SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
X Annual report pursuant to Section 13 or 15(d) of the Securities
-------Exchange Act of 1934 for the fiscal year ended December 31, 1996 or
Transition report pursuant to Section 13 or 15(d) of the Securities
- --------Exchange Act of 1934 for the transition period from __________ to
__________
Commission file number 000-24478.
DEARBORN BANCORP, INC.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Michigan 38-3073622
- -----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
22290 Michigan Avenue, Dearborn, MI 48123-2247
- -----------------------------------------------------------------------------
(Address of principal executive office) (Zip code)
(313) 274-1000
- -----------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to section 12(d) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
None None
Securities registered pursuant to section 12(g) of the Act:
Common Stock
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes_X__ No ______
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to the Form 10-K. [X]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant as of March 15, 1997: Common Stock, $8,301,350.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock as of January 31, 1997: Common Stock, 950,000 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1996 Annual Report to Stockholders of Registrant are
incorporated in Parts I, II and IV of this report. Portions of the definitive
Proxy Statement of the Registrant dated April 18, 1997, to be filed pursuant
to Regulation 14A, are incorporated by reference in Part III of this report.
<PAGE>
DEARBORN BANCORP, INC.
FORM 10-K
PART I
Item 1. Business
Dearborn Bancorp, Inc. (the "Holding Company" or the "Registrant")
was incorporated as a Michigan corporation on September 30, 1992. Initially,
the primary purpose of the Holding Company was to form, own and operate,
Community Bank of Dearborn (the "Bank").
The Bank
The Bank is a commercial bank organized under Michigan law that
commenced business on February 28, 1994. The Bank offers a wide range of
financial products and services. These include checking accounts, savings
accounts, money market accounts, certificates of deposit, business checking,
direct deposit, loan services (commercial, consumer, real estate mortgages),
travelers' checks, cashiers' checks, wire transfers, safety deposit boxes,
collection services, and night depository services. The Bank does not have a
trust department.
As a normal part of the Bank's business, the Bank makes loans to
individuals and businesses located within the Bank's market area. The loan
policy for the Bank states that the function of the lending operation is
twofold: to provide a means for the investment of funds at a profitable rate
of return with an acceptable degree of risk, and to meet the credit needs of
the responsible businesses and individuals who are customers of the Bank.
The Bank's loan policy will change from time to time as interest
rates, market conditions and competitive factors change. The policy sets
forth guidelines on a nondiscriminatory basis for lending in accordance with
applicable laws and regulations. The policy describes various criteria in
granting loans including the ability to pay; the character of the customer;
evidence of financial responsibility; purpose of the loan; knowledge of
collateral and its value; terms of repayment; source of repayment; payment
history; and economic conditions.
The Bank's primary market area is the cities of Dearborn and Dearborn
Heights, Michigan located approximately 15 miles southwest of Detroit in
Wayne County, Michigan, with a combined population of approximately 148,000.
The Dearborn economy is anchored by its largest employer, World
Headquarters of Ford Motor Company. Dearborn is also supported by more than
150 other manufacturers and has over 11 million square feet of major office
facilities. Dearborn also is served by Fairlane Shopping Center, 3,000 area
hotel rooms, and Oakwood Health Services Corporation which employs over 2,200
people.
Competition
The Holding Company and the Bank compete with numerous existing bank
holding companies, commercial banks, savings and loan associations and credit
unions that have an established business and customer base in the market area
served by the Bank. Other businesses which also compete with the Holding
Company and the Bank include finance companies, factors, mortgage brokers,
insurance companies, securities brokerage firms, money market mutual funds
and private lenders. Most competitors have substantially greater resources
than the Holding Company and the Bank.
Supervision and Regulation
The Holding Company is a registered bank holding company and subject
to the supervision of the Federal Reserve System ("Federal Reserve"). The
Holding Company is required to file with the Federal Reserve annual reports
and such other information as the Federal Reserve may require under the Bank
Holding Company Act of 1956, as amended (the "Act"). The Holding Company and
the Bank are each subject to examination by the Federal Reserve.
2
<PAGE>
The Act requires every bank holding company to obtain prior approval
of the Federal Reserve before it may merge with or consolidate into another
bank holding company, acquire substantially all assets of any bank, or
acquire ownership or control of any voting shares of any bank, if after such
acquisition, it would own or control, directly or indirectly, more that 5% of
the voting shares of such bank holding company or bank. The Federal Reserve
may in its discretion approve the acquisition by the Holding Company the
voting shares or substantially all assets of a bank located in Michigan and,
subject to certain restrictions, located in any other state.
The Act also prohibits a bank holding company, with certain
exceptions, from acquiring direct or indirect ownership or control of more
than 5% of the voting shares of any company that is not a bank, and from
engaging in any business other than that of banking, managing and controlling
banks and their subsidiaries. Holding companies may engage in, and may own
shares of companies engaged in, certain businesses found by the Federal
Reserve to be closely related to banking or the management or control of
banks. Under current regulations of the Federal Reserve, a holding company
and its non-bank subsidiaries are permitted to engage in investment
management, sales and consumer finance, equipment leasing, data processing,
discount securities brokerage, mortgage banking and brokerage, and other
activities. These activities are subject to certain limitation imposed by the
regulations.
Transactions between the Holding Company and the Bank are subject to
various restrictions imposed by state and federal law. Such transactions
include loans and other extensions of credit, purchases of securities, any
payments of fees and other distributions. Federal law places restrictions on
the amount and nature of loans to executive officers, directors and
controlling persons of banks insured by the Federal Deposit Insurance
Corporation and holding companies controlling such banks.
The Bank is a state chartered bank and subject to regulation and
examination by the Michigan Financial Institutions Bureau. The Bank also is
subject to certain provisions of the Federal Deposit Insurance Act and
regulations issued under that act. The regulations affect many activities of
the Bank, including the permissible types and amounts of loans, investments,
capital adequacy, branching, interest rates payable on deposits, required
reserves, and the safety and soundness of the Bank's practices. The Bank is a
not a member bank of the Federal Reserve System and is regulated and examined
by the Federal Deposit Insurance Corporation.
A summary of consolidated net interest income, consolidated net
interest income volume / rate analysis, rate sensitivity analysis / gap
analysis and capital ratios is set forth under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
the 1996 Annual Report to Stockholders and is incorporated herein by
reference.
Item 2. Properties
Dearborn Bancorp, Inc. owns a single story commercial / retail office
building located at 22290 Michigan Avenue, Dearborn, Michigan. Approximately
74% of the 8,400 square foot building is leased to Community Bank of Dearborn
and the remaining space is leased to a non-affiliated tenant.
Dearborn Bancorp, Inc. also owns a single story commercial / retail
office building located at 24935 W. Warren Avenue, Dearborn Heights,
Michigan. Approximately 79% of the 3,240 square foot building is leased to
Community Bank of Dearborn and the remaining space is leased to a
non-affiliated tenant.
Item 3. Legal Proceedings
There are no legal proceedings pending against the Holding Company or
the Bank.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
fourth quarter of 1996.
3
<PAGE>
Executive Officers of the Holding Company and Bank
Set forth below are the names and ages of the executive officers of
the Holding Company and the Bank, positions held and the years from
which held. There are no family relationships among such persons.
John E. Demmer, 73
Chairman of the Board, Dearborn Bancorp, Inc. and Community Bank of
Dearborn Chairman of the Board and Director of the Parent Company
since 1992. Chairman of the Board and Director of the Bank since
1993. Chairman of the Board and Chief Executive Officer of Jack
Demmer Ford, Inc. since 1994. President and Chief Executive Officer
of Jack Demmer Ford, Inc. from 1957 to 1994.
Richard Nordstrom, 69
President, Dearborn Bancorp, Inc.
President and Director of the Parent Company since 1992. Director of
the Bank since 1993. Chairman of the Board of Nordstrom Samson
Associates from 1960 to 1996.
Donald G. Karcher, 67
Vice President and Treasurer, Dearborn Bancorp, Inc. Vice President,
Treasurer, and Director of the Parent Company since 1992. Director of
the Bank since 1993. Chairman of the Board of Karcher Agency, Inc.
since 1994. President of Karcher Agency, Inc. from 1965 to 1994.
Wilber M. Brucker, Jr., 71
Secretary, Dearborn Bancorp, Inc. and Community Bank of Dearborn
Secretary and Director of the Parent Company since 1992. Secretary
and Director of the Bank since 1993. Of Counsel, Law Firm of Riley
and Roumell from 1989 to 1995.
Michael J. Ross, 46
Vice President, Dearborn Bancorp, Inc. President and Chief Executive
Officer, Community Bank of Dearborn Vice President and Director of
the Parent Company since 1993. President, Chief Executive Officer,
and Director of the Bank since 1993. President of Mike Ross and
Associates, Inc. from 1992 to 1993.
