UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

For the quarterly period ended March 31, 2005

or

For the transition period from                                        to                                        

Commission File Number 0-32041

CITIZENS FIRST BANCORP, INC.

(810) 987-8300

Not Applicable

     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

     The Issuer had 8,486,845 shares of common stock, par value $0.01 per share, outstanding as of May 5, 2005.

CITIZENS FIRST BANCORP, INC.
FORM 10-Q

INDEX

PART 1 – FINANCIAL INFORMATION

Item 1.

CITIZENS FIRST BANCORP, INC. AND SUBSIDIARIES

See accompanying notes to unaudited consolidated financial statements.

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CITIZENS FIRST BANCORP, INC. AND SUBSIDIARIES

See accompanying notes to unaudited consolidated financial statements.

2

CITIZENS FIRST BANCORP, INC. AND SUBSIDIARIES

See accompanying notes to unaudited consolidated financial statements.

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CITIZENS FIRST BANCORP, INC. AND SUBSIDIARIES

See accompanying notes to unaudited consolidated financial statements.

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CITIZENS FIRST BANCORP, INC. AND SUBSIDIARIES

NOTE 1 — BASIS OF FINANCIAL STATEMENT PRESENTATION

     The accompanying unaudited consolidated interim financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and with the instructions to Form 10-Q. Accordingly, certain information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements are not included herein. The interim financial statements should be read in conjunction with the financial statements of Citizens First Bancorp, Inc. and Subsidiaries and the notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2004.

     All adjustments, consisting only of normal recurring adjustments, which in the opinion of management are necessary for a fair presentation of financial position, results of operations and cash flows, have been made. The results of operations for the three months ended March 31, 2005 are not necessarily indicative of the results that may be expected for the year ended December 31, 2005.

Certain amounts in the prior period’s financial statements have been reclassified to conform to the current period’s presentation.

NOTE 2 — PRINCIPLES OF CONSOLIDATION

     Citizens First Bancorp, Inc. (the “Bancorp”), a Delaware company, is the holding company for Citizens First Savings Bank (“Citizens”) and Metrobank (“Metrobank”), both state-chartered savings banks headquartered in Port Huron and Farmington Hills, Michigan, respectively. The consolidated financial statements include the accounts of the Bancorp and its wholly owned subsidiaries (the “Company”) Citizens and Metrobank (the “Banks”). Citizens also includes the accounts of its wholly owned subsidiaries, Citizens Financial Services, Inc. and Citizens First Mortgage, LLC. Citizens Financial Services, Inc. includes the accounts of its wholly owned subsidiary, CFS Insurance Agency. Citizens Financial Services, Inc. receives revenue from its subsidiary, which provides insurance services to individuals and small businesses in the Port Huron area. Citizens First Mortgage, LLC receives revenue from interest income on loans and the sale of loans.

NEW ACCOUNTING PRONOUNCEMENTS

     In December 2004, the Financial Accounting Standards Board (FASB) revised SFAS 123, Accounting for Stock-Based Compensation and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS 123R, Share Based Payment, establishes accounting requirements for share-based compensation to employees and carries forward prior guidance on accounting for awards to non-employees. This Statement does not address the accounting for employee share ownership plans, which are subject to AICPA Statement of Position 93-6, Employers’ Accounting for Stock Ownership Plans This Statement requires an entity to recognize the cost of employee services received in share-based payment transactions and measure the cost on the grant-date fair value of the award.

     In April 2005, the Securities and Exchange Commission (SEC) issued a ruling amending the date for compliance with SFAS 123(R). Registrants will be required to adopt SFAS 123(R) beginning with the first interim or annual reporting period of the registrant’s first fiscal year beginning on or after June 15, 2005. For the Company, this ruling will require adoption of SFAS 123(R) by no later than January 1, 2006. The Company’s management is currently evaluating its analysis of the revised standard, of which the effect of the revised standard’s implementation will be recognition of compensation expense associated with stock options. Additionally, the Company is reviewing various methods and strategies for the adoption of SFAS 123(R). See Note 3 for SFAS 123 pro form disclosures.

