<PAGE>
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 June 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 36-4331185
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
701-705 LASALLE STREET 61350
OTTAWA, ILLINOIS (ZIP Code)
(Address of principal executive offices)
(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 July 31, 2000 the
Registrant had outstanding 662,281 shares of common stock, $1.00 par value per
share.
<PAGE>
FIRST OTTAWA BANCSHARES, INC.
--------------------------------------------------------------------------------
Form 10-Q Quarterly Report
Table of Contents
PART I
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 16
Item 6. Exhibits and Reports on Form 8-K 16
Item 7. Signatures 17
--------------------------------------------------------------------------------
2.
<PAGE>
FIRST OTTAWA BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- --------
<S> <C> <C>
ASSETS
Cash and due from banks $ 6,266 $ 13,243
Securities available-for-sale 87,376 89,983
Loans held for sale 333 1,738
Loans, less allowance for loan losses of $1,083
and $1,059 121,724 126,647
Bank premises and equipment, net 2,550 2,494
Interest receivable and other assets 6,626 6,385
-------- --------
Total assets $224,875 $240,490
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Demand - non-interest-bearing $ 18,537 $ 17,917
NOW accounts 27,505 30,338
Money market accounts 10,930 10,530
Savings 18,353 18,702
Time, $100,000 and over 25,934 23,073
Other time 77,157 83,329
-------- --------
Total deposits 178,416 183,889
Federal funds purchased 7,420 7,600
Securities sold under agreements to repurchase 15,085 18,665
Interest payable and other liabilities 3,227 4,353
-------- --------
Total liabilities 204,148 214,507
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 23,372 22,947
Treasury stock, at cost, 87,719 shares (5,000) -
Accumulated other comprehensive loss (2,395) (1,714)
-------- --------
Total shareholders' equity 20,727 25,983
-------- --------
Total liabilities and shareholders' equity $224,875 $240,490
======== ========
</TABLE>
--------------------------------------------------------------------------------
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)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income
Loans (including fee income) $ 2,623 $ 2,506 $ 5,270 $ 4,990
Securities
Taxable 935 1,148 1,866 2,283
Exempt from federal income tax 437 472 873 959
Federal funds sold - 1 - 1
-------- -------- -------- --------
Total interest income 3,995 4,127 8,009 8,233
Interest expense
NOW account deposits 135 170 286 337
Money market deposit accounts 108 104 206 195
Savings deposits 92 126 194 250
Time deposits 1,379 1,502 2,756 3,023
Repurchase agreements 216 101 445 196
Federal funds purchased 156 56 248 111
-------- -------- -------- --------
Total interest expense 2,086 2,059 4,135 4,112
-------- -------- -------- --------
NET INTEREST INCOME 1,909 2,068 3,874 4,121
Provision for loan losses 90 90 180 180
-------- -------- -------- --------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,819 1,978 3,694 3,941
Noninterest income
Service charges on deposit accounts 180 129 349 256
Trust and farm management fee income 90 108 180 216
Other fees and commissions 151 245 246 342
Securities gains (losses), net (4) 1 (4) 1
-------- -------- -------- --------
Total noninterest income 417 483 771 815
Noninterest expenses
Salaries and employee benefits 904 738 1,739 1,520
Occupancy and equipment expense 191 226 415 457
Data processing expense 125 125 259 242
Supplies 35 68 68 116
Advertising and promotions 43 63 85 108
Professional fees 60 59 126 98
Other expenses 285 162 531 343
-------- -------- -------- --------
Total noninterest expenses 1,643 1,441 3,224 2,885
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 593 1,020 1,241 1,871
Provision for income taxes 49 166 154 334
-------- -------- -------- --------
NET INCOME $ 544 $ 854 $ 1,087 $ 1,536
======== ======== ======== ========
Comprehensive income (loss) $ 294 $ (654) $ 406 $ (608)
======== ======== ======== ========
Earnings per share $ 0.82 $ 1.14 $ 1.62 $ 2.05
======== ======== ======== ========
Average shares outstanding 662,281 750,000 671,956 750,000
</TABLE>
--------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.
4.
