# UNITED STATESSECURITIES
AND EXCHANGE COMMISSIONWashington, 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 March 31, 2009      
|------------------------------------------------------------------------------------------------------------------------------------------------
|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 ofincorporation or organization) | 38-2869722
(I.R.S. EmployerIdentification 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
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.             
        Yes [X]    No [__]

Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate Web site,
if any, every Interactive Data File required to be submitted and posted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).     
Yes [__]   No [__]

Indicate  by  check
 mark  whether  the  registrant  is  a  large  accelerated   filer,  an  accelerated
 filer,  a non-accelerated filer, or a smaller reporting company.  See definitions of "large  accelerated   filer," "accelerated
 filer"  and "smaller reporting company" in Rule 12b-2 of the Exchange
Act. Large accelerated filer [__]      Accelerated filer [__]         Non-accelerated filer [__]
      Smaller reporting company [X]

Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the 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:
3,128,351 shares of the Corporations Common Stock (no par value) were outstanding as
of April 30, 2009.

---



# TABLE OF CONTENTS

|                                                                                             
|---------------------------------------------------------------------------------------------
|Part I. Financial Information (unaudited)                                                    
|Item 1. Financial Statements:                                                                
|Consolidated Balance Sheets as of March 31, 2009 and December 31, 2008                       
|Consolidated Statements of Income for the three months ended March 31, 2009 and 2008         
|Consolidated Statements of Stockholders' Equity and Comprehensive Income                     
|for the three months ended March 31, 2009 and 2008                                           
|Consolidated Statements of Cash Flows for the three months ended March 31, 2009 and 2008     
|Notes to 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 1A. Risk Factors                                                                        
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                          
|Item 6. Exhibits                                                                             
|                                                                                             
|Signatures                                                                                   

---



# PART I  FINANCIAL
INFORMATION Item 1. Financial
Statements

# FNBH BANCORP, INC. AND
SUBSIDIARIES                                        Consolidated Balance Sheets
(Unaudited)

|Assets                                                              | March 31,2009 | December 31,2008
|------------------------------------------------------------------- | ------------- | ----------------
|Cash and due from banks                                             |               |                 
|Short term investments                                              |               |                 
|Total cash and cash equivalents                                     |               |                 
|Certificates of deposit                                             |               |                 
|Investment securities:                                              |               |                 
|Investment securities available for sale, at fair value             |               |                 
|FHLBI and FRB stock, at cost                                        |               |                 
|Total investment securities                                         |               |                 
|Loans held for investment:                                          |               |                 
|Commercial                                                          |               |                 
|Consumer                                                            |               |                 
|Real estate mortgage                                                |               |                 
|Total loans held for investment                                     |               |                 
|Less allowance for loan losses                                      |               |                 
|Net loans held for investment                                       |               |                 
|Premises and equipment, net                                         |               |                 
|Other real estate owned, held for sale                              |               |                 
|Deferred taxes, net                                                 |               |                 
|Accrued interest and other assets                                   |               |                 
|Total assets                                                        |               |                 
|                                                                    |               |                 
|Liabilities and Shareholders' Equity                                |               |                 
|Liabilities                                                         |               |                 
|Deposits:                                                           |               |                 
|Demand (non-interest bearing)                                       |               |                 
|NOW                                                                 |               |                 
|Savings and money market                                            |               |                 
|Time deposits                                                       |               |                 
|Brokered certificates of deposit                                    |               |                 
|Total deposits                                                      |               |                 
|Other borrowings                                                    |               |                 
|Accrued interest, taxes, and other liabilities                      |               |                 
|Total liabilities                                                   |               |                 
|Shareholders' Equity                                                |               |                 
|Preferred stock, no par value.  Authorized 30,000 shares; no shares |               |                 
|issued and outstanding at March 31, 2009                            |               |                 
|Common stock, no par value. Authorized 4,200,000 shares; 3,128,351  |               |                 
|shares issued and outstanding at March 31, 2009 and 3,119,620       |               |                 
|shares issued and outstanding at December 31, 2008                  |               |                 
|Retained earnings                                                   |               |                 
|Deferred directors' compensation                                    |               |                 
|Accumulated other comprehensive income, net                         |               |                 
|Total shareholders' equity                                          |               |                 
|Total liabilities and shareholders' equity                          |               |                 

See notes to consolidated
financial statements.

1

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FNBH BANCORP, INC. AND
SUBSIDIARIES                             Consolidated Statements of Income (Unaudited)

|                                                    | Three Months Ended March 31,
|--------------------------------------------------- | ----------------------------
|                                                    |                             
|Interest and dividend income:                       |                             
|Interest and fees on loans                          |                             
|Interest and dividends on investment securities:    |                             
|U.S. Treasury, agency securities, and CMOs          |                             
|Obligations of states and political subdivisions    |                             
|Preferred stock                                     |                             
|Other securities                                    |                             
|Interest on certificates of deposit                 |                             
|Interest on short term investments                  |                             
|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 OREO/repossessions                  |                             
|Other                                               |                             
|Total noninterest income                            |                             
|Noninterest expense:                                |                             
|Salaries and employee benefits                      |                             
|Net occupancy expense                               |                             
|Equipment expense                                   |                             
|Professional and service fees                       |                             
|Computer service fees                               |                             
|FDIC assessment fees                                |                             
|Computer software amortization expense              |                             
|Printing and supplies                               |                             
|Director fees                                       |                             
|Loan collection and foreclosed property expense     |                             
|Net loss on sale of OREO/repossessions              |                             
|Other                                               |                             
|Total noninterest expense                           |                             
|Income (loss) before federal income tax expense     |                             
|Federal income tax expense                          |                             
|Net income (loss)                                   |                             
|Per share statistics:                               |                             
|Basic EPS                                           |                             
|Diluted EPS                                         |                             
|Dividends                                           |                             
|Basic average shares outstanding                    |                             
|Diluted average shares outstanding                  |                             

See notes to consolidated
financial statements.

2

---



FNBH BANCORP, INC. AND
SUBSIDIARIES        Consolidated Statements of Shareholders' Equity and Comprehensive
Income     For the Three Months Ended March 31, 2009 and 2008(Unaudited)

