SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    Form 10-K
                              --------------------

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1999

                         Commission file number 0-25752

                               FNBH BANCORP, INC.
             (Exact name of registrant as specified in its charter)

                 MICHIGAN                                 38-2869722
     (State or other jurisdiction of                   (I.R.S. Employer
     incorporation or organization)                   Identification No.)

                  101 East Grand River, Howell, Michigan 48843
               (Address of principal executive offices) (Zip Code)

        Registrant's telephone number, including area code: (517)546-3150

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:
                           Common Stock, no par value
                                (Title of Class)
                             -----------------------

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 by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by  reference in Part III of this Form 10-K or any  amendments  to
this Form 10-K. _X_

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant,  based  on a per  share  price  of  $42 as of  March  1,  2000,  was
$65,738,526  (common  stock,  no par value).  As of December 31, 1999 there were
outstanding 1,565,203 shares of the Company's Common Stock (no par value).

Documents Incorporated by Reference:
Portions of the Company's  Proxy Statement and appendix dated March 17, 2000 for
the Annual Meeting of Shareholders to be held April 19, 2000 are incorporated by
reference into Parts I, II and III of this report.
<PAGE>
                                     PART I

     Included in this Form 10-K are certain  forward-looking  statements  within
the  meaning of Section  27A of the  Securities  Act of 1993,  as  amended,  and
Section  21 E  of  the  Securities  Exchange  Act  of  1934,  as  amended.  Such
forward-looking  statements are based on the beliefs of the Company's management
as well as on assumptions  made by and  information  currently  available to the
Company at the times such  statements  were made.  Actual  results  could differ
materially from those included in such forward-  looking  statements as a result
of, among other things,  factors set forth below in this Report  generally,  and
certain economic and business  factors,  some of which may be beyond the control
of the Company.  Investors are  cautioned  that all  forward-looking  statements
involve risks and uncertainty.

Item 1 - Business

     FNBH Bancorp, Inc. (the Company), a Michigan business corporation, is a one
bank holding company,  which owns all of the outstanding  capital stock of First
National  Bank in Howell  (the  "Bank").  The Company was formed in 1988 for the
purpose  of  acquiring  all of the stock of the Bank in a  shareholder  approved
reorganization, which became effective May, 1989.

     The  Bank  was  originally   organized  in  1934  as  a  national   banking
association.  As of March 1, 2000, the Bank had  approximately 118 full-time and
part-time  employees.  None of the Bank's  employees  is  subject to  collective
bargaining agreements.  The Company does not directly employ any personnel.  The
Bank  serves  primarily  four  communities,   Howell,  Brighton,  Hartland,  and
Fowlerville,  all of which are  located  in  Livingston  County.  The county has
historically  been  rural  in  character  but  has a  growing  urban  population
especially in the southeast  quadrant of the county,  primarily  attributable to
growth around the City of Brighton.

     On November  26, 1997 H.B.  Realty Co., a subsidiary  of the  Company,  was
established  to purchase  land for a future  branch site of the Bank and to hold
title to other Bank real estate when it is considered prudent to do so.

Bank Services

     The Bank is a full service  bank  offering a wide range of  commercial  and
personal banking  services.  These services include checking  accounts,  savings
accounts,   certificates  of  deposit,  commercial  loans,  real  estate  loans,
installment  loans,  trust  and  investment  services,  collections,  traveler's
checks,  night  depository,  safe deposit box and U.S.  Savings Bonds.  The Bank
maintains correspondent  relationships with major banks in Detroit,  pursuant to
which the Bank  engages in federal  funds sale and  purchase  transactions,  the
clearance of checks and certain foreign currency transactions. The Bank also has
a relationship  with the Federal Home Loan Bank of  Indianapolis  where it makes
<PAGE>
short  term  investments  and  where  it has a line  of  credit  of  $16,000,000
available.  In addition, the Bank participates with other financial institutions
to fund certain large loans which would exceed the Bank's legal lending limit if
made solely by the Bank.

     The Bank's  deposits are generated in the normal course of business and the
loss of any one  depositor  would not have a  materially  adverse  effect on the
business of the Bank. As of December 31, 1999, 43% of outstanding loans were for
either commercial or residential construction or development. As of December 31,
1999,  the  Bank's  certificates  of  deposit of  $100,000  or more  constituted
approximately 8% of total deposit liabilities. The Bank's deposits are primarily
from its service  area and the Bank does not seek or  encourage  large  deposits
from outside the area.

     The Company's  cash revenues are derived  primarily  from dividends paid by
the Bank. The Bank's principal sources of revenue are interest and fees on loans
and interest on investment  securities.  Interest and fees on loans  constituted
approximately  80% of total revenues for the periods ended December 31, 1999 and
December 31,  1998.  Interest on  investment  securities,  including  short-term
investments  and federal  funds  sold,  constituted  approximately  12% of total
revenues in 1999 and 1998.  Revenues were also  generated  from deposit  service
charges and other financial service fees.

     The Bank provides real estate,  consumer, and commercial loans to customers
in its  market.  Sixty  percent of the Bank's  loan  portfolio  is in fixed rate
loans.  Most of these  loans,  approximately  92%,  mature  within five years of
issuance.  Approximately  $11,000,000  in loans (or about 5% of the Bank's total
loan portfolio) have fixed rates with maturities exceeding five years. Fifty-six
percent of the Bank's interest-bearing  deposits are in savings, NOW, and MMDAs,
all of which are variable rate  products.  Of the  approximately  $96,700,000 in
certificates, $66,951,000 mature within a year, with the majority of the balance
maturing within a five year period.

     Requests  to the Bank for  credit  are  considered  on the  basis of credit
worthiness of each applicant,  without  consideration to race, color,  religion,
national origin, sex, marital status,  physical handicap, age, or the receipt of
income  from  public  assistance  programs.  Consideration  is also given to the
applicant's capacity for repayment,  collateral, capital and alternative sources
of repayment.  Loan  applications are accepted at all the Bank's offices and are
approved  under each lending  officer's  authority.  Loan  requests in excess of
$400,000 are required to be presented to the Board of Directors or the Executive
Committee of the Board for its review and approval.

     As described in more detail below, the Bank's cumulative one year gap ratio
of rate  sensitive  assets to rate  sensitive  liabilities  for the period ended
December  31,  1999,  was  6%  liability  sensitive,  compared  to 8%  liability
sensitive at December 31, 1998. See discussion and table under "Quantitative and
Qualitative Disclosures about Market Risk" in Item 7 below.
<PAGE>
     The Bank  sells  participations  in  commercial  loans  to other  financial
institutions  approved  by the Bank,  for the purpose of meeting  legal  lending
limit  requirements  or loan  concentration  considerations.  The Bank regularly
sells fixed rate residential  mortgages to Freddie Mac while retaining servicing
on the sold loans.  Those residential real estate mortgage loan requests that do
not meet Freddie Mac  criteria  are  reviewed by the Bank for  approval  and, if
approved, are retained in the Bank's loan portfolio.  The Bank also may purchase
loans which meet its normal credit standards.

     The Bank's investment policy is considered to be generally conservative. It
provides for unlimited  investment in U.S.  government and agency bonds,  with a
maximum  maturity of five years.  Municipal  bonds may be  purchased  to provide
nontaxable  income,  with  the  maximum  life  of  municipal  bonds  limited  to
approximately  ten years with a double A rating or better. A single A rated bond
may be  purchased  if it matures in four years or less.  Non-rated  bonds may be
purchased from local  communities  that are familiar to the Bank, with a maximum
block size of a single purchase limited to $300,000. Investments in states other
than Michigan may not exceed 20% of the municipal portfolio,  and investments in
a  single  issuer  may  not  exceed  10%  of  equity  capital.  Mortgage  backed
securities,  which are fully  collateralized  by securities issued by government
sponsored agencies, may be purchased in block sizes of up to $500,000,  provided
the average life expectancy  does not exceed seven years.  In addition,  certain
collateralized  mortgage obligations may be purchased if their average life does
not exceed five years. In any case,  investments in mortgage  backed  securities
may not exceed 10% of the investment portfolio.

     The  acquisition of "high-risk  mortgage  securities" is prohibited.  In no
case may the Bank participate in such activities as gains trading, "when-issued"
trading,  "pair offs", corporate settlement of government and agency securities,
repositioning  repurchase  agreements,  and short sales. All securities  dealers
effecting  transactions  in  securities  held or  purchased  by the Bank must be
approved by the Board of Directors.

Bank Competition

     The Bank has seven offices within the four  communities  it serves,  all of
which  are  located  in  Livingston  County,  Michigan.  Three  of the  offices,
including the main office,  are located in Howell.  There are two  facilities in
Brighton, and one each in Hartland, and Fowlerville.  See "Properties" below for
more  detail  on these  facilities.  Within  these  communities,  its  principal
competitors  are Old Kent Bank,  National  City  Bank,  D&N Bank,  and  Michigan
National Bank. Each of these financial institutions,  which are headquartered in
larger  metropolitan  areas,  have  significantly  greater  assets and financial
resources than the Company.  Among the principal  competitors in the communities
in  which  the Bank  operates,  the Bank is the  only  locally  based  financial
institution.  Based on deposit  information  as of June 30, 1999, the Bank holds
approximately 19.25% of local deposits, compared to approximately 18.80% held by
Old Kent Bank,  approximately 13.45% held by D&N Bank, approximately 11.05% held
b National City Bank, and  approximately  8.95% held by Michigan  National Bank.
Information  as to asset size of competitor  financial  institutions  is derived
from publicly available reports
<PAGE>
filed by and with regulatory agencies.  Within the Bank's markets, Old Kent Bank
maintains four branch  offices,  National City Bank operates six branch offices,
D&N Bank has five branch  offices,  and Michigan  National Bank has three branch
offices.  The only  competitor  expansion of which  management is aware is a new
branch of Old Kent Bank coming to Genoa Township.

     The  financial   services   industry   continues  to  become   increasingly
competitive.  Principal methods of competition include loan and deposit pricing,
advertising  and  marketing  programs,  and the types and  quality  of  services
provided.  The deregulation of the financial services industry and the easing of
restrictions  on bank and  holding  company  activities  have  led to  increased
competition  among banks and other financial  providers for funds,  loans, and a
broad array of other financial  services.  Competition  within the Bank's market
has been  relatively  stable  within the past  years.  Management  continues  to
evaluate the opportunities for the expansion of products and services.

Growth of Bank

     The following table sets forth certain information  regarding the growth of
the Bank:
<TABLE>
                                                                   Balances as of December 31,
                                                                   ---------------------------
                                                                           (in thousands)
                                                1999           1998            1997            1996            1995
                                                ----           ----            ----            ----            ----
<S>                                         <C>            <C>             <C>             <C>             <C>
Total Assets                                $296,419       $264,894        $226,314        $202,009        $182,958
Loans, Net of Unearned Income                209,964        185,018         158,397         136,067         127,463
Securities                                    50,598         38,646          43,725          47,257          35,251
Noninterest-Bearing Deposits                  47,980         47,402          41,631          35,048          30,815
Interest-Bearing Deposits                    221,210        192,155         160,668         145,896         133,060
Total Deposits                               269,190        239,557         202,299         180,944         163,875
Shareholders' Equity                          25,312         23,497          21,732          19,597          17,530
</TABLE>
     Through  1998,  the Bank  operated six branch  facilities:  one in downtown
Howell,  one at Lake Chemung  (five miles east of downtown  Howell),  one on the
east side of Brighton, one in Hartland,  one in the village of Fowlerville,  and
the sixth is a grocery store branch,  located west of downtown Howell. In August
of 1999,  the Bank opened a new regional  facility on the west side of Brighton.
As of  December  31,  1999,  this new branch  had  approximately  $3,900,000  in
deposits.  In the time period presented,  all of the Bank's branches grew due to
general growth in the county.

Supervision and Regulation

     The following is a summary of certain  statutes and  regulations  affecting
the Company and the Bank. This summary is qualified in its entirety by reference
to the  particular  statutes and  regulations.  Changes in  applicable  laws and
regulations  may have a material  effect on the  Company  and the Bank and their
respective businesses.
<PAGE>
General

     Financial   institutions  and  their  holding   companies  are  extensively
regulated  under  federal and state law.  Consequently,  the growth and earnings
performance  of the Company and the Bank can be affected not only by  management
decisions and general economic conditions, but also by the statutes administered
by,  and the  regulations  and  policies  of,  various  governmental  regulatory
authorities.  Those  authorities  include the Board of  Governors of the Federal
Reserve  System  (the  "Federal  Reserve  Board"),  the FDIC,  the Office of the
Comptroller of the Currency (the "OCC"), the Internal Revenue Service, and state
taxing authorities. The effect of such statutes, regulations and policies can be
significant and cannot be predicted with a high degree of certainty.

     Federal and state laws and  regulations  generally  applicable to financial
institutions and their holding companies regulate, among other things, the scope
of business, investments,  reserves against deposits, capital levels relative to
operations,   lending  activities  and  practices,  the  nature  and  amount  of
collateral for loans, the establishment of branches, mergers, consolidations and
dividends.  The system of supervision  and regulation  applicable to the Company
and  the  Bank  establishes  a  comprehensive  framework  for  their  respective
operations  and is intended  primarily for the  protection of the FDIC's deposit
insurance  funds,  the  depositors  of the Bank,  and the  public,  rather  than
shareholders of the Company.

     Federal law and regulations  establish  supervisory standards applicable to
the  lending  activities  of  the  Bank,  including  internal  controls,  credit
underwriting,  loan documentation and loan-to-value  ratios for loans secured by
real property.

Recent Legislation

     The Gramm-Leach-Bliley Act of 1999 (the "GLB Act") removed large parts of a
regulatory  framework  that had its origins in the  Depression Era of the 1930s.
Effective March 11, 2000, new  opportunities  become available for banks,  other
depository institutions,  insurance companies and securities firms to enter into
combinations  that  permit a single  financial  services  organization  to offer
customers more financial  products and services.  The GLB Act provides for a new
regulatory  framework for regulation  through the "financial  holding  company,"
which will have as its umbrella regulator the Federal Reserve Board.  Functional
regulation of the financial holding company's separately regulated  subsidiaries
will be conducted by their primary functional regulator.  In order to qualify as
a financial  holding  company,  a bank holding  company must file an election to
become  a  financial  holding  company  and  each of its  banks  must  be  "well
capitalized" and "well managed." In addition,  the GLB Act makes satisfactory or
above Community Reinvestment Act compliance for insured depository  institutions
and their financial holding  companies  necessary in order for them to engage in
new  financial  activities.  The GLB Act provides a federal  right to privacy of
non-public  personal  information of individual  customers.  The Company and the
Bank  are  also  subject  to  certain  state  laws  that  deal  with the use and
distribution of non-public personal information.
<PAGE>
     The  Company  believes  that  the  GLB  Act  could  significantly  increase
competition  in its business and is evaluating the  desirability  of electing to
become a financial holding company. The Company believes that it is qualified to
elect financial holding company status but has not yet decided to do so.

The Company

     As a registered  bank holding company under the Bank Holding Company Act of
1956,  as amended  (the  "Act"),  the  Company is  subject  to  supervision  and
examination by the Board of Governors of the Federal  Reserve  System  ("Federal
Reserve Board") and is required to file, with the Federal Reserve Board,  annual
reports and  information  regarding  its  business  operations  and those of its
subsidiaries.

     The Act  requires a bank  holding  company to obtain  the  approval  of the
Federal  Reserve Board before it may acquire more than 5% of the voting stock or
substantially  all of the  assets of any bank or merge or  consolidate  with any
other bank holding company. If the effect of a proposed  acquisition,  merger or
consolidation may substantially lessen competition or tend to create a monopoly,
the Federal  Reserve Board cannot approve the  acquisition  unless it finds that
the  anticompetitive  effects of the acquisition,  merger,  or consolidation are
clearly  outweighed by the  convenience and needs of the community to be served.
The Act also  provides  that the  consummation  of any  acquisition,  merger  or
consolidation  must be delayed at least 15 days  following  the  approval of the
Federal  Reserve Board and that any action  brought under the antitrust  laws of
the United States during the time will delay the  effectiveness  of its approval
during the pendency of the action unless otherwise ordered by the board.

     The Riegle-Neal  Interstate Banking and Branching Efficiency Act authorizes
adequately  capitalized and adequately managed bank holding companies to acquire
banks located outside their  respective home states,  irrespective of state law.
This legislation also authorizes,  effective June 1, 1997 (subject to individual
state's rights to accelerate this date or prohibit  interstate  branching within
their borders),  banking  organizations  to branch  nationwide by acquisition or
consolidation  of  existing  bank  in  other  states.  Michigan  law  authorizes
out-of-state banks to acquire and establish  branches in Michigan,  provided the
laws of the  state of the  out-of-state  institution  permit  Michigan  banks to
acquire or establish branches in that state. Interstate acquisitions are subject
to the  approval  of various  federal  and state  agencies  and subject to other
conditions.

     Subject to certain  exceptions,  a bank holding  company is also prohibited
from  acquiring  direct or indirect  ownership or control of more than 5% of the
voting  shares of any company that is not a bank and from  engaging  directly or
indirectly in activities  unrelated to banking or managing or controlling banks.
One of the exceptions to this prohibition  permits  activities by a bank holding
company or its subsidiaries which the Federal Reserve Board has determined to be
so closely related to banking o managing or controlling  banks as to be a proper
incident  thereto.  In  determining  whether a  particular  activity is a proper
incident to banking or managing or controlling  banks, the Federal
<PAGE>
Reserve Board considers whether performance of the activity by an affiliate of a
bank  holding  company can  reasonably  be  expected to produce  benefits to the
public,  such  as  greater  convenience,   increased  competition  or  gains  in
efficiency that outweigh possible adverse effects,  such as undue  concentration
of resources, decreased or unfair competition,  conflicts of interest or unsound
banking practices. The Federal Reserve Board has adopted regulations prescribing
those  activities  which it presently  regards as  permissible  for bank holding
companies and their subsidiaries.  Some of these activities include:  performing
certain data processing  services;  certain personal and real property  leasing;
making, acquiring, or servicing loans and other extensions of credit as would be
made by a  mortgage,  finance,  credit  card or other  factoring  company;  bank
related courier services; and, under certain circumstances, acting as any or all
of the following:  investment or financial  advisor,  insurance agent or broker,
and  underwriter  for  credit  life  insurance  and credit  accident  and health
insurance.  The Act does not place geographic  restrictions on the activities of
the  nonbank  subsidiaries  of bank  holding  companies.  The  enactment  of the
Economic Growth and Regulatory  Paperwork  Reduction Act of 1996 streamlines the
nonbanking activities  application process for well capitalized and well managed
bank holding companies.

     The Act, the Federal  Reserve Act, and the Federal  Deposit  Insurance  Act
also  subject  bank  holding   companies  and  their   subsidiaries  to  certain
restrictions on any extensions of credit by subsidiary banks to the bank holding
company  or any of its  subsidiaries,  or  investments  in the  stock  or  other
securities thereof,  and on the taking of such stock or securities as collateral
for loans to any borrower. Further, under the Act and regulations of the Federal
Reserve Board, a bank holding company and its  subsidiaries  are prohibited from
engaging in certain  tie-in  arrangements  in  connection  with any extension of
credit, sale or lease of any property or furnishing of service.

     The Federal  Reserve  Board  provides  guidelines  for the  measurement  of
capital adequacy of bank holding companies.  The Company's capital,  as adjusted
under these guidelines, is referred to as risk-based capital. The Company's Tier
1  risk-based  capital  ratio,  at  December  31,  1999,  was  11.36%  and total
risk-based  capital was 12.62%.  At December 31, 1998,  these ratios were 12.52%
and  13.79%,  respectively.  Minimum  regulatory  Tier 1  risk-based  and  total
risk-based  capital ratios under the Federal Reserve Board guidelines are 4% and
8%, respectively. These same capital ratios are applied at the bank level by the
Federal Deposit Insurance  Corporation,  under which a well-capitalized  bank is
defined as one with at least 10% risk-based  capital.  Capital  guidelines  also
provide for a standard to measure  risk-based  capital to total assets.  This is
referred to as the leverage ratio. The Company's  leverage ratio at December 31,
1999 was 9.13%,  while at December 31, 1998 it was 9.14%.  The minimum  standard
leverage ratio is 3%. See also "Capital" discussion in Item 7 below.

     As a Michigan business  corporation,  the Company may generally declare and
pay dividends, provided the Company is not insolvent and that the payment of the
dividend  would not render it  insolvent,  and,  after  giving the effect of the
distribution,  that the  Company's  total assets would equal or exceed its total
liabilities plus the dissolution
<PAGE>
preference of any senior equity  securities (of which there currently are none).
The payment of dividends to its shareholders is limited by the Company's ability
to obtain  funds from the Bank and by the  above-referenced  regulatory  capital
guidelines.

The Bank

     The Bank is organized as a national  banking  association  and is therefore
regulated and supervised by the OCC. The deposits of the Bank are insured by the
Federal Deposit Insurance Corporation ("FDIC").  Consequently,  the Bank is also
subject to the provisions of the Federal  Deposit  Insurance Act. As a result of
such supervision and regulation, the Bank is subject to requirements to maintain
reserves against deposits,  restrictions on the nature and amount of loans which
may be made and the interest which may be charged thereon, restrictions relating
to investments and other  activities,  limitations based on capital and surplus,
and  limitations on the payment of dividends on its capital  stock.  The various
regulatory  and  legal  requirements  referenced  above  are  primarily  for the
protection of the Bank's  depositors and customers  rather than the shareholders
of the Company.

     As a national  bank, the Bank may not pay a dividend on its common stock if
the dividend would exceed the net undivided profits then on hand after deducting
losses  and bad debts.  Additionally,  the prior  approval  of the Office of the
Comptroller of the Currency,  or its designee, is required for any dividend to a
bank  holding  company  by an  affiliated  national  bank  if the  total  of all
dividends, including any proposed dividend declared by such bank in any calendar
year,  exceeds  the total of its net  profits  for that year  combined  with its
retained net profits for the preceding two years, less any required transfers to
surplus.

     The  Federal  Deposit  Insurance  Act  was  amended  in  1991  by the  FDIC
Improvement  Act of 1991.  The FDIC  Improvement  Act  provides  for  regulatory
intervention  should a bank's  capital  deteriorate,  limits certain real estate
lending and increases audit requirements. The FDIC has been granted authority to
impose special  assessments  on banks to repay  borrowings of the FDIC. The FDIC
Improvement Act defines a reserve ratio at which the Bank Insurance Fund ("BIF")
is to be maintained through FDIC semi- annual assessment rates on the BIF member
banks.  The FDIC has also established a system of risk-based  deposit  insurance
premiums under the FDIC Improvement Act. This system  established four levels of
premium rates based on the risk classification of the institution. As a national
bank,  the Bank's  premiums  are paid to BIF.  Given the  designation  as a well
managed, well capitalized institution,  the Bank pays the lowest assessment rate
possible to BIF.

     As required by the Deposit  Insurance  Funds Act of 1996,  in 1997 the Bank
commenced making payments to the FDIC for the Financing Corporation (FICO) bonds
that were issued  previously.  The FICO rate for BIF member banks is 1.220 basis
points  annually  applied  to  assessable  deposits.  During  1999 the Bank paid
$28,000 to the FDIC.
     In 1996 the  Michigan  Legislature  adopted  the Credit  Reform  Act.  This
statute,  together with  amendments to other  related  laws,  permits  regulated
lenders,  indirectly
<PAGE>
including  Michigan-chartered  banks,  to charge  and  collect  higher  rates of
interest  and  increased  fees on  certain  types of loans  to  individuals  and
businesses.  The laws  prohibit  "excessive  fees and  charges,"  and  authorize
governmental  authorities  and borrowers to bring actions for injunctive  relief
and  statutory  and actual  damages  for  violations  by lenders.  The  statutes
specifically  authorize  class  actions,  and also civil  money  penalties,  for
knowing and willful or persistent violations.

