10-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

þ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2006 or

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from                      to                     

Commission file number 000-24478.

DEARBORN BANCORP, INC.

(Exact name of registrant as specified in its charter)

Michigan	38-3073622
(State or other jurisdiction of	(I.R.S. employer 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)

Securities registered pursuant to section 12(b) of the Act:

	Name of each exchange on
Title of each class	which registered
Common Stock	The Nasdaq Stock Market, LLC

Securities registered pursuant to section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes o No þ

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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act

Large accelerated filer o Accelerated filer þ      Non-accelerated filer o

Indicate by check mark if the registrant is a shell company, as defined in Rule 12b-2 of the Exchange Act.
Yes o No þ

The aggregate market value of the common equity held by non-affiliates of the registrant computed by reference to the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second quarter, was approximately $123,826,482.

As of March 1, 2007, 8,893,581 shares of common stock of the registrant were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the 2006 Annual Report to Stockholders of the Registrant are incorporated in Parts I, II and IV of this report. Portions of the definitive Proxy Statement of the Registrant dated April 13, 2007, to be filed pursuant to Regulation 14A, are incorporated by reference in Part III of this report.

TABLE OF CONTENTS

PART I
Item 1.	Business	3
Item 1A.	Risk Factors	16
Item 1B.	Unresolved Staff Comments	20
Item 2.	Properties	21
Item 3.	Legal Proceedings	22
Item 4.	Submission of Matters to a Vote of Security Holders	22
PART II
Item 5.	Market for Registant's Common Equity, and Related Stockholder Matters	22
Item 6.	Selected Financial Data	22
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	22
Item 7A.	Quantitative and Qualitative Disclosure about Market Risk.	22
Item 8.	Financial Statements and Supplementary Data	22
Items 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	22
Item 9A.	Controls and Procedures	23
Item 9B.	Other Information	23
PART III
Item 10.	Directors and Executive Officers of the Registrant	23
Item 11.	Executive Compensation	23
Item 12.	Security Ownership of Certain Beneficial Owners and Management	24
Item 13.	Certain Relationships and Related Transactions	24
Item 14.	Principal Accountant Fees and Services	24
PART IV
Item 15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K	25
Form 10-K Signatures		27
Exhibit Index		28
2006 Annual Report to Shareholders
Consent of Independent Registered Public Accounting Firm
Rule 13a-14(a) CEO Certification
Rule 13a-14(a) CFO Certification
CEO Certification Pursuant to Section 906
CFO Certification Pursuant to Section 906

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DEARBORN BANCORP, INC.
FORM 10-K

PART I

Forward Looking Statements

     The following discussion 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.

Item 1. Business

     Dearborn Bancorp, Inc. (the “Corporation”), a Michigan corporation, is a bank holding corporation owning all the common stock of the Community Bank of Dearborn (the “Bank”), a Michigan banking corporation which commenced business on February 28, 1994. The Bank is the only commercial bank headquartered in Dearborn, Michigan and conducts business primarily in Wayne, Macomb, Oakland and Washtenaw Counties, Michigan.

Background

     The liberalization of Michigan’s branch banking laws, together with the expansion of interstate banking, has led to substantial consolidation of the banking industry in Michigan, including within the county in which the Bank has its executive offices. In the past, several of the financial institutions within the primary market area of the Bank have either been acquired by or merged with larger financial institutions or out-of-state financial institutions. In some cases, when these consolidations occurred, local boards of directors were dissolved and local management relocated or in some cases terminated and has, in some cases, resulted in policy and credit decisions being centralized away from local management.

     In the opinion of the Corporation’s management, this situation has created a favorable opportunity for a local commercial bank with local management and directors. Management of the Corporation believes that such a bank attracts those customers who wish to conduct business with a locally managed institution that demonstrates an active interest in their business and personal financial affairs. The Corporation believes that a locally managed institution, in many cases, will be able to deliver more timely responses to customer requests, provide customized financial products and services and offer customers the personal attention of the Bank’s senior banking officers. The Bank seeks to take advantage of this opportunity by emphasizing in its marketing plan the Bank’s local management and the Bank’s ties and commitment to its market area.

     The Corporation was incorporated as a Michigan business corporation on September 30, 1992. The Corporation was formed to acquire all of the Bank’s issued and outstanding stock and to engage in the business of a bank holding corporation under the Bank Holding Company Act of 1956, as amended (the “Act”).

     The executive offices of the Corporation and the Bank are located at 1360 Porter Street, Dearborn, Michigan 48124, telephone number (313) 565-5700. Currently, the website address is www.cbdear.com. Effective May 1, 2007, the website address will be www.fidbank.com. The investor relations page of the website can be directly accessed at www.dearbornbancorp.com.

3

Business of the Corporation

     The primary purpose of the Corporation is the ownership of the Bank. In the future, the Corporation may form or acquire other subsidiaries as permitted under the Act and the regulations of the Federal Reserve.

Business of the Bank

     Principal operations of the Bank commenced on February 28, 1994 when the Bank opened for business at its main office, located at 22290 Michigan Avenue, Dearborn, Michigan. The date opened, location and office type of each office is listed below:

Date Opened	Location	Type of office
February 1994	22290 Michigan Avenue	Full service retail branch with ATM
	Dearborn, Michigan 48124	Regional lending center
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, Suite 110	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
October 2004	450 East Michigan Avenue	Full service retail branch with ATM
	Saline, MI 48176
October 2004	250 West Eisenhower Parkway, Suite 100	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
November 2004	4000 Allen Road,	Operations Center
	Allen Park, MI 48101
December 2004	1360 Porter Street	Loan production office
	Dearborn, MI 48124	Regional lending center

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The Bank, through its main office, branch offices and regional lending centers, emphasizes and offers highly personalized service to its customers.

     On January 4, 2007, the Corporation acquired Fidelity Financial Corporation of Michigan (Fidelity), a commercial bank with seven offices in Oakland County, Michigan. The acquisition will significantly expand the Bank’s presence in Oakland County, Michigan. Management believes that the acquisition will be beneficial to the Bank’s customers and the Corporation’s shareholders.

     The customer service officers are well-trained, experienced bank officers who fill the needs of the customers and handle the requests of their customers in a professional manner. The management of the Corporation and the Bank believe that it is important to the success of the Bank’s strategy to create long-term relationships between customers and Bank employees. The Bank’s senior management holds regular staff information meetings so that all employees are given information regarding the Bank’s plans and objectives, and employees are offered the opportunity to make suggestions to improve the Bank’s performance. The management of the Bank believes that this approach creates a commitment by all employees to the Bank’s success.

     The Bank offers a wide range of financial products and services. These include checking accounts, savings accounts, money market accounts, certificates of deposit, business checking, direct deposit, loan services (commercial, consumer, real estate mortgages), travelers’ checks, cashiers’ checks, wire transfers, safety deposit boxes, online banking, telephone banking, collection services, and night depository services. The Bank offers check imaging options including statements on CD ROM and online banking services to its customers.. The Bank does not have a trust department.

     On August 19, 1997, the Bank purchased a shell insurance agency and renamed the agency Community Bank Insurance Agency, Inc. Community Bank Insurance Agency’s primary functions are to act as the sales agent for the Corporation’s own insurance policies and to hold a minority interest in MBT Title Services, LLC, a title insurance company, which allows the Bank to offer title insurance to its customers.

     On May 1, 2001, the Bank formed Community Bank Mortgage, Inc., a mortgage company that originates, holds and sells commercial and residential mortgages.

     On March 26, 2002, the Bank formed Community Bank Audit Services, Inc., a company that provides internal audit and compliance consulting to other small community banks.

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Business Strategy

     Grow Through Branch Expansion. Since commencing operations, our growth has mainly been accomplished internally. Our growth strategy is to create a commercial lending franchise concentrated in select communities. We expect to continue our historic pattern of expanding our footprint by adding offices in contiguous areas of our existing market and by filling gaps between our existing offices. Our planned opening of a new branch in Shelby Township, Michigan in the second quarter of 2007 is part of this strategy. We believe that the demographics and growth characteristics within the communities we serve should also provide significant opportunities for us to grow our loan and deposit relationships at our existing offices.

     Grow Through Selected Acquisitions. Another part of our growth strategy is to continue pursuing selected acquisitions. In 2004, we acquired the Bank of Washtenaw and have successfully completed its integration into our operations. We believe that we have the ability to integrate the operational and cultural aspects of other institutions given the acquisition experience of our management. We intend to focus on organizations that have already proven to be successful in their respective market areas, and where we believe integration risk to be low. Our acquisition of Fidelity on January 4, 2007 is consistent with this strategy.

     Emphasize Community Banking. We strive to maintain a strong commitment to community banking. Our goal is to attract small to medium-sized businesses, as well as individuals as customers who wish to conduct business with a local commercial bank that demonstrates an active interest in their business and personal affairs. We are becoming increasingly sophisticated in our ability to analyze our customer relationships, which increases our ability to recognize the opportunity to offer additional products and services that will expand each relationship. We believe our ability to deliver products and services in a highly personalized manner helps differentiate us from larger, regional banks operating in our market area.

     Hire Experienced, Local Bankers. Our strategy has revolved around the hiring of experienced, local banking professionals and relationship managers to run our offices, call on customers and originate loans and deposits. We encourage our employees to be active in community affairs and business, trade and service organizations. Our senior loan officers have an average of over 20 years of experience in the financial services industry and have operated in our market area through a wide range of economic cycles and lending market conditions. We believe that the recruitment of banking professionals with significant experience in, and knowledge of, our markets facilitates our growth and partially mitigates the credit risk associated with our rapidly growing loan portfolio.

     Capitalize on Consolidation in Our Market. Several of the financial institutions within our market area have either been acquired by, or merged with, larger or out-of-state financial institutions. These acquisitions have included: Royal Bank of Scotland Group, Plc’s acquisition of Charter One Financial, Inc., J.P. Morgan Chase & Co.’s acquisition of Bank One Corporation, ABN AMRO Holding N.V.’s acquisition of Michigan National Corporation, and Fifth Third Bancorp’s acquisition of Old Kent Financial Corporation. In some cases, when these consolidations occurred, the ensuing employee and customer disruptions created opportunities for us to attract experienced personnel and establish relationships with customers wishing to conduct business with a locally-managed institution with strong ties to the community. We have positioned ourselves to capitalize on business opportunities that may result from customer dislocation associated with these and future consolidations.

     Control Our Operating Costs. Our practice of employing fewer, but highly qualified and productive individuals at all levels of the organization is key to maintaining a decentralized management structure. These individuals are able to manage large loan portfolios, which increases interest income while controlling personnel costs. Additionally, to manage our growth in an efficient manner, we continue to enhance our operating procedures and in 2004 we opened an operations center in Allen Park, Michigan that consolidated many of our administrative and support functions. This facility houses our data processing, accounting, auditing, compliance and customer support activities.

     Focus on Commercial Real Estate Lending. While we offer a full range of consumer and commercial loan products, our primary lending focus will continue to be providing local businesses with loans secured by owner-occupied real estate. Typically, we seek commercial real estate lending relationships with customers borrowing from $500,000 to $4 million. Although our legal lending limit was approximately $13 million as of December 30, 2006, our Board of Directors has set our current in-house lending limit at $6 million. Our in-house limit accommodates the vast majority of lending opportunities we encounter. If local businesses have credit needs beyond the scope of our in-house lending capacity, we may participate out a portion of the credit with other financial institutions in order to accommodate our customers’ needs. As of December 31, 2006, commercial real estate loans comprised 72% of our loan portfolio.

6

Market Area

     Our current market area includes Wayne, Macomb, Washtenaw and Oakland Counties, which are all located in southeastern Michigan. We currently have offices in the following communities: Ann Arbor, Auburn Hills, Canton Township, Clinton Township, Dearborn, Dearborn Heights, Plymouth Township, Saline, and Southgate, Michigan. Our market area has a diverse economy based primarily on manufacturing, retail and service businesses and contains the headquarters for twenty-three Fortune 500 companies. According to 2000 U.S. Census Data, the populations of Wayne (excluding the City of Detroit), Macomb, Washtenaw and Oakland Counties totaled 3,414,967, while median household incomes for such counties were $50,848, $58,598, $59,069 and $69,794, respectively.

     Our market area represents a significant banking market in the State of Michigan. According to the FDIC, total deposits in Wayne (excluding the City of Detroit), Macomb, Washtenaw, and Oakland Counties, including those of banks and thrifts, were approximately $72.7 billion as of June 30, 2006, which accounted for approximately 47.7% of the total deposit market share in the State of Michigan and has increased approximately 43.9% from $50.5 billion in deposits as of June 30, 2000.

     Our acquisition of Fidelity on January 4, 2007 added seven offices in the Oakland County, Michigan communities of Birmingham, Bloomfield Township, Bingham Farms, and Southfield (4). Oakland County is one of the largest and most affluent counties in the United States. According to the most recent U.S. Census Data, out of 38 counties throughout the United States with a population over one million, Oakland County has the 4^th highest per capita household income and is ranked 6^th based on the percentage of its workforce employed in management, professional, and related occupations. In 2000, 45% of the workers in Oakland County were in management, professional, and related occupations, as compared to 32% and 34% for the State of Michigan and the United States, respectively. According to 2003 U.S. Census estimates, the median home value in Oakland County was $213,696, which is 57% and 53% above the median home values for the State of Michigan and United States, respectively. Additionally, based on 2005 U.S. Census estimates, Oakland County experienced the 4^th largest population increase of any county in the State of Michigan from 2000 — 2005, and in 2005 was the 2nd largest county in the State of Michigan and the 31^st largest county in the United States based on total population.

     Oakland County is a leading center of international commerce and foreign investment. According to the Oakland County Department of Planning and Economic Development, Oakland County exports over $10 billion in goods and services to 145 countries annually, and is ranked 9^th among counties in the United States based on the number of manufacturing firms that export to foreign countries. Oakland County is also home to sixteen divisions, affiliates, or subsidiaries of the twenty largest foreign-owned companies operating in the Detroit metropolitan statistical area ranked by total company revenue.

7

Marketing Plan

     The Bank’s marketing plan focuses on the concepts of corporate citizenship and personal interaction within the communities the Bank serves through promotion of, and active participation in, a number of civic organizations and ongoing community activities. Management believes that these efforts establish the identity and philosophy of the Bank within the communities it serves and allow Bank officers and employees to personally interact with local business leaders and members of the public. The marketing plan also emphasizes direct sales calls by Bank officers and specific telemarketing programs involving the Bank’s branch managers and customer service representatives.

     The Bank has two primary target markets: consumer financial services, with an emphasis on individual deposit accounts, single family residential lending and home equity lending; and business financial services, with an emphasis on deposit and loan products designed for small- to medium-sized businesses.

     Community Club. At inception, the Bank established a “Community Club” which has become an important marketing tool to increase the Bank’s total deposits. The Community Club is targeted at individuals over the age of 50. As of December 31, 2006, the Community Club had over 7,200 members who accounted for total deposits of $216.0 million, or 34% of the Bank’s total deposits.

     Among other things, membership in the Community Club entitles the customer to increased personal attention and service by Bank staff and a ¹/4% premium on new certificate of deposit accounts with a minimum $1,000 balance and one year maturity. The Bank also hosts local community events, educational seminars and travel programs which have been well received by the Community Club members. Management believes that the success of the Community Club and the Bank’s continued efforts to expand the benefits of the program will foster an increase in the number of Community Club members and deposit accounts.

     Business Financial Services. The Bank’s business marketing efforts are directed by senior management, including Michael J. Ross, Warren R. Musson, Stephen C. Tarczy and Jeffrey J. Wolber with Mr. Wolber assigned as sales manager, whose duties include administering and coordinating the business development efforts of the Bank. Subsequent to the acquisition of Fidelity on January 4, 2007, John A. Lindsey joined this group when he became Oakland Regional President.

     Each bank officer, in addition to each branch manager, is responsible for creating new business opportunities for the Bank. The targeted list of new business customers represents a mix of industrial, manufacturing, professional and retail clients with an emphasis on businesses with annual sales of $10 million or less.

     The Bank has developed an aggressive telemarketing program for new business. Businesses are identified through listings provided by the various Chambers of Commerce, local phone directories and other sources targeted to the communities the Bank serves. Initial sales calls are introductory in nature with follow-up calls made to determine whether a meeting can be arranged with the targeted company to discuss the Bank’s products and services. The Bank believes this strategy has been, and will continue to be, successful in generating new business for the Bank.

     In addition to its telemarketing program, the Bank’s officers maintain contact with local attorneys, accountants and other representatives in the local community that may be in a position to refer business to the Bank. The Bank also encourages and supports its officers and employees to join and participate in various community organizations and events.

     Through their many years of business and community leadership, each of the Corporation’s Directors has been, and will continue to be, a strong source of referrals for the Bank.

     Consumer Financial Services. The Bank originates residential real estate loans primarily through its retail branch facilities. Branch managers and mortgage loan originators develop new residential mortgage applications from several sources including real estate brokers, insurance agents, accountants, attorneys, existing residential mortgage customers and other customers of the Bank. An extensive telemarketing effort generates potential customers as a result of these contacts. Additionally, the Bank has developed targeted real estate newsletters that are mailed to an existing database composed of those referral sources. The Bank also maintains an active role in several local real estate boards offering product training to members.

     The Bank, as a result of its secondary market operations, is able to offer a variety of loan products that serve the needs of first time home buyers. Customers desiring to construct new homes are able to obtain financing as a result of the Bank’s construction loan program that is offered in addition to the permanent loan. Non-conforming loans, which include larger residential loans, are also provided through the Bank’s secondary marketing efforts. The Bank also provides loans that it holds in its own portfolio on those transactions that evidence satisfactory credit quality and income but are unable to be sold in the secondary market for various reasons.

     Management believes that cross-selling of the Bank’s products and services to its existing customers is vital to expanding account relationships, generating additional sales opportunities and increasing fee income.

8

Loan Policy

     As a routine part of the Bank’s business, the Bank makes loans to individuals and businesses located within the Bank’s market area. The loan policy of the Bank states that the function of the lending operation is two-fold: to provide a means for the investment of funds at a profitable rate of return with an acceptable degree of risk, and to meet the credit needs of the responsible businesses and individuals who are customers of the Bank. However, the Board of Directors of the Bank recognizes that in the normal business of lending, some losses on loans will be inevitable and should be considered a part of the normal cost of doing business. Under the loan policy, individual lending authority for loans in excess of $100,000 is granted to a limited number of officers, each of whom has over 25 years of banking experience. Currently this group includes Michael J. Ross and Warren R. Musson. They are authorized to lend up to $100,000 unsecured and $1,000,000 for collateralized loans.

     The Bank’s loan policy anticipates that priorities in extending loans will change from time to time as interest rates, market conditions and competitive factors change. The policy sets forth guidelines on a nondiscriminatory basis for lending in accordance with applicable laws and regulations. The policy describes various criteria in granting loans, including the ability to pay; the character of the customer; evidence of financial responsibility; purpose of the loan; knowledge of collateral and its value; terms of repayment; source of repayment; payment history; and economic conditions.

     The loan policy specifies individual lending limits for certain officers up to a maximum of $25,000 for unsecured loans and $100,000 for secured loans. When certain officers have the approval of certain other officers, these limits may be increased to $100,000 for unsecured loans and $500,000 for secured loans. Loans of greater than $500,000 require the approval of our Loan Committee and loans greater than $1,000,000 require the approval of our Executive Loan Committee. Loans in excess of $6,000,000 up to the legal maximum authorized by law require the approval of our Board of Directors.

     The loan policy also limits the amount of funds that may be loaned against specified types of collateral including: listed securities — not greater than 80% loan to value; U.S. Government securities — not greater than 90% loan to value; and insured bank deposits — not greater than 100% loan to value. As to loans secured principally by real estate, the policy complies with the FIRREA Act of 1989 regarding appraisals of the property offered as collateral by licensed independent appraisers. The loan policy also provides general guidelines as to collateral, provides for environmental reviews, contains specific limitations with respect to loans to employees, executive officers and directors, provides for problem loan identification, establishes a policy for the maintenance of a loan loss reserve, provides for loan reviews and sets forth policies for mortgage lending and other matters relating to the Bank’s lending business.

9

Lending Practices

     Commercial Loans. Our commercial lending group originates commercial loans primarily in Wayne, Macomb, Oakland and Washtenaw Counties in southeastern Michigan. Commercial loans are originated by a group of lending officers with the assistance of Michael J. Ross and Warren R. Musson. Loans are originated for general business purposes, including working capital, accounts receivable financing, machinery and equipment acquisition, and commercial real estate financing including new construction and land development.

     Working capital loans are often structured as a line of credit and are reviewed periodically in connection with the borrower’s year-end financial reporting. These loans generally are secured by all of the assets of the borrower, a personal guaranty of the owners and have an interest rate plus a margin tied to the national prime rate. Loans for machinery and equipment purposes typically have a maturity of five to seven years and are fully amortizing. Commercial real estate loans are usually written with a five-year maturity and are amortized over a fifteen to twenty-year period. Commercial real estate loans may have an interest rate that is fixed to maturity or float with a margin over the prime rate or another index. Fixed rate loans typically contain a pre-payment premium.

     We evaluate all aspects of a commercial loan transaction in order to minimize credit and interest rate risk. Underwriting includes an assessment of management, products, markets, cash flow, capital, income and collateral. The analysis includes a review of historical and projected financial results. Appraisals are obtained by licensed independent appraisers who are well known to us on transactions involving real estate and, in some cases, equipment.

     Commercial real estate lending involves more risk than residential lending, because loan balances are greater and repayment is dependent upon the borrower’s operations. We attempt to minimize risk associated with these transactions by limiting our exposure to existing well-known customers and new customers with an established profitable history. Risk is further reduced by limiting the concentration of credit to any one borrower as well as the type of commercial real estate financed.

     Residential Real Estate Loans. Our subsidiary, Community Bank Mortgage, Inc. originates residential real estate loans in its market area according to secondary market underwriting standards. These loans provide borrowers with a fixed interest rate with terms up to thirty years. Loans are sold on a servicing released basis in the secondary market with all interest rate risk and credit risk passed to the purchaser. Community Bank Mortgage, Inc. from time to time may elect to underwrite certain residential real estate loans to be held in its own loan portfolio. These loans are generally underwritten with the same standards that apply to the secondary market. The majority of the portfolio loans have a fixed rate of interest for the first five years, then the interest rate is indexed to the one-year treasury rate and adjusts annually.

     Consumer Loans. We originate consumer loans for a wide variety of personal financial requirements. Consumer loans include home equity lines of credit, and loans secured by new and used automobiles, boats, savings accounts as well as overdraft protection for checking account customers. We also purchase retail installment loans from a select list of automobile dealerships located primarily in our market.

     Consumer loans, except for home equity lines of credit, generally have shorter terms and higher interest rates than residential mortgage loans and usually involve more credit risk than mortgage loans because of the type and nature of the collateral. While we do not utilize a formal credit scoring system, we believe our loans are underwritten carefully, with a strong emphasis on the amount of the down payment, credit quality, employment stability, and monthly income. These loans are generally repaid on a monthly repayment schedule with the source of repayment tied to the borrower’s periodic income. In addition, consumer lending collections are dependent on the borrower’s continuing financial stability, and are thus likely to be adversely affected by job loss, illness and personal bankruptcy. In many cases, repossessed collateral for a defaulted consumer loan will not provide an adequate source of repayment of the outstanding loan balance because of depreciation of the underlying collateral. We believe that the generally higher yields earned on consumer loans compensate for the increased credit risk associated with such loans and that consumer loans are important to our efforts to serve the credit needs of the communities and customers that we serve.

10

     Allowance for Loan Losses. An allowance for loan losses is maintained at a level that we consider adequate to provide for losses in the loan portfolio. Allowances for loan losses are based upon our experience and estimates of the net realizable value of collateral in each loan portfolio. Our Board of Directors and senior management review the allowance quarterly. Our evaluation takes into consideration experience, the level of classified assets, non-performing loans, the current level of the allowance as it relates to the total loan portfolio, current economic conditions, recent regulatory examinations and other factors.

     In determining the allowance for loan losses, we consider three principal elements: (i) specific allocations based on probable losses identified during the review of the loan portfolio, (ii) allocations based principally on historical loan loss experience, and (iii) additional allowances based on subjective factors, including local and general economic business factors and trends, portfolio concentrations and changes in the size, mix and/or general terms of the loan portfolios.

     The first element reflects our estimate of probable losses based upon our systematic review of specific loans. These estimates are based upon a number of objective factors, such as payment history, financial condition of the borrower, and discounted collateral exposure.

     As further discussed below, we have developed a risk rating system that is applied to our commercial loan portfolio. Loans rated 5 or higher are deemed “classified”. Classified loans with a balance of $500,000 or greater are subject to specific review to determine whether they are impaired, as defined by FAS 114. Portions of our allowance are assigned to individual loans based on this analysis.

     Loans graded 4 or better and homogeneous mortgage and consumer loans are provided for in the allowance for loan losses computation by allocations based upon loan grade and type. These allocations include consideration of a variety of objective and subjective factors including our historical loss experience, delinquent status, the purpose and size of the loan, its collateral type, the current economic environment and other business factors and trends that we believe impact the ability of our borrowers to repay their obligations.

     Delinquent Loans, Non-performing Assets and Classified Assets. When a borrower fails to make a required payment on a loan, our Bank attempts to cause the deficiency to be cured by contacting the borrower. In most cases, deficiencies are cured promptly as a result of these collection efforts.

     When a borrower fails to make a timely payment, the borrower will receive a delinquency notice within 15 days of the due date. When the payment reaches 30 days past due, a second notice will be sent and a phone call will be made. In most cases, delinquencies are paid promptly. Generally, if a real estate loan becomes 90 days delinquent, the borrower and collateral will be assessed to determine whether foreclosure action is required. When deemed appropriate by management, a foreclosure action will be instituted or a deed in lieu of foreclosure will be pursued.

     Loans that are 90 days past due and are not well secured and in the process of collection will be placed on non-accrual status. Under-collateralized loans that are 90 days past due will be fully or partially charged-off. The amount charged-off will be charged against the loan loss allowance.

     Our Bank has developed a risk-rating system to quantify loan quality. The system assigns a risk rating from 1 to 9 for each loan. Classified loans are those with risk ratings of 5 or higher. Each loan rating is determined by analyzing the borrowers’ management, financial ability, sales trends, operating results, financial conditions, asset protection, contingencies, payment history, financial flexibility, credit enhancements and other relevant factors. Loans that fall into the classified categories are monitored on a regular basis and proper action is taken to minimize our bank’s exposure. Losses or partial losses will be taken when they are recognized.

