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

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

For the quarterly period
ended September 30, 2005 OR[ ] TRANSITION REPORT
PURSUANT TO SECTION 13 or 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition
period from ________ to _______

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
   (I.R.S. 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 _______________________

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

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

Indicate by check mark
whether the  registrant is a shell  company (as defined in Rule 12b-2 of the Exchange
 Act). Yes [__]   No [X]

The number of shares outstanding of
each of the issuers classes of common stock, as of the latest practicable date:
3,186,731 shares of the Corporations Common Stock (no par value) were outstanding as
of November 7, 2005.

---



INDEX

|                                                                                 
|---------------------------------------------------------------------------------
|Part I. Financial Information (unaudited)                                        
|                                                                                 
|Item 1.                                                                          
|Interim Financial Statements:                                                    
|Consolidated Balance Sheets as of September 30, 2005 and December 31, 2004       
|Consolidated Statements of Income, three months ended September 30, 2005 and 2004
|and nine months ended September 30, 2005 and 2004                                
|Consolidated Statements of Stockholders' Equity and Comprehensive                
|Income for the three months ended September 30, 2005 and 2004                    
|Consolidated Statements of Stockholders' Equity and Comprehensive                
|Income for the nine months ended September 30, 2005 and 2004                     
|Consolidated Statements of Cash Flows for nine months ended                      
|September 30, 2005 and 2004                                                      
|                                                                                 
|Notes to Interim Consolidated Financial Statements                               
|                                                                                 
|Item 2.                                                                          
|Management's Discussion and Analysis of                                          
|Financial Condition and Results of Operations                                    
|                                                                                 
|Item 3.                                                                          
|Quantitative and Qualitative Disclosures about Market Risk                       
|                                                                                 
|Item 4.                                                                          
|Controls and Procedures                                                          
|                                                                                 
|                                                                                 
|Part II.  Other Information                                                      
|                                                                                 
|Item 2.                                                                          
|Unregistered Sales of Equity Securities and Use of Proceeds                      
|                                                                                 
|Item 6.                                                                          
|Exhibits                                                                         
|                                                                                 
|Signatures                                                                       

2

---



PART I  FINANCIAL
INFORMATION

Item 1.Financial Statements
Unaudited interim consolidated
financial statements follow.

3

---



|FNBH BANCORP, INC. AND SUBSIDIARIESConsolidated Balance Sheets (Unaudited)
Assets | September 302005 | December 312004
|--------------------------------------------------------------------------------- | ---------------- | ---------------
|                                                                                  |                  |                
|Cash and due from banks                                                           |                  |                
|Short term investments                                                            |                  |                
|                                                                                  |                  |                
|Total cash and cash equivalents                                                   |                  |                
|                                                                                  |                  |                
|Certificates of deposit                                                           |                  |                
|Investment securities held to maturity, net (fair value of $16,148,000            |                  |                
|at September 30, 2005 and $16,706,000 at December 31, 2004)                       |                  |                
|Investment securities available for sale, at fair value                           |                  |                
|Mortgage-backed securities available for sale, at fair value                      |                  |                
|FHLBI and FRB stock, at cost                                                      |                  |                
|                                                                                  |                  |                
|Total investment securities                                                       |                  |                
|                                                                                  |                  |                
|Loans:                                                                            |                  |                
|Commercial                                                                        |                  |                
|Consumer                                                                          |                  |                
|Real estate mortgage                                                              |                  |                
|                                                                                  |                  |                
|Total Loans                                                                       |                  |                
|Less allowance for loan losses                                                    |                  |                
|                                                                                  |                  |                
|Net loans                                                                         |                  |                
|Premises and equipment, net                                                       |                  |                
|Land and facilities held for sale, net                                            |                  |                
|Other real estate owned, held for sale                                            |                  |                
|Accrued interest and other assets                                                 |                  |                
|                                                                                  |                  |                
|Total assets                                                                      |                  |                
|                                                                                  |                  |                
|                                                                                  |                  |                
|Liabilities and Stockholders' Equity                                              |                  |                
|Liabilities                                                                       |                  |                
|Deposits:                                                                         |                  |                
|Demand (non-interest bearing)                                                     |                  |                
|NOW                                                                               |                  |                
|Savings and money markets                                                         |                  |                
|Time deposits                                                                     |                  |                
|Brokered certificates of deposit                                                  |                  |                
|                                                                                  |                  |                
|Total deposits                                                                    |                  |                
|Other borrowings                                                                  |                  |                
|Accrued interest, taxes, and other liabilities                                    |                  |                
|                                                                                  |                  |                
|Total liabilities                                                                 |                  |                
|Stockholders' Equity                                                              |                  |                
|Common stock, no par value. Authorized 4,200,000 shares; 3,186,731                |                  |                
|shares issued and outstanding at September 30, 2005 and                           |                  |                
|3,179,654 shares issued and outstanding at December 31, 2004                      |                  |                
|Retained earnings                                                                 |                  |                
|Deferred directors' compensation                                                  |                  |                
|Unearned long term incentive plan                                                 |                  |                
|Accumulated other comprehensive loss, net                                         |                  |                
|                                                                                  |                  |                
|Total stockholders' equity                                                        |                  |                
|                                                                                  |                  |                
|Total liabilities and stockholders' equity                                        |                  |                
|                                                                                  |                  |                

See notes to interim
consolidated financial statements.

4

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|FNBH BANCORP, INC. AND SUBSIDIARIES                 | Three months ended September 30 | Nine months ended September 30
|--------------------------------------------------- | ------------------------------- | ------------------------------
|                                                    |                                 |                               
|                                                    |                                 |                               
|                                                    |                                 |                               
|Interest and dividend income:                       |                                 |                               
|Interest and fees on loans                          |                                 |                               
|Interest and dividends on investment securities:    |                                 |                               
|U.S. Treasury and agency securities                 |                                 |                               
|Obligations of states and political subdivisions    |                                 |                               
|Corporate bonds                                     |                                 |                               
|Other securities                                    |                                 |                               
|Interest on short term investments                  |                                 |                               
|Interest on certificates of deposit                 |                                 |                               
|                                                    |                                 |                               
|Total interest and dividend income                  |                                 |                               
|                                                    |                                 |                               
|                                                    |                                 |                               
|Interest expense:                                   |                                 |                               
|Interest on deposits                                |                                 |                               
|Interest on other borrowings                        |                                 |                               
|                                                    |                                 |                               
|Total interest expense                              |                                 |                               
|                                                    |                                 |                               
|                                                    |                                 |                               
|Net interest income                                 |                                 |                               
|                                                    |                                 |                               
|Provision for loan losses                           |                                 |                               
|                                                    |                                 |                               
|Net interest income after provision for loan losses |                                 |                               
|                                                    |                                 |                               
|                                                    |                                 |                               
|Noninterest income:                                 |                                 |                               
|Service charges and other fee income                |                                 |                               
|Trust income                                        |                                 |                               
|Gain on sale of loans                               |                                 |                               
|Other                                               |                                 |                               
|                                                    |                                 |                               
|Total noninterest income                            |                                 |                               
|                                                    |                                 |                               
|                                                    |                                 |                               
|Noninterest expense:                                |                                 |                               
|Salaries and employee benefits                      |                                 |                               
|Net occupancy expense                               |                                 |                               
|Equipment expense                                   |                                 |                               
|Professional and service fees                       |                                 |                               
|Printing and supplies                               |                                 |                               
|Advertising                                         |                                 |                               
|Other                                               |                                 |                               
|                                                    |                                 |                               
|Total noninterest expense                           |                                 |                               
|                                                    |                                 |                               
|                                                    |                                 |                               
|Income before federal income taxes                  |                                 |                               
|                                                    |                                 |                               
|Federal income taxes                                |                                 |                               
|                                                    |                                 |                               
|Net income                                          |                                 |                               
|                                                    |                                 |                               
|                                                    |                                 |                               
|Per share statistics:                               |                                 |                               
|Basic EPS                                           |                                 |                               
|Diluted EPS                                         |                                 |                               
|Dividends                                           |                                 |                               
|Basic average shares outstanding                    |                                 |                               
|Diluted average shares outstanding                  |                                 |                               

