 3,102
======== ========
Reconciliation of net income (loss) to net cash
provided by operating activities
Net income (loss) $ 258 $ (92)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities
Provision for possible credit
losses 73 54
Depreciation and amortization
expense 71 65
Accretion of discount on
investment securities (4) (2)
Amortization of premium on
investment securities 8 47
(Gain) on sale of investment
securities -- (4)
Decrease in mortgages held for 242 238
sale
(Increase) in interest receivable (243) (84)
Increase (decrease) in interest
payable 51 (6)
(Increase) decrease in other
assets (49) 9
Increase (decrease) in other
liabilities (110) 6
-------- --------
Net cash provided by operating activities $ 297 $ 231
======== ========
<FN>
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
5
<PAGE>
DEARBORN BANCORP, INC.
FORM 10-Q (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Accounting and Reporting Policies
The 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 unaudited financial statements of the Corporation for the three
and six month periods ended June 30, 1997 and 1996 reflect all
adjustments, consisting of normal recurring items which are, in the
opinion of management, necessary to present a fair statement of the
results for the interim period. The operating results for the
reported periods are not necessarily indicative of results of
operations for the entire year.
The consolidated financial statements 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 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 1996 Annual Report to Stockholders.
PART 1 - 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.
6
<PAGE>
DEARBORN BANCORP, INC.
FORM 10-Q (continued)
ANALYSIS OF BALANCE SHEET AND IMPACT UPON OPERATING RESULTS
Average total assets for the three and six month periods ended June 30, 1997
amounted to $67.4 million and $63.4 million, respectively. Average total
asset for the three and six month periods ended June 30, 1996 amounted to
$42.4 million and $39.0 million, respectively.
The annualized return on average total assets for the three and six month
periods ended June 30, 1997 was 0.86% and 0.81%, respectively. The annualized
return on average total assets for the three and six month periods ended June
30, 1996 was (0.05%) and (0.46%), respectively. The annualized return on
average equity for the three and six month periods ended June 30, 1997 was
7.00% and 6.39%, respectively. The annualized return on average equity for
the three and six month periods ended June 30, 1996 was (0.38%) and (3.36%),
respectively.
Net interest income was $595,000 and $1,130,000 for the three and six month
periods ended June 30, 1997, respectively. The annualized net interest margin
for the three and six month periods ended June 30, 1997, on a tax equivalent
basis, was 3.53% and 3.56%, respectively. Net interest income was $394,000
and $719,000 for the three and six month periods ended June 30, 1996,
respectively. The annualized net interest margin for the three and six month
periods ended June 30, 1996, on a tax equivalent basis, was 3.72% and 3.69%,
respectively.
Loans
Major categories of loans included in the loan portfolio are as follows (in
thousands):
<TABLE>
<CAPTION>
06/30/97 12/31/96 06/30/96
-------- -------- --------
<S> <C> <C> <C>
Consumer loans $11,159 $ 8,877 $ 5,522
Commercial, financial, & other 7,032 7,199 5,589
Commercial real estate construction 2,490 1,971 260
Commercial real estate mortgages 8,122 6,384 4,501
Residential real estate mortgages 14,333 11,832 9,314
------- ------- -------
43,136 36,263 25,186
Less allowance for possible credit losses 436 366 255
------- ------- -------
$42,700 $35,897 $24,931
======= ======= =======
</TABLE>
7
<PAGE>
DEARBORN BANCORP, INC.
FORM 10-Q (continued)
Average total loans for the six month periods ended June 30, 1997 and 1996,
amounted to $40.0 million and $21.4 million, respectively. Interest income on
total loans was $1,827,000 and $1,052,000, respectively, as of June 30, 1997
and 1996, resulting in an effective yield of 9.14% and 9.83% on a tax
equivalent basis.
Non-Performing Assets and Problem Loans
The following is a summary of non-performing assets and problems loans (in
thousands):
<TABLE>
<CAPTION>
06/30/97 12/31/96 06/30/96
-------- -------- --------
<S> <C> <C> <C>
Non-accrual loans $5 $8 $9
Renegotiated loans -- -- --
Other real estate owned -- -- --
--- --- ---
$5 $8 $9
== == ==
</TABLE>
Allowance and Provision for Possible Credit Losses
The following is an analysis of the allowance for possible credit losses (in
thousands):
<TABLE>
<CAPTION>
06/30/97 06/30/96
-------- --------
<S> <C> <C>
Balance, beginning of year $ 366 $ 204
Provision for possible credit losses
charged to operations 73 54
------- -------
439 258
Loans charged off 3 3
------- -------
Balance, June 30 $ 436 $ 255
======= =======
As a percent of total loans 1.01% 1.01%
======= =======
Ratios (amounts in thousands):
Net charge-offs to total loans,
annualized 0.01% 0.02%
Average allowance for possible loan
losses 398 219
Average total loans, gross 40,000 21,409
Average allowance to average total loans 1.00% 1.02%
</TABLE>
8
<PAGE>
DEARBORN BANCORP, INC.
