10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly period ended            March 31, 2005.

Commission file number 000-24478.

DEARBORN BANCORP, INC.

(Exact name of registrant as specified in its charter)

Michigan	38-3073622
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

1360 Porter Street, Dearborn, MI		48124
(Address of principal executive office)	(Zip Code)

(313) 565-5700

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate the number of shares outstanding for each of the issuer’s classes of common stock, as of April 30, 2005.

Class	Shares Outstanding
Common Stock	4,831,197

Indicate by check mark whether the registrant is an accelerated filer (as defined in rule 12b-2 of the 1934 Securities and Exchange Act).

Yes o No þ

DEARBORN BANCORP, INC.
INDEX

Part I.		Financial Information:
Item 1.		Financial Statements
		The following consolidated financial statements of Dearborn Bancorp, Inc. and its subsidiary included in this report are:	Page
		Independent Accountants’ Report	3
		Consolidated Balance Sheets – March 31, 2005, December 31, 2004 and March 31, 2004	4
		Consolidated Statements of Income - For the Three Months Ended March 31, 2005 and 2004	5
		Consolidated Statements of Comprehensive Income - For the Three Months Ended March 31, 2005 and 2004	6
		Consolidated Statements of Cash Flows - For the Three Months Ended March 31, 2005 and 2004	7
		Notes to Consolidated Financial Statements	8-13
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital	14-27
Item 3.		Quantitative and Qualitative Disclosures about Market Risk	28-30
Item 4.		Controls and Procedures	31
Part II.		Other Information:
	Pursuant to SEC rules and regulations, the following item(s) are included with the Form 10-Q Report:
		Item 6. Exhibits and Reports on Form 8-K	32
	Pursuant to SEC rules and regulations, the following items are omitted from this Form 10-Q as inapplicable or to which the answer is negative:
		Item 1. Legal Proceedings
		Item 2. Changes in Securities and Use of Proceeds
		Item 3. Defaults upon Senior Securities
		Item 4. Submission of Matters to a Vote of Security Holders
		Item 5 Other Information
SIGNATURES			33
Section 302 Certification of Chief Executive Officer
Section 302 Certification of Chief Financial Officer
Section 906 Certification of Chief Executive Officer
Section 906 Certification of Chief Financial Officer

2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
Dearborn Bancorp, Inc.
Dearborn, Michigan

We have reviewed the consolidated balance sheets of Dearborn Bancorp, Inc. as of March 31, 2005 and the related consolidated statements of income and comprehensive income and the related consolidated statements of cash flows for the three month periods ended March 31, 2005 and 2004. These financial statements are the responsibility of the company’s management.

We conducted our review in accordance with standards established by the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

	/s/ Crowe Chizek and Company LLC
Grand Rapids, Michigan
May 2, 2005

3

DEARBORN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS (unaudited)

(Dollars, in thousands)	03/31/05			12/31/04			03/31/04
ASSETS
Cash and cash equivalents
Cash and due from banks	$	10,933		$	5,946		$	9,149
Federal funds sold		7,214			12,640			11,751
Interest bearing deposits with banks		412			2,283			57
Total cash and cash equivalents		18,559			20,869			20,957
Mortgage loans held for sale		4,458			1,692			1,266
Securities, available for sale		19,652			21,075			12,521
Federal Home Loan Bank stock		1,134			1,122			1,086
Loans
Loans		612,472			587,562			420,783
Allowance for loan loss		(6,288	)		(5,884	)		(4,632	)
Net loans		606,184			581,678			416,151
Premises and equipment, net		14,017			13,124			8,323
Real estate owned		146			138			—
Goodwill		7,042			7,080			—
Other intangible assets		863			902			—
Accrued interest receivable		2,017			1,889			1,525
Other assets		2,965			3,093			1,714
Total assets	$	677,037		$	652,662		$	463,543
LIABILITIES
Deposits
Non-interest bearing deposits	$	64,978		$	63,065		$	37,097
Interest bearing deposits		482,829			477,815			358,807
Total deposits		547,807			540,880			395,904
Other liabilities
Federal funds purchased		16,060			—			—
Securities sold under agreements to repurchase		3,083			4,115			—
Federal Home Loan Bank advances		20,614			20,614			20,638
Accrued interest payable		1,339			1,107			761
Other liabilities		1,187			1,342			490
Subordinated debentures		10,000			10,000			10,000
Total liabilities		600,090			578,058			427,793
STOCKHOLDERS’ EQUITY
Common stock - - 10,000,000 shares authorized, 4,831,197 shares at 03/31/05, 4,794,012 shares at 12/31/04; and 3,263,433 shares at 03/31/04		75,280			74,918			34,622
Retained earnings		2,109			344			1,302
Accumulated other comprehensive loss		(442	)		(658	)		(174	)
Total stockholders’ equity		76,947			74,604			35,750
Total liabilities and stockholders’ equity	$	677,037		$	652,662		$	463,543

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

4

DEARBORN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

	Three Months Ended		Three Months Ended
(In thousands, except share and per share data)	03/31/05		03/31/04
Interest income
Interest on loans	$	9,702	$	6,404
Interest on securities, available for sale		140		71
Interest on federal funds		48		16
Interest on deposits with banks		2		7
Total interest income		9,892		6,498
Interest expense
Interest on deposits		2,886		1,660
Interest on other borrowings		286		231
Interest on subordinated debentures		140		123
Total interest expense		3,312		2,014
Net interest income		6,580		4,484
Provision for loan losses		464		224
Net interest income after provision for loan losses		6,116		4,260
Non-interest income
Service charges on deposit accounts		150		132
Fees for other services to customers		32		12
Gain on the sale of loans		130		143
Gain on the sale of real estate		87		—
Other income		2		19
Total non-interest income		401		306
Non-interest expenses
Salaries and employee benefits		2,307		1,817
Commissions on the origination of loans		65		63
Occupancy and equipment expense		634		359
Intangible expense		38		—
Advertising and marketing		114		77
Stationery and supplies		89		71
Professional services		199		115
Data processing		116		71
Other operating expenses		281		218
Total non-interest expenses		3,843		2,791
Income before income tax provision		2,674		1,775
Income tax provision		909		601
Net income	$	1,765	$	1,174
Per share data:
Net income — basic	$	0.37	$	0.36
Net income — diluted	$	0.34	$	0.33
Weighted average number of shares outstanding — basic		4,810,735		3,255,238
Weighted average number of shares outstanding — diluted		5,152,744		3,589,246

