SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For transition period from ____________ to ______________
Commission file number 005-57237
FIRST OTTAWA BANCSHARES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction
of incorporation or organization)
36-4331185
(I.R.S. Employer Identification No.)
701-705 LASALLE STREET
OTTAWA, ILLINOIS
(Address of principal executive offices)
61350
(ZIP Code)
(815) 434-0044
(Registrant's telephone number,
including area code)
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 the number of shares outstanding of each of the Registrant's classes of
common stock as of the latest practicable date: As of October 31, 2000 the
Registrant had outstanding 662,281 shares of common stock, $1.00 par value per
share.
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FIRST OTTAWA BANCSHARES, INC.
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<TABLE>
<CAPTION>
Form 10-Q Quarterly Report
Table of Contents
PART I
<S> <C>
Item 1. Condensed Consolidated Financial Statements 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk 14
PART II
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Item 7. Signatures 16
</TABLE>
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2
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FIRST OTTAWA BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
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<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
--------- ---------
<S> <C> <C>
ASSETS
Cash and due from banks ................................ $ 5,527 $ 13,243
Federal funds sold ..................................... 7,700 --
--------- ---------
Total cash and cash equivalents ................... 13,227 13,243
Securities available-for-sale .......................... 87,277 89,983
Loans held for sale .................................... 458 1,738
Loans, less allowance for loan losses of $1,132
and $1,059 ............................................ 119,582 126,647
Bank premises and equipment, net ....................... 2,509 2,494
Interest receivable and other assets ................... 7,398 6,385
--------- ---------
Total assets ...................................... $ 230,451 $ 240,490
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Demand - non-interest-bearing ................. $ 18,971 $ 17,917
NOW accounts .................................. 27,712 30,338
Money market accounts ......................... 9,161 10,530
Savings ....................................... 16,689 18,702
Time, $100,000 and over ....................... 25,984 23,073
Other time .................................... 79,566 83,329
--------- ---------
Total deposits ........................... 178,083 183,889
Federal funds purchased ........................... 470 7,600
Securities sold under agreements to repurchase .... 26,772 18,665
Interest payable and other liabilities ............ 2,983 4,353
--------- ---------
Total liabilities ............................. 208,308 214,507
Shareholders' equity
Common stock - $1 par value, 750,000 shares
authorized and issued ........................... 750 750
Additional paid-in capital ........................ 4,000 4,000
Retained earnings ................................. 23,853 22,947
Treasury stock, at cost, 87,719 shares ............ (5,000) --
Accumulated other comprehensive loss .............. (1,460) (1,714)
--------- ---------
Total shareholders' equity .................... 22,143 25,983
--------- ---------
Total liabilities and shareholders' equity $ 230,451 $ 240,490
========= =========
</TABLE>
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See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
FIRST OTTAWA BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share data)
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<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
----- ----- ----- -----
<S> <C> <C> <C> <C>
Interest income
Loans (including fee income) $ 2,619 $ 2,617 $ 7,888 $ 7,607
Securities
Taxable 920 1,050 2,786 3,333
Exempt from federal income tax 418 459 1,291 1,417
Federal funds sold 31 4 31 5
Total interest income ---------- ---------- ---------- ----------
3,988 4,130 11,996 12,362
Interest expense
NOW account deposits 134 174 420 511
Money market deposit accounts 89 102 295 297
Savings deposits 91 124 285 374
Time deposits 1,509 1,464 4,265 4,487
Repurchase agreements 351 132 796 328
Federal funds purchased 27 74 275 185
---------- ---------- ---------- ----------
Total interest expense 2,201 2,070 6,336 6,182
---------- ---------- ---------- ----------
NET INTEREST INCOME 1,787 2,060 5,660 6,180
Provision for loan losses 90 90 270 270
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,697 1,970 5,390 5,910
Noninterest income
Service charges on deposit accounts 182 162 531 418
Trust and farm management fee income 90 108 270 324
Other fees and commissions 159 107 404 449
Securities gains (losses), net 14 (48) 11 (47)
---------- ----------- ---------- -----------
Total noninterest income 445 329 1,216 1,144
Noninterest expenses
Salaries and employee benefits 889 822 2,629 2,342
Occupancy and equipment expense 189 259 604 716
Data processing expense 127 115 386 357
Supplies 40 49 107 164