FORM 10-Q (continued)
Investment Securities Available for Sale
The amortized cost and estimated market value of investments in debt
securities available for sale are as follows (in thousands):
<TABLE>
<CAPTION>
June 30, 1997
---------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
US Treasury securities $ 3,006 $ 8 $ (9) $ 3,005
US Government agency securities 16,503 8 (37) 16,474
------- ----- ---- -------
Totals $19,509 $16 $(46) $19,479
======= ===== ==== =======
<CAPTION>
June 30, 1996
---------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
US Treasury securities $ 5,273 $1 $(9) $5,265
US Government agency securities 9,003 3 (30) 8,976
------- ---- ---- -------
Totals $14,276 $4 $(39) $14,241
======= ===== ==== =======
</TABLE>
Investment securities available for sale averaged $17.5 million and $11.5
million for the six months ended June 30, 1997 and 1996, respectively.
Interest income as of June 30, 1997 and 1996 for securities available for
sale was $531,000 and $334,000, respectively, which resulted in an effective
yield of 6.14% and 5.82%.
Investment Securities Held to Maturity
The Corporation has no investment securities classified in the held to
maturity category.
Federal Funds Sold
Federal funds sold averaged $2.1 million and $2.3 million for the six month
periods ended June 30, 1997 and 1996, respectively. Income on these
short-term assets as of June 30, 1997 and 1996 was $61,000 and $61,000,
respectively, which resulted in an effective yield of 5.72% and 5.33%.
9
<PAGE>
DEARBORN BANCORP, INC.
FORM 10-Q (continued)
Liabilities and Interest Expense
The following is a summary of the distribution of deposits (in thousands):
<TABLE>
<CAPTION>
06/30/97 12/31/96 06/30/96
-------- -------- --------
<S> <C> <C> <C>
Non-interest bearing:
Demand $ 9,711 $ 7,583 $ 8,276
======= ======= =======
Interest bearing:
Checking $ 738 $ 977 $ 735
Money market 5,487 5,977 3,777
Savings 1,375 1,240 1,227
Time, under $100,000 24,672 19,048 13,350
Time, $100,000 and over 17,090 12,638 11,615
------- ------- -------
$49,362 $39,880 $30,704
======= ======= =======
</TABLE>
Average total deposits and average interest bearing deposits for the six
month period ended June 30, 1997 amounted to $54.5 million and $47.1 million,
respectively. In comparison, average total deposits and average interest
bearing deposits for the six month period ended June 30, 1996 were $32.9
million and $27.5 million, respectively. Total interest expense for deposits
was $1,268,000 for the six month period ended June 30, 1997, resulting in an
effective interest rate of 4.65% on total deposits and 5.42% on interest
bearing deposits. In comparison, total interest expense for deposits was
$706,000 for the six month period ended June 30, 1996, resulting in an
effective yield of 4.29% on total deposits and 5.16% on interest bearing
deposits.
For the six month periods ended June 30, 1997 and 1996:
Non-interest bearing deposits had an average balance of $7.4 million
and $5.5 million, respectively.
Average interest bearing checking deposits were $0.9 million and $0.8
million, respectively, with associated interest expense of $8,000 and
$7,000 resulting in an effective interest rate of 1.87% and 1.86%.
Average money market deposits were $7.3 million and $5.5 million,
respectively, with associated interest expense of $151,000 and
$118,000 resulting in an effective interest rate of 4.11% and 4.24%.
10
<PAGE>
DEARBORN BANCORP, INC.
FORM 10-Q (continued)
Average savings deposits were $1.3 million and $1.2 million,
respectively, with associated interest expense of $16,000 and $15,000
resulting in an effective interest rate of 2.50% and 2.50%.
Interest bearing time deposits had an average balance of $37.6
million and $20.0 million, respectively, with associated interest
expense of $1,092,000 and $566,000 which resulted in an effective
interest rate of 5.81% and 5.68%.
