Bilbo Baggins

Small in stature but large in life, Bilbo Baggins is a hero in every sense of the word. From his hesitant, fearful personality at the beginning of The Hobbit by J.R.R. Tolkein, Bilbo transforms into a confident, fearless warrior with strong moral convictions of right and wrong by the final chapters. As we turn the pages of the book we experience this development of character, discovering Bilbo's layers as the plot develops.
One of the first instances in which Bilbo begins his transformation is when he confronts the trolls at their fire. He doesn't panic even when he is captured. He keeps his wits about him and manages to remain out of the trolls' cook pot. As the dwarves are captured, Bilbo doesn't make his own escape to save himself. Though Gandalf must rescue them all, Bilbo doesn't save his own skin and desert the dwarves. It is interesting to note that he demonstrated bravery at this point even though he did not yet possess the ring of power, nor the elven blade, Sting.
Later in the story we see Bilbo's confidence grow. He blossoms into a full blown hero when he rescues the dwarves from the spiders in Mirkwood Forest. He also demonstrates his ability to solve problems in logical ways when he rescues the dwarves from the Elves in the forest by putting them in barrels to float their way to freedom.
When the dwarves and Bilbo finally reach their destination and come to the dragon's lair in the Lonely Mountain, it is Bilbo who is brave enough to confront Smaug and steal from the dragon as he sleeps. Later he does the right thing, and gives the Arkenstone to Bard and confesses to Thorin that he has done so.
All in all Bilbo demonstrates actions that place him in the category of hero. He risks his own life to complete tasks that are necessary and expected of him even though he is afraid, he uses his head and doesn't panic when he must act, and he displays the characteristics of a morally minded individual.