UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~March 3031, ~~2015~~2016

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______to_______

Commission File Number 000-51367

OTTAWA SAVINGS BANCORP, INC.

(Exact name of registrant as specified in its charter)

United States (State or other jurisdiction of incorporation or organization)	20-3074627 (I.R.S. Employer Identification Number)
United States	20-3074627
925 LaSalle Street Ottawa, Illinois (Address of principal executive offices)	61350 (Zip Code)
(State or other jurisdiction of incorporation or	(I.R.S. Employer Identification Number)
organization)
925 LaSalle Street	61350
Ottawa, Illinois	(Zip Code)
(Address of principal executive offices)

(815) 433-2525

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year,

if changed since last report)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer ☐	Accelerated Filer ☐

Non-Accelerated Filer ☐ (Do not check if a smaller reporting company)	Smaller Reporting Company ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class	~~Outstanding as of November 13, 2015~~	Outstanding as of May 10, 2016
Common Stock, $0.01 par value	~~2,894,123~~		2,894,123

OTTAWA SAVINGS BANCORP, INC.

FORM 10-Q

For the quarterly period ended ~~September~~March 3031, ~~2015~~2016

INDEX

		Page Number
PART I – FINANCIAL INFORMATION
Item 1	Financial Statements	3
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	2524
Item 3	Quantitative and Qualitative Disclosures about Market Risk	3732
Item 4	Controls and Procedures	3732
PART II – OTHER INFORMATION
Item 1	Legal Proceedings	3732
Item 1A	Risk Factors	3732
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	3732
Item 3	Defaults upon Senior Securities	3733
Item 4	Mine Safety Disclosures	3733
Item 5	Other Information	3833
Item 6	Exhibits	3833
SIGNATURES		3934

Part I – Financial Information

ITEM 1 – FINANCIAL STATEMENTS

OTTAWA SAVINGS BANCORP, INC.

Consolidated Balance Sheets

~~September~~March 3031, ~~2015~~2016 and December 31, ~~2014~~2015

(Unaudited)

	September 30,			December 31,
	March 31, 2016			December 31, 2015
	2015			2014
Assets
Cash and due from banks	$	2,~~577~~524,~~799~~974		$	2,~~053~~096,~~117~~966
Interest earning deposits		1,826,125			3,140,118
Interest bearing deposits		1,635,668			5,038,753
Total cash and cash equivalents		4,~~403~~160,~~924~~642			57,~~193~~135,~~235~~719
Time deposits		~~649~~250,000			~~854~~250,~~861~~000
Federal funds sold		5949,~~668,~~000			1,~~662~~604,000
Securities available for sale		5048,~~640~~444,~~707~~907			5246,~~772~~984,~~108~~907
Non-marketable equity securities		1,358,121			1,~~780~~358,~~674~~121
Loans, net of allowance for loan losses of $2,324,587 and $2,314,607 at September 30, 2015 and December 31, 2014, respectively		139,256,712			142,501,513
Loans, net of allowance for loan losses of $2,191,844 and $2,224,006 at March 31, 2016 and December 31, 2015, respectively		144,743,430			140,110,201
Loans held for sale		~~102~~100,000			-
Premises and equipment, net		7,~~067~~005,~~382~~512			7,~~040~~058,~~228~~047
Accrued interest receivable		~~824~~801,~~066~~846			~~881~~775,~~612~~641
Foreclosed real estate		~~146~~318,~~428~~670			~~232~~313,~~650~~368
Deferred tax assets		2,~~897~~552,~~770~~190			32,~~055~~725,~~068~~354
Cash value of life insurance		2,~~183~~207,~~848~~596			2,~~148~~195,~~043~~424
Goodwill		649,869			649,869
Core deposit intangible		~~480~~428,000			~~567~~451,000
Other assets		12,~~958~~595,~~706~~360			21,~~386~~951,~~030~~700
Total assets	$	~~218~~216,~~286~~565,~~533~~143		$	~~221~~213,~~724~~563,~~891~~351
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Non-interest bearing	$	911,~~913~~084,~~540~~694		$	810,~~198~~325,~~356~~832
Interest bearing		~~171~~169,~~847~~090,~~271~~829			~~174~~166,~~034~~409,~~663~~076
Total deposits		~~181~~180,~~760~~175,~~811~~523			~~182~~176,~~233~~734,~~019~~908
Accrued interest payable		21,~~794~~902			~~369~~394
FHLB advances		21,~~672~~138,~~003~~422			52,~~483~~139,~~036~~117
Other liabilities		3,~~072~~786,~~363~~854			3,~~876~~600,~~053~~655
Total liabilities		~~187~~185,~~507~~102,~~971~~701			~~191~~182,~~592~~475,~~477~~074
Commitments and contingencies
Redeemable common stock held by ESOP plan		~~462~~422,~~890~~255			~~424~~376,~~730~~543
Stockholders' Equity
Common stock, $.01 par value, 12,000,000 shares authorized; 3,001,055 shares issued		30,010			30,010
Additional paid-in-capital		15,~~842~~847,~~174~~200			15,~~830~~845,~~623~~341
Retained earnings		1516,~~947~~453,~~081~~280			1516,~~423~~194,~~412~~374
Unallocated ESOP shares		(~~216~~190,~~223~~785	)		(~~254~~203,~~380~~504	)
Unearned management recognition plan shares		(52,~~975~~649	)		(123,~~388~~751	)
Accumulated other comprehensive income		~~393~~537,~~613~~504			~~327~~437,~~255~~925
		31,990,680			31,344,532
		32,674,560			32,300,395
Less:
Treasury stock, at cost; 106,932 shares		(1,212,118	)		(1,212,118	)
Maximum cash obligation related to ESOP shares		(~~462~~422,~~890~~255	)		(~~424~~376,~~730~~543	)
Total stockholders' equity		3031,~~315~~040,~~672~~187			2930,~~707~~711,~~684~~734
Total liabilities and stockholders' equity	$	~~218~~216,~~286~~565,~~533~~143		$	~~221~~213,~~724~~563,~~891~~351

See accompanying notes to these unaudited consolidated financial statements.

OTTAWA SAVINGS BANCORP, INC.

Consolidated Statements of Operations

Three ~~and Nine~~ Months Ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015

(Unaudited)

	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
	2015			2014			2015		2014
	2016			2015
Interest and dividend income:
Interest and fees on loans	$	1,~~670~~723,~~235~~298		$	1,~~463~~752,~~865~~996		$	~~5,126,949~~	$	~~4,310,573~~
Securities:
Residential mortgage-backed and related securities		~~159~~152,~~046~~077			~~133~~157,~~958~~273			~~473,026~~		~~415,161~~
State and municipal securities		~~142~~134,~~296~~980			72142,~~342~~027			~~425,199~~		~~214,535~~
Dividends on non-marketable equity securities		12,~~680~~190			1,~~303~~376			~~4,958~~		~~3,383~~
Interest-earning deposits		3,545			328			11,415		2,300
Interest-bearing deposits		7,344			5,352
Total interest and dividend income		12,~~976~~019,~~802~~889			12,~~671~~059,~~796~~024			~~6,041,547~~		~~4,945,952~~
Interest expense:
Deposits		~~215~~202,~~036~~470			~~234~~224,~~254~~255			~~658,202~~		~~741,065~~
Borrowings		154,~~847~~620			~~179~~15,868			~~47,379~~		~~179~~
Total interest expense		~~230~~207,~~883~~090			~~234~~240,~~433~~123			~~705,581~~		~~741,244~~
Net interest income		1,~~745~~812,~~919~~799			1,~~437~~818,~~363~~901			~~5,335,966~~		~~4,204,708~~
Provision for loan losses		-120,000			~~225~~165,000			~~220,000~~		~~695,000~~
Net interest income after provision for loan losses		1,~~745~~692,~~919~~799			1,~~212~~653,~~363~~901			~~5,115,966~~		~~3,509,708~~
Other non-interest income:
Other income:
Gain on sale of securities		-96			4221,~~054~~630			~~21,630~~		~~42,054~~
Gain on sale of loans		5738,~~812~~930			1838,~~455~~608			~~148,221~~		~~25,442~~
Gain on sale of OREO		~~168~~65,~~974~~197			605,~~706~~491			~~215,907~~		~~81,701~~
Gain on sale of repossessed assets		~~7,237~~632			~~4,000~~-			~~9,572~~		~~7,872~~
Origination of mortgage servicing rights, net of amortization		(3,434	)		1,368			7,402		(1,513	)
Loan origination and servicing income		58,622			46,856
Customer service fees		122,735			79,941			328,293		223,523
Origination of mortgage servicing rights, net of amortization		2,130			(970	)
Income on bank owned life insurance		11,549			12,865			35,805		39,285
Customer service fees		98,271			94,797
Other		26,965			28,454			79,737		83,652
Income on bank owned life insurance		12,172			12,184
Total other non-interest income		391,838			247,843			846,567		502,016
Other		24,819			27,389
Other non-interest expenses:
Total other income		300,869			245,985
Salaries and employee benefits		739,607			476,538			2,151,162		1,300,716
Other expenses:
Directors fees		37,800			25,200			113,400		75,600
Salaries and employee benefits		827,685			711,343
Occupancy		168,137			124,932			498,748		385,204
Directors fees		40,800			37,800
Deposit insurance premium		45,673			35,098			134,778		103,772
Occupancy		152,078			153,765
Legal and professional services		82,528			184,365			267,931		405,294
Deposit insurance premium		44,223			44,907
Data processing		124,221			80,797			1,296,387		219,274
Legal and professional services		87,128			103,660
Loss on sale of securities		-			17,234			2,039		17,234
Data processing		135,022			374,928
Valuation adjustments and expenses on foreclosed real estate		44,865			13,524			154,768		55,710
Loss on sale of securities		-			2,039
Loss on sale of OREO		-			-			-		10,271
Loan expense		58,542			60,268
Loss on sale of repossessed assets		-			-			11,971		2,919
Valuation adjustments and expenses on foreclosed real estate		36,513			20,098
Other		227,380			164,872			702,685		473,146
Loss on sale of repossessed assets		-			9,883
Total other non-interest expenses		1,470,211			1,122,560			5,333,869		3,049,140
Other		237,756			221,187
Income before income tax expense		667,546			337,646			628,664		962,584
Total other expenses		1,619,747			1,739,878
Income tax expense		210,564			101,426			104,995		294,546
Income before income tax expense		373,921			160,008
Net income	$	456,982		$	236,220		$	523,669	$	668,038
Income tax expense		115,015			16,344
Basic earnings per share	$	0.16		$	0.11		$	0.18	$	0.32
Net income	$	258,906		$	143,664
Diluted earnings per share	$	0.16		$	0.11		$	0.18	$	0.32
Basic earnings per share	$	0.09		$	0.05
Diluted earnings per share	$	0.09		$	0.05

See accompanying notes to these unaudited consolidated financial statements.

OTTAWA SAVINGS BANCORP, INC.

Consolidated Statements of Comprehensive Income

Three ~~and Nine Months~~ Ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015

(Unaudited)

	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
	2015			2014			2015			2014
	2016			2015
Net income	$	~~456~~258,~~982~~906		$	~~236~~143,~~220~~664		$	~~523,669~~		$	~~668,038~~
Other comprehensive (loss) income, before tax:
Other comprehensive income, before tax:
Securities available for sale:
Unrealized holding gains (losses) arising during the period		129,597			(8,643	)		128,052			475,011
Unrealized holding gains arising during the period		163,649			408,355
Reclassification adjustment for net (gains) included in net income		-			(24,820	)		(19,591	)		(24,820	)
Reclassification adjustment for (gains) included in net income		(96	)		(19,591	)
Other comprehensive income (loss), before tax		129,597			(33,463	)		108,461			450,191
Other comprehensive income, before tax		163,553			388,764
Income tax expense (benefit) related to items of other comprehensive income		50,307			(12,990	)		42,103			174,427
Income tax expense related to items of other comprehensive income		63,974			150,911
Other comprehensive income (loss), net of tax		79,290			(20,473	)		66,358			275,764
Other comprehensive income, net of tax		99,579			237,853
Comprehensive income	$	~~536~~358,~~272~~485		$	~~215~~381,~~747~~517		$	~~590,027~~		$	~~943,802~~

See accompanying notes to these unaudited consolidated financial statements.

OTTAWA SAVINGS BANCORP, INC.

Consolidated Statements of Cash Flows

~~Nine~~Three Months Ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015

(Unaudited)

	2015			2014
	2016			2015
Cash Flows from Operating Activities
Net income	$	~~523~~258,~~669~~906		$	~~668~~143,~~038~~664
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		~~165~~58,~~740~~535			~~134~~56,~~199~~426
Provision for loan losses		~~220~~120,000			~~695~~165,000
Provision for deferred income taxes		~~115~~109,~~195~~190			~~(11~~31,~~002~~172	)
Net amortization of premiums and discounts on securities		~~535~~163,~~220~~362			~~418~~171,~~500~~845
Gain on sale of securities, net		(~~19,591~~96	)		(2419,~~820~~591	)
Origination of mortgage loans held for sale		(51,~~075~~473,~~975~~405	)		(1,~~570~~197,~~150~~400	)
Proceeds from sale of mortgage loans held for sale		51,~~112~~412,~~792~~335			1921,~~487,592~~548
Gain on sale of loans, net		(~~138~~38,~~817~~930	)		(2538,~~442~~608	)
Origination of mortgage servicing rights, net of amortization		(7,401	)		1,513
Origination and purchase of mortgage servicing rights, net of amortization		(2,130	)		970
Gain on sale of foreclosed real estate		(215,907	)		(71,430	)
Gain on sale of foreclosed real estate, net		(65,197	)		(5,491	)
Write down of foreclosed real estate		7514,~~490~~550			-
Loss (gain) on sale of repossessed assets		2,399			(4,953	)
(Gain) loss on sale of repossessed assets, net		(632	)		9,883
ESOP compensation expense		4113,~~981~~121			3413,~~363~~287
MRP compensation expense		61,~~413~~102			62,~~412~~138
Compensation expense on RRP options granted		71,~~727~~457			72,~~726~~576
Amortization of core deposit intangible		8723,000			-29,000
Amortization (accretion) of fair value adjustments on acquired:
Loans		~~115~~30,~~835~~796			-6,847
Certificates of deposit		(8219,000	)		-(31,000	)
Increase in cash surrender value of life insurance		(35,805	)		(39,285	)
Federal Home Loan Bank Advances		(695	)		-
Increase in cash surrender value of life insurance		(12,172	)		(12,184	)
Change in assets and liabilities:
Decrease in accrued interest receivable		57,546			31,673
(Increase) decrease in accrued interest receivable		(26,205	)		63,803
Decrease (increase) in other assets		402,797			(210,619	)
(Increase) decrease in other assets		(654,907	)		21,925
(Decrease) in accrued interest payable and other liabilities		(801,265	)		(175,454	)
Increase (decrease) in accrued interest payable and other liabilities		240,143			(7,161	)
Net cash provided by operating activities		1153,~~093,043~~128			1328,~~351,861~~649
Cash Flows from Investing Activities
Securities available for sale:
Purchases		(93,~~481~~613,~~877~~482	)		(3,~~809~~241,~~868~~338	)
Sales, calls, maturities, and paydowns		11,206,110			8,311,265
Sales, calls, maturities and paydowns		2,153,769			7,274,293
Net decrease in time deposits		~~205,861~~-			-100,000
Net (increase) decrease in federal funds sold		(4,006,000	)		2,741,000
Net increase in loans		(4,896,715	)		(467,343	)
Net decrease (increase) in loans		1,844,187			(2,426,528	)
Net decrease in federal funds sold		655,000			(1,373,000	)
Proceeds from sale of foreclosed real estate		1102,~~218,318~~099			~~408~~153,~~582~~091
Proceeds from sale of repossessed assets		~~102~~17,~~629~~509			3451,~~425~~434
Sale of non-marketable equity securities		422,553			-
Purchase of premises and equipment		(6,000	)		(62,186	)
Purchase of premises and equipment		(192,894	)		(8,271	)
Net cash (used in) provided by investing activities		(5,587,820	)		2,434,951
Net cash provided by investing activities		1,318,887			5,250,605
Cash Flows from Financing Activities
Net decrease in deposits		(390,208	)		(10,657,761	)
Net increase in deposits		3,459,615			1,120,848
Proceeds from Federal Home Loan Bank advances		-			2,000,000
Principal reduction of Federal Home Loan Bank advances		(1,000,000	)		(2,792,728	)
Principal reduction of Federal Home Loan Bank advances		(2,811,033	)		(2,000,000	)
Net cash provided by (used in) financing activities		2,459,615			(1,671,880	)
Net cash used in financing activities		(3,201,241	)		(10,657,761	)
Net (decrease) increase in cash and cash equivalents		(2,975,077	)		1,091,720
Net decrease in cash and cash equivalents		(789,311	)		(4,055,295	)
Cash and cash equivalents:
Beginning		5,193,235			6,605,840
Beginning of period		7,135,719			5,193,235
Ending	$	4,403,924		$	2,550,545
End of period	$	4,160,642		$	6,284,955
(Continued)

(Continued)

See accompanying notes to these unaudited consolidated financial statements.

OTTAWA SAVINGS BANCORP, INC.

Consolidated Statements of Cash Flows

~~Nine~~Three Months Ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015

(Unaudited)

	2015			2014
	2016			2015
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest paid to depositors	$	~~655~~200,~~777~~962		$	~~739~~222,~~490~~831
Interest paid on borrowings		474,~~379~~620			~~179~~15,868
Income taxes paid, net of (refunds) received		(48,000	)		231,000
Income taxes paid, net of refunds received		-			(13,800	)
Supplemental Schedule of Noncash Investing and Financing Activities
Real estate acquired through or in lieu of foreclosure		~~991~~109,~~679~~190			~~400~~426,~~425~~207
Other assets acquired in settlement of loans		733,~~100~~500			4734,~~850~~600
Sale of foreclosed real estate through loan origination		-			316,200
Increase in ESOP put option liability		45,712			82,275
Increase in ESOP put option liability		38,160			76,440

See accompanying notes to these unaudited consolidated financial statements.