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     Our Bank’s risk rating system is similar to that used by regulatory agencies. Problem assets are classified as “substandard” (risk rating 7), “doubtful” (risk rating 8) or “loss” (risk rating 9). “Substandard” assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. “Doubtful” assets have the same weaknesses as “substandard” assets, with the additional characteristics that (i) the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable and (ii) there is a high possibility of loss. An asset classified “loss” is considered uncollectible and of such little value that its continuance as an asset of the institution is not warranted. The regulations also contain “special mention” (risk rating 6) and “watch credit” (risk rating 5) categories, consisting of assets which do not currently expose an institution to a sufficient degree of risk to warrant classification but which possess credit deficiencies or potential weaknesses deserving management’s close attention.

     Generally, our Bank classifies as “substandard” all loans that are delinquent more than 90 days, unless management believes the delinquency status is short-term due to unusual circumstances. Loans delinquent fewer than 90 days may also be classified if the loans have the characteristics described above rendering classification appropriate.

     The aggregate amounts of our Bank’s classified assets at December 31, 2006, and December 31, 2005 were as follows (dollars in thousands):

		December 31,		December 31,
	Rating	2006		2005
Watch credit	5	$	23,042	$	9,666
Special mention	6		17,558		2,140
Substandard	7		13,715		2,805
Doubtful	8		—		25
Loss	9		—		—
Total classified assets		$	54,315	$	14,636

     Classified assets increased $39.7 million during the year ended December 31, 2006. The economic slowdown in our market area has resulted in an increase in the number and dollar amount of classified loans. We analyze loans graded 5 or higher individually for impairment. Many of these loans are performing and well collateralized but exhibit characteristics that make downgrading the loan appropriate. At December 31, 2006, classified assets had an allocated allowance of $1.8 million.

     The increase in delinquent accruing loans during the year ended December 31, 2006 is primarily due to the worsening payment status of one commercial real estate construction loan, one commercial real estate mortgage loan and two commercial loans with a balance of $3,732,000. The increase in non-accrual loans during the year ended December 31, 2006 is primarily due to the downgrading of one commercial real estate construction and eight commercial real estate mortgage loans with a balance of $4,843,000 to non-accrual status. An impairment analysis was completed on these loans resulting in a specific allocation of the allowance for loan losses to these loans of $688,000 at December 31, 2006. We continue to work to collect these loans as they are all secured by real estate which we believe will have significant value, even in liquidation.

     The following table reflects the amount of loans in delinquent status as of December 31, 2006 and 2005 (dollars in thousands):

	December 31,			December 31,
	2006			2005
Loans delinquent
30 to 89 days	$	3,704		$	1,294
90 or more days		2,101			189
Non-accruing		5,560			984
Total delinquent loans	$	11,365		$	2,467
Ratio of total delinquent loans to total loans		1.50	%		0.38	%

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Deposits and Other Services

     Deposits. We offer a broad range of deposit services, including checking, savings, and money market accounts, certificates of deposit and direct deposit services. Transaction accounts and certificates of deposit are tailored to our primary market area at rates competitive with those offered in our area. All deposit accounts are insured by the FDIC up to the maximum amount permitted by law. We solicit deposit accounts from individuals, businesses, associations, financial institutions and government entities.

     Other Services. We offer a courier service for the deposit convenience of our business customers. We also offer a voice response, automated telephone banking service, available 24 hours a day and check imaging options including statements on CD ROM.

Investments

     Our principal investments are our investment in the common stock of our Bank and the common securities of the trust. Our funds may be invested from time to time in various debt instruments, including obligations of or guaranteed by the United States, general obligations of a state or political subdivision or an agency of a state or political subdivision, banker’s acceptances or certificates of deposit of United States commercial banks, or commercial paper of United States issuers rated in the highest category by a nationally-recognized investment rating service. We are permitted to make unlimited portfolio investments in equity securities and to make equity investments in subsidiary corporations engaged in certain non-banking activities, including real estate-related activities such as mortgage banking, community development, real estate appraisals, arranging equity financing for commercial real estate, and owning and operating real estate used substantially by our Bank or acquired for its future use. However, we have no present plans to make any of these equity investments. Our Board of Directors may alter our investment policy at any time without stockholder approval.

     Our Bank may invest its funds in a wide variety of debt instruments and may participate in the federal funds market with other depository institutions. Subject to certain exceptions, our Bank is prohibited from investing in equity securities. Under one exception, in certain circumstances and with the prior approval of the FDIC, our Bank could invest up to 10% of its total assets in the equity securities of a subsidiary corporation engaged in the acquisition and development of real property for sale, or the improvement of real property by construction or rehabilitation of residential or commercial units for sale or lease. Our Bank has no present plans to make such an investment. Real estate acquired by our Bank in satisfaction of or foreclosure upon loans may be held by our Bank. Our Bank is also permitted to invest in such real estate as is necessary for the convenient transaction of its business. Our Bank’s Board of Directors may alter the investment policy without stockholder approval at any time.

Employees

     As of December 31, 2006, the Bank had 161 employees, including 53 officers and 108 customer service, operations and other support persons. Management believes that the Bank’s relations with its employees are excellent.

     Subsequent to the acquisition of Fidelity on January 4, 2007, the Bank employed 67 former Fidelity employees, including 14 officers and 53 customer service, operations and other support persons.

Competition

     The Bank faces strong competition for deposits, loans and other financial services from numerous banks, savings banks, thrifts, credit unions and other financial institutions as well as other entities which provide financial services, including consumer finance companies, securities brokerage firms, mortgage brokers, insurance companies, mutual funds, and other lending sources and investment alternatives. Some of the financial institutions and financial services organizations with which the Bank competes are not subject to the same degree of regulation as the Bank. Many of the financial institutions and financial services organizations aggressively compete for business in the Bank’s market area. Most of these competitors have been in business for many years, have established customer bases, are larger, have substantially higher lending limits than the Bank, and are able to offer certain services that the Bank does not currently provide, including more extensive branch networks, trust services, and international banking services. In addition, most of these entities have greater capital resources than the Bank, which, among other things, may allow them to price their services at levels more favorable to the customer and to provide larger credit facilities than could the Bank. Additionally, legislation regarding interstate branching and banking may increase competition in the future from out-of-state banks.

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Supervision and Regulation

     The Corporation is a registered bank holding company and subject to the supervision of the Federal Reserve System (“Federal Reserve”). The Corporation is required to file with the Federal Reserve annual reports and such other information as the Federal Reserve may require under the Bank Holding Company Act of 1956, as amended (the “Act”). The Corporation and the Bank are each subject to examination by the Federal Reserve.

     The Act requires every bank holding company to obtain prior approval of the Federal Reserve before it may merge with or consolidate into another bank holding company, acquire substantially all assets of any bank, or acquire ownership or control of any voting shares of any bank, if after such acquisition, it would own or control, directly or indirectly, more than 5% of the voting shares of such bank holding company or bank. The Federal Reserve may in its discretion approve the acquisition by the Corporation of the voting shares or substantially all assets of a bank located in Michigan and, subject to certain restrictions, located in any other state.

     The Act also prohibits a bank holding company, with certain exceptions, from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company that is not a bank, and from engaging in any business other than that of banking, managing and controlling banks and their subsidiaries. Holding companies may engage in, and may own shares of companies engaged in, certain businesses found by the Federal Reserve to be closely related to banking or the management or control of banks. Under current regulations of the Federal Reserve, a holding company and its non-bank subsidiaries are permitted to engage in investment management, sales and consumer finance, equipment leasing, data processing, discount securities brokerage, mortgage banking and brokerage, and other activities. These activities are subject to certain limitation imposed by the regulations.

     Transactions between the Corporation and the Bank are subject to various restrictions imposed by state and federal law. Such transactions include loans and other extensions of credit, purchases of securities, any payments of fees and other distributions. Federal law places restrictions on the amount and nature of loans to executive officers, directors and controlling persons of banks insured by the Federal Deposit Insurance Corporation and holding companies controlling such banks.

     The Bank is a state chartered bank and subject to regulation and examination by the Michigan Office of Financial and Insurance Services. The Bank also is subject to certain provisions of the Federal Deposit Insurance Act and regulations issued under that act. The regulations affect many activities of the Bank, including the permissible types and amounts of loans, investments, capital adequacy, branching, interest rates payable on deposits, required reserves, and the safety and soundness of the Bank’s practices. The Bank is not a member bank of the Federal Reserve System and is regulated and examined by the Federal Deposit Insurance Corporation.

     A summary of consolidated net interest income, consolidated net interest income volume / rate analysis, rate sensitivity analysis / gap analysis and capital ratios is set forth under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the 2006 Annual Report to Stockholders and is incorporated herein by reference.

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Executive Officers of the Corporation and Bank

Set forth below are the names and ages of the executive officers of the Corporation and the Bank, positions held and the years from which held. There are no family relationships among such persons.

John E. Demmer, 83

Chairman of the Board, Dearborn Bancorp, Inc. and Community Bank of Dearborn
Chairman of the Board and Director of the Corporation since 1992. Chairman of the Board and Director of the Bank since 1993. Chairman of the Board and Chief Executive Officer of Jack Demmer Ford, Inc. since 1994. Chairman of the Board and Chief Executive Officer of Jack Demmer Lincoln Mercury, Inc since 1999.

Michael J. Ross, 56

President and Chief Executive Officer, Dearborn Bancorp, Inc.
President and Chief Executive Officer, Community Bank of Dearborn
President and Chief Executive Officer of the Corporation since 2003. President and Director of the Corporation since 1998. Vice President and Director of the Corporation from 1993 to 1997. President, Chief Executive Officer, and Director of the Bank since 1993.

Jeffrey L. Karafa, 42

Vice President, Treasurer and Secretary, Dearborn Bancorp, Inc.
Senior Vice President, CFO and Secretary, Community Bank of Dearborn
Vice President and Treasurer of the Corporation since 1998. Secretary of the Corporation since 1999. Senior Vice President and CFO of the Bank since 2000. Secretary of the Bank since 1999. Vice President of the Bank from 1996 to 1999. Assistant Vice President of the Bank from 1994 to 1996.

Warren R. Musson, 50

Senior Vice President, Head of Lending, Community Bank of Dearborn
Senior Vice President of the Bank since 2000. Vice President of the Bank during 1999. Senior Vice President and Senior Loan Officer of Peoples State Bank from 1993 to 1999.

Stephen C. Tarczy, 57

Northeast Regional President, Community Bank of Dearborn
Northeast Regional President of the Bank since 2001. President and CEO of Macomb Community Bank from 1995 to 2001.

Jeffrey J. Wolber, 51

Senior Vice President, Head of Retail, Community Bank of Dearborn
Senior Vice President of the Bank since 2000. Vice President of the Bank from 1994 to 1999.

Subsequent to the acquisition of Fidelity on January 4, 2007, John A. Lindsey was appointed Oakland Regional President, an executive officer of the Bank. Previously, Mr. Lindsey was President and Chief Executive Officer of Fidelity from 1995 to 2006.

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Item 1A. Risk Factors

     The following risk factors could affect our business, financial conditions or results of operations. These risk factors should be considered in connection with evaluating the forward-looking statements contained in this Annual Report because they could cause the actual results and conditions to differ materially from those projected in forward-looking statements. Before you buy our common stock, you should know that investing in our common stock involves risks, including the risks described below. The risks that are highlighted are not the only ones we face. If the adverse matters referred to in any of the risks actually occur, our business, financial condition or operations could be adversely affected.

We may experience greater than expected difficulties in integrating Fidelity into our operations resulting in our inability to realize the expected benefits and cost savings from the acquisition.

     The acquisition of Fidelity will involve the integration of two financial institutions that have previously operated independently of one another. Management expects to realize cost savings together with other financial and operating benefits from the acquisition of Fidelity, but there can be no assurance as to when, or the extent to which, if at all, the Corporation will be able to realize these benefits. The Corporation may experience greater than expected difficulties in integrating Fidelity’s business, which could have an adverse effect on our ability to realize the expected benefits of the acquisition.

     There are many things that could go wrong and adversely affect the business and profitability of the combined financial institution. We cannot predict the full range of post-acquisition problems that may occur. Some possible difficulties include:

• the integration of the business of the Corporation and Fidelity takes longer, or is more difficult, time-consuming or costly than expected;

• the expected growth opportunities and cost savings from the transaction are not fully realized or take longer to realize than expected;

• economic conditions deteriorate in southeastern Michigan, the primary market of both the Corporation and Fidelity; or

• operating costs, customer losses, and business disruption following the acquisition, including adverse effects on relationships with employees, are greater than expected.

     Because Fidelity is a private company, it is not subject to the public reporting requirements of the Securities Exchange Act of 1934, as amended, or the internal control structure and procedures for financial reporting, including those required by Section 404 of the Sarbanes-Oxley Act of 2002. If we are unable to integrate Fidelity’s internal controls with our own before the end of 2007, we may have to exclude Fidelity from our assessment of our internal control over financial reporting, and that, in turn, could cause investors to lose confidence in our reported financial information and could adversely effect our stock price.

Adverse economic conditions in the automobile manufacturing and related service industries may impact our banking business.

     The automobile manufacturing industry has experienced significant economic difficulties over the past five years, which, in turn, has adversely impacted a number of related industries that serve the automobile manufacturing industry, including automobile parts suppliers. Recently, Delphi Corporation and Collins & Aikman Corporation, two automobile suppliers located in our banking market, declared bankruptcy, and a number of other companies serving the automobile industry and located in our banking market are facing ongoing economic pressures. We cannot assure you that the economic conditions in the automobile manufacturing and related service industries will improve at any time in the foreseeable future or that adverse economic conditions in these industries will not impact our Bank.

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Adverse changes in economic conditions or interest rates may negatively affect our earnings, capital and liquidity.

     The results of operations for financial institutions, including our bank, may be materially and adversely affected by changes in prevailing local and national economic conditions, including declines in real estate market values and the related declines in value of our real estate collateral, rapid increases or decreases in interest rates and changes in the monetary and fiscal policies of the federal government. Our profitability is heavily influenced by the spread between the interest rates we earn on investments and loans and the interest rates we pay on deposits and other interest-bearing liabilities. Substantially all our loans are to businesses and individuals in southeastern Michigan, and any decline in the economy of this area could adversely affect our customers’ ability to repay such loans and our ability to make new loans to credit worthy borrowers. Like most banking institutions, our net interest spread and margin will be affected by general economic conditions and other factors that influence market interest rates and our ability to respond to changes in these rates. At any given time, our assets and liabilities will be such that they will be affected differently by a given change in interest rates.

Our credit losses could increase and our allowance for loan losses may not be adequate to cover actual loan losses resulting in a decrease in our net income and earnings per share and a possible decline in our stock price.

     The risk of non-payment of loans is inherent in all lending activities, and non-payment, if it occurs, may have a materially adverse effect on our earnings and overall financial condition as well as the value of our common stock. Our focus on commercial lending may result in an increased concentration of loans to small businesses. As a result, we may assume greater lending risks than other banks. We make various assumptions and judgments about the collectibility of our loan portfolio and provide an allowance for losses based on several factors. If our assumptions are wrong, our allowance for loan losses may not be sufficient to cover our losses, which would have an adverse effect on our operating results. While we have not experienced any significant charge-offs or had large numbers of non-performing loans, due to the significant increase in loans originated since we began operations we cannot assure you that we will not experience an increase in delinquencies and losses as these loans continue to mature. The actual amount of future provisions for loan losses cannot be determined at this time and may exceed the amount of past provisions. Additions to our allowance for loan losses decrease our net income and earnings per share and may have an adverse effect on our stock price.

Our commercial real estate loans involve higher principal amounts than other loans, and repayment of these loans may be dependent on factors outside our control or the control of our borrowers.

     Commercial real estate lending typically involves higher loan principal amounts, and the repayment of these loans generally is dependent, in large part, on sufficient income from the properties securing the loans to cover operating expenses and debt service. Because payments on loans secured by commercial real estate often depend upon the successful operating and management of the properties, repayment of these loans may be affected by factors outside the borrower’s control, including adverse conditions in the real estate market or the economy. If the cash flow from the property is reduced, the borrower’s ability to repay the loan and the value of the security for the loan may be impaired. At December 31, 2006, commercial real estate loans totaled $546 million, or 72% of our total loan portfolio. Because our loan portfolio contains a number of commercial real estate loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase in our percentage of non-performing loans. An increase in non-performing loans could result in a loss of earnings from these loans, an increase in the provision for loan losses and an increase in charge-offs, all of which could have a material adverse effect on our financial condition and results of operations.

Our growth and expansion may be limited by many factors.

     We have pursued and intend to continue to pursue an internal growth strategy, the success of which will depend primarily on generating an increasing level of loans and deposits at acceptable risk and interest rate levels without commensurate increases in non-interest expenses. There can be no assurance that we will be successful in continuing our growth strategy due to delays and other impediments resulting from regulatory oversight, limited availability of qualified personnel, or unavailability of branch sites. The time and costs of evaluating new markets, hiring experienced local management and opening new offices and the time lags between these activities and the generation of sufficient assets and deposits to support the costs of the expansion may negatively affect our business. In addition, the success of our growth strategy will depend on maintaining sufficient regulatory capital levels and on adequate economic conditions in our market area.

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     In addition to the acquisition of Fidelity, we continually seek to acquire other financial institutions or parts of those institutions. Acquisitions and mergers involve a number of risks, including:

• the time and costs associated with identifying and evaluating potential acquisitions and merger partners may negatively affect our business;

• the estimates and judgments used to evaluate credit, operations, management and market risks with respect to the target institution may not be accurate;

• we may not be able to finance an acquisition without diluting our existing stockholders;

• the diversion of our management’s attention to the negotiation of a transaction may detract from their business productivity;

• we may enter into new markets where we lack experience;

• we may introduce new products and services into our business with which we have no prior experience; and

• we may incur an impairment of goodwill associated with an acquisition and experience adverse short-term effects on our results of operations.

     In addition, no assurance can be given that we will be able to integrate our operations after an acquisition without encountering difficulties including, without limitation, the loss of key employees and customers, the disruption of our respective ongoing businesses or possible inconsistencies in standards, controls, procedures and policies. Successful integration of our operations with another entity’s will depend primarily on our ability to consolidate operations, systems and procedures, to establish appropriate internal controls, and to eliminate redundancies and costs. If we have difficulties with the integration, we might not achieve the economic benefits we expect to result from any particular acquisition or merger. In addition, we may experience greater than expected costs or difficulties relating to such integration.

We rely heavily on our management and other key personnel, and the loss of any of them may adversely affect our operations.

     We are and will continue to be dependent upon the services of our management team, including our President and Chief Executive Officer and our other senior managers. Losing one or more key members of the management team could adversely affect our operations. We do not have employment contracts or key man life insurance on any of our officers or directors, other than Mr. Ross.

     In addition, we will continue to depend on our key commercial loan officers. We have several commercial loan officers who are responsible, or share responsibility, for generating and managing a significant portion of our commercial loan portfolio. Our success can be attributed in large part to the relationships these officers as well as members of our management team have developed and are able to maintain with our customers as we continue to implement our community banking philosophy. The loss of any of these commercial loan officers could adversely affect our loan portfolio and performance, and our ability to generate new loans.

     Some of the other financial institutions in our market require their key employees to sign agreements that preclude or limit their ability to leave their employment and compete with them or solicit their customers. These agreements make it more difficult for us to hire loan officers with experience in our market who can immediately solicit their former or new customers on our behalf.

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Our future success is dependent on our ability to compete effectively in the highly competitive banking industry.

     We face substantial competition in all phases of our operations from a variety of different competitors. Our future growth and success will depend on our ability to compete effectively in this highly competitive environment. We compete for deposits, loans and other financial services with numerous Michigan-based and out-of-state banks, thrifts, credit unions and other financial institutions as well as other entities that provide financial services. Some of the financial institutions and financial service organizations with which we compete are not subject to the same degree of regulation as we are. Most of our competitors have been in business for many years, have established customer bases, are larger, have substantially higher lending limits than we do and offer other services which we do not, including trust services, brokerage, mutual funds and international banking services. The primary competitors in our market area are JPMorganChase, Charter One Bank, N.A., Comerica Incorporated, Fifth Third Bancorp, National City Corporation and LaSalle Bank Midwest National Association. Under the Gramm-Leach-Bliley Act of 1999, effective March 11, 2000, securities firms and insurance companies that elect to become financial holding companies may acquire banks and other financial institutions. The financial services industry is also likely to become more competitive as further technological advances enable more companies to provide financial services. These technological advances may diminish the importance of depository institutions and other financial intermediaries in the transfer of funds between parties.

Growth and stockholder returns may be adversely affected if sources of capital are not available to help us meet them.

     Since inception, we have sought to maximize stockholder returns by leveraging our capital. While we believe that earnings from our operations will enable us to continue to grow for the next two to three years, if earnings do not meet our current estimates, if we incur unanticipated losses or expenses, or if we grow faster than expected, we may need to obtain additional capital through borrowing, additional issuances of debt or equity securities, or otherwise. If we do not have continued access to sufficient capital, we may be required to reduce our level of assets or reduce our rate of growth in order to maintain regulatory compliance. Under those circumstances our net income and the rate of growth of our net income may be adversely affected.

We are subject to significant government regulation, and any regulatory changes may adversely affect us.

     The banking industry is heavily regulated under both federal and state law. These regulations are primarily intended to protect customers, not our creditors or stockholders. As a bank holding company, we are also subject to extensive regulation by the Federal Reserve Board, in addition to other regulatory and self- regulatory organizations. Our ability to establish new facilities or make acquisitions is conditioned upon the receipt of the required regulatory approvals from these organizations. Regulations affecting banks and financial services companies undergo continuous change, and we cannot predict the ultimate effect of these changes, which could have a material adverse effect on our profitability or financial condition.

We continually encounter technological change, and we may have fewer resources than our competitors to continue to invest in technological improvements.

     The banking industry is undergoing technological changes with frequent introductions of new technology-driven products and services. In addition to better serving customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs. Our future success will depend, in part, on our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience as well as creating additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements. There can be no assurance that we will be able to effectively acquire and implement new technology-driven products and services or be successful in marketing these products and services to our customers.

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Our Articles of Incorporation and Bylaws and the laws of Michigan contain provisions that may discourage or prevent a takeover of the Corporation and reduce any takeover premium.

     Our Articles of Incorporation and Bylaws, and the corporate laws of the State of Michigan, include provisions which are designed to provide our board of directors with time to consider whether a hostile takeover offer is in our and our stockholders’ best interest. These provisions, however, could discourage potential acquisition proposals and could delay or prevent a change in control. The provisions also could diminish the opportunities for a holder of our common stock to participate in tender offers, including tender offers at a price above the then-current market price for our common stock. These provisions could also prevent transactions in which our stockholders might otherwise receive a premium for their shares over then-current market prices, and may limit the ability of our stockholders to approve transactions that they may deem to be in their best interests.

     The Michigan Business Corporation Act contains provisions intended to protect stockholders and prohibit or discourage various types of hostile takeover activities. In addition to these provisions and the provisions of our Articles of Incorporation and Bylaws, federal law requires the Federal Reserve Board’s approval prior to acquiring “control” of a bank holding company. All of these provisions may delay or prevent a change in control without action by our stockholders, and could adversely affect the price of our common stock.

There is a limited trading market for our common stock.

     The price at which our common stock is offered in this offering may be greater than the market price for our common stock following the offering. The price of our common stock has been, and will continue to be, subject to fluctuations based on, among other things, economic and market conditions for bank holding companies and the stock market in general, as well as changes in investor perceptions of the company. This issuance of new shares of our common stock also may adversely affect the market for our common stock.

     Our common stock is traded on the Nasdaq Global Market under the symbol “DEAR”. The development and maintenance of an active public trading market depends upon the existence of willing buyers and sellers, the presence of which is beyond our control. While we are a publicly-traded company, the volume of trading activity in our stock is still relatively limited. Even if a more active market develops, there can be no assurance that such a market will continue, or that our stockholders will be able to sell their shares at or above the offering price.

The number of shares owned by our directors and executive officers could make it more difficult to obtain approval for some matters submitted to stockholder vote, including mergers and acquisitions.

     As of March 1, 2007, our directors and executive officers and their affiliates own approximately 18% of the outstanding common stock

Item 1B. Unresolved Staff Comments

We have received no written comments regarding our periodic or current reports from the staff of the Securities and Exchange Commission that were issued 180 days or more before the end of our 2006 fiscal year and that remain unresolved.

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Item 2. Properties

     The Bank’s main office is located in a single story building containing 11,400 square feet at 22290 Michigan Avenue, Dearborn, Michigan, which is owned by the Corporation and leased to the Bank.

     The Bank’s Dearborn Heights, Michigan branch office is located in a 3,240 square foot, single story commercial/retail office building at 24935 W. Warren Avenue at the corner of Silvery Lane, which is also owned by the Corporation. On March 15, 2005, the Bank acquired adjacent property at 24901 W. Warren Avenue in order to expand parking.

     The Bank’s Plymouth Township, Michigan branch office is located at 44623 Five Mile at the corner of Sheldon Road and contains 1,595 square feet of leased space in a retail shopping center anchored by a regional grocery store.

     The Bank’s Canton Township, Michigan branch office is located in a 6,056 square foot single story commercial/retail office building at 1325 N. Canton Center near the corner of Saltz Road and is owned by the Bank.

     The Bank’s Clinton Township, Michigan regional lending center is located at 45000 River Ridge Drive, Suite 110, along Hall Road (M-59) near the corner of Romeo Plank Road. The Bank leases 7,426 of space in the River Ridge Corporate Office Center Building.

     The Bank’s Clinton Township, Michigan branch office is located at 19100 Hall Road near Romeo Plank Road. The Bank leases a 3,750 square foot single story commercial/retail office building.

     The Bank’s Southgate, Michigan branch office is located in a 2,035 square foot single story building, which is located at 12820 Fort Street and is owned by the Bank.

     The Bank’s Auburn Hills, Michigan regional lending center and branch office is located at 3201 University Drive, Suite 180. The Bank currently leases 2,037 square feet of this commercial office building.

     The Bank’s Saline, Michigan branch office is located at 450 East Michigan Avenue. The Bank currently leases 2,575 square feet of this single story office building.

     The Bank’s Ann Arbor, Michigan regional lending center and branch office is located at 250 West Eisenhower. The Bank currently leases 4,523 square feet of this commercial office building.

     The Bank’s Ann Arbor, Michigan branch office is located at 2180 West Stadium Boulevard. The Bank currently leases this 2,800 square feet single story office building.

     The Bank’s Administrative and Wayne Regional Lending Center is located at 1360 Porter Street in Dearborn, Michigan and is owned by the Bank. This office is the executive headquarters of the Corporation. The Bank’s administrative, human resources and commercial lending departments currently occupy this 10,000 square foot, two story building.

