SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly period ended June 30, 2003. ------------- 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) 22290 Michigan Avenue, Dearborn, MI 48123-2247 ---------------------------------------------- (Address of principal executive office) (Zip Code) (313) 274-1000 -------------- (Registrant's telephone number, including area code) N/A --- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding for each of the issuer's classes of common stock, as of July 31, 2003. Class Shares Outstanding ----- ------------------- Common Stock 2,785,384 Indicate by check mark whether the registrant is an accelerated filer (as defined in rule 12b-2 of the 1934 Securities and Exchange Act). Yes No X ----- ----- DEARBORN BANCORP, INC. INDEX Part I. Financial Information: Item 1. Financial Statements The following consolidated financial statements of Dearborn Bancorp, Inc. and its subsidiary included in this report are: Page ---- Independent Accountants' Report 3 Consolidated Balance Sheets - June 30, 2003, December 31, 2002 and June 30, 2002 4 Consolidated Statements of Income - For the Three And Six Months Ended June 30, 2003 and 2002 5 Consolidated Statements of Comprehensive Income - For the Three and Six Months Ended June 30, 2003 and 2002 6 Consolidated Statements of Cash Flows - For the Six Months Ended June 30, 2003 and 2002 7 Notes to Consolidated Financial Statements 8-11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital 12-24 Item 3. Quantitative and Qualitative Disclosures about Market Risk 25-26 Item 4. Controls and Procedures 27 Part II. Other Information: Pursuant to SEC rules and regulations, the following item(s) are included with the Form 10-Q Report: Item 4. Submission of Matters to a Vote of Security Holders 28 Item 5 Other Information Item 6. Exhibits and Reports on Form 8-K Pursuant to SEC rules and regulations, the following items are omitted from this Form 10-Q as inapplicable or to which the answer is negative: Item 1. Legal Proceedings Item 2. Changes in Securities and Use of Proceeds Item 3. Defaults upon Senior Securities SIGNATURES 30 2 INDEPENDENT ACCOUNTANTS' REPORT Board of Directors and Shareholders Dearborn Bancorp, Inc. Dearborn, Michigan We have reviewed the consolidated balance sheets of Dearborn Bancorp, Inc. as of June 30, 2003 and 2002, the related consolidated statements of income and comprehensive income for the three and six month periods then ended, and the related consolidated statements of cash flows for the six month periods then ended. These financial statements are the responsibility of the Corporation's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America. /s/ Crowe Chizek and Company LLC Grand Rapids, Michigan July 21, 2003 3 DEARBORN BANCORP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (Dollars, in thousands) (unaudited) (audited) (unaudited) 06/30/03 12/31/02 06/30/02 --------- --------- --------- ASSETS Cash and cash equivalents Cash and due from banks $ 9,393 $ 5,903 $ 3,726 Federal funds sold 6,162 8,572 8,779 Interest bearing deposits with banks 3,425 4,975 2,645 --------- --------- --------- Total cash and cash equivalents 18,980 19,450 15,150 Mortgage loans held for sale 13,053 9,852 406 Securities, available for sale 27,411 22,216 41,713 Federal Home Loan Bank stock 1,047 1,033 1,000 Loans Loans 327,383 267,522 226,800 Allowance for loan losses (3,514) (2,875) (2,313) --------- --------- --------- Net loans 323,869 264,647 224,487 Premises and equipment, net 5,680 5,276 4,739 Accrued interest receivable 1,329 1,260 1,329 Other assets 1,691 1,366 716 --------- --------- --------- Total assets $ 393,060 $ 325,100 $ 289,540 ========= ========= ========= LIABILITIES Deposits Non-interest bearing deposits $ 42,008 $ 32,457 $ 28,785 Interest bearing deposits 286,489 229,629 210,742 --------- --------- --------- Total deposits 328,497 262,086 239,527 Other liabilities Federal Home Loan Bank advances 20,660 20,660 20,000 Trust preferred securities 10,000 10,000 -- Accrued interest payable 617 609 604 Other liabilities 1,002 1,054 418 --------- --------- --------- Total liabilities 360,776 294,409 260,549 STOCKHOLDERS' EQUITY Common stock - 5,000,000 shares authorized, 2,782,831 shares at 06/30/03, 2,614,587 12/31/02; and 2,726,006 shares at 06/30/02 32,229 30,611 28,636 Accumulated earnings 14 -- 210 Accumulated other comprehensive income 41 80 145 --------- --------- --------- Total stockholders' equity 32,284 30,691 28,991 --------- --------- --------- Total liabilities and stockholders' equity $ 393,060 $ 325,100 $ 289,540 ========= ========= ========= The accompanying notes are an integral part of these consolidated financial statements 4 DEARBORN BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended Six Months Ended 06/30/03 06/30/02 06/30/03 06/30/02 ---------- ---------- ---------- ---------- Interest income Interest on loans $ 5,452 $ 4,030 $ 10,452 $ 7,680 Interest on securities, available for sale 189 329 388 574 Interest on deposits with banks 52 37 130 58 Interest on federal funds 39 53 79 130 ---------- ---------- ---------- ---------- Total interest income 5,732 4,449 11,049 8,442 Interest expense Interest on deposits 1,890 1,705 3,843 3,204 Interest on other borrowings 353 224 705 449 ---------- ---------- ---------- ---------- Total interest expense 2,243 1,929 4,548 3,653 ---------- ---------- ---------- ---------- Net interest income 3,489 2,520 6,501 4,789 Provision for loan losses 511 263 739 488 ---------- ---------- ---------- ---------- Net interest income after provision for loan losses 2,978 2,257 5,762 4,301 ---------- ---------- ---------- ---------- Non-interest income Service charges on deposit accounts 110 88 213 164 Fees for other services to customers 6 8 15 16 Gain on the sale of loans 675 133 1,301 355 Gain on the sale of securities, available for sale 79 -- 79 -- Other income 36 9 49 16 ---------- ---------- ---------- ---------- Total non-interest income 906 238 1,657 551 Non-interest expenses Salaries and employee benefits 1,829 1,096 3,606 2,104 Occupancy and equipment expense 349 225 671 443 Advertising and marketing 62 57 144 119 Stationery and supplies 84 49 185 113 Professional services 114 69 