1998

Ottawa Financial Corporation / Ameribank

Report To Shareholders



[COVER  PHOTO:  CURRENTLY  UNDER  CONSTRUCTION  IN MUSKEGON IS THE MERCY  HEALTH
PAVILION  WHICH  WILL  HOUSE  MEDICAL  OFFICES.  MERCY  HOSPITAL  WILL LEASE THE
FACILITY  FOR WHICH  FINANCING IS BEING  PROVIDED BY  AMERIBANK.  REVIEWING  THE
PROJECT'S PROGRESS ARE FROM LEFT TO RIGHT,  WILLIAM FETTIS AND DENNY CHERETTE OF
INVESTMENT  PROPERTY  ASSOCIATES  AND LEE  PANKRATZ,  AMERIBANK'S  CHIEF LENDING
OFFICER.]


<PAGE>



Our Mission: Leadership Through Service

AmeriBank,  a  wholly-owned  subsidiary of Ottawa  Financial  Corporation,  is a
financial service  organization  offering a broad line of financial products and
services. AmeriBank delivers value to its shareholders, customers, employees and
the  communities  it serves  through  superior  quality  products and  services,
visionary   leadership,   strong  employee  relations,   solid  performance  and
profitable growth.



<PAGE>


<TABLE>
<CAPTION>

<S>                                                      <C>                                       <C>
Ottawa Financial Corporation Officers                    Branch Office and ATM Locations           Grand Rapids

Gordon H. Cunningham                                     Holland/Zeeland                           Downtown Grand Rapids
Chairman of the Board, Attorney                                                                    190 Monroe Avenue, NW
                                                         Downtown Holland                          616-559-1712
Douglas J. Iverson                                       245 Central Avenue
Vice Chairman and CEO                                    616-393-7141                              Alpine (ATM)
                                                                                                   3320 Alpine Avenue, NW
Ronald L. Haan                                           Beechwood (ATM)                           616-785-1000
President, COO and Secretary                             180 Douglas Avenue
                                                         616-393-7180                              Breton (ATM)
Jon W. Swets                                                                                       2609 Breton Avenue, SE
Chief Financial Officer and Assistant Secretary          Downtown Holland Drive-In (ATM)           616-956-7110
                                                         10 East 9th Street
                                                         616-393-7104                              Byron Center (ATM)
                                                                                                   2384 84th Street, SW
Ottawa Financial Corporation Board of Directors          Downtown Zeeland                          616-878-1573
                                                         146 East Main Street
Gordon H. Cunningham                                     616-772-2191                              Cascade (ATM)
Chairman of the Board                                                                              6750 Cascade Road, SE
Attorney & Partner                                       Hamilton (ATM)                            616-949-5515
Cunningham Dalman, P.C.                                  4672 Pine Street
                                                         616-751-5101                              Cutlerville (ATM)
Douglas J. Iverson                                                                                 675 68th Street, SW
Vice Chairman and CEO                                    Hudsonville (ATM)                         616-827-1400
AmeriBank                                                2855 Port Sheldon Street, SW
                                                         616-669-4400                              Grandville (ATM)
Ronald L. Haan                                                                                     4495 Wilson Avenue, SW
President, COO and Secretary                             South Washington (ATM)                    616-531-0700
AmeriBank                                                1000 South Washington Avenue
                                                         616-393-7065                              Jenison (ATM)
Ronald J. Bieke                                                                                    600 Baldwin Drive, SW
President                                                West Ottawa (ATM)                         616-457-3350
Arcadia BIDCO Corporation                                392 136th Street
                                                         616-393-7103                              Kentwood (ATM)
B. Patrick Donnelly, III                                                                           5300 Kalamazoo Avenue, SE
President                                                Zeeland West (ATM)                        616-281-5200
Productive Solutions, LLC                                523 West Main Street
                                                         616-772-4800                              Muskegon/North Lakeshore
Gordon L. Grevengoed
Retired Vice Chairman of the Board and CEO               ATM Only Locations                        Downtown Muskegon
AmeriBank                                                                                          880 First Street
                                                         Westshore Mall                            616-726-4461
G. W. Haworth                                            12231 James Street, Holland
Founding Chairman                                                                                  Fremont (ATM)
Haworth, Inc.                                            Hope College                              211 W. Main Street
                                                         DeWitt Center, Holland                    616-924-5600
Robert D. Kolk
President                                                Haworth Inc.                              Grand Haven (ATM)
Mechanical Transplanter Co.                              Member Center, Holland                    1600 S. Beacon Boulevard
                                                                                                   616-846-1350
Brian Koop
Vice President and Senior Executive                                                                Hart (ATM)
JCI Institute                                                                                      424 State Street
                                                                                                   616-873-5607
Leon E. Koops
President                                                                                          North Muskegon (ATM)
Hamilton Distributing Company                                                                      621 Dykstra Road
                                                                                                   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


                                                                                                   Ottawa Financial Corporation
                                                                                                   245 Central Avenue
                                                                                                   Holland, Michigan 49423
                                                                                                   www.AmeriBank.net
</TABLE>

<PAGE>



































                                   AmeriBank

                          ---------------------------

                          Ottawa Financial Corporation


<PAGE>



TABLE OF CONTENTS


Our Mission: Leadership Through Service, Inside Front Cover

Letter To Our Shareholders, page 2

Commercial Banking: Consistent Approach Defines Success, page 4

Branch Banking: Expanding Services, Building Strong Relationships, page 6

Residential Mortgages: Realizing Gains in a Challenging Environment, page 8

AmeriPlan: A First Year Success Story, page 10

Gordon L. Grevengoed: A Tribute, page 12

Financial Charts, page 13

Selected Consolidated Financial Information, page 14

Management's Discussion and Analysis of Financial Condition and Results of
Operations, page 16

Report of Independent Auditors, page 28

Consolidated Balance Sheets, page 29

Consolidated Statements of Income, page 30

Consolidated Statements of Changes in Shareholders' Equity, page 31

Consolidated Statements of Cash Flows, page 32

Consolidated Statements of Comprehensive Income, page 33

Notes to Consolidated Financial Statements, page 34

Quarterly Financial Information, page 51

Shareholder Information, page 52

Officers and Directors, Inside Back Cover

Branch Office and ATM Locations, Inside Back Cover


Cover  photo:  Currently  under  construction  in Muskegon  is the Mercy  Health
Pavilion  which  will  house  medical  offices.  Mercy  Hospital  will lease the
facility  for which  financing is being  provided by  AmeriBank.  Reviewing  the
project's progress are from left to right,  William Fettis and Denny Cherette of
Investment  Property  Associates  and Lee  Pankratz,  AmeriBank's  Chief Lending
Officer.


                                                OTTAWA FINANCIAL CORPORATION   1
<PAGE>


[PICTURE OF DOUGLAS J. IVERSON, VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER OTTAWA
FINANCIAL CORPORATION]



Letter to our Shareholders


Dear Shareholders:

1998  was  a  year  of  strong   financial   performance  for  Ottawa  Financial
Corporation. Our record earnings of $8.7 million for the year resulted in an 18%
improvement  in earnings per share.  We remain  committed to the  enhancement of
shareholder  value.  That  commitment  defines  our  strategic  initiatives  and
determines  the  products  we provide,  the  services we offer and the people we
employ.

   During  1998,  we focused on  expanding  our  business  banking  services and
promised  to  develop  as  a  full  financial  service  company.  We  have  made
significant  progress in both areas.  We increased our commercial loan portfolio
by $71.1 million, representing 45% growth. We expanded our deposit customer base
by $39.0 million,  with the largest increase in commercial deposit accounts.  In
addition,  our investment  subsidiary  contributed $597,000 in gross revenues to
noninterest  income  during the year.  Our qualified  staff,  along with our new
commercial  banking  product  lines  such  as  account  analysis,  zero  balance
accounts, sweep accounts and direct deposit-ACH origination, contributed heavily
to achieving these goals.

   Our focus for 1999 is on the bottom line.  Our goals for this  upcoming  year
include  continuing to grow the loan  portfolio.  Our  attention  will be on the
higher yielding commercial and consumer lines of business.  In addition,  we are
analyzing  opportunities for enhancing noninterest income, as well as evaluating
and   implementing   new   initiatives   for  containing   costs  and  improving
efficiencies.  We are pleased  about  providing  automated  underwriting  to our
mortgage banking  customers and look forward to complete  implementation of this
service in 1999. We are confident this technology  will improve  efficiencies in
our mortgage loan origination.

2   OTTAWA FINANCIAL CORPORATION

<PAGE>


   We have a strong  loyalty to the local  markets  we serve and are  excited to
introduce AmeriBank as the first co-sponsor of the Grand Rapids and Holland area
Parade of Homes. Historically, these parades combined have attracted over 30,000
individuals,  builders,  developers and realtors from Western  Michigan.  We are
encouraged that this  opportunity will increase our presence in our market areas
and  will  enable  us  to  attract  new,  and  strengthen   existing,   customer
relationships.

   As a financial  service company,  our operations are dependent on technology.
We have been committed to implementing  the latest advances in technology,  when
cost justified, for the benefit of our customers and internal efficiencies. With
the dependency on technology  has come an intense  public  interest in preparing
for the year 2000, sometimes called Y2K. Our Y2K plan is on schedule and we have
been successfully  preparing and testing all systems and affected areas in order
to provide a smooth transition into the year 2000.

   It is  with  great  admiration  for his  professional  talents  and  personal
accomplishments  that I wish to thank Gordon L.  Grevengoed  for his 42 years of
leadership  and  loyalty.  Mr.  Grevengoed,  Vice  Chairman,  President  and CEO
announced his retirement in November 1998. While Mr.  Grevengoed will be leaving
the  management  of the company,  we are pleased that he will be  continuing  to
assist in defining  the  direction of the  corporation  and the bank through his
service  as a member  of the  Board  of  Directors.  As a  personal  friend  and
colleague, I would like to wish Gordon health and happiness in his well-deserved
retirement.

   I am fortunate to be working along side of Ronald L. Haan, President and COO,
who is a highly talented and experienced financial executive. Both Ron and I, in
our newly appointed  positions,  are surrounded by a qualified  management team.
This key  group of gifted  individuals  will be  instrumental  in  guiding  your
company  into the next  millennium  and  delivering  on our  promise  to improve
shareholder value.

   On behalf of the  Corporation,  I would like to thank our employees for their
hard work and  dedicated  service,  our customers for their loyalty and support,
and our  shareholders  for their  allegiance  and continued  confidence.  We are
committed to building  shareholder value through  continuous  improvement in our
operations and look forward to an exciting year ahead.

Sincerely,

/s/ Douglas J. Iverson

Douglas J. Iverson
Vice Chairman and Chief Executive Officer
Ottawa Financial Corporation


                                                OTTAWA FINANCIAL CORPORATION   3
<PAGE>



                           LEADERSHIP THROUGH SERVICE


[PICTURE OF MICHAEL WEBSTER, SENIOR VICE PRESIDENT, COMMERCIAL LENDING --
CAPTION: AMERIBANK HAS DEVELOPED A REPUTATION IN THE AREA OF COMMERCIAL REAL
ESTATE, CONSTRUCTION, AND DEVELOPMENT LENDING BY SERVING THIS MARKET
CONSISTENTLY SINCE 1990.

     --   MICHAEL WEBSTER
          SENIOR VICE PRESIDENT,
          COMMERCIAL LENDING]


COMMERCIAL BANKING:
CONSISTENT APPROACH DEFINES SUCCESS

Consistency.  In a word,  it  captures  the  essence of  AmeriBank's  commercial
banking division.  Whether describing service offerings,  relationship building,
or caliber of staff,  consistency is key to our continuing success in commercial
and business banking.

   1998 was an outstanding year on all fronts. Our pledge to introduce a variety
of non-lending commercial products and services was fulfilled enabling AmeriBank
to better meet the present and future  needs of our  customers.  The addition of
more  sophisticated  cash management  services such as sweep accounts,  business
credit cards, bank courier service and others aided in attracting new commercial
customers.

   Cash management  services go hand-in-hand with commercial  lending which also
saw significant growth in 1998. Total outstanding  commercial  business and real
estate loans rose from $157 million to $228 million--an  increase of 45 percent.
This portfolio  includes  commercial real estate,  construction  and development
loans,  multi-family real estate loans,  industrial real estate loans, equipment
and commercial vehicle loans and operating lines of credit. In addition, letters
of credit to support  purchases,  as well as taxable and tax-free bond issuances
are offered.  Even with strong  growth,  asset quality has not  diminished.  The
findings of our independent loan review confirm that asset quality  continues to
be very high.

   A  long-range  goal is to  restructure  our  loan  portfolio  evenly  between
commercial,  residential  mortgage and consumer loans.  Whereas commercial loans
represented 21 percent of our total loan  portfolio at year-end  1997,  they now
comprise 29 percent.  This represents  remarkable progress toward our goal which
will allow the bank to increase earnings at a comfortable level of risk.

   Commercial  lending,  in particular,  has benefited greatly from a consistent
approach.  Michael Webster,  Senior Vice President of Commercial  Lending,  says
AmeriBank  has built a name for itself in the area of  commercial  real  estate,
construction and development  lending by serving this market  consistently since
1990.  "It's a lending  discipline  that takes longer to understand and properly
administer than others.  We have seasoned  professionals  and we've been able to
attract additional talent because of our solid reputation."