I  SELECTED STATISTICAL INFORMATION

(A) Distribution of Assets, Liabilities, and Shareholders' Equity:
(B) Interest Rates and Interest Differential:

     The table on the following page shows the daily average  balances for major
categories of interest earning assets and interest bearing liabilities, interest
earned (on a taxable equivalent basis) or paid, and the effective rate or yield,
for the three years ended December 31, 1999, 1998, and 1997.

     Net interest  income is the difference  between  interest  earned on loans,
securities  and other earning  assets and interest paid on deposits and borrowed
funds. In the following tables,  the interest earned on investments and loans is
expressed on a fully  taxable  equivalent  (FTE) basis.  Tax exempt  interest is
increased to an amount comparable to interest subject to federal income taxes in
order to properly  evaluate the effective  yields earned on earning assets.  The
tax  equivalent  adjustment  is based on a federal  income tax rate of 34%.  The
following  Yield Analysis  shows that the Bank's  interest  margin  decreased 28
basis  point in 1999 as a result of a  decrease  of 49 basis  points in yield on
earning  assets,  partially  offset  by a  decrease  of 38 basis  points  in the
interest cost on deposits.  In 1998 the interest margin  increased 1 basis point
due to a 12 basis point increase in yield on earning assets  partially offset by
an increase in interest cost of 10 basis points.
<PAGE>
<TABLE>
                           Yield Analysis of Consolidated Average Assets and Liabilities
                                              (dollars in thousands)



                                            1999                             1998                             1997
                                            ----                             ----                             ----
                               Average                Yield/    Average                Yield/    Average                 Yield/
                               Balance    Interest     Rate     Balance    Interest     Rate     Balance    Interest      Rate
                               -------    --------     ----     -------    --------     ----     -------    --------      ----
Assets:
<S>                            <C>        <C>          <C>      <C>        <C>          <C>      <C>        <C>           <C>
Interest earning assets:
Short term investments         $10,384       $507.5    5.79%     $8,630       $449.1    5.20%     $2,754       $148.8     5.40%
Securities:
   Taxable                      30,051      1,526.1    5.08%     23,019      1,386.9    6.02%     31,873      1,906.0     5.98%
   Tax-exempt                   16,896      1,165.6    6.90%     15,221      1,085.1    7.13%     13,262        975.8     7.36%
Loans(1)(2)                    198,448     18,790.8    9.47%    175,873     17,317.6    9.85%    148,096     14,540.3     9.82%
                               -------    ---------             -------    ---------            --------    ---------
Total earning assets and
   total interest income       255,779    $21,990.0    8.60%    222,743    $20,238.7    9.09%    195,985    $15,570.9     8.97%
                                          ---------                        ---------                        ---------
Cash & due from banks           11,680                            9,836                            7,620
All other assets                15,955                           11,335                            8,089
Allowance for loan loss         (4,219)                          (3,777)                          (3,499)
                               -------                           ------                           ------
   Total assets               $279,195                         $240,137                         $208,195
                              ========                         ========                         ========
Liabilities and
   Shareholders' Equity
Interest bearing deposits:
Savings, money market, NOW    $111,141     $2,991.6    2.69%    $91,552     $2,772.5    3.03%    $79,104     $2,210.5     2.79%
Time                            92,802      4,970.0    5.36%     81,119      4,617.2    5.69%     71,093      4,059.5     5.71%
Short term borrowings               98          5.3    5.40%        179         10.7    5.98%        610         35.3     5.77%
                              --------    ---------             -------     --------            --------    ---------
Total interest bearing
  liabilities and total
  interest expense             204,041     $7,966.9    3.90%    172,850     $7,400.4    4.28%    150,807     $6,305.3     4.18%
                                          ---------                         --------                         --------
Non-interest bearing deposits   48,240                           43,619                           34,668
All other liabilities            2,232                            1,751                            1,792
Shareholders' Equity            24,682                           21,917                           20,928
                                ------                           ------                           ------
Total liabilities and
   shareholders' equity       $279,195                         $240,137                         $208,195
                              ========                         ========                         ========
Interest spread                                        4.70%                            4.81%                             4.79%
                                                       =====                            =====                             ====
Net interest income-FTE                   $14,023.1                        $12,838.3                        $11,265.6
                                          =========                        =========                        =========
Net interest margin                                    5.48%                            5.76%                             5.75%
                                                       =====                            =====                             =====
</TABLE>
(1)  Nonaccruing loans are not significant during the three year period and, for
     purposes of the  computations  above,  are  included in average  daily loan
     balances.
(2)  Interest on loans  includes  origination  fees  totaling  $710,000 in 1999,
     $600,000 in 1998, and $380,000 in 1997.
<PAGE>
(C) The following table sets forth the effects of volume and rate changes on net
interest  income  on a taxable  equivalent  basis.  All  figures  are  stated in
thousands of dollars.
<TABLE>
                                                Year ended                               Year ended
                                       December 31, 1999 compared to            December 31, 1998 compared to
                                       Year ended December 31, 1998             Year ended December 31, 1997
                                        ----------------------------            ----------------------------
                                        Amount of Increase/(Decrease)           Amount of Increase/(Decrease)
                                               due to change in                        due to change in
                                               ----------------                        ----------------
                                                                Total                                      Total
                                                               Amount                                     Amount
                                                                 Of                                         of
                                                Average       Increase/                    Average      Increase/
                                  Volume         Rate        (Decrease)      Volume         Rate       (Decrease)
                                  ------         ----        ----------      ------         ----       ----------
<S>                               <C>          <C>            <C>           <C>            <C>           <C>
Interest Income:
Short term investments..........  $     91    $    (33)       $     58      $    317      $    (17)      $     300
Securities:
  Taxable.......................       424        (284)            140          (529)           10            (519)
  Tax Exempt....................       119         (39)             80           144           (35)            109
Loans...........................     2,223        (750)          1,473         2,727            50           2,777

  Total interest income.........  $  2,857    $ (1,106)       $  1,751     $   2,659      $      8       $   2,667

Interest Expense:
Interest bearing deposits:
  Savings/NOW accounts..........  $    593    $   (374)       $    219     $     348      $    214       $     562
  Time..........................       665        (312)            353           573           (15)            558
Short-term borrowings...........        (5)          1              (6)          (25)            1             (24)

   Total interest expense.......  $  1,253    $   (687)       $    566     $     896      $    200       $   1,096

Net interest income (FTE).......  $  1,604    $   (419)       $  1,185     $   1,763      $   (192)      $   1,571
</TABLE>
The  change  in  interest  due to  changes  in both  balance  and  rate has been
allocated to change due to balance and change due to rate in  proportion  to the
relationship of the absolute dollar amounts of change in each.
<PAGE>
II  SECURITIES PORTFOLIO

(A)The following table sets forth the book value of securities at December 31:
<TABLE>
                                                              (in thousands)

                                                         1999             1998               1997
                                                         ----             ----               ----
<S>                                                 <C>                <C>                <C>
Held to maturity:
U.S. Treasury                                       $       0          $   1,999          $  15,993
States and political subdivisions                      17,709             16,279             14,028
Mortgage-backed securities                                335                602                633
                                                          ---                ---                ---
   Total                                            $  18,044          $  18,880          $  30,654
Available for sale:
U.S. Treasury                                       $  22,860          $  12,092          $  13,026
U.S. Government agencies                                8,861              6,982                  0
Mortgage-backed securities                                  0                  0                  0
FRB Stock                                                  44                 44                 44
FHLB Stock                                                789                648                  0
                                                    ---------          ---------                ---
   Total                                            $  32,554          $  19,766          $  13,070
</TABLE>
     (B)The following table sets forth  contractual  maturities of securities at
December 31, 1999 and the weighted average yield of such securities:
<TABLE>
                                                                   (dollars in thousands)
                                                              Maturing After         Maturing After
                                        Maturing Within       One But Within         Five But Within        Maturing After
                                           One Year             Five Years             Ten Years              Ten Years
                                           --------             ----------             ---------              ---------
                                      Amount      Yield      Amount     Yield      Amount      Yield      Amount      Yield
                                      ------      -----      ------     -----      ------      -----      ------      -----
<S>                                 <C>           <C>        <C>        <C>        <C>         <C>        <C>         <C>
Held to maturity
   States and political
      subdivisions                  $    606      5.55%      $6,350     5.23%     $10,753      4.68%           0
   Mortgage backed
      Securities                         184      5.32%         151     5.57%           0                      0
                                         ---                    ---                     -                      -
      Total                         $    790      5.50%      $6,123     5.29%     $11,131      4.68%          $0
                                    ========                 ======               =======                     ==

Tax equivalent adjustment
   for calculations of yield             $11                   $110                  $206
                                         ===                   ====                  ====

Available for sale
   U.S. Treasury                     $16,937      4.89%    $  5,922     5.39%
   U.S. Agency                       $ 6,943      4.90%    $  1,919     5.15%
   FRB Stock                                                                                               $  44      6.00%
   FHLB Stock                                                                                                789      8.00%
                                                                                                             ---
      Total                          $23,880      4.89%    $  7,841     5.33%          $0                  $ 833      7.89%
                                     =======               ========                    ==                  =====
</TABLE>

     The rates  set  forth in the  tables  above  for  obligations  of state and
political  subdivisions  have  been  restated  on a fully tax  equivalent  basis
assuming a 34% marginal tax rate. The amount of the adjustment is as follows:
<PAGE>
<TABLE>
                                                                                             Rate on Tax
                                   Tax-Exempt Rate               Adjustment               Equivalent Basis
                                   ---------------               ----------               ----------------
<S>                                     <C>                         <C>                         <C>
Under 1 year                            5.55%                       1.85%                       7.40%
1-5 years                               5.28%                       1.84%                       7.12%
5-10 years                              4.68%                       1.84%                       6.52%
</TABLE>
     Additional   statistical   information  concerning  the  Bank's  securities
portfolio is incorporated  by reference in Note 2 of the Company's  Consolidated
Financial  Statements  for the year ended  December  31,  1999  included  in the
Appendix to the  Company's  definitive  proxy  statement,  dated March 17, 2000,
relating to the April 17, 2000,  Annual Meeting of  Shareholders  (as filed with
the Commission as exhibit 13 to the Report).

III LOAN PORTFOLIO

     (A)The table below shows loans outstanding at December 31:
<TABLE>
                                                                            (in thousands)
                                                      1999          1998          1997        1996          1995
                                                      ----          ----          ----        ----          ----
<S>                                                 <C>           <C>           <C>          <C>           <C>
Secured by real estate:
   Residential first mortgage                       $ 29,904      $ 38,051      $ 38,073     $ 36,148      $ 36,871
   Residential home equity/other junior liens          7,822         9,106        13,665       12,883        10,566
   Construction and land development                  23,375        23,048        19,490       14,042         9,075
   Other                                              89,809        68,960        53,743       43,006        42,454
Consumer                                              16,811        16,653        14,011       12,272        11,233
Commercial                                            38,891        26,058        18,299       15,830        14,546
Other                                                  4,043         3,770         1,729        2,360         3,213
                                                       -----         -----         -----        -----         -----
            Total Loans (Gross)                     $210,655      $185,646      $159,010     $136,541      $127,958
</TABLE>

     The loan  portfolio  is  periodically  reviewed  and the  results  of these
reviews are reported to the Company's  Board of Directors.  The purpose of these
reviews  is to  verify  proper  loan  documentation,  to  provide  for the early
identification  of potential  problem loans, and to evaluate the adequacy of the
allowance for loan losses.

     (B)The  following  table  shows the amount of  commercial,  financial,  and
agricultural loans outstanding as of December 31, 1999 which, based on remaining
scheduled repayments of principal, are in the periods indicated.
<TABLE>
                                                                              Maturing
                                                                           (in thousands)
                                                                     After one
                                                      Within one     but within       After five
                                                        year         five years         years             Total
                                                        ---          ----------         -----             -----
<S>                                                   <C>            <C>              <C>               <C>
Real estate construction & land development....       $12,536         $10,829               0           $ 23,375
Real estate other (secured by commercial &
   multi-family)...............................         8,528          74,784           6,497             89,809
Commercial (secured by business assets or
   Unsecured)..................................        11,970          26,132             789             38,891
Other (loans to farmers, political
   Subdivisions, & overdrafts) ................           297           1,799           1,947              4,043

      Totals...................................       $33,331        $113,554          $9,233           $156,118
</TABLE>
<PAGE>
     Below is a  schedule  of amounts  due after one year  which are  classified
according to their sensitivity to changes in interest rates.
<TABLE>
                                                                 Interest Sensitivity
                                                                    (in thousands)
                                                         Fixed Rate                 Variable Rate
                                                         ----------                 -------------
<S>                                                      <C>                          <C>
Due after one but within five years...............         $84,003                    $29,551
Due after five years..............................           6,352                      2,881
</TABLE>
     (C)  Nonperforming  loans  consist of loans  accounted  for on a nonaccrual
basis  and  loans  contractually  past  due 90 days or  more as to  interest  or
principal  payments (but not included in nonaccrual loans). The aggregate amount
of non-performing loans, as of December 31, is presented in the table below:
<TABLE>
                                                                    (dollars in thousands)
                                               1999           1998            1997            1996             1995
                                               ----           ----            ----            ----             ----
<S>                                          <C>            <C>             <C>              <C>             <C>
Nonperforming Loans:
Nonaccrual loans                             $  173         $ 1,519         $   809          $  109          $  926
Loans past due 90 days or more                    4              25             249             448              66
                                                  -              --             ---             ---              --
   Total nonperforming loans                 $  177         $ 1,544         $ 1,058          $  557          $  992
                                             ======         =======         =======          ======          ======
Percent of total loans                         .08%            .83%            .67%            .41%            .78%
</TABLE>
     Additional   information   concerning   nonperforming   loans,  the  Bank's
nonaccrual policy,  loan impairment,  and loan concentrations is incorporated by
reference to Note 3 of the Company's  Consolidated  Financial Statements for the
year  ended  December  31,  1999  included  in the  Appendix  to  the  Company's
definitive  proxy  statement,  dated March 17,  2000,  relating to the April 17,
2000, Annual Meeting of Shareholders (as filed with the Commission as exhibit 13
to the Report).

     There were no other interest  bearing  assets,  at December 31, 1999,  that
would be required to be disclosed under Item III(C), if such assets were loans.

     There were no foreign loans outstanding at December 31, 1999.
<PAGE>
IV SUMMARY OF LOAN LOSS EXPERIENCE

     (A)The  following table sets forth loan balances and summarizes the changes
in the allowance for loan losses for each of the years ended December 31:
<TABLE>
                                                                          (dollars in thousands)
                                                        1999         1998          1997         1996         1995
                                                        ----         ----          ----         ----         ----
<S>                                                   <C>          <C>           <C>          <C>          <C>
Loans:
  Average daily balance of loans for the year....     $198,448     $175,873      $148,096     $130,648     $122,500
  Amount of loans (gross) outstanding at end
      of the year................................      210,655      185,646       159,011      136,541      127,958
Allowance for loan losses:
   Balance at beginning of year..................        3,958        3,424         3,335        3,097        2,672
   Loans charged off:
      Real estate................................            0          110             0           70            0
      Commercial.................................          322           63           375          129          118
      Consumer...................................          164          129           124           88           91
                                                           ---          ---           ---           --           --
          Total charge-offs......................          486          302           499          287          209
   Recoveries of loans previously charged off:
       Real estate...............................           35           96            32            1            0
       Commercial................................           98           51            43           31           95
       Consumer..................................           38           49            27           45           91
                                                            --           --            --           --           --
           Total recoveries......................          171          196           102           77          186

Net loans charged off............................          315          106           397          210           23
Additions to allowance charged to operations.....          840          640           486          448          448
                                                           ---          ---           ---          ---          ---
           Balance at end of year................     $  4,483     $  3,958      $  3,424     $  3,335     $  3,097

Ratios:
   Net loans charged off to average loans
       outstanding                                        .16%         .06%          .27%         .16%         .02%
   Allowance for loan losses to loans
       outstanding                                       2.13%        2.13%         2.15%        2.44%        2.42%
</TABLE>
     The allowance for loan losses  reflected above is a valuation  allowance in
its entirety and the only allowance available to absorb future loan losses.

     (B)The  following  table  presents  the portion of the  allowance  for loan
losses  applicable  to each  loan  category  and the  percent  of  loans in each
category to total loans, as of December 31:
<TABLE>
                                                          (dollars in thousands)
                             1999                1998                1997                1996                 1995
                             ----                ----                ----                ----                 ----
                        Amount   Percent    Amount   Percent    Amount   Percent    Amount   Percent    Amount   Percent
                        ------   -------    ------   -------    ------   -------    ------   -------    ------   -------
<S>                     <C>      <C>        <C>      <C>        <C>      <C>        <C>      <C>        <C>      <C>
Commercial........     $3,803    77.6%     $ 3,384    74.1%      $2,785   69.2%      $2,401     66.7%    $2,204   64.7%
Consumer..........        441    11.8%         355    12.5%         332   15.6%         465     16.2%       412   15.8%
Real Estate.......        239    10.6%         219    13.4%         307   15.2%         457     17.1%       481   19.5%
                          ---                 ----                  ---                 ---                 ---
      Total.......     $4,483    100%       $3,958    100%       $3,424    100%      $3,335     100%     $3,097    100%
                       ======    ====       ======    ====       ======    ====      ======     ====     ======    ====
</TABLE>
<PAGE>
V  DEPOSITS

     The following  table sets forth average  deposit  balances and the weighted
average rates paid thereon for the years ended December 31:
<TABLE>
                                                                 (dollars in thousands)
                                                  1999                      1998                     1997
                                                  ----                      ----                     ----
                                           Average                      Average                    Average
                                           Balance           Rate       Balance        Rate        Balance        Rate
                                           -------           ----       -------        ----        -------
<S>                                        <C>               <C>      <C>              <C>       <C>
Non-interest bearing demand                $  48,240                  $  43,619                  $  34,668
Savings, money market and NOW                111,141         2.69%       91,552        3.03%        79,104        2.79%
Time deposits                                 92,802         5.36%       81,119        5.69%        71,093        5.71%
                                              ------                     ------                     ------
      Total                                 $252,857         3.90%     $216,290        4.28%      $184,865        4.18%
                                            ========                   ========                   ========
</TABLE>
     The table for  maturities of  negotiated  rate time deposits of $100,000 or
more  outstanding at December 31, 1999 is incorporated by reference to note 7 of
the Company's  Consolidated Financial Statements for the year ended December 31,
1999 included in the Appendix to the Company's definitive proxy statement, dated
March 17, 2000,  relating to the April 17, 2000,  Annual Meeting of Shareholders
(as filed with the Commission as exhibit 13 to the Report).

VI  RETURN ON EQUITY AND ASSETS

     The ratio of net  income to  average  shareholders'  equity  and to average
total assets, and certain other ratios, for the years ended December 31 follow:
<TABLE>
                                                1999           1998            1997            1996            1995
                                                ----           ----            ----            ----            ----
<S>                                           <C>            <C>             <C>             <C>             <C>
Net income as a percent of:
   Average common equity                      15.05%         17.83%          17.84%          19.12%          19.60%
   Average total assets                        1.33%          1.63%           1.79%           1.88%           1.88%
</TABLE>
     Additional  performance ratios are set forth in Selected Financial Data, in
Item 6, Part II of this Report. Any significant  changes in the current trend of
the above  ratios are  reviewed  in  Management's  Discussion  and  Analysis  of
Financial  Condition and Results of Operations,  set forth in Item 7, Part II of
this Report.

VII  SHORT-TERM BORROWING

     The information required in this item is not applicable for this Company.
<PAGE>
Item 2 - Properties

     The Bank operates from seven facilities,  located in four  communities,  in
Livingston County, Michigan. The executive offices of the Company are located at
the  Bank's  main  office,  101 East Grand  River,  Howell,  Michigan.  The Bank
maintains  two  branches  in Howell at 5990 East Grand River and 2400 West Grand
River.  The Bank  also  maintains  branch  offices  at 9911  East  Grand  River,
Brighton,  Michigan,  8080  Challis  Road,  Brighton  Michigan,  760 South Grand
Avenue, Fowlerville,  Michigan, and 10700 Highland Road, Hartland, Michigan. All
of the offices  have ATM  machines  and all except the West Grand River  branch,
which is in a grocery store,  have drive up services.  All of the properties are
owned by the Bank except for the West Grand River  branch  which is leased.  The
lease is for fifteen years,  expiring  September 2007. The average lease payment
over the life of the lease is $3,167 monthly.

Item 3 - Legal Proceedings

     The Company is not involved in any material legal proceedings.  The Bank is
involved in ordinary routine litigation  incident to its business;  however,  no
such  proceedings  are expected to result in any material  adverse effect on the
operations or earnings of the Bank. Neither the Bank nor the Company is involved
in any proceedings to which any director,  principal officer, affiliate thereof,
or person who owns of record or beneficially  more than five percent (5%) of the
outstanding  stock of either the Company or the Bank,  or any  associate  of the
foregoing,  is a party or has a material  interest adverse to the Company or the
Bank.

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

     No matters were  submitted to a vote of security  holders during the fourth
quarter of 1999.

                       Additional Item--Executive Officers

     Executive  officers of the Company are  appointed  annually by the Board of
Directors.  There are no family  relationships  among these officers  and/or the
directors  of the  Company,  or any  arrangement  or  understanding  between any
officer and any other person pursuant to which the officer was elected.
<PAGE>
     The  following  table sets forth  certain  information  with respect to the
Company's executive officers as of December 31, 1999:
<TABLE>
                                                                                          First Selected as an Officer
     Name (Age)               Position with Company                                              of the Company
     ---------                ---------------------                                              --------------
<S>                           <C>                                                                <C>
Barbara D. Martin (53)        President, Chief Executive Officer, and Director of the
                              Company and the Bank                                                  1983
Barbara J. Nelson (52)        Secretary/Treasurer of the Company and Senior Vice
                              President, Cashier, and Chief Financial Officer of the Bank           1985
Herbert W. Bursch (47)        Senior Vice President, Retail Services, of the Bank                   1999
John D. Logan (50)            Senior Vice President, Trust and Investments, of the                  1997
James Wibby (49)              Senior Vice President, Senior Lender, of the Bank                     1997
Nancy Morgan (49)             Vice President, Human Resources of the Bank                           1988
Jerry Armstong (40)           Vice President, Operations, of the Bank                               1997
</TABLE>


                                     PART II

Item 5 - Market for Registrant's Common Equity and Related Stockholder Matters

     There is no active market for the Company's  Common Stock,  and there is no
published  information  with respect to its market price.  There are  occasional
direct sales by  shareholders  of which the  Company's  management  is generally
aware.  It is the  understanding  of the management of the Company that over the
last two years,  the Company's Common Stock has sold at a premium to book value.
From  January 1, 1998,  through  December 31,  1999,  there were,  so far as the
Company's  management  knows, 369 sales of shares of the Company's Common Stock,
involving a total of 115,338  shares.  The price was reported to  management  in
these transactions; however there may have been other transactions involving the
Company  stock at prices not reported to  management.  During this  period,  the
highest price known to be paid was $42.00 per share during the last two quarters
of 1999, and the lowest price was $30.00 per share in the first quarter of 1998.
To the  knowledge  of  management,  the last sale of Common  Stock  occurred  on
February 29, 2000.

