[FRONT COVER]

Ottawa Financial Corporation / AmeriBank


1999 Report to Shareholders

Profitability

Growth

Techniques

Values

Diversification

Citizenship

Leadership


[INSIDE FRONT COVER]

Growth Through Leadership

AmeriBank,  a  wholly-owned  subsidiary  of  Ottawa  Financial  Corporation,  is
committed to the concepts of leadership,  citizenship  and technology to achieve
growth.  By offering a broad line of financial  products and services in support
of community and business objectives,  AmeriBank  consistently delivers value to
our shareholders, customers, employees and the communities we serve.


Table of Contents


Financial Highlights, page 1

Letter To Our Shareholders, page 2

Financial Charts, page 17

Selected Consolidated Financial Information, page 18

Management's Discussion and Analysis of Financial Condition and
Results of Operations, page 20

Report of Independent Auditors, page 30

Consolidated Balance Sheets, page 31

Consolidated Statements of Income, page 32

Consolidated Statements of Changes in Shareholders' Equity, page 33

Consolidated Statements of Cash Flows, page 34

Consolidated Statements of Comprehensive Income, page 35

Notes to Consolidated Financial Statements, page 36

Quarterly Financial Information, page 55

Shareholder Information, page 56

Officers and Directors, Inside Back Cover

Branch Office and ATM Locations, Inside Back Cover


<PAGE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS

                                                                              1999             1998          % Change
----------------------------------------------------------------------------------------------------------------------
Dollars in thousands, except per share data(1)

<S>                                                                      <C>              <C>                    <C>
Net interest income                                                      $  30,096        $  27,892             +7.9%
Noninterest income                                                           6,683            7,811             -14.4
Noninterest expense                                                         20,963           21,092               -.6
Income before income taxes                                                  14,646           13,681              +7.1
Net income                                                                   9,508            8,668              +9.7
Diluted earnings per common share                                             1.51             1.31             +15.3

Total assets                                                             1,017,168          938,030              +8.4
Total liabilities                                                          939,336          864,623              +8.6
Shareholders' equity                                                        77,832           73,407              +6.0
Book value per share                                                         12.77            12.25              +4.2
Cash dividends declared per share                                              .45              .35             +28.6

</TABLE>

(1) All per share information has been retroactively adjusted to reflect the 10%
stock dividends paid on June 30, 1999 and August 31, 1998.

<TABLE>
<CAPTION>

<S>                                <C>                                     <C>
Favorable trend in return          30.5% compounded annual                 Improved efficiency through
on equity through active           growth rate in earnings per share       increased revenue on
capital management...              from 1995 to 1999...                    stabilized expenses...


RETURN                             EARNINGS                                EFFICIENCY
ON      [LINE GRAPH]               PER        [LINE GRAPH]                 RATIO        [LINE GRAPH]
EQUITY                             SHARE

</TABLE>


*  Adjusted to remove the impact of the one-time SAIF assessment.
** All amounts adjusted for stock dividends.

--------------------------------------------------------------------------------
                                                           1999 ANNUAL REPORT  1


<PAGE>


Dear Shareholders:

During 1999, we focused on profitable  growth through improved  efficiencies and
diversification  of our products and services.  With this focus, we grew to over
one billion  dollars in assets for the first time in history and achieved record
earnings of $9.5 million.  This  resulted in earnings per share of $1.51,  a 15%
improvement over the prior year and a 30.5% compounded  annual growth rate since
1995.

   While our financial  performance in 1999 was strong,  we saw the value of our
stock decline 6% from the prior year. The rising  interest rate  environment and
other factors  negatively  affected  bank stocks  across the country.  Our solid
financial  performance  has resulted in an average  total  annual  return to our
shareholders  of 20% since our  inception  as a public  company in 1994.  We are
determined  to focus on our  strategic  goals  which will  maximize  shareholder
value.

   Executing on our strategic initiatives,  we focused our attention during 1999
on expanding  business  banking  services.  We  continued to diversify  our loan
portfolio  by expanding  the higher  yielding  lines of  business.  As a result,
commercial real estate and commercial  business loans increased by $46.2 million
during  the  year,  30%  higher  than  the  previous  year.  Further,  we  added
specialized  expertise to our cash management  staff to broaden our product line
for business customers.

   In addition to an emphasis on diversification, we also evaluated alternatives
for containing costs and improving efficiencies. Indicative of our commitment in
these areas have been the  successful  integration  of our Y2K  readiness  plan,
implementation of automated  underwriting and our well-received  AmeriLoan24(TM)
"loan by phone" service.

   Ottawa's performance and accomplishments are products of our highly dedicated
and successful employees, management team and Board of Directors. I am fortunate
to be working along side of Ronald L. Haan,  President and COO, who continues to
provide strong  leadership  and direction.  We are supported by a talented Chief
Financial  Officer,  Jon W. Swets,  and a  well-qualified  management team. This
talented group of individuals  is focused on continually  improving  performance
and delivering quality products and services to our customers.

   I would like to thank Gerrard W. Haworth for his leadership and dedication to
our Board of Directors over the past 33 years. In June 1999, Mr. Haworth retired
from our Board.  His  unparalleled  success and  achievement in business and our
community  have been a model for us.  We will miss his  leadership  and wish him
health and happiness in his retirement.

--------------------------------------------------------------------------------
2  OTTAWA FINANCIAL CORPORATION

<PAGE>



A bank's  commitment  to a community's  values  aren't  always  reflected in its
balance  sheet.  Even so, it's important to us that we conduct our business in a
fashion which is consistent with the principles and integrity of the communities
we serve. This loyalty to local markets,  along with AmeriBank's  service-driven
culture,  enables us to attract new  customer  relationships  while  maintaining
existing  ones.  Our genuine  interest in the success of our customers and their
profitability defines the foundation of these relationships.

   In the following pages you'll hear from some of our customers about how we've
met their  banking  needs and  delivered  on our promise to provide high quality
products and services.

   The upcoming year will be a challenging  one for the banking  industry.  With
rising interest rates,  tightening net interest margins,  increasing competitive
pressures and growing  customer  needs, we need to stay committed to our primary
strategic   initiative:   profitable  growth  through  improved  efficiency  and
diversification.  We will continue to pursue higher yielding commercial business
loans, while maintaining strong asset quality,  and develop additional  business
products to better  serve our  commercial  customers  and  enhance  non-interest
income.  Some of our objectives - technology  enhancements and Internet banking,
for instance - will not only meet the evolving needs of our  customers,  they'll
also be the catalysts for improved operational efficiencies.

   On  behalf  of the  Corporation,  I would  like to thank  our  employees  and
management team for their outstanding service, our customers for their continued
loyalty and our shareholders  for their  confidence and support.  We will remain
focused  on our  goal of  achieving  profitable  growth  and look  forward  with
enthusiasm to the year ahead.

Sincerely,
                                             "...we need to stay
/s/ Douglas J. Iverson                       committed to our primary
                                             strategic initiative:
Douglas J. Iverson                           profitable growth through
Vice Chairman and Chief Executive Officer    improved efficiency
Ottawa Financial Corporation                 and diversification."

                                             [PICTURE]

--------------------------------------------------------------------------------
                                                           1999 ANNUAL REPORT  3
<PAGE>



" AmeriBank really                           [PICTURE]
  understood the problem
  and was enthusiastic
  in its desire to help."

[PICTURE]

Glenn Anderson
President
Holland Plastics Corporation
Grand Haven, MI

Custom injection molder
and manufacturer

GROWTH. The opportunity for business growth often comes  unexpectedly.  Just ask
Glenn Anderson, President of Holland Plastics Corporation. "One of our customers
had an  incredible  demand - one that  required a  significant  increase  in our
credit  line,"  he  says.  "AmeriBank  really  understood  the  problem  and was
enthusiastic  in its desire to help. In fact,  one of the bank officers has been
heavily  involved in the decision for us to move into new  markets."  Because it
understands  the need  for  growth,  AmeriBank  is  eager  to help  this  custom
injection molder and  manufacturer.  One of our  responsibilities  to them is to
ensure they have the tools needed to remain competitive.


--------------------------------------------------------------------------------
4  OTTAWA FINANCIAL CORPORATION

<PAGE>


"Our success  isn't  difficult  to  understand.  AmeriBank  grows by helping our
clients  grow.  With a healthy  diversity of clientele  which  mirrors the local
market,  we're able to avoid cyclic trends which can negatively  affect specific
industries."

AmeriBank  closed  the  books  on the  20th  Century  with  a  solid  record  of
performance  and a bright  outlook for  continued  growth into the 21st Century.
Much of our success can be attributed to the ability of AmeriBank staff to build
lasting relationships with customers and to customize products and services that
help them reach their goals.

   While  the focus of our  efforts  is on  helping  customers  succeed,  we too
benefit from the relationships that develop.  We are fortunate to work with many
talented and visionary  individuals with whom we share common goals and a vision
for the future.  This is truly the  foundation  upon which  mutually  beneficial
relationships grow and flourish.


[PICTURE]

Ron Haan
President, COO
AmeriBank
Grand Rapids, MI


GROWTH

[PICTURE]

--------------------------------------------------------------------------------
                                                           1999 ANNUAL REPORT  5

<PAGE>



We are often asked, "With so many financial service companies around these days,
what makes  AmeriBank  different?"  Good question.  We think it's because we see
each of our customers as a long-term relationship.  In order to succeed, each of
us - bank and customer alike - needs to rely on the commitment and  capabilities
of the other.

   To keep our part of the bargain, we not only provide for customers' immediate
needs,  we also do whatever it takes to meet their evolving,  often  unexpected,
financial needs.


LEADERSHIP

[PICTURE]


--------------------------------------------------------------------------------
6  OTTAWA FINANCIAL CORPORATION

<PAGE>


[PICTURE]                               "We're not just an
                                         account number for them...
                                         As far as I'm concerned,
                                         we're partners forever."


LEADERSHIP. "AmeriBank tries to help with everything. They're always looking for
solutions,"  declares Dan Davis,  President of TLI, Inc. As a trailer rental and
leasing  company that believes in the value of personal  service and competitive
pricing,  TLI appreciates their  partnership with AmeriBank.  "We're not just an
account  number  for  them,"  says  Davis.  "They've  taken  the time to  really
understand  the elements that are important to my business  including  providing
creative financing for a special buying opportunity we encountered  recently. As
far as I'm concerned, we're partners forever."




[PICTURE]


Dan Davis
President
TLI, Inc.
Grand Rapids, MI

Trailer rental and
leasing company


--------------------------------------------------------------------------------
                                                           1999 ANNUAL REPORT  7
<PAGE>



Techniques

"Our business is built
 on relationships, but
 only if we can deliver
 the goods. AmeriBank                   [PICTURE]
 understands our need
 for continuing technology
 improvements in order
 to make this possible."


[PICTURE]

Bill Ockerlund
CFO
Steketee-Van Huis, Inc.
Holland, MI

Commercial printing
and packaging



Banking  is  a  rapidly  evolving   business.   In  today's  highly  competitive
environment,  it pays to be nimble.  Our culture at AmeriBank thrives on change,
which means that change is a strategic advantage for us.

   By using an innovative  combination  of financial  and service  technologies,
AmeriBank  can  customize a range of lending and deposit  products  that provide
unique  financial  solutions  for our  customers.  In every sense,  we are their
business partners.

   We understand that a growing, productive relationship requires that we do our
part to meet their financial and competitive market needs.


--------------------------------------------------------------------------------
8  OTTAWA FINANCIAL CORPORATION

<PAGE>


TECHNIQUE.  Technology  combines with technique for high-end  commercial printer
Steketee-VanHuis.  "The challenge we face," reports President Ted Etheridge, "is
a desire to stay private  while  competing  with large,  public  companies.  Our
business  is  built on  relationships,  but only if we can  deliver  the  goods.
AmeriBank  takes  the time to  understand  our need  for  continuing  technology
improvements  in order to make this possible." The name  Steketee-VanHuis  means
high quality within the printing  industry.  We're proud to be associated with a
company  nimble  enough  to  successfully  carve  out  a  profitable  niche  for
themselves in a volatile marketplace.



"The challenge we face
 is a desire to stay private
 while  competing
 with large, public
 companies...
 (AmeriBank)                            [PICTURE]
 makes this
 possible."


Ted Etheridge
CEO
Steketee-Van Huis, Inc.
Holland, MI

Commercial printing
and packaging


TECHNIQUES

[PICTURE]

--------------------------------------------------------------------------------
                                                           1999 ANNUAL REPORT  9
<PAGE>



A business cannot succeed without  growth,  nor can it grow without profit.  The
financial marketplace is increasingly  competitive and AmeriBank has taken steps
to ensure our profitability for shareholders by streamlining our operations with
the latest technology and adopting an administrative vigilance which continually
seeks out new methods of cost reduction.


PROFITABILITY

[PICTURE]


--------------------------------------------------------------------------------
10  OTTAWA FINANCIAL CORPORATION

<PAGE>



[PICTURE]                                    "It's a pleasure to
                                              work with a bank that
                                              appreciates real world,
                                              bottom-line thinking."


                                             [PICTURE]

                                             Mark Stockwell
                                             President
                                             Stockwell Manufacturing Company
                                             Grand Rapids, MI

                                             Quality screw
                                             machine products


PROFITABILITY. Mark Stockwell, President of Stockwell Manufacturing, understands
that corporate profits don't automatically generate themselves.  "The quality of
our  products  is  exceptionally  high,  yet they  must be  priced  to sell in a
competitive  marketplace.  It's a pleasure to work with a bank that  appreciates
real world,  bottom-line thinking." The services we provide to companies such as
Stockwell  Manufacturing  include an understanding  of the constant  pressure on
their profits. "I'm very happy with AmeriBank," says Stockwell.  "Their services
are second to none. I've recommended them to others many times."



--------------------------------------------------------------------------------
                                                          1999 ANNUAL REPORT  11

<PAGE>



"When we're presented
 with new opportunities,                          [PICTURE]
 AmeriBank can
 match strides with
 us quickly. That's an
 important skill in
 your banking partner."

[PICTURE]

Steve Buth
CEO
Profile Industrial Packaging, Inc.
Grand Rapids, MI

Plastic film
for industry



At AmeriBank, we believe that our customers as well as our employees are the key
to our success.  That's why we're committed to delivering the finest products to
our  customers and to investing in the  communities  where we all work and live.
West Michigan has always had a special attitude towards  business.  Competitive,
yes,  but with a concern for and  commitment  to the  community  at large.  They
understand that business success is lessened if the larger community is not also
enriched.  AmeriBank not only shares this philosophy,  it supports its expansion
throughout the entire West Michigan region.


--------------------------------------------------------------------------------
12  OTTAWA FINANCIAL CORPORATION

<PAGE>



CITIZENSHIP.  "We're in the packaging business, but what we really sell is trust
and  dependability,"  declares  Steve  Ehmann,  President of Profile  Industrial
Packaging.  He likes the fact that AmeriBank is big enough to help when he needs
it, yet is able to maintain a community  bank attitude  towards  quick  service.
"Our company has to move fast to take advantage of new business  opportunities,"
Ehmann states.  "AmeriBank's  fast and flexible service attitude is a tremendous
asset to us."  Understanding  the  special  needs of growing  companies  such as
Profile Industrial Packaging is one of the many ways AmeriBank also supports our
community.


"We're in the packaging
 business, but what
 we really sell is
 trust and
 dependability,"

[PICTURE]

Steve Ehmann
President
Profile Industrial
Packaging, Inc.
Grand Rapids, MI

Plastic film
for industry

CITIZENSHIP

[PICTURE]

--------------------------------------------------------------------------------
                                                          1999 ANNUAL REPORT  13

<PAGE>



We are fast becoming the bank of choice for small  businesses in West  Michigan.
From  plastics  manufacturing  to golf  retailing,  and  commercial  printing to
transportation,  our customers cover nearly the entire breadth of the commercial
landscape.

   This  diversity  of our service  and lending  portfolio  is  intentional.  By
viewing the local and  regional  economy  from the many  different  perspectives
represented in this diversity, we are able to better educate not only ourselves,
but also our customers, on potential opportunities and hidden dangers.



Diversification

[PICTURE]

--------------------------------------------------------------------------------
14  OTTAWA FINANCIAL CORPORATION

<PAGE>


[PICTURE]                                    "We wanted to think
                                              down-the-road when we
                                              started our business...
                                              AmeriBank helped us
                                              plan for the expansion of
                                              services we offer today."


Diversification.   Whether  you're  looking  for  high-quality  golf  equipment,
professional  instruction or superior practice facilities,  Rockford Golf Center
has it all.  "We wanted to think  down-the-road  when we started our  business,"
says President Roger Mowrey,  "and AmeriBank helped us plan for the expansion of
services we offer today." By keeping prices in line, watching their expenses and
associating  themselves with only brand name merchandise,  Rockford Golf is fast
becoming a name to be reckoned  with in West  Michigan.  Roger  Mowrey  knows it
would have been difficult to do alone.  "AmeriBank goes out of their way to help
you. There's no one there I can't trust and that means a lot to a businessman."


                                             [PICTURE]

                                             Roger Mowrey
                                             President
                                             Rockford Golf Center, Inc.
                                             Rockford, MI

                                             Master range and
                                             golf shop

--------------------------------------------------------------------------------
                                                          1999 ANNUAL REPORT  15


<PAGE>



"We've learned that the best                           [PICTURE]
 way to keep AmeriBank's
 bottom-line healthy is
 to share the same business
 values as the clients
 we serve. Everyone
 wins when we
 all have the
 same goal."

