General

Website. The Company maintains a website at www.firstottawa.com. The Company makes available free of charge on or through its website, the annual report on Form 10K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after the Company electronically files such material with, or furnish it to, the Securities and Exchange Commission. The Company will also provide copies of its filings free of charge upon written request to: Ms. Cheryl Gage, Corporate Secretary, First Ottawa Bancshares, Inc. 701-705 LaSalle Street, P.O. Box 657, Ottawa, Illinois 61350. Additionally, all of the Company’s filings with the Securities and Exchange Commission are also available, free of charge, through the Securities and Exchange Commission’s website at www.sec.gov.

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004

Commission file number: 005-57237

FIRST OTTAWA BANCSHARES, INC.

(Exact name of Registrant as specified in its charter)

Delaware		36-4331185
(State or Other Jurisdiction		(I.R.S. Employer Identification No.)
of Incorporation or Organization)

701-705 LaSalle Street		61350
Ottawa, Illinois		(ZIP Code)
(Address of Principal Executive Offices)

(815) 434-0044

(Registrant Telephone Number,

including Area Code)

Securities registered under Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, par value $1.00 per share

(Title of Class)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes o No ý

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, based on the last known sales price on or prior to June 30, 2004, the last business day of the registrant’s most recently completed second fiscal quarter, was $28,704,480.

649,989 shares of common stock were outstanding as of March 14, 2005.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Parts II and IV are incorporated by reference from the Registrant’s 2003 Annual Report to Stockholders; and a portion of Part III is incorporated by reference from the Registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held May 18, 2005.

Except for those portions of the 2004 Annual Report incorporated by reference, the Annual Report is not deemed filed as part of this Report.

PART I

Item 1. Business.

First Ottawa Bancshares, Inc. (the “Company”) is a bank holding company for its wholly-owned subsidiary, First National Bank of Ottawa (the “Bank”), and the Bank’s wholly owned subsidiary, First Ottawa Financial Corporation. The Company was organized during 1999 and on October 1, 1999 exchanged 100% of its common stock for 100% of the Bank’s common stock. This exchange was accounted for as an internal reorganization. All references to the combined Company, unless otherwise indicated, at or before October 1, 1999, refer to the Bank. As of December 31, 2004, the Company had total assets of $288.7 million, total deposits of $254.0 million, loans, including loans held for sale, of $134.5 million and total stockholders’ equity of $23.9 million. For the year ended December 31, 2004, the Company had interest income of $13.5 million and net income of $2.6 million, which amounted to basic and diluted net income per share of $4.03.

The Company conducts a general banking business embracing most of the services, both commercial and consumer, which banks may lawfully provide, including the following principal services: the acceptance of deposits for demand, savings, and time accounts and the servicing of such accounts; commercial, agricultural, consumer, and real estate lending, including installment loans, personal lines of credit, and overdraft protection; trust operations; farm management; safe deposit operations; and an extensive variety of additional services tailored to the needs of individual customers, including the sale of traveler’s checks, cashier’s checks, and foreign currency and other special services. Loans, both commercial and consumer, are provided on either a secured or unsecured basis to corporations, partnerships, and individuals. Commercial lending covers such areas as business, industry, capital, agriculture, inventory, and real estate, with the latter including residential properties. Consumer loans are made for a variety of purposes including automobile purchases, recreational vehicle purchases, consumer goods, installment loans, and other types of loans.

The Company is located in the city of Ottawa, Illinois (population 17,500) in LaSalle County in Illinois. A substantial portion of the Company’s business is dependent upon the economic conditions in this market area. LaSalle County is the second largest county by area in the state of Illinois. Ottawa is located in northeastern Illinois approximately 80 miles southwest of Chicago and approximately 65 miles north of Bloomington. Ottawa may be accessed by Interstate 80; U.S. Route 6; State Routes 23 and 71; and recently completed Interstate 39, which is located 11 miles west of Ottawa. The city is also serviced by two railroads and the Ottawa Airport.

Ottawa is the county seat of LaSalle County. Accordingly, many county, state, and other governmental offices are located in Ottawa.

LaSalle County has a diverse economy with a balance in agriculture, transportation and industry. Grain terminals on the Illinois Deep Waterway at Ottawa provide a direct distribution point for agricultural products to overseas markets via the Gulf of Mexico and the St. Lawrence Seaway. LaSalle County annually ranks in the top 10 counties in Illinois for corn and soybean production. LaSalle County, the site of the largest producer of silica sand in the United States, has a diverse manufacturing sector which includes, in addition to the production of silica sand, the manufacture of residential glass, automotive and industrial belts and equipment, electronic typewriters and computer printers, plastics, office supplies, and rubber products. Many of these companies conduct business in national and, in some instances, international markets.

LaSalle County is continuing to expand. Many developments have had a significant impact on the area economy, including a new County Office Building on the north edge of Ottawa and several new and expanded shopping center projects.

The First National Bank of Ottawa (the “Bank”) purchased and assumed substantially all of the deposit liabilities of two branch offices located in Streator, Illinois from First Midwest Bank (collectively, the “Branches”) on November 14, 2003. Approximately $69.3 million of deposits and the related cash balances were transferred to the Bank via cash transfers from First Midwest Bank. In connection with the acquisition of such deposit liabilities and related cash balances, the Bank also acquired certain other assets of the Branches, including real estate, furniture and fixtures and approximately $11.8 million of the loans carried on the books of the Branches. Many of the employees remained with the Branches and became employees of the Bank.

The Company opened a full service banking facility in July 2003 in the city of Morris, Illinois and has purchased real estate in Yorkville, Illinois with the intention of establishing a full service branch facility in that community. Construction completion and the branch opening are expected to occur in early 2005. The Company continues to explore expansion opportunities within its existing market area and in surrounding areas.

Lending Activities. The Company relies on interest income from lending activities as a major source of revenue. The Company has a community bank focus — serving the credit needs of the local community. Because of this local focus, the Company has a flexible process for handling loan requests rather than being tied to rigid standards. The discussions below regarding lending policies reflect general guidelines and may vary on a case-by-case basis depending on the borrower’s credit history and the type and size of loan. During the approval process for loans it originates, the Company assesses both the applicant’s ability to repay the loan and the value of any collateral securing the loan. The Company verifies the applicant’s ability to repay the loan by using credit reports, financial statements, confirmations, and other items, including appraisals.