Timothy J. Cuttle, 51
Executive Vice President, Community Bank of Dearborn
Executive Vice President and Chief Lending Officer of the Bank since
1996. Vice President of Huntington Banks of Michigan from 1990 to
1995.
Jeffrey L. Karafa, 32
Vice President and Cashier, Community Bank of Dearborn
Vice President and Cashier of the Bank since 1996. Assistant Vice
President of the Bank from 1994 to 1996. Second Vice President of
Michigan National Bank from 1992 to 1994.
Jeffrey J. Wolber, 41
Vice President, Community Bank of Dearborn Vice President of the Bank
since 1994. Banking Officer and Branch Manager of NBD Bank. from 1990
to 1993.
PART II
Item 5. Market for Registrant's Common Equity, and Related Stockholder
Matters
The information required by this item appears on page 4 of the
Corporation's 1996 Annual Report to Stockholders under the caption "Dearborn
Bancorp, Inc., Common Stock" and is incorporated by reference herein.
4
<PAGE>
Item 6. Selected Financial Data
The information required by this item appears on page 5 of the
Corporation's 1996 Annual Report to Stockholders under the caption "Summary
of Selected Financial Data" and is incorporated by reference herein.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required by this item appears on pages 29 through 34
of the Corporation's 1996 Annual Report to Stockholders under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and is incorporated by reference herein.
Item 8. Financial Statements and Supplementary Data
The financial statements included on pages 8 through 28 of the
Corporation's 1996 Annual Report to Stockholders are incorporated by
reference herein.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There are no changes in or disagreements with accountants on
accounting and financial disclosure.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information set forth under the caption "Information about
Directors and Nominees for Directors" on pages 3 through 5 of the definitive
Proxy Statement of the Corporation dated April 18, 1997 is incorporated by
reference herein.
Reference is made to Part I of this report for information as to
executive officers of the Corporation and Bank.
Item 11. Executive Compensation
The information set forth under the caption "Executive Compensation"
on page 6 of the definitive Proxy Statement of the Corporation dated April
18, 1997 is incorporated by reference herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information set forth under the caption "Security Ownership" on
pages 2 through 3 of the definitive Proxy Statement of the Corporation dated
April 18, 1997 is incorporated by reference herein.
Item 13. Certain Relationships and Related Transactions
The information set forth under the caption "Related Transactions" on
page 7 of the definitive Proxy Statement of the Corporation dated April 18,
1997 is incorporated by reference herein.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) Financial Statements
5
<PAGE>
The following financial statements of the Corporation appear
on the indicated pages of the Corporation's 1996 Annual Report
to Stockholders and are incorporated by reference in item 8.
Report of Independent Certified Public Accountants
on 1996 and 1995 consolidated financial statements page 8
Consolidated Balance Sheets page 9
Consolidated Statements of Operations page 10
Consolidated Statements of Stockholder's Equity page 11
Consolidated Statements of Cash Flows page 12
Notes to Consolidated Financial Statements pages 13-28
(2) Financial Statement Schedules
No schedules are required under this item.
(3) Exhibits
The Exhibits marked with one asterisk below were filed as
Exhibits to the Registration Statement of the Registrant on
Form S-18 (Registration Number 33-55808) are incorporated
herein by reference. Exhibits marked with two asterisks below
were filed as Exhibits to the Form 10-K Report of the
Registrant for the fiscal year ended December 31, 1993 are
incorporated herein by reference. Exhibits marked with three
asterisks below were filed as Exhibits to the Form 10-K Report
of the Registrant for the fiscal year ended December 31, 1994
are incorporated herein by reference. Exhibits marked with
four asterisks below were filed as Exhibits to the Form 10-K
Report of the Registrant for the fiscal year ended December
31, 1995 are incorporated herein by reference, the Exhibit
numbers in brackets being those in such Registration
Statements.
(3)(a)* Articles of Incorporation of Registrant. [3(a)]
(3)(b)* By-Laws of the Registrant. [3(b)]
(3)(b)**** By-Laws of the Registrant, As Amended. [3(b)]
(10)(a)* Letter re employment of Michael J. Ross
by Registrant. [10(a)]
(10)(b)*** 1994 Stock Option Plan. [10(b)]
(13) 1996 Annual Report to Stockholders.
(21)** Subsidiaries of the Registrant. [21]
(23)** Consent of McEndarffer, Hoke & Bernhard, P.C. [23]
(b) Reports on Form 8-K
The Corporation filed no reports on Form 8-K during the
quarter ended December 31, 1996.
6
<PAGE>
Form 10-K Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on March 25,
1997.
Dearborn Bancorp, Inc.
/s/ John E. Demmer
By ----------------------------------------
(John E. Demmer, Chairman of the Board)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 25, 1997.
/s/ John E. Demmer Chairman of the Board, Chief Executive Officer
- ------------------- and Director
(John E. Demmer) (Principal Executive Officer)
/s/ Donald G. Karcher
- ---------------------- Vice President, Treasurer and Director
(Donald G. Karcher) (Principal Financial and Accounting Officer)
/s/ Margaret I. Campbell
- ------------------------ Director
(Margaret I. Campbell)
- --------------------- Director
(Michael V. Dorian)
- --------------------- Director
(David Himick)
/s/ Bradley F. Keller
- ---------------------- Director
(Bradley F. Keller)
- ------------------------- Director
(Steven M. Kirkpatrick)
/s/ William E. Kreger
- ---------------------- Director
(William E. Kreger)
/s/ Jeffrey G. Longstreth
- ------------------------- Director
(Jeffrey G. Longstreth)
/s/ Richard Nordstrom
- ---------------------- President
(Richard Nordstrom) and Director
/s/ Michael J. Ross
- --------------------- Vice President
(Michael J. Ross) and Director
- --------------------- Director
(Dr. Robert C. Schwyn)
/s/ Ronnie J. Story
- --------------------- Director
(Ronnie J. Story)
7
Exhibit 13
DEARBORN BANCORP, INC.
and its subsidiary
COMMUNITY BANK OF DEARBORN
1996
ANNUAL REPORT
<PAGE>
INSIDE COVER
THIS PAGE INTENTIONALLY LEFT BLANK
2
<PAGE>
<TABLE>
<CAPTION>
DEARBORN BANCORP, INC
and its subsidiary
COMMUNITY BANK OF DEARBORN
<S> <C>
CONTENTS
Description of Business . . . . . . . . . . . . . . . . . . 4
Summary of Selected Financial Data . . . . . . . . . . . . . . . 5
Chairman's Letter to Stockholders . . . . . . . . . . . . . . . 6
Report of Independent Certified Public Accountants . . . . . . . . . 8
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . 9
Consolidated Statements of Operations . . . . . . . . . . . . . . 10
Consolidated Statements of Stockholders' Equity . . . . . . . . . . 11
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . 12
Notes to Consolidated Financial Statements . . . . . . . . . . . . 13
Management's Discussion and Analysis . . . . . . . . . . . . . . 29
Dearborn Bancorp, Inc. Directors and Officers . . . . . . . . . . . 35
Community Bank of Dearborn Directors and Officers . . . . . . . . . 36
</TABLE>
3
<PAGE>
DESCRIPTION OF BUSINESS
Dearborn Bancorp, Inc.
Dearborn Bancorp, Inc. (the "Parent Company" and, together with its
subsidiary, the "Corporation") is a registered bank holding company which was
incorporated on September 30, 1992. The primary purpose of the holding
company is to own and operate the subsidiary bank, Community Bank of Dearborn
(the "Bank").
Community Bank of Dearborn
The Bank was incorporated on June 28, 1993 and began operations as a state
chartered commercial bank on February 28, 1994 from its main office located
on Michigan Avenue in Dearborn. On December 20, 1995, a second office located
on West Warren Avenue in Dearborn Heights was opened. The Bank offers a wide
range of financial products and services. These include checking accounts,
savings accounts, money market accounts, certificates of deposit, business
checking, direct deposit, loan services (commercial, consumer, real estate
mortgages), travelers' checks, cashiers' checks, wire transfers, safety
deposit boxes, collection services, and night depository service. The Bank
does not have a trust department.
FORM 10-K AVAILABLE
For a free copy of the Company's Form 10-K filed with the U.S. Securities and
Exchange Commission, please direct your request to Mr. Jeffrey Karafa,
Dearborn Bancorp, Inc., P.O. Box 2247, Dearborn, Michigan 48123-2247.
ANNUAL MEETING
The Annual Meeting of Stockholders will be held on May 20, 1997, at Park
Place, 23400 Park Avenue, Dearborn, Michigan, at 4:00 p.m.
DEARBORN BANCORP, INC., COMMON STOCK
To the Parent Company's knowledge, there has been no significant trading in
the Parent Company's common stock since it was issued in 1993, and there is
no organized market in the Parent Company's stock. Shares are traded on an
individual basis. The last known trade in 1996 was on March 8, 1996 at $12.00
per share. On December 31, 1996 the Parent Company recorded common stock
subscriptions for 276,000 shares of common stock at a price of $10.00 per
share in connection with a rights offering to existing stockholders. No
dividends have been paid and the Parent Company has no current plans to pay
dividends in the future.