|                                                                | Common Stock | Retained
Earnings | Deferred
 Directors'
Compensation | Accumulated
    Other
Comprehensive
   Income | Total
|--------------------------------------------------------------- | ------------ | ----------------- | --------------------------------- | --------------------------------------------- | -----
|Balances at December 31, 2007                                   |              |                   | $                                 | 6,141,835                                     |      
|Earned portion of long term    incentive plan                   |              |                   |                                   | 13,678                                        |      
|Issued 258 shares for employee    stock purchase plan           |              |                   |                                   | 3,197                                         |      
|Issued 345 shares for current    directors' fees                |              |                   |                                   | 4,499                                         |      
|Directors' deferred compensation    (1,173 stock units)         |              |                   |                                   |                                               |      
|Issued 712 shares for deferred    directors' fees               |              |                   |                                   | 15,108                                        |      
|Comprehensive income:                                           |              |                  
|Net income                                                      |              |                   |                                   |                                               |      
|Change in unrealized gain on                                    |              |                  
|investment securities available for     sale, net of tax effect |              |                   |                                   |                                               |      
|Total comprehensive income                                      |              |                   |                                   |                                               |      
|Cash dividends ($.08 per share)                                 |              |                   |                                   |                                               |      
|Balances at March 31, 2008                                      |              |                   | $                                 | 6,178,317                                     |      
|                                                                |              |                  
|Balances at December 31, 2008                                   |              |                   | $                                 | 6,583,158                                     |      
|Earned portion of long term    incentive plan                   |              |                   |                                   | 14,291                                        |      
|Issued 681 shares for employee stock    purchase plan           |              |                   |                                   | 1,621                                         |      
|Issued 7,781 shares for current    directors' fees              |              |                   |                                   | 19,530                                        |      
|Issued 823 shares for deferred    directors' fees               |              |                   |                                   | 16,414                                        |      
|Comprehensive income (loss):                                    |              |                  
|Net loss                                                        |              |                   |                                   |                                               |      
|Change in unrealized gain on                                    |              |                  
|investment securities available for     sale, net of tax effect |              |                   |                                   |                                               |      
|Total comprehensive loss                                        |              |                   |                                   |                                               |      
|Balances at March 31, 2009                                      |              |                   | $                                 | 6,635,014                                     |      

See notes to consolidated
financial statements.

3

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FNBH BANCORP, INC. AND
SUBSIDIARIES                                   Consolidated Statements of Cash Flows
(Unaudited)

|                                                                               | Three Months Ended March 31,
|------------------------------------------------------------------------------ | ----------------------------
|                                                                               |                             
|Cash flows from operating activities:                                          |                             
|Net income (loss)                                                              |                             
|Adjustments to reconcile net loss to net cash provided by operating activites: |                             
|Provision for loan losses                                                      |                             
|Depreciation and amortization                                                  |                             
|Deferred income tax expense                                                    |                             
|Net amortization on investment securities                                      |                             
|Earned portion of long term incentive plan, net                                |                             
|Shares issued for current and variable directors' compensation                 |                             
|Shares earned for deferred directors' compensation                             |                             
|(Gain) loss on the sale of other real estate owned, held for sale              |                             
|Decrease (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:                                          |                             
|Purchases of available for sale securities                                     |                             
|Purchases of held to maturity securities                                       |                             
|Proceeds from maturities and calls of available for sale securities            |                             
|Proceeds from mortgage-backed securities paydowns-available for sale           |                             
|Proceeds from maturities and calls of held to maturity securities              |                             
|Purchases of certificates of deposit                                           |                             
|Maturity of certificates of deposit                                            |                             
|Net decrease in loans                                                          |                             
|Proceeds from sale of other real estate owned, held for sale                   |                             
|Capital expenditures                                                           |                             
|Net cash provided by investing activities                                      |                             
|Cash flows from financing activities:                                          |                             
|Net decrease in deposits                                                       |                             
|Payments on FHLBI note                                                         |                             
|Proceeds from issuance of short term debt                                      |                             
|Repayment of short term debt                                                   |                             
|Maturity of long-term debt                                                     |                             
|Dividends paid                                                                 |                             
|Shares issued for employee stock purchase plan                                 |                             
|Net cash used in financing activities                                          |                             
|Net decrease 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                                                                  |                             
|Net federal income taxes refunded                                              |                             
|Loans transferred to other real estate                                         |                             
|Loans charged off                                                              |                             

See notes to consolidated
financial statements.

4

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Notes to 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
          March 31, 2009 and consolidated results of operations and cash flows for the
          three months ended March 31, 2009 and 2008.

2.    
          The results of operations for the three months ended March 31, 2009 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 2008 Annual Report
          contained in the Corporations report on Form 10-K filing.

4.    
          The provision for income taxes represents federal income tax expense calculated
          using estimated annualized rates on taxable income or loss generated during the
          respective periods adjusted, as necessary, to avoid recording tax benefits
          during loss periods in excess of amounts expected to be realized.

5.    
          Investment and Mortgage-Backed/CMO Securities. A summary of the amortized cost
          and approximate fair value of investment and mortgage-backed/CMO securities at
          March 31, 2009 and December 31, 2008 follows:

|                               | March 31, 2009 | December 31, 2008
|------------------------------ | -------------- | -----------------
|                               |                |                  
|Available for sale:            |                |                  
|Obligations of state and       |                |                  
|political subdivisions         |                |                  
|U.S. Treasury and agency       |                |                  
|securities                     |                |                  
|Mortgage-backed/CMO            |                |                  
|securities                     |                |                  
|Preferred stock securities (1) |                |                  
|Total securities               |                |                  

(1)    
          Represents preferred stock issued by Freddie Mac and Fannie Mae.

There was one municipal security in a
continuous loss position for 12 months or more at March 31, 2009. The loss is primarily
due to changes in rates. Unrealized losses on securities at March 31, 2009 have not been
recognized in income because management has the intent and ability to hold the securities
for a period of time sufficient to allow for any anticipated recovery in fair values. As
of December 31, 2008, there were no securities in a continuous loss position for 12 months
or more.

There were no other-than-temporary impairment
charges recorded for the periods ended March 31, 2009 and 2008, respectively.

5

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The following is a summary of the
unrealized losses and fair value of the securities available for sale portfolio at March
31, 2009 by length of time that individual securities in each category have been in a
continuous loss position:

|                           | March 31, 2009
|-------------------------- | --------------
|                           |               
|                           |               
|Available for sale:        |               
|Obligations of state and   |               
|political subdivisions     |               
|U.S. Treasury and agency   |               
|securities                 |               
|Mortgage-backed/CMO        |               
|securities                 |               
|Preferred stock securities |               
|Total available for sale   |               

Investment securities, with an
amortized cost of approximately $17,827,000 at March 31, 2009 and $17,871,000 at December
31, 2008 were pledged to secure public deposits and for other purposes required or
permitted by law.

The Bank owns stock in both the
Federal Home Loan Bank of Indianapolis (FHLBI) and the Federal Reserve Bank (FRB), both of
which are recorded at cost. The Bank is required to hold stock in the FHLBI equal to 5% of
the institutions borrowing capacity with the FHLBI. The Banks investment in
FHLBI stock amounted to $950,700 at March 31, 2009 and December 31, 2008. The Banks
investment in FRB stock, which totaled $44,250 at March 31, 2009 and December 31, 2008, is
a requirement for the Banks membership in the Federal Reserve System. These
investments can only be resold to, or redeemed, by the issuer.

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 $37,387,000 at March 31, 2009,
          $38,656,000 at December 31, 2008, $31,138,000 at September 30, 2008, and
          $15,772,000 at March 31, 2008. (See Managements Discussion and Analysis of
          Financial Condition and Results of Operations).

7.    
          FASB Statement No. 157, Fair Value Measurements (FAS 157), defines
          fair value as a price that would be received to sell an asset or paid to
          transfer a liability in an orderly transaction between market participants. A
          fair value measurement assumes that the transaction to sell the asset or
          transfer the liability occurs in the principal market for the asset or
          liability. The price in the principal (or most advantageous) market used to
          measure the fair value of the asset or liability shall not be adjusted for
          transaction costs. An orderly transaction is a transaction that assumes exposure
          to the market for a period prior to the measurement date to allow for marketing
          activities that are usual and customary for transactions involving such assets
          and liabilities; it is not a forced transaction. Market participants are buyers
          and sellers in the principal market that are (i) independent, (ii)
          knowledgeable, (iii) able to transact and (iv) willing to transact.