Six loan officers have the authority to handle all lending activities of the Company. Each lending officer has authority to approve extensions of credit up to their individual lending limit. The Company has an Officers Loan Committee (consisting of Assistant Vice Presidents, Vice Presidents, Executive Vice Presidents and the President of the Bank) which approves loans of up to $1,000,000. All loans between $1,000,000 and $2,000,000 are sent to the Director’s Loan Committee for approval. The Director’s Loan Committee is also responsible for monitoring concentration of credits, problem and past due loans, and charge-offs of uncollectible loans; formulating recommendations for the Board of Directors regarding loan policy modifications, loan

All table amounts throughout the Form 10-K are in thousands except share and per share data.

The following table presents the components of the Company’s loan portfolio as of December 31 for each year shown.

	2004			2003			2002			2001			2000

Real estate loans	$	74,225		$	70,839		$	46,622		$	47,282		$	56,069

Commercial and agricultural loans	28,341			24,197			33,950			29,361			16,266

Installment loans, net of unearned income	17,575			22,812			19,951			24,595			39,441

Home equity lines of credit	12,651			12,456			9,120			6,795			5,143

Total Loans	132,792			130,304			109,643			108,033			116,919

Allowance for loan losses	(1,174		)	(1,049		)	(1,167		)	(1,109		)	(1,108		)

Loans, net	$	131,618		$	129,255		$	108,476		$	106,924		$	115,811

Loans held for sale	$	1,701		$	1,644		$	1,811		$	1,475		$	693

Maturities (based on contractual terms) of the Company’s commercial and construction loan portfolio at December 31, 2004 are summarized below:

	One Year or Less		One to Five Years		Over Five Years		Total

Commercial and agricultural	$	11,368	$	10,976	$	5,997	$	28,341

Construction	1,588		—		—		1,588

Total	$	12,956	$	10,976	$	5,997	$	29,929

At December 31, 2004, of the total loans that mature in more than one year, $66.9 million, or 78.9%, bear interest at fixed rates and $17.9 million, or 21.1%, bear interest at variable rates.

Consumer Loans. The Company makes consumer loans for various purposes, including personal, family, and nonbusiness reasons such as automobile loans and recreational vehicle loans, on both a direct and indirect basis. Consumer loans totaled approximately $30.2 million at December 31, 2004, or approximately 22.5% of the Company’s total loan portfolio. Approximately 50.7% of the Company’s consumer loans were automobile loans, and of these loans, approximately 77.8% were made indirectly by the Company through automobile dealers. The Company’s consumer loans are fixed-rate loans with final maturities of five years or less. At December 31, 2004, the Company had 12 consumer loans totaling $147,000 that were past due in excess of 90 days. Management feels the Company is well collateralized and expects no loss in excess of specific allocations on the loans.

In approving consumer loans, lending officers consider the borrower’s past credit history, the borrower’s ability to repay the debt, the collateral offered, and local economic conditions that could affect the borrower’s income. Loans being originated for new borrowers must be accompanied by a completed application dated and signed by the borrower, giving the details of the loan request. Total debts, along with the gross monthly income of the borrower, are required to be shown on the application. A brief cash flow analysis is performed by the loan officer showing the amount of the borrower’s income available for debt service based on current debts plus the new loan request. Generally, debt service to gross income should not exceed 40%. New credit reports are obtained on all borrowers with each loan request. The value of collateral on loans secured by used automobiles is generally determined by using industry-accepted used car guides. In connection with used automobile loans, the Company generally requires a 90% loan-to-value ratio; however, depending upon various factors, including the credit experience of the Company with the borrower, the Company may extend credit in excess of the value of the used automobile. A loan-to-value ratio of 90% of sticker price is generally required for new automobile loans. Boats, mobile homes, recreational vehicles, and similar items generally require a loan-to-value ratio of 70% to 80% of the current market value of the collateral. Unsecured consumer loans are granted to borrowers based upon satisfactory income, indebtedness levels, and credit records and experience.

Commercial, Agricultural, and Real Estate Lending.

Commercial and Agricultural. At December 31, 2004, the Company’s commercial and agricultural loans totaled $28.3 million, or approximately 21.0% of the total loan portfolio of the Company. The majority of agricultural and commercial non-real estate loans are written for one to five years, may bear interest at a fixed or variable rate and are amortized over a 15-year to 20-year period. Fixed rates are established by the Company’s management after considering the cost of funds to the Company as well as the rates of competing institutions. The variable rate is generally based upon the national prime rate as disclosed in The Wall Street Journal. Principal and interest payments on commercial loans generally are required monthly; whereas, payments on agricultural loans vary from monthly, quarterly, semi-annually, and annually. At December 31, 2004, the Company had no commercial non-real estate loans past due in excess of 90 days. There were 2 agricultural non-real estate loans totaling $337,000 at December 31, 2004 that were past due in excess of 90 days. Management feels the Company is well collateralized and expects no loss in excess of specific allocations on the loans.

All commercial and agricultural borrowers, both existing and new, are required by policy to have a current financial statement no older than one year. Borrowers also are required to provide the Company with recent tax returns and pro forma projections. Using certain computer programs and the data supplied by borrowers, the loan officers produce additional financial information utilized in analyzing the loans and the borrowers. The general nature of the collateral securing the Company’s commercial and agricultural loans consists of equipment, farm products, crops, inventory, chattel paper, accounts receivable, and general intangibles. The Company’s loan-to-value ratio with respect to agricultural and commercial non-real estate loans averages 66 2/3% to 75% of the value of the collateral securing the loan.

Real Estate Lending. The Company’s primary real estate lending consists of commercial loans with a small portion in residential and agricultural real estate loans. Real estate loans at December 31, 2004 totaled approximately $74.2 million or approximately 55.1% of the Company’s total loan portfolio. All borrowers requesting a real estate loan are required to submit an application which is reviewed by the lending officer. A credit investigation is performed and an analysis of the borrower’s ability to repay is conducted. Subsequently, an inspection and appraisal of the real property is conducted to determine whether or not the property is of sufficient value to meet the Company’s suggested maximum loan-to-value ratio of 80% to 85% of the lesser of the appraised value or the purchase price of the property securing the loan. Under certain federal guaranteed loan programs utilized by the Company, the maximum loan-to-value ratio is higher. With respect to loans secured by commercial or industrial real estate, the Company analyzes the potential for environmental liability concerns and, depending upon the circumstances, the Company may require additional information or testing. Commercial and agricultural real estate loans are generally originated under the same policies and procedures as discussed above for commercial and agricultural non-real estate loans.

