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

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

                For the quarterly period ended September 30, 1998
                                       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                                          38-2869722
     (State or other jurisdiction of                         (I.R.S. Employer
     incorporation or organization)                         Identification No.)

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

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

                             -----------------------

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___

The number of shares outstanding of each of the issuers classes of common stock,
as of the latest  practicable  date:  1,562,588  shares of the Company's  Common
Stock (no par value) were outstanding as of September 30, 1998.

                                                               Page 1 of a Total
                                                                     of 21 Pages
<PAGE>
                                      INDEX


                                                                            Page
                                                                          Number
Part I.   Financial Information (unaudited):

   Item 1.
   Interim Financial Statements:
   Consolidated Balance Sheet as of Sept. 30, 1998 and Dec. 31, 1997...........4
   Consolidated Statements of Income, three months ended
   Sept. 30, 1998 and 1997, and nine months ended  Sept. 30, 1998 and 1997.....5
   Consolidated Statement of Shareholders' Equity and Comprehensive
   Income for nine months ended September 30, 1998.............................6
   Consolidated Statements of Cash Flows for nine months ended
   September 30, 1998 and 1997.................................................7
   Notes to Interim Consolidated Financial Statements..........................8

   Item 2.
   Management's Discussion and Analysis of
   Financial Condition and Results of Operations...............................9

   Item 3.
   Quantitative and Qualitative Disclosures about Market Risk.................20


Part II.  Other Information

   Item 6.....................................................................20

   Signatures.................................................................21



                                       2
<PAGE>
                         PART I - FINANCIAL INFORMATION

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







                                       3
<PAGE>
<TABLE>
                        FNBH BANCORP, INC. AND SUBSIDIARY


Consolidated Balance Sheets                                                     September 30     December 31
                                                                                    1998             1997
Assets                                                                           (unaudited)
<S>                                                                              <C>           <C>
Cash and due from banks                                                          $10,437,412   $  15,638,564
Short term investments                                                            12,408,975       3,100,000
                                                                                  ----------       ---------
   Total cash and cash equivalents                                                22,846,387      18,738,564

Investment securities held to maturity, net (fair value of $22,122,000
   at September 30, 1998 and $30,571,000 at Dec. 31, 1997)                        22,028,742      30,065,021
Investment securities available for sale, at fair value                           11,086,217      13,026,347
Mortgage-backed securities held to maturity, net (fair value of
   $701,000 at September 30, 1998 and $632,000 at Dec. 31, 1997)                     700,951         633,372
                                                                                     -------         -------
      Total investment securities                                                 33,815,910      43,724,740
Loans:
   Commercial                                                                    134,487,198     110,005,566
   Consumer                                                                       25,792,714      24,896,572
   Real estate mortgages                                                          23,820,091      24,108,647
                                                                                  ----------      ----------
      Total loans                                                                184,100,003     159,010,785
   Less unearned income                                                              611,871         613,444
   Less allowance for loan losses                                                  3,971,262       3,423,847
                                                                                   ---------       ---------
      Net loans                                                                  179,516,870     154,973,494

Premises and equipment - net                                                      10,222,862       4,974,412
Accrued interest and other assets                                                  3,081,562       3,903,047
Other real estate owned                                                              275,713               0
                                                                                    --------       ---------
      Total assets                                                              $249,759,304    $226,314,257
                                                                                ============    ============

Liabilities and Stockholders' Equity
Liabilities
Deposits:
   Non-interest bearing demand                                                  $ 46,285,960    $ 41,630,813
   NOW                                                                            25,866,868      23,699,151
   Savings and money market                                                       70,596,214      60,839,930
   Time                                                                           81,744,478      76,129,297
                                                                                  ----------      ----------
      Total deposits                                                             224,493,520     202,299,191

Accrued interest, taxes, and other liabilities                                     1,788,230       2,283,041
                                                                                   ---------       ---------
      Total liabilities                                                          226,281,750     204,582,232

Shareholders' Equity
Common stock, no par value.  Authorized 4,200,000 shares; 1,562,588
shares issued and outstanding at September 30, 1998 and 1,575,000
shares issued and outstanding at December 31, 1997                                 4,815,580       5,250,000
Retained earnings                                                                 18,701,254      16,467,201
Unearned management retention plan                                                  (66,220)               0
Accumulated other comprehensive income, net                                           26,940          14,824
                                                                                      ------          ------
      Total stockholders' equity                                                  23,477,554      21,732,025
      Total liabilities and stockholders' equity                                $249,759,304    $226,314,257
                                                                                ============    ============

See notes to interim consolidated financial statements
</TABLE>

                                       4
<PAGE>
<TABLE>
                        FNBH BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Income
Unaudited                                                   Three Months Ended Sept.        Nine Months Ended Sept.
                                                               1998          1997          1998           1997
Interest income:
<S>                                                         <C>           <C>           <C>             <C>
   Interest and fees on loans                               $4,538,914    $3,759,274    $12,807,746     $10,569,360
   Interest and dividends on investment securities:
      U.S. Treasury and agency securities                      261,502       452,522      1,067,402       1,459,957
      Obligations of state and political subdivisions          197,138       175,115        583,267         521,579
      Other securities                                          13,210             0         30,032           1,328
   Interest on short term investments                          135,410        19,603        244,451          77,248
                                                               -------        ------        -------          ------
      Total interest income                                  5,146,174     4,406,514     14,732,898      12,629,472
                                                             ---------     ---------     ----------      ----------