Statement No. 157 requires the use of
valuation techniques that are consistent with the market approach, the income approach
and/or the cost approach. The market approach uses prices and other relevant information
generated by market transactions involving identical or comparable assets and liabilities.
The income approach uses valuation techniques to convert future amounts, such as cash
flows and earnings, to a single present amount on a discounted basis. The cost approach is
based on the amount that currently would be required to replace the service capacity of an
asset (replacement cost). Valuation techniques should be consistently applied. Inputs to
valuation techniques refer to the assumptions that market participants would use in
pricing the asset or liability. Inputs may be observable, meaning those that reflect the
independent sources, or unobservable, meaning those that reflect the reporting
entitys own assumptions about the assumptions market participants would use in
pricing the asset or liability developed based on the best information available in the
circumstances. In that regard, Statement No. 157 establishes a fair value hierarchy for
valuation inputs that gives the highest priority to quoted prices in active markets for
identical assets or liabilities and the lowest priority to unobservable inputs. The fair
value hierarchy is as follows:

6

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| | Level
1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that
the entity has the ability to access as of the measurement date.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Level
2: Significant other observable inputs other than Level 1 prices such as quoted prices for
similar assets or liabilities in active markets; quoted prices for identical or similar
assets or liabilities in markets that are not active; or other inputs that are observable
or can be derived from or corroborated by observable market data by correlation or other
means.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Level
3: Significant unobservable inputs that reflect a reporting entitys own assumptions
about the assumptions that market participants would use in pricing an asset or liability.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following is a description of the
Corporations valuation methodologies used to measure and disclose the fair values of
its financial assets and liabilities on a recurring or nonrecurring basis:

| | Securities
available for sale. Securities available for sale are recorded at fair value on a
recurring basis. Fair value measurement is based on quoted prices, if available. If quoted
prices are not available, fair values are measured using independent pricing models. Level
2 securities include U.S. government and agency securities, other U.S. government and
agency mortgage-backed securities, municipal bonds and preferred stock securities. Level 3
securities include private collateralized mortgage obligations.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | See
Note 5 to the Consolidated Financial Statements for additional information on available
for sale securities and their fair values.
| | --------------------------------------------------------------------------------------------------------------------------------------

| | Loans.
                     The Corporation does not record loans at fair value on a recurring
basis.                     However, from time to time, the Corporation records
nonrecurring fair value                     adjustments to collateral dependent loans to
reflect partial write-downs or                     specific reserves that are based on
the observable market price or current                     appraised value of the
collateral. These loans are reported in the nonrecurring                     table below
at initial recognition of impairment and on an ongoing basis until
                    recovery or charge off. When the fair value of the collateral is
based on an                     observable market price or a current appraised value, the
Corporation records                     the impaired loan as nonrecurring Level 2. When a
current appraised value is not                     available or management determines the
fair value of the collateral is further                     impaired below the appraised
value and there is no observable market price, the                     Corporation
records the impaired loan as nonrecurring Level 3.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Other
real estate owned and other-repossessed assets.Real estate acquired through
foreclosure is adjusted to fair value less costs to sell upon transfer of the loan to
foreclosed assets, usually based on an appraisal of the property. Subsequently, foreclosed
assets are carried at the lower of carrying value or fair value. A valuation based on a
current appraisal or by a brokers opinion is considered a Level 2 fair value. The
fair value of repossessed and returned equipment is based on available pricing guidelines,
auction results and third-party price opinions, less estimated selling costs. Assets
acquired through repossession are recorded at the lower of carrying value or fair value.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7

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Assets and Liabilities
Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at
fair value under FAS No. 157 on a recurring basis are as follows:

|                                         | Fair Value Measurements at March 31, 2009
|---------------------------------------- | -----------------------------------------
|                                         |                                          
|Investment securities available for sale |                                          

|                                         | Fair Value Measurements at December 31, 2008
|---------------------------------------- | --------------------------------------------
|                                         |                                             
|Investment securities available for sale |                                             

Assets and Liabilities
at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)

Assets and liabilities measured at fair
value on a recurring basis using significant unobservable inputs (Level 3) for the quarter
ended March 31, 2009 are as follows:

|                                                          | Fair Value Measurements Using Significant Unobservable Inputs(Level 3)
|--------------------------------------------------------- | ----------------------------------------------------------------------
|Fair Value of CMO, January 1, 2009(1)                     |                                                                       
|Total gains (losses) realized/unrealized:                 |                                                                       
|Included in earings                                       |                                                                       
|Included in other comprehensive income                    |                                                                       
|Purchases, issuances, and other settlements               |                                                                       
|Transfers into Level 3                                    |                                                                       
|Fair Value of CMO, March 31, 2009                         |                                                                       
|                                                          |                                                                       
|Total amount of losses for the period included in earings |                                                                       
|attributable to the change in unrealized losses relating  |                                                                       
|to assets still held at March 31, 2009                    |                                                                       

(1)               Non-agency
CMO classified as available for sale is valued using internal                valuation
models and pricing information from third parties.

8

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Assets and Liabilities
Measured at Fair Value on a Nonrecurring Basis

Assets and liabilities measured at
fair value on a nonrecurring basis are as follows:

|                        | Fair Value Measurements at March 31, 2009
|----------------------- | -----------------------------------------
|                        |                                          
|Impaired loans (1)      |                                          
|Other real estate owned |                                          
|Repossessed assets      |                                          

|                   | Fair Value Measurements at December 31, 2008
|------------------ | --------------------------------------------
|                   |                                             
|Impaired loans (1) |                                             

|(1) | Represents carrying value and related write-downs and specific reserves
          pertaining to collateral dependent loans for which adjustments are based on the
          appraised value of the collateral or by other unobservable inputs.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8.    Basic earnings per share
is based on the weighted average number of common           shares and participating
securities outstanding during the period. Diluted           earnings per share are the same
as basic earnings per share because any additional potential common shares issuable are included in the basic
earnings per share calculation.
 As discussed
below under the caption, Impact of New           Accounting Standards, FSP
EITF 03-6-1 was adopted effective January 1,           2009. This FSP requires that
unvested stock awards which contain non-forfeitable           rights to dividends or
dividend equivalents, whether paid or unpaid (referred to           as participating
securities), be included in the number of shares           outstanding for both
basic and diluted earnings per share calculations. Our           unvested restricted
stock under the Long-Term Incentive Plan is considered a           participating
security. All prior period earnings per share data presented is           required to be
adjusted retrospectively to conform to the provisions of the FSP.           In the event
of a net loss, the participating securities are excluded from the           calculation
of both basic and diluted earnings per share. Due to our net loss in           2009 of
$630,865, unvested restricted shares of 7,082 were not included in           determining
both basic and diluted earnings per share for the three months ended           March 31,
2009. For the three months ended March 31, 2008, 14,511 shares of           unvested
restricted stock were added to basic shares outstanding. This had no           impact on
the net income per share of $0.19.

