# 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 September 30, 2007

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 outstanding of
each of the issuers classes of common stock, as of the latest practicable date:
3,045,723 shares of the Corporations Common Stock (no par value) were outstanding as
of October 31, 2007.

---



# TABLE OF CONTENTS

|                                                                                              | PageNumber
|--------------------------------------------------------------------------------------------- | ----------
|Part I. Financial Information (unaudited)                                                     |           
|Item 1. Financial Statements:                                                                 |           
|Consolidated Balance Sheets as of September 30, 2007 and December 31, 2006                    |           
|Consolidated Statements of Income for the three months and nine months ended                  |           
|September 30, 2007 and 2006                                                                   |           
|Consolidated Statements of Stockholders' Equity and Comprehensive Income                      |           
|for the three months ended September 30, 2007 and 2006                                        |           
|Consolidated Statements of Stockholders' Equity and Comprehensive                             |           
|Income for the nine months ended September 30, 2007 and 2006                                  |           
|Consolidated Statements of Cash Flows for the nine months ended September 30, 2007 and 2006   |           
|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)

|                                                                       | September 30,2007 | December 31,2006
|---------------------------------------------------------------------- | ----------------- | ----------------
|                                                                       |                   |                 
|                                                                       |                   |                 
|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 $15,772,518 |                   |                 
|at September 30, 2007 and $17,030,269 at December 31, 2006)            |                   |                 
|Investment securities available for sale, at fair value                |                   |                 
|Mortgage-backed/CMO securities available for sale, at fair value       |                   |                 
|FHLBI and FRB stock, at cost                                           |                   |                 
|                                                                       |                   |                 
|Total investment securities                                            |                   |                 
|Loans held for investment:                                             |                   |                 
|Commercial                                                             |                   |                 
|Consumer                                                               |                   |                 
|Real estate mortgage                                                   |                   |                 
|                                                                       |                   |                 
|Total loans held for investment                                        |                   |                 
|Less allowance for loan losses                                         |                   |                 
|                                                                       |                   |                 
|Net loans held for investment                                          |                   |                 
|Premises and equipment, net                                            |                   |                 
|Other real estate owned, held for sale                                 |                   |                 
|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; 3,045,723     |                   |                 
|shares issued and outstanding at September 30, 2007 and 3,074,528      |                   |                 
|shares issued and outstanding at December 31, 2006                     |                   |                 
|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
SUBSIDIARIESConsolidated Statements of Income (Unaudited)

|                                                    | Three months ended September 30 | Nine months ended September 30
|--------------------------------------------------- | ------------------------------- | ------------------------------
|                                                    |                                 |                               
|                                                    |                                 |                               
|                                                    |                                 |                               
|                                                    |                                 |                               
|Interest and dividend income:                       |                                 |                               
|Interest and fees on loans                          |                                 |                               
|Interest and dividends on investment securities:    |                                 |                               
|U.S. Treasury, agency securities, and CMOs          |                                 |                               
|Obligations of states and political subdivisions    |                                 |                               
|Corporate bonds                                     |                                 |                               
|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                      |                                 |                               
|Gain (loss) on available for sale securities        |                                 |                               
|Other                                               |                                 |                               
|                                                    |                                 |                               
|Total noninterest income                            |                                 |                               
|                                                    |                                 |                               
|                                                    |                                 |                               
|Noninterest expense:                                |                                 |                               
|Loss on sale/writedown of commercial loans held     |                                 |                               
|for sale                                            |                                 |                               
|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 (loss) before federal income taxes (credit)  |                                 |                               
|Federal income taxes (credit)                       |                                 |                               
|                                                    |                                 |                               
|Net income (loss)                                   |                                 |                               
|                                                    |                                 |                               
|                                                    |                                 |                               
|Per share statistics:                               |                                 |                               
|Basic EPS                                           |                                 |                               
|Diluted EPS                                         |                                 |                               
|Dividends                                           |                                 |                               
|Basic average shares outstanding                    |                                 |                               
|Diluted average shares outstanding                  |                                 |                               

See notes to consolidated
financial statements.

2

---



# FNBH BANCORP, INC. AND
SUBSIDIARIESConsolidated Statements of Stockholders' Equity and Comprehensive Income
For the Three Months Ended September 30, 2007 and 2006 (Unaudited)

