UNITED STATES
SECURITIES 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, 2008

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 incorporation or organization) | (I.R.S. Employer
Identification No.)

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

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

Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
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 is a large  accelerated  filer,  an  accelerated  filer, a
 non-accelerated  filer, or a smaller reporting company (as defined in Exchange Act Rule
12b-2).
Large accelerated filer [_]  Accelerated filer [X]  Non-accelerated filer [_]  
Smaller Reporting Company [_]

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:
3,056,392 shares of the Corporations Common Stock (no par value) were outstanding as
of April 30, 2008.

---



TABLE OF CONTENTS

|                                                                                              | PageNumber
|--------------------------------------------------------------------------------------------- | ----------
|Part I. Financial Information (unaudited)                                                     |           
|Item 1. Financial Statements:                                                                 |           
|Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007                        |           
|Consolidated Statements of Income for the three months ended                                  |           
|March 31, 2008 and 2007                                                                       |           
|Consolidated Statements of Stockholders' Equity and Comprehensive Income                      |           
|for the three months ended March 31, 2008 and 2007                                            |           
|Consolidated Statements of Cash Flows for the three months ended March 31, 2008 and 2007      |           
|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
INFORMATIONItem 1. Financial Statements

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

|                                                                       | March 31,2008 | December 31,2007
|---------------------------------------------------------------------- | ------------- | ----------------
|                                                                       |               |                 
|                                                                       |               |                 
|Assets                                                                 |               |                 
|Cash and due from banks                                                |               |                 
|Short term investments                                                 |               |                 
|                                                                       |               |                 
|Total cash and cash equivalents                                        |               |                 
|Certificates of deposit                                                |               |                 
|Investment securities:                                                 |               |                 
|Investment securities held to maturity, net (fair value of $16,584,254 |               |                 
|at March 31, 2008 and $15,600,812 at December 31, 2007)                |               |                 
|Investment securities available for sale, at fair value                |               |                 
|Mortgage-backed/CMO securities available for sale, at fair value       |               |                 
|Preferred stock 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                                 |               |                 
|Accrued interest and other assets                                      |               |                 
|                                                                       |               |                 
|Total assets                                                           |               |                 
|                                                                       |               |                 
|                                                                       |               |                 
|Liabilities and Stockholders' 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                                                      |               |                 
|Stockholders' Equity                                                   |               |                 
|Common stock, no par value. Authorized 4,200,000 shares; 3,056,392     |               |                 
|shares issued and outstanding at March 31, 2008 and 3,045,153 shares   |               |                 
|shares issued and outstanding at December 31, 2007                     |               |                 
|Retained earnings                                                      |               |                 
|Deferred directors' compensation                                       |               |                 
|Accumulated other comprehensive income, net                            |               |                 
|                                                                       |               |                 
|Total stockholders' equity                                             |               |                 
|                                                                       |               |                 
|Total liabilities and stockholders' equity                             |               |                 
|                                                                       |               |                 

See notes to consolidated financial
statements.

1

---



# FNBH BANCORP, INC. AND
SUBSIDIARIESConsolidated 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 mortgage loans                      |                            
|Other                                               |                            
|                                                    |                            
|Total noninterest income                            |                            
|                                                    |                            
|                                                    |                            
|Noninterest expense:                                |                            
|Salaries and employee benefits                      |                            
|Net occupancy expense                               |                            
|Equipment expense                                   |                            
|Professional and service fees                       |                            
|Computer service fees                               |                            
|Printing and supplies                               |                            
|Director fees                                       |                            
|Advertising                                         |                            
|Other                                               |                            
|                                                    |                            
|Total noninterest expense                           |                            
|                                                    |                            
|Income before federal income taxes                  |                            
|Federal income taxes                                |                            
|                                                    |                            
|Net income                                          |                            
|                                                    |                            
|                                                    |                            
|Per share statistics:                               |                            
|Basic EPS                                           |                            
|Diluted EPS                                         |                            
|Dividends                                           |                            
|Basic average shares outstanding                    |                            
|Diluted average shares outstanding                  |                            

See notes to consolidated
financial statements.