212 122 Data processing 71 68 135 122 Other operating expenses 226 135 439 311 ---------- ---------- ---------- ---------- Total non-interest expenses 2,735 1,699 5,392 3,334 ---------- ---------- ---------- ---------- Income before income tax provision 1,149 796 2,027 1,518 Income tax provision 390 270 688 515 ---------- ---------- ---------- ---------- Net income $ 759 $ 526 $ 1,339 $ 1,003 ========== ========== ========== ========== Per share data: Net income - basic $ 0.27 $ 0.19 $ 0.48 $ 0.37 Net income - diluted $ 0.25 $ 0.18 $ 0.45 $ 0.35 Weighted average number of shares outstanding - basic 2,772,012 2,726,006 2,761,150 2,726,297 Weighted average number of shares outstanding - diluted 3,014,805 2,869,334 2,985,306 2,850,306 The accompanying notes are an integral part of these consolidated financial statements 5 DEARBORN BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (In thousands) Three Months Ended Six Months Ended 06/30/03 06/30/02 06/30/03 06/30/02 ----------- ----------- ----------- ----------- Net income $ 759 $ 526 $ 1,339 $ 1,003 Other comprehensive income, net of tax Unrealized gains on securities Unrealized holding gains arising during period 35 261 20 129 Less: reclassification adjustment for gains included in net income (79) -- (79) -- Tax effects 15 (89) 20 (44) ----------- ----------- ----------- ----------- Other comprehensive income (loss) (29) 172 (39) 85 ----------- ----------- ----------- ----------- Comprehensive income $ 730 $ 698 $ 1,300 $ 1,088 =========== =========== =========== =========== The accompanying notes are an integral part of the consolidated financial statements. 6 DEARBORN BANCORP, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) 6/30/03 6/30/02 -------- -------- Cash flows from operating activities Interest and fees received $ 10,980 $ 8,198 Interest paid (4,540) (3,853) Taxes paid (1,000) (709) Proceeds from sale of mortgages held for sale 81,158 23,471 Origination of mortgages held for sale (83,058) (20,607) Cash paid to suppliers and employees (4,892) (3,062) -------- -------- Net cash provided by (used in) in operating activities (1,352) 3,438 Cash flows from investing activities Proceeds from maturities of securities available for sale 7,500 10,782 Proceeds from sales of securities available for sale 3,079 -- Proceeds from repayments of securities available for sale 612 253 Purchases of securities available for sale (16,412) (31,050) Purchases of Federal Home Loan Bank stock (14) -- Increase in loans, net of payments received (59,961) (46,005) Purchases of property and equipment (626) (188) -------- -------- Net cash used in investing activities (65,822) (66,208) Cash flows from financing activities Net increase in non-interest bearing deposits 9,551 7,344 Net increase in interest bearing deposits 56,860 54,702 Stock option exercise 293 -- -------- -------- Net cash provided by financing activities 66,704 62,046 Increase in cash and cash equivalents (470) (724) Cash and cash equivalents at the beginning of the period 19,450 15,874 -------- -------- Cash and cash equivalents at the end of the period $ 18,980 $ 15,150 ======== ======== Reconciliation of net income to net cash provided by (used in) operating activities Net income $ 1,339 $ 1,003 Adjustments to reconcile net income to net cash provided by (used in) operating activities Provision for loan losses 739 488 Depreciation and amortization expense 222 193 Accretion of discount on securities, available for sale (4) (4) Amortization of premium on securities, available for sale 50 87 Gain on the sale of securities, available for sale (79) -- (Increase) decrease in mortgages held for sale (3,201) 2,509 Increase in interest receivable (69) (244) Increase (decrease) in interest payable 8 (259) Increase in other assets (305) (135) Decrease in other liabilities (52) (200) -------- -------- Net cash provided by (used in) operating activities ($ 1,352) $ 3,438 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 7 DEARBORN BANCORP, INC. FORM 10-Q (continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. Accounting and Reporting Policies The consolidated financial statements of Dearborn Bancorp, Inc. (the "Corporation") include the consolidation of its only subsidiary, Community Bank of Dearborn (the "Bank"). The accounting and reporting policies of the Corporation are in accordance with generally accepted accounting principles and conform to practice within the banking industry. The consolidated financial statements of the Corporation as of June 30, 2003 and 2002, and December 31, 2002 and for the three and six month periods ended June 30, 2003 and 2002 reflect all adjustments, consisting of normal recurring items which are in the opinion of management, necessary for a fair presentation of the results for the interim period. The operating results for the quarter are not necessarily indicative of results of operations for the entire year. The consolidated financial statements as of June 30, 2003 and 2002, and for the three and six months ended June 30, 2003 and 2002 included herein have been prepared by the Corporation, without an audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in interim financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. These financial statements should be read in conjunction with the financial statements and notes thereon included in the Corporation's 2002 Annual Report to Stockholders on Form 10-K. Certain of the Corporation's accounting policies are important to the portrayal of the Corporation's financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Facts and circumstances which could affect these material judgments include, but without limitation, changes in interest rates, in the performance of the economy or in the financial condition of borrowers. Management believes that its critical accounting policies include determining the allowance for loan losses and determining the fair value of securities and other financial instruments. 