The following table presents basic
and diluted earnings per share:

|                                                                   | First Quarter
|------------------------------------------------------------------ | -------------
|                                                                   |              
|Weighted average  common shares outstanding                        |              
|Weighted average unvested restricted stock outstanding             |              
|Total weighted average basic and diluted common shares outstanding |              
|                                                                   |              
|Net income (loss) available to common shareholders                 |              
|Basic net income (loss) per share                                  |              
|Diluted net income (loss) per share                                |              

9

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9.    
          Under the Long-Term Incentive Plan (the Plan), the Corporation
          grants stock options and restricted stock as compensation to key employees. The
          Corporation has not awarded any stock options under the Plan to date. The
          restricted shares have a five-year vesting period. The awards are recorded at
          fair market value on the grant date and are amortized into salary expense over
          the vesting period. The number of shares available for issuance under the Plan
          cannot exceed 200,000.

A summary of the activity under the
Plan for the three months ended March 31, 2009 and 2008 is presented below:

|                          | 2009 | 2008
|------------------------- | ---- | ----
|Restricted Stock Awards   |      |     
|Outstanding at January 1, |      |     
|Granted                   |      |     
|Vested                    |      |     
|Forfeited                 |      |     
|Outstanding at March 31,  |      |     

The total fair value of awards
granted during the three months ended March 31, 2008 was $133,536. The total fair value of
the awards vested during the three months ended March 31, 2009 and 2008 was $14,291 and
$13,678, respectively. As of March 31, 2009, there was $125,686 of total unrecognized
compensation cost related to nonvested stock awards under the Plan. That cost is expected
to be recognized over a weighted-average period of 3.3 years.

10.    
          Certain amounts included in the 2008 Consolidated Financial Statements have been
          reclassified to conform to the 2009 presentation.

# Item 2.   Management's
Discussion and Analysis of Financial Condition and Results of Operations

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. The following is a discussion of the Corporations results of
operations for the three months ended March 31, 2009 and 2008, and also provides
information relating to the Corporations financial condition, focusing on its
liquidity and capital resources.

10

---



On October 16, 2008, the Bank entered
into a formal agreement with the Office of the Comptroller of the Currency (OCC). Pursuant
to the agreement, the Bank has agreed to take certain actions intended to address various
issues that have impacted the Banks financial condition and performance. The
agreement primarily pertains to actions regarding asset quality and overall administration
of the Banks credit functions. The Bank has implemented a new loan policy, completed
additional evaluations of the loan portfolio (using both internal and external resources)
and obtained updated appraisals on the majority of adversely rated credits. The Bank has
also obtained a new outside independent loan review service for 2009. The Corporation
believes that the Bank has made progress in addressing the issues set forth in the formal
agreement; however, to date, the Bank remains subject to the terms of that agreement. The
Bank has also been advised of additional capital requirements see Capital
section of this Managements Discussion and Analysis for further details.

|Earnings                                      | First Quarter
|--------------------------------------------- | -------------
|(in thousands except per share data)          |              
|Net income (loss)                             |              
|Basic and diluted net income (loss) per share |              

Net loss for the three months ended
March 31, 2009 as compared to the same period last year, was negatively affected by lower
interest income on loans due to lower average balances, higher nonaccrual loans, lower
yields, higher loan loss provision, lower noninterest income and higher noninterest
expense. These unfavorable variances were partially offset by lower interest expense due
to lower average deposit balances and lower rates.

In the first quarter of 2009, net
interest income decreased $523,000 (12.8%), provision for loan loss increased $511,000
(74.2%), noninterest income decreased $75,000 (8.8%) and noninterest expense increased
$295,000 (8.5%). Partially offsetting these unfavorable variances is a decrease in federal
income taxes of $193,000.

|Net Interest Income          | First Quarter
|---------------------------- | -------------
|(in thousands)               |              
|Interest and dividend income |              
|Interest expense             |              
|Net interest income          |              

11

---



The following tables illustrate some
of the significant factors contributing to the changes in net interest income (fully tax
equivalent basis) for the three months ended March 31:

# INTEREST YIELDS AND
COSTS             March 31, 2009 and 2008
                                                        (in thousands)

|                                               | ----------First Quarter ----------
|---------------------------------------------- | ----------------------------------
|                                               |                                   
|                                               |                                   
|Assets:                                        |                                   
|Interest earning 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 earning assets and total interest income |                                   
|Cash and due from banks                        |                                   
|All other assets                               |                                   
|Allowance for loan losses                      |                                   
|Total Assets                                   |                                   
|                                               |                                   
|Liabilities and Shareholders' Equity:          |                                   
|Interest bearing liabilities:                  |                                   
|NOW, savings & MMDA                            |                                   
|Time                                           |                                   
|Short term borrowings                          |                                   
|FHLBI advances                                 |                                   
|Total interest bearing liabilities and         |                                   
|Total interest expense                         |                                   
|Non-interest bearing deposits                  |                                   
|All other liabilities                          |                                   
|Stockholders' Equity                           |                                   
|Total Liabilities and Shareholders' 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, average non-accruing loans of $36,390,000
               in 2009 and $15,932,000 in 2008 are included in the average daily loan balance.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Interest on loans includes origination fees totaling $28,000 in 2009 and $94,000
               in 2008.
| | --- | --------------------------------------------------------------------------------------------------------

12

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Interest Earning
Assets/Interest Income On a tax equivalent basis, interest
income decreased $1,773,000 (26.1%) in the first quarter of 2009 compared to the first
quarter of 2008. This is due to a decrease in the yield on average earning assets of 122
basis points combined with a decrease in average earning assets of $34,433,000 (8.5%).

The average balance of short term
investments, certificates of deposit and securities decreased $1,427,000 (2.4%) in the
first quarter of 2009 as compared with the same period in 2008. Loans, which earn a higher
yield than investments, had a decrease in average balances of $33,006,000 (9.5%) combined
with a 135 basis point decrease in yield in the first quarter of 2009 compared to the same
period last year.

The largest decline in loans in terms
of average balance was in commercial loans, the majority of our loan portfolio, due to
decreased loan origination activities and charge offs . The decline in interest income
from the prior year is due to decreases in the prime rate and higher average balances of
nonperforming loans in 2009. The increasing level of nonperforming loans has negatively
impacted loan interest income in the first quarter of 2009. Management expects the average
balance of nonperforming loans to continue to remain high in 2009, adversely impacting net
interest income. Moreover, competitive pressures as well as the weakened local economy
have had, and are expected to continue to have, a negative impact on commercial loan
balances and yields.

Interest Bearing
Liabilities/Interest Expense  Interest expense on deposits for the
first quarter of 2009 decreased $1,176,000 (47.0%) compared to the first quarter of 2008.
This was the result of lower cost of funds due to lower interest rates paid on deposits of
133 basis points combined with lower average deposit balances of $23,508,000 (7.4%).
Pricing competition in the local market for deposits continues to be a factor in
attracting deposits at reasonable costs.

Borrowed funds average balance
decreased $5,230,000 (58.4%) in the first quarter of 2009 compared to the first quarter of
2008. The Bank repaid an $8,000,000 FHLBI advance in February 2009. As of March 31, 2009,
the Bank had a $414,000 loan advance outstanding, included in borrowed funds, which was
entered into in 2000 from the FHLBI. Additional FHLBI and Federal Reserve discount
borrowings are available to fund future loan growth if needed. As of March 31, 2009, the
Corporation has a note outstanding of approximately $67,000 which requires quarterly
principal payments of $33,333 plus accrued interest at prime plus 1.50% and matures on
July 6, 2009. The Corporation made a principal payment of $33,333 on April 6, 2009.