[PICTURE]

Jon Swets
Chief Financial Officer
AmeriBank
Grand Rapids, MI



VALUES. As President of Pearson Foods, Inc., David Pearson understands the value
of sharing a similar outlook with his financial institution.  "We operate within
a fast-paced,  entrepreneurial  environment,"  he says.  "To satisfy  customers'
needs,  our product line not only has to cover a wide spectrum,  it also must be
supported by our  commitment to product  quality and genuine  customer  service.
AmeriBank has the entrepreneurial  attitude which is a good fit for us," Pearson
reports.  "The pressures of our marketplace can make us a very demanding banking
customer.  We appreciate that  AmeriBank's  branch staff helps us clear a lot of
red tape and focus on the essence of our needs."


With the experience we've gained over the years,  AmeriBank is able to recognize
the  potential of small  businesses  and help them achieve it in ways they never
thought possible.

   We  understand  that  loans  aren't the only  vital  need for  growing  small
businesses.  AmeriBank  starts by learning as much as we can about our customers
and their  businesses  because the more we know about them,  the easier it is to
respond to their needs.

   That's where our team of veteran loan officers comes in.  They're  responsive
and resourceful in meeting the needs of our customers. More importantly, they're
surrounded by professional  staff who understand  that  customers'  needs have a
higher priority than our own.


Values

[PICTURE]

--------------------------------------------------------------------------------
16  OTTAWA FINANCIAL CORPORATION

<PAGE>



FINANCIAL CHARTS

  Achieved $1 billion in assets              Change in mix consistent
  for the first time in history...           with strategic direction...

  [LINE GRAPH--TOTAL ASSETS                  [LINE GRAPH--LOAN PORTFOLIO MIX
     MILLIONS OF DOLLARS]                         PER SHARE]


  Improvement in net interest margin         Level of non-performing
  through favorable mix changes in           assets well below peer...
  loans and deposits...

  [LINE GRAPH--NET INTEREST MARGIN           [LINE GRAPH--NON-PERFORMING
     PER SHARE]                                   ASSETS TO TOTAL ASSETS
                                                  PER SHARE]







--------------------------------------------------------------------------------
                                                          1999 ANNUAL REPORT  17

<PAGE>


<TABLE>
<CAPTION>

SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following  financial data  summarizes  more detailed  financial  information
disclosed throughout this report.


December 31,                                              1999            1998           1997           1996(1)          1995
--------------------------------------------------------------------------------------------------------------------------------
Dollars in thousands, except share and per share data

<S>                                                    <C>             <C>             <C>             <C>            <C>
Selected Financial Condition Data:
Total assets                                           $1,017,168      $ 938,030       $ 885,817       $848,306       $ 370,305
Loans receivable, net                                     856,759        769,770         747,423        715,551         276,457
Securities and Federal Home Loan Bank stock                92,838         83,428          64,616         69,864          66,926
Deposits                                                  711,954        693,632         654,560        622,492         243,220
Federal Home Loan Bank advances                           216,353        160,268         145,458        139,170          43,241
Shareholders' Equity                                       77,832         73,407          76,363         76,917          79,560

Selected Operations Data:
Total interest income                                  $   68,978      $  67,904       $  64,726       $ 54,669       $  25,579
Total interest expense                                     38,882         40,012          37,704         30,531          11,321
-------------------------------------------------------------------------------------------------------------------------------
Net interest income                                        30,096         27,892          27,022         24,138          14,258
Provision for loan losses                                   1,170            930             660            564             160
-------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision
   for loan losses                                         28,926         26,962          26,362         23,574          14,098
Service charges and other fees                              5,068          4,749           3,356          3,042           2,219
Gain on sales of loans                                        666          2,398             370            141             309
Other noninterest income (loss)                               949            664             420            145            (435)
-------------------------------------------------------------------------------------------------------------------------------
Total noninterest income                                    6,683          7,811           4,146          3,328           2,093
Total noninterest expense(2)                               20,963         21,092          18,708         21,844          10,651
-------------------------------------------------------------------------------------------------------------------------------
Income before federal income tax expense                   14,646         13,681          11,800          5,058           5,540
Income tax expense                                          5,138          5,013           4,273          1,964           1,911
-------------------------------------------------------------------------------------------------------------------------------
Net income                                             $    9,508      $   8,668       $   7,527       $  3,094       $   3,629
===============================================================================================================================
Basic earnings per common share(3)                         $ 1.60         $ 1.45          $ 1.21          $ .46          $  .52
===============================================================================================================================
Diluted earnings per common share(3)                       $ 1.51         $ 1.31          $ 1.11          $ .45          $  .52
===============================================================================================================================
Cash dividends declared per common share(3)                $  .45         $  .35          $  .30          $ .25          $  .23
===============================================================================================================================

(1)    Significant variation from prior years due primarily to the acquisition of AFSB in February 1996.
(2)    Noninterest expense for 1996 includes the one-time SAIF assessment of $3.5 million.
(3)    Weighted average common shares  outstanding for 1999, 1998, 1997, 1996, and 1995 were 5,961,287,  5,980,195,  6,231,985,
       6,719,022,  and 6,953,208  respectively.  Weighted average common and dilutive  potential common shares  outstanding for
       1999, 1998, 1997, 1996, and 1995 were 6,295,044,  6,630,634, 6,786,963, 6,879,536, and 6,995,320 respectively. All share
       and per share  information  has been  retroactively  adjusted to reflect the 10% stock  dividends paid on June 30, 1999,
       August 31, 1998 and  September  30, 1997,  and the adoption of Statement  of  Financial  Accounting  Standards  No. 128,
       Earnings per Share.
</TABLE>

--------------------------------------------------------------------------------
18  OTTAWA FINANCIAL CORPORATION

<PAGE>


<TABLE>
<CAPTION>

SELECTED CONSOLIDATED FINANCIAL INFORMATION

December 31,                                       1999            1998          1997            1996            1995
----------------------------------------------------------------------------------------------------------------------
Dollars in thousands, except per share data
<S>                                                <C>              <C>            <C>            <C>            <C>
Selected Financial Ratios and Other Data:
Performance Ratios:
Return on assets                                   1.00%            .94%           .87%           .41%           1.08%
   SAIF adjusted(2)                                                                               .72
Average interest rate spread during period         2.96            2.89           3.01           3.08            3.31
Net interest margin(1)                             3.37            3.26           3.37           3.50            4.44
Ratio of operating expense to
   average total assets                            2.19            2.28           2.15           3.06            3.16
   SAIF adjusted(2)                                                                              2.56
Efficiency(3)                                     56.95           60.20          60.66          79.56           65.14
   SAIF adjusted(2)                                                                             66.75
Return on equity                                  12.41           11.49           9.93           3.93            4.62
   SAIF adjusted(2)                                                                              6.83

Quality Ratios:
Non-performing assets to
   total assets at end of period                   0.21            0.43           0.36           0.36            0.76
Allowance for loan losses to
   non-performing loans                          359.21          119.51         118.62         109.89           51.38
Allowance for loan losses to
   total loans receivable, net                     0.55            0.49           0.44           0.44            0.45

Capital Ratios:
Equity to total assets at end of period            7.65            7.83           8.62           9.07           21.48
Average equity to average assets                   8.02            8.15           8.73           9.09           22.62
Ratio of average interest-earning assets
   to average interest-bearing liabilities         1.09x           1.08x          1.07x          1.10x           1.32x
Number of full service offices                       27              26             26             26              13

(1)    Net interest income divided by average interest-earning assets.
(2)    Ratio is revised to remove the impact of the one-time SAIF assessment of $3.5 million expensed in 1996.
(3)    Ratio of  noninterest  expense  to the total of net  interest  income  before  provision  for loan  losses  and
       noninterest income net of gains and losses on sales of assets.
</TABLE>


--------------------------------------------------------------------------------
                                                          1999 ANNUAL REPORT  19

<PAGE>


--------------------------------------------------------------------------------
MANAGEMENT'S  DISCUSSION  &  ANALYSIS  OF  FINANCIAL  CONDITION  AND  RESULTS OF
OPERATIONS

This  Management's  Discussion and Analysis should be read with the consolidated
financial statements attached. The financial statements reflect the consolidated
financial  condition and results of operations of Ottawa  Financial  Corporation
and its wholly-owned subsidiary, AmeriBank.

GENERAL

Ottawa  Financial  Corporation's  focus  in 1999 on  profitable  growth  through
improved efficiencies and diversification enabled us to grow to over one billion
in assets for the first time in history  and  achieve  record  earnings  of $9.5
million.  Improvements in net interest income and  stabilization  of noninterest
expenses contributed heavily to the growth in earnings.  These earnings resulted
in earnings per share of $1.51, a 15% improvement over the prior year.

   We continued to diversify our loan  portfolio by growing the higher  yielding
loan categories.  Our focus on expanding our business banking services,  as well
as healthy loan demand in our market area,  enabled us to increase our portfolio
of commercial real estate and commercial  business loans.  These portfolios grew
by a combined total of $46.2 million during the year, repre- senting 30% growth.
In addition, we increased our consumer portfolio by $21.1 million,  representing
18% growth.

   During  1999,  we  also  evaluated  alternatives  for  containing  costs  and
improving  efficiencies.  We  performed  a thorough  analysis of ways to improve
efficiency in providing  customer  service at our 27 retail  banking  offices in
Western  Michigan.  We  successfully  implemented new technology in our mortgage
department  to improve  operational  efficiency  and  provide  greater  customer
convenience.  In addition,  we defined standards for stabilizing salary costs in
all areas of the bank.  These  changes,  as well as the  growth in net  interest
income,  resulted in an improvement  in our  efficiency  ratio to 56.95% in 1999
from 60.20% in 1998.

FINANCIAL CONDITION

Total assets  increased to $1.0 billion at December 31, 1999 from $938.0 million
at December 31, 1998.  Most of this growth was in the loan  portfolio  and, to a
lesser extent, in securities  available for sale.  Proceeds  received  primarily
from the growth in deposits and FHLB advances funded the increase in assets.

   Securities increased to $81.1 million at December 31, 1999 from $71.6 million
at December 31, 1998.  The growth in securities of $9.5 million was primarily in
agency bonds with the purpose of investing  our excess  interest-bearing  demand
deposits in other financial institutions at December 31, 1998.

   Net loans  receivable  increased to $856.8  million at December 31, 1999 from
$769.8 million at December 31, 1998. The commercial business and commercial real
estate  portfolios grew by $46.2 million,  while the consumer  portfolio grew by
$21.1  million,  representing  growth  rates  of 30% and 18%.  Our  focus on the
development of our commercial and business banking services,  as well as healthy
loan demand in our market area, provided for this growth.

   The residential  mortgage loan portfolio  increased by $26.3 million in 1999.
Due to the low  interest  rate  environment  in the  beginning  of the year,  we
experienced a portion of our adjustable-rate mortgage loan portfolio refinancing
to  fixed-rate  loans.  Since  we sell  almost  all of our 15 and 30  year  term
fixed-rate mortgage loan production and retain for our portfolio adjustable-rate

--------------------------------------------------------------------------------
20  OTTAWA FINANCIAL CORPORATION

<PAGE>


--------------------------------------------------------------------------------
MANAGEMENT'S  DISCUSSION  &  ANALYSIS  OF  FINANCIAL  CONDITION  AND  RESULTS OF
OPERATIONS

mortgage loan production,  we experienced a decrease in our overall  residential
mortgage  loan  portfolio  through the third  quarter of 1999.  During the later
portion of the third quarter and entire fourth quarter however,  the combination
of rising  interest  rates and loan  demand in our market area caused a shift in
mix from fixed-rate loans to  adjustable-rate  loans. The growth in this product
during  the  last  quarter  of 1999  more  than  offset  the  overall  reduction
experienced in the mortgage loan  portfolio  during the first nine months of the
year.

   The  increase in net loans  receivable  reflects the  continued  healthy loan
demand in our market area.  We were well  positioned  with our loan  products to
capitalize  on this demand.  The growth was  achieved  while  maintaining  rates
consistent with our competitors and maintaining credit quality standards.

   Deposits increased to $712.0 million at December 31, 1999 from $693.6 million
at December 31, 1998. Growth occurred in the areas of business  checking,  money
market savings and  certificates of deposit  accounts.  These increases funded a
portion of the loan growth,  however,  approximately 84% of the residential real
estate,  commercial  business and commercial  real estate loan growth  discussed
above occurred in the last half of 1999. This quick growth in the loan portfolio
necessitated  the use of wholesale  funding sources.  As a result,  Federal Home
Loan Bank ("FHLB")  advances  increased by $56.1  million  primarily in the last
half of 1999 to fund this loan growth.

   The primary components of growth in shareholders'  equity for 1999 related to
net income,  as well as proceeds received from the exercise of stock options and
warrants.  The increases in  shareholders'  equity were offset by quarterly cash
dividends declared and additional  repurchases of the Corporation's  outstanding
shares of common stock.  During 1999, we  repurchased  241,985  shares of common
stock  at an  average  price of  $21.26  per  share.  Stock  repurchases  are an
important part of our capital management and are used to supplement asset growth
in achieving our desired capital levels.  However, as growth in assets continues
stock repurchase activity may be diminished.

   After careful  consideration  and  evaluation,  the  management  and Board of
Directors  of  Ottawa  Financial  Corporation  determined  it was  in  the  best
interests of the Corporation and its  shareholders to make an exchange offer for
warrants outstanding at the end of 1998. On December 24, 1998, Ottawa offered to
exchange,  for each  outstanding  warrant,  at the holder's  option,  either .44
shares of the  Corporation's  common stock or $10.03 in cash. The purpose of the
exchange  was to reduce the amount of cash to be  received  by the  Corporation,
estimated at $7.8  million,  and the number of shares of common stock that could
be issued  pursuant to an exercise of the warrants.  We believed we had adequate
capital for our current and foreseeable  operations and did not believe we could
adequately  leverage  the funds  that would be  received  upon  exercise  of the
warrants in a manner consistent with our business objectives. We determined that
the offer to  exchange  the  warrants  for common  stock or cash would limit the
receipt of excess capital and the number of shares issuable upon exercise of the
warrants  and  best   utilize  our  capital  base  to  maximize   value  to  our
shareholders. As of January 26, 1999, the expiration date of the exchange offer,
Ottawa accepted  tenders for  approximately  86% of its warrants.  In connection
with this  exchange,  we issued  180,600  shares  of our  common  stock and paid
$90,130 in cash. The remaining 14% of the warrants were exercised by the date of
the warrant plan expiration, resulting in additional capital of $1.1 million.

   On June 30,  1999,  we paid a 10% stock  dividend,  the third stock  dividend
declared  by the  corporation.  We have  not  reduced  the  amount  of the  cash
dividends  as a result of the stock  dividend.  All share and per share  amounts
have been retroactively adjusted to reflect the stock dividends paid on June 30,
1999, August 31, 1998 and September 30, 1997.

--------------------------------------------------------------------------------
                                                          1999 ANNUAL REPORT  21

<PAGE>


--------------------------------------------------------------------------------
MANAGEMENT'S  DISCUSSION  &  ANALYSIS  OF  FINANCIAL  CONDITION  AND  RESULTS OF
OPERATIONS


RESULTS OF OPERATIONS
COMPARISON OF 1999 TO 1998

Net income.  Net income for 1999 was $9.5 million,  or $1.51 per diluted  common
share,  compared to $8.7  million,  or $1.31 per diluted  common share for 1998.
Diluted  earnings per share  increased $.20, or 15%, for the year ended December
31, 1999 compared to 1998.  The  improvement in earnings over the prior year was
due  primarily to the growth in net  interest  income and the  stabilization  of
noninterest  expense.  This  improvement was partially offset by the decrease in
gains on sales of loans.

   In 1996, we introduced a measure we refer to as "cash" or "tangible" earnings
per share. Due to significant  differences in methods of accounting for business
combinations,  the  concept  of cash or  tangible  earnings  per share  provides
comparability  between  companies  using  different  methods.   Amortization  of
goodwill and core deposit  intangibles,  which are  non-cash  components  of net
income,  are added back to earnings in computing  cash or tangible  earnings per
share.  Further,  Employee Stock Ownership Plan and Management  Recognition Plan
expenses are added back as these items also do not involve actual current period
cash outflow.  Cash or tangible earnings per share also serves as an alternative
measure for  determining  the rate of growth in regulatory  (tangible)  capital.
Since the  amortization  of goodwill and core deposit  intangibles  and expenses
related to the Employee Stock Ownership Plan and Management  Recognition Plan do
not  reduce  tangible  capital,  these  items  are  added  back to  earnings  in
evaluating  tangible capital growth.  Our diluted cash or tangible  earnings per
share under this method was $1.86 for the year ended December 31, 1999, compared
to $1.66 for 1998, showing a 12% improvement.  Since we specifically  formulated
the calculations  for cash or tangible  earnings per share, the calculations may
not be comparable to similarly titled measures reported by other companies. This
measure is not intended to reflect cash flow per share.

   Return on equity for 1999 was  12.41%  compared  to 11.49%  for 1998.  The 8%
improvement  in return on equity  was  primarily  attributable  to the  improved
earnings.  In addition,  our stock buyback  activity and warrant  exchange offer
also positively impacted return on equity.

Net Interest  Income.  Our net income is primarily  dependent  upon net interest
income.  Net interest income is a function of the difference,  or margin between
the average yield earned on loans and investment securities and the average rate
paid on deposits  and other  borrowings,  as well as  relative  amounts of these
assets  and  liabilities.  Net  interest  income is  affected  by  economic  and
competitive  factors that influence  interest rates, loan demand,  deposit flows
and alternative sources of funds.

