# UNITED STATESSECURITIES
AND EXCHANGE COMMISSION Washington, D.C. 20549

# Form 10-Q

[X] QUARTERLY REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period
ended March 31, 2006

OR

[_] TRANSITION REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition
period from ________ to _______

Commission file number
0-25752

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

|MICHIGAN
(State or other jurisdiction ofincorporation or organization) | 38-2869722(I.R.S. 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, or a non-accelerated filer.
See definition or accelerated filer and large accelerated filer Rule 12b-2 of
the Exchange Act. (Check one):

Large accelerated filer [_]
Accelerated filer [X] Non-accelerated filer [_]

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 of shares
outstanding of each of the issuers classes of common stock, as of the latest
practicable date: 3,184,520 shares of the Corporations Common Stock (no par value)
were outstanding as of April 30, 2006.

---



# TABLE OF CONTENTS

|                                                                                              | 
|--------------------------------------------------------------------------------------------- | 
|                                                                                              | 
|Part I Financial Information (unaudited)                                                     
|Item 1. Financial Statements:                                                                 | 
|Consolidated Balance Sheets as of March 31, 2006 and December 31, 2005                        | 
|Consolidated Statements of Income for the three months ended March 31, 2006 and 2005          | 
|Consolidated Statements of Stockholders' Equity and Comprehensive                             | 
|Income for the three months ended March 31, 2006 and 2005                                     | 
|Consolidated Statements of Cash Flows for the three months ended March 31, 2006 and 2005      | 
|Notes to Consolidated Financial Statements                                                    | 
|                                                                                              | 
|Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | 
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                            | 
|Item 4.  Controls and Procedures                                                              | 
|                                                                                              | 
|Part II. Other Information                                                                    | 
|Item 1A. Risk Factors                                                                         | 
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                           | 
|Item 6. Exhibits                                                                              | 
|                                                                                              | 
|Signatures                                                                                    | 

---



# PART I  FINANCIAL
INFORMATION

# Item 1. Financial
Statements

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

|Assets                                                                 | March 312006 | December 312005
|---------------------------------------------------------------------- | ------------ | ---------------
|                                                                       |              |                
|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 $17,889,324 |              |                
|at March 31, 2006 and $16,763,204 at December 31, 2005)                |              |                
|Investment securities available for sale, at fair value                |              |                
|Mortgage-backed securities available for sale, at fair value           |              |                
|FHLBI and FRB stock, at cost                                           |              |                
|                                                                       |              |                
|Total investment securities                                            |              |                
|                                                                       |              |                
|Loans:                                                                 |              |                
|Commericial                                                            |              |                
|Consumer                                                               |              |                
|Real estate mortgage                                                   |              |                
|                                                                       |              |                
|Total loans                                                            |              |                
|Less allowance for loan losses                                         |              |                
|                                                                       |              |                
|Net loans                                                              |              |                
|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; 3,181,032     |              |                
|shares issued and outstanding at March 31, 2006 and 3,187,374 shares   |              |                
|issued and outstanding at December 31, 2005                            |              |                
|Retained earnings                                                      |              |                
|Deferred directors' compensation                                       |              |                
|Accumulated other comprehensive loss, net                              |              |                
|                                                                       |              |                
|Total stockholders' equity                                             |              |                
|                                                                       |              |                
|Total liabilities and stockholders' equity                             |              |                
|                                                                       |              |                

See notes to consolidated financial
statements.