     In March 2004, FASB’s Emerging Issues Task Force (“EITF”), reached consensus on “The Meaning of Other-Than-Temporary and Its Application to Certain Investments” in EITF Issue No. 03-1. The guidance included in the EITF largely consists of expanded disclosures and the guidance was intended to be fully effective in 2003, except for loss-recognition guidance which had a delayed effective date into 2004. In 2004, the FASB has further delayed the loss recognition provisions of Issue No. 03-1, pending additional deliberation in the future. Because of the inconclusive status of the EITF’s current position on the loss recognition aspects of Issue No. 03-1, the Company’s management is unable to speculate on the potential impact of this matter on the Company’s consolidated financial statements.

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NOTE 3 — STOCK BASED COMPENSATION

     Under the Company’s stock based incentive plan, the Company may grant up to 476,338 stock awards and 1,429,014 stock options to its directors, officers and employees. The Company accounts for stock options under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. No stock based employee compensation cost related to stock options is reflected in net income as all options granted under the plan had an exercise price equal to the market value of the underlying common stock on the date of grant. The Company has provided below pro forma disclosures of net income and earnings per share and other disclosures, as if the Company had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-based Compensation, to stock-based employee compensation (in thousands, except per share data). Refer to NEW ACCOUNTING PRONOUNCEMENTS above for discussion regarding FASB Statement No. 123R, Share Based Payment.

NOTE 4 — EARNINGS PER SHARE

     Basic earnings per share is calculated by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares that may be issued by the Company relate to outstanding stock options and restricted stock awards and are determined using the treasury stock method. Treasury and unallocated ESOP shares are not considered outstanding for purposes of calculating basic or diluted earnings per share.

     Earnings per common share have been computed based on the following (in thousands, except per share data):

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NOTE 5 – GOODWILL AND INTANGIBLES

Goodwill at March 31, 2005 and December 31, 2004 was $9.8 million. Goodwill is reviewed annually for impairment. The Company completed this review during the fourth quarter of 2004 and determined that goodwill was not impaired.

Net other intangible assets at March 31, 2005 and December 31, 2004 were $3.6 million and $3,7 million, respectively. These assets consist primarily of core deposit intangibles and are being amortized in accordance with the Company’s policy. Amortization expense on intangible assets is expected to be $561,000, $477,000, $405,000, $345,000 and $405,000 in 2005, 2006, 2007, 2008, and 2009 respectively.

NOTE 6 — LOANS

Loans were as follows (in thousands):

NOTE 7 — STANDBY AND COMMERCIAL LETTERS OF CREDIT AND FINANCIAL GUARANTEES

     The Company is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit, and commercial letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheet. The Company’s exposure to credit loss is represented by the contractual amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance-sheet instruments.

     The total contractual amounts of standby letters of credit and financial guarantees were $8.7 million and $6.4 million at March 31, 2005 and December 31, 2004, respectively. There were no contractual amounts of commercial letters of credit at March 31, 2005 or December 31, 2004.

Item 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following analysis discusses changes in the financial condition and results of operations of the Company for the periods presented and should be read in conjunction with the Company’s Consolidated Financial Statements and the notes thereto, appearing in Part I, Item 1. of this document.

     FORWARD-LOOKING STATEMENTS. The Company may from time to time make written or oral “forward-looking statements.” These forward-looking statements may be contained in the Company’s Annual Report to Stockholders, in the Company’s Form 10-K filed with the Securities and Exchange Commission (the “SEC”), in other filings with the SEC and in other communications by the

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Company, which are made in good faith pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements with respect to anticipated future operating and financial performance, including revenue creation, lending origination, operating efficiencies, loan sales, charge-offs, loan loss allowances and provisions, growth opportunities, interest rates, acquisition and divestiture opportunities, capital and other expenditures and synergies, efficiencies, cost savings and funding and other advantages expected to be realized from various activities. The words “may,” “could,” “should,” “would,” “will”, “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “project,” “predict,” “continue” and similar expressions are intended to identify forward-looking statements.

Forward-looking statements include statements with respect to the Company’s beliefs, plans, strategies, objectives, goals, expectations, anticipations, estimates or intentions that are subject to significant risks or uncertainties or that are based on certain assumptions. Future results and the actual effect of plans and strategies are inherently uncertain, and actual results could differ materially from those anticipated in the forward-looking statements, depending upon various important factors, risks or uncertainties. Those factors, many of which are subject to change based on various other factors, including factors beyond the Company’s control, and other factors, including others discussed in the Company’s Annual Report to Stockholders, in the Company’s Form 10-K, other factors identified in the Company’s other filings with the SEC, as well as other factors identified by management from time to time, could have a material adverse effect on the Company and its operations or cause its financial performance to differ materially from the plans, objectives, expectations, estimates or intentions expressed in the Company’s forward-looking statements. The impact of technological changes implemented by the Company and the Banks and by other parties, including third party vendors, which may be more difficult or more expensive than anticipated or which may have unforeseen consequences to the Company and its customers. In this regard, the Company entered into an agreement with Fiserv Solutions, Inc. (“Fiserv”) to convert Metrobank from the Jack Henry to the Fiserv software package. There can be no assurance, however, that the planned computer conversion will not be more difficult or expensive than anticipated or have unforeseen consequences.