Average interest bearing other liabilities consisted of mortgage indebtedness
and federal funds purchased for the six month periods ended June 30, 1997 and
1996. The average balance was $550,000 and $552,000, respectively, with
associated interest expense of $21,000 and $22,000 resulting in an effective
interest rate of 7.75% and 7.75%.
Non-Interest Income
Total non-interest income for the three month periods ended June 30, 1997 and
1996 amounted to $70,000 and $57,000, respectively. For the six month periods
ended June 30, 1997 and 1996, non-interest income totaled $142,000 and
$126,000, respectively. The primary component of non-interest income
consisted of gain on the sale of residential mortgages in the amount of
$34,000 and $68,000 for the three and six month periods ended June 30, 1997,
respectively.
Non-Interest Expenses
Total non-interest expenses for the three month periods ended June 30, 1997
and 1996 amounted to $521,000 and $420,000, respectively. For the six month
periods ended June 30, 1997 and 1996, non-interest expenses amounted to
$1,001,000 and $883,000, respectively. The largest component of non-interest
expenses consisted of salaries and employee benefits. For the six month
period ended June 30, 1997 the number of full time equivalent employees was
26, resulting in a salaries and employee benefits expense of $590,000. For
the six month period ended June 30, 1996, the number of full time equivalent
employees was 24, resulting in a salaries and employee benefits expense of
$554,000.
11
<PAGE>
DEARBORN BANCORP, INC.
FORM 10-Q (continued)
Rate Sensitivity Analysis / Gap Analysis
The relationship between earning assets and liabilities considered to be
interest rate sensitive within given maturity ranges is called the asset or
liability funding gap depending on whether such earning assets exceed or are
exceeded by interest sensitive liabilities. As of June 30, 1997, total
earning assets exceeded interest bearing liabilities by $14.1 million. The
excess was funded by non-interest bearing demand deposits and stockholders'
equity. The Rate Sensitivity Analysis / Gap Analysis as of June 30, 1997 is
presented in the following table.
<TABLE>
<CAPTION>
Interest Rate Sensitivity Period
----------------------------------------------------------
1-90 91-365 1-5 Over
Days Days Years 5 Years Total
----------- ---------- ---------------------- ------------
<S> <C> <C> <C> <C> <C>
Earning assets
Federal funds sold $ 1,300 $ -- $ -- $ -- $ 1,300
Mortgage loans held for sale 61 -- -- -- 61
Securities available for sale 1,000 999 17,480 -- 19,479
Total loans, net of
non-accrual 11,275 6,358 24,712 786 43,131
-------- -------- -------- -------- --------
Total earning assets 13,636 7,357 42,192 786 63,971
Interest bearing liabilities
Total interest bearing 12,744 20,688 15,930 -- 49,362
deposits
Mortgage payable -- -- -- 545 545
-------- -------- -------- -------- --------
Total interest bearing liabilities 12,744 20,688 15,930 545 49,907
Net asset (liability) funding gap 892 (13,331) 26,262 241 $ 14,064
-------- -------- -------- -------- ========
Cumulative net asset (liability)
funding gap $ 892 $(12,439) $ 13,823 $ 14,064
======== ======== ======== ========
</TABLE>
This table presents earning assets and interest bearing liabilities by
maturity or the earliest repricing opportunities. Non-maturity interest
bearing deposits are distributed across a basic gap schedule as proposed by
FFIEC Financial Institutions Letter 65-93, dated September 20, 1993.
12
<PAGE>
DEARBORN BANCORP, INC.
FORM 10-Q (continued)
LIQUIDITY
The Corporation maintains a liquid position. As of June 30, 1997, the
Corporation had $1.3 million in federal funds sold and securities classified
as available for sale of $19.5 million. Those securities with maturities
within one year totaled $2.0 million. Loan repayments provide another source
of liquidity. The Corporation is continuing to build a stable customer base
of core deposits and has proven the ability to attract deposits within the
Corporation's market area. The liquidity of the Corporation and its
subsidiary provides flexibility to meet credit-worthy loan requests and
deposit fluctuations.
CAPITAL
The Corporation maintains a strong capital base. Consolidated stockholders'
equity totaled $8.4 million as of June 30, 1997. Primary capital for the
Corporation, consisting of stockholders' equity and the allowance for
possible loan losses, totaled $8.9 million. Primary capital to total assets
was 13.0%.