Interest expense:
   Interest on deposits                                      1,881,989     1,602,965      5,434,726       4,589,221
   Other interest expense                                        3,890        13,417         10,712          34,909
                                                                 -----        ------         ------          ------
      Total interest expense                                 1,885,879     1,616,382      5,445,438       4,624,130
                                                             ---------     ---------      ---------       ---------

      Net interest income                                    3,260,295     2,790,132      9,287,460       8,005,342

Provision for loan losses                                      170,000       112,125        470,000         336,375
                                                               -------       -------        -------         -------
      Net interest income after provision for loan losses    3,090,295     2,678,007      8,817,460       7,668,967
                                                            ----------     ---------      ---------       ---------

Non-interest income:
   Service charges                                             416,180       405,364      1,188,897       1,171,633
   Gain on sale of loans                                        62,909        40,912        202,383         113,067
   Other                                                        25,153        89,474         62,058         110,274
                                                                ------        ------         ------         -------
      Total non-interest income                                504,242       535,750      1,453,338       1,394,974
                                                               -------       -------      ---------       ---------

Non-interest expense:
   Salaries and employee benefits                            1,066,661     1,036,621      3,185,178       2,848,854
   Net occupancy                                               170,348       133,494        450,556         404,921
   Equipment expense                                           209,082       118,063        471,080         335,943
   Professional and service fees                               113,487        69,244        238,300         259,174
   Printing and supplies                                        65,538        53,662        172,757         175,376
   Michigan Single Business Tax                                 57,300        54,000        152,800         142,100
    Other                                                      357,778       376,363      1,134,601       1,041,335
                                                               -------       -------      ---------       ---------
      Total non-interest expense                             2,040,194     1,841,447      5,805,272       5,207,703
                                                             ---------     ---------      ---------       ---------

Income before federal income taxes                           1,554,343     1,372,310      4,465,526       3,856,238

Federal income taxes                                           494,000       409,500      1,352,000       1,147,000
                                                               -------       -------      ---------       ---------

      Net income                                            $1,060,343    $  962,810     $3,113,526      $2,709,238
                                                            ==========    ==========     ==========      ==========
Per share statistics*
   Basic EPS                                                      $.68          $.61          $1.98           $1.72
   Diluted EPS                                                    $.68          $.61          $1.98           $1.72
   Cash Dividends                                                 $.20          $.15          $ .56           $ .45

*Based on 1,573,215 average shares outstanding Sept. 30, 1998 and
1,575,000 average shares outstanding Sept. 30, 1997.

See notes to interim consolidated financial statements
</TABLE>

                                       5
<PAGE>
<TABLE>
                        FNBH BANCORP, INC. AND SUBSIDIARY
     Consolidated Statement of Stockholders' Equity and Comprehensive Income
              For the Nine Months Ended September 30, 1998 and 1997
                                   (Unaudited)



                                                                                           Accumulated
                                                                                             Other
                                                            Common          Retained      Comprehensive
                                                            Stock           Earnings         Income        Total
<S>                                                       <C>              <C>            <C>            <C>
Balances at December 31, 1996                             $5,250,000       14,308,934      38,174        19,597,108
Net income                                                                  2,709,238                     2,709,238
Change in unrealized gain on debt securities
   available for sale, net of tax effect                                                  (11,315)          (11,315)
                                                                                                           --------
Total comprehensive income                                                                                2,697,923
Cash dividends (45(cent)per share)                                           (708,750)                     (708,750)
                                                          ----------       ----------     -------        ----------
Balances at September 30, 1997                            $5,250,000       16,309,422      26,859        21,586,281
                                                          ==========       ==========     =======        ========== 


See notes to interim consolidated financial statements
</TABLE>



<TABLE>
                                                                                          Unearned     Accumulated
                                                                                         Management       Other
                                                             Common        Retained      Retention    Comprehensive
                                                              Stock        Earnings         Plan          Income            Total
<S>                                                         <C>            <C>            <C>            <C>            <C>
Balances at December 31, 1997                               $5,250,000     16,467,201                      14,824       21,732,025
Net income                                                                  3,113,526                                    3,113,526
Change in unrealized gain on debt securities
   available for sale, net of tax effect                                                                   12,116           12,116
                                                                                                                            ------
Total comprehensive income                                                                                               3,125,642
Shares purchased @ $35 per share                              (525,000)                                                   (525,000)
Shares issued  for management retention plan                    82,775                     (82,775)
Shares issued for directors' compensation                        7,805                                                       7,805
Amortization of management retention plan                                                   16,555                          16,555
Cash dividends (56(cent)per share)                                           (879,473)                                    (879,473)
                                                            ----------      ----------     -------         ------       ----------
Balances at September 30, 1998                              $4,815,580      18,701,254     (66,220)        26,940       23,477,554
                                                            ==========      ==========     =======         ======       ==========