2

---



# FNBH BANCORP, INC. AND
SUBSIDIARIES
Consolidated Statements of Stockholders' Equity and Comprehensive Income
For the Three Months Ended March 31, 2008 and 2007 (Unaudited)

|                                                     | Common Stock | Retained Earnings | Deferred Directors' Compensation | Accumulated Other Comprehensive Loss | Total
|---------------------------------------------------- | ------------ | ----------------- | -------------------------------- | ------------------------------------ | -----
|                                                     |              |                   |                                  |                                      |      
|                                                     |              |                   |                                  |                                      |      
|Balances at December 31, 2006                        |              |                   | $                                | 6,005,835                            |      
|Earned portion of long term incentive plan           |              |                   |                                  | 95,034                               |      
|Issued 413 shares for employee stock purchase plan   |              |                   |                                  | 10,371                               |      
|Issued 75 shares for current directors' fees         |              |                   |                                  | 1,982                                |      
|Directors' deferred compensation (1215 stock units)  |              |                   |                                  |                                      |      
|Issued 685 shares for deferred directors' fees       |              |                   |                                  | 14,549                               |      
|Comprehensive income:                                |              |                  
|Net income                                           |              |                   |                                  |                                      |      
|Change in unrealized loss on investment securities   |              |                  
|available for sale, net of tax effect                |              |                   |                                  |                                      |      
|                                                     |              |                   |                                  |                                      |      
|Total comprehensive income                           |              |                   |                                  |                                      |      
|Repurchase of common stock (39,000 shares)           |              |                   |                                  | (77,610                              | )    
|Cash dividends ($.21 per share)                      |              |                   |                                  |                                      |      
|                                                     |              |                  
|Balances at March 31, 2007                           |              |                   | $                                | 6,050,161                            |      
|                                                     |              |                  
|                                                     |              |                  
|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 loss 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                            |      
|                                                     |              |                  

See notes to consolidated
financial statements.

3

---



# FNBH BANCORP, INC. AND
SUBSIDIARIESConsolidated Statements of Cash Flows (Unaudited)

|                                                                           | Three months ended March 31
|-------------------------------------------------------------------------- | ---------------------------
|                                                                           |                            
|                                                                           |                            
|                                                                           |                            
|Cash flows from operating activities:                                      |                            
|Net income                                                                 |                            
|Adjustments to reconcile net income to net cash provided by                |                            
|operating activities:                                                      |                            
|Provision for loan losses                                                  |                            
|Depreciation and amortization                                              |                            
|Deferred income tax expense                                                |                            
|Net amortization on investment securities                                  |                            
|Earned portion of long term incentive plan                                 |                            
|Shares issued for current and variable directors' compensation             |                            
|Shares earned for deferred directors' compensation                         |                            
|Gain on sale of loans originated for sale                                  |                            
|Proceeds from sale of loans originated for sale                            |                            
|Origination of loans held for sale                                         |                            
|(Gain) loss on the sale of other real estate owned, held for sale          |                            
|Decrease 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 at-par 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 (increase) decrease in loans                                           |                            
|Proceeds from sale of other real estate owned, held for sale               |                            
|Capital expenditures                                                       |                            
|                                                                           |                            
|Net cash provided by (used in) investing activities                        |                            
|                                                                           |                            
|Cash flows from financing activities:                                      |                            
|Net increase (decrease) in deposits                                        |                            
|Payments on FHLBI note                                                     |                            
|Proceeds from issuance of short term debt                                  |                            
|Repayment of short term debt                                               |                            
|Repurchase of common stock                                                 |                            
|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) paid                                   |                            
|Loans transferred to other real estate                                     |                            
|Loans charged off                                                          |                            

See notes to consolidated
financial statements.

4

---



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, 2008 and consolidated results of operations and cash flows for the
          three months ended March 31, 2008 and 2007.

2.    
          The results of operations for the three months ended March 31, 2008 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 2007 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 generated during the
          respective periods.

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, 2008 and December 31, 2007 follows:

|                               | March 31, 2008 | December 31, 2007
|------------------------------ | -------------- | -----------------
|                               |                |                  
|                               |                |                  
|                               |                |                  
|                               |                |                  
|Held to maturity:              |                |                  
|Obligations of state and       |                |                  
|political subdivisions         |                |                  
|                               |                |                  
|Total held to maturity         |                |                  
|                               |                |                  
|                               |                |                  
|Available for sale:            |                |                  
|U.S Treasury and agency        |                |                  
|securities                     |                |                  
|Mortgage-backed/CMO            |                |                  
|securities                     |                |                  
|Preferred stock securities (1) |                |                  
|                               |                |                  
|Total available for sale       |                |                  
|                               |                |                  
|                               |                |                  
|Total securities               |                |                  
|                               |                |                  

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

There were no securities in a
continuous loss position for 12 months or more at March 31, 2008. As of December 31, 2007,
there were three agency securities and seven municipal securities in a continuous loss
position for 12 months or more and no other-than-temporary impairment was recorded.