OVERVIEW. The Company is a community-oriented financial institution, offering a wide range of deposit and loan products to its customers. The Company’s commitment to community oriented banking is reflected in its Certificate of Incorporation, which is posted on the Company’s website (www.cfsbank.com), as well as in its corporate governance. In recent years, the Company’s strategy has been one of controlled balance sheet growth and broader diversification of its loan products and loan portfolio. The Company has emphasized originating residential mortgage loans, commercial and multi-family real estate loans, construction loans, commercial loans, automobile loans, home equity loans and lines of credit and a variety of consumer loans while maintaining asset quality and improving profitability on these products. The Company originates fixed-rate one-to-four-family residential mortgage loans primarily for sale, while generally retaining the servicing rights as to those mortgages. Loans that do no meet the standards of the investors for a variety of reasons and reasons that do not impair the value of the loan remain in the Company’s loan portfolio. Our focus also continues to increase sources of noninterest income through service fees and other value added products that we believe the our customers may benefit.

     The metropolitan Detroit area is the largest market in Michigan and continues to be a key focus of our expansion and growth opportunities. The acquisition of Metrobank provided the Company with a presence of four branches in central Oakland county. Although this market is highly competitive, the Company believes that the ability to provide excellent customer service and innovative banking products, in addition to increased growth focus on commercial loans, to our customers will yield increased growth in our balance sheet and earnings.

     More recently, management and employees of Citizens and Metrobank have been focusing on the conversion of Metrobank from the Jack Henry to the ITI Fiserv data processing system. The coordination and time invested in this project has been significant to ensure that the conversion does not materially effect our customers and the delivery of our products and services. It is the expectation of management that the conversion will occur during second and third quarters of 2005. This conversion is another step towards our efforts to combine Metrobank into the Company.

CRITICAL ACCOUNTING POLICIES. As of March 31, 2005, there have been no material changes in the disclosures regarding critical accounting policies as disclosed in the Company’s Form 10-K for the year ended December 31, 2004. Management believes its critical accounting policies relate to the allowance for loan losses, the valuation of mortgage servicing rights and goodwill.

COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2005 AND DECEMBER 31, 2004

     Summary. Total assets increased $71.0 million, or 5.1%, to $1.464 billion at March 31, 2005 from $1.393 billion at December 31, 2004, primarily due to the increase in net loans of $54.6 million, or 4.6%, due to the increased emphasis in loan growth in the Oakland County market from the acquisition of Metrobank in early 2004. Additionally, we have been focusing on the Macomb County market and have opened loan production centers in an effort to expand our market share in the southeastern Michigan market using a

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managed growth approach. Additionally, Federal Home Loan Bank (FHLB) stock increased $1.2 million or 8.6% due to the increase in FHLB advances. The FHLB requires its members to maintain certain capital holdings based on advances outstanding. Securities available for sale increased $4.1 million or 4.1% due to purchases of investments at the Bancorp. Premises and equipment increased $1.6 million or 4.8% due to increases in construction in process for future branch expansions.

     Total liabilities increased $69.6 million, or 5.7%, from $1.230 billion at December 31, 2004 to $1.300 billion at March 31, 2005. Total deposits increased $39.0 million or 4.2% as the Company has increased efforts to attract new deposits in the Oakland and Macomb Counties. FHLB advances have increased by $33.6 million or 14.5% primarily to fund the loan growth experienced during the quarter.

     Portfolio Loans and Asset Quality. Nonperforming assets totaled $7.2 million at March 31, 2005 compared to $11.7 million at December 31, 2004, a decrease of $4.4 million, or 38.0%. Additionally, nonperforming assets as a percentage of total assets decreased to 0.49% at March 31, 2005 compared to 0.84% at December 31, 2004. The improvements in the Company’s asset quality ratios are a result of a revision to our policy on the classification of nonperforming assets. Previous to January 1, 2005, our policy stated that nonperforming loans had to demonstrate a current payment status for a period of 90 days once the credit reached 90 days past due to be reclassified as a performing loan. The Company amended its policy to reclassify the loans as performing, once they become current, as this data provides management more useful information about the quality of our loan portfolio.