1

---



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

|                                                    | Three months ended March 31
|--------------------------------------------------- | ---------------------------
|                                                   
|                                                    |                            
|Interest and dividend income:                       |                            
|Interest and fees on loans                          |                            
|Interest and dividends on investment securities:    |                            
|U.S. Treasury and agency securities                 |                            
|Obligations of states and political subdivisions    |                            
|Corporate bonds                                     |                            
|Other securities                                    |                            
|Interest on short term investments                  |                            
|Interest on certificates of deposit                 |                            
|                                                    |                            
|Total interest and dividend income                  |                            
|                                                    |                            
|                                                    |                            
|Interest expense:                                   |                            
|Interest on deposits                                |                            
|Interest on other borrowings                        |                            
|                                                    |                            
|Total interest expense                              |                            
|                                                    |                            
|                                                    |                            
|Net interest income                                 |                            
|                                                    |                            
|Provision for loan losses                           |                            
|                                                    |                            
|Net interest income after provision for loan losses |                            
|                                                    |                            
|                                                    |                            
|Noninterest income:                                 |                            
|Service charges and other fee income                |                            
|Trust income                                        |                            
|Gain on sale of loans                               |                            
|Other                                               |                            
|                                                    |                            
|Total noninterest income                            |                            
|                                                    |                            
|                                                    |                            
|Noninterest expense:                                |                            
|Salaries and employee benefits                      |                            
|Net occupancy expense                               |                            
|Equipment expense                                   |                            
|Professional and service fees                       |                            
|Computer service fees                               |                            
|Printing and supplies                               |                            
|Advertising                                         |                            
|Other                                               |                            
|                                                    |                            
|Total noninterest expense                           |                            
|                                                    |                            
|                                                    |                            
|Income before federal income taxes                  |                            
|                                                    |                            
|Federal income taxes                                |                            
|                                                    |                            
|Net income                                          |                            
|                                                    |                            
|                                                    |                            
|Per share statistics:                               |                            
|Basic EPS                                           |                            
|Diluted EPS                                         |                            
|Dividends                                           |                            
|Basic average shares outstanding                    |                            
|Diluted average shares outstanding                  |                            

See notes to consolidated financial
statements.

2

---



FNBH BANCORP, INC.
AND SUBSIDIARIESConsolidated
Statements of Stockholders Equity and Comprehensive IncomeFor the Three Months
Ended March 31, 2006 and 2005 (Unaudited)

|                                                     | Common Stock | Retained Earnings | Deferred Directors' Compensation | Accumulated Other Comprehensive Loss | Total    
|---------------------------------------------------- | ------------ | ----------------- | -------------------------------- | ------------------------------------ | ---------
|                                                     |              |                  
|Balances at December 31, 2004                        |              |                   | $                                | 5,858,133                            |          
|Amortization of long term incentive plan             |              |                   |                                  | 16,558                               |          
|Issued 2,402 shares for employee stock purchase plan |              |                   |                                  | 61,515                               |          
|Issued 171 shares for current directors' fees        |              |                   |                                  | 5,152                                |          
|Deferred compensation (690 stock units)              |              |                   |                                  |                                      |          
|Comprehensive income:                                |              |                  
|Net income                                           |              |                   |                                  |                                      | 1,660,950
|Change in unrealized loss on debt securities         |              |                  
|available for sale, net of tax effect                |              |                   |                                  |                                      |          
|                                                     |              |                  
|Total comprehensive income                           |              |                   |                                  |                                      |          
|Cash dividends ($.19 per share)                      |              |                   |                                  |                                      | (604,134 
|                                                     |              |                  
|Balances at March 31, 2005                           |              |                   | $                                | 5,941,358                            |          
|                                                     |              |                  
|                                                     |              |                  
|Balances at December 31, 2005                        |              |                   | $                                | 6,088,540                            |          
|Amortization of long term incentive plan             |              |                   |                                  | 14,855                               |          
|Issued 434 shares for employee stock purchase plan   |              |                   |                                  | 10,673                               |          
|Issued 224 shares for current directors' fees        |              |                   |                                  | 5,797                                |          
|Deferred compensation (968 stock units)              |              |                   |                                  |                                      |          
|Comprehensive income:                                |              |                  
|Net income                                           |              |                   |                                  |                                      | 1,602,748
|Change in unrealized loss on debt securities         |              |                  
|available for sale, net of tax effect                |              |                   |                                  |                                      |          
|                                                     |              |                  
|Total comprehensive income                           |              |                   |                                  |                                      |          
|Repurchase of shares (7,000 shares)                  |              |                   |                                  | (13,650                              | )        
|Cash dividends ($.21 per share)                      |              |                   |                                  |                                      | (667,878 
|                                                     |              |                  
|Balances at March 31, 2006                           |              |                   | $                                | 6,106,215                            |          
|                                                     |              |                  

See notes to consolidated financial
statements.