The Company’s residential real estate loans consist of 15-year, 20-year and 30-year fixed-rate and variable-rate loans with amortization periods equal to the maturity of the loan. The Company’s fixed-rate loans with biweekly payments account for approximately 68.6% of all the residential real estate loans of the Company. The biweekly loan program amortizes 25year loans in approximately 18.9 years. The Company also originates a variety of loans that are sold into the secondary market through Federal Home Loan Mortgage Corporation (“Freddie Mac”) and private investors. These loans are underwritten to meet all Freddie Mac requirements. The Company retains servicing rights on loans sold into the secondary market. At December 31, 2004, mortgage loans serviced for the secondary market totaled approximately $36.4 million.

At December 31, 2004, the Company had 6 real estate mortgage loans totaling $404,000 past due in excess of 90 days. Management feels the Company is well collateralized and expects no loss in excess of specific allocations on the loans.

Interest Rates and Fees. Interest rates and fees charged on the Company’s loans are affected primarily by the market demand for loans and the supply of money available for lending purposes. These factors are affected by, among other things, general economic conditions and the policies of the federal government, including the Federal Reserve Board, legislative tax policies, and governmental budgetary matters.

Non-Performing Loans. When a borrower fails to make a required payment on a loan and does not cure the delinquency within 30 days, the loan is classified as delinquent. In this event, the normal procedure followed by the Company is to make contact with the borrower at prescribed intervals in an effort to bring the loan to a current status. In most cases, delinquencies are cured promptly, but, if not, the Company normally records a notice of default, subject to any required prior notice to the borrower, and commences foreclosure proceedings when loan payments are 120 days past due.

At December 31, 2004, the Company had 65 loans delinquent for 30 to 90 days in an aggregate principal amount of $1.8 million and representing 1.3% of the total loan portfolio. At

December 31, 2004, the Company had 22 loans totaling $888,000 delinquent for more than 90 days.

It is the Company’s policy to discontinue the accrual of interest income on any loan when, in accordance with banking regulations or in the opinion of management, there is reasonable doubt as to the collectibility of interest or principal. Interest on these loans is credited to income only when the collection of principal has been reasonably assured and only to the extent interest payments are received. If management feels collection of both interest and principal is probable, the loan is not transferred to nonaccrual status. At December 31, 2004, there were 6 loans totaling $161,000 on nonaccrual status.

As a result of economic conditions and other factors beyond the Company’s control, the Company’s future loss and delinquency experience cannot be predicted with certainty.

The nonperforming assets of the Company as of December 31 are indicated below:

	2004			2003			2002			2001			2000

Non-accrual loans	$	161		$	137		$	364		$	387		$	467

Loans ninety days past due and still accruing interest	727			293			757			860			2,177
Other real estate owned	—			—			204			—			169

Total nonperforming assets	$	888		$	430		$	1,325		$	1,247		$	2,813

Nonperforming loans as a percentage of total loans, net of unearned income and deferred loan fees	.66		%	.33		%	1.02		%	1.17		%	2.26		%

Nonperforming assets as a percentage of total assets	.31			.15			.55			.54			1.25

Nonperforming loans as a percentage of the allowance for loan losses	75.64			40.99			96.06			112.44			238.63

The effect of nonaccrual loans upon interest income is not deemed to be material by management. Loans are placed in nonaccrual status when 90 days past due, unless they are fully secured and in the process of collection. At December 31, 2004, there were other impaired loans with specific reserve allocations classified as problem loans that were not included above. Management also maintains a loans requiring attention report that includes loans greater than 60 days delinquent or other loans as deemed necessary by the Company’s internal loan review or the loan committee. The total of loans requiring attention as of December 31, 2004 was $4.7 million.

Allowance for Losses on Loans. In originating loans, the Company recognizes that losses will be experienced on loans and that the risk of loss will vary with, among other things, the type of loan being made, the creditworthiness of the borrower over the term of the loan, general

economic conditions and, in the case of a secured loan, the quality of the security for the loan. The Company maintains an allowance for loan losses to absorb probable incurred credit losses inherent in the loan portfolio. The allowance for loan losses represents management’s estimate of probable incurred losses based on information available as of the date of the financial statements. The allowance for loan losses is based on management’s evaluation of the collectibility of the loan portfolio, including past loan loss experience, known and inherent risks in the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, and economic conditions.

The loan portfolio and other credit exposures are regularly reviewed by management to evaluate the adequacy of the allowance for loan losses. The methodology for assessing the appropriateness of the allowance includes comparisons to actual losses, industry data and economic conditions. In addition, the regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for loan losses. Such agencies may require the Company to make additional provisions for estimated losses based upon judgments different from those of management.

In connection with assessing the allowance, loss factors are applied to various pools of outstanding loans. The Company segregates the loan portfolio according to risk characteristics (i.e., mortgage loans, commercial real estate, agricultural, business, consumer, etc.) and risk gradings. Loss factors are derived using the Company’s historical loss experience and may be adjusted for significant factors that, in management’s judgment, affect the collectibility of the portfolio as of the evaluation date. Commercial real estate and commercial business loans are individually evaluated for impairment and specific reserves are allocated as needed in accordance with Statement of Financial Accounting Standards No. 114 and No. 118.

In addition, management assesses the allowance using factors that cannot be associated with specific credit or loan categories. These factors include management’s subjective evaluation of local and economic and business conditions, portfolio concentration and changes in the character and size of the loan portfolio. The allowance methodology reflects management’s objective that the overall allowance appropriately reflects a margin for the imprecision necessarily inherent in the estimates of expected credit losses.

The allowance for loan losses is established through a charge to operations at the time loan value becomes impaired or, in the judgment of management, other subjective factors warrant additional reserves. As noted in the previous table, nonperforming loans increased by $458,000 in 2004 after decreasing by $895,000 during 2003. Management considered this information along with other portfolio trends in concluding on the adequacy of the allowance for loan losses at December 31, 2004. At December 31, 2004, the balance in the allowance was $1.2 million, or .87% of gross loans outstanding. Management has concluded that the allowance for loan losses is adequate at December 31, 2004. However, there can be no assurance that the allowance for loan losses is adequate to cover all losses.

The Company had no properties resulting from foreclosures classified as other real estate owned at December 31, 2004. Other real estate is generally carried at the lower of cost or estimated market value.

Summary of Loan Loss Experience. The allowance for loan losses is maintained by management at a level considered adequate to cover losses that are currently anticipated based upon 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.