5

---



The following is a summary of the
unrealized losses and fair value of the securities available for sale portfolio at March
31, 2008 by length of time that individual securities in each category have been in a
continuous loss position:

|                         | Less than 12 months | March 31, 200812 months or more | Total
|------------------------ | ------------------- | ------------------------------- | -----
|                         |                     |                                 |      
|                         |                     |                                 |      
|                         |                     |                                 |      
|                         |                     |                                 |      
|Held to maturity:        |                     |                                
|Obligations of state and |                     |                                
|political subdivisions   |                     |                                 | $    
|                         |                     |                                 |      
|                         |                     |                                
|Available for sale:      |                     |                                
|U.S. Treasury and agency |                     |                                
|securities               |                     |                                 | $    
|Mortgage-backed/CMO      |                     |                                
|securities               |                     |                                 |      
|                         |                     |                                 |      
|                         |                     |                                
|Total available for sale |                     |                                 | $    
|                         |                     |                                 |      

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 $15,772,000 at March 31, 2008,
          $14,573,000 at December 31, 2007, and $12,791,000 at March 31, 2007. (See
          Managements Discussion and Analysis of Financial Condition and Results of
          Operations).

7.    
Effective January 1, 2008, the Corporation implemented Statement of Financial
Accounting Standards No. 157, Fair Value Measurements, relating to its financial
assets and liabilities. Statement No. 157 establishes a fair value hierarchy
that prioritizes the use of inputs used in valuation methodologies into the
following three levels:

| | 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 1 securities include U.S.
government and agency securities and other U.S. government and agency mortgage-backed
securities that are traded by dealers or brokers in active over-the-counter markets. Level
2 securities include private collateralized mortgage obligations, municipal bonds and
preferred stock securities. The Corporation has no Level 3 securities.

6

---



Securities held to maturity.Securities held to maturity are carried at amortized cost when management has the positive
intent and ability to hold them to maturity. The fair value of held to maturity
securities, as disclosed in the accompanying consolidated financial statements, is based
on quoted prices, if available. If quoted prices are not available, fair values are
measured using independent pricing models.

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 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. At time of foreclosure,
foreclosed assets are adjusted to fair value less costs to sell upon transfer of
the loans to foreclosed assets, establishing a new cost basis. At that time,
they are reported in the Corporations fair value disclosures related to
nonfinancial assets.

Mortgage servicing rights (MSRs).MSRs are carried at the lower of cost or fair value, and therefore can be subject to the
fair value measurements on a nonrecurring basis. MSRs do not trade in an active market
with readily observable prices. Accordingly, the Corporation determines the fair values of
MSRs using a valuation model that calculates the present value of estimated future net
servicing income. The model incorporates assumptions that market participants use in
estimating future net servicing income, including estimates of prepayment speeds, discount
rate, cost to service, escrow account earnings, contractual servicing fee income,
ancillary income and late fees. Fair value measurements of the Corporations MSRs use
significant unobservable inputs and, accordingly, are classified as Level 3. MSRs are
reported in the nonrecurring table below at initial recognition of impairment and on an
ongoing basis until recovery.

Assets and Liabilities
Measured at Fair Value on a Recurring Basis

The balances of assets and
liabilities measured at fair value on a recurring basis as of March 31, 2008 are as
follows:

|                              | Total | Quoted Prices in Active Markets for Identical Assets(Level 1) | Significant Other Observable Inputs(Level 2) | Significant Unobservable Inputs(Level 3)
|----------------------------- | ----- | ------------------------------------------------------------- | -------------------------------------------- | ----------------------------------------
|                              |       |                                                               |                                              |                                         
|                              |       |                                                               |                                              |                                         
|Securities available for sale |       |                                                               | $                                            | 19,814,676                              

7

---



Assets and Liabilities
Measured at Fair Value on a Nonrecurring Basis

The balances of assets
and liabilities measured at fair value on a nonrecurring basis as of March 31, 2008 are
as follows:

|                   | Total | Quoted Prices in Active
Markets for Identical Assets(Level 1) | Significant Other
Observable Inputs(Level 2) | Significant Unobservable
Inputs(Level 3) | Total Gains(Losses)
|------------------ | ----- | ------------------------------------------------------------- | -------------------------------------------- | ---------------------------------------- | -------------------
|                   |       |                                                               |                                              |                                          |                    
|                   |       |                                                               |                                              |                                          |                    
|Impaired loans (1) |       |                                                               | $                                            | 5,833,851                                |                    