     As of March 1, 2000, there were  approximately 850 holders of record of the
Company's  Stock. The following table sets forth the range of high and low sales
prices of the Company's  Common Stock during 1998 and 1999, based on information
made  available to the  Company,  as well as per share cash  dividends  declared
during those periods.  Although  management is not aware of any  transactions at
higher or lower prices,  there may have been  transactions at prices outside the
ranges listed in the table.
<PAGE>
     Sales price and dividend information for the years 1998 and 1999:
<TABLE>
                                                Sales Prices                        Cash Dividends Declared
                                                ------------                        -----------------------
            1998                         High                     Low
            ----                         ----                     ---
<S>                                     <C>                      <C>                          <C>
First Quarter                           $30.00                   $30.00                       $0.18
Second Quarter                          $35.00                   $35.00                       $0.18
Third Quarter                           $35.00                   $35.00                       $0.20
Fourth Quarter                          $35.00                   $35.00                       $0.49(1)
            1999                         High                     Low
            ----                         ----                     ---
First Quarter                           $40.00                   $40.00                       $0.20
Second Quarter                          $40.00                   $40.00                       $0.20
Third Quarter                           $42.00                   $40.00                       $0.20
Fourth Quarter                          $42.00                   $42.00                       $0.50(2)
</TABLE>
(1)  Includes  a special  dividend  of $0.29 per share.  (2)  Includes a special
dividend of $0.30 per share.


     The holders of the Company's  Common Stock are entitled to dividends  when,
as,  and if  declared  by the Board of  Directors  of the  Company  out of funds
legally  available  for that  purpose.  Dividends  have been paid on a quarterly
basis. In determining dividends,  the Board of Directors considers the earnings,
capital  requirements and financial condition of the Company and the Bank, along
with other relevant  factors.  The Company's  principal source of funds for cash
dividends is the dividends paid by the Bank. The ability of the Company and Bank
to pay dividends is subject to regulatory restrictions and requirements.
<PAGE>
Item 6 - Selected Financial Data
<TABLE>
                             SUMMARY FINANCIAL DATA
                      (in thousands, except per share data)



                                              1999           1998            1997            1996            1995
                                              ----           ----            ----            ----            ----
<S>                                        <C>             <C>             <C>             <C>             <C>
Income Statement Data:
   Interest income                           $21,597        $19,910         $17,276         $15,717         $14,394
   Interest expense                            7,967          7,400           6,305           5,644           4,879
   Net interest income                        13,630         12,510          10,971          10,073           9,515
   Provision for loan losses                     840            640             486             448             448
   Non-interest income                         2,015          1,954           1,851           1,686           1,418
   Non-interest expense                        9,543          8,238           6,982           6,151           5,867
   Income before tax                           5,262          5,586           5,354           5,160           4,618
   Net income                                  3,715          3,907           3,733           3,574           3,200
Basic Per Share Data(1):
   Net income                                  $2.38          $2.49           $2.37           $2.27           $2.03
   Dividends paid                               1.10           1.05            1.00             .93             .68
   Weighted average shares
     outstanding                           1,563,996      1,570,537       1,575,000       1,575,000       1,575,000
Balance Sheet Data:
   Total assets                              296,419        264,894         226,314         202,009         182,958
   Loans, net                                209,952        185,018         158,397         136,067         127,463
   Allowance for loan losses                   4,483          3,958           3,424           3,335           3,097
   Deposits                                  269,190        239,557         202,299         180,944         163,875
   Shareholders' equity                       25,312         23,497          21,732          19,597          17,530
Ratios:
   Dividend payout ratio                      46.31%         42.11%          42.19%          41.13%          33.46%
   Equity to asset ratio                       8.84%         9.13 %          10.05%           9.82%           9.61%
</TABLE>
(1) Per  share  data for all  years  has been  restated  to give  effect  to the
three-for-one stock split, payable as a dividend paid in February 1997.



Item 7  Management's Discussion and Analysis of Financial Condition and Results
        of Operations

     This  discussion  provides  information  about the  consolidated  financial
condition and results of operations of FNBH Bancorp,  Inc.  ("Company")  and its
subsidiaries,  First  National  Bank in Howell  ("Bank")  and HB Realty Co., and
should be read in conjunction with the Consolidated Financial Statements.

FINANCIAL CONDITION

     During  1999  total  assets  increased  12%  to  $296,419,000.   Investment
securities  increased $12 million (31%) while gross loans  increased $25 million
(13%).  Deposits  increased $29.6 million (12%) to  $269,190,000.  Stockholders'
equity increased $1.8 million (8%) to $25,312,000.
<PAGE>
Securities

     The securities  portfolio is an important  source of liquidity for the Bank
to meet unusual deposit  fluctuations.  Management of the Bank makes  investment
decisions  which  will  ensure  the  safety  of  funds  entrusted  to it by  its
depositors  and  shareholders.   Approximately  $32,000,000  of  the  securities
portfolio is invested in US  government  and agency  obligations.  An additional
$18,000,000  of the portfolio  consists of tax exempt  obligations of states and
political  subdivisions.  The Company's current and projected tax position makes
these  investments  advantageous  to the  Bank.  The  Bank's  investment  policy
requires purchases of tax exempt issues to be of bonds with AA ratings or better
if the  maturity  exceeds 4 years  unless the bond is a local,  nonrated  issue.
"Other"  securities  consist of equity  holdings in the Federal Reserve Bank and
the Federal Home Loan Bank.

     The following table shows the percentage  makeup of the security  portfolio
as of December 31:
<TABLE>
                                                                                           1999            1998
                                                                                           ----            ----
<S>                                                                                      <C>             <C>
U.S. Treasury & agency securities..............................                           62.7%           54.5%
Agency mortgage backed securities..............................                             .7%            1.6%
Tax exempt obligations of states and political subdivisions....                           35.0%           42.1%
Other                                                                                      1.6%            1.8%
                                                                                           ----            ----
      Total securities.........................................                          100.0%          100.0%
</TABLE>

Loans
     The loan  personnel of the Bank are committed to making  quality loans that
produce a good  rate of return  for the Bank and also  serve  the  community  by
providing funds for home purchases,  business purposes,  and consumer needs. The
overall loan portfolio grew $25,000,000 (13%) in 1999.

     As a full service  lender,  the Bank offers a variety of home mortgage loan
products.  The Bank makes  fixed  rate,  long-term  mortgages  which  conform to
secondary market standards which it sells. This practice allows the Bank to meet
the housing credit needs of its service area, while at the same time maintaining
loan to deposit ratios and interest  sensitivity and liquidity  positions within
Bank policy. The Bank retains servicing on sold mortgages thereby furthering the
customer  relationship and adding to servicing income. During 1999 the Bank sold
$12,000,000 in residential mortgages.

     The Bank has also been able to service  customers  with loan needs which do
not conform to secondary market  requirements by offering variable rate products
which are retained in the mortgage portfolio. While not meeting secondary market
requirements,  these  nonconforming  mortgages do meet bank loan  guidelines and
have a good payment record.  During 1999 the Bank made approximately  $5,000,000
in variable rate mortgage loans which it retained in the mortgage portfolio.
<PAGE>
     During 1999,  the Bank  experienced  a  significant  amount of loan demand.
Growth in the county resulted in a need for financing commercial projects,  some
of which were for the  construction  of  commercial  buildings and some of which
were for the development of residential subdivisions. Commercial loans ended the
year at  $163,469,000,  a 19%  increase  for the  year.  Additionally,  the Bank
originated  $4,000,000  in  commercial  loans  which it sold in part or total to
other banks due to legal lending  limits  Consumer loans  increased  $1,800,000,
about 8%.

     The  following  table  reflects the makeup of the  commercial  and consumer
loans in the  Consolidated  Financial  Statements.  Included in the  residential
first mortgage  totals below are the "real estate  mortgage" loans listed in the
Consolidated  Financial Statements and other loans to customers who pledge their
homes as  collateral  for  their  borrowings.  In the  majority  of the loans to
commercial customers, the Bank is relying on the borrower's cash flow to service
the loans.  However,  these loans may b secured by personal or  commercial  real
estate. A portion of the loans listed in residential  first mortgages  represent
commercial loans where the borrower has pledged his/her residence as collateral.
"Other" real estate loans  include  $87,000,000  in loans  secured by commercial
property with the remaining  $3,000,000 secured by multi-family  units. The most
significant  loan growth was in commercial  loans  secured by business  property
which increased  $20,800,000,  30% over the prior year, and in commercial  loans
not secured by real estate which increased $12,800,000, a 49% increase.

     The following table shows the balance and percentage  makeup of loans as of
December 31:
<TABLE>
                                                                          (dollars in thousands)
                                                                 1999                                 1998
                                                                 ----                                 ----
                                                       Balances         Percentage           Balances         Percentage
                                                       --------         ----------           --------         ----------
<S>                                                    <C>              <C>                  <C>              <C>
Secured by real estate:
Residential first mortgage                             $ 29,904           14.2%              $ 38,051           20.5%
Residential home equity/other junior liens
                                                          7,822            3.7%                 9,106            4.9%
Construction and land development                        23,375           11.1%                23,048           12.4%
Other                                                    89,809           42.6%                68,960           37.1%
Consumer                                                 16,811            8.0%                16,653            9.0%
Commercial                                               38,891           18.5%                26,058           14.1%
Other                                                     4,043            1.9%                 3,770            2.0%
                                                         ------          ------              --------          ------
            Total Loans (Gross)                        $210,655          100.0%              $185,646          100.0%
</TABLE>
     The Bank's loan personnel have  endeavored to make high quality loans using
well  established  policies and procedures  and a thorough loan review  process.
Loans in excess of $400,000  are  approved  by a  committee  of the Board or the
Board.  The Bank has hired an  independent  person to review the  quality of the
loan portfolio on a regular basis. Loan quality is demonstrated by the ratios of
nonperforming  loans  and  assets  as a  percentage  of the  loan  portfolio  as
illustrated in the table below for December 31:
<PAGE>
<TABLE>
                                                                                    (dollars in thousands)
                                                                              1999           1998         1997
                                                                              ----           ----         ----
<S>                                                                          <C>           <C>          <C>
Nonperforming Loans:
Nonaccrual loans.........................................                    $ 173         $1,519       $  809
Loans past due 90 days and still accruing................                        4             25          249
                                                                                 -              -          ---
   Total nonperforming loans.............................                      177          1,544        1,058
Other real estate........................................                        0              0            0
                                                                                 -              -            -
  Total nonperforming assets.............................                  $   177         $1,544       $1,058
                                                                           =======         ======       ======

Nonperforming loans as a percent of total loans..........                     .08%           .83%         .67%
Nonperforming assets as a percent of total loans.........                     .08%           .83%         .67%
Nonperforming loans as a percent of the loan loss
   reserve...............................................                      .4%            39%          31%
</TABLE>
     Nonperforming  assets  are  comprised  of loans for which  the  accrual  of
interest  has been  discontinued,  accruing  loans  90 days or more  past due in
payments,  and other  real  estate  which has been  acquired  primarily  through
foreclosure  and  is  waiting  disposition.  Loans  are  generally  placed  on a
nonaccrual  basis when  principal  or  interest  is past due 90 days or more and
when, in the opinion of management, full collection of principal and interest is
unlikely.

     The  $1,400,000  decrease in  nonperforming  loans is primarily  due to the
foreclosure and subsequent sale of property for an approximately $1,000,000 loan
that was nonperforming in 1998.

     Impaired  loans  totaled  $3,400,000  at  December  31,  1999,  compared to
$4,300,000 at the prior year end.  Included in impaired loans are  nonperforming
loans from the above  table,  except for  homogenous  residential  mortgage  and
consumer  loans,  and an additional  $3,380,000 of commercial  loans  separately
identified as impaired.  The decrease in impaired  loans is primarily due to the
decline in nonaccrual loans mentioned above.

     During 1999 the Bank  charged off loans  totaling  $486,000  and  recovered
$171,000 for a net charge off amount of $315,000. In the previous year, the Bank
had net charge offs totaling $106,000.

     The  allowance  for loan losses  totaled  $4,483,000  at year end which was
2.13% of total loans, the same percentage it was in 1998.  Management  considers
this to be  adequate  to cover  any  anticipated  losses.  Management  regularly
evaluates  the allowance  for loan losses based on the  composition  of the loan
portfolio,  an evaluation of specific credits,  historical loss experience,  the
level of  nonperforming  loans and loans that have been  identified as impaired.
Externally, the local economy and events or trends which might negatively impact
the loan portfolio are also considered.
<PAGE>
     The  following  table shows  changes in the loan loss reserve for the years
ended December 31:
<TABLE>
                                                                                   (dollars in thousands)
                                                                             1999           1998          1997
                                                                             ----           ----          ----
<S>                                                                        <C>            <C>           <C>
Balance at beginning of the year......................                     $3,958         $3,424        $3,335
Additions (deduction):
   Loans charged off..................................                       (486)          (302)         (499)
   Recoveries of loans previously charged off..                               171            196           102
   Provision charged to operations....................                        840            640           486
                                                                             ----            ---           ---
Balance at end of the year............................                     $4,483         $3,958        $3,424

Allowance for loan losses to loans outstanding........                      2.13%          2.13%         2.15%
</TABLE>
Deposits
     Deposit  balances  of  $269,190,000  at  December  31, 1999 were nearly $30
million  (12.4%)  higher than the  previous  year end.  Because year end deposit
balances can fluctuate in unusual ways, it is more meaningful to analyze changes
in average balances.  Average deposits  increased $37 million (17%) during 1999.
Non-interest  bearing  demand  deposits  increased  $5.3  million,  about 12% on
average.  Average savings and NOW balances increased $19.7 million (21.5%) while
average time deposits increased $11.7 million or about 14%.


The  following  table sets forth  average  deposit  balances for the years ended
December 31:
<TABLE>
                                                                                   (in thousands)
                                                                        1999           1998             1997
                                                                        ----           ----             ----
<S>                                                                 <C>             <C>              ,C>
Non-interest bearing demand                                         $ 48,914        $ 43,619         $ 34,707
Savings, money market, and NOW                                       111,141          91,463           79,104
Time deposits                                                         92,802          81,118           71,093
                                                                      ------          ------           ------
      Total average deposits                                        $252,857        $216,200         $184,904
</TABLE>
     The  increase in savings  deposits  was  primarily  due to a $13.1  million
increase in money market accounts.  The growth in certificates was the result of
maintaining  competitive  rates in the market and selectively  offering  special
rates on particular time products.

     The  majority of the Bank's  deposits are from core  customer  sources-long
term relationships with local personal,  business, and public customers. In some
financial  institutions,  the presence of interest bearing  certificates greater
than  $100,000  indicates  a  reliance  upon  purchased  funds.  However,  large
certificates in the Bank's portfolio consist primarily of core deposits of local
customers.  The Bank does not support growth through purchased funds or brokered
deposits.  See Note 7 of the  Consolidated  Financial  Statements for a maturity
schedule of over $100,000 certificates.
<PAGE>
Capital

     The Company's  capital at year end totaled  $25,312,000,  a $1,800,000 (8%)
increase over the prior year.  Banking  regulators have set forth various ratios
of  capital  to assets to assess a  financial  institution's  soundness.  Tier 1
capital is equal to shareholders' equity while Tier 2 capital includes a portion
of the  allowance  for loan losses.  The  regulatory  agencies  have set capital
standards for "well capitalized" institutions. The leverage ratio, which divides
Tier 1 capital by three months average assets, must be 5% for a well capitalized
institution.  The  Bank's  leverage  ratio was  7.74% at year end  1999.  Tier 1
risk-based  capital,  which  includes some off balance sheet items in assets and
weights  assets  by risk,  must be 6% for a well  capitalized  institution.  The
Bank's was 9.90% at year end 1999. Total risk-based capital, which includes Tier
1 and Tier 2 capital, must be 10% for a well capitalized institution. The Bank's
total risk based capital ratio was 11.15% at year end. The Bank's strong capital
ratios put it in the best  classification on which the FDIC bases its assessment
charge.

     The following table lists various Bank capital ratios at December 31:
<TABLE>
                                                     1999                 1998                 1997
                                                     ----                 ----                 ----
<S>                                                <C>                  <C>                  <C>
Equity to asset ratio                               7.02%                7.14%                9.19%
Tier 1 leverage ratio                               7.74%                7.47%                9.50%
Tier 1 risk-based capital                           9.90%               10.17%               14.12%
Total risk-based capital                           11.15%               11.42%               15.37%
</TABLE>
     The 1998  decline in the Bank's  capital  ratio was the result of dividends
paid to the parent company to enable a subsidiary company to purchase land, some
of which was  intended for a branch site,  the  remainder to be sold.  In 1999 a
portion of the land was sold to the Bank for a branch site.  The Bank's  capital
account was  credited  for the proceeds of the sale.  As the  remaining  land is
sold,  the Bank's  capital  account will be recredited for the proceeds from the
sale.

     The  Company's  ability to pay  dividends is subject to various  regulatory
requirements.  Management  believes,  however,  that  earnings  will continue to
generate  adequate  capital to continue  the payment of  dividends.  In 1999 the
Company paid dividends totaling  $1,721,000,  or 46% of earnings.  Book value of
the stock was $16.17 at year end.

     The  Company  maintains  a five year plan  which was the result of a formal
strategic  planning  process.  Management and the Board continue to monitor long
term goals  which  include  expanded  services to achieve  growth and  retaining
earnings to fund growth, while providing return to shareholders.

     In 1999,  the Bank opened a new branch in the  northwest  part of Brighton.
Adjoining the building site is vacant land, valued at approximately  $2,800,000,
which the company  intends to sell. In the coming year,  the Bank plans to focus
on expanding service through technological delivery systems.
<PAGE>
Liquidity and Funds Management

     Liquidity is monitored by the Bank's  Asset/Liability  Management Committee
(ALCO) which meets at least monthly. ALCO developed,  and the Board of Directors
approved,  a liquidity  policy which targets a minimum 15% liquidity  ratio. The
Bank's liquidity ratio averaged 19.6% in 1999.

     Deposits  are the  principal  source  of  funds  for the  Bank.  Management
monitors rates at other financial institutions in the area to ascertain that its
rates are  competitive in the market.  Management  also attempts to offer a wide
variety of products  to meet the needs of its  customers.  The Company  does not
deal in brokered funds and the makeup of its over $100,000  certificates,  which
amounted to $22,400,000  at December 31, 1999 compared to $18,100,000  the prior
year, consists of local depositors known to the Bank.

     It is the intention of the Bank's management to handle unexpected liquidity
needs  through its Federal Funds  position.  The goal is to maintain a daily Fed
Funds balance sufficient to cover required cash draws. In addition, the Bank has
a  $16,000,000  line of  credit  available  at the  Federal  Home  Loan  Bank of
Indianapolis.  The  Bank has  pledged  certain  mortgage  loans  and  investment
securities as collateral  for the  borrowing.  In the event the Bank must borrow
for an extended  period,  management may look to "available for sale" securities
in the investment portfolio for liquidity.

     Throughout   the  past  year,   Fed  Funds  Sold   balances  have  averaged
approximately $10,400,000 compared to $8,600,000 the prior year. Management kept
larger  than  normal  balances  in Fed  Funds in 1999 in  order to be ready  for
whatever  demands there might be for Year 2000 issues.  As it turned out,  there
was no unusual demand for cash.

     Periodically the Bank borrowed money through the Fed Funds market.

Quantitative and Qualitative Disclosures about Market Risk
     The Bank's  Asset/Liability  Management  committee  (ALCO) meets monthly to
review the Bank's  performance.  The committee  discusses  the current  economic
outlook and its impact on the Bank and current  interest rate forecasts.  Actual
results are  compared to budget in terms of growth and income.  A yield and cost
analysis  is done to monitor  interest  margin.  Various  ratios  are  discussed
including  capital  ratios and  liquidity.  The quality of the loan portfolio is
reviewed in light of the current  allowance.  The Bank's exposure to market risk
is reviewed.

     Interest rate risk is the potential for economic  losses due to future rate
changes and can be reflected as a loss of future net  interest  income  and/or a
loss of current  market  values.  The  objective is to measure the effect on net
interest  income and to adjust the balance  sheet to minimize the inherent  risk
while at the same time maximizing  income.  Tools used by management include the
standard GAP report which lays out the repricing  schedule for various asset and
liability  categories and an interest rate shock simulation
<PAGE>
report.  The Bank has no market  risk  sensitive  instruments  held for  trading
purposes. The Bank does not enter into futures,  forwards,  swaps, or options to
manage interest rate risk. However,  the Bank is party to financial  instruments
with  off-balance  sheet  risk in the  normal  course  of  business  to meet the
financing  needs of its  customers  including  commitments  to extend credit and
letters of credit.  A commitment or letter of credit is not recorded as an asset
until the  instrument is exercised  (see Note 12 of the  Consolidated  Financial
Statements).

     The table below shows the  scheduled  maturity and  repricing of the Bank's
assets and liabilities as of December 31, 1999:
<TABLE>
                                             0-3 Months     4-12 Months        1-5             5+
                                                                              Years           Years          Total
<S>                                          <C>             <C>            <C>               <C>          <C>
Assets:
Loans....................................    $63,711         $30,472        $106,833          $9,639       $210,655
Securities...............................      5,828          19,674          14,343          10,753         50,598
Short term investments...................     12,301                                                         12,301
Other assets.............................                                                     22,865         22,865
                                             -------         -------        --------         -------       --------
      Total assets.......................    $81,840         $50,146        $121,176         $43,257       $296,419

Liabilities & Shareholders' Equity:
Demand, savings, money
  market & NOW...........................    $56,906         $16,717         $63,371         $35,495       $172,489
Time.....................................     20,423          46,528          29,741               9         96,701
Other liabilities and equity.............                                                     27,229         27,229
                                             -------         -------         -------         -------       --------
      Total liabilities and equity.......    $77,329         $63,245         $93,112         $62,733       $296,419

Rate sensitivity gap and ratios:
   Gap for period........................     $4,511        $(13,099)        $28,064        $(19,476)
   Cumulative gap........................      4,511          (8,588)         19,476

Cumulative rate sensitive ratio..........       1.06             .94            1.08            1.00
December 31, 1998 rate sensitive ratio...       1.28             .92            1.08            1.00

</TABLE>
<PAGE>
<TABLE>
                                                      Total                  Average Interest Rate      Estimated Fair Value
Assets:                                               -----                  ---------------------      --------------------
<S>                                                  <C>                            <C>                      <C>
   Loans,  net                                       $205,468                       9.47%                    $203,100
   Securities                                          50,598                       5.73%                      50,534
   Short term investments                              12,301                       4.89%                      12,301

Liabilities:
   Savings, MMDA, NOW                                $124,509                       2.69%                     124,500
   Time                                                96,701                       5.36%                      97,000
</TABLE>

     Estimated fair value for securities are based on quoted market prices.  For
variable rate loans that reprice  frequently and with no  significant  change in
credit risk, fair values are generally based on carrying values.  The fair value
of other loans is estimated by  discounting  future cash flows using the current
rates at which  similar  loans would be made to borrowers  with  similar  credit
ratings  and  for  the  same  remaining  maturities.  Because  it has a one  day
maturity,  the carrying  value is used a fair value for fed funds sold. The fair
value of deposits with no stated maturity, such as savings, NOW and money market
accounts  is  equal  to  the  amount  payable  on  demand.  The  fair  value  of
certificates of deposit is estimated using rates currently  offered for deposits
with similar remaining maturities.

     The entire  balance of  savings,  NOW and MMDAs is not  categorized  as 0-3
months,  although they are variable rate  products.  Some of these  balances are
core  deposits  which are not  considered  rate  sensitive  based on the  Bank's
historical experience.