8 A. Accounting and Reporting Policies (continued) Employee compensation expense under stock option plans is reported using the intrinsic value method. No stock-based compensation cost is reflected in net income, as all options granted had an exercise price equal to or greater than the market price of the underlying common stock at date of grant. The following table illustrates the effect on net income and earnings per share if expense was measured using the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-based Compensation (in thousands, except share and per share data). Three Months ended Six Months Ended 06/30/03 06/30/02 06/30/03 06/30/02 ----------- ----------- ----------- ----------- Net income As reported $ 759 $ 526 $ 1,339 $ 1,003 Less: stock-based compensation expense determined under fair value based method 353 290 698 553 ----------- ----------- ----------- ----------- Pro forma $ 406 $ 236 $ 641 $ 450 =========== =========== =========== =========== Basic income per share As reported $ 0.27 $ 0.19 $ 0.48 $ 0.37 Pro forma 0.15 0.09 0.23 0.17 Diluted income per share As reported $ 0.25 $ 0.18 $ 0.45 $ 0.35 Pro forma 0.13 0.08 0.21 0.16 9 B. Securities Available For Sale The amortized cost and estimated market value of securities available for sale are as follows (in thousands): June 30, 2003 ---------------------------------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value ------- ------- ------- ------- US Treasury securities $ 2,032 $ 7 $ -- $ 2,039 Mortgage backed securities 1,603 57 -- 1,660 Corporate debt securities 8,605 -- -- 8,605 Municipal securities 11,109 5 (7) 11,107 FHLMC preferred stock 4,000 -- -- 4,000 ------- ------- ------- ------- Totals $27,349 $ 69 ($7) $27,411 ======= ======= ======= ======= December 31, 2002 --------------------------------------------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value -------------- -------------- -------------- -------------- US Treasury securities $ 2,005 $ 2 $ -- $ 2,007 Mortgage backed securities 2,202 90 -- 2,292 Corporate debt securities 2,500 -- -- 2,500 Municipal securities 11,388 39 (10) 11,417 FHLMC preferred stock 4,000 -- -- 4,000 -------------- -------------- -------------- -------------- Totals $ 22,095 $ 131 ($ 10) $ 22,216 ============== ============== ============== ============== The amortized cost and estimated market value of securities available for sale at June 30, 2003 by contractual maturity are shown below (in thousands): Estimated Amortized Market Cost Value ---------- ---------- Due in three months through one year $ 4,032 $ 4,039 Due in one year through five years 12,344 12,342 Due in over ten years 5,370 5,370 Mortgage backed securities 1,603 1,660 FHLMC preferred stock 4,000 4,000 ---------- ---------- Totals $ 27,349 $ 27,411 ========== ========== 10 C. Stock Option Plan Options to buy common stock are granted to officers and employees under a Stock Option Plan which provides for issue of up to 638,142 shares. Exercise price is the market price at date of grant. The maximum option term is ten years, and options vest fully after six months from the date of grant. If an option expires or terminates without having been exercised, such option becomes available for future grant under the Plan. A summary of the option activity for the six months ended June 30, 2003 is as follows: Weighted Weighted Average Fair Available Average Value of For Options Exercise Options Grant Outstanding Price Granted ----- ----------- ----- ------- Outstanding at January 1, 2003 108,754 484,745 $ 8.52 Granted (108,754) 108,754 17.52 $ 6.33 Exercised -- (37,696) 7.84 Forfeited 4,200 (4,200) 17.52 -------- ------- --------- Outstanding at June 30, 2003 4,200 551,603 $ 10.27 For the options outstanding at June 30, 2003, the range of exercise prices was $5.34 to $17.52 per share with a weighted-average remaining contractual term of 7.5 years. At June 30, 2003, 447,049 options were exercisable at weighted average exercise price of $8.58 per share. Stock options for 104,554 shares of common stock were not considered in computing diluted earnings per share for the six months ended June 30, 2003 because they were antidilutive. D. Employment and Change in Control Agreements During the second quarter of 2003, the Corporation entered into an Employment Agreement with its Chief Executive Officer and Change in Control Agreements with several of its executive officers. Under the terms of these agreements, certain events leading to termination of employment with the Corporation could result in cash payments aggregating approximately $1,737,000 at June 30, 2003. 11 PART I - FINANCIAL INFORMATION ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis are intended to address significant factors affecting the financial condition and results of operations of the Corporation. The discussion provides a more comprehensive review of the financial position and operating results than can be obtained from a reading of the financial statements and footnotes presented elsewhere in this report. Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and about the Corporation and Bank. Words such as "anticipates", "believes", "estimates", "expects", "forecasts", "intends", "is likely", "plans", "projects", variations of such words and similar expressions are intended to identify such forward- looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("Future Factors") that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements. The Corporation undertakes no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events (whether anticipated or unanticipated), or otherwise. Future Factors include changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; changes in banking regulation; changes in tax laws; changes in prices, levies and assessments; the impact of technological advances; governmental and regulatory policy changes; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; and changes in the national and local economy. These are representative of the Future Factors that could cause a difference between an ultimate actual outcome and a preceding forward-looking statement. 