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

|(2) | Represents changes in specific reserves on impaired loans net of chargeoffs which
          impacts the allowance for loan losses.
|--- | ----------------------------------------------------------------------------------------------------------------------------------

Nonfinancial Assets
and Liabilities Subject to FSP FAS 157-b Deferral Provisions

The Corporation will apply the fair
value measurement and disclosure provisions of SFAS No. 157 effective January 1, 2009 to
nonfinancial assets and liabilities measured on a nonrecurring basis. The Corporation
measures the fair value of the following on a nonrecurring basis: (1) long-lived assets
and (2) foreclosed assets.

8.    
          Basic earnings per share is computed by dividing net income by the weighted
          average number of shares of common stock and deferred director fee stock units
          outstanding during the period. Diluted earnings per share is computed by
          dividing net income by the weighted average number of common shares and deferred
          director fee stock units outstanding and potential common stock outstanding
          during the period, plus the effect of common stock equivalents (e.g. unvested
          restricted shares) that are dilutive, calculated under the treasury stock
          method.

The following table presents basic
and diluted earnings per share:

|                                            | First Quarter
|------------------------------------------- | -------------
|                                            |              
|                                            |              
|                                            |              
|Weighted average basic shares outstanding   |              
|Effect of dilutive restricted stock         |              
|                                            |              
|Weighted average diluted shares outstanding |              
|                                            |              
|Net income                                  |              
|Basic earnings per share                    |              
|Diluted earnings per share                  |              

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 stock awards 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.

8

---



A summary of the activity under the
Plan for the three months ended March 31, 2008 and 2007 is presented below:

|                          | 2008 | 2007
|------------------------- | ---- | ----
|                          |      |     
|                          |      |     
|                          |      |     
|                          |      |     
|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 and 2007 was $133,536 and $83,243
respectively. The total fair value of the awards vested during the three months ended
March 31, 2008 and 2007 was $13,678 and $95,034, respectively. As of March 31, 2008, there
was $245,322 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
4.3 years.

# 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, 2008 and 2007, and also provides
information relating to the Corporations financial condition, focusing on its
liquidity and capital resources.

|                                             | First Quarter
|-------------------------------------------- | -------------
|Earnings(in thousands except per share data) |              
|                                             |              
|                                             |              
|Net income                                   |              
|Basic earnings per share                     |              
|Diluted earnings per share                   |              

Net income for the three months ended
March 31, 2008 as compared to the same period last year, was negatively affected by lower
interest income on loans due to lower average balances and lower yields, lower noninterest
income and higher noninterest expense. These unfavorable variances were partially offset
by lower provision for loans losses and lower interest expense due to lower average
balances and lower rates.

9

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Net income for the three months ended
March 31, 2008 decreased $399,000 (40.8%) compared to the same period last year. In the
first quarter of 2008, net interest income decreased $744,000 (15.4%), noninterest income
decreased $84,000 (9.0%) and noninterest expense increased $17,000 (.5%). Partially
offsetting these unfavorable variances was a decrease in provision for loan losses of
$250,000 (26.6%) and lower federal income taxes of $196,000 (50.3%).

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

10

---



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 (in thousands)March 31, 2008 and 2007

|                                               | ----------First Quarter Averages----------
|---------------------------------------------- | ------------------------------------------
|                                               |                                           
|                                               |                                           
|                                               |                                           
|                                               |                                           
|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 Stockholders' 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, non-accruing loans are included in the
               average daily loan balances.
| | --- | -------------------------------------------------------------------------------------------------------------------------

| | (3) | Interest on loans includes origination fees
               totaling $94,000 in 2008 and $85,000 in 2007.
| | --- | --------------------------------------------------------------------------------------------------------

11

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Interest Earning
Assets/Interest IncomeOn a tax equivalent basis, interest
income decreased $1,190,000 (14.9%) in the first quarter of 2008 compared to the first
quarter of 2007. The yield on average earning assets decreased by 51 basis points combined
with a decrease of $41,328,000 (9.2%) in average earning assets. The yield on earning
assets decreased primarily as a result of the 200 basis point decline in the prime lending
rate during the first quarter of 2008.