See notes to interim consolidated financial statements
</TABLE>

                                       6
<PAGE>
<TABLE>
                        FNBH BANCORP, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows
Unaudited                                                                         Nine months ended Sept. 30
                                                                                    1998             1997
 Cash flows from operating activities:
<S>                                                                               <C>            <C>
   Net income                                                                     $3,113,526     $ 2,709,238
   Adjustments  to  reconcile  net  income  to net cash  provided  by  operating
activities:
      Provision for loan losses                                                      470,000         336,375
      Depreciation and amortization                                                  435,618         322,468
      Net amortization on investment securities                                       26,154          27,113
      Loss on disposal of equipment                                                      725             718
      Gain on sale of loans                                                                -        (113,067)
      Gain on sale of securities                                                    (202,383)         (1,546)
      Proceeds from sale of loans                                                 14,476,034       7,490,568
      Origination of loans held for sale                                         (14,363,746)     (7,737,344)
      (Increase) decrease in accrued interest income and other assets                545,772         731,888
      Increase (decrease) in accrued interest, taxes, and other liabilities         (516,911)        160,134
                                                                                   ---------         -------
         Net cash provided by operating activiti es                                3,984,789       3,926,545
                                                                                   ---------       ---------
Cash flows from investing activities:
   Purchases of available for sale securities                                     (8,044,578)       (995,781)
   Proceeds from sales of available for sale securities                                    -       4,001,562
   Proceeds  from maturities and calls of available for sale securities           10,000,000       5,000,000
    Proceeds from mortgage-backed securities paydowns-available for sale                   -           8,702
   Purchases of held to maturity securities                                       (2,818,408)     (4,661,189)
   Proceeds from maturities and calls of held to maturity securities              10,390,000         500,000
   Proceeds from mortgage-backed securities paydowns-held to maturity                374,080         240,355
   Net increase in loans                                                         (24,883,123)    (21,129,983)
   Capital expenditures                                                           (5,684,793)       (261,943)
                                                                                 -----------        --------
         Net cash used in investing activities                                   (20,666,822)    (17,298,277)
                                                                                 ------------    -----------
Cash flows from financing activities:
   Net increase in deposits                                                       22,194,329      11,774,502
   Dividends paid                                                                   (879,473)       (708,750)
   Stock buyback                                                                    (525,000)              -
                                                                                   ---------      ----------
         Net cash provided by financing activities                                20,789,856      11,065,752
                                                                                  ----------      ----------

Net decrease in cash and cash equivalents                                          4,107,823      (2,305,980)

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

Cash and cash equivalents at end of period                                       $22,846,387     $11,263,236
                                                                                 ===========     ===========
Supplemental disclosures:
   Interest paid                                                                  $5,439,063     $ 4,539,687
   Federal income taxes paid                                                       1,430,000       1,140,000
   Loans transferred to other real estate                                            335,713               -
   Loans charged off                                                                  99,014         219,294

See notes to interim consolidated financial statements
</TABLE>

                                       7
<PAGE>
Notes to Interim Consolidated Financial Statements(unaudited) 

The accompanying  unaudited consolidated financial statements have been prepared
in  accordance  with  generally  accepted  accounting   principles  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 generally  accepted  accounting  principles  for complete
financial statements.

1. In the opinion of management of the  Registrant,  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 Registrant as of September 30, 1998, and
consolidated  results of  operations  for the three months and nine months ended
September  30,  1998 and 1997 and  consolidated  cash flows for the nine  months
ended September 30, 1998 and 1997.

2. The  results  of  operations  for the  three  months  and nine  months  ended
September 30, 1998 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 Notes to Consolidated  Financial  Statements in the 1997
Annual Report contained in the Registrant's report on Form 10-K filing.

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

5.  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  $731,000  at  September  30,  1998 and
$1,058,000 at December 31, 1997.  (See  Management's  Discussion and Analysis of
financial condition and results of operations).

6. The Company has adopted Financial Accounting Standards Board (FASB) Statement
No. 128,  Earnings Per Share,  effective for periods  ending after  December 15,
1997. SFAS 128 establishes  standards for computing and presenting  earnings per
share  (EPS).  Basic EPS is  computed  by  dividing  net income by the  weighted
average common shares  outstanding.  Diluted EPS reflects dilution if options to
issue common stock were exercised or converted into common stock.

                                       8
<PAGE>
Item 2.
                      Management's Discussion and Analysis
                of Financial Condition and Results of Operations
                          Interim Financial Statements

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

FNBH Bancorp, Inc. (the Company), a Michigan business corporation, is a one bank
holding  company,  which  owns  all of the  outstanding  capital  stock of First
National  Bank in Howell (the Bank) and all the  outstanding  stock of HB Realty
Co., a subsidiary  which owns real estate.  The following is a discussion of the
Company's  results of  operations  for the three  months and nine  months  ended
September  30,  1998 and 1997,  and also  provides  information  relating to the
Company's financial condition, focusing on its liquidity and capital resources.
<TABLE>
Earnings  (in thousands                       Third Quarter                       Year-to-Date
except per share data)                      1998         1997                   1998        1997
                                            ----         ----                   ----        ----
<S>                                         <C>          <C>                    <C>         <C>
Net Income                                  $1,060       $963                   $3,114      $2,709

Diluted Net Income per Share                  $.68       $.61                    $1.98       $1.72
</TABLE>
Net income for the three months ended September 30, 1998 increased approximately
$100,000 (10%) from the amount reported for the third quarter of the prior year.
For  the  quarter,  net  interest  income  increased  $470,000  (17%).  However,
non-interest  income decreased  $32,000 (6%), the loan loss provision  increased
58,000 (52%),  non-interest expense increased nearly $200,000 (11%), and federal
tax accruals  increased  $84,000 (21%)  partially  offsetting the effects of the
quarterly increase in net interest income.

Net  income  for the first  nine  months of the year  increased  $404,000  (15%)
compared to the same  period last year.  Contributing  to this  increase  was an
increase of $1,282,000  (16%) in net interest  income and an increase of $58,000
(4%) in non-interest  income,  partially offset by an increase of $134,000 (40%)
in the loan loss  provision,  an  increase  of  $598,000  (11%) in  non-interest
expense, and an increase in federal tax accruals of $205,000 (18%).