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

5

DEARBORN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

	Three Months Ended			Three Months Ended
(In thousands)	03/31/05			03/31/04
Net income	$	1,765		$	1,174
Other comprehensive income (loss), net of tax
Unrealized gains (losses) on securities
Unrealized holding gains (losses) arising during period		328			(296	)
Less: reclassification adjustment for gains included in net income		—			—
Tax effects		(112	)		100
Other comprehensive income (loss)		216			(196	)
Comprehensive income	$	1,981		$	978

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

6

DEARBORN BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

	Three Months Ended
(In thousands)	3/31/05			3/31/04
Cash flows from operating activities
Interest and fees received	$	9,764		$	6,434
Interest paid		(3,080	)		(2,007	)
Taxes paid		(250	)		—
Proceeds from sale of mortgages held for sale		8,272			10,383
Origination of mortgages held for sale		(10,908	)		(10,001	)
Cash paid to suppliers and employees		(3,996	)		(2,949	)
Net cash provided by operating activities		(198	)		1,860
Cash flows from investing activities
Proceeds from maturities of securities available for sale		3,200			4,000
Proceeds from repayments of securities available for sale		89			121
Purchases of securities available for sale		(1,535	)		—
Purchases of Federal Home Loan Bank stock		(12	)		(13	)
Increase in loans, net of payments received		(24,970	)		(19,731	)
Purchases of property and equipment		(1,107	)		(2,884	)
Net cash used in investing activities		(24,335	)		(18,507	)
Cash flows from financing activities
Net increase (decrease) in non-interest bearing deposits		1,913			(1,984	)
Net increase in interest bearing deposits		5,014			18,269
Net increase in federal funds payable		16,060			—
Net decrease in other borrowings		(1,032	)		—
Stock option exercise		268			171
Net cash provided by financing activities		22,223			16,456
Decrease in cash and cash equivalents		(2,310	)		(191	)
Cash and cash equivalents at the beginning of the period		20,869			21,148
Cash and cash equivalents at the end of the period	$	18,559		$	20,957
Reconciliation of net income to net cash provided by operating activities
Net income	$	1,765		$	1,174
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Provision for loan losses		464			224
Depreciation and amortization expense		214			115
Accretion of discount on investment securities		(12	)		(1	)
Amortization of premium on investment securities		9			11
(Increase) decrease in mortgages held for sale		(2,766	)		239
Increase in interest receivable		(128	)		(64	)
Increase in interest payable		232			7
Decrease in other assets		85			128
(Increase) decrease in other liabilities		(61	)		27
Net cash provided by operating activities	($	198	)	$	1,860

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

7

DEARBORN BANCORP, INC.
FORM 10-Q (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A.   Accounting and Reporting Policies

The consolidated financial statements of Dearborn Bancorp, Inc. (the “Corporation”) include the consolidation of its only subsidiary, Community Bank of Dearborn (the “Bank”). The accounting and reporting policies of the Corporation are in accordance with accounting principles generally accepted in the United States of America and conform to practice within the banking industry.

The consolidated financial statements of the Corporation as of March 31, 2005 and 2004, and December 31, 2004 and for the three month periods ended March 31, 2005 and 2004 reflect all adjustments, consisting of normal recurring items which are in the opinion of management, necessary for a fair presentation of the results for the interim period. The operating results for the quarter are not necessarily indicative of results of operations for the entire year.

The consolidated financial statements as of March 31, 2005 and 2004, and for the three months ended March 31, 2005 and 2004 included herein have been prepared by the Corporation, without an audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in interim financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the financial statements and notes thereon included in the Corporation’s 2004 Annual Report to Stockholders on Form 10-K.

Certain of the Corporation’s accounting policies are important to the portrayal of the Corporation’s financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Facts and circumstances which could affect these material judgments include, but without limitation, changes in interest rates, in the performance of the economy or in the financial condition of borrowers. Management believes that its critical accounting policies include determining the allowance for loan losses and determining the fair value of securities and other financial instruments and assessing other than temporary impairments of securities.

8

A.   Accounting and Reporting Policies (continued)

Employee compensation expense under stock option plans is reported using the intrinsic value method. No stock-based compensation cost is reflected in net income, as all options granted had an exercise price equal to or greater than the market price of the underlying common stock at date of grant. The following table illustrates the effect on net income and earnings per share if expense was measured using the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-based Compensation (in thousands, except share and per share data).

	For the Three Months Ended
	03/31/05		03/31/04
Net income
As reported	$	1,765	$	1,174
Less: stock-based compensation expense determined under fair value based method		—		9
Pro forma	$	1,765	$	1,165
Basic income per share
As reported	$	0.37	$	0.36
Pro forma	$	0.37	$	0.36
Diluted income per share
As reported	$	0.34	$	0.33
Pro forma	$	0.34	$	0.32

Stock options vest after a six month period from date of grant. No options were granted in 2004 or 2005.

9

B.   Securities Available For Sale

The amortized cost and estimated market value of securities available for sale are as follows (in thousands):

	March 31, 2005
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
US Treasury securities	$	13,699	$	—	($	103	)	$	13,596
Mortgage backed securities		737		14		—			751
Corporate debt securities		1,885		—		—			1,885
FHLMC preferred stock		4,000		—		(580	)		3,420
Totals	$	20,321	$	14	($	683	)	$	19,652

	December 31, 2004
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
US Treasury securities	$	15,696	$	—	($	62	)	$	15,634
Mortgage backed securities		826		25		—			851
Corporate debt securities		1,550		—		—			1,550
FHLMC preferred stock		4,000		—		(960	)		3,040
Totals	$	22,072	$	25	($	1,022	)	$	21,075

The amortized cost and estimated market value of securities available for sale at March 31, 2005 by contractual maturity are shown below (in thousands):

			Estimated
	Amortized		Market
	Cost		Value
Due in three months or less	$	2,000	$	1,997
Due in three months through one year		8,695		8,638
Due in over one year through five years		3,004		2,961
Due in over five years		1,885		1,885
Mortgage backed securities		737		751
FHLMC preferred stock		4,000		3,420
Totals	$	20,321	$	19,652

10

The entire portfolio has a net unrealized loss of $669,000 at March 31, 2005. Securities with unrealized losses at March 31, 2005, aggregated by investment category and the length of time that the securities have been in a continuous loss position, are as follows:

Investment category	Fair Value		Unrealized Loss
US treasury securities	$	13,596	($	103	)
FHLMC preferred stock		3,420		(580	)
Total temporarily impaired	$	17,016	($	683	)

Length of time in a continuous loss position	Fair Value		Unrealized Loss
Less than one year	$	13,596	($	103	)
One to three years		3,420		(580	)
Total temporarily impaired	$	17,016	($	683	)

The Bank holds a floating rate issue of the preferred stock of the Federal Home Loan Mortgage Corporation (FHLMC) that has an unrealized loss of $580,000. The unrealized loss on FHLMC preferred stock has not been recognized into income because the issuer of this security is of high credit quality, management has the intent and ability to hold this security for the foreseeable future, and the decline in fair value is believed largely due to changes in interest rates and reported business issues not related to the underlying operations of the organization. Management believes that the fair value will recover as the security’s interest rate increases and the reported business issues are fully resolved.

