Exhibit 13

and its subsidiary

2009
ANNUAL REPORT

Dearborn Bancorp, Inc.

and its subsidiary

Fidelity Bank

CONTENTS

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

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, Fidelity Bank (the “Bank”). Dearborn Bancorp, Inc. trades on the Nasdaq Global Market under the symbol “DEAR”.

Fidelity Bank

The Bank was incorporated as Community Bank of Dearborn 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. The Corporation acquired the Bank of Washtenaw on October 29, 2004. On January 4, 2007, the Corporation acquired Fidelity Financial Corporation of Michigan and its subsidiary, Fidelity Bank. On April 30, 2007, Community Bank of Dearborn was renamed Fidelity Bank.

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, ATM services, telephone banking services, loan services (commercial, consumer, real estate mortgages), travelers’ checks, cashiers’ checks, wire transfers, safe deposit boxes, collection services, night depository service and internet banking services. The Bank does not have a trust department.

Internet banking can be utilized through the Bank’s website, www.fidbank.com. The Bank’s customers are able to execute transfers to their accounts and view their account information and transactions. Commercial customers have the option of utilizing the cash management module. This feature enables commercial customers to designate multiple users, initiate wire transfers, process ACH transactions, perform stop payments, and process federal tax payments. Over 1,000 users have signed up for online banking. The website also contains product information regarding the Bank’s loan and deposit products and the Corporation’s most recent financial information.

Community Bank Insurance Agency, Inc.

On August 19, 1997, the Bank formed Community Bank Insurance Agency, Inc. This company conducts limited insurance-related activities and holds a minority interest in MBT Title Services, LLC, a title insurance company.

Community Bank Mortgage, Inc.

On May 1, 2001, the Bank formed Community Bank Mortgage, Inc., a mortgage company that originates, sells and holds commercial and residential mortgage loans. On January 1, 2008, the operations of the mortgage company were merged into the Bank.

Community Bank Audit Services, Inc.

On March 13, 2002, the Bank formed Community Bank Audit Services, Inc., a company that offers internal auditing and compliance services to financial institutions.

To Our Stockholders,

          The downturn in economic activity began to affect Fidelity Bank and Southeastern Michigan in 2007 and has only continued to worsen since then. Among other problems, including the once-unthinkable bankruptcies of General Motors and Chrysler, this decline has seriously depressed both residential and commercial real estate values in the area where we do business. Unlike many other metropolitan areas, we did not have a “real estate bubble” to burst here but values collapsed all the same. As a result, many of our real estate related loans have become problems as sales volumes and collateral values of properties have dramatically declined. Obviously, this situation has had an enormous impact upon our organization.

          As a consequence of these developments, we recorded a net loss of ($61,175,000) or ($8.00) per fully diluted share during 2009, compared to a net loss of ($31,925,000) or ($3.99) per share during 2008. The factors that contributed most to this loss during 2009 were various costs related to Fidelity Bank’s problem loans, particularly the provision for loan losses, write downs and losses on the sale of other real estate, and defaulted loan expenses. Other factors of importance were the recording of a valuation allowance on our deferred tax asset, the impairment of intangible assets, and a significant increase in FDIC assessment expense.

          The most significant factor in the decline in earnings during 2009 was the cost associated with Fidelity Bank’s non-performing assets. We recorded a provision for loan losses of $50,863,000 during 2009 compared to $14,606,000 during 2008. The amount provided for loan losses is based upon an analysis of activity in the allowance for loan losses. The large increase in the provision during 2009 was the result of a higher level of non-performing loans and net charge-offs. Net charge-offs amount to $30,190,000 in 2009 while they had been $10,771,000 during 2008. We also recorded write-downs and losses on the sale of other real estate of $2,905,000 during 2009 compared to $3,037,000 of such write-downs and losses in 2008. Defaulted loan expenses, primarily legal fees, taxes, insurance and maintenance of real estate to which we have taken title amounted to $4,624,000 in 2009 while they had been $2,078,000 during 2008.

          During 2009, our local markets were significantly impacted by the unprecedented bankruptcy filings of two major automobile manufacturers during the second quarter of 2009. While the Corporation had no direct exposure to these entities, these bankruptcy filings, subsequent shutdown of production for several months and the resulting employee layoffs has had a devastating impact on the general economic conditions in Southeastern Michigan during 2009. This downturn in economic activity has continued to worsen the condition of the residential real estate market during 2009 as well as to significantly impact the Bank’s commercial and commercial real estate mortgage portfolios. This downturn has also led to a significant decline in collateral values of all types of real property.

          The second most significant component of the 2009 loss was the recording of a $25,851,000 valuation allowance against the deferred tax asset that we had carried on our financial statements. The practical effect of this non-cash charge was to completely eliminate the deferred tax asset. The valuation allowance has the potential to keep us from paying income taxes on approximately $75 million in future earnings. On a good note, we were able to recognize an income tax refund of $5,452,000 in the Fourth Quarter when new legislation extended our Net Operating Loss carry back period for federal income taxes from two to five years for 2008 and 2009 losses.