OTTAWA SAVINGS BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements

(~~continued~~Continuted)

NOTE 1 – NATURE OF BUSINESS

Ottawa Savings Bancorp, Inc. (the “Company”) is a savings and loan holding company incorporated under the laws of the United States on July 11, 2005, for the purpose of serving as the holding company of Ottawa Savings Bank (the “Bank”), as part of the Bank’s conversion from a mutual to a stock form of organization. The Company is a publicly traded banking company with assets of $~~218~~216.36 million at ~~September~~March 3031, ~~2015~~2016 and is headquartered in Ottawa, Illinois. The Bank’s business is to attract deposits from the general public and use those funds to originate and purchase one-to-four family, multi-family and non-residential real estate, construction, commercial and consumer loans, which the Bank primarily holds for investment. The Bank has continually diversified its products to meet the needs of the communities it serves.

In 2005, the Board of Directors of the Bank unanimously adopted a plan of conversion providing for the conversion of the Bank from an Illinois chartered mutual savings bank to a federally chartered stock savings bank and the purchase of all of the common stock of the Bank by the Company. ~~The depositors of the Bank approved the plan at a meeting held in 2005.~~

~~In adopting the plan, the Board of Directors of the Bank determined that the conversion was advisable and in the best interests of its depositors and the Bank.~~ The conversion was completed in 2005 when the Company issued 1,223,701 shares of common stock to Ottawa Savings Bancorp MHC (a mutual holding company), and 1,001,210 shares of common stock to the public.

On December 31, 2014, the Company acquired Twin Oaks Savings Bank (“Twin Oaks”) and merged Twin Oaks with and into the Bank, with the Bank being the surviving entity in the merger (the “Merger”). ~~Since~~As ~~the~~a ~~Merger~~result ~~occurred~~of at the ~~close of business on December 31~~Merger, ~~2014, there are no operating results of~~ the ~~former~~Company ~~Twin~~increased ~~Oaks~~its ~~included~~market share in the ~~consolidated~~La ~~financial~~Salle ~~statements~~County ~~for~~market ~~2014;~~and ~~however,~~expanded ~~beginning~~into ~~January~~Grundy ~~1, 2015 they are included going forward~~County.

In connection with the Merger, the Company issued 776,144 shares of common stock to Ottawa Savings Bancorp, MHC. As of ~~September~~March 3031, ~~2015~~2016, Ottawa Savings Bancorp MHC holds 1,999,845 shares of common stock, representing 69.1% of the Company’s common shares outstanding.

NOTE 2 – BASIS OF PRESENTATION

The consolidated financial statements presented in this quarterly report include the accounts of the Company and the Bank. The consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and predominant practices followed by the financial services industry, and are unaudited. In the opinion of the Company’s management, all adjustments, consisting of normal recurring adjustments, which the Company considers necessary to fairly state the Company’s financial position and the results of operations and cash flows have been recorded. The interim financial statements should be read in conjunction with the audited financial statements and accompanying notes of the Company for the year ended December 31, ~~2014~~2015. Certain amounts in the accompanying financial statements and footnotes for ~~2014~~2015 have been reclassified with no effect on net income or stockholders’ equity to be consistent with the ~~2015~~2016 classifications. The results of the Company’s operations for any interim period are not necessarily indicative of the results of the Company’s operations for any other interim period or for a full fiscal year.

NOTE 3 – USE OF ESTIMATES

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements. Changes in these estimates and assumptions are considered reasonably possible and may have a material impact on the consolidated financial statements and, thus, actual results could differ from the amounts reported and disclosed herein.

At ~~September~~March 3031, ~~2015~~2016, there were no material changes in the Company’s significant accounting policies from those disclosed in the Form 10-K filed with the Securities and Exchange Commission on March 30, ~~2015~~2016.

NOTE 4 – CRITICAL ACCOUNTING POLICIES

We consider accounting policies involving significant judgments and assumptions by management that have, or could have, a material impact on the carrying value of certain assets or on income to be critical accounting policies. We consider the allowance for loan losses to be our critical accounting policy.

OTTAWA SAVINGS BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements

(~~continued~~Continuted)

Allowance for Loan Losses. ~~Our~~The allowance for loan losses is ~~maintained~~an atamount ~~a level~~ necessary to absorb ~~loan~~known or inherent losses ~~which~~that are both probable and reasonably estimable. ~~Management,~~and inis ~~determining~~established ~~the~~through ~~allowance~~a provision for loan losses, ~~considers~~charged ~~the~~to ~~losses~~earnings. ~~inherent~~Loan inlosses ~~its~~are ~~loan~~charged ~~portfolio~~against ~~and changes in~~ the ~~nature~~allowance ~~and~~when ~~volume~~management ofbelieves ~~loan activities, along with~~ the ~~general~~uncollectability ~~economic and real estate market conditions. We utilize a two-tier approach: (1) identification~~ of ~~impaired loans and establishment of specific loss allowances on such loans; and (2) establishment of general valuation allowances on the remainder of our loan portfolio. We maintain~~ a loan ~~review~~balance ~~system,~~is ~~which allows for a periodic review of our loan portfolio and the early identification of potential impaired loans~~confirmed. ~~Such~~Subsequent ~~system takes into consideration~~recoveries, ~~among~~if ~~other things~~any, ~~delinquency~~are ~~status,~~credited ~~size~~to ~~of loans, type and market value of collateral and financial condition of~~ the ~~borrowers~~allowance. ~~Specific~~The ~~loan~~allowance ~~loss allowances are established~~ for ~~identified~~loan losses ~~based~~is evaluated on a ~~review~~regular ofbasis ~~such~~by ~~information.~~management Aand ~~loan evaluated for impairment~~ is ~~considered to be impaired when,~~ based onupon ~~current~~management’s ~~information~~periodic ~~and~~review ~~events,~~of ~~it is probable that we will be unable to collect all amounts due according to~~ the ~~contractual~~collectability ~~terms~~ of the ~~loan agreement. All~~ loans ~~identified~~in aslight ~~impaired~~of ~~are~~historical ~~evaluated~~experience, ~~independently. We do not aggregate such loans for evaluation purposes. Loan impairment is measured based on~~ the ~~present~~nature ~~value~~and volume of ~~expected future cash flows discounted at~~ the loan’s ~~effective interest rate or~~portfolio, asadverse asituations ~~practical~~that ~~expedient,~~may ataffect ~~the~~each ~~loan~~borrower’s ~~observable~~ability ~~market~~to ~~price~~repay, orestimated ~~the fair~~ value of ~~the~~any underlying collateral ifand ~~the~~prevailing ~~loan~~economic ~~is collateral dependent~~conditions. ~~The~~This ~~interest~~evaluation ~~on these loans~~ is ~~accounted~~inherently ~~for~~subjective onas ~~the~~it ~~cash-basis~~requires orestimates ~~cost-recovery~~that ~~method,~~are ~~until~~susceptible ~~qualifying for return~~ to ~~accrual~~significant ~~status.~~revision ~~Should~~as ~~full~~more ~~collection~~information ofbecomes ~~principal be expected, cash collected on nonaccrual loans can be recognized as interest income~~available.

~~General~~A loan ~~loss~~is ~~allowances~~considered ~~consists~~impaired when, based on current information and events, it is probable that we will be unable to collect the scheduled payments of ~~quantitative~~principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and ~~qualitative~~the ~~factors~~probability of collecting scheduled principal and ~~covers~~interest ~~non-impaired~~payments ~~loans~~when due. ~~The~~Loans ~~quantitative~~that ~~factors~~experience ~~are~~insignificant ~~based~~payment ondelays ~~historical~~and ~~loss~~payment ~~experience~~shortfalls ~~adjusted~~generally ~~for~~are ~~qualitative~~not ~~factors.~~classified ~~The~~as ~~historical~~impaired. ~~loss~~Management ~~experience~~determines isthe ~~determined~~significance byof ~~portfolio~~payment ~~segment~~delays and ispayment ~~based~~shortfalls on a case-by-case basis, taking into consideration all of the ~~actual~~circumstances ~~loss~~surrounding ~~history~~the ~~experienced~~loan byand the ~~Company~~borrower, ~~using~~including the ~~most~~length ~~recent~~of ~~twelve~~the ~~quarters~~delay, ~~with~~the ~~heavier~~reasons ~~weighting~~for ~~given~~the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the ~~most~~principal ~~recent~~and ~~quarters~~interest owed. ~~The~~Impairment ~~weighting~~is ~~applies~~measured ~~40%~~on toa ~~each~~loan by loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the ~~most~~loan’s ~~recent~~effective ~~four~~interest ~~quarters~~rate, ~~and~~the ~~30%~~loan’s toobtainable ~~each~~market price, or the fair value of the ~~next~~collateral ~~eight~~if ~~quarters~~the loan is collateral dependent.

The allowance is increased through provisions charged against current earnings, and offset by recoveries of previously charged-off loans. Loans which are determined to be uncollectible are charged against the allowance. Management uses available information to recognize probable and reasonably estimable loan losses, but future loss provisions may be necessary based on changing economic conditions. The allowance for loan losses as of September 30, 2015 is maintained at a level that represents management’s best estimate of losses inherent in the loan portfolio, and such losses were both probable and reasonably estimable. In addition, the Office of the Comptroller of the Currency, as an integral part of its examination process, periodically reviews our allowance for loan losses.

NOTE 5 – EARNINGS PER SHARE

Basic earnings per share is based on net income divided by the weighted average number of shares outstanding during the period, including allocated and committed-to-be-released Employee Stock Ownership Plan (“ESOP”) shares and vested Management Recognition Plan (“MRP”) shares. Diluted earnings per share show the dilutive effect, if any, of additional common shares issuable under stock options and awards.

	Three Months Ended						Nine Months Ended
	Three Months Ended March 31,
	September 30,						September 30,
	2016			2015
	2015			2014			2015			2014
Net income available to common stockholders	$	258,906		$	143,664
Net income available to common stockholders	$	456,982		$	236,220		$	523,669		$	668,038
Basic potential common shares:
Basic potential common shares:
Weighted average shares outstanding		2,894,123			2,894,123
Weighted average shares outstanding		2,894,123			2,117,979			2,894,123			2,117,979
Weighted average unallocated ESOP shares		(19,912	)		(25,000	)
Weighted average unallocated ESOP shares		(22,461	)		(27,549	)		(23,720	)		(28,808	)
Weighted average unvested MRP shares		(1,047	)		(2,795	)
Weighted average unvested MRP shares		(2,795	)		(4,539	)		(2,795	)		(4,539	)
Basic weighted average shares outstanding		2,873,164			2,866,328
Basic weighted average shares outstanding		2,868,867			2,085,891			2,867,608			2,084,632
Dilutive potential common shares:
Dilutive potential common shares:
Weighted average unrecognized compensation on MRP shares		919			2,338
Weighted average unrecognized compensation on MRP shares		2,409			5,637			2,373			5,643
Weighted average RRP options outstanding		7,752			7,660
Weighted average RRP options outstanding *		9,413			1,203			11,112			-
Dilutive weighted average shares outstanding		2,881,835			2,876,326
Dilutive weighted average shares outstanding		2,880,689			2,092,731			2,881,093			2,090,275
Basic earnings per share	$	0.09		$	0.05
Basic earnings per share	$	0.16		$	0.11		$	0.18		$	0.32
Diluted earnings per share	$	0.09		$	0.05
Diluted earnings per share	$	0.16		$	0.11		$	0.18		$	0.32

* For the nine months ended September 30, 2014, the effect of share options was not included in the calculation of diluted earnings per share because to do so would have been anti-dilutive.

OTTAWA SAVINGS BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements

(continued)

NOTE 6 – EMPLOYEE STOCK OWNERSHIP PLAN

On July 11, 2005, the Company adopted an ESOP for the benefit of substantially all employees. Upon adoption of the ESOP, the ESOP borrowed $763,140 from the Company and used those funds to acquire 76,314 shares of the Company's stock in the initial public offering at a price of $10.00 per share.

Shares purchased by the ESOP with the loan proceeds are held in a suspense account and are allocated to ESOP participants on a pro rata basis as principal and interest payments are made by the ESOP to the Company. The loan is secured by shares purchased with the loan proceeds and will be repaid by the ESOP with funds from the Company’s discretionary contributions to the ESOP and earnings on the ESOP assets. Annual principal and interest payments of approximately $77,000 are to be made by the ESOP.

OTTAWA SAVINGS BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements

(Continuted)

As shares are released from collateral, the Company will report compensation expense equal to the current market price of the shares, and the shares will become outstanding for earnings-per-share (“EPS”) computations. Dividends on allocated ESOP shares reduce retained earnings, and dividends on unallocated ESOP shares reduce accrued interest.

A terminated participant or the beneficiary of a deceased participant who received a distribution of employer stock from the ESOP has the right to require the Company to purchase such shares at their fair market value any time within 60 days of the distribution date. If this right is not exercised, an additional 60 day exercise period is available in the year following the year in which the distribution is made and begins after a new valuation of the stock has been determined and communicated to the participant or beneficiary. At ~~September~~March 3031, ~~2015~~2016, 4638,~~289~~739 shares at a fair value of $10.0090 have been classified as mezzanine capital.

The following table reflects the status of the shares held by the ESOP:

	September 30,			December 31,
	March 31,			December 31,
	2015			2014
	2016			2015
Shares allocated		5457,~~692~~236			5055,~~876~~964
Shares withdrawn from the plan		(818,~~403~~497	)		(818,~~403~~497	)
Unallocated shares		2119,~~622~~078			2520,~~438~~350
Total ESOP shares		6757,~~911~~817			6757,~~911~~817
Fair value of unallocated shares	$	~~216~~207,~~220~~950		$	~~254~~204,~~380~~518

NOTE 7 – INVESTMENT SECURITIES

The amortized cost and fair values of securities, with gross unrealized gains and losses, follows:

Gross

Amortized

Unrealized

Fair

Cost

Gains

Losses

Value

September 30, 2015:

March 31, 2016:

Available for Sale

State and municipal securities

1918,~~000~~582,~~794~~161

~~354~~574,~~476~~479

631,~~365~~487

19,~~291~~155,~~905~~153

Residential mortgage-backed securities

3028,~~996~~979,~~564~~926

~~456~~414,~~851~~918

~~104~~105,~~613~~090

3129,~~348~~289,~~802~~754

4947,~~997~~562,~~358~~087

~~811~~989,~~327~~397

~~167~~106,~~978~~577

5048,~~640~~444,~~707~~907

December 31, 2014:

December 31, 2015:

Available for Sale

State and municipal securities

1918,~~997~~733,~~846~~573

~~261~~525,~~791~~089

3421,~~445~~454

2019,~~225~~237,~~192~~208

Residential mortgage-backed securities

3227,~~239~~532,~~374~~067

~~357~~365,~~715~~558

50149,~~173~~926

3227,~~546~~747,~~916~~699

5246,~~237~~265,~~220~~640

~~619~~890,~~506~~647

84171,~~618~~380

5246,~~772~~984,~~108~~907

The amortized cost and fair value at March 31, 2016, by contractual maturity, are shown below. Maturities may differ from contractual maturities in residential mortgage-backed securities because the mortgages underlying the securities may be called or prepaid without penalties. Therefore, stated maturities of residential mortgage-backed securities are not disclosed.

	Securities Available for Sale
	Amortized		Fair
	Cost		Value

Due in three months or less	$	-	$	-
Due after three months through one year		35,628		36,029
Due after one year through five years		2,086,238		2,148,217
Due after five years through ten years		7,200,706		7,425,262
Due after ten years		9,259,589		9,545,645
Residential mortgage-backed securities		28,979,926		29,289,754
	$	47,562,087	$	48,444,907

OTTAWA SAVINGS BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements

(~~continued~~Continuted)

The ~~amortized~~following ~~cost~~table ~~and~~reflects ~~fair~~securities ~~value~~with atgross ~~September~~unrealized ~~30,~~losses ~~2015,~~for byless ~~contractual~~than ~~maturity,~~12 ~~are~~months ~~shown~~and ~~below.~~for ~~Maturities~~12 ~~may~~months ~~differ from contractual maturities in residential mortgage-backed securities because the mortgages underlying the securities may be called~~ or ~~prepaid~~more ~~without~~at ~~penalties.~~March ~~Therefore~~31, ~~stated~~2016 ~~maturities~~and ofDecember ~~residential~~31, ~~mortgage-backed securities are not disclosed.~~2015:

	Securities Available for Sale
	Less than 12 Months				12 Months or More				Total
	Amortized		Fair
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Cost		Value
	Value		Losses		Value		Losses		Value		Losses
Due in three months or less	$	240,759	$	241,020
March 31, 2016
Due after three months through one year		497,765		505,210
Securities Available for Sale
Due after one year through five years		538,967		557,821
State and municipal securities	$	898,342	$	1,487	$	-	$	-	$	898,342	$	1,487
Due after five years through ten years		6,807,390		6,944,870
Residential mortgage-backed securities		6,637,334		64,876		3,288,403		40,214		9,925,737		105,090
Due after ten years		10,915,914		11,042,984
	$	7,535,676	$	66,363	$	3,288,403	$	40,214	$	10,824,079	$	106,577
Residential mortgage-backed securities		30,996,564		31,348,802
December 31, 2015
	$	49,997,359	$	50,640,707
Securities Available for Sale
State and municipal securities	$	169,601	$	101	$	436,067	$	21,353	$	605,668	$	21,454
Residential mortgage-backed securities		10,468,746		120,218		1,247,527		29,708		11,716,273		149,926
	$	10,638,347	$	120,319	$	1,683,594	$	51,061	$	12,321,941	$	171,380

The following table reflects securities with gross unrealized losses for less than 12 months and for 12 months or more at September 30, 2015 and December 31, 2014:

	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
September 30, 2015
Securities Available for Sale
State and municipal securities	$	2,883,129	$	21,144	$	690,005	$	42,221	$	3,573,134	$	63,365
Residential mortgage-backed securities		7,595,398		70,265		2,497,265		34,348		10,092,663		104,613
	$	10,478,527	$	91,409	$	3,187,270	$	76,569	$	13,665,797	$	167,978
December 31, 2014
Securities Available for Sale
State and municipal securities	$	408,165	$	93	$	701,492	$	34,352	$	1,109,657	$	34,445
Residential mortgage-backed securities		2,449,087		21,546		3,468,577		28,627		5,917,664		50,173
	$	2,857,252	$	21,639	$	4,170,069	$	62,979	$	7,027,321	$	84,618

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability to retain and whether it is not more likely than not the Company will be required to sell its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and industry analysts’ reports.

