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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-Q

or

Commission file number: 000-14209

FIRSTBANK CORPORATION
(Exact name of registrant as specified in its charter)

Registrant's telephone number, including area code: (989) 463-3131

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 filing requirements for the past 90 days.   [ X ] Yes   [     ] No

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    [ X ] Yes   [     ] No

        Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

        Common stock . . . 5,389,772 shares outstanding as of October 31, 2003.

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INDEX

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Item 1: Financial Statements (UNAUDITED)

FIRSTBANK CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
(Dollars in thousands)
UNAUDITED

See notes to consolidated financial statements.

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FIRSTBANK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
SEPTEMBER 30, 2003 AND 2002
(Dollars in thousands except per share data)
UNAUDITED

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FIRSTBANK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
SEPTEMBER 30, 2003 AND 2002
(Dollars in thousands except per share data)
UNAUDITED

See notes to consolidated financial statements

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FIRSTBANK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2003 AND 2002
(Dollars in thousands)
UNAUDITED

See notes to consolidated financial statements.

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FIRSTBANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
UNAUDITED

NOTE A — FINANCIAL STATEMENTS

The accompanying unaudited financial information presented is for Firstbank Corporation (“Corporation”) and its wholly owned subsidiaries: Firstbank — Alma, Firstbank (Mt. Pleasant), Firstbank — West Branch (including its wholly owned subsidiaries; 1^st Armored, Inc., 1^st Title, Inc., and its majority holding in C.A. Hanes Realty, Inc.), Firstbank — Lakeview, Firstbank — St. Johns (collectively the “Banks”) and Gladwin Land Company, Inc. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine month period ended September 30, 2003, are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. The balance sheet at December 31, 2002, has been derived from the audited financial statements at that date. For further information, refer to the consolidated financial statements and footnotes thereto included in the Corporation’s annual report on Form 10-K for the year ended December 31, 2002.

Stock Compensation

Employment compensation expense under stock options 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.

NOTE B — SECURITIES

Individual securities held in the security portfolio are classified as securities available for sale. Securities might be sold prior to maturity due to changes in interest rates, prepayment risks, yield, availability of alternate investments, liquidity needs, or other factors. Securities classified as available for sale are reported at their fair value and the related unrealized holding gain or loss is reported, net of related income tax effects, as a separate component of shareholders’ equity until realized.

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NOTE C — LOAN COMMITMENTS

NOTE D – NONPERFORMING LOANS AND ASSETS

Nonperforming Loans and Assets

The following table summarizes nonaccrual and past due loans at the dates indicated:

Analysis of the Allowance for Loan Losses

*All loan ratios exclude loans held for sale
^Annualized

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NOTE E – BASIC AND DILUTED EARNINGS PER SHARE

Stock options for 85,894 shares of common stock were not considered in computing diluted earnings per share for the three and nine month periods of 2002 because they were antidilutive.

NOTE F – GOODWILL AND INTANGIBLE ASSETS

(Dollars in thousands)

Goodwill

The carrying value of goodwill at September 30, 2003 is unchanged from the prior year end:

Acquired Intangible Assets

During the first quarter of 2003, the Corporation sold customer relationship intangibles with a gross carrying value of $329,000 and accumulated amortization of $200,000, which resulted in a realized gain of $67,000.

Estimated remaining amortization expense for each of the next five years is as follows:

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The consolidated financial information presented is for Firstbank Corporation (“Corporation”) and its wholly owned subsidiaries; Firstbank — Alma, Firstbank (Mt. Pleasant), Firstbank — West Branch (including its wholly owned subsidiaries; 1^st Armored, Inc., 1^st Title, Inc. and its majority holding in C.A. Hanes Realty, Inc.), Firstbank — Lakeview, Firstbank — St. Johns (collectively the “Banks”) and Gladwin Land Company, Inc.

Financial Condition

Total assets showed little change during the first nine months of 2003, decreasing $2.9 million, or 0.4%, from December 31, 2002 to September 30, 2003. Securities available for sale and Federal Home Loan Bank stock increased $6.4 million, or 10.1%, and $111,000, or 2.3%, respectively. Cash and cash equivalents decreased $1.3 million, or 2.1%, and loans held for sale decreased $6.4 million, or 65.9%.

Total portfolio loan balances rose $235,000, led by growth in commercial, including commercial real estate loans, and real estate construction loans which increased $7.7 million, or 2.7% and $7.2 million or 17.2%, respectively. The growth in commercial loans was offset by decreases in other loan categories. Residential mortgages decreased by $25.9 million, or, 11.9%, and consumer loans decreased $3.4 million, or 5.3%. The decline in mortgage loans was largely attributable to re-finance activity, where portfolio loans were re-financed and sold into the secondary market, with servicing retained by the Corporation.