See notes to interim
consolidated financial statements.

5

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FNBH BANCORP, INC. AND
SUBSIDIARIES   Consolidated Statements of Stockholders' Equity and Comprehensive Income
     For the Three Months Ended September 30, 2005 and 2004 (Unaudited)

|                                                    | Common Stock | Retained Earnings | Deferred Directors' Compensation | Unearned Long Term Incentive Plan | Accumulated  Other Comprehensive  Income (Loss) | Total  
|--------------------------------------------------- | ------------ | ----------------- | -------------------------------- | --------------------------------- | ----------------------------------------------- | -------
|                                                    |              |                   |                                  |                                   |                                                 |        
|Balances at June 30, 2004                           |              |                   | $                                | 5,953,028                         |                                                 | $      
|Amortization of long term incentive plan            |              |                   |                                  |                                   |                                                 |        
|Issued 569 shares for employee stock purchase plan  |              |                   |                                  | 14,800                            |                                                 |        
|Issued 142 shares for current directors' fees       |              |                   |                                  | 4,345                             |                                                 |        
|Reclassification of 19,321 share units for          |              |                  
|deferred directors' fees                            |              |                   |                                  |                                   |                                                 | 437,211
|Comprehensive income:                               |              |                   |                                  |                                   |                                                 |        
|Net income                                          |              |                   |                                  |                                   | 1,647,092                                       |        
|Change in unrealized gain on investment             |              |                  
|securities available for sale, net of tax effect    |              |                   |                                  |                                   |                                                 |        
|                                                    |              |                   |                                  |                                   |                                                 |        
|Total comprehensive income                          |              |                   |                                  |                                   |                                                 |        
|Cash dividends ($0.19 per share)                    |              |                   |                                  |                                   | (603,740                                        | )      
|                                                    |              |                   |                                  |                                   |                                                 |        
|Balances at September 30, 2004                      |              |                   | $                                | 5,972,173                         |                                                 | $      
|                                                    |              |                   |                                  |                                   |                                                 |        
|                                                    |              |                  
|Balances at June 30, 2005                           |              |                   | $                                | 6,193,109                         |                                                 | $      
|Amortization of long term incentive plan            |              |                   |                                  |                                   |                                                 |        
|Issued 415 shares for employee stock purchase plan  |              |                   |                                  | 11,379                            |                                                 |        
|Issued 175 shares for current directors' fees       |              |                   |                                  | 5,050                             |                                                 |        
|Issued 798 share units for deferred directors' fees |              |                   |                                  |                                   |                                                 | 23,015 
|Comprehensive income:                               |              |                  
|Net income                                          |              |                   |                                  |                                   | 1,924,460                                       |        
|Change in unrealized gain (loss) on investment      |              |                  
|securities available for sale, net of tax effect    |              |                   |                                  |                                   |                                                 |        
|                                                    |              |                   |                                  |                                   |                                                 |        
|Total comprehensive income                          |              |                   |                                  |                                   |                                                 |        
|Cash dividends ($0.21 per share)                    |              |                   |                                  |                                   | (669,090                                        | )      
|                                                    |              |                   |                                  |                                   |                                                 |        
|Balances at September 30, 2005                      |              |                   | $                                | 6,209,538                         |                                                 | $      
|                                                    |              |                   |                                  |                                   |                                                 |        

See notes to interim
consolidated financial statements.

6

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FNBH BANCORP, INC. AND
SUBSIDIARIES      Consolidated Statements of Stockholders' Equity and Comprehensive
Income         For the Nine Months Ended September 30, 2005 and 2004 (Unaudited)