   These  qualities have not gone  unnoticed,  particularly  during this time of
bank  mega-mergers.  Says Webster,  "We're dependable and consistent in a market
that hasn't seen much consistency."

   In 1999,  the commercial  division will focus on growing its loan  portfolio,
adding experienced  lenders and delivering  top-quality  service to an expanding
customer base.


4   OTTAWA FINANCIAL CORPORATION

<PAGE>




[PAGE 5 -- PICTURE]


<PAGE>


[PICTURE OF JIM STUCK, GRANDVILLE BRANCH MANAGER --
CAPTION:  PROVIDING  QUALITY  SERVICE  IS  ROOTED IN THE  DEVELOPMENT  OF STRONG
RELATIONSHIPS.  AMERIBANK'S BRANCH BANKS FOCUS ON DEVELOPING CLOSE TIES WITH THE
PEOPLE AND COMMUNITIES THEY SERVE.
  --   JIM STUCK
       GRANDVILLE BRANCH MANAGER]



BRANCH BANKING:
EXPANDING SERVICES, BUILDING
STRONG RELATIONSHIPS

Today's  consumers are seeking  better and faster ways of meeting the demands of
daily living. Increasingly, technology is providing the solutions. At AmeriBank,
we  continue  to harness the power and ease of  technological  advances  for the
benefit  of our  customers.

   During the  second  quarter  of 1998,  we  introduced  AmeriCall  24TM.  This
automated  telephone  service provides an extremely  efficient way for AmeriBank
customers to access their  accounts  anytime,  anywhere.  Customers  are able to
retrieve  useful  account and  banking  information  as well as complete  common
banking transactions such as transfers,  advances, and payments.  AmeriCall 24TM
has  proven  to be  very  popular  for  many of our  customers.  The  volume  of
transactions has steadily increased each month, with well over 1800 transactions
now received daily.

   Fulfilling  customer  expectations  through new and  different  products  and
services tailored to their future needs will continue to be one of our corporate
objectives.  Likewise,  we continue to focus on the quality of service  provided
and the  building  of  relationships.  Our  slogan,  "Friendly.  Local.  Smart."
summarizes these benefits.

   These attributes come to life annually in a community  service project called
StoryBook Christmas. Bank staff and customers pull together to collect thousands
of new and gently used books for distribution to West Michigan organizations who
then  distribute  them to  children  in need.  During the 1998  holiday  season,
AmeriBank's 26 branches collected over 8,700 books.

   In Grand Rapids,  the pediatric unit at St. Mary's Hospital received over 500
books--a  portion of the books that were collected by the Grandville and Cascade
branch  offices.  "Our staff,  customers and people from the community  have all
supported  this  program with their  enthusiasm  and their  contributions,"  Jim
Stuck, manager of AmeriBank's Grandville branch said. "We are pleased to be able
to help the kids by making their stay in the hospital a little more  pleasant by
offering them a choice of books."

   In all, more than 20 groups and organizations  receive books collected during
the  program.  Storybook  Christmas  fulfills  a  need  in our  community  while
strengthening the bond between customers and staff.


6   OTTAWA FINANCIAL CORPORATION

<PAGE>





[PAGE 7 -- PICTURE]


<PAGE>


[PICTURE OF CINDY MATTHEWS, MUSKEGON BRANCH MANAGER --
CAPTION:  AMERIBANK'S  MUSKEGON  BRANCH  HAD  ITS  BEST  YEAR  EVER  IN  WRITING
RESIDENTIAL MORTGAGES, CONTRIBUTING TO THE BANK'S RECORD-SETTING YEAR.
  --   CINDY MATTHEWS
       MUSKEGON BRANCH MANAGER]


RESIDENTIAL MORTGAGES:
REALIZING GAINS IN A CHALLENGING ENVIRONMENT

Our  residential  mortgage  division saw record  activity in 1998. We originated
$258  million  in new  loans.  In  addition,  $2.4  million in gains on sales of
mortgage loans were generated from secondary market  operations,  representing a
significant increase in this type of noninterest income.

   While the bank realized  record loan activity,  sales of those loans actually
caused the bank's  outstanding  residential  mortgage portfolio to decline by 12
percent.  This small decrease contributed  favorably to the restructuring of our
loan  portfolio  which  has  as  its  goal,  a more  even  distribution  between
residential  mortgage,  consumer,  and  commercial  loans.  We made  significant
progress  toward this  long-term  goal in 1998.  As a result of the  residential
mortgage  activities  noted here,  our total loan  portfolio  is now more evenly
balanced.

   These results were largely affected by our low-rate  environment and a highly
competitive  marketplace  characterized by a variety of loan options.  To offset
these market forces,  specialized  expertise has been added to the Corporation's
staff to develop the consumer and commercial  loan portfolios and other lines of
fee-generating business consistent with the Corporation's strategic plan.

   During the  second  quarter,  we saw the  addition  of a new title  insurance
subsidiary  which will complement our  residential  mortgage  program.  This new
subsidiary is expected to offer competitive title insurance products to our loan
customers while adding revenue to our bottom line.

   Over the years,  we have worked to build asset quality in our  commercial and
consumer  loan  portfolio.  The  findings of our most recent,  independent  loan
review  confirm that  AmeriBank  has been able to maintain a high level of asset
quality  in the  face  of  increasing  loan  activity.  We  are  proud  of  this
achievement  and pledge to continue to increase our portfolio  with high quality
assets.


8   OTTAWA FINANCIAL CORPORATION

<PAGE>




[PAGE 9 -- PICTURE]



<PAGE>



[PICTURE OF DON VANDENBRINK, AMERIBANK FINANCIAL PLANNER --
CAPTION: AMERIPLAN HAS BEEN SUCCESSFUL NOT ONLY IN MEETING THE NEEDS OF EXISTING
BANK  CUSTOMERS  BUT ALSO IN ATTRACTING  NEW  CUSTOMERS.  FORTY-FIVE  PERCENT OF
AMERIPLAN'S BUSINESS IN 1998 CAME FROM NEW CUSTOMERS.
  --   DON VANDENBRINK
       AMERIBANK FINANCIAL PLANNER]


AMERIPLAN:
A FIRST YEAR SUCCESS STORY

Our evolution  into a financial  service  organization  offering a broad line of
financial   products  and  services  remained  on  target  with  the  successful
introduction of AmeriPlan  Financial Services,  Inc. This new  subsidiary--which
completed  its first  full  year--assists  customers  with  personal,  long-term
financial planning and offers alternative investment products and services.

   AmeriPlan met its first-year  sales goals resulting in significant  increases
in non-interest fee income for the Corporation. AmeriPlan attained profitability
during 1998 and contributed a total of $597,000 in gross revenues.  The majority
of sales were mutual funds and  annuities.  Two  additional  services were added
late in the year. Long-term care insurance and wrap accounts are now available.

   AmeriPlan's  introduction  has been met with strong  interest  among existing
customers  and also has  served  as a magnet  attracting  new  customers  to the
Corporation.  Don VandenBrink,  financial planner serving the Holland area, says
45 percent of AmeriPlan's business came from new customers, resulting in a whole
new revenue source for the bank. VandenBrink attributes the positive response to
several factors  including a high level of trust between  customer and provider,
the  ever  increasing  need  for   non-traditional   bank  products,   and  also
convenience.  "Customers  often  comment that it is so great having one location
where they can have all of their financial needs met," says VandenBrink.

   These accomplishments were consistent with our stated goals of attracting new
bank  relationships,  strengthening  existing  bank  relationships  and  growing
non-interest fee income. AmeriPlan services are offered through three registered
individuals each serving one of the Bank's three primary regions:  Grand Rapids,
Holland and Muskegon.

   During  1999,  AmeriPlan  will  continue  to build on its  client  base while
offering a high level of customer  service.  To achieve this,  additional  staff
members will be added in the support area. We are extremely optimistic about our
future as a financial services  organization and AmeriPlan's  continued success.



10   OTTAWA FINANCIAL CORPORATION

<PAGE>




[PAGE 11 -- PICTURE]

<PAGE>




                        GORDON L. GREVENGOED: A TRIBUTE


In November  1998,  Ottawa  Financial  Corporation  announced the  retirement of
Gordon  L.  Grevengoed,  Vice  Chairman,  President  and  CEO.  Grevengoed,  who
continues to serve on the boards of both the  Corporation  and the Bank, says he
is very pleased to be leaving the management of the company in the hands of Doug
Iverson,  Vice-Chairman  and CEO, and Ron Haan,  President and COO. "We are very
fortunate to have two very talented  individuals  to lead the company as we move
into the new millennium. Both men are experienced, extremely gifted and are well
regarded in their communities and in the financial arena."

   Grevengoed joined Ottawa Savings and Loan Association in Holland in 1956. One
of five employees at the time, he worked as a teller and took loan applications.
In reflecting on his 42 years in banking,  he noted that it has been change that
has added  excitement to his work.  Change may be an  understatement.  From it's
humble  beginnings as a single  branch,  Ottawa Savings Bank grew to 13 branches
and 190 employees before its merger in February 1996 with AmeriBank.  Grevengoed
orchestrated  the merger which combined  Ottawa Savings Bank and AmeriBank under
the parent company, Ottawa Financial Corporation. Since then, under Grevengoed's
capable  leadership,  AmeriBank  has grown to include 326  employees and 26 bank
locations in 6 west Michigan  counties.  Assets have appreciated by more than 32
percent to almost a billion dollars.

   Grevengoed  says his immediate  retirement  plans call for spending more time
with his wife Marilyn,  their fourteen  grandchildren,  doing Christian  service
work and  playing  golf and  tennis.  He said he knows he will  have  plenty  of
opportunities  to stay involved in the community,  but he plans to take his time
deciding just what he will do.



12   OTTAWA FINANCIAL CORPORATION

<PAGE>




FINANCIAL CHARTS


[BAR GRAPH:               [BAR GRAPH:                        [BAR GRAPH:
RETURN ON EQUITY          EARNINGS PER SHARE                 NET INTEREST MARGIN
PERCENTAGE                DOLLARS PER SHARE                  PERCENTAGE

1994 -  6.38              1994* -  .21                       1994 - 4.17
1995 -  4.62              1995  -  .57                       1995 - 4.44
1996*-  6.83              1996**-  .86                       1996 - 3.50
1997 -  9.93              1997  - 1.22                       1997 - 3.37
1998 - 11.49              1998  - 1.44                       1998 - 3.26]

*ADJUSTED TO REMOVE       ALL PER SHARE INFORMATION
THE IMPACT OF THE         HAS BEEN ADJUSTED TO
ONE-TIME SAIF             REFLECT THE 10% STOCK
ASSESSMENT.]              DIVIDENDS PAID ON AUGUST 31,
                          1998 AND SEPTEMBER 30, 1997
                          *BASED UPON EARNINGS
                          SUBSEQUENT TO STOCK
                          CONVERSION IN AUGUST 1994.
                          **ADJUSTED TO REMOVE THE
                          IMPACT OF THE ONE-TIME SAIF
                          ASSESSMENT.]


[BAR GRAPH:               [BAR GRAPH:                        [BAR GRAPH:
TOTAL ASSETS              RETURN ON ASSETS                   NON-PERFORMING
MILLIONS OF DOLLARS       PERCENTAGE                         ASSETS TO TOTAL
                                                             ASSETS
                                                             PERCENTAGE
1994 - 328                1994 - 1.03                        1994 - .36
1995 - 370                1995 - 1.08                        1995 - .76
1996 - 848                1996*-  .72                        1996 - .36
1997 - 886                1997 -  .87                        1997 - .36
1998 - 938]               1998 -  .94                        1998 - .43]

                          *ADJUSTED TO REMOVE THE IMPACT
                          OF THE ONE-TIME SAIF ASSESSMENT.]