4
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF SELECTED FINANCIAL DATA
(In thousands, except per share 1996 1995 1994 1993 1992
data) --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the Year
Net interest income $ 1,608 $ 1,019 $ 408 $ 65 $ --
Noninterest income 284 210 93 -- --
Noninterest expenses 1,701 1,403 1,065 205 --
Net income (loss) 27 (288) (664) (140) --
Per Common Share
Net income (loss) $ 0.04 $ (0.43) $ (0.99) $ (1.85) $ --
At Year End
Investment securities,
available for sale $ 10,493 $ 10,035 $ 7,088 $ -- $ --
Total loans 36,263 19,945 9,907 -- --
Total assets 56,599 35,130 20,879 7,041 140
Total deposits 47,463 28,922 14,389 -- --
Mortgage payable 554 569 584 597 --
Total stockholders' equity 8,190 5,458 5,626 6,381 133
Profitability Ratios
Return on average
stockholders' equity 0.50% (5.20)% (11.62)% (2.19)% --
Return on average total assets 0.06% (1.01)% (5.12)% (1.99)% --
Average equity to average
total assets 12.19% 19.46% 44.06% 90.63% --
</TABLE>
5
<PAGE>
CHAIRMAN'S AND PRESIDENT'S LETTER
To Our Shareholders:
1996 will be remembered as a very important year in the history of
our company and our bank. First, it was the year when we "turned the corner"
and began to operate at a modest profit. And, second, it was the year when
rapid growth required us to raise additional capital through a highly
successful rights offering. Both of these events occurred considerably sooner
than we had projected when Community Bank of Dearborn first opened for
business on February 28, 1994.
Net income for the full year was a modest $27,000 but much better
than the net losses of $288,000 in 1995 and $664,000 in 1994 while we were in
a start-up mode. On a quarterly basis, we lost $87,000 in the first quarter
and just $5,000 in the second quarter. Then, we earned a profit of $60,000 in
the third quarter and $59,000 in the fourth quarter. Essentially, it took us
just a bit more than two years to go from a standing start to a break-even
operation. This is an unusual record for any new banking company.
We became profitable so quickly because of our swift growth. By the
end of the year, total assets had reached $56,599,000, 61% more than they
were at the end of 1995. During 1996, total deposits also went up 64% to
$47,463,000 and total loans increased 82% to $36,263,000.
At mid-year, it became apparent that the only way we could sustain
this rate of growth would be to add to our capital by selling additional
common stock. As a consequence, the board of directors took steps to
implement a rights offering to existing shareholders that resulted in the
sale of 276,000 new shares of common stock at $10 per share. With this
$2,760,000 in additional capital and the income we expect to earn over the
next two years, we should have enough capital to support total assets of
$100 million by the end of 1998.
One of our key strategies for achieving growth is the careful
development of a network of branch banking offices in Dearborn, Dearborn
Heights, and other nearby communities. Our first branch opened in December of
1995 on West Warren Avenue between Telegraph and Beech-Daly Roads in Dearborn
Heights. This office became profitable in less than one year. Now that it has
moved beyond the break-even point we are planning to open a second branch
bank at Five Mile and Sheldon Roads in Plymouth Township.
This new office should open in mid 1997. We expect to do as well
there as we have done in Dearborn Heights. The Northville - Plymouth - Canton
corridor along I-275 is one of the fastest growing areas in Southeastern
Michigan but there are no independent community banks doing business there.
Consequently, we believe that we will attract new business from customers who
prefer doing business at a bank like ours while we also will benefit from
nearby development.
The people who organized our company and Community Bank of Dearborn
did so because they were convinced that both business organizations and
individuals are served best by a financial institution that keeps its key
decision makers close to its customers. The success we have achieved during
our first three years of operation has proved that they were correct. Our
directors and senior officers know our customers and our customers know our
directors and senior officers. We formulate our policies based on a personal
knowledge of our customers' attitudes, opinions and preferences. Often, we
can respond to a customer's request
6
<PAGE>
in a matter of hours, not days or weeks. When circumstances warrant, we can
modify our procedures to suit a customer's special needs because we are not
bound by inflexible policies handed down from a distant city.
By giving our customers this highly personal service and ready access
to our decision makers, we have made considerably more progress than we
predicted when we first opened for business. Now, it is becoming clear that
our independent community banking approach to doing business will assure us
compounding success in the years ahead.
The directors and senior officers join us in encouraging you to
attend our Annual Meeting. It will be held at Park Place in Dearborn on May
20, 1997, at 4:00 PM. We look forward to seeing you there, hearing your
comments and answering your questions.
Sincerely,
/s/ John E. Demmer /s/ Michael J. Ross
- ----------------------------- -------------------------
John E. Demmer Michael J. Ross
Chairman of the Board and CEO President and CEO
Dearborn Bancorp, Inc. Community Bank of Dearborn
7
<PAGE>
Suite 400
First Center Office Plaza
26911 Northwestern Hwy.
Southfield, MI 48034-8439
810 262-1950
FAX 810 350-3581
Report of Independent Certified Public Accountants
Grant Thornton LLP
Accountants and
Management Consultants
The U.S. Member Firm of
Grant Thornton International
Board of Directors
Dearborn Bancorp, Inc.
We have audited the accompanying consolidated balance sheets of Dearborn
Bancorp, Inc. and subsidiary as of December 31, 1996 and 1995, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Dearborn Bancorp, Inc. and subsidiary as of December 31, 1996 and 1995,
and the result of their operations and their consolidated cash flows for each
of the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ Grant Thornton LLP
- -----------------------
Detroit, Michigan
January 27, 1997
8
<PAGE>
<TABLE>
<CAPTION>
DEARBORN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands) December 31,
---------------------
1996 1995
----------- --------
<S> <C> <C>
ASSETS
Cash and cash equivalents
Cash and due from banks $ 2,126 $ 1,342
Federal funds sold 5,300 1,200
-------- --------
Total cash and cash equivalents 7,426 2,542
Mortgage loans held for sale 303 408
Investment securities, available for sale (note B) 10,493 10,035
Loans (note C)
Loans 36,263 19,945
Allowance for possible credit losses (366) (204)
-------- --------
Net loans 35,897 19,741
Bank premises and equipment, net (note D) 2,080 2,013
Accrued interest receivable 306 290
Other assets 94 101
-------- --------
Total assets $ 56,599 $ 35,130
======== ========
LIABILITIES
Deposits (note E)
Non-interest bearing deposits $ 7,583 $ 4,073
Interest bearing deposits 39,880 24,849
-------- --------
Total deposits 47,463 28,922
Other liabilities
Mortgage payable (note F) 554 569
Accrued interest payable 127 92
Other liabilities 265 89
-------- --------
Total liabilities 48,409 29,672
STOCKHOLDERS' EQUITY
Common stock - no par value, 1,000,000 shares
authorized, 674,000 shares outstanding
in 1996 and 1995 6,521 6,521
Common stock subscribed but unissued,
276,000 shares in 1996 (note L) 2,752 --
Accumulated deficit (1,065) (1,092)
Net unrealized gain (loss) on securities
available for sale (note B) (18) 29
-------- --------
Total stockholders' equity 8,190 5,458
Total liabilities and stockholders'
equity $ 56,599 $ 35,130
======== ========
<FN>
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
DEARBORN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data) Years Ended December 31,
----------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Interest income
Interest and fees on loans $ 2,466 $ 1,369 $ 348
Interest on investment securities,
available for sale 733 466 232
Interest on federal funds and deposits
with banks 115 188 94
--------- --------- ---------
Total interest income 3,314 2,023 674
Interest expense
Interest on deposits 1,662 959 220
Interest on other liabilities 44 45 46
--------- --------- ---------
Total interest expense 1,706 1,004 266
Net interest income 1,608 1,019 408
Provision for possible credit losses (note C) 164 114 100
--------- --------- ---------
Net interest income after provision for possible
credit losses 1,444 905 308
Non-interest income
Service charges on deposit accounts 92 38 11
Fees for other services to customers 19 16 15
Gain on the sale of loans 130 126 61
Gain on the sale of investment 37 19 --
securities
Other income 6 11 6
--------- --------- ---------
Total non-interest income 284 210 93
Non-interest expenses
Salaries and employee benefits 1,060 877 658
Occupancy and equipment expense 198 147 104
Advertising and marketing 93 63 68
Stationery and supplies 56 62 59
Professional services 63 79 59
Data processing 71 47 15
FDIC insurance premiums 2 16 8
Other operating expenses 158 112 94
--------- --------- ---------
Total non-interest expenses 1,701 1,403 1,065
--------- --------- ---------
Income (loss) before provision for federal
income tax 27 (288) (664)
Provision for federal income tax (note H) -- -- --
--------- --------- ---------
Net income (loss) $ 27 $ (288) $ (664)
========= ========= =========
Per share data:
Net income (loss) $ 0.04 $ (0.43) $ (0.99)
========= ========= =========
Weighted average number of shares outstanding 674,756 674,000 674,000
========= ========= =========
<FN>
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
DEARBORN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1996, 1995 and 1994
Common Net Unrealized