|                                                     | Common
Stock | Retained
Earnings | Deferred
Directors'
Compensation | Accumulated
Other
Comprehensive
Loss | Total
|---------------------------------------------------- | ------------ | ----------------- | -------------------------------- | ------------------------------------ | -----
|                                                     |              |                   |                                  |                                      |      
|                                                     |              |                   |                                  |                                      |      
|Balances at June 30, 2006                            |              |                   | $                                | 6,143,636                            |      
|Earned portion of long term incentive plan           |              |                   |                                  | 11,495                               |      
|Issued 273 shares for employee stock purchase plan   |              |                   |                                  | 6,741                                |      
|Directors' deferred compensation (1,113 stock units) |              |                   |                                  |                                      |      
|Comprehensive income:                                |              |                  
|Net income                                           |              |                   |                                  |                                      |      
|Change in unrealized loss on debt 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 September 30, 2006                       |              |                   | $                                | 6,084,262                            |      
|                                                     |              |                   |                                  |                                      |      
|Balances at June 30, 2007                            |              |                   | $                                | 6,098,227                            |      
|Earned portion of long term incentive plan           |              |                   |                                  | 15,610                               |      
|Issued 205 shares for employee stock purchase plan   |              |                   |                                  | 3,961                                |      
|Issued 172 shares for current directors' fees        |              |                   |                                  | 3,498                                |      
|Directors' deferred compensation (1,251 stock units) |              |                   |                                  |                                      |      
|Comprehensive income:                                |              |                  
|Net loss                                             |              |                   |                                  |                                      |      
|Change in unrealized loss on debt securities         |              |                  
|available for sale, net of tax effect                |              |                   |                                  |                                      |      
|Less reclassification adjustment for net gain        |              |                  
|included in net loss, net of tax effect              |              |                   |                                  |                                      |      
|                                                     |              |                   |                                  |                                      |      
|Total comprehensive loss                             |              |                   |                                  |                                      |      
|Cash dividends ($.21 per share)                      |              |                   |                                  |                                      |      
|                                                     |              |                   |                                  |                                      |      
|Balances at September 30, 2007                       |              |                   | $                                | 6,121,296                            |      
|                                                     |              |                  

See notes to consolidated
financial statements.

3

---



# FNBH BANCORP, INC. AND
SUBSIDIARIESConsolidated Statements of Stockholders' Equity and Comprehensive Income
For the Nine Months Ended September 30, 2007 and 2006 (Unaudited)

|                                                     | Common
Stock | Retained
Earnings | Deferred
Directors'
Compensation | Accumulated
Other
Comprehensive
Loss | Total
|---------------------------------------------------- | ------------ | ----------------- | -------------------------------- | ------------------------------------ | -----
|                                                     |              |                   |                                  |                                      |      
|                                                     |              |                   |                                  |                                      |      
|Balances at December 31, 2005                        |              |                   | $                                | 6,088,540                            |      
|Earned portion of long term incentive plan           |              |                   |                                  | 69,420                               |      
|Issued 969 shares for employee stock purchase plan   |              |                   |                                  | 23,916                               |      
|Issued 270 shares for current directors' fees        |              |                   |                                  | 6,999                                |      
|Issued 1,244 shares for variable directors' fees     |              |                   |                                  | 32,257                               |      
|Directors' deferred compensation (4,624 stock units) |              |                   |                                  |                                      |      
|Comprehensive income:                                |              |                  
|Net income                                           |              |                   |                                  |                                      |      
|Change in unrealized loss on debt securities         |              |                  
|available for sale, net of tax effect                |              |                   |                                  |                                      |      
|                                                     |              |                   |                                  |                                      |      
|Total comprehensive income                           |              |                   |                                  |                                      |      
|Repurchase of common stock (69,000 shares)           |              |                   |                                  | (136,870                             | )    
|Cash dividends ($.63 per share)                      |              |                   |                                  | -                                    |      
|                                                     |              |                   |                                  |                                      |      
|Balances at September 30, 2006                       |              |                   | $                                | 6,084,262                            |      
|                                                     |              |                   |                                  |                                      |      
|                                                     |              |                  
|Balances at December 31, 2006                        |              |                   | $                                | 6,005,835                            |      
|Earned portion of long term incentive plan           |              |                   |                                  | 119,086                              |      
|Issued 904 shares for employee stock purchase plan   |              |                   |                                  | 20,927                               |      
|Issued 371 shares for current directors' fees        |              |                   |                                  | 8,489                                |      
|Issued 1,141 shares for variable directors' fees     |              |                   |                                  | 30,020                               |      
|Issued 685 shares for deferred directors' fees       |              |                   |                                  | 14,549                               |      
|Directors' deferred compensation (4,549 stock units) |              |                   |                                  |                                      |      
|Comprehensive income:                                |              |                  
|Net loss                                             |              |                   |                                  |                                      |      
|Change in unrealized loss on debt securities         |              |                  
|available for sale, net of tax effect                |              |                   |                                  |                                      |      
|Less reclassification adjustment for net loss        |              |                  
|included in net loss, net of tax effect              |              |                   |                                  |                                      |      
|                                                     |              |                   |                                  |                                      |      
|Total comprehensive loss                             |              |                   |                                  |                                      |      
|Repurchase of common stock (39,000 shares)           |              |                   |                                  | (77,610                              | )    
|Cash dividends ($.63 per share)                      |              |                   |                                  | -                                    |      
|                                                     |              |                   |                                  |                                      |      
|Balances at September 30, 2007                       |              |                   | $                                | 6,121,296                            |      
|                                                     |              |                  

See notes to consolidated
financial statements.

