**Exhibit 13**

** **

**Profile**

 

WestSuburban Bancorp, Inc. (“West Suburban”) is the parent bank holdingcompany of West Suburban Bank, Lombard, Illinois (the “Bank” and, together withWest Suburban, the “Company”). The Company had total assets at December 31,2004 of approximately $1.75 billion. The Bank is one of the largest independentbanks headquartered in DuPage County.

 

| **West Suburban Bancorp, Inc.  Financial Highlights** |
|------------------------------------------------------------|

 

| ** **     | ** ** | **Years Ended December 31,  (Dollars in thousands, except per share data)** | ** ** |
|----------------|------------|----------------------------------------------------------------------------------|------------|
| ** **     | ** ** | **2004**                                                                         | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** | **2000** | ** ** |
| Net income     |       | $                                                                                | 23,658     |   | $ | 25,908 |   | $ | 17,932 |   | $ | 20,183 |   | $ | 21,003 |   |
| Per share data |       |                                                                             |       |   |   |   |   |   |   |   |   |
| Earnings       |       | 54.82                                                                            |       | 59.90 |   | 41.46 |   | 46.67 |   | 48.56 |   |
| Book value (1) |       | 347.87                                                                           |       | 346.62 |   | 341.47 |   | 335.30 |   | 323.17 |   |
| Net loans      |       | 1,046,125                                                                        |       | 1,074,215 |   | 1,128,816 |   | 1,093,376 |   | 1,016,140 |   |
| Total assets   |       | 1,748,049                                                                        |       | 1,710,695 |   | 1,586,063 |   | 1,473,559 |   | 1,431,958 |   |
| Deposits       |       | 1,569,742                                                                        |       | 1,529,931 |   | 1,420,256 |   | 1,309,720 |   | 1,269,954 |   |
|                |            |                                                                                  |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)          Book value per share represents the aggregate amountof shareholders’ equity and common stock in ESOP subject to contingentrepurchase obligation divided by the number of outstanding shares.

 

**Table of Contents**

 
| Profile                                                                                                | 1  |
|--------------------------------------------------------------------------------------------------------|----|
| Special  Note Concerning Forward-Looking Statements                                                    | 2  |
| Letter to Our  Shareholders, Customers and Friends                                                     | 3  |
| Common Stock,  Book Value and Dividends                                                                | 4  |
| Business  Review                                                                                       | 4  |
| Report  of Independent Registered Public Accounting Firm                                               | 5  |
| Consolidated Financial  Statements                                                                     | 6  |
| Notes to  Consolidated Financial Statements                                                            | 10 |
| Report  by Management on Internal Control Over Financial Reporting                                     | 27 |
| Report of  Independent Registered Public Accounting Firm on Internal Control Over  Financial Reporting | 28 |
| Selected Financial Data                                                                                | 30 |
| Average Balance  Sheets, Net Interest Income and Average Rates and Yields on a Tax Equivalent  Basis   | 31 |
| Management’s  Discussion and Analysis of Financial Condition and Results of Operations            | 32 |
| Boards of Directors and Officers                                                                       | 41 |
| Addresses of West  Suburban Facilities                                                                 | 44 |
| Map  of Facilities                                                                                     | 46 |
| Shareholder Information                                                                                | 47 |

 

1

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###### ***SpecialNote Concerning Forward-Looking*** Statements

 

*This document (including informationincorporated by reference) contains, and future oral and written statements ofthe Company and its management may contain, forward-looking statements withinthe meaning of the Private Securities Litigation Reform Act of 1995 withrespect to the financial condition, results of operations, plans, objectives,future performance and business of the Company. Forward-looking statements,which may be based upon beliefs, expectations and assumptions of the Company’smanagement and on information currently available to management, are generallyidentifiable by the use of words such as “believe,” “expect,” “anticipate,” “plan,”“intend,” “estimate,” “may,” “will,” “would,” “could,” “should” or othersimilar expressions. Additionally, all statements in this document, includingforward-looking statements, speak only as of the date they are made, and theCompany undertakes no obligation to update any statement in light of newinformation or future events.*

 