The Corporation does not hold any securities in the “Held to Maturity” category nor does the Corporation hold or utilize derivatives.

11

C.   Stock Option Plan

Options to buy common stock are granted to officers and employees under a Stock Option Plan which provides for issue of up to 738,729 shares. Exercise price is the market price at date of grant. The maximum option term is ten years, and options vest fully after six months from the date of grant. If an option expires or terminates without having been exercised, such option becomes available for future grant under the Plan.

A summary of the option activity for the three months ended March 31, 2005 is as follows:

						Weighted
	Available					Average
	For		Options			Exercise
	Grant		Available			Price
Outstanding at January 1, 2005		—		540,474		$	9.18
Exercised		—		(37,185	)		7.22
Outstanding at March 31, 2005		—		503,289		$	9.33

For the options outstanding at March 31, 2005, the range of exercise prices was $4.61 to $17.80 per share with a weighted-average remaining contractual term of 6.0 years. At March 31, 2005, 503,289 options were exercisable at weighted average exercise price of $9.33 per share. There were no antidilutive shares for the quarters ended March 31, 2005 and 2004.

12

D.   Acquisition

On October 29, 2004, the Corporation acquired the Bank of Washtenaw (“Washtenaw”), a wholly owned subsidiary of Pavillion Bancorp, Inc. for $15,100,000 in cash. The assets and liabilities of the Bank of Washtenaw at acquisition and net income derived from those assets and liabilities since the acquisition have been consolidated into the Bank. Washtenaw, which was founded in January 2001, has its main office in Saline, Michigan with a branch office and a regional lending center in Ann Arbor, Michigan. As of October 29, 2004, Washtenaw had total assets of $85,500,000, gross loans of $67,100,000 and total deposits of $66,100,000.

The acquisition has been accounted for using the purchase method of accounting, and accordingly, the purchase price has been allocated to the tangible and identified intangible assets purchased and the liabilities assumed based upon the estimated fair values at the date of acquisition. There are refinements in the process of allocating the purchase price that have not been entirely completed. Identified intangible assets and purchase accounting fair value adjustments are being amortized under various methods over the expected lives of the corresponding assets and liabilities. Goodwill will not be amortized, but will be reviewed for impairment on an annual basis. Goodwill and other intangible assets are tax deductible over 15 years. Currently, identified intangible assets subject to amortization are $863,000. Goodwill aggregates to $7,042,000.

The consolidated statements of income reflect the operating results of Washtenaw since the effective date of the acquisition. The following table presents pro forma information for the Corporation including the acquisition of Bank of Washtenaw for the quarter ended March 31, 2004, as if the acquisition had occurred at the beginning of 2004.

	Three Months Ended
(In thousands, except share and per share data)	3/31/2004
Interest income	$	7,516
Interest expense		2,357
Net interest income		5,159
Provision for loan loss		224
Net interest income after provision for loan losses		4,935
Non-interest income		383
Non-interest expense		3,433
Income before income tax provision		1,885
Income tax provision		639
Net income	$	1,246
Basic earnings per share	$	0.38
Diluted earnings per share	$	0.35

13

PART I — FINANCIAL INFORMATION

ITEM 2. — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis are intended to address significant factors affecting the financial condition and results of operations of the Corporation. The discussion provides a more comprehensive review of the financial position and operating results than can be obtained from a reading of the financial statements and footnotes presented elsewhere in this report.

Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that are based on management’s beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and about the Corporation and Bank. Words such as “anticipates”, “believes”, “estimates”, “expects”, “forecasts”, “intends”, “is likely”, “plans”, “projects”, variations of such words and similar expressions are intended to identify such forward- looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions (“Future Factors”) that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements. The Corporation undertakes no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events (whether anticipated or unanticipated), or otherwise.

Future Factors include changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; changes in banking regulation; changes in tax laws; changes in prices, levies and assessments; the impact of technological advances; governmental and regulatory policy changes; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; and changes in the national and local economy. These are representative of the Future Factors that could cause a difference between an ultimate actual outcome and a preceding forward-looking statement.

14

General

The Corporation was formed in 1992 and the Bank was formed in 1993. Subsequently, the Bank has opened offices in several communities in Southeastern Michigan. The Corporation acquired the Bank of Washtenaw on October 29, 2004. The three branches, previously operated by the Bank of Washtenaw have been consolidated into the operations of the Bank. The date opened, branch location and branch type of each branch is listed below:

Date Opened	Location	Type of office
February 1994	22290 Michigan Avenue	Full service retail branch with ATM
	Dearborn, Michigan 48124
December 1995	24935 West Warren Avenue	Full service retail branch
	Dearborn Heights, Michigan 48127
August 1997	44623 Five Mile Road	Full service retail branch with ATM
	Plymouth, Michigan 48170
May 2001	1325 North Canton Center Road	Full service retail branch with ATM
	Canton, Michigan 48187
December 2001	45000 River Ridge Drive	Regional lending center
	Clinton Township, Michigan 48038
November 2002	19100 Hall Road	Full service retail branch with ATM
	Clinton Township, Michigan 48038
February 2003	12820 Fort Street	Full service retail branch with ATM
	Southgate, Michigan 48195
May 2003	3201 University Drive, Suite 180	Full service retail branch
	Auburn Hills, Michigan 48326	Regional lending center
October 2004	450 East Michigan Avenue	Full service retail branch with ATM
	Saline, MI 48176
October 2004	250 West Eisenhower Parkway	Full service retail branch with ATM
	Ann Arbor, MI 48103	Regional lending center
October 2004	2180 West Stadium Blvd.	Full service retail branch with ATM
	Ann Arbor, MI 48103
December 2004	1360 Porter Street	Loan production office
	Dearborn, MI 48124	Regional lending center

