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, 1996

                         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. ______

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant,  based  on a per  share  price  of  $25 as of  March  1,  1997,  was
$39,375,000  (common  stock,  no par value).  As of December 31, 1996 there were
outstanding 1,575,000 shares of the Company's Common Stock (no par value). Stock
information  has been  restated to give  effect to a three for one stock  split,
payable as a dividend of two shares for each one share of company  stock held of
record January 16, 1997, paid February 16, 1997.

Documents  Incorporated by Reference:  
Portions of the Company's Proxy Statement for the Annual Meeting of Shareholders
to be held April 23, 1997 are incorporated by reference into Parts 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, 1997, the Bank had  approximately 110 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.

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,  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.  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.  
<PAGE>
No material portion of the Bank's loans is concentrated within a single industry
or group of related industries. As of December 31, 1996, the Bank's certificates
of deposit of $100,000 or more  constituted  approximately  7% 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  77% and 80% of total  revenues for the periods ended December 31,
1996 and December 31, 1995,  respectively.  Interest on  investment  securities,
including   short-term   investments   and  federal   funds  sold,   constituted
approximately 16% and 14% of total revenues in 1996 and 1995. 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.  Fifty-one  percent of the Bank's loan portfolio is in fixed rate
loans.  Most of these  loans,  approximately  94% , mature  within five years of
issuance.  Approximately  $4,400,000 in loans (or roughly 3% of the Bank's total
loan  portfolio)  have  fixed  rates  with  maturities   exceeding  five  years.
Fifty-five percent of the Bank's interest-bearing  deposits are in savings, NOW,
and  MMDAs,  all of which  are  variable  rate  products.  Of the  approximately
$65,800,000 in certificates,  $38,800,000 mature within a year, with 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
$200,000 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  ratio of rate  sensitive
assets to rate sensitive liabilities for the period ended December 31, 1996, was
11% asset  sensitive,  compared to 18% at December 31, 1995.  See discussion and
table under "Liquidity and Funds Management" in Item 7 below.

     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. 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.
<PAGE>
     The Bank's investment policy is considered to be generally conservative. It
provides for  unlimited  investment  in U.S.  government  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.  Nonrated bonds may be purchased from local
communities that are familiar to the Bank, with a maximum block size of a single
purchase limited to $200,000.  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.

     In addition to the above referenced thresholds affecting the acquisition of
investment securities,  holdings of approved "non high-risk mortgage securities"
are required to be "stress  tested" at least  annually.  Any security that fails
this test is  required to be marked to market.  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 six  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. The other three facilities are
located in Brighton,  Hartland, and Fowlerville. See "Properties" below for more
detail on these facilities.  Within these communities, its principal competitors
are Old Kent Bank, First of America 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, 1996, the Bank holds  approximately
17% of local  deposits,  compared  to  approximately  22% held by Old Kent Bank,
approximately 17% held by First of America,  approximately 11% held by D&N Bank,
and  approximately  9% held by Michigan  National Bank.  Information as to asset
size of competitor  financial  institutions  is derived from publicly  available
reports filed by and with regulatory  agencies.  Within the Bank's markets,  Old
Kent Bank  maintains  four branch  offices,  First of America Bank  operates six
branch offices, D&N Bank has five branch offices, and 
<PAGE>
Michigan  National Bank has three branch offices.  Management of the Bank is not
aware of any plans by these  financial  institutions to expand their presence in
the Bank's market, although a de novo bank was opened in Brighton in 1996.

     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  has  led to
increased  competition  among  banks  and  other  financial  institutions  for a
significant  portion  of funds  which have  traditionally  been  deposited  with
commercial  banks.  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, such as trust services, the offer of
nonproprietary mutual fund products, telephone, computer or on-line banking, and
additional branching opportunities. Within the next year, management of the Bank
anticipates establishing a trust department and offering telephone banking.

Growth of Bank

     The following table sets forth certain information  regarding the growth of
the Bank:
<TABLE>
                                                 Balances as of December 31,
                                                      (in thousands)
                                 1996       1995       1994       1993       1992
                                 ----       ----       ----       ----       ----
<S>                             <C>        <C>        <C>        <C>        <C>
Total Assets ................   $202,009   $182,958   $168,438   $155,556   $154,703
Loans, Net of Unearned Income    136,067    127,463    117,008    112,820    108,957
Securities ..................     47,257     35,251     33,891     28,425     25,086
Noninterest-Bearing Deposits      35,048     30,815     29,513     22,000     23,682
Interest-Bearing Deposits ...    145,896    133,060    122,194    118,489    117,243
Total Deposits ..............    180,944    163,875    151,707    140,489    140,925
Shareholders' Equity ........     19,597     17,530     15,305     13,814     12,255
</TABLE>
     During  most of the five  years  presented,  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 a shopping center in
Hartland, one in the village of Fowlerville,  and the sixth, opened in September
of 1992, was a grocery store branch, located west of downtown Howell. In July of
1995, the Bank moved its Hartland facility from the shopping center, which was a
leased  building,  to a new building,  built on property  purchased by the Bank,
just east of the  shopping  center  site.  The Bank  experienced  a decrease  in
deposits in 1993 but steady growth since that time. The 1994 growth is primarily
attributable  to the  growth  at the  Bank's  Brighton  and  Fowlerville  branch
facilities.  In 1995, all branches,  except Brighton, and in 1996 all the Bank's
branches grew due to general growth in the county.
<PAGE>
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.

     The  Company  operates  in a  highly  regulated  industry,  and thus may be
affected  by changes in state and  federal  legislation  and  regulations.  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 banks in other states.  Subject to the approval of the
Michigan Financial  Institutions  Bureau,  effective November 29, 1995, 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 
<PAGE>
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 or 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  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
subsidiary's  of bank holding  companies.  The recent  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  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.  During 1996,  because the BIF reserves had reached the legally
mandated  level of 1.25% of  insured  deposits,  the Bank  paid  only an  annual
membership fee of $2,000.
<PAGE>
     As required by the Deposit  Insurance  Funds Act of 1996,  in 1997 the Bank
will commence making payments to the FDIC for the Financing  Corporation  (FICO)
bonds that were issued previously.  The FICO rate for BIF members banks is 1.296
basis points annually applied to assessable deposits.

     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, 1996 was 14.71% and total risk-based
capital was 15.96%.  At December 31, 1995,  these ratios were 14.30% and 15.55%,
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, 1996 was 9.86%,
while at December 31, 1995 it was 9.83%. The minimum standard  leverage ratio is
3%. See also "Capital" discussion in Item 7 below.

     The Bank is organized as a national  banking  association  and is therefore
regulated and  supervised by the Office of the  Comptroller of the Currency (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 bank holding company,  the Company is
subject to the direct  supervision of the Federal  Reserve Board. 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 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  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. 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 
<PAGE>
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 Michigan  Legislature  adopted,  effective  March 28, 1996,  the Credit
Reform Act.  This  statute,  together  with  amendments  to other  related laws,
permits regulated lenders,  indirectly  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.

     FDIC regulations which became effective April 1, 1996,  impose  limitations
(and in certain cases, prohibitions) on (i) certain "golden parachute" severance
payments  by  troubled  depository  institutions  and their  affiliated  holding
companies to  institution-affiliated  parties  (primarily  directors,  officers,
employees,  or  principal  shareholders  of the  institution),  and (ii) certain
indemnification  payments by a depository  institution or its affiliated holding
company,  regardless of financial condition, to institution-affiliated  parties.
The FDIC regulations impose limitations on indemnification  payments which could
restrict, in certain circumstances, payments by the Company or the Bank to their
respective directors or officers otherwise permitted under the Michigan Business
Corporation Act ("MBCA") or the National Bank Act, respectively.

     On September 30, 1996,  EGRPRA was signed into law,  which provides for the
recapitalization  of  SAIF  and  includes  approximately  40  regulatory  relief
initiatives.  Among other  matters,  this  legislation  provides  for  expedited
application  procedures for nonbanking  activities by well  capitalized and well
managed bank holding  companies,  provides  reform to the Fair Credit  Reporting
Act, and provides  other forms of regulatory  relief to the  financial  services
industry.

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, 1996, 1995, and 1994.

     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 
<PAGE>
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  31 basis  points (5%) in 1996 as a
result of both a decrease in yield on earning assets and an increase in interest
cost on deposits. In 1995 the interest margin increased 23 basis points (4%) due
to an increase in yield on earning assets.
<TABLE>
                                                 Yield Analysis of Consolidated Average Assets and Liabilities
                                                                     (dollars in thousands)
                                              1996                             1995                                1994
                                              ----                             ----                                ----
                                 Average                   Yield/    Average                  Yield/   Average                Yield/
                                 Balance     Interest      Rate      Balance   Interest        Rate    Balance    Interest     Rate
<S>                              <C>          <C>           <C>      <C>        <C>            <C>     <C>        <C>          <C>
Assets:
Interest earning assets:
Federal funds sold ...........      $5,135       $269.2     5.24%     $3,084       $177.7      5.76%    $4,983      $202.4     4.06%
Securities:
   Taxable ...................      32,042      1,906.4     5.95%     25,591      1,444.5      5.64%    23,419     1,263.3     5.39%
   Tax-exempt ................      11,172        853.4     7.64%      9,413        779.5      8.28%     7,601       678.7     8.93%
Loans(1)(2) ..................     130,648     12,946.8     9.91%    122,500     12,237.8      9.99%   114,384    10,489.6     9.17%
                                   -------     --------              -------     --------              -------    --------     
Total earning assets and total
   interest income ...........     178,997    $15,975.8     8.93%    160,588    $14,639.5      9.12%   150,387   $12,634.0     8.40%
                                              ---------                         ---------                        ---------
Cash & due from banks ........       7,195                             6,432                             5,708
All other assets .............       7,341                             6,443                             5,708
Allowance for loan loss.......      (3,281)                           (2,934)                           (2,424)
                                  --------                          --------                          --------
   Total assets ..............    $190,252                          $170,529                          $159,379
                                  ========                          ========                          ========
Liabilities and
   Shareholders' Equity
Interest bearing deposits:
Savings/NOW accounts .........     $76,128     $2,129.9     2.80%    $70,057    $ 1,826.6      2.61%   $71,448    $1,731.5     2.42%
Time .........................      62,577      3,514.5     5.62%     54,924      3,045.1      5.54%    46,882     2,106.4     4.49%
Federal funds purchased ......           4           .2     5.58%        105          6.8      6.43%         0           0     N/A
                                   -------     --------              -------    ---------              -------    -------- 
Total interest bearing
  liabilities and total
  interest expense............     138,709     $5,644.6     4.07%    125,086    $ 4,878.5      3.90%   118,330    $3,837.9     3.24%
                                               --------                         ---------                         --------
Non-interest bearing deposits       31,005                            27,348                            25,233
All other liabilities ........       1,664                             1,797                             1,090
Shareholders' Equity .........      18,874                            16,298                            14,726
                                   -------                           -------                           -------
Total liabilities and
   shareholders' equity ......    $190,252                          $170,529                          $159,379
                                  ========                          ========                          ======== 
Interest spread ..............                              4.86%                              5.22%                           5.16%
                                                            =====                              =====                           =====
Net interest income-FTE ......                $10,331.2                          $9,761.0                         $8,796.1
                                              =========                          ========                         ========
Net interest margin ..........                              5.77%                              6.08%                           5.85%
                                                            =====                              =====                           =====

</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  $451,000 in 1996,
     $440,000 in 1995, and $453,000 in 1994.
<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, 1996 compared to Year   December 31, 1995 compared to Year
                                   ended December 31, 1995           ended December 31, 1994
                                  -----------------------          -----------------------
                                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 .......   $   118    $   (27)   $    91    $   (77)   $    53    $   (24)
Securities:
Taxable ..................       364         98        462        117         64        181
  Tax Exempt .............       146        (72)        74        162        (61)       101