Loan loss experience for the five years ended December 31, 2004 is summarized as follows:

	2004			2003			2002			2001			2000

Balance of the allowance for loan losses at beginning of year	$	1,049		$	1,167		$	1,109		$	1,108		$	1,059
Charge-offs
Real Estate	63			66			46			111			135
Commercial	—			50			6			35			39
Installment	210			303			181			254			341
Total charge-offs	273			419			233			400			515

Recoveries
Real Estate	—			16			39			4			—
Commercial	4			57			63			6			21
Installment	94			108			69			91			177
Total recoveries	98			181			171			101			204
Net charge-offs	175			238			62			299			311
Provision	300			120			120			300			360

Balance at end of year	$	1,174		$	1,049		$	1,167		$	1,109		$	1,108

Net charge-offs to average total loans	.13		%	.21		%	.06		%	.26		%	.25		%
Allowance for loan losses to total loans at year-end	.87			.80			1.06			1.03			.95

The Company’s allocation of the allowance for loan losses as of December 31 is presented below:

	2004				2003				2002				2001				2000
	Amount		Percent of Total Loans		Amount		Percent of Total Loans		Amount		Percent of Total Loans		Amount		Percent of Total Loans		Amount		Percent of Total Loans

Real estate loans	$	234	19.88	%	$	444	54.37	%	$	281	42.56	%	$	308	43.78	%	$	378	47.97	%

Commercial and agricultural loans	519		44.24		209		18.57		307		30.94		380		27.62		291		13.91

Installment loans	185		15.79		242		27.06		236		26.50		287		28.60		297		38.12

Unallocated	236		N/A		154		N/A		343		N/A		134		N/A		142		N/A

Balance at end of year	$	1,174	100.00	%	$	1,049	100.00	%	$	1,167	100.00	%	$	1,109	100.00	%	$	1,108	100.00	%

Investment Activities. The investment policies of the Company as established by the Board of Directors attempt to provide and maintain liquidity, generate a favorable return on investments without incurring undue interest rate and credit risk, and complement the Company’s lending activities. The policies provide the authority to invest in United States Treasury and federal agency securities, mortgage-backed securities, municipal securities, equity securities, and Certificates of Deposits.

Approximately $3.8 million of the United States government agency notes held at December 31, 2004 are callable at the option of the issuer, which present prepayment risk to the Company.

As of December 31, 2004, the Company had approximately $4.5 million invested in municipalities located within LaSalle County, Illinois.

The Company purchased $7.1 million of Index Powered Certificates of Deposit over the course of 2002, 2003 and 2004. These deposits were placed with multiple issuers so that $6.2 million of the principal deposited is insured through the FDIC and the remaining $900,000 is collateralized with a letter of credit from the single issuing institution. Income returns are not guaranteed for these instruments, however principal is guaranteed if held to maturity.

Securities Portfolio. The following table shows the maturity distribution of the available-for-sale securities portfolio and the weighted average yield of the portfolio at December 31, 2004. The carrying amounts of the portfolio at December 31, 2004 are found in Note 2 to the financial statements included in the Annual Report to Stockholders.

	One Year or Less		Weighted Average Yield		One to Five Years		Weighted Average Yield		Five to Ten Years		Weighted Average Yield		Over Ten Years		Weighted Average Yield		Total		Weighted Average Yield

U.S. Treasury securities	$	—	—	%	$	8,955	3.22	%	$	1,104	3.62	%	$	—	—	%	$	10,059	3.26	%
U.S. Government agencies	—		—		46,119		3.74		1,482		3.94		—		—		47,601		3.75
States and political subdivisions	1,316		6.93		8,091		6.07		14,196		4.18		2,979		6.75		26,582		5.17
Mortgage-backed securities and collateralized obligations (1)	635		3.47		10,028		4.57		1,677		3.96		—		—		12,340		4.43

Corporate bonds	1,223		5.93		3,430		2.96		—		—		—		—		4,653		3.75
Equity securities	3,417		N/A		—		—		—		—		—		—		3,417		N/A

Total securities	$	6,591	5.86	%	$	76,623	4.00	%	$	18,459	4.11	%	$	2,979	6.75	%	$	104,652	4.16	%

(1) Mortgage-backed securities reflect the contractual maturity of the related instrument.

Deposits.The principal deposit services offered by the Company are demand, savings, and time deposit accounts and programs, which include interest-bearing and non-interest-bearing demand deposits and individual retirement accounts. The Company has had a stable deposit base. Management believes that this stability is due to the Company’s emphasis on being a locally owned and operated bank and by providing quality, personalized service to its customers.

The following shows the Company’s average balances and rates paid during the years shown.

	For the Years Ended December 31,
	2004						2003						2002
	Average Balance		Percent of Deposits		Rate		Average Balance		Percent of Deposits		Rate		Average Balance		Percent of Deposits		Rate

Noninterest-bearing demand deposits	$	29,815	11.0	%	—	%	$	20,775	10.2	%	—	%	$	19,879	11.6	%	—	%
Interest-bearing demand deposits	107,136		39.5		1.17		69,435		34.1		1.02		42,056		24.6		1.39
Savings accounts	29,121		10.8		.59		21,158		10.4		.98		18,388		10.7		1.70
Time deposits accounts	105,002		38.7		2.60		92,110		45.3		3.57		90,909		53.1		4.61

	$	271,074	100.0	%	1.53	%	$	203,478	100.0	%	2.07	%	$	171,232	100.0	%	2.79	%

The distribution of the major components of deposits as of December 31, 2004 and 2003 is summarized in the balance sheets included in the 2004 consolidated financial statements, which consolidated financial statements are incorporated herein by reference. The following is a maturity distribution of time certificates of deposit of $100,000 or more at December 31, 2004:

	Balance		Percentage
Maturity
Three months or less	$	4,597	20.5	%
Over three months to six months	3,890		17.3
Over six months to one year	2,284		10.2
Over one year	11,691		52.0

Total	$	22,462	100.0	%

Borrowings. The Company’s other available sources of funds include financing arrangements for securities sold under agreements to repurchase, federal funds purchased lines, and Federal Home Loan Bank borrowings. Total borrowings increased $6.4 million in 2004. This increase was a result of a $5.6 million increase in federal funds purchased and $750,000 increase in repurchase agreements. Physical control is maintained for all securities sold under repurchase agreements. Information concerning securities sold under agreements to repurchase is summarized as follows:

	2004			2003			2002

Balance at December 31	$	750		$	—		$	1,622
Weighted average interest rate during the year	1.63		%	2.11		%	1.86		%
Weighted average interest rate at the end of the year	1.63		%	—		%	2.04		%
Maximum month-end balance	$	750		$	1,545		$	37,594
Average balance for the year	215			475			25,567

Trust. The Company’s trust department primarily services LaSalle County and surrounding counties. At December 31, 2004, the trust department had 184 trust accounts under management, 133 of which were discretionary accounts. The trust department provides a full complement of asset management services for personal trusts, estates, and agencies. The trust department had assets under management of approximately $52.6 million at December 31, 2004, of which $44.0 million was in discretionary accounts.