The Bank has also formed three subsidiaries that offer additional or specialized services to the Bank’s customers. The Bank’s subsidiaries, their formation date and the type of services offered are listed below:

Date Formed	Name	Services Offered
August 1997	Community Bank Insurance Agency, Inc.	Limited insurance related activities
May 2001	Community Bank Mortgage, Inc.	Origination of commercial and residential mortgage loans
March 2002	Community Bank Audit Services, Inc.	Internal auditing and compliance services for financial institutions

15

Results of Operations

The Corporation reported net income of $1,765,000 for the three month period ended March 31, 2005, compared to net income of $1,174,000 for the three month period ended March 31, 2004 an increase of $591,000 or 50%. The increase in net income was primarily due to the improvement in net interest income. The improvement in net interest income was primarily due to the increase in the commercial real estate loan and other commercial loan portfolios during the period. The increase in loans was partially funded with short term investments such as interest bearing deposits with banks, federal funds sold and floating rate securities, which carry a lower yield than loans.

Net Interest Income

2005 Compared to 2004. As noted on the two charts on the following pages, net interest income for the three month period ended March 31, 2005 was $6,580,000, compared to $4,484,000 for the same period ended March 31, 2004, an increase of $2,096,000 or 47%. This increase was caused primarily by the volume of interest earning assets and interest bearing liabilities. The Corporation’s interest rate spread was 3.76% for the three month period ended March 31, 2005, compared to 3.85% for the same period in 2004. The Corporation’s interest rate margin was 4.21% for the three month period ended March 31, 2005, compared to 4.13% for the same period in 2004.

Average Balances, Interest Rates and Yields. Net interest income is affected by the difference (“interest rate spread”) between rates of interest earned on interest-earning assets and rates of interest paid on interest-bearing liabilities and the relative amounts of interest-bearing liabilities and interest-earning assets. When the total of interest-earning assets approximates or exceeds the total of interest-bearing liabilities, any positive interest rate spread will generate net interest income. Financial institutions have traditionally used interest rate spreads as a measure of net interest income. Another indication of an institution’s net interest income is its “net yield on interest-earning assets” or “net interest margin,” which is net interest income divided by average interest-earning assets.

16

The following table sets forth certain information relating to the Corporation’s consolidated average interest-earning assets and interest-bearing liabilities and reflects the average yield on assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average daily balance of assets or liabilities, respectively, for the periods presented. During the periods indicated, non-accruing loans, if any, are included in the loan category.

	Three months ended						Three months ended
	March 31, 2005						March 31, 2004
	Average				Average		Average				Average
(In thousands)	Balance		Interest		Rate		Balance		Interest		Rate
Assets
Interest bearing deposits with banks	$	453	$	2		1.79%	$	2,775	$	7		1.01%
Federal funds sold		8,248		48		2.36%		7,518		16		0.86%
Securities, available for sale		21,702		140		2.62%		14,838		71		1.92%
Loans		604,039		9,702		6.51%		411,413		6,404		6.26%
Sub-total earning assets		634,442		9,892		6.32%		436,544		6,498		5.99%
Other assets		30,915						15,632
Total assets	$	665,357					$	452,176
Liabilities and stockholders’ equity
Interest bearing deposits	$	482,392	$	2,886		2.43%	$	348,571	$	1,660		1.92%
Other borrowings		41,922		426		4.12%		30,638		354		4.65%
Sub-total interest bearing liabilities		524,314		3,312		2.56%		379,209		2,014		2.14%
Non-interest bearing deposits		62,936						36,402
Other liabilities		2,032						1,081
Stockholders’ equity		76,075						35,484
Total liabilities and stockholders’ equity	$	665,357					$	452,176
Net interest income			$	6,580					$	4,484
Net interest rate spread						3.76%						3.85%
Net interest margin on earning assets						4.21%						4.13%

17

Rate/Volume Analysis. The following table analyzes net interest income in terms of changes in the volume of interest-earning assets and interest-bearing liabilities and changes in yields and rates. The table reflects the extent to which changes in the interest income and interest expense are attributable to changes in volume (changes in volume multiplied by prior year rate) and changes in rate (changes in rate multiplied by prior year volume). Changes attributable to the combined impact of volume and rate have been allocated proportionately to changes due to volume and changes due to rate.

	Three Months Ended March 31, 2005/2004
	Change in Interest Due to:
	Average			Average			Net
(In thousands)	Balance			Rate			Change
Assets
Interest bearing deposits with banks	($	10	)	$	5		($	5	)
Federal funds sold		4			28			32
Investment securities, available for sale		44			25			69
Loans		3,041			257			3,298
Total earning assets	$	3,079		$	315		$	3,394
Liabilities
Interest bearing deposits	$	787		$	439		$	1,226
Other borrowings		112			(40	)		72
Total interest bearing liabilities	$	899		$	399		$	1,298
Net interest income							$	2,096
Net interest rate spread								(0.09%)
Net interest margin on earning assets								0.08%

Provision for Loan Losses

2005 Compared to 2004. The provision for loan losses was $464,000 for the three month period ended March 31, 2005, compared to $224,000 for the same period in 2004, an increase of $240,000 or 107%. The provision for loan losses for the three month period ended March 31, 2005 is based on the internal analysis of the adequacy of the allowance for loan losses. The provision for loan losses was based upon management’s assessment of relevant factors, including types and amounts of non-performing loans, historical loss experience on such types of loans, and current economic conditions. The increase in provision during 2005 was driven by changes in loan growth and the fact that during the first quarter of 2004, the company recorded net recoveries of $94,000 verses net chargeoffs of $60,000 in the first quarter of 2005.

18

Non-interest Income

2005 Compared to 2004. Non-interest income was $401,000 for the three month period ended March 31, 2005, compared to $306,000 for the same period in 2004, an increase of $95,000 or 31% for period. The increase was primarily due to the increase in the gain on the sale of real estate during the period. This gain was the result of the sale of the commercial building that secured one commercial mortgage loan.

Non-interest Expense

2005 Compared to 2004. Non-interest expense was $3,843,000 for the three month period ended March 31, 2005, compared to $2,791,000 for the same period in 2004, an increase of $1,052,000 or 38% for the period. The largest component of non-interest expense was salaries and employee benefits which amounted to $2,307,000 for the three month period ended March 31, 2005, compared to $1,817,000 for the same period in 2004. The primary factors for the increase in salaries and benefits expense were the acquisition of the Bank of Washtenaw in October of 2004 and the expansion of the commercial lending and retail banking departments. As of March 31, 2005, the number of full time equivalent employees was 148 compared to 113 as of March 31, 2004. Salaries and employee benefits will continue to increase as a result of general staff increases.