     The Bank’s Operations Center is located in a 56,820 square foot three story building, which is located at 4000 Allen Road in Allen Park, Michigan and is owned by the Bank.

     The following properties of the Bank were added as a result of the acquisition of Fidelity on January 4, 2007:

     The Bank’s Birmingham, Michigan branch office and regional lending center is located in a 12,616 square foot two story building at 1040 E. Maple and is owned by the Bank.

     The Bank’s Bloomfield Township, Michigan branch office is located at 3681 W. Maple. The Bank leases this 4,320 square foot single story office building.

     The Bank’s Bingham Farms, Michigan branch office is located at 30700 Telegraph Road. The Bank leases 1,106 square feet in the Bingham Office Center Complex.

21

     The Bank’s Southfield/Twelve Mile branch office is located at 20000 Twelve Mile Road in Southfield, Michigan and is owned by the Bank.

     The Bank’s Travelers Tower branch office is located at 26555 Evergreen Road in Southfield, Michigan. The Bank currently leases 1,129 square feet in the Travelers Tower Office Building.

     The Bank’s Galleria branch office is located at 200 Galleria in Southfield, Michigan. The Bank currently leases 1,120 square feet in the Galleria Officenter.

     The Bank’s North Park Plaza branch office is located at 17117 W. Nine Mile Road in Southfield, Michigan. The Bank currently leases 1,321 square feet in the North Park Plaza Office Building.

     The Bank’s Troy Operations center is located in 9,900 square foot office building at 2681 Industrial Row in Troy, Michigan and is owned by the Bank.

Item 3. Legal Proceedings

     From time to time, the Corporation and its subsidiaries are parties to legal proceedings incidental to their business. At December 31, 2006, there were no legal proceedings which management anticipates would have a material adverse effect on the results of operations or financial position of the Corporation.

Item 4. Submission of Matters to a Vote of Security Holders

     No matters were submitted to a vote of security holders during the fourth quarter of 2006.

PART II

Item 5. Market for Registrant’s Common Equity, and Related Stockholder Matters

     The information required by this item appears in the Corporation’s 2006 Annual Report to Stockholders under the caption “Quarterly Common Stock Price Information” and “ Cumulative Stock Performance Graph” and is incorporated by reference herein. The Corporation approved 5% stock dividends on May 17, 2006 and November 24, 2006 to all shareholders of record as of June 2, 2006 and December 8, 2006, respectively.

     At March 1, 2007, there were 370 record holders of the common stock. In addition, it is estimated that there were approximately 2,900 beneficial owners of common stock who own their shares through brokers or banks.

Item 6. Selected Financial Data

     The information required by this item appears in the Corporation’s 2006 Annual Report to Stockholders under the caption “Summary of Selected Financial Data” and is incorporated by reference herein.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     The information required by this item appears in the Corporation’s 2006 Annual Report to Stockholders under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and is incorporated by reference herein.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk

     The information required by this item appears in the Corporation’s 2006 Annual Report to Stockholders under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and is incorporated by reference herein.

Item 8. Financial Statements and Supplementary Data

     The financial statements included in the Corporation’s 2006 Annual Report to Stockholders are incorporated by reference herein.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

22

     There are no changes in or disagreements with accountants on accounting and financial disclosure.

Item9A. Controls and Procedures

     As of December 31, 2006, an evaluation was performed under the supervision of and with the participation of the Corporation’s management, including the President and Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures. Based on that evaluation, the Corporation’s management, including the President and Chief Executive Officer and the Chief Financial Officer, concluded that the Corporation’s disclosure controls and procedures were effective as of December 31, 2006. There have been no significant changes in the Corporation’s internal controls or in other factors that could significantly affect internal controls subsequent to December 31, 2006.

     The Report by Dearborn Bancorp, Inc. and Subsidiary on Internal Controls over Financial Reporting in the Corporation’s 2006 Annual Report to Stockholders is incorporated by reference herein.

Item 9B. Other Information

There was no other information to disclose.

PART III

Item 10. Directors and Executive Officers of the Registrant

     The information set forth under the caption “Information about Directors and Nominees for Directors” in the definitive Proxy Statement of the Corporation dated April 13, 2007 is incorporated by reference herein.

     Reference is made to Part I of this report for information as to executive officers of the Corporation and Bank.

     The Corporation has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The members of the Audit Committee consist of Margaret I. Campbell, William J. Demmer, Michael J. Dorian, Jr., Donald G. Karcher and Bradley F. Keller. The Board of Directors has determined that Bradley F. Keller and Donald G. Karcher, members of the Audit Committee, are qualified as audit committee financial experts, as that term is defined in the rules of the Securities and Exchange Commission. Bradley F. Keller and Donald G. Karcher are independent, as independence for audit committee members is defined in the listing standards of the Nasdaq Stock Market and the rules of the Securities and Exchange Commission.

     We have adopted a Code of Ethics that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. The Code of Ethics and any amendments to or waivers from the Code of Ethics, to the extent applicable to our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions, are available upon request at no charge. Such requests should be made by writing or calling: Carolyn Wilkins, Corporate Services Officer, 4000 Allen Road, Allen Park, Michigan 48101; (313) 381-3200 or by E-mail at Carolyn.Wilkins @cbdear.com.

Item 11. Executive Compensation

     The information set forth under the caption “Executive Compensation” and “Officer Agreements” in the definitive Proxy Statement of the Corporation dated April 13, 2007 is incorporated by reference herein.

23

Item 12. Security Ownership of Certain Beneficial Owners and Management

     The information set forth under the captions “Security Ownership” in the definitive Proxy Statement of the Corporation dated April 13, 2007 is incorporated by reference herein.

     The following table summarizes information, as of December 31, 2006, relating to the Corporation’s compensation plans under which its equity securities are authorized for issuance.

					Number of securities
	Number of Securities to		Weighted average		remaining available for
	be issued upon exercise		exercise price of		future issuance under
	of outstanding options,		outstanding options,		equity compensation
	warrants and rights		warrants and rights		plans
Plan Category	( a )		( b )		( c )
Equity Compensation Plans approved by security holders ( 1 )		528,243	$	8.69		287,428
Equity Compensation Plans not approved by security holders		—		—		—
Total		528,243	$	8.69		287,428

(1) Column ( a ) includes 468,423 shares from the 1994 Stock Option Plan and 59,820 shares from the 2005 Long-Term Incentive Plan. Shares in column ( c ) represent the shares that are available for grant under the 2005 Long-Term Incentive Plan.

Item 13. Certain Relationships and Related Transactions

     The information set forth under the caption “Related Transactions” in the definitive Proxy Statement of the Corporation dated April 13, 2007 is incorporated by reference herein.

Item 14. Principal Accountant Fees and Services

     The information presented under the caption “Fees Paid to Independent Public Accountants” in the definitive Proxy Statement of the Corporation dated April 13, 2007 is incorporated by reference herein.

24

PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

     (a)(1) Financial Statements

The following financial statements of the Corporation appear in the Corporation’s 2005 Annual Report to Stockholders and are incorporated by reference in item 8.

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2006 and 2005

Consolidated Statements of Income for the years ended December 31, 2006, 2005 and 2004

Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2006, 2005 and 2004

Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004

Notes to Consolidated Financial Statements

     (2) Financial Statement Schedules

No schedules are required under this item.

(3) Exhibits

The Exhibit numbers in brackets being those in such Registration Statements, Form 10-K or Form 10-Q Reports.

(3)(a)	Articles of Incorporation of Registrant, As Amended. [3(a)] was filed as an Exhibit to the Form 10-Q Report of the Registrant for the quarter ended June 30, 1997 and is incorporated herein by reference.
(3)(b)	By-Laws of the Registrant, As Amended. [3(b)] was filed as an Exhibit to the Form 10-K Report of the Registrant for the fiscal year ended December 31, 1995 and is incorporated herein by reference.
(10)(a)	1994 Stock Option Plan, As Amended. [10(a)] was filed as an Exhibit to the Form 10-Q Report of the Registrant for the quarter ended June 30, 1997 and is incorporated herein by reference. (X)
(10)(a)	2005 Long-Term Incentive Plan [10(a)] was filed as an Exhibit to the Form 10-Q Report of the Registrant for the quarter ended June 30, 2005 and is hereby incorporated by reference. (X)
(10)(b)	Employment Agreement between the Registrant and Michael J. Ross. [10(b)] was filed as an Exhibit to Form 10-Q of the Registrant for the quarter ended June 30, 2003 and is incorporated herein by reference.

25

(10)(c)	Change in Control Agreement between the Registrant and five officers. [10(c)] was filed as an Exhibit to Form 10-Q of the Registrant for the quarter ended June 30, 2003 and is incorporated herein by reference.
(10.1)	Form of Stock Option Agreement granted to various executive officers. (10.1) was filed as an exhibit to Form 8-K of the Registrant, dated December 6, 2005.
(10.2)	Form of Restricted Stock Agreement granted to various officers. (10.2) was filed as an exhibit to Form 8-K of the Registrant, dated December 6, 2005.
(14)	Code of Ethics of the Registrant (14) was filed as an Exhibit to Form 10-K of the Registrant for the year ended December 31, 2003 and is incorporated herein by reference.
(21)	Subsidiaries of the Registrant (21) was filed as an Exhibit to Form 10-K of the Registrant for the year ended December 31, 2003 and is incorporated herein by reference.
Exhibit (13)	2006 Annual Report to Stockholders.
Exhibit (23)	Consent of Independent Registered Public Accounting Firm
Exhibit (31.1)	Rule 13a-14(a) CEO Certification.
Exhibit (31.2)	Rule 13a-14(a) CFO Certification.
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.
(X)A compensatory plan required to be filed as an exhibit.

     (b) Reports on Form 8-K

          The Corporation filed four reports on Form 8-K during the quarter ended December 31, 2006.

     Form 8-K dated October 17, 2006, filing a press release announcing Dearborn Bancorp, Inc.’s 2006 third quarter earnings.

     Form 8-K dated November 7, 2006, filing a press release announcing the pricing and sale of the Corporation’s common stock.

     Form 8-K dated November 10, 2006, filing a press release announcing the completion of the sale of the Corporation’s common stock.

     Form 8-K dated November 24, 2006, filing a press release announcing Dearborn Bancorp, Inc.’s declaration of a stock dividend.

26

Form 10-K Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 8, 2007.

Dearborn Bancorp, Inc.
By:	/s / John E. Demmer
	(John E. Demmer, Chairman of the Board and Director)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 8, 2007.

/s / Michael J. Ross (Michael J. Ross)	President, Chief Executive Officer and Director (Principal Executive Officer)
/s / Jeffrey L. Karafa (Jeffrey L. Karafa)	Vice President, Treasurer and Secretary (Principal Financial and Accounting Officer)

/s / Margaret I. Campbell (Margaret I. Campbell)	Director	/s/ William J. Demmer (William J. Demmer)	Director
/s / Michael V. Dorian, Jr. (Michael V. Dorian, Jr.)	Director	/s / Bradley F. Keller (Bradley F. Keller)	Director
/s / David Himick (David Himick)	Director	/s / Jeffrey G. Longstreth (Jeffrey G. Longstreth)	Director
/s / Donald G. Karcher (Donald G. Karcher)	Director	Dr. Robert C. Schwyn (Dr. Robert C. Schwyn)	Director
		/s / Ronnie J. Story (Ronnie J. Story)	Director

27

Exhibit Index

Exhibit No.	Description
(3)(a)	Articles of Incorporation of Registrant, As Amended. [3(a)] was filed as an Exhibit to the Form 10-Q Report of the Registrant for the quarter ended June 30, 1997 and is incorporated herein by reference.
(3)(b)	By-Laws of the Registrant, As Amended. [3(b)] was filed as an Exhibit to the Form 10-K Report of the Registrant for the fiscal year ended December 31, 1995 and is incorporated herein by reference.
(10)(a)	1994 Stock Option Plan, As Amended. [10(a)] was filed as an Exhibit to the Form 10-Q Report of the Registrant for the quarter ended June 30, 1997 and is incorporated herein by reference. (X)
(10)(a)	2005 Long-Term Incentive Plan [10(a)] was filed as an Exhibit to the Form 10-Q Report of the Registrant for the quarter ended June 30, 2005 and is hereby incorporated by reference. (X)
(10)(b)	Employment Agreement between the Registrant and Michael J. Ross. [10(b)] was filed as an Exhibit to Form 10-Q of the Registrant for the quarter ended June 30, 2003 and is incorporated herein by reference.
(10)(c)	Change in Control Agreement between the Registrant and five officers. [10(c)] was filed as an Exhibit to Form 10-Q of the Registrant for the quarter ended June 30, 2003 and is incorporated herein by reference.
(10.1)	Form of Stock Option Agreement granted to various executive officers. (10.1) was filed as an exhibit to Form 8-K of the Registrant, dated December 6, 2005.
(10.2)	Form of Restricted Stock Agreement granted to various officers. (10.2) was filed as an exhibit to Form 8-K of the Registrant, dated December 6, 2005.
(14)	Code of Ethics of the Registrant (14) was filed as an Exhibit to Form 10-K of the Registrant for the year ended December 31, 2003 and is incorporated herein by reference.
(21)	Subsidiaries of the Registrant (21) was filed as an Exhibit to Form 10-K of the Registrant for the year ended December 31, 2003 and is incorporated herein by reference.
Exhibit (13)	2006 Annual Report to Stockholders.
Exhibit (23)	Consent of Independent Registered Public Accounting Firm
Exhibit (31.1)	Rule 13a-14(a) CEO Certification.
Exhibit (31.2)	Rule 13a-14(a) CFO Certification.
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.
(X) A compensatory plan required to be filed as an exhibit.

28

EX-13

                                                                      Exhibit 13

                          [DEARBORN BANCORP INC. LOGO]

                               and its subsidiary

                             [COMMUNITY BANK LOGO]

                                      2006
                                  ANNUAL REPORT



                             DEARBORN BANCORP, INC.

                               AND ITS SUBSIDIARY

                           COMMUNITY BANK OF DEARBORN

                                                                          
CONTENTS

 Corporate Information..................................................      3

 Chairman's and President's Letter to Stockholders......................      4

 Summary of Selected Financial Data.....................................      8

 Report of Independent Registered Public Accounting Firm................      9

 Management's Report on Internal Control Over Financial Reporting.......     11

 Consolidated Balance Sheets............................................     12

 Consolidated Statements of Income......................................     13

 Consolidated Statements of Changes in Stockholders' Equity.............     14

 Consolidated Statements of Cash Flows..................................     16

 Notes to Consolidated Financial Statements.............................     18

 Management's Discussion and Analysis...................................     47

 Dearborn Bancorp, Inc. Directors and Officers..........................     68

 Community Bank of Dearborn Directors and Executive Officers............     69

 Community Bank of Dearborn Officers....................................     70

 Community Bank of Dearborn Subsidiaries................................     71

 Investor Information...................................................     73



                                       2


                             DESCRIPTION OF BUSINESS

DEARBORN BANCORP, INC.

Dearborn Bancorp, Inc. (the "Parent Company" and, together with its subsidiary,
the "Corporation") is a registered bank holding company which was incorporated
on September 30, 1992. The primary purpose of the holding company is to own and
operate the subsidiary bank, Community Bank of Dearborn (the "Bank"). Dearborn
Bancorp, Inc. trades on the Nasdaq Global Market under the symbol "DEAR".

COMMUNITY BANK OF DEARBORN

The Bank was incorporated on June 28, 1993 and began operations as a state
chartered commercial bank on February 28, 1994 from its main office located on
Michigan Avenue in Dearborn. Subsequently, branch offices were opened in
Dearborn Heights, Plymouth Township, Canton Township, Clinton Township and
Auburn Hills. The Bank consolidated the three branches of the Bank of Washtenaw,
acquired by the Corporation on October 29, 2004 into the Bank's operations. This
consolidation included a branch office in Saline, Michigan, a branch office in
Ann Arbor, Michigan and a regional lending center in Ann Arbor, Michigan.

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.

In 2005, the Bank introduced its website, www.cbdear.com, with online banking
capabilities to the public. 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. During its first year of operation, 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.

In 2006, the Corporation entered into a definitive agreement to acquire Fidelity
Financial Corporation of Michigan (Fidelity) for $70.5 Million. The acquisition
to be financed by the sale of the Corporation's common stock. On November 10,
2006, the Corporation completed the sale of 2,918,250 shares of common stock at
$20.00 per share. The shares were sold in a firm commitment underwritten
offering lead managed by Oppenheimer & Co., Inc. and co-managed by Howe Barnes
Hoefer & Arnett, Inc. The Corporation received net proceeds from the offering of
approximately $55.1 million. On January 4, 2007, the Corporation completed the
acquisition of Fidelity. For additional information regarding the acquisition of
Fidelity, refer to Note T.

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.

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.

                                       3


To Our Stockholders:

      We are filled with what we consider justifiable pride as we report on
another solid performance by our Company during 2006. Once again, our net income
reached a new record high while our total assets were growing by more than 20%.
Moreover, we reached an agreement to make the largest acquisition in our history
and completed a highly successful stock offering to finance the transaction.
Because of all this, we closed the year just four days away from becoming a $1+
billion banking company. To put this accomplishment into perspective, recall
that Community Bank of Dearborn opened for business on February 28, 1994, with
one office, no deposits, no loans and just $7 million in total assets.

      Net income for the past year was $7,819,000 or $1.17 per fully diluted
common share, 4.1 percent more than in 2005 when our earnings were $7,510,000 or
$1.20 per diluted share. During the year, total assets went up by 21.2 percent
to $855,931,000 while they had been $706,497,000 at the end of 2005. Total
deposits grew 8.7 percent, going to $633,216,000 from $582,438,000. Total loans
increased by 15.1 percent. They were $756,420,000 at year-end compared to
$657,037,000 at the beginning of the year.

      Stockholders' equity was $144,985,000 at December 31 while it had been
$84,213,000 one year earlier. It should be noted, however, that we sold
approximately 2,900,000 additional shares of common stock at $20 per share in
the Fourth Quarter of the year, accounting for most of the increase.

      Without a doubt, the single most important fact affecting our
profitability in 2006 was the "disappearing yield curve." This has been a
problem not just for us but for all banking companies, large and small, that
depend upon loans and investments for most of their income. Banks borrow from
their depositors at short-term rates and then lend and invest those funds at
intermediate and long-term rates. Beginning in 2005, the Federal Reserve began
raising short-term rates and banks had to increase the interest rates paid to
their depositors. Long-term rates, however, did not go up correspondingly,
largely because of excess liquidity in the international money markets. The
effect on our net interest margins has been very significant.

      Our total interest income went up 22.9 percent in 2006, primarily
reflecting our growth. Total interest expense, however, went up 57.8 percent. As
a consequence, our net interest income only went up an anemic 2.0 percent. If we
had not experienced strong growth in the loan portfolio, it would have declined.

      Some of our community bank peers around the country have attempted to
counteract this situation by making higher-yielding commercial real estate
loans, particularly for new construction. However, we have resisted the trend to
over-invest in these types of loans, which have been questioned by the various
banking regulators. Only 18.0 percent of our loans are construction loans. A
little more than 54 percent of our loans are commercial real estate loans but
most of them were made in connection with providing financing to our small and
mid-sized business customers. In many cases, we ask for a mortgage on a
customer's plant, store, or office building as additional collateral for the
loan.

                                       4


      The quality of our loan portfolio is best judged by activity in the
allowance for loan losses. In 2006, recoveries from loans previously charged off
exceeded charge offs by $24,000. Not every loan is always repaid in full as
agreed. Nevertheless, our record in this area suggests that most of our loans
are well secured and we can expect a significant recovery even if a borrower
does default. It should also be noted that at the end of 2006, we had only a
single house with an appraised value of $55,000 included in our other real
estate owned category and it was not considered material in the preparation of
our financial statements.

      Still, we do not want to suggest that all of our customers are immune to
the economic distress that is widespread in southeastern Michigan. The troubles
of the "Big Three" auto manufacturers and their suppliers, large and small, have
been well documented in the national and local press. At year-end, we had $7.7
million in non-performing loans on our books. This was only nine-tenths of one
percent of total assets, a very manageable figure, even though it did represent
a significant increase during the past year.

      We are often asked how we can expect to be successful in a market that has
been so depressed in recent years. The fact is that our largest corporations are
in serious trouble. Nevertheless, the Greater Detroit Metropolitan Area is still
the tenth largest market in the United States and, even in the midst of all its
problems, there are still substantial pockets of prosperity throughout the
region.

      Our "secret of success" is to identify those pockets of prosperity and
then to seek deposits and loans there. Even with significant growth in the
recent past, we only hold about a one percent share of the total banking market
in southeastern Michigan. In short, when a banking organization is relatively
small and the overall market is huge, there are many opportunities for
profitable growth and compounding success even in a difficult economic
environment.

      We believe that the success of our Fourth Quarter stock offering indicates
that we speak optimistically about our Company's prospects. This was a firm
commitment underwritten offering lead managed by Oppenheimer & Co. and
co-managed by Howe Barnes Hoefer & Arnett, Inc.. An initial offering of 2.7
million shares at $20 per share was oversubscribed by approximately 200,000
shares on the first day. Approximately one-third of these new shares were
purchased by individual investors. On the other hand, two-thirds of them were
purchased by institutional investors. These institutions use sophisticated
analysis to substantiate their purchase decisions. It is a vote of confidence
that all of us who are responsible for the performance of our Company
appreciate. We will certainly strive to meet the expectations of these new
stockholders as well as all of our existing ones.

                                       5


      We offered this new stock because, in September, we agreed to acquire
Fidelity Financial Corporation of Michigan for $70.5 million in cash. We used
the net proceeds from the offering of approximately $55.1 million along with
other resources to complete the acquisition on January 4, 2007.

      Fidelity Financial is the holding company for Fidelity Bank. Founded in
1971, this Bank has its main office in Birmingham, Michigan, with single branch
offices in Bloomfield Township and Bingham Farms and four branch offices in
Southfield, all in Oakland County, Michigan. At December 31, 2006, Fidelity had
total assets of $220,400,000, total loans of $179,600,000 and total deposits of
$187,500,000. Thus, closing of the transaction gave our Company total assets of
well over $1 billion.

      Oakland County has long been the most prosperous county in southeastern
Michigan. Along with Washtenaw County, it has experienced economic growth in
spite of the problems in other parts of the region. We expanded our operations
into Washtenaw County, site of the University of Michigan, in 2004 with the
acquisition of Bank of Washtenaw. That bank's three branches were consolidated
into Community Bank of Dearborn shortly after the transaction closed.

      In the case of the seven Fidelity offices, we intend to continue operating
them under the Fidelity name for the time being although technically they will
become branches of Community Bank.

     We are doing this because we are adopting the Fidelity name for our entire
organization effective April 30, 2007. We acquired the rights to this name along
with the rest of Fidelity Financial's assets. As we have grown and expanded our
geographic footprint, we have realized that in some cases the name, Community
Bank of Dearborn, has been an impediment to our marketing efforts.

      There are too many potential customers who think of a "community bank" as
being too small to satisfy their financial services needs. In reality, our legal
lending limit is now over $20 million although we would never lend that much to
a single borrower without seeking participations from our correspondent banks.
Then, to further complicate matters, "of Dearborn" is construed by some as
suggesting a geographical limitation on our operations. If we were to change the
name of Community Bank of Dearborn to Fidelity Bank, we would be adopting a
respected name with no implications of small size or geographic limitations.

      We have said on a number of occasions that the Board of Dearborn Bancorp
has no intention of declaring cash dividend at any time in the near future. We
still consider our Company to be in a "growth mode" and preservation of capital
is essential in such a situation. Nevertheless, our directors have continued
their policy of regularly declaring stock dividends in lieu of cash dividends so
that our stockholders receive tangible benefits from the progress we have been
making. Accordingly, five percent stock dividends were distributed in June and
December of 2006.

                                       6


      Now, as we begin a new year, we are concentrating on our marketing
activities while integrating Fidelity Bank's branches and operations into
Community Bank of Dearborn's. We anticipate meaningful economies of scale to
result from the consolidation of "backroom" functions and the seven Fidelity
offices in Oakland County will make us a definite factor in this vibrant part of
the metropolitan area. We believe that our proven approach to the business of
banking will allow us to attract sizeable volumes of new deposits and loans
through these locations.

      The biggest problem we anticipate in 2007 is the flat yield curve, which
seems unlikely to change in the near term. We intend to continue dealing with
this situation by strictly controlling unnecessary overhead expenses and
redoubling our efforts to attract new and profitable business.

      Overall, we are optimistic about our prospects during the coming months
and anticipate being in a position to provide you with another positive report
on the progress of our Company at this time next year.

      Our directors and senior officers join us in inviting you to attend the
Annual Meeting on May 15, 2007. The meeting will be held at Park Place, 23400
Park Avenue, Dearborn, Michigan at 4:00 p.m. We look forward to meeting you,
providing you with a comprehensive report on our operations, answering your
questions and hearing your suggestions at that time.

                                   Sincerely,

   John E. Demmer                                         Michael J. Ross
Chairman of the Board                                      President and
                                                     Chief Executive Officer

                                       7


                       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, 2006 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, 2006 and 2005,
and the Consolidated Statements of Income for the years ended December 31, 2006,
2005 and 2004 are included elsewhere in this Annual Report.