          We also recognized another non-cash charge of $3,997,000 for the impairment of other intangible assets that were created from prior bank acquisitions. This final impairment completely removes these intangible assets from our financial statements. The goodwill created from the prior acquisitions was completely written-off in 2008.

          We also recorded a major increase in FDIC assessment expense during 2009. FDIC expenses amounted to $2,843,000 last year while they had been just $696,000 in the previous year. This increase was primarily due to an increase in the assessment rates charged during the year along with a special assessment on all banks. Stress on the FDIC’s reserves due to resolution of bank failures is unlikely to ease any time soon.

          Total assets at December 31, 2009, decreased to $986,486,000 while they had been $1,121,918,000 one year earlier in an effort to preserve capital levels. As a result of the net loss recorded in 2009, stockholders’ equity declined to $41,945,000 at year end. Consequently, Fidelity Bank’s capitalization status went from well capitalized to under capitalized and resulted in the negotiation of a Consent Order with the Federal Deposit Insurance Corporation and the Office of Financial and Insurance Regulation for the State of Michigan.

          In view of the economic environment and our organization’s condition, we are moving forward very cautiously. It is clear that we must improve Fidelity Bank’s Tier One capital and restore its capitalization status to well-capitalized as soon as possible. The two primary means of doing this are to issue new common stock or to shrink the bank’s asset size.

          In the meantime, we are striving to deal with our non-performing assets and sell our portfolio of other real estate. For now, we have curtailed new lending in order to concentrate our efforts on these two critical tasks. In addition, we are carefully controlling expenses and overhead. As we continue to develop and implement specific plans to deal with the challenges we face, we can make no promises other than our focused efforts to make things better. The Annual Meeting of Stockholders will be held on May 18, 2010, at the Park Place, 23400 Park Avenue, Dearborn, Michigan, at 3:00 p.m. We hope that you will attend.

Sincerely,

John E. Demmer
Chairman of the Board

Michael J. Ross
President and
Chief Executive Officer

SUMMARY OF SELECTED FINANCIAL DATA

The following selected consolidated financial and other data as of and for each of the five years in the period ended December 31, 2009 should be read in conjunction with the Consolidated Financial Statements and the Notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The Consolidated Balance Sheets as of December 31, 2009 and 2008, and the Consolidated Statements of Income for the years ended December 31, 2009 and 2008 are included elsewhere in this Annual Report.

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

COMMITMENT TO COMMUNITY

          Commitment to community is one of the primary principles upon which Dearborn Bancorp, Inc. and its primary subsidiary, Fidelity Bank were founded. Since Fidelity Bank opened for business in 1994, management has emphasized the importance of community involvement and community development as part of the Bank’s mission. In fact, the majority of the Bank’s directors, officers and employees live in the communities that are serviced by the Bank. During 2009, the Bank provided the following local organizations with financial support or personal involvement:

American Arab Chamber of Commerce
Ann Arbor Board of Realtors
Ann Arbor Chamber of Commerce
Auburn Hills Chamber of Commerce
Birmingham Area Seniors (BASCC)
Birmingham Bloomfield Chamber of Commerce
Birmingham Lions Club
Birmingham Optimist Club
Boy Scouts of America
Canton Chamber of Commerce
Canton Community Foundation
Canton Exchange Club
Canton Senior Center
Canton Senior Safety Coalition
Central Macomb Chamber of Commerce
Clinton Township Community Blood Drive
Clinton Township Senior Expo
Dearborn Baseball
Dearborn Board of Realtors
Dearborn Chamber of Commerce
Dearborn Exchange Club
Dearborn Goodfellows
Dearborn Heights Chamber of Commerce
Dearborn Heights Lion’s Club
Dearborn Heights Parks and Recreation
Dearborn Heights Spirit Festival
Dearborn Kiwanis
Dearborn Optimist Club
Dearborn Police Officers Charity
Dearborn Rotary Club
Dearborn Senior Center
Dearborn Symphony Orchestra
Divine Child School
Easter Seals of Michigan
Garden Club of Dearborn
Goodwill Industries of Greater Detroit
Habitat for Humanity
Henry Ford Community College Foundation
Kiwanis Club of Dearborn
Macomb County Treasurer’s Association
Mike Adray Memorial Foundation
NAACP (Detroit Branch)
Northville Chamber of Commerce
Oakwood Health Care Foundation
Plymouth Chamber of Commerce
Rochester Chamber of Commerce
Saline 4-H Farmers
Saline Area Chamber of Commerce
Showcase Plymouth
Southern Wayne County Chamber of Commerce
Southfield Area Chamber of Commerce
Southgate Senior Center
Washtenaw County 4-H Fair
Washtenaw Housing Alliance
Wayne County Treasurers Association
West Washtenaw Business Association
Western Wayne Association of Realtors
YWCA of Western Wayne County

Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Stockholders
Dearborn Bancorp, Inc.
Dearborn, Michigan

