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

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

# For the fiscal year ended December 31, 2002

# Commission file number 0-25752

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

|MICHIGAN
     (State or other jurisdiction of
      incorporation or organization) | 38-2869722
                               (IRS Employer
                             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)

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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. YesX 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.

Indicate by checkmark whether the
registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2) Yes NoX 
The aggregate market value of common stock held by nonaffiliates as of June
30, 2002, was $64,704,396. 
As of December 31, 2002 there were outstanding 3,157,798 shares
of the Companys common stock (no par value).

Documents Incorporated by
Reference:

Portions of the Companys Proxy
Statement and appendix dated March 13, 2003 for the Annual Meeting of Shareholders to be
held April 15, 2003 are incorporated by reference into Parts I, II and III of this report.



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# PART I

Included
or incorporated by reference 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 Companys internet address is www.fnbsite.com.

The
Bank was originally organized in 1934 as a national banking association. As of March 1,
2003, the Bank had approximately 136 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 suburban population
especially in the southeast quadrant of the county, primarily attributable to growth
around the City of Brighton.

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

# Bank Services

The
Bank is a full service bank offering a wide range of commercial and personal banking
services. These services include checking accounts, savings accounts, certificates of
deposit, commercial loans, real estate loans, installment loans, trust and investment
services, collections, travelers checks, night depository, safe deposit box and U.S.
Savings Bonds. The Bank maintains correspondent relationships with major banks in Detroit,
pursuant to which the Bank engages in federal funds sale and purchase transactions, the
clearance of checks and certain foreign currency transactions. The Bank also has a
relationship with the Federal Home Loan Bank of Indianapolis where it makes short term
investments and where it has a line of credit of $27,700,000, of which $22,100,000 is
available, and $5,600,000 is funded as of year end. 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.

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The
Banks deposits are generated in the normal course of business and the loss of any
one depositor would not have a materially adverse effect on the business of the Bank. As
of December 31, 2002, the Banks certificates of deposit of $100,000 or more
constituted approximately 12% 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 79% of total
revenues for the period ended December 31, 2002 and for the period ended December 31,
2001. Interest on investment securities, including short-term investments and federal
funds sold, constituted approximately 9% of total revenues in 2002 and 10% of total
revenues in 2001. 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. As
of December 31, 2002, 30% of outstanding loans were for either commercial or residential
construction or development. 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 $10,000,000 in loans (or about 3% of the Banks total loan
portfolio) have fixed rates with maturities exceeding five years. Fifty-eight percent of
the Banks interest-bearing deposits are in savings, NOW, and MMDAs, all of which are
variable rate products. Of the approximately $131,500,000 in certificates, $55,000,000
mature within a year, with the majority of the balance maturing within a five year period.

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

As
described in more detail below, the Banks cumulative one year gap ratio of rate
sensitive assets to rate sensitive liabilities for the period ended December 31, 2002, was
43% asset sensitive, compared to 13% liability sensitive at December 31, 2001. See
discussion and table under Quantitative and Qualitative Disclosures about Market
Risk in Item 7 below.

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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
the Federal Home Loan Mortgage Corporation (Freddie Mac) while retaining servicing on the
sold loans. Those residential real estate mortgage loan requests that do not meet Freddie
Mac criteria are reviewed by the Bank for approval and, if approved, are retained in the
Banks loan portfolio. The Bank also may purchase loans which meet its normal credit
standards.

The
Banks investment policy is designed to provide a framework within which the Bank may
maximize earnings potential by acquiring assets designed to enhance profitability, absorb
excess funds, provide liquidity, maintain a high credit quality, implement interest rate
risk measures, provide collateral for pledging, generate a favorable return on
investments, and provide tax-exempt income as appropriate. Safety, liquidity, and interest
rate risk standards will not be compromised in favor of increased return. When making
investment decisions the Bank considers investment type, credit quality (including maximum
credit exposure to one obligor at any one time) and maturity of investments. Consideration
is also given to each investments risk-weight as determined by regulatory Risk-Based
Capital Guidelines.

The
portfolio must be coordinated with the overall asset/liability management of the balance
sheet. The use of the investment portfolio for market oriented trading activities or
speculative purposes is expressly prohibited unless otherwise approved by the Board of
Directors. Investments are acquired for which the Bank has both the ability and intent to
hold to maturity. Specific limits determine the types, maturities, and amounts of
securities the Bank intends to hold. Guidelines on liquidity requirements, as well as an
acknowledgement of the Banks credit profile and capital position may affect the
Banks ability to hold securities to maturity. It is not the intention of management
to profit from short term securities price movements. Business reasons for securities
purchases and sales will be noted at the time of the transaction. 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 eight offices within the four communities it serves, all of which are located in
Livingston County, Michigan. Four of the offices, including the main office, are located
in Howell. There are two facilities in Brighton, and one each in Hartland, and
Fowlerville. See Properties below for more detail on these facilities. Within
these communities, its principal competitors are Fifth Third Bank, National City Bank,
Republic Bank, and Standard Federal. Each of these financial institutions, which are
headquartered in larger metropolitan areas, has 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 owned financial institution.

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Based on
deposit information as of June 30, 2002, the Bank holds approximately 22.34% of local
deposits, compared to approximately 19.85% held by Fifth Third Bank, approximately 10.36%
held by National City, approximately 9.93% held by Republic Bank, and approximately 8.72%
held by Standard Federal. 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, Fifth Third Bank maintains six branch offices,
National City Bank operates seven branch offices, Republic Bank has five branch offices,
and Standard Federal has three branch offices. Management is not aware of any plans by
these financial institutions to expand their presence in the Banks market.

The
financial services industry continues to become increasingly competitive. Principal
methods of competition include loan and deposit pricing, advertising and marketing
programs, and the types and quality of services provided. The deregulation of the
financial services industry and the easing of restrictions on bank and holding company
activities have led to increased competition among banks and other financial providers for
funds, loans, and a broad array of other financial services. There has been increased
competition within the Banks market over the past few years as new branches are
built to meet the needs of the growing population in the county. Management continues to
evaluate the opportunities for the expansion of products and services and is anticipating
opening a new branch in Hamburg in the fourth quarter of 2003.

# Growth of Company

The
following table sets forth certain information regarding the growth of the Company:

`Balances as of December 31,
                                                                  (in thousands)
                                              2002           2001          2000           1999           1998
                                              ----           ----          ----           ----           ----
Total Assets                              $420,686       $392,978      $348,363       $296,419       $264,894
Loans, Net of Unearned Income              327,117        286,280       255,414        209,952        185,018
Securities                                  44,611         55,989        39,311         50,598         38,646
Noninterest-Bearing Deposits                62,232         62,938        55,253         47,980         47,402
Interest-Bearing Deposits                  311,840        288,731       254,961        221,210        192,155
Total Deposits                             374,072        351,669       310,214        269,190        239,557
Shareholders' Equity                        37,580         32,404        28,887         25,312         23,497`

Through
2001, the Bank operated seven branch facilities: one in downtown Howell, one at Lake
Chemung (five miles east of downtown Howell), two in Brighton (one on the east side and
one on the west side), one in Hartland, one in the village of Fowlerville, and the sixth
is a grocery store branch, located west of downtown Howell. In April of 2002, the Bank
opened a new branch on the east side of Howell. As of December 31, 2002, this new branch
had approximately $2,500,000 in deposits. In the time period presented, all of the
Banks branches grew due to general growth in the county.