(In thousands, except share and per share data)              2006          2005           2004           2003           2002
                                                         -----------    -----------    -----------    -----------    -----------
                                                                                                      
OPERATIONS
Interest income                                          $    53,886    $    43,855    $    29,790    $    23,564    $    18,259
Interest expense                                              25,884         16,403          9,409          8,631          7,505
                                                         -----------    -----------    -----------    -----------    -----------
Net interest income                                           28,002         27,452         20,381         14,933         10,754
Provision for loan losses                                        943          1,081          1,400          1,699          1,052
                                                         -----------    -----------    -----------    -----------    -----------
Net interest income after provision for loan losses           27,059         26,371         18,981         13,234          9,702
Total non-interest income                                        925            505          1,065          1,917          1,250
Total non-interest expense                                    16,225         15,499         11,700          9,823          6,948
                                                         -----------    -----------    -----------    -----------    -----------
Income before federal income tax expense                      11,759         11,377          8,346          5,328          4,004
Income tax expense                                             3,940          3,867          2,837          1,807          1,357
                                                         -----------    -----------    -----------    -----------    -----------
Net income                                               $     7,819    $     7,510    $     5,509    $     3,521    $     2,647
                                                         ===========    ===========    ===========    ===========    ===========

FINANCIAL CONDITION
Total assets                                             $   855,931    $   706,497    $   652,662    $   446,075    $   325,100
Mortgage loans held for sale                                   1,823          1,041          1,692          1,505          9,852
Securities, available for sale                                 5,878         17,153         21,075         16,948         22,216
Federal Home Loan Bank stock                                   1,288          1,293          1,122          1,073          1,033
Loans                                                        756,420        657,037        587,562        400,958        267,522
Allowance for loan losses                                     (7,775)        (6,808)        (5,884)        (4,314)        (2,875)
Other assets                                                  98,297         36,781         26,226          8,757          7,902
Deposits                                                     633,216        582,438        540,880        379,619        262,086
Federal Home Loan Bank advances                               25,561         25,588         20,614         20,638         20,660
Subordinated debentures                                       10,000         10,000         10,000         10,000         10,000
Other borrowings                                              37,919          1,615          4,115            ---            ---
Other liabilities                                              4,250          2,643          2,449          1,217          1,663
Stockholders' equity                                         144,985         84,213         74,604         34,601         30,691

PER SHARE INFORMATION (1)
Net income per common share - basic                      $      1.23    $      1.27    $      1.16    $      0.90    $      0.69
Net income per common share - diluted                    $      1.17    $      1.20    $      1.06    $      0.83    $      0.66
Book value per common share                              $     16.15    $     14.11    $     12.80    $      8.77    $      7.95
Average shares outstanding  - basic                        6,372,471      5,899,281      4,767,907      3,908,219      3,841,761
Average shares outstanding - diluted                       6,672,319      6,274,404      5,217,001      4,246,523      4,038,269
Shares outstanding at end of period                        8,975,085      5,967,190      5,827,368      3,943,151      3,862,238

OTHER DATA
Return on average assets                                        1.02%          1.08%          1.05%          0.89%          0.93%
Return on average equity                                        8.20%          9.44%         10.56%         10.80%          9.08%
Net interest margin                                             3.80%          4.14%          4.04%          3.97%          3.94%
Net interest spread                                             3.06%          3.62%          3.69%          3.63%          3.37%
Allowance for possible credit losses to total loans             1.03%          1.04%          1.00%          1.08%          1.07%
Nonperforming assets to total assets                            0.90%          0.26%          0.47%          0.42%          0.84%
Stockholders' equity to total assets                           16.94%         11.92%         11.43%          7.76%          9.44%
Total interest expense to gross interest income                48.03%         37.40%         31.58%         36.63%         41.10%
Number of Offices                                                 12             12             12              8              6


(1)   All share and per share amounts have been adjusted to reflect the issuance
      of stock dividends.

                                       8


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Dearborn Bancorp, Inc. and Subsidiary
Dearborn, Michigan

We have audited the accompanying consolidated balance sheets of Dearborn
Bancorp, Inc. and subsidiary as of December 31, 2006 and 2005, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 2006. These
financial statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Dearborn Bancorp, Inc. and subsidiary as of December 31, 2006 and 2005, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2006, in conformity with U. S. generally accepted
accounting principles.

We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of Dearborn
Bancorp, Inc.'s internal control over financial reporting as of December 31,
2006, based on criteria established in Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) and our report dated March 9, 2007 expressed an unqualified opinion
thereon.

                                                   Crowe Chizek and Company LLC

Grand Rapids, Michigan
March 9, 2007

                                       9


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have audited management's assessment, included in the accompanying
Management's Report on Internal Control Over Financial Reporting, that Dearborn
Bancorp, Inc. maintained effective internal control over financial reporting as
of December 31, 2006, based on criteria established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Dearborn Bancorp, Inc.'s management is responsible
for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting.
Our responsibility is to express an opinion on management's assessment and an
opinion on the effectiveness of the Corporation's internal control over
financial reporting based on our audit

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed 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. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, management's assessment that Dearborn Bancorp, Inc. maintained
effective internal control over financial reporting as of December 31, 2006, is
fairly stated, in all material respects, based on criteria established in
Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Also in our opinion, Dearborn
Bancorp, Inc. maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2006, based on criteria established
in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).

We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated financial
statements of Dearborn Bancorp, Inc. and our report dated March 9, 2007
expressed an unqualified opinion on those consolidated financial statements.

                                                    Crowe Chizek and Company LLC

Grand Rapids, Michigan
March 9, 2007

                                       10


        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, 2006. 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, 2006, Dearborn Bancorp, Inc. maintained effective control over
financial reporting presented in conformity with generally accepted accounting
principles based on those criteria.

The Corporation's independent auditors have issued an audit report on our
assessment of the Corporation's internal control over financial reporting.

Dearborn Bancorp, Inc. and Subsidiary

/s/ Michael J. Ross
Michael J. Ross.
President and Chief Executive Officer

/s/ Jeffery L. Karafa
Jeffery L. Karafa
Vice President, Treasurer and Secretary

                                       11


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS



                                                                      December 31,
                                                                 ---------------------
(Dollars, in thousands)                                             2006        2005
                                                                 ---------   ---------
                                                                       
ASSETS
Cash and cash equivalents
          Cash and due from banks                                $   5,824   $   7,118
          Federal funds sold                                        64,198       2,268
          Interest bearing deposits with banks                           8          69
                                                                 ---------   ---------
                    Total cash and cash equivalents                 70,030       9,455

Mortgage loans held for sale                                         1,823       1,041
Securities, available for sale                                       5,878      17,153
Federal Home Loan Bank stock                                         1,288       1,293
Loans
          Loans                                                    756,420     657,037
          Allowance for loan losses                                 (7,775)     (6,808)
                                                                 ---------   ---------
                    Net loans                                      748,645     650,229

Bank premises and equipment, net                                    14,293      13,792
Real estate owned                                                       52         663
Goodwill                                                             5,473       5,473
Other intangible assets                                              2,041       2,291
Accrued interest receivable                                          3,337       2,586
Other assets                                                         3,071       2,521
                                                                 ---------   ---------

          Total assets                                           $ 855,931   $ 706,497
                                                                 =========   =========

LIABILITIES
Deposits
          Non-interest bearing deposits                          $  53,065   $  59,652
          Interest bearing deposits                                580,151     522,786
                                                                 ---------   ---------
                    Total deposits                                 633,216     582,438

Other liabilities
          Federal funds purchased                                   37,300         ---
          Securities sold under agreements to repurchase               619       1,615
          Federal Home Loan Bank advances                           25,561      25,588
          Other liabilities                                            516         960
          Accrued interest payable                                   3,734       1,683
          Subordinated debentures                                   10,000      10,000
                                                                 ---------   ---------
                    Total liabilities                              710,946     622,284

STOCKHOLDERS' EQUITY
          Common stock - no par value 10,000,000 shares
                   authorized, 8,975,085  and 5,967,190 shares
                   outstanding in 2006 and 2005, respectively      144,907      83,684
          Retained earnings                                             84         573
          Accumulated other comprehensive (loss)                        (6)        (44)
                                                                 ---------   ---------
                    Total stockholders' equity                     144,985      84,213
                                                                 ---------   ---------

                    Total liabilities and stockholders' equity   $ 855,931   $ 706,497
                                                                 =========   =========


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

                                       12


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

                        CONSOLIDATED STATEMENTS OF INCOME



                                                                                           Years Ended December 31,
                                                                                    ---------------------------------------
(In thousands, except share data)                                                       2006         2005          2004
                                                                                    -----------   -----------   -----------
                                                                                                       
Interest income
          Interest on loans                                                         $    52,321   $    42,904   $    29,040
          Interest on securities, available for sale                                        834           598           460
          Interest on deposits with banks                                                   158           111           129
          Interest on federal funds                                                         573           242           161
                                                                                    -----------   -----------   -----------
                    Total interest income                                                53,886        43,855        29,790

Interest expense
          Interest on deposits                                                           23,447        14,427         8,013
          Interest on other liabilities                                                   2,437         1,976         1,396
                                                                                    -----------   -----------   -----------
                    Total interest expense                                               25,884        16,403         9,409

                    Net interest income                                                  28,002        27,452        20,381
Provision for loan losses                                                                   943         1,081         1,400
                                                                                    -----------   -----------   -----------

Net interest income after provision for loan losses                                      27,059        26,371        18,981
                                                                                    -----------   -----------   -----------

Non-interest income
          Service charges on deposit accounts                                               699           639           569
          Fees for other services to customers                                               48            79            30
          Gain on the sale of loans                                                         145           361           407
          Gain (loss) on the sale of securities                                               9           (44)          ---
          Loss on the write-down of securities                                              ---          (696)          ---
          Gain (loss) on the sale of real estate owned                                     (103)           92           (28)
          Other income                                                                      127            74            87
                                                                                    -----------   -----------   -----------
                    Total non-interest income                                               925           505         1,065

Non-interest expenses
          Salaries and employee benefits                                                 10,288         9,402         7,722
          Occupancy and equipment expense                                                 2,420         2,528         1,582
          Intangible expense                                                                250           230            28
          Advertising and marketing                                                         385           384           336
          Stationery and supplies                                                           402           365           310
          Professional services                                                             768           893           436
          Data processing                                                                   531           448           332
          Other operating expenses                                                        1,181         1,249           954
                                                                                    -----------   -----------   -----------
                    Total non-interest expenses                                          16,225        15,499        11,700
                                                                                    -----------   -----------   -----------

Income before federal income tax provision                                               11,759        11,377         8,346
Income tax provision                                                                      3,940         3,867         2,837
                                                                                    -----------   -----------   -----------

Net income                                                                          $     7,819   $     7,510   $     5,509
                                                                                    ===========   ===========   ===========

Per share data:
Net income - basic                                                                  $      1.23   $      1.27   $      1.16
Net income - diluted                                                                $      1.17   $      1.20   $      1.06

Weighted average number of shares outstanding - basic                                 6,372,471     5,899,281     4,767,907
Weighted average number of shares outstanding - diluted                               6,672,319     6,274,404     5,217,001


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

                                       13


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                  Years Ended December 31, 2006, 2005 and 2004



                                                                                                   Accumulated
                                                                                                      Other           Total
                                                                          Common      Retained    Comprehensive   Stockholders'
(In thousands, except shares)                                              Stock      Earnings          Income       Equity
                                                                        ----------   ----------   -------------   -------------
                                                                                                      
Balance, January 1, 2004                                                $   34,451   $      128    $         22   $      34,601

          Issuance of common stock                                          34,040          ---             ---          34,040

          Exercise of stock options                                            616          ---             ---             616

          Tax effect of issuance of stock options                              518          ---                             518

          Stock dividend #1                                                  2,504       (2,504)            ---             ---

          Stock dividend #2                                                  2,789       (2,789)            ---             ---

          Net income                                                           ---        5,509             ---           5,509

          Other comprehensive income
              Net change in net unrealized loss on
                 securities available for
                 sale                                                          ---          ---          (1,030)         (1,030)
              Tax effects                                                                                   350             350
                                                                                                  -------------   -------------
                  Other comprehensive loss                                     ---          ---            (680)           (680)

Total comprehensive income                                                                                                4,829
                                                                        ----------   ----------   -------------   -------------

Balance, December 31, 2004                                              $   74,918   $      344   ($        658)  $      74,604

          Stock awards earned                                                   21          ---             ---              21

          Stock options earned                                                  10          ---             ---              10

          Exercise of stock options                                          1,028          ---             ---           1,028

          Tax effect of issuance of stock
          options                                                              426          ---             ---             426

          Stock dividend #1                                                  3,307       (3,307)            ---             ---

          Stock dividend #2                                                  3,974       (3,974)            ---             ---

          Net income                                                           ---        7,510             ---           7,510

          Other comprehensive income
              Reclassification adjustment
               for losses included in net income                               ---          ---             740             740
              Changes in net unrealized loss on
               securities available for sale                                   ---          ---             190             190
                                                                                                  -------------   -------------
              Net change in net unrealized loss
                 on securities available for sale                              ---          ---             930             930
              Tax effects                                                                                  (316)           (316)
                                                                                                  -------------   -------------
                  Other comprehensive income                                   ---          ---             614             614

Total comprehensive income                                                                                                8,124
                                                                        ----------   ----------   -------------   -------------

Balance, December 31, 2005                                              $   83,684   $      573   ($         44)  $      84,213
                                                                        ==========   ==========   =============   =============


The accompanying notes are an integral part of these consolidated statements

                                       14


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                  Years Ended December 31, 2006, 2005 and 2004



                                                                                                   Accumulated
                                                                                                      Other          Total
                                                                         Common       Retained    Comprehensive   Stockholders'
                                                                          Stock       Earnings        Income          Equity
                                                                        ----------   ----------   -------------   -------------
                                                                                                      
Balance, January 1, 2006                                                $   83,684   $      573   ($         44)  $      84,213

          Issuance of common stock                                          55,131          ---             ---          55,131

          Purchase of common stock                                          (2,824)         ---             ---          (2,824)

          Stock awards earned                                                  151          ---             ---             151

          Stock options earned                                                  67          ---             ---              67

          Exercise of stock options                                            292          ---             ---             292

          Tax effect of issuance of stock options                               98          ---             ---              98

          Stock dividend #1                                                  4,115       (4,115)            ---             ---

          Stock dividend #2                                                  4,193       (4,193)            ---             ---

          Net income                                                           ---        7,819             ---           7,819

          Other comprehensive income
              Reclassification adjustment for gain
                 included in net income                                        ---          ---              (9)             (9)
              Changes in net unrealized loss on
                 securities available for sale                                 ---          ---              68              68
                                                                                                  -------------   -------------
              Net change in net unrealized loss
                 on securities available for sale                              ---          ---              59              59
              Tax effects                                                                                   (21)            (21)
                                                                                                  -------------   -------------
                  Other comprehensive income                                   ---          ---              38              38

Total comprehensive income                                                   7,857
                                                                        ----------   ----------   -------------   -------------

Balance, December 31, 2006                                              $  144,907   $       84   ($          6)  $     144,985
                                                                        ==========   ==========   =============   =============


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

                                       15


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS



(In thousands)                                                           Years Ended December 31,
                                                                    ---------------------------------
                                                                      2006         2005        2004
                                                                    ---------   ---------   ---------
                                                                                   
Cash flows from operating activities
          Interest and fees received                                $  53,135   $  42,710   $  29,101
          Interest paid                                               (23,833)    (15,827)     (8,604)
          Proceeds from sale of mortgages held for sale                22,339      37,556      42,320
          Origination of mortgages held for sale                      (22,789)    (36,446)    (41,974)
          Taxes paid                                                   (4,590)     (3,400)     (2,435)
          Gain (loss) on sale of real estate owned                       (103)         92         (28)
          Cash paid to suppliers and employees                        (14,146)    (14,255)    (11,476)
                                                                    ---------   ---------   ---------
          Net cash provided by operating activities                    10,013      10,430       6,904

Cash flows from investing activities
          Proceeds from the sale of securities available for sale      96,704       3,260         ---
          Proceeds from calls, maturities and repayments
              of securities available for sale                         12,848      12,357      40,886
          Purchases of securities available for sale                  (97,941)    (11,496)    (45,991)
          (Purchase) sale of Federal Home Loan Bank stock                   5        (171)        (49)
          Increase in loans, net of payments received                 (99,359)    (69,632)   (119,769)
          Purchases of property and equipment                          (1,447)     (1,648)     (7,513)
          Net cash paid in Bank of Washtenaw acquisition                  ---         ---      (5,010)
                                                                    ---------   ---------   ---------
          Net cash used in investing activities                       (89,190)    (67,330)   (137,446)

Cash flows from financing activities
          Net increase (decrease) in non-interest bearing deposits     (6,587)     (3,413)     (3,649)
          Net increase in interest bearing deposits                    57,365      44,971      98,637
          Increase (decrease) in other borrowings                        (996)     (2,500)        125
          Net increase in federal funds payable                        37,300         ---         ---
          Proceeds from Federal Home Loan Bank advances                   ---       5,000         ---
          Repayments on Federal Home Loan Bank advances                   (27)        (26)        (24)
          Issuance of common stock                                     55,131         ---      34,040
          Purchase of common stock                                     (2,824)        ---         ---
          Exercise of stock options                                       292       1,028         616
          Tax benefit of stock options exercised                           98         426         518
                                                                    ---------   ---------   ---------
          Net cash provided by financing activities                   139,752      45,486     130,263

Increase (decrease) in cash and cash equivalents                       60,575     (11,414)       (279)
Cash and cash equivalents at the beginning of the period                9,455      20,869      21,148
                                                                    ---------   ---------   ---------

Cash and cash equivalents at the end of the period                  $  70,030   $   9,455   $  20,869
                                                                    =========   =========   =========


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

                                       16


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)



                                                                              Years Ended December 31,
                                                                           ------------------------------
(In thousands)                                                               2006       2005       2004
                                                                           --------   --------   --------
                                                                                        
Reconciliation of net income to net cash provided by operating activities
Net income                                                                 $  7,819   $  7,510   $  5,509
          Adjustments to reconcile net income to net cash
                    provided by operating activities
                    Provision for loan losses                                   943      1,081      1,400
                    Depreciation and amortization expense                       946        980        556
                    Restricted stock award expense                              151         21        ---
                    Stock option expense                                         67         10        ---
                    Accretion of discount on investment securities             (277)       (47)       (71)
                    Amortization of premium on investment securities              8         38         19
                    Amortization of intangible assets                           250        230         27
                    (Increase) decrease in mortgages held for sale             (782)       651       (187)
                    Increase in interest receivable                            (751)      (697)      (182)
                    Increase in interest payable                              2,051        576        209
                    (Gain) loss on sale or write-down of securities              (9)       740        ---
                    (Increase) decrease in other assets                          41       (281)      (883)
                    Increase (decrease) in other liabilities                   (444)      (382)       507
                                                                           --------   --------   --------

Net cash provided by operating activities                                  $ 10,013   $ 10,430   $  6,904
                                                                           ========   ========   ========

Supplemental noncash disclosures:
                   Transfers from loans to real estate owned               $     91   $  1,850   $    417

Noncash investing activities:
        Bank of Washtenaw acquisition:
                   Loans acquired                                               ---        ---   $ 66,665
                   Bank premises and equipment                                  ---        ---        613
                   Acquisition intangibles recorded                             ---        ---      8,009
                   Other assets acquired                                        ---        ---        502
                   Deposits assumed                                             ---        ---    (66,273)
                   Borrowing assumed                                            ---        ---     (3,990)
                   Other liabilities assumed                                    ---        ---       (516)
                                                                           --------   --------   --------

                                                                                ---        ---   $  5,010
                                                                           ========   ========   ========


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

                                       17


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

      Basis of Presentation and Operations

      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. The Bank
      operates twelve community banking offices in Dearborn (2), Dearborn
      Heights, Plymouth Township, Canton Township, Clinton Township (2),
      Southgate, Auburn Hills, Saline and Ann Arbor (2) in Michigan, offering a
      full range of banking services to individuals and businesses. The Bank
      also operates Community Bank Mortgage, Inc., a mortgage company that
      originates and services residential and commercial mortgage loans,
      Community Bank Insurance Agency, 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 installment 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.

      Principles of Consolidation

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

      Sale of Common Stock

      The Corporation sold 2,918,250 shares of its common stock at $20.00 per
      share on November 10, 2006. The net proceeds from the stock offering was
      approximately $55,131,000. These proceeds were utilized to acquire
      Fidelity Financial Corporation of Michigan ( Fidelity ) on January 4, 2007

      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 certain financial instruments,
      and the carrying value of intangible assets.

                                       18


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Continued)

      Cash Flows

      For purposes of the consolidated statements of cash flows, the Corporation
      considers cash on hand, cash due from banks, federal funds sold, and
      interest bearing deposits with other banks to be cash equivalents. Net
      cash flows are reported for loan, deposit and short-term borrowing
      transactions.

      Mortgage Loans Held for Sale

      Mortgage loans held for sale are carried at the lower of cost or market on
      an aggregate basis. These loans are sold servicing released to other
      entities.

      Securities

      When securities are purchased and the Corporation intends to hold the
      securities for an indefinite period of time but not necessarily to
      maturity, they are classified as available for sale and carried at fair
      value. Any decision to sell a security available for sale would be based
      on various factors, including significant movements in interest rates,
      changes in the maturity mix of the Corporation's assets and liabilities,
      liquidity demands, regulatory capital considerations, and other similar
      factors. Cost is adjusted for amortization of premiums and accretion of
      discounts to maturity. Unrealized gains and losses on available for sale
      securities are excluded from income and recorded as an amount, net of tax,
      in other comprehensive income and as a separate component of stockholders'
      equity until realized. All of the Corporation's securities are classified
      as available for sale. Gains and losses on sales are based on the
      amortized cost of the security and securities are written down to fair
      market value when a decline in fair value is not temporary.

      Declines in the fair value of securities below their cost that are other
      than temporary are reflected as realized losses. In estimating
      other-than-temporary losses, management considers: (1) the length of time
      and extent that fair value has been less than cost, (2) the financial
      condition and near term prospects of the issuer, and (3) the Corporation's
      ability and intent to hold the security for a period 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 unearned interest, 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.

                                       19


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Continued)

      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.

      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 or
      industry loss experience adjusted for various factors.

      A loan is impaired when full payment under the loan terms is not expected.
      Loan relationships that are rated watch or worse with a balance above
      $500,000 are individually evaluated for impairment. If a loan 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 or at the fair value of the collateral if repayment is expected
      solely from the collateral.

      Transfers of Financial Assets

      Transfers of financial assets are accounted for as sales, when control
      over the assets has been relinquished. Control over transferred assets is
      deemed to be surrendered when the assets have been isolated from the
      Corporation, the transferee obtains the right (free of conditions that
      constrain it from taking advantage of that right) to pledge or exchange
      the transferred assets, and the Corporation does not maintain effective
      control over the transferred assets through an agreement to repurchase
      them before their maturity.

      Foreclosed Assets

      Assets acquired through or instead of loan foreclosure are initially
      recorded at fair value when acquired, establishing a new cost basis. If
      fair value declines below the new cost basis, a valuation allowance is
      recorded through expense. Costs after acquisition are expensed.

      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:

           Building and improvements - 5 to 30 years
           Furniture and equipment - 3 to 10 years

      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.

                                       20


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Continued)

      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.

      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 a bank acquisition in 2004. 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 17 years.

      Stock Compensation

      Effective January 1, 2006, the Corporation adopted Statement of Financial
      Accounting Standards ("SFAS") No. 123(R), Share-based Payment, using the
      modified prospective transition method. Accordingly, the Company has
      recorded stock-based employee compensation cost using the fair value
      method starting in 2006. For 2006, adopting this standard resulted in a
      reduction in net income of $67,000 and a decrease in basic and diluted
      earnings per share of $.01.

      The Corporation has two incentive stock plans. Employee compensation
      expense under the 1994 Stock Option Plan was reported using the intrinsic
      value method. No stock-based compensation cost from this plan 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 per share data).



                                                                               2004
                                                                           -----------
                                                                        
Net Income
            As reported                                                    $     5,509
            Less: stock-based compensation expense
            determined under fair value based method                                (9)
                                                                           -----------
            Pro forma                                                      $     5,500
Basic income per share
            As reported                                                    $      1.16
            Pro forma                                                      $      1.15
Diluted income per share
            As reported                                                    $      1.06
            Pro forma                                                      $      1.05


      Employee compensation expense under the 2005 Long Term Incentive Plan is
      reported using the fair value recognition provisions of FASB Statement No.
      123, Accounting for Stock-based Compensation in 2005. Since stock-based
      compensation cost is reflected in net income in 2005, there is no pro
      forma effect.

                                       21


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Continued)

      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.

      Income Taxes

      The Corporation files a consolidated federal income tax return. The
      Corporation uses the asset and liability method of accounting for income
      taxes. Deferred tax assets and liabilities are 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.

      Stock Dividends

      The fair value of shares issued in stock dividends is transferred from
      retained earnings to common stock, to the extent of available retained
      earnings. Any excess of fair value over available retained earnings is
      considered a return of capital. All share and per share amounts are
      retroactively adjusted for stock dividends.

      Reclassifications

      Some items in the prior year financial statements were reclassified to
      conform to the current presentation.

      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.

      Income Per Share

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

      Comprehensive Income

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

                                       22


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Continued)

      Restrictions on Cash

      The Corporation was required to have $25,000 and $3,980,000 of cash on
      hand or on deposit with the Federal Reserve Bank to meet regulatory
      reserve and clearing requirements at year end 2006 and 2005, respectively.
      These balances do not earn interest. The decline in required reserves in
      2006 resulted from revised designation of certain deposit accounts to
      categories requiring lower reserves.

      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.

      Adoption of New Accounting Standards:

      In September 2006, the Securities and Exchange Commission (SEC) released
      Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year
      Misstatements when Quantifying Misstatements in Current Year Financial
      Statements (SAB 108), which is effective for fiscal years ending on or
      after November 15, 2006. SAB 108 provides guidance on how the effects of
      prior-year uncorrected financial statement misstatements should be
      considered in quantifying a current year misstatement. SAB 108 requires
      public companies to quantify misstatements using both an income statement
      (rollover) and balance sheet (iron curtain) approach and evaluate whether
      either approach results in a misstatement that, when all relevant
      quantitative and qualitative factors have been considered, is material. If
      prior year errors that have been previously considered immaterial now are
      considered material based on either approach, no restatement is necessary
      so long as properly applied its previous approach and all relevant facts
      and circumstances were considered. Adjustments considered immaterial in
      prior years under the method previously used, but now considered material
      under the dual approach required by SAB 108, are to be recorded upon
      initial adoption of SAB 108. The amount so recorded is shown as a
      cumulative effect adjustment is recorded in opening retained earnings as
      of January 1, 2006. The adoption of SAB 108 had no effect on the
      Corporation's financial statements for the year ended December 31, 2006.

      Effect of Newly Issued But Not Yet Effective Accounting Standards:

      FIN 48, which prescribes a recognition threshold and measurement attribute
      for a tax position taken or expected to be taken in a tax return. FIN 48
      also provides guidance on derecognition, classification, interest and
      penalties, accounting for interim periods, disclosure and transition. FIN
      48 is effective for fiscal years beginning after December 15, 2006. The
      Corporation has determined that the adoption of FIN 48 will not have a
      material effect on the financial statements.