   Net interest income  increased $2.2 million on a tax equivalent basis for the
year  ended  December  31,  1999 as  compared  to the same  period in 1998.  The
increase in net  interest  income was  attributable  to the  positive  impact of
interest-earning asset volume increases caused by internal growth experienced in
1999 and late 1998,  as well as the positive  impact of decreases in the cost of
interest-bearing  liabilities. The improvement in interest income resulting from
the increase in the volume of interest-earning  assets was partially offset by a
decrease in the yield on  interest-earning  assets  caused by the decline in the
general market interest rates.  There was an even larger decrease in the cost of
interest-bearing  liabilities,  resulting  in an  improvement  in  net  interest
spread.  While there was an overall  increase in the volume of  interest-bearing
liabilities,  the shift in mix from higher  costing  certificates  of deposit to
lower costing demand deposits  contributed to the lower interest expense.  These
improvements in net interest income were due to the spread improvement discussed
above and the growth in noninterest-bearing deposits during the past year.

--------------------------------------------------------------------------------
22  OTTAWA FINANCIAL CORPORATION

<PAGE>


--------------------------------------------------------------------------------
MANAGEMENT'S  DISCUSSION  &  ANALYSIS  OF  FINANCIAL  CONDITION  AND  RESULTS OF
OPERATIONS


AVERAGE BALANCES, INTEREST RATES AND YIELDS

This table presents the amount of interest income from average  interest-earning
assets and the yields earned on those assets, as well as the interest expense on
average  interest-bearing  liabilities and the rates paid on those  liabilities.
All average balances are daily average balances.

<TABLE>
<CAPTION>

Year Ended December 31,                                        1999                           1998                            1997
----------------------------------------------------------------------------------------------------------------------------------
                                       Average   Interest              Average  Interest              Average   Interest
                                   Outstanding    Earned/   Yield/ Outstanding   Earned/   Yield/ Outstanding    Earned/    Yield/
                                       Balance       Paid     Rate     Balance      Paid     Rate     Balance       Paid      Rate
----------------------------------------------------------------------------------------------------------------------------------
Dollars in thousands

<S>                                   <C>         <C>        <C>      <C>        <C>        <C>      <C>         <C>         <C>
INTEREST-EARNING ASSETS:
Loans receivable(1)(2)                $795,190    $62,967    7.92%    $778,282   $62,687    8.05%    $732,927    $59,994     8.19%
Securities(2)                           78,825      4,677    5.93       60,513     3,859    6.38       56,635      3,787     6.68
Other interest-earning assets           18,962      1,377    7.26       19,119     1,425    7.46       15,754      1,071     6.80
----------------------------------------------------------------------------------------------------------------------------------
   Total interest-earning assets(1)    892,977     69,021    7.72      857,914    67,971    7.92      805,316     64,852     8.05

 INTEREST-BEARING LIABILITIES:
Demand and NOW deposits                205,820      7,139    3.47      173,322     6,517    3.76      149,909      5,823     3.89
Savings deposits                        52,411        905    1.73       59,485     1,125    1.89       65,678      1,551     2.37
Certificate accounts                   383,296     20,623    5.38      401,026    22,741    5.67      393,757     22,024     5.61
FHLB advances                          171,179      9,985    5.83      160,533     9,591    5.97      140,746      8,293     5.91
Other interest-bearing liabilities       3,521        230    6.54          663        38    5.73          184         13     7.07
----------------------------------------------------------------------------------------------------------------------------------
   Total interest-bearing liabilities  816,227     38,882    4.76      795,029    40,012    5.03      750,274     37,704     5.04
Net interest income                              $ 30,139                       $ 27,959                        $ 27,148
==================================================================================================================================
Net interest rate spread                                     2.96%                          2.89%                            3.01%
==================================================================================================================================
Net earning assets                    $ 76,750                        $ 62,885                       $ 55,042
Net yield on average
   interest-earning assets                                   3.37%                          3.26%                            3.37%
==================================================================================================================================
Average interest-earning assets to
   average interest-bearing liabilities              1.09x                          1.08x                           1.07x
==================================================================================================================================

(1)    Calculated net of deferred loan fees, loan discounts, loans in process and allowance for loan losses.

(2)    Tax-exempt interest on loans and securities has been converted to a fully-taxable equivalent basis.
</TABLE>

--------------------------------------------------------------------------------
                                                          1999 ANNUAL REPORT  23

<PAGE>


--------------------------------------------------------------------------------
MANAGEMENT'S  DISCUSSION  &  ANALYSIS  OF  FINANCIAL  CONDITION  AND  RESULTS OF
OPERATIONS

RATE/VOLUME ANALYSIS OF NET INTEREST INCOME

This table presents the dollar amount of changes in interest income and interest
expense for major  components of  interest-earning  assets and  interest-bearing
liabilities.  For each category of interest-earning  assets and interest-bearing
liabilities,  infor-mation is provided on changes attributable to (i) changes in
volume (i.e., changes in volume multiplied by old rate) and (ii) changes in rate
(i.e.,  changes in rate multiplied by old volume).  Changes attributable to both
rate and volume which cannot be segregated  have been allocated  proportionately
to the change due to volume and the change due to rate.

<TABLE>
<CAPTION>

Year Ended December 31                                          1999 vs. 1998                           1998 vs. 1997
-----------------------------------------------------------------------------------------------------------------------------
                                           Increase      Increase                     Increase        Increase
                                         (Decrease)    (Decrease) Total Increase    (Decrease)      (Decrease) Total Increase
                                      Due To Volume   Due To Rate     (Decrease) Due To Volume     Due To Rate     (Decrease)
-----------------------------------------------------------------------------------------------------------------------------
Dollars in thousands
<S>                                       <C>          <C>             <C>            <C>            <C>            <C>
INTEREST-EARNING ASSETS:
Loans receivable                          $   1,258    $    (978)      $    280       $  3,632       $   (940)      $   2,692
Securities                                    1,062         (244)           818            222           (150)             72
Other interest-earning assets                   (12)         (36)           (48)           244            111             355
-----------------------------------------------------------------------------------------------------------------------------
   Total interest-earning assets              2,308       (1,258)         1,050          4,098           (979)          3,119

Interest-bearing liabilities:
Demand and NOW deposits                   $   1,060    $    (438)      $    622       $    873       $   (179)      $     694
Savings deposits                               (127)         (93)          (220)          (137)          (289)           (426)
Certificate accounts                           (982)      (1,136)        (2,118)           410            307             717
FHLB advances                                   613         (219)           394          1,181            117           1,298
Other interest-bearing liabilities              186            6            192             27             (2)             25
-----------------------------------------------------------------------------------------------------------------------------
   Total interest-bearing liabilities           750       (1,880)        (1,130)         2,354            (46)          2,308
-----------------------------------------------------------------------------------------------------------------------------
Net interest income                       $   1,558    $     622       $  2,180       $  1,744       $   (933)      $     811
=============================================================================================================================
</TABLE>


Provision for Loan Losses. Management's periodic analysis of the adequacy of the
allowance  for  loan  losses  determines  the  provision  for loan  losses.  The
provision  was $1.2 million in 1999  compared to $930,000 in 1998.  The ratio of
non-performing  assets,  consisting  of  loans  90 days or more  delinquent  and
foreclosed  assets, to total assets was .21% as of December 31, 1999 compared to
 .43% as of December  31,  1998.  The ratio of the  allowance  for loan losses to
total loans  receivable  was .55% as of December 31, 1999 compared to .49% as of
December 31, 1998.  The increase in the  provision was primarily for the purpose
of growing the  allowance  for loan loss  balance to keep pace with loan growth.
The increase was also in response to the shift in the mix of the loan  portfolio
from mortgage loans to commercial and consumer loans and the higher risk of loss
associated  with these loans.  We  anticipate we will increase the allowance for
loan loss balance in future periods as we continue to increase these  commercial
and consumer loan portfolios.

   We maintain the allowance for loan losses at a level  considered  adequate to
cover  possible  losses  that  are  currently  anticipated  based  on past  loss
experience,  general economic  conditions,  information  about specific borrower
situations,  including their financial position and collateral values, and other
factors and estimates, which are subject to change over time. Although the level
of  non-performing  assets is considered in establishing  the allowance for loan
losses  balance,  variations in  non-performing  loans have not been  meaningful
based on our past  loss  experience  and,  as such,  have not had a  significant
impact on the overall level of the allowance for loan losses.

--------------------------------------------------------------------------------
24  OTTAWA FINANCIAL CORPORATION

<PAGE>


--------------------------------------------------------------------------------
MANAGEMENT'S  DISCUSSION  &  ANALYSIS  OF  FINANCIAL  CONDITION  AND  RESULTS OF
OPERATIONS

   While we consider the allowance for loan losses to be adequate to provide for
potential  losses,  there can be no assurance that future losses will not exceed
estimated  amounts or that  additional  provisions  for loan  losses will not be
required in future periods. In addition,  the Financial  Institutions Bureau and
the Federal Deposit Insurance  Corporation  review the allowance for loan losses
as part of their  examination  process.  These  regulatory  agencies may require
additional  general or specific  allowances  based upon their  judgement  of the
information available to them at the time of their examination.

Noninterest  Income.  Noninterest  income for 1999 was $6.7 million  compared to
$7.8  million  for 1998.  The  decrease  related to the lower  gains on sales of
mortgage loans.  The rising interest rate  environment in 1999 not only caused a
reduction  in the  volume  of  loans  originated  for  sale  but  also  caused a
tightening  of the  profit  margins  experienced  on the  sale of  those  loans.
Noninterest income in other areas including loan servicing fees, deposit account
service charges and fees from the sale of mutual funds and annuities improved in
1999.

Noninterest  Expense.  Noninterest  expense  decreased to $21.0 million for 1999
compared to $21.1 million for 1998.  Slight  increases in salaries  expense were
more than  offset  by the  reduction  in ESOP  expense  due to lower  accounting
charges  related  to the  reduction  in our  stock  price,  and  pension  income
resulting in overall  decreases in  compensation  and benefits  expense for 1999
compared to 1998. Due to favorable  market  conditions,  the  performance of the
pension  assets was strong and exceeded the expenses  associated  with the plan,
thereby  resulting  in net pension  income.  Our  efficiency  ratio,  defined as
noninterest  expense  divided by the sum of net interest  income and noninterest
income, decreased from 60.20% in 1998 to 56.95% in 1999. This ratio demonstrates
that our ability to generate  revenues on our  noninterest  expense  dollars has
improved over the prior year.

Income Tax Expense.  The increase in the income tax expense from $5.0 million in
1998 to $5.1 million in 1999 is due to the higher pre-tax income for the year.

COMPARISON OF 1998 TO 1997

Net income.  Net income for 1998 was $8.7 million,  or $1.31 per diluted  common
share,  compared to $7.5  million,  or $1.11 per diluted  common share for 1997.
Diluted  earnings per share  increased $.20, or 18%, for the year ended December
31, 1998  compared to 1997.  The growth in  noninterest  income and, to a lesser
extent,  the  increase  in net  interest  income  provided  the  improvement  in
earnings.  Increases in the provision for loan losses and  noninterest  expenses
partially offset the improvements in earnings.

   Our diluted cash or tangible  earnings per share under was $1.66 for the year
ended December 31, 1998,  compared to $1.44 for 1997, showing a 16% improvement.
Return on  equity  for 1998 was  11.49%  compared  to 9.93%  for  1997.  The 16%
improvement  in return on equity  was  primarily  attributable  to the  improved
earnings.  In addition,  our stock  buyback  activity also  positively  impacted
return on equity.

Net Interest Income.  Net interest income increased $811,000 on a tax equivalent
basis for the year ended  December  31,  1998 as  compared to the same period in
1997. The volume increases in interest-earning  assets caused by internal growth
experienced  in 1998 and late 1997  increased net interest  income.  Despite the
significant  decline in general market  interest rates during 1998, the yield on
total  interest-earnings  assets  experienced  only a  slight  decline.  This is
attributable  to the change in the  composition  of our loan portfolio to higher
yielding   commercial   loans  during  1998.  The  stable   composition  of  our
interest-bearing  liabilities,  accompanied  by the  offsetting  affects  of the
general  decline in the cost of deposits  compared to the small  increase in the
cost  of  FHLB   advances,   resulted  in  a  minor   decline  in  the  cost  of
interest-bearing   liabilities.   Together,   the   decline   in  the  yield  on
interest-earning   assets,  offset  with  the  small  decline  in  the  cost  of
interest-bearing  liabilities,  resulted in a decline in the net interest spread
from  3.01% in 1997 to  2.89%  in 1998.  While  the  rates on  deposit  accounts

--------------------------------------------------------------------------------
                                                          1999 ANNUAL REPORT  25
<PAGE>


--------------------------------------------------------------------------------
MANAGEMENT'S  DISCUSSION  &  ANALYSIS  OF  FINANCIAL  CONDITION  AND  RESULTS OF
OPERATIONS

generally  decreased  during 1998, the cost of  certificate of deposit  accounts
increased to 5.67% for 1998 compared to 5.61% for 1997. This increase in cost of
certificates  of deposit is almost  entirely due to the decrease in amortization
of the purchase accounting  adjustment relative to certificate accounts obtained
in the acquisition of the former AmeriBank,  FSB in early 1996.  Amortization of
this  purchase  accounting  adjustment  was an offset to interest  expense.  The
reduction  in net  interest  margin  from  3.37%  in  1997 to  3.26%  in 1998 is
primarily attributable to the spread decline discussed above.

Provision  for Loan  Losses.  The  provision  was  $930,000 in 1998  compared to
$660,000 in 1997.  The ratio of  non-performing  assets,  consisting of loans 90
days or more  delinquent and foreclosed  assets,  to total assets was .43% as of
December 31, 1998  compared to .36% as of December  31,  1997.  The ratio of the
allowance for loan losses to total loans  receivable was .49% as of December 31,
1998 compared to .44% as of December 31, 1997. The increase in the provision was
primarily for the purpose of growing the allowance for loan loss balance to keep
pace with loan growth. The increase was also in response to the shift in the mix
of the loan  portfolio  from mortgage loans to commercial and consumer loans and
the higher risk of loss associated with these loans.

Noninterest  Income.  Noninterest  income for 1998 was $7.8 million  compared to
$4.1 million for 1997.  Increased  sales and  realizations  of gains on sales of
mortgage  loans,  along with fees on sales of mutual funds and  annuities,  have
significantly  increased  noninterest income. In addition,  increases in deposit
account service fees contributed to the growth in noninterest income. During the
third  quarter of 1997,  we modified  deposit  fee  structures  to achieve  more
consistency  between  AmeriBank  and AFSB.  Savings  accounts  that fell below a
minimum  balance and checking  accounts  that had cancelled  checks  returned to
customers with monthly bank statements were assessed fees.

Noninterest  Expense.  Noninterest  expense  increased to $21.1 million for 1998
compared to $18.7 million for 1997.  Employee  related costs, a portion of which
relates to the increased expense of the Employee Stock Ownership Plan due to the
higher market value of our stock,  increased  noninterest  expense.  Further, we
added specialized  expertise to our staff to develop the commercial and consumer
loan portfolios and other lines of fee generating  business  consistent with our
strategic  plan.  The  benefits  of these  investments  in  resources  have been
reflected  in the  growth  in the  commercial  business  and  real  estate  loan
portfolio  and the  increases  in fee  income  on  sales  of  mutual  funds  and
annuities.

Income Tax Expense.  The increase in the income tax expense from $4.3 million in
1997 to $5.0 million in 1998 is due to the higher pre-tax income for the year.

Y2K READINESS DISCLOSURE

We  successfully  completed our Y2K readiness  plan and  experienced no material
issues.  All systems and functions  have been  processing  well since January 1,
2000. We will continue to monitor all systems throughout the year.

ASSET/LIABILITY MANAGEMENT; MARKET RISK ANALYSIS

The balance sheet consists of investments in interest-earning  assets, primarily
loans and investment securities,  which are primarily funded by interest-bearing
liabilities,  deposits and borrowings.  These financial instruments have varying
levels of sensitivity to changes in market interest  rates,  resulting in market
risk.  Other  than  loans  that are  originated  and held for  sale,  all of our
financial  instruments  are for other than trading  purposes.  We are subject to
interest  rate risk to the extent  that our  interest-bearing  liabilities  with
short and  intermediate-term  maturities reprice more rapidly, or on a different
basis, than our interest-earning assets.

--------------------------------------------------------------------------------
26  OTTAWA FINANCIAL CORPORATION

<PAGE>


--------------------------------------------------------------------------------
MANAGEMENT'S  DISCUSSION  &  ANALYSIS  OF  FINANCIAL  CONDITION  AND  RESULTS OF
OPERATIONS

   Senior  management and the Board of Directors  review the Bank's  exposure to
interest  rate risk on a  quarterly  basis.  We  measure  interest  rate risk by
computing  estimated  changes in net interest income and the net portfolio value
of cash flows from  assets,  liabilities  and  off-balance  sheet items within a
range of assumed changes in market  interest rates. If estimated  changes to net
portfolio value and net interest income are not within the limits established by
the Board,  the Board may  direct  management  to adjust  the  Bank's  asset and
liability mix to bring interest rate risk within Board approved limits.

   Net portfolio value represents the market value of equity and is equal to the
market value of assets minus the market value of liabilities,  with  adjustments
made for  off-balance  sheet items.  This analysis  assesses the risk of loss in
market risk sensitive  instruments in the event of sudden and sustained 1% to 3%
increases and decreases in market interest rates. The following tables set forth
the  change  in  AmeriBank's  net  portfolio  value and net  interest  income at
December 31, 1999 and 1998, based on internal assumptions, that would occur upon
an immediate  change in interest  rates,  with no effect given to any steps that
management might take to counteract that change.