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# 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 such statutes and regulations. A change
in applicable laws or regulations may have a material effect on the Company, the Bank and
the business of the Company and the Bank.

# General

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

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

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

# The Company

General.
          The Company is a bank holding company and, as such, is registered with, and
          subject to regulation by, the Federal Reserve Board under the Bank Holding
          Company Act, as amended (the BHCA). Under the BHCA, the Company is
          subject to periodic examination by the Federal Reserve Board, and is required to
          file with the Federal Reserve Board periodic reports of its operations and such
          additional information as the Federal Reserve Board may require.

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In
accordance with Federal Reserve Board policy, the Company is expected to act as a source
of financial strength to the Bank and to commit resources to support the Bank in
circumstances where the Company might not do so absent such policy. In addition, if the
Banks capital becomes impaired, the OCC may require the Bank to restore its capital
by a special assessment upon the Company as the Banks sole shareholder. If the
Company were to fail to pay any such assessment, the directors of the Bank would be
required, under federal law, to sell the shares of the Banks stock owned by the
Company at public auction and use the proceeds of the sale to restore the Banks
capital.

Investments
and Activities. In general, any direct or indirect acquisition by the
Company of any voting shares of any bank which would result in the Companys direct
or indirect ownership or control of more than 5% of any class of voting shares of such
bank, and any merger or consolidation of the Company with another bank company, will
require the prior written approval of the Federal Reserve Board under the BHCA.

The
merger or consolidation of an existing bank subsidiary of the Company with another bank,
or the acquisition by such a subsidiary of assets of another bank, or the assumption of
liability by such a subsidiary to pay any deposits in another bank, will require the prior
written approval of the responsible Federal depository institution regulatory agency under
the Bank Merger Act. In addition, in certain such cases an application to, and the prior
approval of, the Federal Reserve Board under the BHCA and/or the OCC, may be required.

With
certain limited exceptions, the BHCA prohibits any bank company from engaging, either
directly or indirectly through a subsidiary, in any activity other than managing or
controlling Bank unless the proposed non-banking activity is one that the Federal Reserve
Board has determined to be so closely related to banking or managing or controlling Bank
as to be a proper incident thereto. Under current Federal Reserve Board regulations, such
permissible non-banking activities include such things as mortgage banking, equipment
leasing, securities brokerage, and consumer and commercial finance company operations.
Well-capitalized and well-managed bank holding companies may engage de novo in
certain types of non-banking activities without prior notice to, or approval of, the
Federal Reserve Board, provided that written notice of the new activity is given to the
Federal Reserve Board within 10 business days after the activity is commenced. If a bank
holding company wishes to engage in a non-banking activity by acquiring a going concern,
prior notice and/or prior approval will be required, depending upon the activities in
which the company to be acquired is engaged, the size of the company to be acquired and
the financial and managerial condition of the acquiring bank holding company.

Eligible
bank holding companies that elect to operate as financial holding companies may engage in,
or own shares in companies engaged in, a wider range of nonbanking activities, including
securities and insurance activities and any other activity that the Federal Reserve Board,
in consultation with the Secretary of the Treasury, determines by regulation or order is
financial in nature, incidental to any such financial activity or complementary to any
such financial activity and does not pose a substantial risk to the safety or soundness of
depository institutions or the financial system generally.

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The Bank Holding Company Act
generally does not place territorial restrictions on the domestic activities of non-bank
subsidiaries of bank or financial holding companies. While the Company believes it is
eligible to elect to operate as a financial holding company, as of the date of this
filing, it has not applied for approval to operate as a financial holding company.

Capital
Requirements. The Federal Reserve Board uses capital adequacy guidelines in
its examination and regulation of bank holding companies. If capital falls below minimum
guidelines, a bank company may, among other things, be denied approval to acquire or
establish additional Bank or non-bank businesses.

The
Federal Reserve Boards capital guidelines establish the following minimum regulatory
capital requirements for bank holding companies: (i) a leverage capital requirement
expressed as a percentage of total average assets, and (ii) a risk-based requirement
expressed as a percentage of total risk-weighted assets. The leverage capital requirement
consists of a minimum ratio of Tier 1 capital (which consists principally of
shareholders equity) to total average assets of 3% for the most highly rated
companies, with minimum requirements of 4% to 5% for all others. The risk-based
requirement consists of a minimum ratio of total capital to total risk-weighted assets of
8%, of which at least one-half must be Tier 1 capital.

The
risk-based and leverage standards presently used by the Federal Reserve Board are minimum
requirements, and higher capital levels may be required if warranted by the particular
circumstances or risk profiles of individual banking organizations. The Federal Reserve
Board has not advised the Company of any specific minimum Tier 1 Capital leverage ratio
applicable to it.

Dividends.
          The Company is a corporation separate and distinct from the Bank. Most of the
          Companys revenues are received by it in the form of dividends paid by the
          Bank. Thus, the Companys ability to pay dividends to its shareholders is
          indirectly limited by statutory restrictions on the Banks ability to pay
          dividends described below. Further, in a policy statement, the Federal Reserve
          Board has expressed its view that a bank holding company experiencing earnings
          weaknesses should not pay cash dividends exceeding its net income or which can
          only be funded in ways that weaken the bank holding companys financial
          health, such as by borrowing. Additionally, the Federal Reserve Board possesses
          enforcement powers over bank holding companies and their non-bank subsidiaries
          to prevent or remedy actions that represent unsafe or unsound practices or
          violations of applicable statutes and regulations. Among these powers is the
          ability to proscribe the payment of dividends by Bank and bank holding
          companies. Similar enforcement powers over the Bank are possessed by the FDIC.
          The prompt corrective action provisions of federal law and
          regulation authorizes the Federal Reserve Board to restrict the payment of
          dividends by the Company for an insured bank which fails to meet specified
          capital levels.

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In
addition to the restrictions on dividends imposed by the Federal Reserve Board, the
Michigan Business Corporation Act provides that dividends may be legally declared or paid
only if after the distribution a corporation, such as the Company, can pay its debts as
they come due in the usual course of business and its total assets equal or exceed the sum
of its liabilities plus the amount that would be needed to satisfy the preferential rights
upon dissolution of any holders of preferred stock whose preferential rights are superior
to those receiving the distribution. The Companys Articles of Incorporation do not
authorize the issuance of preferred stock and there are no current plans to seek such
authorization.

The
Companys common stock is registered with the Securities and Exchange Commission
(SEC) under the Securities Act of 1933, as amended (the Securities
Act), and the Securities Exchange Act of 1934, as amended (the Exchange
Act). As a result, the Company is subject to the information, proxy solicitation,
insider trading and other restrictions and requirements of the SEC under the Exchange Act.
On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002. The
Sarbanes-Oxley Act provides for numerous changes to the reporting, accounting, corporate
governance and business practices of companies as well as financial and other
professionals who have involvement with the U.S. public securities markets. The SEC
continues to issue new and proposed rules implementing various provisions of the
Sarbanes-Oxley Act.