                                       23


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE B - SECURITIES AVAILABLE FOR SALE

      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, 2006
                                    ----------------------------------------------------------------------
                                                            Gross               Gross
                                       Amortized          Unrealized         Unrealized           Fair
                                         Cost               Gains              Losses            Value
                                    ----------------    ---------------    ----------------    -----------
                                                                                   
US Treasury securities              $          4,982    $           ---         ($       14)   $     4,968
Municipal bonds                                  497                  4                 ---            501
Mortgage backed securities                       407                  2                 ---            409
                                    ----------------    ---------------    ----------------    -----------

          Totals                    $          5,886    $             6         ($       14)   $     5,878
                                    ================    ===============    ================    ===========




                                                              December 31, 2005
                                    ----------------------------------------------------------------------
                                                            Gross               Gross
                                       Amortized          Unrealized         Unrealized           Fair
                                         Cost               Gains              Losses            Value
                                    ----------------    ---------------    ----------------    -----------
                                                                                   
US Treasury securities              $         16,665    $           ---    ($            68)   $    16,597
Mortgage backed securities                       555                  2                  (1)           556
                                    ----------------    ---------------    ----------------    -----------

          Totals                    $         17,220    $             2                 (69)   $    17,153
                                    ================    ===============    ================    ===========


      The amortized cost and fair value of securities available for sale at
      December 31, 2006 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 three months through one year                    $         5,062    $       5,048
Due in one year through five years                                  417              421
Mortgage backed securities                                          407              409
                                                        ----------------   -------------

          Totals                                        $         5,886    $       5,878
                                                        ================   =============


                                       24


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE B - SECURITIES AVAILABLE FOR SALE  (Continued)

      Sales of securities, available for sale during 2006 resulted primarily
      from the liquidation of securities that were purchased during the fourth
      quarter of 2006. These securities were purchased with funds received from
      the sale of common stock on November 10, 2006. The funds received from the
      sale of these securities were utilized for the acquisition of Fidelity on
      January 4, 2007.

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



                                     2006        2005        2004
                                  ----------   ---------   ---------
                                                  
Proceeds                          $   97,941   $   3,260   $     ---
Gross gains                                9         ---         ---
Gross losses                             ---         740         ---


      Securities having a carrying value of $1,392,000 and $4,524,000 at
      December 31, 2006 and 2005, respectively, were pledged to secure Federal
      Home Loan Bank of Indianapolis advances and securities sold under
      agreements to repurchase.

      Securities with unrealized losses at year-end 2006 and 2005, aggregated by
      investment category and length of time that individual securities have
      been in a continuous unrealized loss position, are as follows:



                                                             December 31, 2006
                              --------------------------------------------------------------------------------
                                Less than one year           One year or more                 Total
                              ------------------------    -----------------------    -------------------------
                                Fair       Unrealized       Fair       Unrealized       Fair       Unrealized
                                Value         Loss          Value        Loss           Value         Loss
                              ---------   ------------    --------    -----------    ----------   ------------
                                                                                
US Treasury securities        $     983   ($         1)   $  3,985    ($       13)   $    4,968   ($        14)
                              ---------   ------------    --------    -----------    ----------   ------------

          Totals              $     983   ($         1)   $  3,985    ($       13)   $    4,968   ($        14)
                              =========   ============    ========    ===========    ==========   ============




                                                             December 31, 2005
                              --------------------------------------------------------------------------------
                                Less than one year           One year or more                 Total
                              ------------------------    -----------------------    -------------------------
                                Fair       Unrealized       Fair       Unrealized       Fair       Unrealized
                                Value         Loss          Value         Loss          Value         Loss
                              ---------   ------------    --------    -----------    ----------   ------------
                                                                                
US Treasury securities        $   9,945   ($        21)   $  6,652    ($       47)   $   16,597   ($        68)
Mortgage backed securities          197             (1)        ---            ---           197             (1)
                              ---------   ------------    --------    -----------    ----------   ------------

           Totals             $  10,142   ($        22)   $  6,652    ($       47)   $   16,794   ($        69)
                              =========   ============    ========    ===========    ==========   ============


                                       25


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE B - SECURITIES AVAILABLE FOR SALE  (Continued)

      Unrealized losses on securities available for sale at December 31, 2006
      have not been recognized because these securities are of high credit
      quality, management has the intent and ability to hold these securities
      for the foreseeable future, and the decline in fair value is believed to
      be largely due to changes in interest rates. The fair value is expected to
      recover as the bonds approach their maturity date.

NOTE C - LOANS, NET

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



                                                   December 31,       December 31,        Percent
                                                       2006               2005          Incr(decr)
                                                 ---------------    ---------------    ----------
                                                                                  
Consumer loans                                   $        32,282    $        35,041         (7.87%)
Commercial, financial, & other                           130,056            110,805         17.37%
Commercial real estate construction                      135,306            118,358         14.32%
Commercial real estate mortgages                         410,829            345,536         18.90%
Residential real estate mortgages                         47,947             47,297          1.37%
                                                 ---------------    ---------------    ----------

                                                         756,420            657,037         15.13%
Allowance for loan losses                                 (7,775)            (6,808)
                                                 ---------------    ---------------

                                                 $       748,645    $       650,229
                                                 ===============    ===============


      Certain directors and executive officers of the Corporation, including
      their related interests, were loan customers of the Bank during 2006 and
      2005. These loan transactions for the years ended December 31, are as
      follows (in thousands):



                                                      2006               2005
                                                 ---------------    ---------------
                                                              
Balance, beginning of year                       $         2,757    $         4,150

New loans during period                                      337                970

Repayments made during period                               (597)            (2,363)
                                                 ---------------    ---------------

Balance, end of period                           $         2,497    $         2,757
                                                 ===============    ===============


                                       26


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE C - LOANS, NET (Continued)

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



                                                               2006             2005            2004
                                                          -------------     -----------     -------------
                                                                                   
Balance, beginning of year                                $       6,808     $     5,884     $       4,314

Allowance on loans acquired                                         ---             ---               184

Charge-offs:
     Consumer loans                                                  24             112                31
     Commercial, financial & other                                  139             169               ---
     Commercial real estate construction                            ---             ---               ---
     Commercial real estate mortgages                                36              86               ---
     Residential loans                                               38             ---               100

Recoveries:
     Consumer loans                                                  17              37                12
     Commercial, financial & other                                  218             131                44
     Commercial real estate construction                            ---             ---               ---
     Commercial real estate mortgages                                26              10                61
     Residential loans                                              ---              32               ---
                                                          -------------     -----------     -------------

Net charge-offs (recoveries)                                        (24)            157                14

Provision for loan losses                                           943           1,081             1,400
                                                          -------------     -----------     -------------

Balance at end of period                                  $       7,775     $     6,808     $       5,884
                                                          =============     ===========     =============


                                       27


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE C - LOANS, NET (Continued)

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



                                                       2006      2005
                                                      ------     ----
                                                           
    Impaired loans with no allocated allowance
       for loan losses                                $1,306     $341
    Impaired loans with allocated allowance
       for loan losses                                 4,254      200
                                                      ------     ----
        Total                                         $5,560     $541
                                                      ======     ====

    Amount of the allowance for loan loss allocated   $  911     $ 69

    Average of impaired loans during the year         $3,788     $940

    Interest income recognized during impairment      $  ---     $---
    Cash-basis interest income recognized             $  ---     $---


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



                                                        2006    2005    2004
                                                      ------  ------  ------
                                                             
    Troubled debt restructuring                       $  ---  $  ---  $  ---
    Over 90 days past due                              2,101     189     143
    Non-accrual loans                                  5,560     984   2,956
                                                      ------  ------  ------
            Total non performing loans                 7,661   1,173   3,099

    Real estate owned                                     52     661     136
    Other repossessed assets                               2       2       2
                                                      ------  ------  ------
            Other non performing assets                   54     663     138
                                                      ------  ------  ------

    Total nonperforming assets                        $7,715  $1,836  $3,237
                                                      ======  ======  ======


      Non-performing loans and impaired loans are defined differently.
      Non-performing loans includes both smaller balance homogeneous loans that
      are collectively evaluated for impairment and individually classified
      impaired loans.

                                       28


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE D - PREMISES AND EQUIPMENT

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



                                  2006     2005
                               -------  -------
                                  
Land and improvements          $ 3,235  $ 3,232
Building and improvements       10,226   10,214
Furniture and equipment          5,859    5,366
                               -------  -------
                                19,320   18,812

Less accumulated depreciation    5,027    5,020
                               -------  -------

        Totals                 $14,293  $13,792
                               =======  =======


      Depreciation expense for 2006, 2005 and 2004 amounted to $946,000,
      $980,000, and $556,000, respectively. During 2006, the Corporation made
      capital expenditures of $1,447,000. The expenditures were primarily due to
      expansion and renovation of two branch offices, a new phone system and
      other improvements in technology. The Corporation retired fully
      depreciated assets of $939,000.

      Rent expense for facilities of $622,000, $617,000 and $678,000 was
      incurred during 2006, 2005 and 2004, respectively. Rental commitments
      under noncancellable operating leases are as follows, before considering
      renewal options that generally are present (in thousands):

                                     
2007                                    $    582
2008                                         542
2009                                         542
2010                                         476
2011                                         401
Thereafter                                   ---
                                        --------
                                        $  2,543
                                        ========



                                       29


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE E - GOODWILL AND OTHER INTANGIBLE ASSETS

      As a result of the acquisition of the Bank of Washtenaw in October of
      2004, the Corporation acquired goodwill and other intangible assets. The
      Corporation identified a core deposit intangible of $929,000 and a
      borrower relationship intangible of $1,620,000. These intangible assets
      were separated from goodwill. The Corporation recorded amortization
      expense of $250,000, $230,000 and $28,000 during 2006, 2005 and 2004,
      respectively. Goodwill amounted to $5,473,000 and there was no impairment
      of that goodwill during 2006.

      Information concerning other intangible assets at December 31, 2006 and
      2005 were as follows (in thousands):



                                                               2006
                                                    ----------------------------
                                                        Gross
                                                      Carrying      Accumulated
                                                       Amount       Amortization
                                                    -------------  -------------
                                                             
Amortized intangible assets

      Core deposit intangible                       $         929  $         302
      Borrower relationship intangible                      1,620            206
                                                    -------------- -------------
            Total                                   $       2,549  $         508
                                                    =============  =============




                                                                2005
                                                    ----------------------------
                                                        Gross
                                                      Carrying      Accumulated
                                                       Amount       Amortization
                                                    -------------- -------------
                                                             
Amortized intangible assets

      Core deposit intangible                       $         929  $         181
      Borrower relationship intangible                      1,620             77
                                                    -------------  -------------
            Total                                   $       2,549  $         258
                                                    =============  =============


      The core deposit intangible is amortized over 10 years and the borrower
      relationship intangible is amortized over 17 years. Estimated amortization
      expense for each of the next five years is as follows (in thousands):



                                           Amortization
                                          -------------
                                       
2007                                      $         257
2008                                                249
2009                                                249
2010                                                216
2011                                                194


                                       30


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE F - DEPOSITS

      Time deposits of $100,000 or more were $330,025,000 and $262,318,000 at
      December 31, 2006 and 2005, respectively. Time deposits of $100,000 or
      more from governmental units, which are included in total time deposits of
      $100,000 or more were $115,363,000 and $85,237,000 at December 31, 2006
      and 2005, respectively.

      Scheduled maturities of time deposits at December 31, 2006 are listed in
      the following table (in thousands):



            $100,000 and over   Less than $100,000     Total
            -----------------   ------------------   --------
                                            
2007        $         289,688   $          110,215   $399,903
2008                   16,031                8,166     24,197
2009                    7,835                2,804     10,639
2010                    6,580                2,493      9,073
2011                    9,891                7,220     17,111
            -----------------   ------------------   --------

   Totals   $         330,025   $          130,898   $460,923
            =================   ==================   ========


      Related party deposits from directors and executive officers of the
      Corporation were approximately $8,481,000 and $8,768,000 at December 31,
      2006 and 2005, respectively.

NOTE G - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

      Securities sold under agreements to repurchase are secured by US
      government agency securities with a carrying amount of $1.0 million and
      $4.0 million at December 31, 2006 and 2005, respectively.

      Securities sold under agreements to repurchase are financing arrangements
      that mature within two years. At maturity, the securities underlying the
      agreements are returned to the Corporation. Information concerning
      securities sold under agreements to repurchase is summarized as follows
      (in thousands):



                                              2006      2005
                                             ------    ------
                                                 
Balance at year-end                          $  619    $1,615
Average daily balance during the year        $  628    $2,995
Average interest rate during the year          1.25%     1.25%
Maximum month-end balance during year        $1,442    $3,612
Weighted average interest rate at year-end     1.25%     1.25%


                                       31


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE H - FEDERAL FUNDS PURCHASED

      The Bank maintains several borrowing lines of credit with several
      correspondent banks. These borrowing lines of credit are a short-term
      source of funds that charge a floating interest rate. Information
      concerning federal funds purchased is summarized as follows (in
      thousands):



                                                       2006
                                                     --------
                                                  
Balance at year-end                                  $ 37,300
Average daily balance during the year                $  7,512
Average interest rate during the year                    5.29%
Maximum month-end balance during year                $ 37,300
Weighted average interest rate at year-end               5.58%


NOTE I - FEDERAL HOME LOAN BANK ADVANCES

      The Bank has entered into an Advances, Pledge and Security Agreement with
      the Federal Home Loan Bank of Indianapolis. Advances were $25,561,000 and
      $25,588,000 at December 31, 2006 and 2005, respectively. These advances
      carry a fixed rate of interest and are secured by a blanket collateral
      agreement with the Federal Home Loan Bank of Indianapolis covering
      eligible mortgage loans in the amount of $41,558,000, commercial real
      estate loans in the amount of $82,187,000 and securities available for
      sale in the amount of $387,000. Federal Home Loan Bank advances are
      comprised of the following at December 31, 2006 (in thousands):



        Date                    Amount                 Rate               Maturity Date
- ---------------------      ----------------      ----------------      -------------------
                                                              
        2001               $          5,000                  4.54%             2007
        2001                          5,000                  4.68%             2008
        2002                            561                  4.01%             2007
        2005                          5,000                  4.43%             2008
        2006                         10,000                  4.96%             2008
                           ----------------      ----------------

       Total               $         25,561                  4.70%
                           ================      ================


      The Bank makes monthly interest payments with principal generally due at
      maturity. Required principal payments at year-end 2006 are $5.6 million in
      2007, $20.0 million in 2008. Prepayment penalties apply if advances are
      repaid prior to maturity. The Bank's capacity to borrow from the Federal
      Home Loan Bank is capped at $60 million by a resolution of the Board of
      Directors of the Bank. The Bank had the ability to borrow up to $40.8
      million based on collateral pledged by the Bank at December 31, 2006.

NOTE J - SUBORDINATED DEBENTURES

      In 2002, Dearborn Bancorp Trust I, a special purpose entity formed by the
      Corporation issued $10,000,000 of floating rate obligated mandatory
      redeemable securities as part of a pooled offering. The Corporation issued
      $10,000,000 of subordinated debentures to the trust in exchange for the
      proceeds of the offering. The interest rate on the debentures is the three
      month LIBOR plus 3.35% and was 8.72% at December 31, 2006. The securities
      have a term of thirty years with interest payments due on a quarterly
      basis. The Corporation may redeem the debentures after December 19, 2007,
      with regulatory approval, at face value.

                                       32


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE K - INCOME TAXES

      The federal tax provision consists of the following (in thousands):



                       2006           2005           2004
                    ----------    ------------    ----------
                                         
Current             $    4,260    $      4,330    $    3,301
Deferred                  (320)           (463)         (464)
                    ----------    ------------    ----------
                    $    3,940    $      3,867    $    2,837
                    ==========    ============    ==========


      The details of the net deferred tax asset are as follows at December 31,
      (in thousands):



                                                                 2006     2005
                                                               -------   -------
                                                                   
Deferred tax assets
          Provision for possible credit  losses                $ 2,595   $ 2,226
          Deferred loan fees and costs                             182       246
          Unrealized losses on securities, available for sale        3        23
          Capital loss                                             252       252
          Other                                                     92        28
                                                               -------   -------

                    Total deferred tax assets                    3,124     2,775

Deferred tax liabilities
         Premises and equipment                                   (234)     (271)
         Goodwill and other intangibles                           (233)     (138)
         Other                                                    (116)     (125)
                                                               -------   -------

                    Total deferred tax liabilities                (583)     (534)
                                                               -------   -------

Net deferred tax asset (liability)                             $ 2,541   $ 2,241
                                                               =======   =======


      The effective federal tax rate is substantially the same as the statutory
      rate of 34%. The goodwill and other intangible assets acquired during 2004
      are being amortized over 15 years for tax purposes and are tax deductible,
      but the goodwill is not being amortized for book purposes. During 2005, a
      deferred tax asset of $252,000 was generated on the capital loss that
      resulted from the sale of FHLMC preferred stock. The capital loss can be
      carried forward through 2010 to offset capital gain income. An allowance
      against the net tax deferred asset is not considered necessary at December
      31, 2006.

                                       33


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE L - FINANCIAL INSTRUMENTS AND OFF-BALANCE-SHEET RISK

      Fair Value of Financial Instruments

      The estimated fair value of the Corporation's financial instruments at
      December 31, are as follows (in thousands):



                                                                            2006                  2005
                                                                     -------------------   -------------------
                                                                               Estimated             Estimated
                                                                      Carrying    Fair      Carrying    Fair
                                                                      Amount     Value      Amount     Value
                                                                     --------  ---------   --------  ---------
                                                                                         
Assets:
          Cash and cash equivalents                                  $ 70,030  $ 70,030    $  9,455  $  9,455
          Mortgage loans held for sale                                  1,823     1,837       1,041     1,055
          Securities, available for sale                                5,878     5,878      17,153    17,153
          Federal Home Loan Bank Stock                                  1,288     1,288       1,293     1,293
          Loans, net                                                  748,645   752,082     650,229   647,621
          Accrued interest receivable                                   3,337     3,337       2,586     2,586

Liabilities:
          Deposits                                                    633,216   634,084     582,438   582,629
          Federal funds purchased                                      37,300    37,300         ---       ---
          Securities sold under agreements to repurchase                  619       619       1,615     1,615
          Federal Home Loan Bank advances                              25,561    25,367      25,588    26,002
          Subordinated debentures                                      10,000    10,000      10,000    10,000
          Accrued interest payable                                      3,734     3,734       1,683     1,683


      The following methods and assumptions were used by the Corporation in
      estimating its fair value disclosure for financial instruments:

      Carrying amount is the estimated fair value for cash and cash equivalents,
      Federal Home Loan Bank stock, accrued interest receivable and payable,
      demand deposits, short-term debt, and variable rate loans or deposits that
      reprice frequently or fully. Security fair values are based on market
      prices or dealer quotes, and if no such information is available, on the
      rate and term of the security and information about the issuer. For fixed
      rate loans or deposits and for variable rate loans or deposits with
      infrequent repricing or repricing limits, fair value is based on
      discounted cash flows using current market rates applied to the estimated
      life and credit risk. Fair values for impaired loans are estimated using
      discounted cash flow analysis or underlying collateral values. Fair value
      of loans held for sale is based on market quotes. Fair value of debt is
      based on current rates for similar financing. The fair value of
      off-balance-sheet items is based on the current fees or cost that would be
      charged to enter into or terminate such arrangements, and was not
      considered material to this presentation.

                                       34


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE L - FINANCIAL INSTRUMENTS  AND OFF-BALANCE- SHEET RISK (Continued)

      Off-Balance-Sheet Risk

      The Corporation is party to financial instruments with off-balance-sheet
      risk in the normal course of business to meet the financing needs of its
      customers and to reduce its own exposure to fluctuations in interest
      rates. These financial instruments include commitments to extend credit
      and financial guarantees. These instruments involve, to varying degrees,
      elements of credit and interest rate risk that are not recognized in the
      consolidated financial statements.

      Exposure to credit loss in the event of nonperformance by the other party
      to the financial instrument for commitments to extend credit and financial
      guarantees written is represented by the contractual notional amount of
      those items. The Corporation generally requires collateral to support such
      financial instruments in excess of the contractual notional amount of
      those instruments and, therefore, is in a fully collateralized position.

      The Corporation had outstanding loan commitments aggregating $171,095,000
      and $186,729,000 at December 31, 2006 and 2005, respectively. Loan
      commitments for variable rate loans were $125,128,000 and $167,474,000 at
      December 31, 2006 and 2005, respectively. Loan commitments for fixed rate
      loans were $52,168,000 and $19,255,000 at December 31, 2006 and 2005,
      respectively. The fixed rate loan commitments at December 31, 2006 have
      interest rates ranging from 5.35% to 9.25% and maturities ranging from one
      year to eight years. A distribution of outstanding loan commitments by
      contractual maturity is shown below (in thousands):

      At December 31, 2006



                                                                         Commitment Period
                                                    ----------------------------------------------------------
                                                     Less than    1 - 3       4 - 5        Over
                                                      1 year      years       years       5 years     Totals
                                                    ----------  ----------  ----------  ----------  ----------
                                                                                     
Home equity lines of credit                         $      102  $      608  $    3,463  $   12,205  $   16,378
Residential loan commitments                             2,034         ---         ---         ---       2,034
Standby letters of credit                                5,195       3,017         ---         ---       8,212
Commercial lines of credit                              55,240       1,378       1,413         237      58,268
Other commercial commitments                            58,951      23,037       4,190          25      86,203
                                                    ----------  ----------  ----------  ----------  ----------

Totals                                              $  121,522  $   28,040  $    9,066  $   12,467  $  171,095
                                                    ==========  ==========  ==========  ==========  ==========


At December 31, 2005



                                                                      Commitment Period
                                                    ----------------------------------------------------------
                                                     Less than    1 - 3       4 - 5        Over
                                                      1 year      years       years      5 years      Totals
                                                    ----------  ----------  ----------  ----------  ----------
                                                                                     
Home equity lines of credit                         $       46  $      225  $      404  $   19,193  $   19,868
Residential loan commitments                             4,227         ---         ---         ---       4,227
Standby letters of credit                                2,159       5,839         992         ---       8,990
Commercial lines of credit                              59,572       1,167         413         909      62,061
Other commercial commitments                            57,862      21,697        3411  $    8,613      91,583
                                                    ----------  ----------  ----------  ----------  ----------

Totals                                              $  123,866  $   28,928  $    5,220  $   28,715  $  186,729
                                                    ==========  ==========  ==========  ==========  ==========


                                       35


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE L - FINANCIAL INSTRUMENTS AND OFF-BALANCE SHEET RISK (Continued)

      Commitments to extend credit are agreements to lend to a customer as long
      as there are no violations of any condition established in the contract.
      Commitments generally have fixed expiration dates or other termination
      clauses and may require a payment of a fee. Since portions of the
      commitments are expected to expire without being drawn upon, the total
      commitments do not necessarily represent future cash requirements. The
      Corporation evaluates each customer's credit worthiness on a case by case
      basis. The amount of collateral obtained upon extension of credit is based
      on management's credit evaluation of the customer.

NOTE M - EMPLOYEE BENEFIT PLANS

      The Bank maintains a 401(k) plan for its employees. All employees are
      eligible to participate in the 401(k) after completion of age and service
      requirements. An employee can be enrolled as a participant on the first
      "Enrollment Date" after reaching age 21 and completing six months of
      service.

      Contributions to the plan by the Bank are discretionary and are expensed
      as made. The Bank matches 50% of the first 6% of employee contributions to
      the plan. Employer contributions vest 20% per year for five years. During
      2006, 2005 and 2004, employer contributions were $171,000, $148,000 and
      $121,000, respectively.

NOTE N - REGULATORY MATTERS

      The Corporation and Bank are subject to various regulatory capital
      requirements administered by the federal banking agencies. Failure to meet
      minimum capital requirements can initiate certain mandatory and possibly
      additional discretionary actions by regulators that, if undertaken, could
      have a direct material effect on the financial statements. Under capital
      adequacy guidelines and, additionally for the Bank, the regulatory
      framework for prompt corrective action, the Corporation and Bank must meet
      specific capital guidelines that involve quantitative measures of assets,
      liabilities, and certain off-balance-sheet items as calculated under
      regulatory accounting practices. At December 31, 2006 and 2005, the most
      recent regulatory notifications categorized the Bank as well capitalized
      under the regulatory framework for prompt corrective action. There are no
      conditions or events since that notification that management believes have
      changed the institution's category. The capital amounts and
      classifications are also subject to qualitative judgments by the
      regulators about components, risk weightings, and other factors.

      Quantitative measures established by regulation to ensure capital adequacy
      require the Corporation and Bank to maintain minimum amounts and ratios
      (set forth in the following table) of total and Tier 1 capital (as defined
      in the regulations) to risk-weighted assets (as defined), and of Tier 1
      capital (as defined) to average assets (as defined).

                                       36


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE N - REGULATORY MATTERS (Continued)

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



                                                                                                               Minimum
                                                                                      Minimum           To Be Well Capitalized
                                                                                    for Capital         Under Prompt Corrective
                                                              Actual              Adequacy Purposes       Action Regulations
                                                      ----------------------   ----------------------   -----------------------
                                                        Amount      Ratio        Amount       Ratio       Amount       Ratio
                                                      ----------  ----------   ----------  ----------   ----------  -----------
                                                                                                  
As of December 31, 2006
   Total capital
      (to risk weighted assets)
          Consolidated                                   155,252       19.69%      63,066        8.00%         N/A          N/A
          Bank                                            85,451       11.06%      61,826        8.00%      77,283        10.00%
   Tier 1 capital
      (to risk weighted assets)
          Consolidated                                   147,477       18.71%      31,533        4.00%         N/A          N/A
          Bank                                            77,676       10.05%      30,913        4.00%      46,370         6.00%
   Tier 1 capital
      (to average assets)
          Consolidated                                   147,477       18.12%      32,555        4.00%         N/A          N/A
          Bank                                            77,676       10.11%      30,739        4.00%      38,424         5.00%

As of December 31, 2005
   Total capital
      (to risk weighted assets)
          Consolidated                                    93,281       13.29%      56,147        8.00%         N/A          N/A
          Bank                                            75,918       10.89%      55,756        8.00%      69,695        10.00%
   Tier 1 capital
      (to risk weighted assets)
          Consolidated                                    86,472       12.32%      28,073        4.00%         N/A          N/A
          Bank                                            69,109        9.92%      27,878        4.00%      41,817         6.00%
   Tier 1 capital
      (to average assets)
          Consolidated                                    86,472       12.32%      28,074        4.00%         N/A          N/A
          Bank                                            69,109       10.09%      27,400        4.00%      34,250         5.00%


      Federal and state banking laws and regulations place certain restrictions
      on the amount of dividends and loans a bank can pay to its parent company.
      Under the most restrictive of these regulations at December 31, 2006, the
      Bank could pay approximately $20,800,000 in dividends to the parent
      company without prior regulatory approval. No cash dividends have ever
      been paid by the Corporation.

                                       37


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE O - INCENTIVE STOCK PLANS

      Incentive stock awards have been granted to officers and employees under
      two Incentive Stock Plans. The first plan is the 1994 Stock Option Plan.
      Options to buy common stock have been granted to officers and employees
      under the 1994 Stock Option Plan, which provides for issue of up to
      814,449 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. No options are available for grant under this
      plan.