<PAGE>
FIRST OTTAWA BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Six Months ended June 30, 2000 and 1999
(In thousands, except per share data)
--------------------------------------------------------------------------------
<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 - - 1,536 - - 1,536
Unrealized net loss on securities
available-for-sale, net of reclassi-
fication and tax effects - - - - (2,144) (2,144)
-------
Comprehensive loss - - - - - (608)
Cash dividends declared
($1 per share) - - (750) - - (750)
---- ------ ------- ------- ------- -------
Balance at June 30, 1999 $750 $4,000 $23,829 $ - $ (678) $27,901
==== ====== ======= ======= ======= =======
Balance at January 1, 2000 $750 $4,000 $22,947 $ - $(1,714) $25,983
Net income - - 1,087 - - 1,087
Unrealized net loss on securities
available-for-sale, net of reclassi-
fications and tax effects - - - - (681) (681)
-------
Comprehensive income - - - - - 406
Cash dividends declared
($1 per share) - - (662) - - (662)
Purchase of 87,719
treasury shares - - - (5,000) - (5,000)
---- ------ ------- ------- ------- -------
Balance at June 30, 2000 $750 $4,000 $23,372 $(5,000) $(2,395) $20,727
==== ====== ======= ======= ======= =======
</TABLE>
--------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.
5.
<PAGE>
FIRST OTTAWA BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months ended June 30, 2000 and 1999
(In thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,087 $ 1,536
Adjustments to reconcile net income to net cash
from operating activities
Change in deferred loan fees 1 2
Provision for loan losses 180 180
Depreciation and amortization 150 151
Premium amortization on securities, net 34 39
Net real estate loans originated for sale 1,387 (1,017)
Loss on loan sales 13 -
Loss (gain) on sale of securities available-for-sale 4 (1)
Loss on sale of other real estate owned 18 -
Change in interest receivable and other assets 168 (103)
Change in interest payable and other liabilities (275) (226)
-------- --------
Net cash from operating activities 2,767 561
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of securities available-for-sale 2,041 14,338
Proceeds from maturities of securities 505 13,782
Purchases of securities available-for-sale (1,009) (18,722)
Net change in loans receivable 4,530 (653)
Proceeds from sale of other real estate owned 50 -
Proceeds from sale of bank premises 15 -
Property and equipment expenditures (143) (266)
-------- --------
Net cash from investing activities 5,989 8,479
CASH FLOWS FROM FINANCING ACTIVITIES
Change in deposits (5,473) 1,961
Change in federal funds purchased (180) (450)
Change in securities sold under agreements
to repurchase (3,580) (5,064)
Purchase of treasury stock (5,000) -
Dividends paid (1,500) (1,500)
-------- --------
Net cash from financing activities (15,733) (5,053)
-------- --------
Change in cash and due from banks (6,977) 3,987
Cash and due from banks at beginning of period 13,243 7,601
-------- --------
CASH AND DUE FROM BANKS AT END OF PERIOD $ 6,266 $ 11,588
======== ========
</TABLE>
--------------------------------------------------------------------------------
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)
June 30, 2000 and 1999
--------------------------------------------------------------------------------
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 six months ended June
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 own
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>
June 30, 2000 December 31, 1999
------------------- -------------------
Amount Ratio Amount Ratio
------ ----- ------ -----
<S> <C> <C> <C> <C>
Total capital (to risk-weighted assets) $24,022 18.2% $28,756 20.8%
Tier I capital (to risk-weighted assets) 22,939 17.3 27,697 20.1
Tier I capital (to average assets) 22,939 10.1 27,697 11.7
</TABLE>
--------------------------------------------------------------------------------
(Continued)
7.
<PAGE>
FIRST OTTAWA BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Table dollars in thousands)
June 30, 2000 and 1999
--------------------------------------------------------------------------------
NOTE 3 - CAPITAL RATIOS (Continued)
At June 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.
--------------------------------------------------------------------------------
8.