|                                                       | Common Stock | Retained Earnings | Deferred Directors' Compensation | Unearned Long Term Incentive Plan | Accumulated  Other Comprehensive  Income (Loss) | Total  
|------------------------------------------------------ | ------------ | ----------------- | -------------------------------- | --------------------------------- | ----------------------------------------------- | -------
|                                                       |              |                   |                                  |                                   |                                                 |        
|Balances at December 31, 2003                          |              |                   | $                                | 5,725,898                         |                                                 | $      
|Amortization of long term incentive plan               |              |                   |                                  |                                   |                                                 |        
|Issued 4,261 shares for long term incentive plan       |              |                   |                                  | 115,985                           |                                                 |        
|Issued 3,145 shares for employee stock   purchase plan |              |                   |                                  | 77,253                            |                                                 |        
|Issued 641 shares for current directors' fees          |              |                   |                                  | 18,051                            |                                                 |        
|Issued 283 shares for deferred directors' fees         |              |                   |                                  | 5,953                             |                                                 |        
|Issued 1,179 shares for directors' variable fees       |              |                   |                                  | 32,092                            |                                                 |        
|Retired 146 shares from long term incentive plan       |              |                   |                                  | (3,059                            | )                                               |        
|Reclassification of 19,321 share units for             |              |                  
|deferred directors' fees                               |              |                   |                                  |                                   |                                                 | 437,211
|Comprehensive income:                                  |              |                   |                                  |                                   |                                                 |        
|Net income                                             |              |                   |                                  |                                   | 4,418,166                                       |        
|Change in unrealized gain (loss) on investment         |              |                  
|securities available for sale, net of tax effect       |              |                   |                                  |                                   |                                                 |        
|                                                       |              |                   |                                  |                                   |                                                 |        
|Total comprehensive income                             |              |                   |                                  |                                   |                                                 |        
|Cash dividends ($0.53 per share)                       |              |                   |                                  |                                   | (1,682,297                                      | )      
|                                                       |              |                   |                                  |                                   |                                                 |        
|Balances at September 30, 2004                         |              |                   | $                                | 5,972,173                         |                                                 | $      
|                                                       |              |                   |                                  |                                   |                                                 |        
|                                                       |              |                  
|Balances at December 31, 2004                          |              |                   | $                                | 6,009,181                         |                                                 | $      
|Amortization of long term incentive plan               |              |                   |                                  |                                   |                                                 |        
|Issued 2,325 shares for long term incentive plan       |              |                   |                                  | 70,239                            |                                                 |        
|Issued 3,224 shares for employee stock   purchase plan |              |                   |                                  | 84,331                            |                                                 |        
|Issued 542 shares for current directors' fees          |              |                   |                                  | 16,000                            |                                                 |        
|Issued 3,340 share units for deferred directors' fees  |              |                   |                                  |                                   |                                                 | 99,282 
|Issued 986 shares for directors' variable fees         |              |                   |                                  | 29,787                            |                                                 |        
|Comprehensive income:                                  |              |                  
|Net income                                             |              |                   |                                  |                                   | 4,744,080                                       |        
|Change in unrealized gain (loss) on investment         |              |                  
|securities available for sale, net of tax effect       |              |                   |                                  |                                   |                                                 |        
|                                                       |              |                   |                                  |                                   |                                                 |        
|Total comprehensive income                             |              |                   |                                  |                                   |                                                 |        
|Cash dividends ($0.59 per share)                       |              |                   |                                  |                                   | (1,878,477                                      | )      
|                                                       |              |                   |                                  |                                   |                                                 |        
|Balances at September 30, 2005                         |              |                   | $                                | 6,209,538                         |                                                 | $      
|                                                       |              |                   |                                  |                                   |                                                 |        

See notes to interim
consolidated financial statements.

7

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|FNBH BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited) | Nine months ended September 30
|------------------------------------------------------------------------------------- | ------------------------------
|                                                                                     
|                                                                                      |                               
|Cash flows from operating activities:                                                 |                               
|Net income                                                                            |                               
|Adjustments to reconcile net income to net cash provided by     operating activities: |                               
|Provision for loan losses                                                             |                               
|Depreciation and amortization                                                         |                               
|Deferred income tax benefit                                                           |                               
|Net amortization on investment securities                                             |                               
|Earned portion of long term incentive plan                                            |                               
|Shares issued for current and variable directors' compensation                        |                               
|Shares earned for deferred directors' compensation                                    |                               
|Loss on disposal of equipment                                                         |                               
|Gain on sale of loans                                                                 |                               
|Proceeds from sale of loans                                                           |                               
|Origination of loans held for sale                                                    |                               
|Gain on the sale of other real estate owned, held for sale                            |                               
|Proceeds from sale of other real estate owned, held for sale                          |                               
|Gain on sale of land and facilities held for sale                                     |                               
|Proceeds from sale of land and facilities held for sale                               |                               
|Increase in accrued interest income and other assets                                  |                               
|Decrease in accrued interest, taxes, and other liabilities                            |                               
|                                                                                      |                               
|Net cash provided by operating activities                                             |                               
|                                                                                      |                               
|Cash flows from investing activities:                                                 |                               
|Purchase of available for sale securities                                             |                               
|Purchase of held to maturity securities                                               |                               
|Purchases/Stock dividend FHLBI stock                                                  |                               
|Proceeds from maturities and calls of available for sale securities                   |                               
|Proceeds from paydowns of mortgage-backed securities available for sale               |                               
|Proceeds from maturities and calls of held to maturity securities                     |                               
|Purchases of certificates of deposit                                                  |                               
|Maturity of certificates of deposit                                                   |                               
|Net (increase) decrease in loans                                                      |                               
|Capital expenditures                                                                  |                               
|                                                                                      |                               
|Net cash provided by (used in) investing activities                                   |                               
|                                                                                      |                               
|Cash flows from financing activities:                                                 |                               
|Net increase in deposits                                                              |                               
|Payments on FHLBI note                                                                |                               
|Proceeds from issuance of short term debt                                             |                               
|Repayment of short term debt                                                          |                               
|Dividends paid                                                                        |                               
|Shares issued for employee stock purchase                                             |                               
|                                                                                      |                               
|Net cash provided by (used in) financing activities                                   |                               
|                                                                                      |                               
|Net increase in cash and cash equivalents                                             |                               
|Cash and cash equivalents at beginning of year                                        |                               
|                                                                                      |                               
|Cash and cash equivalents at end of period                                            |                               
|                                                                                      |                               
|Supplemental disclosures:                                                             |                               
|Interest paid                                                                         |                               
|Federal income taxes paid                                                             |                               
|Loans transferred to other real estate                                                |                               
|Loans transferred to land and facilities, held for sale                               |                               
|Loans charged off                                                                     |                               

See notes to interim
consolidated financial statements.

8

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Notes to Interim
Consolidated Financial Statements (unaudited)  The accompanying unaudited
consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America (GAAP) for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required by GAAP for
complete financial statements.

1.    
          In the opinion of management of FNBH Bancorp, Inc. (the Corporation), the
          unaudited consolidated financial statements filed with this Form 10-Q contain
          all adjustments (consisting of only normal recurring accruals) necessary to
          present fairly the consolidated financial position of the Corporation as of
          September 30, 2005, and consolidated results of operations and cash flows for
          the nine months ended September 30, 2005 and 2004.

2.    
          The results of operations for the nine months ended September 30, 2005 and 2004
          are not necessarily indicative of the results to be expected for the full year.

3.    
          The accompanying unaudited consolidated financial statements should be read in
          conjunction with the Consolidated Financial Statements in the 2004 Annual Report
          contained in the Corporations report on Form 10-K filing as amended.

4.    
          The provision for income taxes represents federal income tax expense calculated
          using estimated annualized rates on taxable income generated during the
          respective periods.

5.    
          Investment and Mortgage-Backed Securities. A summary of the amortized cost and
          approximate fair value of investment and mortgage-backed securities at September
          30, 2005 and December 31, 2004 follows:

|                                    | September 30, 2005 | December 31, 2004
|----------------------------------- | ------------------ | -----------------
|                                    |                    |                  
|                                    |                    |                  
|                                    |                    |                  
|Held to maturity:                   |                    |                  
|Obligations of state and political  |                    |                  
|subdivisions                        |                    |                  
|                                    |                    |                  
|Total held to maturity              |                    |                  
|                                    |                    |                  
|                                    |                    |                  
|Available for sale:                 |                    |                  
|U.S. Treasury and agency securities |                    |                  
|Corporate bonds                     |                    |                  
|Mortgage-backed securities          |                    |                  
|                                    |                    |                  
|Total available for sale            |                    |                  
|                                    |                    |                  

There were 19 securities in a
continuous loss position for 12 months or more at September 30, 2005, which consisted of 3
mortgage-backed securities and 16 agency securities. Because the declines in fair value
were due to changes in market interest rates, not in estimated cash flows, no
other-than-temporary impairment was recorded at September 30, 2005. The Corporation has
both the intent and ability to hold these securities for the time necessary to recover the
amortized cost.