At ~~September~~March 3031, ~~2015~~2016, 2818 securities had unrealized losses with an aggregate depreciation of 10.2198% from the Company’s amortized cost basis. The Company does not consider these investments to be other than temporarily impaired at ~~September~~March 3031, ~~2015~~2016 due to the following:

●

Decline in value is attributable to interest rates.

●

The value did not decline due to credit quality.

●

The Company does not intend to sell these securities.

●

The Company has adequate liquidity such that it will not more likely than not have to sell these securities before recovery of the amortized cost basis, which may be at maturity.

There were no proceeds of $0.6 million from the sales of securities for the three months ended ~~September~~March 3031, ~~2015~~2016 and proceeds of $3.5.6 million for the three months ended ~~September~~ 30March 31, ~~2014~~2015. The sales during the three months ended ~~September~~March 3031, ~~2014~~2016 resulted in gross realized gains of $~~42,054~~96 and ~~gross~~no realized or losses ~~of $17,234, for a net realized gain of $24,820~~. ~~There~~The ~~were~~sales ~~proceeds~~during ~~of $5.6 million from~~ the ~~sale~~three ~~of securities for the nine~~ months ended ~~September~~March 3031, 2015 ~~and~~resulted ~~proceeds of $3.5 million for the nine months ended September 30, 2014, resulting~~ in gross realized gains of $21,630 and ~~$42,054, respectively, and~~ gross realized losses of $2,039 ~~and $17~~,~~234,~~ ~~respectively,~~ for net realized gains of $19,591 ~~and $24,820, respectively~~. The tax provision applicable to the realized gains amounted to $~~7,605~~38 and $97,~~635~~605, respectively, for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015.

OTTAWA SAVINGS BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements

(~~continued~~Continuted)

NOTE 8 – LOANS AND ALLOWANCE FOR CREDIT LOSSES

The components of loans, net of deferred loan costs (fees), are as follows:

	September 30,			December 31,
	March 31,			December 31,
	2015			2014
	2016			2015
Mortgage loans:
One-to-four family residential loans	$	9899,~~755~~223,~~277~~438		$	9899,~~144~~254,~~990~~737
Multi-family residential loans		34,~~984~~183,~~287~~641			3,~~111~~969,~~650~~207
Total mortgage loans		~~102~~103,~~739~~407,~~564~~079			~~101~~103,~~256~~223,~~640~~944
Other loans:
Non-residential real estate loans		20,~~087~~491,~~027~~126			20,~~928~~177,~~085~~322
Commercial loans		11,~~279~~573,~~688~~233			12,~~242~~069,~~145~~815
Consumer direct		1,~~428~~989,~~380~~695			1,~~724~~651,~~700~~371
Purchased auto		69,~~046~~474,~~640~~141			85,~~664~~211,~~550~~755
Total other loans		3843,~~841~~528,~~735~~195			4339,~~559~~110,~~480~~263
Gross loans		~~141~~146,~~581~~935,~~299~~274			~~144~~142,~~816~~334,~~120~~207
Less: Allowance for loan losses		(2,~~324~~191,~~587~~844	)		(2,~~314~~224,~~607~~006	)
Loans, net	$	~~139~~144,~~256~~743,~~712~~430		$	~~142~~140,~~501~~110,~~513~~201

The following table reflects the carrying amount of loans acquired in the Twin Oaks merger, which are included in the loan categories above as of the dates indicated.

	September 30,			December 31,
	March 31,			December 31,
	2015			2014
	2016			2015
Mortgage loans:
One-to-four family residential loans	$	2120,~~473~~308,~~139~~604		$	2320,~~667~~752,~~808~~355
Multi-family residential loans		~~295~~277,~~822~~231			~~529~~294,~~147~~020
Total mortgage loans		2120,~~768~~585,~~961~~835			2421,~~196~~046,~~955~~375
Other loans:
Non-residential real estate loans		2,~~730~~652,~~212~~108			32,~~141~~685,~~438~~987
Commercial loans		~~940~~829,~~662~~194			1852,~~450,602~~077
Consumer direct		~~602~~415,~~317~~551			1541,~~006,915~~174
Purchased auto		-			-
Total other loans		3,896,853			4,079,238
Total other loans		4,273,191			5,598,955
Gross loans		24,482,688			25,125,613
Gross loans		26,042,152			29,795,910
Less: Allowance for loan losses		(100,000	)		(85,000	)
Less: Allowance for loan losses		(50,000	)		-
Loans, net	$	24,382,688		$	25,040,613
Loans, net	$	25,992,152		$	29,795,910

Purchases of loans receivable, segregated by class of loans, for the periods indicated were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended March 31,
	2015		2014		2015		2014
	2016		2015
Purchased auto loans	$	-5,007,392	$	~~2,509,980~~-	$	-	$	~~4,038,146~~

OTTAWA SAVINGS BANCORP, INC.

Notes to Unaudited Consolidated Financial Statements

(~~continued~~Continuted)

Net (charge-offs) / recoveries, segregated by class of loans, for the periods indicated were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	Three Months Ended March 31,
	2015			2014			2015			2014
	2016			2015
One-to-four family	$	(~~157~~151,~~703~~015	)	$	3948,~~872~~566		$	~~(73,744~~	)	$	~~(197,968~~	)
Multi-family		43,~~472~~972			~~11,547~~(352	)		~~(21,477~~	)		~~19,895~~
Non-residential		~~(18,307~~-	)		~~(181,863~~-	)		~~(18,307~~	)		~~(336,110~~	)
Commercial		-			-			-			-
Consumer direct		~~(11~~1,~~906~~727	)		(2423,~~600~~488	)		~~(55,577~~	)		~~(23,047~~	)
Purchased auto		(206,~~185~~846	)		(2617,~~142~~508	)		~~(40,915~~	)		~~(53,329~~	)
Net (charge-offs)/recoveries	$	(~~203~~152,~~629~~162	)	$	~~(181~~7,~~186~~218	)	$	~~(210,020~~	)	$	~~(590,559~~	)

~~OTTAWA~~The ~~SAVINGS~~following ~~BANCORP~~table presents the activity in the allowance for loan losses by portfolio segment for the three months ended March 31, ~~INC.~~2016 and 2015:

Notes to Unaudited Consolidated Financial Statements

March 31, 2016	One-to-Four Family			Multi-family		Non-residential		Commercial			Consumer Direct		Purchased Auto			Total
Balance at beginning of period	$	1,727,582		$	142,237	$	198,340	$	51,306		$	37,187	$	67,354		$	2,224,006
Provision charged to income		26,052			15,940		7,910		(1,863	)		12,683		59,278			120,000
Loans charged off		(189,894	)		-		-		-			-		(8,680	)		(198,574	)
Recoveries of loans previously charged off		38,879			3,972		-		-			1,727		1,834			46,412
Balance at end of period	$	1,602,619		$	162,149	$	206,250	$	49,443		$	51,597	$	119,786		$	2,191,844

(continued)

March 31, 2015	One-to-Four Family		Multi-family			Non-residential			Commercial		Consumer Direct			Purchased Auto			Total
Balance at beginning of period	$	1,812,448	$	121,918		$	245,098		$	35,947	$	10,804		$	88,392		$	2,314,607
Provision charged to income		95,169		9,714			(16,925	)		8,019		33,626			35,397			165,000
Loans charged off		-		(4,323	)		-			-		(25,025	)		(19,661	)		(49,009	)
Recoveries of loans previously charged off		48,566		3,971			-			-		1,537			2,153			56,227
Balance at end of period	$	1,956,183	$	131,280		$	228,173		$	43,966	$	20,942		$	106,281		$	2,486,825

The following table presents the ~~activity~~recorded investment in ~~the~~loans ~~allowance~~and ~~for~~the ~~loan~~related ~~losses~~allowances allocated by portfolio segment ~~for~~and ~~the~~based ~~three~~on ~~months~~impairment ~~ended~~method ~~September~~as 30of March 31, ~~2015~~2016 and ~~2014~~December 31, 2015:

September 30, 2015	One-to-Four Family			Multi-family		Non-residential			Commercial		Consumer Direct			Purchased Auto			Total
March 31, 2016	One-to-four Family			Multi-family		Non-residential			Commercial		Consumer Direct			Purchased Auto			Total
Balance at beginning of period	$	1,986,275		$	143,970	$	243,010		$	32,650	$	29,199		$	93,112		$	2,528,216
Loans individually evaluated for impairment	$	2,367,914		$	-	$	2,027,946		$	-	$	-		$	-		$	4,395,860
Provision charged to income		(122,360	)		18,729		67,433			12,777		18,628			4,793			-
Loans acquired with deteriorated credit quality		526,435			-		-			-		-			-			526,435
Loans charged off		(158,302	)		-		(18,307	)		-		(13,647	)		(21,772	)		(212,028	)
Loans collectively evaluated for impairment		96,329,089			4,183,641		18,463,180			11,573,233		1,989,695			9,474,141			142,012,979
Recoveries of loans previously charged off		599			4,472		-			-		1,741			1,587			8,399
Ending Balance	$	99,223,438		$	4,183,641	$	20,491,126		$	11,573,233	$	1,989,695		$	9,474,141		$	146,935,274
Balance at end of period	$	1,706,212		$	167,171	$	292,136		$	45,427	$	35,921		$	77,720		$	2,324,587
Period-end amount allocated to:
Loans individually evaluated for impairment	$	86,056		$	-	$	75,135		$	-	$	-		$	-		$	161,191
Loans acquired with deteriorated credit quality		32,685			-		-			-		-			-			32,685
Loans collectively evaluated for impairment		1,483,878			162,149		131,115			49,443		51,597			119,786			1,997,968
Balance at end of period	$	1,602,619		$	162,149	$	206,250		$	49,443	$	51,597		$	119,786		$	2,191,844

September 30, 2014	One-to-Four Family			Multi-family		Non-residential			Commercial		Consumer Direct			Purchased Auto			Total
Balance at beginning of period	$	2,472,553		$	211,585	$	180,350		$	34,334	$	-		$	72,385		$	2,971,207
Provision charged to income		(184,948	)		48,145		265,918			2,714		36,834			56,337			225,000
Loans charged off		(26,809	)		-		(181,863	)		-		(25,000	)		(28,021	)		(261,693	)
Recoveries of loans previously charged off		66,681			11,547		-			-		400			1,879			80,507
Balance at end of period	$	2,327,477		$	271,277	$	264,405		$	37,048	$	12,234		$	102,580		$	3,015,021

The following table presents the activity in the allowance for loan losses by portfolio segment for the nine months ended September 30, 2015 and 2014:

September 30, 2015	One-to-Four Family			Multi-family			Non-residential			Commercial		Consumer Direct			Purchased Auto			Total
Balance at beginning of period	$	1,812,448		$	121,918		$	245,098		$	35,947	$	10,804		$	88,392		$	2,314,607
Provision charged to income		(32,492	)		66,730			65,345			9,480		80,694			30,243			220,000
Loans charged off		(168,359	)		(33,892	)		(18,307	)		-		(60,055	)		(46,062	)		(326,675	)
Recoveries of loans previously charged off		94,615			12,415			-			-		4,478			5,147			116,655
Balance at end of period	$	1,706,212		$	167,171		$	292,136		$	45,427	$	35,921		$	77,720		$	2,324,587

September 30, 2014	One-to-Four Family			Multi-family		Non-residential			Commercial		Consumer Direct			Purchased Auto			Total
Balance at beginning of period	$	2,277,325		$	141,367	$	388,215		$	29,965	$	1,698		$	72,010		$	2,910,580
Provision charged to income		248,120			110,015		212,300			7,083		33,583			83,899			695,000
Loans charged off		(277,812	)		-		(336,110	)		-		(25,947	)		(59,224	)		(699,093	)
Recoveries of loans previously charged off		79,844			19,895		-			-		2,900			5,895			108,534
Balance at end of period	$	2,327,477		$	271,277	$	264,405		$	37,048	$	12,234		$	102,580		$	3,015,021

OTTAWA SAVINGS BANCORP, INC.

December 31, 2015	One-to-four Family		Multi-family		Non-residential		Commercial		Consumer Direct		Purchased Auto		Total
Loans individually evaluated for impairment	$	2,311,855	$	-	$	2,069,922	$	-	$	-	$	3,069	$	4,384,846
Loans acquired with deteriorated credit quality		575,605		-		-		-		-		-		575,605
Loans collectively evaluated for impairment		96,367,277		3,969,207		18,107,400		12,069,815		1,651,371		5,208,686		137,373,756
Ending Balance	$	99,254,737	$	3,969,207	$	20,177,322	$	12,069,815	$	1,651,371	$	5,211,755	$	142,334,207

Period-end amount allocated to:
Loans individually evaluated for impairment	$	295,770	$	-	$	75,086	$	-	$	-	$	-	$	370,856
Loans acquired with deteriorated credit quality		15,828		-		-		-		-		-		15,828
Loans collectively evaluated for impairment		1,415,984		142,237		123,254		51,306		37,187		67,354		1,837,322
Balance at end of period	$	1,727,582	$	142,237	$	198,340	$	51,306	$	37,187	$	67,354	$	2,224,006

Notes to Unaudited Consolidated Financial Statements

(continued)

The following table presents the recorded investment in loans and the related allowances allocated by portfolio segment and based on impairment method as of September 30, 2015 and December 31, 2014:

September 30, 2015	One-to-four Family		Multi-family		Non-residential		Commercial		Consumer Direct		Purchased Auto		Total
Loans individually evaluated for impairment	$	2,206,835	$	-	$	2,111,669	$	-	$	-	$	10,392	$	4,328,896
Loans acquired with deteriorated credit quality		816,153		-		-		-		-		-		816,153
Loans collectively evaluated for impairment		95,732,289		3,984,287		17,975,358		11,279,688		1,428,380		6,036,248		136,436,250
Ending Balance	$	98,755,277	$	3,984,287	$	20,087,027	$	11,279,688	$	1,428,380	$	6,046,640	$	141,581,299
Period-end amount allocated to:
Loans individually evaluated for impairment	$	131,483	$	-	$	107,086	$	-	$	-	$	-	$	238,569
Loans collectively evaluated for impairment		1,574,729		167,171		185,050		45,427		35,921		77,720		2,086,018
Balance at end of period	$	1,706,212	$	167,171	$	292,136	$	45,427	$	35,921	$	77,720	$	2,324,587

December 31, 2014	One-to-four Family		Multi-family		Non-residential		Commercial		Consumer Direct		Purchased Auto		Total
Loans individually evaluated for impairment	$	2,352,445	$	257,399	$	2,007,871	$	-	$	-	$	10,971	$	4,628,686
Loans acquired with deteriorated credit quality		1,292,549		-		31,098		-		-		-		1,323,647
Loans collectively evaluated for impairment		94,499,996		2,854,251		18,889,116		12,242,145		1,724,700		8,653,579		138,863,787
Ending Balance	$	98,144,990	$	3,111,650	$	20,928,085	$	12,242,145	$	1,724,700	$	8,664,550	$	144,816,120
Period-end amount allocated to:
Loans individually evaluated for impairment	$	43,055	$	-	$	-	$	-	$	-	$	-	$	43,055
Loans collectively evaluated for impairment		1,769,393		121,918		245,098		35,947		10,804		88,392		2,271,552
Balance at end of period	$	1,812,448	$	121,918	$	245,098	$	35,947	$	10,804	$	88,392	$	2,314,607

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions.

The following table presents loans individually evaluated for impairment, by class of loans, as of ~~September~~March 3031, ~~2015~~2016 and December 31, ~~2014~~2015:

September 30, 2015

Unpaid Contractual Principal Balance

Recorded Investment With No Allowance

Recorded Investment With Allowance

Total Recorded Investment

Related Allowance

Average Recorded Investment

March 31, 2016

Unpaid Contractual Principal Balance

Recorded Investment With No Allowance

Recorded Investment With Allowance

Total Recorded Investment

Related Allowance

Average Recorded Investment

One-to-four family

3,~~194~~034,~~256~~280

21,~~326~~691,~~376~~312

~~696~~1,~~612~~203,037

32,~~022~~894,~~988~~349

~~131~~118,~~483~~741

3,~~767~~019,~~407~~955

Multi-family

Non-residential

2,~~111~~027,~~669~~946

~~399~~363,~~708~~985

1,~~711~~663,961

2,~~111~~027,~~669~~946

~~107~~75,~~086~~135

21,~~125~~950,~~299~~103

Commercial

~~29,052~~-

Consumer direct

~~4,618~~-

Purchased auto

~~10,392~~-

52,~~773~~046

5,~~316~~062,~~317~~226

2,~~736~~055,~~476~~297

2,~~408~~866,~~573~~998

54,~~145~~922,~~049~~295

~~238~~193,~~569~~876

54,~~932~~972,~~149~~104

December 31, 2014

Unpaid Contractual Principal Balance

Recorded Investment With No Allowance

Recorded Investment With Allowance

Total Recorded Investment

Related Allowance

Average Recorded Investment

December 31, 2015

Unpaid Contractual Principal Balance

Recorded Investment With No Allowance

Recorded Investment With Allowance

Total Recorded Investment

Related Allowance

Average Recorded Investment

One-to-four family

63,~~321~~014,~~593~~703

31,~~364~~902,~~478~~819

~~280~~984,~~516~~641

32,~~644~~887,~~994~~460

43311,~~055~~598

3,~~232~~596,~~026~~800

Multi-family

~~440,669~~-

~~257,399~~-

~~196,499~~-

Non-residential

2,~~220~~069,~~498~~922

2389,~~038,969~~961

-1,679,961

2,~~038~~069,~~969~~922

-75,086

2,~~030~~114,~~582~~684

Commercial

-21,789

Consumer direct

~~3,851~~-

-3,464

Purchased auto

103,~~971~~069

46,~~179~~574

85,~~997~~087,~~582~~694

52,~~671~~295,~~817~~849

~~280~~2,~~516~~664,602

54,~~952~~960,~~333~~451

43386,~~055~~684

5,~~463~~743,~~286~~311

For the three ~~and nine~~ months ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015, the Company recognized no accrued or cash basis interest income on impaired loans.