12 GENERAL The Corporation was formed in 1992 and the Bank was formed in 1993. Principal operations of the Bank commenced on February 28, 1994 when the Bank opened for business at its main office. Subsequently, branch offices were opened in Dearborn Heights and Plymouth Township. During 2001, the Bank opened its fourth and fifth offices in Canton Township, Michigan and Clinton Township, Michigan, respectively. Additionally, Community Bank Mortgage, Inc., a mortgage company, was formed and began operations in 2001. The Bank formed Community Bank Audit Services, Inc., a subsidiary that offers internal audit and compliance services during 2002. The Bank also moved the Clinton Township retail branch operations to 19100 Hall Road during the fourth quarter of 2002. The branch office is adjacent to the office at 45000 River Ridge, which will continue to serve as a regional lending center. During the first quarter of 2003, the Bank opened its sixth branch office, located at 12820 Fort Street in Southgate, Michigan. During the second quarter of 2003, the Bank opened a regional lending center at 3201 University Drive in Auburn Hills, Michigan. RESULTS OF OPERATIONS The Corporation reported net income of $759,000 and $1,339,000 for the three and six month periods ended June 30, 2003, compared to net income of $526,000 and $1,003,000 for the three and six month periods ended June 30, 2002. The increase in net income was primarily due to the improvements in net interest income and the increase in gain on the sale of loans. The improvement in net interest income was primarily due to the increase in the commercial real estate loan and other commercial loan portfolios and the decreasing cost of deposits during the period. Management expects net interest income to continue to increase during 2003 due to planned deployment of funds currently invested in federal funds sold into loans and the repricing of time deposits. The gain on sale of loans, which is based on the level of residential real estate mortgage originations are expected to continue at current levels during the third quarter of 2003. 13 NET INTEREST INCOME 2003 Compared to 2002. As noted on the two charts on the following pages, net interest income for the three and six month periods ended June 30, 2003, was $3,489,000 and $6,501,000, compared to $2,520,000 and $4,789,000 for the same periods ended June 30, 2002, an increase of $969,000 or 38% and $1,712,000 or 36%, respectively. This increase was caused primarily by an increase in the volume of interest earning assets and interest bearing liabilities. The Corporation's interest rate spread was 3.32% and 3.15%, respectively, for the three and six month periods ended June 30, 2003, compared to 3.11% and 3.19% for the same periods in 2002. The Corporation's interest rate margin was 3.70% and 3.59%, respectively, for the three and six month periods ended June 30, 2003, compared to 3.68% and 3.76% for the same periods in 2002. The Corporation's decrease in interest rate spread and net interest margin during the six months ended June 30, 2003 was primarily the result of the relatively large amount of the Bank's funds that are temporarily invested in interest bearing deposits with banks and federal funds sold. As these funds are deployed into loans, the Bank's interest rate spread and net interest rate margin are expected to improve. Management expects that both the net interest margin on earning assets and the net interest rate spread will increase during 2003 as the Bank converts funds currently held in federal funds and interest bearing deposits with banks into loans and the cost of deposits continue to decrease. Planned deposit growth for the remainder of 2003 is expected to slow considerably in comparison to the first half of 2003. 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. 14 The following table sets forth certain information relating to the Corporation's consolidated average interest-earning assets and interest-bearing liabilities and reflects the average yield on assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average daily balance of assets or liabilities, respectively, for the periods presented. During the periods indicated, non-accruing loans, if any, are included in the loan category. Three months ended Three months ended June 30, 2003 June 30, 2002 ------------------------------- ----------------------------- Average Average Average Average (In thousands) Balance Interest Rate Balance Interest Rate -------- -------- ------- -------- -------- ------- Assets Interest-bearing deposits with banks $ 16,957 $ 52 1.23% $ 8,910 $ 37 1.67% Federal funds sold 13,370 39 1.17% 13,292 53 1.60% Securities, available for sale 29,390 189 2.59% 36,215 329 3.65% Loans 319,084 5,452 6.87% 217,306 4,030 7.46% -------- -------- ------- -------- -------- ------- Sub-total earning assets 378,801 5,732 6.09% 275,723 4,449 6.49% Other assets 13,440 9,313 -------- -------- Total assets $392,241 $285,036 ======== ======== Liabilities and stockholders' equity Interest bearing deposits $295,443 $ 1,890 2.57% $209,762 $ 1,705 3.27% Other borrowings 30,660 353 4.63% 20,000 224 4.50% -------- -------- ------- -------- -------- ------- Sub-total interest bearing liabilities 326,103 2,243 2.77% 229,762 1,929 3.38% Non-interest bearing deposits 32,708 25,554 Other liabilities 1,391 958 Stockholders' equity 32,039 28,762 -------- -------- Total liabilities and stockholders' equity $392,241 $285,036 ======== ======== Net interest income $ 3,489 $ 2,520 ======== ======== Net interest rate spread 3.32% 3.11% ======= ======= Net interest margin on earning assets 3.70% 3.68% ======= ======= 15 Six Months Ended Six Months Ended June 30, 2003 June 30, 2002 ------------------------------- ------------------------------ Average Average Average Average (In thousands) Balance Interest Rate Balance Interest Rate -------- -------- ------- -------- -------- ------- Assets Interest-bearing deposits with banks $ 21,961 $ 130 1.20% $ 7,931 $ 58 1.48% Federal funds sold 13,611 79 1.17% 14,832 130 1.77% Securities, available for sale 27,293 388 2.87% 30,303 574 3.83% Loans 303,214 10,452 6.97% 204,507 7,680 7.59% -------- -------- ------- -------- -------- ------- Sub-total earning assets 366,079 11,049 6.10% 257,573 8,442 6.63% Other assets 13,405 10,408 -------- -------- Total assets $379,484 $267,981 ======== ======== Liabilities and stockholders' equity Interest bearing deposits $281,144 $ 3,843 2.76% $194,584 $ 3,204 3.33% Other borrowings 30,660 705 4.65% 20,000 449 4.54% -------- -------- ------- -------- -------- ------- Sub-total