Loans ....................       814       (105)       709        744      1,004      1,748
  Total interest income ..   $ 1,442    $  (106)   $ 1,336    $   946    $ 1,060    $ 2,006

Interest Expense:
Interest bearing deposits:
  Savings/NOW accounts ...   $   159    $   145    $   304    $   (34)   $   129    $    95
Time .....................       424         45        469        361        578        939
Short-term borrowings ....        (7)         0         (7)         7          0          7
   Total interest expense    $   576    $   190    $   766    $   334    $   707    $ 1,041
Net interest income (FTE)    $   866    $  (296)   $   570    $   612    $   353    $   965


</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)
                                          1996      1995      1994
                                          ----      ----      ----
<S>                                       <C>       <C>       <C>
Held to maturity:
U.S. Treasury .........................   $13,996   $ 9,511   $19,120
U.S. Government agencies ..............     1,017     2,033     1,998
States and political subdivisions .....    12,765     9,878     8,964
Mortgage-backed securities ............       352       614       733
FRB Stock .............................        44        44        44
                                          -------   -------   -------   
   Total ..............................   $28,174   $22,080   $30,859
Available for sale:
U.S. Treasury .........................   $18,046   $11,090   $ 1,966
U.S. Government agencies ..............     1,001     2,025       999
Mortgage-backed securities ............        36        56        67
Other securities ......................         0         0         0
                                          -------   -------   -------   
   Total ..............................   $19,083   $13,171   $ 3,032
</TABLE>
     (B)The following table sets forth  contractual  maturities of securities at
December 31, 1996 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 Ten
                                     One Year            Five Years          Ten Years             Years
                               Amount         Yield    Amount     Yield    Amount   Yield      Amount     Yield
<S>                            <C>            <C>      <C>        <C>      <C>       <C>       <C>        <C>
Held to maturity
   U.S. Treasury ...........   $ 1,005        5.09%    $12,991    5.99%
   U.S. Government agencies      1,017        6.04%
   States and political
      subdivisions .........       824        9.21%      4,076    8.51%    7,865     7.72%
   Mortgage backed
      securities ...........       144        6.50%        208    7.04%
   FRB Stock ...............      ____                    ____             _____                   44     6.00%
      Total ................   $ 2,990        6.62%    $17,275    6.60%   $7,865     7.72%        $44     6.00%
                               =======                 ========           ======              =======
Tax equivalent adjustment
   for calculations of yield   $    16                 $    78            $  150
                               =======                 =======            ======
Available for sale
   U.S. Treasury ...........   $ 8,019        6.02%    $10,027    5.98%
   U.S. Government agencies      1,001        5.70%
   Mortgage backed
      securities ...........   _______                      36    7.50%   ______              _______
      Total ................   $ 9,020        5.98%    $10,063    5.99%   $    0              $     0
                               =======                 =======            ======              =======
</TABLE>
<PAGE>
     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:
<TABLE>
                                                                                        Rate on Tax
                                 Tax-Exempt Rate              Adjustment              Equivalent Basis
<S>                                   <C>                        <C>                        <C>
Under 1 year                          6.08%                      3.13%                      9.21%
1-5 years                             5.63%                      2.88%                      8.51%
5-10 years                            5.13%                      2.59%                      7.72%
</TABLE>
     Additional   statistical   information  concerning  the  Bank's  securities
portfolio is  incorporated by reference in Note 2, Pages 14-18, of the Company's
Consolidated Financial Statements for the year ended December 31, 1996.

III LOAN PORTFOLIO

     (A)The table below shows loans outstanding at December 31:
<TABLE>
                                                                         (in thousands)
                                                   1996        1995        1994        1993        1992
                                                   ----        ----        ----        ----        ----
<S>                                               <C>         <C>          <C>         <C>         <C>
Secured by real estate:
   Residential first mortgage                     $ 36,148    $ 36,871     $ 33,842    $ 35,239    $ 38,281
   Residential home equity/other junior liens       12,883      10,566        8,819       9,142       8,890
   Construction and land development                14,042       9,075        8,150       6,505       4,446
   Other                                            43,006      42,454       40,103      36,873      32,288
Consumer                                            12,272      11,233       10,730      10,739      11,956
Commercial                                          15,830      14,546       12,324      11,119      11,284
Other                                                2,360       3,213        3,559       3,746       2,345
                                                  --------    --------     --------    --------    --------
   Total Loans (Gross)                            $136,541    $127,958     $117,527    $113,363    $109,490
</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.
<PAGE>
     (B)The  following  table  shows the amount of  commercial,  financial,  and
agricultural loans outstanding as of December 31, 1996 which, based on remaining
scheduled repayments of principal, are in the periods indicated.
<TABLE>
                                                                           Maturing
                                                                 (in thousands of dollars)
                                                                  After one
                                                   Within one     but within    After five
                                                      year        five years       years          Total
<S>                                                   <C>           <C>             <C>         <C>
Real estate construction & land development.....      $ 9,584       $ 2,459                     $12,043
Real estate other (secured by commercial &
multi-family)...................................        6,550        33,911         2,545        43,006
Commercial (secured by business assets or
unsecured)......................................        6,596         9,177            57        15,830
Other (loans to farmers, political
   subdivisions, & overdrafts)..................          227         2,133             0         2,360
                                                      -------       -------        ------        ------   
Totals..........................................      $22,957       $47,680        $2,602       $73,239
</TABLE>
     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 of dollars)
                                              Fixed Rate                Variable Rate
<S>                                           <C>                       <C>
Due after one but within five years...........$33,658                    $14,022
Due after five years..........................  1,055                      1,547
</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)
                                            1996           1995           1994          1993           1992
                                            ----           ----           ----          ----           ----
<S>                                       <C>            <C>           <C>            <C>              <C>
Nonperforming Loans:
Nonaccrual loans                          $  109         $  926        $   983        $1,568           $709
Loans past due 90 days or more               448             66            295            34            289
                                             ---             --            ---            --            ---
   Total nonperforming loans              $  557         $  992         $1,278        $1,602           $998
                                          ======         ======         ======        ======           ====
Percent of total loans                      .41%           .78%          1.09%         1.41%           .91%
</TABLE>
     Additional   information   concerning   nonperforming   loans,  the  Bank's
nonaccrual policy,  loan impairment,  and loan concentrations is incorporated by
reference  to Note 3 on Pages  18-20  of the  Company's  Consolidated  Financial
Statements for the year ended December 31, 1996.

     There were no other interest bearing assets at December 31, 1996 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, 1996.
<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)
                                                  1996       1995        1994        1993        1992
                                                  ----       ----        ----        ----        ----
<S>                                              <C>         <C>         <C>          <C>         <C>
Loans:
  Average daily balance of loans
           for the year ......................   $ 130,648   $ 122,500   $ 114,384    $ 113,161   $ 108,500
  Amount of loans (gross) outstanding
           at end of the year ................     136,541     127,958     117,527      113,363     109,490
Allowance for loan losses:
   Balance at beginning of year ..............       3,097       2,672       2,205        2,044       1,643
   Loans charged off:
      Real estate ............................          70           0          12            0           0
      Commercial .............................         129         118          37          275         105
      Consumer ...............................          88          91          72          122          56
                                                 ---------   ---------   ---------    ---------   ---------
          Total charge-offs ..................         287         209         121          397         161
Recoveries of loans previously charged off:
      Real estate ............................           1           0           0            0           0
      Commerical .............................          31          95          64           68          16
      Consumer ...............................          45          91          76           41          27
                                                 ---------   ---------   ---------    ---------   ---------
           Total recoveries ..................          77         186         140          109          43
Net loans charged off (recoveries) ...........         210          23         (19)         288         118
Additions to allowance charged to operations .         448         448         448          449         519
                                                 ---------   ---------   ---------    ---------   ---------
           Balance at end of year ............   $   3,335   $   3,097   $   2,672    $   2,205   $   2,044
Ratios:
   Net loans charged off to average loans
       outstanding                                    .16%         .02%       (.02%)       .25%        .11%
   Allowance for loan losses to loans
       outstanding                                   2.44%        2.42%       2.27%       1.94%       1.87%
</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.
<PAGE>
     (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)
                     1996              1995              1994              1993                 1992
                     ----              ----              ----              ----                 ----
              Amount     Percent   Amount  Percent   Amount  Percent   Amount  Percent     Amount       Percent
<S>           <C>        <C>       <C>     <C>       <C>     <C>       <C>     <C>         <C>          <C>
Commercial..  $  830     66.7%     $851    64.7%     $1,093    61.3%   $1,206     57.7%      $1,527      46.3%
Real estate.      70     17.1%       60    19.5%         45    23.1%      113     26.3%         146      28.7%
Consumer ...      90     16.2%       74    15.8%         95    15.6%      144     16.0%         223      25.0%
Unallocated.   2,345              2,112               1,439               742                   148
              ------             ------              ------            ------                ------
      Total   $3,335      100%   $3,097     100%     $2,672     100%   $2,205      100%      $2,044       100%
              ======     =====   ======    =====     ======    =====   ======     =====      ======       ====
</TABLE>
 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)
                                                 1996                    1995                    1994
                                                 ----                    ----                    ----
                                         Average                 Average                   Average
                                         Balance         Rate    Balance         Rate      Balance       Rate
<S>                                      <C>             <C>     <C>             <C>     <C>             <C>
Non-interest bearing demand              $  31,005               $  27,348               $  25,233
Savings, NOW, and money market              76,128       2.80%      70,057       2.61%      71,448       2.42%
Time deposits                               62,577       5.62%      54,924       5.54%      46,882       4.49%
                                            ------                  ------                  ------
      Total                               $169,710       4.07%    $152,329       3.20%    $143,563       2.67%
                                          ========                ========                ========
</TABLE>
     The table for  maturities of  negotiated  rate time deposits of $100,000 or
more  outstanding at December 31, 1996 is incorporated by reference to note 6 on
Page 22 of the Company's  Consolidated  Financial  Statements for the year ended
December 31, 1996.

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>
                                     1996          1995           1994          1993           1992
                                     ----          ----           ----          ----           ----
<S>                                  <C>           <C>            <C>           <C>            <C>
Net income as a percent of:
   Average common equity             19.12%        19.60%         16.63%        17.43%         17.30%
   Average total assets               1.88%         1.88%          1.52%         1.51%          1.35%
</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.
<PAGE>
VII  SHORT-TERM BORROWING

     The information required in this item is not applicable for this Company.

Item 2 - Properties

     The Bank  operates from six  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,  760 South Grand Avenue,  Fowlerville,  Michigan, and 10700
Highland Road, Hartland,  Michigan. All of the offices have ATM machines and all
except the W. 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 1996.

                       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, 1996:

                                                                  First Selected
                                                                   as an Officer
Name (Age)                  Position with Company                 of the Company

Barbara D. Martin (50)      President, Chief Executive                 1983
                            Officer and Director
Janet L. Miesle (60)        Secretary of the Company and               1980
                            Senior Vice President and Cashier
                            of the Bank
Barbara J. Nelson (49)      Treasurer of the Company and Vice          1985
                            President and Controller of the
                            Bank


                                     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, 1995,  through  December 31,  1996,  there were,  so far as the
Company's  management  knows, 136 sales of shares of the Company's Common Stock,
involving a total of 59,931 shares. The price was reported to management in some
of these transactions,  and management has no way of confirming the prices which
were reported. During this period, the highest price known to be paid was $20.00
per share in the last half of 1995 and during all of 1996,  and the lowest price
was $18.33 per share in February 1995. To the knowledge of management,  the last
sale of Common Stock  occurred on February 14, 1997.  All per share  information
has been  restated to give effect to a three for one stock  split,  payable as a
dividend  of two  shares  for each one  share of  company  stock  held of record
January 16, 1997, paid February 16, 1997.