4

---



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

|                                                                                         | Nine months endedSeptember 30
|---------------------------------------------------------------------------------------- | -----------------------------
|                                                                                         |                              
|                                                                                         |                              
|                                                                                         |                              
|Cash flows from operating activities:                                                    |                              
|Net income (loss)                                                                        |                              
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |                              
|Provision for loan losses                                                                |                              
|Depreciation and amortization                                                            |                              
|Deferred income tax expense (benefit)                                                    |                              
|Net amortization on investment securities                                                |                              
|Earned portion of long term incentive plan                                               |                              
|Shares issued for current and variable directors' compensation                           |                              
|Shares earned for deferred directors' compensation                                       |                              
|Loss on disposal of equipment                                                            |                              
|Loss on available for sale securities                                                    |                              
|Gain on sale of loans held for sale                                                      |                              
|Loss on sale/writedown of commercial loans held for sale                                 |                              
|Proceeds from sale of loans originated for sale                                          |                              
|Proceeds from sale of loans held for sale                                                |                              
|Origination of loans held for sale                                                       |                              
|Loss on sale of other real estate owned, held for sale                                   |                              
|Increase in accrued interest income and other assets                                     |                              
|Increase (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                                                 |                              
|Purchases/Stock dividend FHLBI stock                                                     |                              
|Proceeds from sales of available for sale securities                                     |                              
|Proceeds from maturities and calls of available for sale securities                      |                              
|Proceeds from mortgage-backed securities paydowns-available for sale                     |                              
|Proceeds from maturities and calls of held to maturity securities                        |                              
|Proceeds from sales of other real estate owned, held for sale                            |                              
|Proceeds from sales of land and facilities held for sale                                 |                              
|Purchases of certificates of deposit                                                     |                              
|Maturity of certificates of deposit                                                      |                              
|Net (increase) decrease in loans                                                         |                              
|Capital expenditures                                                                     |                              
|                                                                                         |                              
|Net cash provided by investing activities                                                |                              
|                                                                                         |                              
|Cash flows from financing activities:                                                    |                              
|Net decrease in deposits                                                                 |                              
|Payments on FHLBI note                                                                   |                              
|Proceeds from issuance of short term debt                                                |                              
|Repayment of short term debt                                                             |                              
|Repurchase of common stock                                                               |                              
|Dividends paid                                                                           |                              
|Shares issued for employee stock purchase                                                |                              
|                                                                                         |                              
|Net cash 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, net of reserves, transferred to held for sale                                     |                              
|Loans charged off                                                                        |                              
|Loans transferred to other real estate                                                   |                              
|Loans, net of reserves, transferred to held for investment from held for sale            |                              

See notes to consolidated
financial statements.

5

---



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
          September 30, 2007, and consolidated results of operations and cash flows for
          the nine months ended September 30, 2007 and 2006.

2.    
          The results of operations for the nine months ended September 30, 2007 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 2006 Annual Report
          contained in the Corporations report on Form 10-K filing.

4.    
          The provision for income taxes represents federal income tax expense (credit)
          calculated using estimated annualized rates on taxable income (loss) 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
          September 30, 2007 and December 31, 2006 follows:

|                         | September 30, 2007 | December 31, 2006
|------------------------ | ------------------ | -----------------
|                         |                    |                  
|                         |                    |                  
|                         |                    |                  
|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               |                    |                  
|                         |                    |                  
|Total available for sale |                    |                  
|                         |                    |                  
|                         |                    |                  
|Total securities         |                    |                  
|                         |                    |                  

There were six agency securities and
sixteen municipal securities in a continuous loss position for 12 months or more at
September 30, 2007. Because the declines in fair value were due to changes in market
interest rates, not in estimated cash flows, and the securities are federal agencies and
insured municipalities, no other-than-temporary impairment was recorded at September 30,
2007. The Corporation has both the intent and ability to hold these securities for the
time necessary to recover the amortized cost. During the third quarter of 2007, six agency
securities and 24 mortgage-backed securities were sold at a net realized loss of $547,571
as reflected in the income statement as Gain (loss) on available for sale
securities. An impairment charge of $553,407 was recorded on these securities as of
June 30, 2007. The proceeds from the sale were reinvested in higher yielding agency and
mortgage-backed securities in July 2007.

6

---



The following is a summary of the
unrealized losses and fair value of the securities at September 30, 2007, by length of
time that individual securities in each category have been in a continuous loss position:

|                         | Less than 12 months | September 30, 200712 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 |                     |                                     | $    
|                         |                     |                                     |      

As of December 31, 2006, there were
36 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 $11,471,000 at September 30, 2007,
          $16,605,000 at June 30, 2007, $12,487,000 at December 31, 2006, and $12,255,000
          at September 30, 2006. (See Managements Discussion and Analysis of
          Financial Condition and Results of Operations).

7.    
          Basic net income (loss) per share and diluted net income (loss) per share are
          computed by dividing net income (loss) by the weighted average number of shares
          of common stock and deferred director fee stock units outstanding during the
          period. Diluted net income (loss) per share is computed by dividing net income
          (loss) 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.