LiquidityLiquidity risk is the risk of the
Corporation being unable to meet current and future financial obligations in a timely
manner. Liquidity is managed to ensure stable, reliable and cost-effective sources of
funds to satisfy demand for credit, deposit withdrawals and investment opportunities. The
Corporation relies on a large, stable core deposit base and a diversified base of
wholesale funding sources to manage liquidity risk.

The Corporation identifies measures
and monitors its liquidity profile. The profile is evaluated daily, weekly and monthly by
analyzing the composition of all funding sources, reviewing projected liquidity
commitments by future month and identifying sources and uses of funds. A contingency
funding plan is also prepared that details the potential erosion of funds in the event of
systematic financial market crisis or institution-specific stress. In addition, the
overall management of the Corporations liquidity position is integrated into retail
deposit pricing policies to ensure a stable core deposit base.

Asset liquidity for financial
institutions typically consists of cash and cash equivalents, certificates of deposits and
investment securities available for sale. These categories totaled $62.6 million at March
31, 2009 or about 16.6% of total assets. This compares to $67.9 million or about 17.5% of
total assets at year end 2008. Liquidity is important for financial institutions because
of their need to meet loan funding commitments and depositor withdrawal requests.
Liquidity can vary significantly on a daily basis based on customer activity.

13

---



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, which are generally considered to be more
volatile and sensitive to changes in rates, consist principally of local depositors known
to the Bank. The Bank had Large Certificates totaling approximately $57,000,000 at March
31, 2009 and $61,000,000 at December 31, 2008. The Bank has $18.6 million of brokered
deposits at March 31, 2009. Due to the Banks capital classification of
adequately capitalized these brokered deposits may not be renewed or
additional deposits taken without prior approval of the Federal Deposit Insurance
Corporation (FDIC). See Capital section of this Managements
Discussion and Analysis for further details.

It is the intention of the
Banks management to handle unexpected liquidity needs through its cash and cash
equivalents, FHLBI borrowings, or Federal Reserve discount borrowings. The Bank has a
$19,000,000 line of credit available at the FHLBI and the Bank has pledged certain
commercial and consumer loans secured by residential real estate as collateral for this
borrowing. As of March 31, 2009, the Bank had $414,000 in borrowings against the line. The
Bank has a $19,000,000 line of credit available at the Federal Reserve and the Bank has
pledged certain commercial loans as collateral for the available borrowing. At March 31,
2009, the Bank did not have any borrowings against the line. The Bank could also put in
place a repurchase agreement which would allow it to borrow from a broker, pledging
investment securities as collateral. In the event the Bank must borrow for an extended
period, management may look to available for sale securities in the investment
portfolio for liquidity.

Interest Rate Risk Interest rate risk is the potential
for economic losses due to future rate changes and can be reflected as a loss of future
net interest income and/or a loss of current market values. The Corporations
Asset/Liability Management Committees (ALCO) 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 reflects the repricing schedule for various asset and liability categories and an
interest rate shock simulation report. The Bank has no market risk sensitive instruments
held for trading purposes. 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.

The table below shows the scheduled
maturity and repricing of the Corporations interest sensitive assets and liabilities
as of March 31, 2009:

|0-3Months                              | 4-12Months | 1-5Years | 5+Years | Total  
|-------------------------------------- | ---------- | -------- | ------- | -------
|Assets:                                |            |          |         |        
|Loans, net                             |            |          | $       | 104,144
|Securities                             |            |          |         | 14,192 
|Certificates of deposit                |            |          |         | 196    
|Short term investments                 |            |          |         | 10,621 
|Total rate sensitive assets            |            |          | $       | 129,153
|Liabilities:                           |            |         
|NOW, savings & MMDA                    |            |          | $       | 51,087 
|Time deposits                          |            |          |         | 44,210 
|Other borrowings                       |            |          |         | 67     
|Total rate sensitive liabilities       |            |          | $       | 95,364 
|Rate sensitivity gap and ratios:       |            |         
|Gap for period                         |            |          | $       | 33,789 
|Cumulative gap                         |            |          |         | 33,789 
|                                       |            |         
|Cumulative rate sensitive ratio        |            |          |         | 1.35   
|December 31, 2008 rate sensitive ratio |            |          |         | 0.98   

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 1.23% asset sensitive as
of March 31, 2009.

Because of the Banks asset
sensitive position, if market interest rates increase, this positive GAP position
indicates that the interest margin would be positively affected. However, 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. Due to these inherent limitations in the GAP analysis, the
Corporation also utilizes simulation modeling, which means the impact of upward and
downward movements of interest rates on interest margin and indicates that a 100 basis
point increase in interest rates would increase net interest income by approximately 1.8%
in the first year, while a 200 basis point increase in interest rates would increase net
interest income by approximately 2.4% in the first year. This is influenced by the
assumptions regarding how quickly and to what extent liabilities will reprice with a
decline in interest rates.

# Loans

|     
|-----
|     
|Total

The Corporation recorded a provision
of $1,200,000 in the first quarter of 2009 compared to $689,000 in the same period of
2008. The 2009 provision is based upon an analysis of estimated losses inherent in the
loan portfolio and other economic factors. Nonperforming loans at March 31, 2009 have
decreased $1,269,000 to $37,387,000 from the December 31, 2008 balance of $38,656,000, and
increased $21,615,000 from the March 31, 2008 balance of $15,772,000. Nonperforming loans
as a percentage of total loans were 12.10% at March 31, 2009 compared to 12.24% at
December 31, 2008, and 4.57% at March 31, 2008. Net charge offs for the first quarter of
2009 were $2,285,000 compared to $891,000 in the first quarter of 2008. Due to the current
economic conditions and the continued decline in real estate values, the provision for
loan losses for the balance of 2009 may be impacted by the Banks concentration in
real estate secured lending

The following table reflects the
composition of the commercial and consumer loans in the Consolidated Financial Statements.
Included in the residential first mortgage totals below are the real estate
mortgage loans listed in the Consolidated Financial Statements and other loans to
customers who pledge their homes as collateral for their borrowings. A portion of the
loans listed in residential first mortgages represent commercial loans where the borrower
has pledged his/her residence as collateral. In the majority of the loans to commercial
customers, the Bank is relying on the borrowers cash flow to service the loans.

15

---



The following table shows the balance
and percentage composition of loans as of:

|                                                 
|-------------------------------------------------
|                                                 
|Secured by real estate:                          
|Residential first mortgage                       
|Residential home equity/other junior liens       
|1-4 family residential construction loans        
|Other construction, land development, and        
|other land loans                                 
|Multifamily residential properties               
|Owner-occupied nonfarm, nonresidential properties
|Other nonfarm, nonresidential properties         
|Commercial                                       
|Consumer                                         
|Other                                            
|Total gross loans                                
|Net unearned fees                                
|Total loans                                      

Loans secured by 1-4 family
residential construction and other construction, land development and other land loans
decreased a total of $7,213,000 (16.9%) in the first quarter of 2009 from December 31,
2008. This is due to the completion of construction projects and charge offs.