<TABLE>
<CAPTION>

December 31, 1999:                                              Net Portfolio Value                Net Interest Income
----------------------------------------------------------------------------------------------------------------------
Change in Interest Rate (Basis Points)           $ Amount in NPV    % Change in NPV  $ Amount in NII   % Change in NII
----------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>                     <C>         <C>                    <C>
 +300                                                   $ 50,356               -39%         $ 20,235              -31%
 +200                                                     60,890               -27            23,412              -20
 +100                                                     73,191               -12            26,468              -10
    0                                                     83,204                --            29,299               --
 -100                                                     84,197                 1            31,910                9
 -200                                                     90,050                 8            33,703               15
 -300                                                     97,142                17            35,349               21

December 31, 1998:                                              Net Portfolio Value                Net Interest Income
-----------------------------------------------------------------------------------------------------------------------
Change in Interest Rate (Basis Points)           $ Amount in NPV   % Change in NPV   $ Amount in NII   % Change in NII
-----------------------------------------------------------------------------------------------------------------------
 +300                                                   $ 45,280               -39%         $ 20,275               -27%
 +200                                                     56,873               -23            23,040               -18
 +100                                                     64,838               -13            25,532                -9
    0                                                     74,187                --            27,965                --
 -100                                                     79,649                 7            30,309                 8
 -200                                                     83,117                12            31,886                14
 -300                                                     91,819                24            33,440                20
</TABLE>

   As illustrated in the table,  net portfolio value is more sensitive to rising
rates than declining rates. This occurs because, as rates rise, the market value
of  fixed-rate  loans  declines  due to  both  the  rate  increase  and  slowing
prepayments.  When rates  decline,  we do not  experience a significant  rise in
market value for these loans because  borrowers prepay at relatively high rates.
The value of most of our deposits and borrowings  changes in  approximately  the
same proportion in rising or falling rate scenarios.

   The  results  for the 300 basis  point  interest  rate  shocks are  monitored
primarily to assist in identifying trends in our interest rate risk profile.  We
feel that a sudden and sustained change in interest rates of 300 basis points is
not a realistic event. Therefore we focus on managing, to acceptable levels, the
change in NPV for the 100 and 200 basis point  interest  rate shocks both up and
down.

   The table  identifies  only slight changes in our interest rate risk position
in 1999 compared to 1998.  The  composition  changes in the balance sheet during
1999 have  produced a net nominal  impact on interest  rate risk.  FHLB advances
grew by $56.1  million  and the  weighted  average  time for this  portfolio  to
reprice decreased by 12 months.  This decrease in repricing  frequency has had a

--------------------------------------------------------------------------------
                                                          1999 ANNUAL REPORT  27
<PAGE>


--------------------------------------------------------------------------------
MANAGEMENT'S  DISCUSSION  &  ANALYSIS  OF  FINANCIAL  CONDITION  AND  RESULTS OF
OPERATIONS


negative  impact on our  interest  rate  risk.  However,  the  weighted  average
maturity in the certificates of deposit  portfolio  increased by four months due
to growth in our 30-month CD product. This increase has had a positive impact on
interest rate risk and entirely  offset the negative impact of the FHLB advances
changes.  Further, growth in the commercial and installment loan portfolios have
had a positive impact on interest rate risk. These portfolios bear less interest
rate risk than the  residential  mortgage  loan  portfolio  due to their shorter
weighted  average  maturities.  However,  this positive impact was outweighed by
composition changes within the mortgage loan portfolio. The net result of all of
these changes has been a slight  increase in  sensitivity  to a rise in interest
rates from 1998 to 1999.

   To decrease our exposure to interest  rate risk,  we are trying to reduce the
duration and average life of our interest-earning  assets. To achieve this goal,
we are  emphasizing  adjustable-rate  mortgage loans and growing our installment
and commercial  business loan portfolios.  In addition,  we are underwriting all
long-term,  fixed-rate mortgages in accordance with Freddie Mac guidelines which
allows us the flexibility of selling these assets into the secondary  market. We
are currently selling all 30- and 15-year fixed-rate  residential mortgage loans
as they are originated.  With our funding  sources,  we are attempting to reduce
the impact of interest rate changes by emphasizing non-interest bearing products
and using longer-term fixed-rate certificates of deposit.

   As with  any  method  of  measuring  interest  rate  risk,  the  above  table
inherently  has   shortcomings.   For  example,   although  certain  assets  and
liabilities may have similar maturities or periods to repricing,  they may react
in different  degrees to changes in market interest rates. The interest rates on
certain types of assets and liabilities  may fluctuate  before changes in market
interest  rates,  while  interest rates on other types may lag behind changes in
market rates.  Additionally,  certain assets,  such as adjustable-rate  mortgage
loans,  have features that  restrict  changes in interest  rates on a short-term
basis and over the life of the asset.  When there is a change in interest rates,
expected  rates of  prepayments  on loans,  decay  rates of  deposits  and early
withdrawals  from  certificates  could likely  differ from those  assumed in the
table. Finally, the ability of many borrowers to service their debt may decrease
in the event of a significant interest rate increase.

   In addition,  the above table may not properly  reflect the impact of general
interest  rate  movements on our net interest  income  because the  repricing of
certain  categories of assets and  liabilities are influenced by competitive and
other pressures beyond our control.

LIQUIDITY AND CAPITAL RESOURCES

AmeriBank's principal sources of funds are deposits; borrowings,  primarily FHLB
advances;  principal  and  interest  payments  on  loans;  sales of  loans;  and
maturities and sales of securities.  We have  classified all securities  held in
portfolio as available for sale,  which  increases  our  liquidity  flexibility.
While  scheduled  loan  repayments  and  maturing   investments  are  relatively
predictable,  deposit flows and loan prepayments are more influenced by interest
rates, general economic conditions and competition.

   We view liquidity management to be both a daily and long-term responsibility.
We maintain a level of liquidity consistent with our assessment of expected loan
demand, loan sales, deposit flows, yields available on interest-earning deposits
and investment securities,  and the objectives of our asset/liability management
program.  We generally  invest excess  liquidity in  interest-earning  overnight
deposits  of the  Federal  Home Loan  Bank of  Indianapolis.  Other  investments
include U.S.  Treasury and federal agency  securities,  collateralized  mortgage
obligations,  mortgage and other  asset-backed  securities,  municipal bonds and
corporate debt  securities.  When overnight  deposits with the Federal Home Loan
Bank are drawn to low levels to maintain  liquidity,  we will  generally  borrow
funds  through the FHLB's  advances  program  instead of selling our  investment
securities.

   Advances  from the Federal  Home Loan Bank of  Indianapolis  increased  $56.1
million during 1999 while assets grew by $79.1 million.  Deposits were the other
source of funds for this asset growth.  Federal Home Loan Bank advances  totaled
$216.4  million as of December 31, 1999.  Approximately  $101.2 million of these
advances  come due in 2000.  We may  choose to renew or pay off  these  advances
depending upon our liquidity needs at that time.

--------------------------------------------------------------------------------
28  OTTAWA FINANCIAL CORPORATION

<PAGE>



--------------------------------------------------------------------------------
MANAGEMENT'S  DISCUSSION  &  ANALYSIS  OF  FINANCIAL  CONDITION  AND  RESULTS OF
OPERATIONS


   Ottawa Financial Corporation,  the holding company for AmeriBank,  also has a
need for, and sources of,  liquidity.  Dividends  from AmeriBank are its primary
source of liquidity,  subject to certain regulatory  constraints (see Note 11 of
the Notes to Consolidated  Financial  Statements).  Ottawa has modest  operating
costs and the dividends paid on common stock are discretionary.

   AmeriBank is subject to three capital to asset  requirements  as discussed in
Note 11 of the Consolidated Financial Statements.

ACCOUNTING AND REGULATORY STANDARDS

For accounting standards,  see "New Accounting  Pronouncements" in Note 1 of the
Notes to Consolidated Financial Statements.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This document,  including  information  included or  incorporated  by reference,
contains, and future filings by the Company on Form 10-K, Form 10-Q and Form 8-K
and future oral and written  statements  by the Company and its  management  may
contain,  forward-looking statements about Ottawa Financial and its subsidiaries
which we believe  are within the meaning of the  Private  Securities  Litigation
Reform  Act  of  1995.  These   forward-looking   statements  include,   without
limitation,   statements  with  respect  to  anticipated  future  operating  and
financial  performance,  growth opportunities,  interest rates, cost savings and
funding advantages  expected or anticipated to be realized by management.  Words
such as "may," "could," "should," "would," "believe," "anticipate,"  "estimate,"
"expect,"  "intend,"  "plan" and similar  expressions  are  intended to identify
these forward-looking statements.  Forward-looking statements by the Company and
its management are based on beliefs,  plans,  objectives,  goals,  expectations,
anticipations,  estimates and intentions of management and are not guarantees of
future performance. The Company disclaims any obligation to update or revise any
forward-looking statements based on the occurrence of future events, the receipt
of new  information,  or otherwise.  The important  factors we discuss below and
elsewhere in this document, as well as other factors discussed under the caption
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  in this  document  and  identified  in our filings with the SEC and
those  presented  elsewhere  by our  management  from time to time,  could cause
actual results to differ materially from those indicated by the  forward-looking
statements made in this document:

   The following  factors,  many of which are subject to change based on various
other  factors  beyond our control,  could cause our  financial  performance  to
differ materially from plans, objectives, expectations, estimates and intentions
expressed  in such  forward-looking  statements:

   o  the strength of the United  States  economy in general and the strength of
      the local economies in which we conduct our operations;
   o  the effects of, and changes in,  trade,  monetary and fiscal  policies and
      laws, including interest rate policies of the Federal Reserve Board;
   o  inflation, interest rate, market and monetary fluctuations;
   o  the timely  development of and acceptance of our new products and services
      and the perceived  overall value of these  products and services by users,
      including  the  features,  pricing  and quality  compared to  competitors'
      products and services;
   o  the willingness of users to substitute  competitors' products and services
      for our products and services;
   o  our success in gaining  regulatory  approval of our products and services,
      when required;
   o  the  impact  of  changes  in  financial  services'  laws  and  regulations
      (including laws concerning taxes, banking, securities and insurance);
   o  the impact of technological changes;
   o  acquisitions;
   o  changes in consumer spending and saving habits; and
   o  our success at managing the risks involved in the foregoing.


--------------------------------------------------------------------------------
                                                          1999 ANNUAL REPORT  29

<PAGE>


--------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS


[CROWE CHIZEK LOGO]


Board of Directors and Shareholders
Ottawa Financial Corporation
Holland, Michigan

We have audited the accompanying consolidated balance sheets of Ottawa Financial
Corporation  as of  December  31, 1999 and 1998,  and the  related  consolidated
statements  of  income,   changes  in  shareholders'   equity,  cash  flows  and
comprehensive  income for each of the three years in the period  ended  December
31, 1999.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

   We  conducted  our audits in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

   In our  opinion,  the  consolidated  financial  statements  referred to above
present  fairly,  in all material  respects,  the  financial  position of Ottawa
Financial  Corporation  as of December 31, 1999 and 1998, and the results of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 1999, in conformity with generally accepted accounting principles.

/s/ Crowe, Chizek and Company LLP

Crowe, Chizek and Company LLP
Grand Rapids, Michigan
March 1, 2000

--------------------------------------------------------------------------------
30  OTTAWA FINANCIAL CORPORATION

<PAGE>


<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS

December 31,                                                                                   1999              1998
---------------------------------------------------------------------------------------------------------------------
Dollars in thousands

ASSETS
<S>                                                                                      <C>               <C>
Cash and due from financial institutions                                                 $   24,420        $   20,437
Interest-bearing demand deposits in other financial institutions                              2,069            21,788
---------------------------------------------------------------------------------------------------------------------
   Total cash and cash equivalents                                                           26,489            42,225
Securities available for sale                                                                81,056            71,646
Loans held for sale                                                                                             3,375
Loans receivable, net                                                                       856,759           769,770
Federal Home Loan Bank stock                                                                 11,782            11,782
Premises and equipment, net                                                                  16,348            15,200
Acquisition intangibles                                                                      11,828            13,032
Other assets                                                                                 12,906            11,000
---------------------------------------------------------------------------------------------------------------------
   Total assets                                                                          $1,017,168        $  938,030
=====================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits                                                                                 $  711,954        $  693,632
Federal Home Loan Bank advances                                                             216,353           160,268
Federal funds purchased                                                                       1,600
Accrued expenses and other liabilities                                                        9,429            10,723
---------------------------------------------------------------------------------------------------------------------
   Total liabilities                                                                        939,336           864,623

Shareholders' equity
Preferred stock
Common stock                                                                                     65                62
Additional paid-in capital                                                                   77,562            73,177
Retained earnings, substantially restricted                                                  10,454            15,363
Accumulated other comprehensive income                                                         (855)               23
Employee Stock Ownership Plan                                                                (1,462)           (1,886)
Management Recognition and Retention Plan                                                      (215)             (712)
Less cost of common stock in treasury                                                        (7,717)          (12,620)
---------------------------------------------------------------------------------------------------------------------
   Total shareholders' equity                                                                77,832            73,407
---------------------------------------------------------------------------------------------------------------------
     Total liabilities and shareholders' equity                                          $1,017,168        $  938,030
=====================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

--------------------------------------------------------------------------------
                                                          1999 ANNUAL REPORT  31

<PAGE>


<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME

                                                                              1999             1998              1997
-----------------------------------------------------------------------------------------------------------------------
Dollars in thousands, except per share data

<S>                                                                      <C>              <C>               <C>
Interest income
   Loans                                                                 $  62,932        $  62,646         $  59,948
   Securities                                                                4,669            3,833             3,707
   Other                                                                     1,377            1,425             1,071
-----------------------------------------------------------------------------------------------------------------------
                                                                            68,978           67,904            64,726
Interest expense
   Deposits                                                                 28,667           30,383            29,398
   Federal Home Loan Bank advances                                           9,985            9,591             8,293
   Other                                                                       230               38                13
-----------------------------------------------------------------------------------------------------------------------
                                                                            38,882           40,012            37,704
-----------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME                                                         30,096           27,892            27,022
Provision for loan losses                                                    1,170              930               660
-----------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                         28,926           26,962            26,362
Noninterest income
   Service charges and other fees                                            4,669            4,400             3,039
   Mortgage servicing fees, net                                                399              349               317
   Gain on sale of mortgage loans                                              666            2,398               370
   Gain (loss) on securities                                                   (8)              (24)              143
   Fees from sales of mutual funds and annuities                               858              597                --
   Other                                                                        99               91               277
-----------------------------------------------------------------------------------------------------------------------
                                                                             6,683            7,811             4,146
Noninterest expense
   Compensation and benefits                                                11,213           11,521            10,356
   Occupancy                                                                 1,680            1,550             1,316
   Furniture, fixtures and equipment                                         1,199            1,241             1,056
   Advertising                                                                 325              275               276
   FDIC deposit insurance premium                                              403              400               324
   State single business tax                                                   570              517               357
   Data processing                                                           1,197            1,130               891
   Professional services                                                       426              495               379
   Acquisition intangibles amortization                                      1,204            1,216             1,226
   Other                                                                     2,746            2,747             2,527
-----------------------------------------------------------------------------------------------------------------------
                                                                            20,963           21,092            18,708
-----------------------------------------------------------------------------------------------------------------------
INCOME BEFORE FEDERAL INCOME TAX EXPENSE                                    14,646           13,681            11,800
Federal income tax expense                                                   5,138            5,013             4,273
-----------------------------------------------------------------------------------------------------------------------
Net income                                                               $   9,508        $   8,668         $   7,527
=======================================================================================================================
Earnings per common share
   Basic                                                                   $  1.60           $ 1.45            $ 1.21
=======================================================================================================================
   Diluted                                                                 $  1.51           $ 1.31            $ 1.11
=======================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements..