The second largest component of non-interest expense was occupancy and equipment expense. Occupancy and equipment expense amounted to $634,000 for the three month period ended March 31, 2005, compared to $359,000 for the same period in 2004, an increase of $275,000 or 77%. The primary factor in the increase in occupancy and equipment expense was the opening of the Operations Center in Allen Park, Michigan and the relocation of the commercial lending department to the Administrative Building in Dearborn, Michigan during the fourth quarter of 2004.

Income Tax Provision

2005 Compared to 2004. The income tax expense was $909,000 for the three month period ended March 31, 2005, compared to $601,000 for the same period in 2004, an increase of $308,000 or 51% for the period. The increase was primarily a result of increased pre-tax income.

19

Comparison of Financial Condition at March 31, 2005 and December 31, 2004

Assets. Total assets at March 31, 2005 were $677,037,000 compared to $652,662,000 at December 31, 2004, an increase of $24,375,000 or 4%. The increase was primarily due to the increase in loans during the period.

Federal Funds Sold. Total federal funds sold at March 31, 2005 were $7,214,000 compared to $12,640,000 at December 31, 2004, a decrease of $5,426,000 or 43%. The decrease was primarily due to the deployment of available funds into loans.

Interest bearing deposits with banks. Total interest bearing deposits with banks at March 31, 2005 were $412,000 compared to $2,283,000 at December 31, 2004, a decrease of $1,871,000 or 82%. The decrease was primarily due to the deployment of available funds into loans. This investment was established to provide the Corporation with an alternate short term investment option. This short term investment is a variable-rate certificate of deposit with the Federal Home Loan Bank of Indianapolis that carries a similar rate of return to federal funds sold.

Mortgage Loans Held for Sale. Total mortgage loans held for sale at March 31, 2005 were $4,458,000 compared to $1,692,000 at December 31, 2004, an increase of $2,766,000 or 163%. This increase was a result of the increase in the level of residential real estate mortgage loans waiting to be purchased by mortgage correspondents.

Securities — Available for Sale. Total securities, available for sale, at March 31, 2005 were $19,652,000 compared to $21,075,000 at December 31, 2004, a decrease of $1,423,000 or 7%. The decrease was due to the sale of securities, available for sale during 2004. The funds from the sale of these securities were utilized to fund loan volume.

Please refer to Note B of the Notes to Consolidated Financial Statements for the amortized cost and estimated market value of securities, available for sale. The entire portfolio has a net unrealized loss of $669,000. The unrealized loss is reflected by an adjustment to stockholders’ equity.

The unrealized loss in the Bank’s securities portfolio is primarily related to the unrealized loss of a single security. This security has an unrealized loss of $580,000. This security is an issue of 80,000 shares of FHLMC preferred stock with a par value of $50 per share. The Bank purchased this equity security in March of 2001. The security carried an initial interest rate of 4.50% until March 31, 2002. Thereafter, the interest rate reprices annually on April 1 of each year to a rate equal to the 12 month LIBOR minus 20 basis points. Additionally, the dividend on this security is 70% tax deductible. This feature increases the effective yield significantly. As interest rates declined in 2002 and 2003, the yield on this security also declined.

20

During 2004, the market value of this security was negatively impacted for two primary factors. The first factor was the declining interest rate environment. Short term interest rates declined during 2002 and 2003 and began to increase during 2004. The yield on this security does not react immediately to shifts in interest rates because of the annual adjustment feature. The coupon on this security did not benefit from the rise in short term interest rates during 2004 due to the timing of the coupon reset date. As the next coupon reset date has approached, the market value of this security has reacted positively. A repricing and market value table for selected dates is listed below:

				Market Value
	Rate			(per share)
3/23/2001		4.50	%	$	50.00
4/1/2002		2.82	%	$	50.00
4/1/2003		1.14	%	$	50.00
4/1/2004		1.14	%	$	46.25
6/30/2004		1.14	%	$	46.05
9/30/2004		1.14	%	$	39.00
12/31/2004		1.14	%	$	38.00
3/31/2005		1.14	%	$	42.75

The coupon rate reset on April 1, 2005 will be 3.64%. Based on the tax deductibility of the dividend, the tax equivalent yield of this security on the reset date of April 1, 2005 will be 4.95%. Based on the current level of short term interest rates and the rising interest rate environment, management expects the market value of this security to continue its upward trend.

The second factor in the market value of this security has been the discovery of certain accounting irregularities at FHLMC and FNMA that have raised questions about the credit quality of these organizations. The timing of the decline in the market value of the security also coincides with the public announcements of these accounting irregularities that occurred.

According to SFAS 115 – Accounting for Certain Investments in Debt and Equity Securities, the characterization of a security with an other than temporary impairment is subjective but generally exists when an investor is unlikely to be able to collect all amounts due according to the contractual terms of the security. Other factors that suggest other than temporary impairment of a security would be the downgrading of the security by a rating agency or the deterioration of the financial condition of the issuer.

Management expects the market value of this security will continue to improve during 2005 as the market factors in the impact of the recent significant increase in the coupon of this security and market interest rates continue to increase. Additionally, management expects the market value of this security will improve as the investment community considers the impact of changes made by the Board of FHLMC, such as changes in leadership and auditors, designed to improve the quality of financial reporting at FHLMC. Furthermore, management possesses the intent and the ability to hold this security for a period of time sufficient to allow for the recovery of this security’s fair value.

21

Federal Home Loan Bank Stock. Federal Home Loan Bank stock was valued at $1,134,000 at March 31, 2005, compared to $1,122,000 at December 31, 2004, an increase of $12,000 or 1%.