# The Bank

General.
          The Bank is organized as a national banking association and is, therefore,
          regulated and supervised by the OCC. The deposit accounts of the Bank are
          insured by the Bank Insurance Fund (the BIF) of the FDIC.
          Consequently, the Bank is also subject to the provisions of the Federal Deposit
          Insurance Act. The Bank is subject to the examination, supervision, reporting
          and enforcement requirements of the OCC as its primary federal regulator. The
          OCC and the federal and state laws applicable to the Bank and its operations,
          extensively regulate various aspects of the banking business including, among
          other things, permissible types and amounts of loans, investments and other
          activities, capital adequacy, branching, interest rates on loans and on
          deposits, the maintenance of non-interest bearing reserves on deposit accounts,
          and the safety and soundness of banking practices.

Deposit
Insurance. As an FDIC-insured institution, the Bank is required to pay
deposit insurance premium assessments to the FDIC. The FDIC has adopted a risk-based
assessment system under which all insured depository institutions are placed into one of
nine categories and assessed insurance premiums, based upon their respective levels of
capital and results of supervisory evaluation. Institutions classified as well-capitalized
(as defined by the FDIC) and considered healthy pay the lowest premium while institutions
that are less than adequately capitalized (as defined by the FDIC) and considered of
substantial supervisory concern pay the highest premium. Risk classification of all
insured institutions is made by the FDIC for each semi-annual assessment period.

9.

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The
Federal Deposit Insurance Act (FDIA) requires the FDIC to establish assessment
rates at levels which will maintain the Deposit Insurance Fund at a mandated reserve ratio
of not less than 1.25% of estimated insured deposits. For several years, the BIF reserve
ratio has been at or above the mandated ratio and assessments have ranged from 0% of
deposits for institutions in the lowest risk category, such as the Bank, to .27% of
deposits in the highest risk category.

FICO
Assessments. The Bank, as a member of the BIF, is subject to assessments to
cover the payments on outstanding obligations of the Financing Corporation
(FICO). FICO was created to finance the recapitalization of the Federal
Savings and Loan Insurance Corporation, the predecessor to the FDICs Savings
Association Insurance Fund (the SAIF) which insures the deposits of thrift
institutions. From now until the maturity of the outstanding FICO obligations in 2019, BIF
members and SAIF members will share the cost of the interest on the FICO bonds on a pro
rata basis. It is estimated that FICO assessments during this period will be less than
0.02% of deposits.

OCC
Assessments. National Banks are required to pay supervisory fees to the OCC
to fund the operations of the OCC. The amount of supervisory fees paid by a national bank
is based upon the banks total assets, as reported to the OCC.

Capital
Requirements. The OCC has established the following minimum capital
standards for national banks: a leverage requirement consisting of a minimum ratio of Tier
1 capital to total average assets of 3% for the most highly-rated Bank with minimum
requirements of 4% to 5% for all others, and a risk-based capital requirement consisting
of a minimum ratio of total capital to total risk-weighted assets of 8%, at least one-half
of which must be Tier 1 capital. Tier 1 capital consists principally of shareholders
equity. These capital requirements are minimum requirements. Higher capital levels will be
required if warranted by the particular circumstances or risk profiles of individual
institutions.

Federal
law provides the federal banking regulators with broad power to take prompt corrective
action to resolve the problems of undercapitalized institutions. The extent of the
regulators powers depends on whether the institution in question is well
capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, or critically undercapitalized.
Federal regulations define these capital categories as follows:

`Total               Tier 1
                                          Risk-Based          Risk-Based
                                          Capital Ratio       Capital Ratio       Leverage Ratio
                                          -------------       -------------       --------------

Well capitalized                          10% or above        6% or above         5% or above
Adequately capitalized                      8% or above       4% or above         4% or above
Undercapitalized                          Less than 8%        Less than 4%        Less than 4%
Significantly undercapitalized            Less than 6%        Less than 3%        Less than 3%
Critically undercapitalized                    --                  --             A ratio of tangible equity
                                                                                  to total assets of 2% or less`

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As
of December 31, 2002, each of the Banks ratios exceeded minimum requirements for the
well capitalized category.

Depending
upon the capital category to which an institution is assigned, the regulators
corrective powers include: requiring the submission of a capital restoration plan; placing
limits on asset growth and restrictions on activities; requiring the institution to issue
additional capital stock (including additional voting stock) or to be acquired;
restricting transactions with affiliates; restricting the interest rate the institution
may pay on deposits; ordering a new election of directors of the institution; requiring
that senior executive officers or directors be dismissed; prohibiting the institution from
accepting deposits from correspondent Bank; requiring the institution to divest certain
subsidiaries; prohibiting the payment of principal or interest on subordinated debt; and
ultimately, appointing a receiver for the institution.

In
general, a depository institution may be reclassified to a lower category than is
indicated by its capital levels if the appropriate federal depository institution
regulatory agency determines the institution to be otherwise in an unsafe or unsound
condition or to be engaged in an unsafe or unsound practice. This could include a failure
by the institution, following receipt of a less-than-satisfactory rating on its most
recent examination report, to correct the deficiency.

Dividends.
          Under federal law, the Bank is restricted as to the maximum amount of dividends
          it may pay on its common stock. The Bank may not pay dividends except out of
          undivided net profits then on hand after deducting its losses and bad debts. In
          addition, the Bank is required by federal law to obtain the prior approval of
          the OCC for the declaration or payment of a dividend, if the total of all
          dividends declared by the Banks Board of Directors in any year will exceed
          the total of (i) the Banks retained net income (as defined and interpreted
          by regulation) for that year plus (ii) the retained net income for the preceding
          two years, less any required transfers to surplus. Federal law generally
          prohibits a depository institution from making any capital distribution
          (including payment of a dividend) or paying any management fee to its holding
          company if the depository institution would thereafter be undercapitalized.
          Further, federal regulatory agencies can prohibit a banking institution or bank
          holding company from engaging in unsafe and unsound business practices and could
          prohibit payment of dividends if such payment could be deemed an unsafe and
          unsound business practice.

Insider
Transactions. The Bank is subject to certain restrictions imposed by the
Federal Reserve Act on any extensions of credit to the Company or its subsidiaries, on
investments in the stock or other securities of the Company or its subsidiaries and the
acceptance of the stock or other securities of the Company or its subsidiaries as
collateral for loans. Certain limitations and reporting requirements are also placed on
extensions of credit by the Bank to its directors and officers, to directors and officers
of the Company and its subsidiaries, to principal shareholders of the Company, and to
related interests of such directors, officers and principal shareholders. In
addition, federal law and regulations may affect the terms upon which any person becoming
a director or officer of the Company or one of its subsidiaries or a principal shareholder
of the Company may obtain credit from Bank with which the Bank maintains a correspondent
relationship.

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Safety
and Soundness Standards. The federal banking agencies have adopted
guidelines to promote the safety and soundness of federally insured depository
institutions. These guidelines establish standards for internal controls, information
systems, internal audit systems, loan documentation, credit underwriting, interest rate
exposure, asset growth, compensation, fees and benefits, asset quality and earnings.