     As of March 1, 1997, there were  approximately 590 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 1995 and 1996, 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 1995 and 1996:
<TABLE>
                                 Sales Prices                     Cash Dividends
                                                                        Declared
        1995             High                    Low
<S>                      <C>                     <C>                   <C>
First Quarter            $18.33                  $18.33                $0.10
Second Quarter           $20.00                  $18.33                $0.12
Third Quarter            $20.00                  $20.00                $0.12
Fourth Quarter           $20.00                  $20.00                $0.35(1)

        1996             High                    Low
First Quarter            $20.00                  $20.00                $0.12
Second Quarter           $20.00                  $20.00                $0.13
Third Quarter            $20.00                  $20.00                $0.13
Fourth Quarter           $20.00                  $20.00                $0.55(2)
</TABLE>
(1)  Includes a special dividend of $0.23 per share.
(2)  Includes a special dividend of $0.42 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)
                                          1996           1995          1994           1993          1992
                                          ----           ----          ----           ----          ----
<S>                                       <C>            <C>           <C>            <C>           <C>
Income Statement Data:
   Interest income                        $15,717        $14,394       $12,412        $11,948       $12,564
   Interest expense                         5,644          4,879         3,838          4,121         4,865
   Net interest income                     10,073          9,515         8,574          7,827         7,699
   Provision for loan losses                  448            448           448            449           519 
   Non-interest income                      1,686          1,418         1,195          1,386         1,346
   Non-interest expense                     6,151          5,867         5,864          5,674         5,729
   Income before tax and
    accounting change                       5,160          4,618         3,457          3,090         2,797
   Net income                               3,574          3,200         2,418          2,311         2,032
Per Share Data(1):
   Income before accounting
    change                                  $2.27          $2.03         $1.54          $1.40         $1.29
   Income after cumulative effect
    of accounting change(2)                  2.27           2.03          1.54           1.47          1.29
   Dividends paid                             .93            .68           .55            .50           .46
   Weighted average shares
     outstanding                        1,575,000      1,575,000     1,575,000      1,575,000     1,575,000
Balance Sheet Data:
   Total assets                           202,009        182,958       168,438        155,556       154,703
   Loans                                  136,067        127,463       117,008        112,820       108,957
   Allowance for loan losses                3,335          3,097         2,672          2,205         2,044
   Deposits                               180,944        163,875       151,707        140,489       140,925
   Shareholders' equity                    19,597         17,530        15,305         13,815        12,255
Ratios:
   Dividend payout ratio                   41.13%         33.46%        35.82%         34.07%        35.84%
   Equity to asset ratio                    9.82%         9.61 %         9.14%          8.45%         7.83%
</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.  (2)
Reflects adjustment due to a change in accounting for income taxes in 1993.

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
subsidiary,  First  National  Bank in  Howell  ("Bank"),  and  should be read in
conjunction with the Consolidated Financial Statements.

FINANCIAL CONDITION

     During 1996 total assets  increased 10% to  $202,009,000.  Contributing  to
this $19 million  increase  was a $10 million  (23%)  increase in short and long
term investments
<PAGE>
and a $8.6 million (7%) increase in loans.  Deposits increased $17 million (10%)
to $180,944,000. Stockholders' equity increased $2 million (12%) to $19,597,000.

Securities
     The security  portfolio is an important source of liquidity for the Bank to
meet unusual  deposit  fluctuations.  The primary  concern of the  management of
First  National  Bank is to ensure  the safety of funds  entrusted  to it by its
depositors  and  shareholders.  Approximately  73% of the security  portfolio is
invested in US government and agency obligations.  Except for a minor holding of
Federal Reserve Bank stock which the Bank is required to own, the balance of the
portfolio   consists  of  tax  exempt   obligations   of  states  and  political
subdivisions.  The  Company's  current and  projected  tax position  makes these
investments  valuable to the Bank.  Investment policy requires  purchases of tax
exempt bonds to be of bonds with AA ratings or better if the maturity  exceeds 4
years unless the bond is a local,  nonrated issue. The following table shows the
percentage makeup of the portfolios as of December 31:
<TABLE>
                                             1996            1995
                                             ----            ----
<S>                                          <C>             <C>
U.S. Treasury & agency securities            72.0%           70.0%
Agency mortgage backed securities              .8%            1.9%
Tax exempt obligations of states
   and political subdivisions                27.1%           28.0%
Other                                          .1%             .1%
                                               ---             ---
      Total securities                      100.0%          100.0%
</TABLE>

     In 1995 the Financial  Accounting Standards Board allowed companies to make
a one time reclassification of securities from held-to-maturity to available-for
sale.  The Bank took advantage of this  opportunity to reclassify  $7,000,000 of
securities to  available-for-sale.  Management felt that this move afforded more
latitude to allow  future sales to meet  liquidity  needs,  for  asset/liability
management purposes, or to obtain improved yields on alternative investments.

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 $8,600,000 (7%) in 1996.

     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 deposits 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 1996 the Bank sold
$9,000,000 in residential mortgages.

     The Bank has also been able to  service  customers  who do not  conform  to
secondary  market  requirements  by offering  variable rate  products  which are
retained in 
<PAGE>
the mortgage portfolio.  These loans are considered nonconforming as they do not
meet certain collateral  requirements of the secondary market and not because of
the credit  quality of the borrower.  Although the mortgage  portfolio  actually
declined by $1,600,000 to  $23,400,000  at year end, its decline would have been
greater had the Bank not made more than $4,000,000 in nonconforming  loans which
it retained in the mortgage portfolio.

     In 1996 there was good commercial loan demand which resulted in a more than
$8,000,000  (10%) increase over the prior year.  Consumer loans increased nearly
$2,000,000  (10%).  The  table  below  explains  the  makeup of the  portion  of
commercial and consumer loans in the Consolidated  Financial Statements that are
collateralized by mortgages.

     Included in the "residential  first mortgage" totals in the table below are
the real estate mortgage loans listed in the Consolidated  Financial  Statements
and loans to commercial customers who pledge their homes as collateral for their
borrowings.  "Other" real estate loans include  $39,000,000  in loans secured by
commercial property with the remaining $4,000,000 secured by multi-family units.
In the  majority  of the loans to  commercial  customers,  which are  secured by
personal or commercial  real estate,  the Bank is relying on the borrower's cash
flow to  service  the  loans.  The  collateral  is taken  as  extra  protection.
Construction and land development  loans have increased  $5,000,000 (55%) as the
growth  in  the  county  has  fueled  the  demand  for  housing  and  commercial
development.

     The growth in home  equity and junior  lien loans has been the result of an
ongoing marketing  campaign.  There has been less growth in consumer loans which
consist of auto loans,  mobile home loans, or other secured or unsecured  loans.
The Bank  does not  offer  credit  cards  but  consumer  loan  balances  include
$1,500,000 in a revolving line of credit product accessible by check. Commercial
loans,  which may be secured by business assets or unsecured,  continued to grow
in 1996. The following table shows balance and percentage  makeup of loans as of
December 31:
<TABLE>
                                                                     (dollars in thousands)
                                                          1996                                 1995
                                                  Balances    Percentage             Balances      Percentage
<S>                                               <C>         <C>                    <C>           <C>
Secured by real estate:
   Residential first mortgage                     $ 36,148         26.5%             $ 36,871         28.8%
   Residential home equity/other junior liens       12,883          9.4%               10,566          8.2%
   Construction and land development                14,042         10.3%                9,075          7.1%
   Other                                            43,006         31.5%               42,454         33.2%
Consumer                                            12,272          9.0%               11,233          8.8%
Commercial                                          15,830         11.6%               14,546         11.4%
Other                                                2,360          1.7%                3,213          2.5%
                                                  --------        -----              --------        ------
   Total Loans (Gross)                            $136,541        100.0%             $127,958        100.0%
</TABLE>
<PAGE>
     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 $200,000  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. The extent of 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)
                                       1996      1995      1994
<S>                                    <C>       <C>       <C>
Nonperforming Loans:
Nonaccrual loans ...................   $  109    $  926    $  983
Loans past due 90 days or more .....      448        66       295
                                       ------    ------    ------
   Total nonperforming loans .......      557       992     1,278
Other real estate ..................      723        46       135
                                       ------    ------    ------
  Total nonperforming assets .......   $1,280    $1,038    $1,413
                                       ======    ======    ======

Nonperforming loans as a
   percent of total loans ..........      .41%      .78%     1.09%

Nonperforming assets as a
   percent of total loans ..........      .94%      .81%     1.20%
Nonperforming loans as a
  percent of the loan loss reserve..       17%       32%       48%
</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.

     Nonperforming  loans  decreased  $435,000 to $557,000 at December 31, 1996.
However the  $723,000 in other real estate at year end 1996 was  included in the
$926,000 in nonaccrual  loans at December 31, 1995. Total  nonperforming  assets
(total  nonperforming loans and other real estate) increased $242,000 during the
year.  The health of the local  economy,  sound  underwriting  standards,  and a
concerted  collection  effort on the part of the Bank have helped  contribute to
the low delinquency rate.

     As indicated in Notes 1 and 3 of the Consolidated Financial Statements, the
Bank adopted Statement of Financial  Accounting Standards No. 114 "Accounting by
Creditors for Impairment of a Loan" in 1995. A loan is considered  impaired when
it is probable  that all or part of amounts due  according  to the  contractural
terms  of the loan  agreement  will be  uncollectible.  Impaired  loans  totaled
$820,000  at  December  31,  1996,  compared  to $900,000 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
$600,000 of commercial loans separately identified as impaired.

     During 1996 the Bank  charged off loans  totaling  $287,000  and  recovered
$77,000 for a net charge off amount of $210,000.  In the previous year, the Bank
had net charge offs  totaling  $23,000.  These low net charge off figures can be
attributed  to a  seasoned
<PAGE>
lending  staff,   conservative   underwriting,   a  good  economic  environment,
aggressive charge off policies,  and repeated collection efforts.  The provision
for loan losses has remained unchanged for the past three years at $448,500.

     The  allowance  for loan losses  totaled  $3,335,000  at year end which was
2.44% of total  loans and more than two and a half times  non-performing  loans.
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.  The following
table shows changes in the loan loss reserve for the years ended December 31:
<TABLE>
                                                               (Dollars in thousands)
                                                         1996        1995        1994
<S>                                                    <C>         <C>         <C>
Balance at beginning of the year ...................   $ 3,097     $ 2,672     $ 2,205
Additions (deduction):
   Loans charged off ...............................      (287)       (209)       (121)
   Recoveries of loans previously charged off ......        77         186         140
   Provision charged to operations .................       448         448         448
                                                       -------     -------     -------    
Balance at end of the year .........................   $ 3,335     $ 3,097     $ 2,672
Allowance for loan losses to loans outstanding .....     2.44%       2.42%       2.27%
</TABLE>
Deposits  
     Deposit  balances of  $180,944,000  at December 31, 1996 were more than $17
million  (10%)  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 $17.4 million during 1996, about
11%.  Non-interest bearing demand deposits increased $3.5 million,  about 13% on
average.  Average  savings and NOW  balances  increased  $.6 million  (9%) while
average time deposits  increased $7.5 million or about 14%. The following  table
sets forth average deposit balances for the years ended December 31:
<TABLE>
                                                        (in thousands)
                                                   1996               1995                 1994
                                                   ----               ----                 ----
<S>                                               <C>                <C>
Non-interest bearing demand                       $ 31,005           $ 27,348             $ 25,233
Savings, NOW and money market                       76,128             70,057               71,448
Time deposits                                       62,577             54,924               46,882
                                                    ------             ------               ------
      Total average deposits                      $169,710           $152,329             $143,563
</TABLE>
     The  increase in  non-interest  bearing  demand  deposits is shared by both
business and consumer customers.  The increase in savings deposits was primarily
due to a  $5.4  million  increase  in  money  market  accounts.  The  growth  in
certificates  was the  result  of  marketing  efforts  aimed  at  attracting  CD
customers and special rates that were offered on particular time products.
<PAGE>
     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 often indicates a reliance upon purchased  funds.  However,  large
certificates  in  the  Bank's  portfolio  consist  of  core  deposits  of  local
customers.  The Bank does not support growth through purchased funds or brokered
deposits.  See Note 6 of the  Consolidated  Financial  Statements for a maturity
schedule of over $100,000 certificates.