7

---



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

|                                            | Third Quarter | Year-to-Date
|------------------------------------------- | ------------- | ------------
|                                            |               |             
|                                            |               |             
|Weighted average basic shares outstanding   |               |             
|Effect of dilutive restricted stock         |               |             
|                                            |               |             
|Weighted average diluted shares outstanding |               |             
|                                            |               |             
|Net income (loss)                           |               |             
|Basic net income (loss) per share           |               |             
|Diluted net income (loss) per share         |               |             
|                                            |               |             
|Anti-dilutive shares excluded from diluted  |               |             
|calculation                                 |               |             

8.    
          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. A summary of the activity under the Plan for the
          nine months ended September 30, 2007 and 2006 is presented below:

|                             | 2007 | 2006
|---------------------------- | ---- | ----
|                             |      |     
|                             |      |     
|                             |      |     
|Outstanding at January 1,    |      |     
|Granted                      |      |     
|Vested                       |      |     
|Forfeited                    |      |     
|                             |      |     
|Outstanding at September 30, |      |     
|                             |      |     

There were no awards granted during
the three months ended September 30, 2007 and 2006. The total fair value of awards vested
during the three months ended at September 30, 2007 and 2006 was $15,610 and $11,495,
respectively. As of September 30, 2007, there was $175,149 of total unrecognized
compensation cost related to non-vested stock awards under the Plan. That cost is expected
to be recognized over a weighted-average period of 3.9 years.

9.    
          Certain amounts included in the 2006 Consolidated Financial Statements have been
          reclassified to conform to the 2007 presentation.

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

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

8

---



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) (including its wholly owned subsidiary FNBH
Mortgage Company, LLC) 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 and nine months ended September 30, 2007 and 2006, and also provides information
relating to the Corporations financial condition, focusing on its liquidity and
capital resources.

|                                                     | Third Quarter | Year-to-Date
|---------------------------------------------------- | ------------- | ------------
|Earnings (Loss)
(in thousands except per share data) |               |             
|                                                     |               |             
|Net income (loss)                                    |               |             
|Basic net income (loss) per share                    |               |             
|Diluted net income (loss) per share                  |               |             

Net income (loss) for the three
months ended September 30, 2007 as compared to the same period last year was negatively
affected by lower net interest income, as well as a variety of adversely impacted loans
which resulted in a substantially higher provision for loan losses and a loss/writedown on
commercial loans, and lower noninterest income, all of which were only slightly offset by
lower noninterest expenses and taxes.

Net income (loss) for the three
months ended September 30, 2007 decreased $5,516,000 compared to the same period last
year. In the third quarter of 2007, net interest income decreased $718,000 (13.8%)
combined with an increase in the provision for loan losses of $3,579,000 (455.9%), a
decrease in noninterest income of $72,000 (7.1%), and a loss on the sale/writedown of
commercial loans of $4,312,000. These unfavorable variances were partially offset by a
decrease in noninterest expense of $235,000 (6.8%) and a decrease in federal income taxes
of $2,929,000 (486.0%).

Net income (loss) for the nine months
ended September 30, 2007 decreased $10,706,000 (245.8%) compared to the same period last
year. Net interest income decreased $2,443,000 (14.8%), combined with an increase in the
provision for loan losses of $9,699,000 (453.4%), a decrease in noninterest income of
$786,000 (25.9%), and a loss on the sale/writedown of commercial loans of $4,312,000.
Partially offsetting these unfavorable variances was a decrease in noninterest expenses of
$954,000 (8.5%) and a decrease in federal income tax expense of $5,580,000 (295.4%).

|Net Interest Income          | Third Quarter | Year-to-Date
|---------------------------- | ------------- | ------------
|(in thousands)               |               |             
|                             |               |             
|Interest and dividend income |               |             
|Interest expense             |               |             
|                             |               |             
|Net interest income          |               |             

9

---



The following tables illustrate some
of the significant factors contributing to the changes in net interest income (fully tax
equivalent basis) for the three and the nine months ended September 30.

# INTEREST YIELDS AND
COSTS (in thousands)           September 30, 2007 and 2006

|                                               | ----------Third 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 $77,000 in 2007 and $120,000
in 2006.
| | --- | ---------------------------------------------------------------------------------------------------------

10

---



# INTEREST YIELDS AND
COSTS (in thousands)              September 30, 2007 and 2006

|                                               | ----------Year-to-Date 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 $271,000 in 2007 and $399,000
in 2006.
| | --- | ----------------------------------------------------------------------------------------------------------

Interest Earning
Assets/Interest Income On a tax equivalent basis, interest
income decreased $587,000 (7.2%) in the third quarter of 2007 compared to the third
quarter of 2006. The yields on average earning assets decreased by 26 basis points
combined with a decrease of $16,877,000 (3.8%) in average earning assets.

11

---



The quarterly average balance of
short term investments, certificates of deposit and securities decreased approximately
$18,031,000 (26.0%) in the third quarter of 2007 as compared with the same period in 2006.
Partially offsetting the decrease in average balances was an increase in the yield on
these investments of 68 basis points due to higher yields on short term investments.
Loans, which earn a higher yield than investments, had an increase in average balances of
$1,154,000 (.3%) in the third quarter of 2007 compared to the same period last year, which
was more than offset by a 52 basis point decrease in yield. While yields on our consumer
and mortgage loans increased, the decrease in yield on commercial loans, the bulk of our
portfolio, decreased our overall yield. This decline from the prior year is due to
continued competition in loan pricing and higher average balances of nonperforming loans
in 2007. Competition is expected to continue to impact loan pricing throughout 2007.
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.