The Company, in conjunction with its trust department, also provides farm management services. At December 31, 2004, the department managed 48 farms. The department manages or directs approximately 6,523 acres of farmland in LaSalle County, Illinois and surrounding counties.

Competition. The Company has active competition in all product and service areas in which it presently engages. The Company not only competes for commercial and individual deposits, loans, and trust business with other LaSalle County, Illinois banks, but also with savings and loan associations, credit unions, and other financial service companies located in and around LaSalle County. Many of these competitors may not be subject to the same regulatory restrictions as the Company. There are approximately 16 commercial banks and 6 savings institutions with offices in LaSalle County, Illinois. The principal methods of competition in the banking and financial services industry are quality of services to the customer; ease of access to services; and pricing of services, including interest rates paid on deposits, interest rates charged on borrowings, and fees charged for fiduciary services.

The Gramm-Leach-Bliley Act may significantly change the competitive environment in which the Company and the Bank conduct business. The financial services industry is also likely to become more competitive as further technological advances enable more companies to provide financial services.

Employees. As of December 31, 2004, the Company had 98 employees, consisting of 84 full-time employees and 14 part-time employees. None of the employees are subject to a collective bargaining agreement, and management believes it has excellent relations with its staff.

Stock Repurchases. During 2004 and 2003, the Company repurchased 1,018 and 5,329 shares of its common stock for an aggregate purchase price of $71,000 and $315,000.

Code of Business Conduct and Ethics. The Company has a code of business conduct and ethics in place that applies to all of its directors and employees. The code sets forth the standard of ethics that the Company expect all of its directors and employees to follow, including the Chief Executive Officer and Chief Financial Officer. The code of business conduct and ethics is posted on the Company’s website at www.firstottawa.com. The Company intends to satisfy the disclosure requirements under Item 5.05 of
Form 8-K regarding any amendment to or waiver of the code with respect to the Chief Executive Officer and Chief Financial Officer, and persons performing similar functions, by posting such information on its website.

Supervision and Regulation

/s/ Thomas P. Rooney

March 29, 2005

Thomas P. Rooney

/s/ William J. Walsh

March 29, 2005

William J. Walsh

Financial institutions, their holding companies and their affiliates are extensively regulated under federal and state law. As a result, the growth and earnings performance of the Company may be affected not only by management decisions and general economic conditions, but also by the requirements of federal and state statutes and by the regulations and policies of various bank regulatory authorities, including the Office of the Comptroller of the Currency (the “OCC”), the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and the Federal Deposit Insurance Corporation (the “FDIC”). Furthermore, taxation laws administered by the Internal Revenue Service and state taxing authorities and securities laws administered by the Securities and Exchange Commission and state securities authorities have an impact on the business of the Company. The effect of these statutes, regulations and regulatory policies may be significant, and cannot be predicted with a high degree of certainty.

Federal and state laws and regulations generally applicable to financial institutions regulate, among other things, the scope of business, the kinds and amounts of investments, reserve requirements, capital levels relative to operations, the nature and amount of collateral for loans, the establishment of branches, mergers and consolidations and the payment of dividends.

This system of supervision and regulation establishes a comprehensive framework for the respective operations of the Company and its subsidiaries and is intended primarily for the protection of the FDIC-insured deposits and depositors of the Bank, rather than shareholders.

The following is a summary of the material elements of the regulatory framework that applies to the Company and its subsidiaries. It does not describe all of the statutes, regulations and regulatory policies that apply, nor does it restate all of the requirements of those statutes, regulations and regulatory policies that are described. As such, the following is qualified in its entirety by reference to applicable law. Any change in applicable statutes, regulations or regulatory policies may have a material effect on the business of the Company and its subsidiaries.

The Company

General. The Company, as the sole shareholder of the Bank, is a bank holding company. As a bank holding company, the Company is registered with, and is subject to regulation by, the Federal Reserve under the Bank Holding Company Act of 1956, as amended (the “BHCA”). In accordance with Federal Reserve policy, the Company is expected to act as a source of financial strength to the Bank and to commit resources to support the Bank in circumstances where the Company might not otherwise do so. Under the BHCA, the Company is subject to periodic examination by the Federal Reserve. The Company is also required to file with the Federal Reserve periodic reports of the Company’s operations and such additional information regarding the Company and its subsidiaries as the Federal Reserve may require.

Acquisitions, Activities and Change in Control. The primary purpose of a bank holding company is to control and manage banks. The BHCA generally requires the prior approval of the Federal Reserve for any merger involving a bank holding company or any acquisition by a bank holding company of another bank or bank holding company. Subject to certain conditions (including deposit concentration limits established by the BHCA), the Federal Reserve may allow a bank holding company to acquire banks located in any state of the United States. In approving interstate acquisitions, the Federal Reserve is required to give effect to applicable state law limitations on the aggregate amount of deposits that may be held by the acquiring bank holding company and its insured depository institution affiliates in the state in which the target bank is located (provided that those limits do not discriminate against out-of-state depository institutions or their holding companies) and state laws that require that the target bank have been in existence for a minimum period of time (not to exceed five years) before being acquired by an out-of-state bank holding company.

The BHCA generally prohibits the Company from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company that is not a bank and from engaging in any business other than that of banking, managing and controlling banks or furnishing services to banks and their subsidiaries. This general prohibition is subject to a number of exceptions. The principal exception allows bank holding companies to engage in, and to own shares of companies engaged in, certain businesses found by the Federal Reserve to be “so closely related to banking ... as to be a proper incident thereto.” This authority would permit the Company to engage in a variety of banking-related businesses, including the operation of a thrift, consumer finance, equipment leasing, the operation of a computer service bureau (including software development), and

mortgage banking and brokerage. The BHCA generally does not place territorial restrictions on the domestic activities of non-bank subsidiaries of bank holding companies.