We have audited the accompanying consolidated balance sheets of Dearborn Bancorp, Inc. (Corporation) as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the years in the two-year period ended December 31, 2009. The Corporation’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. Our audit included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and 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 financial position of Dearborn Bancorp, Inc. as of December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming the Corporation will continue as a going concern. As further discussed in Note B, the Corporation has suffered recurring losses resulting from the effects of the economic downturn in their operating region causing its subsidiary bank to be undercapitalized and resulting in a consent order to be issued by its primary regulator. These facts raise substantial doubt about the Corporation’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note B. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ BKD, LLP

Indianapolis, Indiana
March 31, 2010

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining an effective system of internal control over financial reporting presented in conformity with generally accepted accounting principles. There are inherent limitations in the effectiveness of any system of internal control. Accordingly, even an effective system of internal control can provide only reasonable assurance with respect to financial statement preparation.

Management assessed the Corporation’s systems of internal control over financial reporting presented in conformity with generally accepted accounting principles as of December 31, 2009. This assessment was based on criteria for effective internal control over financial reporting described in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that, as of December 31, 2009, Dearborn Bancorp, Inc. maintained effective control over financial reporting presented in conformity with generally accepted accounting principles based on those criteria.

The Corporation’s registered public accounting firm has issued an attestation report on our internal control over financial reporting.

Dearborn Bancorp, Inc. and Subsidiary

DEARBORN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

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

The accompanying notes are an integral part of these consolidated statements.

DEARBORN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS

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

The accompanying notes are an integral part of these consolidated statements.

DEARBORN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Continued)

Years Ended December 31, 2009 and 2008

										Accumulated
										Other				Total
		Common				Retained				Comprehensive				Stockholders’
		Stock				Earnings				Income (loss)				Equity
Balance, January 1, 2008		$	134,278			$	3,250			$	20			$	137,548
Purchase of common stock (575,500 shares)			(2,627	)			—				—				(2,627	)
Stock awards earned (43,883 shares granted, 9,592 shares forfeited)			71				—				—				71
Stock option expense			62				—				—				62
Net loss			—				(31,925	)			—				(31,925	)
Other comprehensive income (loss)
Changes in net unrealized gain on securities available for sale											293				293
Reclassification adjustment for gain included in net income			—				—				(17	)			(17	)
Net change in net unrealized gain on securities available for sale			—				—				276				276
Deferred tax effects											(94	)			(94	)
Other comprehensive income			—				—				182				182
Total comprehensive income															(31,743	)
Balance, December 31, 2008		$	131,784				($28,675	)		$	202			$	103,311

The accompanying notes are an integral part of these consolidated statements.

DEARBORN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Continued)

Years Ended December 31, 2009 and 2008

										Accumulated
										Other				Total
		Common				Retained				Comprehensive				Stockholders’
		Stock				Earnings				Income (loss)				Equity
Balance, December 31, 2008		$	131,784				($28,675	)		$	202			$	103,311
Stock awards earned			76				—				—				76
Stock option expense			69				—				—				69
Net loss			—				(61,175	)			—				(61,175	)
Other comprehensive income (loss)
Changes in net unrealized loss on securities available for sale											(21	)			(21	)
Reclassification adjustment for gain included in net income			—				—				(490	)			(490	)
Net change in net unrealized loss on securities available for sale			—				—				(511	)			(511	)
Deferred tax effects											175				175
Other comprehensive loss			—				—				(336	)			(336	)
Total comprehensive income															(61,511	)
Balance, December 31, 2009		$	131,929				($89,850	)			($134	)		$	41,945

DEARBORN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS

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

The accompanying notes are an integral part of these consolidated statements.

DEARBORN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

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

The accompanying notes are an integral part of these consolidated statements.

DEARBORN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009 and 2008

NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the preparation of the accompanying consolidated financial statements follows.

Nature of Operations and Principals of Consolidation

Dearborn Bancorp, Inc. (the “Corporation”) was incorporated in Michigan on September 30, 1992. The Corporation’s primary subsidiary, Community Bank of Dearborn (the “Bank”), began operations on February 28, 1994. As discussed in Note B, the Corporation acquired Fidelity Financial Corporation of Michigan on January 4, 2007 and merged its operations into the Bank. On April 30, 2007, the Community Bank of Dearborn was renamed Fidelity Bank. The Bank operates seventeen banking offices in Dearborn (2), Dearborn Heights, Plymouth Township, Canton Township, Clinton Township (2), Southgate, Auburn Hills, Saline, Ann Arbor, Birmingham, Bloomfield Township, Bingham Farms, Southfield (2) and Shelby Township in Michigan, offering a full range of banking services to individuals and businesses. The Bank also operates Community Bank Insurance Agency, Inc., an insurance agency with limited activities and Community Bank Audit Services, Inc., a company that offers internal auditing services to financial institutions.