The quarterly average balance of
short term investments, certificates of deposit and securities decreased approximately
$644,000 (1.1%) in the first quarter of 2008 as compared with the same period in 2007.
Partially offsetting the decrease in average balances was an increase in the yield on
these investments of 37 basis points due to higher yields on certificates of deposit and
taxable securities. Loans, which earn a higher yield than investments, had a decrease in
average balances of $40,684,000 (10.5%) in the first quarter of 2008 compared to the same
period last year combined with a 62 basis point decrease in yield. The largest decline in
terms of both average balance and rate was in commercial loans, the vast majority of our
portfolio. This decline from the prior year is due to decreases in the prime rate,
continued competition in loan pricing and higher average balances of nonperforming loans
in 2008. Competition is expected to continue to impact loan pricing throughout 2008.
Moreover, these 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 ExpenseInterest expense on deposits for the
first quarter of 2008 decreased $426,000 (14.5%) compared to the first quarter of 2007.
This was the result of lower cost of funds due to lower interest rates paid on deposits of
29 basis points, partially combined with lower average balances of $25,748,000 (7.5%).
Pricing competition in the local market for deposits continues to be a factor.

Borrowed funds average balance
increased $510,000 in the first quarter of 2008 compared to 2007 due to an increase in
FHLBI advances offset by a decrease in purchased Federal Funds. As of March 31, 2008, the
Bank had a $797,000 loan advance outstanding, included in borrowed funds, which was
entered into in 2000 from the FHLBI plus an $8,000,000 loan advance entered into in 2007
from the FHLBI. Additional FHLBI borrowings are available to fund future loan growth if
needed. The holding company has a $200,000 advance outstanding at March 31, 2008 from a
correspondent bank used to pay the February 2008 dividend to shareholders.

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

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. As of March 31, 2008, the Bank had Large Certificates totaling approximately
$74,000,000 compared to $72,000,000 at December 31, 2007.

It is the intention of the
Banks management to handle unexpected liquidity needs through its Federal Funds
position with a correspondent bank and by FHLBI borrowings. The Bank has a line of credit
of approximately $28,000,000 available at the FHLBI and has pledged certain commercial and
consumer loans secured by residential real estate as collateral for this borrowing. As of
March 31, 2008, the Bank had $8,797,000 in borrowings against the line. The Bank also has
a blanket repurchase agreement in place where it can borrow from a broker, pledging
Treasury and Agency securities as collateral. Management may also need to look to
available for sale securities in the investment portfolio to meet additional
liquidity needs. The holding company has a $650,000 unsecured line with $450,000 available
as of March 31, 2008.

12

---



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

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

# Interest Rate
Sensitivity as of March 31, 2008

|0-3Months                              | 4-12Months | 1-5Years | 5+Years | Total  
|-------------------------------------- | ---------- | -------- | ------- | -------
|                                       |            |          |         |        
|Assets:                                |            |          |         |        
|Loans, net                             |            |          | $       | 103,529
|Securities                             |            |          |         | 3,613  
|Certificates of deposit                |            |          |         | -      
|Short term investments                 |            |          |         | 14,390 
|                                       |            |          |         |        
|Total rate sensitive assets            |            |          | $       | 121,532
|                                       |            |          |         |        
|                                       |            |         
|Liabilities:                           |            |         
|NOW, savings & MMDA                    |            |          | $       | 74,015 
|Time deposits                          |            |          |         | 69,034 
|Other borrowings                       |            |          |         | -      
|                                       |            |          |         |        
|Total rate sensitive liabilities       |            |          | $       | 143,049
|                                       |            |          |         |        
|                                       |            |         
|Rate sensitivity gap and ratios:       |            |         
|Gap for period                         |            |          | $       | (21,517
|Cumulative gap                         |            |          |         | (21,517
|                                       |            |         
|Cumulative rate sensitive ratio        |            |          |         | 0.85   
|December 31, 2007 rate sensitive ratio |            |          |         | 0.83   

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 liability sensitive as of
March 31, 2008. A liability sensitive position would normally indicate increased net
interest income in a falling rate environment as liabilities would be repriced quicker
than assets. 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
measures the impact of upward and downward movements of interest rates on interest margin
and provides meaningful insight into strategies management can take to help mitigate the
movement of interest rates.