      A summary of the option activity in the 1994 Plan follows:



                                                                      Weighted
                                           Available                   Average
                                              for        Options       Exercise
                                             Grant     Outstanding      Price
                                          -----------  -----------   -----------
                                                            
Outstanding at January 1, 2004                    ---      754,227          7.82
Exercised                                         ---      (97,277)         7.10
                                          -----------  -----------   -----------
Outstanding at December 31, 2004                  ---      656,950          7.93
Exercised                                         ---     (139,810)         7.66
                                          -----------  -----------   -----------
Outstanding at December 31, 2005                  ---      517,140          8.00
Exercised                                         ---      (48,717)         6.40
                                          -----------  -----------   -----------
Outstanding at December 31, 2006                  ---      468,423   $      8.16
                                          ===========  ===========   ===========


      Options outstanding under the 1994 Plan at December 31, 2006 were as
      follows:



                                             Outstanding                     Exerciseable
                                -------------------------------------  ------------------------

                                              Weighted
                                               Average     Weighted                   Weighted
                                              Remaining     Average                   Average
                                             Contractual   Exercise                   Exercise
Range of Exercise Prices           Number        Life        Price       Number        Price
- ------------------------        -----------  -----------  -----------  -----------  -----------
                                                                     
$4.96 - $9.36                       349,840    3.9 years  $      6.48      349,840  $      6.48
$10.97 - $14.65                     118,583    6.1 years  $     13.15      118,583  $     13.15
                                -----------                            -----------

Totals                              468,423    5.3 years  $      8.16      468,423  $      8.16
                                ===========                            ===========


                                       38


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE O - INCENTIVE STOCK PLANS (Continued)

At December 31, 2006, 2005 and 2004, 468,423, 517,140 and 656,950 options were
exercisable at weighted average exercise prices of $8.16, $8.00 and $7.93 per
share, respectively. On December 31, 2006, there were no shares available for
grant under the 1994 Plan.

There were no antidilutive options outstanding for the years ended December 31,
2006 and 2005. The intrinsic value of options exercised during the years ended
December 31, 2006, 2005 and 2004 were approximately $707,000, $1,592,000 and
$1,280,000, respectively. The intrinsic value of options outstanding at December
31, 2006 was approximately $5,077,000.

During 2005, the Corporation initiated the 2005 Long-Term Incentive Plan. Under
this plan, up to 347,248 shares may be granted to officers and employees of the
Bank. This plan provides that stock awards may take the form of any combination
of options, shares, share units or performance awards.

The administration of the plan, including the granting of awards and the nature
of those awards is determined by the Corporation's Compensation Committee. In
August of 2006, the Corporation's Compensation Committee authorized and Board of
Directors approved grants of stock options and restricted stock . The awards
have a term of ten years and typically vest fully three years from the grant
date. In order for vesting to occur, the Corporation must meet certain
performance criteria. The expected compensation cost of the 2005 plan is being
calculated assuming the Corporation's attainment of "target" performance goals
over the vesting period of the options. The actual cost of these awards could
range from zero to 150% of the currently recorded compensation cost, depending
on the Corporation's performance.

Stock Options Granted - The incentive stock options were granted with exercise
prices equal to market prices on the day of grant. The weighted average fair
value of the options granted at grant date was $7.83 and $8.36 for options
granted during 2006 and 2005, respectively. The following assumptions were used
to determine weighted average fair value of the options granted at grant date:



                                                 2006        2005
                                             -----------  -----------
                                                    
Risk-free interest rate                             4.77%        4.39%
Expected option life                           6.5 years    6.5 years
Dividend yield                                      0.00%        0.00%
Expected volatility of stock price                 18.37%       25.09%


                                       39


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE O - INCENTIVE STOCK PLANS (Continued)

A summary of the plan's option activity during 2005 and 2006 is as follows:



                                                                 Weighted
                                                                 Average
                                                      Number     Exercise
                                                     of Shares    Price
                                                    ----------  ----------
                                                          
Outstanding at January 1, 2005                             ---
Shares Granted - Stock Options                          17,467  $    20.83
                                                    ----------  ----------
Outstanding at December 31, 2005                        17,467         ---
Shares Granted - Stock Options                          17,784       22.81
                                                    ----------  ----------
Outstanding at December 31, 2006                        35,251  $    21.83
                                                    ==========  ==========

Options exercisable                                        ---
                                                    ==========


During the twelve months ended December 31, 2006, the Corporation recognized
stock option compensation expense of $67,000. The stock options vest on June 30,
2008 and June 30, 2009. Compensation cost of $87,000, $44,000 and $22,000 is
expected to be recognized during 2007, 2008 and 2009, respectively.

Stock Grants - Stock awards are granted to officers. A summary of the plan's
stock award activity is as follows:



                                                      Number       Grant Date
                                                     of Shares   Value per Share
                                                    ----------   ---------------
                                                           
Outstanding at January 1, 2005                             ---
Shares Awarded                                          12,843   $         20.83
                                                    ----------
Outstanding at December 31, 2005                        12,843
Shares Awarded                                          12,239   $         22.81
Shares Forfeited                                          (513)
                                                    ----------
Outstanding at December 31, 2006                        24,569
                                                    ==========

Shares vested                                              ---
                                                    ==========


The stock grants vest on June 30, 2008 and June 30, 2009. Compensation cost of
$151,000 was recognized during the twelve months ended December 31, 2006.
Compensation cost of $197,000, $93,000 and $47,000 is expected to be recognized
during 2007, 2008 and 2009, respectively.

                                       40


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE P - INCOME PER SHARE

      The following is a reconciliation of the numerator and denominator of the
      basic and diluted income per share calculation for the years ended
      December 31, 2006, 2005 and 2004 (in thousands, except share and per share
      data):



                                                       2006        2005        2004
                                                    ----------  ----------  ----------
                                                                   
Basic
       Net income                                   $    7,819  $    7,510  $    5,509

       Weighted average common shares                6,372,471   5,899,281   4,767,907

       Basic earnings per common share              $     1.23  $     1.27  $     1.16

Diluted
       Net income                                   $    7,819  $    7,510  $    5,509

       Weighted average common shares
             outstanding for basic earnings per
             common share                            6,372,471   5,899,281   4,767,907

       Add: Dilutive effects of assumed                299,848     375,123     449,094
            exercise of stock options

        Average shares and dilutive potential
             common shares                           6,672,319   6,274,404   5,217,001

        Dilutive earnings per common share          $     1.17  $     1.20  $     1.06


      Stock options for 35,251 shares of common stock were not considered in
      computing diluted earnings per common share for 2006 because they were
      antidilutive. There were no antidilutive options in 2005 or 2004. All
      share and per share amounts have been adjusted for stock dividends.

                                       41


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE Q - PARENT ONLY CONDENSED FINANCIAL INFORMATION

      The condensed financial information that follows presents the financial
      condition of the parent company, Dearborn Bancorp, Inc., along with the
      results of its operations and its cash flows.

                            CONDENSED BALANCE SHEETS



                                                                   December 31,
                                                              ----------------------
(In thousands)                                                   2006        2005
                                                              ----------  ----------
                                                                    
ASSETS
          Cash and cash equivalents                           $   63,416   $   2,516
          Securities available for sale                            4,065      12,629
          Investment in subsidiary                                85,192      76,850
          Other assets                                             2,568       2,074
                                                              ----------  ----------

          Total assets                                        $  155,241   $  94,069
                                                              ==========  ==========

LIABILITIES AND
     STOCKHOLDERS' EQUITY
          Other liabilities                                   $      256  ($     144)
          Subordinated debentures                                 10,000      10,000
                                                              ----------  ----------

          Total liabilities                                       10,256       9,856
                                                              ----------  ----------

          Stockholders' equity                                   144,985      84,213
                                                              ----------  ----------

          Total liabilities and stockholders' equity          $  155,241   $  94,069
                                                              ==========  ==========


                         CONDENSED STATEMENTS OF INCOME



                                                       Years Ended December 31,
                                                ------------------------------------
(In thousands)                                     2006         2005         2004
                                                ----------   ----------   ----------
                                                                 
Interest income                                 $      948   $      447   $      260
Operating expenses                                   1,446        1,092          919
                                                ----------   ----------   ----------

Net loss before equity in undistributed
          income of subsidiary                        (498)        (645)        (659)
Equity in undistributed income
          of subsidiary                              8,317        8,155        6,168
                                                ----------   ----------   ----------

                    Net income                  $    7,819   $    7,510   $    5,509
                                                ==========   ==========   ==========


                                       42


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE Q - PARENT ONLY CONDENSED FINANCIAL INFORMATION (Continued)

                       CONDENSED STATEMENTS OF CASH FLOWS



                                                                         Years Ended December 31,
                                                                   ------------------------------------
(In thousands)                                                         2006        2005         2004
                                                                   ----------   ----------   ----------
                                                                                    
Cash flows from operating activities
          Net income                                               $    7,819   $    7,510   $    5,509
          Adjustments to reconcile net income
          to net cash provided by operating activities
               Equity in undistributed income of subsidiary            (8,317)      (8,155)      (6,168)
               Other, net                                                  81          (52)        (291)
                                                                   ----------   ----------   ----------
Net cash flows provided by operating activities                          (417)        (697)        (950)

Cash flows from investing activities
          Investment in subsidiary                                        ---       (2,000)     (22,101)
          Purchases of securities, available for sale                 (77,920)     (11,496)     (29,595)
          Proceeds from the sale of securities available for sale      77,840
          Proceeds from calls, maturities and repayments
              of securities available for sale                          8,700        9,885       23,150
          Property and equipment acquired                                 ---          (20)         ---
                                                                   ----------   ----------   ----------

Net cash flows used in investing activities                             8,620       (3,631)     (28,546)

Cash flows from financing activities
          Proceeds from exercise of stock options                         292        1,028          616
          Repurchase of common stock                                   (2,824)         ---          ---
          Issuance of common stock                                     55,131          ---       34,040
          Tax benefit of stock options exercised                           98          426          518
          Decrease in note payable                                        ---          ---       (1,000)
                                                                   ----------   ----------   ----------

Net cash flows used in financing activities                            52,697        1,454       34,174
                                                                   ----------   ----------   ----------

Increase (decrease) in cash and cash equivalents                       60,900       (2,874)       4,678

Cash and cash equivalents at the beginning of year                      2,516        5,390          712
                                                                   ----------   ----------   ----------

Cash and cash equivalents at end of year                           $   63,416   $    2,516   $    5,390
                                                                   ==========   ==========   ==========


                                       43


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE R - QUARTERLY FINANCIAL DATA (UNAUDITED)

      (In thousands, except per share data)



                                Interest  Net Interest    Net        Earnings per share
                                 Income     Income       Income     Basic   Fully diluted
                                --------  ------------  --------  --------  -------------
                                                             
2006
     First quarter              $ 12,244  $      6,856  $  1,946  $   0.33  $        0.31
     Second quarter               13,062         6,956     2,056      0.34           0.33
     Third quarter                13,870         6,846     1,565      0.26           0.25
     Fourth quarter               14,710         7,344     2,252      0.30           0.29

2005
     First quarter              $  9,892  $      6,580  $  1,765  $   0.30  $        0.28
     Second quarter (1)           10,638         6,665     1,412      0.24           0.23
     Third quarter                11,334         7,053     2,079      0.35           0.33
     Fourth quarter               11,991         7,154     2,254      0.38           0.36


(1)   During the second quarter of 2005, the Corporation recognized an "Other
      Than Temporary Loss" of $696,000. This write-down of securities, available
      for sale resulted in a decrease to net income of $459,000, which decreased
      basic earnings per share and diluted earnings per share by $.08 and $.07,
      respectively.

                                       44


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE S - ACQUISITION

On January 4, 2007, the Corporation acquired the Fidelity Financial Corporation
of Michigan (Fidelity) for $70,500,000 in cash. As of January 4, 2007, the
assets and liabilities of Fidelity at acquisition and net income derived from
those assets and liabilities since the acquisition have been consolidated into
the Bank. Fidelity was founded in 1973 and has its main office in Birmingham,
Michigan with single branch offices in Bloomfield Township, Michigan and Bingham
Farms, Michigan and four branch offices in Southfield, Michigan. As of December
31, 2006, Fidelity had total assets of $220,419,000, gross loans of $179,553,000
and total deposits of $187,547,000.

The acquisition of Fidelity will enable the Corporation to build a competitive
presence in Oakland County for the Bank's loan and deposit products. Management
expects to build upon Fidelity's reputation and continue to increase the Bank's
presence in Oakland County, while decreasing operating expenses by utilizing the
infrastructure and operational capabilities already in place at the Bank.

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 $11,200,000. Goodwill aggregates
to $25,700,000.

The following table presents pro forma information for the Corporation including
the acquisition of Fidelity for the year ended December 31, 2006 as if the
acquisition had occurred at the beginning of 2006. The pro forma financial
information does not purport to be indicative of the operating results or
financial position that would have actually occurred or existed if the
transactions had occurred on the dates indicated, nor is it indicative of our
future operating results or our financial position


                                       45


                      DEARBORN BANCORP, INC. AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 2006, 2005 AND 2004

NOTE S - ACQUISITION (Continued)
(In thousands, except share and per share data)



                             Dearborn   Fidelity   Adjustments    Combined
                             --------   --------   -----------   ----------
                                                     
Interest income               $53,886    $16,096       ($441)    $   69,541
Interest expense               25,884      4,840          52         30,776
                              -------    -------     -------     ----------
   Net interest income         28,002     11,256        (493)        38,765
Provision for loan loss           943        400          --          1,343
                              -------    -------     -------     ----------
   Net interest income
      after provision
      for loan losses          27,059     10,856        (493)        37,422
Non-interest income               925      1,214          --          2,139
Non-interest expense           16,225      7,623       1,199         25,047
                              -------    -------     -------     ----------
   Income before income
      tax provision            11,759      4,447      (1,692)        14,514
Income tax provision            3,940         --         937          4,877
                              -------    -------     -------     ----------
Net income                    $ 7,819    $ 4,447     ($2,629)    $    9,637
                              =======    =======     =======     ==========
Basic earnings per share                                         $     1.07
Diluted earnings per share                                       $     1.03
Weighted average shares
   outstanding - basic                                            9,028,878
Weighted average shares
   outstanding - diluted                                          9,328,726


The adjustments related to net interest income are due to financing costs
related to funding the acquisition. The adjustments related to non interest
income are entirely due to the amortization of intangible assets and additional
depreciation expense. The adjustments related to income tax provision are due to
the income tax effects of the other adjustments and the income taxes on
Fidelity's 2006 pre-tax income. Fidelity was a Subchapter S Corporation and did
not record income tax expense.


                                       46


           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

COMPANY OVERVIEW

Dearborn Bancorp, Inc. was incorporated as a Michigan business corporation on
September 30, 1992. The Corporation was formed to acquire all of the Bank's
issued and outstanding stock and to engage in the business of a bank holding
corporation under the Bank Holding Company Act of 1956, as amended (the "Act").

Community Bank of Dearborn (the "Bank"), a Michigan banking corporation,
commenced business on February 28, 1994 in Dearborn, Michigan. The Bank is the
only commercial bank headquartered in Dearborn, Michigan and offers a full line
of loan and deposit products and services. The Bank offers excellent customer
service to its loan and deposit customers and maintains strong relationships
with the communities served by the Bank. The Bank emphasizes strong loan
quality, excellent customer service and efficient operations in order to
maximize profitability and shareholder value.

Subsequent to the commencement of business in Dearborn, Michigan in 1994, the
Bank opened five additional offices in Wayne County, Michigan. Since 2001, the
Bank two offices in Macomb County, Michigan and in 2003, the Bank opened an
office in Oakland County, Michigan.

In 2004, the Corporation acquired the Bank of Washtenaw from Pavillion Bancorp.
The Bank of Washtenaw's three banking offices, all of which are located in
Washtenaw County, Michigan were successfully consolidated into the Community
Bank of Dearborn. The Bank currently operates twelve banking offices in Wayne,
Macomb, Oakland and Washtenaw Counties, Michigan.

In September of 2006, the Corporation signed a definitive agreement to acquire
Fidelity Financial Corporation of Michigan (Fidelity), a commercial bank with
seven offices in Oakland County, Michigan. The acquisition will significantly
expand the Bank's presence in Oakland County, Michigan. Management believes that
the acquisition will be beneficial to the Bank's customers and the Corporation's
shareholders. This acquisition was completed on January 4, 2007.

The Bank will open a banking office in Shelby Township, Michigan during the
second quarter of 2007. A list of banking offices is shown on the following
page.

While maintaining high asset quality and improving profitability, the Bank has
sustained substantial asset growth. The expansion of our commercial banking
department has been a primary element in the Bank's asset growth. This growth
has been funded primarily by deposits. The Corporation expects to continue its
growth in the Metropolitan Detroit market and look for additional acquisitions
as they become available.

The Corporation's earnings depend primarily on net interest income. Management
strives to maximize net interest income through monitoring the economic and
competitive environment and making appropriate adjustments in the
characteristics and pricing of our products and services.

Other factors that contribute significantly to our earnings are the maintenance
of strong asset quality and efficient operations. Management continually
monitors the quality of the loan portfolio and the impact of the economic and
competitive environment and takes appropriate measures to maintain high asset
quality. Management does not expect the acquisition of Fidelity to have a
significant impact on the Bank's asset quality.

The Bank's market area consists primarily of the Metropolitan Detroit area. This
is a large real estate market and the Bank's loan portfolio accounts for less
than one percent of this market. The Detroit real estate market has been
negatively impacted by the unfavorable economic conditions in the State of
Michigan. Despite the local economy and its impact on certain industries, many
local industries and economies are prospering. The Bank has maintained strong
asset quality in this environment by enforcing strong underwriting guidelines
and utilizing a diligent loan review process.

                                       47


Net income during the year ended December 31, 2006 was affected by a compression
in net interest income compared with the same period in 2005. This was the
result of competitive pricing pressure in both loans and deposit generation.
Additionally, the continuation of a flat treasury yield has resulted in lower
interest rates spreads than in other reporting periods.

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, Suite 110         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

October 2004     450 East Michigan Avenue                   Full service retail branch with ATM
                 Saline, MI 48176

October 2004     250 West Eisenhower Parkway, Suite 100     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



                                       48


FORWARD-LOOKING STATEMENTS

The following discussion 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.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The "Management's Discussion and Analysis of Financial Condition and Results of
Operations", as well as disclosures found elsewhere in the annual report, are
based upon the consolidated financial statements of Dearborn Bancorp, Inc.,
which have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of these financial
statements requires Dearborn Bancorp, Inc. to make estimates and judgements that
affect the reported amounts of assets, liabilities, revenues and expenses.
Material estimates that are particularly susceptible to significant change in
the near term relate to the determination of the allowance for loan loss. Actual
results could differ from those estimates.

The allowance for loan loss is maintained at a level believed adequate by
management to absorb probable incurred losses in the loan portfolio.
Management's evaluation of the adequacy of the allowance for loan loss is an
estimate based on reviews of individual loans, assessments of the impact of
current economic conditions on the portfolio, and historical loss experience.
See Note C of the Notes to Consolidated Financial Statements and the discussion
of "Allowance for Loan Loss" in the Management's Discussion and Analysis.

Management believes the accounting estimates related to the allowance for loan
loss is a "critical accounting estimate" because:

      1)    The estimates are highly susceptible to change from period to period
            and require management to make judgements concerning the quality of
            the loan portfolio and the impact of current economic conditions on
            borrowers' ability to repay their loans.

      2)    The impact of recognizing an impairment or loan loss could have a
            material effect on the financial statements of Dearborn Bancorp,
            Inc.

      3)    The Bank's rapid growth and entry into new markets make estimating
            the required analysis more complicated and result in past experience
            not being as reliable an indicator of current loss exposure as it
            might be otherwise.

Management has discussed the development and selection of these critical
accounting estimates with the audit committee of the board of directors and the
audit committee has reviewed the Corporation's disclosures related to them in
this Management's Discussion and Analysis.

                                       49


RESULTS OF OPERATIONS

2006 Compared to 2005. The Corporation reported net income of $7,819,000 in 2006
compared to $7,510,000 in 2005, an increase of $309,000 or 4%. The Corporation's
increase in net income was primarily due to an increase in net interest income
and the $696,000 impairment on securities in 2005, partially offset by increases
in non-interest expense.

2005 Compared to 2004. The Corporation reported net income of $7,510,000 in 2005
compared to $5,509,000 in 2004, an increase of $2,001,000 or 36%. The
Corporation's increase in net income was primarily due to an increase in net
interest income, partially offset by a decrease in other income and increases in
non-interest expense.

NET INTEREST INCOME

2006 Compared to 2005. Net interest income for the year ended December 31, 2006
was $28,002,000 compared to $27,452,000 for the year ended December 31, 2005, an
increase of $550,000 or 2%. The increase in net interest income was primarily
due to increases in the volume of interest earning assets and interest bearing
liabilities. The Corporation's net interest rate spread decreased to 3.07% in
2006 from 3.63% in 2005, a decrease of 56 basis points. The decrease in the net
interest rate spread was due to liability costs increasing faster than asset
yields. The Corporation's net interest margin decreased to 3.80% in 2006 from
4.14% in 2005.

Average interest earning assets grew by $75.5 million between the periods while
interest bearing liabilities grew by $64.0 million. While management is
continually reviewing spreads and margins, future increases in the net interest
margin are primarily expected from continued volume growth in the higher
yielding loan portfolio and the diversification of the Bank's deposit structure.
The primary source of funding for the expected growth in the loan portfolio is
deposit growth. During 2007, the Corporation is expecting the net interest rate
spread and net interest rate margin to increase slightly as a result of
diversification of the deposit mix and an expected decrease in short-term
interest rates.

2005 Compared to 2004. Net interest income for the period ended December 31,
2005 was $27,452,000 compared to $20,381,000 for the period ended December 31,
2004, an increase of $7,071,000 or 35%. The increase in net interest income was
primarily due to increases in the volume of interest earning assets and interest
bearing liabilities. The Corporation's net interest rate spread decreased to
3.63% in 2005 from 3.69% in 2004, a decrease of 6 basis points. The decrease in
the net interest rate spread was due to liability costs increasing faster than
asset yields. Additionally, the Bank has improved its asset mix by deploying a
larger proportionate share of its funds into loans. The increase in the cost of
deposits was primarily due to the repricing of the Bank's time deposits. The
Corporation's net interest margin increased to 4.14% in 2005 from 4.04% in 2004.

                                       50


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.

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 net loan category.



                                              Year ended December 31, 2006            Year ended December 31, 2005
                                           ------------------------------------    -----------------------------------
                                            Average                    Average      Average                   Average
(In thousands)                              Balance       Interest       Rate        Balance      Interest      Rate
                                           ----------    ---------     -------     ----------    ---------    -------
                                                                                            
Assets
  Interest-bearing deposits with
   banks                                   $    3,333    $     158      4.74%      $    3,675    $     111     3.02%
  Federal funds sold                           11,682          573      4.90%           7,783          242     3.11%
  Investment securities, available
   for sale                                    19,555          893      4.57%          19,673          598     3.04%
  Loans                                       703,590       52,321      7.44%         631,491       42,904     6.79%
                                           ----------    ---------      ----       ----------    ---------     ----
    Sub-total earning assets                  738,160       53,945      7.31%         662,622       43,855     6.62%
  Other assets                                 28,876                                  30,220
                                           ----------                              ----------

    Total assets                           $  767,036                              $  692,842
                                           ==========                              ==========

Liabilities and stockholders' equity
  Interest bearing deposits                $  568,095    $  23,447      4.13%      $  506,228    $  14,427     2.85%
  Other borrowings                             43,694        2,437      5.58%          41,564        1,976     4.75%
                                           ----------    ---------      ----       ----------    ---------     ----
    Sub-total interest bearing
     liabilities                              611,789       25,884      4.23%         547,792       16,403     2.99%
  Non-interest bearing deposits                57,647                                  63,164
  Other liabilities                             2,224                                   2,305
  Stockholders' equity                         95,376                                  79,581
                                           ----------                              ----------

  Total liabilities and stockholders'
   equity                                  $  767,036                              $  692,842
                                           ==========                              ==========

    Tax equivalent net interest income                   $  28,061                               $  27,452
                                                         =========                               =========

    Net interest rate spread                                            3.08%                                  3.63%
                                                                        ====                                   ====

    Net interest margin on earning
     assets                                                             3.80%                                  4.14%
                                                                        ====                                   ====

    Tax equivalent adjustment                                  (59)                                     --
                                                         ---------                               ---------

    Net interest income                                  $  28,002                               $  27,452
                                                         =========                               =========


                                       51


(continued)



                                                     Year Ended December 31, 2004
                                                  ---------------------------------
                                                   Average                 Average
(In thousands)                                     Balance     Interest     Rate
                                                  ---------    --------    --------
                                                                  
Assets
  Interest-bearing deposits with banks            $   9,305    $    129      1.39%
  Federal funds sold                                 10,602         161      1.52%
  Investment securities, available for sale          23,122         460      1.99%
  Loans                                             460,840      29,040      6.30%
                                                  ---------    --------      ----
    Sub-total earning assets                        503,869      29,790      5.91%
  Other assets                                       19,715
                                                  ---------

    Total assets                                  $ 523,584
                                                  =========

Liabilities and stockholders' equity
  Interest bearing deposits                       $ 393,004    $  8,013      2.04%
  Other borrowings                                   30,634       1,396      4.56%
                                                  ---------    --------      ----
    Sub-total interest bearing liabilities          423,638       9,409      2.22%
  Non-interest bearing deposits                      45,456
  Other liabilities                                   2,339
  Stockholders' equity                               52,151
                                                  --------

    Total liabilities and stockholders' equity    $ 523,584
                                                  =========

    Tax equivalent net interest income                         $ 20,381
                                                               ========

    Net interest rate spread                                                 3.69%
                                                                             ====

    Net interest margin on earning assets                                    4.04%
                                                                             ====

    Tax equivalent adjustment                                        --
                                                               --------

    Net interest income                                        $ 20,381
                                                               ========


                                       52


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.