The following is a presentation of the Corporation's regulatory capital
ratios:
<TABLE>
<CAPTION>
Minimum
Regulatory
06/30/97 06/30/96 Guidelines
-------- -------- ----------
<S> <C> <C> <C>
Risk-Based Capital Ratios
Tier 1 Capital 19.90% 21.30% 4.00%
Total Capital 20.92% 22.32% 8.00%
Leverage Ratio 12.56% 12.60% 4.00%
</TABLE>
The Federal Deposit Insurance Corporation Improvement Act of 1991 established
five capital tiers for banks. Pursuant to that statute the federal bank
regulatory agencies have defined the five capital tiers for banks. Under
these regulations, a bank is defined to be well capitalized, the highest
tier, if it maintains a Tier 1 Capital ratio of at least 6 percent, a Total
Capital ratio of at least 10 percent and a Leverage Ratio of at least 5
percent. Based on the regulatory ratios at June 30, 1997, the Corporation is
well capitalized.
13
<PAGE>
DEARBORN BANCORP, INC.
FORM 10-Q (continued)
PART 2 - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Corporation held its regular annual meeting of stockholders on
May 20, 1997. At this meeting, an election was held for four
directors, to serve three year terms expiring in 2000. The voting
results for each nominee were as follows:
<TABLE>
<CAPTION>
Nominee Total For Total Withheld
------- --------- --------------
<S> <C> <C>
David Himick 755,697 None
William E. Kreger 755,807 None
Jeffrey G. Longstreth 756,307 None
Michael J. Ross 756,307 None
</TABLE>
In addition, the stockholders were asked to approve two proposals.
A proposal to amend the articles of incorporation to increase the
number of authorized shares of common stock from 1,000,000 to
3,000,000 shares was approved as follows:
voted yes 738,200; voted no 13,566; abstained 7,500.
A proposal to amend the 1994 stock option plan to (a) make available
an additional 100,000 shares of common stock for issuance and to (b)
eliminate the provision in the plan which provides that no person may
be granted more than 10% of the number of shares available for
issuance during the aggregate term of the plan was approved as
follows:
voted yes 696,343; voted no 26,277; abstained 10,411.
ITEM 6. EXHIBITS AND REPORTS IN FORM 8-K.
(a)(1) Financial Statements:
The following consolidated financial statements of Dearborn Bancorp,
Inc. and its subsidiary included in this report are:
Consolidated Balance Sheets - June 30, 1997, December 31, 1996 and
June 30, 1996
Consolidated Statements of Operations - For the Three and Six Months
Ended June 30, 1997 and 1996
Consolidated Statements of Cash Flows - For the Six Months Ended June
30, 1997 and 1996
Notes to Consolidated Financial Statements
14
<PAGE>
DEARBORN BANCORP, INC.
FORM 10-Q (continued)
(a)(2) Exhibits
The Exhibits below are filed as Exhibits to the Registration Statement
of the Registrant on Form S-18 (Registration Number 33-55808) are
incorporated herein by reference.
(3)(a) Articles of Incorporation of Registrant,
As Amended Exhibit I
(10)(b) 1994 Stock Option Plan, As Amended Exhibit II
(b) A Form 8-K Report was not filed during the three months ended
June 30, 1997.
15
<PAGE>
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 and Chief Executive Officer
/s/ Donald G. Karcher
-------------------------
Donald G. Karcher
Treasurer and Chief Financial Officer
Date: August 1, 1997
EXHIBIT 3.A
C&S 515 (Rev. 5/95) 9788#7993 0612 DRG&FI $3012.50
- -----------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF COMMERCE -- CORPORATION AND SECURITIES BUREAU
- -----------------------------------------------------------------------------
Date Received (FOR BUREAU USE ONLY)
JUN 11 1997
- ------------------------------- FILED
ADJUSTED PURSUANT TO
TELEPHONE AUTHORIZATION JUN 11 1997
- -------------------------------
Name
Verne C. Hampton II Administrator
- ------------------------------- MI DEPARTMENT OF CONSUMER & INDUSTRY SERVICES
Address CORPORATION, SECURITIES &
LAND DEVELOPMENT BUREAU
500 Woodward Avenue, Suite 4000 EFFECTIVE DATE:
- -------------------------------
City State Zip Code
Detroit MI 48226
- -------------------------------
Document will be returned to the name and address you enter above
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
For use by Domestic Profit and Nonprofit Corporations
(Please read information and instructions on the last page)
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), or Act 162, Public Acts of 1982 (nonprofit corporations), the
undersigned corporation executes the following Certificate:
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1. The Present name of the corporation is Dearborn Bancorp, Inc
2. The identification number assigned by the Bureau is: 501-297
3. The location of the registered office is:
22290 Michigan Avenue, Dearborn
P.O. Box 2247, Michigan 48123-2247
- ------------------------------------------------------------------------------
4. Article III 1. of the Articles of Incorporation is hereby amended to read
-----
as follows:
The total authorized shares:
1. Common Shares: 3,000,000
Preferred Shares: None
<PAGE>
5. COMPLETE SECTION (a) IF THE AMENDMENT WAS ADOPTED BY THE UNANIMOUS CONSENT
OF THE INCORPORATOR(S) BEFORE THE FIRST MEETING OF THE BOARD OF DIRECTORS OR
TRUSTEES; OTHERWISE, COMPLETE SECTION (b). DO NOT COMPLETE BOTH.