     Given the liability sensitive position of the Bank at December 31, 1999, if
interest  rates  increase  200 basis  points  and  management  did not  respond,
management   estimates   that  pretax  net  interest   income   would   decrease
approximately  $100,000 while a similar decrease in rates would cause pretax net
interest income to increase by a like amount. See discussion under "Net Interest
Income" below.

RESULTS OF OPERATIONS

     The  Company  recorded  net  income  of  $3,715,000  in  1999  compared  to
$3,907,000  in  1998.  While  net  interest  income  climbed  $1,120,000,  costs
associated  with conversion to a new computer  system and  preparations  for Y2K
reduced net income. Also, dampening profits were the start-up costs of opening a
new branch and the effect of the excess land acquired with that branch site. The
Company's  return on average  assets  (ROA) was 1.33% in 1999,  a 30 basis point
decline from the prior year.  The return on average  stockholders'  equity (ROE)
was 15.05%, down from the 17.83% reported in 1998.
<PAGE>
     The  following  table  contains  key  performance  ratios  for years  ended
December 31:
<TABLE>
                                                           1999                1998               1997
                                                           ----                ----               ----
<S>                                                      <C>                 <C>                <C>
Net income to:
   Average stockholders' equity                          15.05%              17.83%             17.84%
   Average assets                                         1.33%               1.63%              1.79%
Basic earnings per common share:                          $2.38               $2.49              $2.37
</TABLE>

Net Interest Income

     Net interest  income is the difference  between  interest earned on earning
assets and interest paid on deposits.  It is the major component of earnings for
a  financial  institution.  For  analytical  purposes,  the  interest  earned on
investments  and loans is expressed on a fully taxable  equivalent  (FTE) basis.
Tax-exempt  interest is increased to an amount comparable to interest subject to
federal income taxes in order to properly  evaluate the effective  yields earned
on earning  assets.  The tax equivalent  adjustment is based on a federal income
tax rate of 34%.

     The following table shows the average balance and percentage earned or paid
on key  components of earning assets and paying  liabilities  for the year ended
December 31:
<TABLE>
                                                                     (dollars in thousands)
                                                    1999                       1998                        1997
                                                    ----                       ----                        ----
                                            Average        Yield/       Average       Yield/        Average      Yield/
                                            Balance         Rate        Balance        Rate         Balance       Rate
                                            -------         ----        -------        ----         -------       ----
<S>                                         <C>           <C>           <C>           <C>           <C>          <C>
Interest earning assets:
Short term investments                      $  10,384     4.89%         $   8,630     5.20%         $   2,754    5.40%
Taxable securities                             30,051     5.08%            23,019     6.02%            31,873    5.98%
Tax-exempt securities                          16,896     6.90%            15,221     7.13%            13,262    7.36%
Loans                                         198,448     9.47%           175,873     9.85%           148,096    9.82%
                                              -------                     -------                     -------
   Total earning assets                      $255,779     8.60%          $222,743     9.09%          $195,985    8.97%
Interest bearing funds:
Savings, MMDA, NOW                           $111,141     2.69%         $  91,552     3.03%         $  79,104    2.79%
Time deposits                                  92,802     5.36%            81,119     5.69%            71,093    5.71%
Federal funds purchased                            98     5.40%               179     5.98%               610    5.77%
                                               ------                   ---------                  ----------
   Total interest bearing funds              $204,041     3.90%          $172,850     4.28%          $150,807    4.18%

Interest spread                                           4.70%                       4.81%                      4.79%
Net interest margin                                       5.48%                       5.76%                      5.75%
</TABLE>

     Tax  equivalent  interest  income in each of the three years  includes loan
origination fees. A substantial portion of such fees is deferred for recognition
in future periods or is considered in  determining  the gain or loss on the sale
of real estate mortgage loans. Tax equivalent  interest income includes net loan
origination  fees totaling  $710,000 in 1999,  $600,000 in 1998, and $380,000 in
1997.
<PAGE>
     The  following  table sets forth the effects of volume and rate  changes on
net interest  income on a taxable  equivalent  basis.  All figures are stated in
thousands of dollars.
<TABLE>
                                                  Year ended                                Year ended
                                        December 31, 1999 compared to             December 31, 1998 compared to
                                           ended December 31, 1998                   ended December 31, 1997
                                           -----------------------                   -----------------------
                                         Amount of Increase/(Decrease)             Amount of Increase/(Decrease)
                                               due to change in                          Due to change in
                                               ----------------                          ----------------
                                                                   Total                                     Total
                                                                   Amount                                    Amount
                                                                     Of                                        Of
                                                  Average        Increase/                    Average      Increase/
                                   Volume           Rate         (Decrease)     Volume         Rate       (Decrease)
                                   ------           ----         ----------     ------         ----       ----------
<S>                                <C>            <C>            <C>           <C>           <C>            <C>
Interest Income:
Federal funds sold............     $      91        $   (33)     $      58     $    317      $   (17)       $    300
Securities:
  Taxable.....................           424           (284)           140         (529)          10            (519)
  Tax Exempt..................           119            (39)            80          144          (35)            109
Loans.........................         2,223           (750)         1,473        2,727           50           2,777

  Total interest income.......       $ 2,857        $(1,106)       $ 1,751      $ 2,659       $    8        $  2,667

Interest Expense:
Interest bearing deposits:
  Savings, MMDA, NOW..              $    593          $(374)      $    219     $    348       $  214       $     562
  Time. ......................           665           (312)           353          573          (15)            558
Short-term borrowings.........            (5)            (1)            (6)         (25)           1             (24)

   Total interest expense.....       $ 1,253          $(687)      $    566        $ 896       $  200       $   1,096

Net interest income (FTE).....       $ 1,604          $(419)       $ 1,185       $1,763       $ (192)      $   1,571
</TABLE>
The  change  in  interest  due to  changes  in both  balance  and  rate has been
allocated to change due to balance and change due to rate in  proportion  to the
relationship of the absolute dollar amounts of change in each.

     Tax equivalent net interest  income  increased  $1,185,000 in 1999 over the
prior year due to a $1,751,000  increase in interest income  partially offset by
approximately  $566,000 increase in interest expense.  The increase in income is
attributable  to an increase in average  earning  assets of  $33,000,000  as the
yield declined 49 basis points.  Loan interest  income was $1,473,000  higher in
1999 than the previous  year. The increase was due to an increase of $22,600,000
in average  balances  partly offse by a 38 basis point  decrease in rates.  Loan
growth was fueled by general growth in Livingston  County which created a demand
for consumer and  commercial  building  projects.  Income on taxable  securities
increased in 1999 due to a  $7,000,000  increase in average  balances.  Interest
rates  decreased 94 basis points.  Tax-exempt  bonds earned $80,000 more in 1999
than the  previous  year.  The  average  balance of these  securities  increased
$1,700,000 while the rate declined 23 basis points. Interest income on shor term
investments  increased  $58,000  due  to an  increase  in  average  balances  of
$1,754,000, partially offset by a decrease in rates of 42 basis points.
<PAGE>
     Interest  expense  increased  $566,000  in 1999  because  average  balances
increased  approximately  $31,200,000 although interest rates decreased 38 basis
points.  The  interest  cost for savings  and NOW  accounts  increased  $219,000
because average savings and NOW balances  increased  $19,600,000  while interest
rates  declined 34 basis points.  Interest on time deposits  increased  $353,000
because  average time deposits  increased  $11,700,000  although  interest rates
declined 33 basis points.  Money market  accounts  once again enjoyed  growth as
customers responded favorably to the tiered rate structure now being offered and
rising  interest  rates.  Growth in time deposits was  encouraged by competitive
pricing and periodically offering special rates on specific products.

     In the previous year, net interest income had increased nearly  $1,571,000.
The  increase in net  interest  income was the result of an increase in interest
income of  $2,667,000,  partially  offset by an increase in interest  expense of
approximately $1,096,000. The increase in interest income in 1998 was the result
of a $26,800,000 increase in earning assets and an increase in yields on earning
assets of 12 basis  points.  The increase in interest  expense was the result of
average balances  increasing  $22,000,000 and interest rates increasing 10 basis
points.

     In the coming year, management expects growth to continue in both loans and
deposits.  An economic  decline could,  however,  adversely  affect growth.  The
interest  spread and  interest  margin will likely  continue to decline  due, in
part,  to the fact that the interest cost on deposits is expected to continue to
rise as  competition  for  deposits  intensifies  among  the bank  and  non-bank
players.
<PAGE>
     The following  table shows the  composition  of average  earning assets and
interest paying liabilities for the years ended December 31:
<TABLE>
                                                               1999            1998            1997
                                                               ----            ----            ----
<S>                                                         <C>             <C>             <C>
As a percent of average earning assets:
   Loans                                                     77.59%          78.95%          75.56%
   Securities                                                18.35%          17.18%          23.03%
   Short term investments                                     4.06%           3.87%           1.41%
                                                              -----          ------          ------
      Average earning assets                                100.00%         100.00%         100.00%

   Savings, money market, and NOW                            43.45%          41.10%          40.36%
   Time deposits                                             36.28%          36.42%          36.27%
   Short term borrowing                                        .04%            .08%            .31%
                                                              -----           -----           -----
      Average interest bearing liabilities                   79.77%          77.60%          76.94%

Earning asset ratio                                          91.61%          92.76%          94.14%
Free-funds ratio                                             20.23%          22.40%          23.06%
</TABLE>

Provision for Loan Losses
     The  provision  for loan losses  increased to $840,000 in 1999  compared to
$640,000 in 1998.  At year end the ratio of allowance for loan loss to loans was
2.13%,  consistent  with  that  of the  1998.  Principally  because  of the  19%
commercial loan growth, management increased the loan loss provision by $200,000
in 1999. Management analyzes the adequacy of the allowance quarterly taking into
consideration  the  portfolio  mix,  historical  loss  experience,  the level of
nonperforming  loans and loans that hav been identified as impaired,  as well as
economic conditions within the Bank's market.

Non-interest Income
     Non-interest  income,  which includes service charges on deposit  accounts,
loan  fees,  other  operating  income,  and  gain(loss)  on sale of  assets  and
securities  transactions,  increased approximately $61,000 (3%) in 1999 compared
to the previous year.  Contributing to this increase was a $225,000  increase in
charges for services  and a $63,000  increase in trust fees  collected.  Both of
these items  increased due to growth,  of the Bank and of the Trust  Department.
Partly offsetting the above mentioned increases, the gain on loan sales declined
$231,000.  This decrease was  principally  the result of reduced loan volume and
rising mortgage rates. This reduced amount of gains is expected to continue into
the year 2000.

Non-interest Expense
     Non-interest expense increased 16% in 1999. The most significant  component
of non-interest  expense is salaries and benefits expense.  In 1999 salaries and
benefits  expense  increased 12% to $4,800,000,  due to the combined  effects of
salary  increases  and  staffing of a new branch.  Occupancy  expense  increased
$89,000  (15%) due to the new branch  which was put in service in August.  Other
expense increased $698,000 (21%).
<PAGE>
The costs  associated with conversion to a new computer system and  preparations
for Year 2000  reduced net income.  Also,  dampening  profits  were the start-up
costs of opening  the  Challis  Road  branch  and the effect of the excess  land
acquired  with that branch  site.  Year 2000 issues were a major  concern of the
Bank's  management in 1998 and 1999. A great deal of time and money was spent to
replace  equipment  and  programs  that were  suspect and to conduct  exhaustive
testing of systems. The Bank had no failure of equipment or programs at the turn
of the millennium.

Federal Income Tax Expense

     Fluctuations  in income taxes resulted  primarily from changes in the level
of profitability  and in variations in the amount of tax-exempt  income.  Income
tax  expense  decreased  $133,000  to  $1,547,000  (8%)  in  1999.  For  further
information  see Note 8 "Federal  Income  Taxes" in the  Company's  Consolidated
Financial Statements.

Prospective Accounting Changes

     In June 1998, the FASB issued Statement of Financial  Accounting  Standards
No. 133,  Accounting for Derivative  Instruments  and Hedging  Activities  (SFAS
133).  SFAS 133  establishes  accounting and reporting  standards for derivative
instruments and hedging activities.  It requires  recognition of all derivatives
as either  assets or  liabilities  in the  statement of financial  condition and
measurement  of those  instruments  at fair value.  The accounting for gains and
losses on  derivatives  depends  on the  intended  use of the  derivative.  This
Statement is effective for all fiscal  quarters of fiscal years  beginning after
June 15, 1999, with earlier application  encouraged.  Retroactive application is
not  permitted.  SFAS 133 is not  expected to have a  significant  impact on the
financial condition or operations of the Corporation.

     In June 1999,  the FASB  issued  SFAS No. 137,  Accounting  for  Derivative
Instruments  and Hedging  Activities-Deferral  of the Effective Date of FASB No.
133.  Statement  137  extends  the  effective  date of SFAS 133 to fiscal  years
beginning after June 15, 2000.

Item 7a - Quantitative and Qualititative Disclosures about Market Risk
         Included in Management's Discussion and Analysis
<PAGE>
Item 8 - Financial Statements and Supplementary Data

     The following  consolidated  financial statements and supplementary data of
the Company  appear on pages 11 to 38 of Appendix I to the Company's  definitive
Proxy  Statement,  dated March 17,  2000,  relating to the April 19, 2000 Annual
Meeting  of  shareholders,  as  filed  with the  Commission.  This  Appendix  is
incorporated  herein by  reference  and included as Exhibit 13 to this report on
Form 10-K:

        Consolidated Balance Sheets
        Consolidated Statements of Income
        Consolidated Statements of Stockholders' Equity and Comprehensive Income
        Consolidated Statements of Cash Flows
        Notes to Consolidated Financial Statement
        Independent Auditors' Report
        Quarterly  financial  data  relating to results of  operations  for the
years ended December 31, 1999 and 1998 are reported on page 38 of Appendix I.

Item 9 - Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure

None


                                    PART III

Item 10 - Directors and Executive Officers of the Registrant

Directors

     The  information  with respect to Directors and Nominees of the Registrant,
set forth under the caption  "Election of Directors" on pages 2 through 4 of the
Company's  definitive  proxy  statement,  as filed with the Commission and dated
March 17, 2000,  relating to the April 19, 2000 Annual Meeting of  Shareholders,
is incorporated herein by reference.


Executive Officers

     The information called for by this item is contained in Part I of this Form
10-K Report.

Item 11 - Executive Compensation

     The information set forth under the caption "Summary Compensation Table" on
pages 5 and 6 of the Company's  definitive  proxy  statement,  as filed with the
Commission  and dated  March 17,  2000,  relating  to the April 19,  2000 Annual
Meeting of Shareholders, is incorporated herein by reference.  Information under
the caption  "Committee  Report on Executive  Compensation" on pages 4 and 5 and
"Shareholder  Return  Performance  Graph"  on  page  8 of the  definitive  proxy
statement is not  incorporated  by referenc herein and is not deemed to be filed
with the Securities and Exchange Commission.
<PAGE>
Item 12 - Security Ownership of Certain Beneficial Owners and Management

     The information set forth under the caption  "Ownership of Common Stock" on
page 7 of the Company's definitive proxy statement, as filed with the Commission
and dated March 17,  2000,  relating  to the April 19,  2000  Annual  Meeting of
Shareholders, is incorporated herein by reference.

Item 13 - Certain Relationships and Related Transactions

     The  information  set forth under the caption  "Certain  Transactions  with
Management" on page 6 of the Company's definitive proxy statement, as filed with
the Commission  and dated March 17, 2000,  relating to the April 19, 2000 Annual
Meeting of Shareholders, is incorporated herein by reference.


                                     PART IV

Item 14 - Exhibits, Financial Statement Schedules and Report on Form 8-K

(a)  1.  Financial Statements

     All  financial  statements of the  Registrant  are  incorporated  herein by
reference  as set  forth in  Appendix  I to the  Registrant's  Definitive  Proxy
Statement,  dated March 17, 2000,  relating to the April 19, 2000 Annual Meeting
of  Shareholders,  a copy of which is filed as Exhibit 13 to this Report on Form
10-K.

     2.  Financial Statement Schedules
         Not applicable.

     3.  Exhibits  (Numbered in accordance  with Item 601 of Regulation  S-K)
         The  Exhibit  Index is located  on the final page of this  report on
         Form 10-K.

(b)  Reports on Form 8-K

         No  reports on Form 8-K were  filed  during the fourth  quarter of the
         year ended December 31, 1999.
<PAGE>
SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) 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, dated March 16, 2000.

FNBH BANCORP, INC.



/s/ Barbara D. Martin
Barbara D. Martin, President & Chief Executive
Officer (Principal Executive Officer)


/s/ Barbara J. Nelson
Barbara J. Nelson, Secretary/Treasurer
(Principal Accounting Officer)


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following  persons on behalf of the Registrant and in the
capacities and on the dates  indicated.  Each director of the Registrant,  who's
signature  appears  below,  hereby  appoints  Barbara D.  Martin and  Barbara J.
Nelson, and each of them severally,  as his or her attorney-in-fact,  to sign in
his or her name and on his or her behalf,  as a director of the Registrant,  and
to file with the Commission any and al Amendments to this Report on Form 10-K.


W. Rickard Scofield, Chairman of the Board              /s/ W. Rickard Scofield


Charles N. Holkins, Vice Chairman of the Board          /s/ Charles N. Holkins


Gary R. Boss, Director                                  /s/ Gary R. Boss


Donald K. Burkel, Director                              /s/ Donald K. Burkel


Harry E. Griffith, Director                             /s/ Harry E. Griffith


Dona Scott Laskey, Director                             /s/ Dona Scott Laskey


Barbara D. Martin, Director                             /s/ Barbara D. Martin


James R. McAuliffe, Director                            /s/ James R. McAuliffe


Randolph E. Rudisill, Director                          /s/ Randolph E. Rudisill


R. Michael Yost, Director                               /s/ R. Michael Yost
<PAGE>
                                  EXHIBIT INDEX

     The  following  exhibits  are  filed  herewith,  indexed  according  to the
applicable assigned number:

Exhibit
Number                                                                      Page
------                                                                      ----

(13)  Pages 11-52 of Appendix I to the Company's Proxy Statement, dated
      March 17, 2000, for the Annual Meeting of Shareholders to be held
      April  19,  2000   representing  that  portion  of  the  Appendix
      incorporated by reference in this report. This Appendix was filed
      with the Commission as part of the Company's  Proxy Statement and
      was delivered to Company  shareholders  in  compliance  with Rule
      14(a)-3 of the Securities Exchange Act of 1934,  as amended.............38

(21)  Subsidiaries of the Registrant..........................................40

(24)  Power of Attorney (included in signature section)

(27)  Financial Data Schedule.................................................41

     The  following  exhibits,  indexed  according  to the  applicable  assigned
number,  were  previously  filed  by the  Registrant  and  are  incorporated  by
reference in this Form 10-K Annual Report.

Exhibit
Number                                         Original Filing Form and Date
------                                         -----------------------------
3.1   Restated Articles of Incorporation       Exhibit 3.1 of Form 10, effective
      of the Registrant                        June 30, 1995 ("Form 10")

3.2   Amendment  to the  Company's             Appendix I of Proxy Statement
      Articles of Incorporation                dated March 17, 1998
      Increase Authorized Shares

3.3   Bylaws of the Registrant                 Exhibit 3.2 of Form 10

4     Form of Registrant's Stock Certificate   Exhibit 4 of Form 10

      Material Contracts:
1.1   Form Restrictive Stock Agreement

10.2  Howell Branch Lease Agreement            Exhibit 10.2 to Form 10

10.3  Company's Long Term Incentive Plan*      Appendix II of Proxy Statement
                                               dated March 17, 1998
*Represents a compensation plan
<PAGE>
EXHIBIT 13


                          Independent Auditors' Report



The Board of Directors and Stockholders
FNBH Bancorp, Inc.:


We have  audited the  consolidated  balance  sheets of FNBH  Bancorp,  Inc.  and
subsidiaries  ("Corporation")  as of December 31, 1999 and 1998, and the related
consolidated  statements  of  income,  stockholders'  equity  and  comprehensive
income,  and cash  flows for each of the years in the  three-year  period  ended
December  31,   1999.   These   consolidated   financial   statements   are  the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of FNBH Bancorp,  Inc.
and  subsidiaries  as of December  31,  1999 and 1998,  and the results of their
operations and their cash flows for each of the years in the  three-year  period
ended  December 31, 1999,  in  conformity  with  generally  accepted  accounting
principles.