The Corporations exposure to
real estate secured loans will continue as the economy and real estate values have
continued to deteriorate. If the economy continues to weaken and/or real estate values
decline further, nonperforming loans may increase in subsequent quarters. In addition,
continued adverse economic conditions could result in further deterioration in the overall
loan portfolio.

Loans also include the
reclassification of demand deposit overdrafts, which amounted to $75,000 and $122,000 at
March 31, 2009 and December 31, 2008, respectively.

Nonperforming assets consist of loans
accounted for on a nonaccrual basis, loans contractually past due 90 days or more as to
interest or principal payments (but not included in nonaccrual loans), and other real
estate which has been acquired primarily through foreclosure and is awaiting disposition.
The aggregate amount of nonperforming loans and other nonperforming assets are presented
below:

|Nonperforming Assets                            
|------------------------------------------------
|                                                
|Nonaccrual Loans                                
|90 days or more past due and still accruing     
|Total nonperforming loans                       
|Other real estate owned                         
|Total nonperforming assets                      
|                                                
|Nonperforming loans as a percent of  total loans
|Allowance for loan losses as a percent of       
|nonperforming loans                             
|Nonperforming assets as a percent of total      
|total loans and other real estate owned         

16

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The following table shows
nonperforming loans by type of loan collateral and percentage composition of nonperforming
loans as of:

|                                          
|------------------------------------------
|                                          
|Balance                                   
|Secured by real estate:                   
|Residential first mortgage                
|Residential home equity/other junior liens
|1-4 family construction loans             
|Other construction, land development      
|and other land loans                      
|Multifamily residential properties        
|Owner-occupied nonfarm, nonresidential    
|properties                                
|Other nonfarm, nonresidential properties  
|Commercial                                
|Consumer                                  
|Total nonperforming loans                 

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. However,
as of March 31, 2009, approximately $15.2 million of nonperforming loans are making
scheduled payments on their loans. Management has decided, based upon the declines in the
value of the real estate securing these loans and concerns regarding the cash flow of the
borrowers, that ultimate collectibility of the full principal and interest on these loans
is uncertain. Loans categorized as 90 days past due and still accruing are well secured
and in the process of collection. Nonperforming assets increased $23,190,000 from first
quarter of 2008 primarily due to higher delinquencies as a result of economic conditions
that impacted customers cash flows and lower collateral values due to the decline in
the real estate market. Nonperforming loans are reviewed regularly for collectibility and
uncollectible balances are promptly charged off.

Impaired loans, as defined by
Statement of Financial Accounting Standards No. 114, Accounting by Creditors for
Impairment of a Loan, totaled approximately $26,175,000 at March 31, 2009, and
specifically identified commercial loans included in non-accrual loans, other than
homogenous small commercial, residential and consumer loans, and $1,425,000 of commercial
loans separately identified as troubled debt restructurings. Included in impaired loans is
$5,889,000 of commercial loans with no specific reserve allocation based on the Statement
No. 114 analysis which indicates the loan is adequately collateralized at this time. 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 collected on a timely basis or
the loan has been restructured and is classified as a trouble debt restructuring. Impaired
loans totaled $27,867,000 at December 31, 2008 and $18,100,000 at March 31, 2008. Impaired
commercial loans had specific reserves calculated in accordance with Statement No. 114 of
$3,175,000 at March 31, 2009, $4,289,000 at December 31, 2008 and $1,172,000 at March 31,
2008.

17

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The following table summarizes the
changes in the allowance for loan losses and reserve for unfunded credit commitments for
the first three months of 2009 and 2008:

|                                                               
|---------------------------------------------------------------
|                                                               
|Allowance for loan losses                                      
|Balance, beginning of year                                     
|Loans charged off:                                             
|Secured by real estate:                                        
|Residential first mortgage                                     
|Residential home equity/junior liens                           
|1-4 family residential construction loans                      
|Other construction and land development and other land loan    
|Multifamily residential properties                             
|Owner-occupied nonfarm, nonresidential properties              
|Other nonfarm, nonresidential properties                       
|Commerical                                                     
|Consumer                                                       
|Total charge-offs                                              
|Recoveries to loans previously charged off:                    
|Secured by real estate:                                        
|Residential home equity/junior liens                           
|1-4 family residential construction loans                      
|Owner occupied non, nonresidential properties                  
|Commerical                                                     
|Consumer                                                       
|Total recoveries                                               
|Net loans charged off                                          
|Additions to allowance charged to operations                   
|Balance, end of quarter                                        
|Reserve for unfunded credit commitments                        
|Balance, beginning of year                                     
|Additions to reserve charged to operations                     
|Balance, end of quarter                                        
|Total allowance for loan losses and reserve for                
|unfunded credit commitments                                    
|Ratios:                                                        
|Net loans charged off (annualized) to average loans outstanding
|Allowance for loan losses to loans outstanding                 

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, and an analysis of the following factors:
delinquency trends, delinquency levels, concentrations of credit, economic trends, loan
growth, and management changes. Management continues to refine its techniques in this
analysis. Economic factors considered in arriving at the loan loss reserve adequacy as of
March 31, 2009, included an uncertain rate environment, high unemployment rate, the
overall economy, and declines in real estate values. When all of these factors were
considered, management determined that the $1,200,000 provision and $13,081,000 allowance
were appropriate. Due to the concentration of the Bank in residential real estate
development and construction loans and the continued decline in the Michigan real estate
market, the Bank is particularly focused on this segment of loans. Management monitors
these types of credit with increased frequency, including periodic updates of the
underlying collateral value.

18

---



|     
|-----
|     
|Total

Noninterest income, which includes
service charges and other fee income, trust income, gain on sale of OREO/ repossessions,
and other miscellaneous income, decreased by $75,000 (8.8%) during the first quarter of
2009 compared to the same quarter in 2008. Service charges and other fee income decreased
$30,000 (4.2%) during the first quarter of 2009 from the first quarter of 2008 primarily
due to decreases in returned check fees and consumer loan late fees partially offset by an
increase in ATM network fees. Trust income decreased $18,600 (18.5%) in the first quarter
2009 compared to the same period last year. Trust income is lower due to lower asset
values and a higher percentage of investments in fixed income products. Gain on the sale
of OREO/repossessions related to the sale of two residential properties in 2008, while in
2009 there was a net loss on the sale of OREO properties.

|     
|-----
|     
|Total

Noninterest expense increased
$295,000 (8.5%) in the first quarter of 2009 compared to the same quarter in 2008.

Salaries and employee benefits
decreased $29,000 (1.7%) in the first quarter of 2009 compared to the first quarter of
2008 primarily due to a decrease in profit sharing expense of $79,000, partially offset by
an increase in contracted payroll of $45,000. Profit sharing expense (discretionary
bonuses) decreased in the first quarter of 2009 compared to the same period of 2008 due to
not accruing profit sharing in the first quarter of 2009 as a result of the financial
results of the Corporation. Contracted payroll has increased due to the Bank hiring
additional temporary help in the commercial loan workout area.

Net occupancy costs decreased $21,000
(5.8%) in 2009 compared to 2008 due to lower property taxes and lower building maintenance
costs.

Equipment expense decreased $10,000
(8.7%) in the first quarter of 2009 compared to the same quarter in 2008 primarily due to
lower depreciation expense and lower equipment maintenance costs.