Net charged-off loans were $347,000 for the first nine months of 2003 compared to $375,000 for the same period in 2002. The ratio of net charged-off loans (annualized) to average loans for the nine months ended September 30, 2003 was unchanged from the year ago period at 0.08%. The provision for loan losses for the nine month period of 2003, at $445,000, exceeded net charge-offs by $98,000, and resulted in an increase in the allowance for loan loss of $98,000, or 0.8%. At September 30, 2003, the allowance as a percent of outstanding loans was 1.93% compared to 1.92% at year end 2002. Management continues to maintain the allowance for loan losses at a level considered appropriate to absorb losses in the portfolio. The allowance balance is established after considering past loan loss experience, current economic conditions, volume, growth and composition of the loan portfolio, delinquencies, and other relevant factors, as detailed further under “Results of Operations.”

Total deposits declined $3.1 million, or 0.5%, from December 31, 2002 to September 30, 2003. Increases of $4.1 million, or 4.2% in non-interest bearing account balances, $4.5 million, or 2.6%, in interest bearing demand deposits and of $13.7 million, or 16.5%, in savings accounts were more than offset by a decrease of $25.4 million, or 11.6%, in time deposits. For the nine month period ended September 30, 2003, securities sold under agreements to repurchase and overnight borrowings decreased by $1.0 million, or 3.3%. Repayments of $4.3 million on Federal Home Loan Bank advances and other notes payable were partially offset by additional borrowings of $2.0 million resulting in a net decrease of $2.3 million, or 3.4%, in the outstanding balance. Accrued interest and other liabilities decreased $2.6 million, or 22.2%, from December 31, 2002 primarily as a result of tax payments during the year and lower accrued interest due to the current rate environment.

Total shareholders’ equity increased $6.1 million, or 7.6%, during the first nine months of 2003. Net income of $9,543,000 and stock issuances of $2,742,000 increased shareholders’ equity, while stock repurchases of $2,972,000, cash dividends of $3,180,000, and lower net unrealized appreciation on securities available for sale of $59,000 decreased shareholders’ equity. Stock issuance was primarily related to dividend reinvestment and exercise of stock options. The book value per share of common stock was $15.96 at September 30, 2003, up from $14.94 at December 31, 2002.

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The following table discloses compliance with current regulatory capital requirements on a consolidated basis:

(Dollars in Thousands)

Results of Operations

Net income for the first nine months of 2003 was $9,543,000 with basic earnings per share of $1.77, and diluted earnings per share of $1.72, compared to $8,593,000, $1.59, and $1.55 respectively, for the same period in 2002. The increase in earnings was led by heavy mortgage re-finance activity that produced a 148% increase in gains on the sale of mortgage loans compared with the same period a year ago.

Year to date average earning assets increased $21.7 million, or 3.1%, from September 30, 2002 to September 30, 2003. The yield on earning assets decreased 91 basis points to 6.32% for the nine months ended September 30, 2003 compared to 7.23% for the same period of 2002. The cost of funding related liabilities decreased 57 basis points when comparing the nine month period ended September 30, from 2.39% in 2002 to 1.82% in 2003. Since the decrease in the cost of funds relative to earning assets was less than the decrease in yield on earning assets, the net interest margin decreased 34 basis points during the first nine months from 4.84% in 2002 to 4.50% in 2003. Net interest income decreased $970,000, or 3.9%, in the first nine months of 2003 compared to the same period in 2002.

For the first nine months of 2003 the provision for loan losses was reduced by $372,000 to $445,000 compared to $817,000 for the same period in 2002. Management uses a quantitative and qualitative methodology for analyzing factors which impact the allowance for loan losses consistently across its five banking subsidiaries. The process applies risk factors for historical charge-offs and delinquency experience, portfolio segment weightings, and industry and regional factors and trends as they affect the banks’ portfolios. The consideration of exposures to industries potentially most affected by current risks in the economic and political environment and the review of potential risks in certain credits that either are, or are not, considered part of the non-performing loan category contributed to the establishment of the allowance levels at each bank. Net charge offs have decreased by $28,000 when compared to the same period of 2002, and management believes that the analysis described above provides a consistent basis for the current provision levels.