9

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The following is a summary of the
unrealized losses and fair value of securities available for sale portfolio at September
30, 2005, by length of time that individual securities in each category have been in a
continuous loss position:

|                                    | Less than 12 months | September 30, 200512 months or more | Total
|----------------------------------- | ------------------- | ----------------------------------- | -----
|                                    |                     |                                     |      
|                                    |                     |                                     |      
|                                    |                     |                                     |      
|Available for sale:                 |                     |                                     |      
|U.S. Treasury and agency securities |                     |                                     | $    
|Mortgage-backed securities          |                     |                                     |      
|                                    |                     |                                     |      
|Total available for sale            |                     |                                     | $    
|                                    |                     |                                     |      

As of December 31, 2004, there were
12 investments that had been in a continuous loss position for 12 months or more and no
impairment was recorded.

6.    
          Managements assessment of the allowance for loan losses is based on an
          evaluation of the loan portfolio, recent loss experience, current economic
          conditions, and other pertinent factors. Loans on non-accrual status and those
          past due more than 90 days amounted to $6,876,000 at September 30, 2005,
          $4,723,000 at June 30, 2005, $1,434,000 at December 31, 2004, and $1,968,000 at
          September 30, 2004. (See Managements Discussion and Analysis of Financial
          Condition and Results of Operations).

7.    
          Basic net income per common share is computed by dividing net income applicable
          to common stock by the weighted average number of shares of common stock and
          deferred director fee stock units outstanding during the period. Diluted net
          income per common share is computed by dividing net income applicable to common
          stock by the weighted average number of shares and deferred director fee stock
          units outstanding and potential common stock outstanding, such as shares of
          unvested restricted stock outstanding during the period calculated under the
          treasury stock method.

The following table presents basic
and diluted net income per share:

|                                            | Third Quarter | Year-to-Date
|------------------------------------------- | ------------- | ------------
|                                            |               |             
|                                            |               |             
|Weighted average basic shares outstanding   |               |             
|Effect of dilutive restricted stock         |               |             
|                                            |               |             
|Weighted average diluted shares outstanding |               |             
|                                            |               |             
|Net income                                  |               |             
|                                            |               |             
|Basic net income per share                  |               |             
|Diluted net income per share                |               |             

8.    
          Beginning in the first quarter of 2005, the allowance for unfunded loan
          commitments was recorded in Accrued interest, taxes, and other
          liabilities. Previously, this portion of the allowance was included in the
          allowance for loan losses and shown as a contra-asset on the Consolidated
          Balance Sheets. Prior period amounts have been reclassified. The allowance for
          losses on unfunded loan commitments is determined in a similar manner to the
          allowance for loan losses.

10

---



In September 2004, the Corporation
reclassified deferred directors compensation (See Note 17 of the Consolidated
Financial Statements in the 2004 Annual Report) from a liability to equity. Prior periods
were not reclassified as the impact of this change was determined not to be significant.

Item 2.

Managements
Discussion and Analysis of Financial
Condition and Results of Operations Interim Financial
Statements

This report includes certain
forward-looking statements, within the meaning of the Private Securities Litigation Reform
Act of 1995, that involve inherent risks and uncertainties. A number of important factors
could cause actual results to differ materially from those in the forward-looking
statements. Those factors include the economic environment, competition, products and
pricing in business areas in which the Corporation operates, prevailing interest rates,
changes in government regulations and policies affecting financial service companies,
credit quality and credit risk management, acquisitions and integration of acquired
businesses.

The Corporation, 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) and all of the outstanding stock of HB
Realty Co., a subsidiary which owns real estate. The following is a discussion of the
Corporations results of operations for the three and nine months ended September 30,
2005 and 2004, and also provides information relating to the Corporations financial
condition, focusing on its liquidity and capital resources.

|                                              | Third Quarter | Year-to-Date
|--------------------------------------------- | ------------- | ------------
|Earnings
(in thousands except per share data) |               |             
|                                              |               |             
|Net Income                                    |               |             
|Basic and diluted net income per share        |               |             

Net income for the three months ended
September 30, 2005 as compared to the same period in the prior year was positively
affected by commercial loan growth and a higher net interest margin. This was offset by a
higher provision for loan losses in 2005.

11

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Net income for the three months ended
September 30, 2005, increased approximately $277,000 (16.8%) compared to the same period
last year. In the third quarter of the current year, net interest income increased
$791,000 (16.1%) offset by an increase in the provision for loan loss of $200,000 (66.7%).
Noninterest income increased by $171,000 (20.1%) offset by an increase in noninterest
expense of $322,000 (10.5%) and federal income taxes of $162,000 (22.4%).

Net income for the nine months ended
September 30, 2005 increased approximately $326,000 (7.4%) compared to the same period
last year. Net interest income increased $2,301,000 (16.2%) offset by an increase in the
provision for loan loss of $1,049,000 (105.4%), a decrease in noninterest income of
$136,000 (4.5%), an increase in noninterest expense of $599,000 (6.0%) and an increase in
federal income taxes of $191,000 (10.0%).

|                                   | Third Quarter | Year-to-Date
|---------------------------------- | ------------- | ------------
|Net Interest Income
(in thousands) |               |             
|                                   |               |             
|Interest Income                    |               |             
|Interest Expense                   |               |             
|                                   |               |             
|Net Interest Income                |               |             

12

---



The following table illustrates some
of the significant factors contributing to the increase in net interest income (fully tax
equivalent basis) for the period.