13

---



|First Quarter
|-------------
|             
|             
|             
|Total        

The Corporation recorded a provision
of $689,000 in the first quarter of 2008 and $939,000 in the same period last year. The
provision is based upon an analysis of estimated losses inherent in the portfolio and
other economic factors. Nonperforming loans at March 31, 2008 have increased $1,199,000
from December 31, 2007 and increased $2,981,000 from March 31, 2007. Net charge offs for
the first quarter of 2008 were $891,000 compared to $674,000 in the same period in 2007.
The provision was lower in the first quarter of 2008 as compared to 2007 despite adverse
trends in net charge-offs and nonperforming loans; however, the provision as a percentage
of loans outstanding was 2.95% at March 31, 2008 compared to 2.96% at December 31, 2007
and 2.01% at March 31, 2007. Management has determined that the
allowance is adequate based on potential losses in the portfolio. Non-accrual, past due 90 days, and renegotiated
loans were 4.57% of total loans at March 31, 2008 compared to 4.19% at December 31, 2007
and 3.29% at March 31, 2007.

Impaired loans, as defined by
Statement of Financial Accounting Standards No. 114, Accounting by Creditors for
Impairment of a Loan, totaled approximately $18,100,000 at March 31, 2008, and included
non-accrual and past due 90 days other than homogenous residential and consumer loans, and
$3,600,000 of commercial loans separately identified as impaired. Impaired loans totaled
$17,000,000 at December 31, 2007 and $14,400,000 at March 31, 2007. A loan is considered
impaired when it is probable that all or part of amounts due according to the contractual
terms of the loan agreement will not be collectable on a timely basis. Nonperforming loans
are reviewed regularly for collectability. Any uncollectable balances are promptly charged
off. Impaired commercial loans had specific reserves calculated in accordance with
Statement No. 114 of $1,172,000 at March 31, 2008, $1,720,000 at December 31, 2007 and
$1,650,000 at March 31, 2007.

The adequacy of the allowance for
loan losses is determined by managements assessment of the composition of the loan
portfolio, an evaluation of specific credits, an analysis of the value of the underlying
collateral for those loans, historical loss experience, relevant economic factors, the
level of nonperforming loans, loans that have been identified as impaired, and the overall
credit quality of the portfolio. Management continues to refine its techniques in this
analysis. 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.

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.

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

14

---



|March 31, 2008                                   | December 31, 2007 | March 31, 2007
|------------------------------------------------ | ----------------- | --------------
|                                                 |                   |               
|                                                 |                   |               
|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 loans |                   |               
|and other real estate owned                      |                   |               

A summary of the composition of loans
is presented below. Included in residential first mortgage totals are real estate
mortgage loans listed in the consolidated financial statements and other loans
(primarily commercial) to customers who pledge their homes as collateral for their
borrowings.

|March 31, 2008                                    | December 31, 2007
|------------------------------------------------- | -----------------
|                                                  |                  
|                                                  |                  
|                                                  |                  
|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          |                  
|                                                  |                  
|Subtotal real estate secured loans                |                  
|Consumer                                          |                  
|Commercial                                        |                  
|Other                                             |                  
|                                                  |                  
|Total gross loans                                 |                  
|Net unearned fees                                 |                  
|                                                  |                  
|Total loans                                       |                  

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

15

---



The following table summarizes the
changes in the allowance for loan losses and reserve for unfunded credit commitments for
the first three months of 2008 and 2007 (in thousands):

|                                                                | 2008 | 2007
|--------------------------------------------------------------- | ---- | ----
|                                                                |      |     
|                                                                |      |     
|Components:                                                     |      |     
|Allowance for loan losses                                       |      |     
|Balance, beginning of year                                      |      |     
|Loans charged off:                                              |      |     
|Real estate mortgage                                            |      |     
|Commerical                                                      |      |     
|Consumer                                                        |      |     
|                                                                |      |     
|Total charge-offs                                               |      |     
|                                                                |      |     
|Recoveries to loans previously charged off:                     |      |     
|Real estate mortgage                                            |      |     
|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                  |      |     

|                   | First Quarter
|------------------ | -------------
|                   |              
|                   |              
|                   |              
|Noninterest Income |              
|(in thousands)     |              
|Total              |              

Noninterest income which includes
service charges and other fee income, trust income, gain on sale of mortgage loans, and
other miscellaneous income decreased by $84,000 (9.0%) during the first quarter of 2008
compared to the same quarter in 2007. Service charges and other fee income decreased
$98,000 (11.9%) during the first quarter of 2008 from the first quarter of 2007 due to
decreases in service charges on deposit accounts, returned check fees and loan late and
service fees. The decrease in deposit service charges is primarily related to business
deposit accounts. The decrease in loan late and service charges is primarily related to
commercial loans. Trust income increased $7,000 (7.4%) in the first quarter 2008 compared
to the same period last year. The Bank had no gain on sale of mortgage loans in the first
quarter of 2008 compared to $19,000 in the same period in 2007. The Bank is now using a
third party to originate mortgage loans and receives a commission. The Bank received
$11,000 in commissions in the first quarter of 2008 which are included in other fee
income. Other income increased $26,000 during the first quarter of 2008 compared to the
same quarter in 2007 primarily due to the gain on sale of other real estate owned
properties.