                                               OTTAWA FINANCIAL CORPORATION   13

<PAGE>



SELECTED CONSOLIDATED FINANCIAL INFORMATION

DOLLARS IN THOUSANDS, EXCEPT SHARE DATA

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

<TABLE>
<CAPTION>

December 31,                                      1998              1997              1996(1)             1995              1994
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>               <C>               <C>                 <C>               <C>      
Selected Financial Condition Data:

Total assets                                   $ 938,030         $ 885,817         $ 848,306           $ 370,305         $ 328,461

Loans receivable, net                            769,770           747,423           715,551             276,457           230,818

Securities and Federal Home Loan Bank stock       83,428            64,616            69,864              66,926            73,577

Deposits                                         693,632           654,560           622,492             243,220           231,321

Federal Home Loan Bank advances                  160,268           145,458           139,170              43,241            13,579

Shareholders' Equity                              73,407            76,363            76,917              79,560            78,593

Selected Operations Data:

Total interest income                          $  67,904         $  64,726         $  54,669           $  25,579         $  20,799

Total interest expense                            40,012            37,704            30,531              11,321             9,182
-----------------------------------------------------------------------------------------------------------------------------------
Net interest income                               27,892            27,022            24,138              14,258            11,617

Provision for loan losses                            930               660               564                 160               170
-----------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision
 for loan losses                                  26,962            26,362            23,574              14,098            11,447

Service charges and other fees                     4,749             3,356             3,042               2,219             1,870

Gain on sales of loans                             2,398               370               141                 309               110

Other noninterest income (loss)                      664               420               145                (435)             (121)
-----------------------------------------------------------------------------------------------------------------------------------
Total noninterest income                           7,811             4,146             3,328               2,093             1,859

Total noninterest expense(2)                      21,092            18,708            21,844              10,651             8,999
-----------------------------------------------------------------------------------------------------------------------------------
Income before federal income tax expense          13,681            11,800             5,058               5,540             4,307

Income tax expense                                 5,013             4,273             1,964               1,911             1,308
-----------------------------------------------------------------------------------------------------------------------------------
Net income                                     $   8,668         $   7,527         $   3,094           $   3,629         $   2,999
===================================================================================================================================
Basic earnings per common share(3)             $    1.59         $    1.33         $     .51           $     .57         $     .21
===================================================================================================================================
Diluted earnings per common share(3)           $    1.44         $    1.22         $     .49           $     .57         $     .21
===================================================================================================================================
Cash dividends declared per common share(3)    $     .39         $     .33         $     .28           $     .25         $     .05
===================================================================================================================================
</TABLE>

(1)  Significant  variation from prior years due primarily to the acquisition of
     AFSB  in  February  1996  (see  Note 2 of  the  Notes  to the  Consolidated
     Financial Statements).
(2)  Noninterest  expense for 1996 includes the one-time SAIF assessment of $3.5
     million  (see  Note  17  of  the  Notes  to  the   Consolidated   Financial
     Statements).
(3)  Weighted  average common shares  outstanding for 1998, 1997, 1996, 1995 and
     1994  were  5,436,541,   5,665,441,   6,108,202,  6,321,098  and  6,320,267
     respectively.  Weighted average common and dilutive potential common shares
     outstanding for 1998, 1997, 1996, 1995 and 1994 were 6,027,849,  6,169,966,
     6,254,124,  6,359,382 and 6,320,267,  respectively. All share and per share
     information  has been  retroactively  adjusted  to  reflect  the 10%  stock
     dividends  paid on August 31, 1998 and September 30, 1997, and the adoption
     of Statement of Financial Accounting Standards No. 128, Earnings per Share.




14   OTTAWA FINANCIAL CORPORATION

<PAGE>


<TABLE>
<CAPTION>

SELECTED CONSOLIDATED FINANCIAL INFORMATION

DOLLARS IN THOUSANDS, EXCEPT SHARE DATA


December 31,                                    1998            1997           1996           1995            1994
-------------------------------------------------------------------------------------------------------------------
<S>                                             <C>             <C>            <C>            <C>             <C>
Selected Financial Ratios and Other Data:
Performance Ratios:
Return on assets                                 .94%            .87%           .41%          1.08%           1.03%
    SAIF adjusted(2)                                                            .72
Average interest rate spread during period      2.89            3.01           3.08           3.31            3.53
Net interest margin(1)                          3.26            3.37           3.50           4.44            4.17
Ratio of operating expense to
 average total assets                           2.28            2.15           3.06           3.16            3.14
    SAIF adjusted(2)                                                           2.56
Efficiency(3)                                  63.19           61.13          79.56          65.14           66.78
    SAIF adjusted(2)                                                          66.75
Return on equity                               11.49            9.93           3.93           4.62            6.38
    SAIF adjusted(2)                                                           6.83

Quality Ratios:
Non-performing assets to
 total assets at end of period                  0.43            0.36           0.36           0.76            0.36
Allowance for loan losses to
 non-performing loans                         119.51          118.62         109.89          51.38          109.78
Allowance for loan losses to
 total loans receivable, net                    0.49            0.44           0.44           0.45            0.48

Capital Ratios:
Equity to total assets at end of period         7.83            8.62           9.07          21.48           23.92
Average equity to average assets                8.15            8.73           9.09          22.62           16.15
Ratio of average interest-earning assets
 to average interest-bearing liabilities        1.08x           1.07x          1.10x          1.32x           1.19x
Number of full service offices                    26              26             26             13              13

</TABLE>

(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 (see Note 17 of the Notes to  Consolidated
     Financial Statements).
(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.


                                               OTTAWA FINANCIAL CORPORATION   15
<PAGE>



MANAGEMENT'S DISCUSSION AND 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 recorded recorded earnings in 1998. Improvements in
net interest income and noninterest income contributed  heavily to the growth in
earnings.  Our focus on developing  our business  banking  services,  as well as
healthy  loan demand in our market area,  enabled us to increase the  commercial
business  and  real  estate  loan  portfolio.  This  portfolio,  which  includes
commercial real estate loans,  construction and development loans,  multi-family
real estate  loans,  industrial  real estate  loans,  equipment  and  commercial
vehicle loans, and operating lines of credit grew by $71.1 million, representing
a 45% growth rate.

   The recent  mergers in our local market area and our promise to become a full
financial  service  company have enabled us to expand and diversify our customer
base.  Deposits  are up $39.0  million from 1997,  with the largest  increase in
commercial  deposit  accounts.  Through our 26 retail banking offices in Western
Michigan,  we began offering a number of new products and services  during 1998.
These  included  special  services for our business  banking  customers  such as
account analysis,  zero balance accounts,  sweep accounts and direct deposit-ACH
origination;  title  insurance  to our  loan  customers  through  our new  title
insurance  subsidiary;  as  well  as  "AmeriCall  24"  for  all of  our  deposit
customers.

   Our new subsidiary,  AmeriPlan  Financial  Services,  Inc., assists customers
with their  personal  financial  planning and offers a variety of investment and
insurance products.  We have added specialized expertise to our staff to develop
this new line of fee generating business consistent with our strategic plan. The
benefit of this investment in resources is reflected in the growth in fee income
on  sales  of  mutual  funds  and  annuities.  This  investment  subsidiary  has
contributed $597,000 in gross revenues to noninterest income during 1998.

Financial Condition

Total  assets  increased  to $938.0  million at  December  31,  1998 from $885.8
million at December 31, 1997. Loans and securities  experienced the most growth.
Proceeds  received  from the growth in  deposits  and FHLB  advances  funded the
increase in assets.

   Securities increased to $71.6 million at December 31, 1998 from $57.3 million
at December  31,  1997.  As interest  rates  declined  during the year,  a large
portion of our agency securities were called by the issuers. With these proceeds
and other funding  sources,  we invested in non-callable  agency  securities and
adjustable rate  securities.  We invested in non-callable  agency  securities to
reduce the risk of having to  reinvest  in lower  yielding  securities  during a
falling  interest rate  environment as a result of the issuers  exercising their
call option and invested in adjustable  rate  securities to manage interest rate
risk.

   Net loans  receivable  increased to $769.8  million at December 31, 1998 from
$747.4 million at December 31, 1997. The commercial business and commercial real
estate portfolio grew by 45%, while the consumer portfolio grew by 8%. 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 one-to-four  family mortgage loan portfolio  decreased by 12% during 1998
even though the volume of loans originated increased dramatically. The volume of
residential  mortgage loans  originated for sale increased from $45.4 million in
1997 to $151.4  million in 1998.  We achieved  this growth from the  significant
increase in refinancing activity resulting from the decline in mortgage interest
rates during 1998, as well a change in our method of pricing  mortgage  loans to
be sold.  During the third quarter of 1997, we offered more competitive rates to
our customers by implementing more  sophisticated  pricing tools. We sell almost


16   OTTAWA FINANCIAL CORPORATION

<PAGE>




all of our 15 and 30 year term fixed rate mortgage production and retain for our
portfolio  adjustable  rate mortgage  production.  A significant  portion of our
adjustable  portfolio  refinanced  to fixed rate during 1998. We then sold these
fixed rate loans causing the overall decrease in our mortgage portfolio.

   The increase in both net loans  receivable and  origination of loans for sale
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 $693.6 million at December 31, 1998 from $654.6 million
at December  31, 1997.  Business  checking  and money  market  savings  accounts
experienced the most growth. The growth in these areas compensated for a decline
in certificates of deposit of $7.5 million. Much of the longer term certificates
of deposit that matured  during the year did not roll over into new  certificate
of deposit accounts likely due to the low interest rate environment.  Due to the
low rates being offered on wholesale  funding  sources,  we increased our use of
Federal  Home Loan Bank  advances in funding the growth in the loan and security
portfolios.

   The primary components of growth in shareholders'  equity for 1998 related to
net income,  as well as proceeds received from the exercise of stock options and
warrants.  These  increases  were more than offset by quarterly  cash  dividends
declared and additional  repurchases of the Corporation's  outstanding shares of
common stock.  During 1998, we repurchased  551,495 shares of common stock at an
average price of $24.73 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.  We will  continue to  repurchase  stock as long as it
positively  affects our financial  performance  and does not jeopardize safe and
sound capital levels. As such, stock repurchase  activity may diminish if growth
in assets continues.

   As of December  31,  1998,  444,431  outstanding  warrant  certificates  were
exercisable  into 537,762 shares of Ottawa's common stock. At the exercise price
of $14.46 per share, this would have resulted in proceeds of $7.8 million. After
careful  consideration and evaluation,  the management and Board of Directors of
Ottawa  Financial  Corporation  determined  it was in the best  interests of the
Company to make an exchange offer for the  outstanding  warrants.  We offered to
exchange for each outstanding warrant, at the holder's option, either .44 shares
of common stock or $10.03 in cash. The purpose of the exchange was to reduce the
amount of cash  received  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,
we accepted  tenders  for  approximately  86% of our  outstanding  warrants.  In
connection  with this exchange,  we issued  164,181  shares of Ottawa  Financial
Corporation  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 $900,000.

   On August 31, 1998, we paid a 10% stock  dividend,  the second 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 August
31, 1998 and September 30, 1997.


                                               OTTAWA FINANCIAL CORPORATION   17
<PAGE>



Results of Operations
Comparison of 1998 to 1997

Net income.  Net income for 1998 was $8.7 million,  or $1.44 per diluted  common
share,  compared to $7.5  million,  or $1.22 per diluted  common share for 1997.
Diluted  earnings per share  increased $.22, 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.

   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 $1.83 for the year ended December 31, 1998, compared
to $1.58 for 1997, showing a 16% 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 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.  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.  The  interest  margin is  affected  by  economic  and
competitive  factors  that  influence  interest  rates,  loan demand and deposit
flows.

   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 Federal Home Loan
Bank  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 have generally  decreased since 1997,
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.


18   OTTAWA FINANCIAL CORPORATION

<PAGE>



   Our strategy  during 1999 will be to continue to grow the loan  portfolio and
alter the composition to increase our percentage of higher  yielding  commercial
and consumer  loans in relation to the total loan  portfolio.  It is anticipated
this shift may continue to have a positive impact on net interest income and the
overall  yield on  interest-earning  assets,  but may also result in  additional
provisions for loan losses as a result of the greater  inherent risks associated
with commercial and consumer lending compared to residential  mortgage  lending.
Interest  rate  spreads on the growth  likely  will  tighten  due to the current
interest rate environment and the cost of funding sources.

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,                                       1998                          1997                         1996
-----------------------------------------------------------------------------------------------------------------------------
                                       Average                        Average                      Average
                                          Out-   Interest                Out-  Interest               Out-  Interest
                                      standing    Earned/   Yield/   standing   Earned/   Yield/  standing   Earned/   Yield/
                                       Balance       Paid     Rate    Balance      Paid     Rate   Balance      Paid     Rate
-----------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>         <C>         <C>    <C>        <C>         <C>   <C>        <C>        <C>
Interest-Earning Assets:
Loans receivable(1)(2)                $778,282    $62,687     8.05%  $732,927   $59,994     8.19% $605,563   $49,036    8.10%
Securities(2)                           60,513      3,859     6.38     56,635     3,787     6.68    75,850     5,037    6.64
Other interest-earning assets           19,119      1,425     7.46     15,754     1,071     6.80    11,378       733    6.44
-----------------------------------------------------------------------------------------------------------------------------
      Total interest-
       earning assets(1)               857,914     67,971     7.92    805,316    64,852     8.05   692,791    54,806    7.91

Interest-Bearing Liabilities:
Demand and NOW deposits                173,322      6,517     3.76    149,909     5,823     3.89   127,574     4,518    3.54
Savings deposits                        59,485      1,125     1.89     65,678     1,551     2.37    68,590     1,735    2.53
Certificate accounts                   401,026     22,741     5.67    393,757    22,024     5.61   341,795    18,803    5.50

FHLB advances                          160,533      9,591     5.97    140,746     8,293     5.91    94,269     5,451    5.78

Other interest-bearing liabilities         663         38     5.73        184        13     7.07       248        24    9.68
-----------------------------------------------------------------------------------------------------------------------------
      Total interest-
       bearing liabilities             795,029     40,012     5.03    750,274    37,704     5.04   632,476    30,531    4.83
-----------------------------------------------------------------------------------------------------------------------------
Net interest income                               $27,959                       $27,148                      $24,275
=============================================================================================================================
Net interest rate spread                                      2.89%                         3.01%                       3.08%
=============================================================================================================================
Net earning assets                     $62,885                        $55,042                      $60,315
=============================================================================================================================
Net yield on average
  interest-earning assets                                     3.26%                         3.37%                       3.50%
=============================================================================================================================
Average interest-earning assets to
  average interest-bearing liabilities                1.08x                        1.07x                        1.10x
=============================================================================================================================
</TABLE>

(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.