Stock Gain (Loss) on
Common Stock Subscribed Securities Total
------------------- but Accumulated Available Stockholders'
(In thousands) Shares Amount Unissued Deficit For Sale Equity
------ ------ ---------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 674 $ 6,521 $ -- $ (140) $ -- $ 6,381
Net loss -- -- -- (664) -- (664)
Net change in
unrealized gain
(loss) on
securities -- -- -- -- (91) (91)
------- ------- ------- ------- ------- -------
Balance, December 31, 1994 674 6,521 -- (804) (91) 5,626
Net loss -- -- -- (288) -- (288)
Net change in
unrealized gain
(loss) on
securities -- -- -- -- 120 120
------- ------- ------- ------- ------- -------
Balance, December 31, 1995 674 6,521 -- (1,092) 29 5,458
276,000 shares of
common stock
subscribed but
unissued
($10.00 per
share, net of
offering costs of
$8) (note L) -- -- 2,752 -- -- 2,752
Net income -- -- -- 27 -- 27
Net change in
unrealized gain
(loss) on
securities -- -- -- -- (47) (47)
------- ------- ------- ------- ------- -------
Balance, December 31, 1996 674 $ 6,521 $ 2,752 $(1,065) $ (18) $ 8,190
======= ======= ======= ======= ======= =======
<FN>
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
DEARBORN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) Years Ended December 31,
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities
Interest and fees received $ 3,415 $ 1,959 $ 513
Interest paid (1,671) (1,040) (210)
Proceeds from sale of mortgages held for
sale 7,648 8,251 4,873
Origination of mortgages held for sale (7,413) (8,493) (4,852)
Cash paid to suppliers and employees (1,330) (1,435) (889)
-------- -------- --------
Net cash provided by (used in) operating
activities 649 (758) (565)
Cash flows from investing activities
Proceeds from the sale of securities
available for sale 8,735 3,249 --
Proceeds from maturities of securities
available for sale 9,250 4,050 1,650
Purchases of securities available for sale (18,514) (10,091) (8,775)
Increase in loans, net of payments
received (16,320) (10,048) (9,907)
Purchases of property and equipment (194) (483) (724)
-------- -------- --------
Net cash used in investing activities (17,043) (13,323) (17,756)
Cash flows from financing activities
Net increase in non-interest bearing
deposits 3,510 1,706 2,367
Net increase in interest bearing deposits 15,031 12,827 12,022
Principal payments on mortgage payable (15) (15) (13)
Common stock subscriptions received 2,752 -- --
-------- -------- --------
Net cash provided by financing activities 21,278 14,518 14,376
Increase (decrease) in cash and cash equivalents 4,884 437 (3,945)
Cash and cash equivalents at the beginning of the
period 2,542 2,105 6,050
-------- -------- --------
Cash and cash equivalents at the end of the period $ 7,426 $ 2,542 $ 2,105
======== ======== ========
Reconciliation of net income (loss) to net cash
provided by (used in) operating activities
Net income (loss) $ 27 $ (288) $ (664)
Adjustments to reconcile net income
(loss) to net cash
used in operating activities
Provision for possible credit
losses 164 114 100
Depreciation and amortization
expense 133 104 48
Accretion of discount on
investment securities (11) (54) (54)
Amortization of premium on
investment securities 72 38 --
(Gain) on the sale of
investment securities (37) (19) --
(Increase) decrease in
mortgages held for sale 105 (368) (40)
(Increase) in interest
receivable (16) (129) (161)
Increase in interest payable 35 36 56
(Increase) decrease in other
assets 1 (57) (11)
Increase (decrease) in other
liabilities 176 (135) 161
-------- -------- --------
Net cash provided by (used in) operating activities $ 649 $ (758) $ (565)
======== ======== ========
<FN>
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
12
<PAGE>
DEARBORN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied
in the preparation of the accompanying consolidated financial
statements follows.
1. Basis of Presentation and Operations
Dearborn Bancorp, Inc. (the Corporation) was incorporated in Michigan
on September 30, 1992. The Corporation's subsidiary, Community Bank
of Dearborn (the Bank), began operations on February 28, 1994. The
Bank operates two community banking offices in Dearborn and Dearborn
Heights, Michigan, offering a full range of banking services to
individuals and businesses.
2. Principles of Consolidation
The consolidated financial statements include the accounts of
Dearborn Bancorp, Inc. and its wholly-owned subsidiary, Community
Bank of Dearborn. All significant intercompany transactions are
eliminated in consolidation.
3. Mortgages Held for Sale
Mortgages held for sale are carried at the lower of cost or market.
Market value is determined on the basis of existing forward delivery
contracts.
4. Investment Securities
When securities are purchased and the Corporation intends to hold the
securities for an indefinite period of time but not necessarily to
maturity, they are classified as available for sale and carried at
market value. Any decision to sell a security available for sale
would be based on various factors, including significant movements in
interest rates, changes in the maturity mix of the Corporation's
assets and liabilities, liquidity demands, regulatory capital
considerations, and other similar factors. Cost is adjusted for
amortization of premiums and accretion of discounts to maturity.
Unrealized gains and losses for available for sale securities are
excluded from income and recorded as an amount, net of tax, in a
separate component of stockholders' equity until realized. All of the
Corporation's securities are classified as available for sale.
5. Interest Income on Loans
Interest on loans is accrued and credited to income based upon the
principal amount outstanding. The accrual of interest on loans is
discontinued when, in the opinion of management, there is an
indication that the borrower may be unable to meet payments as they
become due. Upon such discontinuance, all unpaid interest accrued is
reversed. Interest accruals are generally resumed when all delinquent
principal and interest has been brought current or the loan becomes
both well secured and in the process of collection.
13
<PAGE>
DEARBORN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
6. Allowance for Possible Credit Losses
The allowance is maintained at a level considered by management to be
adequate to provide for reasonably foreseeable loan losses based on
an evaluation of the loan portfolio, loan loss experience and the
economic condition of the borrower. The Bank maintains a minimum
allowance to total loans ratio of one percent in accordance with
regulatory agency agreements.
7. Loan Impairment
A loan is identified as impaired when it is probable in the opinion
of management that interest and principal may not be collected
according to the contractual terms of the loan agreement.
8. Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line method
over useful lives ranging from five to thirty years.
9. Income Taxes
The Corporation files a consolidated Federal income tax return. The
Corporation uses the asset and liability method of accounting for
income taxes. Deferred tax assets and liabilities are recorded based
on the difference between the tax bases of assets and liabilities and
their carrying amounts for financial reporting purposes. Tax planning
strategies are utilized in the computation of deferred federal income
taxes. In addition, the current or deferred tax consequences of a
transaction is measured by applying the provisions of enacted tax
laws to determine the amount of taxes receivable or payable,
currently or in future years.
10. Use of Estimates
In the preparation of financial statements, management is required to
make estimates and assumptions that affect reported amounts of assets
and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
11. Cash Equivalents
For purposes of the consolidated statements of cash flows, the
Corporation considers cash on hand, cash due from banks, and federal
funds sold to be cash equivalents.
14
<PAGE>
DEARBORN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996, 1995 and 1994
NOTE B - INVESTMENT SECURITIES, AVAILABLE FOR SALE
The amortized cost and estimated market value of investment
securities available for sale are as follows (in thousands):
<TABLE>
<CAPTION>
December 31, 1996
-------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
US Treasury securities $ 2,009 $ -- $ (10) $ 1,999
US Government agency
securities 8,502 4 (12) 8,494
------- ------- ------- -------
Totals $10,511 $ 4 $ (22) $10,493
======= ======= ======= =======
<CAPTION>
December 31, 1995
-------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
US Treasury securities $ 4,961 $ 14 $ -- $ 4,975
US Government agency
securities 5,045 16 (1) 5,060
------- ------- ------- -------
Totals $10,006 $ 30 $ (1) $10,035
======= ======= ======= =======
</TABLE>
The amortized cost and estimated market value of investment
securities available for sale at December 31, 1996 by contractual
maturity, are shown below (in thousands):
<TABLE>
<CAPTION>
Estimated
Amortized Market
Cost Value
--------- ---------
<S> <C> <C>
Due in three months or less $ 2,000 $ 2,000
Due in three months through one year 2,006 2,003
Due in one year through five years 6,505 6,490
------- -------
Totals $10,511 $10,493
======= =======
</TABLE>
15
<PAGE>
DEARBORN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996, 1995 and 1994
NOTE B - INVESTMENT SECURITIES, AVAILABLE FOR SALE (Continued)
Securities having a carrying value of $2,009,000 and a market value
of $1,998,000 were pledged to secure public deposits. Securities
having a carrying value of $994,000 and a market value of $998,000
were pledged to secure treasury, tax and loan payments with the
Federal Reserve Bank of Chicago. In addition, securities having a
carrying value of $2,000,000 and a market value of $1,999,000 were
pledged as collateral to secure a Federal Funds credit line.