--------------------------------------------------------------------------------
32  OTTAWA FINANCIAL CORPORATION

<PAGE>


<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                                                            Accumu-
                                                                              lated  Unallocated
                                                                              Other     Employee     Unearned                 Total
                                                      Additional            Compre-        Stock   Management                Share-
                                              Common     Paid-in  Retained  hensive    Ownership  Recognition   Treasury   holders'
Years ended December 31, 1999, 1998 and 1997   Stock     Capital  Earnings   Income  Plan Shares  Plan Shares      Stock     Equity
-----------------------------------------------------------------------------------------------------------------------------------
Dollars in thousands, except share data
<S>                                            <C>      <C>       <C>       <C>        <C>           <C>       <C>         <C>
BALANCE - JANUARY 1, 1997                      $  60    $ 61,049  $ 32,672  $  (79)    $ (2,806)     $(1,977)  $(12,002)   $ 76,917
Net income for the year ended
   December 31, 1997                                                 7,527                                                    7,527
29,079 shares issued upon
   exercise of stock options                                 258                                                                258
38,182 shares issued upon
   exercise of stock warrants                                502                                                                502
62,760 shares committed to be released
   under employee stock ownership plan                       654                            483                               1,137
Issuance of 11,638 shares of common
   stock for management recognition plan                     249                                        (249)
Shares earned under management
   recognition and retention plan                                                                        572                    572
15,224 shares forfeited under management
   recognition and retention plan                           (152)                                        152
Acquisition of 528,740 treasury
   shares, at cost                                                                                               (8,833)     (8,833)
Cash dividend - $.30 per share                                      (1,858)                                                  (1,858)
10% Stock dividend                                         4,821   (14,955)                                      10,134
Change in unrealized gain (loss) on securities
   available for sale, net of tax of $73                                       141                                              141
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 1997                       60      67,381    23,386      62       (2,323)      (1,502)   (10,701)     76,363

Net income for the year ended
   December 31, 1998                                                 8,668                                                    8,668
62,425 shares issued upon
   exercise of stock options                       1         491                                                                492
124,353 shares issued upon
   exercise of stock warrants                      1       1,634                                                              1,635
59,611 shares committed to be released
   under employee stock ownership plan                       909                            437                               1,346
Shares earned under management
   recognition and retention plan                                                                        509                    509
15,481 shares forfeited under management
   recognition and retention plan                           (293)       12                               281
Acquisition of 606,645 treasury
   shares, at cost                                                                                              (13,640)    (13,640)
Cash dividend - $.35 per share                                      (2,113)                                                  (2,113)
10% Stock dividend                                         2,869   (14,590)                                      11,721
Tax benefit of equity deductions                             186                                                                186
Change in unrealized gain (loss) on securities
   available for sale, net of tax of $(21)                                     (39)                                             (39)
-----------------------------------------------------------------------------------------------------------------------------------
   BALANCE - DECEMBER 31, 1998                    62      73,177    15,363      23       (1,886)        (712)   (12,620)     73,407

Net income for the year ended
   December 31, 1999                                                 9,508                                                    9,508
82,077 shares issued upon
   exercise of stock options                       1         790                                                                791
81,124 shares issued upon
   exercise of stock warrants                      1       1,077                                                              1,078
180,600 shares issued upon exchange
   of stock warrants                               1         (93)                                                               (92)
56,463 shares committed to be released
   under employee stock ownership plan                       733                            424                               1,157
Shares earned under management
   recognition and retention plan                                                                        497                    497
Acquisition of 241,985 treasury
   shares, at cost                                                                                               (5,145)     (5,145)
Cash dividend - $.45 per share                                      (2,689)                                                  (2,689)
10% Stock dividend                                         1,680   (11,728)                                      10,048
Tax benefit of equity deductions                             198                                                                198
Change in unrealized gain (loss) on securities
   available for sale, net of tax of $(452)                                   (878)                                            (878)
-----------------------------------------------------------------------------------------------------------------------------------
   BALANCE - DECEMBER 31, 1999                 $  65    $ 77,562  $ 10,454  $ (855)    $ (1,462)     $  (215)  $ (7,717)    $77,832
===================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.

--------------------------------------------------------------------------------
                                                          1999 ANNUAL REPORT  33
<PAGE>


<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31,                                                      1999             1998              1997
----------------------------------------------------------------------------------------------------------------------
Dollars in thousands
<S>                                                                      <C>              <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                               $   9,508        $   8,668         $   7,527
Adjustments to reconcile net income to net cash from operating activities
   Depreciation                                                              1,255            1,209             1,079
   Net amortization of security premiums and discounts                         329              418               314
   Amortization of intangible assets                                         1,204            1,216             1,226
   Provision for loan losses                                                 1,170              930               660
   (Gain) loss on sales of securities                                            8               24              (143)
   Loss on limited partnership investment                                      281              332                82
   ESOP expense                                                              1,157            1,346             1,137
   MRP expense                                                                 497              509               572
   Origination of loans for sale                                          (63,310)         (151,356)          (45,354)
   Proceeds from sales of loans originated for sale                         66,652          150,678            43,531
   Gain on sales of loans                                                    (666)           (2,398)             (370)
   Changes in assets and liabilities
     Other assets                                                          (1,740)           (1,286)              (94)
     Other liabilities                                                     (1,096)            1,473             1,709
----------------------------------------------------------------------------------------------------------------------
       Net cash from operating activities                                   15,249           11,763            11,876
CASH FLOWS FROM INVESTING ACTIVITIES
Activity in available-for-sale securities
   Purchases                                                              (36,993)          (59,110)          (30,092)
   Maturities, prepayments and calls                                        24,916           40,301            33,409
   Sales                                                                     1,005            3,965             2,324
Purchases of FHLB stock                                                                      (4,474)             (350)
Purchases of loans                                                        (20,942)                             (6,039)
Loan originations and principal payments on loans                         (66,518)          (21,621)          (26,255)
Premises and equipment expenditures, net                                   (2,403)           (1,379)           (1,575)
----------------------------------------------------------------------------------------------------------------------
   Net cash used in investing activities                                 (100,935)          (42,318)          (28,578)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits                                                    18,322           39,072            32,068
Net increase (decrease) in Federal funds purchased                           1,600                             (2,000)
Proceeds from FHLB advances                                                114,961          163,625            67,000
Repayment of FHLB advances                                                (58,876)         (148,815)          (60,712)
Proceeds from exercise of stock options                                        791              492               258
Proceeds from exercise of stock warrants                                     1,078            1,635               502
Cash paid for exchange of stock warrants                                      (92)
Cash dividends paid                                                        (2,689)           (2,113)           (1,858)
Purchase of treasury shares                                                (5,145)          (13,640)           (8,833)
----------------------------------------------------------------------------------------------------------------------
   Net cash from financing activities                                       69,950           40,256            26,425
----------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents                                   (15,736)            9,701             9,723
Cash and cash equivalents at beginning of year                              42,225           32,524            22,801
----------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                                 $  26,489        $  42,225         $  32,524
======================================================================================================================
Supplemental disclosures of cash flow information
   Cash paid during the year for
     Interest                                                            $  39,100        $  39,228         $  37,289
     Income taxes                                                            5,050            4,340             3,167
</TABLE>

See accompanying notes to consolidated financial statements.

--------------------------------------------------------------------------------
34  OTTAWA FINANCIAL CORPORATION

<PAGE>


<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years ended December 31,                                                      1999             1998              1997
----------------------------------------------------------------------------------------------------------------------
Dollars in thousands
<S>                                                                      <C>              <C>               <C>
Net income                                                               $   9,508        $   8,668         $   7,527
Other comprehensive income (loss), net of tax:
   Unrealized gains (losses) arising during the period
     on securities available for sale                                        (883)              (55)              235
   Less: Reclassification adjustment for accumulated
     (gains) losses included in net income                                      5                16               (94)
----------------------------------------------------------------------------------------------------------------------
     Unrealized gains (losses) on securities available for sale              (878)              (39)              141
----------------------------------------------------------------------------------------------------------------------
   Comprehensive income                                                  $  8,630         $   8,629         $   7,668
----------------------------------------------------------------------------------------------------------------------
</TABLE>


See accompanying notes to consolidated financial statements.



--------------------------------------------------------------------------------
                                                          1999 ANNUAL REPORT  35

<PAGE>


--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature  of  Operations  and  Principles  of   Consolidation:   Ottawa  Financial
Corporation is a thrift holding  company and the sole  shareholder of AmeriBank.
AmeriBank is the sole shareholder of O.S. Services, Inc. and AmeriPlan Financial
Services,  Inc. The consolidated  financial  statements  include the accounts of
Ottawa,  AmeriBank and AmeriBank's  wholly-owned  subsidiaries.  All significant
inter-company transactions and balances have been eliminated in consolidation.

   AmeriBank's   primary   services  include   accepting   deposits  and  making
commercial,  mortgage and installment  loans at its 27 retail banking offices in
six counties in the Western  Michigan.  Due to the significance of these primary
services,  our operations are reported as one segment.  Other operations include
that of O.S. Services and AmeriPlan Financial  Services.  The operations of O.S.
Services  include  investing  in the stock of MMLIC Life  Insurance  Company and
participating  as a limited partner in affordable  housing  projects.  AmeriPlan
Financial  Services was  established in December  1997.  Its operations  include
selling investment products,  including mutual funds and annuities, and offering
discount brokerage services.

   As of January 1, 2000,  AmeriBank's  residential  mortgage lending operations
were segregated and transferred into AmeriBank  Mortgage Company, a wholly-owned
subsidiary of AmeriBank.  The operations of AmeriBank  Mortgage  Company include
originating and selling residential mortgage loans.

Use of Estimates in the Preparation of Financial Statements:  The preparation of
financial statements in conformity with generally accepted accounting principles
requires us to make estimates and assumptions  that affect the reported  amounts
of assets and  liabilities,  disclosure of contingent  assets and liabilities at
the date of the financial  statements,  and the reported  amount of revenues and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.  The primary estimates  incorporated into our consolidated  financial
statements which are particularly susceptible to change in the near term include
the  allowance  for loan losses,  the  realization  of deferred tax assets,  the
determination  and  carrying  value  of  certain  financial   instruments,   the
determination  and carrying value of impaired loans, the status of contingencies
and the evaluation of impairment of mortgage servicing assets.

Concentration  of Credit  Risk:  Loans are granted to, and deposits are obtained
from,  customers  primarily in the Western  Michigan  area as  described  above.
Substantially  all loans are secured by specific items of collateral,  including
residential  real  estate,  commercial  real estate and consumer  assets.  Other
financial  instruments  which  potentially  subject Ottawa to  concentrations of
credit risk include deposit accounts in other financial institutions.

Consolidated  Statements  of  Cash  Flows:  For  purposes  of  the  consolidated
statements  of  cash  flows,  cash  equivalents  include  demand  balances  with
financial  institutions and Federal funds sold for one-day  periods.  Cash flows
are reported net for short-term investment,  loan and deposit transactions,  and
short-term borrowings.

Securities  Available  for  Sale:  Securities  available  for  sale  consist  of
securities  which  might be sold prior to  maturity  due to changes in  interest
rates,  prepayment  risks,  yield and  availability of alternative  investments,
liquidity  needs or other factors.  Securities  classified as available for sale
are reported at their fair value and the related unrealized holding gain or loss
is reported, net of income tax, in other comprehensive income.

   Declines in the fair value of  individual  securities  below  cost,  which we
consider to be other than temporary, are charged to earnings as a realized loss.

   Premiums and  discounts on securities  available  for sale are  recognized in
interest  income using the  level-yield  method over the  estimated  life of the
security.  Gains and  losses on the sale of  securities  available  for sale are
determined using the specific identification method.

Loan Income:  Interest on loans is accrued over the term of the loans based upon
the principal outstanding, using the interest method. We review loans delinquent
90 days or more to determine if the interest  accrual should be discontinued and
the loan  considered  impaired.  The  carrying  values  of  impaired  loans  are
periodically adjusted to reflect cash payments, revised estimates of future cash
flows,  and  changes  in the  present  value of  expected  cash flows due to the
passage of time.  Cash  payments  representing  interest  income are reported as
such.  Other cash payments are reported as reductions in carrying  value,  while
increases or decreases due to changes in estimates of future payments and due to

--------------------------------------------------------------------------------
36  OTTAWA FINANCIAL CORPORATION

<PAGE>


--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


the  passage of time are  reported  as  adjustments  to the  provision  for loan
losses.

   For loans  originated for portfolio,  loan fees are deferred,  net of certain
direct  loan  origination  costs.  The net amount  deferred  is  reported in the
consolidated  balance  sheets  as a  reduction  of loans  and is  recognized  as
interest  income  over the  contractual  term of the loan using the  level-yield
method.

Mortgage Banking Activities:  Mortgage loans originated and intended for sale in
the  secondary  market are carried at the lower of cost or  estimated  aggregate
market value. Net unrealized  losses are recognized in a valuation  allowance by
charges to income.  Mortgage loans are sold into the secondary  market at market
prices,  which includes  consideration for normal servicing fees. The total cost
of mortgage loans  purchased or originated  with the intent to sell is allocated
between the right to service the loan and the mortgage  loan without  servicing,
based on their  relative fair values.  The  capitalized  cost of loan  servicing
rights is  amortized in  proportion  to, and over the period of,  estimated  net
future servicing revenue.

   Mortgage  servicing  rights are  periodically  evaluated  for  impairment  by
stratifying  them based on predominant  risk  characteristics  of the underlying
serviced loans, such as loan type, term and note rate. Impairment represents the
excess of cost of an individual  mortgage servicing rights stratum over its fair
value, and is recognized through a valuation allowance.

Allowance  for Loan  Losses:  Because  some loans may not be repaid in full,  an
allowance for loan losses is maintained. Increases to the allowance are recorded
by a provision for loan losses  charged to expense.  Estimating  the risk of the
loss and the amount of loss on any loan is necessarily subjective.  Accordingly,
we maintain  the  allowance  at a level  considered  adequate to cover  possible
losses that are currently  anticipated  based on past loss  experience,  general
economic  conditions,  information about specific borrower situations  including
their financial  position and collateral values, and other factors and estimates
which are  subject  to change  over  time.  While we may  periodically  allocate
portions of the  allowance  for  specific  problem  loan  situations,  including
impaired loans  discussed  below,  the whole allowance is available for any loan
charge-offs  that  occur.  Loans  are  charged  off in whole or in part when our
estimate of the undiscounted cash flows from the loan are less than the recorded
investment  in the loan,  although  collection  efforts may  continue and future
recoveries may occur.

   Loan  impairment  is reported  when full payment  under the loan terms is not
expected.  Impairment is evaluated in total for smaller-balance loans of similar
nature such as residential mortgage,  consumer, and credit card loans, and on an
individual loan basis for other loans.  If a loan is impaired,  a portion of the
allowance is allocated so that the loan is reported,  net, at the present  value
of  estimated  future cash flows using the loan's  existing  rate or at the fair
value of collateral if repayment is expected solely from the  collateral.  Loans
are evaluated  for  impairment  when payments are delayed,  typically 90 days or
more, or when it is probable that all principal and interest amounts will not be
collected according to the original terms of the loan.

Premises  and  Equipment:  Premises  and  equipment  are  stated  at  cost  less
accumulated depreciation.  Premises and related components are depreciated using
the  straight-line  method with  useful  lives  ranging  from 10 to 40 years and
furniture and  equipment are  depreciated  using the  straight-line  method with
useful lives ranging from 3 to 10 years.  Maintenance and repairs are charged to
expense and improvements are capitalized.  The cost and accumulated depreciation
applicable to assets retired or otherwise  disposed of are  eliminated  from the
accounts and the gain or loss on disposition  is included in noninterest  income
or expense.  These assets are reviewed for impairment  when events  indicate the
carrying amount may not be recoverable.

Real Estate Owned: Real estate properties  acquired through, or in lieu of, loan
foreclosure  are  initially  recorded  at fair value at the date of  foreclosure
establishing a new cost basis.  After  foreclosure,  valuations are periodically
performed by  management  and the real estate is carried at the lower of cost or
fair value minus estimated  costs to sell.  Revenue and expenses from operations
of real estate owned is included in other noninterest expense.

Acquisition  Intangibles:   Goodwill  is  the  excess  of  purchase  price  over
identified  net assets in  business  acquisitions.  Goodwill  is expensed on the
straight-line method over 15 years.  Identified  intangibles represent the value
of depositor  relationships  purchased and is expensed on an  accelerated  basis
over 10 years.  Goodwill and identified  intangibles are assessed for impairment
based on estimated undiscounted cash flows, and written down if necessary.

--------------------------------------------------------------------------------
                                                          1999 ANNUAL REPORT  37
<PAGE>


--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Income Taxes:  Income tax expense is based on the amount of taxes due on the tax
return plus the change in deferred taxes  computed based on the expected  future
tax consequences of temporary  differences  between the carrying amounts and tax
bases  of  assets  and  liabilities,  using  enacted  tax  rates,  adjusted  for
allowances made for uncertainty regarding the realization of net tax assets.

Retirement  Plans:  Ottawa  sponsors a  noncontributory  defined benefit pension
plan.  The plan  covers  all  employees  who have met  certain  age and  service
requirements.  Benefits from the defined benefit pension plan are based on years
of service and the employee's  compensation.  The funding policy for the plan is
to  contribute  the  minimum  funding   requirement   calculated  by  consulting
actuaries.

Employee Stock  Ownership  Plan: The cost of shares issued to the employee stock
ownership  plan but not yet  allocated  to  participants  are  presented  in the
consolidated balance sheet as a reduction of shareholders' equity.  Compensation
expense  is  recorded  based  on the  market  price  of the  shares  as they are
committed to be released for allocation to participant accounts.  The difference
between  the market  price and the cost of shares  committed  to be  released is
recorded as an adjustment to paid in capital. Dividends on allocated plan shares
are recorded as a reduction of retained earnings;  dividends on unallocated plan
shares are reflected as a reduction of debt and accrued interest.

Earnings Per Share:  Amounts reported as basic earnings per common share reflect
the  earnings  available  to common  shareholders  for the year  divided  by the
weighted  average number of common shares  outstanding  during the year.  Common
shares  outstanding  includes issued shares less shares held in the treasury and
unallocated  shares held by the employee stock ownership plan.  Diluted earnings
per common share includes the shares that would be outstanding assuming exercise
of dilutive stock options and warrants.  All share and per share information has
been retroactively  adjusted to reflect the 10% stock dividends paid on June 30,
1999, August 31, 1998 and September 30, 1997.

Comprehensive  Income:  Comprehensive  income  consists  of net income and other
comprehensive  income.  Other comprehensive income includes unrealized gains and
losses on securities  available for sale which are also recognized as a separate
component of equity.

New  Accounting  Pronouncements:  Beginning  January 1, 2001,  a new  accounting
standard  will  require all  derivatives  to be  recorded at fair value.  Unless
designated  as hedges,  changes in these fair  values  will be  recorded  in the
income statement. Fair value changes involving hedges will generally be recorded
by offsetting  gains and losses on the hedge and on the hedged item, even if the
fair value of the hedged item is not otherwise recorded. This is not expected to
have a material  effect but the effect will depend on  derivative  holdings when
this standard applies. As of December 31, 1999 we have no derivative holdings.