|                    | First Quarter
|------------------- | -------------
|                    |              
|                    |              
|                    |              
|Noninterest Expense |              
|(in thousands)      |              
|Total               |              

16

---



Noninterest expense increased $17,000
(0.5%) in the first quarter of 2008 compared to the same quarter in 2007. Salaries and
employee benefits decreased $157,000 (8.4%) in the first quarter of 2008 compared to the
first quarter of 2007 primarily due to lower salaries of $76,000 (5.5%), related payroll
taxes of $34,000 (22.9%), pension contribution of $25,000 (26.9%) and profit sharing
expense of $44,000 (35.8%). The Bank had filled the majority of open positions by the end
of the first quarter and expects salaries to increase. Net occupancy costs increased
$53,000 (17.5%) in 2008 compared to 2007 due to higher building services expense and
building repair and maintenance. Equipment expense increased $9,000 (8.7%) primarily due
to higher other equipment expense and equipment maintenance. Professional and service fees
decreased $3,000 (0.6%) due to lower audit and consulting fees partially offset by higher
legal fees. Legal fees are expected to remain high as the Bank will require additional
legal services as nonperforming loans are worked out. Computer service fees increased
$4,000 (3.4%). Printing and supplies increased $54,000 (103.1%) due to timing of
purchasing supplies. Director fees decreased $41,000 (41.4%) due to fewer committee
meetings and no profit sharing bonus accrual for directors in 2008. Advertising expense
decreased $16,000 (22.1%) in the first quarter of 2008 as a result of not renewing the
Corporations outside advertising agency, which was on a retainer basis. Other
expenses increased $114,000 (36.8%) in the first quarter of 2008 compared to the same
period in 2007 primarily due to higher software amortization of $48,000 related to the
core system which was purchased in April 2007, higher expenses on foreclosed properties of
$29,000, and a 2007 reversal of a $78,000 settlement accrued in 2006.

The Bank will be subject to higher
deposit insurance premiums in the second half of 2008 as compared to 2007, due to the
remaining one-time assessment credit being primarily used to offset premiums in 2007 and
the first quarter of 2008. The total increase in premiums in 2008 as compared to 2007 is
estimated to be approximately $160,000 based on current assessments.

|Income Tax Expense | First Quarter
|------------------ | -------------
|(in thousands)     |              
|                   |              
|                   |              
|Total              |              

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

|Capital                         | 
|------------------------------- | 
|(in thousands)                  | 
|                                | 
|                                | 
|Stockholders' Equity            | 
|Ratio of Equity to Total Assets | 

The Federal Reserve Board provides
guidelines for the measurement of capital adequacy. The Banks capital, as adjusted
under these guidelines, is referred to as risk-based capital. The Banks Tier 1
risk-based capital ratio at March 31, 2008 was 10.88% and total risk-based capital was
12.15%. At March 31, 2007, these ratios were 12.10% and 13.36%, respectively. Minimum
regulatory Tier 1 risk-based and total risk-based capital ratios under the Federal Reserve
Board guidelines are 4% and 8%, respectively. The capital guidelines also provide for a
standard to measure risk-based capital to total assets which is called the leverage ratio.
The Banks leverage ratio was 9.62% at March 31, 2008 and 10.55% at March 31, 2007.
The minimum standard leverage ratio is 3% but financial institutions are expected to
maintain a leverage ratio of 1 to 2 percentage points above the 3% minimum.

While the Bank remains well
capitalized, further dividends from the Bank to the Corporation will require OCC approval.
This is due to the fact that, under 12 USC 60, the Bank may only pay dividends, without
prior OCC approval, to the extent of its current years retained earnings (current
years earnings less current years dividends paid) plus the prior two
years retained earnings. The prior years loss of the Bank obligate the Bank to
obtain this approval. To the extent that the Corporation pays dividends at the current
rate or a reduced rate, given (1) the loss incurred in 2007, and (2) dividends paid by the
Bank to the Corporation in 2007, and based on an assumption of future earnings
commensurate with historical earning levels, OCC approval will be required as a condition
to future dividends until at least 2010. We have no basis or understanding with the OCC
that such approval will be granted.