3

---



FNBH BANCORP, INC. AND
SUBSIDIARIES  Consolidated 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 benefit                                                       |                            
|Net amortization on investment securities                                         |                            
|Earned portion of long term incentive plan                                        |                            
|Shares issued for current directors' compensation                                 |                            
|Shares earned for deferred directors' compensation                                |                            
|Gain on sale of loans                                                             |                            
|Proceeds from sale of loans                                                       |                            
|Origination of loans held for sale                                                |                            
|(Gain) loss on the sale of other real estate owned, held for sale                 |                            
|Proceeds from sale of other real estate owned, held for sale                      |                            
|Increase in accrued interest income and other assets                              |                            
|Increase 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                                          |                            
|Purchases/Stock dividend FHLBI stock                                              |                            
|Proceeds from maturities and calls of available for sale securities               |                            
|Proceeds from mortgage-backed securities paydowns-available for sale              |                            
|Proceeds from maturities and calls of held to maturity securities                 |                            
|Purchases of certificates of deposit                                              |                            
|Maturity of certificates of deposit                                               |                            
|Net (increase) decrease in loans                                                  |                            
|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                                         |                            
|                                                                                  |                            
|Net cash provided by (used in) financing activities                               |                            
|                                                                                  |                            
|Net increase (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                                                                     |                            
|Federal income taxes paid                                                         |                            
|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, 2006, and consolidated results of operations and cash flows for the
          three months ended March 31, 2006 and 2005.

2.    
          The results of operations for the three months ended March 31, 2006 and 2005 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 2005 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 Securities. A summary of the amortized cost and
          approximate fair value of investment and mortgage-backed securities at March 31,
          2006 and December 31, 2005 follows:

|                           | March 31, 2006 | December 31, 2005
|-------------------------- | -------------- | -----------------
|                           |                |                  
|                           |                |                  
|                           |                |                  
|Held to maturity:          |                |                  
|Obligations of state and   |                |                  
|political subdivisions     |                |                  
|                           |                |                  
|Total held to maturity     |                |                  
|                           |                |                  
|Available for sale:        |                |                  
|U.S Treasury and agency    |                |                  
|securities                 |                |                  
|Corporate bonds            |                |                  
|Mortgage-backed securities |                |                  
|                           |                |                  
|Total available for sale   |                |                  
|                           |                |                  
|                           |                |                  
|Total securities           |                |                  
|                           |                |                  

There were 27 securities in a
continuous loss position for 12 months or more at March 31, 2006, which consist of six
asset-backed securities and 21 agency securities. Because the declines in fair value were
due to changes in market interest rates, not in estimated cash flows, and the securities
are bank qualified municipals, federal agencies or mortgage-backed securities issued by
federal agencies, no other-than-temporary impairment was recorded at March 31, 2006. The
Corporation has both the intent and ability to hold these securities for the time
necessary to recover the amortized cost.

5

---



The following is a summary of the
unrealized losses and fair value of the securities available for sale at March 31, 2006,
by length of time that individual securities in each category have been in a continuous
loss position:

|                           | March 31, 2006
|-------------------------- | --------------
|                           |               
|                           |               
|                           |               
|                           |               
|Available for sale:        |               
|U.S. Treasury and agency   |               
|securities                 |               
|Mortgage-backed securities |               
|                           |               
|Total available for sale   |               
|                           |               

As of December 31, 2005, there were
24 investments that had been in a continuous loss position for 12 months or more and no
impairment was recorded.

6.    
          Managements assessment of the allowance for loan losses is based on an
          evaluation of the loan portfolio, recent loss experience, current economic
          conditions, and other pertinent factors. Loans on non-accrual status and those
          past due more than 90 days amounted to $6,728,000 at March 31, 2006, $5,625,000
          at December 31, 2005, and $1,961,000 at March 31, 2005. (See Managements
          Discussion and Analysis of Financial Condition and Results of Operations).

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

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

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

8.    
          Certain amounts included in the 2005 Consolidated Statements have been
          reclassified to conform to the 2006 presentation.

