Dearborn ($DEAR) Bancorp Posts First-Quarter Profit

By Michael Bogan
Beacon Contributing Writer

Dearborne Bancorp Incorporated (Nasdaq: DEAR), the Holding Company for Fidelity Bank, posted net income of $1,128,000, or 15 cents per share, for the fiscal first quarter ended March 31, 2010. This compares with a fiscal 2009 first-quarter loss of $6,249,000, or a loss of 81 cents per share.

As of March 31, the company’s book value reached $43.2 million, equating to $5.62 per share, a more than four-fold discount to book value from the market closing price on March 31, 2010 of $1.11.
Regulatory capital guidelines suggest the bank still remains “undercapitalized” as of March 31, 2010.

At March 31, 2010, the Dearborn, Mich.-based bank reported assets of $970,669,000, a drop of 9.6% from a year ago. Total bank deposits totaled $852,017,000 at the close of the first quarter, a decline of 6.12%. Loans reached $813,961,000 at March 31, 2010, a decrease of 9.57% from a year ago. The company said it has focused on collection and maintenance of existing loans and has greatly reduced new loan extensions in an effort to conserve reserves.

“During the first quarter, charge-offs were $4.9 million, primarily due to the declines in the value of collateral securing previously classified loans that were already reserved in our Allowance for Loan Losses at December 31, 2009. Our allowance for loan losses now stands at $30.3 million, or 3.72% of loans,� said Michael J. Ross, president and CEO of Dearborn Bancorp and Fidelity Bank. �The carrying value of other real estate owned was written down by $656,000 and defaulted loan expense including taxes, insurance, maintenance and legal was $1.0 million during the quarter.”

Ross added, “During the first quarter, $31.5 million of trouble debt restructure returned to performing status, $11.1 million of performing loans were newly restructured, and $7.4 million of accruing restructured loans were placed on non-accrual status to speed the recovery of outstanding principle balances. Loans transferred from performing classified status to non-accrual status grew by $32.6 million as borrowers continue to struggle in the recession in Southeast Michigan.”

Ross concluded, “The core operations of the Company continue to produce income to offset the high cost of FDIC insurance and the holding costs of other real estate owned. The level of charge-offs remains the determining factor as to whether the Company can maintain profitability in future quarters. Thus, our primary concerns for 2010 remain the Michigan economy, credit quality, and the stability or improvement of the underlying collateral values in our loan portfolio.”