                                               OTTAWA FINANCIAL CORPORATION   19
<PAGE>




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,  information 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                                                 1998 vs. 1997                                 1997 vs. 1996
------------------------------------------------------------------------------------------------------------------------------------
                                              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                              $  3,632       $   (940)      $  2,692       $ 10,420       $    538       $ 10,958
Securities                                         222           (150)            72         (1,285)            35         (1,250)
Other interest-earning assets                      244            111            355            296             42            338
----------------------------------------------------------------------------------------------------------------------------------

      Total interest-earning assets              4,098           (979)         3,119          9,431            615         10,046

Interest-bearing liabilities:
Demand and NOW deposits                       $    873       $   (179)      $    694       $    840       $    465       $  1,305
Savings deposits                                  (137)          (289)          (426)           (72)          (112)          (184)
Certificate accounts                               410            307            717          2,902            319          3,221
FHLB advances                                    1,181            117          1,298          2,737            105          2,842
Other interest-bearing liabilities                  27             (2)            25             (5)            (6)           (11)
----------------------------------------------------------------------------------------------------------------------------------
      Total interest-bearing liabilities         2,354            (46)         2,308          6,402            771          7,173
----------------------------------------------------------------------------------------------------------------------------------
Net interest income                           $  1,744       $   (933)      $    811       $  3,029       $   (156)      $  2,873
==================================================================================================================================
</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  $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.  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


20   OTTAWA FINANCIAL CORPORATION

<PAGE>



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.

   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 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.

Year 2000  Issue.  The year 2000  ("Y2K")  issue  relates  to the  inability  of
computer  systems to recognize the year 2000.  Processing  problems could result
from existing computer programs and systems misinterpreting the year 2000 as the
year 1900. The financial  institutions industry could be significantly  impacted
by the Y2K issue due to our dependence on technology and date-sensitive data. If
systems  cannot  identify  the year 2000,  calculations  that rely on date field
information,  such  as  interest,  payment  or due  dates  and  other  operating
functions,  could  create  incorrect  information.  We may be unable to  process
transactions,   prepare   statements  or  engage  in  similar  normal   business
activities.  Similarly,  a failure  to  properly  address  the Y2K  issue  could
negatively  impact our ability to interact with our suppliers and creditors,  as
well as to adequately assess the  creditworthiness of our borrowers.  Therefore,
if not  adequately  addressed,  the Y2K issue could have a  significant  adverse
impact on our operations  and, in turn,  our financial  condition and results of
operations.

   Financial institution regulators are increasing their focus on Y2K compliance
issues. The Federal Financial  Institutions  Examination  council issued several
statements on Y2K Project Management  Awareness.  These statements require us to
examine the potential  impact of the Y2K issue on our  customers,  suppliers and
borrowers.  These statements also require us to assess our exposure, measure our
risk and prepare a plan to address the Y2K issue.

   Our Y2K  assessment  began in late 1997 when an action plan was developed and
approved by our Board of  Directors.  We created a "Y2K Task Force" to work with
associates corporate-wide to prepare for Y2K. This task force has identified all
areas that may be affected  by the coming  millenium.  These  areas  include (i)


                                               OTTAWA FINANCIAL CORPORATION   21
<PAGE>



information technology systems, such as our data processor and other proprietary
and vendor  supported  business  applications  (ii)  non-information  technology
systems,  such  as  facilities  and  related  building  services,  for  example,
utilities,  security systems, general business equipment and non-computer office
equipment;  and  (iii)  business  relationships,   for  example,  borrowers  and
suppliers.  Our  Computer  and  Network  Department,  as well as our  Technology
Committee,  have been testing our  information  and  non-information  technology
systems to assess Y2K compliance.  If an area is not validated as Y2K compliant,
then updates are made to become Y2K compliant.

The phases of our Y2K plan and the status of completion are discussed below.

1. Awareness: We defined the Y2K problem and identified the resources to perform
   compliance  work.  We formed a Y2K task force and  developed  a strategy  for
   identifying  areas that may be affected by Y2K.  We  completed  this phase in
   September 1997.

2. Assessment:  We evaluated  the  complexity  of the Y2K issue and detailed the
   effort necessary to address the issues.  This phase identified all areas that
   may be affected by the Y2K date change.  We went beyond  obvious  information
   systems such as hardware,  software,  networks and automated  teller machines
   and included environmental systems that are dependent on embedded microchips,
   such as security  systems,  elevators and vaults.  We categorized  items into
   three main areas:  mission critical,  non-mission critical and miscellaneous.
   We  then  assigned  all  items  identified  to  individuals   throughout  the
   Corporation. We completed this phase in June 1998.

3. Renovation:  This phase  included  code  enhancements,  hardware and software
   upgrades,  system  replacements,  vendor  certifications  and  other  similar
   changes.  We prioritized  this work based on information  gathered during the
   assessment  phase.  Where  we  rely  on  third  party  vendors,  we  obtained
   certifications  verifying Y2K compliance.  Where  certifications could not be
   obtained,  alternative  options were  identified  for all  important  banking
   functions. We completed this phase in December 1998.

4. Validation:  We are testing the incremental  changes to hardware and software
   components.  In addition to testing the upgraded components, we are verifying
   connections  with  other  systems.  We are  establishing  controls  to assure
   effective and timely completion of all hardware and software testing prior to
   final  implementation.  As  with  the  renovation  phase,  we  will  continue
   discussions with vendors  regarding the success of their validation  efforts.
   We expect to complete this phase by March 31, 1999.

5. Implementation:  We will  certify  systems as Y2K  compliant.  For any system
   failing  certification,  we will  assess  the  effect on our  operations  and
   implement  our  contingency  plans.  Any  mission-critical   system  that  is
   potentially  non-compliant will be immediately  resolved.  In addition,  this
   phase will  ensure  that any new  systems or  subsequent  changes to verified
   systems are Y2K compliant. We expect to complete this phase by June 30, 1999.

   We are expensing all costs  associated  with required  system changes as they
occur.  These costs are being funded through  operating cash flows.  We estimate
the total cost of our Y2K  conversion  project will be  $350,000,  net of income
taxes. We do not expect  significant  increases in future data processing  costs
relating to Y2K compliance.

   The software program that processes and tracks customer  account  information
is the most significant  component of our computer system.  This software is the
ITI Premier Financial  Information System that is used by 3,500 banks across the
country and has been certified as Y2K compliant. This is relatively new software
that was written to include four digits for the year  calculations and therefore
does not require its language to be rewritten.  An outside  service  bureau runs
this software for us. Since we are in the process of converting to a new service
bureau,  we have not yet  completed the Y2K  compliance  testing on our network.


22   OTTAWA FINANCIAL CORPORATION

<PAGE>



However,  the  service  bureau  itself is  certified  as Y2K  compliant  and has
verified  compliance  for other  clients it services.  We expect to complete the
testing on our network by March 31, 1999.

   While  our Y2K  readiness  process  is  proceeding  according  to plan,  as a
precaution,  we developed a  contingency  plan for each of our mission  critical
systems during the assessment phase.  Since most of our mission critical systems
are dependent on third party vendors or service providers,  our contingency plan
is to select a new vendor or service  provider and convert to their  system.  We
have  secured  alternative  sources or services for mission  critical  areas for
which we did not receive a  satisfactory  response by January 31, 1999.  We will
seek alternative sources or services for non-mission critical areas for which we
do not receive a  satisfactory  response  by June 30,  1999.  We also  developed
contingency  plans in the event of  physical  disaster  including  power  outage
and/or telecommunication system outages. We assigned responsibilities  regarding
final  preparation  to  individuals  within each  department.  In  addition,  we
identified  a  centralized  location  to  accomplish   communications  and  data
processing under various disaster conditions.

Comparison of 1997 to 1996

Net income.  Net income for 1997 was $7.5  million  compared to $3.1 million for
1996.  The  one-time  assessment  of $3.5  million to  recapitalize  the Savings
Association  Insurance  Fund is included in net income for 1996.  Net income for
1996  would  have been  $5.4  million  without  this  assessment.  Growth in net
interest income and  improvements  in efficiency  contributed to the increase in
net income.

   Diluted  earnings per share for 1997 was $1.22 compared to $.49 for the prior
year.  Diluted earnings per share would have been $.86 for 1996 if the effect of
the $3.5 million  assessment was removed from earnings.  The  improvement in net
interest  income and Ottawa's  stock  repurchase  activity  positively  impacted
earnings per share. Our tangible earnings per share was $1.58 for 1997, compared
to a tangible earnings per share of $.99 for 1996, as adjusted for the effect of
the special Savings Association Insurance Fund assessment.

   Return on equity  increased from 6.83% in 1996 to 9.93% in 1997. The improved
earnings  resulting  from the growth in assets in 1996 and 1997,  along with our
stock repurchases, increased return on equity.

Net  Interest  Income.  Net  interest  income  increased  $2.9  million on a tax
equivalent  basis for the year ended  December  31,  1997  compared  to the same
period  in 1996.  Volume  increases  resulting  from the  AFSB  acquisition  and
internal growth  experienced during 1996 and 1997 increased net interest income.
While net interest income increased, the net interest spread declined from 3.08%
in 1996 to 3.01% in 1997.  The  increase in the loan  portfolio  as a percent of
total  interest-earning  assets,  as well as a  general  rise  in the  rates  of
interest-earning  assets,  improved the yield on  interest-earning  assets.  The
increase   in  Federal   Home  Loan  Bank   advances   as  a  percent  of  total
interest-bearing  liabilities,  a shift in mix from lower costing demand deposit
and savings accounts to higher costing money market demand and savings accounts,
as  well  as a  general  rise  in the  rates  of  interest-bearing  liabilities,
increased the cost of interest-bearing liabilities. The improvement in the yield
on interest-earning assets, however, was more than offset by the increase in the
cost of interest-bearing liabilities, resulting in a decline in the net interest
spread.  This spread decline,  along with Ottawa becoming more leveraged through
acquisition and internal growth,  reduced net interest margin from 3.50% in 1996
to 3.37% in 1997.  The ratio of  average  interest-earnings  assets  to  average
interest-bearing  liabilities,  which  declined  from  1.10x in 1996 to 1.07x in
1997, illustrates our increase in leveraging.

                                               OTTAWA FINANCIAL CORPORATION   23
<PAGE>



Provision  for Loan Losses.  The provision for loan losses was $660,000 for 1997
and $564,000 for 1996. The ratio of non-performing  assets,  consisting of loans
90 days or more delinquent and foreclosed assets, to total assets was .36% as of
both December 31, 1997 and 1996. The ratio of allowance for loan losses to total
loans  receivable was .44% as of both December 31, 1997 and 1996. While the risk
profile of the loan  portfolio  did not change  dramatically,  we increased  the
provision so the allowance for loan loss balance kept pace with the loan growth.

Noninterest  Income.  Noninterest  income increased from $3.3 million in 1996 to
$4.1 million in 1997.  Enhancements  in deposit  account  service fees that were
implemented  during the third quarter of 1997 to achieve more consistency in fee
structures between AmeriBank and AFSB improved  noninterest income. The increase
in deposit account service fees was  complimented by increases in gains on sales
of mortgage loans and gains on sales of equity securities.

Noninterest  Expense.  Noninterest expense decreased from $21.8 million for 1996
to $18.7 million for 1997. The one-time SAIF assessment in 1996 of $3.5 million,
as well as declines in FDIC deposit insurance,  data processing and professional
services,  decreased noninterest expense. Increases in compensation and benefits
partially offset these decreases.

   Legislation  was signed into law on September 30, 1996, to  recapitalize  the
Savings  Association  Insurance  Fund,  requiring  us to pay a one-time  special
assessment of $3.5 million.  The decrease in the FDIC deposit insurance reflects
the lower  charge of 6.5 cents per $100 of domestic  deposits in 1997 versus the
23 cents per $100 of domestic deposits in 1996.

   We underwent an electronic data processing conversion in 1996. The conversion
itself  required   substantial   outside  consulting   services,   resulting  in
approximately  $400,000 of non-recurring  expenses during 1996.  During 1997, we
experienced economies of operations reflected in lower levels of data processing
and other  noninterest  expenses  and  experienced  cost  savings as a result of
reduced contracted services.

   A  greater  number of  full-time  equivalent  employees  and an  increase  in
employee stock ownership plan expense attributable to the higher market price of
our stock during 1997 increased compensation and benefits.

Income Tax  Expense.  Income tax expense for 1997 was $4.3  million  compared to
$2.0  million for 1996.  The higher  federal tax expense is  primarily  due to a
higher level of pre-tax income and to a lesser  extent,  a full twelve months of
goodwill  amortization,  which  is not  deductible  for  tax  purposes,  in 1997
compared to ten and one half months of amortization in 1996, based upon the date
of the merger consummation.

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.

   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.