Consumer
Protection Laws. The Banks businesses include making a variety of
types of loans to individuals. In making these loans, the Bank is subject to State usury
and regulatory laws and to various federal statutes, including the privacy of consumer
financial information provisions of the Gramm-Leach-Bliley Act and regulations promulgated
thereunder, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in
Lending Act, the Real Estate Settlement Procedures Act, and the Home Mortgage Disclosure
Act, and the regulations promulgated thereunder, which prohibit discrimination, specify
disclosures to be made to borrowers regarding credit and settlement costs, and regulate
the mortgage loan servicing activities of the Bank, including the maintenance and
operation of escrow accounts and the transfer of mortgage loan servicing. In receiving
deposits, the Bank is subject to extensive regulation under State and federal law and
regulations, including the Truth in Savings Act, the Expedited Funds Availability Act, the
Bank Secrecy Act, the Electronic Funds Transfer Act, and the Federal Deposit Insurance
Act. Violation of these laws could result in the imposition of significant damages and
fines upon the Bank and its directors and officers.

12

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# 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, 2002, 2001, and 2000.

Net
interest income is the difference between interest earned on loans, securities and other
earning assets and interest paid on deposits and borrowed funds. In the following tables,
the interest earned on investments and loans is expressed on a fully taxable equivalent
(FTE) basis. Tax exempt interest is increased to an amount comparable to interest subject
to federal income taxes in order to properly evaluate the effective yields earned on
earning assets. The tax equivalent adjustment is based on a federal income tax rate of
34%. The following Yield Analysis shows that the Banks interest margin decreased 11
basis points in 2002 as a result of a decrease of 121 basis points in yield on earning
assets, partially offset by a decrease of 141 basis points in the interest cost on
deposits. In 2001 the interest margin decreased 65 basis points due to an 85 basis point
decrease in yield on earning assets partially offset by a 24 basis point decrease in
interest cost.

13

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# Yield Analysis of
Consolidated Average Assets and Liabilities 
(dollars in thousands)

`2002                                2001                                2000
                                                    ----                                ----                                ----
                                       Average                 Yield/      Average                  Yield/     Average                  Yield/
                                       Balance     Interest    Rate        Balance     Interest     Rate       Balance     Interest     Rate
                                       -------     --------    ----        -------     --------     ----       -------     --------     ----
Assets: 
Interest earning assets:
Short term investments                $  3,522    $    57.4     1.63%      $19,924       $770.6     3.87%     $  4,278       $271.7     6.35%
Certificates of deposit                  5,424        177.7     3.28%          929         26.9     2.90%
Securities:
   Taxable                              34,869      1,614.7     4.63%       24,075      1,372.0     5.70%       29,283      1,607.9     5.49%
   Tax-exempt                           17,109      1,186.9     6.94%       18,415      1,246.4     6.77%       18,580      1,220.3     6.57%
Loans(1)(2)                            311,060     23,197.8     7.46%      270,776     24,182.3     8.93%      238,697     23,407.8     9.81%
                                      --------    ---------               --------    ---------               --------    ---------
Total earning assets and total
   interest income                     371,984    $26,234.5     7.05%      334,119    $27,598.2     8.26%      290,838    $26,507.7     9.11%
Cash & due from banks                   14,641    ---------                 13,634    ---------                 11,615    ---------
All other assets                        17,723                              15,320                              16,022
Allowance for loan loss                 (5,436)                             (5,614)                             (4,911)
                                         -----                               -----                               -----
   Total assets                       $398,912                            $357,459                            $313,564
                                      ========                            ========                            ========
Liabilities and
   Shareholders' Equity
Interest bearing deposits:
Savings, money market, NOW            $153,651     $2,286.0     1.49%     $128,257     $3,007.8     2.35%     $120,770     $3,434.0     2.84%
Time                                   131,019      5,154.8     3.93%      131,527      7,427.4     5.65%      104,669      6,158.5     5.88%
Short term borrowings                    8,430        167.6     1.99%                                            1,366         91.3     6.67%
FHLB advances                            5,578        408.8     7.23%        5,801        425.9     7.23%        4,893        358.0     7.23%
                                      --------    ---------               --------    ---------               --------    ---------
Total interest bearing
  liabilities and total interest
  expense                              298,678     $8,017.2     2.68%      265,585    $10,861.1     4.09%      231,698    $10,041.8     4.33%
Non-interest bearing deposits           61,223     --------                 57,166    ---------                 51,428    ---------
All other liabilities                    3,925                               3,641                               3,220
Shareholders' Equity                    35,086                              31,067                              27,218
                                        ------                              ------                              ------
Total liabilities and
   shareholders' equity               $398,912                            $357,459                            $313,564
                                      ========                            ========                            ========
Interest spread                                                 4.37%                               4.17%                               4.78%
                                                                =====                               =====                               =====
Net interest income-FTE                           $18,217.3                           $16,737.1                           $16,465.9
                                                  =========                           =========                           =========
Net interest margin                                             4.90%                               5.01%                               5.66%
                                                                =====                               =====                               =====`

(1)    
          Included in average daily loan balances are nonaccruing loans with average
          balances of $2,322,000 in 2002, $1,612,000 in 2001, and $1,237,000 in 2000.

(2)    
          Interest on loans includes origination fees totaling $750,000 in 2002, $790,000
          in 2001, and $700,000 in 2000.

14

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(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.

`Year ended                              Year ended
                                 December 31, 2002 compared to Year      December 31, 2001 compared to Year
                                       ended December 31, 2001                ended December 31, 2000
                                       -----------------------                -----------------------

                                    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)
                                  ------        ----      ----------     ------        ----       ----------
Interest Income:
Short term investments....        $ (634)     $   (79)    $  (713)      $   994      $  (495)      $   499
Certificates of deposit...            130           20         150           27             0           27
Securities:
  Taxable.................            615        (372)         243        (286)            50        (236)
  Tax Exempt..............           (88)           29        (59)         (11)            37           26
Loans.....................          3,597      (4,582)       (985)        3,145       (2,371)          774

  Total interest income...        $ 3,620     $(4,984)    $(1,364)      $ 3,869      $(2,779)      $ 1,090

Interest Expense:
Interest bearing deposits:
  Savings/NOW accounts....        $   595     $(1,317)    $  (722)      $   213      $  (639)      $ (426)
  Time....................           (29)      (2,244)     (2,273)        1,580         (311)        1,269
Short term borrowings.....            168            0         168         (91)             0         (91)
FHLB & other borrowings...           (16)          (1)        (17)           66             1           67

  Total interest expense..        $   718     $(3,562)    $(2,844)      $ 1,768      $  (949)      $   819

Net interest income (FTE)         $ 2,902     $(1,422)    $  1,480      $ 2,101      $(1,830)      $   271`

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.