a. / / The foregoing amendment to the Articles of Incorporation was duly
adopted on the __________________day of ___________________,
19_____, in accordance with the provisions of the Act by the
unanimous consent of the incorporator(s) before the first meeting of
the Board of Directors or Trustees.
Signed this __________________day of______________, 19______.
_____________________________________ ___________________________________
(Signature) (Signature)
_____________________________________ ___________________________________
(Type or Print Name) (Type or Print Name)
_____________________________________ ___________________________________
(Signature) (Signature)
_____________________________________ ___________________________________
(Type or Print Name) (Type or Print Name)
b. /X/ The foregoing amendment to the Articles of Incorporation was duly
adopted on the 20th day of May, 1997. The amendment:
---- --- --
(check one of the following)
/X/ was duly adopted in accordance with Section 611(2) of the Act
by the vote of the shareholders if a profit corporation, or by
the vote of the shareholders or members if a nonprofit
corporation, or by the vote of the directors if a nonprofit
corporation organized on a nonstock directorship basis. The
necessary votes were cast in favor of the amendment.
/ / was duly adopted by the written consent of all directors
pursuant to Section 525 of the Act and the corporation is a
nonprofit corporation organized on a nonstock directorship basis.
/ / was duly adopted by the written consent of the shareholders or
members having not less than the minimum number of votes
required by statute in accordance with Section 407(1) and (2) of
the Act if a nonprofit corporation, or Section 407(1) of the Act
if a profit corporation. Written notice to shareholders who have
not consent in writing has been given. (Note: Written consent by
less than all of the shareholders or members is permitted only
if such provision appears in the Articles of Incorporation.)
/ / was duly adopted by the written consent of all the shareholders
or members entitled to vote in accordance with section 407(3) of
the Act if a nonprofit corporation, or Section 407(2) of the
Act if a profit corporation.
Signed this 20th day of May , 1997
----- ------ --
By /s/ Michael J. Ross
--------------------------------------------
(Only Signature of President, Vice-President,
Chairperson, or Vice-Chairperson)
Michael J. Ross Vice-President
-------------------------------------------------
(Type or Print Name) (Type or Print Title)
EXHIBIT 10.B
Amended as of May 20, 1997
STOCK OPTION PLAN OF DEARBORN BANCORP, INC.
Article I. - Purpose
The purpose of the Stock Option Plan (the "Plan") of Dearborn
Bancorp, Inc., a Michigan corporation, is to enable key employees of the
Company and its subsidiaries to participate in the Company's future growth
and profitability by offering them long-term performance-based incentive
compensation. The Plan also provides a means through which the Company and
its subsidiaries can attract and retain key employees.
Article II. - Definitions
2.1 The following terms have the meaning described below when used
in the Plan:
(a). "Board of Directors" shall mean the Board of Directors of
the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended, and as it may be further amended from time to time.
(c) "Committee" shall mean the Stock Option Committee of the
Board of Directors.
(d) "Common Stock" shall mean the Common Stock of the Company.
(e) "Company" shall mean Dearborn Bancorp, Inc.
(f) "Fair Market Value" shall mean as of any given date the
price established and determined by the Board of Directors, provided,
however, if the Common Stock is traded in the over-the-counter market, fair
market value shall mean the closing price of the Common Stock, in such market
rounded, if necessary, to the next full one cent, or if there is no such
price published, then on the most recent preceding date on which such prices
are published.
(g) "Incentive Stock Option" shall mean a stock option granted
under Article VI that is intended to meet the requirements of Section 422 of
the Code.
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<PAGE>
(h) "Non-Qualified Stock Option" shall mean a stock option
granted under Article VI that is not intended to be an Incentive Stock
Option.