Loss  Contingencies:  Loss  contingencies,  including  claims and legal  actions
arising in the ordinary course of business, are recorded as liabilities when the
likelihood  of loss is probable and an amount or range of loss can be reasonably
estimated.  Management  does not believe there are such matters that will have a
material effect on the financial statements.

Equity:  Ottawa is authorized to issue 5,000,000  shares of preferred stock from
time to time in one or more series subject to applicable  provisions of law, and
the  Board  of  Directors  is  authorized  to  fix  the  designations,   powers,
preferences  and relative  participating,  optional and other special  rights of
such shares,  including  voting rights (which could be multiple or as a separate
class) and conversion rights. In the event of a proposed merger, tender offer or
other  attempt to gain  control of Ottawa  that the Board does not  approve,  it
might be  possible  for the  Board to  authorize  the  issuance  of a series  of
preferred stock with rights and preferences  that would impede the completion of
such a  transaction.  The Board of  Directors  has not issued and has no present
plans for the issuance of any preferred stock.

   Common stock has $.01 par and 10,000,000  shares  authorized.  As of December
31, 1999 and 1998, 6,471,617 and 6,155,234 shares were issued. Treasury stock is
carried at cost.  As of December 31, 1999 and 1998,  376,828 and 162,257  shares
were held in the treasury.  Transfers from retained  earnings are made for stock
dividends using the fair value of shares issued.

Reclassifications:  Certain amounts in the 1998 and 1997 consolidated  financial
statements have been reclassified to conform with the 1999 presentation.

--------------------------------------------------------------------------------
38  OTTAWA FINANCIAL CORPORATION

<PAGE>


--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Note 2 - Securities

Securities available for sale at year end are as follows:
                                                                                    Gross              Gross
                                                             Amortized Cost   Unrealized Gains    Unrealized Losses     Fair Value
-----------------------------------------------------------------------------------------------------------------------------------
Dollars in thousands

1999
<S>                                                           <C>               <C>                <C>                 <C>
Debt securities
Obligations of U.S. Government corporations and agencies      $     46,647      $         33       $        724        $     45,956
Municipal obligations                                                  106                                    2                 104
Corporate                                                            7,051                                  123               6,928
Asset-backed                                                        28,548                34                514              28,068
-----------------------------------------------------------------------------------------------------------------------------------
                                                              $     82,352      $         67       $      1,363        $     81,056
===================================================================================================================================

                                                                                    Gross              Gross
                                                             Amortized Cost   Unrealized Gains    Unrealized Losses     Fair Value
-----------------------------------------------------------------------------------------------------------------------------------
Dollars in thousands

1998

Debt securities
Obligations of U.S. Government corporations and agencies      $     25,510      $         69       $         37        $     25,542
Municipal obligations                                                  649                 4                                    653
Corporate                                                            8,095                85                  4               8,176
Asset-backed                                                        37,358               137                220              37,275
-----------------------------------------------------------------------------------------------------------------------------------
                                                              $     71,612      $        295       $        261        $     71,646
===================================================================================================================================
</TABLE>

Contractual  maturities of debt  securities  available for sale at year end 1999
are  as  follows.  Securities  not  due at a  single  maturity  date,  primarily
asset-backed  securities,  are shown separately.  Expected maturities may differ
from  contractual  maturities  because  borrowers  may have the right to call or
prepay obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
                                                                      Amortized Cost              Fair Value
-------------------------------------------------------------------------------------------------------------
Dollars in thousands
<S>                                                                     <C>                     <C>
Due in one year or less                                                 $     15,051            $     14,960
Due after one year through five years                                         37,175                  36,445
Due after five through ten years                                               1,578                   1,583
-------------------------------------------------------------------------------------------------------------
                                                                              53,804                  52,988
Asset-backed debt securities                                                  28,548                  28,068
-------------------------------------------------------------------------------------------------------------
                                                                        $     82,352            $     81,056
=============================================================================================================
</TABLE>

<TABLE>
<CAPTION>

Sales of securities available for sale are as follows:
                                                            1999                1998                 1997
-----------------------------------------------------------------------------------------------------------
Dollars in thousands
<S>                                                       <C>                 <C>                 <C>
Proceeds                                                  $  1,005            $  3,965            $  2,324
Gross gains                                                                                            154
Gross losses                                                    (8)                (24)                (11)

</TABLE>

As of December  31,1999,  securities  with a carrying value of $74,024,000  were
pledged to secure  Federal Home Loan Bank  advances  under a blanket  collateral
agreement.

--------------------------------------------------------------------------------
                                                          1999 ANNUAL REPORT  39

<PAGE>


--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
NOTE 3 - LOANS

Loans at year end are as follows:
                                                                                               1999              1998
----------------------------------------------------------------------------------------------------------------------
Dollars in thousands

<S>                                                                                       <C>               <C>
Residential mortgage loans (principally conventional)
   Secured by one-to-four family residences                                               $ 432,145         $ 425,974
   Construction                                                                              50,814            30,673
----------------------------------------------------------------------------------------------------------------------
                                                                                            482,959           456,647
Commercial loans
   Secured by multi-family and commercial properties                                        122,884           101,039
   Construction                                                                              74,897            87,119
   Business                                                                                  78,318            53,935
----------------------------------------------------------------------------------------------------------------------
                                                                                            276,099           242,093
Consumer and other loans
   Home equity                                                                               53,497            49,647
   Other (principally auto)                                                                  87,853            70,643
----------------------------------------------------------------------------------------------------------------------
                                                                                            141,350           120,290
----------------------------------------------------------------------------------------------------------------------
                                                                                            900,408           819,030
Less
   Undisbursed portion of construction loans                                                (38,482)          (44,797)
   Deferred fees and discounts                                                                 (453)             (640)
   Allowance for loan losses                                                                 (4,714)           (3,823)
----------------------------------------------------------------------------------------------------------------------
                                                                                            (43,649)          (49,260)
----------------------------------------------------------------------------------------------------------------------
                                                                                          $ 856,759         $ 769,770
======================================================================================================================
</TABLE>

As of December  31,1999,  residential  mortgage loans  amounting to $418,481,000
were  pledged  to  secure  Federal  Home  Loan  Bank  advances  under a  blanket
collateral agreement.

<TABLE>
<CAPTION>

NOTE 4 - ALLOWANCE  FOR LOAN LOSSES

An analysis of the allowance for loan losses follows:

                                                                              1999             1998              1997
----------------------------------------------------------------------------------------------------------------------
Dollars in thousands

<S>                                                                          <C>                <C>               <C>
Balance - beginning of year                                              $   3,823        $   3,293         $   3,129
   Provision                                                                 1,170              930               660
   Recoveries                                                                  265              176               119
   Loans charged-off                                                         (544)             (576)             (615)
----------------------------------------------------------------------------------------------------------------------
Balance - end of year                                                    $   4,714        $   3,823         $   3,293
======================================================================================================================
</TABLE>

--------------------------------------------------------------------------------
40  OTTAWA FINANCIAL CORPORATION

<PAGE>


--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

Information regarding impaired loans is as follows:
                                                                              1999             1998              1997
----------------------------------------------------------------------------------------------------------------------
Dollars in thousands

<S>                                                                      <C>              <C>               <C>
Average investment in impaired loans                                     $   1,715        $   1,710         $   1,354
Interest income recognized on impaired loans including
   interest income recognized on cash basis                                     69               24               104
Interest income recognized on impaired loans on cash basis                      69               24                 4


                                                                                               1999              1998
----------------------------------------------------------------------------------------------------------------------
Dollars in thousands
Balance of impaired loans at year end                                                     $   3,247         $   1,452
Less portion for which no allowance for loan losses is allocated                             (2,861)           (1,053)
----------------------------------------------------------------------------------------------------------------------
   Portion of impaired loan balance for which an allowance for credit losses is allocated $     386         $     399
   Portion of allowance for loan losses allocated to the impaired loan balance            $      51         $      65
</TABLE>


NOTE 5 - SECONDARY MORTGAGE MARKET ACTIVITIES

Mortgage loans serviced for others,  principally  the Federal Home Loan Mortgage
Corporation,  which  are  not  reported  as  assets,  totaled  $261,047,000  and
$227,939,000 at December 31, 1999 and 1998. Custodial escrow balances maintained
in connection with this loan servicing,  and included in demand  deposits,  were
$488,000 and $372,000 at December 31, 1999 and 1998.

   Following  is an  analysis  of  the  activity,  in  thousands,  for  mortgage
servicing rights:

Balance at January 1, 1997                                          $     457
   Additions                                                              237
   Amortization                                                           (44)
------------------------------------------------------------------------------
Balance at December 31, 1997                                              650
------------------------------------------------------------------------------
   Additions                                                            1,655
   Amortization                                                          (177)
------------------------------------------------------------------------------
Balance at December 31, 1998                                            2,128
   Additions                                                              759
   Amortization                                                          (292)
------------------------------------------------------------------------------
Balance at December 31, 1999                                        $   2,595
==============================================================================

   The carrying values of mortgage  servicing rights approximate fair values for
all years presented.

--------------------------------------------------------------------------------
                                                          1999 ANNUAL REPORT  41

<PAGE>


--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6 - PREMISES AND EQUIPMENT

Premises and equipment at year end are as follows:

                                            1999              1998
-------------------------------------------------------------------
Dollars in thousands

Land                                   $   3,590         $   3,206
Buildings and improvements                12,641            11,638
Furniture and equipment                    8,764             7,636
-------------------------------------------------------------------
                                          24,995            22,480
Accumulated depreciation                  (8,647)           (7,280)
-------------------------------------------------------------------
                                       $  16,348         $  15,200
===================================================================

NOTE 7 - DEPOSITS

Deposits at year end are as follows:

                                              1999              1998
---------------------------------------------------------------------
Dollars in thousands

Noninterest-bearing                      $  40,969         $  40,813
NOW accounts and MMDAs                     215,403           200,132
Passbook and statement savings              46,022            54,475
Certificates of deposit                    409,560           398,212
---------------------------------------------------------------------
                                         $ 711,954         $ 693,632
=====================================================================

   Scheduled maturities of time deposits, in thousands, over the next five years
are as follows:

                                               1999              1998
----------------------------------------------------------------------
Year 1                                    $ 234,465         $ 320,191
Year 2                                       95,553            53,416
Year 3                                       72,554            11,093
Year 4                                        3,324             7,529
Year 5 and thereafter                         3,664             5,983
----------------------------------------------------------------------
                                          $ 409,560         $ 398,212
======================================================================

   The  aggregate  amount of demand,  savings and  certificates  of deposit with
balances of $100,000 or more was  approximately  $99,881,000  and $91,717,000 at
December 31, 1999 and 1998.

--------------------------------------------------------------------------------
42  OTTAWA FINANCIAL CORPORATION

<PAGE>


--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 8 - BORROWINGS

Advances  from the Federal  Home Loan Bank of  Indianapolis,  collateralized  by
securities and mortgage loans under a blanket  collateral  agreement and Federal
Home Loan Bank stock, consist of the following at year end:

<TABLE>
<CAPTION>

Principal Terms                        Advance Amount           Range of Maturities      Weighted Average Interest Rate
------------------------------------------------------------------------------------------------------------------------
Dollars in thousands

1999

<S>                                         <C>                                                                   <C>
Single-maturity fixed rate advances         $  99,125           January 2000 to June 2010                         6.08%
Putable advances                               64,000           May 2000 to April 2009                            5.60%
Short-term variable rate advances              50,000           January 2000 to July 2000                         5.80%
Amortizable mortgage advances                   3,228           May 2000                                          6.82%
------------------------------------------------------------------------------------------------------------------------
                                            $ 216,353
========================================================================================================================

1998

Single-maturity fixed rate advances         $ 104,125           February 1999 to June 2010                        6.06%
Putable advances                               51,000           May 2000 to May 2008                              5.53%
Amortizable mortgage advances                   5,143           June 1999 to May 2000                             6.91%
------------------------------------------------------------------------------------------------------------------------
                                              160,268
========================================================================================================================

</TABLE>

   Maturities of advances  outstanding,  in thousands,  over the next five years
are:

                                        1999              1998
-----------------------------------------------------------------
Year 1                             $ 101,228         $  61,405
Year 2                                13,000            18,738
Year 3                                22,000             8,000
Year 4                                17,000            12,000
Year 5                                16,000            15,000
Year 6 and thereafter                 47,125            45,125
-----------------------------------------------------------------
                                   $ 216,353         $ 160,268
=================================================================

   Some of the advances  are subject to  prepayment  penalties  according to the
conditions of the credit policy of the Federal Home Loan Bank.  Putable advances
are fixed rate  advances for a scheduled  period of time after which the Federal
Home Loan Bank may convert the advance to a variable rate. If converted,  we may
prepay the advance without penalty.

   At December 31, 1999,  Ottawa had unused lines of credit with two major banks
totaling $28.4 million.


--------------------------------------------------------------------------------
                                                          1999 ANNUAL REPORT  43

<PAGE>



--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 9 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

Ottawa is a party to financial  instruments with  off-balance-sheet  risk in the
normal course of business to meet the financing  needs of its  customers.  These
financial  instruments  include standby  letters of credit,  commitments to make
loans and fund loans in process.  Ottawa's  exposure to credit loss in the event
of nonperformance by the other party to these financial  instruments is equal to
the  contractual  amount of these  instruments.  Ottawa  follows the same credit
policy to make these  commitments  as it uses for those  loans  recorded  in the
financial statements.

   The  contract  amounts  of  these  financial  instruments  at year end are as
follows:
<TABLE>
<CAPTION>
                                                                                               1999              1998
----------------------------------------------------------------------------------------------------------------------
Dollars in thousands

<S>                                                                                       <C>               <C>
Financial instruments whose contract amount represents credit risk
   Commitments to make loans                                                              $  23,881         $  19,427
   Unused consumer lines of credit                                                           41,691            34,854
   Unused commercial lines of credit                                                         39,273            24,190
   Loans in process                                                                          38,483            44,797
   Letters of credit                                                                         22,138            10,340
</TABLE>

   Since  certain  commitments  to make loans and fund  loans in process  expire
without being used, the above amounts do not necessarily  represent  future cash
commitments.  Commitment periods are generally for 30 to 120 days. Approximately
33% and 39% of  commitments  to make loans and to fund lines of credit and loans
in process  were made at fixed  rates as of  December  31,  1999 and 1998.  Rate
ranges for these fixed rate commitments were 7.13% to 10.50% and 6.20% to 10.00%
as of  December  31,  1999 and 1998.  Lines of credit  are  generally  issued at
variable  market  rates.  No  losses  are  anticipated  as  a  result  of  these
transactions.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

Ottawa has entered into employment  agreements  with two of its officers.  Under
the terms of these agreements,  certain events leading to separation from Ottawa
could result in cash payments aggregating approximately $1.8 million.

   A lawsuit  against  AmeriBank  was filed in December  1998  alleging  that we
engaged in the unauthorized  practice of law due to charging a fee for preparing
loan documents. The complaint sought class action certification,  restitution of
all fees paid for the last six years,  interest,  attorney fees and other costs.
The class action certification was obtained in March 1999. We filed a motion for
summary  disposition based upon our belief that the complaint was wholly without
merit.  In July 1999,  the court granted our motion and the case was  dismissed.
After the case was dismissed, the plaintiff amended the complaint and alleged we
violated  certain  banking  regulations.  In September  1999, the case was again
dismissed  from the state court  system.  After the case was  dismissed  for the
second time, the attorney for the plaintiff  filed a similar case on behalf of a
new plaintiff in the federal court system,  with a focus on the allegation  that
we violated certain banking  regulations.  In October 1999 we filed a motion for
summary  disposition  within the federal  courts.  In December 1999 the case was
dismissed from the federal courts.  Subsequently,  both cases have been appealed
at both the  federal  and state  courts.  We  continue  to  believe  that  these
allegations  are wholly  without merit and intend to vigorously  defend  against
these lawsuits.

   Ottawa and AmeriBank  periodically  become  defendants in certain  claims and
legal actions arising in the ordinary course of business.  Currently,  there are
no  matters  which  are  expected  to  have a  material  adverse  effect  on our
consolidated financial position or results of operations.

--------------------------------------------------------------------------------
44  OTTAWA FINANCIAL CORPORATION

<PAGE>



--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 11 - RESTRICTIONS ON RETAINED EARNINGS AND CAPITAL REQUIREMENTS

Effective  July 25,  1997,  AmeriBank  completed  its  conversion  to a Michigan
chartered savings bank. As a state chartered savings bank,  AmeriBank's  primary
regulators  are the  Financial  Institutions  Bureau of Michigan and the Federal
Deposit Insurance Corporation.

   AmeriBank is subject to regulatory capital requirements administered by these
regulatory  agencies.  Capital adequacy  guidelines and prompt corrective action
regulations involve quantitative  measures of assets,  liabilities,  and certain
off-balance  sheet  items  calculated  under  regulatory  accounting  practices.
Capital amounts and classifications are also subject to qualitative judgments by
regulators  about  components,  risk  weightings,  and  other  factors,  and the
regulators can lower  classifications in certain cases.  Failure to meet various
capital  requirements  can initiate  regulatory  action that could have a direct
material effect on the financial statements.