interest bearing liabilities 311,804 4,548 2.95% 214,584 3,653 3.44% Non-interest bearing deposits 34,663 23,809 Other liabilities 1,434 1,078 Stockholders' equity 31,583 28,510 -------- -------- Total liabilities and stockholders' equity $379,484 $267,981 ======== ======== Net interest income $ 6,501 $ 4,789 ======== ======== Net interest rate spread 3.15% 3.19% ======= ======= Net interest margin on earning assets 3.59% 3.76% ======= ======= 16 Rate/Volume Analysis. The following table analyzes net interest income in terms of changes in the volume of interest-earning assets and interest-bearing liabilities and changes in yields and rates. The table reflects the extent to which changes in the interest income and interest expense are attributable to changes in volume (changes in volume multiplied by prior year rate) and changes in rate (changes in rate multiplied by prior year volume). Changes attributable to the combined impact of volume and rate have been allocated proportionately to changes due to volume and changes due to rate. Three Months Ended Six Months Ended June 30, 2003/2002 June 30, 2003/2002 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 $ 25 ($10) $ 15 $ 83 ($11) $ 72 Federal funds sold -- (14) (14) (7) (44) (51) Investment securities, available for sale (43) (97) (140) (44) (142) (186) Loans 1,741 (319) 1,422 3,408 (636) 2,772 --------- --------- --------- --------- --------- --------- Total earning assets $ 1,723 ($440) $ 1,283 $ 3,440 ($833) $ 2,607 ========= ========= ========= ========= ========= ========= Liabilities Interest bearing deposits $ 550 ($365) $ 185 $ 1,189 ($550) $ 639 Other borrowings 123 6 129 245 11 256 --------- --------- --------- --------- --------- --------- Total interest bearing liabilities $ 673 ($359) $ 314 $ 1,434 ($539) $ 895 ========= ========= ========= ========= ========= ========= Net interest income $ 969 $ 1,712 ========= ========= Net interest rate spread 0.21% (0.04%) ========= ========= Net interest margin on earning assets 0.02% (0.17%) ========= ========= PROVISION FOR LOAN LOSSES 2003 Compared to 2002. The provision for loan losses was $511,000 and $739,000 for the three and six month periods ended June 30, 2003, compared to $263,000 and $488,000 for the same periods in 2002, an increase of $248,000 or 94% for the three month period and $251,000 or 51% for the six month period. The provision for loan losses for the three and six month periods ended June 30, 2003 is based on the internal analysis of the adequacy of the allowance for loan losses. The provision for loan losses was based upon management's assessment of relevant factors, including types and amounts of non-performing loans, historical and anticipated loss experience on such types of loans, and current and projected economic conditions. 17 NON-INTEREST INCOME 2003 Compared to 2002. Non-interest income was $906,000 and $1,657,000 for the three and six month periods ended June 30, 2003, compared to $238,000 and $551,000 for the same periods in 2002, an increase of $668,000 or 281% for the three month period and $1,106,000 or 201% for the six month period. The increase was primarily due to the increase in the gain on the sale of loans during the period. The volume of mortgage loans sold increased during the period primarily due to the addition of five mortgage loan originators during 2002 and two mortgage loan originators during 2003. Management expects the gain on sale of loans to continue at the same level during the third quarter of 2003. NON-INTEREST EXPENSE 2003 Compared to 2002. Non-interest expense was $2,735,000 and $5,392,000 for the three and six month periods ended June 30, 2003, compared to $1,699,000 and $3,334,000 for the same periods in 2002, an increase of $1,036,000 or 61% for the three month period and $2,058,000 or 62% for the six month period. The largest component of non-interest expense was salaries and employee benefits which amounted to $1,829,000 and $3,606,000 for the three and six month periods ended June 30, 2003, compared to $1,096,000 and $2,104,000 for the same period in 2002, an increase of $733,000 or 67% for the three month period and $1,502,000 or 71% for the six month period. The primary factor in the increase in salaries and benefits expense was the addition of two branch offices during 2002 and the expansion of the commercial lending and residential lending departments. As of June 30, 2003, the number of full time equivalent employees was 113 compared to 80 as of June 30, 2002. Salaries and employee benefits will continue to increase as a result of general staff increases. INCOME TAX PROVISION 2003 Compared to 2002. The income tax expense was $390,000 and $688,000 for the three and six month periods ended June 30, 2003, compared to $270,000 and $515,000 for the same period in 2002, an increase of $120,000 or 44% for the three month period and $173,000 or 34% for the six month period. The increase was primarily a result of increased pre-tax income. 18 COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2003 AND DECEMBER 31, 2002 Assets. Total assets at June 30, 2003 were $393,060,000 compared to $325,100,000 at December 31, 2002, an increase of $67,960,000 or 21%. The increase was primarily due to the increase in loans during the period. Federal Funds Sold. Total federal funds sold at June 30, 2003 were $6,162,000 compared to $8,572,000 at December 31, 2002, a decrease of $2,410,000 or 28%. The decrease was primarily due to the utilization of federal funds sold to fund loans. Available funds are deployed into federal funds sold until they can be utilized to fund loan volume. Interest bearing deposits with banks. Total interest bearing deposits with banks at June 30, 2003 were $3,425,000 compared to $4,975,000 at December 31, 2002, a decrease of $1,550,000 or 31%. These funds are deployed into interest bearing deposits with banks until they can be utilized to fund loan volume. This investment was established to provide the Corporation with an alternate short term investment option. This short term investment is a variable-rate certificate of deposit with the Federal Home Loan Bank of Indianapolis that carries a similar rate of return to federal funds sold. Mortgage