Advertising and promotions 41 58 127 167
Professional fees 65 127 191 225
Other expenses 265 224 795 567
---------- ---------- ---------- ----------
Total noninterest expenses 1,616 1,654 4,839 4,538
---------- ---------- ---------- ----------
Income before income taxes 526 645 1,767 2,516
Provision for income taxes 45 84 199 418
---------- ---------- ---------- ----------
NET INCOME $ 481 $ 561 $ 1,568 $ 2,098
========== ========== ========== ==========
Comprehensive income (loss) $ 1,416 $ 211 $ 1,822 $ (396)
========== ========== ========== ===========
Earnings per share $ 0.73 $ 0.75 $ 2.34 $ 2.80
=========== ========== ========== ===========
Average shares outstanding 662,281 750,000 668,708 750,000
</TABLE>
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See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
FIRST OTTAWA BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Nine Months ended September 30, 2000 and 1999
(In thousands, except per share data)
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<TABLE>
<CAPTION>
Accumulated Total
Additional Other Share-
Common Paid-In Retained Treasury Comprehensive holders'
Stock Capital Earnings Stock Income (Loss) Equity
----- ------- -------- ----- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1999 $ 750 $ 4,000 $ 23,043 $ - $ 1,466 $ 29,259
Net income - - 2,098 - - 2,098
Unrealized net loss on securities
available-for-sale, net of
reclassification and tax
effects - - - - (2,494) (2,494)
---------
Comprehensive loss - - - - - (396)
Cash dividends declared
($1 per share) - - (750) - - (750)
--------- ---------- ----------- --------- --------- ----------
Balance at September 30, 1999 $ 750 $ 4,000 $ 24,391 $ - $ (1,028) $ 28,113
========= ========== ========== ========= ========== =========
Balance at January 1, 2000 $ 750 $ 4,000 $ 22,947 $ - $ (1,714) $ 25,983
Net income - - 1,568 - - 1,568
Unrealized net gain on securities
available-for-sale, net of
reclassifications and tax
effects - - - - 254 254
---------
Comprehensive income - - - - - 1,822
Cash dividends declared
($1 per share) - - (662) - - (662)
Purchase of 87,719
treasury shares - - - (5,000) - (5,000)
--------- ---------- ---------- --------- --------- ---------
Balance at September 30, 2000 $ 750 $ 4,000 $ 23,853 $ (5,000) $ (1,460) $ 22,143
========= ========== ========== ========= ========= =========
</TABLE>
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See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
FIRST OTTAWA BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months ended September 30, 2000 and 1999
(In thousands)
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<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,568 $ 2,098
Adjustments to reconcile net income to net cash
from operating activities
Change in deferred loan fees (1) -
Provision for loan losses 270 270
Depreciation and amortization 220 253
Premium amortization on securities, net 36 54
Net real estate loans originated for sale 1,263 (1,209)
Loss on loan sales 18 -
Loss (gain) on sale of securities available-for-sale (11) 47
Loss on sale of other real estate owned 18 -
Change in interest receivable and other assets (1,038) (454)
Change in interest payable and other liabilities 132 (386)
----------- -----------
Net cash from operating activities 2,475 673
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities available-for-sale 2,452 26,353
Proceeds from maturities of securities 1,640 16,754
Purchases of securities available-for-sale (1,027) (25,231)
Net change in loans receivable 6,538 (7,352)
Proceeds from sale of other real estate owned 50 -
Proceeds from sale of bank premises 15 -
Property and equipment expenditures (168) (294)
----------- -----------
Net cash from investing activities 9,500 10,230
CASH FLOWS FROM FINANCING ACTIVITIES
Change in deposits (5,806) (4,552)
Change in federal funds purchased (7,130) (4,050)
Change in securities sold under agreements
to repurchase 8,107 123
Purchase of treasury stock (5,000) -
Dividends paid (2,162) (2,250)
----------- -----------
Net cash from financing activities (11,991) (10,729)
----------- ------------
Change in cash and cash equivalents (16) 174
Cash and cash equivalents at beginning of period 13,243 7,601
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 13,227 $ 7,775
=========== ===========
</TABLE>
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See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
FIRST OTTAWA BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table dollars in thousands)
September 30, 2000 and 1999
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NOTE 1 - BASIS OF PRESENTATION
The accounting policies followed in the preparation of the interim condensed
consolidated financial statements are consistent with those used in the
preparation of annual consolidated financial statements. The interim condensed
consolidated financial statements reflect all normal and recurring adjustments,
which are necessary, in the opinion of management, for a fair statement of
results for the interim periods presented. Results for the nine months ended
September 30, 2000 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2000.