/s/ KPMG LLP
KPMG LLP


January 20, 2000
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                           Consolidated Balance Sheets

                           December 31, 1999 and 1998

<TABLE>
                                     Assets                                             1999                  1998
                                                                                 -----------------    -------------------
<S>                                                                                    <C>                    <C>

Cash and cash equivalents:
 Cash and due from banks                                                       $        12,113,652             12,304,296
 Short-term investments                                                                 12,300,630             18,934,366
                                                                                 -----------------    -------------------

          Total cash and cash equivalents                                               24,414,282             31,238,662
                                                                                 -----------------    -------------------
Investment securities held to maturity, net (fair value
  of $17,650,000 in 1999 and $19,066,000 in 1998)                                       17,709,401             18,278,233
Investment securities available for sale, at fair value                                 32,554,004             19,765,936
Mortgage-backed securities held to maturity, net (fair
  value of $330,000 in 1999 and $602,000 in 1998)                                          334,451                601,940
                                                                                 -----------------    -------------------
          Total investment and mortgage-backed
            securities                                                                  50,597,856             38,646,109
                                                                                 -----------------    -------------------
Loans:
  Commercial                                                                           163,469,045            137,634,020
  Consumer                                                                              24,826,156             23,064,800
  Real estate mortgage                                                                  22,360,282             24,946,777
                                                                                 -----------------    -------------------

          Total loans                                                                  210,655,483            185,645,597

  Less unearned income                                                                    (703,849)              (627,169)
  Less allowance for loan losses                                                        (4,483,283)            (3,958,008)
                                                                                 -----------------    -------------------

          Net loans                                                                    205,468,351            181,060,420

Bank premises and equipment, net                                                         9,009,661              7,289,461
Land held for sale, net                                                                  2,835,290              3,128,914
Accrued interest income and other assets                                                 4,093,780              3,530,318
                                                                                 -----------------    -------------------

          Total assets                                                         $       296,419,220            264,893,884
                                                                                 =================    ===================
</TABLE>


See accompanying notes to consolidated financial statements.
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                           Consolidated Balance Sheets

                           December 31, 1999 and 1998

<TABLE>

                    Liabilities and Stockholders' Equity                               1999                   1998
                                                                               ------------------     -------------------
<S>                                                                                  <C>                    <C>

Deposits:
  Demand (non-interest bearing)                                                   $    47,980,695             47,401,813
  NOW                                                                                  34,645,921             29,087,082
  Savings and money market accounts                                                    89,862,739             75,129,137
  Time                                                                                 96,701,098             87,938,732
                                                                               ------------------     ------------------

           Total deposits                                                             269,190,453            239,556,764

Accrued interest, taxes, and other liabilities                                          1,917,121              1,840,587
                                                                               ------------------     ------------------

           Total liabilities                                                          271,107,574            241,397,351

Commitments and contingencies

Stockholders' equity:
  Common stock, $0 par value. Authorized 4,200,000
    shares; 1,565,203 shares issued and outstanding
    at December 31, 1999 and 1,562,765 shares issued
    and outstanding at December 31, 1998                                                4,919,280              4,821,775
  Retained earnings                                                                    20,723,357             18,728,787
  Unearned management retention plan                                                     (139,597)               (66,220)
  Accumulated other comprehensive income (loss)                                          (191,394)                12,191
                                                                               ------------------     ------------------

           Total stockholders' equity                                                  25,311,646             23,496,533
                                                                               ------------------     ------------------



           Total liabilities and stockholders' equity                          $      296,419,220            264,893,884
                                                                               ==================     ==================
</TABLE>
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                        Consolidated Statements of Income

                  Years ended December 31, 1999, 1998, and 1997

<TABLE>
                                                                          1999              1998               1997
                                                                    ----------------   ---------------   ----------------
<S>                                                                    <C>               <C>                <C>
Interest and dividend income:
  Interest and fees on loans                                       $    18,725,205        17,293,769         14,521,085
  Interest and dividends on investment and
    mortgage-backed securities:
      U.S. Treasury securities                                             999,431         1,230,696          1,774,730
      Obligations of other U.S. Government agencies                        461,654           111,575            128,630
      Obligations of state and political subdivisions                      838,532           780,637            700,488
      Other securities                                                      64,975            44,600              2,655
  Interest on short-term investments                                       507,499           449,102            148,799
                                                                    --------------     -------------     --------------

            Total interest and dividend income                          21,597,296        19,910,379         17,276,387
                                                                    --------------     -------------     --------------

Interest expense:
  Interest on deposits                                                   7,961,603         7,389,692          6,270,079
  Interest on other borrowings                                               5,283            10,712             35,236
                                                                    --------------     -------------     --------------

            Total interest expense                                       7,966,886         7,400,404          6,305,315
                                                                    --------------    --------------    ---------------

            Net interest income                                         13,630,410        12,509,975         10,971,072

Provisions for loan losses                                                 840,000           640,000            486,375
                                                                    --------------     -------------     --------------
            Net interest income after provision for
              loan losses                                               12,790,410        11,869,975         10,484,697

Non-interest income:
  Service charges                                                        1,762,678         1,537,841          1,560,775
  Trust income                                                             143,707            80,438              4,481
  Gain on sale of securities                                                    --                --              1,306
  Gain on sale of loans                                                     43,262           274,361            165,843
  Other                                                                     65,456            61,201            118,854
                                                                    --------------     -------------     --------------

            Total non-interest income                                    2,015,103         1,953,841          1,851,259
                                                                    --------------     -------------     --------------
</TABLE>
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                        Consolidated Statements of Income

                  Years ended December 31, 1999, 1998, and 1997

<TABLE>
                                                                         1999               1998               1997
                                                                   ----------------   ----------------   ----------------
<S>                                                                    <C>                <C>                <C>
Non-interest expenses:
    Salaries and employee benefits                                 $     4,832,475          4,314,012          3,790,828
    Net occupancy expense                                                  689,777            600,472            536,152
    Equipment expense                                                      741,580            724,265            479,972
    Professional and service fees                                          460,742            273,824            321,115
    Printing and supplies                                                  335,574            248,406            244,273
    Michigan Single Business Tax                                           164,600            201,900            195,100
    Provision for real estate losses                                       300,000            205,000                 --
    Other                                                                2,018,447          1,669,710          1,414,749
                                                                   ---------------    ---------------    ---------------

           Total non-interest expenses                                   9,543,195          8,237,589          6,982,189
                                                                   ---------------    ---------------    ---------------

           Income before Federal income taxes                            5,262,318          5,586,227          5,353,767

Federal income taxes                                                     1,547,000          1,679,500          1,620,500
                                                                   ---------------    ---------------    ---------------

           Net income                                            $       3,715,318          3,906,727          3,733,267
                                                                   ===============    ===============    ===============

Basic and diluted net income per share                           $            2.38               2.49               2.37
                                                                   ===============    ===============    ===============

Cash dividends per share                                         $            1.10               1.05               1.00
                                                                   ===============    ===============    ===============
</TABLE>

See accompanying notes to consolidated financial statements.
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

    Consolidated Statements of Stockholders' Equity and Comprehensive Income
                  Years ended December 31, 1999, 1998, and 1997

<TABLE>
                                                                                     Unearned      Accumulated
                                                                                    management        other
                                                      Common          Retained       retention    comprehensive
                                                       stock          earnings         plan          income           Total
                                                   -------------   --------------   -----------   -------------  ---------------
<S>                                                  <C>             <C>             <C>               <C>         <C>

Balances at December 31, 1996                   $     5,250,000       14,308,934            --          38,174       19,597,108

Comprehensive income:
  Net income                                                 --        3,733,267            --              --        3,733,267
  Changes in unrealized gain on securities
    available for sale, net of tax                           --               --            --         (23,350)         (23,350)
                                                                                                                  --------------

          Total comprehensive income                                                                                  3,709,917

Cash dividends ($1.00 per share)                             --       (1,575,000)           --              --       (1,575,000)
                                                   -------------   --------------   -----------   -------------  ---------------

Balances at December 31, 1997                         5,250,000       16,467,201            --          14,824       21,732,025

Repurchase of 15,000 shares at $35 per share           (525,000)              --            --              --         (525,000)
Issued 2,365 shares for management
  retention plan                                         82,775               --       (82,775)             --               --
Issued 400 shares for directors' compensation            14,000               --            --              --           14,000
Amortization of management retention plan                    --               --        16,555              --           16,555

Comprehensive income:
  Net income                                                 --        3,906,727            --              --        3,906,727
  Changes in unrealized gain on securities
    available for sale, net of tax                           --               --            --          (2,633)          (2,633)
                                                                                                                  -------------

          Total comprehensive income                                                                                   3,904,094

Cash dividends ($1.05 per share)                             --       (1,645,141)           --              --        (1,645,141)
                                                   -------------   --------------   -----------   -------------   --------------

Balances at December 31, 1998                         4,821,775       18,728,787       (66,220)          12,191       23,496,533

Issued 2,435 shares for management
  retention plan                                         97,400               --       (97,400)             --               --
Issued 3 shares for employee awards                         105               --            --              --              105
Amortization of management retention plan                    --               --        24,023              --           24,023

Comprehensive income:
  Net income                                                 --        3,715,318            --              --        3,715,318
  Changes in unrealized gain (loss) on securities
    available for sale, net of tax                           --               --            --         (203,585)       (203,585)
                                                                                                                 ---------------

          Total comprehensive income                                                                                  3,511,733


Cash dividends ($1.10 per share)                              --      (1,720,748)            --              --      (1,720,748)
                                                   -------------   --------------   -----------   -------------  ---------------

Balances at December 31, 1999                   $     4,919,280       20,723,357      (139,597)        (191,394)      25,311,646
                                                   =============   ==============   ===========   =============  ===============

</TABLE>

See accompanying notes to consolidated financial statements.
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

                  Years Ended December 31, 1999, 1998, and 1997

<TABLE>
                                                                           1999                 1998                1997
                                                                     ---------------        --------------     --------------
<S>                                                                  <C>                     <C>                <C>
Cash flows from operating activities:
   Net income                                                        $     3,715,318           3,906,727          3,733,267
   Adjustments to reconcile net income to net cash
     provided by operating activities:
        Provision for loan losses                                            840,000             640,000            486,375
        Depreciation and amortization                                        760,047             681,339            449,320
        Deferred Federal income tax benefit                                 (235,600)           (261,800)            (1,700)
        Net amortization on investment securities                             88,233              44,771             34,884
        Earned portion of management retention plan                           24,023              16,555                 --
        Loss on disposal of equipment                                         18,358              20,668                718
        Gain on sales of securities                                               --                  --             (1,306)
        Gain on sale of loans                                                (43,262)           (274,361)          (165,843)
        Proceeds from sale of loans                                       16,044,643          18,030,745          9,556,579
        Origination of loans held for sale                               (16,080,472)        (18,305,410)        (9,827,744)
        Provision for real estate losses                                     300,000             205,000                 --
        Increase in accrued interest income and other assets                (109,238)         (2,121,678)          (269,012)
        Increase (decrease) in accrued interest, taxes,
          and other liabilities                                              (30,241)           (236,154)           826,774
                                                                      --------------      --------------        -----------
             Net cash provided by operating activities                     5,291,809           2,346,402          4,822,312
                                                                      --------------      --------------        -----------

Cash flows from investing activities:
   Purchases of available-for-sale securities                            (17,157,030)        (16,067,003)        (3,006,406)
   Proceeds from sale of available-for-sale
     securities                                                                   --                  --          4,025,340
   Proceeds from maturities of available-for-sale
     securities                                                            3,000,000          10,000,000          5,000,000
   Repayments from mortgage-backed securities
     available for sale                                                           --                  --             11,727
   Purchases of held-to-maturity securities                               (2,919,503)         (3,865,946)        (5,631,408)
   Proceeds from maturities and calls of held-to-
     maturity securities                                                   4,268,000          14,490,000          2,820,000
   Repayments from mortgage-backed securities
     held to maturity                                                        460,169             472,876            243,671
   Net increase in loans                                                 (25,181,161)        (26,536,607)       (22,290,462)
   Capital expenditures                                                   (2,498,605)         (3,017,056)          (605,848)
                                                                      --------------      --------------     --------------
               Net cash used in investing activities                     (40,028,130)        (24,523,736)       (19,433,386)
                                                                      --------------      --------------     --------------
</TABLE>
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

                  Years Ended December 31, 1999, 1998, and 1997

<TABLE>
                                                                     1999                1998                1997
                                                                 ------------        -------------       ------------
<S>                                                              <C>                 <C>                 <C>
Cash flows from financing activities:
   Net increase in deposits                                      $ 29,633,689          37,257,573         21,355,422
   Dividends paid                                                  (1,720,748)         (1,645,141)        (1,575,000)
   Shares repurchased                                                      --            (525,000)                --
                                                                 ------------        ------------        -----------

        Net cash provided by financing activities                  27,912,941          35,087,432         19,780,422
                                                                 ------------        ------------        -----------
        Net increase (decrease) in cash and
         cash equivalents                                          (6,823,380)         12,910,098          5,169,348

Cash and cash equivalents at beginning of year                     31,238,662          18,738,564         13,569,216
                                                                 ------------        ------------        -----------

Cash and cash equivalents at end of year                         $ 24,415,282          31,648,662         18,738,564
                                                                 ============        ============        ===========
Supplemental disclosures:
   Interest paid                                                 $  7,904,981           7,397,252          6,195,714
   Federal income taxes paid                                        1,607,000           2,085,000          1,600,000

Supplemental schedule of noncash investing
  and financing activities:
   Loans transferred to other real estate                             900,000             335,713                 --
   Loans charged off                                                  485,657             301,674            499,084
                                                                 ============        ============        ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                       December 31, 1999, 1998, and 1997


(1)  Summary of Significant Accounting Policies

  (a)  Principles of Consolidation

     The consolidated financial statements include the accounts of FNBH Bancorp,
     Inc. and its wholly-owned  subsidiaries,  First National Bank in Howell and
     H.B. Realty Co. All significant intercompany balances and transactions have
     been eliminated.

     First National Bank in Howell  ("Bank") is a  full-service  bank offering a
     wide range of commercial  and personal  banking  services.  These  services
     include  checking  accounts,  savings  accounts,  certificates  of deposit,
     commercial  loans,  real  estate  loans,  installment  loans,  collections,
     traveler's checks, night depository,  safe deposit box, U.S. Savings Bonds,
     and trust  services.  The Bank serves  primarily four  communities--Howell,
     Brighton, Hartland, and Fowlerville--all of which are located in Livingston
     County, Michigan.

     H.B. Realty Co. was established on November 26, 1997 to purchase land for a
     future  branch site of the Bank and to hold title to other Bank real estate
     when it is considered prudent to do so.

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the reported amounts of assets and liabilities and
     disclosure  of  contingent  assets  and  liabilities  at  the  date  of the
     financial  statements,  and the  reported  amounts of revenues and expenses
     during  the  reporting  period.  Actual  results  could  differ  from those
     estimates.  The accounting and reporting policies of FNBH Bancorp, Inc. and
     subsidiaries  ("Corporation")  conform  to  generally  accepted  accounting
     principles  and to  general  practice  within  the  banking  industry.  The
     following is a description of the more significant of these policies.

  (b) Investment and Mortgage-backed Securities

     Investment   securities  held  to  maturity  are  those   securities  which
     management  has the  ability  and  positive  intent  to  hold to  maturity.
     Investment  securities  held to maturity  are stated at cost,  adjusted for
     amortization of premium and accretion of discount.

     Investment  securities  that fail to meet the  ability  and-positive-intent
     criteria are accounted  for as securities  available for sale and stated at
     fair value, with unrealized gains and losses, net of income taxes, reported
     as a separate component of other comprehensive income until realized.

     Trading  account  securities  are  carried at market  value.  Realized  and
     unrealized   gains  or  losses  on  trading   securities  are  included  in
     non-interest income.

     Gains  or  losses  on the  sale of  securities  are  computed  based on the
     adjusted cost of the specific security.
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                       December 31, 1999, 1998, and 1997


  (c) Loans

     Loans are stated at their principal amount outstanding, net of an allowance
     for  loan  losses.  Interest  on  loans  is  accrued  daily  based  on  the
     outstanding  principal  balance.  Loan  origination fees and certain direct
     loan  origination  costs are deferred and recognized  over the lives of the
     related loans as an adjustment of the yield.  Mortgage  loans held for sale
     are carried at the lower of cost or market,  determined  on a net aggregate
     basis.  Market  is  determined  on the  basis  of  delivery  prices  in the
     secondary  mortgage  market.  When  loans are sold,  gains and  losses  are
     recognized based on the specific identification method.

     The Bank originates  mortgage loans for sale to the secondary  market,  and
     sells the loans with servicing retained.

     The total  cost of  mortgage  loans  originated  with the intent to sell is
     allocated  between the loan  servicing  right and the mortgage loan without
     servicing,  based on their relative fair value at the date of  origination.
     The  capitalized  cost of loan servicing  rights is amortized in proportion
     to, and over the period of, estimated net future servicing revenue.

     Mortgage  servicing rights are periodically  evaluated for impairment.  For
     purposes of measuring impairment,  mortgage servicing rights are stratified
     based on predominant risk characteristics of the underlying serviced loans.
     These risk  characteristics  include loan type, term, year originated,  and
     note  rate.  Impairment  represents  the  excess  of cost of an  individual
     mortgage  servicing  rights  stratum over its fair value and is  recognized
     through a valuation allowance.

     Fair values for  individual  strata are based on quoted  market  prices for
     comparable  transactions,  if available, or estimated fair value. Estimates
     of fair value include  assumptions about  prepayment,  default and interest
     rates, and other factors which are subject to change over time.  Changes in
     these  underlying  assumptions  could  cause  the fair  value  of  mortgage
     servicing  rights,   and  the  related  valuation   allowance,   to  change
     significantly in the future.

  (d) Allowance for Loan Losses

     The allowance for loan losses is based on management's  periodic evaluation
     of the loan portfolio and reflects an amount that, in management's opinion,
     is adequate to absorb losses in the existing  portfolio.  In evaluating the
     portfolio,  management takes into consideration numerous factors, including
     current economic conditions, prior loan loss experience, the composition of
     the loan portfolio,  and management's  evaluation of the  collectibility of
     specific  loans.  Although the Bank evaluates the adequacy of the allowance
     for loan losses based on  information  known to management at a given time,
     various regulatory  agencies,  as part of their normal examination process,
     may require future additions to the allowance for loan losses.

     Impaired  loans have been  identified  in  accordance  with  provisions  of
     Statement  of  Financial  Accounting  Standards  ("SFAS") No. 114. The Bank
     considers a loan to be impaired  when it is probable that it will be unable
     to collect all or part of amounts due according to the contractual terms of
     the loan agreement.  Impaired loans are measured based on the present value
     of expected cash flows discounted at the loan's effective interest rate or,
     as a practical  expedient,  at a loan's observable marke price, or the fair
     value of the collateral if the loan is collateral dependent.
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                       December 31, 1999, 1998, and 1997



  (e) Nonperforming Assets

     The Bank  charges  off all or part of loans when  amounts  are deemed to be
     uncollectible,   although   collection  efforts  may  continue  and  future
     recoveries may occur.

     Nonperforming  assets  are  comprised  of loans for which  the  accrual  of
     interest  has been  discontinued,  loans  for  which  the  terms  have been
     renegotiated  to less than market  rates due to a serious  weakening of the
     borrower's financial condition,  loans 90 days past due and still accruing,
     and  other  real  estate,   which  has  been  acquired   primarily  through
     foreclosure and is awaiting disposition.

     Loans are generally placed on a nonaccrual basis when principal or interest
     is past due 90 days or more and when,  in the opinion of  management,  full
     collection  of principal  and  interest is unlikely.  At the time a loan is
     placed  on  nonaccrual  status,  interest  previously  accrued  but not yet
     collected is charged against  current income.  Income on such loans is then
     recognized  only to the  extent  that cash is  received  and  where  future
     collection of principal is probable.

     Interest income on impaired loans is accrued based on the principal amounts
     outstanding.  The accrual of interest is discontinued when an impaired loan
     becomes 90 days past due. The Bank utilized the "fair value of  collateral"
     method to measure  impairment,  as virtually all of the loans considered to
     be impaired are commercial mortgage loans.

  (f) Real Estate

     Other real estate owned at the time of foreclosure is recorded at the lower
     of the Bank's cost of acquisition or the asset's fair market value,  net of
     disposal cost,  which becomes the property's new basis.  Any write-downs at
     date of acquisition are charged to the allowance for loan losses.  Expenses
     incurred  in  maintaining  assets  and  subsequent  write-downs  to reflect
     declines in value are charged to other expense.

     Real estate  held for sale is  recorded at the lower of carrying  amount or
     estimated fair value less estimated disposal costs.  Subsequent adjustments
     to estimated  fair value and/or  disposal costs are recorded as a component
     of non-interest expense.

  (g) Bank Premises and Equipment

     Bank  premises  and  equipment  are  stated  at  cost,   less   accumulated
     depreciation and amortization.  Depreciation and amortization,  computed on
     the  straight-line  method,  are charged to  operations  over the estimated
     useful lives of the assets.

  (h) Federal Income Taxes

     Deferred  tax  assets and  liabilities  are  recognized  for the future tax
     consequences  attributable to differences  between the financial  statement
     carrying  amounts of existing assets and  liabilities and their  respective
     tax bases.  Deferred tax assets and  liabilities are measured using enacted
     tax rates  expected to apply to taxable  income in the years in which those
     temporary  differences are expected to be recovered or settled.  The effect
     on  deferred  tax  assets  and  liabilities  of a  change  in tax  rates is
     recognized in income in the period that includes the enactment date.
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                       December 31, 1999, 1998, and 1997


   (i) Statements of Cash Flows

     For purposes of reporting cash flows, cash equivalents  include amounts due
     from banks and federal funds sold and other short term investments.

   (j) Comprehensive Income

     The Bank adopted the  provisions of SFAS No. 130,  Reporting  Comprehensive
     Income,  as of January 1, 1998. SFAS No. 130 establishes  standards for the
     reporting and display of  comprehensive  income and its components (such as
     changes in unrealized gains and losses on securities available for sale) in
     a financial  statement that is displayed with the same  prominence as other
     financial statements.  In accordance with the adoption of SFAS No. 130, the
     Bank now reports comprehensive income within the statement of stockholders'
     equity.  Comprehensive income includes net income and any changes in equity
     from  non-owner  sources that bypass the income  statement.  The purpose of
     reporting  comprehensive  income is to report a measure  of all  changes in
     equity of an enterprise that result from recognized  transactions and other
     economic events of the period other than  transactions with owners in their
     capacity as owners.  Prior year financial statements have been reclassified
     to conform to the requirements of SFAS No. 130.

   (k) Stock Split

     On January 16, 1997, the board of directors declared a 3-for-1 stock split,
     payable  as a dividend  of two  shares for each one share of company  stock
     held by  stockholders  of record as of January 16, 1997.  All references in
     the  consolidated  financial  statements  and notes  thereto  to numbers of
     shares,  per-share amounts, and market prices of the Company's common stock
     have been restated giving retroactive recognition to the stock split.

   (l) Earning Per Share

     Earnings per share of common stock are based on the weighted average number
     of common shares outstanding during the year.

   (m) Reclassification

     Certain  reclassifications  have been made to conform with the current year
     presentation.
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                       December 31, 1999, 1998, and 1997


   (2) Investment and Mortgage-backed Securities

     A summary of the amortized  cost and  approximate  fair value of investment
     securities at December 31, 1999 follows:
<TABLE>

                                                            Held to maturity                           Available for sale
                                                       -----------------------------------     --------------------------------
                                                        Amortized          Approximate           Amortized         Approximate
                                                          cost               fair value            cost             fair value
                                                       --------------      ---------------     -------------       ------------
<S>                                                     <C>                <C>
U.S. Treasury and agency securities                      $      --                  --            32,011,148           31,721,254
Obligations of states and political subdivisions        17,709,401          17,650,000                    --                   --
Federal Reserve Bank Stock                                      --                  --                44,250               44,250
Federal Home Loan Bank Stock                                    --                  --               788,500              788,500
                                                       -----------         -----------         -------------       --------------
                                                        17,709,401          17,650,000            32,843,898           32,554,004

Mortgage-backed securities                                 334,451             330,000                    --                   --
                                                       -----------         -----------         -------------       --------------
                                                       $18,043,852          17,980,000            32,843,898           32,554,004
                                                       ===========         ===========         =============       ==============
</TABLE>
     A summary  of  unrealized  gains and  losses on  investment  securities  at
     December 31, 1999 follows:
<TABLE>
                                                           Held to maturity                           Available for sale
                                                  -----------------------------------          -------------------------------
                                                     Gross                Gross                 Gross                Gross
                                                    unrealized           unrealized            unrealized           unrealized
                                                     gains                losses                gains                losses
                                                  -----------------------------------          -------------------------------
<S>                                                 <C>                 <C>                    <C>                 <C>
U.S. Treasury and agency securities                 $     --                   --                    147              290,041
Obligations of states and political subdivisions     168,724              228,125                     --                   --
Mortgage-backed securities                                --                4,451                     --                   --
                                                  ----------          -----------              ---------           ----------
                                                  $  168,724              232,576                    147              290,041
                                                  ==========          ===========              =========           ==========
</TABLE>
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                       December 31, 1999, 1998, and 1997

The  amortized  cost and  approximate  fair value of  investment  securities  at
December 31, 1999, by contractual maturity, are shown below. Expected maturities
will differ from contractual  maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
                                                  Held to maturity                                     Available for sale
                                      ------------------------------------------          -----------------------------------------
                                        Amortized                 Approximate                Amortized                Approximate
                                          cost                     fair value                  cost                   fair value
                                      ----------------           ---------------          ---------------          ----------------
<S>                                   <C>                        <C>                      <C>                      <C>
Due in one year or less               $        606,283                   609,000               24,037,298               23,879,889
Due after one year
 through five years                          6,350,298                 6,466,000                7,973,851                7,841,365
Due after five years
 through ten years                          10,752,820                10,575,000                       --                       --
                                      ----------------           ---------------          ---------------          ---------------
                                            17,709,401                17,650,000               32,011,149               31,721,254
Federal Reserve Bank
 stock                                              --                        --                   44,250                   44,250

Federal Home Loan
 Bank stock                                         --                        --                  788,500                  788,500

Mortgage-backed
 securities (principally
 short-term)                                   334,451                   330,000                       --                       --
                                      ----------------           ---------------          ---------------          ---------------
                                       $    18,043,852                17,980,000               32,843,899               32,554,004
                                      ================           ===============          ===============          ===============
</TABLE>

The amortized cost and approximate fair value of investment securities of states
(including all their political  subdivisions) that individually  exceeded 10% of
stockholders' equity at December 31, 1999 and 1998 are as follows:
<TABLE>
                                                      1999                                             1998
                                   ---------------------------------------------     ---------------------------------------
                                       Amortized                   Approximate          Amortized            Approximate
                                         cost                       fair value            cost                fair value
                                   ----------------              ---------------     ----------------     ------------------
<S>                                <C>                           <C>                 <C>                 <C>
State of Michigan                  $     10,652,008                   10,620,000            9,753,080             10,094,000
                                   ----------------              ---------------     ----------------     ------------------
</TABLE>
Investment  securities,  with an amortized cost of  approximately  $1,800,000 at
December  31, 1999 and  $500,000 at December  31,  1998,  were pledged to secure
public deposits and for other purposes as required or permitted by law.