6

---



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 which owns real estate. The following is a discussion of the
Corporations results of operations for the three months ended March 31, 2006 and
2005, 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 and diluted net income per share       

Net income for the three months ended
March 31, 2006 decreased approximately $58,000 (3.5%) compared to the same period last
year. In the first quarter of the current year, net interest income increased $499,000
(9.4%), noninterest income increased $36,000 (3.7%) and income taxes decreased $31,000
(4.2%). Offsetting these favorable occurrences were an increase in the provision for loan
losses of $234,000 (63.9%) and increased noninterest expenses of $390,000 (11.2%).

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

7

---



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

# INTEREST YIELDS AND
COSTS (in thousands)March 31, 2006 and 2005

|                                               | ----------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 $156,000 in 2006 and $128,000 in 2005.

Interest Earning
Assets/Interest Income On a tax equivalent basis, interest
income increased approximately $1,109,000 (16.1%) in the first quarter of 2006 compared to
the first quarter of 2005. The increase was the result of higher average earning assets of
$10,039,000 (2.3%) and an increase in the yield on average earning assets of 85 basis
points. The increase in yield is primarily the result of increases in the prime interest
rate.

8

---



The quarterly average balance of
short term investments, certificates of deposit and securities decreased approximately
$4,280,000 (5.2%) in the first quarter of 2006 as compared with the same period in 2005.
Partially offsetting the decrease in average balances was an increase in the yield on
these investments of 35 basis points due to higher yields on short term investments which
benefited from the increases in the prime interest rate. Loans, which earn a higher yield
than investments, had an increase in average balances of $14,319,000 (4.0%) in the first
quarter of 2006 compared to the same period last year as well as an 88 basis point
increase in yield. While yields on loans have improved from the prior year, continued
competition in loan pricing is preventing the Bank from realizing the full impact of the
prime rate increases. Competition is expected to continue to impact loan pricing
throughout 2006. Due to competitive pricing pressures on deposits, net interest margin may
experience compression in 2006. 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 growth.

Interest Bearing
Liabilities/Interest Expense Interest expense on deposits for the
first quarter of 2006 increased $685,000 (49.9%) from the first quarter 2005. This was the
result of higher average balances of $12,027,000 (3.6%) in 2006 compared to 2005 combined
with an increase in the average interest rate paid on deposits of 18 basis points.
Deposits shifted to relatively higher cost time deposits as rates increased. Rate
increases on deposit products are expected to impact the yield paid on deposits for the
remainder of 2006.

Borrowed funds average balance
decreased $5,342,000 in the first quarter of 2006 compared to 2005 due to a decrease in
Fed Funds and short term advances combined with the maturity of a Federal Home Loan Bank
of Indianapolis (FHLBI) loan for $3,000,000 in April 2005. As of March 31, 2006, the bank
had a $1,481,000 loan advance entered into in 2000. FHLBI borrowings are available to fund
future loan growth if needed.

Liquidity Liquidity 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, consists principally of local depositors known
to the Bank. As of March 31, 2006, the Bank had Large Certificates totaling approximately
$71,000,000 compared to $65,000,000 at December 31, 2005. At March 31, 2006, the Bank had
$31,000,000 in brokered certificates compared to $30,000,000 at December 31, 2005,
$22,100,000 of which are certificates over $100,000 as of March 31, 2006.

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 $37,000,000 available at the FHLBI. As of March 31, 2006, approximately
$1,500,000 of the line had been used for long term advances, as previously described. The
Bank has pledged certain mortgage loans as collateral for this borrowing. The Bank also
has a repurchase agreement in place where it can borrow from a broker who will lend money
against certain securities of the Bank. Finally, management may look to available
for sale securities in the investment portfolio to meet additional liquidity needs.

9

---



Interest Rate Risk Interest 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, 2006

|0-3Months                        | 4-12Months | 1-5Years | 5+Years | Total  
|-------------------------------- | ---------- | -------- | ------- | -------
|                                 |            |          |         |        
|Assets:                          |            |          |         |        
|Loans                            |            |          | $       | 169,720
|Securities                       |            |          |         | 7,120  
|Certificates of deposit          |            |          |         | 1,178  
|Short term investments           |            |          |         | 5,785  
|                                 |            |          |         |        
|Total rate sensitive assets      |            |          | $       | 183,803
|                                 |            |         
|Liabilities:                     |            |         
|NOW, savings & MMDA              |            |          | $       | 69,882 
|Time deposits                    |            |          |         | 48,702 
|Other borrowings                 |            |          |         | -      
|                                 |            |          |         |        
|Total rate sensitive liabilities |            |          | $       | 118,584
|                                 |            |         
|Rate sensitivity gap and ratios: |            |         
|Gap for period                   |            |          | $       | 65,219 
|Cumulative gap                   |            |          |         | 65,219 
|                                 |            |         
|Cumulative rate sensitive ratio  |            |          |         | 1.55   