INTEREST YIELDS AND
COSTS (in thousands)                September 30, 2005 and 2004

|                                                          | ----------Third Quarter Averages----------
|--------------------------------------------------------- | ------------------------------------------
|                                                         
|                                                          |                                           
|                                                          |                                           
|Assets:                                                   |                                           
|Short term investments                                    |                                           
|Certificates of deposit                                   |                                           
|Securities:  Taxable                                      |                                           
|Tax-exempt (1)                                            |                                           
|Commercial loans (2)(3)                                   |                                           
|Consumer loans (2)(3)                                     |                                           
|Mortgage loans (2)(3)                                     |                                           
|                                                          |                                           
|Total earnings assets/total interest income               |                                           
|                                                          |                                           
|                                                          |                                           
|Cash and due from banks                                   |                                           
|All other assets                                          |                                           
|Allowance for loan loss                                   |                                           
|                                                          |                                           
|Total Assets                                              |                                           
|                                                          |                                           
|                                                          |                                           
|Liabilities and Stockholders' Equity:                     |                                           
|Interest bearing deposits:                                |                                           
|MMDA, Savings & NOW accounts                              |                                           
|Time                                                      |                                           
|Short term borrowings                                     |                                           
|FHLBI advances                                            |                                           
|                                                          |                                           
|Total interest bearing liabilities/total interest expense |                                           
|                                                          |                                           
|                                                          |                                           
|Non-interest bearing deposits                             |                                           
|All other liabilities                                     |                                           
|Stockholders' Equity                                      |                                           
|                                                          |                                           
|Total Liabilities and Stockholders' Equity                |                                           
|                                                          |                                           
|Interest spread                                           |                                           
|                                                          |                                           
|Net interest income-FTE                                   |                                           
|                                                          |                                           
|Net interest margin                                       |                                           
|                                                          |                                           

(1) Average yields in the above
table have been adjusted to a tax-equivalent basis using a 34% tax rate and exclude the
effect of any market value adjustments recorded under Statement of Financial Accounting
Standards No. 115. (2) For purposes of the computation above, non-accruing loans are
included in the average daily loan balances. (3) Interest on loans includes origination
fees totaling $164,000 in 2005 and $199,000 in 2004.

13

---



INTEREST YIELDS AND
COSTS (in thousands)                September 30, 2005 and 2004

|                                                          | ----------Year-to-Date Averages----------
|--------------------------------------------------------- | -----------------------------------------
|                                                         
|                                                          |                                          
|                                                          |                                          
|Assets:                                                   |                                          
|Short term investments                                    |                                          
|Certificates of deposit                                   |                                          
|Securities:  Taxable                                      |                                          
|Tax-exempt (1)                                            |                                          
|Commercial loans (2)(3)                                   |                                          
|Consumer loans (2)(3)                                     |                                          
|Mortgage loans (2)(3)                                     |                                          
|                                                          |                                          
|Total earnings assets/total interest income               |                                          
|                                                          |                                          
|                                                          |                                          
|Cash and due from banks                                   |                                          
|All other assets                                          |                                          
|Allowance for loan loss                                   |                                          
|                                                          |                                          
|Total Assets                                              |                                          
|                                                          |                                          
|                                                          |                                          
|Liabilities and Stockholders' Equity:                     |                                          
|Interest bearing deposits:                                |                                          
|MMDA, Savings & NOW accounts                              |                                          
|Time                                                      |                                          
|Short term borrowings                                     |                                          
|FHLBI advances                                            |                                          
|                                                          |                                          
|Total interest bearing liabilities/total interest expense |                                          
|                                                          |                                          
|                                                          |                                          
|Non-interest bearing deposits                             |                                          
|All other liabilities                                     |                                          
|Stockholders' Equity                                      |                                          
|                                                          |                                          
|Total Liabilities and Stockholders' Equity                |                                          
|                                                          |                                          
|Interest spread                                           |                                          
|                                                          |                                          
|Net interest income-FTE                                   |                                          
|                                                          |                                          
|Net interest margin                                       |                                          
|                                                          |                                          

(1) Average yields in the above
table have been adjusted to a tax-equivalent basis using a 34% tax rate and exclude the
effect of any market value adjustments recorded under Statement of Financial Accounting
Standards No. 115. (2) For purposes of the computation above, non-accruing loans are
included in the average daily loan balances. (3) Interest on loans includes origination
fees totaling $444,000 in 2005 and $541,000 in 2004.

14

---



Interest Earning
Assets/Interest IncomeOn a tax equivalent basis, interest
income increased approximately $1,333,000 (20.9%) in the third quarter of 2005 compared to
the third quarter of 2004. The increase was the result of higher average earning assets of
$28,038,000 (6.5%) and an increase in the yield on earning assets of 78 basis points. The
increase in yield is primarily the result of increases in the prime interest rate.

The quarterly average balance of
short term investments and securities was $8,503,000 (8.9%) lower in the third quarter of
2005 as compared with the same period in 2004. There was an increase in the yield on these
investments of 40 basis points in the third quarter of 2005 compared to 2004 due to higher
rates on short term investments which is the result of increases in short-term interest
rates. Loans, which earn a higher yield than investments, had an increase in average
balances of $36,541,000 (10.9%) in the third quarter of 2005 compared to the same period
last year and an increase in yield of 77 basis points. While yields on loans have improved
from the prior year, increased competition in loan pricing is preventing the Bank from
realizing the full impact of the prime rate increases. We expect that competitive pricing
for loans will continue throughout 2005, effecting both yield and volume.

For the first nine months of the
year, tax equivalent interest income increased $3,218,000 (17.2%). Loan interest income
increased $3,027,000 (18.5%) due to average balances increasing $26,379,000 (7.8%) and the
average yield increasing 65 basis points. The increase in loan growth occurred in
commercial loans. Average commercial loans increased $27,109,000 (10.1%). Short term
investments and securities positively affected interest income by $190,000 (8.1%) over the
prior year, the result of the average yield increasing 31 basis points.

Interest Bearing
Liabilities/Interest ExpenseInterest expense on deposits for the
third quarter of 2005 increased $587,000 (46.5%) from the third quarter of 2004. This was
the result of higher average balances of $18,527,000 (5.6%) in 2005 compared to 2004 and
higher interest rates paid on deposits which increased the cost of these funds by 59 basis
points. Rate increases on deposit products will continue to impact the yield paid on
deposits for the remainder of 2005 and 2006. This combined with the competition in loan
pricing would result in net interest margin compression in the fourth quarter of 2005 and
may continue into 2006.

Interest expense on deposits
increased during the first nine months of 2005 compared to the first nine months of 2004
by $957,000 (24.8%) due to an increase in the average deposit balances of $14,023,000
(4.3%) and increase in the average rate paid on deposits of 31 basis points.

The quarterly average balance of
short term borrowings and FHLBI advances decreased $347,000 (6.8%) in the third quarter of
2005 compared to 2004. Due to the decrease in loan demand in the third quarter, short term
borrowings or federal funds purchased have not been necessary. As of September 30, 2005
the Bank had a $1,785,000 loan advance entered into in 2000 to help with the Banks
rate sensitivity. FHLBI borrowings are available to fund future loan growth if needed.

LiquidityLiquidity is monitored by the
Banks Asset/Liability Management Committee (ALCO) which meets at least monthly. The
Board of Directors has approved a liquidity policy which requires the Bank, while it is
well capitalized as defined by the Federal Financial Institutions Examination Council
(FFIEC), to maintain a current ratio of no less than 1:1 (core basic surplus liquidity
equal to 0), representing that the Banks contingency for unexpected funding outflows
is being primarily met by short term investments and unencumbered treasury and agency
securities. Additional requirements of the policy are that when FHLBI available credit is
added to core basic surplus liquidity, the Bank must have liquidity totaling 5% of assets,
and when brokered certificates and Fed Funds lines are added, the Bank must have liquidity
totaling 8% of assets. Should the Banks capital ratios fall below the well
capitalized level, additional liquidity totaling 5% of assets will be required.