Loans Held for Sale. Total mortgage loans held for sale at June 30, 2003 were $13,053,000 compared to $9,852,000 at December 31, 2002, an increase of $3,201,000 or 32%. This increase was a result of the increased level of residential real estate mortgage loans waiting to be purchased by mortgage correspondents. Securities - Available for Sale. Total securities, available for sale, at June 30, 2003 were $27,411,000 compared to $22,216,000 at December 31, 2002, an increase of $5,195,000 or 23%. The increase was due to the purchase of securities, available for sale during the period. These securities were purchased in order to increase the Bank's earning asset yield. The entire portfolio has a unrealized gain of $62,000 at June 30, 2003. The Corporation does not hold any securities in the "Held to Maturity" category nor does the Corporation hold or utilize derivatives. Please refer to Note B of the Notes to Consolidated Financial Statements for the amortized cost and estimated market value of securities, available for sale. Federal Home Loan Bank Stock. Federal Home Loan Bank stock was valued at $1,047,000 at June 30, 2003, compared to $1,033,000 at December 31, 2002, an increase of $14,000 or 1%. 19 Loans. Total loans at June 30, 2003 were $327,383,000 compared to $267,522,000 at December 31, 2002, an increase of $59,861,000 or 22%. The increase was primarily due to the continued expansion of the commercial lending department during 2003. This expansion included the addition of seven experienced loan officers during the last twelve months. Three of these loan officers are located at our regional lending center in Auburn Hills, Michigan and will continue to focus their efforts on developing commercial lending relationships in Oakland County. Major categories of loans included in the loan portfolio are as follows (in thousands): 06/30/03 12/31/02 06/30/02 --------- --------- --------- Consumer loans $ 21,521 $ 22,170 $ 20,363 Commercial, financial, & other 59,623 46,187 39,344 Commercial real estate construction 41,698 30,083 21,402 Commercial real estate mortgages 172,205 139,243 113,147 Residential real estate mortgages 32,336 29,839 32,544 --------- --------- --------- 327,383 267,522 226,800 Allowance for loan losses (3,514) (2,875) (2,313) --------- --------- --------- $ 323,869 $ 264,647 $ 224,487 ========= ========= ========= The following is a summary of non-performing assets and problems loans (in thousands): 06/30/03 12/31/02 06/30/02 --------- --------- --------- Over 90 days past due and still accruing $ 34 $ 32 $ 20 Non-accrual loans 2,564 2,641 760 --------- --------- --------- $ 2,598 $ 2,673 $ 780 ========= ========= ========= Non-accrual loans at June 30, 2003 were $2,564,000, of which, $1,818,000 was related to one commercial loan relationship that is well secured. The remaining non-accrual loans consisted of one residential loan in bankruptcy proceedings with a balance of $287,000 and three slow paying commercial loans with balances of $228,000, $176,000 and $55,000. Allowance for Loan Losses. The allowance for loan losses was $3,514,000 at June 30, 2003 compared to $2,875,000 at December 31, 2002, an increase of $639,000 or 22%. The increase was primarily due to growth in the loan portfolio during the six months ended June 30, 2003. The allowance for loan losses was based upon management's assessment of relevant factors, including loan growth, types and amounts of non-performing loans, historical and anticipated loss experience on such types of loans, and current economic conditions. 20 The following is an analysis of the allowance for loan losses (in thousands): Six Months Ended Year Ended Six Months Ended 06/30/03 12/31/02 06/30/02 --------------- --------------- --------------- Balance, beginning of year $ 2,875 $ 1,922 $ 1,922 Charge-offs: Consumer loans (16) (32) (21) Commercial loans (100) (141) (82) Recoveries: Consumer loans 4 9 3 Commercial loans 12 65 3 --------------- --------------- --------------- Net charge-offs (100) (99) (97) Additions charged to operations 739 1,052 488 --------------- --------------- --------------- Balance, end of period $ 3,514 $ 2,875 $ 2,313 =============== =============== =============== Allowance to total loans 1.07% 1.07% 1.02% =============== =============== =============== Allowance to nonperforming assets 136.20% 107.56% 296.54% =============== =============== =============== Net charge-offs to average loans 0.04% 0.17% 0.05% =============== =============== =============== Premises and Equipment. Bank premises and equipment at June 30, 2003 was $5,680,000 compared to $5,276,000 at December 31, 2002, an increase of $404,000 or 8%. The increase in premises and equipment was primarily due to the cost of the renovation of the Bank's branch office in Southgate, Michigan. Accrued Interest Receivable. Accrued interest receivable at June 30, 2003 was $1,329,000 compared to $1,260,000 at December 31, 2002, an increase of $69,000 or 5%. The increase was primarily due to the increase in the Bank's loan portfolio. Other Assets. Other assets at June 30, 2003 were $1,691,000 compared to $1,366,000 at December 31, 2002, an increase of $325,000 or 24%. The increase was primarily due to changes in deferred tax assets. 21 Deposits. Total deposits at June 30, 2003 were $328,497,000 compared to $262,086,000 at December 31, 2002, an increase of $66,411,000 or 25%. The following is a summary of the distribution of deposits (in thousands): 06/30/03 12/31/02 06/30/02 ------------------ ------------------ ------------------- Non-interest bearing: Demand $ 42,008 $ 32,457 $ 28,785 ------------------ ------------------ ------------------- Interest bearing: Checking $ 25,417 $ 25,083 $ 12,999 Money market 14,587 13,490 18,542 Savings 99,666 63,677 51,844 Time, under $100,000 66,571 61,331 61,082 Time, $100,000 and over 80,248 66,048 66,275 ------------------ ------------------ ------------------- 286,489 229,629 210,742 ------------------ ------------------ ------------------- Total deposits $ 328,497 $ 262,086 $ 239,527 ================== ================== =================== The increase in deposits was primarily due to normal business development, marketing, telemarketing, referral programs and growth