<PAGE>
FIRST OTTAWA BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------
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. 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 June 30, 2000 were $224.9 million compared to $240.5 million at
December 31, 1999, a decrease of $15.6 million, or 6.5%. 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 $7.0 million
to remove the extra liquidity that had been built up as a contingency against
any year 2000 problems. In addition, approximately $5.0 million was used to
repurchase shares of the Company's common stock. Loans held for sale was reduced
by $1.4 million as new loans originated are being sold sooner in the secondary
market. Additionally, loans decreased $4.9 million as loan repayments exceeded
new loan demand during the first half of 2000.
Total equity was $20.7 million at June 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. Additionally, a $681,000
increase in unrealized loss on securities available for sale and dividends
declared of $662,000 were largely offset by net income of $1,087,000.
CONSOLIDATED RESULTS OF OPERATIONS
Net income for the second quarter of 2000 was $544,000, or 82 cents per share, a
36.3% decrease compared to $854,000, or $1.14 per share, in the second quarter
of 1999. The decrease in net income for the quarter was primarily a result of a
decrease in net interest income of $159,000, an increase of $166,000 in salaries
and benefits expense and a reduction in income tax expense of $117,000.
During the six months ended June 30, 2000, net income was $1,087,000, or $1.62
per share, compared to $1,536,000, or $2.05 per share during the first six
months of 1999. This 29.2% decrease in net income for the six month period is
primarily due to a $247,000 decrease in net interest income, or 6.0%, and an
increase in noninterest expense of $339,000, or 11.8%, partially offset by a
decrease in income tax expense of $180,000 or 53.9%. The annualized return on
average assets was 0.95% in 2000 compared to 1.28% in 1999. The return on
average equity decreased to 9.99% in 2000 from 10.57% in 1999.
--------------------------------------------------------------------------------
(Continued)
9.
<PAGE>
FIRST OTTAWA BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------
NET INTEREST INCOME
Net interest income was $1,909,000 and $2,068,000 during the three months ended
June 30, 2000 and 1999. The Company's net interest margin was 3.96% for the
three months ended June 30, 2000, and 4.08% a year earlier. The decrease was
largely due to an increase in the ratio of average interest bearing liabilities
to average interest earning assets as the Company purchased federal funds and
then repurchased $5,000,000 of common stock. This increase in the ratio of
average interest bearing liabilities to interest earning assets was partially
offset by an increase in the yield on earning assets to 7.82% for the three
months ended June 30, 2000 from 7.70% in the year earlier period.
Net interest income for the six months ended June 30, 2000 and 1999 was
$3,874000 and $4,121,000, respectively. The Company's net interest margin was
3.99% for the six months ended June 30, 2000 and 4.12% a year earlier.
PROVISION FOR LOAN LOSSES
The provision for loan losses remained unchanged at $90,000 in the second
quarter of 2000 and 1999. As of June 30, 2000, the allowance for loan losses
totaled $1.1 million, or .88% of total loans which is an increase from .82% as
of December 31, 1999. Nonaccrual loans increased from $397,000 at December 31,
1999 to $492,000 at June 30, 2000. Nonperforming loans, including nonaccrual
loans, decreased $490,000 to $1,450,000 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 $417,000 for the three months ended
June 30, 2000 compared to $483,000 for the same period in 1999, a decrease of
$66,000. Service charges on deposit accounts increased $51,000, or 39.5%, to
$180,000. Changes in the way overdraft charges are assessed accounted for
$47,000 of this increase. 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 declined $94,000 to $151,000, largely due to a reduction in
mortgage banking income.
For the six months ended June 30, 2000, noninterest income decreased $44,000 to
$771,000. Service charges on deposit accounts increased $93,000, or 36.3%, trust
and farm management fee income decreased $36,000 and other fees and commission
declined $96,000 for the reasons previously discussed.
--------------------------------------------------------------------------------
(Continued)
10.
<PAGE>
FIRST OTTAWA BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------
NONINTEREST EXPENSE
The Company's noninterest expenses increased to $1,643,000 for the three months
ended June 30, 2000 from $1,441,000 in 1999. Salaries and benefits increased
$166,000, or 22.5%, to $904,000. Decreases in occupancy and equipment expense of
$35,000, supplies expense of $33,000 and $20,000 in advertising and promotions
partially offset these increases as management implemented cost control
procedures. Other expenses increased $123,000 to $285,000. The majority of the
increase in other expenses resulted from a $62,000 increase in expenses related
to the disposition of repossessed property, and a $20,000 increase in the
accrual for directors' fees.