Capital
     The  Company's  capital  at  year  end  totaled  $19,600,000,  a more  than
$2,000,000 (12%) 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 9.86% at year
end 1996. 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 14.71% at year end 1996. 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 15.96% at year end.
The Bank's strong capital ratios put it in the best  classification on which the
FDIC bases its assessment charge.
<TABLE>
     The following table lists various capital ratios at December 31:
                                                1996                1995                1994
                                                ----                ----                ----
<S>                                             <C>                 <C>                 <C>
Equity to asset ratio                            9.82%               9.61%               9.14%
Tier 1 leverage ratio                            9.86%               9.83%               9.32%
Tier 1 risk-based capital                       14.71%              14.30%              13.88%
Total risk-based capital                        15.96%              15.55%              15.13%
</TABLE>
     The growth in capital  ratios is due to the  strong  earnings  the Bank has
experienced in the last several years. 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 1996 the Company paid dividends  totaling  $1,470,000,  or 41% of
earnings.  Book  value of the stock was  $12.44  at year end,  restated  to give
effect to a three for one stock  split,  payable as a dividend of two shares for
each one share of company stock held of record  January 16, 1997,  paid February
16, 1997.

     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.
<PAGE>
     In the coming year the Bank will likely  spend in excess of  $1,000,000  on
various technology needs. In addition, the Bank has received regulatory approval
to establish a new branch in the northwest part of Brighton. These projects will
be financed from internally generated funds.

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  requires a minimum 15%  liquidity  ratio.
Throughout 1995 and 1996 the Bank's liquidity ratio exceeded 20%.

     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 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.  The Bank's  policy
requires all purchases of Fed Funds to be approved by senior  management so that
liquidity  needs are known.  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  slightly
more than $5,000,000  compared to $3,000,000 the prior year.  Management strives
to keep a Fed Funds balance of $3-4 million,  a target which will generally meet
liquidity needs. Because of the strong demand deposit growth in 1996, management
chose to remain more liquid. On occasion the Bank borrowed money through the Fed
Funds market. The Bank did not need to sell investment  securities for liquidity
and the borrowings  were a normal part of doing business in times of strong loan
demand and unpredictable deposit swings.

     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 rate  sensitivity  report is
analyzed and strategies  are created to attempt to produce the desired  results.
This report lays out the  repricing  schedule for various  assets and  liability
categories.
<PAGE>
The table below shows the Bank's rate sensitivity as of December 31, 1996:
<TABLE>
                                            0-3        4-12        1-5        5+
                                          Months     Months       Years      Years      Total
<S>                                       <C>         <C>        <C>        <C>         <C>
Assets:
     Loans ............................   $ 51,975    $ 35,504   $ 44,256   $  4,806    $136,541
     Securities .......................      3,179       8,820     26,549      8,709      47,257
     Fed funds ........................      6,500                                         6,500
     Other assets .....................                                       11,711      11,711
                                          --------    --------   --------   --------    --------
           Total assets ...............   $ 61,654    $ 44,324   $ 70,805   $ 25,226    $202,009
Liabilities & Shareholders' Equity:
     Demand, Savings & NOW ............   $ 52,847                          $ 62,326    $115,173
     Time .............................     11,016      31,775     22,968         12      65,771
     Other liabilities and equity .....                                       21,065      21,065
                                          --------    --------   --------   --------    --------
           Total liabilities and equity   $ 63,863    $ 31,775   $ 22,968   $ 83,403    $202,009
Rate sensitivity gap and ratios:
     Gap for period ...................   $ (2,209)   $ 12,549   $ 47,837   $(58,177)
     Cumulative gap ...................     (2,209)     10,340     58,177

Cumulative rate sensitive ratio .......        .97        1.11       1.49       1.00
December 31, 1995 rate sensitive ratio         .92        1.18       1.46       1.00
</TABLE>
     Given the asset  sensitive  position of the Bank at December 31,  1996,  if
interest  rates  decrease  200 basis  points  and  management  did not  respond,
management  estimates that pretax income would decrease  approximately  $400,000
while a similar  increase in rates would  cause  pretax  income to increase by a
like amount.  See discussion  under "Net Interest Income" below. As noted above,
the entire balance of savings,  NOW and MMDAs are 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.

RESULTS OF OPERATIONS

     The Company  achieved record earnings in 1996. Net income of $3,570,000 was
an increase of $374,000  (12%) over 1995  earnings.  The  increase was due to an
increase in both net interest  income and  non-interest  income.  The  Company's
return on average  assets was 1.88% in 1996,  unchanged from the prior year. The
return on average  stockholders'  equity (ROE) was 19.12%,  a decrease  from the
19.60% ROE reported in 1995. The decline in ROE occurred  because average equity
grew 14.5% while earnings grew 12%.
<PAGE>
The following table contains key performance ratios for years ended December 31:
<TABLE>
                                        1996            1995           1994
                                        ----            ----           ----
<S>                                     <C>            <C>            <C>
Net income to:
   Average stockholders' equity         19.12%         19.60%         16.63%
   Average assets                        1.88%          1.88%          1.52%
Earnings per common share:*             $2.27          $2.03          $1.54
</TABLE>
*restated  to give effect to 3 for 1 stock  split,  payable as a dividend of two
shares for each one share of company stock held of record January 16, 1997, paid
February 16, 1997.

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>
                                           1996                     1995                     1994
                                           ----                     ----                     ----
                                    Average      Yield/      Average      Yield/      Average      Yield/
                                    Balance       Rate       Balance       Rate       Balance       Rate
<S>                                 <C>          <C>         <C>          <C>         <C>          <C>
Interest earning assets:
Federal funds sold                   $  5,135    5.24%       $   3,084    5.76%       $   4,983    4.06%
Taxable securities                     32,042    5.95%          25,591    5.64%          23,419    5.39%
Tax-exempt securities                  11,172    7.64%           9,413    8.28%           7,601    8.93%
Loans                                 130,648    9.91%         122,500    9.99%         114,384    9.17%
                                      -------                  -------                  -------
   Total earning assets              $178,997    8.93%        $160,588    9.12%        $150,387    8.40%
Interest bearing funds:
Savings/NOW accounts                 $ 76,128    2.80%       $  70,057    2.61%       $  71,448    2.42%
Time deposits                          62,577    5.62%          54,924    5.54%          46,882    4.49%
Federal funds purchased                     4    5.58%             105    6.43%               0     N/A
                                     --------                 --------                 --------
   Total interest bearing funds:     $138,709    4.07%        $125,086    3.90%        $118,330    3.24%

Interest spread                                  4.86%                    5.22%                    5.16%
Net interest margin                              5.77%                    6.08%                    5.85%
</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, however, includes
net loan  origination  fees  totaling  $451,000 in 1996,  $440,000 in 1995,  and
$453,000 in 1994.
<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, 1996 compared to Year     December 31, 1995 compared to Year
                                     ended December 31, 1995                ended December 31, 1994
                                    -----------------------                -----------------------
                                  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 .......   $   118    $   (27)   $    91    $   (77)   $    53    $   (24)
Securities:
Taxable ..................       364         98        462        117         64        181
  Tax Exempt .............       146        (72)        74        162        (61)       101
Loans ....................       814       (105)       709        744      1,004      1,748
  Total interest income ..   $ 1,442    $  (106)   $ 1,336    $   946    $ 1,060    $ 2,006

Interest Expense:
Interest bearing deposits:
  Savings/NOW accounts ...   $   159    $   145    $   304    $   (34)   $   129    $    95
Time .....................       424         45        469        361        578        939
Short-term borrowings ....        (7)         0         (7)         7          0          7
   Total interest expense    $   576    $   190    $   766    $   334    $   707    $ 1,041
Net interest income (FTE)    $   866    $  (296)   $   570    $   612    $   353    $   965
</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.

     Net interest income increased $570,000 in 1996 over the prior year due to a
$1,336,000  increase  in  interest  income  partially  offset  by  approximately
$766,000 increase in interest expense.  The increase in income can be attributed
to an increase in average earning assets of $18,400,000.  The increase in income
on earning  assets  would have been  greater had the yield not declined 19 basis
points.  Interest income on Fed Funds Sold increased  $91,000 due to an increase
in average balances of more than  $2,000,000,  partially offset by a decrease in
rates of 52 basis points.  Income on taxable securities increased  approximately
$462,000 as both the average balance and the rate increased. Taxable securities,
which consist mostly of U.S.  Treasury notes, grew  approximately  $6,500,000 on
average. The security portfolio grew to accommodate deposit growth. The yield on
taxable securities  increased 31 basis points due to the fact that most of these
bonds are purchased with two year  maturities  and those  purchased in 
<PAGE>
1994 were  maturing  and being  replaced  with 1996 bonds which are now yielding
higher  interest.  On the other hand,  the Bank generally  purchases  tax-exempt
bonds with ten year  maturities.  Rates are lower on bonds being purchased today
than  those  earned  ten  years  ago on the  tax-exempt  bonds  which  they  are
replacing.  Loan interest was $709,000  higher than in 1995. The increase is due
to an increase of nearly $8,000,000 on average balances,  partially offset by an
8 point  decline in rates.  Loan  growth was largely  attributable  to growth in
construction  and land  development  loans. In the consumer  sector,  growth was
primarily in home equity loans.

     Interest  expense  increased in 1996  because  average  balances  increased
approximately  $13,600,000  and interest  rates  increased 17 basis points.  The
increase in interest  bearing funds  balances was evenly split with a $6,000,000
increase in savings  and NOW  accounts,  while time  deposits  grew  $7,600,000.
Savings  balances  increased  as  customers  responded  favorably  to  the  more
aggressive  tiered  rates  instituted  for money  market  accounts  in the third
quarter of 1995.  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  $1,000,000.
The  increase in net  interest  income was the result of an increase in interest
income of  $2,000,000,  partially  offset by an increase in interest  expense of
approximately $1,000,000. The increase in interest income in 1995 was the result
of a $10,000,000 increase in earning assets and an increase in yields on earning
assets of 72 basis  points.  The increase in interest  expense was the result of
average balances  increasing  nearly $7,000,000 and interest rates increasing 17
basis points.

     In the coming year, management expects growth to continue in both loans and
deposits,  although deposits may grow faster than loans as was the case in 1996.
The interest  spread and interest  margin will likely continue to decline unless
the Fed  increases  rates  which is  uncertain.  With  competition  intense  for
deposits, management does not expect deposit rates to decline in 1997.

     The following  table shows the  composition  of average  earning assets and
interest paying liabilities for the years ended December 31:
<TABLE>
                                                          1996            1995          1994
<S>                                                      <C>             <C>           <C>
As a percent of average earning assets:
   Loans                                                  72.99%          76.28%        76.07%
   Securities                                             24.14%          21.80%        20.61%
   Fed funds sold                                          2.87%           1.92%         3.32%
                                                           -----           -----         -----
      Average earning assets                             100.00%         100.00%       100.00%

   Savings and NOW                                        42.53%          43.63%        47.51%
   Time deposits                                          34.96%          34.20%        31.17%
   Fed funds purchased                                         0            .07%             0
                                                         -------         -------       -------
      Average interest bearing liabilities                77.49%          77.90%        78.68%

Earning asset ratio                                       94.08%          94.17%        94.36%
Free-funds ratio                                          22.51%          22.10%        21.32%
</TABLE>
<PAGE>
Provision for Loan Losses
     The provision for loan losses of $448,500  remained the same for 1996 as it
was the prior two years.  This  provision  was  sufficient to produce a ratio of
allowance for loan loss to loans of 2.44% and a ratio of nonperforming  loans to
the  allowance for loan loss of 17% at year end. (See "Loans" on pages 22 & 23).
The growth in commercial  loans,  which  typically  carry more risk, may require
increased  provisions in the future.  Management analysis of the adequacy of the
allowance  considers the portfolio mix 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  by  approximately  $270,000  (19%) in 1996
compared to the  previous  year.  Most of the increase was due to an increase in
service charge income from loans, deposit accounts,  and other banking services.
Service  charge  income  increased  $170,000  (13%) over the prior year,  due to
deposit growth and  adjustments  to some charges made to more fairly  compensate
the Bank for services  performed.  Management  does not anticipate  that service
charge income will continue to grow at the rate experienced in 1996.