First Ottawa Bancshares, Inc. ("Company") was organized during 1999 and on
October 1, 1999 exchanged 100% of its common stock for 100% of the First
National Bank of Ottawa's ("Bank") common stock. This exchange was accounted for
as an internal reorganization. Accordingly, all information reflects the
internal reorganization as if it had occurred as of the beginning of the
earliest reporting period.
NOTE 2 - TREASURY STOCK
On December 6, 1999, the Company commenced a tender offer ("the Offer") to
acquire up to 87,719 common shares at $57 per share. The Offer expired on
January 20, 2000 and the Company purchased 86,373 shares, representing
approximately 11.51% of its outstanding common shares, for an aggregate purchase
price of $4,923,261.
On March 6, 2000, the Company commenced a tender offer (the "Odd-lot Offer") to
acquire up to 1,346 common shares at $57 per share from stockholders who owned
fewer than 100 shares. The Odd-lot Offer expired on March 30, 2000 and the
Company purchased 1,346 shares, representing .20% of its outstanding common
shares for an aggregate purchase price of $76,722.
NOTE 3 - CAPITAL RATIOS
At the end of the period the Company and Bank's capital ratios were the same and
were:
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000 DECEMBER 31, 1999
------------------ -----------------
AMOUNT RATIO AMOUNT RATIO
------ ----- ------ -----
<S> <C> <C> <C> <C>
Total capital (to risk-weighted assets) $ 24,735 18.7% $ 28,756 20.8%
Tier I capital (to risk-weighted assets) 23,424 17.7 27,697 20.1
Tier I capital (to average assets) 23,424 10.5 27,697 11.7
</TABLE>
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(Continued)
7
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NOTE 3 - CAPITAL RATIOS (Continued)
At September 30, 2000, the Company and the Bank were categorized as well
capitalized and management is not aware of any conditions or events since the
most recent notification that would change the Company's or Bank's categories.
NOTE 4 - NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 133 on derivatives will, in
2001, require all derivatives to be recorded at fair value in the balance sheet,
with changes in fair value reported in income. If derivatives are documented and
effective as hedges, the change in the derivative fair value will be offset by
an equal change in the fair value of the hedged item. Under the new standard,
securities held-to-maturity can no longer be hedged, except for changes in the
issuer's creditworthiness. Therefore, upon adoption of the Statement, companies
will have another one-time window of opportunity to reclassify held-to-maturity
securities to either trading or available-for-sale, provided certain criteria
are met. The Statement may be adopted early, at the start of a calendar quarter.
The Company does not plan to adopt the Statement early and adoption is not
expected to have a material impact since the Company does not have significant
derivative instruments or hedging activity and all securities are classified as
available-for-sale.
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8
<PAGE>
FIRST OTTAWA BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis is intended as a review of significant
factors affecting the financial condition and results of operations of the
Company for the periods indicated. The discussion should be read in conjunction
with the Condensed Consolidated Financial Statements and Notes herein as well as
the consolidated financial statements and notes included in the Company's 1999
Annual Report on Form 10-K. In addition to historical information, the following
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ significantly from
those anticipated in these forward-looking statements as a result of certain
factors discussed elsewhere in this report.