The Bank’s primary deposit products are checking, savings, and term certificate accounts, and its primary lending products are commercial, residential mortgage, and consumer loans. Substantially all loans are secured by specific items of collateral including business assets, consumer assets and real estate. Commercial loans are expected to be repaid from cash flow from operations of businesses. Real estate loans are secured by both residential and commercial real estate. Other financial instruments which potentially represent concentrations of credit risk include deposit accounts in other financial institutions.

While the Corporation’s management monitors the revenue streams of the various products and services, operations are managed and financial performance is evaluated on a Corporation-wide basis. Accordingly, all of the Corporation’s banking operations are considered by management to be aggregated in one reportable operating segment.

The consolidated financial statements include the accounts of Dearborn Bancorp, Inc. and its wholly-owned subsidiary, Fidelity Bank and its wholly-owned subsidiaries, Community Bank Insurance Agency, Inc. and Community Bank Audit Services, Inc. All significant intercompany transactions are eliminated in consolidation.

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. Estimates that are more susceptible to change in the near term include the allowance for loan losses, fair value of real estate owned, fair value of certain financial instruments, and the carrying value of intangible assets.

DEARBORN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

December 31, 2009 and 2008

NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Cash and Cash Equivalents

The Corporation considers all liquid investments with original maturities of three months or less to be cash equivalents. At December 31, 2009 and 2008, cash equivalents consisted primarily of interest-bearing deposits with banks and federal funds sold.

One or more of the financial institutions holding the Corporations’s cash accounts are participating in the FDIC’s Transaction Account Guarantee Program. Under the program, through June 30, 2010, all noninterest-bearing transaction accounts at these institutions are fully guaranteed by the FDIC for the entire amount in the account.

For financial institutions opting out of the FDIC’s Transaction Account Guarantee Program or interest-bearing cash accounts, the FDIC’s insurance limits increased to $250,000, effective October 3, 2008. The increase in federally insured limits is currently set to expire December 31, 2013. At December 31, 2009, the Corporation’s cash accounts exceeded federally insured limits by approximately $68,388,000 of which approximately $68,138,000 was held with the Federal Reserve Bank of Chicago and the Federal Home Loan Bank of Indianapolis.

Restrictions on Cash

The Corporation was required to have $91,000 and $1,917,000 of cash on hand or on deposit with the Federal Reserve Bank to meet regulatory reserve and clearing requirements at year end 2009 and 2008, respectively. These balances do not earn interest. Additionally, the Corporation pledged securities with a collateral value of $15,337,000 to the Federal Reserve Bank.

Securities

Effective April 1, 2009, the Corporation adopted new accounting guidance related to recognition and presentation of other-than-temporary impairment (ASC 320-10). When the Corporation does not intend to sell a debt security, and it is more likely than not, the Corporation will not have to sell the security before recovery of its cost basis, it recognizes the credit component of an other-than-temporary impairment of a debt security in earnings and the remaining portion in other comprehensive income. For held-to-maturity debt securities, the amount of an other-than-temporary impairment recorded in other comprehensive income for the noncredit portion of a previous other-than-temporary impairment is amortized prospectively over the remaining life of the security on the basis of the timing of future estimated cash flows of the security.

As a result of this guidance, the Corporation’s consolidated statement of operations as of December 31, 2009, reflects the full impairment (that is, the difference between the security’s amortized cost basis and fair value) on debt securities that the Corporation intends to sell or would more likely than not be required to sell before the expected recovery of the amortized cost basis. For available-for-sale and held-to-maturity debt securities that management has no intent to sell and believes that it more likely than not will not be required to sell prior to recovery, only the credit loss component of the impairment is recognized in earnings, while the noncredit loss is recognized in accumulated other comprehensive income (loss). The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term of the security as projected based on cash flow projections.

DEARBORN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

December 31, 2009 and 2008

NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Prior to the adoption of the recent accounting guidance on April 1, 2009, management considered, in determining whether other-than-temporary impairment exists, (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer and (3) the intent and ability of the Corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of deferred loan fees and costs and an allowance for loan losses.

Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the loan term. Interest income on mortgage and commercial loans is generally discontinued at the time the loan is 90 days delinquent unless the credit is well-secured and in process of collection. Consumer loans are typically charged off no later than 180 days past due. In all cases, loans are placed on non-accrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not received for loans placed on non-accrual is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Loans Held for Sale

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to noninterest income. Gains and losses on loan sales are recorded in noninterest income, and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan.

Allowance for Loan Losses

The allowance for loan losses is a valuation allowance for probable incurred credit losses, increased by the provision for loan losses and decreased by charge-offs less recoveries. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off. Loan losses are charged against the allowance when management believes the uncollectability of the loan balance is confirmed or when required by policy.

DEARBORN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

December 31, 2009 and 2008

NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired or loans otherwise classified as substandard or doubtful. The general component covers non-classified loans and is based on historical loss experience adjusted for current factors.

A loan is impaired when full payment under the loan terms is not expected. Loan relationships over $500,000 that are rated substandard and are on non-accrual status are individually evaluated for impairment. If this evaluation indicated that there is a collateral shortfall and the loan is collateral dependent, the shortfall is charged off. If a loan that is not collateral dependent is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the fair value of estimated future cash flows using the loan’s existing rate.