                                                        2006/2005                              2005/2004
                                               Change in Interest Due to:              Change in Interest Due to:
                                            ---------------------------------       ----------------------------------
                                            Average      Average       Net          Average      Average        Net
(In thousands)                              Balance       Rate        Change        Balance       Rate        Change
                                            -------      -------     --------       --------     --------    ---------
                                                                                          
Assets
  Interest bearing deposits with banks     ($    16)     $    63     $     47      ($     94)    $     76    ($     18)
  Federal funds sold                            191          140          331             (3)          84           81
  Investment securities, available
   for sale                                      (5)         300          295             14          124          138
  Loans                                       5,361        4,056        9,417         12,728        1,136       13,864
                                            -------      -------     --------       --------     --------     --------
Total earning assets                        $ 5,531      $ 4,559     $ 10,090       $ 12,645     $  1,420     $ 14,065
                                            =======      =======     ========       ========     ========     ========

Liabilities
  Interest bearing deposits                 $ 2,553        6,467     $  9,020       $  4,820        1,594     $  6,414
  Other borrowings                              119          342          461            550           30          580
                                            -------      -------     --------       --------     --------     --------
Total interest bearing liabilities          $ 2,672      $ 6,809     $  9,481       $  5,370     $  1,624     $  6,994
                                            =======      =======     ========       ========     ========     ========

     Tax equivalent net interest
      income                                                         $    609                                 $  7,071
                                                                     ========                                 ========

     Net interest rate spread                                           (0.55%)                                  (0.06%)
                                                                     ========                                 ========

     Net interest margin on earning
      assets                                                            (0.34%)                                   0.10%
                                                                     ========                                 ========


PROVISION FOR LOAN LOSSES

2006 Compared to 2005. The provision for loan losses was $943,000 in 2006,
compared to $1,081,000 in 2005, a decrease of $138,000 or 13%. The decrease was
primarily due to a decrease in net charge-offs during 2006. While loan growth
increased to 15% during 2006 compared to 12% during 2005, the Bank recorded net
recoveries of $24,000 compared to net charge-offs of $157,000 during 2005.

The provision for loan losses is based upon management's assessment of relevant
factors, including types and amounts of non-performing loans, historical loss
experience on such types of loans, the relevant change in the size and mix of
the loan portfolio and the impact of current economic conditions on borrowers'
ability to repay their loans.

2005 Compared to 2004. The provision for loan losses was $1,081,000 in 2005,
compared to $1,400,000 in 2004, a decrease of $319,000 or 23%. The decrease was
primarily due to slightly lower loan growth and slightly improved asset quality
during 2005. While net charge-offs increased to $157,000 in 2005 from $14,000 in
2004, non-performing loans declined from $3,099,000 at December 31, 2004 to
$1,173,000 at December 31, 2005.

                                       53


NON-INTEREST INCOME

2006 Compared to 2005. Non-interest income was $925,000 in 2006, compared to
$505,000 in 2005, an increase of $420,000 or 83%. The increase was primarily due
to a write-down and subsequent loss on the sale of a single issue of FHLMC
preferred stock during 2005. This loss is discussed further in the following
paragraph. When the write-down and subsequent sale of the FHLMC preferred stock
is excluded from non-interest income, non-interest income during 2006 is
$320,000 or 26% lower than non interest income in 2005. This decrease was
primarily due to a decrease in the gain on sale of loans and an increase in the
loss on the sale of real estate. Gain on the sale of loans decreased from
$361,000 in 2005 to $145,000 in 2006, due to a decrease in loans sold during
2006. The Corporation recorded loss on the sale of real estate owned of $103,000
during 2006, compared to a gain on the sale of real estate of $92,000 during
2005.

2005 Compared to 2004. Non-interest income was $505,000 in 2005, compared to
$1,065,000 in 2004, a decrease of $560,000 or 53%. The decrease was primarily
due to a write-down and subsequent loss on the sale of a single issue of FHLMC
preferred stock. A $696,000 write-down, and a $44,000 loss on the sale of the
FHLMC preferred stock were recognized during 2005. Non-interest income excluding
the write-down and subsequent sale of the FHLMC preferred stock was $1,245,000,
which was an increase of $180,000 or 17% from 2004.

NON-INTEREST EXPENSE

2006 Compared to 2005. Non-interest expense was $16,225,000 in 2006 compared to
$15,499,000 in 2005, an increase of $726,000 or 5%. The largest component of the
change in non-interest expense was salaries and employee benefits which amounted
to $10,288,000 in 2006 compared to $9,402,000 in 2005, an increase of $886,000
or 9%. As of December 31, 2006, the number of full time equivalent employees was
157 compared to 151 as of December 31, 2005.

2005 Compared to 2004. Non-interest expense was $15,499,000 in 2005 compared to
$11,700,000 in 2004, an increase of $3,799,000 or 32%. The largest component of
the change in non-interest expense was salaries and employee benefits which
amounted to $9,402,000 in 2005. In 2004, salaries and employee benefits were
$7,722,000. The primary factors for the increase in salaries and employee
benefits expense was the first full year of operations of the three branch
offices that the Bank acquired as a result of the Bank of Washtenaw acquisition
in October of 2004.

The second largest component of the change in non-interest expense was occupancy
and equipment expense, which amounted to $2,528,000 in 2005. In 2004, occupancy
and equipment expense amounted to $1,582,000. Primary factors in the increase
were the first full year of operations at the Bank's Operations Center and at
the three branch offices that were acquired as a result of the Bank of Washtenaw
acquisition. Additionally, various technology investments were made throughout
the Bank.

INCOME TAX PROVISION

2006 Compared to 2005. The income tax expense was $3,940,000 in 2006 compared to
$3,867,000 in 2005, an increase of $73,000 or 2%. The increase was primarily due
to the increase in income before federal income tax as the effective tax rate
remained fairly stable. The effective tax rate declined to 33.5% in 2006 from
34% in 2005 due to short term investments in tax free securities during the
fourth quarter of 2006. Refer to Note K of the Notes to Consolidated Financial
Statements for additional information.

2005 Compared to 2004. The income tax expense was $3,867,000 in 2005 compared to
$2,837,000 in 2004, an increase of $1,030,000 or 36%. The increase was primarily
due to the increase in income before federal income tax as the effective tax
rate remained stable.

                                       54


COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 2006 AND DECEMBER 31, 2005

Assets. Total assets at December 31, 2006 were $855,931,000 compared to
$706,497,000 at December 31, 2005, an increase of $149,434,000 or 21%. The
increase was primarily due to increases in loans and federal funds sold. The
increase in federal funds sold was primarily due to the funds received from the
issuance of 2,918,250 shares of common stock. Funds received from the issuance
of common stock amounted to $55,100,000. These funds were utilized to fund the
acquisition of Fidelity Financial Corporation of Michigan on January 4, 2007.

Securities Available for Sale. Total securities available for sale, at December
31, 2006 were $5,878,000 compared to $17,153,000 at December 31, 2005, a
decrease of $11,275,000 or 66%. During 2006, the Corporation sold $97.9 million
in securities and $12.8 million in securities were called or matured. $77.9
million or 80% of the securities sold during 2006 were securities that were
invested for a short duration with funds from the sale of common stock on
November 4, 2007. These securities were sold on December 29, 2006 and the funds
from the sale were utilized to partially fund the acquisition of Fidelity on
January 4, 2007. The Bank's portfolio of securities available for sale has an
amortized cost and a fair value of $5.9 million. The securities at December 31,
2006 are as follows (in thousands):



                                                           Gross            Gross
                                       Amortized        Unrealized        Unrealized         Fair
                                          Cost             Gains            Losses           Value
                                       -----------      ----------        ----------      -----------
                                                                                 
US Treasury securities                 $     4,982      $       --        ($      14)     $     4,968
Municipal bonds                                497               4                --              501
Mortgage backed securities                     407               2                --              409
                                       -----------      ----------        ----------      -----------

          Totals                       $     5,886      $        6        ($      14)     $     5,878
                                       ===========      ==========        ==========      ===========


A maturity and repricing schedule of the securities portfolio at December 31,
2006 is listed below (in thousands):



                           Less than one year        One to five years          Over five years
                                       Weighted                 Weighted                 Weighted
                                        Average                  Average                  Average
                           Amount       Yield        Amount       Yield       Amount       Yield      Total
                          ---------    --------    ---------    --------    ---------    --------    --------
                                                                                
US Treasury securities    $   4,968      4.79%     $      --        --      $      --        --      $  4,968
Municipal securities             80      3.70%           421      3.82%            --        --           501
Mortgage backed
  securities                     --        --            242      5.70%           167      6.13%          409
                          ---------      ----      ---------      ----      ---------      ----      --------

          Totals          $   5,048                $     663                $     167                $  5,878
                          =========                =========                =========                ========


The entire portfolio has a net unrealized loss of $8,000. The unrealized loss is
reflected by an adjustment to stockholders' equity. The Corporation does not
hold any securities in the "Held to Maturity" category nor does the Corporation
hold or utilize derivatives.

                                       55


Loans. Total loans at December 31, 2006 were $756,420,000 compared to
$657,037,000 at December 31, 2005, an increase of $99,383,000 or 15%. The
components of the outstanding balances for the years ended December 31, are as
follows (in thousands):



                                          2006          2005          2004          2003          2002
                                       ----------    ----------    ----------    ----------    ----------
                                                                                
Consumer loans                         $   32,282    $   35,041    $   42,149    $   25,200    $   22,170
Commercial, financial, & other            130,056       110,805       129,103        68,922        46,187
Commercial real estate construction       137,596       118,358        72,286        50,087        30,083
Commercial real estate mortgages          410,829       345,536       296,634       208,305       139,243
Residential real estate mortgages          45,657        47,297        47,090        48,444        29,839
                                       ----------    ----------    ----------    ----------    ----------

                                       $  756,420    $  657,037    $  587,262    $  400,958    $  267,522
                                       ==========    ==========    ==========    ==========    ==========


During 2006, loans increased in commercial real estate construction and
commercial real estate mortgages. The decline in consumer loans was primarily
due to the increase in short term interest rates. This category is comprised
primarily of home equity lines of credit. The decrease in residential real
estate mortgages was primarily due to the decrease in demand for residential
real estate.

The Bank expects the percentage of total commercial loans to increase as a
percentage of the loan portfolio in 2007 via business development programs.
Additionally, the Bank expects the largest loan growth to occur in the
commercial real estate mortgage category. These types of loans carry a
relatively large average balance, produce more cross-selling opportunities and
are typically well secured by real estate. The Bank believes that the higher
level of risk that is also inherent with these types of loans is offset by the
Bank with high standards for credit quality and a well-seasoned group of
commercial lenders.

                                       56


A maturity and repricing schedule of the loan portfolio, which distributes fixed
rate loans by maturity date and adjustable rate loans by repricing date at
December 31, 2006 is listed below (in thousands):



                                         Within       Three to       One to        After
                                          Three        Twelve         Five          Five
                                         Months        Months         Years         Years        Total
                                       ----------    ----------    ----------    ----------    ----------
                                                                                
Consumer loans                         $   24,899    $      675    $    6,218    $      426    $   32,218
Commercial, financial & other              72,824        10,692        40,503         6,037       130,056
Commercial real estate construction       110,800        11,845        10,025         2,416       135,086
Commercial real estate mortgages           51,813        18,842       320,941        15,160       406,756
Residential real estate mortgages           2,900         6,991        27,332         9,521        46,744
                                       ----------    ----------    ----------    ----------    ----------

                                       $  263,236    $   49,045    $  405,019    $   33,560       750,860
                                       ==========    ==========    ==========    ==========

Non-accrual loans                                                                                   5,560
                                                                                               ----------

   Total loans                                                                                 $  756,420
                                                                                               ==========

Loans at fixed interest rates          $   22,330    $   41,990    $  372,532    $   33,560    $  470,412
Loans at variable interest rates          240,906         7,055        32,487            --       280,448
                                       ----------    ----------    ----------    ----------    ----------

                                       $  263,236    $   49,045    $  405,019    $   33,560       750,860
                                       ==========    ==========    ==========    ==========

Non-accrual loans                                                                                   5,560
                                                                                               ----------

   Total loans                                                                                 $  756,420
                                                                                               ==========


Variable rate loans comprise 37% of the loan portfolio. The interest rates of
these loans change or reprice at specific intervals according to certain market
indices. The remainder of the loan portfolio has a fixed interest rate until
maturity.

The Bank automatically places any loan that has been partially charged-off and
most consumer loan borrowers in bankruptcy proceedings on non-accrual. The Bank
on a discretionary basis places loans on non-accrual when a borrower is in
bankruptcy where adequate security cannot be demonstrated and the borrower
ceases paying interest. All other loans are typically placed on non-accrual
after the borrower is ninety days or more past due unless collection is expected
within 60 days. Refer to Note C of the Notes to the Consolidated Financial
Statements for additional information.

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



                                        2006        2005        2004
                                      --------    --------    --------
                                                     
Troubled debt restructuring           $     --    $     --    $     --
Over 90 days past due                    2,101         189         143
Non-accrual loans                        5,560         984       2,956
                                      --------    --------    --------
        Total non performing loans    $  7,661    $  1,173    $  3,099
                                      ========    ========    ========


                                       57


Non-accrual loans at December 31, 2006 were $5,560,000. The increase in
non-accrual loans during the year ended December 31, 2006 is primarily due to
the downgrading of one commercial real estate construction and eight commercial
real estate mortgage loans with a balance of $4,843,000 to non-accrual status.
An impairment analysis was completed on these loans resulting in a specific
allocation of the allowance for loan losses to these loans of $688,000 at
December 31, 2006. We continue to work to collect these loans as they are all
secured by real estate which we believe will have significant value, even in
liquidation.

Allowance for Loan Losses. The allowance for loan losses at December 31, 2006
was $7,775,000 compared to $6,808,000 at December 31, 2005, an increase of
$967,000 or 14%. The increase was primarily to provide for the growth in the
loan portfolio during 2006. Transactions in the allowance for loan losses for
the years ended December 31, are as follows (in thousands):



                                          2006          2005         2004         2003         2002
                                        --------      --------     --------     --------     --------
                                                                              
Balance, beginning of year              $  6,808      $  5,884     $  4,314     $  2,875     $  1,922

Allowance on loans acquired                   --            --          184           --           --

Charge-offs:
 Consumer loans                               24           112           31           38           32
 Commercial, financial & other               139           169           --          141          141
 Commercial real estate construction          --            --           --           50           --
 Commercial real estate mortgages             36            86           --          124           --
 Residential loans                            38            --          100           --           --

Recoveries:
 Consumer loans                               17            37           12           13            9
 Commercial, financial & other               218           131           44           30           65
 Commercial real estate construction          --            --           --           50           --
 Commercial real estate mortgages             26            10           61           --           --
 Residential loans                            --            32           --           --
                                        --------      --------     --------     --------     --------

Net charge-offs                              (24)          157           14          260           99

Additions charged to operations              943         1,081        1,400        1,699        1,052
                                        --------      --------     --------     --------     --------

Balance at end of period                $  7,775      $  6,808     $  5,884     $  4,314     $  2,875
                                        ========      ========     ========     ========     ========

Allowance to total loans                    1.03%         1.04%        1.00%        1.08%        1.07%
                                        ========      ========     ========     ========     ========

Net Charge-offs to average loans            0.00%         0.02%        0.00%        0.08%        0.04%
                                        ========      ========     ========     ========     ========


The increase in the allowance for loan losses was based upon management's
assessment of relevant factors, including types and amounts of non-performing
loans, historical loss experience for the Bank and for other banks in the peer
group on such types of loans, the relevant change in the size and mix of the
Bank's loan portfolio and expected impact of current economic conditions on
borrowers' ability to repay their loans.

                                       58


The allocation of the allowance for loan losses as of December 31, 2006 is as
follows (in thousands):



                                                           Total
                                     ------------------------------------------------
                                       2006      2005      2004      2003      2002
                                     --------  --------  --------  --------  --------
                                                              
Consumer loans                       $    470  $    521  $    551  $    337  $    282
Commercial, financial, & other          1,553     1,901     1,653       972       660
Commercial real estate construction     1,582     1,371       976       639       312
Commercial real estate mortgages        3,772     2,700     2,302     1,899     1,344
Residential real estate mortgages         398       315       402       467       277
                                     --------  --------  --------  --------  --------
                                     $  7,775  $  6,808  $  5,884  $  4,314  $  2,875
                                     ========  ========  ========  ========  ========




                                       Percent of allowance for loan losses in each
                                        category to total allowance for loan losses
                                     ------------------------------------------------
                                         2006      2005      2004     2003    2002
                                       --------  --------  ------   -------  -------
                                                              
Consumer loans                            6.05%     7.65%    9.36%    7.81%    9.81%
Commercial, financial, & other           19.97%    27.92%   28.09%   22.53%   22.96%
Commercial real estate construction      20.35%    20.14%   16.59%   14.81%   10.85%
Commercial real estate mortgages         48.51%    39.66%   39.12%   44.02%   46.75%
Residential real estate mortgages         5.12%     4.63%    6.83%   10.83%    9.63%
                                        ------    ------   ------   ------   ------
                                        100.00%   100.00%  100.00%  100.00%  100.00%
                                        ======    ======   ======   ======   ======




                                     Percent of loans in each category to total loans
                                     ------------------------------------------------
                                       2006       2005     2004      2003      2002
                                      ------     -----    ------    ------    ------
                                                               
Consumer loans                          4.27%     4.63%     7.17%     6.27%     8.29%
Commercial, financial, & other         17.19%    14.65%    21.97%    17.22%    17.26%
Commercial real estate construction    17.89%    15.65%    12.30%    12.55%    11.25%
Commercial real estate mortgages       54.31%    45.68%    50.54%    51.92%    52.05%
Residential real estate mortgages       6.34%     6.25%     8.01%    12.04%    11.15%
                                      ------     -----    ------    ------    ------
                                      100.00%    86.86%   100.00%   100.00%   100.00%
                                      ======     =====    ======    ======    ======


The increase in the allocation of the allowance for loan losses to commercial
real estate construction and commercial real estate mortgage loans at December
31, 2006 compared to December 31, 2005 is primarily due to our impairment
evaluation of the nine new non-accrual loans discussed earlier. This increase
was partially offset by a decrease in the allocation of the allowance for loan
losses to commercial, financial and other loans due primarily to smaller
required impairment allocations for several commercial loans and by smaller
allocations to consumer and residential real estate loans due primarily to lower
loan volumes and lower delinquency levels.

                                       59


Bank Premises and Equipment. Bank premises and equipment at December 31, 2006
were $14,293,000 compared to $13,792,000 at December 31, 2005, an increase of
$501,000 or 4%. The increase was mainly due to upgrades in technology instituted
throughout the Bank.

Real Estate Owned. Real estate owned at December 31, 2006 was $52,000, compared
to $663,000 at December 31, 2005, a decrease of $611,000 or 92%. Real estate
owned at December 31, 2006 is comprised of one residential property with an
appraised value of $55,000. The Bank expects to complete the sale of this
property during 2007. The Corporation recorded loss on the sale of real estate
of $103,000 during 2006. All of the properties that comprised real estate owned
at December 31, 2005 were sold during 2006.

Goodwill and Other Intangible Assets. Goodwill and other intangible assets were
$7,514,000 at December 31, 2006, compared to $7,764,000 at December 31, 2005, a
decrease of $250,000 or 3%. The Bank has intangible assets for the estimated
value of core deposit accounts and borrower relationships 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 was valued at $929,000 and is being amortized over a
period of ten years. The borrower relationship intangible was valued to
$1,620,000 and is being amortized over a period of 17 years. At December 31,
2006, the core deposit intangible and borrower relationship intangible amounted
to $627,000 and $1,414,000, respectively.

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 $5.5 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. There was no impairment at December 31, 2006.

Accrued Interest Receivable. Accrued interest receivable at December 31, 2006
was $3,337,000 compared to $2,586,000 at December 31, 2005, an increase of
$751,000 or 29%. The increase was primarily due to increase in the size and
yield of the loan portfolio.

Other Assets. Other assets at December 31, 2006 were $3,071,000 compared to
$2,521,000 at December 31, 2005, an increase of $550,000 or 22%. The decrease
was largely due to a decrease in the Corporation's deferred tax asset.

                                       60


Deposits. Total deposits at December 31, 2006 were $633,216,000 compared to
$582,438,000 at December 31, 2005, an increase of $50,778,000 or 9%. The
components of the outstanding balances and percentage increase in deposits from
2005 to 2006 are as follows (in thousands):



                                   December 31, 2006         December 31, 2005
                                 ---------------------     ---------------------           Percent
                                  Balance       Percent     Balance       Percent    Increase/(Decrease)
                                 ----------     -------    ----------     -------    ----------------------
                                                                      
Non-interest bearing:
      Demand                     $   53,065       8.38%    $   59,652      10.24%          (11.04%)
                                 ----------                ----------

Interest bearing:
      Checking                   $   62,770       9.91%    $   13,413       2.30%          367.98%
      Money market                   14,289       2.26%        26,514       4.55%          (46.11%)
      Savings                        42,169       6.66%        69,503      11.93%          (39.33%)
      Time, under $100,000          130,898      20.67%       151,038      25.94%          (13.33%)
      Time, $100,000 and over       330,025      52.12%       262,318      45.04%           25.81%
                                 ----------     ------     ----------     ------           ------
                                    580,151      91.62%       522,786      89.76%           10.97%
                                 ----------     ------     ----------     ------           ------

                                 $  633,216     100.00%    $  582,438     100.00%            8.72%
                                 ==========     ======     ==========     ======           ======


The increase in deposits was primarily due to growth in interest-bearing
checking deposits. During 2006, the Bank completed an annual birthday
celebration in March 2006, a time deposit promotion that featured the Bank's
seven month certificate of deposit product and another promotion that introduced
the Bank's High Performance Checking product. Management developed these
campaigns in order to increase liquidity and diversify the Bank's deposit mix.

In addition to these deposit campaigns, the Bank has continued to employ a
strategy to utilize public funds to a higher degree, in the form of time
deposits, $100,000 and over, in the State of Michigan. The Bank also has
continued to utilize brokered deposits as a source of funds. In order to
coordinate and manage these efforts, the Bank has also designated a public funds
officer. Public funds at December 31, 2006 were $115.4 million compared to $85.2
million at December 31, 2005. There were 31 and 28 entities with public funds on
deposit at December 31, 2006 and December 31, 2005, respectively. The average
term of time deposits invested with the Bank by public units was 87 and 95 days
at December 31, 2006 and 2005, respectively. Brokered deposits were $56.0
million with an average rate of 4.59% at December 31, 2006, compared to $45.1
million with an average rate of 3.79% at December 31, 2005.

Final maturities of total time deposits are as follows (in thousands):



                                 $100,000 and over    Less than $100,000      Total
                                 -----------------    ------------------    ----------
                                                                   
2007                             $         289,688    $          110,215    $  399,903
2008                                        16,031                 8,166        24,197
2009                                         7,835                 2,804        10,639
2010                                         6,580                 2,493         9,073
2011                                         9,891                 7,220        17,111
                                 -----------------    ------------------    ----------

  Totals                         $         330,025    $          130,898    $  460,923
                                 =================    ==================    ==========


                                       61


The following is a summary of the distribution and weighted average interest
rate of deposits at December 31, 2006 (in thousands):



                                         2006                       2005
                              -----------------------     ----------------------
                                             Weighted                   Weighted
                                              Average                    Average
                                Amount          Rate          Amount     Rate
                              ----------     --------     ----------    --------
                                                            
Non-interest bearing:
   Demand                     $   53,065         --       $   59,652        --
                              ----------                  ----------

Interest bearing:
   Checking                   $   62,770       3.35%      $   13,413      1.01%
   Money market                   14,289       2.56%          26,514      2.43%
   Savings                        42,169       1.73%          69,503      1.90%
   Time, under $100,000          130,898       4.59%         151,038      3.70%
   Time, $100,000 and over       330,025       5.03%         262,318      3.90%
                              ----------                  ----------
                                 580,151                     522,786
                              ----------                  ----------

                              $  633,216                  $  582,438
                              ==========                  ==========


The Bank continues a strategy of shifting maturing time deposits into other
savings products. In addition, the Bank continued to enact a strategy to utilize
municipal and brokered deposits to a greater degree.

Federal Funds Purchased. Federal funds purchased were $37,300,000 at December
31, 2006 compared to $0 at December 31, 2005. Federal funds purchased are
utilized as a short term funding source for the Bank. Management utilized this
short term source of liquidity at December 31, 2006 primarily because of the
likelihood of decreasing interest rates during 2007 and 2008 and the expected
utilization of additional liquidity sources after the acquisition of Fidelity on
January 4, 2007.

Federal Home Loan Bank Advances. Federal Home Loan Bank advances at December 31,
2006 amounted to $25,561,000 compared to $25,588,000 at December 31, 2005.

In 1999, the Bank joined the Federal Home Loan Bank of Indianapolis. Membership
in the Federal Home Loan Bank provides the Bank with a stable source of
additional funding at a reasonable cost. Federal Home Loan Bank advances are
collateralized with a blanket collateral agreement with the Federal Home Loan
Bank and investment securities, available for sale. Please refer to Note I of
the Notes to the Consolidated Financial Statements for additional information.

Other Borrowings. Other borrowings were $619,000 at December 31, 2006 compared
to $1,615,000 at December 31, 2005, a decrease of $996,000 or 62%. These
borrowings were comprised of several repurchase agreements that were acquired in
the 2004 acquisition of the Bank of Washtenaw. These repurchase agreements are
secured by securities held by the Bank.

Other Liabilities. Other liabilities were $516,000 at December 31, 2006 compared
to $960,000 at December 31, 2005, a decrease of $444,000 or 46%. The decrease
was primarily due to a decrease in accrued expenses.

                                       62


Accrued Interest Payable. Accrued interest payable at December 31, 2006 was
$3,734,000 compared to $1,683,000 at December 31, 2005, an increase of
$2,051,000 or 122%. The increase was due to the increase in the volume and cost
of interest-bearing liabilities during 2006.

Subordinated Debentures. 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 to allow
for additional growth. Please refer to Note J of the Notes to the Consolidated
Financial Statements for additional information.

CAPITAL

Stockholders' equity at December 31, 2006 was $144,985,000 compared to
$84,213,000 as of December 31, 2005, an increase of $60,772,000 or 72%. The
Corporation completed a stock offering during the fourth quarter of 2006. The
Corporation sold 2,918,250 shares of its common stock at $20.00 per share. The
net proceeds from the stock offering were approximately $55,131,000.

At December 31, 2006 and 2005, the Bank and Corporation exceeded all applicable
regulatory capital requirements as described in Note N of the Notes to the
Consolidated Financial Statements.

MARKET RISK ANALYSIS

The Corporation's primary market risk exposure is interest rate risk and, to a
lesser degree, liquidity risk. All of our transactions are denominated in U. S.
dollars with no specific foreign exchange exposure. The Corporation has no
agricultural-related loan assets and therefore has no significant exposure to
changes in commodity prices. Any impact that change foreign exchange rates or
commodity prices would have on interest rates are assumed to be insignificant.
Interest rate risk is the exposure of our financial condition to adverse
movements in interest rates. We derive our income primarily from the excess of
interest collected on our interest-earning assets over the interest paid on our
interest-bearing liabilities. The rates of interest earned on the assets and
owed on our liabilities of the Corporation generally are established
contractually for a period of time. Since market interest rates change over
time, we are exposed to lower profitability if we cannot adapt to interest rate
changes. Accepting interest rate risk can be an important source of
profitability and shareholder value; however, excessive levels of interest rate
risk could pose a significant threat to our earnings and capital base.
Accordingly, effective risk management that maintains interest rate risk at
prudent levels is essential to our safety and soundness.