15

---



Deposits are the principal source of
funds for the Bank. Management monitors rates at other financial institutions in the area
to ascertain that its rates are competitive in the market. Management also attempts to
offer a wide variety of products to meet the needs of its customers. The makeup of the
Banks Large Certificates (over $100,000), which are generally considered
to be more volatile and sensitive to changes in rates, consists principally of local
depositors known to the Bank. As of September 30, 2005, the Bank had Large Certificates
totaling approximately $91,000,000 compared to $54,000,000 at December 31, 2004. At
September 30, 2005, the Bank had $30,701,000 in brokered certificates. These certificates
include both those over and under $100,000 which are funds generated through brokers
outside of our local market area. These certificates have $19,389,000 maturing within the
next twelve months. The Bank has utilized this market more in 2005 as it strives to keep
the cost of funds down in an ever increasing competitive local market.

It is the intention of the
Banks management to handle unexpected liquidity needs through its Federal Funds
position with a correspondent bank, brokered certificates and by FHLBI borrowings. The
Bank has a line of credit of approximately $43,000,000 available at the FHLBI. As of
September 30, 2005 approximately $1,800,000 of the line had been used for a long term
advance, as previously described. The Bank has pledged certain mortgage loans as
collateral for this borrowing. The Bank also has a repurchase agreement in place where it
can borrow from a broker who will lend money against certain securities of the Bank.
Finally, management may look to available for sale securities in the
investment portfolio to meet additional liquidity needs.

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

In addition to liquidity and interest
rate risk management issues, ALCO discusses the Banks performance and the current
economic outlook and its impact on the Bank and current interest rate forecasts. Actual
results are compared to budget in terms of growth and income. A yield and cost analysis is
done to monitor interest margin. Various ratios are discussed including capital ratios,
other balance sheet ratios, and profitability ratios.

16

---



Interest Rate Sensitivity as of
September 30, 2005 (dollars in thousands)

|                                 | 0-3Months | 4-12Months | 1-5Years | 5+Years | Total
|-------------------------------- | --------- | ---------- | -------- | ------- | -----
|                                 |           |            |          |         |      
|Assets:                          |           |            |          |         |      
|Loans                            |           |            | $        | 185,684 |      
|Securities                       |           |            |          | 5,411   |      
|Certificates of deposit          |           |            |          | 1,866   |      
|Short term investments           |           |            |          | 23,047  |      
|                                 |           |            |          |         |      
|Total rate sensitive assets      |           |            | $        | 216,008 |      
|                                 |           |           
|Liabilities:                     |           |           
|MMDA, Savings & NOW              |           |            | $        | 76,621  |      
|Time                             |           |            |          | 24,388  |      
|Other borrowings                 |           |            |          | -       |      
|                                 |           |            |          |         |      
|Total rate sensitive liabilities |           |            | $        | 101,009 |      
|                                 |           |           
|Rate sensitivity gap and ratios: |           |           
|Gap for period                   |           |            | $        | 114,999 |      
|Cumulative gap                   |           |            |          | 114,999 |      
|                                 |           |           
|Cumulative rate sensitive ratio  |           |            |          | 2.14    |      

The preceding table sets forth the
time periods in which earning assets and interest bearing liabilities will mature or may
re-price in accordance with their contractual terms. The entire balance of savings
including MMDA and NOW are not categorized as 0-3 months, although they are variable rate
products. Some of these balances are core deposits and are not considered rate sensitive.
Allocations are made to time periods based on the Banks historical experience and
managements analysis of industry trends.

In the gap table above, the short
term (one year and less) cumulative interest rate sensitivity is asset sensitive as of
September 30, 2005. An asset sensitive position would normally indicate increased net
interest income in a rising rate environment. Gap analysis is limited and may not provide
an accurate indication of the impact of general interest rate movements on the net
interest margin since repricing of various categories of assets and liabilities is subject
to the Banks needs, competitive pressures, and the needs of the Banks
customers. In addition, various assets and liabilities indicated as repricing within the
same period may in fact reprice at different times within the period and at different rate
indices. Additionally, simulation modeling, which measures the impact of upward and
downward movements of interest rates on interest margin, provides meaningful insight into
strategies management can take to help mitigate the movement of interest rates.

|Third Quarter | Year-to-Date
|------------- | ------------
|              |             
|              |             
|Total         |             

The Corporation recorded a loan loss
provision of $500,000 in the third quarter of 2005 compared to a provision of $300,000 in
the same period last year. The provision is based upon an analysis of estimated losses
inherent in the portfolio and other economic factors. Non-performing loans at September
30, 2005 are up $2,153,000 from June 30, 2005, $5,442,000 from December 31, 2004, and have
increased $4,908,000 from the balance at September 30, 2004. Net charge offs for the third
quarter of 2005 were $303,000 compared to $197,000 in the same period in 2004.

17

---



Year to date the provision is
$2,044,000 compared to $995,000 in the prior year. Management has determined that the
allowance is adequate based on potential losses in the portfolio. At September 30, 2005
the allowance for loan loss as a percent of loans was 1.97% compared to 1.92% at June 30,
2005, 1.67% at March 31, 2005, 1.70% at December 31, 2004, and 1.75% at September 30,
2004. For the first nine months of 2005 the Bank had net charge offs of $829,000 compared
to $685,000 for 2004. The Bank has experienced a sixty-two percent increase in gross
charge-offs in the consumer loan portfolio at September 30, 2005 compared to September 30,
2004 due to increased bankruptcy filings. Non-accrual, past due 90 days, and renegotiated
loans were 1.86% of total loans at September 30, 2005, compared to 1.27% at June 30, 2005,
0.54% at March 31, 2005, 0.40% at December 31, 2004 and 0.58% at September 30, 2004.

At September 30, 2005 the Bank had
two nonperforming loans in the process of bankruptcy or foreclosure proceedings which
totaled $2.3 million. The remaining nonperforming loans have increased in the third
quarter due to higher loan delinquencies caused in part by the weakened local economy
causing cash flow problems for our borrowers and further aggravated by increasing interest
rates which affect our residential home developers and builders. This has led the Bank to
further refine its criteria for classifying loans, developing more rigorous workout
plans and evaluating previous appraisals, and in some cases, order reappraisals on
specific commercial properties to ensure the adequacy of the underlying collateral.