24   OTTAWA FINANCIAL CORPORATION

<PAGE>




   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, 1998 and 1997, 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, 1998:                                         Net Portfolio Value                     Net Interest Income
----------------------------------------------------------------------------------------------------------------------

Change in Interest Rate (Basis  Points)      $ Amount in NPV   % Change in NPV      $ Amount in NPV    % Change in NPV
----------------------------------------------------------------------------------------------------------------------
<S>        <C>                                      <C>                     <C>            <C>                     <C>
          +300                                      $ 38,798               -48%            $ 20,275               -27%
          +200                                        52,011               -30               23,040               -18
          +100                                        63,218               -15               25,532                -9
             0                                        74,187                --               27,965                --
          -100                                        84,511                14               30,309                 8
          -200                                        89,599                21               31,886                14
          -300                                        99,922                35               33,440                20

December 31, 1997:                                         Net Portfolio Value                     Net Interest Income
----------------------------------------------------------------------------------------------------------------------
Change in Interest Rate (Basis  Points)      $ Amount in NPV   % Change in NPV      $ Amount in NPV    % Change in NPV
----------------------------------------------------------------------------------------------------------------------
          +300                                      $ 54,990               -33%            $ 19,803               -22%
          +200                                        64,479               -21               21,699               -14
          +100                                        73,263               -11               23,518                -7
             0                                        81,958                --               25,286                --
          -100                                        90,649                11               27,101                 7
          -200                                        96,085                17               28,488                13
          -300                                       106,833                30               29,521                17
</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 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  shows  there has been an  increase  in  sensitivity  to a rise in
interest  rates from 1997 to 1998. At an increase in interest rates of 200 basis
points, net portfolio value decreases by 30% as of December 31, 1998 compared to
a 21% decrease as of December 31, 1997.  Approximately one-third of the increase
in  sensitivity  relates to the decrease in our equity from December 31, 1997 to
December 31, 1998. As equity decreases through continued capital management, the
percent  change in NPV  increases  for the same dollar amount change in NPV. The


                                               OTTAWA FINANCIAL CORPORATION   25
<PAGE>




other  reasons for the  increase in  sensitivity  relate to the loan and deposit
portfolio mix changes  during the year. A significant  portion of our adjustable
rate  mortgage  loan  portfolio  refinanced  into fixed  rate  loans  causing an
increase in our interest rate risk in a rising rate  environment.  Further,  the
weighted  average  maturity of our  certificate of deposit  portfolio  decreased
during 1998.  This change in maturity  structure  also causes an increase in our
interest rate risk in a rising rate environment.

   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 consumer and
commercial  business  portfolios  which  are  shorter  term in  nature  than the
mortgage portfolio.  In addition, we are underwriting all long-term,  fixed rate
mortgages in accordance with Federal Home Loan Mortgage  Corporation  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  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 advances from the Federal Home Loan Bank.

   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
Federal Home Loan Bank 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 Federal Home Loan Bank's  advances  program instead of selling
our investment securities.

   Advances from the Federal Home Loan Bank of Indianapolis increased only $14.8
million  during  1998 while  assets  grew by $52.2  million.  Deposits  were the
primary source of funds for this asset growth and there was very little pressure
on  liquidity.  Federal Home Loan Bank  advances  totaled  $160.3  million as of
December 31, 1998.  Approximately  $61.4  million of these  advances come due in
1999.  We may  choose  to renew or pay off  these  advances  depending  upon our
liquidity needs at that time.


26   OTTAWA FINANCIAL CORPORATION

<PAGE>

   Ottawa  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 13 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 12 of the Consolidated Financial Statements.

Accounting and Regulatory Standards

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

Disclosure Regarding Forward-Looking Statements

We may from  time to time make  written  or oral  "forward-looking  statements."
These  forward-looking  statements  may be  contained  in this Annual  Report to
Shareholders,  in our  filings  with the  Securities  and  Exchange  Commission,
including  our  Annual  Report  on Form  10-K  and its  exhibits,  and in  other
communications by us, which are made in good faith pursuant to the "safe harbor"
provisions of the Private  Securities  Litigation  Reform Act of 1995. The words
"may",  "could",  "should",   "would",  "believe",   "anticipate",   "estimate",
"expect",  "intend",  "plan",  and similar  expressions are intended to identify
forward-looking statements.

   Forward-looking  statements  include  statements with respect to our beliefs,
plans, objectives, goals, expectations, anticipations, estimates and intentions,
that are subject to significant risks and uncertainties.  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 the
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 our business.

   This list of  important  factors is not  exclusive.  We do not  undertake  to
update any forward-looking statement,  whether written or oral, that may be made
from time to time by or on behalf of Ottawa or AmeriBank.


                                               OTTAWA FINANCIAL CORPORATION   27

<PAGE>




               REPORT OF INDEPENDENT AUDITORS




               Board of Directors
               Ottawa Financial Corporation
[EMBLEM]       Holland, Michigan

CROWE CHIZEK   We have audited the accompanying  consolidated  balance sheets of
               Ottawa  Financial  Corporation  as of December 31, 1998 and 1997,
               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, 1998.
               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, 1998
               and 1997,  and the results of its  operations  and its cash flows
               for each of the three  years in the  period  ended  December  31,
               1998,   in  conformity   with   generally   accepted   accounting
               principles.


               /s/ Crowe, Chizek and Company LLP

               Crowe, Chizek and Company LLP
               Grand Rapids, Michigan
               February 26, 1999



28   OTTAWA FINANCIAL CORPORATION

<PAGE>



<TABLE>
<CAPTION>

CONSOLIDATED BALANCE SHEETS

DOLLARS IN THOUSANDS

December 31,                                                              1998           1997
---------------------------------------------------------------------------------------------

Assets

<S>                                                                  <C>            <C>      
Cash and due from financial institutions                             $  20,437      $  25,437
Interest-bearing demand deposits in other financial institutions        21,788          7,087
---------------------------------------------------------------------------------------------
      Total cash and cash equivalents                                   42,225         32,524
Securities available for sale                                           71,646         57,308
Loans held for sale                                                      3,375          1,955
Loans receivable, net                                                  769,770        747,423
Federal Home Loan Bank stock                                            11,782          7,308
Premises and equipment, net                                             15,200         15,030
Acquisition intangibles                                                 13,032         14,248
Other assets                                                            11,000         10,021
---------------------------------------------------------------------------------------------
      Total assets                                                   $ 938,030      $ 885,817
=============================================================================================

Liabilities and Shareholders' Equity

Deposits                                                             $ 693,632      $ 654,560
Federal Home Loan Bank advances                                        160,268        145,458
Accrued expenses and other liabilities                                  10,723          9,436
---------------------------------------------------------------------------------------------
      Total liabilities                                                864,623        809,454

Commitments and contingent liabilities

Shareholders' equity
Preferred stock
Common stock                                                                62             60
Additional paid-in capital                                              73,177         67,381
Retained earnings, substantially restricted                             15,363         23,386
Net unrealized gain (loss) on securities available for sale                 23             62
Employee Stock Ownership Plan                                           (1,886)        (2,323)
Management Recognition and Retention Plan                                 (712)        (1,502)
Less cost of common stock in treasury                                  (12,620)       (10,701)
---------------------------------------------------------------------------------------------
      Total shareholders' equity                                        73,407         76,363
---------------------------------------------------------------------------------------------
            Total liabilities and shareholders' equity               $ 938,030      $ 885,817
=============================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.


                                               OTTAWA FINANCIAL CORPORATION   29

<PAGE>



<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF INCOME

DOLLARS IN THOUSANDS, EXCEPT SHARE DATA


Years ended December 31,                                    1998          1997         1996
-------------------------------------------------------------------------------------------
<S>                                                     <C>           <C>          <C>
Interest income
       Loans                                            $ 62,646      $ 59,948     $ 48,991
       Securities                                          3,833         3,707        4,945
       Other                                               1,425         1,071          733
-------------------------------------------------------------------------------------------
                                                          67,904        64,726       54,669
Interest expense
       Deposits                                           30,383        29,398       25,056
       Federal Home Loan Bank advances                     9,591         8,293        5,451
       Other                                                  38            13           24
-------------------------------------------------------------------------------------------
                                                          40,012        37,704       30,531
-------------------------------------------------------------------------------------------
Net interest income                                       27,892        27,022       24,138

Provision for loan losses                                    930           660          564
-------------------------------------------------------------------------------------------

Net interest income after provision for loan losses       26,962        26,362       23,574

Noninterest income
       Service charges and other fees                      4,400         3,039        2,755
       Mortgage servicing fees                               349           317          287
       Gain on sale of mortgage loans                      2,398           370          141
       Gain (loss) on securities                             (24)          143            5
       Other                                                 688           277          140
-------------------------------------------------------------------------------------------
                                                           7,811         4,146        3,328
Noninterest expense
       Compensation and benefits                          11,521        10,356        8,945
       Occupancy                                           1,550         1,316        1,112
       Furniture, fixtures and equipment                   1,241         1,056          781
       Advertising                                           275           276          364
       FDIC deposit insurance premium                        400           324        1,235
       SAIF assessment                                                                3,510
       State single business tax                             517           357          338
       Data processing                                     1,130           891          939
       Professional services                                 495           379          697
       Acquisition intangibles amortization                1,216         1,226        1,081
       Other                                               2,747         2,527        2,842
-------------------------------------------------------------------------------------------
                                                          21,092        18,708       21,844
-------------------------------------------------------------------------------------------
Income before federal income tax expense                  13,681        11,800        5,058

Federal income tax expense                                 5,013         4,273        1,964
-------------------------------------------------------------------------------------------

Net income                                              $  8,668      $  7,527     $  3,094

Earnings per common share
===========================================================================================
       Basic                                            $   1.59      $   1.33     $    .51
===========================================================================================
       Diluted                                          $   1.44      $   1.22     $    .49
===========================================================================================

See accompanying notes to consolidated financial statements.
</TABLE>


30   OTTAWA FINANCIAL CORPORATION

<PAGE>


<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

DOLLARS IN THOUSANDS, EXCEPT SHARE DATA

                                                                                    Net Unrealized
                                                                                       Gain (Loss)  Unallocated
                                                                                     on Securities     Employee      Unearned
                                                            Additional                   Available        Stock    Management
                                                   Common      Paid-in    Retained       for Sale,    Ownership   Recognition
Years ended December 31, 1998, 1997 and 1996        Stock      Capital    Earnings      Net of Tax  Plan Shares   Plan Shares
---------------------------------------------------------------------------------------------------------------------------------

<S>                                               <C>        <C>         <C>             <C>          <C>         <C>
Balance - December 31, 1995                       $    59    $  57,662   $  31,277       $     391    $ (3,302)   $   (2,311)
Net income for the year ended
  December 31, 1996                                                          3,094
Cost of warrants and options related
  to the acquisition of AmeriBank                                2,306
152,093 shares issued upon
  exercise of stock options                             1          507
60,024 shares committed to be released
  under employee stock ownership plan                              332                                     496
Issuance of 18,150 shares of common
  stock for management recognition plan                            242                                                  (242)
Shares earned under management
  recognition and retention plan                                                                                         576
Acquisition of 577,008 treasury
  shares, at cost
Cash dividend - $.28 per share                                               (1,699)
Change in unrealized gain (loss) on securities
  available for sale, net of tax of $242                                                      (470)
---------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1996                            60       61,049       32,672            (79)     (2,806)       (1,977)

Net income for the year ended
  December 31, 1997                                                           7,527
26,435 shares issued upon
  exercise of stock options                                        258
34,711 shares issued upon
  exercise of stock warrants                                       502
57,098 shares committed to be released
  under employee stock ownership plan                              654                                     483
Issuance of 10,580 shares of common
  stock for management recognition plan                            249                                                  (249)
Shares earned under management
  recognition and retention plan                                                                                         572
13,840 shares forfeited under management
  recognition and retention plan                                  (152)                                                  152
Acquisition of 480,673 treasury
  shares, at cost
Cash dividend - $.33 per share                                               (1,858)
10% Stock dividend                                               4,821      (14,955)
Change in unrealized gain (loss) on securities
  available fo sale, net of tax of $73                                                         141
---------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1997                            60       67,381       23,386             62      (2,323)       (1,502)

Net income for the year ended
  December 31, 1998                                                           8,668
56,750 shares issued upon
  exercise of stock options                             1          491
113,048 shares issued upon
  exercise of stock warrants                            1        1,634
54,233 shares committed to be released
  under employee stock ownership plan                              909                                     437
Shares earned under management
  recognition and retention plan                                                                                         509
14,074 shares forfeited under management
  recognition and retention plan                                  (293)          12                                      281
Acquisition of 551,495 treasury
  shares, at cost
Cash dividend - $.39 per share                                               (2,113)
10% Stock dividend                                               2,869      (14,590)
Tax benefit of equity deductions                                   186
Change in unrealized gain (loss) on securities
  available fo sale, net of tax of $(21)                                                       (39)
---------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1998                        $   62    $  73,177     $ 15,363         $   23    $ (1,886)      $  (712)
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                               OTTAWA FINANCIAL CORPORATION   31
<PAGE>



CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (cont'd)

DOLLARS IN THOUSANDS, EXCEPT SHARE DATA


                                                                       Total
                                                  Treasury      Shareholders'
Years ended December 31, 1998, 1997 and 1996         Stock            Equity
-----------------------------------------------------------------------------