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

In the gap table above, the short
term (one year and less) cumulative interest rate sensitivity is asset sensitive as of
March 31, 2006. An asset sensitive position would normally indicate increased net interest
income in a rising rate environment. Gap analysis is limited and may not provide an
accurate indication of the impact of general interest rate movements on the net interest
margin since repricing of various categories of assets and liabilities is subject to the
Banks needs, competitive pressures, and the needs of the Banks customers. In
addition, various assets and liabilities indicated as repricing within the same period may
in fact reprice at different times within the period and at different rate indices.
Additionally, simulation modeling, which measures the impact of upward and downward
movements of interest rates on interest margin, provides meaningful insight into
strategies management can take to help mitigate the movement of interest rates.

10

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

The Corporation recorded a loan loss
provision of $600,000 in the first quarter of 2006 compared to a provision of $366,000 in
the same period last year. The provision is based upon an analysis of estimated losses
inherent in the portfolio and other economic factors. Non-performing loans at March 31,
2006 have increased $1,103,000, from December 31, 2005, and increased $4,767,000 from
March 31, 2005. Net charge offs for the first quarter of 2006 were $366,000 compared to
$408,000 in the same period in 2005. The allowance for loan losses as a percent of loans
was 1.95% compared to 1.88% at December 31, 2005 and 1.67% at March 31, 2005. Non-accrual,
past due 90 days, and renegotiated loans were 1.81% of total loans at March 31, 2006,
compared to 1.51% at December 31, 2005 and .54% at March 31, 2005.

Impaired loans, as defined by
Statement of Financial Accounting Standards (SFAS) No. 114, Accounting by Creditors for
Impairment of a Loan, totaled approximately $10,400,000 at March 31, 2006, and
included non-accrual and past due 90 days other than homogenous residential and consumer
loans, and $5,500,000 of commercial loans separately identified as impaired. Impaired
loans totaled $10,100,000 at December 31, 2005 and $5,900,000 at March 31, 2005. 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.

The adequacy of the allowance for
loan losses is determined by managements assessment of the composition of the loan
portfolio, an evaluation of specific credits, an analysis of the value of the underlying
collateral for those loans, historical loss experience, relevant economic factors, the
level of nonperforming loans, loans that have been identified as impaired, and the overall
credit quality of the portfolio. Management continues to refine its techniques in this
analysis. Impaired commercial loans had specific reserves calculated in accordance with
SFAS No. 114 of $2,092,000 at March 31, 2006, $2,093,000 at December 31, 2005, and
$1,630,000 at March 31, 2005.

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 at March 31, 2006
compared to December 31, 2005.

11

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|March 31, 2006                                                  | December 31, 2005
|--------------------------------------------------------------- | -----------------
|                                                                |                  
|Nonaccrual loans                                                |                  
|90 days or more past due and still accruing                     |                  
|                                                                |                  
|Total nonperforming loans                                       |                  
|Other real estate                                               |                  
|                                                                |                  
|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                                                    |                  

The following table summarizes the
changes in the allowance for loan losses and reserve for unfunded credit commitments for
the first three months of 2006 and 2005 (in thousands):

|2006                                                            | 2005
|--------------------------------------------------------------- | ----
|                                                                |     
|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                                      |     
|Reductions 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                  |     

12

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

Noninterest income which includes
service charges and other fee income, trust income, gain on sale of loans and other
miscellaneous income increased by $36,000 (3.7%) during the first quarter of 2006 compared
to the same quarter in 2005. Service charges and other fee income increased $78,000 (9.4%)
during the first quarter of 2006 from the first quarter of 2005 due to increases in
service charges on deposit accounts, returned check fees and ATM network income. Trust
income increased $8,100 (12.6%) in the first quarter 2006 compared to the same period last
year due to higher assets under management. Gain on the sale of loans decreased $5,000
(30.7%) due to lower volume of mortgage loans originated for sale. During the first
quarter of 2006, $768,000 of loans were sold compared to $1,254,000 in the same quarter of
2005. Other income decreased $45,000 (81.6%) during the first quarter of 2006 primarily
due to gains on other real estate owned recognized in 2005.