15

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# II INVESTMENT PORTFOLIO

(A)   The
following table sets forth the book value of securities at December 31:

`(in thousands)
                                                        2002              2001             2000
                                                        ----              ----             ----
Held to maturity:
States and political subdivisions                     16,863            17,979           18,887
Mortgage-backed securities                                26                78              577
                                                          --                --              ---
   Total                                            $ 16,889          $ 18,057         $ 19,464
Available for sale:
U.S. Treasury                                       $      0          $  2,019         $ 13,028
U.S. Government agencies                              12,032             9,569            5,986
Corporate securities                                   4,721            12,828                0
Mortgage-backed securities                             9,925            12,683                0
FRB Stock                                                 44                44               44
FHLB Stock                                             1,000               789              789
                                                    --------          --------         --------
   Total                                            $ 27,722          $ 37,932         $ 19,847`

(B)   The following
table sets forth contractual maturities of securities at December 31, 2002 and the
weighted average yield of such securities:

`(dollars in thousands)
                                                         Maturing After      Maturing After
                                    Maturing Within      One But Within     Five But Within       Maturing After
                                       One Year            Five Years          Ten Years             Ten Years
                                       --------            ----------          ---------             ---------

                                     Amount     Yield     Amount    Yield     Amount    Yield     Amount     Yield
                                     ------     -----     ------    -----     ------    -----     ------     -----
Held to maturity
   States and political
      subdivisions                  $ 1,398     7.32%    $10,148    7.05%     $5,317    6.65%          0
   Mortgage backed securities            26     4.77%          0                   0                   0
                                         --                    -                   -                   -
      Total                         $ 1,424     7.27%    $10,148    7.05%     $5,317    6.65%         $0
                                    =======              =======              ======                  ==

Tax equivalent adjustment
   for calculations of yield            $29                 $211                $110
                                        ===                 ====                ====

Available for sale
   U.S. Agency                        1,548     4.84%    $10,484    4.48%
   Corporate bonds                        0                4,721    4.16%
   Mortgage backed securities           116     5.03%      3,358    4.58%     $1,851    4.56%     $4,600     6.26%
   FRB Stock                                                                                          44     6.00%
   FHLB Stock                                                                                      1,000     5.75%
      Total                         $ 1,664     4.85%    $18,563    4.42%     $1,851    4.56%     $5,644     6.17%
                                    =======              =======              ======              ======`

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:

16

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`Rate on Tax
                                  Tax-Exempt Rate              Adjustment              Equivalent Basis
                                  ---------------              ----------              ----------------
Under 1 year                           5.24%                      2.08%                      7.32%
1-5 years                              4.97%                      2.08%                      7.05%
5-10 years                             4.57%                      2.08%                      6.65%`

Additional
statistical information concerning the Banks securities portfolio is incorporated by
reference in Note 3 of the Companys Consolidated Financial Statements for the year
ended December 31, 2002 included in the Appendix to the Companys definitive proxy
statement, dated March 13, 2003, relating to the April 15, 2003, Annual Meeting of
Shareholders (as filed with the Commission as exhibit 13 to the Report).

# III LOAN PORTFOLIO

(A)   The
table below shows loans outstanding at December 31:

`(in thousands)
                                                       2002        2001         2000        1999         1998
                                                       ----        ----         ----        ----         ----
Secured by real estate:
   Residential first mortgage                      $ 37,202    $ 27,456     $ 31,328    $ 29,904     $ 38,051
   Residential home equity/other junior liens        11,184       8,066        9,999       7,822        9,106
   Construction and land development                 49,516      42,221       35,020      23,375       23,048
   Commercial                                       153,720     118,191      105,041      89,809       68,960
Consumer                                             25,261      22,719       20,700      16,811       16,653
Commercial                                           43,276      59,602       45,239      38,891       26,058
Other                                                 7,801       8,870        8,897       4,043        3,770
                                                     ------      ------       ------      ------       ------
   Total Loans (Gross)                             $327,960    $287,125     $256,224    $210,655     $185,646`

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 assist the Bank in evaluating the adequacy of the allowance for loan losses.

(B)   The
following table shows the amount of commercial, financial, and agricultural loans
outstanding as of December 31, 2002 which, based on remaining scheduled repayments of
principal, are in the periods indicated.

17

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`Maturing
                                                                            --------
                                                                         (in thousands)
                                                                    After one
                                                    Within one     but within     After five
                                                       year        five years        years          Total
                                                       ----        ----------        -----          -----
Real estate construction & land development..          $32,605       $16,911              0       $ 49,516
Real estate other (secured by commercial &
   multi-family).............................           20,776       125,914          7,030        153,720
Commercial (secured by business assets or
   Unsecured)................................           20,822         19,050         3,404         43,276
Other (loans to farmers, political
   Subdivisions, & overdrafts)...............            2,400          1,563         3,838          7,801
                                                       -------       --------       -------       --------
      Totals.................................          $76,603       $163,438       $14,272       $254,313`

Below is a schedule of amounts due after one year which are classified  according to their  sensitivity to
changes in interest rates.

`Interest Sensitivity
                                                                 --------------------
                                                                    (in thousands)
                                                         Fixed Rate                Variable Rate
                                                         ----------                -------------
Due after one but within five years......                 $111,109                    $52,329
Due after five years.....................                    6,709                      7,563`

(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:

`(dollars in thousands)
                                             2002           2001           2000           1999           1998
                                             ----           ----           ----           ----           ----
Nonperforming Loans:
Nonaccrual loans                           $3,288        $ 2,636          $ 608          $ 173         $1,519
Loans past due 90 days or more                809            361            209              4             25
                                              ---            ---            ---              -             --
   Total nonperforming loans               $4,097        $ 2,997          $ 817          $ 177         $1,544
                                           ======        =======          =====          =====         ======
Percent of total loans                      1.25%          1.04%           .32%           .08%           .83%`

Additional
information concerning nonperforming loans, the Banks nonaccrual policy, loan
impairment, and loan concentrations is incorporated by reference to Note 4 of the
Companys Consolidated Financial Statements for the year ended December 31, 2002
included in the Appendix to the Companys definitive proxy statement, dated March 13,
2003, relating to the April 15, 2003, Annual Meeting of Shareholders (as filed with the
Commission as exhibit 13 to this Report).

There
were no other interest bearing assets, at December 31, 2002, that would be required to be
disclosed under Item III(C), if such assets were loans.

The
loan portfolio has no significant concentrations in any one industry. There were no
foreign loans outstanding at December 31, 2002.

18

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# IV SUMMARY OF LOAN LOSS
EXPERIENCE

(A)   The
following table sets forth loan balances and summarizes the changes in the allowance for
loan losses, which is the Companys critical accounting policy, for each of the years
ended December 31:

`(dollars in thousands)
                                                         2002        2001        2000        1999        1998
                                                         ----        ----        ----        ----        ----
Loans:
  Average daily balance of loans for the year...     $311,060    $270,776    $238,697    $198,448    $175,873
  Amount of loans (gross) outstanding at end
    of the year.................................      327,960     287,125     256,224     210,655     185,646
Allowance for loan losses:
   Balance at beginning of year.................        5,668       5,193       4,483       3,958       3,424
   Loans charged off:
      Real estate...............................            0           0           0           0         110
      Commercial................................          598         322         526         322          63
      Consumer..................................          169         195          83         164         129
                                                          ---         ---          --         ---         ---
          Total charge-offs.....................          767         517         609         486         302
   Recoveries of loans previously charged off:
       Real estate..............................            0           0           0          35          96
       Commercial...............................          177          47          79          98          51
       Consumer.................................           91          45          40          38          49
                                                           --          --          --          --          --
           Total recoveries.....................          268          92         119         171         196

Net loans charged off...........................          499         425         490         315         106
Additions to allowance charged to operations....          625         900       1,200         840         640
                                                          ---         ---       -----         ---         ---
           Balance at end of year...............       $5,794      $5,668      $5,193      $4,483      $3,958

Ratios:
   Net loans charged off to average loans
       outstanding                                       .16%        .16%        .21%        .16%        .06%
   Allowance for loan losses to loans
       outstanding                                      1.77%       1.97%       2.03%       2.13%       2.13%`

(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:

`(dollars in thousands)
                             2002              2001              2000              1999              1998
                             ----              ----              ----              ----              ----
                        Amount  Percent   Amount  Percent   Amount  Percent   Amount  Percent   Amount  Percent
                        ---------------   ---------------   ---------------   ---------------   ---------------
Commercial........       $5,166   89.2%    $2,244   79.1%    $4,725   77.0%    $3,803   77.6%    $3,384   74.1%
Consumer..........          406    7.0%       160   11.3%       315   12.2%       441   11.8%       355   12.5%
Real Estate.......          222    3.8%        26    9.6%       153   10.8%       239   10.6%       219   13.4%
                            ---                                 ---                                 ---
Unallocated.......                          3,238
                                            =====
     Total........       $5,794    100%    $5,668    100%    $5,193    100%    $4,483    100%    $3,958    100%
                         ======    ====    ======    ====    ======    ====    ======    ====    ======    ====`

19

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# V DEPOSITS

The
following table sets forth average deposit balances and the weighted average rates paid
thereon for the years ended December 31:

`(dollars in thousands)
                                                    2002                    2001                    2000
                                                    ----                    ----                    ----
                                            Average                 Average                 Average
                                            Balance       Rate      Balance       Rate      Balance       Rate
                                            -------       ----      -------       ----      -------       ----
Non-interest bearing demand                $ 61,223                $ 57,166                $ 51,428
Savings, money market and NOW               153,651       1.49%     128,257       2.35%     120,770       2.84%
Time deposits                               131,019       3.93%     131,527       5.65%     104,669       5.88%
                                           --------                --------                --------
      Total                                $345,893       2.61%    $316,950       4.02%    $276,867       4.26%
                                           ========                ========                ========`

The
table for maturities of negotiated rate time deposits of $100,000 or more outstanding at
December 31, 2002 is incorporated by reference to Note 9 of the Companys
Consolidated Financial Statements for the year ended December 31, 2002 included in the
Appendix to the Companys definitive proxy statement, dated March 13, 2003, relating
to the April 15, 2003, Annual Meeting of Shareholders (as filed with the Commission as
exhibit 13 to this Report).

# VI RETURN ON EQUITY AND
ASSETS

The
ratio of net income to average shareholders equity and to average total assets, and
certain other ratios, for the years ended December 31 follow:

`2002           2001          2000           1999           1998
                                              ----           ----          ----           ----           ----
Net income as a percent of:
   Average common equity                    17.97%         16.80%        18.76%         15.05%         17.83%
   Average total assets                      1.58%          1.46%         1.63%          1.33%          1.63%`

Additional
performance ratios are set forth in Selected Financial Data included in the
Appendix to the Companys definitive proxy statement, dated March 13, 2003, relating
to the April 15, 2003, Annual Meeting of Shareholders and is incorporated herein by
reference. 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, included in the Appendix to the Companys definitive proxy statement,
dated March 13, 2003, relating to the April 15, 2003, Annual Meeting of Shareholders (as
filed with the Commission as exhibit 13 to this Report).

# VII SHORT-TERM BORROWING

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

20

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Item 2  Properties

The Bank
operates from eight 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 three branches in Howell at
5990 East Grand River, 4299 East Grand River, and 2400 West Grand River. The Bank also
maintains branch offices at 9911 East Grand River, Brighton, Michigan, 8080 Challis Road,
Brighton Michigan, 760 South Grand Avenue, Fowlerville, Michigan, and 10700 Highland Road,
Hartland, Michigan. All of the offices have ATM machines and all except the West Grand
River branch, which is in a grocery store, have drive up services. All of the properties
are owned by the Bank except for the West Grand River branch which is leased. The lease is
for fifteen years, expiring September 2007. The average lease payment over the remaining
life of the lease is $3,888 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 2002.

# 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.

21

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The
following table sets forth certain information with respect to the Companys
executive officers as of December 31, 2002:

`First Selected as an Officer
             Name (Age)                     Position with Company                   of the Company
             ----------                     ---------------------                   --------------
Barbara D. Martin (56)                President,     Chief     Executive                 1983
                                      Officer,   and   Director  of  the
                                      Company and the Bank
Barbara J. Nelson (55)                Secretary/Treasurer     of     the                 1985
                                      Company     and    Senior     Vice
                                      President,   Cashier,   and  Chief
                                      Financial Officer of the Bank
Herbert W. Bursch (50)                Senior  Vice   President,   Retail                 1999
                                      Services, of the Bank
Nancy Morgan (52)                     Senior   Vice   President,   Human                 1988
                                      Resources of the Bank
Janice Trouba (41)                    Senior  Vice  President,   Finance                 2002
                                      and Accounting, of the Bank
James Wibby (52)                      Senior  Vice   President,   Senior                 1997
                                      Lender, of the Bank`

# PART II

Item 5  Market for
Registrants Common Equity and Related Stockholder Matters

There
is not an established trading market for the Companys Common Stock. Information
regarding its market price can be obtained on the internet at nasdaq.com, symbol FNHM.
There is one market maker for the stock. 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, 2001, through December 31, 2002,
there were, so far as the Companys management knows, a total of 293,732 shares of
the Companys Common Stock sold. The price was reported to management in some of
these transactions; however there may have been other transactions involving the Company
stock at prices not reported to management. During 2002, the highest and lowest prices
known to management involving sales of more than 200 shares were $25.00 and $19.25 per
share, respectively. To the knowledge of management, the last sale of Common Stock
occurred on February 21, 2003 at a price of $23.75 per share.

As
of March 1, 2003, there were approximately 940 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 2001 and 2002, 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 exceeding 200 shares at higher or lower
prices, there may have been transactions at prices outside the ranges listed in the table.

22

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Sales
price, for sales involving more than 200 shares, and dividend information for the years
2001 and 2002:

`Sales Prices                      Cash Dividends Declared
                                                ------------                      -----------------------
            2001                        High                    Low
            ----                        ----                    ---
First Quarter                          $21.00                  $21.00                      $0.10
Second Quarter                         $22.50                  $21.00                      $0.10
Third Quarter                          $22.50                  $22.50                      $0.10
Fourth Quarter                         $22.50                  $20.00                      $0.30(1)

            2002                        High                    Low
            ----                        ----                    ---
First Quarter                          $22.50                  $21.50                      $0.13
Second Quarter                         $21.50                  $19.25                      $0.16
Third Quarter                          $23.00                  $21.25                      $0.17
Fourth Quarter                         $25.00                  $22.49                      $0.17`

(1)    
          Includes a special dividend of $0.20 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 statutory and regulatory restrictions and
requirements.

Item 6  Selected
Financial Data

The
information set forth under the caption Summary Financial Data on page 44 of
Appendix II to the Companys definitive proxy statement, as filed with the Commission
and dated March 13, 2003, relating to the April 15, 2003 Annual Meeting of Shareholders,
is incorporated herein by reference.

23

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

The
information set forth under the caption Managements Discussion and Analysis of
Financial Condition and Results of Operations on pages 32 through 45 of Appendix II
to the Companys definitive proxy statement, as filed with the Commission and dated
March 13, 2003, relating to the April 15, 2003 Annual Meeting of Shareholders, is
incorporated herein by reference.