Additionally, bank holding companies that meet certain eligibility requirements prescribed by the BHCA and elect to operate as financial holding companies may engage in, or own shares in companies engaged in, a wider range of nonbanking activities, including securities and insurance underwriting and sales, merchant banking and any other activity that the Federal Reserve, in consultation with the Secretary of the Treasury, determines by regulation or order is financial in nature, incidental to any such financial activity or complementary to any such financial activity and does not pose a substantial risk to the safety or soundness of depository institutions or the financial system generally. As of the date of this filing, the Company has neither applied for nor received approval to operate as a financial holding company.

Federal law also prohibits any person or company from acquiring “control” of an FDIC-insured depository institution or its holding company without prior notice to the appropriate federal bank regulator. “Control” is conclusively presumed to exist upon the acquisition of 25% or more of the outstanding voting securities of a bank or bank holding company, but may arise under certain circumstances at 10% ownership.

Capital Requirements. Bank holding companies are required to maintain minimum levels of capital in accordance with Federal Reserve capital adequacy guidelines. If capital levels fall below the minimum required levels, a bank holding company, among other things, may be denied approval to acquire or establish additional banks or non-bank businesses.

The Federal Reserve’s capital guidelines establish the following minimum regulatory capital requirements for bank holding companies: (i) a risk-based requirement expressed as a percentage of total assets weighted according to risk; and (ii) a leverage requirement expressed as a percentage of total assets. The risk-based requirement consists of a minimum ratio of total capital to total risk-weighted assets of 8% and a minimum ratio of Tier 1 capital to total risk-weighted assets of 4%. The leverage requirement consists of a minimum ratio of Tier 1 capital to total assets of 3% for the most highly rated companies, with a minimum requirement of 4% for all others. For purposes of these capital standards, Tier 1 capital consists primarily of permanent stockholders’ equity less intangible assets (other than certain loan servicing rights and purchased credit card relationships). Total capital consists primarily of Tier 1 capital plus certain other debt and equity instruments that do not qualify as Tier 1 capital and a portion of the company’s allowance for loan and lease losses.

The risk-based and leverage standards described above are minimum requirements. Higher capital levels will be required if warranted by the particular circumstances or risk profiles of individual banking organizations. For example, the Federal Reserve’s capital guidelines contemplate that additional capital may be required to take adequate account of, among other things, interest rate risk, or the risks posed by concentrations of credit, nontraditional activities or securities trading activities. Further, any banking organization experiencing or anticipating significant growth would be expected to maintain capital ratios, including tangible capital positions (i.e., Tier 1 capital less all intangible assets), well above the minimum levels. As of December 31, 2004, the Company had regulatory capital in excess of the Federal Reserve’s minimum requirements.

Dividend Payments. The Company’s ability to pay dividends to its shareholders may be affected by both general corporate law considerations and policies of the Federal Reserve applicable to bank holding companies. As a Delaware corporation, the Company is subject to the limitations of the Delaware General Corporation Law (the “DGCL”). The DGCL allows the Company to pay dividends only out of its surplus (as defined and computed in accordance with the provisions of the DGCL) or if the Company has no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Additionally, policies of the Federal Reserve caution that a bank holding company should not pay cash dividends that exceed its net income or that can only be funded in ways that weaken the bank holding company’s financial health, such as by borrowing. The Federal Reserve also possesses enforcement powers over bank holding companies and their non-bank subsidiaries to prevent or remedy actions that represent unsafe or unsound practices or violations of applicable statutes and regulations. Among these powers is the ability to proscribe the payment of dividends by banks and bank holding companies.

Federal Securities Regulation. The Company’s common stock is registered with the SEC under the Securities Act of 1933, as amended, and the Exchange Act. Consequently, the Company is subject to the information, proxy solicitation, insider trading and other restrictions and requirements of the SEC under the Exchange Act.

The Bank

General. The Bank is a national bank, chartered by the OCC under the National Bank Act. The deposit accounts of the Bank are insured by the FDIC’s Bank Insurance Fund (“BIF”), and the Bank is a member of the Federal Reserve System. As a national bank, the Bank is subject to the examination, supervision, reporting and enforcement requirements of the OCC, the chartering authority for national banks. The FDIC, as administrator of the BIF, also has regulatory authority over the Bank.

Deposit Insurance. As an FDIC-insured institution, the Bank is required to pay deposit insurance premium assessments to the FDIC. The FDIC has adopted a risk-based assessment system under which all insured depository institutions are placed into one of nine categories and assessed insurance premiums based upon their respective levels of capital and results of supervisory evaluations. Institutions classified as well-capitalized (as defined by the FDIC) and considered healthy pay the lowest premium while institutions that are less than adequately capitalized (as defined by the FDIC) and considered of substantial supervisory concern pay the highest premium. Risk classification of all insured institutions is made by the FDIC for each semi-annual assessment period.

During the year ended December 31, 2004, BIF assessments ranged from 0% of deposits to 0.27% of deposits. For the semi-annual assessment period beginning January 1, 2005, BIF assessment rates will continue to range from 0% of deposits to 0.27% of deposits.

FICO Assessments. Since 1987, a portion of the deposit insurance assessments paid by members of the FDIC’s Savings Association Insurance Fund (“SAIF”) has been used to cover interest payments due on the outstanding obligations of the Financing Corporation (“FICO”).

FICO was created in 1987 to finance the recapitalization of the Federal Savings and Loan Insurance Corporation, the SAIF’s predecessor insurance fund. As a result of federal legislation enacted in 1996, beginning as of January 1, 1997, both SAIF members and BIF members became subject to assessments to cover the interest payments on outstanding FICO obligations until the final maturity of such obligations in 2019. These FICO assessments are in addition to amounts assessed by the FDIC for deposit insurance. During the year ended December 31, 2004, the FICO assessment rate for BIF and SAIF members was approximately 0.02% of deposits.

Supervisory Assessments. National banks are required to pay supervisory assessments to the OCC to fund the operations of the OCC. The amount of the assessment is calculated using a formula that takes into account the bank’s size and its supervisory condition (as determined by the composite rating assigned to the bank as a result of its most recent OCC examination). During the year ended December 31, 2004, the Bank paid supervisory assessments to the OCC totaling $86,000.

Capital Requirements. Banks are generally required to maintain capital levels in excess of other businesses. The OCC has established the following minimum capital standards for national banks, such as the Bank: (i) a leverage requirement consisting of a minimum ratio of Tier 1 capital to total assets of 3% for the most highly-rated banks with a minimum requirement of at least 4% for all others; and (ii) a risk-based capital requirement consisting of a minimum ratio of total capital to total risk-weighted assets of 8% and a minimum ratio of Tier 1 capital to total risk-weighted assets of 4%. For purposes of these capital standards, the components of Tier 1 capital and total capital are the same as those for bank holding companies discussed above.