For the six months ended June 30, 2000, noninterest expenses increased $339,000
to $3,224,000 when compared to the year earlier period. Salaries and benefits
increased $219,000, or 14.4%, to $1,739,000. Occupancy and equipment expense,
supplies expense and advertising and promotion expense declined $113,000 in
total due to implementation of cost controls. The increase in professional fees
is due to a special loan review project that was outsourced and expenditures
related to increased disclosure requirements as the Company transitioned from
filing under the small business regulations of the Securities and Exchange
Commission to the full disclosure regulations. Other expenses increased $188,000
during the first half 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.
--------------------------------------------------------------------------------
(Continued)
11.
<PAGE>
FIRST OTTAWA BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------
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 June 30, 2000, cash and
short-term investments totaled $6.3 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.
--------------------------------------------------------------------------------
(Continued)
12.
<PAGE>
FIRST OTTAWA BANCSHARES, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
(Continued)
13.
<PAGE>
FIRST OTTAWA BANCSHARES, INC. AND SUBSIDIARY
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
--------------------------------------------------------------------------------
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 June 30, 2000 and June 30, 1999.
<TABLE>
<CAPTION>
----------------2000 Net Income---------------
---------------
Amount Change Change
------ ------ ------
(Dollars in Thousands)
<S> <C> <C> <C>
+200 bp $1,884 $(216) (10.3)%
Base 2,100 - -
-200 bp 2,280 180 8.6%
<CAPTION>
----------------1999 Net Income---------------
---------------
Amount Change Change
------ ------ ------
(Dollars in Thousands)
<S> <C> <C> <C>
+200 bp $2,647 $(401) (13.2)%
Base 3,048 - -
-200 bp 3,392 344 11.3%
</TABLE>
As shown above, at June 30, 2000, the effect of an immediate 200 basis point
increase in interest rates would decrease the Company's net interest income by
10.3% or approximately $216,000. The effect of an immediate 200 basis point
decrease in rates would increase the Company's net interest income by 8.6% or
approximately $180,000. Overall net income sensitivity has decreased from June
30, 1999 to June 30, 2000.
--------------------------------------------------------------------------------
14.
<PAGE>
FIRST OTTAWA BANCSHARES, INC. AND SUBSIDIARY
--------------------------------------------------------------------------------
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
Election of Directors
At the Annual Meeting of Stockholders on May 17, 2000, Bradley J.
Armstrong, Joachim J. Brown, John L. Cantlin, Eugene, P.
Daugherity, Patty P. Godfrey, Thomas E. Haeberle, Donald J.
Harris, Howard E. Jameson, Erika S. Kuiper, Thomas P. Rooney, and
William J. Walsh were elected to serve as directors until the
2001 Annual Meeting of Stockholders. The voting for each director
was as follows:
<TABLE>
<CAPTION>
Votes for Votes Withheld
--------- --------------
<S> <C> <C>
Bradley J. Armstrong 468,879 27,790
Joachim J. Brown 468,879 27,790
John L. Cantlin 468,879 27,790
Eugene P. Daugherity 553,152 7,180
Patty P. Godfrey 459,765 35,270
Thomas E. Haeberle 468,768 27,890
Donald J. Harris 556,755 3,890
Howard E. Jameson 467,295 29,230
Erika S. Kuiper 552,283 7,761
Thomas P. Rooney 467,751 28,610
William J. Walsh 462,401 33,090
</TABLE>
--------------------------------------------------------------------------------
15.
<PAGE>
FIRST OTTAWA BANCSHARES, INC. AND SUBSIDIARY
--------------------------------------------------------------------------------
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
27. Financial Data Schedule
Reports on Form 8-K
None
--------------------------------------------------------------------------------
16.
<PAGE>
FIRST OTTAWA BANCSHARES, INC. AND SUBSIDIARY
--------------------------------------------------------------------------------
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.
Dated August 9, 2000
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)
--------------------------------------------------------------------------------
17.