Impaired loans, as defined by
Statement of Financial Accounting Standards (SFAS) No. 114, Accounting by Creditors for
Impairment of a Loan, totaled approximately $9,800,000 at September 30, 2005, and
included non-accrual and past due 90 days other than homogenous residential and consumer
loans, and $6,770,000 of commercial loans separately identified as impaired. Impaired
loans totaled $9,700,000 at June 30, 2005, $5,900,000, at March 31, 2005 and December 31,
2004 and $6,800,000 at September 30, 2004. A loan is considered impaired when it is
probable that all or part of amounts due according to the contractual terms of the loan
agreement will not be collectable on a timely basis.

The adequacy of the allowance for
loan losses is determined by managements assessment of the composition of the loan
portfolio, an evaluation of specific credits, an analysis of the value of the underlying
collateral for those loans, historical loss experience, relevant economic factors, the
level of nonperforming loans, loans that have been identified as impaired, and the overall
credit quality of the portfolio. Management continues to refine its techniques in this
analysis. Impaired commercial loans had specific reserves calculated in accordance with
SFAS No. 114 of $2,839,000 at September 30, 2005, $2,748,000 at June 30, 2005, $1,630,000
at March 31, 2005, $1,740,000 at December 31, 2004, and $1,700,000 at September 30, 2004.

Beginning in the first quarter of
2005, the allowance for unfunded loan commitments was recorded in Accrued interest,
taxes and other liabilities. Previously, this portion of the allowance was included
in the allowance for loan losses and shown as a contra-asset on the Consolidated Balance
Sheets. Prior period amounts have been reclassified. The allowance for losses on unfunded
loan commitments is determined in a similar manner to the allowance for loan losses.

Nonperforming assets are loans for
which the accrual of interest has been discontinued, accruing loans 90 days or more past
due in payments, and other real estate which has been acquired primarily through
foreclosure and is waiting disposition.

18

---



Loans are generally placed on a
nonaccrual basis when principal or interest is past due ninety days or more and when, in
the opinion of management, full collection of principal and interest is unlikely. Loans
categorized as ninety days past due and still accruing are well secured and in the process
of collection. The following table reflects nonperforming assets at September 30, 2005,
June 30, 2005, March 31, 2005 and December 31, 2004.

|Nonperforming Assets
(in thousands)                                          | September 30,2005 | June 30,2005 | March 31,2005 | December 31,2004
|---------------------------------------------------------------------------- | ----------------- | ------------ | ------------- | ----------------
|                                                                             |                   |              |               |                 
|Nonaccrual loans                                                             |                   |              | $             | 3,887           
|90 days or more past due and still accruing                                  |                   |              |               | 2,989           
|                                                                             |                   |              |               |                 
|Total nonperforming loans                                                    |                   |              | $             | 6,876           
|Other real estate                                                            |                   |              |               | 773             
|                                                                             |                   |              |               |                 
|Total nonperforming assets                                                   |                   |              | $             | 7,649           
|                                                                             |                   |             
|Nonperforming loans as a percent of total loans                              |                   |              |               | 1.86            
|Allowance for loan losses as a percent of nonperforming loans                |                   |              |               | 106             
|Nonperforming assets as a percent of total loans and other real estate owned |                   |              |               | 2.06            

The following table summarizes the
changes in the allowance for loan losses for the first nine months of 2005 and 2004.

|Year to DateSeptember 30, 2005                                  | Year to DateSeptember 30, 2004
|--------------------------------------------------------------- | ------------------------------
|                                                                |                               
|                                                                |                               
|                                                                |                               
|Allowance for loan losses:                                      |                               
|Balance at beginning of year as restated                        |                               
|Loans charged off:                                              |                               
|Real estate mortgages                                           |                               
|Commercial                                                      |                               
|Consumer                                                        |                               
|                                                                |                               
|Total charge-offs                                               |                               
|Recoveries to loans previously charged off:                     |                               
|Real estate mortgages                                           |                               
|Commercial                                                      |                               
|Consumer                                                        |                               
|                                                                |                               
|Total recoveries                                                |                               
|                                                                |                               
|Net loans charged off                                           |                               
|Additions to allowance charged to operations                    |                               
|                                                                |                               
|Balance at end of quarter                                       |                               
|Ratios:                                                         |                               
|Net loans charged off (annualized) to average loans outstanding |                               
|Allowance for loan losses to loans outstanding                  |                               

19

---



|Third Quarter | Year-to-Date
|------------- | ------------
|              |             
|              |             
|Total         |             

Noninterest income which includes
service charges and other fee income, trust income, gain on sale of loans and other
miscellaneous income increased by $171,000 (20.1%) during the third quarter of 2005 from
the comparable quarter in 2004. Service charges and other fee income increased $160,000
(21.4%) during the third quarter of 2005 from the second quarter of 2004 due to an
increase in loan late fees and increased NSF charges.

For the nine months ending September
30, 2005, noninterest income decreased $136,000 (4.5%). Other income decreased by $309,000
(83.7%) due primarily to the recognition in 2004 of a $299,000 nonrecurring gain on the
sale of property held for sale.

|Third Quarter | Year-to-Date
|------------- | ------------
|              |             
|              |             
|Total         |             

Noninterest expense increased
$322,000 (10.5%) in the third quarter of 2005 compared to the same period in 2004.
Salaries and employee benefits increased $144,000 (8.6%) in the third quarter of 2005
compared to the third quarter of 2004 due to fewer unfilled positions at September 30,
2005. Professional and service fees are $63,000 (16.9%) higher in 2005 than in 2004 due to
higher legal fees related to loan collections and higher consultant fees on special
projects. Printing and supplies costs increased $56,000 (108.4%) due to higher costs
associated with new products and the related brochures. Other expenses increased $63,000
(14.4%) primarily due to higher loan and collection expenses of $44,000.

For the first nine months of the
year, noninterest expense increased $599,000 (6.0%) compared to the prior year. Salaries
and employee benefits increased $164,000 (3.0%) due to higher benefit costs. Occupancy
costs increased $75,000 (9.1%) due to higher building services expenses, insurance and
property taxes. Professional and service fees increased $126,000 (11.2%) due to reasons
discussed above as well as higher accrued accounting fees related to the Sarbanes-Oxley
Act requirements, printing and supplies increased $124,000 (58.6%) due to reasons
discussed above, and other expenses increased $224,000 (15.8%) primarily due to increases
in computer service fees and loan and collection expenses offset by a decrease in NSF
check and other losses.

|Third Quarter | Year-to-Date
|------------- | ------------
|              |             
|              |             
|Total         |             

Fluctuations in income taxes resulted
primarily from changes in the level of profitability and in variations in the amount of
tax-exempt income.