Additionally,  the Bank has a blanket collateral agreement with the Federal Home
Loan Bank of  Indianapolis  (FHLB)  pledging the  remaining  Treasury and agency
securities  owned  by the  Bank.  As of  December  31,  1999,  the  Bank  had no
borrowings from the FHLB.
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                       December 31, 1999, 1998, and 1997


A  summary  of the  amortized  cost and  approximate  fair  value of  investment
securities at December 31, 1998 follows:
<TABLE>
                                              Held to maturity                          Available for sale
                                   ------------------------------------    ------------------------------------
                                      Amortized           Approximate        Amortized            Approximate
                                         cost              fair value           cost              fair value
                                   --------------      ----------------    --------------      ----------------
<S>                                <C>                 <C>                 <C>                 <C>
U.S. Treasury and
 agency securities                    $ 1,999,129          2,003,000           19,055,396          19,073,886
Obligations of states
 and political
 subdivisions                          16,279,104         17,063,000                   --                  --
Federal Reserve
 Bank Stock                                    --                 --               44,250              44,250
Federal Home Loan
 Bank Stock                                    --                 --              647,800             647,800
                                   --------------      -------------       --------------      --------------
                                       18,278,233         19,066,000           19,747,446          19,765,936

Mortgage-backed
 securities                               601,940            602,000                   --                  --
                                   --------------      -------------       --------------      --------------
                                     $ 18,880,173         19,668,000           19,747,446          19,765,936
                                   ==============      =============       ==============      ==============
</TABLE>
A summary of unrealized  gains and losses on  investment  securities at December
31, 1998 follows:
<TABLE>
                                                       Held to maturity                      Available for sale
                                                 --------------------------------    --------------------------------
                                                     Gross             Gross            Gross              Gross
                                                   unrealized        unrealized       unrealized         unrealized
                                                     gains             losses           gains             losses
                                                 -------------      -------------    -------------      -------------
<S>                                               <C>               <C>              <C>                <C>
U.S. Treasury and agency
 securities                                         $ 3,871               --              48,955          30,465
Obligations of states and
 political subdivisions                             786,742            2,846                  --              --
Mortgage-backed securities                               67                7                  --              --
                                                  ---------         --------         -----------        --------
                                                  $ 790,680            2,853              48,955          30,465
                                                  =========         ========         ===========        ========
</TABLE>
The Bank  recognized  gross gains of $1,912 and gross  losses of $606 in 1997 on
the sale of  investment  securities  available  for sale.  In 1999 and 1998,  no
investment  securities  available for sale were sold.  Accordingly,  no realized
gains or losses were recorded.

Proceeds from sales of investment securities available for sale during the years
ended  December  31,  1999,  1998,  and 1997 were $-0-,  $-0-,  and  $4,025,000,
respectively.
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                       December 31, 1999, 1998, and 1997


   (3) Loans

     Loans on  nonaccrual  amounted to  $173,000,  $1,519,000,  and  $809,000 at
     December  31,  1999,  1998,  and  1997,  respectively.  If these  loans had
     continued  to accrue  interest in  accordance  with their  original  terms,
     approximately $21,000, $110,000, and $154,000 of interest income would have
     been  realized  in 1999,  1998,  and  1997,  respectively.  The Bank had no
     troubled-debt restructured loans at December 31, 1999 and 1998.

     Details of past-due and nonperforming loans follow:
<TABLE>
                                                90 days past due and
                                                   still accruing                           Nonaccrual
                                           -----------------------------        ----------------------------------
                                               1999             1998                1999                 1998
                                           -----------      ------------        --------------      --------------
<S>                                        <C>              <C>                 <C>                 <C>
Commercial and mortgage loans
 secured by real estate                    $        --            25,000                93,000            1,373,000
Consumer loans                                   3,000                --                40,000               83,000
Commercial and other loans                       1,000                --                40,000               63,000
                                           -----------      ------------       ---------------      ---------------
                                           $     4,000            25,000               173,000            1,519,000
                                           -----------      ------------       ---------------      ---------------
</TABLE>
     Impaired loans totaled $3,400,000,  $4,300,000,  and $3,100,000 at December
     31, 1999, 1998, and 1997, respectively. Specific reserves relating to these
     loans were $900,000, $500,000, and $366,000 at December 31, 1999, 1998, and
     1997, respectively.  These reserves were calculated in accordance with SFAS
     No. 114.  There were no loans  considered  impaired  for which there was no
     related specific reserve.

     Cash  receipts   received  and  recognized  as  income  on  impaired  loans
     approximated $313,000,  $291,000, and $256,000 for the years ended December
     31, 1999,  1998,  and 1997,  respectively.  Average  impaired loans for the
     years  ended  December  31,  1999,   1998,  and  1999  were   approximately
     $4,600,000, $3,800,000, and $3,500,000, respectively.

     Loans serviced for others were approximately $49,500,000,  $44,300,000, and
     $38,300,000 at December 31, 1999, 1998, and 1997, respectively.

     The Bank capitalized $79,000,  $115,000,  and $67,000 in mortgage servicing
     rights and incurred approximately $52,000,  $33,000, and $19,000 in related
     amortization expense during 1999, 1998, and 1997, respectively. At December
     31,  1999 and 1998,  these  mortgage  servicing  rights had a book value of
     $212,000  and  $185,000  and  fair  value  of  approximately  $380,000  and
     $300,000,  respectively.  Mortgage  loans with  mortgage  servicing  rights
     capitalized  totaled  approximately  $33,000,000  at  December  31, 1999 an
     $26,000,000  at December 31, 1998. No valuation  allowance for  capitalized
     mortgage servicing rights was considered  necessary as of December 31, 1999
     and 1998.

     Included  in  real  estate  loans  at  December  31,  1999  and  1998  were
     approximately $-0- and $434,000, respectively, of fixed-rate mortgage loans
     held for sale.

     The Bank's  primary  market area is  considered  to be  Livingston  County,
     Michigan.  The Bank is not dependent  upon any single  industry or business
     for its banking opportunities.
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                       December 31, 1999, 1998, and 1997


     Certain  directors  and  executive  officers,   including  their  immediate
     families  and  companies  in which  they are  principal  owners,  were loan
     customers  of the Bank  during  1999 and 1998.  Such loans were made in the
     ordinary  course of business in accordance  with the Bank's normal  lending
     policies, including the interest rate charged and collateralization, and do
     not represent more than a normal credit risk.

     Loans to related parties are summarized below for the periods indicated:
<TABLE>
                                                                                    1999                  1998
                                                                                -------------        --------------
     <S>                                                                        <C>                    <C>
     Balance at beginning of year                                               $      714,000             704,000

     New loans                                                                         235,000             217,000
     Loan repayments                                                                  (151,000)           (207,000)
                                                                                --------------        ------------

          Balance at end of year                                                     $ 798,000             714,000
                                                                                ==============        ============
</TABLE>
   (4) Allowance for Loan Losses

     The  following  represents a summary of the activity in the  allowance  for
     loan losses for the years ended December 31, 1999, 1998, and 1997:
<TABLE>
                                                                 1999                1998                1997
                                                            --------------      --------------      -------------
    <S>                                                     <C>                 <C>                 <C>
    Balance at beginning of year                            $    3,958,008           3,423,847          3,335,044

    Provision charged to operations                                840,000             640,000            486,375
    Loans charged off                                             (485,657)           (301,674)          (499,084)
    Recoveries of loans charged off                                170,932             195,835            101,512
                                                            --------------      --------------      -------------
        Balance at end of year                                 $ 4,483,283           3,958,008          3,423,847
                                                            ==============      ==============      =============
</TABLE>
   (5) Bank Premises and Equipment

     A  summary  of  bank  premises  and  equipment,   and  related  accumulated
     depreciation and amortization at December 31, 1999 and 1998 follows:
<TABLE>
                                                                                    1999                      1998
                                                                                --------------           -------------
    <S>                                                                         <C>                      <C>
    Land and land improvements                                                  $    2,368,791               2,116,070
    Bank premises                                                                    6,523,383               4,928,872
    Furniture and equipment                                                          4,718,009               4,328,827
                                                                                --------------           -------------
                                                                                    13,610,183              11,373,769

    Less accumulated depreciation and amortization                                  (4,600,522)             (4,084,308)
                                                                                --------------           -------------
                                                                                $    9,009,661               7,289,461
                                                                                ==============           =============
</TABLE>
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                       December 31, 1999, 1998, and 1997


   (6) Land Held for Sale

     In 1997, the Bank  purchased an option for $900,000,  and in 1998 exercised
     that option for  approximately  $3,000,000 for a tract of land.  Subsequent
     improvements to the land were made amounting to approximately $200,000.

     During  1998,  the Bank  allocated  approximately  $800,000 of the carrying
     value of the property to land for a branch site. The remaining  property is
     held for sale.

     The Bank  also  reduced  the  carrying  cost of the  land  held for sale by
     approximately $300,000 and $200,000 during 1999 and 1998, respectively,  to
     provide for  estimated  disposal  costs and/or  declined  estimated  market
     value. These charges are included as a component of non-interest expense.

   (7) Time Certificates of Deposit

     At December 31, 1999,  the  scheduled  maturities  of time  deposits with a
     remaining term of more than one year were:
<TABLE>

         Year of maturity:
               <S>                                                           <C>
               2001                                                          $   24,523,000
               2002                                                               3,103,000
               2003                                                                 987,000
               2004                                                               1,113,000
               2005                                                                   9,000
                                                                             --------------
                                                                             $   29,735,000
                                                                             ==============
</TABLE>
     Included  in time  deposits  are  certificates  of  deposit  in  amounts of
     $100,000 or more.  These  certificates  and their  remaining  maturities at
     December 31, 1999, 1998, and 1997 are as follows:
<TABLE>
                                                             1999                   1998                   1997
                                                       ---------------          -------------       ----------------
    <S>                                                <C>                      <C>                 <C>
    Three months or less                               $    5,436,960               3,692,410              2,851,788
    Three through six months                                5,190,724               7,529,933              4,683,524
    Six through twelve months                               6,731,297               6,610,965              6,077,151
    Over twelve months                                      5,073,865                 248,332              1,305,782
                                                       --------------           -------------       ----------------

                                                       $   22,432,846              18,081,640             14,918,245
                                                       ==============           =============       ================
</TABLE>
     Interest   expense   attributable   to  the  above  deposits   amounted  to
     approximately  $1,167,000,  $968,000, and $716,000 in 1999, 1998, and 1997,
     respectively.
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                       December 31, 1999, 1998, and 1997

   (8) Federal Income Taxes

     Federal income tax expense (benefit) consists of:
<TABLE>

                                                                 1999                 1998                1997
                                                           --------------       ---------------     ---------------
     <S>                                                    <C>                 <C>                 <C>
     Current                                                $   1,782,600            1,941,300           1,622,200
     Deferred                                                    (235,600)            (261,800)             (1,700)
                                                            -------------       --------------      --------------

                                                            $   1,547,000            1,679,500           1,620,500
                                                            =============       ==============      ==============
</TABLE>
     Federal income tax expense  differed from the amounts  computed by applying
     the U.S. Federal income tax rate of 34% to pretax income as a result of the
     following:
<TABLE>
                                                                1999                 1998               1997
                                                            -------------       -------------       -------------
<S>                                                         <C>                 <C>                 <C>
Computed "expected" tax expense                             $   1,789,200           1,899,300           1,820,300
Increase (reduction) in tax resulting from:
   Tax-exempt interest and dividends, net                        (294,600)           (247,800)           (221,800)
   Other, net                                                      52,400              28,000              22,000
                                                            -------------       -------------       -------------

                                                            $   1,547,000           1,679,500           1,620,500
                                                            =============       =============       =============
</TABLE>
     The tax  effects of  temporary  differences  that give rise to  significant
     portions  of the  deferred  tax  assets and  deferred  tax  liabilities  at
     December 31, 1999 and 1998 are presented below:
<TABLE>
                                                                                    1999                     1998
                                                                                -------------            ------------
<S>                                                                             <C>                      <C>
    Deferred tax assets:
       Allowance for loan losses                                                $   1,389,500               1,210,900
       Deferred loan fees                                                              28,000                  43,300
       Unrealized loss on securities available for sale                                98,500                      --
       Other                                                                          346,300                 233,600
                                                                                -------------            ------------

                   Total gross deferred tax assets                                  1,862,300               1,487,800

    Deferred tax liabilities:
       Unrealized gain on securities available for sale                                    --                  (6,300)
       Other                                                                         (147,800)               (107,400)

                  Total gross deferred tax liabilities                               (147,800)               (113,700)
                                                                                -------------            ------------

                  Net deferred tax asset                                        $   1,714,500               1,374,100
                                                                                =============            ============
</TABLE>
     The deferred  tax assets are subject to certain  asset  realization  tests.
     Management believes no valuation allowance is required at December 31, 1999
     and 1998, due to the  combination  of potential  recovery of tax previously
     paid and the reversal of certain deductible temporary differences.
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                       December 31, 1999, 1998, and 1997



   (9) Leases

     The Bank has  several  noncancelable  operating  leases  that  provide  for
     renewal options.

     Future minimum lease payments under noncancelable leases as of December 31,
     1999 are as follows:
<TABLE>
             Year ending
             December 31
                 <S>                                                  <C>
                 2000                                                 $      38,000
                 2001                                                        38,000
                 2002                                                        39,250
                 2003                                                        43,000
                 2004                                                        43,000
       Later years through 2008                                             118,250
                                                                      -------------
                                                                      $     319,500
                                                                      =============
</TABLE>
     Rental  expense  charged to operations in 1999,  1998, and 1997 amounted to
     approximately  $42,000,  $41,000,  and  $41,000,  respectively,   including
     amounts paid under short-term, cancelable leases.

   (10) Pension Plan

     The Bank  sponsors  a  defined  contribution  money  purchase  thrift  plan
     covering all employees 21 years of age or older who have completed one year
     of service as defined in the plan agreement.  Contributions are equal to 5%
     of total employee earnings plus 50% of employee  contributions  (limited to
     10% of their  earnings),  or the maximum  amount  permitted by the Internal
     Revenue Code. The pension plan expense of the Bank for 1999, 1998, and 1997
     was approximately $236,000, $222,000, and $204,000, respectively.

   (11) Management Retention Plan

     Restricted stock was awarded to key employees beginning in 1998,  providing
     for the  immediate  award of the Bank's stock  subject to a vesting  period
     which  takes  place over 5 years.  The awards are  recorded  at fair market
     value and amortized  into  salaries  expense over the vesting  period.  The
     amount of compensation costs related to restricted stock awards included in
     salary   expense  in  1999  and  1998  amounted  to  $24,023  and  $16,555,
     respectively.

   (12) Financial Instruments with Off-balance Sheet Risk

     The Bank is a party to financial instruments with off-balance sheet risk in
     the normal course of business to meet the financing needs of its customers.
     These  financial  instruments  are loan  commitments  to extend  credit and
     letters of credit. These instruments involve, to varying degrees,  elements
     of credit  risk in excess of the  amounts  recognized  in the  consolidated
     balance sheets.
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                       December 31, 1999, 1998, and 1997


     The Bank's  exposure to credit loss in the event of the  nonperformance  by
     the other party to the financial instruments for loan commitments to extend
     credit and letters of credit is represented by the  contractual  amounts of
     these instruments.  The Bank uses the same credit policies in making credit
     commitments as it does for on-balance sheet loans.

     Financial  instruments  whose  contract  amounts  represent  credit risk at
     December 31, 1999 and 1998 are as follows:
<TABLE>

                                                                      1999               1998
                                                                 -------------       -------------
    <S>                                                          <C>                 <C>
    Fixed rate                                                   $   3,700,000           8,600,000
    Variable rate                                                   36,300,000          39,300,000
                                                                 -------------       -------------

             Total credit commitments                            $  40,000,000          47,900,000

    Letters of credit                                            $   1,048,000             736,000
                                                                 =============       =============
</TABLE>
     Loan  commitments  to extend credit are agreements to lend to a customer as
     long as there is no violation of any condition established in the contract.
     Commitments  generally  have fixed  expiration  dates or other  termination
     clauses and may require payment of a fee. Since many of the commitments are
     expected to expire without being drawn upon, the total  commitment  amounts
     do not necessarily  represent future cash requirements.  The Bank evaluates
     each customer's  creditworthiness  on a case-by-case  basis.  The amount of
     collateral  obtained,  if deemed  necessary  by the Bank upon  extension of
     credit,  is based on management's  credit  evaluation of the  counterparty.
     Collateral held varies,  but may include  accounts  receivable;  inventory;
     property,   plant,   and   equipment;    residential   real   estate;   and
     income-producing  commercial properties.  Market risk may arise if interest
     rates move adversely subsequent to the extension of commitments.

     Letters of credit written are conditional commitments issued by the Bank to
     guarantee the  performance  of a customer to a third party.  All letters of
     credit are  short-term  guarantees  of one year or less.  The  credit  risk
     involved  in  issuing  letters  of credit is  essentially  the same as that
     involved in extending  loans to customers.  The Bank  primarily  holds real
     estate as collateral  supporting those  commitments for which collateral is
     deemed  necessary.  The extent of  collateral  held on those  commitment at
     December 31, 1999 and 1998 is in excess of the committed amount.

   (13) Capital

     The Bank is subject to various regulatory capital requirements administered
     by  the  federal  banking   agencies.   Failure  to  meet  minimum  capital
     requirements  can  initiate  certain  mandatory  and  possibly   additional
     discretionary  actions by  regulators  that,  if  undertaken,  could have a
     direct material effect on the Bank's  financial  statements.  Under capital
     adequacy  guidelines  and the  regulatory  framework for prompt  corrective
     action,  the Bank  must  meet  specific  capital  guidelines  that  involve
     quantitativ  measures  of  the  Bank's  assets,  liabilities,  and  certain
     off-balance   sheet  items  as  calculated  under   regulatory   accounting
     practices. The Bank's capital classification is also subject to qualitative
     judgments  by  regulators  about  components,  risk  weightings,  and other
     factors.

     Quantitative  measures established by regulation to ensure capital adequacy
     require the Bank to maintain minimum amounts and ratios of total and Tier 1
     capital  (as  defined  in the  regulations)  to  risk-weighted  assets  (as
     defined), and Tier 1 capital (as defined) to average assets (as defined).
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                       December 31, 1999, 1998, and 1997



     The most  recent  notification  from the Office of the  Comptroller  of the
     Currency  categorized  the Bank as well  capitalized  under the  regulatory
     framework  for  prompt  corrective   action.  To  be  categorized  as  well
     capitalized,  the Bank  must  maintain  minimum  total  risk-based,  Tier 1
     risk-based, and Tier 1 leverage ratios as set forth in the table. There are
     no conditions or events since that  notification  that management  believes
     have changed the institution's category.

     The Bank's  actual  capital  amounts and ratios are also  presented  in the
     following table as of December 31, 1999 and 1998:
<TABLE>
                                                                                                             To be well
                                                                                                          capitalized under
                                                                            For capital                   prompt corrective
                                        Actual                            adequacy purposes               action provisions
                                        Amount          Ratio           Amount         Ratio           Amount            Ratio
                                      -----------      --------       ----------      --------      ------------        -------
<S>                                   <C>               <C>           <C>             <C>           <C>                 <C>
As of December 31, 1998:
   Total capital
     (to Risk Weighted Assets)          21,227,000       11.42%       14,871,920         >=8%        18,589,900          >=10%

   Tier 1 Capital
     (to Risk Weighted Assets)          18,903,000       10.17%        7,435,960         >=4%         9,294,950           >=6%



   Tier 1 Capital
     (to Average Assets)                18,903,000        7.47%        9,530,200         >=4%        11,912,800           >=5v

As of December 31, 1999:
   Total Capital
     (to Risk Weighted Assets)          24,811,000       11.15%       17,794,900         >=8%        22,243,500          >=10%

   Tier 1 Capital
     (to Risk Weighted Assets)          22,031,000        9.90%        8,897,400         >=4%        11,121,750           >=6%

   Tier 1 Capital
     (to Average Assets)                22,031,000        7.74%       11,029,000         >=4%        13,786,200           >=5%
                                      ============       ======      ===========        =====       ===========         ======
</TABLE>
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                       December 31, 1999, 1998, and 1997



   (14) Net Income Per Common Share

     SFAS No.  128,  Earnings  per Share,  was  adopted in 1997.  The  Statement
     simplifies the standards for computing earnings per share. Basic net income
     per common  share is computed by dividing net income  applicable  to common
     stock by the weighted average number of shares of common stock  outstanding
     during the  period.  Diluted  net income per common  share is  computed  by
     dividing net income  applicable  to common  stock by the  weighted  average
     number  of  shares,  and  potential  common  stock  such as  stock  options
     outstanding during the period, of which there were none.
<TABLE>

                                                                              Year ended December 31
                                                                  1999                  1998                   1999
                                                            ---------------        ---------------      -----------------
<S>                                                         <C>                    <C>                   <C>
Basic -
      average shares outstanding                            $     1,563,996              1,570,537             1,575,000
                                                            ===============        ===============       ===============

Net income                                                  $     3,715,318              3,906,727             3,733,267
                                                            ===============        ===============       ===============

Net income applicable to common stock                       $     3,715,318              3,906,727             3,733,267
                                                            ===============        ===============       ===============

Basic net income per share                                  $          2.38                   2.49                  2.37
                                                            ===============        ===============       ===============
</TABLE>
   (15) Contingent Liabilities

     The Bank is subject to various claims and legal proceedings  arising out of
     the normal course of business, none of which, in the opinion of management,
     based on the advice of legal counsel, is expected to have a material effect
     on the Bank's financial position or results of operations.

   (16) Fair Value of Financial Instruments

     SFAS No.  107,  Disclosures  About  Fair  Value of  Financial  Instruments,
     requires disclosure of fair-value  information about financial  instruments
     for which it is practicable  to estimate that value.  In cases where quoted
     market prices are not available,  fair values are based on estimates  using
     present  value  or  other  valuation   techniques.   Those  techniques  are
     significantly affected by the assumptions used, including the discount rate
     and estimates of future cash flows. In that regard, the derived fair- value
     estimates cannot be substantiated by comparison to independent markets and,
     in  many  cases,  cannot  be  realized  in  immediate   settlement  of  the
     instrument.

     Fair-value methods and assumptions for the Bank's financial instruments are
     as follows:

     Cash  and  Cash   Equivalents  -  The  carrying  amounts  reported  in  the
     consolidated   balance  sheet  for  cash,  federal  funds,  and  short-term
     investments sold reasonably approximate those assets' fair values.

     Investment and Mortgage-backed  Securities - Fair values for investment and
     mortgage-backed  securities are based on quoted market prices. The carrying
     amount of accrued interest receivable approximates their fair values.
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                       December 31, 1999, 1998, and 1997



     Loans  - For  variable-rate  loans  that  reprice  frequently  and  with no
     significant  change in credit  risk,  fair  values are  generally  based on
     carrying values. The fair value of loans is estimated by discounting future
     cash flows using the current  rates at which similar loans would be made to
     borrowers   with  similar   credit  ratings  and  for  the  same  remaining
     maturities.