At ~~September~~March 3031, ~~2015~~2016, there were 3833 impaired loans totaling approximately $54.19 million, compared to 6734 impaired loans totaling approximately $65.0 million at December 31, ~~2014~~2015. The change in impaired loans was a result of writing down and moving 23two impaired loans totaling approximately $1.0.1 million to OREO, the pay-off, or charge-off, or restructure of 20four impaired loans totaling approximately $0.61 million, upgrading and returning ~~four~~one ~~loans~~loan ~~totaling~~of approximately $0.61 million to ~~accruing~~accrual status, and payments of approximately $0.1 million, offset by ~~adding 16 loans totaling approximately $1.6 million to~~ the ~~impaired~~addition ~~loan list and principal advances~~ of ~~approximately~~four ~~$0.2 million. The large decrease in the number of impaired~~ loans ~~(e.g.~~totaling 38 at September 30, 2015, compared to 67 at December 31, 2015), includes 25 loans acquired with deteriorated credit quality that were sold as part of a bulk sale during the third quarter of 2015. In the bulk sale, the Company received approximately $0.74 million ~~for~~to ~~11 impaired loans and~~ the ~~properties transferred to OREO which were previously secured by 14~~ impaired ~~loans.~~loan ~~A gain of $82,000 was recognized on this bulk sale~~list.

Our loan portfolio also includes certain loans that have been modified in a troubled debt restructuring (“TDR”), where economic concessions have been granted to borrowers who have experienced financial difficulties. These concessions typically result from our loss mitigation activities and could include reductions in the interest rate, payment extensions, forbearance or other actions. TDRs are classified as nonperforming at the time of restructuring and typically are returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period of at least six months.

When we modify loans in a TDR, we evaluate any possible impairment similar to other impaired loans based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan agreement, or use the current fair value of the collateral, less estimated selling costs, for collateral dependent loans. If we determine that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance. In periods subsequent to modification, we evaluate all TDRs, including those that have payment defaults, for possible impairment and recognize impairment through the allowance.

Impaired loans at ~~September~~March 3031, ~~2015~~2016 included $2.85 million of loans whose terms have been modified in troubled debt restructurings, compared to $2.6 million at December 31, ~~2014~~2015. The amount of TDR loans included in impaired loans ~~increased~~decreased slightly as a result ofprincipal ~~the~~payments ~~re-default~~and ofas ~~two~~a ~~TDRs~~result ~~(originally~~of ~~restructured~~moving inone ~~2010)~~TDR ~~totaling approximately $0.6 million and principal advances on two TDRs~~ of approximately $0.21 million to ~~pay~~OREO, ~~real~~off-set ~~estate~~by ~~taxes,~~an ~~offset~~increase bydue ~~writing~~to ~~down~~the ~~and~~restructure ~~moving~~of ~~seven~~two ~~TDRs~~impaired loans totaling approximately $0.51 million ~~to OREO, and payments of approximately $62,000~~. The remaining restructured loans are being monitored by management and remain on nonaccrual status as they have not, per accounting guidelines, performed in accordance with their restructured terms for the requisite period of time (generally at least six consecutive months) to be returned to accrual status.

Loans classified as ~~troubled~~TDRs ~~debt restructurings~~ during the three ~~and nine~~ months ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015, segregated by class, are shown in the tables below.

	~~Three Months Ended~~		Three Months Ended							~~Three Months Ended~~		Three Months Ended
	September 30, 2015									September 30, 2014
			March 31, 2016									March 31, 2015
	~~Number of Modifications~~		Number of Modifications	~~Recorded Investment~~		Recorded Investment	~~Increase in Allowance~~		Increase in Allowance	~~Number of Modifications~~		Number of Modifications	~~Recorded Investment~~		Recorded Investment	~~Increase in Allowance~~		Increase in Allowance
	~~(as of period end)~~		(as of period end)							~~(as of period end)~~		(as of period end)
One-to-four family		-		$2	-	$	$82,400	-	$	-	-		$-	-	$	$-	-	$	-
Multi-family		-		-	-		-	-		-	1		-	~~259,190~~		-	~~125,190~~		-
Non-residential		-		-	-		-	-		-	-		-	-		-	-		-
Commercial		-		-	-		-	-		-	-		-	-		-	-		-
Consumer direct		-		-	-		-	-		-	-		-	-		-	-		-
Purchased auto		-		-	-		-	-		-	-		-	-		-	-		-
		-		$	-		$	-			1		$	259,190		$	125,190
				2		$	82,400		$	-			-		$	-		$	-

	Nine Months Ended						Nine Months Ended
	September 30, 2015						September 30, 2014
	Number of Modifications		Recorded Investment		Increase in Allowance		Number of Modifications		Recorded Investment		Increase in Allowance
	(as of period end)						(as of period end)
One-to-four family		-	$	-	$	-		-	$	-	$	-
Multi-family		-		-		-		1		259,190		125,190
Non-residential		-		-		-		-		-		-
Commercial		-		-		-		-		-		-
Consumer direct		-		-		-		-		-		-
Purchased auto		-		-		-		-		-		-
		-	$	-	$	-		1	$	259,190	$	125,190

There were no TDR loans that were restructured during the twelve months prior to March 31, 2016 and 2015 that had payment defaults (i.e., 60 days or more past due following a modification), during the three months ended March 31, 2016 and 2015.

There were no troubled debt restructured loans that were restructured during the twelve months prior to September 30, 2015 and 2014 that had payment defaults (i.e., 60 days or more past due following a modification), during the three months ended September 30, 2015 and 2014. The troubled debt restructured loans that were restructured during the twelve months prior to September 30, 2015 and 2014 that had payment defaults during the nine months ended September 30, 2015 and 2014, segregated by class are shown below.

	Nine Months Ended				Nine Months Ended
	September 30, 2015				September 30, 2014
	Number of Defaults		Recorded Investment		Number of Defaults		Recorded Investment
	(as of period end)				(as of period end)
One-to-four family		-	$	-		1	$	63,751
Multi-family		-		-		-		-
Non-residential		-		-		-		-
Commercial		-		-		-		-
Consumer direct		-		-		-		-
Purchased auto		-		-		-		-
		-	$	-		1	$	63,751

All TDRs are evaluated for possible impairment and any impairment identified is recognized through the allowance. Additionally, the qualitative factors are updated quarterly for trends in economic and nonperforming factors, including collateral securing TDRs.

The following table presents the recorded investment in nonaccrual loans and loans past due over 90 days still on accrual status, by class of loans, as ~~September~~March 3031, ~~2015~~2016 and December 31, ~~2014~~2015:

September 30, 2015	Nonaccrual		Loans Past Due Over 90 Days Still Accruing
March 31, 2016	Nonaccrual		Loans Past Due Over 90 Days Still Accruing
One-to-four family	$	32,~~112~~987,~~883~~761	$	-
Multi-family		-		-
Non-residential		2,~~111~~027,~~669~~946		-
Commercial		-		-
Consumer direct		-		-
Purchased auto		~~10,392~~-		-
	$	5,~~234~~015,~~944~~707	$	-

December 31, 2014	Nonaccrual		Loans Past Due Over 90 Days Still Accruing
December 31, 2015	Nonaccrual		Loans Past Due Over 90 Days Still Accruing
One-to-four family	$	32,~~732~~982,~~833~~386	$	-
Multi-family		~~257,399~~-		-
Non-residential		2,~~038~~069,~~969~~922		-
Commercial		-		-
Consumer direct		-		-
Purchased auto		103,~~971~~069		-
	$	65,~~040~~055,~~172~~377	$	-

~~The following table presents the aging of the recorded investment in loans, by class of loans, as of September 30, 2015 and December 31, 2014:~~17

September 30, 2015	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total Loans
One-to-four family	$	1,919,366	$	1,263,571	$	748,961	$	3,931,898	$	94,823,379	$	98,755,277
Multi-family		-		-		-		-		3,984,287		3,984,287
Non-residential		568,205		113,512		18,127		699,844		19,387,183		20,087,027
Commercial		9,978		-		-		9,978		11,269,710		11,279,688
Consumer direct		6,131		4,128		-		10,259		1,418,121		1,428,380
Purchased auto		3,069		-		10,392		13,461		6,033,179		6,046,640
	$	2,506,749	$	1,381,211	$	777,480	$	4,665,440	$	136,915,859	$	141,581,299

The following table presents the aging of the recorded investment in loans, by class of loans, as of March 31, 2016 and December 31, 2015:

December 31, 2014

Loans 30-59 Days Past Due

Loans 60-89 Days Past Due

Loans 90 or More Days Past Due

Total Past Due Loans

Current Loans

Total Loans

March 31, 2016

Loans 30-59 Days Past Due

Loans 60-89 Days Past Due

Loans 90 or More Days Past Due

Total Past Due Loans

Current Loans

Total Loans

One-to-four family

2908,~~622,762~~111

~~309~~1,~~909~~084,774

1513,~~741,415~~714

42,~~674~~506,~~086~~599

9396,~~470~~716,~~904~~839

9899,~~144~~223,~~990~~438

Multi-family

~~150,418~~-

~~257,399~~-

~~407,817~~-

24,~~703~~183,~~833~~641

34,~~111~~183,~~650~~641

Non-residential

~~526~~267,~~713~~271

~~419,697~~-

~~114,573~~-

1267,~~060,983~~271

1920,~~867~~223,~~102~~855

20,~~928~~491,~~085~~126

Commercial

~~96,525~~-

1211,~~145~~573,~~620~~233

1211,~~242~~573,~~145~~233

Consumer direct

910,~~172~~838

1,~~715~~978,~~528~~857

1,~~724~~989,~~700~~695

Purchased auto

~~10,971~~-

89,~~653~~474,~~579~~141

89,~~664~~474,~~550~~141

31,~~405~~186,~~590~~220

~~729~~1,~~606~~084,774

2513,~~124,358~~714

62,~~259~~784,~~554~~708

~~138~~144,~~556~~150,566

~~144~~146,~~816~~935,~~120~~274

December 31, 2015	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Past Due Loans		Current Loans		Total Loans
One-to-four family	$	1,251,155	$	753,597	$	737,042	$	2,741,794	$	96,512,943	$	99,254,737
Multi-family		31,274		-		-		31,274		3,937,933		3,969,207
Non-residential		847,216		112,739		18,127		978,082		19,199,240		20,177,322
Commercial		9,086		-		-		9,086		12,060,729		12,069,815
Consumer direct		4,814		-		-		4,814		1,646,557		1,651,371
Purchased auto		2,391		-		3,069		5,460		5,206,295		5,211,755
	$	2,145,936	$	866,336	$	758,238	$	3,770,510	$	138,563,697	$	142,334,207

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. For commercial and non-residential real estate loans, the Company’s credit quality indicator is internally assigned risk ratings. Each commercial and non-residential real estate loan is assigned a risk rating upon origination. The risk rating is reviewed annually, at a minimum, and on an as needed basis depending on the specific circumstances of the loan.

For residential real estate loans, multi-family, consumer direct and purchased auto loans, the Company’s credit quality indicator is performance determined by delinquency status. Delinquency status is updated regularly by the Company’s loan system for real estate loans, multi-family and consumer direct loans. The Company receives monthly reports on the delinquency status of the purchased auto loan portfolio from the servicing company. Generally, when residential real estate loans, multi-family and consumer direct loans become over 90 days past due, they are classified as substandard. Periodically, based on subsequent performance over 6-12 months, these loans could be upgraded to special mention.

The Company uses the following definitions for risk ratings:

●

Pass – loans classified as pass are of a higher quality and do not fit any of the other “rated” categories below (e.g., special mention, substandard or doubtful). The likelihood of loss is considered remote.

●

Special Mention – loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

●

Substandard – loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

●

Doubtful – loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

●

Not Rated – loans in this bucket are not evaluated on an individual basis.

~~As of September 30, 2015 and December 31, 2014, the risk category of loans by class is as follows:~~18

September 30, 2015	Pass		Special Mention		Substandard		Doubtful		Not rated
One-to-four family	$	-	$	1,395,046	$	3,022,988	$	-	$	94,337,243
Multi-family		-		-		-		-		3,984,287
Non-residential		17,948,986		26,372		2,111,669		-		-
Commercial		10,743,759		535,929		-		-		-
Consumer direct		-		-		-		-		1,428,380
Purchased auto		-		-		10,392		-		6,036,248
Total	$	28,692,745	$	1,957,347	$	5,145,049	$	-	$	105,786,158

As of March 31, 2016 and December 31, 2015, the risk category of loans by class is as follows:

December 31, 2014	Pass		Special Mention		Substandard		Doubtful		Not rated
March 31, 2016	Pass		Special Mention		Substandard		Doubtful		Not Rated
One-to-four family	$	-	$	1,~~486~~116,~~881~~880	$	32,~~644~~894,~~994~~349	$	-	$	9395,~~013~~212,~~115~~209
Multi-family		-		-		~~257,399~~-		-		24,~~854~~183,~~251~~641
Non-residential		18,~~889~~440,~~116~~434		-22,746		2,~~038~~027,~~969~~946		-		-
Commercial		11,~~646~~573,~~385~~233		~~595,760~~-		-		-		-
Consumer direct		-		-		-		-		1,~~724~~989,~~700~~695
Purchased auto		-		-		~~10,971~~-		-		89,~~653~~474,~~579~~141
Total	$	30,~~535~~013,~~501~~667	$	21,~~082~~139,~~641~~626	$	54,~~952~~922,~~333~~295	$	-	$	~~106~~110,~~245~~859,~~645~~686

At September 30, 2015, the Company held approximately $146,000 of foreclosed residential real estate property. In addition, the Company also held approximately $531,000 in consumer mortgage loans collateralized by residential real estate properties that are in the process of foreclosure.

December 31, 2015	Pass		Special Mention		Substandard		Doubtful		Not Rated
One-to-four family	$	-	$	692,601	$	2,887,460	$	-	$	95,674,676
Multi-family		-		-		-		-		3,969,207
Non-residential		18,083,194		24,206		2,069,922		-		-
Commercial		12,069,815		-		-		-		-
Consumer direct		-		-		-		-		1,651,371
Purchased auto		-		-		3,069		-		5,208,686
Total	$	30,153,009	$	716,807	$	4,960,451	$	-	$	106,503,940

19At March 31, 2016, the Company held approximately $319,000 of foreclosed residential real estate property, compared to approximately $313,000 at December 31, 2015. In addition, the Company also held approximately $290,000 and $234,000, in consumer mortgage loans collateralized by residential real estate properties that were in the process of foreclosure at March 31, 2016 and December 31, 2015, respectively.

NOTE 9 – STOCK COMPENSATION

Total stock-based compensation expense was approximately $143,000 ~~for~~and ~~both~~$5,000 for the ~~nine~~three month periods ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015, respectively. In accordance with FASB ASC 718, Compensation-Stock Compensation, compensation expense is recognized on a straight-line basis over the grantees’ vesting period or to the grantees’ retirement eligibility date, if earlier. During the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015, the Company did not grant additional options or shares under the Management Recognition Plan (MRP).

NOTE 10 – RECENT ACCOUNTING DEVELOPMENTS

In January 2014, the FASB issued ASU No. 2014-04, Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. The update clarifies that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (i) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (ii) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar agreement. In addition, the update requires disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure in accordance with local requirements of the applicable jurisdiction. An entity can elect to adopt the amendments using either a modified retrospective method or a prospective transition method. The Company adopted this guidance effective January 1, 2015. The adoption of this update did not have an impact on the Company’s financial position, results of operation or cash flows.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 implements a common revenue standard that clarifies the principles for recognizing revenue. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 is effective on January 1, 2018 and is not expected to have a significant impact on the Company’s financial statements.

In ~~August~~January ~~2014~~2016, the FASB issued ASU ~~No. 2014~~2016-1401, ~~Classification~~Financial ofInstruments—Overall ~~Certain~~(Subtopic ~~Government~~825-~~Guaranteed~~10): ~~Mortgage~~Recognition ~~Loans~~and ~~upon~~Measurement ~~Foreclosure. The objective~~ of ~~this~~Financial ~~guidance~~Assets isand toFinancial ~~reduce~~Liabilities, ~~diversity~~which inupdates ~~practice~~certain ~~related~~aspects toof ~~how creditors classify government-guaranteed mortgage loans~~recognition, ~~including FHA or VA guaranteed loans~~measurement, ~~upon~~presentation ~~foreclosure.~~and ~~Some~~disclosure ~~creditors~~of ~~reclassify~~financial ~~those loans to real estate consistent with other foreclosed loans that do not have guarantees; others reclassify the loans to other receivables~~instruments. ~~The amendments in~~ ASU ~~2014~~2016-1401 ~~require~~will ~~that a mortgage loan~~ be ~~derecognized~~effective ~~and~~for ~~that a separate other receivable be recognized upon foreclosure if~~ the ~~following~~Company ~~conditions~~on ~~are~~January ~~met: (~~1), 2018. The ~~loan~~Company ~~has~~does ~~a government guarantee that is~~ not ~~separable~~believe ~~from~~ the ~~loan~~adoption ~~before foreclosure; (2) At the time~~ of ~~foreclosure,~~ the ~~creditor~~new ~~has~~financial ~~the~~instruments ~~intent~~standard towill ~~convey~~have ~~the real estate property to the guarantor and make~~ a ~~claim~~material on the guarantee, and the creditor has the ability to recover under that claim; and (3) At the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable should be measured based on the amount of the loan balance (principal and interest) expected to be recovered from the guarantor. The Company adopted this guidance effective January 1, 2015. The adoption of this update did not have an impact on ~~the~~its ~~Company’s~~consolidated financial ~~position, results of operation or cash flows~~statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under the new guidance in this ASU, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee`s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term. Under the new guidance, lessor accounting is largely unchanged. Certain targeted improvements were made to align, where necessary, lessor accounting with the lessee accounting model and Topic 606, Revenue from Contracts with Customers. The new lease guidance also simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. ASU 2016-02 is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is currently evaluating the effect that this standard will have on its consolidated financial statements.