NOTE C - LOANS
Major categories of loans included in the portfolio at December 31
are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Consumer loans $ 8,877 $ 4,620
Commercial, financial, & other 7,199 5,375
Commercial real estate construction 1,971 961
Commercial real estate mortgages 6,384 2,676
Residential real estate mortgages 11,832 6,313
------- -------
36,263 19,945
Less allowance for possible credit 366 204
losses
------- -------
$35,897 $19,741
======= =======
</TABLE>
16
<PAGE>
DEARBORN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996, 1995 and 1994
NOTE C - LOANS (Continued)
Final loan maturities and rate sensitivity of the loan portfolio at
December 31, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
Within Three to One to After
Three Twelve Five Five
Months Months Years Years Total
------- -------- ------ ------ -----
<S> <C> <C> <C> <C> <C>
Consumer loans $ 2,342 $ 88 $ 5,790 $ 649 $ 8,869
Commercial, financial &
other 4,048 1,052 2,099 -- 7,199
Commercial real estate
construction 1,687 249 35 -- 1,971
Commercial real estate
mortgages 337 -- 5,693 354 6,384
Residential real estate
mortgages 1,767 5,380 4,565 120 11,832
------- ------- ------- ------- -------
$10,181 $ 6,769 $18,182 $ 1,123 36,255
======= ======= ======= =======
Non-accrual loans 8
-------
Total loans $36,263
=======
Loans at fixed interest
rates $ 509 $ 1,166 $14,080 $ 1,003 $16,758
Loans at variable interest
rates 9,672 5,603 4,102 120 19,497
------- ------- ------- ------- -------
$10,181 $ 6,769 $18,182 $ 1,123 36,255
======= ======= ======= =======
Non-accrual loans 8
-------
Total loans $36,263
=======
</TABLE>
Certain directors of the Corporation, including their related
interests, were loan customers of the Bank during 1996. Such loans
were made in the ordinary course of business at the Bank's normal
credit terms and interest rates, and do not represent more than a
normal risk of collection. Total loans to these persons at December
31, 1996 amounted to $1,850,000. During 1996, $1,091,000 of new loans
were made and repayments totaled $640,000. These loans aggregated to
23% of consolidated stockholders' equity as of December 31, 1996.
17
<PAGE>
DEARBORN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996, 1995 and 1994
NOTE C - LOANS (Continued)
Transactions in the allowance for possible credit losses for the
years ended December 31 are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Balance, beginning of year $ 204 $ 100 $ --
Provision for possible credit losses
charged to operations 164 114 100
------- ------- -------
368 214 100
Loans charged off (4) (10) --
Recoveries of loans charged off 2 -- --
------- ------- -------
$ 366 $ 204 $ 100
======= ======= =======
As a percent of total loans 1.01% 1.02% 1.00%
======= ======= =======
</TABLE>
The aggregate balances on non-accrual loans and the reduction of
interest income associated with these loans at December 31, are as
follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Non-accrual loans $ 8 $ 43 $ --
===== ===== ======
As a percentage of total loans 0.02% 0.21% --
===== ===== ======
Income in accordance with original
loan terms $ 1 $ 2 --
Income recognized -- -- --
----- ----- ------
Reduction in interest income $ 1 $ 2 $ --
===== ===== ======
</TABLE>
The Corporation adopted Statement of Financial Accounting Standards
(SFAS) No. 114 (as amended by SFAS No. 118), "Accounting by Creditors
for Impairment of a Loan", effective as of January 1, 1995. Loan
impairment is measured by estimating the expected future cash flows
and discounting them at the respective effective interest rate or by
valuing the underlying collateral. No loans have been identified as
impaired at December 31, 1996 and 1995.
18
<PAGE>
DEARBORN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996, 1995 and 1994
NOTE D - BANK PREMISES AND EQUIPMENT
Bank premises and equipment are comprised of the following at
December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Land and improvements $ 394 $ 394
Building and improvements 1,469 1,368
Furniture and equipment 484 391
------ ------
2,347 2,153
Less accumulated depreciation 267 140
------ ------
$2,080 $2,013
====== ======
</TABLE>
Depreciation expense for 1996, 1995 and 1994 amounted to $127,000,
$98,000 and $42,000, respectively.
NOTE E - DEPOSITS
The following is a summary of the distribution and weighted average
interest rate of deposits at December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------------------- --------------------
Average Average
Amount Rate Amount Rate
-------------------- --------------------
<S> <C> <C> <C> <C>
Non-interest bearing:
Demand $ 7,583 -- $ 4,073 --
======= =======
Interest bearing:
Checking $ 977 2.02% $ 676 1.98%
Money market 5,977 4.22% 7,088 4.34%
Savings 1,240 2.50% 1,073 2.50%
Time, under $100,000 19,048 5.83% 6,673 6.06%
Time, $100,000 and over 12,638 5.71% 9,339 5.76%
------- -------
$39,880 $24,849
======= =======
</TABLE>
19
<PAGE>
DEARBORN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996, 1995 and 1994
NOTE E - DEPOSITS (Continued)
Final maturities of time deposits of $100,000 and greater at December
31, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
1996
----
<S> <C>
Due in three months or less $ 4,261
Due in three months through one year 7,207
Due in one year through five years 1,170
-------
Total $12,638
=======
</TABLE>
NOTE F - MORTGAGE PAYABLE
The mortgage payable with a bank matures September 1, 2013 and
requires monthly installments of $4,925 including interest at 7.75%
per annum. Effective September, 1998 the interest rate will be
computed annually at 2.5% plus the five year treasury rate. The note
is collateralized by a first real estate mortgage on a building and
land.
Aggregate maturities for the five years following December 31, 1996
and thereafter are as follows (in thousands):
1997 $ 17
1998 18
1999 20
2000 21
2001 23
Thereafter 455
----
$554
====
NOTE G - FEDERAL FUNDS PURCHASED
During 1996, the Bank entered into a federal funds credit line with
another bank in the amount of $1,000,000 to provide additional
flexibility in the daily management of liquidity. Terms of the credit
line require the Bank to pledge securities with a minimum market
value of $1,250,000. At December 31, 1996 the Bank had pledged
securities with carrying value of $2,000,000 and a market value of
$1,999,000. The outstanding balance of the federal funds credit line
at December 31, 1996 was zero.
20
<PAGE>
DEARBORN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996, 1995 and 1994
NOTE H - INCOME TAXES
At December 31, 1996 the Corporation had net operating loss
carryforwards of approximately $1,175,000 expiring in 2008 through
2011. These losses are available to reduce otherwise taxable income
in future periods.
The details of the net deferred tax asset are as follows at December
31, (in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets
Provision for possible credit losses $ 110 $ 49
Unrealized losses on securities
available for sale 8 --
Net operating loss carryforwards 400 446
Other 1 --
----- -----
Total deferred tax assets 519 495
Deferred tax liabilities
Accretion of discounts on securities
available for sale (1) (14)
Deferred loan fees (59) (34)
Premises and equipment (56) (35)
Accrual to cash conversion (46) (53)
Unrealized gain on securities
available for sale (1) (10)
----- -----
Total deferred tax liabilities (163) (146)
----- -----
Net deferred tax asset before
valuation allowance 356 349
Valuation allowance (356) (349)
----- -----
Net deferred tax asset $ -- $ --
===== =====
</TABLE>
The tax benefit of the unrealized losses on securities available for
sale, net of the valuation allowance, was charged directly to its
related component of stockholders' equity.
21
<PAGE>
DEARBORN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996, 1995 and 1994
NOTE H - INCOME TAXES (Continued)
A valuation allowance equal to the tax benefit of the temporary
differences and net operating loss carryforwards has been provided
since their future realization is uncertain. The net increase in the
valuation allowance in 1996 was $7,000.
NOTE I - FINANCIAL INSTRUMENTS
Fair Values of Financial Instruments
The estimated fair values of the Corporation's financial instruments
at December 31, are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------------------------- -----------------------------
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents $7,426 $7,426 $2,542 $2,542
Loans held for sale 303 307 408 414
Securities 10,493 10,493 10,035 10,035
Loans 35,897 35,332 19,741 19,890
Liabilities:
Deposits 47,463 47,444 28,922 28,978
Mortgage Payable 554 554 569 569
</TABLE>
The following methods and assumptions were used by the Corporation in
estimating its fair value disclosure for financial instruments:
Cash and cash equivalents: The carrying amounts reported in the
balance sheet for cash and short-term instruments approximate those
assets' fair values.