(i) "Option" shall mean an Incentive Stock Option or
Non-Qualified Stock Option.
(j) "Participant" shall mean an eligible employee who has been
granted an Option.
(k) "Subsidiary" shall mean a corporation a majority of the
outstanding voting capital stock of which is owned by the Company.
Article III. - Administration
3.1 Stock Option Committee. (a) The Stock Option Committee
appointed by the Board of Directors of the Company shall administer the Plan.
The members of the Committee shall not be eligible to receive an Option under
the Plan. The Committee shall have full power and authority, subject to such
orders or resolutions not inconsistent with the provisions of the Plan as may
from time to time be issued or adopted by the Board of Directors, to grant to
eligible employees Options under Article VI of the Plan, to interpret the
provisions of the Plan and any agreements relating to Options granted under
the Plan and to supervise the administration of the Plan.
(b) Decisions of Committee. All decisions made by the Committee
pursuant to the provisions of the Plan and related resolutions of the Board
of Directors shall be final, conclusive and binding on all persons, including
the Company, its shareholders and employees, and beneficiaries of employees.
Article IV - Shares Subject to the Plan
4.1 (a) Number of Shares. Subject to adjustment as provided for in
Section 4.1(b), the maximum number of shares of Common Stock with respect to
which Options may be granted shall be 150,000 shares of Common Stock. Shares
of Common Stock shall be made available from the authorized but unissued
shares of the Company. If an Option granted under the Plan shall expire or
terminate for any reason, the shares subject to, but not delivered, under
such Option shall be available for other Options to be issued under the Plan.
-2-
<PAGE>
(b) Adjustments. All as may be deemed appropriate by the
Committee, the aggregate number of shares of Common Stock which may be issued
under the Plan, the number of shares covered by each outstanding Option, and
the price per share in each Option, shall all be proportionately adjusted for
any increase or decrease in the number of issued shares of Common Stock of
the Company resulting from a subdivision or consolidation of shares or any
other capital adjustment, a stock split, the payment of a stock dividend, or
other increase or decrease in such shares effected without receipt of
consideration by the Company.
Article V - Eligibility
5.1 The persons eligible to participate in the Plan and receive
Options under the Plan shall consist of officers and other key employees of
the Company and its subsidiaries, including directors who are full time
employees, as determined by the Committee.
Article VI - Stock Options
6.1 Grant of Options. Subject to the limitations of the Plan, the
Committee, after such consultation with and consideration of the
recommendations of management as the Committee considers desirable, shall
select from eligible employees Participants to be granted Options and
determine the time when each Option shall be granted and the number of shares
subject to each Option. Options may be either Incentive Stock Options or
Non-Qualified Stock Options. An employee may be granted multiple options
under the Plan. The Committee may not grant an employee Incentive Stock
Options which in the aggregate are first exercisable during any one calendar
year with respect to Common Stock the aggregate Fair Market Value of which
(determined as of the time of grant) exceeds $100,000.
6.2 Option Agreements. Each Option under the Plan shall be
evidenced by an option agreement that shall be signed by an officer of the
Company and the Participant and shall contain such provisions as may be
approved by the Committee. Any such option agreement may be amended from time
to time as approved by the Committee and the Participant, provided that the
terms of such option agreement after being amended conform to the terms of
the Plan.
-3-
<PAGE>
6.3 Option Price. The price at which shares may be purchased upon
exercise of an Option shall be not less than one hundred percent (100%) of
the Fair Market Value of such shares on the date such Option is granted.
6.4 Exercise of Options.
(a) The period during which each Option may be exercised shall be
fixed by the Committee at the time such Option is granted, but such period in
no event shall expire later than ten (10) years from the date the Option is
granted.
(b) Except as permitted by Sections 6.6 and 7.1, each Option may
not be exercised for a period of six months from the date the Option is
granted and then only during the continuance of the Participant's employment
with the Company or any of its subsidiaries. Subject to the foregoing
limitations and the terms and conditions of the option agreement and unless
cancelled prior to exercise, each Option shall be exercisable in whole or in
part in installments at such time or times as the Committee may prescribe and
specify in the applicable option agreement.
(c) No shares shall be delivered pursuant to any exercise of an
Option until payment in full of the option price therefor is received by the
Company. Such payment shall be made in cash or, at the discretion of the
Committee, through the delivery of shares of Common Stock of the Company with
a value equal to the total option price or a combination of cash and shares.