     Accrued Interest Income - The carrying amount of accrued interest income is
     a reasonable estimate of fair value.

     Deposit  Liabilities - The fair value of deposits with no stated  maturity,
     such as demand deposit,  savings,  NOW, and money market accounts, is equal
     to the amount payable on demand.  The fair value of certificates of deposit
     is  estimated  using rates  currently  offered for  deposits  with  similar
     remaining maturities.

     Accrued  Interest Payable - The carrying amount of accrued interest payable
     is a reasonable estimate of fair value.

     Off-balance  Sheet  Instruments - The fair value of  commitments  to extend
     credit is estimated using the fees currently  charged to enter into similar
     agreements,  taking into account the remaining  terms of the agreements and
     the present  creditworthiness  of the  counterparties.  For fixed-rate loan
     commitments,  fair value also  considers  the  difference  between  current
     levels  of  interest  rates  and the  committed  rates.  The fair  value of
     commitments to extend  credit,  including  letters of credit,  approximates
     book  value of  $450,000  and  $490,000  at  December  31,  1999 and  1998,
     respectively.

     The  estimated  fair  values of the  Bank's  financial  instruments  are as
     follows:
<TABLE>
                                                        1999                                        1998
                                      --------------------------------------         --------------------------------------
                                        Carrying                   Fair                 Carrying                  Fair
          Financial Assets                value                    value                  value                   value
                                      --------------           -------------          -------------           -------------
<S>                                   <C>                      <C>                    <C>                     <C>
Cash and cash equivalents             $   24,414,000              24,414,000             31,239,000              31,239,000
Investment and mortgage-
   backed securities                      50,598,000              50,534,000             38,646,000              39,434,000
Loans, net                               205,468,000             203,100,000            181,060,000             187,500,000

          Financial Liabilities

Deposits:
   Demand                                 47,981,000              48,000,000             47,402,000              47,400,000
   NOW                                    34,646,000              34,600,000             29,087,000              29,100,000
   Savings and money
     market accounts                      89,863,000              89,900,000             75,129,000              75,100,000
   Time                                   96,701,000              97,000,000             87,939,000              89,300,000

   Accrued interest
    income                                 1,841,000               1,800,000              1,645,000               1,600,000
   Accrued interest
    payable                                  628,000                 600,000                553,000                 600,000
                                      ==============           =============           ============           =============
</TABLE>
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                       December 31, 1999, 1998, and 1997


          Limitations

     Fair-value  estimates  are  made at a  specific  point  in  time,  based on
     relevant market information and information about the financial instrument.
     These  estimates do not reflect any premium or discounts  that could result
     from offering for sale at one time the  Corporation's  entire holdings of a
     particular financial instrument. Because no market exists for a significant
     portion of the Corporation's  financial  instruments,  fair-value estimates
     are based on judgments  regarding  future loss experience  current economic
     conditions,  risk  characteristics  of various financial  instruments,  and
     other  factors.  These  estimates  are  subjective  in nature  and  involve
     uncertainties and matters of significant judgment,  and therefore cannot be
     determined  with  precision.  Changes in  assumptions  could  significantly
     affect the estimates.

   (17) Dividend Restrictions

     On a parent  company-only  basis, the Corporation's only source of funds is
     dividends  paid by the Bank.  The ability of the Bank to pay  dividends  is
     subject to limitations  under various laws and regulations,  and to prudent
     and sound banking  principles.  The Bank may declare a dividend without the
     approval of the Office of Comptroller of the Currency  ("OCC"),  unless the
     total  dividend in a calendar year exceeds the total of its net profits for
     the year  combined with its retained  profits of the two  preceding  years.
     Under  these  provisions,   approximately   $2,500,000  was  available  for
     dividends on December 31, 1999 without the approval of the OCC.

   (18) Condensed Financial Information - Parent Company Only

     The  condensed  balance  sheets at  December  31,  1999 and  1998,  and the
     statements of income and cash flows for the years ended  December 31, 1999,
     1998, and 1997, of FNBH Bancorp, Inc. follow:
<TABLE>

                            Condensed Balance Sheets


                                                                                 1999                        1998
                                                                           -----------------           ---------------
<S>                                                                        <C>                         <C>
Assets:
    Cash                                                                   $          18,784                    45,726
    Investment in subsidiaries:
       First National Bank in Howell                                              21,839,986                18,759,233
       H.B. Realty Co.                                                             3,399,472                 4,652,015
       Other assets                                                                   59,654                    39,557
                                                                           -----------------           ---------------
                                                                           $      25,317,896                23,496,531
                                                                           -----------------           ---------------
Liabilities and stock equity:
    Other liabilities                                                      $           6,250                        --
    Stockholder's equity                                                          25,311,646                23,496,531
                                                                           -----------------           ---------------
                  Total liabilities and stock equity                       $      25,317,896                23,496,531
                                                                           =================           ===============

</TABLE>
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                       December 31, 1999, 1998, and 1997


<TABLE>
                         Condensed Statements of Income


                                                                            Year ended December 31,
                                                        ----------------------------------------------------------
                                                            1999                     1998                 1997
                                                        --------------          --------------      --------------
<S>                                                    <C>                      <C>                 <C>
Operating income - dividends from
     subsidiaries                                      $     1,720,748               6,872,496          2,554,996
                                                       ---------------          --------------      -------------

          Total operating income                             1,720,478               6,872,496          2,554,996
                                                       ---------------          --------------      -------------
Operating expenses - administrative and
     other expenses                                             37,223                  40,683             39,418
                                                       ---------------          --------------      -------------

          Total operating expenses                              37,223                  40,683             39,418
                                                       ---------------          --------------      -------------

Income before equity in undistributed
     net income of subsidiaries                              1,683,525               6,831,813          2,515,578

Equity in undistributed net income of
     subsidiaries                                            2,031,793              (2,925,086)         1,217,689
                                                       ---------------          --------------      -------------

          Net income                                   $     3,715,318               3,906,727          3,733,267
                                                       ===============          ==============      =============
</TABLE>
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                       December 31, 1999, 1998, and 1997


<TABLE>
                       Condensed Statements of Cash Flows

                                                                          Year ended December 31,
                                                       ------------------------------------------------------------
                                                            1999                   1998                   1997
                                                       ---------------      ----------------        ---------------
<S>                                                    <C>                  <C>                     <C>
Net income                                             $     3,715,318             3,906,727              3,733,267
Adjustments to reconcile net income to net
  cash from operating activities:
     Increase in other assets                                  (20,097)              (28,056)               (11,500)
     Increase in other liabilities                               6,250                    --                     --
     Equity in undistributed net income of
       subsidiaries                                         (2,031,793)            2,925,086             (1,217,689)
                                                       ----------------      ---------------        ----------------

           Total adjustments                                (2,045,640)            2,897,030             (1,229,189)
                                                       ----------------      ---------------        ----------------
           Net cash provided by
             operating activities                            1,669,678             6,803,757              2,504,078
                                                       ---------------       ---------------        ----------------
Cash flow from investing activities -
  investments in and advancements to
    subsidiary, net                                                 --           (4,678,372)               (940,721)
                                                       ---------------       --------------         ---------------
           Net cash used in investing
            activities                                              --           (4,678,372)               (940,721)
                                                       ---------------       ---------------        ----------------
Cash flow from financing activities:
   Dividends paid                                           (1,720,748)          (1,645,141)             (1,575,000)
   Common stock repurchased                                         --             (525,000)                     --
   Common stock issued                                          97,505               96,775                      --
   Change in management retention plan                         (73,377)             (66,220)                     --
                                                       ---------------       --------------         ---------------
            Net cash used in financing
             activities                                     (1,696,620)          (2,139,586)             (1,575,000)
                                                       ---------------       --------------         ---------------

            Net decrease in cash                               (26,942)             (14,201)                (11,643)

Cash at beginning of period                                     45,726               59,927                  71,570
                                                       ---------------       --------------         ---------------

Cash at end of period                                  $        18,784               45,726                  59,927
                                                       ===============       ==============         ===============
</TABLE>
<PAGE>
                       FNBH BANCORP, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                       December 31, 1999, 1998, and 1997


   (19) Quarterly Financial Data - Unaudited

     The following table presents summarized  quarterly data for each of the two
     years ended December 31:
<TABLE>
                                                                       Quarters ended in 1999
                                          -----------------------------------------------------------------------------
                                              March 31            June 30            September 30           December 31
                                          --------------       -------------        --------------         -------------
     <S>                                  <C>                  <C>                  <C>                    <C>
     Selected operations data:
       Interest income                    $    5,086,427          5,132,300             5,631,057             5,747,512
       Net interest income                     3,148,976          3,180,674             3,664,933             3,635,827
       Provision for loan losses                 210,000            210,000               210,000               210,000
       Income before income taxes              1,144,177          1,166,272             1,561,401             1,390,468
       Net income                                827,177            822,372             1,092,101               973,668

       Basic net income per share                   0.53               0.53                  0.70                  0.62

       Cash dividends per share                     0.20               0.20                  0.20                  0.50
                                          ==============       ============          ============           ===========
</TABLE>
<TABLE>
                                                                   Quarters ended in 1998
                                          ------------------------------------------------------------------------
                                             March 31            June 30             September 30          December 31
                                          --------------       ------------          ------------          ------------
     <S>                                  <C>                  <C>                   <C>                   <C>
     Selected operations data:
       Interest income                    $    4,679,544          4,907,180             5,146,174             5,177,481
       Net interest income                     2,922,521          3,104,644             3,260,295             3,222,515
       Provision for loan losses                 150,000            150,000               170,000               170,000
       Income before income taxes              1,351,692          1,559,491             1,554,343             1,120,701
       Net income                                946,692          1,106,491             1,060,343               793,201

       Basic net income per share                   0.60               0.70                  0.68                  0.51
       Cash dividends per share                     0.18               0.18                  0.20                  0.49
                                          ==============       ============          ============           ===========
</TABLE>
<PAGE>
           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations

     This  discussion  provides  information  about the  consolidated  financial
condition and results of operations of FNBH Bancorp,  Inc.  ("Company")  and its
subsidiaries,  First  National  Bank in Howell  ("Bank")  and HB Realty Co., and
should be read in conjunction with the Consolidated Financial Statements.

FINANCIAL CONDITION

     During  1999  total  assets  increased  12%  to  $296,419,000.   Investment
securities  increased $12 million (31%) while gross loans  increased $25 million
(13%).  Deposits  increased $29.6 million (12%) to  $269,190,000.  Stockholders'
equity increased $1.8 million (8%) to $25,312,000.

Securities
     The securities  portfolio is an important  source of liquidity for the Bank
to meet unusual deposit  fluctuations.  Management of the Bank makes  investment
decisions  which  will  ensure  the  safety  of  funds  entrusted  to it by  its
depositors  and  shareholders.   Approximately  $32,000,000  of  the  securities
portfolio is invested in US  government  and agency  obligations.  An additional
$18,000,000  of the portfolio  consists of tax exempt  obligations of states and
political  subdivisions.  The Company's current and projected tax position makes
these  investments  advantageous  to the  Bank.  The  Bank's  investment  policy
requires purchases of tax exempt issues to be of bonds with AA ratings or better
if the  maturity  exceeds 4 years  unless the bond is a local,  nonrated  issue.
"Other"  securities  consist of equity  holdings in the Federal Reserve Bank and
the Federal Home Loan Bank.

     The following table shows the percentage  makeup of the security  portfolio
as of December 31:
<TABLE>
                                                                       1999         1998
<S>                                                                   <C>          <C>
U.S.Treasury & agency securities                                      62.7%        54.5%
Agency mortgage backed securities                                       .7%         1.6%
Tax exempt obligations of states and political subdivisions           35.0%        42.1%
Other                                                                  1.6%         1.8%
                                                                       ----         ----
  Total securities                                                   100.0%       100.0%
</TABLE>

Loans
     The loan  personnel of the Bank are committed to making  quality loans that
produce a good  rate of return  for the Bank and also  serve  the  community  by
providing funds for home purchases,  business purposes,  and consumer needs. The
overall loan portfolio grew $25,000,000 (13%) in 1999.

     As a full service  lender,  the Bank offers a variety of home mortgage loan
products.  The Bank makes  fixed  rate,  long-term  mortgages  which  conform to
secondary market standards which it sells. This practice allows the Bank to meet
the housing credit needs of its service area, while at the same time maintaining
loan to deposit ratios and interest  sensitivity and liquidity  positions within
Bank policy. The Bank retains servicing on sold mortgages thereby furthering the
customer  relationship and adding to servicing income. During 1999 the Bank sold
$12,000,000 in residential mortgages.

     The Bank has also been able to service  customers  with loan needs which do
not conform to secondary market  requirements by offering variable rate products
which are retained in the mortgage portfolio. While not meeting secondary market
requirements,  these  nonconforming  mortgages do meet bank loan  guidelines and
have a good payment record.  During 1999 the Bank made approximately  $5,000,000
in variable rate mortgage loans which it retained in the mortgage portfolio.
<PAGE>
     During 1999,  the Bank  experienced  a  significant  amount of loan demand.
Growth in the county resulted in a need for financing commercial projects,  some
of which were for the  construction  of  commercial  buildings and some of which
were for the development of residential subdivisions. Commercial loans ended the
year at  $163,469,000,  a 19%  increase  for the  year.  Additionally,  the Bank
originated  $4,000,000  in  commercial  loans  which it sold in part or total to
other banks due to legal lending  limits  Consumer loans  increased  $1,800,000,
about 8%.

     The  following  table  reflects the makeup of the  commercial  and consumer
loans in the  Consolidated  Financial  Statements.  Included in the  residential
first mortgage  totals below are the "real estate  mortgage" loans listed in the
Consolidated  Financial Statements and other loans to customers who pledge their
homes as  collateral  for  their  borrowings.  In the  majority  of the loans to
commercial customers, the Bank is relying on the borrower's cash flow to service
the loans.  However,  these loans may be secured by personal or commercial  real
estate. A portion of the loans listed in residential  first mortgages  represent
commercial loans where the borrower has pledged his/her residence as collateral.
"Other" real estate loans  include  $87,000,000  in loans  secured by commercial
property with the remaining  $3,000,000 secured by multi-family  units. The most
significant  loan growth was in commercial  loans  secured by business  property
which increased  $20,800,000,  30% over the prior year, and in commercial  loans
not secured by real estate which increased $12,800,000, a 49% increase.

     The following table shows the balance and percentage  makeup of loans as of
December 31:
<TABLE>
                                                                         (Dollars in thousands)
                                                               1999                                  1998
                                                    Balances         Percentage            Balances         Percentage
<S>                                                 <C>                <C>                 <C>                <C>
Secured by real estate:
   Residential first mortgage                       $ 29,904           14.2%               $ 38,051           20.5%
   Residential home equity/other junior liens          7,822            3.7%                  9,106            4.9%
   Construction and land development                  23,375           11.1%                 23,048           12.4%
   Other                                              89,809           42.6%                 68,960           37.1%
Consumer                                              16,811            8.0%                 16,653            9.0%
Commercial                                            38,891           18.5%                 26,058           14.1%
Other                                                  4,043            1.9%                  3,770            2.0%
                                                      ------          ------               --------          ------
            Total Loans (Gross)                     $210,655          100.0%               $185,646          100.0%
</TABLE>
     The Bank's loan personnel have  endeavored to make high quality loans using
well  established  policies and procedures  and a thorough loan review  process.
Loans in excess of $400,000  are  approved  by a  committee  of the Board or the
Board.  The Bank has hired an  independent  person to review the  quality of the
loan portfolio on a regular basis. Loan quality is demonstrated by the ratios of
nonperforming  loans  and  assets  as a  percentage  of the  loan  portfolio  as
illustrated in the table below for December 31:
<TABLE>
                                                                                    (Dollars in thousands)
                                                                         1999             1998              1997
<S>                                                                    <C>              <C>               <C>
Nonperforming Loans: Nonaccrual loans                                   $ 173           $1,519            $  809
Loans past due 90 days and still accruing                                   4               25               249
                                                                            -               --               ---
   Total nonperforming loans                                              177            1,544             1,058
Other real estate                                                           0                0                 0
                                                                            -                -                 -
  Total nonperforming assets                                          $   177           $1,544            $1,058
                                                                      =======           ======            ======

Nonperforming loans as a percent of total loans                          .08%             .83%              .67%
Nonperforming assets as a percent of total loans                         .08%             .83%              .67%
Nonperforming loans as a percent of the loan loss
reserve                                                                    4%              39%               31%
</TABLE>
<PAGE>
     Nonperforming  assets  are  comprised  of loans for which  the  accrual  of
interest  has been  discontinued,  accruing  loans  90 days or more  past due in
payments,  and other  real  estate  which has been  acquired  primarily  through
foreclosure  and  is  waiting  disposition.  Loans  are  generally  placed  on a
nonaccrual  basis when  principal  or  interest  is past due 90 days or more and
when, in the opinion of management, full collection of principal and interest is
unlikely.

     The  $1,400,000  decrease in  nonperforming  loans is primarily  due to the
foreclosure and subsequent sale of property for an approximately $1,000,000 loan
that was nonperforming in 1998.

     Impaired  loans  totaled  $3,400,000  at  December  31,  1999,  compared to
$4,300,000 at the prior year end.  Included in impaired loans are  nonperforming
loans from the above  table,  except for  homogenous  residential  mortgage  and
consumer  loans,  and an additional  $3,380,000 of commercial  loans  separately
identified as impaired.  The decrease in impaired  loans is primarily due to the
decline in nonaccrual loans mentioned above.

     During 1999 the Bank  charged off loans  totaling  $486,000  and  recovered
$171,000 for a net charge off amount of $315,000. In the previous year, the Bank
had net charge offs totaling $106,000.

     The  allowance  for loan losses  totaled  $4,483,000  at year end which was
2.13% of total loans, the same percentage it was in 1998.  Management  considers
this to be  adequate  to cover  any  anticipated  losses.  Management  regularly
evaluates  the allowance  for loan losses based on the  composition  of the loan
portfolio,  an evaluation of specific credits,  historical loss experience,  the
level of  nonperforming  loans and loans that have been  identified as impaired.
Externally,  the local economy and events o trends which might negatively impact
the loan portfolio are also considered.

     The  following  table shows  changes in the loan loss reserve for the years
ended December 31:
<TABLE>
                                                                                       (Dollars in thousands)
                                                                          1999                 1998                 1997
<S>                                                                     <C>                  <C>                  <C>
Balance at beginning of the year                                        $3,958               $3,424               $3,335
Additions (deduction):
   Loans charged off                                                      (486)                (302)                (499)
   Recoveries of loans previously charged off                              171                  196                  102
   Provision charged to operations                                         840                  640                  486
                                                                          ----                 ----                  ---
Balance at end of the year                                              $4,483               $3,958               $3,424

Allowance for loan losses to loans outstanding                           2.13%                2.13%                2.15%
</TABLE>

Deposits

     Deposit  balances  of  $269,190,000  at  December  31, 1999 were nearly $30
million  (12.4%)  higher than the  previous  year end.  Because year end deposit
balances can fluctuate in unusual ways, it is more meaningful to analyze changes
in average balances.  Average deposits  increased $37 million (17%) during 1999.
Non-interest  bearing  demand  deposits  increased  $5.3  million,  about 12% on
average.  Average savings and NOW balances increased $19.7 million (21.5%) while
average time deposits increased $11.7 million or about 14%.

     The following table sets forth average deposit balances for the years ended
December 31:
<TABLE>
                                                                     (Dollars in thousands)
                                                       1999                 1998                  1997
<S>                                                 <C>                  <C>                  <C>
Non-interest bearing demand                         $ 48,914             $ 43,619              $ 34,707
Savings, NOW and money market                        111,141               91,463                79,104
Time deposits                                         92,802               81,118                71,093
                                                      ------             --------              --------
      Total average deposits                        $252,857             $216,200              $184,904
</TABLE>
<PAGE>
     The  increase in savings  deposits  was  primarily  due to a $13.1  million
increase in money market accounts.  The growth in certificates was the result of
maintaining  competitive  rates in the market and selectively  offering  special
rates on particular time products.

     The  majority of the Bank's  deposits are from core  customer  sources-long
term relationships with local personal,  business, and public customers. In some
financial  institutions,  the presence of interest bearing  certificates greater
than  $100,000  indicates  a  reliance  upon  purchased  funds.  However,  large
certificates in the Bank's portfolio consist primarily of core deposits of local
customers.  The Bank does not support growth through purchased funds or brokered
deposits.  See Note 7 of the  Consolidated  Financial  Statements for a maturity
schedule of over $100,000 certificates.

Capital

     The Company's  capital at year end totaled  $25,312,000,  a $1,800,000 (8%)
increase over the prior year.  Banking  regulators have set forth various ratios
of  capital  to assets to assess a  financial  institution's  soundness.  Tier 1
capital is equal to shareholders' equity while Tier 2 capital includes a portion
of the  allowance  for loan losses.  The  regulatory  agencies  have set capital
standards for "well capitalized" institutions. The leverage ratio, which divides
Tier 1 capital by three months average assets, must be 5% for a well capitalized
institution.  The  Bank's  leverage  ratio was  7.74% at year end  1999.  Tier 1
risk-based  capital,  which  includes some off balance sheet items in assets and
weights  assets  by risk,  must be 6% for a well  capitalized  institution.  The
Bank's was 9.90% at year end 1999. Total risk-based capital, which includes Tier
1 and Tier 2 capital, must be 10% for a well capitalized institution. The Bank's
total risk based capital ratio was 11.15% at year end. The Bank's strong capital
ratios put it in the best  classification on which the FDIC bases its assessment
charge.

     The following table lists various Bank capital ratios at December 31:
<TABLE>
                                                    1999                 1998                 1997
<S>                                                <C>                 <C>                  <C>
Equity to asset ratio                              7.02%                7.14%                9.19%
Tier 1 leverage ratio                              7.74%                7.47%                9.50%
Tier 1 risk-based capital                          9.90%               10.17%               14.12%
Total risk-based capital                          11.15%               11.42%               15.37%
</TABLE>
     The 1998  decline in the Bank's  capital  ratio was the result of dividends
paid to the parent company to enable a subsidiary company to purchase land, some
of which was  intended for a branch site,  the  remainder to be sold.  In 1999 a
portion of the land was sold to the Bank for a branch site.  The Bank's  capital
account was  credited  for the proceeds of the sale.  As the  remaining  land is
sold,  the Bank's  capital  account will be recredited for the proceeds from the
sale.

     The  Company's  ability to pay  dividends is subject to various  regulatory
requirements.  Management  believes,  however,  that  earnings  will continue to
generate  adequate  capital to continue  the payment of  dividends.  In 1999 the
Company paid dividends totaling  $1,721,000,  or 46% of earnings.  Book value of
the stock was $16.17 at year end.

     The  Company  maintains  a five year plan  which was the result of a formal
strategic  planning  process.  Management and the Board continue to monitor long
term goals  which  include  expanded  services to achieve  growth and  retaining
earnings to fund growth, while providing return to shareholders.

     In 1999,  the Bank opened a new branch in the  northwest  part of Brighton.
Adjoining the building site is vacant land, valued at approximately  $2,800,000,
which the company  intends to sell. In the coming year,  the Bank plans to focus
on expanding service through technological delivery systems.
<PAGE>
Liquidity and Funds Management

     Liquidity is monitored by the Bank's  Asset/Liability  Management Committee
(ALCO) which meets at least monthly. ALCO developed,  and the Board of Directors
approved,  a liquidity  policy which targets a minimum 15% liquidity  ratio. The
Bank's liquidity ratio averaged 19.6% in 1999.