CONSOLIDATED FINANCIAL CONDITION
Total assets at September 30, 2000 were $230.5 million compared to $240.5
million at December 31, 1999, a decrease of $10.0 million, or 4.2%. This
decrease was the result of reductions in cash and due from banks, securities
available for sale, loans held for sale and loans. Cash and due from banks was
reduced $7.7 million to remove the extra liquidity that had been built up as a
contingency against any year 2000 problems. This cash was reinvested in federal
funds sold at September 30, 2000. In addition, approximately $5.0 million was
used to repurchase shares of the Company's common stock. Loans held for sale was
reduced by $1.3 million as new loans originated are being sold sooner in the
secondary market. Additionally, loans decreased $7.1 million as loan repayments
exceeded new loans originated during the three-quarters of 2000. The majority of
this decrease, or $4.9 million, was the result of tightening underwriting
standards on new indirect automobile loans.
Total equity was $22.1 million at September 30, 2000 compared to $26.0 million
at December 31, 1999. This decrease was the result of the stock repurchases
completed by the Company in January 2000 and March 2000. The Company repurchased
87,719 shares of common stock at $57 per share.
CONSOLIDATED RESULTS OF OPERATIONS
Net income for the third quarter of 2000 was $481,000, or 73 cents per share, a
14.3% decrease compared to $561,000, or 75 cents per share, in the third quarter
of 1999. The decrease in net income for the quarter was primarily a result of a
decrease in net interest income of $273,000, partially offset by an increase of
$116,000 in noninterest income, a decrease in noninterest expense of $38,000 and
a reduction in income tax expense of $39,000.
During the nine months ended September 30, 2000, net income was $1,568,000, or
$2.34 per share, compared to $2,098,000, or $2.80 per share during the first
nine months of 1999. This 25.3% decrease in net income for the nine month period
is primarily due to a $520,000 decrease in net interest income, or 8.4%, and an
increase in noninterest expense of $301,000, or 6.6%, partially offset by a
decrease in income tax expense of $219,000 or 52.4%. The annualized return
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(Continued)
9
<PAGE>
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on average assets was 0.92% in 2000 compared to 1.17% in 1999. The return on
average equity decreased to 9.65% in 2000 from 9.71% in 1999.
NET INTEREST INCOME
Net interest income was $1,787,000 and $2,060,000 during the three months ended
September 30, 2000 and 1999. The Company's net interest margin was 3.72% for the
three months ended September 30, 2000, and 4.06% a year earlier. This decrease
was primarily due to three factors. First, the mix of interest bearing
liabilities shifted toward higher cost repurchase agreements. Second, as the
overall levels of interest rates increased our margin has declined because our
interest bearing liabilities repriced at a quicker pace than our interest
earning assets. Lastly, the ratio of average interest bearing liabilities to
average earning assets increased as the Company repurchased $5,000,000 of common
stock. The yield on earning assets increased to 7.80% for the quarter ended
September 30, 2000 compared to 7.70% for the year earlier period. The cost of
interest bearing liabilities increased to 4.80% from 4.38% for the same period.
Net interest income for the nine months ended September 30, 2000 and 1999 was
$5,660,000 and $6,180,000, respectively. The Company's net interest margin was
3.91%, for the nine months ended September 30, 2000 and 4.11% a year earlier.
PROVISION FOR LOAN LOSSES
The provision for loan losses remained unchanged at $90,000 in the third quarter
of 2000 and 1999. As of September 30, 2000, the allowance for loan losses
totaled $1.1 million, or .94% of total loans which is an increase from .83% as
of December 31, 1999. Nonaccrual loans increased from $397,000 at December 31,
1999 to $585,000 at September 30, 2000. Nonperforming loans, including
nonaccrual loans, decreased $48,000 to $1,892,000 over the same period. The
amounts of the provision and allowance for loan losses are influenced by current
economic conditions, actual loss experience, industry trends and other factors,
including real estate values in the Company's market area and management's
assessment of current collection risks within the loan portfolio.