Loans held for sale: The market value of these loans represents
estimated fair value. The market value is determined in the aggregate
on the basis of existing forward delivery commitments.
22
<PAGE>
DEARBORN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996, 1995 and 1994
NOTE I - FINANCIAL INSTRUMENTS (Continued)
Fair Values of Financial Instruments (Continued)
Investment securities: Fair values for investment securities are
based on quoted market prices, where available. If quoted market
prices are not available, fair values are bases on quoted market
prices of comparable instruments.
Loans: For variable rate loans that reprice frequently and with no
significant change in credit risk, fair values are based on carrying
values. The fair values for other loans are estimated using
discounted cash flow analysis, using interest rates currently being
offered for loans with similar terms to borrowers of similar credit
quality. The carrying amount of accrued interest receivable
approximates its fair value.
Off-balance-sheet instruments: The Corporation's off-balance-sheet
instruments approximate their fair values.
Deposit liabilities: The fair values disclosed for demand deposits
are, by definition, equal to the amount payable on demand at the
reporting date. Fair values for fixed rate certificates of deposits
are estimated using a discounted cash flow calculation that applies
interest rates currently being offered on similar certificates. The
carrying amount of accrued interest payable approximates its fair
value.
Mortgage payable: The fair value of the Corporation's mortgage
payable is estimated using discounted cash flow analyses, based on
the Corporation's current incremental borrowing rate for similar
types of borrowing arrangements.
Limitations: Fair value estimates are made at a specific point in
time, based on relevant market information and information about the
financial instrument. These estimates do not reflect any premium or
discount that could result from offering for sale, at one time, the
Corporation's entire holdings of a particular financial instrument.
Because no market exists for a significant portion of the
Corporation's financial instruments, fair value estimates are based
on management's judgments regarding future expected loss experience,
current economic conditions, risk characteristics and other factors.
These estimates are subjective in nature and involve uncertainties
and matters of significant judgment and therefore cannot be
determined with precision. Changes in assumptions could significantly
affect the estimates.
Off-Balance-Sheet Risk
The Corporation is party to financial instruments with
off-balance-sheet risk in the normal course of business to meet the
financing needs of its customers and to reduce its own exposure to
fluctuations in interest rates. These financial instruments include
commitments to extend credit and financial guarantees. These
instruments involve, to varying degrees, elements of credit and
interest rate risk that are not recognized in the consolidated
statements of operations.
Exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit
and financial guarantees written is represented by the contractual
notational amount of those items. The Corporation generally requires
collateral to support such financial instruments in excess of the
contractual notational amount of those instruments and, therefore, is
in a fully collateralized position.
23
<PAGE>
DEARBORN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996, 1995 and 1994
NOTE I - FINANCIAL INSTRUMENTS (Continued)
Off-Balance-Sheet Risk (Continued)
The Corporation had outstanding loan commitments aggregating
$4,284,000 at December 31, 1996.
Commitments to extend credit are agreements to lend to a customer as
long as there are no violations of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require a payment of a fee. Since
portions of the commitments are expected to expire without being
drawn upon, the total commitments do not necessarily represent future
cash requirements. The Corporation evaluates each customer's
creditworthiness on a case by case basis. The amount of collateral
obtained upon extension of credit is based on management's credit
evaluation of the customer.
The Corporation originates primarily residential and commercial real
estate loans, commercial loans, and installment loans. The
Corporation estimates that 71% of their portfolio is based in Wayne
County, 14% in Oakland County, and the remainder distributed
throughout Michigan.
At December 31, 1996, the Corporation has consumer loans secured by
real estate aggregating approximately $2,602,000 and construction
loans relating to commercial, residential, and land development
properties of $1,971,000.
NOTE J - EMPLOYEE BENEFIT PLANS
On January 1, 1996, the Bank established a 401(k) plan for its
employees. All employees are eligible to participate in the 401(k)
after completion of age and service requirements. An employee can be
enrolled as a participant on the first "Enrollment Date" after
reaching age 18 and completing six months of service. Contributions
to the plan by the Bank are discretionary. As of December 31, 1996
the Corporation has elected not to match any portion of employee
contributions to the plan.
NOTE K - REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory - and possibly
additional discretionary - actions by regulators that, if undertaken,
could have a direct material effect on the Bank's financial
statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's
assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. The Bank's capital
amounts and classifications are also subject to qualitative judgments
by the regulators about components, risk weightings, and other
factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier 1 capital (as defined in
the regulations) to risk-weighted assets (as defined), and of Tier 1
capital (as defined) to average assets (as defined).
24
<PAGE>
DEARBORN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996, 1995 and 1994
NOTE K - REGULATORY MATTERS (Continued)
The following is a presentation of the Corporation's and Bank's
regulatory capital ratios.
<TABLE>
<CAPTION>
December 31, Minimum
------------------- Regulatory
1996 1995 Guidelines
---- ---- ----------
<S> <C> <C> <C>
Dearborn Bancorp, Inc. and Subsidiary
Risk-Based Capital Ratios
Tier 1 Capital 23.9% 26.6% 4.0%
Total Capital 25.0% 27.6% 8.0%
Leverage Ratio (Tier 1 to
Average Assets) 15.9% 15.4% 4.0%
Community Bank of Dearborn
Risk-Based Capital Ratios
Tier 1 Capital 13.2% 17.8% 4.0%
Total Capital 14.4% 18.9% 8.0%
Leverage Ratio (Tier 1 to
Average Assets) 8.5% 10.2% 4.0%
</TABLE>
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") established five capital tiers for banks. Pursuant to that
statute the federal bank regulatory agencies have defined 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 their respective regulatory capital ratios at December 31,
1996 and 1995, both the Corporation and the Bank are well
capitalized.
NOTE L - COMMON STOCK SUBSCRIBED BUT UNISSUED
On November 15, 1996, the Corporation issued an offering memorandum,
which included an over-subscription privilege, to those stockholders
who are residents of the State of Michigan the right to subscribe to
276,000 shares of common stock at a price of $10.00 per share. All
rights expired on December 31, 1996.
At the close of business on December 31, 1996, the Corporation had
received requests to purchase 290,549 shares of common stock. In
accordance with the Corporation's offering memorandum $2,760,000 was
recorded as common stock subscribed, representing 276,000 shares of
common stock and $145,490 was recorded as an oversubscription rights
payable. On January 21, 1997, the common stock subscribed was
formally issued.
25
<PAGE>
DEARBORN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996, 1995 and 1994
NOTE M - STOCK OPTION PLAN
On June 21, 1994, the Corporation adopted a stock option plan to
enable key employees of the Corporation and its subsidiaries to
participate in the Corporation's future growth and profitability by
the granting of long-term performance-based incentive compensation.
As of December 31, 1996, 50,000 shares of common stock were
authorized with no options granted.
NOTE N - ISSUED BUT NOT YET ADOPTED ACCOUNTING STANDARDS
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards ("SFAS") No. 125, " Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities," as amended by SFAS No. 127. The Statement provides
accounting and reporting standards for transfer and servicing of
financial assets and extinguishments of liabilities based on
consistent application of a financial-components approach that
focuses on control. The Statement is effective for transfers and
servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996, except for certain transactions
such as repurchase agreements and securities lending, which are
effective after December 31, 1997. This pronouncement is to be
applied prospectively. Management does not expect the Statement to
have a significant impact on the consolidated financial condition or
results of operations of the Bank.
NOTE O - SUMMARY OF UNAUDITED FINANCIAL INFORMATION
The following quarterly financial information is unaudited. However,
in the opinion of management, all adjustments which include normal
recurring adjustments necessary to present fairly the results of
operations for such periods are reflected (in thousands except per
share data).
<TABLE>
<CAPTION>
March 31 June 30 September 30 December 31
------------- ------------ ------------- -------------
1996 1995 1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net interest
income $ 325 $ 206 $ 394 $ 229 $ 424 $ 277 $ 465 $ 307
Provision for
possible
credit losses (18) (17) (36) (36) (39) (22) (71) (39)
Noninterest income 69 28 57 55 70 84 88 43
Noninterest
expense (463) (339) (420) (337) (395) (331) (423) (396)
------ ------ ------ ------ ----- ----- ----- ------
Net income (loss) $ (87) $ (122) $ (5) $ (89) $ 60 $ 8 $ 59 $ (85)
====== ====== ====== ====== ===== ===== ===== ======
Net income (loss)
per share $(0.13) $(0.18) $(0.01) $(0.13) $0.09 $0.01 $0.09 $(0.13)
====== ====== ====== ====== ===== ===== ===== ======
</TABLE>
26
<PAGE>
DEARBORN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996, 1995 and 1994
NOTE P - PARENT ONLY CONDENSED FINANCIAL INFORMATION
The condensed financial information that follows presents the
financial condition of the parent company, Dearborn Bancorp, Inc.,
along with the results of its operations and its cash flows.