     "Other"  non-interest income increased $32,000 to $96,000 in 1996. Included
in 1996 other non-interest income is a nonrecurring  $70,000 gain on the sale of
other real estate. In 1995 there were gains of $24,500 on the sale of other real
estate and $20,000 on the sale of equipment.

Non-interest Expense
     Non-interest  interest  expense  increased 5% in 1996. The most significant
component of  non-interest  expense is salaries and  benefits  expense.  In 1996
salaries and benefits expense increased 2.5% to $3,300,000,  due to the combined
effects  of salary  increases  and  certain  positions  which  were  temporarily
unfilled.

     Occupancy   expense  increased  $30,000  and  equipment  expense  increased
$13,000.  The increase in occupancy was primarily due to increased  depreciation
costs  as  the  main  office  and  Brighton  branch  buildings  both  had  major
renovations  that  were put in  service  in 1996.  Equipment  expense  increased
primarily  because repair and maintenance  costs  increased  while  depreciation
costs decreased.  Management  anticipates that in 1997 some older equipment will
be  replaced  which may  result in  decreased  maintenance  costs but  increased
depreciation.

     Other expense increased $160,000 (9%). The most notable factor contributing
to the  increase in other  expense was a $190,000  increase in fees  because the
Bank hired  consultants for selected  projects.  Further increases in salary and
other expense are  anticipated in 1977 as a trust officer will be hired and some
start up costs for a trust department will be incurred.
<PAGE>
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  increased  $168,000  to  $1,585,500  (12%) in 1996  compared  to a
$379,000  (36%) increase in 1995.  For further  information  see Note 7 "Federal
Income Taxes" in the Company's Consolidated Financial Statements.

Prospective Accounting Changes
     In June 1996 the Financial  Accounting Standards Board issued SFAS No. 125,
"Accounting for Transfers and Servicing of Financial  Assets and  Extinguishment
of  Liabilities"  ("Statement  125"),  which  provides  accounting and reporting
standards for transfers and servicing of financial assets and  extinguishment of
liabilities.  Those standards are based on consistent application of a financial
components  approach  that focuses on control.  Under the  financial  components
approach,  after a  transfer  of  financial  assets,  an entity  recognizes  the
financial and servicing  assets it controls and the liabilities it has incurred,
derecognizes   financial   assets  when  control  has  been   surrendered,   and
derecognizes  liabilities when extinguished.  This statement supersedes portions
of  Statement  122 and is effective  for  transfers  and  servicing of financial
assets and  extinguishment  of  liabilities  occurring  after December 31, 1996.
Statement 125 is not expected to have a material impact on the operating results
or financial condition of the Bank.


Item 8 - Financial Statements and Supplementary Data

     The following  consolidated  financial statements and supplementary data of
the Company appear in the Appendix to the Company's  definitive Proxy Statement,
dated  March 27,  1997,  commencing  at page 23,  relating to the April 23, 1997
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
         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, 1996 and 1995 are reported on page ?? of the Appendix.

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

None
<PAGE>
                                    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 1 through 3 of the
Company's  definitive  proxy  statement,  as filed with the Commission and dated
March 27, 1997,  relating to the April 23, 1997 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
page 4 of the Company's definitive proxy statement, as filed with the Commission
and dated March 27,  1997,  relating  to the April 23,  1997  Annual  Meeting of
Shareholders, is incorporated herein by reference. Information under the caption
"Committee Report on Executive  Compensation" on pages 3 and 4 of the definitive
proxy statement is not  incorporated by reference herein and is not deemed to be
filed with the Securities and Exchange Commission.

Item 12 - Security Ownership of Certain Beneficial Owners and Management

     The information set forth under the caption  "Ownership of Common Stock" on
page 6 of the Company's definitive proxy statement, as filed with the Commission
and dated March 27,  1997,  relating  to the April 23,  1997  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 5 of the Company's definitive proxy statement, as filed with
the Commission  and dated March 27, 1997,  relating to the April 23, 1997 Annual
Meeting of Shareholders, is incorporated herein by reference.
<PAGE>
                                     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 the Appendix to the Registrant's  Definitive
          Proxy Statement,  dated March 27, 1997, relating to the April 23, 1997
          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, 1996.





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 13, 1997.

FNBH BANCORP, INC.



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

/s/ Barbara J. Nelson          Barbara J. Nelson, Treasurer
                               (Principal Accounting Officer)
<PAGE>
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 all Amendments to this Report on Form 10-K.


Roy A. Westran, Chairman of the Board                  /s/ Roy A. Westran


Harry E. Griffith, Vice Chairman of the Board          /s/ Harry E. Griffith


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


Peter H. Burgher, Director                             /s/ Peter H. Burgher


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


Rebecca S. English, Director                           /s/ Rebecca S. English


Charles N. Holkins, Director                           /s/ Charles N. Holkins


S. W. Itsell, Director                                 /s/ S. W. Itsell


Dona Scott Laskey, Director                            /s/ Dona Scott Laskey


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


W. Rickard Scofield, Director                          /s/ W. Rickard Scofield


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)  The Company's Financial Statements, on pages 23 to 40 of the
      Appendix to the Company's Proxy Statement for Annual Meeting
      of Shareholders to be held April 23, 1997.  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..........................................70

     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   Bylaws of the Registrant                 Exhibit 3.2 of Form 10

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

      Material Contracts:

10.2  Howell Branch Lease Agreement            Exhibit 10.2 to Form 10
<PAGE>
<PAGE>




FNBH BANCORP, INC., AND SUBSIDIARY
Consolidated Financial Statements

December 31, 1996 and 1995
With Independent Auditors' Report Thereon)


                            



<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY

                                Table of Contents


                                                                       Page(s)
Independent Auditors' Report                                              1

Consolidated Balance Sheets                                              2-3

Consolidated Statements of Income                                        4-5

Consolidated Statements of Stockholders' Equity                           6

Consolidated Statements of Cash Flows                                    7-8

Notes to Consolidated Financial Statements                               9-35

<PAGE>
                          Independent Auditors' Report


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


We have audited the  consolidated  balance  sheets of FNBH  Bancorp,  Inc.,  and
subsidiary  ("Corporation")  as of  December 31,  1996 and 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of  the  years  in  the  three-year   period  ended  December  31,  1996.  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  subsidiary  as of  DecemberE31,  1996 and 1995,  and the  results  of their
operations and their cash flows for each of the years in the  three-year  period
ended  December 31, 1996,  in  conformity  with  generally  accepted  accounting
principles.

As discussed in notes 1 and 3, the Corporation  changed its method of accounting
for mortgage  servicing  rights in 1996 to adopt the  provisions of SFAS No. 122
Accounting  for  Mortgage  Servicing  Rights,  an  amendment  of SFAS No. 65. As
discussed in Notes 1 and 3, the Corporation changed its method of accounting for
impaired  loans in 1995 to adopt the  provisions of SFAS No. 114,  Accounting by
Creditors for  Impairment  of a Loan, as amended by SFAS No. 118,  Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosures.

                                                  /s/ KPMG Peat Marwick LLP
                                                                    
Detroit, Michigan
January 16, 1997

<PAGE>
<TABLE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
                     Consolidated Balance Sheets, Continued
                           December 31, 1996 and 1995
                Assets                     1996            1995
<S>                                    <C>              <C>
Cash and cash equivalents:
  Cash and due from banks .......   $   7,069,216    $   8,055,641
   Federal funds sold ...........       6,500,000        8,400,000

Total cash and cash equivalents .      13,569,216       16,455,641

Investment securities held-to-
 maturity, net (fair value of
 $28,160,000 in 1996 and
 $21,897,000 in 1995) (note 2) ..      27,821,614       21,465,669
Investment securities available-
 for-sale, at fair value (note 2)      19,047,187       13,115,000
Mortgage-backed securities
 held-to-maturity, net (fair
 value of $353,000 in 1996 and
 $620,000 in 1995) (note 2) .....         351,930          614,118
Mortgage-backed securities
 available for sale, at fair
 value (note 2) .................          35,960           56,483
Total investment and mortgage-
 backed securities ..............      47,256,691       35,251,270

Loans (note 3):
  Commercial ....................      91,015,036       82,793,050
  Real estate mortgage ..........      23,402,833       25,001,209
       Consumer
                                       22,122,885       20,164,158
Total loans .....................     136,540,754      127,958,417

Less unearned income ............        (473,311)        (495,463)
 Less allowance for
   loan losses (note 4) .........      (3,335,044)      (3,096,690)
Net loans .......................     132,732,399      124,366,264

Other real estate owned .........         723,011           45,688
Bank premises and equipment,
  net (note 5) ..................       4,818,603        4,287,299
Accrued interest income and
 other assets (note 7) ..........       2,909,324        2,551,343

 Total assets ...................   $ 202,009,244    $ 182,957,505
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
                           Consolidated Balance Sheets
                           December 31, 1996 and 1995

  Liabilities and Stockholders' Equity       1996           1995
<S>                                          <C>            <C>
Deposits:
 Demand (non-interest bearing) ...........   $ 35,047,948   $ 30,815,052
 NOW .....................................     25,145,241     22,318,050
 Savings and money market accounts .......     54,979,331     51,564,415
 Time (note 6) ...........................     65,771,249     59,177,115

Total deposits ...........................    180,943,769    163,874,632

Accrued interest, taxes,
 and other liabilities ...................      1,468,367      1,553,105

Total liabilities ........................    182,412,136    165,427,737

Stockholders' equity:

  Common stock, $0 par value 
  Authorized 2,100,000 shares;
  1,575,000 shares issued and
  outstanding at December 31,
  1996 and 1995 ..........................      5,250,000      5,250,000

  Retained earnings ......................     14,308,934     12,205,242

  Net unrealized gain on
  securities available-for-sale,
  net of tax (note 2) ....................         38,174         74,526

Total stockholders' equity ...............     19,597,108     17,529,768


Commitments and contingent
 liabilities (notes 9, 10, and 11)

Total liabilities and stockholders' equity   $202,009,244   $182,957,505
</TABLE>
 See notes to consolidated financial statements.
<PAGE>
<TABLE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
                       Consolidated Statements of Income
                 Years ended December 31, 1996, 1995, and 1994

                                                       1996           1995           1994
<S>                                                    <C>            <C>            <C>
Interest and dividend income:
  Interest and fees on loans .......................   $ 12,932,241   $ 12,219,074    $ 10,473,297
     Interest and dividends on investment
      and mortgage-backed securities:
     U.S. Treasury securities ......................      1,639,212      1,167,705       1,094,947
     Obligations of other U.S. government agencies .        264,493        274,156         160,367
     Obligations of state and political subdivisions        609,437        552,542         473,184
     Other securities ..............................          2,655          2,655           7,989
     Interest on federal funds sold ................        269,257        177,663         202,357
                                                       ------------   ------------    ------------

     Total interest income .........................     15,717,295     14,393,795      12,412,141
                                                       ------------   ------------    ------------

Interest expense:
  Interest on deposits .............................      5,644,358      4,871,772       3,837,913
  Interest on other borrowings .....................            213          6,766            --
                                                       ------------   ------------    ------------

     Total interest expense ........................      5,644,571      4,878,538       3,837,913
                                                       ------------   ------------    ------------

     Net interest income ...........................     10,072,724      9,515,257       8,574,228