For the first nine months of the
year, tax equivalent interest income decreased $697,000 (2.9%). Loan interest income
decreased $237,000 (1.1%) due to the average yield decreasing 28 basis points which was
only partially offset by higher average balances of $10,103,000 (2.7%). The increase in
loan growth occurred in commercial loans as the average commercial loan balances increased
$21,796,000 (7.1%). Short term investment and securities interest income decreased by
$460,000 (18.9%) due to a decrease in the average balances of $17,795,000 (24.5%),
partially offset by an increase in the average yield of 32 basis points.

Interest Bearing
Liabilities/Interest ExpenseInterest expense on deposits for the
third quarter of 2007 increased $140,000 (5.2%) compared to the third quarter of 2006.
This was the result of higher cost of funds due to higher interest rates paid on deposits
of 28 basis points partially offset by lower average balances of $11,103,000 (3.3%).
Pricing competition in the local market for deposits continues to be a factor resulting in
higher rates paid.

Interest expense on deposits for the
first nine months of 2007 increased $1,603,000 (22.6%) compared to the same period in
2006. This was the result of an increase in the average interest rate paid on deposits of
70 basis points, partially offset by lower average balances of $6,378,000 (1.9%) in 2007
compared to 2006. For competitive purposes, rates on deposit products were increased in
the second half of 2006.

Borrowed funds average balance
increased $1,292,000 in the third quarter of 2007 compared to 2006 due to an increase in
Federal Funds borrowed and short term advances. At period end, borrowed funds in total
were down $12,329,000 over the December 31, 2006 balances due to higher public fund
deposit balances at September 30, 2007, which is the normal pattern for these funds. As of
September 30, 2007, the Bank had a $1,152,000 loan advance outstanding, included in
borrowed funds, which was entered into in 2000 from the FHLBI. Additional FHLBI borrowings
are available to fund future loan growth if needed.

LiquidityLiquidity is monitored by the
Banks Asset/Liability Management Committee (ALCO) which meets at least monthly. The
Board of Directors has approved a liquidity policy which requires the Bank, while it is
well capitalized as defined by the Federal Financial Institutions Examination Council
(FFIEC), to maintain a current ratio of no less than 1:1 (core basic surplus liquidity
equal to 0), representing that the Banks contingency for unexpected funding outflows
is being primarily met by short term investments and unencumbered treasury and agency
securities. Additional requirements of the policy are that when FHLBI available credit is
added to core basic surplus liquidity, the Bank must have liquidity totaling 5% of assets;
and when brokered 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 September 30, 2007, the Bank had Large Certificates totaling
approximately $74,000,000 compared to $89,000,000 at December 31, 2006, including brokered
certificates of $1,500,000 at September 30, 2007. At September 30, 2007, the Bank had
(including those over $100,000) $11,000,000 in brokered certificates compared to
$18,000,000 at December 31, 2006.

12

---



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 $35,000,000 available at the FHLBI. As of September 30, 2007,
approximately $1,200,000 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. To enhance the liquidity at the corporate level, management is exploring
the possibility of an unsecured line of credit for FNBH Bancorp, Inc.

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 September 30, 2007

|0-3Months                        | 4-12Months | 1-5Years | 5+Years | Total  
|-------------------------------- | ---------- | -------- | ------- | -------
|                                 |            |          |         |        
|Assets:                          |            |          |         |        
|Loans, net                       |            |          | $       | 105,543
|Securities                       |            |          |         | 4,165  
|Certificates of deposit          |            |          |         | 687    
|Short term investments           |            |          |         | 15,586 
|                                 |            |          |         |        
|Total rate sensitive assets      |            |          | $       | 125,981
|                                 |            |         
|Liabilities:                     |            |         
|NOW, savings & MMDA              |            |          | $       | 78,961 
|Time deposits                    |            |          |         | 52,487 
|Other borrowings                 |            |          |         | -      
|                                 |            |          |         |        
|Total rate sensitive liabilities |            |          | $       | 131,448
|                                 |            |         
|Rate sensitivity gap and ratios: |            |         
|Gap for period                   |            |          | $       | (5,467 
|Cumulative gap                   |            |          |         | (5,467 
|                                 |            |         
|Cumulative rate sensitive ratio  |            |          |         | 0.96   

13

---



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
September 30, 2007. 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. Additionally,
simulation modeling, which measures the impact of upward and downward movements of
interest rates on interest margin, provides meaningful insight into strategies management
can take to help mitigate the movement of interest rates.