                                       9
<PAGE>
<TABLE>
Net Interest Income                        Third Quarter                      Year-to-Date
(in thousands)                          1998         1997                  1998         1997
                                        ----         ----                  ----         ----
<S>                                     <C>          <C>                   <C>          <C>
Interest Income                         $5,146       $4,406                $14,733      $12,629
Interest Expense                         1,886        1,616                  5,446        4,624
                                         -----        -----                  -----        -----
Net Interest Income                     $3,260       $2,790                $ 9,287       $8,005
</TABLE>
The Company's 1998 third quarter net interest  income  increased  $470,000 (17%)
when compared with the same period in the prior year,  while net interest income
for the  year to date  was  $1,282,000  (16%)  higher  than  that of  1997.  The
following table illustrates some of the factors  contributing to the increase in
net interest income for the period and for the year to date.
<TABLE>
                                                      TABLE 1
                                     INTEREST YIELDS AND COSTS (in thousands)
                                            September 30, 1998 and 1997

                                                ---------------Third Quarter Averages----------------
                                                      1998                                1997
                                                      ----                                ----
                                        Average                             Average
                                        Balance     Interest      Rate      Balance      Interest       Rate
Assets:
<S>                                     <C>         <C>           <C>       <C>          <C>            <C>          
Short Term Investments                  $  9,775    $   135.5     5.43%     $   1,450    $    19.6      5.29%
Securities:  Taxable                      18,413        274.6     5.97%        30,368        452.5      5.96%
             Tax-exempt(1)                15,401        273.1     7.13%        13,289        243.3      7.32%
 Loans(2)(3)                             182,329      4,544.1     9.75%       152,146      3,763.7      9.68%
                                         -------     --------                --------      -------
Total earning assets/total
interest income                          225,918     $5,227.3     9.08%       197,253     $4,479.1      8.89%
                                         -------     --------                 -------     --------
Cash & due from banks                     10,094                                7,776
All other assets                          13,533                                7,747
Allowance for loan loss                   (3,874)                              (3,585)
                                         -------                             --------
   Total assets                         $245,671                             $209,191
                                        ========                             ========
Liabilities and
  Shareholders' Equity
Interest bearing deposits:
Savings & NOW accounts                 $  92,946    $   720.1     3.07%     $  77,202    $   550.4      2.83%
Time                                      81,476      1,161.9     5.66%        72,376      1,052.6      5.77%
Other borrowings                             244          3.9     6.22%           922         13.4      5.69%
                                             ---    ---------                 -------       ------
Total interest bearing
liabilities/total interest expense       174,666    $ 1,885.9     4.28%       150,500     $1,616.4      4.26%
                                                    ---------                             --------
Non-interest bearing deposits             45,574                               35,543
All other liabilities                      1,985                                1,815
Shareholders' Equity                      23,446                               21,333
                                          ------                              -------
Total liabilities and
   shareholders' equity                 $245,671                             $209,191
                                        ========                             ========
Interest spread                                                   4.80%                                 4.63%
                                                                  =====                                 =====
Net interest income-FTE                             $ 3,341.4                            $ 2,862.7
                                                    =========                            =========      
Net interest margin                                               5.77%                                 5.67%
                                                                  =====                                 =====
</TABLE>

                                       10
<PAGE>
     (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
          Standards No. 115.
     (2)  For purposes of the computation above, non-accruing loans are included
          in the average daily loan balances.
     (3)  Interest on loans includes  origination fees totaling $159,000 in 1998
          and $106,500 in 1997.
<TABLE>
                                                 ----------------Year to Date Averages-----------------
                                                          1998                             1997
                                                          ----                             ----
                                       Average                                Average
                                       Balance        Interest    Rate        Balance     Interest     Rate
Assets:
<S>                                    <C>            <C>         <C>        <C>          <C>          <C>
Short term investments                 $  5,940       $  244.6    5.43%  $      1,944   $     77.2     5.24%
Securities:  Taxable                     24,367        1,097.3    6.02%        32,693      1,461.3     5.96%
             Tax-exempt(1)               15,112          808.7    7.14%        13,124        727.2     7.39%
Loans(2)(3)                             173,055       12,822.4    9.79%       144,999     10,584.1     9.66%
                                        -------       --------                -------     --------
Total earning assets/total
interest income                         218,474      $14,973.0    9.07%       192,760    $12,849.8     8.84%
                                                     ---------                           ---------
Cash & due from banks                     9,181                                 7,437
All other assets                         11,370                                 8,187
Allowance for loan loss                  (3,678)                               (3,475)
                                        -------                                ------
   Total assets                        $235,347                            $  204,909
                                       ========                              ========   
Liabilities and
  Shareholders' Equity
Interest bearing deposits:
Savings & NOW accounts                 $ 88,933      $ 2,009.9    3.02%    $   78,703    $ 1,620.9     2.75%
Time                                     79,873        3,424.8    5.73%        69,844      2,968.3     5.68%
Other borrowings                            239           10.7    5.90%           809         34.9     5.69%
                                           ----           ----                -------       ------
Total interest bearing
liabilities/total interest expense      169,045      $ 5,445.4    4.31%       149,356     $4,624.1     4.14%
                                                     ---------                            --------
Non-interest bearing deposits            41,718                                33,226
 All other liabilities                    1,785                                 1,670
Shareholders' Equity                     22,799                                20,657
                                         ------                              --------
Total liabilities and
  shareholders' equity                 $235,347                             $ 204,909
                                       ========                             =========
Interest spread                                                   4.76%                                4.70%
                                                                  =====                                =====
Net interest income-FTE                              $ 9,527.6                            $8,225.7
                                                     =========                            ========
Net interest margin                                               5.74%                                5.63%
                                                                  =====                                =====
</TABLE>
    (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
          Standards No. 115.
    (2)   For  purposes  of  the  computations  above,  non-accruing  loans  are
          included in the average daily loan balances.
    (3)   Interest on loans includes  origination fees totaling $450,000 in 1998
          and $254,000 in 1997