Item 7a 
Quantitative and Qualititative Disclosures about Market Risk

Included
in Managements Discussion and Analysis

Item 8  Financial
Statements and Supplementary Data

The
following consolidated financial statements and supplementary data of the Company appear
on pages 1 through 31 of Appendix II to the Companys definitive Proxy Statement,
dated March 13, 2003, relating to the April 15, 2003 Annual Meeting of shareholders, as
filed with the Commission. This Appendix is incorporated herein by reference and included
as Exhibit 13 to this report on Form 10-K:

Consolidated Balance Sheets
        Consolidated Statements of Income
        Consolidated Statements of Stockholders Equity and Comprehensive Income
        Consolidated Statements of Cash Flows
        Notes to Consolidated Financial Statement
        Independent Auditors Report
        Quarterly
financial data relating to results of operations for the years ended December 31, 2002 and
2001 are reported on page 4 of Appendix II.

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

None

# PART III

Item 10  Directors
and Executive Officers of the Registrant

# Directors

The
information with respect to Directors and Nominees of the Registrant, set forth under the
caption Election of Directors on pages 2 and 3 of the Companys
definitive proxy statement, as filed with the Commission and dated March 13, 2003,
relating to the April 15, 2003 Annual Meeting of Shareholders, is incorporated herein by
reference.

24

---

# Executive Officers

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

Item 11  Executive
Compensation

The
information set forth under the caption Summary Compensation Table on pages 6
and 7 of the Companys definitive proxy statement, as filed with the Commission and
dated March 13, 2003, relating to the April 15, 2003 Annual Meeting of Shareholders, is
incorporated herein by reference. Information under the caption Committee Report on
Executive Compensation on page 7 and Shareholder Return Performance
Graph on page 9 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 pages 8
and 9 of the Companys definitive proxy statement, as filed with the Commission and
dated March 13, 2003, relating to the April 15, 2003 Annual Meeting of Shareholders, is
incorporated herein by reference.

The
Company maintains a Long-Term Incentive Plan under which common stock of the Company is
authorized for issuance to employees. As of December 31, 2002, the Company has not granted
any options, warrants or rights to acquire common stock under the Plan. As of that date,
the number of securities remaining available for issuance as equity-based compensation is
182,173 shares.

Item 13  Certain
Relationships and Related Transactions

The
information set forth under the caption Certain Transactions with Management
on page 8 of the Companys definitive proxy statement, as filed with the Commission
and dated March 13, 2003, relating to the April 15, 2003 Annual Meeting of Shareholders,
is incorporated herein by reference.

Item 14 Controls
and Procedures

With
the participation of management, the Companys Chief Executive Officer and Chief
Financial Officer, after evaluating the effectiveness of the Companys disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c)) on
January 30, 2003 (the Evaluation Date), have concluded that, as of such date,
the Companys disclosure controls and procedures were adequate and effective to
ensure that material information relating to the Company and its consolidated subsidiaries
would be made known to them by others within those entities in connection with the filing
of the Companys Annual Report on Form 10-K for the annual period ended December 31,
2002.

25

---

There
were no significant changes to the Companys internal controls or other factors that
could significantly affect the Companys disclosure controls subsequent to the
Evaluation Date through the date of filing of this Form 10-K for the annual period ended
December 31, 2002, nor were there any significant deficiencies or material weaknesses in
the Companys internal controls that would require corrective action.

# PART IV

Item 15  Exhibits,
Financial Statement Schedules and Report on Form 8-K

|(a) | 1. | Financial StatementsAll financial statements of the Registrant are incorporated herein by reference as set
forth in Appendix III to the Registrant's Definitive Proxy Statement, dated March 13, 2003, relating to the April
15, 2003 Annual Meeting of Shareholders, a copy of which is filed as Exhibit 13 to this Report on Form 10-K.
|--- | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | 2. | Financial Statement SchedulesNot 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-KNo reports on Form 8-K were filed during the fourth quarter of the year ended        December       31,
2002.                                                                                                                                                                                                         

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, 2003.

|FNBH BANCORP, INC. | 
|------------------ | 

|/s/ Barbara D. Martin | Barbara D. Martin, President & Chief Executive
              Officer (Principal Executive Officer)                                       
|--------------------- | -----------------------------------------------------------------------------------------------------------------------------------------
|/s/ Barbara J. Nelson | Barbara J. Nelson, Secretary/Treasurer & CFO
                                                              (Principal Accounting Officer)

26

---

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 Janice B. Trouba, 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.

|Rickard Scofield, Chairman of the Board      | /s/ Rickard Scofield    
|-------------------------------------------- | ------------------------
|Donald K. Burkel, Vice Chairman of the Board | /s/ Donald K. Burkel    
|Athena Bacalis, Director                     | /s/ Athena Bacalis      
|Gary R. Boss, Director                       | /s/ Gary R. Boss        
|Harry E. Griffith, Director                  | /s/ Harry E. Griffith   
|Richard F. Hopper, Director                  | /s/ Richard F. Hopper   
|Dona Scott Laskey, Director                  | /s/ Dona Scott Laskey   
|Barbara D. Martin, Director                  | /s/ Barbara D. Martin   
|James R. McAuliffe, Director                 |                         
|Randolph E. Rudisill, Director               | /s/ Randolph E. Rudisill
|R. Michael Yost, Director                    | /s/ R. Michael Yost     

27

---

CERTIFICATIONS

I, Barbara D. Martin, certify that:

|1. |  | I have reviewed this annual report on Form 10-K of FNBH Bancorp, Inc.;
|-- |  | ----------------------------------------------------------------------

|2. |  | Based on my knowledge, this annual report does not contain any untrue statement
                    of a material fact or omit to state a material fact necessary to make the
                    statements made, in light of the circumstances under which such statements were
                    made, not misleading with respect to the period covered by this annual report;
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. |  | Based on my knowledge, the financial statements, and other financial information
                    included in this annual report, fairly present in all material respects the
                    financial condition, results of operations and cash flows of the registrant as
                    of, and for, the periods presented in this annual report;
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. |  | The registrants other certifying officers and I are responsible for
                    establishing and maintaining disclosure controls and procedures (as defined in
                    Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a) | designed such disclosure controls and procedures to ensure that material
               information relating to the registrant, including its consolidated subsidiaries,
               is made known to us by others within those entities, particularly during the
               period in which this annual report is being prepared;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) | evaluated the effectiveness of the registrants disclosure controls and
               procedures as of January 30, 2003 (the Evaluation Date); and
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------

| | c) | presented in this annual report our conclusions about the effectiveness of the
               disclosure controls and procedures based on our evaluation as of the Evaluation
               Date;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. |  | The registrants other certifying officers and I have disclosed, based on
                    our most recent evaluation, to the registrants auditors and the audit
                    committee of registrants board of directors (or persons performing the
                    equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a) | all significant deficiencies in the design or operation of internal controls
               which could adversely affect the registrants ability to record, process,
               summarize and report financial data and have identified for the
               registrants auditors any material weaknesses in internal controls; and
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) | any fraud, whether or not material, that involves management or other employees
               who have a significant role in the registrants internal controls; and
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6. |  | The registrants other certifying officers and I have indicated in this
                    annual report whether there were significant changes in internal controls or in
                    other factors that could significantly affect internal controls subsequent to
                    the date of our most recent evaluation, including any corrective actions with
                    regard to significant deficiencies and material weaknesses.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: March 13, 2003

|/s/ Barbara D. Martin

Barbara D. Martin
Chief Executive Officer | 
|---------------------------------------------------------------- | 