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

Noninterest expense increased
$390,000 (11.2%) in the first quarter of 2006 compared to the same period in 2005.
Salaries and benefits increased $169,000 (8.6%) in the first quarter of 2006 compared to
the first quarter of 2005 due to increased benefit costs, annual salary increases and
filling of open positions. Net occupancy cost decreased $8,000 (2.5%) in 2006 compared to
2005 primarily due to the lower building service expenses offset by increased maintenance
expenses. Equipment expenses decreased $6,000 (2.9%) due to lower equipment maintenance
and depreciation expense in 2006. Professional and service fees are $144,000 (42.0%)
higher in 2006 than in 2005 due to recruitment fees and timing of various strategic
projects. Computer service fees decreased $6,000 (7.0%) due to timing of expense. Printing
and supplies costs decreased $17,000 (18.6%) due to 2005 including costs associated with
new products and the related brochures. Advertising costs increased $50,000 (91.4%) due to
more promotions during the first quarter of 2006. Other expenses increased $64,000 (15.0%)
due to commercial loan and collection fees and a fair market value write down on a
property in other real estate owned.

On April 28, 2006 the Corporation
filed an 8-K with the SEC detailing the resignation of Herbert W. Bursch as President and
Chief Executive Officer (CEO) of the Corporation, effective immediately and the
appointment of Barbara Draper as the interim President and CEO of the Corporation. Ms.
Draper previously served as the Corporations President and CEO for 11 years and
currently serves on the Board of Directors of the Corporation. Management anticipates
additional noninterest expenses in 2006 of approximately $250,000 due to the resignation
of the CEO and the recruitment of a successor.

|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.

13

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|March 31, 2006                  | December 31, 2005
|------------------------------- | -----------------
|                                |                  
|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, 2006 was 12.93% and total risk-based capital was
14.19%. At March 31, 2005, these ratios were 11.61% and 12.86%, respectively. Minimum
regulatory Tier 1 risk-based and total risk-based capital ratios under the Federal Reserve
Board guidelines are 4% and 8%, respectively. The capital guidelines also provide for a
standard to measure risk-based capital to total assets which is called the leverage ratio.
The Banks leverage ratio was 10.72% at March 31, 2006, and 9.56% in 2005. The
minimum standard leverage ratio is 3% but financial institutions are expected to maintain
a leverage ratio of 1 to 2 percentage points above the 3% minimum.

Critical Accounting
Policies The 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, 2005.

Contractual ObligationsAs of March 31, 2006, December 31,
2005, and March 31, 2005, the Bank had outstanding irrevocable standby letters of credit,
which carry a maximum potential commitment of approximately $3,600,000, $3,200,000 and
$3,200,000, 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, 2006, December 31, 2005 and March 31, 2005, where there is collateral, is in
excess of the committed amount. A letter of credit is not recorded on the balance sheet
until a customer fails to perform.

Impact of New Accounting
StandardsDuring the first quarter of fiscal
2006, the Corporation adopted the provisions of the Financial Accounting Standards
Boards (FASB) SFAS 123(R), Share-Based Payment. The Corporation has two plans
affected by the issuance of this Statement. The Long Term Incentive Plan allows for the
granting of stock options to certain employees; however, the Corporation has not, to date,
issued any options under this plan. Consequently, the Statement has no impact on the
Corporations results of operations or financial condition relating to stock options
until such time as options are granted. The second plan affected is the Employee Stock
Purchase Plan (ESPP). The Statement allows for ESPP shares to be issued at ninety-five
percent of fair market value as of the grant date with no compensation expense recognized.
Effective April 1, 2005, the Corporations plan allows for the purchase of shares at
ninety-five percent of fair market value as of the grant date, thus no compensation
expense was recognized upon the effectiveness of SFAS 123(R). Also, in accordance with the
requirements of the pronouncement, the Corporation reclassified unearned long term
incentive compensation to common stock in the Corporations consolidated balance
sheet as of March 31, 2006 and December 31, 2005. The adoption of SFAS 123(R) did not have
a significant impact on its consolidated financial statements or results of operations.