                                       11
<PAGE>
Interest Earning Assets/Interest Income

On a tax equivalent basis, net interest income increased  approximately $479,000
in the third  quarter of 1998 compared to that of 1997.  Improved  earning asset
yields combined with a $30,000,000  (20%) growth in average loan balances led to
the net interest  income  growth.  The  amortization  of loan  origination  fees
increased  $52,500 compared to the third quarter of last year. The growth in the
loan  portfolio  has been  funded by deposit  growth and by a  reduction  in the
security  portfolio.  The change in mix in the composition of the Bank's earning
assets has resulted in an increase in the yield on earning assets. Management is
committed  to  continuing  to meet the credit  needs of the  community  and will
continue to promote deposit growth to do so. In addition, the Bank has a line of
credit  available  at the Federal Home Loan Bank to fund loan growth if deposits
are  insufficient.  Since the Bank's  loan  portfolio  is  primarily  made up of
commercial  loans,  approximately  $50,000,000  of which are variable rate loans
tied to prime,  the recent  decrease in prime is expected to have some impact on
the interest margin in the next quarter.

For the first  nine  months of the year,  tax  equivalent  net  interest  income
increased  $1,302,000.  Again,  the increase was primarily  attributable to loan
growth.  Loan interest income  increased  $2,238,000,  with average  balances up
$28,000,000  and  yields  increased  13 basis  points.  The  growth in loans was
primarily  in  the   commercial   sector  where   average   balances   increased
approximately  $26,000,000 (26%) for the year.  Average consumer loans increased
$1,765,000 (7%).  Average mortgage loans increased  $515,000 (2%). This moderate
mortgage  loan growth is due to the Bank's policy of selling fixed rate mortgage
loans which mature in fifteen  years or more.  Mortgage  demand has been strong,
generating  additional fee income.  The Bank sold  $13,400,000 in mortgage loans
during the first nine months of 1998.


Interest Bearing Liabilities/Interest Expense

In the third quarter of 1998, interest expense increased $270,000 both due to an
increase  in rates of 2 basis  points and an  increase  in average  balances  of
$24,000,000.  Savings  and  NOW  interest  expense  increased  $170,000  because
balances increased $15,700,000 and rates increased 24 basis points.  Interest on
time  deposits  increased  $110,000 in the third  quarter of 1998 over the prior
year.  The increase  was  entirely  due to growth as the rate  declined 11 basis
points.  The deposit  growth was the result of the Bank's  marketing  efforts to
increase its share of Livingston County deposits.

In the first three  quarters  of the year,  interest  expense was  approximately
$821,000  higher  than  1997  due  to  average   balances  of  interest  bearing
liabilities increasing $20,000,000 and the rate paid increasing 17 basis points.
Savings and NOW interest expense increased  $389,000 because balances  increased
$10,200,000  and the interest rate  increased 27 basis points.  Interest on time
deposits  increased  $457,000 because the balance increased  $10,000,000 and the
rate increased 5 basis points.

                                       12
<PAGE>
Liquidity

Liquidity is monitored by the Bank's Asset/Liability Management Committee (ALCO)
which  meets  at least  monthly.  ALCO  developed,  and the  Board of  Directors
approved,  a  liquidity  policy  which  targets  a 15%  liquidity  ratio.  As of
September 30, the Bank's liquidity was 16.7%.

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 Bank  does not deal in
brokered funds, and the makeup of its over $100,000 certificates, which amounted
to  $17,200,000  at  September  30, 1998  ($14,900,000  at December  31,  1997),
consists of local depositors known to the Bank.

It is the  intention of the Bank's  management  to handle  unexpected  liquidity
needs  through its Federal Funds  position.  The goal is to maintain a daily Fed
Funds  balance  sufficient to cover  required cash draws.  During the first nine
months of the year,  short term  investments  averaged nearly  $5,900,000  while
purchased  funds  averaged  $239,000.  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.

During the third quarter,  $9,000,000 in Treasury securities matured. Because of
the relatively flat yield curve and the unfavorable  investing atmosphere of the
third  quarter,  a portion  of these  funds  were  invested  short term with the
Federal Home Loan Bank.  These funds are available on an overnight  call and add
to the Bank's liquidity position.  In addition,  the Bank has a $13,000,000 line
of credit  available at the Federal Home Loan Bank. The Bank has pledged certain
mortgage loans and investment securities as collateral for the FHLB borrowing.

Also impacting the Bank's  liquidity was a $4,000,000  purchase of land. Part of
this land is being used as a branch site, but a substantial  portion of the land
is expected to be sold.  When it is sold,  the cash  generated  will improve the
Bank's liquidity ratio.

In addition to liquidity issues, ALCO discusses the current economic outlook and
its impact on the Bank and current  interest rate forecasts.  Actual results are
compared to budget in terms of growth and income.  A yield and cost  analysis is
done to monitor interest margin.  Various ratios are discussed including capital
ratios and liquidity. The rate sensitivity report is analyzed and strategies are
created to attempt to produce the desired results.  The rate sensitivity  report
describes the repricing schedule for various asset and liability categories.