Balance - December 31, 1995                      $ (4,215)         $ 79,561
Net income for the year ended
  December 31, 1996                                                   3,094
Cost of warrants and options related
  to the acquisition of AmeriBank                                     2,306
152,093 shares issued upon
  exercise of stock options                                             508
60,024 shares committed to be released
  under employee stock ownership plan                                   828
Issuance of 18,150 shares of common
  stock for management recognition plan
Shares earned under management
  recognition and retention plan                                        576
Acquisition of 577,008 treasury
  shares, at cost                                  (7,787)           (7,787)
Cash dividend - $.28 per share                                       (1,699)
Change in unrealized gain (loss) on securities
  available for sale, net of tax of $242                               (470)
------------------------------------------------------------------------------
Balance - December 31, 1996                       (12,002)           76,917

Net income for the year ended
  December 31, 1997                                                   7,527
26,435 shares issued upon
  exercise of stock options                                             258
34,711 shares issued upon
  exercise of stock warrants                                            502
57,098 shares committed to be released
  under employee stock ownership plan                                 1,137
Issuance of 10,580 shares of common
  stock for management recognition plan
Shares earned under management
  recognition and retention plan                                        572
13,840 shares forfeited under management
  recognition and retention plan
Acquisition of 480,673 treasury
  shares, at cost                                  (8,833)           (8,833)
Cash dividend - $.33 per share                                       (1,858)
10% Stock dividend                                 10,134
Change in unrealized gain (loss) on securities
  available fo sale, net of tax of $73                                  141
------------------------------------------------------------------------------
Balance - December 31, 1997                       (10,701)           76,363

Net income for the year ended
  December 31, 1998                                                   8,668
56,750 shares issued upon
  exercise of stock options                                             492
113,048 shares issued upon
  exercise of stock warrants                                          1,635
54,233 shares committed to be released
  under employee stock ownership plan                                 1,346
Shares earned under management
  recognition and retention plan                                        509
14,074 shares forfeited under management
  recognition and retention plan
Acquisition of 551,495 treasury
  shares, at cost                                 (13,640)          (13,640)
Cash dividend - $.39 per share                                       (2,113)
10% Stock dividend                                 11,721
Tax benefit of equity deductions                                        186
Change in unrealized gain (loss) on securities
  available fo sale, net of tax of $(21)                                (39)
------------------------------------------------------------------------------
Balance - December 31, 1998                    $  (12,620)        $  73,407
------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.



                                              OTTAWA FINANCIAL CORPORATION   31A

<PAGE>



<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF CASH FLOWS

DOLLARS IN THOUSANDS

Years ended December 31,                                                              1998              1997              1996
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>               <C>               <C>
Cash flows from operating activities
Net income                                                                       $   8,668         $   7,527         $   3,094
Adjustments to reconcile net income to net cash from operating activities
       Depreciation                                                                  1,209             1,079               844
       Net amortization of security premiums and discounts                             418               314               332
       Amortization of intangible assets                                             1,216             1,226             1,081
       Provision for loan losses                                                       930               660               564
       (Gain) loss on sales of securities                                               24              (143)               (5)
       Loss on limited partnership investment                                          332                82               112
       ESOP expense                                                                  1,346             1,137               828
       MRP expense                                                                     509               572               576
       Origination of loans for sale                                              (151,356)          (45,354)           (9,833)
       Proceeds from sales of loans originated for sale                            150,678            43,531             9,973
       Gain on sales of loans                                                       (2,398)             (370)             (140)
       Changes in assets and liabilities
              Other assets                                                          (1,286)              (94)             (302)
              Other liabilities                                                      1,473             1,709               793
-------------------------------------------------------------------------------------------------------------------------------
                     Net cash from operating activities                             11,763            11,876             7,917

Cash flows from investing activities
Acquisition of AFSB                                                                                                    (23,534)
Activity in available-for-sale securities
       Purchases                                                                   (59,110)          (30,092)          (14,016)
       Maturities, prepayments and calls                                            40,301            33,409            31,980
       Sales                                                                         3,965             2,324            25,371
Purchases of FHLB stock                                                             (4,474)             (350)           (3,112)
Purchases of loans                                                                                    (6,039)          (27,027)
Loan originations and principal payments on loans                                  (21,621)          (26,255)         (117,970)
Premises and equipment expenditures, net                                            (1,379)           (1,575)           (2,985)
-------------------------------------------------------------------------------------------------------------------------------
       Net cash used in investing activities                                       (42,318)          (28,578)         (131,293)

Cash flows from financing activities
Net increase in deposits                                                         $  39,072         $  32,068         $  46,248
Net increase (decrease) in Federal funds purchased                                                    (2,000)            2,000
Proceeds from FHLB advances                                                        163,625            67,000           112,500
Repayment of FHLB advances                                                        (148,815)          (60,712)          (21,461)
Proceeds from exercise of stock options                                                492               258               508
Proceeds from exercise of stock warrants                                             1,635               502                  
Cash dividends paid                                                                 (2,113)           (1,858)           (1,699)
Purchase of treasury shares                                                        (13,640)           (8,833)           (7,787)
-------------------------------------------------------------------------------------------------------------------------------
       Net cash from financing activities                                           40,256            26,425           130,309
-------------------------------------------------------------------------------------------------------------------------------

Net change in cash and cash equivalents                                              9,701             9,723             6,933

Cash and cash equivalents at beginning of year                                      32,524            22,801            15,868
-------------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents at end of year                                         $  42,225         $  32,524         $  22,801
===============================================================================================================================

Supplemental disclosures of cash flow information
       Cash paid during the year for
              Interest                                                           $  39,228         $  37,289         $  29,194
              Income taxes                                                           4,340             3,167             1,766
</TABLE>

See accompanying notes to consolidated financial statements.



32   OTTAWA FINANCIAL CORPORATION

<PAGE>


<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

DOLLARS IN THOUSANDS


Years ended December 31,                                          1998           1997           1996
-----------------------------------------------------------------------------------------------------
<S>                                                            <C>            <C>            <C>    
Net income                                                     $ 8,668        $ 7,527        $ 3,094

Other comprehensive income, net of tax:

       Unrealized gains (losses) arising during
          the period on securities available for sale              (55)           235           (467)

       Less: Reclassification adjustment for accumulated
          (gains) losses included in net income                     16            (94)            (3)
-----------------------------------------------------------------------------------------------------
       Unrealized gains (losses) on securities available
          for sale                                                 (39)           141           (470)
-----------------------------------------------------------------------------------------------------
Comprehensive income                                           $ 8,629        $ 7,668        $ 2,624
=====================================================================================================

</TABLE>

See accompanying notes to consolidated financial statements.














                                               OTTAWA FINANCIAL CORPORATION   33
<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
intercompany transactions and balances have been eliminated in consolidation.

   AmeriBank's   primary   services  include   accepting   deposits  and  making
commercial,  mortgage and installment  loans at its 26 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.

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 thantemporary, 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
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.

34   OTTAWA FINANCIAL CORPORATION
<PAGE>


Note 1 (continued)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

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.


                                               OTTAWA FINANCIAL CORPORATION   35
<PAGE>


Note 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 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.   The   accounting   standard  that  requires   reporting
comprehensive  income first applies for 1998, with prior information restated to
be comparable.

New  Accounting  Pronouncements:  Beginning  January 1, 2000,  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, 1998 we have no derivative holdings.

   Mortgage loans originated for sale converted into securities will be affected
by a new accounting standard for 1999. The new standard allows classifying these
securities as available for sale, trading,  or held to maturity,  instead of the
current  requirement  to  classify as  trading.  This is not  expected to have a
material  effect but the effect will vary depending on the level and designation
of securitizations as well as on market price movements. As of December 31, 1998
we have no securitizations.

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, 1998 and 1997,  6,155,234 and 6,614,297  shares were  outstanding.  Treasury
stock is carried at cost. As of December 31, 1998 and 1997,  707,073 and 769,904
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 on the 1997 and 1996 consolidated  financial
statements have been reclassified to conform with the 1998 presentation.


36   OTTAWA FINANCIAL CORPORATION

<PAGE>


Note 2
ACQUISITION

On February 13, 1996,  Ottawa  completed the  acquisition  of AmeriBank  Federal
Savings Bank, a federal savings bank  headquartered in Muskegon,  Michigan using
the purchase method of accounting. The consolidated statements of income reflect
the operating results of AmeriBank Federal Savings Bank since the effective date
of the acquisition. The following table presents unaudited pro forma information
as if the  acquisition  of  AmeriBank  Federal  Savings Bank had occurred at the
beginning  of 1996.  The pro forma  information  includes  adjustments  for lost
interest  on funds paid to  consummate  the  acquisition,  the  amortization  of
intangibles arising from the transaction, the elimination of acquisition related
expenses,   and  the  related  income  tax  effects.  The  pro  forma  financial
information is not  necessarily  indicative of the results of operations as they
would have been had the transactions been effected on the assumed dates.

                                                                 1996
--------------------------------------------------------------------------------
(Unaudited, Dollars in thousands except share data)

Interest income                                               $57,609
Interest expense                                               32,332
--------------------------------------------------------------------------------
   Net interest income                                         25,277
Provision for loan losses                                         700
--------------------------------------------------------------------------------
   Net interest income after provision for loan losses         24,577
Noninterest income                                              3,408
Noninterest expense                                            22,782
--------------------------------------------------------------------------------
   Income before federal income tax expense                     5,203
Federal income tax expense                                      2,050
--------------------------------------------------------------------------------
   Net income                                                 $ 3,153
================================================================================
Proforma earnings per common share
   Basic                                                      $   .52
================================================================================
   Diluted                                                        .50
================================================================================

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


                                               OTTAWA FINANCIAL CORPORATION   37

<PAGE>


Note 3
SECURITIES


Securities available for sale at year end are as follows:

<TABLE>
<CAPTION>
                                                                           Gross                 Gross
                                             Amortized Cost     Unrealized Gains     Unrealized Losses          Fair Value
--------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S>                                                 <C>                  <C>                  <C>                  <C>    
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
==========================================================================================================================


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

1997
Debt securities
        Obligations of U.S. Government
          corporations and agencies                 $24,999              $    65              $    57              $25,007
        Municipal obligations                         1,846                   12                    2                1,856
        Corporate                                     2,000                   10                                     2,010
        Asset-backed                                 28,369                  169                  103               28,435
--------------------------------------------------------------------------------------------------------------------------
                                                    $57,214              $   256              $   162              $57,308
==========================================================================================================================
</TABLE>


Contractual  maturities of debt  securities  available for sale at year end 1998
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.

                                      Amortized Cost     Fair Value
--------------------------------------------------------------------------------
(Dollars in thousands)

Due in one year or less                      $ 5,542        $ 5,543
Due after one year through five years         28,605         28,722
Due after five through ten years                 107            106
--------------------------------------------------------------------------------
                                              34,254         34,371
Asset-backed debt securities                  37,358         37,275
--------------------------------------------------------------------------------
                                             $71,612        $71,646
================================================================================

Sales of securities available for sale are as follows:

                             1998                  1997                  1996
--------------------------------------------------------------------------------
(Dollars in thousands)

Proceeds                 $  3,965              $  2,324              $ 25,371
Gross gains                                         154                    26
Gross losses                  (24)                  (11)                  (21)


38   OTTAWA FINANCIAL CORPORATION


<PAGE>



Note 4
LOANS


Loans at year end are as follows:

                                                         1998           1997
--------------------------------------------------------------------------------
(Dollars in thousands)

First mortgage loans (principally conventional)
      Secured by one-to-four family residences      $ 425,974      $ 483,502
      Secured by other properties                     101,039         73,810
      Construction loans                              117,792         71,145
--------------------------------------------------------------------------------
                                                      644,805        628,457
   Less
      Undisbursed portion of construction loans       (44,797)       (25,787)
      Deferred fees and discounts                      (1,272)          (854)
--------------------------------------------------------------------------------
                                                      598,736        601,816
Commercial loans                                       53,935         37,322
Consumer and other loans
   Student loans                                                          21
   Home equity and second mortgage                     49,647         55,960
   Other                                               71,275         55,597
--------------------------------------------------------------------------------
                                                      120,922        111,578
--------------------------------------------------------------------------------
                                                      773,593        750,716
Allowance for loan losses                              (3,823)        (3,293)
--------------------------------------------------------------------------------
                                                    $ 769,770      $ 747,423
================================================================================


Note 5
ALLOWANCE FOR LOAN LOSSES


An analysis of the allowance for loan losses follows:

                                      1998            1997            1996
--------------------------------------------------------------------------------
(Dollars in thousands)

Balance - beginning of year        $ 3,293         $ 3,129         $ 1,251
   Acquired balance                                                  1,358
   Provision                           930             660             564
   Recoveries                          176             119              90
   Loans charged-off                  (576)           (615)           (134)
--------------------------------------------------------------------------------
Balance - end of year              $ 3,823         $ 3,293         $ 3,129
================================================================================

   Information regarding impaired loans is as follows:

                                                          1998     1997     1996
--------------------------------------------------------------------------------
(Dollars in thousands)

Average investment in impaired loans                    $1,710   $1,354   $1,612
Interest income recognized on impaired loans including
  interest income recognized on cash basis                  24      104       46
Interest income recognized on impaired
  loans on cash basis                                       24        4        5


                                               OTTAWA FINANCIAL CORPORATION   39

<PAGE>



Note 5 (continued)
ALLOWANCE FOR LOAN LOSSES

                                                         1998         1997
--------------------------------------------------------------------------------
(Dollars in thousands)

Balance of impaired loans                             $ 1,452      $ 1,942
Less portion for which no allowance for
  loan losses is allocated                             (1,053)        (490)
--------------------------------------------------------------------------------
   Portion of impaired loan balance for which an
     allowance for credit losses is allocated         $   399      $ 1,452
================================================================================
   Portion of allowance for loan losses allocated
     to the impaired loan balance                     $    65      $   346



Note 6
SECONDARY MORTGAGE MARKET ACTIVITIES


Mortgage loans serviced for others,  principally  the Federal Home Loan Mortgage
Corporation,  which  are  not  reported  as  assets,  totaled  $227,939,000  and
$130,431,000 at December 31, 1998 and 1997. Custodial escrow balances maintained
in connection with this loan servicing,  and included in demand  deposits,  were
$372,000 and $238,000 at December 31, 1998 and 1997.