   The  prompt  corrective  action  regulations  provide  five  classifications,
including   well   capitalized,   adequately   capitalized,    undercapitalized,
significantly undercapitalized, and critically undercapitalized,  although these
terms are not used to  represent  overall  financial  condition.  If  adequately
capitalized,  regulatory  approval is required to accept brokered  deposits.  If
under-  capitalized,  capital  distributions are limited, as is asset growth and
expansion,   and  plans  for  capital  restoration  are  required.  The  minimum
requirements are:

                          Capital to Risk-Weighted Assets     Tier 1 Capital
                          Total                    Tier 1    to Average Assets
-------------------------------------------------------------------------------
Well capitalized            10%                        6%             5%
Adequately capitalized       8                         4              4
Undercapitalized             6                         3              3


   AmeriBank's  actual capital levels (in millions) and minimum  required levels
at year end are as follows:

<TABLE>
<CAPTION>
                                                                         Minimum Required       Minimum Required To Be
                                                                            For Capital      Well Capitalized Under Prompt
                                                     Actual              Adequacy Purposes   Corrective Action Regulations

                                                Amount     Ratio        Amount      Ratio         Amount       Ratio
---------------------------------------------------------------------------------------------------------------------------
1999

<S>                                            <C>          <C>        <C>           <C>         <C>           <C>
Total capital (to risk weighted assets)        $ 70.2       10.2%      $ 54.9        8.0%        $ 68.7        10.0%
Tier 1 capital (to risk weighted assets)         65.5       9.5          27.5       4.0            41.2        6.0
Tier 1 capital (to average total assets)         65.5       6.7          39.2       4.0            49.0        5.0

1998

Total capital (to risk weighted assets)        $ 62.3       10.3%      $ 48.6        8.0%        $ 60.7        10.0%
Tier 1 capital (to risk weighted assets)         58.5       9.6          24.3       4.0            36.4        6.0
Tier 1 capital (to average total assets)         58.5       6.3          37.0       4.0            46.2        5.0

</TABLE>

   AmeriBank was categorized as well capitalized at year end 1999 and 1998.

--------------------------------------------------------------------------------
                                                          1999 ANNUAL REPORT  45

<PAGE>



--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


   During 1999 and 1998,  AmeriBank made capital  distributions to Ottawa in the
amount of $6,000,000 and $12,500,000,  respectively.  These  distributions  were
made  primarily to allow Ottawa to pay dividends  and fund the stock  repurchase
transactions  discussed  in Note 12. The  distributions  were within  regulatory
guidelines.

   The  Qualified  Thrift  Lender  test  requires  at least  65% of assets to be
maintained in housing-related finance and other specified areas. If this test is
not met, limits are placed on growth,  branching, new investments,  Federal Home
Loan Bank advances and dividends, or AmeriBank must convert to a commercial bank
charter. Management believes this test is met.

   At the time of conversion to a stock  association,  a liquidation  account of
$26,527,000 was established  which is equal to AmeriBank's total net worth as of
the date of the latest audited balance sheet  appearing in the final  conversion
prospectus.  The  liquidation  account  will be  maintained  for the  benefit of
eligible  depositors  who continue to maintain  their accounts at the Bank after
the conversion.  The liquidation account is to be reduced annually to the extent
that eligible  depositors  have reduced their  qualifying  deposits.  Subsequent
increases  do  not  restore  an  eligible  account  holder's   interest  in  the
liquidation  account.  In the event of a  complete  liquidation,  each  eligible
depositor  will be  entitled  to  receive a  distribution  from the  liquidation
account in an amount  proportionate to the current adjusted  qualifying balances
for  accounts  then held.  AmeriBank  may not pay  dividends  that would  reduce
shareholders' equity below the required liquidation account balance.

Note 12 - Stock Repurchase Programs

During 1999,  1998 and 1997,  Ottawa  repurchased  241,985,  606,645 and 528,740
shares of its common stock at an average price of $21.26, $22.48 and $16.70

   Repurchased  shares are  treated as  treasury  shares and are  available  for
general  corporate  purposes,   including  issuance  in  connection  with  stock
dividends, stock based compensation and warrant plans.

   All  share and per  share  information  has been  retroactively  adjusted  to
reflect  the 10% stock  dividends  paid on June 30,  1999,  August 31,  1998 and
September 30, 1997.

NOTE 13 - STOCK WARRANT PLAN

In connection with the acquisition of AmeriBank Federal Savings Bank on February
13, 1996, Ottawa issued 566,546 warrants to the former AmeriBank Federal Savings
Bank  shareholders.  All warrants were  exercisable  immediately  upon issue and
expired on February 16, 1999.

   On December  24,  1998,  Ottawa  offered to  exchange,  for each  outstanding
warrant, at the holder's option,  either .44 shares of the Corporation's  common
stock or $10.03 in cash.  As of January 26,  1999,  the  expiration  date of the
exchange offer,  Ottawa accepted tenders for  approximately 86% of its warrants.
In connection  with this  exchange,  Ottawa issued  180,600 shares of its common
stock and paid $90,130 in cash. The remaining 14% of the warrants were exercised
by the date of the warrant plan expiration,  resulting in additional  capital of
$1.1 million.

--------------------------------------------------------------------------------
46  OTTAWA FINANCIAL CORPORATION

<PAGE>


--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 14 - STOCK-BASED COMPENSATION PLANS

Ottawa   maintains  an  Employee  Stock   Ownership  Plan  for  the  benefit  of
substantially  all employees.  During 1994,  this plan borrowed  $4,222,050 from
Ottawa and used those funds to acquire 561,532 shares of the Corporation's stock
at $7.52 per share.  Participants  become fully vested in allocated shares after
five years of credited service and may receive their distribution in the form of
cash or stock.

   Shares  issued  to  the  employee  stock  ownership  plan  are  allocated  to
participants based on principal and interest payments made on the loan. The loan
is secured by shares  purchased with the loan proceeds and will be repaid by the
plan  with  funds  from  Ottawa's  discretionary  contributions  to the plan and
earnings on the plan's assets. Principal payments are scheduled to occur in even
quarterly amounts over a ten-year period.  However,  in the event  contributions
exceed the minimum debt service requirements, additional principal payments will
be made.  For  purposes  of the  following  disclosure,  all share and per share
information has been  retroactively  adjusted to reflect the 10% stock dividends
paid on June 30, 1999, August 31, 1998 and September 30, 1997. During 1999, 1998
and 1997,  56,463,  59,611,  and  62,760  shares of stock  with a fair  value of
$20.49, $22.58 and $18.12 per share were committed to be released,  resulting in
employee stock ownership plan compensation expense of $1,157,000, $1,346,000 and
$1,137,000, respectively.

Shares held by the plan at year end are as follows:

                                           1999           1998            1997
-------------------------------------------------------------------------------
Dollars in thousands
Allocated shares                        367,132        310,670         251,059
Unallocated shares                      194,400        250,862         310,473
-------------------------------------------------------------------------------
   Total ESOP shares                    561,532        561,532         561,532
===============================================================================
Fair value of unallocated shares      $   3,524      $   4,850       $   8,731
===============================================================================

   Ottawa  maintains  a  management   recognition   plan,  with  299,243  shares
authorized.  This is a restricted stock award plan in which stock awards vest in
five equal annual  installments,  subject to the  continuous  employment  of the
recipients.  Compensation  expense is based upon the  market  price of  Ottawa's
stock at the date of  grant,  and is  recognized  on a  prorata  basis  over the
vesting period of the awards.  Compensation  expense for this plan was $497,000,
$509,000  and  $572,000  for  1999,  1998 and  1997.  The  unamortized  unearned
compensation value of the management recognition plan is shown as a reduction to
shareholders' equity in the consolidated balance sheets.

   Ottawa also  maintains a stock  option and  incentive  plan,  with  1,427,518
shares  authorized.  Stock  options vest in five equal annual  installments  and
expire  10 years  from the  date of  grant.  No  compensation  expense  is being
recognized  for options that have an exercise price equal to the market price of
the Corporation's stock at the date of grant.

   The management  recognition  plan and the stock option and incentive plan are
administered by a committee of the Board of Directors of Ottawa.  This committee
selects recipients and defines the terms of awards consistent with the plans.

   Statement  of  Financial  Accounting  Standards  No. 123  requires  pro forma
disclosures for companies that do not adopt its fair value accounting method for
stock-based  employee  compensation.   Accordingly,   the  following  pro  forma
information  presents  net income,  basic  earnings per common share and diluted
earnings  per  common  share had the fair  value  method  been  used to  measure
compensation  cost for the stock option and inventive plan. In future years, the
pro forma  effect of not  applying  this  standard  is  expected  to increase as
additional options are granted. The compensation cost charged against income for
the management  recognition plan is the same as if the provisions of FAS No. 123
had been applied.

--------------------------------------------------------------------------------
                                                          1999 ANNUAL REPORT  47

<PAGE>


--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                                          1999             1998              1997
--------------------------------------------------------------------------------------------------
Dollars in thousands, except per share data

<S>                                                  <C>              <C>               <C>
Net income as reported                               $   9,508        $   8,668         $   7,527
Pro forma net income                                     8,948            8,218             7,150
--------------------------------------------------------------------------------------------------
Basic earnings per common share as reported               1.60             1.45              1.21
Pro forma basic earnings per common share                 1.50             1.37              1.15
--------------------------------------------------------------------------------------------------
Diluted earnings per common share as reported             1.51             1.31              1.11
Pro forma diluted earnings per common share               1.43             1.25              1.06
--------------------------------------------------------------------------------------------------
</TABLE>

   The fair values of stock options were  estimated  using option pricing models
with the following weighted-average assumptions as of grant date.


                                         1999          1998          1997
--------------------------------------------------------------------------
Risk-free interest rate                   5.89%         4.77%         6.27%
Expected life                         10 Years      10 Years      10 Years
Expected volatility of stock price        6.14%         6.45%         6.00%
Expected dividends                        2.22%         1.91%         1.97%

   Information regarding activity in the stock option plan is as follows:

<TABLE>
<CAPTION>
                                         Number        Weighted-Average                Range of        Weighted-Average
                                     of Options          Exercise Price          Exercise Price    Fair Value of Grants
------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                     <C>             <C>                             <C>
OUTSTANDING, END OF 1996                771,229                 $ 10.14         $ 3.61- $ 12.31
   Granted                               99,928                   16.97                                          $ 4.96
   Exercised                            (29,079)                   8.87
   Forfeited                            (30,434)                  10.23
------------------------------------------------------------------------------------------------------------------------
OUTSTANDING, END OF 1997                811,644                 $ 10.97         $ 3.61- $ 24.07
   Granted                              141,824                   23.04                                          $ 4.52
   Exercised                            (62,425)                   7.88
   Forfeited                            (61,442)                  22.43
------------------------------------------------------------------------------------------------------------------------
OUTSTANDING, END OF 1998                829,601                 $ 12.42         $ 5.92- $ 27.58
   Granted                               56,430                   20.43                                          $ 5.09
   Exercised                            (87,028)                  10.21
   Forfeited                             (4,825)                  15.70
------------------------------------------------------------------------------------------------------------------------
OUTSTANDING, END OF 1999                794,178                 $ 13.21         $ 5.92- $ 27.58
========================================================================================================================
</TABLE>

   Stock options exercisable at year-end are as follows:

                                           Number  Weighted-Average
                                       of Options    Exercise Price
--------------------------------------------------------------------
1997                                      267,760            $ 9.51
1998                                      362,220             10.62
1999                                      415,075             11.32

   At year-end 1999, the weighted average remaining life of options  outstanding
was 6.58 years.

   All  share and per  share  information  has been  retroactively  adjusted  to
reflect  the 10% stock  dividends  paid on June 30,  1999,  August 31,  1998 and
September 30, 1997.

--------------------------------------------------------------------------------
48  OTTAWA FINANCIAL CORPORATION

<PAGE>


--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 15 - PENSION PLANS

Ottawa  sponsors a  noncontributory  defined benefit pension plan. On January 1,
1998 two separate  plans were merged into one. The separate plans were from each
of the two Banks that merged in early 1996.  Both plans were curtailed  prior to
the merger.

   The  following  sets forth the funded  status and amounts  recognized  in the
consolidated financial statements at year end for the plan. The 1997 information
shown below reflects combined information for the two separate plans.

                                                       1999              1998
------------------------------------------------------------------------------
Dollars in thousands

Change in benefit obligation:
   Beginning benefit obligation                   $   3,592         $   3,947
   Interest cost                                        246               288
   Actuarial gain                                        20               263
   Benefits paid                                       (393)             (906)
------------------------------------------------------------------------------
   Ending benefit obligation                          3,465             3,592

Change in plan assets, at fair value:
   Beginning plan assets                              6,167             5,923
   Actual return                                        527             1,203
   Benefits paid                                       (454)             (959)
------------------------------------------------------------------------------
   Ending plan assets                                 6,240             6,167
------------------------------------------------------------------------------
Funded Status                                         2,775             2,575
Unrecognized net (gain) loss                           (590)             (678)
------------------------------------------------------------------------------
   Prepaid pension asset                          $   2,185         $   1,897
------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                         1999           1998            1997
-------------------------------------------------------------------------------------------------------------
Dollars in thousands

<S>                                                                 <C>            <C>             <C>
Net pension cost included in operations, including the effects
 of curtailment, consisted of the following components
   Interest cost on projected benefit obligation                    $     246      $     288       $     280
   Actual return on plan assets                                         (527)         (1,203)           (878)
   Net amortization and deferral                                          (7)            589             466
-------------------------------------------------------------------------------------------------------------
   Net pension income                                               $   (288)      $    (326)      $    (132)
=============================================================================================================
</TABLE>

   The weighted average discount rate used in determining the actuarial  present
value of the projected benefit obligation was 7.00% for all years presented. The
expected  long-term rate of return on assets was 8.00% for all years  presented.
As a result of the plan curtailments,  all accumulated  benefits under the plans
are vested and no further benefits arising from service to Ottawa will accrue.

   The plan  assets are  invested in U.S.  Government  and  corporate  bonds and
listed stocks.

   Ottawa  maintains  a  401(k)  plan  covering   substantially  all  employees.
Employees who are 21 years and older and who have  completed one year of service
are  eligible.  Employees  may elect to contribute to the plan from 1% to 15% of
their  salary  subject  to a  statutory  maximum  amount.  Ottawa  does not make
matching contributions to this plan.

--------------------------------------------------------------------------------
                                                          1999 ANNUAL REPORT  49

<PAGE>


--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 16 - FEDERAL INCOME TAXES

The provision for federal income taxes consists of the following:

                                          1999            1998            1997
-------------------------------------------------------------------------------
Dollars in thousands

Current tax expense                  $   5,078       $   4,858       $   3,961
Deferred tax expense (benefit)              60             155             312
-------------------------------------------------------------------------------
                                     $   5,138       $   5,013       $   4,273
===============================================================================

   The  provision  for federal  income taxes  differs from that  computed at the
statutory corporate tax rate as follows:

<TABLE>
<CAPTION>
                                                         1999             1998              1997
-------------------------------------------------------------------------------------------------
Statutory rate                                             35%              35%               34%
-------------------------------------------------------------------------------------------------
<S>                                                 <C>              <C>               <C>
Tax expense at statutory rate                       $   5,126        $   4,789         $   4,012
Low-income housing credit                                (350)            (327)             (239)
ESOP                                                      256              314               227
Tax-exempt interest                                       (24)             (45)              (84)
Goodwill amortization                                     329              329               319
Change in deferred tax asset valuation allowance          (14)             (46)              (60)
Other                                                    (185)              (1)               98
-------------------------------------------------------------------------------------------------
                                                    $   5,138        $   5,013         $   4,273
=================================================================================================
</TABLE>







--------------------------------------------------------------------------------
50  OTTAWA FINANCIAL CORPORATION

<PAGE>



--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


   The tax  effects  of  temporary  differences  that give  rise to  significant
portions of deferred tax assets and deferred tax  liabilities at year end are as
follows:

<TABLE>
<CAPTION>
                                                                1999              1998
---------------------------------------------------------------------------------------
Dollars in thousands

<S>                                                        <C>               <C>
Deferred tax assets
   Deferred loan fees                                      $     209         $     192
   Management recognition plan restricted stock                   98                96
   ESOP                                                           52                52
   Capital loss carryforward                                      66                80
   Accrued expenses                                               --               138
   Allowance for loan losses                                     922               428
   Nonaccrual loan interest                                       56                73
   Unrealized loss on available-for-sale securities              454                --
   Other                                                          53               118
---------------------------------------------------------------------------------------
                                                               1,910             1,177
Deferred tax liabilities
   Depreciation                                                 (561)             (590)
   Pension                                                      (576)             (405)
   Purchase accounting adjustment                               (918)             (870)
   FHLB stock dividends                                          (70)              (70)
   Mortgage servicing rights                                    (790)             (619)
   Unrealized gain on available-for-sale securities               --               (10)
   Other                                                         (80)              (87)
---------------------------------------------------------------------------------------
                                                               (2995)           (2,651)
Valuation allowance for deferred tax assets                      (66)              (80)
---------------------------------------------------------------------------------------
   Net deferred tax liability                              $  (1,151)        $  (1,554)
=======================================================================================
</TABLE>

   A valuation  allowance  related to deferred tax assets is required when it is
considered  more  likely than not that all or part of the  benefits  relating to
such assets will not be realized.  Management  established a valuation allowance
for the  benefits  associated  with the  losses on  mutual  fund  securities  at
December  31,  1996,  since such losses were capital in nature and could only be
realized  through  offsetting  capital gains.  Sources of capital gains were not
available at either December 31, 1999 or 1998.

   During 1997, new tax law was established  regarding thrift bad debt reserves.
Under the new  rules,  recapture  of a portion  of the tax bad debt  reserve  is
required.  Beginning  with  the 1998 tax  year,  the  Company  will  include  an
additional  $520,000  per year for six years in its  taxable  income.  These new
rules had no impact  on the  consolidated  financial  statements  as  accounting
provisions  have  required  recording  deferred  taxes  for  the  amounts  to be
recaptured.