                                       13
<PAGE>
<TABLE>
Interest Rate Sensitivity

(dollars in thousands)                              0-3         4-12           1-5           5+
                                                 Months       Months         Years        Years        Total
Assets:
<S>                                             <C>          <C>           <C>           <C>        ,C>
   Loans..................................      $74,010      $30,124       $71,838       $7,516     $183,488
   Securities.............................        4,100        5,915        12,795       11,006       33,816
   Fed funds..............................       12,409                                               12,409
   Other assets...........................                                               20,046       20,046
                                                -------      -------       -------       ------       ------
      Total assets........................      $90,519      $36,039       $84,633      $38,568     $249,759

Liabilities & Shareholders' Equity:
   Demand, Savings & NOW..................      $43,978      $15,398       $53,027      $30,346     $142,749
   Time...................................       22,813       40,784        18,120           28       81,745
    Other liabilities and equity..........                                               25,265       25,265
                                                -------      -------       -------       ------     --------
       Total liabilities and equity.......      $66,791      $56,182       $71,147      $55,639     $249,759

Rate sensitivity gap and ratios:
   Gap for period.........................       23,728      (20,143)       13,486      (17,071)
    Cumulative gap........................       23,728        3,585        17,071

Cumulative rate sensitive ratio...........         1.36         1.03          1.09         1.00
Dec. 31, 1997 rate sensitive ratio........         1.27         1.16          1.09         1.00
</TABLE>

Based on the asset  sensitive  position of the Bank at September  30,  1998,  if
interest  rates  decrease  200 basis  points  and  management  did not  respond,
management   estimates  that  annualized  net  interest  income  would  decrease
approximately  $150,000,  while a  similar  increase  in rates  would  cause net
interest income to increase by a like amount.  This forecast  assumes that short
and long  term  rates  change  equally.  However,  the  Bank's  commercial  loan
portfolio  currently has  $50,000,000  variable rate loans tied to prime. In the
event that short term rates  decline  more than long term  rates,  the effect on
income may be greater than $150,000.  In the preceding table, the entire balance
of savings,  MMDA, and NOW are not categorized as 0-3 months,  although they are
variable rate  products.  Some of these balances are core deposits which are not
considered rate sensitive based on the Bank's historical experience and industry
practice.
<TABLE>
Provision for Loan Losses        Third Quarter                        Year-to-Date
(in thousands)                1998           1997                1998           1997
                              ----           ----                ----           ----
<S>                           <C>            <C>                 <C>            <C>
Total                         $170           $112                $470           $336
</TABLE>
The  provision  for loan losses  increased  $58,000 in the third quarter of 1998
compared to the prior year.  Year to date the provision  has increased  $134,000
(40%). Because of the significant amount of loan growth the Bank has experienced
in the last year,  principally in the commercial loan portfolio,  an increase in
the provision was deemed advisable. In September of 1998, the allowance for loan
loss as a percent of loans was 2.16%,  compared to 2.24% a year earlier. For the
first nine months of 1998, the Bank had net recoveries of $68,000, compared with
net charge offs of $131,500 last year. Non-accrual,

                                       14
<PAGE>
past due 90 days,  and  renegotiated  loans  were  .40% and .95% of total  loans
outstanding at September 30, 1998 and 1997  respectively and .67% of total loans
at December 31, 1997.

Impaired  loans, as defined by Statement of Financial  Accounting  Standards No.
114,  Accounting by Creditors for  Impairment of a Loan,  totaled  approximately
$3,700,000  at September  30, 1998,  compared to $3,100,000 at December 31, 1997
and included non-accrual, and past due 90 days other than homogenous residential
and consumer loans,  and, at September 30, 1998,  $3,200,000 of commercial loans
separately  identified  as impaired.  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 be  uncollectible.  The majority of the impaired  loan
balance  relates  to one  borrower  whose  loan is  considered  to be  generally
adequately collateralized.

Management  assessment  of  the  allowance  for  loan  losses  is  based  on the
composition of the loan portfolio, an evaluation of specific credits, historical
loss  experience,  the level of  nonperforming  loans  and loans  that have been
identified as impaired. Externally, the local economy and events or trends which
might negatively impact the loan portfolio are also considered. Certain impaired
loans  with  a  balance  of  $3,600,000  had  specific  reserves  calculated  in
accordance with SFAS No. 114 of $460,000 at September 30, 1998.

Nonperforming  assets  are  loans for which the  accrual  of  interest  has been
discontinued,  accruing  loans 90 days or more past due in  payments,  and other
real estate which has been acquired primarily through foreclosure and is waiting
disposition. The following table describes nonperforming assets at September 30,
1998 compared to December 31, 1997.
<TABLE>
Nonperforming Assets 
(in thousands)                                                Sept. 30, 1998        December 31, 1997
<S>                                                              <C>                      <C>
Non-accrual loans                                                  $731                   $809
90 days or more past due and still accruing                           0                    249
                                                                    ---                    ---
         Total nonperforming loans                                  731                  1,058
Other real estate                                                   276                      0
                                                                   ----                    ---
         Total nonperforming assets                              $1,007                 $1,058

Nonperforming loans as a percent of total loans                    .40 %                    .67 %
Nonperforming assets as a percent of total loans                   .55 %                    .67 %
Nonperforming loans as a percent of the loan loss reserve            18%                     31%
</TABLE>

                                       15
<PAGE>
The following  table sets forth loan balances and  summarizes the changes in the
allowance for loan losses for the first nine months of 1998 and 1997.
<TABLE>

Loans:   (dollars in thousands)                                       Year to date         Year to date
                                                                     Sept. 30, 1998       Sept. 30, 1997
<S>                                                                     <C>                   <C>
   Average daily balance of loans for the year to date                  173,055               144,999
   Amount of loans (gross) outstanding at end of the
   Quarter                                                              183,488               158,021
Allowance for loan losses:
   Balance at beginning of year                                           3,424                 3,335
   Loans charged off:
      Real estate                                                             0                     0
      Commercial                                                             20                   163
                       