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

Balance at January 1, 1996                                  $    0
   Additions (acquired and originated)                         489
   Amortization                                                (32)
--------------------------------------------------------------------------------

Balance at December 31, 1996                                   457
--------------------------------------------------------------------------------
   Additions                                                   237
   Amortization                                                (44)
--------------------------------------------------------------------------------

Balance at December 31, 1997                                   650
--------------------------------------------------------------------------------
   Additions                                                 1,655
   Amortization                                               (177)
--------------------------------------------------------------------------------

Balance at December 31, 1998                                $2,128
================================================================================

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


Note 7
PREMISES AND EQUIPMENT


Premises and equipment at year end are as follows:

                                                  1998        1997
--------------------------------------------------------------------------------
(Dollars in thousands)

Land                                           $ 3,206     $ 3,675
Buildings and improvements                      11,638      11,336
Furniture and equipment                          7,636       6,150
--------------------------------------------------------------------------------
                                                22,480      21,161
Accumulated depreciation                        (7,280)     (6,131)
--------------------------------------------------------------------------------
                                               $15,200     $15,030
================================================================================


40   OTTAWA FINANCIAL CORPORATION

<PAGE>


Note 8
DEPOSITS

Deposits at year end are as follows:
                                                  1998        1997
--------------------------------------------------------------------------------
(Dollars in thousands)

Noninterest-bearing                           $ 40,813    $ 28,431
NOW accounts and MMDAs                         200,132     160,296
Passbook and statement savings                  54,475      60,143
Certificates of deposit                        398,212     405,690
--------------------------------------------------------------------------------
                                              $693,632    $654,560
================================================================================

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

   1999                                                    $320,191
   2000                                                      53,416
   2001                                                      11,093
   2002                                                       7,529
   2003 and thereafter                                        5,983
--------------------------------------------------------------------------------
                                                           $398,212
================================================================================

   The  aggregate  amount of demand,  savings and  certificates  of deposit with
balances of $100,000 or more was  approximately  $103,596,000 and $78,138,000 at
December 31, 1998 and 1997.


Note 9
BORROWINGS

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

<TABLE>
<CAPTION>
                                                                       Range of                 Weighted Average
Principal Terms                           Advance Amount              Maturities                  Interest Rate
----------------------------------------------------------------------------------------------------------------
(Dollars in thousands)

1998
<S>                                         <C>                <C>                                    <C>
Single-maturity fixed rate advances         $104,125           February 1999 to June 1010              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
================================================================================================================

1997
Single-maturity fixed rate advances         $ 96,500           February 1998 to December 2007          5.99%
Putable advances                              18,000              May 2000 to December 2002            5.87%
Short-term variable rate advances             25,000               March 1998 to July 1998             5.80%
Amortizable mortgage advances                  5,958                June 1999 to May 2000              6.91%
================================================================================================================
                                            $145,458
</TABLE>

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

   1999                                                   $ 61,405
   2000                                                     18,738
   2001                                                      8,000
   2002                                                     12,000
   2003                                                     15,000
   2004 and thereafter                                      45,125
--------------------------------------------------------------------------------
                                                          $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.

   At December 31,  1998,  Ottawa had an unused line of credit with a major bank
totaling $15 million.

                                               OTTAWA FINANCIAL CORPORATION   41
<PAGE>



Note 10
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>

                                                                          1998        1997
--------------------------------------------------------------------------------------------
(Dollars in thousands)
<S>                                                                    <C>         <C>
Financial instruments whose contract amount represents credit risk
   Commitments to make loans                                           $19,427     $23,844
   Unused consumer lines of credit                                      34,854      33,729
   Unused commercial lines of credit                                    24,190       9,930
   Loans in process                                                     44,797      25,787
   Letters of credit                                                    10,340       5,110
</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
39% and 43% of  commitments to make loans and to fund loans in process were made
at fixed  rates as of December  31,  1998 and 1997.  Rate ranges for these fixed
rate commitments were 6.20% to 10.00% and 6.00% to 10.5% as of December 31, 1998
and 1997.  Lines of credit are issued at variable  market  rates.  No losses are
anticipated as a result of these transactions.


Note 11
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 $1.5 million.

   A lawsuit against  AmeriBank has recently been filed.  The complaint  alleges
that we have engaged in the  unauthorized  practice of law due to charging a fee
for preparing loan documents.  The complaint  seeks class action  certification,
restitution of all fees paid for the last six years, interest, attorney fees and
other  costs.  We  believe,  after  consultation  with legal  counsel,  that the
complaint is wholly without merit, and intend to vigorously  defend against this
lawsuit.

   On-Line  Financial  Services,  Inc. was serving as  AmeriBank's  primary data
processing service provider.  Due to dissatisfaction  with the services provided
by On-Line,  we claimed  damages  against  On-Line and  converted  to a new data
processing servicer in March 1999. On-Line has alleged that we have no basis for
being  dissatisfied  with their services and has claimed  liquidated  damages of
approximately  $1.5  million.  On-Line  has also  indicated  that to receive our
historical data and financial information, they will charge us $1.7 million upon
deconversion.  We believe,  after  consultation  with legal counsel,  that these
charges are not  consistent  with the contract and intend to dispute them. It is
anticipated  that our damage claim against On-Line could exceed  $750,000.  Both
parties have agreed to have the claims settled in arbitration, which is expected
to begin during or after March 1999.

   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.



42   OTTAWA FINANCIAL CORPORATION

<PAGE>

Note 12
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
undercapitalized,  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
-----------------------------------------------------------------------------------------------------------------------------------
1998
<S>                                              <C>             <C>         <C>             <C>        <C>             <C>
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

1997
Total capital (to risk weighted assets)          $  62.2         11.3%       $  43.9         8.0%       $  54.8         10.0%
Tier 1 capital (to risk weighted assets)            58.9         10.7           21.9         4.0           32.9          6.0
Tier 1 capital (to average total assets)            58.9          6.8           34.5         4.0           43.4          5.0
</TABLE>

   AmeriBank  was  categorized  as well  capitalized  at year end 1998 and 1997.

   During 1998 and 1997,  AmeriBank made capital  distributions to Ottawa in the
amount of $12,500,000 and $4,000,000,  respectively.  These  distributions  were
made  primarily to allow Ottawa to pay dividends  and fund the stock  repurchase
transactions  discussed in Note 13. The distributions were within the guidelines
described above.

   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.

                                               OTTAWA FINANCIAL CORPORATION   43

<PAGE>
Note 13
STOCK REPURCHASE PROGRAMS

During 1998,  1997 and 1996,  Ottawa  repurchased  551,495,  480,673 and 577,008
shares of its common stock at an average price of $24.73, $18.37 and $13.50.

   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 August 31, 1998 and September 30, 1997.

Note 14
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.  Prior to the 10% stock dividends paid on August 31, 1998 and
September  30, 1997,  each warrant  entitled the holder to purchase one share of
Ottawa  Financial  Corporation's  common  stock at an exercise  price of $17.50.
Effective  August 31,  1998,  each  warrant  allows the holder to purchase  1.21
shares of common stock at a price of $14.46 per share reflecting a proportionate
adjustment as a result of the 10% stock dividends. All warrants were exercisable
immediately upon issue and expired on February 16, 1999.

   No warrants  were  exercised  during 1996.  During 1997 and 1998,  34,711 and
113,048 shares of Ottawa Financial  Corporation's  common stock were issued upon
the exercise of 28,687 and 93,428  warrants.  As of December  31, 1998,  444,431
warrant certificates were exercisable into 537,762 shares of common stock.

   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  164,181 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
$900,000.

Note 15
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 510,868 shares of the Corporation's stock
at $8.26 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 August 31, 1998 and  September  30, 1997.  During  1998,  1997 and 1996,
54,233,  57,098, and 60,024 shares of stock with a fair value of $24.82,  $19.91
and $13.79 per share were committed to be released,  resulting in employee stock
ownership  plan  compensation  expense of  $1,346,000,  $1,137,000 and $828,000,
respectively.

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

                                      1998        1997        1996
--------------------------------------------------------------------------------
                                          (Dollars in thousands)
Allocated shares                    282,638     228,405     171,307
Unallocated shares                  228,230     282,463     339,561
--------------------------------------------------------------------------------
   Total ESOP shares                510,868     510,868     510,868
================================================================================
Fair value of unallocated shares   $  4,850    $  8,731    $  4,717
================================================================================

   Ottawa  maintains  a  management   recognition   plan,  with  272,039  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 $509,000,
$572,000  and  $576,000  for  1998,  1997 and  1996.  The  unamortized  unearned
compensation value of the management recognition plan is shown as a reduction to
shareholders' equity in the consolidated balance sheets.
44   OTTAWA FINANCIAL CORPORATION
<PAGE>


Note 15 (continued)
STOCK-BASED COMPENSATION PLANS

   Ottawa also  maintains a stock  option and  incentive  plan,  with  1,014,646
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.

<TABLE>
<CAPTION>

                                                       1998          1997          1996
----------------------------------------------------------------------------------------
(Dollars in thousands except share data)

<S>                                               <C>           <C>           <C>
Net income as reported                            $   8,668     $   7,527     $   3,094
Pro forma net income                                  8,218         7,150         2,783
----------------------------------------------------------------------------------------
Basic earnings per common share as reported            1.59          1.33           .51
Pro forma basic earnings per common share              1.51          1.26           .45
----------------------------------------------------------------------------------------
Diluted earnings per common share as reported          1.44          1.22           .49
Pro forma diluted earnings per common share            1.38          1.17           .45
----------------------------------------------------------------------------------------
</TABLE>

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

                                       1998        1997        1996
------------------------------------------------------------------------

Risk-free interest rate                4.77%       6.27%       5.78%
Expected life                          10 Years    10 Years    10 Years
Expected volatility of stock price     6.45%       6.00%       4.00%
Expected dividends                     1.91%       1.97%       2.23%

   Information regarding the stock option plan at year end 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 1995                           552,374                                      $10.90
        Granted                                    125,219               $13.40                                        $3.18
        Conversion of AFSB options                 179,743                 3.57
        Exercised                                 (152,093)                3.37
        Forfeited                                   (4,126)               10.90
Outstanding, end of 1996                           701,117               $11.15          $3.97- $13.54
        Granted                                     90,844                18.67                                        $5.46
        Exercised                                  (26,435)                9.76
        Forfeited                                  (27,667)               11.25
Outstanding, end of 1997                           737,859               $12.07           $3.97-$26.48
        Granted                                    128,931                25.34                                        $4.97
        Exercised                                  (56,750)                8.67
        Forfeited                                  (55,856)               24.67
Outstanding, end of 1998                           754,184                13.66           $3.61-$30.34
=================================================================================================================================
</TABLE>

                                               OTTAWA FINANCIAL CORPORATION   45

<PAGE>

Note 15 (continued)
STOCK-BASED COMPENSATION PLANS

   Stock options exercisable at year-end are as follows:

                                                Number      Weighted-Average
                                            of Options        Exercise Price
--------------------------------------------------------------------------------
1996                                           134,380                $ 9.90
1997                                           243,418                 10.46
1998                                           329,291                 11.68

   At year-end 1998, the weighted average remaining life of options  outstanding
was 7.27 years.

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

Note 16
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 as  discussed  in Note 2. 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 and 1996
information  shown below  reflects  combined  information  for the two  separate
plans.

                                                 1998             1997
--------------------------------------------------------------------------------
                                                  (Dollars in thousands)
Change in benefit obligation:
   Beginning benefit obligation               $ 3,947          $ 4,089
   Interest cost                                  288              280
   Actuarial gain                                 263
   Benefits paid                                 (906)            (422)
--------------------------------------------------------------------------------
   Ending benefit obligation                    3,592            3,947

Change in plan assets, at fair value:
   Beginning plan assets                        5,923            5,467
   Actual return                                1,203              878
   Benefits paid                                 (959)            (422)
--------------------------------------------------------------------------------
   Ending plan assets                           6,167            5,923
--------------------------------------------------------------------------------
Funded Status                                   2,575            1,976
Unrecognized net (gain) loss                     (678)            (405)
--------------------------------------------------------------------------------
   Prepaid pension asset                      $ 1,897          $ 1,571
================================================================================

<TABLE>
<CAPTION>
                                                                    1998       1997       1996
-----------------------------------------------------------------------------------------------
                                                                      (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                   $ 288      $ 280      $ 274
   Actual return on plan assets                                    (1203)      (878)      (663)
   Net amortization and deferral                                     589        466        270
-----------------------------------------------------------------------------------------------
      Net pension income                                           $(326)     $(132)     $(119)
===============================================================================================
</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%, 8.25% and 8.00% for 1998,
1997 and 1996. 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,  listed
stocks and a group annuity fund at a major life insurance company.