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS
(In thousands) December 31,
---------------
1996 1995
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $2,901 $ 231
Investment securities,
available for sale -- 706
Investment in subsidiary 4,203 3,341
Other assets 1,792 1,755
------ ------
$8,896 $6,033
====== ======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Mortgage payable $ 554 $ 569
Other liabilities 152 6
Stockholders' equity 8,190 5,458
------ ------
$8,896 $6,033
====== ======
<CAPTION>
CONDENSED STATEMENTS OF OPERATIONS
(In thousands) Years Ended December 31,
-----------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Dividends from subsidiary bank $ -- $ -- $ --
Operating income 35 87 82
Operating expenses (60) (77) (62)
----- ----- -----
Net income (loss) before equity in
undistributed income (loss) (25) 10 20
of subsidiary
Equity in undistributed income
(loss) of subsidiary 52 (298) (684)
----- ----- -----
Net income (loss) $ 27 $(288) $(664)
===== ===== =====
</TABLE>
27
<PAGE>
DEARBORN BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996, 1995 and 1994
NOTE P - PARENT ONLY CONDENSED FINANCIAL INFORMATION (Continued)
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands) Years Ended December 31,
-----------------------------
1996 1995 1994
------- -------- -------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ 27 $ (288) $ (664)
Adjustments to reconcile
net income (loss) to net
cash used in operating
activities
Equity in undistributed
income (loss) of
subsidiary (52) 298 684
Other 61 37 (27)
------- ------- -------
Net cash flows provided by (used in)
operating activities 36 47 (7)
Cash flows from investing activities
Investment in subsidiary (850) (500) (3,800)
Investment in securities -- (698) (1,595)
Maturity of securities -- 1,600 --
Sale of securities 703 -- --
Property and equipment (101) (361) (477)
------- ------- -------
Net cash flows provided by (used in)
investing activities (248) 41 (5,872)
Cash flows from financing activities
Proceeds from common stock
subscribed 2,752 -- --
Proceeds due stockholders
on oversubscription 145 -- --
Reduction of mortgage
payable (15) (15) (13)
Dividends paid -- -- --
------- ------- -------
Net cash flows provided by (used in)
financing activities 2,882 (15) (13)
Increase (decrease) in cash and
cash equivalents 2,670 73 (5,892)
Cash and cash equivalents at
beginning of year 231 158 6,050
------- ------- -------
Cash and cash equivalents at end of
year $ 2,901 $ 231 $ 158
======= ======= =======
</TABLE>
28
<PAGE>
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 and should be read in conjunction
with the financial statements, footnotes and supplemental financial data
presented elsewhere in this report.
For the fiscal years of 1992 and 1993 the Corporation was "A Company in the
Development Stage." Principal operations commenced on February 28, 1994 when
the Bank opened for business. Activity for 1993 was primarily limited to the
sale of common stock and the initial organization of the Bank. On December
20, 1995, the Bank opened a second office, located at 24935 West Warren
Avenue in Dearborn Heights, Michigan.
RESULTS OF OPERATIONS
1996 Summary and Highlights
The Corporation reported income of $27 thousand in 1996 compared to a loss of
$288 thousand in 1995 and a loss of $664 thousand in 1994. The improvement
each year was primarily a factor of growth in the volume of loans and
deposits and the corresponding net interest income associated with the
increased volume.
During 1996 and 1995, respectively, the Corporation's total assets increased
by $21.5 million and $14.2 million as a result of the continued growth of
deposit gathering, lending, investing and other asset and liability
management operations.
Total deposits grew from $14.4 million in 1994 to $28.9 million in 1995 to
$47.5 million in 1996, thus allowing funds to be reinvested in loans and
investment securities available for sale.
Loans grew from $9.9 million in 1994 to $19.9 million in 1995 and to $36.3
million in 1996, and investment securities available for sale, grew from $7.1
million in 1994 to $10.0 million in 1995 and to $10.5 million in 1996.
The Bank originates loans and accepts deposits with an emphasis on:
o "Community Club" retail and deposit services to persons aged 50 and
older.
o Small business lending and deposit services.
o Professional individual services, lines of credit and auto loans.
o The origination and sale of residential real estate mortgages.
29
<PAGE>
Net Interest Income
An analysis of the Corporation's average balance sheet and associated
interest income, expense and average rates for 1996, 1995 and 1994 is
presented as follows.
<TABLE>
<CAPTION>
DEARBORN BANCORP, INC. AND SUBSIDIARY
SUMMARY OF CONSOLIDATED NET INTEREST INCOME
Year Ended December 31, 1996 Year Ended December 31, 1995
---------------------------- -----------------------------
Average Average Average Average
(In thousands) Balance Interest Rate Balance Interest Rate
------- --------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Assets
Federal funds sold and
interest bearing
deposits with banks $ 2,137 $ 115 5.38% $ 3,184 $ 188 5.90%
Investment securities,
available for sale 12,400 733 5.91% 8,240 466 5.66%
Loans 25,835 2,466 9.55% 14,345 1,369 9.54%
------- ------ ---- ------- ------ ----
Sub-total earning
assets 40,372 3,314 8.21% 25,769 2,023 7.85%
Other assets 3,618 2,711
------- -------
Total assets $43,990 $28,480
======= =======
Liabilities and stockholders'
equity
Interest bearing deposits $31,713 $1,662 5.24% $18,748 $ 959 5.12%
Mortgage payable 564 44 7.75% 576 45 7.75%
------- ------ ---- ------- ------ ----
Sub-total interest
bearing
liabilities 32,277 1,706 5.29% 19,324 1,004 5.20%
Non-interest bearing
deposits 6,142 3,359
Other liabilities 210 256
Stockholders' equity 5,361 5,541
------- -------
Total liabilities
and stockholders'
equity $43,990 $28,480
======= =======
Net interest income $1,608 $1,019
====== ======
Net interest rate
spread 2.92% 2.65%
Net interest margin ==== ====
on earning assets 3.98% 3.95%
==== ====
</TABLE>
30
<PAGE>
(Continued)
<TABLE>
<CAPTION>
Year Ended December 31, 1994
---------------------------
Average Average
(In thousands) Balance Interest Rate
-------- -------- ---------
<S> <C> <C> <C>
Assets
Federal funds sold and
interest bearing
deposits with banks $ 3,097 $ 94 3.03%
------- ---- ----
Investment securities,
available for sale 4,828 232 4.81%
Loans 3,582 348 9.71%
------- ---- ----
Sub-total earning
assets 11,507 674 5.86%
Other assets 1,458
-------
Total assets $12,965
=======
Liabilities and stockholders'
equity
Interest bearing deposits $ 5,444 $220 4.04%
Mortgage payable 591 46 7.75%
------- ---- ----
Sub-total interest
bearing liabilities 6,035 266 4.40%
Non-interest bearing
deposits 903
Other liabilities 314
Stockholders' equity 5,713
-------
Total liabilities
and stockholders'
equity $12,965
=======
Net interest income $408
====
Net interest rate
spread 1.46%
Net interest margin ====
on earning assets 3.55%
====
</TABLE>
31
<PAGE>
An analysis of the Corporation's change in net interest income
for 1996 and 1995 is presented as follows.
<TABLE>
<CAPTION>
DEARBORN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED NET INTEREST INCOME VOLUME / RATE ANALYSIS
1996/1995 1995/1994
Change in Interest Due to: Change in Interest Due to:
----------------------------- -------------------------------
Average Average Net Average Average Net
(In thousands) Balance Rate Change Balance Rate Change
--------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Assets
Federal funds sold and
interest bearing
deposits with banks $ (56) $(17) $ (73) $ 5 $ 89 $ 94
Investment securities,
available for sale 246 21 267 193 41 234
Loans 1,097 -- 1,097 1,027 (6) 1,021
------ ---- ------ ------ ---- ------
Total earning assets $1,287 $ 4 $1,291 $1,225 $124 $1,349
====== ==== ====== ====== ==== ======
Liabilities
Interest bearing deposits $ 679 $ 23 $703 $ 680 $ 59 $ 739
Mortgage payable (1) -- (1) (1) -- (1)
====== ==== ====== ====== ==== ======
Total interest bearing
liabilities $ 678 $ 23 $ 702 $ 679 $ 59 $ 738
====== ==== ====== ====== ==== ======
Net interest income $ 589 $ 611
====== ======
Net interest rate
Spread 0.27% 1.19%
====== ======
Net interest margin
on earning assets 0.03% 0.40%
====== ======
</TABLE>
32
<PAGE>
An analysis of the Corporation's interest rate sensitivity and gap analysis
is presented as follows. The information presents earning assets and interest
bearing liabilities by maturity or the earliest repricing opportunity.