Provision for loan losses (note 4) .................        448,500        448,500         448,500
                                                       ------------   ------------    ------------
     Net interest income
      after provision for loan losses ..............      9,624,224      9,066,757       8,125,728

    Non-interest income:
       Service charges .............................      1,487,042      1,314,004       1,180,434
       Loss on sale of securities (note 2) .........           --          (30,004)        (80,980)
       Gain on sale of loans .......................        103,209         69,387          58,326
       Other .......................................         95,660         64,088          37,130
                                                       ------------   ------------    ------------

         Total non-interest income .................      1,685,911      1,417,475       1,194,910
                                                       ------------   ------------    ------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
                  Consolidated Statements of Income, Continued
                  Years ended December 31, 1996, 1995, and 1994

                                     1996         1995         1994
<S>                                  <C>          <C>          <C>
Non-interest expenses:
  Salaries and employee benefits .   $3,287,930   $3,207,779   $3,109,116
  Net occupancy expense ..........      494,218      463,043      503,093
  Equipment expense ..............      444,697      431,728      464,453
  Printing and supplies ..........      227,239      220,289      185,453
  Other (note 8) .................    1,696,859    1,543,731    1,601,545
                                     ----------   ----------   ----------

       Total non-interest expenses    6,150,943    5,866,570    5,863,660
                                     ----------   ----------   ----------
Income before federal income taxes    5,159,192    4,617,662    3,456,978

Federal income taxes (note 7) ....    1,585,500    1,417,500    1,038,500
                                     ----------   ----------   ----------
       Net income ................    3,573,692    3,200,162    2,418,478
                                     ----------   ----------   ----------
Net income per share .............   $     2.27   $     2.03   $     1.54
                                     ==========   ==========   ==========
Cash dividends per share .........   $      .93   $      .68   $      .55
                                     ==========   ==========   ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
                 Consolidated Statements of Stockholders' Equity
                  Years ended December 31, 1996, 1995, and 1994
                                                                                Net Unrealized
                                                                                 Gain (Loss) on
                                                                                 Securities
                                                                                 Available-for-
                                               Common         Retained           Sale, Net of 
                                               Stock          Earnings           Tax (Note 2)    Total
                                               -----          --------            --------        -----
<S>                                            <C>            <C>                 <C>           <C>
Balances as of December 31, 1993 ...........   $  5,250,000   $  8,529,102    $     35,448    $ 13,814,550

Net income .................................           --        2,418,478            --         2,418,478
    Changes in unrealized loss on
    securities available for sale ..........           --             --           (62,046)        (62,046)
    net of tax
Cash dividends ($.55 per share) ............           --         (866,250)           --          (866,250)
                                                                                                         
Balances at December 31, 1994 ..............      5,250,000     10,081,330         (26,598)     15,304,732

Net income .................................           --        3,200,162            --         3,200,162
    Changes in unrealized loss on
    securities available for sale-- ........           --             --           101,382         101,382
    net of tax
    Implementation of Guide to
    Implementation of Statement ............           --             --              (258)           (258)
    115, net of tax
Cash dividends ($.68 per share) ............           --       (1,076,250)           --        (1,076,250)
                                                                                                               
Balances at December 31, 1995 ..............      5,250,000     12,205,242          74,526      17,529,768

Net income .................................           --        3,573,692            --         3,573,692
Changes in unrealized gain on securities
 available for sale, net ...................           --             --           (36,352)        (36,352)
of tax
Cash dividends ($.93 per share) ............           --       (1,470,000)           --        (1,470,000)
                                                                                                                

Balances at December 31, 1996 ..............   $  5,250,000   $ 14,308,934    $     38,174    $ 19,597,108
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
                      Consolidated Statements of Cash Flows
                  Years ended December 31, 1996, 1995, and 1994
                                              1996            1995            1994
<S>                                           <C>             <C>             <C>
Cash flows from operating activities:
  Net income ..............................   $  3,573,692    $  3,200,162    $  2,418,478
  Adjustments to reconcile
     net income to net cash
     provided by operating activities:
   Provision for loan losses ..............        448,500         448,500         448,500
   Depreciation and amortization ..........        402,592         384,315         423,791
   Deferred federal income tax
      expense (benefit) ...................        (42,900)          8,000        (214,000)
   Net amortization on investment
       securities .........................         50,581          88,873         132,757
   Loss on disposal of equipment ..........          1,668           3,762          17,305
   Loss on sales of securities ............           --            30,004          80,980
   Gain on sale of loans ..................       (103,209)        (69,387)        (58,326)
   Proceeds from sale of loans ............     10,920,683       5,557,668       9,486,872
   Origination of loans held for sale .....    (11,608,783)     (5,738,281)     (9,486,872)
   (Increase) decrease in accrued
     interest income and other assets .....       (992,404)         23,041          12,807
   Increase (decrease) in accrued
     interest, taxes, and other
     liabilities ..........................        (66,038)         74,400         205,325
Net cash provided by operating activities .      2,584,382       4,011,057       3,467,617

Cash flows from investing activities:
   Purchases of available-for-sale
      securities ..........................     (9,979,018)     (6,016,056)     (2,999,531)
   Proceeds from sales of
      available-for-sale securities .......           --         3,037,422       1,925,859
   Proceeds from maturities of
      available-for-sale securities .......      4,000,000            --         2,000,000
   Repayments from mortgage-backed
      securities available-for-sale .......         19,531          14,954         146,350
   Purchases of held-to-maturity securities    (17,608,826)     (3,447,071)    (15,242,811)
   Proceeds from maturities and calls
      of held-to-maturity securities ......     11,316,782       4,965,000       8,202,000
   Repayments from mortgage-backed
      securities held to maturity .........        140,477         119,662         194,432
   Net increase in loans ..................     (8,023,327)    (10,228,892)     (4,111,361)
   Capital expenditures ...................       (935,563)     (1,231,516)       (391,657)
     Net cash used by investing activities.    (21,069,944)    (12,786,497)    (10,276,719)
                                                       
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
                     Consolidated Statements of Cash Flows,
                       Continued Years ended December 31,
                              1996, 1995, and 1994

                                             1996             1995             1994
<S>                                        <C>             <C>             <C>
Cash flows from financing activities:
   Net increase in deposits ............   $ 17,069,137    $ 12,167,639    $ 11,218,377
   Dividends paid ......................     (1,470,000)     (1,076,250)       (866,250)

       Net cash provided by
         financing activities ..........     15,599,137      11,091,389      10,352,127

Net increase (decrease) in
    cash and cash equivalents ..........     (2,886,425)      2,315,949       3,543,025

Cash and cash equivalents
    at beginning of year ...............     16,455,641      14,139,692      10,596,667

Cash and cash equivalents
    at end of year .....................   $ 13,569,216    $ 16,455,641    $ 14,139,692

Supplemental disclosures:
  Interest paid ........................   $  5,674,395    $  4,826,022    $  3,816,845
  Federal income taxes paid ............      1,645,000       1,427,500       1,109,000
  Loans transferred to other real estate        723,011          45,688         132,701
  Loans charged off ....................        287,285         209,300         120,574

Transfer of investment securities to
  available-for-sale classification: ...           --         7,058,046            --
</TABLE>
See notes to consolidated financial statements.
<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
                   Notes to Consolidated Financial Statements
                           December 31, 1996 and 1995



(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 subsidiary, First National Bank in
          Howell.  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,
          and   U.S.   Savings   Bonds.   The   Bank   serves   primarily   four
          communitiesNHowell,  Brighton,  Hartland, and FowlervilleNall of which
          are located in Livingston County, Michigan.

          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 subsidiary  ("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 at December 31, 1996 and 1995,  consist of U.S.
          Treasury,   municipal  bond,  and  government  agency  securities.  In
          accordance  with  SFAS  No.  115,  the  Bank  classifies  its debt and
          marketable  equity  securities  in one of three  categories:  trading,
          available-for-sale, or held-to-maturity. Trading securities are bought
          and held principally for the purpose of selling them in the near term.
          Held-to-maturity securities are those securities in which the Bank has
          the ability and intent to hold the security until maturity.  All other
          securities not included in trading or held-to-maturity  are classified
          as available-for-sale.
<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
              Notes to Consolidated Financial Statements, Continued

(1) Summary of Significant Accounting Policies, Continued
             

     (b) Investment and Mortgage-Backed Securities, Continued

          Trading and available-for-sale  securities are recorded at fair value.
          Held-to-maturity  securities  are recorded at amortized cost, adjusted
          for the amortization or accretion of premiums or discounts. Unrealized
          holding  gains and  losses  on  trading  securities  are  included  in
          earnings.  Unrealized holding gains and losses, net of the related tax
          effect,  on  available-for-sale  securities are excluded from earnings
          and are reported as a separate component of stockholders' equity until
          realized.  Transfers of securities  between categories are recorded at
          fair value at the date of transfer.

          A  decline  in  the  market   value  of  any   available-for-sale   or
          held-to-maturity  security  below  cost  that  is  deemed  other  than
          temporary   results  in  a  charge  to  earnings,   resulting  in  the
          establishment of a new cost basis for the security.

          Premiums and  discounts are amortized or accreted over the life of the
          respective   security   as  an   adjustment   to   yield   using   the
          effective-interest  method. Dividend and interest income is recognized
          when earned.  Realized gains and losses for  securities  classified as
          available-for-sale  are included in earnings and are derived using the
          specific-identification  method for determining the cost of securities
          sold.

     (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 an 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.

          Effective  January  1,  1996,  the  Bank  adopted  the  provisions  of
          statement of Financial Accounting Standards (SFAS) No. 122, Accounting
          for Mortgage  Servicing  Rights, an amendment of SFAS No. 65. The Bank
          originates  mortgage loans for sale to the secondary market, and sells
          the loans with servicing retained.
<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
              Notes to Consolidated Financial Statements, Continued

(1) Summary of Significant Accounting Policies, Continued
                                 
     (c) Loans, Continued

          Beginning in 1996,  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   risks   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 though 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  carefully  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.
<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
              Notes to Consolidated Financial Statements, Continued

(1) Summary of Significant Accounting Policies, Continued

     (e) Nonperforming Assets

          Effective January 1, 1995, the Bank adopted the provisions of SFAS No.
          114,  Accounting by Creditors for  Impairment of a Loan.  SFAS No. 114
          requires that impaired loans be measured based on the present value of
          expected  future  cash  flows,  discounted  at  the  loan's  effective
          interest  rate or at the loan's  observed  market  price,  or the fair
          value  of the  collateral  if the loan is  collateral-dependent.  This
          statement   applies   to  all  loans  that  are   restructured   in  a
          troubled-debt  restructuring  involving a modification of terms.  SFAS
          No. 114 was  amended in October  1994 by SFAS No. 118,  Accounting  by
          Creditors  for  Impairment  of  a  Loan  -  Income   Recognition   and
          Disclosures.  This  amendment  allows for interest  income on impaired
          loans to be recognized using existing methods and deletes those income
          recognition provisions described in 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.  In evaluating the portfolio
          for impairment,  management takes into consideration  several factors,
          including current economic conditions,  past loan loss experience, the
          estimated value of any underlying collateral,  the overall balance and
          composition  of the loan  portfolio,  and  management's  evaluation of
          collectibility of specific loans.

          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,  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.
<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
              Notes to Consolidated Financial Statements, Continued

(1) Summary of Significant Accounting Policies, Continued

     (e) Nonperforming Assets, Continued

          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) Other Real Estate Owned

          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.

     (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  different  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 SUBSIDIARY
              Notes to Consolidated Financial Statements, Continued

(1) Summary of Significant Accounting Policies, Continued

     (i) 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 5Epercent  of total  employee  earnings  plus  50Epercent  of
          employee contributions  (limited to 10Epercent of their earnings),  or
          the maximum amount permitted by the Internal Revenue Code. The pension
          plan expense of the Bank for 1996,  1995,  and 1994 was  approximately
          $200,000, $175,000, and $185,000, respectively.