Professional and service fees
increased $12,000 (2.3%) compared to 2008 primarily due to higher audit and accounting
fees of $17,000, higher OCC fees of $25,000 due to higher rates assessed to the Bank, and
higher legal fees of $49,000 relating primarily to nonperforming loans. These fees were
partially offset by lower consulting fees of $75,000 related to recruiting fees.

Computer service fees decreased
$23,000 (17.7%) in 2009 compared to 2008 due to timing of service contract renewals.

FDIC assessment fees increased
$304,000 in the first quarter of 2009 compared to the first quarter of 2008 due to higher
FDIC rates. Rates are expected to continue to rise in 2009. In addition, under a proposed rule,
the FDIC indicated its plans to impose a 20 basis point emergency assessment on insured
depository institutions to be paid on September 30, 2009 based on deposits at June 30, 2009.  The FDIC later indicated that the
amount of this special assessment could decrease if certain events occur.  The proposed rule would also authorize the FDIC to
impose an additional emergency assessment of up to 10 basis points after June 30, 2009, if necessary to maintain public
confidence in the federal deposit insurance.  The expense will most likely be recognized in the second quarter of 2009 when the
proposal is finalized.

Printing and supplies decreased
$62,000 (58.5%) in 2009 compared to 2008 due to timing of purchases and printing costs
associated with the annual shareholder meeting. Expenses are expected to be higher in the
second quarter of 2009.

Director fees decreased $35,000
(59.9%) in the first quarter of 2009 compared to the same quarter of 2008 due to
reductions in director compensation implemented in the latter half of 2008 and in 2009.

19

---



Loan collection and foreclosed
property expense decreased $26,000 (21.0%) in the first quarter compared to 2008 due to
lower expenses on foreclosed properties in 2009. These costs are expected to remain high,
despite the current quarter decrease, in the near term future.

Net loss on sale of
OREO/repossessions of $180,000 is the result of a net loss and a write down on the sale of foreclosed
properties in the first quarter of 2009.

Other expenses increased $15,000
(5.6%) in 2009 compared to 2008 primarily due to the Corporation paying higher business
insurance premiums partially offset by lower advertising expense. Business insurance
premiums are increasing due to the overall instability in the financial markets and the
Corporations financial performance in 2008 and 2007. Business insurance premiums are
expected to continue to increase in 2009, and will be approximately $525,000 for the
2009 year.

|     
|-----
|     
|Total

Fluctuations in income taxes resulted
primarily from changes in the level of profitability and in variations in the amount of
tax-exempt income as a percentage of the pre-tax loss. The Corporation recorded a federal
deferred tax valuation allowance on the tax credit for the loss recognized during the
first quarter of 2009 due to the uncertainty of future taxable income necessary to fully
realize the recorded net deferred tax asset.

# Capital

The Corporations and the
Banks actual capital amounts and ratios are presented in the following table as of
March 31, 2009 and December 31, 2008:

|                                         | Actual | Minimum for Capital Adequacy Purposes | To be Well Capitalized Under Prompt Corrective Action Provision
|---------------------------------------- | ------ | ------------------------------------- | ---------------------------------------------------------------
|                                         |        |                                       |                                                                
|Total Capital (to risk weighted assets)  |        |                                       |                                                                
|Bank                                     |        |                                       | $                                                              
|FNBH Bancorp                             |        |                                       |                                                                
|                                         |        |                                      
|Tier 1 Capital (to risk weighted assets) |        |                                      
|Bank                                     |        |                                       |                                                                
|FNBH Bancorp                             |        |                                       |                                                                
|                                         |        |                                      
|Tier 1 Capital (to average assets)       |        |                                      
|Bank                                     |        |                                       |                                                                
|FNBH Bancorp                             |        |                                       |                                                                

|As of December 31, 2008                  | Amount | Ratio | Amount | Ratio      | Amount | Ratio
|---------------------------------------- | ------ | ----- | ------ | ---------- | ------ | -----
|Total Capital (to risk weighted assets)  |        |       |        |            |        |      
|Bank                                     |        |       | $      | 31,419,000 |        |      
|FNBH Bancorp                             |        |       |        | 31,365,000 |        |      
|                                         |        |      
|Tier 1 Capital (to risk weighted assets) |        |      
|Bank                                     |        |       |        | 27,183,000 |        |      
|FNBH Bancorp                             |        |       |        | 27,129,000 |        |      
|                                         |        |      
|Tier 1 Capital (to average assets)       |        |      
|Bank                                     |        |       |        | 27,183,000 |        |      
|FNBH Bancorp                             |        |       |        | 27,129,000 |        |      

20

---



The definition of well
capitalized is a total risk-based capital ratio of 10% or greater, a Tier 1
risk-based capital ratio of 6.0% or greater, and a leverage ratio of 5.0% or greater. A
bank is classified as adequately capitalized if it has a total risk-based
capital of 8.0% or greater, has a Tier 1 risk-based capital ratio of 4.0% or greater and
has a leverage ratio of 4.0% or greater. A bank may be reclassified into another category
based on supervisory criteria other than the capital calculations alone.

The Corporation and its subsidiary
Bank would be classified as adequately capitalized at March 31, 2009 based on the above
minimum capital requirements.

The above capital requirements are
minimum requirements. Higher capital levels may be required by the regulators if warranted
by the particular circumstances or risk profiles of individual institutions. As discussed
earlier, on October 16, 2008, the Bank entered into a formal agreement with the OCC.
Pursuant to the agreement, the Bank has agreed to take certain actions intended to address
various issues that have impacted the Banks financial condition and performance.
Separate from the agreement, the OCC imposed higher minimum capital requirements on the
Bank. As of March 31, 2009, the Banks capital ratios are below the imposed minimum
requirement. Given our recent losses, asset quality issues, and overall financial
condition, it is reasonable to assume that we will need to raise additional capital in the
near future to provide us with sufficient capital resources and liquidity to meet our
commitments and business needs. We may not be able to raise the necessary capital on
favorable terms, or at all. The ongoing liquidity crisis and the loss of confidence in
financial institutions will likely serve to only further increase our cost of funding and
further limit our access to capital. An ability to raise capital on acceptable terms could
have a materially adverse effect on our business, financial condition and results of
operations. Through the date of filing of this Form 10-Q, the Bank has not been notified
of any additional corrective action that may be taken by the OCC as a result.

The Corporations ability to pay
dividends is subject to various regulatory and state law requirements. Due to the
Banks recent losses, the Bank cannot pay a dividend to the Corporation without the
prior approval of the OCC. The Corporation suspended, indefinitely, the payment of
dividends in the third quarter of 2008 due to the Banks inability to pay dividends
to the holding company and insufficient cash at the holding company to pay the dividends.

At a special meeting of the
shareholders held on February 19, 2009, the shareholders of the Corporation approved an
amendment to the Corporations Articles of Incorporation to authorize the Board of
Directors to issue up to 30,000 shares of preferred stock. The terms and conditions of
these securities, when and if issued, including dividend or interest rates, conversion
prices, voting rights, redemption prices, maturity dates and similar matters will be
determined by the Board of Directors. There were no issued and outstanding shares as of
April 30, 2009.