strategies which included a grand opening promotion for the Bank's retail branch office in Clinton Township, Michigan during February 2003, which targeted time deposit growth and an annual birthday celebration and marketing campaign in March 2003. Management continues to implement a strategy during 2003 to change the mix of the deposit portfolio by focusing more heavily on demand, interest bearing checking, savings and money market, while reducing its reliance on time deposits. Management expects deposits to grow at a more moderate rate during the remainder of 2003. Federal Home Loan Bank Advances. Federal Home Loan Bank advances were $20,660,000 at June 30, 2003 and December 31, 2002. Trust Preferred Securities. Trust preferred securities were $10,000,000 at June 30, 2003 and December 31, 2002. The Corporation issued $10,000,000 of floating rate obligated mandatory redeemable securities through Dearborn Bancorp Trust I, a special purpose entity as part of a pooled offering on December 19, 2002. The interest rate is the three month LIBOR plus 3.35% and was 4.64% at June 30, 2003. The securities have a term of thirty years. The Corporation may redeem the securities after five years, with regulatory approval, at face value. They are presented in the liability section of the balance sheet, but are included as Tier 1 capital for regulatory capital purposes. Debt issue costs of $300,000 have been capitalized and are being amortized over the term of the securities. Unamortized debt issuance costs were $295,000 at June 30, 2003. Accrued Interest Payable. Accrued interest payable at June 30, 2003 was $617,000 compared to $609,000 at December 31, 2001, an increase of $8,000 or 1%. The increase was primarily due to the increasing amount of interest bearing deposits during the period. 22 Other Liabilities. Other liabilities at June 30, 2003 were $1,002,000 compared to $1,054,000 at December 31, 2002, a decrease of $52,000 or 5%. The decrease was primarily due to the decrease in expenses payable during the period. CAPITAL Stockholders' equity at June 30, 2003 was $32,284,000 compared to $30,691,000 as of December 31, 2002, an increase of $1,593,000 or 5%. The following is a presentation of the Corporation's and Bank's regulatory capital ratios (in thousands): Minimum To Be Well Capitalized Minimum for Capital Under Prompt Corrective Actual Adequacy Purposes Action Provisions ---------------------- ------------------------ --------------------------- Amount Ratio Amount Ratio Amount Ratio ---------------------- ------------------------ --------------------------- As of June 30, 2003 Total capital (to risk weighted assets) Consolidated 45,757 12.9% 28,338 8.0% 35,423 10.0% Bank 36,526 10.5% 27,766 8.0% 34,708 10.0% Tier 1 capital (to risk weighted assets) Consolidated 42,243 11.9% 14,169 4.0% 21,254 6.0% Bank 33,012 9.5% 13,883 4.0% 20,825 6.0% Tier 1 capital (to average assets) Consolidated 42,243 10.8% 15,690 4.0% 19,612 5.0% Bank 33,012 8.7% 15,258 4.0% 19,073 5.0% As of December 31, 2002 Total capital (to risk weighted assets) Consolidated 43,486 14.2% 23,075 8.0% 28,844 10.0% Bank 29,819 10.1% 22,249 8.0% 27,811 10.0% Tier 1 capital (to risk weighted assets) Consolidated 40,611 13.3% 11,538 4.0% 17,306 6.0% Bank 26,944 9.1% 11,124 4.0% 16,687 6.0% Tier 1 capital (to average assets) Consolidated 40,611 12.9% 12,318 4.0% 15,398 5.0% Bank 26,944 8.9% 12,066 4.0% 15,082 5.0% Based on the respective regulatory capital ratios at June 30, 2003 and December 31, 2002, the Corporation and Bank are considered well capitalized. 23 LIQUIDITY AND ASSET AND LIABILITY MANAGEMENT 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 and a federal funds purchase credit facility. 24 PART I - FINANCIAL INFORMATION ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Sensitivity Analysis. The Corporation has sought to manage its exposure to changes in interest rates by matching the effective maturities or repricing characteristics of the Corporation's interest-earning assets and interest-bearing liabilities. The matching of the assets and liabilities may be analyzed by examining the extent to which the assets and liabilities are interest rate sensitive and by monitoring the expected effects of interest rate changes on net interest income. An asset or liability is interest rate sensitive within a specific time period if it will mature or reprice within that time period. If the Corporation's assets mature or reprice more quickly or to a greater extent that its liabilities, the Corporation's net portfolio value and net interest income would tend to increase during periods of rising interest rates but decrease during periods of falling interest rates. If the Corporation's assets mature or reprice more slowly or to a lesser extent than its liabilities, its net portfolio value and net interest income would tend to decrease during periods of rising interest rates but increase during periods of falling interest rates. The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are "interest rate sensitive" and by monitoring an institution's interest rate sensitivity "gap." An asset or liability is said to be interest rate sensitive within a specific period if it will mature or reprice within that period. The interest rate sensitivity "gap" is the difference between the amount of interest-earning assets maturing or repricing within a specific time period and the amount of interest-bearing liabilities maturing or repricing within that time period. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities, and is considered negative when the amount of interest rate sensitive liabilities exceed the amount of interest rate sensitive assets. During a period of rising interest rates, a negative gap would be expected to adversely affect net interest income while a positive gap would be expected to result in an increase in net interest income, while conversely during a period of declining interest rates, a negative gap would be expected to result in an increase in net interest income and a positive gap would be expected to adversely affect net interest income. 