October 19, 2006
Mail Stop 4561
By U.S. Mail and facsimile to (313) 223 -3598
Michael J. Ross, President
Dearborn Bancorp, Inc.
1360 Porter Street
Dearborn, Michigan 48124-2823
Re: Dearborn Bancorp, Inc.
Registration Statement on Form S-3
Filed September 22, 2006
File No. 333-137542
Dear Mr. Ross:
We have reviewed your filing and have the following comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
The purpose of our review process is to assist you in your
compliance with the applicable disclosure requirements and to
enhance
the overall disclosure in your filing. We look forward to working
with you in these respects. We welcome any questions you may have
about our comments or any other aspect of our review. Feel free
to
call us at the telephone numbers listed at the end of this letter.
General
1. Please clarify the offering price or how the offering price
will
be determined. See Item 505 of Regulation S-K and Item 5 of Form
S-3.
2. Advise the staff with your legal and factual analysis as to how
you determined that this transaction, which appears to require an
increase in total outstanding shares of Dearborn Bancorp of almost
50% did not require the approval of the company`s shareholders.
3. Advise the staff regarding the timeline of the negotiations to
purchase Fidelity.
Prospectus Summary
Dearborn Bancorp, page 1
4. If the registrant or the bank has a website, please include the
address.
Pro Forma Consolidated Statements of Income, pages 7-8
5. We note your disclosure on page 8 that Fidelity elected to be
treated as a Subchapter S corporation for tax purposes, and
historically all taxable income was attributable to its
shareholders.
We also note your inclusion of Fidelity`s assumed federal income
tax
expense within its historical financial results column. Please
revise your presentation of Fidelity`s historical financial
results
to include the assumed federal income tax expense within the
adjustments column. Alternatively, clearly label this expense and
net income as pro forma amounts.
Pro Forma Consolidated Balance Sheet, page 9
6. Please revise your footnotes to include a schedule showing the
calculation and allocation of Fidelity`s purchase price.
7. Please tell us how you considered the guidance of SOP 03-3 in
determining that pro forma adjustments to the allowance for loan
losses were not required.
8. Please revise your footnotes to disclose the following
information
regarding the core deposit and borrower relationship intangibles
to
be obtained in the Fidelity acquisition:
* the significant assumptions used in determining the valuation of
each asset; and
* how their useful lives were determined.
Refer to Rule 11-02(b) (6) of Regulation S-X.
9. Please revise to quantify pro forma adjustments for deferred
tax
liabilities related to the core deposit and borrower relationship
intangible assets, if applicable.
10. Your disclosures indicate that you intend to merge the
activities
of Fidelity into your company and expect to integrate the two
organizations and anticipate realization of cost savings and other
financial and operating benefits (Risk Factors, page 10). Please
tell us whether management has completed any plans related to
these
activities, including but not limited to the details of your plan,
when you expect to finalize the plan and when you expect to record
the charges associated with your merger activities. Revise, if
applicable, to include a pro forma adjustment for the liability
for
charges you expect to incur in connection with the merger.
Alternatively, revise your footnotes to clarify why your
integration
plans do not meet the criteria of being directly attributable to
the
transaction and factually supportable. Refer to EITF 95-3 and
Rule
11-02(b) (6) of Regulation S-X.
Risk Factors, page 10
11. Please review your risk factor headings and revise to state
the
risk addressed. For example, in the first risk factor heading
state
that the risks of a delayed completion of the acquisition are the
dilution of earnings per share and the decline of your stock
price.
In the second heading, clarify that a risk of integration
difficulties is the inability to realize expected benefits and
cost
savings from the acquisition. In the fifth heading, state the
risks
of decreased net income and earnings per share and of decreased
stock
price.
12. In the sixth risk factor state clearly the risks on nonpayment
on
your commercial real estate loans.
Management`s Discussion and Analysis, page 18
13. In release 33-8350, the Commission stressed the importance of
the
Management`s Discussion and Analysis section as management`s
opportunity to discuss the past and future course of the company`s
business. Among the items that the Commission mentioned was an
Overview section that discussed the highlights of past performance
and discussed major events or trends that would alter the
company`s
future performance. Your Management`s Discussion and Analysis
section does not include an overview. It further does not provide
management`s guidance to its current and future shareholders
regarding how management expects future results to be impacted by
the
acquisition of Fidelity and by other known trends in your market,
like the large decline in real estate values in Michigan. Please
revise to include a discussion of management`s view of how these
trends and events are likely to affect the company.
Non-performing assets and Allowance for loan losses, page 19
14. Please revise your disclosure to include the allocation of the
allowance for loan losses by loan category as of June 30, 2006.
In
addition, please revise your discussion of non-accrual loans to
further clarify the relatively large increases in non-performing
loans as compared to the relatively small increase in the
allowance
for loan losses during the six months ended June 30, 2006.
Loans, page 27
15. We note you automatically place any loan which has been
partially
charged off on non-accrual status. Please provide us with the
following additional information regarding these loans.
* quantify for us the amount of loans partially charged off for
each
period presented;
* describe your accounting policy for these loans; for example,
tell
us whether you consider these loans to be restructured under the
provisions of FAS 15 and FAS 114; and
* revise your filing to include your accounting policy, if
material.
Allowance for loan losses, page 27
16. Please revise your discussion of the allowance to clearly
describe the details of your methodology for determining the
allowance. The description of your methodology should be
presented
to clearly explain your determination of each element (i.e.
specific,
general) of the allowance, including, but not limited to the
following:
* a full description of each element of the allowance;
* which loans were evaluated specifically versus as a group;
* how you determine the loss factors applied to graded loans in
order
to develop a general allowance; and
* risk factors considered in establishing each element of the
allowance.
Description of Common Stock
Certain Charter Provisions, page 53
17. Please change the subheading to reference that the "certain"
provisions are "anti-takeover" in nature.
Financial Statements
General
18. We note you did not include Fidelity`s financial statements in
your filing. Please provide us with a detailed analysis that
explains how you determined inclusion of these financial
statements
is not required, including your calculations of the significance
tests prescribed by Rule 3-05 of Regulation S-X.
As of and for the six-months ended June 30, 2006, and the year
ended
December 31, 2005
Note E - Goodwill and Other Intangible Assets, page F-9
19. Please tell us how you determined the following regarding the
Bank of Washtenaw core deposit and borrower relationship
intangibles:
* your method for determining the fair value of each asset;
* how you determined the useful lives for each of these assets;
and
* how you are maintaining each asset and will evaluate future
impairments.
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,in writing, a statement from the company and each filing person
acknowledging that:
* the company or filing person is responsible for the adequacy and
accuracy of the disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company or filing person may not assert staff comments as a
defense in any proceeding initiated by the Commission or any
person
under the federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Amanda Roberts at 202-551-3417 or Sharon
Blume at 202-551-3474 if you have questions regarding comments on the
financial statements and related matters. Please contact Jessica
Livingston at 202-551-3448 or me at 202-551-3419 with any other
questions.
Sincerely,
Christian Windsor
Special Counsel
Financial Services Group
cc: Verne C. Hampton II
Dickerson Wright PLLC
500 Woodward Avenue, Suite 4000
Detroit, Michigan 48226-3425