Foreclosed Assets Held for Sale

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net income or expense from foreclosed assets.

Premises and Equipment

Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows:

Buildings and improvements — 10 to 39 years
Furniture and equipment — 3 to 10 years

Long-Term Assets

Premises and equipment and other long-term assets are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.

Federal Home Loan Bank (FHLB) Stock

The Bank is a member of the FHLB system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income. The Corporation reviewed the FHLB Stock and based on the current performance of the Federal Home Loan Bank of Indianapolis, the Corporation determined there was no impairment of this stock at December 31, 2009.

DEARBORN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

December 31, 2009 and 2008

NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Goodwill and Other Intangible Assets

Goodwill results from business acquisitions and represents the excess of the purchase price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets. Goodwill is assessed at least annually for impairment and any such impairment will be recognized in the period identified.

Other intangible assets consist of core deposit and business relationship intangible assets arising from bank acquisitions in 2004 and 2007. They are initially measured at fair value and are being amortized on an accelerated method over their estimated useful lives, which range from 10 to 11 years.

In addition to a quarterly review by management, goodwill and other intangible assets are evaluated annually by an outside consultant for impairment. If there is impairment, a non-cash impairment expense is recorded.

Stock Compensation

At December 31, 2009 and 2008, the Corporation has a share-based compensation plan, which is more fully described in Note P.

Loan Commitments and Related Financial Instruments

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.

Stock Dividends

The fair value of shares issued in stock dividends is transferred from retained earnings to common stock. All share and per share amounts are retroactively adjusted for stock dividends.

DEARBORN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

December 31, 2009 and 2008

NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes

The Corporation files a consolidated federal income tax return. Income tax expense is the total of federal income tax due or refundable and the change in deferred tax assets and liabilities. The Corporation uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. A valuation allowance, if needed, reduces deferred tax amounts to the amount expected to be realized.

The Corporation adopted ASC 740, “Accounting for Income Taxes”, formerly known as FASB Interpretation 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), as of January 1, 2007. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no affect on the Corporation’s financial statements.

The Corporation recognizes interest and/or penalties related to income tax matters in income tax expense.

Reclassifications

Some items in the prior year financial statements were reclassified to conform to the current presentation. These reclassifications had no impact on net income.

Loss Contingencies

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements.

Earnings (Loss) Per Share

Basic earnings (loss) per share is net income (loss) divided by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share includes the dilutive effect of additional potential common shares issuable under stock options. Earnings (loss) per share is restated for all stock splits and dividends through the date of issue of the financial statements.

Comprehensive Income (loss)

Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss). Other comprehensive income includes unrealized gains and losses on securities available for sale, net of deferred income tax, which are also recognized as separate components of equity.

DEARBORN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

December 31, 2009 and 2008

NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Dividend Restrictions

Banking regulations require maintaining certain capital levels and may limit the dividends paid by the Bank to the Corporation or by the Corporation to stockholders.

Fair Value of Financial Instruments

Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.

Valuation Measurements

Valuation methodologies often involve a significant degree of judgment, particularly when there are no observable active markets for the items being valued. Investment securities and residential mortgage loans held for sale are carried at fair value, as defined in ASC 820, “Fair Value Measurements and Disclosures”, formerly SFAS No. 157 “Fair Value Measurement”, which requires key judgments affecting how fair value for such assets and liabilities is determined. In addition, the outcomes of valuations have a direct bearing on the carrying amounts for goodwill, and intangibles assets. To determine the values of these assets and liabilities, as well as the extent to which related assets may be impaired, management makes assumptions and estimates related to discount rates, asset returns, prepayment rates and other factors. The use of different discount rates or other valuation assumptions could produce significantly different results, which could affect the Corporation’s results of operations.

Adoption of New Accounting Standards

In July 2009, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. This ASU requires some new disclosures and clarifies some existing disclosure requirements about fair value measurement as set forth in Codification Subtopic 820-10. The FASB’s objective is to improve these disclosures and, thus, increase the transparency in financial reporting. Specifically, ASU 2010-06 amends Codification Subtopic 820-10 to now require:

A reporting entity should disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers; and

In the reconciliation for fair value measurements using significant unobservable inputs, a reporting entity should present separately information about purchases, sales, issuances, and settlements.

In addition, ASU 2010-06 clarifies the requirements of the following existing disclosures:

DEARBORN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

December 31, 2009 and 2008

NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

For purposes of reporting fair value measurement for each class of assets and liabilities, a reporting entity needs to use judgment in determining the appropriate classes of assets and liabilities; and

A reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements.

The adoption of this standard did not have a material impact on the Corporation’s financial statements.

ASU 2009-01 (formerly SFAS No. 168), Topic 105 — Generally Accepted Accounting Principles - FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles

ASU 2009-01 establishes the FASB Accounting Standards Codification (Codification) as the single source of authoritative U.S. generally accepted accounting principles (U.S. GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. ASU 2009-01 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. We have made the appropriate changes to GAAP references in our financial statements.