25 Different types of assets and liabilities with the same or similar maturities may react differently to changes in overall market rates or conditions, and thus changes in interest rates may affect net interest income positively or negatively even if an institution were perfectly matched in each maturity category. Additionally, the gap analysis does not consider the many factors as banking interest rates move. While the interest rate sensitivity gap is a useful measurement and contributes toward effective asset and liability management, it is difficult to predict the effect of changing interest rates solely on that measure, without accounting for alterations in the maturity or repricing characteristics of the balance sheet that occur during changes in market interest rates. During periods of rising interest rates, the Corporation's assets tend to have prepayments that are slower than those in an interest rate sensitivity gap and would increase the negative gap position. Conversely, during a period of declining interest rates, the Corporation's assets would tend to prepay faster than originally expected thus decreasing the negative gap position. In addition, some of the Corporation's assets, such as adjustable rate mortgages, have caps on the amount by which their interest rates can change in any single period, and therefore may not reprice as quickly as liabilities in the same maturity category. The following table sets forth the amounts of interest earning assets and interest bearing liabilities outstanding at June 30, 2003, which are expected to mature or reprice in each of the time periods shown below. Interest Rate Sensitivity Period ------------------------------------------------------------ (In thousands) 1-90 91-365 1-5 Over Days Days Years 5 Years Total ------------- ------------ ---------- ----------- --------- Earning assets Federal funds sold $ 6,162 $ --- $ --- $ --- $ 6,162 Interest bearing deposits with Banks 3,425 --- --- --- 3,425 Mortgage loans held for sale 13,053 --- --- --- 13,053 Securities, available for sale 11,105 6,040 8,807 1,459 27,411 Federal Home Loan Bank stock 1,047 --- --- --- 1,047 Total loans, net of non-accrual 121,669 17,860 174,592 10,698 324,819 --------- --------- --------- --------- --------- Total earning assets 156,461 23,900 183,399 12,157 375,917 Interest bearing liabilities Total interest bearing deposits 173,964 74,578 37,947 --- 286,489 Federal Home Loan Bank advances --- --- 15,660 5,000 20,660 Trust preferred securities 10,000 --- --- --- 10,000 --------- --------- --------- --------- --------- Total interest bearing liabilities 183,964 74,578 53,607 5,000 317,149 Net asset (liability) funding gap (27,503) (50,678) 129,792 7,157 $ 58,768 --------- --------- --------- --------- ========= Cumulative net asset (liability) funding gap ($27,503) ($78,181) $ 51,611 $ 58,768 ========= ========= ========= ========= 26 DEARBORN BANCORP, INC. AND SUBSIDIARY FORM 10-Q (continued) Item 4. Controls and Procedures As of June 30, 2003, an evaluation was performed under the supervision of and with the participation of the registrant's management, including the President and Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the registrant's disclosure controls and procedures. Based on that evaluation, the registrant's management, including the President and Chief Executive Officer and the Chief Financial Officer, concluded that the registrant's disclosure controls and procedures were effective as of June 30, 2003. There have been no significant changes in the registrant's internal controls or in other factors that could significantly affect internal controls subsequent to June 30, 2003. 27 PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS The corporation held its regular annual meeting on May 15, 2003. At this meeting, four directors were re-elected to serve three-year terms expiring in 2006. The voting results for each nominee were as follows: Nominee Total For ------- --------- David Himick 2,305,108 Jeffrey G. Longstreth 2,305,108 Michael J. Ross 2,305,108 Robert C. Schwyn 2,305,108 ITEM 5. OTHER INFORMATION - SEE ATTACHED As of June 20, 2003, the Registrant entered into an Employment Agreement with Michael J. Ross, the President and Chief Executive Officer of the Registrant. A copy of the Employment Agreement is filed with this Report as Exhibit 10 (a). As of June 20, 2003, the Registrant also entered into Change in Control Agreements with the following executive officers of the Registrant: Jeffrey L. Karafa, William T. Larosa, Warren R. Musson, Stephen Tarczy and Jeffrey J. Wolber. A copy of the form of the Change in Control Agreement is filed with this Report as Exhibit 10 (b). 28 ITEM 6. EXHIBITS AND REPORTS IN FORM 8-K. (a) Exhibits Exhibit 10(a) Employment Agreement dated as of June 20, 2003 between the Registrant and Michael J. Ross. Exhibit 10(b) Form of Change in Control Agreement dated as of June 20, 2003 between Registrant and five executive officers. Exhibit 31.1 CEO Certification. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit 31.2 CFO Certification. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit 32.1 CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit 32.2 CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) A Form 8-K Report, dated May 21, 2003 was filed during the quarter ended June 30, 2003. 29 DEARBORN BANCORP, INC. FORM 10-Q (continued) SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dearborn Bancorp, Inc. (Registrant) /s/ John E. Demmer ------------------------------- John E. Demmer Chairman /s/ Michael J. Ross ------------------------------- Michael J. Ross President and Chief Executive Officer /s/ Jeffrey L. Karafa ------------------------------- Jeffrey L. Karafa Treasurer and Chief Financial Officer Date: August 10, 2003 30 Exhibit Index Number Description Exhibit 10(a) Employment Agreement dated as of June 20, 2003 between the Registrant and Michael J. Ross. Exhibit 10(b) Form of Change in Control Agreement dated as of June 20, 2003 between Registrant and five executive officers. Exhibit 31.1 CEO Certification. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit 31.2 CFO Certification. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Exhibit 32.1 CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Exhibit 32.2 CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.