NONINTEREST INCOME
The Company's noninterest income totaled $445,000 for the three months ended
September 30, 2000 compared to $329,000 for the same period in 1999, an increase
of $116,000. Service charges on deposit accounts increased $20,000, or 12.3%, to
$182,000. Trust and farm management fee income decreased $18,000 due to a
reduction in farm acreage managed and fewer estates administered. Other fees and
commissions increased $52,000 to $159,000, largely due to increases in mortgage
banking income and late fees on loans.
For the nine months ended September 30, 2000, noninterest income increased
$72,000 to $1,144,000. Service charges on deposit accounts increased $113,000,
or 27.0%, trust and farm management fee income decreased $54,000 for the reasons
previously discussed. The $45,000 decrease in other fees and commissions was
primarily the result of lower mortgage banking income during the first six
months of 2000.
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(Continued)
10
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NONINTEREST EXPENSE
The Company's noninterest expenses decreased to $1,616,000 for the three months
ended September 30, 2000 from $1,654,000 in 1999. Salaries and benefits
increased $67,000, or 8.2%, to $889,000. Decreases in occupancy and equipment
expense of $70,000, supplies expense of $9,000 and $17,000 in advertising and
promotions partially offset these increases as management implemented cost
control procedures. Other expenses increased $41,000 to $265,000. The majority
of the increase in other expenses resulted from a $11,000 increase in expenses
related to the disposition of repossessed property, and a $21,000 increase in
the accrual for directors' fees. Professional fees were $62,000 higher in 1999
due to the formation of the Company and consulting fees for strategic planning,
Year 2000 and investment strategies.
For the nine months ended September 30, 2000, noninterest expenses increased
$301,000 to $4,839,000 when compared to the year earlier period. Salaries and
benefits increased $287,000, or 12.3%, to $2,629,000. Occupancy and equipment
expense, supplies expense and advertising and promotion expense declined
$209,000 in total due to implementation of cost controls. Professional fees were
higher in 1999 due to the formation of the Company and consulting fees for
strategic planning, Year 2000 and investment strategies. Other expenses
increased $228,000 during the three-quarters of 2000. The majority of this
increase resulted from a $26,000 increase in expenses related to other real
estate owned, a $64,000 increase in expenses related to the disposition of
repossessed property, a $30,000 increase in the accrual for directors' fees, and
a $10,000 increase in cash over and short and charged off checks.
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(Continued)
11
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LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are deposits and proceeds from principal
and interest payments on loans and securities. While maturities and scheduled
amortization of loans and securities are predictable sources of funds, deposit
flows and mortgage prepayments are greatly influenced by general interest rates,
economic conditions, and competition. The Company generally manages the pricing
of its deposits to be competitive and to increase core deposit relationships.
Liquidity management is both a daily and long-term responsibility of management.
The Company adjusts its investments in liquid assets based upon management's
assessment of (i) expected loan demand, (ii) expected deposit flows, (iii)
yields available on interest-earning deposits and securities, and (iv) the
objectives of its asset/liability management program. Excess liquid assets are
invested generally in interest-earning overnight deposits and short- and
intermediate-term U.S. government and agency obligations.
The Company's most liquid assets are cash and short-term investments. The levels
of these assets are dependent on the Company's operating, financing, lending,
and investing activities during any given year. At September 30, 2000, cash and
short-term investments totaled $13.2 million. The Company has other sources of
liquidity if a need for additional funds arises, including securities maturing
within one year and the repayment of loans. The Company may also utilize the
sale of securities available-for-sale, federal funds lines of credit from
correspondent banks and advances from the Federal Home Loan Bank.
During the first quarter 2000, the Company repurchased 87,719 shares, or 11.7%
of its outstanding shares, at $57 per share.