In March 2006, the FASB issued
Statement No. 156, Accounting for Servicing of Financial Assets, which is an
amendment of Statement No. 140. The Statement requires all separately recognized servicing
assets and liabilities to be initially measured at fair value, if practicable. It permits
entities to choose either the amortization method or the fair value measurement method
subsequently measuring each class of separately recognized servicing assets and servicing
liabilities. The Statement is intended to simplify the accounting for servicing assets and
liabilities, particularly for those entities that use derivative instruments, which are
required to be accounted for at fair value, to mitigate the risks inherent in servicing
assets and servicing liabilities. The Statement is effective for the Corporation beginning
January 1, 2007. Management has not completed its review of the new guidance; however, the
effect of the Statements implementation in not expected to be material to the
Corporations results of operation or financial position.

14

---



In February 2006, the FASB issued
Statement No. 155, Accounting for Certain Hybrid Financial Instruments, which is an
amendment of Statement No. 133 and Statement No. 140. This accounting standard permits
fair value re-measurement for any hybrid financial instrument containing an embedded
derivative that otherwise would require bifurcation; clarifies which interest-only strips
and principal-only strips are not subject to the requirements of Statement No. 133;
establishes a requirement to evaluate interests in securitized financial assets to
identify them as freestanding derivatives or as hybrid financial instruments containing an
embedded derivative requiring bifurcation; clarifies that concentrations of credit risk in
the form of subordination are not embedded derivatives; and amends Statement No. 140 to
eliminate the prohibition on a qualifying special-purpose entity from holding a derivative
financial instrument pertaining to a beneficial interest other than another derivative
financial instrument. Statement No. 155 is effective for all financial instruments
acquired or issued after January 1, 2007. Management has not completed its review of the
new guidance; however, the effect of the Statements implementation is not expected
to be material to the Corporations results of operation or financial position.

# 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, 2005.

# 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, 2006, 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, 2006, there were no changes in our internal control over
financial reporting that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# PART II  OTHER
INFORMATION

# Item 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 were registered under the Securities Act.

On March 16, 2006, the
Corporations Board of Directors authorized a new share repurchase program. The new
repurchase program authorizes the repurchase of up to one hundred thousand shares of the
Corporations common stock and expires March 16, 2007.

15

---



The following table shows certain
information relating to purchases of common stock for the three-months ended March 31,
2006:

|Period        | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of a Publicly Announced Program | Maximum Number That May Yet Be Purchased Under the Program
|------------- | -------------------------------- | ---------------------------- | ------------------------------------------------------------------------ | ----------------------------------------------------------
|              |                                  |                              |                                                                          |                                                           
|January 2006  |                                  |                              |                                                                          | -                                                         
|February 2006 |                                  |                              |                                                                          | 7,000                                                     
|March 2006    |                                  |                              |                                                                          | -                                                         
|              |                                  |                              |                                                                          |                                                           
|Total         |                                  |                              |                                                                          | 7,000                                                     
|              |                                  |                              |                                                                          |                                                           

(1)    
          On January 19, 2006, the Corporations Board of Directors authorized the
          repurchase of 7,000 shares at fair market value. This transaction was on
          open-market purchase. All the shares were purchased as part of one transaction.
          The transaction was completed on February 1, 2006. This repurchase was not part
          of a share repurchase program.

# Item 6. Exhibits

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

| | 31.1 | Certificate
of the Chief Executive Officer of FNBH Bancorp, Inc. pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------

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

16

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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, 2006 to be signed on its behalf by the
undersigned hereunto duly authorized.

| |  | FNBH BANCORP, INC./s/ Barbara Draper
Barbara DraperPresident and Chief Executive Officer/s/ Janice B. Trouba
Janice B. TroubaChief Financial Officer
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

DATE: May 8, 2006

17

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