Total non-interest income for the nine month period ended September 30, 2003 increased $5.2 million, or 64.8%, compared to September 30, 2002. Strong mortgage refinance activity continued through the first eight months of 2003 and resulted in an increase of $4.8 million, or nearly 150%, in gain on the sale of mortgage loans when the first nine months of 2003 are compared to the same period in 2002. The high mortgage loan sale gains in 2003 are the result of customer reaction to a favorable rate environment, and management does not expect these gains to continue in an environment where interest rates are not hitting new lows. Partially offsetting these gains was lower mortgage servicing income, which declined from a negative $386,000 in 2002 to a negative $1,164,000 in 2003. The negative amounts in both periods resulted from refinances and other mortgage loan pre-payments. Accounting rules require that remaining mortgage servicing rights attached to prepaid or refinanced mortgage loans be written off against mortgage servicing income. At the same time, new

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mortgage servicing rights are created for the refinanced mortgage and are recorded as a component of the gain on sale of mortgages. The increased size of the negative amount at September 30, 2003 reflects a higher volume of mortgage re-finance activity in the current year.

Service fees on deposit accounts, for the nine month period ended September 30, 2003, increased $123,000, or 6.9%, over the comparable period in 2002. Improved rates of collection and management of fee waivers contributed to the increase. Miscellaneous other income increased by $1.1 million, or 31.2%. Increased revenue among non-bank subsidiaries (1^st Title, Inc, 1^st Armored, Inc., C.A. Hanes Realty, and Gladwin Land, Inc.) accounted for $1,112,000 of the increase. Other additions to non-interest income included $183,000 related to gains on sale of a small book of brokerage business and sale of certain real estate properties owned, and $153,000 in revenue paid by the purchaser of Firstbank-Alma’s trust business. Other areas of miscellaneous income decreased.

Total non-interest expense increased $3.1 million, or 16.3%, when comparing the nine month periods ended September 30, 2003 and 2002. Salary and benefit expense increased $1.7 million, or 16.4%, over the 2002 level. Approximately $1.1 million of this increase was the result of staffing two new full-service branch facilities which were not in operation during the first nine months of 2002, yearly merit raises, an increase in staff necessary to meet the needs related to the high volume in the mortgage business, and bonus expense recognized rateably over the year. The cost of employee benefits increased $606,000 primarily as a result of increases in health insurance expense and increased employment taxes.

Occupancy and equipment expenses increased $126,000, or 4.7%. Depreciation, rental expense, and small equipment purchases for two new branch offices caused an increase of $115,000. Excluding the new facilities, occupancy and equipment expense increased $11,000. Michigan Single Business tax increased by $86,000, or 81.1%, as a result of higher earnings subject to this tax. Other miscellaneous non-interest expense increased $1.2 million or 21.6%, when the first nine months are compared to the same period of 2002. Increases in commissions and contracted services for real estate title and appraisal work at two non-bank subsidiaries accounted for $320,000 of the increase. In addition, advertising and promotional expense throughout the company increased by $290,000, largely related to the increased mortgage re-finance activity. Write-downs on bank owned real estate properties was $95,000 above the comparable 2002 period.

Federal Income Tax expense increased by $546,000, or 12.9%, as a result of increased income.

Net income for the three month period was $2,875,000, basic earnings per share were $0.53, and diluted earnings per share were $0.52 compared to $3,109,000, $0.57, and $0.56 for the third quarter of 2002, as the net interest margin narrowed and average loan balances declined. The three month yield on earning assets declined 103 basis points from 7.11% in 2002 to 6.08% in 2003. For the same periods, the cost of funding related liabilities decreased 61 basis points from 2.27% in 2002 to 1.66% in 2003. As a result, net interest margin for the three month period decreased from 4.84% in 2002 to 4.42% in 2003. The provision for loan losses was decreased $107,000, or 48.2% when the third quarter of 2003 is compared to the same period of 2002 as a result of strong asset quality measures in the current quarter and application of the loan loss analysis procedures discussed previously.

Total non-interest income for the third quarter of 2003 showed an increase of $1.2 million, or 39.5%, over the third quarter of 2002. By far the largest increase was in the gain realized on the sale of mortgage loans which was $1.2 million, or 83.1% greater than the gain in the third quarter of 2002. Service charges on deposit accounts were unchanged from the year ago period. Other miscellaneous non-interest income showed an increase of $307,000, or a 24.2% gain over the 2002 figure due for the most part to increased business at 1^st Title, Inc., Gladwin Land Company, Inc. and C.A. Hanes Realty, Inc. Certain other components of non-interest income declined when the third quarter of 2003 is compared to the third quarter of 2002. Most notable of the decreases was seen in mortgage loan servicing which decreased from a negative $224,000 in the third quarter of 2002 to a negative $470,000 due to the active mortgage refinance market and the accounting methods for mortgage servicing rights discussed above.