     The following table sets forth information regarding nonperforming assets (in thousands):

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     The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance is increased by provisions charged to operations and reduced by net charge-offs. The following table sets forth activity in the allowance for loan losses for the interim periods (in thousands):

     Deposits. Interest bearing deposits increased $36.3 million or 4.3% from December 31, 2004 to $880.0 million at March 31, 2005. This increase primarily consisted of an increase in NOW checking accounts of $5.9 million, or 4.5%, to $135.5 million and certificates of deposits of $49.5 million, or 13.7%, to $410.4 million due to various promotions of these types of deposits implemented during the first quarter, partially offset by a decrease in money market deposit accounts of $19.0 million, or 7.4%, to $236.7 million primarily due to a reduction of accounts from municipalities and other public entities.

     Stockholders’ Equity. Total equity was $164.3 million at March 31, 2005 compared to $162.9 million at December 31, 2004, an increase of $1.4 million primarily due to net income and an increase in unearned and deferred compensation obligations offset by the payment of dividends and a $185,000 decrease (net of tax) in unrealized losses on available for sale securities.

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2005 and 2004

     Net Income. Net income for the three months ended March 31, 2005 increased $124,000, or 6.6%, to $2.0 million from $1.9 million for the previous period. This increase was primarily due to a increase of $1.2 million or 11.5% in net interest income after provision for loan losses, a $289,000 or 14.5% increase in noninterest income, partially offset by a $1.4 million or 14.7% increase in noninterest expense and a decrease in federal income tax expense due to an analysis of tax accruals at quarter end for the Company and its subsidiaries.

     Net Interest Income. Net interest income, after provision for loan losses for the three months ended March 31, 2005 increased $1.2 million, or 11.5%, to $11.5 million from $10.3 million at March 31, 2004. This increase was primarily due to a $2.8 million, or 18.3%, increase in total interest income on loans due to prime rate increases of 175 basis points from the previous period, growth in the loan portfolio of 17.8% and, as indicated in the table below, a net increase in the interest rate spread of 8 basis points over the same previous period. These increases were offset by a $1.3 million, or 21.7%, increase in total interest expense due to an increase on offering rates on deposits, the increase cost in attracting new deposits and an increase in the cost of borrowings to fund loan growth. Management expects net interest income to increase slightly throughout 2005 as we continue to monitor interest rate risk in a rising interest rate environment. Loan growth is expected to continue slightly over the next three quarters as we continue to implement certain phases of our long term strategic plan.

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     The following table presents an analysis of net interest margin for the three month periods ending March 31, 2005 and 2004 (in thousands).

     Provision for Loan Losses. The provisions for loan losses for the three months ended March 31, 2005 and 2004 were $480,000 and $90,000, respectively. This increase in the provision for loan losses is the result of management’s analysis of the loan loss allowance in conjunction with the growth experienced during the more recent quarters, current and forecasted economic conditions in the regional markets where we conduct business, and historical charge off rates in the overall loan portfolio. Additional reserves were provided for a problem loan that management is diligently working through with our customer as mentioned in the Company’s annual report on Form 10-K for the year ended December 31, 2004. The resolution of this problem loan is not expected to have a material impact to net income. The loan loss allowance as a percentage of total loans decreased from 1.12% at December 31, 2004 to 1.09% at March 31, 2005. The allowance for loan losses as a percentage of nonperforming loans increased from 127% at December 31, 2004 to 203% at March 31, 2005 as a result of lower nonperforming loans in conjunction with an increase in the allowance for loan losses at March 31, 2005 compared to December 31, 2004.

     Management considers its allowance for loan losses to be one of its critical accounting policies, meaning that in order to determine the allowance and provision for loan losses, management must make estimates and assumptions about matters that are highly uncertain and as to which different estimates and assumptions would have a material impact on the Company’s net income and on the Company’s overall financial condition and results of operations.