      Consumer                                                               79                    56
                                                                             --                    --
         Total charge-offs                                                   99                   219
                                  
   Recoveries of loans previously charged off:
      Real estate                                                             0                    33
      Commercial                                                            132                    33
      Consumer                                                               44                    22
                                                                             --                    --
         Total recoveries                                                   176                    88

Net loans charged off (recoveries)                                          (77)                  131
Additions to allowance charged to operations                                470                   336
                                                                            ---                   ---
         Balance at end of quarter                                       $3,971                $3,540

Ratios:
    Net loans charged off (annualized) to average                                       
    loans outstanding                                                     (.04%)                 .12%
   Allowance for loan losses to loans outstanding                         2.16%                 2.24%
</TABLE>

Loans are generally  placed on a nonaccrual  basis when principal or interest is
past due 90 days or more and when, in the opinion of management, full collection
of principal and interest is unlikely.
<TABLE>
Non-interest Income                        Third Quarter                      Year-to-Date
(in thousands)                          1998           1997                1998           1997
                                        ----           ----                ----           ----
<S>                                     <C>            <C>                 <C>            <C>
Total                                   $504           $536                $1,453         $1,395
</TABLE>
Non-interest  income,  which includes service charges on deposit accounts,  loan
and customer  service fees, other operating  income,  and gain (loss) on sale of
assets  decreased by $32,000 (6%) in the third  quarter of 1998  compared to the
same  period in the  previous  year.  The reason for the  decline  was that 1997
non-interest income included a nonrecurring gain of $86,000 on the sale of other
real estate.

                                       16
<PAGE>
For the year,  non-interest  income increased $58,000,  chiefly the result of an
increase in gains from the sale of mortgage  loans.  With the  interest  rate on
mortgage  loans at a  relatively  low  level,  borrowers  have been  looking  to
refinance,  creating  much loan activity amid a favorable  rate  environment  in
which to sell loans on the secondary market.
<TABLE>
Non-interest Expense                       Third Quarter                      Year-to-Date
(in thousands)                          1998           1997                1998           1997
                                        ----           ----                ----           ----
<S>                                     <C>            <C>                 <C>            <C>
Total                                   $2,040         $1,841              $5,805         $5,208
</TABLE>
Non-interest  expense  increased  $199,000  (11%) in the third  quarter  of 1998
compared  to the same  period  last year.  Contributing  to this  increase is an
increase  of $37,000 in  occupancy  expense,  at least  partly due to  increased
property taxes related to land owned by the Company,  and an increase of $90,000
in equipment expense largely due to the costs related to deploying a LAN and the
related depreciation expense.

For the year  non-interest  expense was nearly  $600,000 (11%) higher than 1997,
for the same reasons  mentioned  above and due to  increases  in salary  expense
related  to  normal  salary  increases,  addition  of a  trust  department,  and
increased profit share accruals.  Equipment costs,  especially,  are expected to
continue to increase in the fourth  quarter and into next year.  A new  computer
system  will  be  fully   functional  in  the  fourth   quarter  with  increased
depreciation costs and support services.
<TABLE>
Income Tax Expense                         Third Quarter                       Year-to-Date
(in thousands)                          1998           1997                1998           1997
                                        ----           ----                ----           ----
<S>                                     <C>            <C>                 <C>            <C>
Total                                   $494           $410                $1,352         $1,147
</TABLE>
Fluctuations  in income taxes  resulted  primarily  from changes in the level of
profitability  and in  variations  in  the  amount  of  tax-exempt  income.  The
increases of $84,00 0 in the third  quarter and $105,000 in the year to date tax
accrual were principally the result of increasing income.
<TABLE>
Capital                                          September 30, 1998         December 31, 1997
(in thousands)
<S>                                                  <C>                        <C>
Shareholders' Equity*                                $23,451                    $21,717
Ratio of Equity to Total Assets                        9.39%                      9.60%
</TABLE>
*Amounts exclude securities  valuation  adjustments  recorded under Statement of
Financial  Accounting  Standards  No. 115  amounting to $27,000 at September 30,
1998 and $15,000 at December 31, 1997.

                                       17
<PAGE>
A financial institution's capital ratio is looked upon by the regulators and the
public as an indication of its soundness.  Shareholders'  equity,  excluding the
securities valuation adjustment, increased $1,892,000 (8%) during the first nine
months of the year.  This  increase  was the result of net income  earned by the
company  reduced  by  dividends  paid of  $879,473.  In  addition,  the  Company
purchased 15,000 shares of its common stock for $525,000 and issued 2,588 shares
for $90,580,  of which 2,365 shares were issued to certain  employees  under the
Company's long term incentive plan.

The Federal  Reserve Board provides  guidelines  for the  measurement of capital
adequacy. The Bank's capital, as adjusted under these guidelines, is referred to
as risk-based  capital.  The Bank's Tier 1 risk-based capital ratio at September
30, 1998 was 10.46%,  and total risk-based  capital was 11.71%. At September 30,
1997 these ratios were 14.29% and 15.54% respectively. Minimum regulatory Tier 1
risk-based and total  risk-based  capital ratios under the Federal Reserve Board
guidelines are 4% and 8% respectively and well capitalized ratios are 6% and 10%
respectively.