<TABLE>
<CAPTION>
DEARBORN BANCORP, INC. AND SUBSIDIARY
RATE SENSITIVITY ANALYSIS / GAP ANALYSIS
Interest Rate Sensitivity Period
----------------------------------------------------------
December 31, 1996 (In thousands) 1-90 91-365 1-5 Over
Days Days Years 5 Years Total
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Earning assets
Federal funds sold $ 5,300 $ -- $ -- $ -- $ 5,300
Mortgage loans held for 303 -- -- -- 303
sale
Securities available for 2,000 1,998 6,495 -- 10,493
sale
Total loans, net of 10,181 6,769 18,182 1,123 36,255
non-accrual ------- --------- ------- ------- -------
Total earning assets $17,784 8,767 24,677 1,123 52,351
Interest bearing liabilities
Total interest bearing
deposits 9,092 20,863 9,925 -- 39,880
Mortgage payable -- -- -- 554 554
------- --------- ------- ------- -------
Total interest bearing liabilities 9,092 20,863 9,925 554 40,434
Net asset (liability) funding gap $ 8,692 $ (12,096) $14,752 $ 569 $11,917
------- --------- ------- ------- =======
Cumulative net asset (liability)
funding gap $ 8,692 $ (3,404) $11,348 $11,917
======= ========= ======= =======
</TABLE>
Other Non-interest Income
Non-interest income for 1996 amounted to $284 thousand, an increase of $74
thousand from 1995 and an increase of $191 thousand from 1994. The primary
components of non-interest income are the gain on sale of residential
mortgages held for sale and service charges on deposit accounts. During 1996,
the Corporation sold $7.5 million in residential mortgages and recorded $130
thousand in gains on the sale of those mortgages. During 1995, residential
mortgage sales of $8.1 million resulted in gains of $126 thousand. During
1994, residential mortgage sales of $4.8 million resulted in gains of $61
thousand. Service charges on deposit accounts amounted to $92 thousand, $38
thousand, and $11 thousand for 1996, 1995 and 1994, respectively. The
increase in service charge income is a function of growth in total deposits
during 1995 and 1996.
33
<PAGE>
Non-interest Expenses
Total non-interest expenses for 1996 amounted to $1,701 thousand, an increase
of $298 thousand from 1995 and an increase of $636 thousand from 1994.
Non-interest expenses and the net increases in non-interest expenses
consisted primarily of salaries and employee benefits as well as occupancy
and equipment expenses. As of December 31, 1996 the number of full time
equivalent employees was 23 as compared to 24 as of December 31, 1995 and 20
as of December 31, 1994. The average number of full time equivalent employees
for 1996, 1995 and 1994 were 24, 21 and 16, respectively.
Liquidity
The Corporation maintains a liquid position. As of December 31, 1996 and
1995, respectively, the Corporation had $5.3 million and $1.2 million in
federal funds sold and securities classified as available for sale of
approximately $10.5 million and $10.0 million. Those securities with
maturities within one year totaled $4.0 million and $6 million as of December
31, 1996 and 1995, respectively. 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 approximately $8.2 million as of December 31, 1996 and
approximately $5.5 million as of December 31, 1995. Primary capital for the
Corporation, consisting of stockholders' equity and the allowance for
possible credit losses, totaled approximately $8.6 million and approximately
$5.7 million at December 31, 1996 and 1995, respectively. For more
information regarding the Corporation's capital, see Note L in the Notes to
Consolidated Financial Statements.
34
<PAGE>
DEARBORN BANCORP, INC.
DIRECTORS AND OFFICERS
WILBER M. BRUCKER, JR.
Secretary of the Company
Retired, Attorney
MARGARET I. CAMPBELL
President
Kean Manufacturing Corporation
JOHN E. DEMMER
Chairman of the Board &
Chief Executive Officer of the Company
Chairman of the Board &
Chief Executive Officer
Jack Demmer Ford, Inc. and
Jack Demmer Leasing
MICHAEL V. DORIAN, JR.
Vice President
Mike Dorian Ford
DAVID HIMICK
Financial Consultant
DONALD G. KARCHER
Vice President & Treasurer of the Company
Chairman of the Board
Karcher Agency, Inc.
BRADLEY F. KELLER
President
Braden Associates, Inc.
STEVEN M. KIRKPATRICK
President & Chief Executive Officer
The Bancorp Group, Inc. and
Capital Mortgage Funding, L.L.C.
WILLIAM E. KREGER
Retired, Real Estate Investor
JEFFREY G. LONGSTRETH
President
Prudential Christie Real Estate
RICHARD NORDSTROM
President of the Company
Retired, Architectural Consultant
MICHAEL J. ROSS
Vice President of the Company
President and Chief Executive Officer
Community Bank of Dearborn
DR. ROBERT C. SCHWYN
Physician
RONNIE J. STORY
President & Chief Executive Officer
Story Development Corp.
35
<PAGE>
COMMUNITY BANK OF DEARBORN
DIRECTORS AND OFFICERS
DIRECTORS
WILBER M. BRUCKER, JR.
Retired, Attorney
MARGARET I. CAMPBELL
President
Kean Manufacturing Corporation
JOHN E. DEMMER
Chairman of the Board &
Chief Executive Officer
Jack Demmer Ford, Inc. and
Jack Demmer Leasing
MICHAEL V. DORIAN, JR.
Vice President
Mike Dorian Ford
DAVID HIMICK
Financial Consultant
DONALD G. KARCHER
Chairman of the Board
Karcher Agency, Inc.
BRADLEY F. KELLER
President
Braden Associates, Inc..
STEVEN M. KIRKPATRICK
President & Chief Executive Officer
The Bancorp Group, Inc. and
Capital Mortgage Funding, L.L.C.
WILLIAM E. KREGER
Retired, Real Estate Investor
JEFFREY G. LONGSTRETH
President
Prudential Christie Real Estate
RICHARD NORDSTROM
Retired, Architectural Consultant
MICHAEL J. ROSS
President and Chief Executive Officer
Community Bank of Dearborn
DR. ROBERT C. SCHWYN
Physician
RONNIE J. STORY
President & Chief Executive Officer
Story Development Corp.
OFFICERS
JOHN E. DEMMER
Chairman of the Board
MICHAEL J. ROSS
President & Chief Executive Officer
TIMOTHY J. CUTTLE
Executive Vice President
JEFFREY L. KARAFA
Vice President and Cashier
JEFFREY J. WOLBER
Vice President
DENIS T. NISSLE
Private Banking Officer
<PAGE>
SAMANTHA J. MAZIASZ
Bank Administration Officer
NANCY M. BARON
Compliance Officer
36
<PAGE>
COMMUNITY BANK OF DEARBORN
BRANCH LOCATIONS
Main Office
22290 Michigan Avenue
PO Box 2247
Dearborn, Michigan 48123-2247
(313) 274-1000
Fax: (313) 274-5050
Hours: 9:30 AM - 4:30 PM Monday through Thursday
9:30 AM - 6:00 PM Friday
9:30 AM - 1:00 PM Saturday, Drive-In Only
Warren Avenue and Silvery Lane Branch
24935 West Warren Avenue
Dearborn Heights, Michigan 48127
(313) 724-0100
Fax: (313) 724-1010
Hours: 9:00 AM - 4:30 PM Monday through Thursday
9:00 AM - 6:00 PM Friday
Opening Mid 1997:
Five Mile and Sheldon Branch
Sheldon Place Shopping Center
44623 Five Mile Road
Plymouth, Michigan 48170
(313) 454-1000
37
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM DEARBORN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 1996 AND THE
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE TWELVE MONTHS
ENDED DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 12-MOS
<PERIOD-START> JAN-01-1996
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> $ 2,126
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,300
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 10,493
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 36,263
<ALLOWANCE> 366
<TOTAL-ASSETS> 56,599
<DEPOSITS> 47,463
<SHORT-TERM> 0
<LIABILITIES-OTHER> 392
<LONG-TERM> 554
0
0
<COMMON> 9,273
<OTHER-SE> (1,083)
<TOTAL-LIABILITIES-AND-EQUITY> 56,599
<INTEREST-LOAN> 2,466
<INTEREST-INVEST> 733
<INTEREST-OTHER> 115
<INTEREST-TOTAL> 3,314
<INTEREST-DEPOSIT> 1,662
<INTEREST-EXPENSE> 1,706
<INTEREST-INCOME-NET> 1,608
<LOAN-LOSSES> 164
<SECURITIES-GAINS> 37
<EXPENSE-OTHER> 1,701
<INCOME-PRETAX> 27
<INCOME-PRE-EXTRAORDINARY> 27
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
<YIELD-ACTUAL> 3.98
<LOANS-NON> 8
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 204
<CHARGE-OFFS> 4
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 366
<ALLOWANCE-DOMESTIC> 366
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