The capital requirements described above are minimum requirements. Higher capital levels will be required if warranted by the particular circumstances or risk profiles of individual institutions. For example, regulations of the OCC provide that additional capital may be required to take adequate account of, among other things, interest rate risk or the risks posed by concentrations of credit, nontraditional activities or securities trading activities.

Further, federal law and regulations provide various incentives for financial institutions to maintain regulatory capital at levels in excess of minimum regulatory requirements. For example, a financial institution that is “well-capitalized” may qualify for exemptions from prior notice or application requirements otherwise applicable to certain types of activities and may qualify for expedited processing of other required notices or applications. Additionally, one of the criteria that determines a bank holding company’s eligibility to operate as a financial holding company is a requirement that all of its financial institution subsidiaries be “well-capitalized.” Under the regulations of the OCC, in order to be “well-capitalized” a financial institution must maintain a ratio of total capital to total risk-weighted assets of 10% or greater, a ratio of Tier 1 capital to total risk-weighted assets of 6% or greater and a ratio of Tier 1 capital to total assets of 5% or greater.

Federal law also provides the federal banking regulators with broad power to take prompt corrective action to resolve the problems of undercapitalized institutions. The extent of the regulators’ powers depends on whether the institution in question is “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized,” in each case as defined by regulation. Depending upon the capital category to which an institution is assigned, the

regulators’ corrective powers include: (i) requiring the institution to submit a capital restoration plan; (ii) limiting the institution’s asset growth and restricting its activities; (iii) requiring the institution to issue additional capital stock (including additional voting stock) or to be acquired; (iv) restricting transactions between the institution and its affiliates; (v) restricting the interest rate the institution may pay on deposits; (vi) ordering a new election of directors of the institution; (vii) requiring that senior executive officers or directors be dismissed; (viii) prohibiting the institution from accepting deposits from correspondent banks; (ix) requiring the institution to divest certain subsidiaries; (x) prohibiting the payment of principal or interest on subordinated debt; and (xi) ultimately, appointing a receiver for the institution.

As of December 31, 2004: (i) the Bank was not subject to a directive from the OCC to increase its capital to an amount in excess of the minimum regulatory capital requirements; (ii) the Bank exceeded its minimum regulatory capital requirements under OCC capital adequacy guidelines; and (iii) the Bank was “well-capitalized,” as defined by OCC regulations.

Dividends. The primary source of funds for the Company is dividends from the Bank. Under the National Bank Act, a national bank may pay dividends out of its undivided profits in such amounts and at such times as the bank’s board of directors deems prudent. Without prior OCC approval, however, a national bank may not pay dividends in any calendar year that, in the aggregate, exceed the bank’s year-to-date net income plus the bank’s retained net income for the two preceding years.

The payment of dividends by any financial institution is affected by the requirement to maintain adequate capital pursuant to applicable capital adequacy guidelines and regulations, and a financial institution generally is prohibited from paying any dividends if, following payment thereof, the institution would be undercapitalized. As described above, the Bank exceeded its minimum capital requirements under applicable guidelines as of December 31, 2004. As of December 31, 2004, approximately $714,000 was available to be paid as dividends by the Bank. Notwithstanding the availability of funds for dividends, however, the OCC may prohibit the payment of any dividends by the Bank if the OCC determines such payment would constitute an unsafe or unsound practice.

Insider Transactions. The Bank is subject to certain restrictions imposed by federal law on extensions of credit to the Company, on investments in the stock or other securities of the Company and the acceptance of the stock or other securities of the Company as collateral for loans made by the Bank. Certain limitations and reporting requirements are also placed on extensions of credit by the Bank to its directors and officers, to the directors and officers of the Company, to principal stockholders of the Company, and to “related interests” of such directors, officers and principal stockholders. In addition, federal law and regulations may affect the terms upon which any person who is a director or officer of the Company or the Bank or a principal stockholder of the Company may obtain credit from banks with which the Bank maintains correspondent relationships.

Safety and Soundness Standards. The federal banking agencies have adopted guidelines that establish operational and managerial standards to promote the safety and soundness of federally insured depository institutions. The guidelines set forth standards for internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, asset quality and earnings.

In general, the safety and soundness guidelines prescribe the goals to be achieved in each area, and each institution is responsible for establishing its own procedures to achieve those goals. If an institution fails to comply with any of the standards set forth in the guidelines, the institution’s primary federal regulator may require the institution to submit a plan for achieving and maintaining compliance. If an institution fails to submit an acceptable compliance plan, or fails in any material respect to implement a compliance plan that has been accepted by its primary federal regulator, the regulator is required to issue an order directing the institution to cure the deficiency. Until the deficiency cited in the regulator’s order is cured, the regulator may restrict the institution’s rate of growth, require the institution to increase its capital, restrict the rates the institution pays on deposits or require the institution to take any action the regulator deems appropriate under the circumstances. Noncompliance with the standards established by the safety and soundness guidelines may also constitute grounds for other enforcement action by the federal banking regulators, including cease and desist orders and civil money penalty assessments.

Branching Authority. National banks headquartered in Illinois, such as the Bank, have the same branching rights in Illinois as banks chartered under Illinois law, subject to OCC approval. Illinois law grants Illinois-chartered banks the authority to establish branches anywhere in the State of Illinois, subject to receipt of all required regulatory approvals.

Federal law permits state and national banks to merge with banks in other states subject to: (i) regulatory approval; (ii) federal and state deposit concentration limits; and (iii) state law limitations requiring the merging bank to have been in existence for a minimum period of time (not to exceed five years) prior to the merger. The establishment of new interstate branches or the acquisition of individual branches of a bank in another state (rather than the acquisition of an out-of-state bank in its entirety) is permitted only in those states that authorize such expansion.

Financial Subsidiaries. Under Federal law and OCC regulations, national banks are authorized to engage, through “financial subsidiaries,” in any activity that is permissible for a financial holding company and any activity that the Secretary of the Treasury, in consultation with the Federal Reserve, determines is financial in nature or incidental to any such financial activity, except (i) insurance underwriting, (ii) real estate development or real estate investment activities (unless otherwise permitted by law), (iii) insurance company portfolio investments and (iv) merchant banking. The authority of a national bank to invest in a financial subsidiary is subject to a number of conditions, including, among other things, requirements that the bank must be well-managed and well-capitalized (after deducting from capital the bank’s outstanding investments in financial subsidiaries). The Bank has neither applied for nor received approval to establish any financial subsidiaries.