Earnings Per Share (EPS): (formerly FSP EITF 03-6-1), Determining Whether Instruments Granted in Shared-Based Payment Transaction are Participating Securities.

In June 2008, the FASB issued ASC 260 which clarifies that unvested share-based payment awards with a right to receive nonforfeitable dividends are participating securities. ASC 260 also provides guidance on how to allocate earnings to participating securities and compute EPS using the two-class method. ASC 260 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. The provisions of ASC 260 did not have a material impact on our EPS calculation.

ASU No. 2009-05, Measuring Liabilities at Fair Value codified in “Fair Value Measurements and Disclosures (Topic 820) — Measuring Liabilities at Fair Value”

In August 2009, this ASU provides amendments for fair value measurements of liabilities. It provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more techniques. ASU 2009-05 also clarifies that when estimating a fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. ASU 2009-05 is effective for the first reporting period (including interim periods) beginning after issuance or fourth quarter 2009. The provisions of ASU 2009-05 did not have a material impact on our financial condition, results of operations or disclosures.

ASU 2009-01 (formerly SFAS No. 168), Topic 105 — Generally Accepted Accounting Principles — FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles

ASU 2009-01 establishes the FASB Accounting Standards Codification (Codification) as the single source of authoritative U.S. generally accepted accounting principles (U.S. GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. ASU 2009-01 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. We have made the appropriate changes to GAAP references in our financial statements.

DEARBORN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

December 31, 2009 and 2008

NOTE A — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Accounting Standards Codification (ASC) 810 (formerly FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R)

In June 2009, the FASB issued this guidance which amends the consolidation guidance applicable to variable interest entities. The amendments to the consolidation guidance affect all entities currently within the scope of ASC Topic 810-10 (formerly FIN 46(R)), as well as qualifying special-purpose entities (QSPEs) that are currently excluded from the scope of that guidance. This guidance is effective as of the beginning of the first annual reporting period that begins after November 15, 2009. The provisions of ASC Topic 810-10 did not have a material impact on our financial condition, results of operations or disclosures.

NOTE B — CONSENT ORDER AND GOING CONCERN CONSIDERATIONS

Consent Order

Due to our financial condition, the Federal Deposit Insurance Corporation (“FDIC”) and the Office of Financial and Insurance Regulation for the State of Michigan (“OFIR”) required that our Board of Directors sign a formal enforcement action (“Consent Order”) with the FDIC and OFIR which conveys specific actions needed to address certain findings from their examination and to address our current financial condition. We entered into the Consent Order on February 12, 2010, which contains a list of requirements that are to be met by specific dates. Certain requirements are listed below:

	•		Completion of a senior management study by an independent consultant
	•		Plans for the reduction of delinquencies and classified assets
	•		Plans for lending and collection policies
	•		Plans for the reduction of loan concentrations
	•		The revision and implementation of a comprehensive strategic plan
	•		The revision of its Liquidity Plan and the submission of weekly liquidity reports to the FDIC and OFIR

The Consent Order also includes a capital directive, which requires the Bank to have and maintain its level of tier 1 capital as a percentage of total assets (capital ratio) at a minimum of 9% and its level of qualifying total capital as a percentage of risk-weighted assets (total risk-based capital ratio) at a minimum of 12% . These ratios are in excess of the statutory minimums to be well-capitalized. At December 31, 2009, the Bank’s capital ratio was 5.10% and the Bank’s total risk-based capital ratio was 7.19%.

Additionally, the Bank is prohibited from declaring or paying any cash dividends without prior written consent of the FDIC.

The Bank submitted a Capital Restoration Plan (“CRP”) to the FDIC and OFIR on December 15, 2009, due to our undercapitalized status based on our September 30, 2009 regulatory report of condition and income. The CRP addresses, among other things, the steps management will take to cause our capital levels to return to the minimum level to be adequately capitalized.

The Bank is currently undercapitalized. Failure to meet the minimum ratios set forth in the Consent Order could result in regulators taking additional enforcement action against us.

DEARBORN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

December 31, 2009 and 2008

NOTE B — CONSENT ORDER AND GOING CONCERN CONSIDERATIONS (Con’t)

Going Concern

As a result of the effects of the economic downturn and the bankruptcy and downsizing of two major automotive manufacturers headquartered in our region, the capital of the Corporation and the Bank has been significantly depleted. Management is currently attempting to raise additional capital that will return the Bank to compliance with regulatory capital requirements of the Consent Order. Our ability to raise capital is contingent on the current capital markets and our financial performance. Available capital markets are not currently favorable and we cannot be certain of our ability to raise capital on any terms.

The losses reported by the Corporation during 2008 and 2009 were primarily due to large provisions for loan losses, the impairment of goodwill and other intangible assets and the establishment of a valuation allowance against the Corporation’s deferred tax asset. Prior to sustaining these losses in 2008 and 2009, the Corporation had a history of profitable operations. Our return to profitable operations is contingent on the economic recovery in our region and the stability of collateral values of the real estate that secures many of our loans. It is difficult to predict when the economy will begin to recover and the impact of that recovery on our operations. Therefore, we cannot predict the timing of our return to profitable operations.