28

---

I, Barbara J. Nelson, certify that:

|1. |  | I have reviewed this annual report on Form 10-K of FNBH Bancorp, Inc.;
|-- |  | ----------------------------------------------------------------------

|2. |  | Based on my knowledge, this annual report does not contain any untrue statement
                    of a material fact or omit to state a material fact necessary to make the
                    statements made, in light of the circumstances under which such statements were
                    made, not misleading with respect to the period covered by this annual report;
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. |  | Based on my knowledge, the financial statements, and other financial information
                    included in this annual report, fairly present in all material respects the
                    financial condition, results of operations and cash flows of the registrant as
                    of, and for, the periods presented in this annual report;
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. |  | The registrants other certifying officers and I are responsible for
                    establishing and maintaining disclosure controls and procedures (as defined in
                    Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a) | designed such disclosure controls and procedures to ensure that material
               information relating to the registrant, including its consolidated subsidiaries,
               is made known to us by others within those entities, particularly during the
               period in which this annual report is being prepared;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) | evaluated the effectiveness of the registrants disclosure controls and
               procedures as of January 30, 2003 (the Evaluation Date); and
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------

| | c) | presented in this annual report our conclusions about the effectiveness of the
               disclosure controls and procedures based on our evaluation as of the Evaluation
               Date;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. |  | The registrants other certifying officers and I have disclosed, based on
                    our most recent evaluation, to the registrants auditors and the audit
                    committee of registrants board of directors (or persons performing the
                    equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a) | all significant deficiencies in the design or operation of internal controls
               which could adversely affect the registrants ability to record, process,
               summarize and report financial data and have identified for the
               registrants auditors any material weaknesses in internal controls; and
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) | any fraud, whether or not material, that involves management or other employees
               who have a significant role in the registrants internal controls; and
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6. |  | The registrants other certifying officers and I have indicated in this
                    annual report whether there were significant changes in internal controls or in
                    other factors that could significantly affect internal controls subsequent to
                    the date of our most recent evaluation, including any corrective actions with
                    regard to significant deficiencies and material weaknesses.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: March 13, 2003

|/s/ Barbara J. Nelson

Barbara J. Nelson
Chief Financial Officer | 
|---------------------------------------------------------------- | 

29

---

# EXHIBIT INDEX

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

|ExhibitNumber |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | Page
|------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----
|(13)          | Pages 1-45 of Appendix II to the Companys Proxy Statement, dated March
               13, 2003, for the Annual Meeting of Shareholders to be held April 15, 2003
               representing that portion of the Appendix incorporated by reference in this
report. This Appendix was filed with the Commission as part of the Companys Proxy
Statement and was delivered to Company shareholders in compliance with Rule 14(a)-3 of the
Securities Exchange Act of 1934, as
amended.................................................................................................................................................................. |     
|              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |     
|(21)          | Subsidiaries of the Registrant..................................................................................................................................                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 31  
|(24)          | Power of Attorney (included in signature section)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     
|(99.1)        | Certificate of the Chief Executive Officer of FNBH Bancorp, Inc. pursuant to
          Section 906 of the Sarbanes-Oxley Act of 2002 (18 USC 1350)...............................................................................................................................................                                                                                                                                                                                                                                                                                                                                                        | 32  
|(99.2)        | Certificate of the Chief Financial Officer of FNBH Bancorp, Inc. pursuant to
          Section 906 of the Sarbanes-Oxley Act of 2002 (18 USC 1350)...............................................................................................................................................                                                                                                                                                                                                                                                                                                                                                        | 33  

30

---

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.

|ExhibitNumber                   |                                                                                    | Original Filing Form and Date                                       
|------------------------------- | ---------------------------------------------------------------------------------- | --------------------------------------------------------------------
|3.1                             | Restated Articles of Incorporation of the Registrant                               | Exhibit 3.1 of Form 10, effective June 30, 1995("Form 10")          
|                                |                                                                                    |                                                                     
|3.2                             | Amendment to the Company's Articles of Incorporation to Increase Authorized Shares | Appendix I of Proxy Statement dated March 17, 1998                  
|                                |                                                                                    |                                                                     
|3.3                             | Bylaws of the Registrant                                                           | Exhibit 3.2 of Form 10                                              
|                                |                                                                                    |                                                                     
|4                               | Form of Registrant's Stock Certificate                                             | Exhibit 4 of Form 10                                                
|                                |                                                                                    |                                                                     
|                                | Material Contracts:                                                                |                                                                     
|                                |                                                                                    |                                                                     
|10.1                            | Howell Branch Lease Agreement                                                      | Exhibit 10.2 to Form 10                                             
|                                |                                                                                    |                                                                     
|10.2                            | Company's Long Term Incentive Plan*                                                | Appendix II of Proxy Statement dated March 17, 1998                 
|                                |                                                                                    |                                                                     
|10.3                            | FNBH Bancorp Inc. Employees' Stock Purchase Plan                                   | Exhibit 4 to Registration Statement on Form S-8 (Reg. No. 333-46244)
|                                |                                                                                    |                                                                     
|10.3                            | Amended and Restated Compensation
   Plan for Nonemployee Directors*               | Appendix II of Proxy Statement
             dated March 15, 2002    
|                                |                                                                                    |                                                                     
|*Represents a compensation plan |                                                                                   

# EXHIBIT 13

# EXHIBIT 21

# SUBSIDIARIES

|Name                                                                                       | Jurisdiction of Incorporation
|------------------------------------------------------------------------------------------ | -----------------------------
|First National Bank in Howell
....................................................         | Michigan                     
|                                                                                           |                              
|H.B. Realty Co
........................................................................... | Michigan                     

31

---

EXHIBIT 99.1

CERTIFICATE OF THE 



CHIEF EXECUTIVE OFFICER OF 



FNBH BANCORP, INC.

Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350):

I,
Barbara D. Martin, Chief Executive Officer of FNBH Bancorp, Inc., certify, to the best of
my knowledge and belief, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18
U.S.C. 1350) that:

(1)       
          The annual report on Form 10-K for the period ended December 31, 2002, which
          this statement accompanies, fully complies with requirements of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934 and;

(2)       
          The information contained in this annual report on Form 10-K for the period
          ended December 31, 2002, fairly presents, in all material respects, the
          financial condition and results of operations of FNBH Bancorp, Inc.

|                        | FNBH BANCORP, INC.
|----------------------- | ------------------
|Date:    March 13, 2003 | By:               
|                        | Its:              

32

---

EXHIBIT 99.2

CERTIFICATE OF THE 



CHIEF FINANCIAL OFFICER OF 



FNBH BANCORP, INC.

Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350):

I,
Barbara J. Nelson, Chief Financial Officer of FNBH Bancorp, Inc., certify, to the best of
my knowledge and belief, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18
U.S.C. 1350) that:

(1)       
          The annual report on Form 10-K for the annual period ended December 31, 2002,
          which this statement accompanies, fully complies with requirements of Section
          13(a) or 15(d) of the Securities Exchange Act of 1934 and;

(2)       
          The information contained in this annual report on Form 10-K for the period
          ended December 31, 2002, fairly presents, in all material respects, the
          financial condition and results of operations of FNBH Bancorp, Inc.

|                        | FNBH BANCORP, INC.
|----------------------- | ------------------
|Date:    March 13, 2003 | By:               
|                        | Its:              

33