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and related data presented herein have been prepared in
accordance with generally accepted accounting principles, which require the
measurement of financial position and operating results in terms of historical
dollars without considering changes in the relative purchasing power of money
over time due to inflation. The primary impact of inflation on the operations of
the Company is reflected in increased operating costs. Unlike most industrial
companies, virtually all of the assets and liabilities of a financial
institution are monetary in nature. As a result, interest rates, generally, have
a more significant impact on a financial institution's performance than does
inflation. Interest rates do not necessarily move in the same direction or to
the same extent as the prices of goods and services.
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(Continued)
12
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SAFE HARBOR STATEMENT
This report contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995 and is including this statement for purposes of these safe harbor
provisions. Forward-looking statements, which are based on certain assumptions
and describe future plans, strategies, and expectations of the Company, are
generally identifiable by use of the words "believe," "expect," "intend,"
"anticipate," "estimate," "project," or similar expressions. The Company's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain. Factors which could have a material adverse effect on the
operations and future prospects of the Company and the Bank include, but are not
limited to, changes in interest rates; general economic conditions; the
legislative/regulatory situation; monetary and fiscal policies of the U.S.
Government, including policies of the U.S. Treasury and the Federal Reserve
Board; the quality or composition of the loan or securities portfolios; demand
for loan products; deposit flows; competition; demand for financial services in
the Company's market area; and accounting principles, policies, and guidelines.
These risks and uncertainties should be considered in evaluating forward-looking
statements, and undue reliance should not be placed on such statements. Further
information concerning the Company and its business, including additional
factors that could materially affect the Company's financial results, is
included in the Company's filings with the Securities and Exchange Commission.
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(Continued)
13
<PAGE>
FIRST OTTAWA BANCSHARES, INC. AND SUBSIDIARY
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's overall interest rate sensitivity is demonstrated by net income
analysis and "Gap" analysis. Net income analysis measures the change in net
income in the event of hypothetical changes in interest rates. This analysis
assesses the risk of change in net income in the event of sudden and sustained
2.0% increases and decreases in market interest rates. The tables below present
the Company's projected changes in annualized net income for the various rate
shock levels at September 30, 2000 and September 30, 1999.
<TABLE>
<CAPTION>
---------------------------------2000 NET INCOME---------------------------
AMOUNT CHANGE CHANGE
------ ------ ------
(Dollars in Thousands)
<S> <C> <C> <C>
+200 bp $ 1,908 $ (94) (4.7)%
Base 2,002 - -
-200 bp 2,096 94 4.7%
</TABLE>
<TABLE>
<CAPTION>
---------------------------------1999 NET INCOME---------------------------
AMOUNT CHANGE CHANGE
------ ------ ------
(Dollars in Thousands)
<S> <C> <C> <C>
+200 bp $ 2,755 $ (63) (2.2)%
Base 2,818 - -
-200 bp 2,865 47 1.7%
</TABLE>
As shown above, at September 30, 2000, the effect of an immediate 200 basis
point increase in interest rates would decrease the Company's 2000 net income by
4.7% or approximately $94,000. The effect of an immediate 200 basis point
decrease in rates would increase the Company's 2000 net income by 4.7% or
approximately $94,000. Overall net income sensitivity has increased from
September 30, 1999 to September 30, 2000.
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14
<PAGE>
FIRST OTTAWA BANCSHARES, INC. AND SUBSIDIARY
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PART II
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the
Company or its subsidiary are a party other than ordinary routine
litigation incidental to their respective businesses.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
3(ii). By-laws of First Ottawa Bancshares, Inc.
27. Financial Data Schedule
Reports on Form 8-K
None
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15
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST OTTAWA BANCSHARES, INC.
(Registrant)
/s/ Joachim J. Brown
-----------------------------------------------------
Joachim J. Brown
President (Principal Executive Officer)
/s/ Donald J. Harris
-----------------------------------------------------
Donald J. Harris
Executive Vice President, Cashier, and Trust Officer
(Principal Financial Officer)
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16