17

---



Critical Accounting
PoliciesThe Corporation maintains critical
accounting policies for the allowance for loan losses. Refer to notes 1c and 1d of the
Notes to Consolidated Financial Statements for additional information included in Form
10-K for the year ended December 31, 2007.

Contractual ObligationsAs of March 31, 2008, December 31,
2007, and March 31, 2007, the Bank had outstanding irrevocable standby letters of credit,
which carry a maximum potential commitment of approximately $1,982,000, $2,328,000 and
$2,800,000, respectively. These letters of credit are conditional commitments issued by
the Bank to guarantee the performance of a customer to a third party. The majority of
these letters of credit are short-term guarantees of one year or less, although some have
maturities which extend as long as two years. The credit risk involved in issuing letters
of credit is essentially the same as that involved in extending loans to customers. The
Bank primarily holds real estate as collateral supporting those commitments for which
collateral is deemed necessary. The extent of collateral held on those commitments at
March 31, 2008, December 31, 2007 and March 31, 2007, where there is collateral, is in
excess of the committed amount. A letter of credit is not recorded on the balance sheet
unless a customer fails to perform.

Impact of New Accounting
StandardsIn September 2006, the Financial
Accounting Standards Board (FASB) issued Statement No. 157, Fair Value Measurements.
The Statement defines fair value, establishes a framework for measuring fair value and
expands disclosures about fair value measurements. This Statement applies to other
accounting pronouncements that require or permit fair value measurements, the Board having
previously concluded in those accounting pronouncements that fair value is the relevant
measurement attribute. The Statement does not require any new fair value measurements and
was initially effective for the Corporation beginning January 1, 2008. In
February 2008, the FASB approved the issuance of FASB Staff Position (FSP) FAS157-2.
FSP FAS 157-2 allows entities to electively defer the effective date of Statement
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. The Corporation will apply the fair value measurement and
disclosure provisions of Statement No. 157 to nonfinancial assets and liabilities
effective January 1, 2009. Such is not expected to be material to our results of
operations or financial position. See Note 7 for a discussion regarding the January 1,
2008 implementation of Statement No. 157 relating to our financial assets and liabilities.

In February 2007, the FASB issued
Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities.
This Statement permits entities to choose to measure eligible items at fair value at
specified election dates. For items for which the fair value option has been elected,
unrealized gains and losses are to be reported in earnings at each subsequent reporting
date. The fair value option is irrevocable unless a new election date occurs, may be
applied instrument by instrument, with a few exceptions, and applies only to entire
instruments and not to portions of instruments. This Statement provides an opportunity to
mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting. Statement No.
159 was effective for the Corporation beginning January 1, 2008. Through March 31, 2008,
the Corporation has not elected the fair value option for any of its financial assets or
liabilities.

In December, 2007 the FASB issued
Statement No. 141(R), Business Combinations, to further enhance the accounting and
financial reporting to related business combinations. This Statement establishes
principles and requirements for how the acquirer in a business combinations (1) recognizes
and measures in its financial statements the identifiable assets acquired, the liabilities
assumed, and any noncontrolling interests 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. Statement 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 Corporations adoption of Statement No.
141(R) will depend upon the extent and magnitude of acquisitions after December 31, 2008.

18

---



# 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, 2007.

# 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, 2008, 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, 2008 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.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 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 and the Long-Term Incentive Plan
during the quarter ended March 31, 2008 were registered under the Securities Act.

There were no purchases of common
stock for the three months ended March 31, 2008.  On May 17, 2007, the Corporations
Board of Directors authorized a share repurchase program. This repurchase program
authorizes the repurchase of up to 100,000 shares of the Corporations common stock
after August 17, 2007 and expires on August 17, 2008.  No shares have yet been repurchased
under this program.

Based on the Banks current
capital situation it is not reasonable to assume any shares will be repurchased in 2008.

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

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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, 2008 to be signed on its behalf by the
undersigned hereunto duly authorized.

| |  | FNBH BANCORP, INC./s/ James R. McAuliffe
James R. McAuliffePresident and Chief Executive Officer
| |  | --------------------------------------------------------------------------------------------------------------

| |  | /s/ Janice B. Trouba
Janice B. TroubaChief Financial Officer
| |  | --------------------------------------------------------------------------

DATE: May 9, 2008

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