     (j) Statements of Cash Flows

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

     (k) Stock Split

          On January 16, 1997, the Board declared a  three-for-one  stock split,
          payable  as a  dividend  of two  shares  for each one share of company
          stock  held of record  January  16,  1997.  The  dividend  is  payable
          February  16,  1997.   The  stock  split   increased   FNBH  Bancorp's
          outstanding common shares from 525,000 to 1,575,000 shares. Additional
          paid-in  capital and common stock were not restated as a result of the
          stock split as the par value of the stock was zero.  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.

     (2) Investment and Mortgage-Backed Securities

          During November 1995, the Financial  Accounting Standards Board issued
          a Guide to  Implementation  of Statement 115 on Accounting for Certain
          Investment  in Debt and Equity  Securities.  This guide  allowed for a
          one-time change in the classification of SFAS No. 115 securities as of
          the date of the  implementation  guide, but no later than December 31,
          1995. As a result,  the Bank made a one-time transfer of approximately
          $7,000,000   of   investment    securities   held   to   maturity   to
          available-for-sale  in 1995.  The market value of the  securities  was
          $7,065,000 at the date of transfer.
<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
              Notes to Consolidated Financial Statements, Continued

(2) Investment and Mortgage-Backed Securities, Continued

          A  summary  of the  amortized  cost  and  approximate  fair  value  of
          investment securities at December 31, 1996, 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 securities .............   $13,995,601   $14,038,000   $17,989,344   $18,046,250
Obligations of other U.S. ............
  government agencies ................     1,017,277     1,020,000     1,000,185     1,000,937
Obligations of states and
    political subdivisions ...........    12,764,486    13,058,000          --            --
Other securities .....................        44,250        44,000          --            --
                                   
                                          27,821,614    28,160,000    18,989,529    19,047,187
Mortgage-backed
    securities .......................       351,930       353,000        35,745        35,960
                                                        
                                         $28,173,544   $28,513,000   $19,025,274   $19,083,147
</TABLE>
<TABLE>
          A summary of unrealized  gains and losses on investment  securities at
          December 31, 1996, follows: 

                                 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 securities .    $ 53,730       $ 11,331       $ 63,565       $  6,659
Obligations of other U.S. 
government agencies ......       2,723            --             752             --
Obligations of states and
political subdivisions ...     318,349         24,835             --             --
Other securities .........        --              250             --             --
Mortgage-backed securities       1,070            --             215             --

                              $375,872       $ 36,416       $ 64,532       $  6,659
</TABLE>
<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
             Notes to Consolidated Financial Statements, Continued

(2) Investment and Mortgage-Backed Securities, Continued

          The amortized cost and approximate fair value of investment securities
          at December  31,  1996,  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            $    2,845,885      $    2,851,000      $    9,003,200      $    9,020,312
    Due after one year through
    five years                             17,066,724          17,242,000           9,986,329          10,026,875
    Due after five years
    through ten years                       7,864,755           8,023,000                  --                  --
    Due after ten years                        44,250              44,000                  --                  --
                                              
                                           27,821,614          28,160,000          18,989,529          19,047,187
    Mortgage-backed securities
    (principally short-term)                  351,930             353,000              35,745              35,960
                               
                                       $   28,173,544      $   28,513,000      $   19,025,274      $   19,083,147
</TABLE>                                  
          The amortized cost and approximate fair value of investment securities
          of  states   (including  all  their   political   subdivisions)   that
          individually   exceeded   10Epercent   of   stockholders'   equity  at
          December 31, 1996 and 1995, are as follows:
<TABLE>
                                  1996                               1995
                          Amortized      Approximate      Amortized        Approximate
                            Cost         Fair Value         Cost           Fair Value
<S>                      <C>             <C>              <C>              <C>
State of Michigan        $6,875,131      $7,014,526       $5,243,554       $5,449,000
                              
</TABLE>
          Investment  securities,   with  an  amortized  cost  of  approximately
          $500,000 at December 31, 1996 and 1995,  were pledged to secure public
          deposits and for other purposes as required or permitted by law.
<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
              Notes to Consolidated Financial Statements, Continued

(2) Investment and Mortgage-Backed Securities, Continued

          A  summary  of the  amortized  cost  and  approximate  fair  value  of
          investment securities at December 31, 1995, 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 securities           $    9,510,704      $    9,525,000      $   11,002,723      $   11,090,313
    Obligations of other U.S.
    government agencies                     2,033,158           2,049,000           2,000,559           2,024,687
    Obligations of states and
    political subdivisions                  9,877,557          10,279,000                  --                  --
    Other securities                           44,250              44,000                  --                  --
                                               
                                           21,465,669          21,897,000          13,003,282          13,115,000
    Mortgage-backed securities                614,118             620,000              55,275              56,483
                                        
                                       $   22,079,787      $   22,517,000      $   13,058,557      $   13,171,483
</TABLE>                                     

          A summary of unrealized  gains and losses on investment  securities at
          December 31, 1995, 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 securities           $     31,253         $    16,957        $     87,590          $    --
    Obligations of other U.S.
    government agencies                      15,842                  --              24,128               --
    Obligations of states and
    political subdivisions                  405,315               3,872                  --               --
    Other securities                             --                 250                  --               --
    Mortgage-backed securities                5,882                  --               1,208               --
                                          
                                       $    458,292         $    21,079        $    112,926          $    --
</TABLE>                                   
<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
              Notes to Consolidated Financial Statements, Continued

(2) Investment and Mortgage-Backed Securities, Continued

          In  1996,  no  investment  securities  available-for-sale  were  sold.
          Accordingly,  no  realized  gains or losses  were  recorded.  The Bank
          recognized  gross losses of $30,004 and $80,980  during 1995 and 1994,
          respectively, on the sale of investment securities available-for-sale.
          No gains were realized in 1995 and 1994.

(3) Loans

          Loans on nonaccrual  amounted to $109,000,  $926,000,  and $983,000 at
          December 31, 1996,  1995, and 1994,  respectively.  If these loans had
          continued to accrue  interest in accordance with their original terms,
          approximately $12,000, $138,000, and $116,000 of interest income would
          have been realized in 1996, 1995, and 1994, respectively. The Bank had
          no troubled-debt restructured loans at December 31, 1996 and 1995.

          Details of past-due and nonperforming loans follow:
<TABLE>

                                             90 Days Past Due
                                            and Still Accruing              Nonaccrual
                                          1996            1995          1996           1995
    <S>                                 <C>              <C>           <C>            <C>
    Commercial and mortgage
      loans secured by real
      estate                             $434,000        $64,000       $ 80,000       $918,000
    Consumer loans                             --          2,000          2,000             --
    Commercial and other                   14,000             --         27,000          8,000
    loans
                                         $448,000        $66,000       $109,000       $926,000
</TABLE>                                     
          Impaired loans totaled  $820,000 and $900,000 at December 31, 1996 and
          1995,  respectively.  Specific  reserves  relating to these loans were
          $70,000 and  $280,000  at  DecemberE31,  1996 and 1995,  respectively.
          These  reserves were  calculated in accordance  with SFAS No.E114.  No
          adjustments to the provision or allowance for loan losses was required
          as a result of the 1995 adoption of SFAS No. 114.  There were no other
          loans  considered  impaired  for which  there was no related  specific
          reserve.
<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
              Notes to Consolidated Financial Statements, Continued

(3) Loans, Continued

          Cash  receipts  received and  recognized  as income on impaired  loans
          approximated  $210,000 and  $100,000  for the year ended  December 31,
          1996 and 1995, respectively. Average impaired loans for the year ended
          December  31,  1996  and  1995,   were   approximately   $970,000  and
          $1,100,000, respectively .

          Loans serviced for others were approximately $33,900,000, $29,500,000,
          and $29,700,000 at December 31, 1996, 1995, and 1994, respectively.

          During 1996, the Bank capitalized $63,000 in mortgage servicing rights
          and incurred  approximately $8,000 in related amortization expense. At
          December 31, 1996,  these mortgage  service rights had a fair value of
          approximately  $60,000.  Mortgage loans with mortgage servicing rights
          capitalized totaled approximately  $9,000,000 at December 31, 1996. No
          valuation  allowances for capitalized  mortgage  servicing rights were
          considered necessary as of December 31, 1996.

          The ongoing impact of FAS 122 is dependent  upon,  among other things,
          the volume of loan originations, the general levels of market interest
          rates, and the rate of estimated prepayments.  Accordingly, management
          is unable to predict with any reasonable certainty what effect FAS 122
          will have on the Bank's future  results of operations or its financial
          condition.

          Included in real estate loans at December 31, 1996 were  approximately
          $688,000 of fixed rate mortgage loans held for sale.

          There were no mortgage loans held for sale at December 31, 1995.

          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.

          Certain  directors and executive  officers,  including their immediate
          families and companies in which they are principal  owners,  were loan
          customers of the Bank during 1996,  and 1995.  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 collection
          risk.
<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
              Notes to Consolidated Financial Statements, Continued

(3) Loans, Continued

          Loans  to  related  parties  are  summarized  below  for  the  periods
          indicated:
<TABLE>
                                  1996            1995
<S>                            <C>            <C>
Balance at beginning of year   $   885,000    $   403,000

New loans ..................       400,000        599,000
Loan repayments ............      (239,000)      (117,000)

Balance at end of year .....   $ 1,046,000    $   885,000
</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, 1996, 1995, and 1994:
<TABLE>
                                   1996            1995           1994
<S>                               <C>            <C>            <C>                           
Balance at beginning of year ..   $ 3,096,690    $ 2,672,007    $ 2,204,743

Provision charged to operations       448,500        448,500        448,500
Loans charged off .............      (287,285)      (209,300)      (120,574)
Recoveries of loans charged off        77,139        185,483        139,338

Balance at end of year ........   $ 3,335,044    $ 3,096,690    $ 2,672,007
</TABLE>
<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
              Notes to Consolidated Financial Statements, Continued

(5) Bank Premises and Equipment

          Asummary of bank  premises  and  equipment,  and  related  accumulated
          depreciation and amortization at December 31, 1996 and 1995, follows:
<TABLE>
                                   1996           1995 
<S>                             <C>            <C>
Land and land improvements ..   $ 1,028,961    $ 1,034,526
Bank premises ...............     4,297,656      3,745,378
Furniture and equipment .....     2,992,840      2,777,037
                                  8,319,457      7,556,941
Less accumulated depreciation
 and amortization ...........    (3,500,854)    (3,269,642)
                                $ 4,818,603    $ 4,287,299
</TABLE>
(6) Time Certificates of Deposit

                                                                           
          At December 31, 1996, the scheduled maturities of time deposits with a
          remaining term of more than one year were:

            Year of Maturity                     1996

                1998                    $      10,923,529
                1999                            6,337,357
                2000                            3,142,743
                2001                            2,666,229
             Thereafter                            11,858

                                         $     23,081,716

<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
              Notes to Consolidated Financial Statements, Continued

(6) Time Certificates of Deposit, Continued

          Included in time  deposits are  certificates  of deposit in amounts of
          $100,000 or more. These certificates and their remaining maturities at
          December 31, 1996, 1995, and 1994, are as follows:
<TABLE>
                               1996          1995            1994
<S>                         <C>           <C>           <C>
Three months or less ....   $ 2,608,872   $ 5,154,950   $ 4,313,339
Three through six months      3,411,513       300,000       600,000
Six through twelve months     4,009,637     3,014,681       608,646
Over twelve months ......     2,183,637     1,351,748     1,477,881

                            $12,213,659   $ 9,821,379   $ 6,999,866
</TABLE>

          Interest  expense  attributable  to the  above  deposits  amounted  to
          approximately  $591,000,  $467,000,  and $266,000 in 1996,  1995,  and
          1994, respectively.