Critical Accounting
Policies The Corporation maintains critical
accounting policies for the allowance for loan losses. Refer to notes 1c, 1d and 1j of the
Notes to Consolidated Financial Statements for additional information included in Form
10-K for the year ended December 31, 2008.

Contractual Obligations  The Bank had outstanding irrevocable
standby letters of credit, which carry a maximum potential commitment of approximately
$332,000 at March 31, 2009 and December 31, 2008 and $1,982,000 at March 31, 2008. 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 March 31, 2009, December
31, 2008 and March 31, 2008, where there is collateral, was in excess of the committed
amount. A letter of credit is not recorded on the balance sheet unless a customer fails to
perform.

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# Impact of New Accounting
Standards

In December 2007, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No.
141(R), Business Combinations, to further enhance the accounting and financial
reporting related to business combinations. SFAS No. 141(R) establishes principles and
requirements for how the acquirer in a business combination (1) recognizes and measures in
its financial statements the identifiable assets acquired, the liabilities assumed, and
any noncontrolling interest in the acquiree, (2) recognizes and measures the goodwill
acquired in the business combination or a gain from a bargain purchase, and (3) determines
what information to disclose to enable users of the financial statements to evaluate the
nature and financial effects of the business combination. SFAS No. 141(R) applies
prospectively to business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December 15, 2008.
Therefore, the effects of the adoption of SFAS No. 141(R) will depend upon the extent and
magnitude of acquisitions after December 31, 2008. The adoption of this standard has had
no impact on our results of operations or statement of position.

In September 2006, the FASB issued
SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value measurements.
SFAS No. 157 applies to other accounting pronouncements that require or permit fair value
measurements, the FASB having previously concluded in those accounting pronouncements that
fair value is the relevant measurement attribute. SFAS No. 157 does not require any new
fair value measurements and was originally effective beginning January 1, 2008. In
February 2008, the FASB issued FASB Staff Position (FSP) FAS 157-2. FSP FAS
157-2 allowed entities to electively defer the effective date of SFAS No. 157 until
January 1, 2009 for nonfinancial assets and nonfinancial liabilities except those items
recognized or disclosed at fair value on an annual or more frequently recurring basis. We
applied the fair value measurement and disclosure provisions of SFAS No. 157 to
nonfinancial assets and nonfinancial liabilities effective January 1, 2009. The
application of such was not material to our results of operations or financial position,
although it did result in additional disclosures included in Note 7 relating to
nonfinancial assets.

In early April 2009, the FASB issued
the following FSPs that are intended to provide additional guidance and require additional
disclosures relating to fair value measurements and other-than-temporary impairment (OTTI)
on an interim and/or annual basis:

| |  | FSP
No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the
Asset orLiability Have Significantly Decreased and Identifying Transactions That
Are Not Orderly (FSP FAS 157-4). This FSP provides additional guidance for estimating
fair value in accordance with SFAS No. 157, Fair Value Measurements, when the
volume and level of activity for the asset or liability have significantly decreased. The
FSP also includes guidance on identifying circumstances that indicate a transaction is
not orderly. The FSP is required to be applied prospectively and retrospective
application is not permitted. It will be effective for interim and annual periods ending
after June 15, 2009, with early adoption permitted for periods ending after March 15,
2009. We did not adopt this FSP for the quarter ended March 31, 2009. We do not expect
this FSP will have a material impact on our financial position or results of operations
upon implementation in the second quarter of 2009, although additional disclosures may be
required upon adoption.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | FSP
No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary
Impairments (FSP FAS 115-2 and FAS 124-2). This FSP, which applies to debt
securities, is intended to provide greater clarity to investors about the credit and
noncredit components of an OTTI event and to more effectively communicate when an OTTI
event has occurred. This FSP defines the credit component of an OTTI charge as the
difference between the present value of the cash flows expected to be collected and the
amortized cost basis of the debt security. When an entity does not intend to sell the
security and it is more likely than not that the entity will not have to sell the
security before recovery of its cost basis, it will recognize the credit component of an
OTTI charge in earnings and the remaining portion in other comprehensive income. In
addition, this FSP requires additional disclosures about investment securities on an
interim basis. The FSP is effective for interim and annual periods ending after June 15,
2009, with early adoption permitted for periods ending after March 15, 2009. This FSP is
to be applied prospectively with a cumulative effect transition adjustment, if
applicable, as of the beginning of the period in which it is adopted. We did not adopt
this FSP for the quarter ended March 31, 2009. Due to a previously recognized OTTI charge related to the non-credit component of a non-agency security, a
one-time cumulative effect transition adjustment will be recorded in the second quarter of 2009 as a result of
the implementation of this FSP.  The adjustment of $693,000 will be reclassified from retained earnings to
accumulated other comprehensive income and will have no impact on net income or shareholders' equity,
although additional disclosures will be required upon adoption.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  | FSP
No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial
Instruments. This FSP requires disclosures about fair value of financial instruments
for interim reporting periods of publicly traded companies in addition to annual
reporting periods. The FSP also requires disclosure of the method(s) and significant
assumptions used to estimate the fair value of financial instruments and changes in
method(s) and significant assumptions, if any, during the period. This FSP is effective
for interim reporting periods ending after June 15, 2009 with early adoption permitted
for periods ending after March 15, 2009. We did not adopt this FSP for the quarter ended
March 31, 2009. The adoption of this FSP in the second quarter will result in additional
disclosures.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In June 2008, the FASB issued FSP
EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment
Transactions are Participating Securities. This FSP provides that unvested share-based
payment awards that contain nonforfeitable rights to dividends or dividend equivalents,
whether paid or unpaid, are participating securities and are required to be included in
the computation of earnings per share pursuant to the two-class method described in SFAS
No. 128, Earnings Per Share. The two-class method of computing earnings per share
includes an earnings allocation formula that determines earnings per share for common
stock and any participating securities according to dividends declared, whether paid or
unpaid, and participation rights in undistributed earnings. This FSP is effective for
financial statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those years. All prior period earnings per share data presented is
required to be adjusted retrospectively to conform with the provisions of this FSP.
Adoption of this FSP had no impact on our first quarter 2009 or 2008 earnings per share.

# 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, 2008.

# 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 March 31, 2009, have concluded that, as of such date, the
Corporations disclosure controls and procedures were effective.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | During
the quarter ended March 31, 2009 there were no changes in the Corporations internal
control over financial reporting that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

23

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# PART II  OTHER
INFORMATION

# Item 1A. Risk Factors

There have been no material changes
from the risk factors previously disclosed in Part I, Item 1A of the Corporations
Form 10-K.

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

All securities sold by the
Corporation through the Employee Stock Purchase Plan during the quarter ended March 31,
2009 were registered under the Securities Act.

There were no purchases of common
stock for the three months ended March 31, 2009 and based on the Banks current
capital situation it is not reasonable to assume any shares will be repurchased in 2009.

# 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.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------

| | 31.2 | Certificate
of the Chief Financial Officer of FNBH Bancorp, Inc. pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------

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

24

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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 March 31, 2009 to be signed on its behalf by the
undersigned hereunto duly authorized.

| | FNBH BANCORP, INC./s/ Ronald L. Long
Ronald L. LongPresident and Chief Executive Officer/s/ Janice B. Trouba
Janice B. TroubaChief Financial Officer
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: May 12, 2009

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