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     Noninterest Income. Noninterest income for the three months ended March 31, 2005 increased $289,000, or 14.5%, primarily due to the increase of $478,000 in income from mortgage banking activities. During the first quarter of 2004, approximately $400,000 was charged against mortgage banking activities due to funds not transferred to the Freddie Mac custodial account on a timely basis. These events have not occurred since then due to proper procedures implemented, tested and approved by management. Additionally, service charges and other fees increased $269,000 as a result of customer growth and implementation of various products designed to generate additional service fees during the end of 2004 which continue to increase noninterest income , one of the Company’s strategic goals. The increases in noninterest income were partially offset by a reduction in the gain on sale of securities available for sale as the Company did not sell any of its securities during the quarter ended March 31, 2005.

     Noninterest Expense. Noninterest expense for the three months ended March 31, 2005 increased $1.4 million or 14.7% to $10.8 million, compared to $9.5 million for the three months ended March 31, 2004. The increase was primarily due to an increase of $531,000 in compensation, payroll taxes and employee benefits due to increases in wages and additions of staff due the new loan production offices and a portion of one-time costs incurred with the reduction of personnel at Metrobank. As management continues to evaluate the staffing levels necessary for the continued combination of Metrobank processes into Citizens, we expect expenses in compensation to increase through the third quarter of 2005 as a result of severance packages, which will be recognized into expense upon severance date, provided to departing employees, offset by efficiencies obtained as a result of such efforts. Also contributing to the increase in noninterest expense was a $146,000 increase in office occupancy expense due to the construction of additional banking centers and increase in the number of leases in Oakland, Macomb and Lapeer counties over the same previous period and a $448,000 increase in professional fees as a result of Sarbanes-Oxley (SOX) Act requirements. Managements expectation is to experience a slight reduction in professional fees over the next three quarters as we have successfully completed the first year of testing under the SOX Act. Management anticipates a marginal increase in noninterest expense over the next three quarters as we implement various strategies to manage the operating costs of the Company.

LIQUIDITY AND CAPITAL RESOURCES

     Liquidity is the ability to meet current and future financial obligations, including the ability to have funds available to respond to the needs of depositors and borrowers as well as maintaining the flexibility to take advantage of investment opportunities. The Company’s primary sources of funds consist of deposit inflows, loan repayments, maturities and sales of investment securities, borrowings from the FHLB, and more recently, brokered deposits. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition.

     Liquidity management is both a daily and long-term responsibility of management. The Company adjusts its investments in liquid assets based upon management’s assessment of (1) expected loan demand, (2) expected deposit flows, (3) yields available on interest-earning deposits and securities, and (4) the objectives of its asset/liability management program. Excess liquid assets are invested generally in interest-earning overnight deposits and short- and intermediate-term U.S. Government and agency obligations.

     The Company’s primary investing activities are the origination of loans and the purchase of securities. In the three months ended March 31, 2005, the Company originated $156.1 million of loans and purchased $6.8 million of securities and in fiscal 2004, originated $636.4 million of loans and purchased $63.9 million of securities.

     The Company’s most liquid assets are cash and short-term investments. The levels of these assets are dependent on the Company’s operating, financing, lending and investing activities during any given period. At March 31, 2005, cash and short-term investments totaled $37.6 million and securities classified as available for sale totaled $101.9 million.

     The Company originates fixed-rate mortgage loans conforming to Freddie Mac and Fannie Mae guidelines generally for sale in the secondary market. The proceeds of such sales provide funds for both additional lending and liquidity to meet current obligations. Sales of fixed-rate mortgage loans were $25.7 million and $126.8 million for the three months ended March 31, 2005 and year ended December 31, 2004, respectively.

     Financing activities consist primarily of activity in deposit accounts, overnight borrowings from our correspondent banks and FHLB advances. The Company experienced a net increase in total deposits of $39.0 million for the three months ended March 31, 2005 and a net increase of $50.0 million for fiscal 2004. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by the Company and its local competitors and other factors. The Company generally manages the pricing of its deposits to be competitive and to increase core deposit relationships, and occasionally offers promotional rates on certain deposit products in order to attract deposits.

     The Company had the ability to borrow a total of approximately $452.9 million from its correspondent banks and the FHLB, of which $275.8 million was outstanding at March 31, 2005. Advances outstanding with the FHLB on that date were $265.8 million.

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During the three months ended March 31, 2005, the net increase in FHLB advances was $33.6 million, primarily to provide liquidity for loan growth and manage interest rate risk. Included in the total amount of available borrowings was a bank line-of-credit in the amount of $10.0 million, of which $10.0 million was outstanding at March 31, 2005. The Company has requested an additional $15 million in available borrowings to provide additional liquidity, which approval is subject to the bank’s review of the overall relationship with the Company.