   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.
46   OTTAWA FINANCIAL CORPORATION
<PAGE>



Note 17
SAIF ASSESSMENT

Legislation  was signed into law on September  30,  1996,  to  recapitalize  the
Savings  Association  Insurance  Fund,  requiring  AmeriBank  to pay a  one-time
special  assessment  of  $3,510,000.  This amount is  reflected  in  noninterest
expense in the 1996 consolidated statement of income.


Note 18
FEDERAL INCOME TAXES

The provision for federal income taxes consists of the following:

                                      1998        1997        1996
--------------------------------------------------------------------------------
(Dollars in thousands)

Current tax expense                 $4,858      $3,961      $1,674
Deferred tax expense (benefit)         155         312         290
--------------------------------------------------------------------------------
                                    $5,013      $4,273      $1,964
================================================================================

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

<TABLE>
<CAPTION>

                                                        1998          1997          1996
------------------------------------------------------------------------------------------

Statutory rate                                            35%           34%           34%
==========================================================================================
<S>                                                  <C>           <C>           <C>
Tax expense at statutory rate                        $ 4,789       $ 4,012       $ 1,720
Low-income housing credit                               (327)         (239)         (150)
ESOP                                                     314           227           113
Tax-exempt interest                                      (45)          (84)          (63)
Goodwill amortization                                    329           319           279
Change in deferred tax asset valuation allowance         (46)          (60)
Other                                                     (1)           98            65
------------------------------------------------------------------------------------------
                                                     $ 5,013       $ 4,273       $ 1,964
==========================================================================================
</TABLE>

   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:

                                                           1998         1997
--------------------------------------------------------------------------------
(Dollars in thousands)

Deferred tax assets
   Deferred loan fees                                   $   192      $   163
   Management recognition plan restricted stock              96           89
   ESOP                                                      52           42
   Capital loss carryforward                                 80          126
   Accrued expenses                                         138           22
   Allowance for loan losses                                428           59
   Nonaccrual loan interest                                  73           66
   Other                                                    118           64
--------------------------------------------------------------------------------
                                                          1,177          631
Deferred tax liabilities
   Depreciation                                            (590)        (578)
   Pension                                                 (405)        (394)
   Purchase accounting adjustment                          (870)        (692)
   FHLB stock dividends                                     (70)         (68)
   Mortgage servicing rights                               (619)         (86)
   Unrealized gain on available for sale securities         (10)         (32)
   Other                                                    (87)         (76)
--------------------------------------------------------------------------------
                                                         (2,651)      (1,926)
Valuation allowance for deferred tax assets                 (80)        (126)
--------------------------------------------------------------------------------
   Net deferred tax liability                           $(1,554)     $(1,421)
================================================================================


                                               OTTAWA FINANCIAL CORPORATION   47

<PAGE>


Note 18 (continued)
FEDERAL INCOME TAXES

   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, 1998 or 1997.

   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 $186,000  attributable to deductions  related to the
exercise of nonqualified stock options and the vesting of management recognition
plan shares was allocated directly to shareholders' equity in 1998.

   Retained earnings at December 31, 1998, 1997 and 1996 includes  approximately
$8.8 million for which no federal income tax liability has been  recorded.  This
amount  represents  an  allocation  of  income  to bad debt  deductions  for tax
purposes  alone.  Reduction of amounts so allocated for purposes  other than tax
bad debt losses or  adjustments  from  carryback of net  operating  losses would
create income for tax purposes only,  which would be subject to current tax. The
unrecorded deferred tax liability on the above amount at December 31, 1998, 1997
and 1996 was approximately $3.0 million.

Note 19
EARNINGS PER SHARE

The factors used in the earnings per share computation follow.
<TABLE>
<CAPTION>
                                                      1998           1997           1996
-----------------------------------------------------------------------------------------
(Dollars in thousands except share data)
<S>                                             <C>            <C>            <C>       
Basic
Net Income available to common shareholders     $    8,668     $    7,527     $    3,094
=========================================================================================
Weighted average common shares outstanding       5,436,541      5,665,441      6,108,202
=========================================================================================
Basic earnings per common share                 $     1.59     $     1.33     $      .51
=========================================================================================
Diluted
Net Income available to common shareholders     $    8,668     $    7,527     $    3,094
=========================================================================================
Weighted average common shares outstanding       5,436,541      5,665,441      6,108,202
Add: Dilutive effects of assumed
  exercises of stock options and warrants          591,308        504,525        145,922
-----------------------------------------------------------------------------------------
Weighted average common and dilutive
  potential common shares outstanding            6,027,849      6,169,966      6,254,124
=========================================================================================
Diluted earnings per common share               $     1.44     $     1.22     $      .49
=========================================================================================
</TABLE>
   All  share and per  share  information  has been  retroactively  adjusted  to
reflect the 10% stock dividends paid on August 31, 1998 and September 30, 1997.

Note 20
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.

48   OTTAWA FINANCIAL CORPORATION
<PAGE>



Note 20 (continued)
FAIR VALUE OF FINANCIAL INSTRUMENTS

   The estimated fair values of Ottawa's  financial  instruments at year end are
as follows:

<TABLE>
<CAPTION>

                                                1998                            1997
                                 Carrying Value      Fair Value  Carrying Value      Fair Value
------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S>                                    <C>             <C>             <C>             <C>     
Financial assets
Cash and cash equivalents              $ 42,225        $ 42,225        $ 32,524        $ 32,524
Securities available for sale            71,646          71,646          57,308          57,308
Federal Home Loan Bank stock             11,782          11,782           7,308           7,308
Loans held for sale                       3,375           3,375           1,955           1,955
Loans, net                              769,770         774,621         747,423         754,092

Financial liabilities
Deposits                                693,632         696,215         654,560         655,796
Federal Home Loan Bank advances         160,268         162,056         145,458         145,494
</TABLE>


Note 21
PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

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

Condensed Balance Sheets
                                                            1998         1997
--------------------------------------------------------------------------------
(Dollars in thousands)

Assets
Cash and due from financial institutions                 $   278      $ 1,406
Loans receivable from Employee Stock Ownership Plan        2,111        2,533
Investment in subsidiary bank                             71,185       72,634
Other assets                                                  95          176
--------------------------------------------------------------------------------
   Total assets                                          $73,669      $76,749
================================================================================
Liabilities                                              $   262      $   386

Shareholders' Equity                                      73,407       76,363
--------------------------------------------------------------------------------

   Total liabilities and shareholders' equity            $73,669      $76,749
================================================================================


                                               OTTAWA FINANCIAL CORPORATION   49

<PAGE>

Note 21 (continued)
PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

<TABLE>
<CAPTION>
Condensed Statements of Income
for the years:                                                                        1998        1997        1996
-------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S>                                                                               <C>         <C>         <C>
Interest and dividend income
        Securities                                                                            $    175    $    807
        Loan to Employee Stock Ownership Plan                                     $    178         210         243
        Dividends from subsidiary bank                                              12,500       4,000       2,449
-------------------------------------------------------------------------------------------------------------------
                                                                                    12,678       4,385       3,499
Net gain on sale of securities                                                                     151         270
Operating expenses                                                                     867         769         737
-------------------------------------------------------------------------------------------------------------------

Income before federal income taxes and
  equity in undistributed (excess distributed)
  earnings of subsidiary bank                                                       11,811       3,767       3,032

Federal income tax expense (benefit)                                                  (232)        (88)        198
-------------------------------------------------------------------------------------------------------------------

Income before equity in undistributed
  (excess distributed) earnings of subsidiary bank                                  12,043       3,855       2,834

Equity in undistributed (excess distributed)
  earnings of subsidiary bank                                                       (3,375)      3,672         260
-------------------------------------------------------------------------------------------------------------------

        Net income                                                                $  8,668    $  7,527    $  3,094
===================================================================================================================

Condensed Statements of Cash Flows
for the years:                                                                        1998        1997        1996
-------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)

Cash flows from operating activities
Net income                                                                        $  8,668    $  7,527    $  3,094
Adjustments to reconcile net income to
  cash provided by operations
        Equity in income of subsidiary bank                                         (9,125)     (7,672)     (2,709)
        Net accretion of securities discounts                                                      (12)        (17)
        Net gain on sale of securities                                                            (151)       (270)
        Change in
               Interest receivable                                                                  75         305
               Other assets                                                             81         (86)        322
               Other liabilities                                                        63          68         270
-------------------------------------------------------------------------------------------------------------------
                      Net cash provided by operating activities                       (313)       (251)        995

Cash flows from investing activities Activity in available-for-sale securities:
        Maturities, prepayments and calls                                                          307       1,064
        Sales                                                                                    5,884      36,118
Principal reduction of ESOP note receivable                                            422         422         422
Contribution to subsidiary bank                                                       (111)       (112)       (108)
Cash paid in the acquisition of AFSB                                                                       (30,943)
Cash dividends received from subsidiary bank                                        12,500       4,000       2,449
-------------------------------------------------------------------------------------------------------------------
        Net cash used in investing activities                                       12,811      10,501       9,002

Cash flows from financing activities
        Purchase of treasury shares                                                (13,640)     (8,833)     (7,787)
        Proceeds from exercise of stock options                                        492         258         508
        Proceeds from exercise of stock warrants                                     1,635         502
        Cash dividends paid                                                         (2,113)     (1,858)     (1,699)
-------------------------------------------------------------------------------------------------------------------
               Net cash from financing activities                                  (13,626)     (9,931)     (8,978)
-------------------------------------------------------------------------------------------------------------------
Net change in cash                                                                  (1,128)        319       1,019

Cash at beginning of period                                                          1,406       1,087          68
-------------------------------------------------------------------------------------------------------------------

Cash at end of period                                                             $    278    $  1,406    $  1,087
===================================================================================================================
</TABLE>

50   OTTAWA FINANCIAL CORPORATION
<PAGE>


QUARTERLY FINANCIAL INFORMATION

unaudited


The following is a summary of selected unaudited quarterly results of operations
for the years ended December 31, 1998 and 1997. 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))
<S>                                                  <C>          <C>          <C>          <C>
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                         .32          .40          .41          .46
Diluted earnings per common share                       .29          .36          .37          .42

1997
Net interest income                                  $6,553       $6,915       $6,784       $6,770
Provision for loan losses                               150          150          180          180
Noninterest income                                      721        1,037          942        1,446
Noninterest expense                                   4,424        4,678        4,727        4,879
Income before income taxes                            2,700        3,124        2,819        3,157
Net income                                            1,716        1,962        1,730        2,119

Basic earnings per common share                         .29          .35          .31          .38
Diluted earnings per common share                       .28          .33          .28          .34

</TABLE>

(1)  All per share  information has been  retroactively  adjusted to reflect the
     stock  dividends  paid on August 31,  1998 and  September  30, 1997 and the
     effects of SFAS No. 128.


                                               OTTAWA FINANCIAL CORPORATION   51
<PAGE>



SHAREHOLDER INFORMATION

Market

Ottawa  Financial  Corporation's  common stock is traded on the Nasdaq  National
Market under the symbol "OFCP." Total shares outstanding, net of treasury stock,
as of December 31, 1998, were 5,448,161. The high and low closing 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 August 31, 1998 and September 30,
1997, were as follows.

Quarter Ended                           High             Low        Dividends
--------------------------------------------------------------------------------
March 31, 1997                     $    17.252      $    13.946      $   .07
June 30, 1997                           18.802           16.942          .08
September 30, 1997                      24.659           18.594          .08
December 31, 1997                       30.909           23.636          .09
March 31, 1998                          29.545           25.909          .09
June 30, 1998                           26.818           25.909          .09
September 30, 1998                      26.141           21.500          .10
December 31, 1998                       24.000           18.875          .11

The  information  set forth in the table above was  provided by The Nasdaq Stock
Market. Such information  reflects  interdealer prices,  without retail mark-up,
mark-down or commission and may not represent actual transactions.

   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 12 of the Notes to Consolidated Financial Statements.

   As of March 11, 1999, Ottawa had approximately  2,210  shareholders of record
and 5,688,572 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 Douglas J. Iverson,  Vice Chairman and CEO, Ottawa  Financial
Corporation,  245 Central  Avenue,  Holland,  MI  49423-3298 or by calling (616)
393-7002.

Corporate Headquarters              Registrar/Transfer Agent
245 Central Avenue                  Registrar and Transfer Company
Holland, MI 49423-3298              Cranford, NJ

Independent Auditor                 General Counsel
Crowe, Chizek and Company LLP       Cunningham Dalman, PC
Grand Rapids, MI                    Holland, MI

                                    Special Counsel
                                    Silver, Freedman & Taff, LLP
                                    Washington, DC




52   OTTAWA FINANCIAL CORPORATION