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

The Corporation recorded a provision
of $4,364,000 in the third quarter of 2007 and $11,838,000 year-to-date. The provision
year-to-date has been impacted by transferring $24,732,000 of loans into the held for sale
classification which had partial charge-offs of $2,935,000 and writedowns to estimated
fair value of $4,603,000, resulting in $17,194,000 of net loans transferred to held for
sale. For the third quarter of 2007, $6,311,000 of loans were transferred to held for sale
with $1,156,000 of partial charge-offs and $1,101,000 of fair value adjustments for a net
transfer of $4,054,000. During the third quarter, $9,779,000 of the loans were sold at a
further loss of $1,107,000, which was recorded in the income statement under the caption
Loss/writedown on commercial loans held for sale, along with the commission
paid to the broker and $68,000 of recoveries on these loans. The remaining $7,415,000 of
loans classified as held for sale were transferred back to loans held for investment at
their estimated fair value of $3,689,000, requiring a further impairment recognized in the
third quarter of 2007 of $3,147,000, after consideration of $579,000 of payments received
on these loans during the third quarter. This impairment was also recorded in the income
statement as part of Loss/writedown on commercial loans held for sale.
Management believes the impairment was reflective of further loan value deterioration
during the third quarter due to general real estate market conditions and concerns in the
wholesale market for asset sales of this type, as management had previously reduced the
carrying amount of these loans to their estimated fair values at June 30, 2007 based on
estimated bids provided by independent third party sources.

The provision is based upon an
analysis of estimated losses inherent in the portfolio and other economic factors. As a
result of these loan sales and the writedown on the loans transferred to held for sale and
subsequently reclassified to loans held for investment, nonperforming loans at: (1)
September 30, 2007, have decreased $5,134,000 to $11,471,000 from the $16,605,000 reported
at June 30, 2007, (2) have decreased $1,016,000 from December 31, 2006 level of
$12,487,000 and (3) have decreased $784,000 from September 30, 2006 level of $12,255,000.
Net charge-offs for the third quarter of 2007 were $3,121,000 (including the $2,257,000
discussed above) compared to $956,000 in the same period in 2006. Management has
determined that the allowance is adequate based on potential losses in the portfolio. At
September 30, 2007, the allowance for loan losses as a percent of loans was 2.45% compared
to 1.98% at December 31, 2006 and 1.92% at September 30, 2006. For the nine months ended
September 30, 2007, the Bank had net charge-offs of $10,386,000 (including the $7,538,000
discussed above) compared to $1,808,000 for the same period in 2006. Non-accrual, past due
90 days, and negotiated loans were 3.21% of total loans at September 30, 2007 compared to
3.25% at December 31, 2006 and September 30, 2006.

14

---



Impaired loans, as defined by
Statement of Financial Accounting Standards (SFAS) No. 114, Accounting by Creditors for
Impairment of a Loan, totaled approximately $11,624,000 at September 30, 2007, and
included non-accrual and past due 90 days other than homogenous residential and consumer
loans, and $1,363,000 of commercial loans separately identified as impaired. Impaired
loans totaled $15,500,000 at December 31, 2006 and $13,500,000 at September 30, 2006. 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 $885,000 at September 30, 2007, $1,980,000 at December 31, 2006, and
$1,350,000 at September 30, 2006.

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. During the third quarter, the Corporation reduced
its level of nonperforming loans by selling $12,036,000 ($9,779,000 after partial
charge-offs and fair value adjustments) of loans. However, due to the economy in Michigan,
the decline in the real estate market and the high level of loan delinquencies on real
estate secured loans, nonperforming loans may increase in subsequent quarters. After
initially classifying $7,415,000 of commercial loans as held for sale at June 30, 2007,
management subsequently decided not to sell these loans due to managements intent to
work out these loans internally rather than selling them at the current bid prices (in a
very weak market currently for asset sales of this type). The loans were, in accordance
with accounting guidance, written down to their estimated fair value of $3,689,000 based
on the bids received. The loans were transferred back into loans held for investment at
their fair value as management no longer has the intent to sell these loans.

15

---



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.

|Nonperforming Assets
(in thousands)              | September 30, 2007 | June 30, 2007 | December 31, 2006 | September 30, 2006
|------------------------------------------------ | ------------------ | ------------- | ----------------- | ------------------
|                                                 |                    |               |                   |                   
|Nonaccrual loans                                 |                    |               | $                 | 10,909            
|90 days or more past due and still accruing      |                    |               |                   | 562               
|                                                 |                    |               |                   |                   
|Total nonperforming loans                        |                    |               |                   | 11,471            
|Other real estate owned                          |                    |               |                   | 531               
|                                                 |                    |               |                   |                   
|Total nonperforming assets                       |                    |               | $                 | 12,002            
|                                                 |                    |              
|Nonperforming loans as a percent of total loans  |                    |               |                   | 3.21%             
|Nonperforming loans (excluding loans HFS) as a   |                    |               |                   | N/A               
|percent of total loans (1)                       |                    |              
|Allowance for loan losses as a percent of        |                    |              
|nonperforming loans (excluding loans HFS)        |                    |               |                   | 76%               
|Nonperforming assets as a percent of total loans |                    |              
|and other real estate owned                      |                    |               |                   | 3.35%             
|Nonperforming assets as a percent of total loans |                    |               |                   | N/A               
|and other real estate owned (exluding loans      |                    |              
|HFS) (1)                                         |                    |              

|(1) | Percentage computed by excluding total held for sale loans of $13,140,590 from
          total loans and $9,757,000 of nonperforming loans included in held for sale
          loans at June 30, 2007.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