Federal Reserve System. Federal Reserve regulations, as presently in effect, require depository institutions to maintain non-interest earning reserves against their transaction accounts (primarily NOW and regular checking accounts), as follows: for transaction accounts aggregating $47.6 million or less, the reserve requirement is 3% of total transaction accounts; and for transaction accounts aggregating in excess of $47.6 million, the reserve requirement is $1.218 million plus 10% of the aggregate amount of total transaction accounts in excess of $47.6 million. The first $7.0 million of otherwise reservable balances are exempted from the

PART II

Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

See page 40 of the 2004 Annual Report to Stockholders (filed as Exhibit 13.1 of this report) which is incorporated herein by reference.

Issuer Purchases of Equity Securities

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
November 1, 2004 through November 30, 2004	18	$	70.00	0	0
December 1, 2004 through December 31, 2004	1,000	$	70.00	0	0
Total	1,018	$	70.00	0	0

Item 6. Selected Financial Data

The information set forth under the caption “Selected Consolidated Financial Data” on page 1 of the 2004 Annual Report to Stockholders (filed as Exhibit 13.1 of this report) is incorporated herein by reference.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information set forth under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 2 through 11 of the 2004 Annual Report to Stockholders (filed as Exhibit 13.1 of this report) is incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

The information set forth under the caption “Quantitative and Qualitative Disclosures about Market Risk” on page 12 of the 2004 Annual Report to Stockholders (filed as Exhibit 13.1 of this report) is incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data

The consolidated financial statements of the Registrant and theReport of Independent Registered Public Accounting Firm as set forth on pages 17 through 39 of the 2004 Annual Report to Stockholders (filed as Exhibit 13.1 of this report) are incorporated herein by reference:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2004 and 2003

Consolidated Statements of Income for the years ended December 31, 2004, 2003, and 2002

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2004, 2003, and 2002

Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003, and 2002

Notes to the Consolidated Financial Statements

The portions of the 2004 Annual Report to Stockholders which are not specifically incorporated by reference as a part of this Form 10-K are not deemed to be a part of this report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Exchange Act) as of December 31, 2004. Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective. There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect internal controls.

Item 9B. Other Information

None

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) 1. Financial Statements

All financial statements of the Registrant are incorporated herein by reference as set forth under Item 8, Part II of this report on Form 10-K.

2. Financial Statement Schedules Not applicable.

3. Exhibits (Numbered in accordance with Item 601 of Regulation S-K)

The following exhibits are filed as part of this report:

3(i) Certificate of Incorporation of First Ottawa Bancshares, Inc.

3(ii) By-Laws of First Ottawa Bancshares, Inc.

10.1 Employment Agreement for J. Brown*

10.2 Executive Officer Bonus Plan*

10.3 Severance Agreement with Donald J. Harris*

10.4 Stock Incentive Plan

10.5 Summary of Director Fees

10.6 Form of Supplemental Nonqualified Retirement Agreement

13.1 Annual Report to Stockholders

21.1 Subsidiaries

23.1 Consent of independent auditor

31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)

31.2 Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)

32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Indicates management contract or compensation plan or arrangement.

SIGNATURE

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	FIRST OTTAWA BANCSHARES, INC.

	By:	/s/ Joachim Brown
		Joachim Brown, President and Chief Executive Officer (Principal Executive Officer)

	By:	/s/ Vincent G. Easi
		Vincent G. Easi, Principal Financial Officer

Date: March 29, 2005

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ Joachim Brown	Director and President/	March 29, 2005
Joachim Brown	Chief Executive Officer

/s/ Bradley J. Armstrong	Director	March 29, 2005
Bradley J. Armstrong

/s/ John L. Cantlin	Director	March 29, 2005
John L. Cantlin

/s/ Patty P. Godfrey	Director	March 29, 2005
Patty P. Godfrey

/s/ Thomas E. Haeberle	Director	March 29, 2005
Thomas E. Haeberle

/s/ Donald J. Harris	Director and Executive	March 29, 2005
Donald J. Harris	Vice President, Chief Operating
	Officer

/s/ Erika L. Schmidt	Director	March 29, 2005
Erika L. Schmidt

EXHIBIT INDEX

Exhibit Number		Description	Incorporated by Reference to	Attached Hereto
	3(i)	Certificate of Incorporation of First Ottawa Bancshares, Inc. (as amended)	Form 10K for the year ended 12/31/2002
	3(ii)	By-Laws of First Ottawa Bancshares, Inc.	Form 10K for the year ended 12/31/2003
	10.1	Employment Agreement for J. Brown	Form 10K for the year ended 12/31/2002
	10.2	Executive Officer Bonus Plan	Form 10K for the year ended 12/31/2002
	10.3	Severance Agreement with Donald J. Harris	Form 10K for the year ended 12/31/2001
	10.4	Stock Incentive Plan	Form S-8 dated 8/1/03
	10.5	Summary of Director Fees		X
	10.6	Form of Supplemental Nonqualified Retirement Agreement		X
	13.1	2004 Annual Report to Stockholders		X
	21.1	Subsidiaries		X
	23.1	Consent of independent auditor		X
	23.2	Consent of independent auditor		X
	31.1	Certification of Chief Executive Officer		X
	31.2	Certification of Chief Financial Officer		X
	32.1	Certification of Chief Executive Officer		X
	32.2	Certification of Chief Financial Officer		X

Plan category	Number of securities to be issued upon exercise of outstanding options	Weighted-average exercise price of outstanding options		Number of securities remaining available for future issuance
Equity compensation plans approved by security holders	14,500	$	59.21	135,500
Equity compensation plans not approved by security holders	0	0		0
Total	14,500	$	59.21	135,500

PART I

Item 1	Business
Item 2	Properties
Item 3	Legal Proceedings
Item 4	Submission of Matters to a Vote of Security Holders

PART II

Item 5	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6	Selected Financial Data
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A	Quantitative and Qualitative Disclosures about Market Risk
Item 8	Financial Statements and Supplementary Data
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A	Controls and Procedures
Item 9B	Other Information

PART III

Item 10	Directors and Executive Officers of the Registrant
Item 11	Executive Compensation
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13	Certain Relationships and Related Transactions
Item 14	Principal Accountant Fees and Services

PART IV

Item 15	Exhibits and Financial Statement Schedules