   An income tax benefit of $198,000 and  $186,000  attributable  to  deductions
related  to the  exercise  of  nonqualified  stock  options  and the  vesting of
management  recognition  plan shares were  allocated  directly to  shareholders'
equity in 1999 and 1998.

   Under the Internal  Revenue Code,  the Bank may, for tax  purposes,  deduct a
provision for bad debts in excess of such  provisions  recorded in the financial
statements.  Retained earnings at December 31, 1999 includes  approximately $8.8
million,  consisting of bad debt deductions  accumulated prior ro 1988, on which
no provision for federal  income taxes has been made.  The  resulting  amount of
unrecognized deferred tax liability was approximately $3.0 million.

--------------------------------------------------------------------------------
                                                          1999 ANNUAL REPORT  51

<PAGE>


--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17 - EARNINGS PER SHARE

The factors used in the earnings per share computation follow.
<TABLE>
<CAPTION>
                                                                                     1999             1998              1997
-----------------------------------------------------------------------------------------------------------------------------
Dollars in thousands, except share and per share data

BASIC
<S>                                                                            <C>              <C>               <C>
Net Income available to common shareholders                                    $    9,508       $    8,668        $    7,527
=============================================================================================================================
Weighted average common shares outstanding                                      5,961,287        5,980,195         6,231,985
=============================================================================================================================
Basic earnings per common share                                                   $  1.60           $ 1.45           $  1.21
=============================================================================================================================
DILUTED
Net Income available to common shareholders                                    $    9,508       $    8,668        $    7,527
=============================================================================================================================
Weighted average common shares outstanding                                      5,961,287        5,980,195         6,231,985
Add: Dilutive effects of assumed exercises of stock options and warrants          333,757          650,439           554,978
-----------------------------------------------------------------------------------------------------------------------------
Weighted average common and dilutive potential common shares outstanding        6,295,044        6,630,634         6,786,963
=============================================================================================================================
Diluted earnings per common share                                                 $  1.51           $ 1.31           $  1.11
=============================================================================================================================
</TABLE>

   All  share and per  share  information  has been  retroactively  adjusted  to
reflect  the 10% stock  dividends  paid on June 30,  1999,  August 31,  1998 and
September 30, 1997.

NOTE 18 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The following  methods and assumptions  were used to estimate the fair values of
each class of financial  instrument for which it is practicable to estimate that
value:

   Carrying  amount is the estimated  fair value for cash and cash  equivalents,
Federal Home Loan Bank stock,  the allowance for loan losses,  demand  deposits,
savings accounts, money market deposits and variable rate loans or deposits that
reprice frequently and fully. Security fair values are based on market prices or
dealer quotes, and if no such information is available,  on quoted market prices
for similar instruments. For fixed rate loans and deposits and for variable rate
loans and deposits with infrequent  repricing or repricing limits, fair value is
based on  discounted  cash  flows  using  current  market  rates  applied to the
estimated  life and credit  risk.  Prepayment  speeds are assumed in  projecting
future cash flows based upon the current  interest rate  environment  and recent
actual  prepayment  history.  Fair values for impaired loans are estimated using
discounted  cash flow  analysis.  Fair  value of loans held for sale is based on
market  quotes.  Fair  value of debt is  based  on  current  rates  for  similar
financing.  The fair value of  off-balance  sheet  items is based on the current
fees or cost that would be charged to enter into or terminate such arrangements.
The fair value of commitments was immaterial at the reporting dates presented.

   The estimated fair values of Ottawa's  financial  instruments at year end are
as follows:
<TABLE>
<CAPTION>
                                                                              1999                               1998
                                                       Carrying Value    Fair Value       Carrying Value    Fair Value
----------------------------------------------------------------------------------------------------------------------
Dollars in thousands
<S>                                                    <C>               <C>              <C>               <C>
FINANCIAL ASSETS
Cash and cash equivalents                              $  26,489         $  26,489        $  42,225         $  42,225
Securities available for sale                             81,056            81,056           71,646            71,646
Federal Home Loan Bank stock                              11,782            11,782           11,782            11,782
Loans held for sale                                           --                --            3,375             3,375
Loans, net                                               856,759           845,444          769,770           774,621
FINANCIAL LIABILITIES
Deposits                                                 711,954           711,141          693,632           696,215
Federal Home Loan Bank advances                          216,353           213,180          160,268           162,056
======================================================================================================================
</TABLE>

--------------------------------------------------------------------------------
52  OTTAWA FINANCIAL CORPORATION

<PAGE>


--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 19 - PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

Condensed financial  information of Ottawa Financial  Corporation at year end is
as follows:

<TABLE>
<CAPTION>

CONDENSED BALANCE SHEETS

December 31,                                                                                   1999              1998
----------------------------------------------------------------------------------------------------------------------
Dollars in thousands

<S>                                                                                       <C>               <C>
ASSETS
Cash and due from financial institutions                                                  $     152         $     278
Loans receivable from Employee Stock Ownership Plan                                           1,689             2,111
Investment in subsidiary bank                                                                76,257            71,185
Other assets                                                                                     10                95
----------------------------------------------------------------------------------------------------------------------
   Total assets                                                                           $  78,108         $  73,669
======================================================================================================================
LIABILITIES                                                                               $     276         $     262
SHAREHOLDERS' EQUITY                                                                         77,832            73,407
----------------------------------------------------------------------------------------------------------------------
   Total liabilities and shareholders' equity                                             $  78,108         $  73,669
----------------------------------------------------------------------------------------------------------------------

CONDENSED STATEMENTS OF INCOME

for the years ended December 31:                                              1999             1998              1997
----------------------------------------------------------------------------------------------------------------------
Dollars in thousands
Interest and dividend income
   Securities                                                                                               $     175
   Loan to Employee Stock Ownership Plan                                 $     147        $     178               210
   Dividends from subsidiary bank                                            6,000           12,500             4,000
----------------------------------------------------------------------------------------------------------------------
                                                                             6,147           12,678             4,385
Net gain on sale of securities                                                                                    151
Operating expenses                                                             875              867               769
----------------------------------------------------------------------------------------------------------------------
Income before federal income taxes and equity in undistributed
   (excess distributed) earnings of subsidiary bank                          5,272           11,811             3,767
Federal income tax expense (benefit)                                         (251)             (232)              (88)
----------------------------------------------------------------------------------------------------------------------
Income before equity in undistributed (excess distributed)
   earnings of subsidiary bank                                               5,523           12,043             3,855
Equity in undistributed (excess distributed) earnings of subsidiary bank     3,985           (3,375)            3,672
----------------------------------------------------------------------------------------------------------------------
   Net income                                                            $   9,508        $   8,668         $   7,527
======================================================================================================================
</TABLE>

--------------------------------------------------------------------------------
                                                          1999 ANNUAL REPORT  53

<PAGE>



--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

CONDENSED STATEMENTS OF CASH FLOWS

for the years ended December 31:                                              1999             1998              1997
----------------------------------------------------------------------------------------------------------------------
Dollars in thousands

<S>                                                                      <C>              <C>               <C>
Cash flows from operating activities
Net income                                                               $   9,508        $   8,668         $   7,527
Adjustments to reconcile net income to cash provided by operations
   Equity in income of subsidiary bank                                     (9,985)           (9,125)           (7,672)
   Net accretion of securities discounts                                                                          (12)
   Net gain on sale of securities                                                                                (151)
Change in
   Interest receivable                                                                                             75
   Other assets                                                                 85               81               (86)
   Other liabilities                                                            14               63                68
----------------------------------------------------------------------------------------------------------------------
   Net cash provided by operating activities                                 (378)             (313)             (251)

Cash flows from investing activities
Activity in available-for-sale securities:
   Maturities, prepayments and calls                                                                              307
   Sales                                                                                                        5,884
Principal reduction of ESOP note receivable                                    422              422               422
Contribution to subsidiary bank                                              (113)             (111)             (112)
Cash dividends received from subsidiary bank                                 6,000           12,500             4,000
----------------------------------------------------------------------------------------------------------------------
   Net cash used in investing activities                                     6,309           12,811            10,501

CASH FLOWS FROM FINANCING ACTIVITIES
   Purchase of treasury shares                                             (5,145)          (13,640)           (8,833)
   Proceeds from exercise of stock options                                     791              492               258
   Proceeds from exercise of stock warrants                                  1,078            1,635               502
   Cash paid for exchange of warrants                                         (92)
   Cash dividends paid                                                     (2,689)           (2,113)           (1,858)
----------------------------------------------------------------------------------------------------------------------
   Net cash from financing activities                                      (6,057)          (13,626)           (9,931)
----------------------------------------------------------------------------------------------------------------------
Net change in cash                                                           (126)           (1,128)              319
Cash at beginning of period                                                    278            1,406             1,087
----------------------------------------------------------------------------------------------------------------------
Cash at end of period                                                    $     152        $     278         $   1,406
======================================================================================================================
</TABLE>

--------------------------------------------------------------------------------
54  OTTAWA FINANCIAL CORPORATION

<PAGE>



--------------------------------------------------------------------------------
QUARTERLY FINANCIAL INCORMATION unaudited


The following is a summary of selected unaudited quarterly results of operations
for the years ended December 31, 1999 and 1998. In our opinion,  all adjustments
necessary for a fair presentation of such financial data have been included. All
such adjustments are of a normal recurring nature.

<TABLE>
<CAPTION>

Quarter Ended                                          March 31            June 30        September 30      December 31
----------------------------------------------------------------------------------------------------------------------
Dollars in thousands, except share data(1)

1999
<S>                                                    <C>               <C>              <C>               <C>
Net interest income                                    $  7,084          $  7,546         $   7,831         $  7,635
Provision for loan losses                                   270               285               300              315
Noninterest income                                        1,825             1,645             1,559            1,654
Noninterest expense                                       5,290             5,385             5,233            5,055
Income before income taxes                                3,349             3,521             3,857            3,919
Net income                                                2,113             2,262             2,485            2,648

Basic earnings per common share                             .35               .38               .41              .45
Diluted earnings per common share                           .34               .36               .39              .43

1998
Net interest income                                   $   6,680         $   7,000        $    7,110          $ 7,102
Provision for loan losses                                   210               225               240              255
Noninterest income                                        1,607             1,939             1,995            2,270
Noninterest expense                                       5,143             5,200             5,352            5,397
Income before income taxes                                2,934             3,514             3,513            3,720
Net income                                                1,831             2,227             2,205            2,405

Basic earnings per common share                             .29               .36               .37              .42
Diluted earnings per common share                           .26               .33               .34              .38

</TABLE>

(1)    All per share information has been retroactively  adjusted to reflect the
       10% stock dividends paid on June 30, 1999 and August 31, 1998.


--------------------------------------------------------------------------------
                                                          1999 ANNUAL REPORT  55

<PAGE>


--------------------------------------------------------------------------------
SHAREHOLDER INFORMATION


MARKET

Ottawa  Financial  Corporation's  common stock is traded on the Nasdaq  National
Market  under the symbol  "OFCP."  The high and low sales  prices for the common
stock as  reported  on the  Nasdaq  as well as  dividends  declared  per  share,
adjusted for the 10% stock  dividends paid on June 30, 1999 and August 31, 1998,
were as follows.

Quarter Ended                  High              Low         Dividends
-----------------------------------------------------------------------
March 31, 1998            $  28.306        $  22.934            $  .08
June 30, 1998                24.793           23.554               .08
September 30, 1998           23.967           19.546               .09
December 31, 1998            21.818           16.818               .10
March 31, 1999               22.045           18.750               .10
June 30, 1999                22.125           18.409               .11
September 30, 1999           23.500           19.875               .12
December 31, 1999            20.875           17.375               .12


The  information  set forth in the table above was  provided by The Nasdaq Stock
Market.

   The Board of  Directors  intends to continue  the payment of  quarterly  cash
dividends,  dependent upon the results of operations and financial  condition of
Ottawa and other  factors.  Restrictions  on dividend  payments are described in
Note 11 of the Notes to Consolidated Financial Statements.

   As of March 14, 2000, Ottawa had approximately  2,089  shareholders of record
and 6,076,389 shares outstanding of common stock.

ANNUAL REPORT ON FORM 10-K

A copy of Ottawa  Financial  Corporation's  Annual Report on Form 10-K, as filed
with the Securities and Exchange Commission, may be obtained without charge upon
written  request to Jon W. Swets,  Chief  Financial  Officer,  Ottawa  Financial
Corporation,  190 Monroe Avenue,  NW, Grand Rapids, MI 49503 or by calling (616)
224-2841.

<TABLE>
<CAPTION>

<S>                                       <C>                                       <C>
Corporate Headquarters                    Independent Auditor                       General Counsel
245 Central Avenue                        Crowe, Chizek and Company LLP             Cunningham Dalman, PC
Holland, MI 49423-3298                    Grand Rapids, MI                          Holland, MI

                                          Registrar/Transfer Agent                  Special Counsel
                                          Registrar and Transfer Company            Silver, Freedman & Taff, LLP
                                          Cranford, NJ                              Washington, DC

</TABLE>

--------------------------------------------------------------------------------
56  OTTAWA FINANCIAL CORPORATION

<PAGE>


[INSIDE BACK COVER]

<TABLE>
<CAPTION>
<S>                                                    <C>                                          <C>
OTTAWA FINANCIAL CORPORATION OFFICERS                  BRANCH OFFICE AND ATM LOCATIONS

Gordon H. Cunningham                                   Holland/Zeeland                              Grand Rapids
Chairman of the Board, Attorney
                                                       Downtown Holland                             Downtown Grand Rapids
Douglas J. Iverson                                     245 Central Avenue                           190 Monroe Avenue, NW
Vice Chairman and CEO                                  616-393-7141                                 616-559-1712

Ronald L. Haan                                         Beechwood (ATM)                              Alpine (ATM)
President, COO and Secretary                           180 Douglas Avenue                           3320 Alpine Avenue, NW
                                                       616-393-7180                                 616-785-1000
Jon W. Swets
Chief Financial Officer and                            Downtown Holland Drive-In (ATM)              Breton (ATM)
Assistant Secretary                                    10 East 9th Street                           2609 Breton Avenue, SE
                                                       616-393-7104                                 616-956-7110

OTTAWA FINANCIAL CORPORATION                           Downtown Zeeland                             Byron Center (ATM)
BOARD OF DIRECTORS                                     146 East Main Street                         2384 84th Street, SW
                                                       616-772-2191                                 616-878-1573
Gordon H. Cunningham
Chairman of the Board                                  Hamilton (ATM)                               Cascade (ATM)
Attorney & Partner                                     4672 Pine Street                             6750 Cascade Road, SE
Cunningham Dalman, P.C.                                616-751-5101                                 616-949-5515

Douglas J. Iverson                                     Hudsonville (ATM)                            Cutlerville (ATM)
Vice Chairman and CEO                                  2855 Port Sheldon Street, SW                 675 68th Street, SW
AmeriBank                                              616-669-4400                                 616-827-1400

Ronald L. Haan                                         South Washington (ATM)                       Grandville (ATM)
President, COO and Secretary                           1000 South Washington Avenue                 4495 Wilson Avenue, SW
AmeriBank                                              616-393-7065                                 616-531-0700

Ronald J. Bieke                                        West Ottawa (ATM)                            Jenison (ATM)
President                                              392 136th Street                             600 Baldwin Drive, SW
Arcadia BIDCO Corporation                              616-393-7103                                 616-457-3350

B. Patrick Donnelly, III                               Zeeland West (ATM)                           Kentwood (ATM)
President                                              523 West Main Street                         5300 Kalamazoo Avenue, SE
Productive Solutions, LLC                              616-772-4800                                 616-281-5200

Gordon L. Grevengoed                                   ATM ONLY LOCATIONS                           Rockford (ATM)
Retired Vice Chairman of the Board                                                                  155 Marcell Drive, NE
and CEO                                                Westshore Mall                               616-433-4204
AmeriBank                                              12231 James Street, Holland
                                                                                                    Muskegon/North Lakeshore
G. W. Haworth                                          Hope College
(director emeritus)                                    DeWitt Center, Holland                       Downtown Muskegon
Founding Chairman                                                                                   880 First Street
Haworth, Inc.                                          Haworth Inc.                                 616-726-4461
                                                       Member Center, Holland
Robert D. Kolk                                                                                      Fremont (ATM)
President                                              24 hour AmeriCall banking                    211 W. Main Street
Mechanical Transplanter Co.                                                                         616-924-5600
                                                       877-515-bank (2265)
Brian Koop                                                                                          Grand Haven (ATM)
Vice President and Senior Executive                                                                 1600 S. Beacon Boulevard
JCI Institute                                                                                       616-846-1350

Leon E. Koops                                                                                       Hart (ATM)
President                                                                                           424 State Street
Hamilton Distributing Company                                                                       616-873-5607

Richard T. Walsh                                                                                    North Muskegon (ATM)
Chairman                                                                                            621 Dykstra Road
Pioneer Industries, Inc.                                                                            616-744-4731

                                                                                                    Roosevelt Park (ATM)
                                                                                                    3145 Henry Street
                                                                                                    616-759-3000

                                                                                                    Terrace Street Drive-In (ATM)
                                                                                                    877 Terrace Street
                                                                                                    616-722-1371

                                                                                                    Whitehall (ATM)
                                                                                                    211 South Mears Avenue
                                                                                                    616-894-5635


</TABLE>


<PAGE>




[Back Cover]

Ottawa Financial Corporation
245 Central Avenue
Holland, Michigan 49423
www.AmeriBank.net