NOTE 11 – FAIR VALUE MEASUREMENT AND DISCLOSURE

FASB ASC Topic 820, Fair Value Measurements and Disclosures, clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants and is not adjusted for transaction costs. This guidance also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement inputs) and the lowest priority to unobservable inputs (Level 3 measurement inputs). The three levels of the fair value hierarchy under FASB ASC 820 are described below:

Basis of Fair Value Measurement:

•

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets.

•

Level 2 - Significant other observable inputs other than Level 1 prices such as quoted prices in markets that are not active, quoted prices for similar assets, or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset.

•

Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

Following is a description of valuation methodologies used for assets and liabilities recorded at fair value:

Securities Available for Sale

Securities classified as available for sale are recorded at fair value on a recurring basis using pricing obtained from an independent pricing service. Where quoted market prices are available in an active market, securities are classified within Level 1. The Company has no securities classified within Level 1. If quoted market prices are not available, the pricing service estimates the fair values by using pricing models or quoted prices of securities with similar characteristics. For these securities, the inputs used by the pricing service to determine fair value consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and bonds’ terms and conditions, among other things resulting in classification within Level 2. Level 2 securities include state and municipal securities, and residential mortgage-backed securities. In cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3. The Company has no securities classified within Level 3.

Foreclosed Assets

Foreclosed assets, consisting of foreclosed real estate and repossessed assets, are adjusted to fair value less estimated costs to sell upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of cost or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the foreclosed asset as non-recurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the foreclosed asset as non-recurring Level 3.

Impaired Loans

Impaired loans are evaluated and adjusted to the lower of carrying value or fair value less estimated costs to sell at the time the loan is identified as impaired. Impaired loans are carried at the lower of cost or fair value. Fair value is measured based on the value of the collateral securing these loans. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the impaired loan as non-recurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the impaired loan as non-recurring Level 3.

The Company did not have any transfers of assets or liabilities between Levels 1 and 2 of the fair value hierarchy during the nine months ended September 30, 2015 and the year ended December 31, 2014. The Company’s policy for determining transfers between levels occurs at the end of the reporting period when circumstances in the underlying valuation criteria change and result in transfers between levels.20

The ~~tables~~Company ~~below~~did ~~present~~not ~~the~~have ~~recorded~~any ~~amount~~transfers of assets ~~measured~~or atliabilities between Levels 1 and 2 of the fair value onhierarchy aduring ~~recurring~~the ~~basis~~three atmonths ~~September~~ended 30March 31, ~~2015~~2016 and the year ended December 31, ~~2014~~2015. The Company’s policy for determining transfers between levels occurs at the end of the reporting period when circumstances in the underlying valuation criteria change and result in transfers between levels.

							Total
September 30, 2015	Level 1		Level 2		Level 3		Fair Value
State and municipal securities available for sale	$	-	$	19,291,905	$	-	$	19,291,905
Residential mortgage-backed securities available for sale		-		31,348,802		-		31,348,802
	$	-	$	50,640,707	$	-	$	50,640,707

The tables below present the recorded amount of assets measured at fair value on a recurring basis at March 31, 2016 and December 31, 2015.

Total

December 31, 2014

Level 1

Level 2

Level 3

Fair Value

March 31, 2016

Level 1

Level 2

Level 3

Fair Value

State and municipal securities available for sale

2019,~~225~~155,~~192~~153

Residential mortgage-backed securities available for sale

3229,~~546~~289,~~916~~754

5248,~~772~~444,~~108~~907

December 31, 2015	Level 1		Level 2		Level 3		Fair Value
State and municipal securities available for sale	$	-	$	19,237,208	$	-	$	19,237,208
Residential mortgage-backed securities available for sale		-		27,747,699		-		27,747,699
	$	-	$	46,984,907	$	-	$	46,984,907

The tables below present the recorded amount of assets measured at fair value on a non-recurring basis at March 31, 2016 and December 31, 2015.

							Total
March 31, 2016	Level 1		Level 2		Level 3		Fair Value
Foreclosed assets	$	-	$	-	$	322,170	$	322,170
Impaired loans, net		-		-		2,673,122		2,673,122

							Total
December 31, 2015	Level 1		Level 2		Level 3		Fair Value
Foreclosed assets	$	-	$	-	$	330,245	$	330,245
Impaired loans, net		-		-		2,277,918		2,277,918

In accordance with accounting pronouncements, the carrying value and estimated fair value of the Company’s financial instruments as of March 31, 2016 and December 31, 2015 are as follows:

			Fair Value Measurements at
	Carrying		March 31, 2016 using:
	Amount		Level 1		Level 2		Level 3		Total
Financial Assets:
Cash and cash equivalents	$	4,160,642	$	4,160,642	$	-	$	-	$	4,160,642
Time deposits		250,000		250,000		-		-		250,000
Federal funds sold		949,000		949,000		-		-		949,000
Securities		49,803,028		-		48,444,907		1,358,121		49,803,028
Accrued interest receivable		801,846		801,846		-		-		801,846
Net loans		144,743,430		-		-		146,509,000		146,509,000
Loans held for sale		100,000		100,000		-		-		100,000
Mortgage servicing rights		288,057		-		-		288,057		288,057
Financial Liabilities:
Non-interest bearing deposits		11,084,694		11,084,694		-		-		11,084,694
Interest bearing deposits		169,090,829		-		-		164,206,306		164,206,306
Accrued interest payable		1,902		1,902		-		-		1,902
FHLB advances		1,138,422		-		1,138,422		-		1,138,422

The tables below present the recorded amount of assets measured at fair value on a non-recurring basis at September 30, 2015 and December 31, 2014.

		Carrying		December 31, 2015 using:
		Amount		Level 1		Level 2		Level 3		Total

Financial Assets:
Cash and cash equivalents	$	7,135,719	$	7,135,719	$	-	$	-	$	7,135,719
Time deposits		250,000		250,000		-		-		250,000
Federal funds sold		1,604,000		1,604,000		-		-		1,604,000
Securities		48,343,028		-		46,984,907		1,358,121		48,343,028
Accrued interest receivable		775,641		775,641		-		-		775,641
Net loans		140,110,201		-		-		141,665,000		141,665,000
Loans held for sale		-		-		-		-		-
Mortgage servicing rights		285,927		-		-		285,927		285,927
Financial Liabilities:
Non-interest bearing deposits		10,325,832		10,325,832		-		-		10,325,832
Interest bearing deposits		166,409,076		-		-		161,173,168		161,173,168
Accrued interest payable		394		394		-		-		394
FHLB advances		2,139,117		-		2,139,117		-		5,483,036

							Total
September 30, 2015	Level 1		Level 2		Level 3		Fair Value
Foreclosed assets	$	-	$	-	$	175,499	$	175,499
Impaired loans, net		-		-		2,170,004		2,170,004

							Total
December 31, 2014	Level 1		Level 2		Level 3		Fair Value
Foreclosed assets	$	-	$	-	$	295,650	$	295,650
Impaired loans, net		-		-		1,561,108		1,561,108

In accordance with accounting pronouncements, the carrying value and estimated fair value of the Company’s financial instruments as of September 30, 2015 and December 31, 2014 are as follows:

			Fair Value Measurements at
	Carrying		September 30, 2015 using:
	Amount		Level 1		Level 2		Level 3		Total
Financial Assets:
Cash and cash equivalents	$	4,403,924	$	4,403,924	$	-	$	-	$	4,403,924
Time deposits		649,000		649,000		-		-		649,000
Federal funds sold		5,668,000		5,668,000		-		-		5,668,000
Securities		51,998,828		-		50,640,707		1,358,121		51,998,828
Net loans		139,256,712		-		-		141,583,000		141,583,000
Loans held for sale		102,000		-		102,000		-		102,000
Accrued interest receivable		824,066		824,066		-		-		824,066
Mortgage servicing rights		279,220		-		-		279,220		279,220
Financial Liabilities:
Non-interest bearing deposits		9,913,540		9,913,540		-		-		9,913,540
Interest bearing deposits		171,847,271		-		-		168,358,460		168,358,460
Accrued interest payable		2,794		2,794		-		-		2,794
FHLB Advances		2,672,003		-		2,672,003		-		2,672,003

			Fair Value Measurements at
	Carrying		December 31, 2014 using:
	Amount		Level 1		Level 2		Level 3		Total
Financial Assets:
Cash and cash equivalents	$	5,193,235	$	5,193,235	$	-	$	-	$	5,193,235
Time deposits		854,861		854,861		-		-		854,861
Federal funds sold		1,662,000		1,662,000		-		-		1,662,000
Securities		54,552,782		-		52,772,108		1,780,674		54,552,782
Net loans		142,501,513		-		-		144,682,000		144,682,000
Accrued interest receivable		881,612		881,612		-		-		881,612
Mortgage servicing rights		271,819		-		-		271,819		271,819
Financial Liabilities:
Non-interest bearing deposits		8,198,356		8,198,356		-		-		8,198,356
Interest bearing deposits		174,034,663		-		-		172,789,644		172,789,644
Accrued interest payable		369		369		-		-		369
FHLB Advances		5,483,036		-		5,483,036		-		5,483,036

The following methods and assumptions were used by the Bank in estimating the fair value of financial instruments:

Cash and ~~Cash~~cash ~~Equivalents~~equivalents: The carrying amounts reported in the balance sheets for cash and cash equivalents approximate fair values.

Time deposits: The carrying amounts reported in the balance sheets for time deposits approximate fair values.

Federal ~~Funds~~funds ~~Sold~~sold: The carrying amounts reported in the balance sheets for federal funds sold approximate fair values.

Securities: The Company obtains fair value measurements of available for sale securities from an independent pricing service. See Note 11 - Fair Value Measurement and Disclosure for further detail on how fair values of securities available for sale are determined. The carrying value of non-marketable equity securities approximates fair value.

Loans: For variable-rate loans that re-price frequently and with no significant change in credit risk, fair values are based on carrying amounts. The fair values for other loans (for example, fixed rate commercial real estate and rental property mortgage loans and commercial and industrial loans) are estimated using discounted cash flow analysis, based on market interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Loan fair value estimates include judgments regarding future expected loss experience and risk characteristics. Fair values for impaired loans are estimated using underlying collateral values, where applicable or discounted cash flows.

Loans held for sale: The carrying amounts reported in the balance sheets for loans held for sale approximate fair values, as usually these loans are originated with the intent to sell and funding of the sales usually occurs within three days.

Accrued ~~Interest~~interest ~~Receivable~~receivable and ~~Payable~~payable: The carrying amounts of accrued interest receivable and payable approximate fair values.

Mortgage ~~Servicing~~servicing ~~Rights~~rights: The carrying amounts of mortgage servicing rights approximate their fair values.

Deposits: The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts). The carrying amounts of variable-rate, fixed-term money market accounts and certificates of deposit approximate their fair values. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies market interest rates currently offered on certificates to a schedule of aggregated expected monthly maturities on time deposits.

FHLB ~~Advances~~advances: The carrying value of FHLB advances is estimated by discounting future cash flows at the currently offered rates for borrowings of similar remaining maturities.

Loan Commitments: Commitments to extend credit were evaluated and fair value was estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counter-parties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The Bank does not charge fees to enter into these agreements. As of September 30, 2015 and December 31, 2014, the fair values of the commitments are immaterial in nature. 22

In Loan ~~addition,~~commitments: ~~other~~Commitments ~~assets~~to extend credit were evaluated and ~~liabilities~~fair ofvalue was estimated using the ~~Bank~~fees ~~that~~currently ~~are~~charged ~~not~~to ~~defined~~enter asinto ~~financial~~similar ~~instruments~~agreements, ~~such~~taking asinto ~~property~~account ~~and~~the ~~equipment~~remaining ~~are~~terms ~~not~~of ~~included~~the inagreements and the ~~above~~present ~~disclosures.~~creditworthiness ~~Also,~~of ~~non~~the counter-~~financial~~parties. ~~instruments~~For ~~typically~~fixed-rate ~~not~~loan ~~recognized~~commitments, infair ~~financial~~value ~~statements~~also ~~nevertheless~~considers ~~may~~the ~~have~~difference ~~value~~between ~~but~~current ~~are~~levels ~~not~~of ~~included~~interest inrates and the ~~above~~committed ~~disclosures~~rates. ~~These~~The ~~include,~~Bank ~~among~~does ~~other~~not ~~items,~~charge ~~the~~fees ~~estimated~~to ~~earnings~~enter ~~power~~into these agreements. As of ~~core~~March ~~deposit~~31, ~~accounts~~2016 and December 31, 2015, the ~~trained~~fair ~~work~~values ~~force,~~of ~~customer~~the ~~goodwill~~commitments ~~and~~are ~~similar~~immaterial ~~items~~in nature.

In addition, other assets and liabilities of the Bank that are not defined as financial instruments, such as property and equipment, are not included in the above disclosures. Also, non-financial instruments typically not recognized in financial statements nevertheless may have value but are not included in the above disclosures. These include, among other items, the estimated earnings power of core deposit accounts, the trained work force, customer goodwill and similar items.

NOTE 12 – ACQUISITION

On December 31, 2014, the Company completed its previously announced ~~the~~ merger ofwith Twin Oaks. ~~into~~Pursuant ~~the Bank pursuant~~ to the terms and conditions of the Agreement and Plan of Merger, dated as of June 30, 2014, Twin Oaks merged with and into the Bank. As part of the transaction, the Company issued 776,144 shares of its common stock to the Ottawa Savings Bancorp, MHC, based on a $9.18 per share stock valuation of the Company’s stock, as determined by an independent appraisal based primarily on the price to book value valuation method and to a lesser extent the price to earnings valuation method, and a market value ~~of $7.125 million~~ determined by an independent appraiser of Twin Oaks of $7.125 million. As a result of the issuance of 776,144 shares in connection with the merger, the Ottawa Savings Bancorp, MHC’s ownership interest in the Company increased from 57.8% to 69.1%.

The Merger was accounted for using the acquisition method of accounting, and accordingly, the assets acquired and liabilities assumed were recognized at fair value on the date the transaction was completed. Under this method of accounting, the Bank and Twin Oaks are treated as one company from the acquisition date forward, and we have recorded the fair value of Twin Oaks’ assets (including intangible assets which arise from either contractual or other legal rights) and liabilities in our consolidated financial statements.

Total merger related costs included in other noninterest expenses in the consolidated statement of operations for the three months ended March 31, 2015 were approximately $243,000. The merger related costs are primarily related to the merger of the core processing systems.

Based on the merger date fair values of the assets acquired and the fair values of the assumed liabilities, the Company recorded goodwill of $649,869, none of which is expected to be tax deductible. The goodwill resulting from the merger primarily consists of the economies of scale expected from combining operations.

Total loans acquired in the merger were recorded at a fair value of $29,795,910 and had a contractual amount due of $31,831,910 as of the acquisition date, which was December 31, 2014. FASB ASC 310-20, Nonrefundable Fees and Other Costs, specifies the approach that needs to be used when the Bank expects to receive all of the contractual principal and interest payments due under an individual loan. Loans not considered to have deteriorated credit quality at the merger date had a contractual balance due of approximately $28,638,000 and an estimated fair value of approximately $28,472,000. The loan discount recorded at the date of the merger consisted of an accretable yield component of approximately $407,000 and an accretable credit component of approximately $(573,000), for a net fair value adjustment of approximately $(166,000).

Loans acquired with deteriorated credit quality and accounted for under FASB ASC Topic 310-30 as of the merger date had a contractual balance due of approximately $3,194,000 and an estimated fair value of approximately $1,324,000. The estimate of the contractual cash flows not expected to be collected due to credit quality was approximately $1,870,000 which consists of an accretable discount of $(362,000) and a non-accretable discount of $(1,508,000).

The ~~Merger~~following ~~was~~table ~~accounted~~reflects activity for ~~using~~ the ~~acquisition~~loans ~~method of accounting, and accordingly, the assets~~ acquired ~~and~~with ~~liabilities~~deteriorated ~~assumed~~credit ~~were~~quality ~~recognized~~for ~~at fair value on~~ the ~~date~~three ~~the~~months ~~transaction~~ended ~~was~~March ~~completed. Under this method of accounting~~31, ~~the~~2016 ~~Bank~~ and Twin Oaks are treated as one company from the acquisition date forward, and we have recorded the fair value of Twin Oaks’ assets (including intangible assets which arise from either contractual or other legal rights) and liabilities in our consolidated financial statements. Since the merger was completed at the close of business on December 31, 2014, there was no effect on the consolidated statement of operations for the year ending December 31, 2014. Beginning January 1, 2015~~, operations of Twin Oaks are included in the Consolidated Statements of Operations.~~:

The following table summarizes the fair value of the acquired assets and liabilities as of December 31, 2014:

	Three Months Ended
	March 31,
	2016			2015
Balance, beginning of year	$	575,605		$	1,323,648
Payment activity		(31,852	)		(38,582	)
Charge-offs		-			(15,959	)
Recoveries		-			-
Transfer to OREO		(44,417	)		-
Accretion to income		27,099			4,344
	$	526,435		$	1,273,451

	2014
Assets
Total cash and cash equivalents	$	2,031,791
Time deposits		854,861
Federal funds sold		440,000
Securities available for sale		23,856,673
Non-marketable equity securities		547,138
Loans		29,795,910
Premises and equipment, net		759,064
Accrued interest receivable		243,972
Deferred tax assets		869,186
Income tax refunds receivable		48,000
Goodwill		649,869
Core deposit intangible		567,000
Other assets		236,745
Total assets acquired	$	60,900,209
Liabilities
Deposits	$	49,610,398
Accrued interest payable		51
FHLB Advances		3,483,036
Other liabilities		681,724
Total liabilities assumed	$	53,775,209
	$	7,125,000

The contractual amount outstanding for the loans acquired with deteriorated credit quality totaled $1,167,000 and $1,208,000 as of March 31, 2016 and December 31, 2015, respectively.