While the Corporation believes that it may be able to raise sufficient capital to meet its capital requirements and manage loan losses in the near term until such time that the local economy improves without having to liquidate assets, the realization of assets in other than the normal course of business in order to provide liquidity could result in losses not reflected in these financial statements.

DEARBORN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

December 31, 2009 and 2008

NOTE C — SECURITIES

The amortized cost and fair value for securities available for sale and the unrealized gains and losses recognized as accumulated other comprehensive income were as follows (in thousands):

		December 31, 2009
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
US Government sponsored entity securities		$	12,759			$	20				($30	)		$	12,749
Corporate bonds			33,308				—				(197	)			33,111
Mortgage backed securities			101				3				—				104
Totals		$	46,168			$	23				($227	)		$	45,964

		December 31, 2008
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
US Government sponsored entity securities		$	21,175			$	226				($2	)		$	21,399
Corporate bonds			13,185				54				(4	)			13,235
Municipal securities			1,303				28				—				1,331
Mortgage backed securities			179				4				—				183
Money market mutual funds			48,000				—				—				48,000
Totals		$	83,842			$	312				($6	)		$	84,148

The amortized cost and fair value of securities available for sale at December 31, 2009 by contractual maturity are shown below (in thousands). Securities not due at a single maturity date, such as mortgage backed securities are shown separately.

		Amortized				Fair
		Cost				Value
Due in one year through five years		$	46,067			$	45,860
Mortgage backed securities			101				104
Totals		$	46,168			$	45,964

DEARBORN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

December 31, 2009 and 2008

NOTE C — SECURITIES (Continued)

Sales of available for sale securities for the years ended December 31, are as follows (in thousands):

		2009				2008
Proceeds		$	54,208			$	7,276
Gross gains			492				17
Gross losses			2				—

Securities having a carrying value of $15,441,000 and $5,524,000 at December 31, 2009 and 2008, respectively, were pledged to secure Federal Home Loan Bank of Indianapolis advances, time deposits, securities sold under agreements to repurchase and clearing activity with the Federal Reserve Bank.

Securities with unrealized losses at year-end 2009 and 2008, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

		December 31, 2009
		Less than one year								One year or more								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
Investment category		Value				Loss				Value				Loss				Value				Loss
US Government sponsored entity securities		$	6,657				($30	)		$	—			$	—			$	6,657				($30	)
Corporate bonds			33,111				(197	)			—				—				33,111				(197	)
Total temporarily impaired		$	39,768				($227	)		$	—			$	—			$	39,768				($227	)

		December 31, 2008
		Less than one year								One year or more								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
Investment category		Value				Loss				Value				Loss				Value				Loss
US Government sponsored entity securities		$	5,997				($2	)		$	—			$	—			$	5,997				($2	)
Corporate bonds			2,041				(4	)			—				—				2,041				(4	)
Total temporarily impaired		$	8,038				($6	)		$	—			$	—			$	8,038				($6	)

DEARBORN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

December 31, 2009 and 2008

NOTE C — SECURITIES (Continued)

The unrealized losses on the Corporation’s investments were caused by interest rate increases. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Corporation does not intend to sell the investments and it is not more likely than not the Corporation will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Corporation does not consider those investments to be other-than-temporarily impaired at December 31, 2009.

The Corporation holds two single issuer trust preferred securities that are classified as securities held to maturity. The amortized cost and fair value of securities, held to maturity are listed below (in thousands):

		December 31, 2009
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				Losses				Value
Trust preferred securities		$	336			$	—			$	—			$	336
Totals		$	336			$	—			$	—			$	336

The contractual maturity of these securities is over five years.

The single issuer trust preferred securities were evaluated for other than temporary impairment by determining the strength of the underlying issuer and its ability to make the contractual principal and interest payments.

One issuer of a trust preferred security the Corporation holds is a bank holding company, headquartered in Michigan that owns commercial banks in several states. The Corporation received a third party valuation of this security and noted the cost basis exceeded the fair value of the security. Upon further analysis, the Corporation noted that the underlying issuer commenced deferral of interest payments on this trust preferred security for up to a period of five years. This issuer has been negatively impacted by the downturn in the economy and the asset quality issues that have impacted the financial services industry in the Michigan market. Various subsidiary banks held by this issuer have been downgraded to adequately-capitalized status as of September 30, 2009. The Corporation believes that based upon the continued deterioration of asset quality and regulatory capital ratio of this issuer results in an other-than-temporary impairment that is credit related. As a result, the Corporation recorded an other-than-temporary impairment charge of $414,000 through the income statement during the year ended December 31, 2009.

Certain debt securities have experienced fair value deterioration due to credit losses, as well as due to other market factors, but are not otherwise other-than-temporarily impaired. The following table provides information about debt securities for which only a credit loss was recognized in income and other losses are recorded in other comprehensive income.