16

---



The following table summarizes the
changes in the allowance for loan losses and reserve for unfunded credit commitments for
the first nine months of 2007 and 2006 (in thousands):

|Components:                                                        | 2007 | 2006
|------------------------------------------------------------------ | ---- | ----
|                                                                   |      |     
|Allowance for loan losses                                          |      |     
|Balance, beginning of year                                         |      |     
|Loans charged off:                                                 |      |     
|Real estate mortgage                                               |      |     
|Commerical(2)                                                      |      |     
|Consumer                                                           |      |     
|                                                                   |      |     
|Subtotal                                                           |      |     
|Charge-offs on loans transferred to held for sale(3)               |      |     
|                                                                   |      |     
|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    |      |     
|Net loans charged off (annualized) to average loans outstanding(1) |      |     
|Allowance for loan losses to loans outstanding                     |      |     

|(1) | Computed without annualizing the charge-off related to transferring loans to
          held for sale.
|--- | -----------------------------------------------------------------------------------------------------

|(2) | Partial charge-offs of $2,934,831 are included in commercial charge-offs to
          reduce the loans transferred to held for sale to their impaired value prior to
          consideration of bid amounts.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Represents charges to the allowance to reduce the investment in the loans to the
          estimated fair values when the loans were transferred to held for sale.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Third Quarter                              | Year-to-Date
|------------------------------------------ | ------------
|                                           |             
|                                           |             
|Noninterest Income
(in thousands)    Total |             

Noninterest income which includes
service charges and other fee income, trust income, gain on sale of mortgage loans, gain
(loss) on securities, and other miscellaneous income decreased by $71,000 (7.0%) during
the third quarter of 2007 compared to the same quarter in 2006. Service charges and other
fee income decreased $92,000 (10.1%) during the third quarter of 2007 from the third
quarter of 2006 due to decreases in service charges on deposit accounts, returned check
fees and loan service fees. The decrease in deposit service charges is primarily related
to business deposit accounts. Trust income increased $15,000 (17.6%) in the third quarter
2007 compared to the same period last year due to higher assets under management. In the
third quarter of 2007, there was a gain on securities of $5,800 due to the final
settlement on securities sold in the third quarter which had an impairment reserve
recorded at June 30, 2007.

17

---



For the nine months ending September
30, 2007, noninterest income decreased $786,000 (25.9%). Service charges and other fee
income decreased $282,000 (10.3%) due primarily to lower deposit service charges, returned
check fees and commercial and consumer loan late fees and service charges. Trust income
increased $46,000 (18.4%) due to the reason discussed above. There was a loss on
securities of $548,000 through September 30, 2007 as discussed above and in footnote 5.

|Third Quarter       | Year-to-Date
|------------------- | ------------
|Noninterest Expense |             
|(in thousands)      |             
|Total               |             

Noninterest expense increased
$4,076,000 (118.5%) in the third quarter of 2007 compared to the same quarter in 2006.
Noninterest expense increased due to the $1,107,000 loss recorded on loans classified as
held for sale at June 30, 2007 and subsequently sold, as well as the $3,147,000
attributable to the writedown on loans classified as held for sale at June 30, 2007 and
then returned to the held for investment classification at their estimated fair value as
of September 30, 2007. See Provision for Loan Losses for further information.
Without this item, noninterest expense decreased $235,000 (6.8%) during the third quarter
of 2007 as compared to the same period in 2006. Salaries and employee benefits decreased
$191,000 (10.9%) in the third quarter of 2007 compared to the third quarter of 2006
primarily due to decreased profit sharing expense of $159,000 (132.9%) and lower medical
insurance costs of $17,000 (20.0%) in 2007 due to a change in the mix of employees
covered. Net occupancy costs increased $17,000 (6.3%) in 2007 compared to 2006 due to
higher building maintenance expense and property taxes. Professional and service fees
increased $12,000 (2.6%) due to higher audit and legal fees. Legal fees are expected to
remain high as loans transferred from the held to sale classification back into loans held
for investment will require additional fees as the loans are worked out. Computer service
fees increased $56,000 (68.8%) due to the doubling of maintenance costs on the core system
for a period of approximately six months. Printing and supplies decreased $13,000 (18.9%)
primarily due to fewer promotional materials being produced. Director fees decreased
$24,000 (27.4%) due to fewer committee meetings. Advertising expense was negative for the
third quarter of 2007 due to the reversal of an accrual for planned promotions at June 30,
2007 that did not occur. Advertising decreased from the same period in 2006 as a result of
not renewing the Corporations outside advertising agency, which was on a retainer
basis.