~~Total~~The ~~acquisition~~following ~~related~~table ~~costs~~reflects ~~included~~activity in ~~other noninterest expenses in~~ the ~~consolidated~~accretable ~~statement~~yield ~~of operations~~ for the ~~nine-month~~loans ~~periods~~acquired ~~ended~~with ~~September~~deteriorated ~~30,~~credit ~~2015~~quality ~~and~~for ~~2014~~the ~~were~~three ~~approximately~~months ~~$850,000~~ended ~~and~~March ~~$256~~31,~~000,~~ ~~respectively.~~2016 ~~For 2015, the acquisition related costs are related to the merge of the core processing systems~~ and ~~include a one-time early termination fee paid to Twin Oak’s former processor of $485,000. In 2014, the costs were primarily legal expenses.~~2015:

Based on the acquisition date fair values of the assets acquired and the fair values of the assumed liabilities, the Company recorded goodwill of $649,869, none of which is expected to be tax deductible. The goodwill resulting from the acquisition primarily consists of the economies of scale expected from combining operations.

	Three Months Ended
	March 31,
	2016			2015
Balance, beginning of year	$	175,342		$	362,000
Net reclassification from non-accretable yield		8,868			-
Accretion into interest income		(27,099	)		(4,344	)
Disposals		-			-
	$	157,111		$	357,656

Total loans acquired in the acquisition were recorded at a fair value of $29,795,910 and had a contractual amount due of $31,831,910 as of the acquisition date which was December 31, 2014. FASB ASC 310-20, Nonrefundable Fees and Other Costs, specifies the approach that needs to be used when the Bank expects to receive all of the contractual principal and interest payments due under an individual loan. Loans not considered to have deteriorated credit quality at the acquisition date had a contractual balance due of approximately $28,638,000 and an estimated fair value of approximately $28,472,000. The loan discount recorded at the date of the acquisition consisted of an accretable yield component of approximately $407,000 and an accretable credit component of approximately $(573,000), for a net fair value adjustment of approximately $(166,000).

Loans acquired with deteriorated credit quality and accounted for under FASB ASC Topic 310-30 as of the acquisition date had a contractual balance due of approximately $3,194,000 and an estimated fair value of approximately $1,324,000. The estimate of the contractual cash flows not expected to be collected due to credit quality was approximately $1,870,000 which consists of an accretable discount of $(362,000) and a non-accretable discount of $(1,508,000).

The following table reflects activity for the loans acquired with deteriorated credit quality for the nine months ended September 30, 2015:

Balance, beginning of year	$	1,323,647
Payment activity		(309,967	)
Charge-offs		(19,810	)
Recoveries		-
Transfer to OREO		(266,225	)
Accretion to income		88,508
	$	816,153

The contractual amount outstanding for the loans acquired with deteriorated credit quality totaled $1,500,000 and $3,194,000 as of September 30, 2015 and December 31, 2014, respectively.

The following table reflects activity in the accretable yield for the loans acquired with deteriorated credit quality for the nine months ended September 30, 2015:

Balance, beginning of year	$	362,000
Reclassification to non-accretable difference		(63,260	)
Reclassification from non-accretable difference		67,446
Accretion into interest income		(88,508	)
Disposals		(64,521	)
	$	213,157

Supplemental Pro Forma Results:

The following table includes pro forma unaudited results for the three and nine month periods ended September 30, 2014, as if the acquisition had occurred as of January 1, 2014. The pro forma information is provided for illustrative purposes only and is not indicative of the results of operations or financial condition that would have been achieved if the acquisition would have taken place at the beginning of the periods presented and should not be taken as indicative of the Company’s future consolidated results of operations or financial condition.

	Three Months		Nine Months
	Ended September 30, 2014
	(unauaudited)
	(Dollar amounts in thousands)
Net interest income after provision for loan losses	$	1,384	$	4,073
Total other non-interest income		300		665
Total revenue		2,528		7,328
Net income	$	69	$	197

Net pro forma adjustments of $8,000 and $25,000, respectively were added to net income for the three and nine months ended September 30, 2014 to reflect the net effect of purchase accounting adjustments amortized over the appropriate time frames.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis of the financial condition and results of operations is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the Unaudited Consolidated Financial Statements and footnotes appearing in Part I, Item 1 of this document.

FORWARD-LOOKING INFORMATION

Statements contained in this report that are not historical facts may constitute forward-looking statements (within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended), which involve significant risks and uncertainties. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of invoking these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by the use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” “plan,” or similar expressions. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain and actual results may differ from those predicted. The Company undertakes no obligation to update these forward-looking statements in the future. The Company cautions readers of this report that a number of important factors could cause the Company’s actual results subsequent to ~~September~~March 3031, ~~2015~~2016 to differ materially from those expressed in forward-looking statements. Factors that could cause actual results to differ from those predicted and could affect the future prospects of the Company include, but are not limited to, fluctuations in market rates of interest and loan and deposit pricing, changes in the securities or financial market, a deterioration of general economic conditions either nationally or locally, our ability to realize estimated benefits (including, but not limited to, cost savings, synergies and growth) from acquired or merged entities, our ability to successfully integrate acquired or merged entities with us (including Twin Oaks), legislative or regulatory changes that adversely affect our business, adverse developments or changes in the composition of our loan or investment portfolios, significant increases in competition, changes in real estate values, difficulties in identifying attractive acquisition opportunities or strategic partners to complement our Company’s approach and the products and services the Company offers, the possible dilutive effect of potential acquisitions or expansion, and our ability to raise new capital as needed and the timing, amount and type of such capital raises. The consequence of these factors, many of which could hurt our business, could include, among other things, increased loan delinquencies, an escalation in problem assets and foreclosures, a decline in demand for our products and services, a reduction in the value of certain assets held by us, an inability to meet our liquidity needs and inan inability to engage in certain lines of business. These risks and uncertainties should be considered in evaluating forward-looking statements. Additionally, other risks and uncertainties may be described in the Company’s Annual Report on form 10-K as filed with the Securities and Exchange Commission on March 30, ~~2015~~2016.

GENERAL

The Bank is a community and customer-oriented savings bank. The Bank's business has historically consisted of attracting deposits from the general public and using those funds to originate and purchase one-to-four family, multi-family and non-residential real estate, construction, commercial and consumer loans, which the Bank primarily holds for investment. The Bank has continually diversified its products to meet the needs of the community. The Bank completed its reorganization pursuant to its Plan of Conversion on July 11, 2005, upon which the Bank converted from an Illinois-chartered mutual savings bank to a federally-chartered mutual savings bank, and on that same date, converted from a federally-chartered mutual savings bank to a federally-chartered stock savings bank, all of the outstanding stock of which was issued to the Company. As part of the reorganization, the Company issued 1,001,210 shares to the public and 1,223,701 shares to Ottawa Savings Bancorp MHC, a mutual holding company.

On December 31, 2014, the Company acquired Twin Oaks and merged Twin Oaks with and into the Bank, with the Bank being the surviving entity in the Merger. As the Merger occurred at the close of business on December 31, 2014, there are no operating results of the former Twin Oaks included in the consolidated financial statements for 2014, however, beginning January 1, 2015 they are included going forward. As a result of the Merger, the Company increased its market share in the La Salle County market and expanded into Grundy County. In connection with the Merger, the Company issued 776,144 shares of common stock to Ottawa Savings Bancorp, MHC. As of December 31, 2014, Ottawa Savings Bancorp MHC holds 1,999,845 shares of common stock, representing 69.1% of the Company’s common shares outstanding.

COMPARISON OF FINANCIAL CONDITION AT ~~SEPTEMBER~~MARCH 3031, ~~2015~~2016 AND DECEMBER 31, ~~2014~~2015

The Company's total assets ~~decreased~~increased $3.400 million, or 1.64%, to $~~218~~216.36 million at ~~September~~March 3031, ~~2015~~2016, from $~~221~~213.76 million at December 31, ~~2014~~2015. The ~~decrease~~increase in assets was primarily due to aan ~~decrease~~increase in loans of $34.26 million, aan ~~decrease~~increase in securities available for sale of $2.1.5 million, aand ~~decrease~~an increase in ~~non-marketable~~other ~~equity~~assets ~~securities~~ of $0.46 million, partially offset by a ~~decreases~~decrease in cash and cash equivalents of $03.80 million, and ~~decreases~~a indecrease ~~other assets of $0.4 million, partially offset by an increase~~ in federal funds sold of $4.0.7 million.

Cash and cash equivalents decreased $03.80 million, or 1541.27%, to $4.42 million at ~~September~~March 3031, ~~2015~~2016 from $57.21 million at December 31, ~~2014~~2015, primarily as a result of cash used in ~~financing~~investing activities of $35.26 million exceeding cash provided by operating activities of $0.92 million and ~~investing~~cash provided by financing activities of $12.5 million. InThe ~~addition~~cash toused ain ~~decrease~~investing activities includes the purchase of approximately $5.0 million in ~~deposits~~auto loans, and the net cash ~~used~~provided inby financing activities ~~includes~~included a principal reduction in Federal Home Loan Bank advances of $21.80 million, off-set by increases in deposit accounts of $3.5 million.

Federal funds sold ~~increased~~decreased $4.0.7 million, or ~~241~~40.08%, to $50.79 million at ~~September~~March 3031, ~~2015~~2016 from $1.76 million at December 31, ~~2014~~2015, primarily as a result of cash ~~provided~~used byin ~~operating and~~ investing activities.

Securities available for sale ~~decreased~~increased $2.1.5 million, or 43.01%, to $5048.64 million at ~~September~~March 3031, ~~2015~~2016 from $5247.80 million at December 31, ~~2014~~2015. The ~~decrease~~increase was primarily due to $3.6 million in purchases, offset by sales and maturities of $50.86 million and pay-downs of $51.46 million~~, offset by $9~~.5 ~~million in purchases.~~

26Loans, net of the allowance for loan losses, increased $4.6 million, or 3.3%, to $144.7 million at March 31, 2016 from $140.1 million at December 31, 2015. The increase in loans, net of the allowance for loan losses, was primarily due to an increase in consumer direct and purchased auto loans of $4.6 million, an increase in non-residential real estate loans of $0.3 million, and an increase in multi-family loans of $0.2 million. The increases were partially offset by a decrease in commercial loans of $0.5 million. Additionally, there were normal pay-downs and principal reductions. The Company is focusing its lending efforts on customers based primarily in its local market.

~~Loans,~~Foreclosed ~~net~~real ofestate ~~the~~remained ~~allowance~~consistent ~~for~~at ~~loan losses, decreased~~ $30.~~2 million, or 2.~~3%, ~~to $139.3~~ million at ~~September~~March 3031, ~~2015~~2016 ~~from~~and ~~$142.5 million at~~ December 31, ~~2014~~2015. ~~The~~Changes ~~decrease~~during ~~in loans, net of~~ the ~~allowance~~three ~~for~~months ~~loan~~ended ~~losses~~March 31, ~~was~~2016 ~~primarily~~included ~~due~~an toincrease aas ~~decrease in the purchased auto loan portfolio of $2.6 million,~~ a ~~decrease~~result of ~~commercial~~two ~~loans~~properties ofvalued ~~$1.0~~at ~~million,~~approximately ~~a decrease of~~ $0.31 million inacquired ~~consumer~~through ~~direct~~loan ~~loans~~foreclosures, ~~and a decrease in non-residential real estate loans of $0.8 million. The decreases were partially~~ offset by ana ~~increase~~decrease indue ~~one-~~to ~~four~~the ~~family~~sale ~~mortgage loans~~ of ~~$0.6~~three ~~million~~properties ~~and~~with anproceeds ~~increase in multi-family loans~~ of approximately $0.91 million. ~~Additionally, there were normal pay-downs and principal reductions. The Company is focusing its lending efforts on customers based primarily in its local market.~~

~~Foreclosed~~Total ~~real~~deposits ~~estate~~increased ~~decreased approximately~~ $03.14 million, or 372.10%, to $0180.12 million at ~~September~~March 3031, ~~2015~~2016, from $0176.27 million at December 31, ~~2014~~2015. The ~~decrease~~increase ~~was~~is primarily due to ~~the~~an ~~addition~~increase ofin 20checking ~~properties~~balances ~~valued~~of ~~at approximately~~ $1.08 million, ~~acquired~~or ~~through~~5.6%, ~~loan~~an ~~foreclosures~~increase ~~offset~~in bysavings ~~the~~account ~~sale~~balances of 17$1.8 ~~properties~~million, ~~with~~or ~~proceeds~~7.8%, and an increase in money market balances of $1.23 million, ~~and~~or ~~additional~~4.5%, ~~valuation~~partially ~~adjustments~~offset onby ~~three~~a ~~properties~~decrease in certificates of ~~approximately~~deposit of $0.1.5 million, or 1.5% from December 31, 2015 to March 31, 2016.

Total deposits decreased $0.5 million, or 0.3%, to $181.8 million at September 30, 2015, from $182.2 million at December 31, 2014. The decrease is primarily due to a decrease in certificates of deposit of $8.2 million, or 8.3%, a decrease in savings account balances of $0.4 million, and a decrease in money market balances of $0.3 million, partially offset by an increase in checking balances of $8.4 million, or 27.0% from December 31, 2014 to September 30, 2015. 25

FHLB ~~Advances~~advances decreased $21.80 million, or 5146.38%, to $21.71 million at ~~September~~March 3031, ~~2015~~2016, from $52.51 million at December 31, ~~2014~~2015. The Company made principal payments of $21.80 million and ~~made~~took no new advances during the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016.

~~Equity~~Stockholders’ equity increased $0.63 million, or 21.1% to $3031.30 million at ~~September~~March 3031, ~~2015~~2016, from $2930.7 million at December 31, ~~2014~~2015. The increase in equity is primarily a result of net income for the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016 of approximately $0.525 million, and an increase other comprehensive income and other ~~increases~~changes totaling approximately $0.105 million.

Economic uncertainty continues to affect our asset quality. The market values of homes in our market area ingenerally ~~general~~continue ~~are~~to ~~improving,~~improve ~~but~~from ~~still~~recessionary ~~below~~valuation ~~pre-recession values~~levels. While local economic conditions are improving, they continue to lag national indicators ~~including higher levels of unemployment~~. Higher unemployment locally continues to affect some of our borrowers’ ability to timely repay their obligations to the Company. These conditions have collectively resulted in nonperforming loans totaling 3.6841% of total gross loans receivable as of ~~September~~March 3031, ~~2015~~2016, down from 43.1555% at December 31, ~~2014~~2015.

The Company’s nonperforming assets consist of non-accrual loans, ~~and~~ foreclosed real estate and other repossessed assets. Loans are generally placed on non-accrual status when it is apparent all of the contractual payments (i.e. principal and interest) will not be received; however, they may be placed on non-accrual status sooner if management has significant doubt as to the collection of all amounts due. Interest previously accrued but uncollected is reversed and charged against interest income. During the first ~~nine~~three months of ~~2015~~2016, ~~nonaccrual~~non-performing ~~loans~~assets decreased 130.38% to $5.23 million from $65.04 million as of December 31, ~~2014~~2015. The ~~change~~decrease in non-performing assets was primarily due to the decrease in non-accrual loans ~~was~~as a result of writing down and moving 23two impaired loans totaling approximately $1.0.1 million to OREO, the pay-off, or charge-off, or restructure of 20four impaired loans totaling approximately $0.61 million, upgrading and returning ~~four~~one ~~loans~~loan ~~totaling~~of approximately $0.61 million to ~~accruing~~accrual status, and payments of approximately $0.1 million, offset by the addition of 16 four loans totaling approximately $10.64 million to the impaired loan list ~~and principal advances of approximately $0~~.~~2 million.~~

The following table summarizes nonperforming assets for the prior five quarters.

	September 30,		June 30,		March 31,		December 31,		September 30,
	March 31,		December,		September 30,		June 30,		March 31,
	2015		2015		2015		2014		2014
	2016		2015		2015		2015		2015
Non-accrual:	(In Thousands)
	(In Thousands)
One-to-four family	$	3,113	$	4,082	$	3,880	$	3,733	$	3,041
Non-accrual:
Multi-family		-		-		136		257		441
One-to-four family	$	2,988	$	2,982	$	3,113	$	4,082	$	3,880
Non-residential real estate		2,112		2,106		1,907		2,039		1,726
Multi-family		-		-		-		-		136
Commercial		-		90		-		-		-
Non-residential real estate		2,028		2,070		2,112		2,106		1,907
Consumer direct		10		10		-		-		-
Commercial		-		-		-		90		-
Purchased auto		-		-		-		11		-
Consumer direct		-		-		10		10		-
Total non-accrual loans		5,235		6,288		5,923		6,040		5,208
Purchased auto		-		3		-		-		-
Total non-accrual loans		5,016		5,055		5,235		6,288		5,923
Past due greater than 90 days and still accruing:
One-to-four family		-		-		-		-		-
Non-residential real estate		-		-		-		-		-
Commercial		-		-		-		-		-
Consumer direct		-		-		-		-		-
Total nonperforming loans		5,~~235~~016		65,~~288~~055		5,~~923~~235		6,~~040~~288		5,~~208~~923
Foreclosed real estate		~~146~~319		~~377~~313		~~511~~146		~~233~~377		~~332~~511
Other repossessed assets		293		2717		3629		6327		2536
Total nonperforming assets	$	5,~~410~~338	$	65,~~692~~385	$	65,~~470~~410	$	6,~~336~~692	$	56,~~565~~470

The table below presents selected asset quality ratios for the prior five quarters.

	September 30,			June 30,			March 31,			December 31,			September 30,
	March 31,			December,			September 30,			June 30,			March 31,
	2015			2015			2015			2014			2014
	2016			2015			2015			2015			2015
Allowance for loan losses as a percent of gross loans receivable		1.6449	%		1.7956	%		1.7164	%		1.5979	%		21.6071	%
Allowance for loan losses as a percent of total nonperforming loans		4443.4170	%		4044.2100	%		4144.9941	%		3840.3321	%		5741.8999	%
Nonperforming loans as a percent of gross loans receivable		3.6841	%		43.4555	%		43.0868	%		4.1545	%		4.4908	%
Nonperforming loans as a percent of total assets		2.4032	%		2.9037	%		2.6940	%		2.7290	%		32.2469	%
Nonperforming assets as a percent of total assets		2.4846	%		32.0952	%		2.9448	%		23.8609	%		32.4694	%

~~COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014~~26

~~General.~~COMPARISON ~~Net~~OF ~~income~~RESULTS ~~for~~OF ~~the~~OPERATIONS ~~three~~FOR ~~months~~THE ~~ended~~THREE ~~September~~MONTHS ~~30,~~ENDED ~~2015~~MARCH ~~was $0.5 million compared to net income of $0.2 million for the three months ended September 30~~31, ~~2014.~~2016 ~~Net~~AND ~~income during the third quarter of~~ 2015 was higher than the third quarter of 2014, primarily due to increases in interest and dividend income, a decrease in provision expense, and increases in other income. The increases were partially offset by higher operating costs and income tax expense.