Loans. Total loans at March 31, 2005 were $612,472,000 compared to $587,562,000 at December 31, 2004, an increase of $24,910,000 or 4%. The increase was primarily due to the continued expansion of the commercial lending department during the past twelve months. This expansion included the addition of two experienced loan officers during the last twelve months. Major categories of loans included in the loan portfolio are as follows (in thousands):

	03/31/05			12/31/04			03/31/04
Consumer loans	$	42,464		$	42,149		$	25,822
Commercial, financial, & other		131,271			129,103			70,190
Commercial real estate construction		78,522			72,286			55,084
Commercial real estate mortgages		314,603			296,934			223,809
Residential real estate mortgages		45,612			47,090			45,878
		612,472			587,562			420,783
Allowance for loan losses		(6,288	)		(5,884	)		(4,632	)
	$	606,184		$	581,678		$	416,151

The following is a summary of non-performing assets and problems loans (in thousands):

	03/31/05		12/31/04		3/31/2004
Over 90 days past due and still accruing	$	40	$	143	$	384
Non-accrual loans		1,868		2,956		1,691
Real estate owned		146		136		—
Other repossessed assets		2		2		—
	$	2,056	$	3,237	$	2,075

Non-accrual loans at March 31, 2005 were $1,868,000. The distribution of non-accrual loans by loan type is as follows:

	Number of
	Loans		Balance
Consumer loans		2	$	35
Commercial, financial, & other		3		499
Commercial real estate construction		1		525
Commercial real estate mortgages		5		699
Residential real estate mortgages		1		110
Total non-accrual loans		12	$	1,868

22

Allowance for Loan Losses. The allowance for loan losses was $6,288,000 at March 31, 2005 compared to $5,884,000 at December 31, 2004, an increase of $404,000 or 7%. The increase resulted primarily from provisions less net charge-offs recorded during the quarter. The allowance for loan losses was based upon management’s assessment of relevant factors, including loan growth, types and amounts of non-performing loans, historical and anticipated loss experience on such types of loans, and current economic conditions.

The following is an analysis of the allowance for loan losses (in thousands):

	Quarter Ended		Year Ended		Quarter Ended
	03/31/05		12/31/04		03/31/04
Balance, beginning of year	$	5,884	$	4,314	$	4,314
Allowance on loans acquired		—		184		—
Charge-offs:
Consumer loans		51		31		5
Commercial, financial & other		43		—		—
Commercial real estate construction		—		—		—
Commercial real estate mortgages		—		100		—
Recoveries:
Consumer loans		7		13		—
Commercial, financial & other		18		104		38
Commercial real estate construction		—		—		—
Commercial real estate mortgages		9		—		61
Net charge-offs		60		14		(94	)
Additions charged to operations		464		1,400		224
Balance, end of period	$	6,288	$	5,884	$	4,632
Allowance to total loans		1.03%		1.00%		1.10%
Allowance to nonperforming assets		305.84%		181.77%		223.23%
Net charge-offs to average loans		0.01%		0.00%		(0.02%)

23

Premises and Equipment. Bank premises and equipment at March 31, 2005 were $14,017,000 compared to $13,124,000 at December 31, 2004, an increase of $893,000 or 7%. The increase in premises and equipment was primarily due to the renovation at the Bank’s Operations Center in Allen Park, Michigan and the updating of equipment at several locations.

Real estate owned. Real estate owned at March 31, 2005 was $146,000 compared to $138,000 at December 31, 2004, an increase of $8,000 or 6%. Real estate owned at March 31, 2005 is comprised of two residential properties with an appraised value of $182,000. The Bank expects to realize a gain as a result of the sale of these properties during 2005.

Goodwill and other intangible assets. Goodwill and other intangible assets were $7,905,000 at March 31, 2005 compared to $7,982,000 at December 31, 2004. The Bank has intangible assets for the estimated value of core deposit accounts acquired in the acquisition of the Bank of Washtenaw. The intangible values represent the present value of the net revenue streams attributable to these intangibles. The core deposit intangible amounted to $929,000 and is being amortized over ten years.

The balance of the acquisition price in excess of the fair market value of the assets and liabilities acquired, including intangible assets, was recorded as goodwill and totaled $7.0 million. Goodwill is defined as an intangible asset with an indefinite useful life, and as such, is not amortized, but is required to be tested annually for impairment of the value. If impaired, an impairment loss must be recorded for the value equal to the excess of the asset’s carrying value over its fair value.

Accrued Interest Receivable. Accrued interest receivable at March 31, 2005 was $2,017,000 compared to $1,889,000 at December 31, 2004, an increase of $128,000 or 7%. The increase was primarily due to the increase in the Bank’s loan portfolio.

Other Assets. Other assets at March 31, 2005 were $2,965,000 compared to $3,093,000 at December 31, 2004, a decrease of $128,000 or 4%. The decrease was primarily due to changes in deferred tax assets.

24

Deposits. Total deposits at March 31, 2005 were $547,807,000 compared to $540,880,000 at December 31, 2004, an increase of $6,927,000 or 1%. The following is a summary of the distribution of deposits (in thousands):

	03/31/05		12/31/04		03/31/04
Non-interest bearing:
Demand	$	64,978	$	63,065	$	37,097
Interest bearing:
Checking	$	14,140	$	15,400	$	20,634
Money market		60,531		54,957		12,785
Savings		77,297		83,773		115,232
Time, under $100,000		131,767		124,448		75,499
Time, $100,000 and over		199,094		199,237		134,657
		482,829		477,815		358,807
Total deposits	$	547,807	$	540,880	$	395,904

Management continues to implement a strategy to change the mix of the deposit portfolio by focusing more heavily on savings and institutional deposits. The increase in deposits was primarily due to normal business development, marketing, telemarketing, referral programs and growth strategies which included a weeklong celebration in March 2005 that highlighted the Bank’s Anniversary. Management expects deposits to grow at an increasing rate during he remainder of 2005.

The Bank has enacted a strategy to utilize public funds to a higher degree. The Bank will also utilize brokered deposits. The Bank has designated a public funds officer to coordinate and manage these efforts. Public funds consist of interest checking and time deposits of local governmental units. They are the result of strong relationships between the Bank and the communities in the Bank’s marketing area and are considered by the Bank to be core deposits. The following is a summary of the distribution of municipal deposits (in thousands):

	03/31/05		12/31/04		03/31/04
Interest bearing checking	$	2,986	$	2,633	$	10,468
Time, $100,000 and over		67,187		71,058		61,735
Total municipal deposits	$	70,173	$	73,691	$	72,203

Brokered deposits are included in the Time, $100,000 and over category. Brokered deposits were $19,390,000, $19,190,000 and $2,380,000 at March 31, 2005, December 31, 2004 and March 31, 2004, respectively.

25

Federal Funds Purchased. Federal funds purchased at March 31, 2005 were $16,060,000 compared to $0 at December 31, 2004. The Bank maintains federal funds purchase credit facilities with several financial institutions as additional sources of funds that the Bank may utilize for short-term liquidity purposes.