The capital guidelines also provide for a standard to measure risk-based capital
to total assets which is called the leverage  ratio.  The Bank's  leverage ratio
was 7.78% at  September  30,  1998 and  10.29%  in 1997.  The  minimum  standard
leverage ratio is 3% and well  capitalized  banks must maintain a leverage ratio
of at least 5%.  All of the  Bank's  capital  ratios  meet the well  capitalized
standards.

Year 2000 issues are an important focus of management's  attention.  The Company
is highly  dependent on  technology  and most bank products are dependent on the
software's ability to make the transition to the Year 2000.  Preparation for the
Year  2000  problem  began two years  ago when a  technology  plan was  drafted.
Although the plan identified ten major technology initiatives to be completed in
two to three years,  the Year 2000 project was given first  priority and efforts
began immediately.  A national bank consulting firm was hired to help prepare an
action plan. The engagement included management  education,  an inventory of all
systems, risk assessment, an action plan, and a project schedule.

A  steering  committee,   comprised  of  ten  key  employees   representing  all
departments  of the bank,  is working on the action plan.  The plan  consists of
five phases: awareness, assessment,  renovation, validation, and implementation.
The awareness and assessment phases are complete. All "mission critical" systems
have been  identified.  The  objective  is to ensure that any system used by the
company that relies on dates will not be affected by the Year 2000 problem,  not
only computers but power systems, vault timers, elevators, etc. The committee is
in  the  process  of  completing  steps  for  the  renovation,  validation,  and
implementation  phases.  Applications  that have been  identified  as being date
sensitive are being  tested.  Testing for most of the mission  critical  systems
including PC and server  hardware and software is complete.  Simulation  testing
will be completed  for core and  ancillary  systems in the fourth  quarter.  The
Company has spent approximately $1,500,000 on hardware and software in the first
three quarters of 1998 and the capital expenditures are essentially complete for
this project.  The main frame computer system 

                                       18
<PAGE>
that  processes the Bank's  business will be converted to a client server system
in the fourth quarter.  When the conversion is complete,  the Company expects to
be Year 2000 compliant.  However, in spite of thorough testing,  the Company can
give no  guarantee  that the systems of other  service  providers,  on which the
Company relies, will be fully compliant. Nor can the Company guarantee that some
non "mission critical" software or hardware program will not fail.

The committee also  recognizes that the Company has  relationships  with vendors
and customers which are important to the smooth functioning of its business.  As
a result, the Company has analyzed  significant vendors and customers' Year 2000
readiness and has determined that any failures they may have are not expected to
have a material effect on the Company.

In June of this year,  the  Company  exercised  an option to purchase an 18 acre
tract of land in northwest Brighton.  The cost of the property was approximately
$4,000,000.  A portion of the land will be used for a new branch building.  Site
preparation  is  complete  and  building  construction  will begin in the fourth
quarter.  Cost of the branch building is estimated at  approximately  $1,200,000
and management anticipates that the branch will be open by the end of the second
quarter in 1999.  The Company  currently  is  attempting  to sell a  substantial
portion  of the  acreage  which is not needed  for the  branch.  A road has been
constructed  on the property.  Any  additional  improvements  that are needed to
enhance the  salability  of the property  are not  expected to exceed  $200,000.
These projects will be financed from internally generated funds.

Accounting Standards

In June 1997, the Financial  Accounting  Standards Board (FASB) issued Statement
of Financial Accounting  Standards No. 130 Reporting  Comprehensive Income (SFAS
130). SFAS 130 establishes standards for reporting and displaying  comprehensive
income and its  components,  including  but not limited to  unrealized  gains or
losses on  securities  available for sale,  in the  financial  statements.  This
statement  was  effective for both interim and annual  periods  beginning  after
December  15,  1997.  SFAS 130  requires  reclassification  of all prior  period
amounts.

In June 1997, the FASB issued  Statement of Financial  Accounting  Standards No.
131,  Disclosures about Segments of an Enterprise and Related  Information (SFAS
131).  SFAS 131  establishes  standards for the way that public  entities report
information about operating segments in financial statements.  This statement is
effective for annual  reporting for 1998 calendar year  entities.  Although this
statement  applies to interim  financial  statements,  interim  reporting is not
required in the initial year of application.

In June 1998, the FASB issued  Statement of Financial  Accounting  Standards No.
133,  Accounting for Derivative  Instruments and Hedging  Activities (SFAS 133).
SFAS  133  establishes   accounting  and  reporting   standards  for  derivative
instruments and hedging activities.  It requires  recognition of all derivatives
as either  assets or  liabilities  in the  statement of financial  condition and
measurement  of those  instruments  at fair value.  the 

                                       19
<PAGE>
accounting  for gains and losses on  derivatives  depends on the intended use of
the  derivative.  This Statement is effective for all fiscal  quarters of fiscal
years  beginning  after June 15,  1999,  with  earlier  application  encouraged.
Retroactive  application  is not  permitted.  SFAS 133 is not expected to have a
significant impact on the financial condition or operations of the Corporation.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk
No material  changes in the market risk faced by the Company has occurred  since
December 31, 1997.





                           PART II - OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits
       There are none applicable.

(b) Reports on Form 8-K:
       There were no reports on Form 8-K filed during the third quarter of 1998.





                                       20
<PAGE>
                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly caused this  Quarterly  Report on Form 10-Q for the quarter
ended September 30, 1998 to be signed on its behalf by the undersigned  hereunto
duly authorized.


                  FNBH BANCORP, INC.



                  _________________________________________________     
                  Barbara D. Martin
                  President and Chief Executive Officer



                  /s/ Barbara J. Nelson
                  Barbara J. Nelson
                  Treasurer



DATE:  November 12, 1998


                                       21