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During the third quarter of 2003 total non-interest expense increased $1.2 million, or 17.9%, compared to the third quarter of 2002. Salaries and employee benefits increased $704,000, or 19.3%. The increase in personnel expense was attributable to temporary help, overtime, and incentive payments and bonuses related to high mortgage volumes, personnel costs for two new branch facilities and yearly merit raises. Expenses for occupancy and equipment increased by $47,000, or 5.2%, when the third quarter of 2003 is compared to the same period of 2002. Amortization of intangible assets decreased by $15,000, or 16.7%, due to the sale of a brokerage customer list, and write-off of the remaining intangible assets related to that customer list and certain other customer accounts in the first quarter of 2003. Michigan Single Business tax increased $12,000, or 26.7%, in the third quarter of 2003 in response to higher earnings subject to this tax. Other miscellaneous expense increased by $429,000, or 22.8% in the third quarter of 2003 compared to the third quarter of 2002. Commissions and contract services associated with mortgage re-financing activity increased by $145,000 and additional advertising and special mortgage promotions contributed $51,000 to the increase in miscellaneous expense.

For the third quarter of 2003, Federal Income Tax decreased by $120,000 compared with 2002, as a result of lower pre-tax income.

Critical Accounting Policies

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 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, determining the fair value of securities and other financial instruments and the valuation of mortgage servicing rights.

FORWARD LOOKING STATEMENTS

This report 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 itself. Words such as “anticipate,” “believe,” “determine,” “estimate,” “expect,” “forecast,” “intend,” “is likely,” “plan,” “project,” “opinion,” variations of such terms, and similar expressions are intended to identify such forward-looking statements. The presentations and discussions of the provision and allowance for loan losses, and determinations as to the need for other allowances presented in this report, are inherently forward-looking statements in that they involve judgments and statements of belief as to the outcome of future events. These statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions 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. Internal and external factors that may cause such a difference 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 regulations; changes in tax laws; changes in prices, levies, and assessments; the impact of technological advances; governmental and regulatory policy changes; the outcomes of pending and future litigation and contingencies; trends in customer behavior and customer ability to repay loans; software failure, errors or miscalculations; and the vicissitudes of the national economy. The Corporation undertakes no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events, or otherwise.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Information under the headings, “Liquidity and Interest Rate Sensitivity” on pages 8 and 9 and “Quantitative and Qualitative Disclosure About Market Risk” on pages 9 through 10 in the registrant’s annual report to shareholders for the year ended December 31, 2002, is here incorporated by reference. Firstbank’s annual report is filed as Exhibit 13 to its Form 10-K annual report for its fiscal year ended December 31, 2002.

Firstbank faces market risk to the extent that both earnings and the fair values of its financial instruments are affected by changes in interest rates. The Corporation manages this risk with static GAP analysis and simulation modeling. The Corporation does not believe that there has been a material change in the nature of the Corporation’s primary market risk exposures, including the categories of market risk to which the Corporation is exposed and the particular markets that present the primary risk of loss to the Corporation. As of the date of this Form 10-Q Quarterly Report, the Corporation does not know of nor expect there to be any material change in the general nature of its primary market risk exposure in the near term.

The methods by which the Corporation manages its primary market risk exposures, as described in the sections of its Form 10-K Annual Report incorporated by reference in response to this item, have not changed materially during the current year. As of the date of this Form 10-Q quarterly report, the Corporation does not expect to change those methods in the near term. However, the Corporation may change those methods in the future to adapt to changes in circumstances or to implement new techniques.

The Corporation’s market risk exposure is mainly comprised of its vulnerability to interest rate risk. Prevailing interest rates and interest rate relationships in the future will be primarily determined by market factors which are outside of Firstbank’s control. All information provided in response to this item consists of forward looking statements. Reference is made to the section captioned “Forward Looking Statements” on page 14 of this Form 10-Q quarterly report for a discussion of the limitations on Firstbank’s responsibility for such statements.

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Item 4. Controls and Procedures

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings. — None

Item 2. Changes in Securities and Use of Proceeds. - None

Item 3. Defaults Upon Senior Securities. — None

Item 4. Submission of Matters to a Vote of Securities Holders. - None

Item 5. Other Information

The audit committee of the Board of Directors approved the categories of all non-audit services performed by the registrant’s independent accountants during the period covered by this report, except for certain miscellaneous services that meet the de minimus exception under current regulations.

Item 6. Exhibits and Reports on Form 8-K

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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.

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EXHIBIT INDEX

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EXHIBIT 31.1

I, Thomas R. Sullivan, certify that:

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EXHIBIT 31.2

I, Samuel G. Stone, certify that:

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EXHIBIT 32.1

I, Thomas R. Sullivan, Chief Executive Officer of Firstbank Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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EXHIBIT 32.2

I, Samuel G. Stone, Executive Vice President and Chief Financial Officer of Firstbank Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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