Interest Rate Sensitivity Analysis. Evaluating the exposure to changes in
interest rates includes assessing both the adequacy of the process used to
control interest rate risk and the quantitative level of exposure. The
Corporation's interest rate risk management process seeks to ensure that
appropriate policies, procedures, management information systems and internal
controls are in place to maintain interest rate risk at prudent levels with
consistency and continuity. In evaluating the quantitative level of interest
rate risk, we assess the existing and potential future effects of changes in
interest rates on our financial position, including capital adequacy, earnings,
liquidity and asset quality.

The Corporation primarily uses two interest rate risk measurement techniques.
The first, which is commonly referred to as GAP analysis, measures the
difference between the dollars amounts of interest-sensitive assets and
liabilities that will be repriced or mature during a given time period. The
Corporation has sought to manage its exposure to changes in interest rates by
matching more closely 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 than 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.

                                       63


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 expected and would tend to
increase the negative gap position. Conversely, during a period of falling
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 December 31, 2006 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          $ 64,198    $      --    $     --   $     --   $ 64,198
   Interest bearing deposits
      with Banks                      8           --          --         --          8
   Mortgage loans held for
      sale                        1,823           --          --         --      1,823
   Securities available
      for sale                       80        4,968         662        168      5,878
   Federal Home Loan Bank
      stock                       1,288           --          --         --      1,288
   Total loans, net of
      non-accrual               263,236       49,045     405,019     33,560    750,860
                               --------   ----------    --------   --------   --------
Total earning assets            330,633       54,013     405,681     33,728    824,055

Interest bearing liabilities
   Total interest bearing
      deposits                  285,080      234,051      61,020         --    580,151
   Federal Home Loan Bank
      advances                       --       10,000      15,561         --     25,561
   Other Borrowings                 619           --          --         --        619
   Subordinated debentures       10,000           --          --         --     10,000
                               --------   ----------    --------   --------   --------
Total interest bearing
   liabilities                  295,699      244,051      76,581         --    616,331
                               --------   ----------    --------   --------   --------

Net asset (liability)
   funding gap                   34,934     (190,038)    329,100     33,728   $207,724
                               --------   ----------    --------   --------   ========

Cumulative net asset
   (liability) funding gap     $ 34,934   ($ 155,104)   $173,996   $207,724
                               ========   ==========    ========   ========


The second interest rate measurement used is commonly referred to as net income
simulation analysis. We believe that this methodology provides a more accurate
measurement of interest rate risk than GAP analysis. The simulation model
assesses the directions and magnitude of variations in net interest income
resulting from potential changes in market interest rates. Key assumptions in
the model include prepayment speeds on various loan and investment assets; cash
flows and maturities of interest-sensitive assets and liabilities; and changes
in market conditions impacting loan and deposit volume and pricing. These
assumption are inherently uncertain, subject to fluctuation and revision in a
dynamic environment; therefore, the model cannot precisely estimate net interest
income or exactly predict the impact of higher or lower interest rates on net
interest income. Actual results will differ from simulated results due to
timing, magnitude, and frequency of interest rate changes, changes in market
conditions and our strategies, among other factors.

                                       64


We conducted an interest rate simulation as of December 31, 2006, that assumed a
gradual change in market rates occurred over the following twelve months. The
following table reflects the suggested impact on net interest income over the
next twelve months (dollars, in thousands):



                        Change in Net Interest Income
                        -----------------------------
Interest Rate Change    Amount                Percent
                        ------                -------
                                        
+ 300 Basis Points      $  221                  1.60%
+ 200 Basis Points          48                  0.35%
+ 100 Basis Points        (199)                -1.44%
- - 100 Basis Points        (419)                -3.04%
- - 200 Basis Points        (454)                -3.29%
- - 300 Basis Points        (519)                -3.76%


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 December 31, 2006 (in thousands):

Contractual Obligations



                                                   Payments Due By Period
                                    ----------------------------------------------------
                                    Less Than                 4-5     Over 5
                                      1 Year    1-3 Years    Years     Years      Total
                                    ---------   ---------   -------   -------   --------
                                                                 
Securities sold under agreements
    to repurchase                    $    619    $     --   $    --   $    --   $    619
Certificates of deposit               399,903      34,835    26,185        --    460,923
Long-term borrowings                    5,561      20,000        --        --     25,561
Lease commitments                         582       1,084       878        --      2,544
Subordinated debentures                    --          --        --    10,000     10,000
                                     --------    --------   -------   -------   --------

Totals                               $406,665    $ 55,919   $27,063   $10,000   $499,647
                                     ========    ========   =======   =======   ========


Unused Loan Commitments and Letters of Credit



                                          Amount Of Commitment Expiration Per Period
                                     ----------------------------------------------------
                                     Less Than                 3-5     Over 5
                                       1 Year    1-3 Years    Years    Years      Total
                                     ---------   ---------   ------   -------    --------
                                                                  
Unused loan commitments              $116,327     $25,023    $9,066   $12,467    $162,883
Standby letters of credit               5,195       3,017        --        --       8,212
                                     --------     -------    ------   -------    --------

Totals                               $121,522     $28,040    $9,066   $12,467    $171,095
                                     ========     =======    ======   =======    ========


                                       65


IMPACT OF INFLATION AND CHANGING PRICES

The Consolidated Financial Statements presented herein have been prepared in
accordance with accounting principles generally accepted in the United States of
America, which require the measurement of financial position and operating
results in terms of historical dollars without considering the change in the
relative purchasing power of money over time due to inflation. The primary
impact of inflation is reflected in the increased cost of the Corporation's
operations. Unlike most industrial companies, virtually all the assets and
liabilities of the Corporation are monetary in nature. As a result, interest
rates have a more significant impact on a financial institution's performance
than do the effects of general levels of inflation. Interest rates do not
necessarily move in the same direction, or to the same extent, as the prices of
goods and services.

TECHNOLOGY

The Corporation, operating as an independent, local community bank, strives to
make available to its employees and customers a high level of technology as a
way to be competitive with other larger financial institutions.

The Bank has implemented the following technologies:

      ATM Banking
      In Touch Voice Response Telephone Banking
      Netteller Internet Banking
      Netteller Cash Management
      Vertex Teller Automation
      Streamline Platform Automation

During 2007, the Bank plans to implement the following technologies:

      Netteller Bill Pay
      Remote Deposit Capture
      Check 21
      Electronic Cash Letter Delivery

                                       66


                             COMMITMENT TO COMMUNITY

      Commitment to community is one of the primary principles upon which
Dearborn Bancorp, Inc. and its primary subsidiary, Community Bank of Dearborn
was founded. Since the Community Bank of Dearborn 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 2006, the Bank provided the following local organizations with
financial support or personal involvement:

Agape Christian Academy, Canton
American Arab Chamber of Commerce
American Red Cross
Ann Arbor Board of Realtors
Ann Arbor Chamber of Commerce
Ann Arbor Symphony Orchestra
Auburn Hills Chamber of Commerce
Canton Chamber of Commerce
Canton Community Foundation
Canton Exchange Club
Canton Liberty Festival
Canton Lion's Club
Canton Senior Safety Coalition
Canton Senior Center
Central Macomb Chamber of Commerce
Clinton Township Community Blood Drive
Clinton Township Senior Expo
Dearborn Animal Center
Dearborn Baseball
Dearborn Board of Realtors
Dearborn Chamber of Commerce
Dearborn Community Arts Council
Dearborn Elderfest
Dearborn Exchange Club
Dearborn Goodfellows
Dearborn Heights Chamber of Commerce
Dearborn Heights Lions Club
Dearborn Heights Park & Recreation
Dearborn Heights Spirit Festival
Dearborn Homecoming
Dearborn Kiwanis
Dearborn Optimist Club
Dearborn Police Officers Charity
Dearborn Rotary Club
Dearborn Senior Center
Dearborn Symphony Orchestra
Dexter Area Chamber of Commerce
Divine Child School
Downriver Senior Olympics
Festival of Trees
Garden City Hospital Foundation
Garden Club of Dearborn
Goodwill Industries of Greater Detroit
Henry Ford Community College Foundation
Junior League Goodwill
Mike Adray Memorial Foundation
Mount Clemens Lions Club
New Morning School
North Oakland Baseball Federation
Northville Chamber of Commerce
Oakwood Health Care Foundation
Orchestra Canton
Plymouth/Canton Schools
Plymouth Chamber of Commerce
Plymouth Community Arts Center
Royal Oak Police
Saint Joseph Mercy Saline Hospital
Saline Area Chamber of Commerce
Saline Celtic Festival
Schoolcraft College Foundation
Showcase Plymouth
Sig Krug Memorial Foundation
Southern Wayne County Chamber of Commerce
Southgate Senior Center
St. Joseph Hospital
Starfish Family Services
Trenton Rotary Club
Washtenaw Development Council
Washtenaw Housing Alliance
Washtenaw United Way
Washtenaw County 4-H Fair
Wayne County Treasurers Association
Wayne County 4-H Fair
West Washtenaw Business Association
Western Wayne Association of Realtors
Westland Foundation
Ypsilanti Chamber of Commerce
YWCA of Western Wayne County

                                       67


                             DEARBORN BANCORP, INC.

                             DIRECTORS AND OFFICERS

DIRECTORS

MARGARET I. CAMPBELL
Retired, Manufacturing

JOHN E. DEMMER
Chairman of the Board and
   Chief Executive Officer
Jack Demmer Ford, Inc.;
Jack Demmer Lincoln-Mercury, Inc. and
Jack Demmer Leasing

WILLIAM J. DEMMER
President
Jack Demmer Ford, Inc and
Jack Demmer Lincoln-Mercury, Inc.

MICHAEL V. DORIAN, JR.
Vice President
Mike Dorian Ford

DAVID HIMICK
Retired, Industrial Supply

DONALD G. KARCHER
Retired
Former Chairman of the Board
Karcher Agency, Inc.

BRADLEY F. KELLER
Retired
Former President
Braden Associates, Inc. and
MultiGard Properties, Ltd.

JEFFREY G. LONGSTRETH
Real Estate Broker
Century 21 - Curran & Christie

MIICHAEL J. ROSS
President and Chief Executive Officer
Community Bank of Dearborn

DR. ROBERT C. SCHWYN
Physician
Oaklane Medical

RONNIE J. STORY
President and Chief Executive Officer
Story Development Corp. and Story Brothers
Grading & Excavating

OFFICERS

JOHN E. DEMMER
Chairman of the Board

MICHAEL J. ROSS
President and Chief Executive Officer

JEFFREY L. KARAFA
Vice President, Treasurer and Secretary

                                       68


                           COMMUNITY BANK OF DEARBORN

                        DIRECTORS AND EXECUTIVE OFFICERS

DIRECTORS

MARGARET I. CAMPBELL
Retired, Manufacturing

JOHN E. DEMMER
Chairman of the Board
Jack Demmer Ford, Inc.;
Jack Demmer Lincoln-Mercury, Inc. and
Jack Demmer Leasing

WILLIAM J. DEMMER
President
Jack Demmer Ford, Inc. and
Jack Demmer Lincoln Mercury

MICHAEL V. DORIAN, JR.
Vice President
Mike Dorian Ford

DAVID HIMICK
Retired, Industrial Supply

DONALD G. KARCHER
Retired
Former Chairman of the Board
Karcher Agency, Inc.

BRADLEY F. KELLER
Retired
Former President
Braden Associates, Inc. and
MultiGard Properties, Ltd.

JEFFREY G. LONGSTRETH
Real Estate Broker
Century 21 - Curran & Christie

MICHAEL J. ROSS
President and Chief Executive Officer
Community Bank of Dearborn

DR. ROBERT C. SCHWYN
Physician
Oaklane Medical

RONNIE J. STORY
President and C.E.O.
Story Development Corp. and Story Brothers
Grading & Excavating

EXECUTIVE OFFICERS

MICHAEL J. ROSS
President
Chief Executive Officer

JEFFREY L. KARAFA
Senior Vice President
CFO & Secretary

JOHN A. LINDSEY
Oakland Regional President

WARREN R. MUSSON
Senior Vice President
Head of Lending

STEPHEN C. TARCZY
Northeast Regional President

JEFFREY J. WOLBER
Senior Vice President
Head of Retail

                                       69


                           COMMUNITY BANK OF DEARBORN
                                    OFFICERS

FIRST VICE PRESIDENTS

BRUCE R. MARSH
First Vice President - Operations

TERRENCE R. O'NEIL
First Vice President - Credit

VICE PRESIDENTS

GARY W. AMES, JR.
Vice President & Controller

KEVIN A. BANK
Vice President - Commercial Loans

GAY M. BERG
Vice President - Branch Operations

DANIEL P. BROPHY
Vice President - Commercial Loans

KATHERINE T. BROWN
Vice President - Commercial Loans

DANIEL A. BZURA
Vice President - Branch Operations

RITA L. CAVATAIO
Vice President - Commercial Loans

GEORGE J. DEMOU
Vice President - Commercial Loans

DOUGLAS O. DUNKLEBERG
Vice President - Commercial Loans

CYNTHIA A. FRAGA
Vice President - Commercial Loans

LEE E. FREELAND
Vice President - Branch Operations

JIHAD A. HACHEM
Vice President - Commercial Loans

F. GLEN ISLAMI Vice
President - Compliance

WYNN C. MILLER
Vice President - Internal Audit

REGAN J. MORIN
Vice President - Commercial Loans

MARK M. PACITTO
Vice President - Commercial Loans

DON A. PLAISTED
Vice President - Commercial Loans

JAMES T. POWERS
Vice President - Product Support

DENNIS C. ROCHELEAU
Vice President & Cashier

GARY P. RUSCH
Vice President - Commercial Loans

WILLIAM M. SCHMIDT
Vice President - Commercial Loans

GREGORY M. SCHNEIDER
Vice President - Commercial Loans

STEVEN P. SLADE
Vice President - Consumer Loans

THOMAS R. THOMPSON
Vice President - Commercial Loans

RICHARD K. VALLEE
Vice President - Branch Operations

BRADY J. VIBERT
Vice President - Commercial Loans

JOHN W. WESTERHEIDE
Vice President - Commercial Loans

ASSISTANT VICE PRESIDENTS

DEBBY M. ASTERIOU

PATRICIA M. CARMONA

KAREN M. COVER

PATRICIA L. DANCIK

DONALD D. HARBIN

DAVID W. LESLIE

DENIS T. NISSLE

MIHAI PARASCA

ELIZABETH A. PIZZO

SUSAN M. VETTRAINO

PAMELA G. WILKS

MARIAN ZELEJI

FIRST LEVEL OFFICERS

STEPHENI C. AGUILA

STEPHEN T. BOLOVEN

MARK D. BOWERS

V. STACY BRANHAM

TERRENCE W. CARLSON

JANICE M. CONTRERA

DANIEL C. GILBERT

KAREN R. HENDERSHOT

ANGELA HSU

RICHARD T. JONES

SANDRA L. LETHBRIDGE

NADINE S. McMILLAN

DEBRA A. REED

PATRICK D. RUSSELL

TIMOTHY D. SIERPIEN

GAILE K. VIBERT

NOREEN F. WAGNER

CHARLES P. WASCZENSKI

CAROLYN A. WILKINS

                                       70


                           COMMUNITY BANK OF DEARBORN
                                  SUBSIDIARIES

                      COMMUNITY BANK INSURANCE AGENCY, INC.
                           Michael J. Ross, President

                          COMMUNITY BANK MORTGAGE, INC.
                           Michael J. Ross, President

                       COMMUNITY BANK AUDIT SERVICES, INC.
                            Wynn C. Miller, President

                                NORTHEAST REGION
                          AUXILIARY BOARD OF DIRECTORS

                                DAVID B. BERGMAN
                                     Partner
                           Sigma Investment Counselors

                             DR. MICHAEL J. BUSUITO
                                    Physician

                                GERALD J. CARNAGO
                  Attorney at Law & Certified Public Accountant
                           Carnago & Associates, P.C.

                                MICHAEL P. GUERRA
                                      Owner
                           Millcreek Building Company

                                VITO A. PAMPALONA
                                    President
                     Vito Anthony Homes and Building Company

                                JAMES A. PATRONA
                                      Owner
                        Universal Press & Machinery, Inc.

                                       71


                           COMMUNITY BANK OF DEARBORN
                                    LOCATIONS

Ann Arbor / Eisenhower Banking Center
250 West Eisenhower Parkway, Suite 100
Ann Arbor, MI 48103
Phone: (734) 302-1481

Ann Arbor /Stadium Banking Center
2180 West Stadium Boulevard
Ann Arbor, MI 48103
Phone: (734) 302-9165

Auburn Hills Banking Center
3201 University Drive, Suite 180
Auburn Hills, MI 48326
Phone: (248) 364-9700

Bingham Farms Banking Center
30700 Telegraph
Bingham Farms, MI 48025
Phone: (248) 642-6757

Birmingham Banking Center
1040 E. Maple
Birmingham, MI 48009
Phone: (248) 642-1901

Bloomfield Township Banking Center
3681 W. Maple
Bloomfield Township, Mi 48301
Phone: (248) 642-1903

Canton Township Banking Center
1325 N. Canton Center Road
Canton, MI 48187
Phone: (734) 981-0022

Clinton Township Banking Center
19100 Hall Road
Clinton Township, MI 48038
Phone: (586) 416-4400

Clinton Township Regional Lending Center
45000 River Ridge Drive, Suite 110
Clinton Township, MI 48038
Phone: (586) 416-0200

Dearborn / Main Office Banking Center
22290 Michigan Avenue
Dearborn, MI 48124
(313) 274-1000

Dearborn Heights Banking Center
24935 West Warren Avenue
Dearborn Heights, MI 48127
Phone: (313) 724-0100

Dearborn Administration and
Regional Lending Center
1360 Porter Street, Suite 200
Dearborn, MI 48124
Phone: (313) 565-5700

Galleria Banking Center
200 Galleria Banking center
Southfield, MI 48034

North Park Plaza Banking Center
17117 W. Nine Mile Road
Southfield, Mi 48075
Phone: (248) 557-4477

Plymouth Township Banking Center
44623 Five Mile
Plymouth, MI 48170
Phone: (734) 454-1000

Saline Banking Center
450 East Michigan Avenue
Saline, MI 48176
Phone: (734) 429-3828

Shelby Township Banking Center
7755 23 Mile Road
Shelby Township, MI 48316
Phone:

Southgate Banking Center
12820 Fort Street
Southgate, MI 48195
Phone: (734) 284-3300

Southfield / Twelve Mile Banking Center
20000 Twelve Mile Road
Southfield, Mi 48076
Phone: (248) 559-5779

Travelers Tower Banking Center
26555 Evergreen
Southfield, Mi 48076
Phone: (248) 351-8311

Bank Operations Center
4000 Allen Road
Allen Park, MI 48101
Phone: (313) 381-3200

                                       72


DEARBORN BANCORP, INC. COMMON STOCK

Dearborn Bancorp, Inc. common stock is listed on the Nasdaq Global Market and is
traded under the symbol "DEAR".

INVESTOR RELATIONS AND FORM 10-K AVAILABLE

Additional information about the Corporation including a free copy of the
Corporation's Form 10-K filed with the Securities and Exchange Commission may be
obtained by writing or calling: Carolyn Wilkins, Corporate Services Officer,
4000 Allen Road, Allen Park, Michigan 48101; (313) 381-3200 or by E-mail at
Carolyn.Wilkins@cbdear.com.

ANNUAL MEETING

The Annual Meeting of Stockholders will be held on Tuesday, May 15, 2007, at
Park Place, 23400 Park Avenue, Dearborn, Michigan, at 4:00 p.m.

INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Crowe Chizek & Company LLC
55 Campau Avenue, N.W., Suite 300
Grand Rapids, Michigan 49503
(616) 774-0774

STOCK TRANSFER AGENT AND REGISTRAR

Stockholders requiring a change of name, address or ownership of stock, as well
as information about shareholder records or lost or stolen certificates,
dividend checks, dividend direct deposit, and dividend reinvestment should
contact:

Computershare Investor Services, LLC
2 North Lasalle Street
Chicago, Illinois 60602
(888) 294-8217
www.computershare.com

WEBSITE INFORMATION

Online Information for the most current news releases and Dearborn Bancorp, Inc.
financial reports and product information, visit our Website at www.cbdear.com

                    QUARTERLY COMMON STOCK PRICE INFORMATION



                    High       Low      Close
                   -------   -------   -------
                              
2006
First quarter      $ 22.68   $ 19.96   $ 20.41
Second quarter.      21.76     19.87     21.14
Third quarter        24.29     21.31     22.65
Fourth quarter       22.86     18.20     19.00

2005
First quarter      $ 25.42   $ 21.39   $ 21.80
Second quarter       23.84     20.82     22.37
Third quarter        22.86     21.75     22.20
Fourth quarter       23.22     20.00     22.45


All per share amounts presented have been adjusted to reflect the issuance of
stock dividends.

                                       73


                       CUMULATIVE STOCK PERFORMANCE GRAPH

The graph and table that follow show the cumulative return on the Common Stock
from December 31, 2001 through December 31, 2006. This return is compared in the
table and graph with the cumulative return over the same period with the
following two indices: (i) the All U.S. Nasdaq Index and (ii) the Nasdaq Bank
Index. The graph and table were prepared assuming that $100 was invested on
December 31, 2001 in the Common Stock and in each of the indices. Cumulative
total return on the Common Stock or the two indices equals the total increase
(decrease) in value since December 31, 2001. The stockholder returns shown on
the performance graph are not necessarily indicative of the future performance
of the Common Stock or any particular index.

                     COMPARISON OF CUMULATIVE TOTAL RETURN*
                          AMONG DEARBORN BANCORP, INC.,
                      THE NASDAQ STOCK MARKET (U.S.) INDEX
                            AND THE NASDAQ BANK INDEX

                              [PERFORMANCE GRAPH]



               Dearborn Bancorp,
                      Inc.          Nasdaq Stock Market (U.S.)    Nasdaq Bank
               -----------------    --------------------------    -----------
                                                         
12/31/2001     $          100.00    $                   100.00    $    100.00
12/31/2002     $          154.73    $                    69.13    $    102.37
12/31/2003     $          209.32    $                   103.37    $    131.69
12/31/2004     $          338.33    $                   112.49    $    150.71
12/31/2005     $          316.60    $                   114.88    $    147.23
12/31/2006     $          267.96    $                   126.22    $    165.21


                                       74


                            PRINCIPAL MARKET MAKERS

Automated Trading Desk
Financial Services, LLC
11 E. Wall Street
Mount Pleasant, SC 29464
(843) 789-2000

B-Trade Services, LLC
1633 Broadway, 48th Floor
New York, NY 10019
(212) 448-5690

Citadel Derivatives Group, LLC
131 South Dearborn Street, 32nd Floor
Chicago, IL 60603
(312) 395-2100

Citigroup Global Markets, Inc.
388 Greenwich St., 38th Floor
New York, NY 10013
(212) 816-6000

FIG Partners, LLC
1175 Peachtree Street, NE
100 Colony Square, Suite 2250
Atlanta, GA 30361
(404) 601-7200

Hill Thompson Magid, & Co.
15 Exchange Place, Suite 800
Jersey City, NJ 07302
(201) 434-6900

Howe Barnes Hoefer & Arnett, Inc.
222 S. Riverside Plaza, 7th Floor
Chicago, Illinois 60606
(312) 655-3000

Knight Equity Markets, L.P.
545 Washington Boulevard
Jersey City, NJ 07310
(201) 557-6844

Oppenheimer & Co, Inc.
125 Broad Street, 16th Floor
New York, NY 10004
(212) 668-8000

Raymond James & Associates, Inc.
880 Carillon Parkway
St. Petersburg, FL 33716
(727) 567-1000

Ryan Beck & Co., Inc.
18 Columbia Turnpike, 1st Floor
Florham Park, NJ 07932
(973) 597-6000

Susquehanna Capital Group
401 City Line Avenue, Suite 220
Bala Cynwyd, PA 19004
(610) 617-2600

UBS Securities, LLC
677 Washington Blvd., 6th Floor
Stamford, CT  06901
(203) 719-1000

                                       75


                                     [LOGO]

                             DEARBORN BANCORP, INC.
                               1360 Porter Street

                            Dearborn, Michigan 48124

                              Phone: (313) 565-5700

                                 www.cbdear.com

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement of Dearborn Bancorp Inc. on Form S-8 (Registration No. 333-129769) of our reports dated March 9, 2007 with respect to the 2006 consolidated financial statements of Dearborn Bancorp, Inc., and management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which reports are included in the 2006 Annual Report on Form 10-K of Dearborn Bancorp, Inc. for the year ended December 31, 2006.

/s/ Crowe Chizek and Company LLC  

Crowe Chizek and Company LLC 

Grand Rapids, Michigan
March 9, 2007

30

EX-31.1

DEARBORN BANCORP, INC.
FORM 10-K (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-K of Dearborn Bancorp, Inc. (the “registrant”);
2.	Based on my knowledge, this 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 annual 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 officers 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: March 14, 2007	/s / Michael J. Ross
	Michael J. Ross President and Chief Executive Officer Dearborn Bancorp, Inc.

31

EX-31.2

DEARBORN BANCORP, INC.
FORM 10-K (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-K of Dearborn Bancorp, Inc. (the “registrant”);
2.	Based on my knowledge, this annual 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 annual 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 officers 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: March 14, 2007	/s / Jeffrey L. Karafa
	Jeffrey L. Karafa Chief Financial Officer and Treasurer Dearborn Bancorp, Inc.

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EX-32.1

DEARBORN BANCORP, INC.
FORM 10-K (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 annual report on Form 10-K for the year ended December 31, 2006 (the “Form 10-K”) of Dearborn Bancorp, Inc. (the “Issuer”).

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

(i)	The Form 10-K 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-K fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

Dated: March 14, 2007

/s / Michael J. Ross

Michael J. Ross
President and Chief Executive Officer,
Dearborn Bancorp, Inc.

33

EX-32.2

DEARBORN BANCORP, INC.
FORM 10-K (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 annual report on Form 10-K for the year ended December 31, 2006 (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-K 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-K fairly presents, in all material respects, the financial condition and results of operations of the Issuer.

Dated: March 14, 2007

/s/ Jeffrey L. Karafa

Jeffrey L. Karafa
Treasurer and Chief Financial Officer,
Dearborn Bancorp, Inc.

34