28General. Net income for the three months ended March 31, 2016 was $0.3 million compared to net income of $0.1 million for the three months ended March 31, 2015. Net income during the first quarter of 2016 was higher than the first quarter of 2015, primarily due to a decrease in provision expense, a decrease in other expenses, and increases in other income. The increases were partially offset by a decrease in net interest income and an increase in income tax expense.

Net Interest Income. The following table summarizes interest and dividend income and interest expense for the three months ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015.

	Three Months Ended
	September 30,
	March 31,
	2015		2014		$ change			% change
	2016		2015		$ change			% change
	(Dollars in thousands)
Interest and dividend income:
Interest and fees on loans	$	1,~~670~~723	$	1,~~464~~753	$	~~206~~(30	)		14(1.0771	)%
Securities:
Residential mortgage-backed securities		~~159~~152		~~134~~157		25(5	)		18(3.6618	)
State and municipal securities		~~142~~135		72142		70(7	)		97(4.2293	)
Dividends on non-marketable equity securities		2		1		1			100.00
Interest-bearing deposits		47		-5		42			~~100~~40.00
Total interest and dividend income		12,~~977~~019		12,~~671~~058		~~306~~(39	)		18(1.3190	)
Interest expense:
Deposits		~~215~~202		~~234~~224		(1922	)		(89.1282	)
Borrowings		165		-16		16(11	)		~~100~~(68.0075	)
Total interest expense		~~231~~207		~~234~~240		(333	)		(113.2875	)
Net interest income	$	1,~~746~~812	$	1,~~437~~818	$	~~309~~(6	)		21(0.5033	)%

The following table presents for the periods indicated the total dollar amount of interest income from average interest- earning assets and the resultant yields, as well as the interest expense on average interest bearing liabilities, expressed both in dollars and rates. No tax equivalent adjustments were made. All average balances are monthly average balances. Non-accruing loans have been included in the table as loans carrying a zero yield. The amortization of loan fees is included in computing interest income; however, such fees are not material.

	Three Months Ended September 30,
	Three Months Ended March 31,
	2015							2014
	2016							2015
					AVERAGE							AVERAGE
	AVERAGE				YIELD/			AVERAGE				YIELD/
	BALANCE		INTEREST		COST			BALANCE		INTEREST		COST
	(Dollars in thousands)
Interest-earning assets
Loans receivable, net (1)	$	~~138~~140,570	$	1,~~670~~723		4.8290	%	$	~~111~~145,~~687~~801	$	1,~~464~~753		54.2481	%
Securities, net (2)		5047,~~630~~332		~~301~~287		2.3843	%		3248,~~902~~592		~~206~~299		2.5046	%
Non-marketable equity securities		1,358		2		0.59	%		1,~~234~~781		1		0.3222	%
Interest-bearing deposits		86,~~905~~360		47		0.1844	%		28,~~382~~182		-5		0.0024	%
Total interest-earning assets		~~199~~195,~~463~~620		12,~~977~~019		34.9613	%		~~148~~204,~~205~~356		12,~~671~~058		4.5103	%
Interest-bearing liabilities
Money Market accounts	$	2930,~~562~~775	$	1516		0.2021	%	$	1927,~~021~~590	$	1114		0.2320	%
Passbook accounts		22,725		4		0.07	%		17,713		3		0.07	%
Savings accounts		23,895		4		0.07	%		22,831		4		0.07	%
Certificates of Deposit accounts		9186,~~908~~692		~~193~~179		0.8483	%		8196,~~353~~182		~~218~~203		10.0784	%
Checking accounts		2826,~~963~~705		3		0.04	%		1424,~~493~~537		23		0.0605	%
Advances and borrowed funds		21,~~672~~137		165		21.4076	%		~~667~~2,683		-16		02.0039	%
Total interest-bearing liabilities		~~175~~169,~~830~~204		~~231~~207		0.5349	%		~~133~~173,~~247~~823		~~234~~240		0.7055	%
NET INTEREST INCOME			$	1,~~746~~812						$	1,~~437~~818
NET INTEREST RATE SPREAD (3)						3.4364	%						3.8148	%
NET INTEREST MARGIN (4)						3.5071	%						3.8856	%
RATIO OF AVERAGE INTEREST-EARNING ASSETS TO AVERAGE INTEREST-BEARING LIABILITIES						~~113~~115.4461	%						~~111~~117.2357	%

(1)	Amount is net of deferred loan origination (costs) fees, undisbursed loan funds, unamortized discounts and allowance for loan losses and includes non-performing loans.
(2)	Includes unamortized discounts and premiums.
(3)	Net interest rate spread represents the difference between the yield on average interest-earning assets and the average cost of interest-bearing liabilities.
(4)	Net interest margin represents net interest income divided by average interest-earning assets.

(1) Amount is net of deferred loan origination (costs) fees, undisbursed loan funds, unamortized discounts and allowance for loan losses and includes non-performing loans.

29(2) Includes unamortized discounts and premiums.

~~The~~(3) ~~following~~Net ~~table summarizes the changes in net~~ interest ~~income due to~~ rate ~~and~~spread ~~volume~~represents ~~for~~ the ~~three~~difference ~~months~~between ~~ended September 30, 2015 and 2014. The column “Net” is segmented into~~ the ~~changes~~yield ~~attributable~~on toaverage ~~variations~~interest-earning inassets ~~volume~~ and the ~~changes~~average ~~attributable~~cost toof ~~changes in~~ interest-bearing ~~rates~~liabilities. ~~The variations attributable to simultaneous volume and rate changes have been proportionately allocated to rate and volume.~~

	Three Months Ended September 30,
	2015 Compared to 2014
	Increase (Decrease) Due to
	VOLUME		RATE			NET
	(Dollars in Thousands)
Interest and dividends earned on
Loans receivable, net	$	323	$	(117	)	$	206
Securities, net		105		(10	)		95
Non-marketable equity securities		-		1			1
Interest-bearing deposits		3		1			4
Total interest-earning assets	$	431	$	(125	)	$	306
Interest expense on
Money Market accounts	$	5	$	(1	)	$	4
Passbook accounts		1		-			1
Certificates of Deposit accounts		22		(47	)		(25	)
Checking		2		(1	)		1
Advances and borrowed funds		12		4			16
Total interest-bearing liabilities		42		(45	)		(3	)
Change in net interest income	$	389	$	(80	)	$	309

(4) Net interest margin represents net interest income divided by average interest-earning assets.

Net interest income increased $309,000, or 21.5%, to $1.7 million for the three months ended September 30, 2015 compared to $1.4 million for the three months ended September 30, 2014. Interest and dividend income increased $306,000 due to the increase in average interest earning assets of $51.3 million, offset by the yield decreasing on interest earning assets from 4.51% to 3.96%. The increase in earning assets is primarily attributable to the Merger with Twin Oaks. The yield on the loan portfolio declined slightly as the low rate environment continued during the third quarter of 2015. In addition, loans increased $26.9 million primarily as a result of loans added to the Bank’s portfolio in connection with the Merger. The increase in net interest income also included a $3,000, or 1.3%, decrease in interest expense. The cost of funds declined 17 basis points, or 24.3%, for the three months ended September 30, 2015 compared to the three months ended September 30, 2014, due to the continued low rate environment. Additionally, the average balance of interest bearing liabilities increased by $42.6 million, or 32.0%. Net interest margin decreased during the three months ended September 30, 2015 to 3.50% compared to 3.88% at September 30, 2014.28

~~Provision~~The ~~for~~following ~~Loan~~table ~~Losses.~~summarizes ~~Management~~the ~~recorded~~changes ain ~~loan~~net ~~loss~~interest ~~provision~~income ofdue $0to rate and ~~$225,000~~volume for the three months ~~periods~~ ended ~~September~~March 3031, ~~2015~~2016 and ~~2014, respectively~~2015. The ~~provision~~column ~~level~~“Net” is ~~primarily~~segmented ~~attributed~~into to the ~~improvement~~changes inattributable ~~the historical loss levels experienced in the third quarter, which re-allocated the provision from one-~~to~~-four~~ ~~family~~variations ~~to multi-family, non-residential, commercial and consumer without requiring additional provision. The economic conditions~~ in ~~the~~volume ~~local market continue to negatively impact collateral values of real estate~~ and the ~~ability~~changes ofattributable ~~borrowers~~ to ~~keep~~changes ~~current~~in ~~per~~interest ~~terms of their obligations~~rates. The ~~slow~~variations ~~payment~~attributable ~~activity and continued slow recovery of property values are the result of local economic conditions that are improving, but continue~~ to ~~lag~~simultaneous ~~national~~volume ~~indicators, including higher levels of unemployment locally of 6.2%, versus 5.6% for the State of Illinois~~ and ~~the~~rate ~~national~~changes ~~level~~have ofbeen ~~5.1%.~~proportionately ~~Based~~allocated onto arate review of the loans that were in the loan portfolio at September 30, 2015, management believes that the allowance is maintained at a level that represents its best estimate of inherent losses in the loan portfolio that were both probable and ~~reasonably estimable~~volume.

	Three Months Ended March 31,
	2016 Compared to 2015
	Increase (Decrease) Due to
	VOLUME			RATE			NET
	(Dollars in Thousands)
Interest and dividends earned on
Loans receivable, net	$	(64	)	$	34		$	(30	)
Securities, net		(8	)		(4	)		(12	)
Non-marketable equity securities		(1	)		2			1
Interest-bearing deposits		(2	)		4			2
Total interest-earning assets	$	(75	)	$	36		$	(39	)
Interest expense on
Money Market accounts	$	2		$	-		$	2
Passbook accounts		-			-			-
Certificates of Deposit accounts		(20	)		(4	)		(24	)
Checking		-			-			-
Advances and borrowed funds		(7	)		(4	)		(11	)
Total interest-bearing liabilities		(25	)		(8	)		(33	)
Change in net interest income	$	(50	)	$	44		$	(6	)

Net interest income decreased $6,000, or 0.3%, remaining at $1.8 million for the three months ended March 31, 2016 compared to $1.8 million for the three months ended March 31, 2015. Interest and dividend income decreased $39,000 due to the decrease in average interest earning assets of $8.7 million, offset by the yield increasing on interest earning assets from 4.03% to 4.13% due to changes in the mix of the portfolio. The decrease in net interest income also included a $33,000, or 13.8%, decrease in interest expense. The cost of funds declined six basis points, from 0.55% to 0.49%, or 10.9%, for the three months ended March 31, 2016 compared to the three months ended March 31, 2015, due to the mix of lower costing deposit products and certificate of deposit (CD) mix. Additionally, the average balance of interest bearing liabilities decreased by $4.6 million, or 2.7%. Net interest margin increased 0.15% during the three months ended March 31, 2016 to 3.71% compared to 3.56% at March 31, 2015.

Provision for Loan Losses. Management recorded a loan loss provision of $120,000 and $165,000 for the three month periods ended March 31, 2016 and 2015, respectively. The provision level is primarily attributed to the improvement in the historical loss levels experienced as compared to the first quarter of 2015, which lowered most categories in the general reserve. The increase in purchased auto loans during the first quarter of 2016 off-set the decrease slightly. Additionally, specific reserves were higher at March 31, 2016 when compared to March 31, 2015, which also off-set the decrease slightly. The economic conditions in the local market continue to negatively impact collateral values of real estate and the ability of borrowers to keep current per terms of their obligations. The slow payment activity and continued slow recovery of property values are the result of local economic conditions that are improving, but continue to lag national indicators, including higher levels of unemployment locally of 9.6%, versus 6.4% for the State of Illinois and the national level of 5.0%. Based on a review of the loans that were in the loan portfolio at March 31, 2016, management believes that the allowance is maintained at a level that represents its best estimate of inherent losses in the loan portfolio that were both probable and reasonably estimable.

Management uses available information to establish the appropriate level of the allowance for loan losses. Future additions or reductions to the allowance may be necessary based on estimates that are susceptible to change as a result of changes in economic conditions and other factors. As a result, our allowance for loan losses may not be sufficient to cover actual loan losses, and future provisions for loan losses could materially adversely affect the Company’s operating results. In addition, various 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 recognize adjustments to the allowance based on their judgments about information available to them at the time of their examination.

3029

Other Income. The following table summarizes other income for the three months ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015.

	Three months ended
	September 30,
	March 31,
	2015			2014			$ change			% change
	2016			2015			$ change			% change
	(Dollars in thousands)
Other income:
Gain on sale of securities	$	-		$	4222		$	(4222	)		(100.00	)%
Gain on sale of loans		5839			1839			40-			~~222.22~~-
Gain on sale of OREO		~~169~~65			615			~~108~~60			~~177~~1,200.0500
Gain on sale of repossessed assets		71			4-			31			75100.00
Origination of mortgage servicing rights, net of amortization		(3	)		1			(4	)		(400.00	)
Loan origination and servicing income		59			47			12			25.53
Customer service fees		123			80			43			53.75
Origination of mortgage servicing rights, net of amortization		2			(1	)		3			300.00
Income on bank owned life insurance		11			13			(2	)		(15.38	)
Customer service fees		98			95			3			3.16
Other		27			29			(2	)		(6.90	)
Income on bank owned life insurance		12			12			-			-
Total other income	$	392		$	248		$	144			58.06	%
Other		25			27			(2	)		(7.41	)
Total other income	$	301		$	246		$	55			22.36	%

The increase in total other income was primarily due to increases onin ~~gain~~gains on ~~sale~~sales of ~~loans,~~OREO ~~increases~~properties inand ~~customer~~increased ~~service~~loan ~~fees,~~origination and ~~gains~~servicing income, offset by a decrease in gain on ~~sales~~sale of ~~OREO properties~~securities. The increase in ~~gain~~loan onorigination ~~sale~~and ofservicing ~~loans~~income is primarily a result of an increase in loans ~~originated for sale~~originations. The increase in gains on sales of OREO properties is primarily due to ~~gains~~the recognition of approximately $7252,000 in deferred gains on the sale of 14three properties ~~previously~~sold ~~securing impaired loans to one borrower. The increase~~ in ~~customer~~prior ~~service fees is primarily due to the increase in deposits related to the Merger with Twin Oaks at December 31, 2014~~years.

Other Expenses. The following table summarizes other expenses for the three months ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015.

	Three months ended
	September 30,
	March 31,
	2015			2014			$ change			% change
	2016			2015			$ change			% change
	(Dollars in thousands)
Other expenses:
Salaries and employee benefits	$	~~740~~828		$	~~477~~711		$	~~263~~117			5516.1446	%
Directors fees		3841			2538			133			527.0089
Occupancy		~~168~~152			~~125~~154			43(2	)		34(1.4030	)
Deposit insurance premium		4644			3545			11(1	)		31(2.4322	)
Legal and professional services		8287			~~184~~104			(~~102~~17	)		(5516.4335	)
Data processing		~~124~~135			81375			43(240	)		53(64.0900	)
Loss on sale of securities		-			172			(172	)		(100.00	)
Valuation adjustments and expenses on foreclosed real estate		45			14			31			221.43
Loan expense		59			60			(1	)		(1.67	)
Other		227			165			62			37.58
Valuation adjustments and expenses on foreclosed real estate		36			20			16			80.00
Total other expenses	$	1,470		$	1,123		$	347			30.90	%
Loss on sale of repossessed assets		-			10			(10	)		(100.00	)
Efficiency ratio (1)		68.76	%		66.65	%
Other		238			221			17			7.69
Total other expenses	$	1,620		$	1,740		$	(120	)		(6.90	)%
Efficiency ratio (1)		76.67	%		84.30	%

(1) Computed as other expenses divided by the sum of net interest income and other income.

The ~~increase~~decrease in other expenses was primarily due to ~~the~~a ~~Merger~~decrease ~~with~~in ~~Twin~~data ~~Oaks~~processing asexpenses, ofoffset ~~December~~by ~~31,~~increases ~~2014~~in assalaries ~~there~~and ~~are~~employee ~~now~~benefits. ~~three~~Data ~~branch~~processing ~~locations~~expenses towere ~~support~~lower ~~rather~~during ~~than~~ the ~~one~~first ~~facility~~quarter ~~that~~of ~~existed~~2016 as ofcompared ~~September~~to 302015, ~~2014.~~because ~~The~~during ~~increase~~2015 ~~also~~we ~~includes~~were ~~increases~~still insupporting ~~salaries~~two ~~and~~core ~~employee~~processing ~~benefits,~~systems ~~resulting from additional staff~~ and ~~directors~~were inincurring ~~connection~~additional ~~with~~costs ~~the~~related ~~Merger~~to ~~and~~merging in the ~~lending~~two ~~area, as well as annual merit increases~~systems. The increase ~~was~~in ~~partially~~salaries ~~offset~~and byemployee abenefits ~~decrease~~was indue ~~legal~~to ~~and~~the ~~professional~~addition ~~services,~~of ~~which~~new ~~were~~employees ~~higher~~and inannual ~~2014~~merit ~~due to the Merger~~increases. The efficiency ratio ~~increased~~decreased due to ~~increased~~decreased other expenses for the current period primarily ~~related~~due to the ~~Merger~~absence of merger related expenses.

~~Income Taxes. The Company recorded an income tax expense of $211,000 and $101,000 for the three months ended September~~ 30, 2015 and 2014, respectively. The difference in effective tax rates between the periods is primarily a result of higher levels of tax exempt income during 2015. For the three months ended September 30, 2015 the Company had approximately $146,000 in tax exempt income, compared to approximately $78,000 for the three months ended September 30, 2014.