Securities Sold Under Agreement to Repurchase. Securities sold under agreements to repurchase at March 31, 2005 were $3,083,000 compared to $4,115,000 at December 31, 2004, a decrease of $1,032,000 or 25%. These Repurchase agreements are secured by securities held by the Bank.

Federal Home Loan Bank Advances. Federal Home Loan Bank advances were $20,614,000 at March 31, 2005 and December 31, 2004.

Accrued Interest Payable. Accrued interest payable at March 31, 2005 was $1,339,000 compared to $1,107,000 at December 31, 2004, an increase of $232,000 or 21%. The increase was primarily due to the increasing amount of interest bearing deposits during the period.

Other Liabilities. Other liabilities at March 31, 2005 were $1,187,000 compared to $1,342,000 at December 31, 2004, a decrease of $155,000 or 12%. The decrease was primarily due to the decrease in expenses payable during the period.

Subordinated Debentures. Subordinated debentures were $10,000,000 at March 31, 2005 and December 31, 2004. On December 19, 2002, the Corporation issued $10,000,000 of floating rate obligated mandatory redeemable securities through a special purpose entity as part of a pooled offering. The securities have a term of thirty years. The Corporation may redeem the securities after five years at face value. They are considered to be Tier 1 capital for regulatory capital purposes. The funds from the issue of these securities were invested into securities available for sale until they can be invested into the Bank subsidiary to allow for additional growth. Debt issue costs of $300,000 have been capitalized and are being amortized over the term of the securities. Unamortized debt issuance costs were $277,000 at March 31, 2005.

26

Capital

Stockholders’ equity at March 31, 2005 was $76,947,000 compared to $74,604,000 as of December 31, 2004, an increase of $2,343,000 or 3%.

The following is a presentation of the Corporation’s and Bank’s regulatory capital ratios (in thousands):

											Minimum
											To Be Well Capitalized
						Minimum for Capital					Under Prompt Corrective
	Actual					Adequacy Purposes					Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of March 31, 2005
Total capital (to risk weighted assets)
Consolidated		85,359		13.30	%		51,356		8.00	%		64,195		10.00	%
Bank		67,595		10.64	%		50,826		8.00	%		63,533		10.00	%
Tier 1 capital (to risk weighted assets)
Consolidated		79,071		12.32	%		25,678		4.00	%		38,517		6.00	%
Bank		61,307		9.65	%		25,413		4.00	%		38,120		6.00	%
Tier 1 capital (to average assets)
Consolidated		79,071		11.88	%		26,614		4.00	%		33,268		5.00	%
Bank		61,307		9.59	%		25,571		4.00	%		31,964		5.00	%
As of December 31, 2004
Total capital (to risk weighted assets)
Consolidated		81,868		13.27	%		49,360		8.00	%		61,700		10.00	%
Bank		63,986		10.47	%		48,913		8.00	%		61,141		10.00	%
Tier 1 capital (to risk weighted assets)
Consolidated		75,984		12.32	%		24,680		4.00	%		37,020		6.00	%
Bank		58,102		9.50	%		24,457		4.00	%		36,685		6.00	%
Tier 1 capital (to average assets)
Consolidated		75,984		12.12	%		25,079		4.00	%		31,348		5.00	%
Bank		58,102		9.78	%		23,765		4.00	%		29,706		5.00	%

Based on the respective regulatory capital ratios at March 31, 2005 and December 31, 2004, the Corporation and Bank are considered well capitalized.

27

PART I — FINANCIAL INFORMATION

ITEM 3. — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Sensitivity Analysis. The Corporation has sought to manage its exposure to changes in interest rates by matching the effective maturities or repricing characteristics of the Corporation’s interest-earning assets and interest-bearing liabilities. The matching of the assets and liabilities may be analyzed by examining the extent to which the assets and liabilities are interest rate sensitive and by monitoring the expected effects of interest rate changes on net interest income.

An asset or liability is interest rate sensitive within a specific time period if it will mature or reprice within that time period. If the Corporation’s assets mature or reprice more quickly or to a greater extent that its liabilities, the Corporation’s net portfolio value and net interest income would tend to increase during periods of rising interest rates but decrease during periods of falling interest rates. If the Corporation’s assets mature or reprice more slowly or to a lesser extent than its liabilities, its net portfolio value and net interest income would tend to decrease during periods of rising interest rates but increase during periods of falling interest rates.

The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest rate sensitive” and by monitoring an institution’s interest rate sensitivity “gap.” An asset or liability is said to be interest rate sensitive within a specific period if it will mature or reprice within that period. The interest rate sensitivity “gap” is the difference between the amount of interest-earning assets maturing or repricing within a specific time period and the amount of interest-bearing liabilities maturing or repricing within that time period. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities, and is considered negative when the amount of interest rate sensitive liabilities exceed the amount of interest rate sensitive assets. During a period of rising interest rates, a negative gap would be expected to adversely affect net interest income while a positive gap would be expected to result in an increase in net interest income, while conversely during a period of declining interest rates, a negative gap would be expected to result in an increase in net interest income and a positive gap would be expected to adversely affect net interest income.

28

Different types of assets and liabilities with the same or similar maturities may react differently to changes in overall market rates or conditions, and thus changes in interest rates may affect net interest income positively or negatively even if an institution were perfectly matched in each maturity category. Additionally, the gap analysis does not consider the many factors as banking interest rates move. While the interest rate sensitivity gap is a useful measurement and contributes toward effective asset and liability management, it is difficult to predict the effect of changing interest rates solely on that measure, without accounting for alterations in the maturity or repricing characteristics of the balance sheet that occur during changes in market interest rates. During periods of rising interest rates, the Corporation’s assets tend to have prepayments that are slower than those in an interest rate sensitivity gap and would increase the negative gap position. Conversely, during a period of declining interest rates, the Corporation’s assets would tend to prepay faster than originally expected thus decreasing the negative gap position. In addition, some of the Corporation’s assets, such as adjustable rate mortgages, have caps on the amount by which their interest rates can change in any single period, and therefore may not reprice as quickly as liabilities in the same maturity category.

The following table sets forth the amounts of interest earning assets and interest bearing liabilities outstanding at March 31, 2005, which are expected to mature or reprice in each of the time periods shown below.