For the first nine months of 2007,
noninterest expense increased $3,358,000 (30.0%) compared to 2006. The primary reason for
the increase in noninterest expense is the loss on loans held for sale/writedown discussed
above. Without regard to the loss/writedown on commercial loans, noninterest expense
decreased $954,000 (8.5%) for the first nine months of 2007 as compared to the first nine
months of 2006. Salaries and employee benefits decreased $1,030,000 (16.8%) primarily due
to decreased profit sharing expense of $822,000 (89.6%) and salaries of $105,000 (2.5%)
due to managements decision not to fill a few vacant positions. Net occupancy
expense increased $6,900 (0.8%) primarily due to lower repair and maintenance expenses
offset by higher building services and property taxes. Equipment expense decreased $29,000
(7.2%) due to lower other equipment expense and depreciation expense. Professional and
service fees increased $98,000 (6.9%) due to a consulting project related to the core
system conversion and higher audit and legal fees. Computer service fees increased
$181,000 (73.8%) due to the costs associated with the core conversion, doubling of
maintenance costs on the core system and increased software maintenance costs. Printing
and supplies increased $14,000 (6.0%) primarily due to supplies related to the core system
conversion. Director fees decreased $10,000 (4.1%) due to decreased committee fees in
2007. Advertising expense decreased $98,000 (41.7%) for the reason stated above. Other
operating expenses decreased by $86,000 (6.1%) due to a decrease in appraisal fees and
charitable contributions and the partial reversal of an accrual for a legal settlement
which was recorded in the fourth quarter of 2006, and settled for a lesser amount in the
first quarter of 2007. These decreases were partially offset by higher losses on the sale
of other real estate owned.

18

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The Bank will be subject to higher
deposit insurance premiums in 2008 as compared to 2007, due to the one-time assessment
credit being primarily used to offset 2007 premiums. In addition, the State of Michigan
has repealed its Single Business Tax (SBT) and replaced it with the Michigan Business Tax
(MBT). Management has not yet completed its analysis of the impact of this change to the
Corporation.

|Third Quarter               | Year-to-Date
|--------------------------- | ------------
|Income Tax Expense (Credit) |             
|(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.

|September 30, 2007              | September 30, 2006 | December 31, 2006
|------------------------------- | ------------------ | -----------------
|                                |                    |                  
|Stockholders' Equity            |                    |                  
|Ratio of Equity to Total Assets |                    |                  

The Federal Reserve Board provides
guidelines for the measurement of capital adequacy. The Banks capital, as adjusted
under these guidelines, is referred to as risk-based capital. The Banks Tier 1
risk-based capital ratio at September 30, 2007 was 10.62% and total risk-based capital was
11.88%. At September 30, 2006, these ratios were 12.71% and 13.97%, 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 9.28% at September 30, 2007, and 10.89% at September
30, 2006. 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 year-to-date losses of the Bank obligate the Bank to
obtain this approval. Accordingly, the Bank requested approval to pay a dividend in
November 2007 to the Corporation and was granted approval by the OCC in late October 2007.
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
prior to September 30, 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.

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, 2006.

Contractual
ObligationsAs of September 30, 2007, December
31, 2006, and September 30, 2006, the Bank had outstanding irrevocable standby letters of
credit, which carry a maximum potential commitment of approximately $2,600,000, $3,300,000
and $4,100,000, respectively. These letters of credit are conditional commitments issued
by the Bank to guarantee the performance of a customer to a third party. The majority of
these letters of credit are short-term guarantees of one year or less, although some have
maturities which extend as long as two years. The credit risk involved in issuing letters
of credit is essentially the same as that involved in extending loans to customers. The
Bank primarily holds real estate as collateral supporting those commitments for which
collateral is deemed necessary. The extent of collateral held on those commitments at
September 30, 2007, December 31, 2006 and September 30, 2006, 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.

19

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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 in generally accepted accounting principles, 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. This
Statement does not require any new fair value measurements and is effective for the
Corporation beginning January 1, 2008. 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 financial statements or results of operations.

In February 2007, the FASB issued
Statement No. 159, The Fair Value Option for Financial Assets and FinancialLiabilities. 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 is effective for the Corporation beginning January 1, 2008. 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
operations 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, 2006.

# Item 4. Controls and
Procedures

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

| | With
the participation of management, the Corporations chief executive officer and chief
financial officer, after evaluating the effectiveness of the Corporations disclosure
controls and procedures (as defined in Exchange Act Rules 13a  15(e) and 15d 
15(e)) for the period ended September 30, 2007, 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 September 30, 2007, 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.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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# PART II  OTHER
INFORMATION

# Item 1A. Risk Factors

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

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

All securities sold by the
Corporation during the quarter ended September 30, 2007 were registered under the
Securities Act.

The following table shows certain
information relating to purchases of common stock for the three-months ended September 30,
2007:

|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
|-------------- | -------------------------------- | ---------------------------- | ------------------------------------------------------------------------ | ----------------------------------------------------------
|               |                                  |                              |                                                                          |                                                           
|July 2007      |                                  |                              |                                                                          | -                                                         
|August 2007    |                                  |                              |                                                                          | -                                                         
|September 2007 |                                  |                              |                                                                          | -                                                         
|               |                                  |                              |                                                                          |                                                           
|Total          |                                  |                              |                                                                          | -                                                         
|               |                                  |                              |                                                                          |                                                           

On August 17, 2006, the
Corporations Board of Directors authorized a share repurchase program. The
repurchase program authorized the repurchase of up to 100,000 shares of the
Corporations common stock and expired August 17, 2007. The Corporation repurchased
49,700 shares under this program.

On May 17, 2007, the
Corporations Board of Directors authorized an additional repurchase plan. This
repurchase plan program authorizes the repurchase of up to 100,000 additional 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.

# 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 September 30, 2007 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: November 9, 2007

22