Income Taxes. The Company recorded income tax expense of $115,000 and $16,000 for the three months ended March 31, 2016 and 2015, respectively. For the three months ended March 31, 2016, the Company had approximately $128,000 in tax exempt income, compared to approximately $135,000 in tax exempt income for the three months ended March 31, 2015. The ratio of tax exempt income to pre-tax income caused the change in tax expense recorded at March 31, 2016, compared to March 31, 2015.

The Company’s income tax differed from the maximum statutory federal rate of 35% for the three months ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015, as follows:

	Three Months Ended
	September 30,
	March 31,
	2015			2014
	2016			2015
Expected income taxes	$	~~233~~130,~~641~~872		$	~~118~~56,~~176~~003
Income tax effect of:
State taxes, net of federal tax benefit		3319,~~319~~526			9,~~675~~625
Tax exempt interest		(4744,~~076~~862	)		(2247,~~907~~108	)
Income taxed at lower rates		(63,~~676~~739	)		(31,~~377~~600	)
Other		(213,~~644~~218	)		(~~141~~576	)
	$	~~210~~115,~~564~~015		$	~~101~~16,~~426~~344

COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 AND 2014

General. Net income for the nine months ended September 30, 2015 was $0.5 million compared to net income of $0.7 million for the nine months ended September 30, 2014. Net income during the first nine months of 2015 was lower than the first nine months of 2014, primarily due to one-time conversion and de-conversion costs charged by the Bank’s core processor to migrate and convert the Twin Oak’s accounts to our systems, and costs charged by Twin Oak’s core processor to work with the Bank’s processor and conversion teams to migrate and convert accounts. Additionally, the bank paid approximately $0.5 million in early termination fees to Twin Oak’s former processor.

Net Interest Income. The following table summarizes interest and dividend income and interest expense for the nine months ended September 30, 2015 and 2014.

	Nine Months Ended
	September 30,
	2015		2014		$ change			% change
	(Dollars in thousands)
Interest and dividend income:
Interest and fees on loans	$	5,127	$	4,311	$	816			18.93	%
Securities:
Residential mortgage-backed securities		473		415		58			13.98
State and municipal securities		425		215		210			97.67
Dividends on non-marketable equity securities		5		3		2			66.67
Interest-bearing deposits		11		2		9			450.00
Total interest and dividend income		6,041		4,946		1,095			22.14
Interest expense:
Deposits		658		741		(83	)		(11.20	)
Borrowings		47		-		47			100.00
Total interest expense		705		741		(36	)		(4.86	)
Net interest income	$	5,336	$	4,205	$	1,131			26.90	%

The following table presents for the periods indicated the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest bearing liabilities, expressed both in dollars and rates. No tax equivalent adjustments were made. All average balances are monthly average balances. Non-accruing loans have been included in the table as loans carrying a zero yield. The amortization of loan fees is included in computing interest income; however, such fees are not material.

	Nine Months Ended September 30,
	2015							2014
					AVERAGE							AVERAGE
	AVERAGE				YIELD/			AVERAGE				YIELD/
	BALANCE		INTEREST		COST			BALANCE		INTEREST		COST
	(Dollars in thousands)
Interest-earning assets
Loans receivable, net (1)	$	139,382	$	5,127		4.90	%	$	110,617	$	4,311		5.20	%
Securities, net (2)		49,949		898		2.40	%		34,942		630		2.40	%
Non-marketable equity securities		1,546		5		0.43	%		1,234		3		0.32	%
Interest-bearing deposits		8,084		11		0.18	%		4,956		2		0.05	%
Total interest-earning assets		198,961		6,041		4.05	%		151,749		4,946		4.35	%
Interest-bearing liabilities
Money Market accounts	$	29,008	$	45		0.21	%	$	20,155	$	36		0.24	%
Passbook accounts		22,841		12		0.07	%		18,192		10		0.07	%
Certificates of Deposit accounts		94,000		592		0.84	%		83,116		690		1.11	%
Checking accounts		25,807		9		0.05	%		15,097		5		0.04	%
Advances and borrowed funds		2,677		47		2.34	%		222		-		0.00	%
Total interest-bearing liabilities		174,333		705		0.54	%		136,782		741		0.72	%
NET INTEREST INCOME			$	5,336						$	4,205
NET INTEREST RATE SPREAD (3)						3.51	%						3.62	%
NET INTEREST MARGIN (4)						3.58	%						3.69	%
RATIO OF AVERAGE INTEREST-EARNING ASSETS TO AVERAGE INTEREST-BEARING LIABILITIES						114.13	%						110.94	%

(1)	Amount is net of deferred loan origination (costs) fees, undisbursed loan funds, unamortized discounts and allowance for loan losses and includes non-performing loans.
(2)	Includes unamortized discounts and premiums.
(3)	Net interest rate spread represents the difference between the yield on average interest-earning assets and the average cost of interest-bearing liabilities.
(4)	Net interest margin represents net interest income divided by average interest-earning assets.

The following table summarizes the changes in net interest income due to rate and volume for the nine months ended September 30, 2015 and 2014. The column “Net” is segmented into the changes attributable to variations in volume and the changes attributable to changes in interest rates. The variations attributable to simultaneous volume and rate changes have been proportionately allocated to rate and volume.

	Nine Months Ended September 30,
	2015 Compared to 2014
	Increase (Decrease) Due to
	VOLUME		RATE			NET
	(Dollars in Thousands)
Interest and dividends earned on
Loans receivable, net	$	1,061	$	(245	)	$	816
Securities, net		269		(1	)		268
Non-marketable equity securities		1		1			2
Interest-bearing deposits		4		5			9
Total interest-earning assets	$	1,335	$	(240	)	$	1,095
Interest expense on
Money Market accounts	$	14	$	(5	)	$	9
Passbook accounts		2		-			2
Certificates of Deposit accounts		69		(167	)		(98	)
Checking		3		1			4
Advances and borrowed funds		43		4			47
Total interest-bearing liabilities		131		(167	)		(36	)
Change in net interest income	$	1,204	$	(73	)	$	1,131

Net interest income increased $1.1 million, or 26.9%, to $5.3 million for the nine months ended September 30, 2015 compared to $4.2 million for the nine months ended September 30, 2014. Interest and dividend income increased $1.1 million due to the increase in average interest earning assets of $47.2 million, offset by the yield decreasing on loans from 5.20% to 4.90%. The increase in earning assets is primarily attributable to the Merger with Twin Oaks. The yield on the loan portfolio declined as the low rate environment continued during the third quarter of 2015. In addition, loans increased $28.8 million as a result of loans added to the Bank’s portfolio in connection with the Merger. The increase in net interest income also included a $36,000, or 4.9%, decrease in interest expense. The cost of funds declined 18 basis points, or 25.0%, for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014, due to the continued low rate environment. Additionally, the average balance of interest bearing liabilities increased by $37.6 million, or 27.5%, primarily due to the Merger. Net interest margin decreased during the nine months ended September 30, 2015 to 3.58% compared to 3.69% at September 30, 2014.

Provision for Loan Losses. Management recorded a loan loss provision of $220,000 and $695,000 for the nine months periods ended September 30, 2015 and 2014, respectively. The provision is primarily attributed to the reserves required for the multi-family, non-residential, consumer direct, and purchased auto segments as the economic conditions in the local market continue to negatively impact collateral values of real estate and the ability of borrowers to keep current per terms of their obligations. The slow payment activity and continued slow recovery of property values are the result of local economic conditions that are improving, but continue to lag national indicators, including higher levels of unemployment locally of 6.2%, versus 5.6% for the State of Illinois and the national level of 5.1%. Based on a review of the loans that were in the loan portfolio at September 30, 2015, management believes that the allowance is maintained at a level that represents its best estimate of inherent losses in the loan portfolio that were both probable and reasonably estimable.

Other Income. The following table summarizes other income for the nine months ended September 30, 2015 and 2014.

	Nine months ended
	September 30,
	2015		2014			$ change			% change
	(Dollars in thousands)
Other income:
Gain on sale of securities	$	22	$	42		$	(20	)		(47.62	)%
Gain on sale of loans		148		25			123			492.00
Gain on sale of OREO		216		82			134			163.41
Gain on sale of repossessed assets		10		8			2			25.00
Origination of mortgage servicing rights, net of amortization		7		(2	)		9			450.00
Customer service fees		328		224			104			46.43
Income on bank owned life insurance		36		39			(3	)		(7.69	)
Other		80		84			(4	)		(4.76	)
Total other income	$	847	$	502		$	345			68.73	%

The increase in total other income was primarily due to increases on gain on sale of loans, increases in customer service fees, and gains on sales of OREO properties. The increase in gain on sale of loans is primarily a result of an increase in loans originated for sale. The increase in gains on sales of OREO properties is primarily due to gains of approximately $72,000 on the sale of 14 properties previously securing impaired loans to one borrower. The increase in customer service fees is primarily due to the increase in deposits related to the Merger with Twin Oaks at December 31, 2014.

Other Expenses. The following table summarizes other expenses for the nine months ended September 30, 2015 and 2014.

	Nine months ended
	September 30,
	2015			2014			$ change			% change
	(Dollars in thousands)
Other expenses:
Salaries and employee benefits	$	2,151		$	1,301		$	850			65.33	%
Directors fees		113			76			37			48.68
Occupancy		499			385			114			29.61
Deposit insurance premium		135			104			31			29.81
Legal and professional services		268			405			(137	)		(33.83	)
Data processing		1,296			219			1,077			491.78
Loss on sale of securities		2			17			(15	)		(88.24	)
Valuation adjustments and expenses on foreclosed real estate		155			56			99			176.79
Loss on sale of OREO		-			10			(10	)		(100.00	)
Loss on sale of repossessed assets		12			3			9			300.00
Other		703			473			230			48.63
Total other expenses	$	5,334		$	3,049		$	2,285			74.94	%
Efficiency ratio (1)		86.27	%		64.78	%

(1) Computed as other expenses divided by the sum of net interest income and other income.

The increase in other expenses was primarily due to the Merger with Twin Oaks as of December 31, 2014 as there are now three branch locations to support rather than the one facility that existed as of September 30, 2014. Additionally, data processing costs increased because, until mid-May of 2015, we were supporting two core processing systems and have also incurred additional costs related to data conversion, including approximately $0.5 million in early termination fees. The increase also includes increases in salaries and employee benefits, resulting from additional staff and directors in connection with the Merger, as well as annual merit increases. The efficiency ratio increased due to increased other expenses for the current period primarily related to the Merger.

Income Taxes. The Company recorded an income tax expense of $105,000 and $295,000 for the nine months ended September 30, 2015 and 2014, respectively. The difference in effective tax rates between the periods is primarily a result of higher levels of tax exempt income during 2015. For the nine months ended September 30, 2015 the Company had approximately $438,000 in tax exempt income, compared to approximately $233,000 for the nine months ended September 30, 2014.

The Company’s income tax differed from the maximum statutory federal rate of 35% for the nine months ended September 30, 2015 and 2014, as follows:

	Nine Months Ended
	September 30,
	2015			2014
Expected income taxes	$	220,032		$	336,904
Income tax effect of:
State taxes, net of federal tax benefit		31,116			53,899
Tax exempt interest		(140,750	)		(67,826	)
Income taxed at lower rates		(6,287	)		(9,626	)
Other		884			(18,805	)
	$	104,995		$	294,546

LIQUIDITY AND CAPITAL RESOURCES

Liquidity. Liquidity management for the Bank is measured and monitored on both a short and long-term basis, allowing management to better understand and react to emerging balance sheet trends. After assessing actual and projected cash flow needs, management seeks to obtain funding at the most economical cost to the Bank. Our primary sources of funds are deposits, amortization, prepayments and maturities of outstanding loans and mortgage-backed and related securities, and other short-term investments, and funds provided from operations. While scheduled payments from amortization of loans and mortgage-backed related securities and maturing investment securities and short-term investments are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition. We invest excess funds in short-term interest-earning assets, including federal funds sold, which enable us to meet lending requirements or long-term investments when loan demand is low.

At ~~September~~March 3031, ~~2015~~2016 the Bank had outstanding commitments to originate $01.79 million in loans, unfunded lines of credit of $11.3 million, and less than $30.31 million in commitments to fund construction loans. In addition, as of ~~September~~March 3031, ~~2015~~2016, the total amount of certificates of deposit that were scheduled to mature in the next 12 months was $3934.2 million. Based on prior experience, management believes that a majority of such deposits will remain with us, although there can be no assurance that this will be the case. In the event a significant portion of our deposits are not retained by us, we will have to utilize other funding sources, such as Federal Home Loan Bank of Chicago (“FHLBC”) advances, in order to maintain our level of assets. Alternatively, we could reduce our level of liquid assets, such as our cash and cash equivalents. As of ~~September~~March 3031, ~~2015~~2016, the Bank had $6569.29 million of available credit from the FHLBC and there were $21.71 million in FHLBC advances outstanding. In addition, as of ~~September~~March 3031, ~~2015~~2016 the Bank had $5.0 million of available credit from Bankers Bank of Wisconsin to purchase Federal Funds.

The Company is a separate legal entity from the Bank and must provide for its own liquidity. In addition to its operating expenses, the Company is responsible for paying any dividends declared to its shareholders and for any repurchased shares of its common stock. Whether dividends are declared, and the timing and amount of any dividends declared, is subject to the discretion of our Board of Directors and depends on various factors, including our net earnings, financial condition, cash requirements, future prospects and other factors that our Board of Directors deems relevant to its analysis and decision making. The Company’s primary source of income is dividends received from the Bank. The amount of dividends that the Bank may declare and pay to the Company in any calendar year, without the receipt of prior approval from the regulatory agencies but with prior notice to the regulatory agencies, cannot exceed net income for that year to date plus retained net income (as defined) for the preceding two calendar years. At ~~September~~March 3031, ~~2015~~2016, the Company had cash and cash equivalents of $~~263~~311,000.

Capital. The Bank is required to maintain regulatory capital sufficient to meet Tier 1 leverage, Tier 1 risk-based and total risk-based capital ratios of at least 4.0%, 4.0% and 8.0%, respectively. The Bank exceeded each of its minimum capital requirements and was considered “well capitalized” within the meaning of federal regulatory requirements with ratios at September 30, 2015 of 12.96%, 20.64% and 21.90%, respectively, compared to ratios at December 31~~, 2014 of 11.59%, 19.03% and 20.28%, respectively.~~

Capital. The Bank is required to maintain regulatory capital sufficient to meet Total capital, Tier 1 capital, Common equity Tier 1 capital, and Tier 1 Leverage ratios of at least 8.0%, 6,0%, 4.5% and 4.0%, respectively. The Bank exceeded each of its minimum capital requirements and was considered “well capitalized” within the meaning of federal regulatory requirements with ratios at March 31, 2016 of 21.63%, 20.38%, 20.38%, and 13.37%, respectively, compared to ratios at December 31, 2015 of 22.36%, 21.10%, 21.10% and 13.18%, respectively. Beginning on January 1, 2016, the Bank must begin holding 0.625% of risk-weighted assets and would increase by that amount annually, until fully implemented in January 2019, as a capital conservation buffer composed of common equity Tier 1 capital above its minimum risk-based capital requirements, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments. At March 31, 2016, the Bank had a capital conservation buffer of 13.63%. As a savings and loan holding company with less than $1.0 billion in assets, the Company is not subject to separate capital requirements.

OFF-BALANCE SHEET ARRANGEMENTS

For the ~~nine~~three months ended ~~September~~March 3031, ~~2015~~2016, we did not engage in any off-balance sheet transactions reasonably likely to have a material effect on our financial condition, results of operations or cash flows.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This Item is not applicable as the Company is a smaller reporting company.

ITEM 4. CONTROLS AND PROCEDURES

Controls and Procedures

As of the end of the period covered by this report, the Company carried out an evaluation under the supervision and with the participation of the Company’s principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended, with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including, its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

In addition, there have been no changes in the Company’s internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II – Other Information

ITEM 1 - LEGAL PROCEEDINGS

The Company is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business that, in the aggregate, are believed by management to be material to the financial condition and results of operations of the Company.

ITEM 1A - RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part 1, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2014~~2015, which could materially affect our business, financial condition or future results. As of ~~September~~March 3031, ~~2015~~2016, the risk factors of the Company have not changed materially from those reported in the Company’s Annual Report on Form 10-K. However, the risks described in our Annual Report on Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4 - MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 - OTHER INFORMATION

Not applicable.

ITEM 6 - EXHIBITS

Exhibit No. Description

Exhibit No.	Description

3.1		Certificate of Incorporation of Ottawa Savings Bancorp, Inc. (incorporated by reference to Exhibit 3.1 to Form 8-K filed with the Securities and Exchange Commission on December 17, 2014)

3.2		Bylaws of Ottawa Savings Bancorp, Inc. (incorporated by reference to Exhibit 3.2 to Company’s Form 8-K filed on January 7, 2015)

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

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

32.1		Section 1350 Certifications

101.0		The following materials from the Ottawa Savings Bancorp, Inc. Quarterly Report on Form 10-Q for the three months ended March 31, 2016 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Financial Condition, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Cash Flows and (iv) related notes.

3.1		Certificate of Incorporation of Ottawa Savings Bancorp, Inc. (incorporated by reference to Exhibit 3.1 to Form 8-K filed with the Securities and Exchange Commission on December 17, 2014)
3.2		Bylaws of Ottawa Savings Bancorp, Inc. (incorporated by reference to Exhibit 3.2 to Company’s Form 8-K filed on January 7, 2015)
31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1		Section 1350 Certifications
101.0		The following materials from the Ottawa Savings Bancorp, Inc. Quarterly Report on Form 10-Q for the nine months ended September 30, 2015 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Financial Condition, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Cash Flows and (iv) related notes.

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	OTTAWA SAVINGS BANCORP, INC.
	Registrant
Date: November 13, 2015	/s/ Jon L. Kranov
Date: May 10, 2016	/s/ Jon L. Kranov
	Jon L. Kranov
	President and Chief Executive Officer
	(Principal Executive Officer)
Date: November 13, 2015	/s/ Marc N. Kingry
	Marc N. Kingry
	Chief Financial Officer
	(Principal Financial Officer)

Date: May 10, 2016	/s/ Marc N. Kingry
	Marc N. Kingry
	Chief Financial Officer
	(Principal Financial Officer)

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