	Interest Rate Sensitivity Period
	1-90		91-365			1-5		Over
(In thousands)	Days		Days			Years		5 Years		Total
Earning assets
Federal funds sold	$	7,214	$	—		$	—	$	—	$	7,214
Interest bearing deposits with banks		412		—			—		—		412
Mortgage loans held for sale		4,458		—			—		—		4,458
Securities available for sale		6,168		9,811			2,962		711		19,652
Federal Home Loan Bank stock		1,134		—			—		—		1,134
Total loans, net of non-accrual		287,870		20,643			277,323		24,769		610,605
Total earning assets		307,256		30,454			280,285		25,480		643,475
Interest bearing liabilities
Total interest bearing deposits		225,958		157,324			99,547		—		482,829
Federal funds purchased		16,060		—			—		—		16,060
Federal Home Loan Bank advances		—		10,025			10,589		—		20,614
Other Borrowings		3,083		—			—		—		3,083
Trust preferred securities		10,000		—			—		—		10,000
Total interest bearing liabilities		255,101		167,349			110,136		—		532,586
Net asset (liability) funding gap		52,155		(136,895	)		170,149		25,480	$	110,889
Cumulative net asset (liability) funding gap	$	52,155	($	84,740	)	$	85,409	$	110,889

29

Liquidity. Liquidity refers to readily available funds to meet the needs of borrowers and depositors. Levels of liquidity are closely monitored in conjunction with loan funding requirements and deposit outflows. Adequate liquidity protects institutions from raising funds under duress at excessive expense and provides a necessary cushion for occasional unpredictable aberrations in demand. While adequate liquidity is imperative, excessive liquidity in lower yielding cash investments or other easily marketable assets reduces potential interest income. Thus, an appropriate balance must be maintained to protect the institution and at the same time, prudently maximize income opportunities. Sources of liquidity from both assets and liabilities include federal funds sold, securities available for sale, loan repayments, core deposits, Federal Home Loan Bank advances and a federal funds purchase credit facility.

The following tables provide information about the Bank’s contractual obligations and commitments at March 31, 2005 (in thousands):

Contractual Obligations

			Payments Due By Period
	Less Than		1-3		3-5		Over 5
	1 Year		Years		Years		Years		Total
Securities sold under agreements to repurchase	$	3,083	$	—	$	—	$	—	$	3,083
Federal funds purchased		16,060		—		—		—		16,060
Long-term borrowings		25		15,589		5,000		—		20,614
Lease commitments		606		1,060		872		504		3,042
Subordinated debentures		—		—		—		10,000		10,000
Totals	$	19,774	$	16,649	$	5,872	$	10,504	$	52,799

Unused Loan Commitments and Letters of Credit

	Amount Of Commitment Expiration Per Period
	Less Than		1-3		3-5		Over 5
	1 Year		Years		Years		Years		Total
Unused loan commitments	$	64,367	$	25,346	$	2,682	$	22,792	$	115,187
Standby letters of credit		2,631		3,250		992		—		6,873
Totals	$	66,998	$	28,596	$	3,674	$	22,792	$	122,060

30

DEARBORN BANCORP, INC. AND SUBSIDIARY
FORM 10-Q (continued)

Item 4. Controls and Procedures

Disclosure Controls and Procedures – As of the end of the period covered by this report, the registrant carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the registrant’s disclosure controls and procedures. Based on the review of the disclosure controls of the registrant, the Chief Executive Officer and the Chief Financial Officer have concluded that the registrant’s disclosure controls and procedures were effective as of March 31, 2005.

Internal Controls Over Financial Reporting – There has been no change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting.

31

PART II — OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS IN FORM 8-K.

(a)	Exhibits
	Exhibit 31.1	CEO Certification. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	Exhibit 31.2	CFO Certification. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	Exhibit 32.1	CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	Exhibit 32.2	CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b)	A Form 8-K Report, dated January 18, 2005 was filed during the quarter ended March 31, 2005.

32

DEARBORN BANCORP, INC.
FORM 10-Q (continued)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dearborn Bancorp, Inc.

(Registrant)

/s/ John E. Demmer

John E. Demmer

Chairman

/s/ Michael J. Ross

Michael J. Ross

President and Chief Executive Officer

/s/ Jeffrey L. Karafa

Jeffrey L. Karafa
Treasurer and Chief Financial Officer

Date: May 10, 2005

33

Exhibit No.	Exhibit Description
Exhibit 31.1	CEO Certification. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31.2	CFO Certification. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1	CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.2	CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EX-31.1

DEARBORN BANCORP, INC.
FORM 10-Q (continued)

Exhibit 31.1

RULE 13a-14(a) CERTIFICATION

I, Michael J. Ross, President and Chief Executive Officer, of Dearborn Bancorp, Inc., certify that:

1.	I have reviewed this report on Form 10-Q of Dearborn Bancorp, Inc. (the “registrant”);
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: May 10, 2005	/s / Michael J. Ross
	Michael J. Ross
	President and Chief Executive Officer
	Dearborn Bancorp, Inc.

EX-31.2

DEARBORN BANCORP, INC.
FORM 10-Q (continued)

Exhibit 31.2

RULE 13a-14(a) CERTIFICATION

I, Jeffrey L. Karafa, Chief Financial Officer and Treasurer, of Dearborn Bancorp, Inc., certify that:

1.	I have reviewed this report on Form 10-Q of Dearborn Bancorp, Inc. (the “registrant”);
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a)   all significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)   any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: May 10, 2005	/s / Jeffrey L. Karafa
	Jeffrey L. Karafa
	Chief Financial Officer and Treasurer
	Dearborn Bancorp, Inc.

EX-32.1

DEARBORN BANCORP, INC.
FORM 10-Q (continued)

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350, and accompanies the quarterly report on Form 10-Q for the quarter ended March 31, 2005 (the “Form 10-Q”) of Dearborn Bancorp, Inc. (the “Issuer”).

     I, Michael J. Ross, President and Chief Executive Officer of the Issuer, certify that:

(i)	The Form 10-Q fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and
(ii)	The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

Dated: May 10, 2005
	/s / Michael J. Ross
	Michael J. Ross
	President and Chief Executive Officer,
	Dearborn Bancorp, Inc.

EX-32.2

DEARBORN BANCORP, INC.
FORM 10-Q (continued)

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. § 1350, and accompanies the quarterly report on Form 10-Q for the quarter ended March 31, 2005 (the “Form 10-K”) of Dearborn Bancorp, Inc. (the “Issuer”).

     I, Jeffrey L. Karafa, Treasurer and Chief Financial Officer of the Issuer, certify that:

(i)	The Form 10-Q fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and
(ii)	The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

Dated: May 10, 2005
	/s / Jeffrey L. Karafa
	Jeffrey L. Karafa
	Treasurer and Chief Financial Officer,
	Dearborn Bancorp, Inc.