Any shares so delivered shall be valued at their Fair Market Value on the
exercise date. No Participant shall be deemed to be a holder of any shares
subject to any Option prior to the issuance of such shares upon exercise of
such Option.
6.5 Non-Transferability of Options. No Option or any rights with
respect thereto shall be subject to any debts or liabilities of a
Participant, nor be assignable or transferable except by Will or the laws of
descent and distribution, nor be exercisable during the Participant's
lifetime other than by the Participant, nor shall Common Stock be issued to
or in the name of one other than the Participant; provided, however, that an
Option may after the death or disability of a Participant be exercised
pursuant to Section 6.6(b); and provided further than any Common Stock issued
to a Participant hereunder may at the request of the Participant be issued in
the names of the Participant and one other person, as joint tenants with
right of survivorship and not as tenants in common, or in the name of a trust
for the benefit of the Participant or for the benefit of the Participant and
others.
6.6 Death and Disability. Subject to the condition that no Option
may be exercised in whole or in part after the expiration of the option
period specified in the
-4-
<PAGE>
applicable option agreement and subject further to the requirement that a
Participant may not exercise an Option within six months following the grant
of the Option:
(a) Except as hereinafter provided, an Option may be exercised by
the Participant only while such Participant is in the employ of the Company
or a subsidiary. In the event that the employment of a Participant to whom an
Option has been granted under the Plan shall terminate (except as set forth
below) such Option may be exercised, to the extent that the Option was
exercisable on the date of termination of employment, only until the earlier
of three (3) months after such termination or the original expiration date of
the Option; provided, however, that if termination of employment results from
death or total and permanent disability, such three (3) month period shall be
extended to twelve (12) months; and provided, further, that any Option held
by a Participant whose employment shall be terminated either (i) for cause as
determined by the Committee or (ii) voluntarily by the Participant and
without the consent of the Company shall, to the extent not theretofore
exercised, forthwith terminate.
(b) In the event of the permanent disability of a Participant as
determined by the Committee, an Option which is otherwise exercisable may be
exercised by the Participant's legal representative or guardian. In the event
of the death of the Participant, an Option which is otherwise exercisable may
be exercised by the person or persons whom the Participant shall have
designated in writing on forms prescribed by and filed with the Committee
("Beneficiaries"), or, if no such designation has been made, by the person or
persons to whom the Participant's rights shall have passed by Will or the
laws of descent and distribution ("Successors"). The Committee may require an
indemnity and/or such evidence or other assurances as it may deem necessary
in connection with an exercise by a legal representative, guardian,
Beneficiary or Successor.
Article VII - General Provisions
7.1 Change in Control.
(a) In the case of a Change in Control (as defined below) of the
Company, unless the Committee determines otherwise, each Option then
outstanding shall immediately become exercisable in full.
(b) Any determination by the Committee made pursuant to this
Section may be made as to all outstanding Options or only as to certain
Options specified by the Committee and any such determinations shall be made
in cases covered by
-5-
<PAGE>
subparagraphs 7.1(c)(i) and (ii) below prior to or as soon as practicable
after the occurrence of such event and in the cases covered by subparagraphs
7.1(c)(iii) or (iv) prior to the occurrence of such event.
(c) A Change in Control shall occur if:
(i) Any "person" or "group of persons" as such terms are
defined in Section 13(d) and 14(c) of the Securities Exchange Act of 1934
(the "Exchange Act") directly or indirectly purchases or otherwise becomes
the "beneficial owner" (as defined in the Exchange Act) or has the right to
acquire such beneficial ownership (whether or not such right is exercised
immediately, with the passage of time or subject to any condition) of voting
securities representing thirty percent (30%) or more of the combined voting
power of all outstanding voting securities of the Company,
(ii) During any period of two consecutive years the individuals
who at the beginning of such period constitute the Board of Directors cease
for any reason to constitute at least the majority of the members thereof
unless (1) there are five or more directors then still in office who were
directors at the beginning of the period and (2) the election or the
nomination for election by the Company's shareholders of each new director
was approved by at least two-thirds (2/3) of the directors then still in
office who were directors at the beginning of the period,
(iii) The shareholders of the Company shall approve an agreement
to merge or consolidate the Company with or into another corporation as a
result of which less than fifty percent (50%) of the outstanding voting
securities of the surviving or resulting entity are or are to be owned by the
former shareholders of the Company (excluding from former shareholders a
shareholder who is or as a result of the transaction in question, becomes an
"affiliate" as defined in Rule 12b-2 under the Exchange Act of any party to
such consolidation or merger), or
(iv) The shareholders of the Company shall approve the sale of
all or substantially all of the Company's business and/or assets to a person
or entity that is not a wholly-owned subsidiary of the Company.