Credit losses on debt securities held		Amount
Balance, January 1, 2009		$	—
Additions related to other than temporary losses not previously recognized			414
Balance, December 31, 2009		$	414

DEARBORN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

December 31, 2009 and 2008

NOTE D — LOANS

Major categories of loans included in the portfolio at December 31 are as follows (in thousands):

										Percent
		2009				2008				Incr(decr)
Consumer loans		$	29,386			$	31,864				(7.78	%)
Commercial, financial, & other			144,630				164,740				(12.21	%)
Construction and land development loans			83,464				113,035				(26.16	%)
Commercial real estate mortgages			531,156				571,204				(7.01	%)
Residential real estate mortgages			44,500				52,426				(15.12	%)
Total loans			833,136				933,269				(10.73	%)
Allowance for loan losses			(35,125	)			(14,452	)
Loans, net		$	798,011			$	918,817

Certain directors and executive officers of the Corporation, including their related interests, were loan customers of the Bank during 2009 and 2008. These loan transactions for the years ended December 31, are as follows (in thousands):

		2009				2008
Balance, beginning of year		$	2,042			$	2,494
New loans during period			—				9
Repayments made during period			(946	)			(461	)
Balance, end of period		$	1,096			$	2,042

DEARBORN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

December 31, 2009 and 2008

NOTE D — LOANS (Continued)

Activity in the allowance for loan losses for the years ended December 31 are as follows (in thousands):

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

DEARBORN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

December 31, 2009 and 2008

NOTE D — LOANS (Continued)

The aggregate balances in impaired loans at December 31, are as follows (in thousands):

		2009				2008
Impaired loans with no allocated allowance for loan losses		$	83,226			$	71,961
Impaired loans with allocated allowance for loan losses			43,553				26,908
Total		$	126,779			$	98,869
Amount of the allowance for loan loss allocated to impaired loans		$	10,715			$	5,273
Average of impaired loans during the year		$	102,550			$	82,436
Interest income recognized during impairment		$	2,349			$	1,460
Cash-basis interest income recognized		$	2,149			$	—

Non-performing assets were as follows (in thousands):

		2009				2008
Troubled debt restructuring and still accruing		$	59,420			$	17,765
Over 90 days past due and still accruing			—				450
Non-accrual loans			49,341				51,708
Total non performing loans			108,761				69,923
Real estate owned			23,435				9,657
Other repossessed assets			—				—
Other non performing assets			23,435				9,657
Total nonperforming assets		$	132,196			$	79,580

Impaired loans and non-performing loans are defined differently. Impaired loans are loans for which the collection of principal and interest according to the contractual terms of the agreement is not probable. Non-performing loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

Non-performing loans included troubled debt restructuring of $59,420,000 at December 31, 2009. These loans were qualified as troubled debt restructuring due to changes from principal and interest payments to interest only payments, reduction of interest rates, or the lengthening of the amortization. Valuation allowances in the amount of $5,452,000 were recorded against the loans. At December 31, 2009, 3 loans classified as troubled debt restructuring amounting to $2,705,000 were not current according to their renegotiated terms.

DEARBORN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

December 31, 2009 and 2008

NOTE E — PREMISES AND EQUIPMENT

Premises and equipment are comprised of the following at December 31 (in thousands):

		2009				2008
Land and improvements		$	7,728			$	7,728
Building and improvements			14,553				14,553
Furniture and equipment			6,988				6,771
			29,269				29,052
Less accumulated depreciation			9,075				7,780
		$	20,194			$	21,272

Depreciation expense for 2009 and 2008 amounted to $1,335,000 and $1,355,000, respectively. Capital expenditures were primarily due to various improvements in technology.

Rent expense for facilities of $1,009,000 and $1,064,000 was incurred during 2009 and 2008, respectively. Rental commitments under noncancellable operating leases are as follows, before considering renewal options that generally are present (in thousands):

2010		$	649
2011			439
2012			48
2013			24
Total		$	1,160

NOTE F — GOODWILL AND OTHER INTANGIBLE ASSETS

The Corporation acquired Fidelity Financial Corporation of Michigan (Fidelity) and the Bank of Washtenaw (Washtenaw) in January of 2007 and October of 2004, respectively. As a result of these acquisitions, the Corporation acquired goodwill and other intangible assets. The Corporation recorded amortization expense of $595,000 and $968,000 in 2009 and 2008, respectively. Goodwill amounted to $0 at December 31, 2009 and 2008.

The carrying basis and accumulated amortization and impairment of intangible assets at December 31, 2009 and 2008, were:

DEARBORN BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

December 31, 2009 and 2008

NOTE F — GOODWILL AND OTHER INTANGIBLE ASSETS (Con’t)

		2009
		Gross Carrying				Accumulated				Accumulated
		Amount				Amortization				Impairment Charge
Core deposit intangible		$	7,792			$	2,389			$	5,403
Borrower relationship intangible			5,178				2,023				3,155
Total intangible assets		$	12,970			$	4,412			$	8,558