20

---



|September 30, 2005              | December 31, 2004
|------------------------------- | -----------------
|                                |                  
|Stockholders' Equity            |                  
|Ratio of Equity to Total Assets |                  

The Federal Reserve Board provides
guidelines for the measurement of capital adequacy. The Banks capital, as adjusted
under these guidelines, is referred to as risk-based capital. The Banks Tier 1
risk-based capital ratio at September 30, 2005 was12.38% and total risk-based capital was
13.64%. At September 30, 2004, these ratios were 12.00% and 13.26%, respectively. Minimum
regulatory Tier 1 risk-based and total risk-based capital ratios under the Federal Reserve
Board guidelines are 4% and 8%, respectively.

The capital guidelines also provide
for a standard to measure risk-based capital to total assets which is called the leverage
ratio. The Banks leverage ratio was 10.14% at September 30, 2005, and 9.59% in 2004.
The minimum standard leverage ratio is 3% but financial institutions are expected to
maintain a leverage ratio of 1 to 2 percentage points above the 3% minimum.

Critical Accounting
PoliciesThe Corporation maintains critical
accounting policies for the allowance for loan losses. Refer to notes 1c and 1d of the
Notes to Consolidated Financial Statements for additional information incorporated by
reference to the Annual Report to Shareholders for the year ended December 31, 2004.

Contractual
ObligationsAs of September 30, 2005, December
31, 2004, and September 30, 2004, the Bank had outstanding irrevocable standby letters of
credit, which carry a maximum potential commitment of approximately $3,500,000, $3,200,000
and $3,500,000, respectively. These letters of credit are conditional commitments issued
by the Bank to guarantee the performance of a customer to a third party. The majority of
these letters of credit are short-term guarantees of one year or less, although some have
maturities which extend as long as two years. The credit risk involved in issuing letters
of credit is essentially the same as that involved in extending loans to customers. The
Bank primarily holds real estate as collateral supporting those commitments for which
collateral is deemed necessary. The extent of collateral held on those commitments at
September 30, 2005, December 31, 2004 and September 30, 2004, where there is collateral,
is in excess of the committed amount. A letter of credit is not recorded on the balance
sheet until a customer fails to perform.

Impact of New
Accounting StandardsIn December 2004, the Financial
Accounting Standards Board (FASB) issued SFAS No. 123(R), Share-Based Payment. This
Statement is a revision of SFAS No. 123, Accounting for Stock-Based Compensation,
and supersedes APB opinion No. 25, Accounting for Stock Issued to Employees,and
its related implementation guidance. The Statement originally effective July 1, 2005, now
delayed until January 1, 2006, is required to be adopted using a modified
prospective method. Under the modified prospective method, the Statement applies to
new awards and to awards modified, repurchased or cancelled after the effective date.
Additionally, compensation cost for the unvested portion of awards as of the effective
date is required to be recognized as the awards vest after the effective date. This
Statement focuses on the accounting for transactions that involve employee services
compensated for in share-based payments and requires that the cost resulting from all
share-based payment transactions be recognized in the financial statements. The Statement
also establishes fair value as the measurement objective in accounting for share-based
payment arrangements and requires all entities to apply a fair-value-based measurement
method in accounting for share-based payment transactions with employees.

21

---



The Corporation currently has two
plans affected by the issuance of this Statement. The Long Term Incentive Plan allows for
the granting of stock options to certain employees; however, the Corporation has not, to
date, issued any options under this plan. Consequently, the Statement will have no impact
on the Corporations results of operations or financial condition until such time as
options are granted. The second plan affected is the Employee Stock Purchase Plan (ESPP).
The Statement allows for ESPP shares to be issued at ninety-five percent of fair market
value as of the grant date with no compensation expense recognized. Effective April 1,
2005, the Corporations plan limits the purchase of shares to ninety-five percent of
fair market value as of the grant date, thus no compensation expense will be recognized
upon the effectiveness of SFAS 123(R). The Corporation does not expect the implementation
of this Statement to have an impact on its results of operations or financial position.

In March 2004, the Emerging Issues
Task Force (EITF) reached consensus on Issue No. 03-1, The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments, (EITF
03-1). EITF 03-1 provides guidance for assessing impairment losses on investments and
includes new disclosure requirements for investments that are deemed to be temporarily
impaired. In September 2004, the FASB issued FASB Staff Position (FSP) EITF 03-1-1,
Effective Date of Paragraphs 10-20 of EITF Issue No. 03-1, The Meaning of Other-Than
Temporary Impairment and Its Application to Certain Investments, which delays the
effective date for the measurement and recognition guidance contained in selected
paragraphs of EITF 03-1 until final application guidance is issued. The delay does not
suspend the requirement to recognize other-than-temporary impairments as required by
existing authoritative literature. On November 3, 2005, the FASB issued a FSP that
nullified the measurement and recognition requirements of EITF 03-1 and requires
implementation for reporting periods beginning after December 15, 2005. The Corporation
does not expect the impact of the FSP, which requires similar disclosures to the current
guidance, to have a material impact on the financial statements of the Corporation.

Item 3. Quantitative
and Qualitative Disclosures About Market Risk

There has been no material change in
the market risk faced by the Corporation since December 31, 2004 other than previously
discussed.

Item 4. Controls and
Procedures

| | (a) | Evaluation
of Disclosure Controls and Procedures.
| | --- | -------------------------------------------------

| | With
the participation of management, the Corporations chief executive officer and chief
financial officer, after evaluating the effectiveness of the Corporations
disclosure controls and procedures (as defined in Exchange Act Rules 13a  15(e) and
15d 15(e)) for the period ended September 30, 2005, have concluded that the
Corporations disclosure controls and procedures were effective as of that date.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | Changes
in Internal Control Over Financial Reporting.
| | --- | -----------------------------------------------------

| | During
the fiscal quarter covered by this Report, there have not been any changes in our
internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---



PART II  OTHER
INFORMATION

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

All
securities sold by the Corporation were registered under the Securities Act.

The Corporation
did not repurchase any of its stock during the current quarter, nor has the
Corporations Board adopted or approved a stock repurchase program.

Item 6. Exhibits

| | The
following exhibits (listed by number corresponding to the Exhibit Table as Item 601 in
Regulation S-K) are filed with this report:
| | --------------------------------------------------------------------------------------------------------------------------------------

| | 31.1 | Certificate
of the Chief Executive Officer of FNBH Bancorp, Inc. pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 31.2 | Certificate
of the Chief Financial Officer of FNBH Bancorp, Inc. pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 32.1 | 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).
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 32.2 | 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).
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

23

---



SIGNATURES

Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report on
Form 10-Q for the quarter ended September 30, 2005 to be signed on its behalf by the
undersigned hereunto duly authorized.

| |  | FNBH BANCORP, INC.By: /s/ Herbert W. Bursch
Herbert W. BurschChief Executive OfficerBy: /s/ Janice B. Trouba
Janice B. TroubaChief Financial Officer
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: November 7, 2005

24