     Deposits  are the  principal  source  of  funds  for the  Bank.  Management
monitors rates at other financial institutions in the area to ascertain that its
rates are  competitive in the market.  Management  also attempts to offer a wide
variety of products  to meet the needs of its  customers.  The Company  does not
deal in brokered funds and the makeup of its over $100,000  certificates,  which
amounted to $22,400,000  at December 31, 1999 compared to $18,100,000  the prior
year, consists of local depositors known to the Bank.

     It is the intention of the Bank's management to handle unexpected liquidity
needs  through its Federal Funds  position.  The goal is to maintain a daily Fed
Funds balance sufficient to cover required cash draws. In addition, the Bank has
a  $16,000,000  line of  credit  available  at the  Federal  Home  Loan  Bank of
Indianapolis.  The  Bank has  pledged  certain  mortgage  loans  and  investment
securities as collateral  for the  borrowing.  In the event the Bank must borrow
for an extended  period,  management may look to "available for sale" securities
in the investment portfolio for liquidity.

     Throughout   the  past  year,   Fed  Funds  Sold   balances  have  averaged
approximately $10,400,000 compared to $8,600,000 the prior year. Management kept
larger  than  normal  balances  in Fed  Funds in 1999 in  order to be ready  for
whatever  demands there might be for Year 2000 issues.  As it turned out,  there
was no unusual demand for cash.

     Periodically the Bank borrowed money through the Fed Funds market.

Quantitative and Qualitative Disclosures about Market Risk

     The Bank's  Asset/Liability  Management  committee  (ALCO) meets monthly to
review the Bank's  performance.  The committee  discusses  the current  economic
outlook and its impact on the Bank and current  interest rate forecasts.  Actual
results are  compared to budget in terms of growth and income.  A yield and cost
analysis  is done to monitor  interest  margin.  Various  ratios  are  discussed
including  capital  ratios and  liquidity.  The quality of the loan portfolio is
reviewed in light of the current  allowance.  The Bank's exposure to market risk
is reviewed.

     Interest rate risk is the potential for economic  losses due to future rate
changes and can be reflected as a loss of future net  interest  income  and/or a
loss of current  market  values.  The  objective is to measure the effect on net
interest  income and to adjust the balance  sheet to minimize the inherent  risk
while at the same time maximizing  income.  Tools used by management include the
standard GAP report which lays out the repricing  schedule for various asset and
liability  categories and an interest rate shock simulation report. The Bank has
no market risk sensitive  instruments held for trading  purposes.  The Bank does
not enter into  futures,  forwards,  swaps,  or options to manage  interest rate
risk. However, the Bank is party to financial instruments with off-balance sheet
risk in the  normal  course  of  business  to meet  the  financing  needs of its
customers  including  commitments  to extend  credit and  letters  of credit.  A
commitment or letter of credit is not recorded as an asset until the  instrument
is exercised (see Note 12 of the Consolidated Financial Statements).
<PAGE>
     The table below shows the  scheduled  maturity and  repricing of the Bank's
assets and liabilities as of December 31, 1999:
<TABLE>
                                                   0-3           4-12         1-5              5+
                                                 Months         Months        Years           Years         Total
<S>                                              <C>            <C>           <C>             <C>          <C>
Assets:
   Loans, net                                    $63,711        $30,472       $106,833        $9,639       $210,655
   Securities                                      5,828         19,674         14,343        10,753         50,598
   Short term investments                         12,301                                                     12,301
   Other assets                                                                               22,865         22,865
                                                 -------        -------       --------        ------         ------
      Total assets                               $81,840        $50,146       $121,176       $43,257       $296,419

Liabilities & Shareholders' Equity:
   Demand, Savings & NOW                         $56,906        $16,717        $63,371       $35,495       $172,489
   Time                                           20,423         46,528         29,741             9         96,701
   Other liabilities and equity                                                               27,229         27,229
                                                 -------        -------        -------        ------         ------
      Total liabilities and equity               $77,329        $63,245        $93,112       $62,733       $296,419

Rate sensitivity gap and ratios:
   Gap for period                                 $4,511       $(13,099)       $28,064      $(19,476)
   Cumulative gap                                  4,511         (8,588)        19,476

Cumulative rate sensitive ratio                     1.06            .94           1.08          1.00
December 31, 1998 rate sensitive ratio              1.28            .92           1.08          1.00
</TABLE>

<TABLE>
                                                Total         Average Interest Rate       Estimated Fair Value
<S>                                             <C>                  <C>                       <C>
Assets:
   Loans,  net                                  $205,468             9.47%                     $203,100
   Securities                                     50,598             5.73%                       50,534
   Short term investments                         12,301             4.89%                       12,301

Liabilities:
   Savings, NOW, MMDA                           $124,509             2.69%                      124,500
   Time                                           96,701             5.36%                       97,000
</TABLE>

     Estimated fair value for securities are based on quoted market prices.  For
variable rate loans that reprice  frequently and with no  significant  change in
credit risk, fair values are generally based on carrying values.  The fair value
of other loans is estimated by  discounting  future cash flows using the current
rates at which  similar  loans would be made to borrowers  with  similar  credit
ratings  and  for  the  same  remaining  maturities.  Because  it has a one  day
maturity,  the carrying  value is used a fair value for fed funds sold. The fair
value of deposits with no stated maturity, such as savings, NOW and money market
accounts  is  equal  to  the  amount  payable  on  demand.  The  fair  value  of
certificates of deposit is estimated using rates currently  offered for deposits
with similar remaining maturities.

     The entire  balance of  savings,  NOW and MMDAs is not  categorized  as 0-3
months,  although they are variable rate  products.  Some of these  balances are
core  deposits  which are not  considered  rate  sensitive  based on the  Bank's
historical experience.
<PAGE>
     Given the liability sensitive position of the Bank at December 31, 1999, if
interest  rates  increase  200 basis  points  and  management  did not  respond,
management   estimates   that  pretax  net  interest   income   would   decrease
approximately  $100,000 while a similar decrease in rates would cause pretax net
interest income to increase by a like amount. See discussion under "Net Interest
Income" below.

RESULTS OF OPERATIONS

     The  Company  recorded  net  income  of  $3,715,000  in  1999  compared  to
$3,907,000  in  1998.  While  net  interest  income  climbed  $1,120,000,  costs
associated  with conversion to a new computer  system and  preparations  for Y2K
reduced net income. Also, dampening profits were the start-up costs of opening a
new branch and the effect of the excess land acquired with that branch site. The
Company's  return on average  assets  (ROA) was 1.33% in 1999,  a 30 basis point
decline from the prior year.  The return on average  stockholders'  equity (ROE)
was 15.05%, down from the 17.83% reported in 1998.

     The  following  table  contains  key  performance  ratios  for years  ended
December 31:
<TABLE>
                                                           1999                1998               1997
<S>                                                      <C>                 <C>                <C>
Net income to:
   Average stockholders' equity                          15.05%              17.83%             17.84%
   Average assets                                         1.33%               1.63%              1.79%
Basic earnings per common share:                         $2.38               $2.49              $2.37
</TABLE>

Net Interest Income

     Net interest  income is the difference  between  interest earned on earning
assets and interest paid on deposits.  It is the major component of earnings for
a  financial  institution.  For  analytical  purposes,  the  interest  earned on
investments  and loans is expressed on a fully taxable  equivalent  (FTE) basis.
Tax-exempt  interest is increased to an amount comparable to interest subject to
federal income taxes in order to properly  evaluate the effective  yields earned
on earning  assets.  The tax equivalent  adjustment is based on a federal income
tax rate of 34%.

     The following table shows the average balance and percentage earned or paid
on key  components of earning assets and paying  liabilities  for the year ended
December 31:
<TABLE>
                                             1999                      1998                      1997
                                             ----                      ----                      ----
                                      Average       Yield/       Average       Yield/        Average       Yield/
                                      Balance        Rate        Balance        Rate         Balance        Rate
<S>                                   <C>           <C>          <C>            <C>          <C>           <C>
Interest earning assets:
Short term investments                $  10,384     4.89%         $   8,630     5.20%         $   2,754    5.40%
Taxable securities                       30,051     5.08%            23,019     6.02%            31,873    5.98%
Tax-exempt securities                    16,896     6.90%            15,221     7.13%            13,262    7.36%
Loans                                   198,448     9.47%           175,873     9.85%           148,096    9.82%
                                        -------                     -------                     -------
   Total earning assets                $255,779     8.60%          $222,743     9.09%          $195,985    8.97%
Interest bearing funds:
Savings/NOW accounts                   $111,141     2.69%         $  91,552     3.03%         $  79,104    2.79%
Time deposits                            92,802     5.36%            81,119     5.69%            71,093    5.71%
Federal funds purchased                      98     5.40%               179     5.98%               610    5.77%
                                         ------                   ---------                  ----------
   Total interest bearing funds:       $204,041     3.90%          $172,850     4.28%          $150,807    4.18%

Interest spread                                     4.70%                       4.81%                      4.79%
Net interest margin                                 5.48%                       5.76%                      5.75%
</TABLE>
<PAGE>
     Tax  equivalent  interest  income in each of the three years  includes loan
origination fees. A substantial portion of such fees is deferred for recognition
in future periods or is considered in  determining  the gain or loss on the sale
of real estate mortgage loans. Tax equivalent  interest income includes net loan
origination  fees totaling  $710,000 in 1999,  $600,000 in 1998, and $380,000 in
1997.

     The  following  table sets forth the effects of volume and rate  changes on
net interest  income on a taxable  equivalent  basis.  All figures are stated in
thousands of dollars.
<TABLE>
                                              Year ended                              Year ended
                                        December 31, 1999 compared to            December 31, 1998 compared to
                                        Year ended December 31, 1998             Year ended December 31, 1997
                                        ----------------------------             ----------------------------
                                         Amount of Increase/(Decrease)           Amount of Increase/(Decrease)
                                              due to change in                        Due to change in
                                              ----------------                        ----------------
                                                                 Total                                      Total
                                                                Amount                                     Amount
                                                                  Of                                         Of
                                                  Average       Increase/                    Average      Increase/
                                    Volume          Rate       (Decrease)      Volume         Rate       (Decrease)
<S>                                 <C>           <C>           <C>           <C>            <C>           <C>
Interest Income:
Federal funds sold                  $      91     $   (33)      $      58     $     317      $     (17)     $    300
Securities:
Taxable                                   424        (284)            140          (529)            10          (519)
  Tax Exempt                              119         (39)             80           144            (35)          109
Loans                                   2,223        (750)          1,473         2,727             50         2,777

  Total interest income              $  2,857    $ (1,106)      $   1,751     $   2,659      $       8      $  2,667

Interest Expense:
Interest bearing deposits:
  Savings/NOW accounts               $    593    $   (374)      $     219    $      348       $    214      $    562
Time                                      665        (312)            353           573            (15)          558
Short-term borrowings                      (5)         (1)             (6)          (25)             1           (24)

   Total interest expense            $  1,253     $  (687)      $     566     $     896       $    200      $  1,096

Net interest income (FTE)            $  1,604     $  (419)      $   1,185      $  1,763       $   (192)     $  1,571
</TABLE>
The  change  in  interest  due to  changes  in both  balance  and  rate has been
allocated to change due to balance and change due to rate in  proportion  to the
relationship of the absolute dollar amounts of change in each.

     Tax equivalent net interest  income  increased  $1,185,000 in 1999 over the
prior year due to a $1,751,000  increase in interest income  partially offset by
approximately  $566,000 increase in interest expense.  The increase in income is
attributable  to an increase in average  earning  assets of  $33,000,000  as the
yield declined 49 basis points.  Loan interest  income was $1,473,000  higher in
1999 than the previous  year. The increase was due to an increase of $22,600,000
in average  balances  partly offset by a 38 basis point decrease in rates.  Loan
growth was fueled by general growth in Livingston  County which created a demand
for consumer and  commercial  building  projects.  Income on taxable  securities
increased in 1999 due to a  $7,000,000  increase in average  balances.  Interest
rates  decreased 94 basis points.  Tax-exempt  bonds earned $80,000 more in 1999
than the  previous  year.  The  average  balance of these  securities  increased
$1,700,000  while the rate  declined 23 basis points.  Interest  income on short
term  investments  increased  $58,000 due to an increase in average  balances of
$1,754,000, partially offset by a decrease in rates of 42 basis points.
<PAGE>
     Interest  expense  increased  $566,000  in 1999  because  average  balances
increased  approximately  $31,200,000 although interest rates decreased 38 basis
points.  The  interest  cost for savings  and NOW  accounts  increased  $219,000
because average savings and NOW balances  increased  $19,600,000  while interest
rates  declined 34 basis points.  Interest on time deposits  increased  $353,000
because  average time deposits  increased  $11,700,000  although  interest rates
declined 33 basis  points.  Money market  account once again  enjoyed  growth as
customers responded favorably to the tiered rate structure now being offered and
rising  interest  rates.  Growth in time deposits was  encouraged by competitive
pricing and periodically offering special rates on specific products.

     In the previous year, net interest income had increased nearly  $1,571,000.
The  increase in net  interest  income was the result of an increase in interest
income of  $2,667,000,  partially  offset by an increase in interest  expense of
approximately $1,096,000. The increase in interest income in 1998 was the result
of a $26,800,000 increase in earning assets and an increase in yields on earning
assets of 12 basis  points.  The increase in interest  expense was the result of
average balances  increasing  $22,000,000 and interest rates increasing 10 basis
points.

     In the coming year, management expects growth to continue in both loans and
deposits.  An economic  decline could,  however,  adversely  affect growth.  The
interest  spread and  interest  margin will likely  continue to decline  due, in
part,  to the fact that the interest cost on deposits is expected to continue to
rise as  competition  for  deposits  intensifies  among  the bank  and  non-bank
players.

     The following  table shows the  composition  of average  earning assets and
interest paying liabilities for the years ended December 31:
<TABLE>
                                                               1999            1998            1997
<S>                                                         <C>             <C>             <C>
As a percent of average earning assets:
   Loans                                                     77.59%          78.95%          75.56%
   Securities                                                18.35%          17.18%          23.03%
   Short term investments                                     4.06%           3.87%           1.41%
                                                              -----           -----           -----
      Average earning assets                                100.00%         100.00%         100.00%

   Savings and NOW                                           43.45%          41.10%          40.36%
   Time deposits                                             36.28%          36.42%          36.27%
   Short term borrowing                                        .04%            .08%            .31%
                                                              -----            ----           -----
      Average interest bearing liabilities                   79.77%          77.60%          76.94%

Earning asset ratio                                          91.61%          92.76%          94.14%
Free-funds ratio                                             20.23%          22.40%          23.06%
</TABLE>
Provision for Loan Losses

     The  provision  for loan losses  increased to $840,000 in 1999  compared to
$640,000 in 1998.  At year end the ratio of allowance for loan loss to loans was
2.13%,  consistent  with  that  of the  1998.  Principally  because  of the  19%
commercial loan growth, management increased the loan loss provision by $200,000
in 1999. Management analyzes the adequacy of the allowance quarterly taking into
consideration  the  portfolio  mix,  historical  loss  experience,  the level of
nonperforming loans and loans that have been identified as impaired,  as well as
economic conditions within the Bank's market.
<PAGE>
Non-interest Income

     Non-interest  income,  which includes service charges on deposit  accounts,
loan  fees,  other  operating  income,  and  gain(loss)  on sale of  assets  and
securities  transactions,  increased approximately $61,000 (3%) in 1999 compared
to the previous year.  Contributing to this increase was a $225,000  increase in
charges for services  and a $63,000  increase in trust fees  collected.  Both of
these items  increased due to growth,  of the Bank and of the Trust  Department.
Partly offsetting the above mentioned increases, the gain on loan sales declined
$231,000.  This decrease was  principally  the result of reduced loan volume and
rising mortgage rates. This reduced amount of gains is expected to continue into
the year 2000.

Non-interest Expense

     Non-interest expense increased 16% in 1999. The most significant  component
of non-interest  expense is salaries and benefits expense.  In 1999 salaries and
benefits  expense  increased 12% to $4,800,000,  due to the combined  effects of
salary  increases  and  staffing of a new branch.  Occupancy  expense  increased
$89,000  (15%) due to the new branch  which was put in service in August.  Other
expense increased  $698,000 (21%). The costs associated with conversion to a new
computer  system  and  preparations  for Year 2000  reduced  net  income.  Also,
dampening profits were the start-up costs of opening the Challis Road branch and
the effect of the excess land acquired with that branch site.

     Year 2000 issues were a major concern of the Bank's  management in 1998 and
1999. A great deal of time and money was spent to replace equipment and programs
that were suspect and to conduct exhaustive testing of systems.  The Bank had no
failure of equipment or programs at the turn of the millennium.

Federal Income Tax Expense

     Fluctuations  in income taxes resulted  primarily from changes in the level
of profitability  and in variations in the amount of tax-exempt  income.  Income
tax  expense  decreased  $133,000  to  $1,547,000  (8%)  in  1999.  For  further
information  see Note 8 "Federal  Income  Taxes" in the  Company's  Consolidated
Financial Statements.

Prospective Accounting Changes

     In June 1998, the FASB issued Statement of Financial  Accounting  Standards
No. 133,  Accounting for Derivative  Instruments  and Hedging  Activities  (SFAS
133).  SFAS 133  establishes  accounting and reporting  standards for derivative
instruments and hedging activities.  It requires  recognition of all derivatives
as either  assets or  liabilities  in the  statement of financial  condition and
measurement  of those  instruments  at fair value.  The accounting for gains and
losses on  derivatives  depends  on the  intended  use of the  derivative.  This
Statement is effective for all fiscal  quarters of fiscal years  beginning after
June 15, 1999, with earlier application  encouraged.  Retroactive application is
not  permitted.  SFAS 133 is not  expected to have a  significant  impact on the
financial condition or operations of the Corporation.

     In June 1999,  the FASB  issued  SFAS No. 137,  Accounting  for  Derivative
Instruments  and Hedging  Activities-Deferral  of the Effective Date of FASB No.
133.  Statement  137  extends  the  effective  date of SFAS 133 to fiscal  years
beginning after June 15, 2000.
<PAGE>
                          STOCK AND EARNINGS HIGHLIGHTS

     There is no active market for the Company's  Common Stock,  and there is no
published  information  with respect to its market price.  There are  occasional
direct sales by  shareholders  of which the  Company's  management  is generally
aware.  It is the  understanding  of the management of the Company that over the
last two years,  the Company's Common Stock has sold at a premium to book value.
From  January 1, 1998,  through  December 31,  1999,  there were,  so far as the
Company's  management  knows, 369 sales of shares of the Company's Common Stock,
involving a total of 115,338  shares.  The price was reported to  management  in
these transactions, however there may have been other transactions involving the
company  stock at prices not reported to  management.  During this  period,  the
highest price known to be paid was $42.00 per share during the last two quarters
of 1999, and the lowest price was $30.00 per share in the first quarter of 1998.
To the  knowledge  of  management,  the last sale of Common  Stock  occurred  on
February 29, 2000.

     As of March 1, 2000, there were  approximately 850 holders of record of the
Company's  Stock. The following table sets forth the range of high and low sales
prices of the Company's  Common Stock during 1998 and 1999, based on information
made  available to the  Company,  as well as per share cash  dividends  declared
during those periods.  Although  management is not aware of any  transactions at
higher or lower prices,  there may have been  transactions at prices outside the
ranges listed in the table.

     Sales price and dividend information for the years 1998 and 1999:
<TABLE>
                                                Sales Prices                        Cash Dividends Declared
<S>                                     <C>                      <C>                          <C>
            1998                         High                     Low
First Quarter                           $30.00                   $30.00                       $0.18
Second Quarter                          $35.00                   $35.00                       $0.18
Third Quarter                           $35.00                   $35.00                       $0.20
Fourth Quarter                          $35.00                   $35.00                       $0.49(1)

            1999                         High                     Low
First Quarter                           $40.00                   $40.00                       $0.20
Second Quarter                          $40.00                   $40.00                       $0.20
Third Quarter                           $42.00                   $40.00                       $0.20
Fourth Quarter                          $42.00                   $42.00                       $0.50(2)
</TABLE>
(1)  Includes a special dividend of $0.29 per share.
(2)  Includes a special dividend of $0.30 per share.
<PAGE>
<TABLE>
                             SUMMARY FINANCIAL DATA
                      (in thousands, except per share data)

                                               1999           1998            1997            1996            1995
Income Statement Data:
<S>                                          <C>            <C>             <C>             <C>             <C>
   Interest income                           $21,597        $19,910         $17,276         $15,717         $14,394
   Interest expense                            7,967          7,400           6,305           5,644           4,879
   Net interest income                        13,630         12,510          10,971          10,073           9,515

   Provision for loan losses                     840            640             486             448             448
   Non-interest income                         2,015          1,954           1,851           1,686           1,418
   Non-interest expense                        9,543          8,238           6,982           6,151           5,867
   Income before tax                           5,262          5,586           5,354           5,160           4,618
   Net income                                  3,715          3,907           3,733           3,574           3,200
Basic Per Share Data(1):
   Net income                                  $2.38          $2.49           $2.37           $2.27           $2.03
   Dividends paid                               1.10           1.05            1.00             .93             .68
   Weighted average shares
     outstanding                           1,563,996      1,570,537       1,575,000       1,575,000       1,575,000
Balance Sheet Data:
   Total assets                              296,419        264,894         226,314         202,009         182,958
   Loans, net                                209,952        185,018         158,397         136,067         127,463
   Allowance for loan losses                   4,483          3,958           3,424           3,335           3,097
   Deposits                                  269,190        239,557         202,299         180,944         163,875
   Shareholders' equity                       25,312         23,497          21,732          19,597          17,530
Ratios:
   Dividend payout ratio                      46.31%         42.11%          42.19%          41.13%          33.46%
   Equity to asset ratio                       8.84%          9.13%          10.05%           9.82%           9.61%
</TABLE>
(1) Per  share  data for all  years  has been  restated  to give  effect  to the
three-for-one stock split, payable as a dividend, paid in February 1997.
<PAGE>
Board of Directors


W. Rickard Scofield, Chairman

Charles N. Holkins, Vice Chairman

Gary R. Boss

Donald K. Burkel

Harry E. Griffith

Dona Scott Laskey

James R. McAuliffe

Barbara Draper Martin

Randolph E. Rudisill

R. Michael Yost

Helen V. W. McGarry, Director Emeritus

Donald E. Monroe, Director Emeritus

Roy A. Westran, Director Emeritus
<PAGE>
Officers


Barbara Draper Martin, President and Chief Executive Officer

Herbert W. Bursch, Senior Vice President, Retail Delivery Services

John D. Logan, Senior Vice President, Trust & Investments

Barbara J. Nelson, Senior Vice President and CFO

James Wibby, Senior Vice President, Senior Lender

Dennis P. Gehringer, Senior Vice President, Commercial Lender

Douglas A. Schyck, Senior Vice President, Commercial Lender

Jerry Armstrong, Vice President, Operations

John M. Hulyk, Vice President, Commercial Lender

Nancy Morgan, Vice President, Human Resources

Tomas E. Bell, Jr. , Assistant Vice President, Commercial Lender

David R. Pothier, Assistant Vice President, Commercial Lender

Patricia Griffith, Controller

Gabi Bresett, Branch Manager

Donna Gehringer, Branch Manager

Dawn Little, Branch Manager

Kay E. Pearce, Branch Manager

Lauri L. Trapp, Branch Manager

Diane Miller, Mortgage Officer

Carole Smoter, Loan Officer
<PAGE>
                                   EXHIBIT 21

                                  SUBSIDIARIES


       Name                                        Jurisdiction of Incorporation
       ----                                        -----------------------------
First National Bank in Howell...............................Michigan

H.B. Realty Co..............................................Michigan