7.2 No Right of Continued Employment. Neither the establishment of
the Plan, the granting of Options or the payment of any benefits hereunder or
any action of the Company or of the Board of Directors or of the Committee
shall be held or construed to confer upon any person any legal right to be
continued in the employ of the Company or its subsidiaries, each of which
expressly reserves the right to discharge any employee whenever the interest
of any such company in its sole discretion may so require without liability
to such company, the Board of Directors or the Committee except as to any
rights that may be expressly conferred upon such employee under the Plan.
-6-
<PAGE>
7.3 No Segregation of Cash or Shares. The Company shall not be
required to segregate any shares of Common Stock that may at any time be
represented by Options, and the Plan shall constitute an "unfunded" plan of
the Company. No employee shall have rights with respect to shares of Common
Stock prior to the delivery of such shares. The Company shall not, by any
provisions of the Plan, be deemed to be a trustee of any Common Stock or any
other property and the liabilities of the Company to any employee pursuant to
the Plan shall be those of a debtor pursuant to such contract obligations as
are created by or pursuant to the Plan, and the rights of any employee,
former employee or beneficiary under the Plan shall be limited to those of a
general creditor of the Company.
7.4 Delivery of Shares. No shares shall be delivered pursuant to
any exercise of an Option under the Plan unless the requirements of such laws
and regulations as may be deemed by the Committee to be applicable thereto
are satisfied. All certificates for shares of Common Stock delivered under
the Plan shall be subject to such stock-transfer orders and other
restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Common Stock is then listed,
and any applicable Federal or state securities law, and the Committee may
cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.
7.5 Governing Law. The Plan and all determinations made and action
taken pursuant thereto shall be governed by the laws of the State of Michigan
and construed in accordance therewith.
7.6 Payments and Tax Withholding. The delivery of any shares of
Common Stock under the Plan shall be for the account of the Company and any
such delivery or distribution shall not be made until the recipient shall
have made satisfactory arrangements for the payment of any applicable
withholding taxes.
Article VIII - Amendment and Termination
8.1 Amendment or Termination. The Board of Directors may amend or
terminate the Plan provided, however, that no such amendment or termination
shall adversely affect any Option then in effect unless the prior approval of
the Participant so affected is obtained and provided further that any
amendment to the Plan shall be
-7-
<PAGE>
subject to shareholder approval to the extent necessary to satisfy the
requirements of Section 16 under the Securities Exchange Act of 1934.
Article IX - Effectiveness of Plan
9.1 The Plan was adopted by the Board of Directors on May 17, 1994
subject to the approval by the shareholders of the Company.
Article X - Severability
10.1 If any provision of the Plan, or any term or condition of any
Option granted thereunder, is invalid, such provision, term, condition or
application shall to that extent be void (or, in the discretion of the Board
of Directors, such provision, term or condition may be amended so as to avoid
such invalidity or failure), and shall not affect other provisions, terms or
conditions or applications thereof, and to this extent such provisions, terms
and conditions are severable.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM DEARBORN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS AT JUNE 30, 1997 AND THE
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS
ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 6-MOS
<PERIOD-START> JAN-01-1997
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> $ 2,059
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,300
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 19,479
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 43,136
<ALLOWANCE> 436
<TOTAL-ASSETS> 68,386
<DEPOSITS> 59,073
<SHORT-TERM> 0
<LIABILITIES-OTHER> 333
<LONG-TERM> 545
0
0
<COMMON> 9,272
<OTHER-SE> (837)
<TOTAL-LIABILITIES-AND-EQUITY> 68,386
<INTEREST-LOAN> 1,827
<INTEREST-INVEST> 531
<INTEREST-OTHER> 61
<INTEREST-TOTAL> 2,419
<INTEREST-DEPOSIT> 1,268
<INTEREST-EXPENSE> 1,289
<INTEREST-INCOME-NET> 1,130
<LOAN-LOSSES> 73
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,001
<INCOME-PRETAX> 198
<INCOME-PRE-EXTRAORDINARY> 198
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 258
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
<YIELD-ACTUAL> 3.53
<LOANS-NON> 5
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
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<ALLOWANCE-OPEN> 366
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 436
<ALLOWANCE-DOMESTIC> 436
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