(7) Federal Income Taxes

          Income tax expense from operations consists of:
<TABLE>
               1996           1995           1994                                          
<S>        <C>            <C>           <C>
Current    $ 1,628,400    $ 1,409,500   $ 1,252,500
Deferred       (42,900)         8,000      (214,000)

           $ 1,585,500    $ 1,417,500   $ 1,038,500
</TABLE>
<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
              Notes to Consolidated Financial Statements, Continued

(7) Federal Income Taxes, Continued

          Income tax expense  differed from the amounts computed by applying the
          U.S.  federal  income  tax rate of 34  percent  to pretax  income as a
          result of the following:
<TABLE>
<S>                                           <C>            <C>            <C>
Computed "expected" tax expense ...........   $ 1,754,125    $ 1,570,000    $ 1,175,373
Increase (reduction) in tax resulting from:
Tax-exempt interest and dividends, net ....      (193,100)      (181,300)      (159,480)
Other, net ................................        24,475         28,800         22,607

                                              $ 1,585,500    $ 1,417,500    $ 1,038,500
</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, 1996 and 1995, are presented below:
<TABLE>
                                          1996             1995
<S>                                    <C>             <C>
Deferred tax assets:
Loan loss reserve ..................   $   999,100    $   918,100
Deferred loan fees .................          --           15,000
Other ..............................       158,900        160,700

Total gross deferred tax assets ....     1,158,000      1,093,800
Deferred tax liabilities:
Deferred fees ......................       (15,400)          --
Unrealized gain on securities
  available for sale ...............       (19,700)       (13,702)
Other ..............................       (25,700)       (19,800)
Total gross deferred tax liabilities       (60,800)       (33,502)

Net deferred tax asset .............   $ 1,097,200    $ 1,060,298
</TABLE>
<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
              Notes to Consolidated Financial Statements, Continued

(8) Supplementary Income Statement Information

          Other  than the items  listed,  other  non-interest  expenses  did not
          include any amounts that exceeded 1 percent of total revenue, which is
          the sum of total interest income and total non-interest income.
<TABLE>
                                1996        1995         1994
<S>                            <C>        <C>           <C>
Other fees .................   $328,475   $133,616       $170,482

Supplies ...................   $227,239   $220,289       $185,453

Marketing ..................   $188,834   $176,504       $161,935

Michigan Single Business Tax   $159,000   $149,800       $158,500
</TABLE>

(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, 1996, are as follows:


Year ending December 31:
           1997                                       34,000
           1998                                       38,000
           1999                                       38,000
           2000                                       38,000
           2001                                       38,000
Later years, through 2007                            243,500

          Rental expense charged to operations in 1996,  1995, and 1994 amounted
          to  approximately   $39,000,   $66,000,  and  $94,000,   respectively,
          including amounts paid under short-term, cancelable leases.
<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
              Notes to Consolidated Financial Statements, Continued

(10) 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.

          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, 1996 and 1995, are as follows: 
<TABLE>
                                        1996                1995 
       <S>                            <C>               <C>
       Fixed-rate                     $8,200,000        $5,600,000
       Variable-rate                  30,800,000        22,200,000
                                        
         Total credit commitments    $39,000,000       $27,800,000
                                       
       Letters of credit             $   710,000       $   850,000
</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.
<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
              Notes to Consolidated Financial Statements, Continued

(10) Financial Instruments with Off-Balance-Sheet Risk, Continued
                    

          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  commitments at December 31, 1996 and 1995, is in excess
          of the committed amount.

(11) 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  quantitative  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).

          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.
<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
              Notes to Consolidated Financial Statements, Continued

(11) Capital, Continued

          The Bank's actual capital amounts and ratios are also presented in the
          following table as of December 31, 1996 and 1995:
<TABLE>
                                             1996               1995
<S>                                        <C>             <C>
Tier 1 .................................   $ 19,526,000   $ 17,393,000
Tier 2 .................................      1,660,000      1,520,000

Total risk-based capital ...............     21,186,000     18,913,000

Risk-weighted assets ...................    130,002,000    119,899,000
Risk-weighted off-balance sheet exposure      2,776,000      1,695,000


Total risk-weighted assets .............    132,778,000    121,594,000
</TABLE>
<TABLE>
                                              Minimum Ratios
                                                for Well-
                                               Capitalized
                                               Institutions               1996              1995             1994
<S>                                               <C>                     <C>               <C>                                    
Tier 1 risk-based capital                         6.00%                  14.71%            14.30%           13.90%
ratio

Total risk-based capital ratio                    10.00%                 15.96%            15.55%           15.13%

Tier 1 leverage ratio                              5.00%                  9.86%             9.83%            9.32%
</TABLE>

(12) 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,  is  expected  to have a  material  effect  on the  Bank's
          financial position or results of operations.
<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
              Notes to Consolidated Financial Statements, Continued


(13) 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 and federal funds 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.

     Loans Receivable

          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 values for fixed-rate  one- to four-family
          residential  mortgage  loans  are  based on  quoted  market  prices of
          similar loans sold in conjunction  with  securitization  transactions,
          adjusted for  differences in loan  characteristics.  The fair value of
          other types 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.   The  carrying  amount  of  accrued  interest  receivable
          approximates the loans' fair value.
<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
              Notes to Consolidated Financial Statements, Continued

(13) Fair Value of Financial Instruments, Continued
                                      
     Deposit Liabilities

          The fair value of  deposits  with no stated  maturity,  such as demand
          deposits,  savings,  NOW, and money market  accounts,  is equal to the
          amount payable on demand.  The fair value of  certificates of deposits
          is estimated using rates  currently  offered for deposits with similar
          remaining  maturities.  The fair  value of  accrued  interest  payable
          approximates its carrying 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 $330,000 and $200,000 at December 31, 1996
          and 1995, respectively.
<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
              Notes to Consolidated Financial Statements, Continued

(13) Fair Value of Financial Instruments, Continued

          The estimated fair values of the Bank's  financial  instruments are as
          follows:
<TABLE>
                                                              1996                                1995
                                                  Carrying            Fair             Carrying            Fair
                                                   Value              Value             Value              Value
          Financial Assets
<S>                                            <C>                <C>                <C>
Cash and short-term investments                $     13,569       $     13,500       $    16,456        $    16,500
Investment securities                                47,257             47,600            35,251             35,700
Loans:
    Commercial loans                                 91,015             90,400            82,793             81,000
    Real estate loans                                23,403             23,600            25,001             25,500
    Consumer loans                                   22,123             22,200            20,164             20,300
Less:
    Allowance for loan losses                        (3,335)            (3,335)           (3,097)            (3,097)
    Unearned fees                                      (473)              (473)             (495)              (495)

                                                              1996                                 1995

                                                  Carrying            Fair             Carrying            Fair
                                                   Value              Value             Value              Value



        Financial Liabilities

Demand deposits                                 $    35,048        $    35,000       $    30,815        $    30,800
NOW accounts                                         25,145             25,100            22,318             22,300
    Savings and money market
    accounts                                         54,979             55,000            51,564             51,600
Time deposits                                        65,771             66,600            59,177             59,900
</TABLE>
<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
              Notes to Consolidated Financial Statements, Continued

(13) Fair Value of Financial Instruments, Continued
                                  
     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.

(14) 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  $7,200,000  was  available  for dividends on JanuaryE1,
          1997, without the approval of the OCC.
<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
              Notes to Consolidated Financial Statements, Continued

(15) Condensed Financial Information - Parent Company Only

          The condensed  balance  sheets at December 31, 1996 and 1995,  and the
          statements  of income and cash flows for the years ended  December 31,
          1996, 1995, and 1994, of FNBH Bancorp, Inc., follow:
<TABLE>
                      Condensed Balance Sheets
                                                            1996            1995
<S>                                                    <C>            <C>
Assets:
    Cash ............................................   $    71,570   $    62,480
    Investment in subsidiary ........................    19,525,538    17,467,288

                                                        $19,597,108   $17,529,768

Liabilities and stock equity:
    Stockholder's equity ............................   $19,597,108   $17,529,768

                   Total liabilities and stock equity   $19,597,108   $17,529,768
</TABLE>
<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
              Notes to Consolidated Financial Statements, Continued

(15) Condensed Financial Information - Parent Company Only, Continued
<TABLE>
                         Condensed Statements of Income
                                                      Year Ended December 31,
                                               1996         1995          1994
<S>                                             <C>          <C>          <C> 

Operating income - dividends from
subsidiary ..............................   $1,522,500   $1,128,750   $  931,875
               Total operating income ...    1,522,500    1,128,750      931,875
Operating expenses - administrative and
other expenses ..........................       43,410       55,220       33,199
               Total operating expenses .       43,410       55,220       33,199
Income before equity in undistributed net
income of subsidiary ....................    1,479,090    1,073,530      898,676
Equity in undistributed net income of
subsidiary ..............................    2,094,602    2,126,632    1,519,802
               Net income ...............   $3,573,692   $3,200,162   $2,418,478
</TABLE>
<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
              Notes to Consolidated Financial Statements, Continued

(15) Condensed Financial Information - Parent Company Only, Continued
<TABLE>
                       Condensed Statements of Cash Flows

                             Year Ended December 31,


                                                     1996              1995         1994
<S>                                                <C>            <C>            <C>                               
Net income .....................................   $ 3,573,692    $ 3,200,162    $ 2,418,478
       Adjustments to reconcile net income to
       net cash from operating activities:
          Decrease in other assets .............          --             --              780
       Equity in undistributed net income of
       subsidiaries ............................    (2,094,602)    (2,126,632)    (1,519,802)

                   Total adjustments ...........    (2,094,602)    (2,126,632)    (1,519,022)

                      Net cash provided by
                      operating activities .....     1,479,090      1,073,530        899,456
    Cash flow from financing activities -
    dividends paid .............................     1,470,000      1,076,250        866,250

                      Net cash used in financing
                      activities ...............    (1,470,000)    (1,076,250)      (866,250)

Net increase (decrease) in cash ................         9,090         (2,720)        33,206
Cash at beginning of period ....................        62,480         65,200         31,994

Cash at end of period ..........................   $    71,570    $    62,480    $    65,200
</TABLE>
<PAGE>
                       FNBH BANCORP, INC., AND SUBSIDIARY
              Notes to Consolidated Financial Statements, Continued

(16) Quarterly Financial Data (Unaudited)

          The following table presents summarized quarterly data for each of the
          two years ended  December  31,  1996  (dollars  in  thousands,  except
          per-share data):
<TABLE>
                                                 Quarters Ended in 1996
                                   March 31      June 30     September 30   December 31
<S>                                <C>          <C>          <C>           <C>
Selected operations data:
    Interest income ............   $3,790,357   $3,847,740   $4,017,484   $4,061,714

    Net interest income ........    2,395,843    2,486,027    2,579,619    2,611,235

       Provision for loan losses      112,125      112,125      112,125      112,125
    Income before income
    taxes ......................    1,248,336    1,407,122    1,287,831    1,215,903

    Net income .................      861,336      979,122      893,331      839,903


    Net income per share .......          .55          .62          .57          .53
    Cash dividends per share ...          .12          .13          .13          .55
</TABLE>
<TABLE>
                                                Quarters Ended in 1995
                                March 31    June 30     September 30  December 31
<S>                            <C>          <C>         <C>           <C>
Selected operations data:

Interest income ............   $3,390,881   $3,578,073   $3,676,374   $3,748,467

Net interest income ........    2,289,320    2,367,331    2,414,987    2,443,619

   Provision for loan losses      112,125      112,125      112,125      112,125

Income before income
taxes ......................    1,074,524    1,088,578    1,189,397    1,265,163

Net income .................      753,024      753,578      821,897      871,663

Net income per share .......          .48          .48          .52          .55
Cash dividends per share ...          .10          .12          .12          .35
</TABLE>
<PAGE>
                                                          
                                   EXHIBIT 21

                                  SUBSIDIARIES

              Name                             Jurisdiction of Incorporation
First National Bank in Howell                          Michigan
<PAGE>