     At March 31, 2005, the Company had outstanding commitments to originate loans of $278.1 million, of which $65.7 million had fixed interest rates. The Company believes that it will have sufficient funds available to meet its current loan commitments. Loan commitments have, in recent periods, been funded through liquidity or through FHLB borrowings. More recently, the Company has selected various brokers to originate brokered deposits in the open market. The brokered deposit relationships provide additional liquidity to fund the gap between growth in our loan portfolio and overall business and increases in deposits from customers. Certificates of deposit that are scheduled to mature in one year or less as of March 31, 2005 totaled $247.3 million. Management believes, based on past experience, that a significant portion of those deposits will remain with the Company. Based on the foregoing, the Company considers its liquidity and capital resources sufficient to meet its outstanding short-term and long-term needs.

     The Banks are subject to various regulatory capital requirements administered by the Federal Deposit Insurance Corporation including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At March 31, 2005, the Banks exceeded all of the regulatory capital requirements and are considered “well capitalized” under regulatory guidelines.

     The primary sources of funding for the Company are maturities of investment securities and, to a lesser extent, earnings on investments, deposits held by the Company and borrowings from its correspondent banks. These funds have been used to pay dividends, repurchase the Company’s common stock and pay general corporate expenses. The Bancorp may utilize future dividend payments from its subsidiary Banks as an additional funding source. The Banks’ ability to pay dividends and other capital distributions to the Bancorp is generally limited by the Michigan Banking Commissioner and Federal Deposit Insurance Corporation. Additionally, the Michigan Banking Commissioner and Federal Deposit Insurance Corporation may prohibit the payment of dividends by the Banks to the Bancorp, which are otherwise permissible by regulation for safety and soundness reasons.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     As of March 31, 2005, there have been no material changes in the quantitative and qualitative disclosures about market risks as disclosed in the Company’s Form 10-K for the year ended December 31, 2004.

Item 4. CONTROLS AND PROCEDURES

     The Company maintains disclosure controls and procedures designed to ensure that the information the Company must disclose in its filings with the Securities and Exchange Commission is recorded, processed, summarized and reported on a timely basis. The Company’s Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, the officers have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective in bringing to their attention on a timely basis, material information required to be included in the Company’s periodic filings under the Exchange Act.

     Disclosure controls and procedures are designed to ensure information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer, the Chief Financial Officer (Principal Financial Officer) and the Controller and Assistant Treasurer (Principal Accounting Officer), as appropriate, to allow timely decisions regarding required disclosure. Disclosure controls include internal controls that are designed to provide reasonable assurance that transactions are properly authorized, assets are safeguarded against unauthorized or improper use and that transactions are properly recorded and reported.

     No significant change in the Company’s internal controls over financial reporting occurred during the Company’s most recent fiscal quarter that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting.

     Any control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of a control system inherently has limitations, and the benefits of controls

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must be weighed against their costs. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. Therefore, no evaluation of a cost-effective system of controls can provide absolute assurance that all control issues and instances of fraud, if any, will be detected.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

     Periodically, there have been various claims and lawsuits involving the Company, such as claims to enforce liens, condemnation proceedings on properties in which the Company holds security interests, claims involving the making and servicing of real property loans and other issues incident to the Company’s business. Neither the Company or its subsidiaries are a party to any pending legal proceedings that management believes would have a material adverse effect on the financial condition or operations the Company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

     The Company entered into deferred fee agreements with certain directors of the Company at various times during 2001 and 2002. Pursuant to these arrangements, directors may defer fees payable to them by the Company, which fees are used to purchase deferred compensation stock units. A director has the right to change or revoke his or her deferral election, but such revocation becomes effective at the beginning of the Company’s subsequent calendar year. No director has revoked his or her deferral election to date. Upon a director’s termination of service with the Board, each stock unit is to be settled on a one-for-one basis in shares of the Company’s common stock. Pursuant to these arrangements, the Company issued to directors during the first quarter approximately 582 deferred compensation stock units for the aggregate consideration of $13,000. All transactions were effected on the last business day of each month. The stock units issued pursuant to these arrangements have not been registered under the Securities Act of 1933 in reliance upon the exemption provided by Section 4(2) thereof.

Item 3. Defaults Upon Senior Securities.

     None.

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

     None.

Item 5. Other Information.

     None.

Item 6. Exhibits

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CONFORMED

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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