*Anumber of factors, many of which are beyond the ability of the Company tocontrol or predict, could cause actual results to differ materially from thosein its forward-looking statements. These factors include, among others, thefollowing: (i) the strength of the local and national economy; (ii) theeconomic impact of terrorist activities and military actions; (iii) thetimely development and acceptance of new products and services, includingproducts and services offered through alternative delivery channels such as theInternet; (iv) changes in federal, state and local laws, regulations andgovernmental policies (including laws, regulations and government policiesrelating to taxation) concerning the Company’s general business; (v) changesin interest rates and prepayment rates of the Company’s assets; (vi) increasedcompetition in the financial services sector and the inability to attract newcustomers and retain existing customers; (vii) changes in technologyimplemented by the Company and by other parties including technological changesimplemented for, or related to, the Company’s website or new products such as prepaidsolutions cards, payroll cards and other similar products and services; (viii) theinability to develop and maintain secure and reliable electronic systemsincluding systems developed for the Company’s website or new products such as prepaidsolutions cards, payroll cards and other similar products and services; (ix) theloss of key executives or employees and the difficulty in replacing them;(x) changes in consumer spending and saving; (xi) unexpected resultsof acquisitions; (xii) unexpected outcomes of existing or new litigationinvolving the Company; (xiii) changes in accounting policies andpractices; and (xiv) the inability of the Company to manage the risksassociated with the foregoing as well as anticipated.**These risks and uncertainties should be considered in evaluatingforward-looking statements and undue reliance should not be placed on suchstatements. Additional information concerning the Company and its business,including additional factors that could materially affect the Company’sfinancial results, is included in the Company’s filings with the Securities andExchange Commission.*

 

2

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# **To Our Shareholders, Customers andFriends**

 

In 2004, West Suburbanwas presented with a number of opportunities and challenges. Our continuing introductionand development of innovative products and services, as well as our commitmentto profitable growth allowed us to leverage the opportunities and overcome thechallenges. Our success resulted in continuing growth in our deposits,continuing growth in our home equity loan originations and significantimprovement in our asset quality. We are proud of our performance –particularly in light of the volatile interest rate environment and theincreasingly competitive marketplace that we face.

 

Our deposits grew nearly3% during 2004. We also reduced our nonperforming loans by 68.5% last year. Wetake pride in our loan underwriting standards and will continue to strive tominimize loan losses. In addition, over the past two years, we have increasedour home equity loan portfolio by more than 40%. In 2005, we will reach out tothe business sector through a marketing campaign intended to increase ourcommercial loans.

 

Our performance in 2004allowed us to continue to pay strong dividends. We paid our shareholders $50.00per share representing aggregate cash distributions of more than $21.6 million.We are also pleased to report that despite our generous dividend payments, ourbook value per share increased to $347.87 at the end of 2004 from $346.62 atthe end of 2003. Our continued strong performance has allowed our shareholdersto realize a return on average shareholders’ equity plus common stock in ESOPsubject to repurchase obligation of 15.58% in 2004 and 16.94% in 2003.

 

An additional challengethat we faced in 2004 was the implementation of our compliance efforts relatingto Section 404 of the Sarbanes-Oxley Act. As a company that is subject toregulation by the Securities and Exchange Commission, West Suburban wasrequired to implement extensive procedures intended to subject our internalcontrol over financial reporting to rigorous testing and ultimately resultingin voluminous documentation. A new report on internal control over financialreporting is included on page 27 of this Annual Report and indicates thatmanagement concluded that as of December 31, 2004, the Company maintained effectiveinternal control over financial reporting.

 

At West Suburban, we havea strong commitment to the communities we serve as evidenced by the variousprograms and organizations in which our employees are involved. These programsand organizations include Christmas in April, DuPage Pads, Family ShelterService, DuPage County Continuum of Care, CASA of DuPage, Hessed House,local school boards, Lions Clubs, Rotary Clubs, chambers of commerce, as wellas various other local and national organizations.

 

As in the past, wecontinue to provide our customers traditional banking products such aschecking, savings and certificate of deposit accounts as well as competitivehome equity and residential mortgage loans. We will continue to enhance ouronline banking services at www.westsuburbanbank.com in order to offer ourcustomers improved accessibility 24 hours a day, seven days a week. Our newconsumer banking initiatives will not distract us from our commitments to ourbusiness customers. We value these relationships and appreciate that our futuresuccess depends upon our ability to continue to be a good partner to businessthroughout the communities we serve.

 

We would like to expressour appreciation to everyone for the support that has allowed us to become andremain one of the largest independent banks headquartered in DuPage Countyand we welcome your comments, criticisms and suggestions. We could not haveachieved our success without the support of our shareholders, customers,communities, friends and employees.

 
| Sincerely,             |   |                                   |
|------------------------|--------|----------------------------------------|
|                   |   |                                   |
| /s/  Kevin J. Acker    |   |                                   | /s/  Duane G. Debs |   |
| Kevin  J. Acker        |   | Duane  G. Debs                         |
| Chairman of the  Board |   | President and  Chief Financial Officer |
|                        |        |                                        |  |  |

 

3

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# **Common Stock, Book Valueand Dividends**

 

West Suburban has asingle class of common stock issued and outstanding. The common stock is nottraded on any stock exchange or on the over-the-counter market. West Suburban’sper share book value as of the end of each quarter and dividends declared forthe last two years are set forth below:

 

| **Year** | ** ** | **Quarter** | ** ** | **Book  Value (1)** | ** ** | **Dividends  Declared** | ** ** |
|----------|------------|-------------|------------|---------------------|------------|-------------------------|------------|
| **2004** |       | 4th         |       | $                   | 347.87     |                    | $          | 20.00 |   |
|     |       | 3rd         |       | 355.89              |       | 10.00                   |       |
|     |       | 2nd         |       | 336.47              |       | 10.00                   |       |
|     |       | 1st         |       | 357.38              |       | 10.00                   |       |
|     |       |        |       |                |       |                    |       |
| 2003     |       | 4th         |       | $                   | 346.62     |                    | $          | 20.00 |   |
|     |       | 3rd         |       | 357.02              |       | 8.00                    |       |
|     |       | 2nd         |       | 357.98              |       | 8.00                    |       |
|     |       | 1st         |       | 348.84              |       | 8.00                    |       |

 

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(1)          Book value per share represents theaggregate amount of shareholders’ equity and common stock in ESOP subject tocontingent repurchase obligation divided by the number of outstanding shares.

 

The dividends declaredduring the 4th quarter of 2004 included a special $10.00 per share dividendpayable on December 15, 2004 to shareholders of record as of December 1,2004. Similarly, the dividend declared during the 4th quarter of 2003 includeda special $10.00 per share dividend payable on December 15, 2003 toshareholders of record as of December 1, 2003.

 

# **Business Review**

 

Asof December 31, 2004, the Company had total assets of approximately $1.75billion and maintained 33 full-service branches, four limited-service branches andsix departments providing insurance, financial and other services for theconvenience of the customers of the Bank throughout DuPage, Kane, Kendall andWill Counties in Illinois. The Bank focuses on providing retail and commercialbanking products and services in its market area. The Company had 497 full-timeequivalent employees at December 31, 2004.

 

# **[WSBLOGO]**

 

4

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**[CROWECHIZEK LOGO]**

 

# **REPORT OF INDEPENDENT REGISTEREDPUBLIC** ACCOUNTING FIRM

 

Board of Directors andShareholders

West Suburban Bancorp, Inc.

Lombard, Illinois

 

We have audited theaccompanying consolidated balance sheets of West Suburban Bancorp, Inc.(the “Company”) as of December 31, 2004 and 2003, and the relatedconsolidated statements of income, changes in shareholders’ equity, and cashflows for each of the three years in the period ended December 31, 2004.These financial statements are the responsibility of the Company’s management.Our responsibility is to express an opinion on these financial statements basedon our audits.

 

We conducted our auditsin accordance with standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An auditalso includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audits provide a reasonable basisfor our opinion.

 

In our opinion, theconsolidated financial statements referred to above present fairly, in allmaterial respects, the financial position of the Company at December 31,2004 and 2003, and the results of its operations and its cash flows for each ofthe three years in the period ended December 31, 2004 in conformity with U.S.generally accepted accounting principles.

 

We also have audited, inaccordance with the standards of the Public Company Accounting Oversight Board(United States), the effectiveness of the Company’s internal control overfinancial reporting as of December 31, 2004, based on criteria establishedin Internal Control—Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission and our report dated February 25,2005 expressed an unqualified opinion therein.

 

 
|                    | /s/ Crowe Chizek  and Company LLC |
|-------------------------|-----------------------------------|
|                    | Crowe Chizek and  Company LLC     |
|                    |
| Oak Brook,  Illinois    |
| February 25,  2005 |

 

5

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**WEST SUBURBAN BANCORP, INC.**

# **CONSOLIDATED BALANCESHEETS**

## **DECEMBER 31,2004 AND 2003**

(Dollars in thousands)

 
| ** **                                                                                       | ** ** | **2004**   | ** ** | **2003**   | ** ** |
|--------------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|
| **Assets**                                                                                       | ** ** | ** ** | ** ** | ** ** | ** ** |
| Cash and due from banks                                                                          |       | $          | 40,402     |       | $          | 42,500 |   |
| Federal funds sold                                                                               |       | 10,998     |       | 26,844     |       |
| Total cash and cash equivalents                                                                  |       | 51,400     |       | 69,344     |       |
| Securities                                                                                       |       |       |       |       |       |
| Available for sale (amortized cost of $486,663 in  2004 and $458,746 in 2003)                    |       | 481,595    |       | 458,146    |       |
| Held to maturity (fair value of $71,690 in 2004 and  $29,671 in 2003)                            |       | 71,936     |       | 29,195     |       |
| Federal Home Loan Bank stock                                                                     |       | 5,352      |       | 5,039      |       |
| Total securities                                                                                 |       | 558,883    |       | 492,380    |       |
| Loans, less allowance for loan losses of $10,527 in  2004 and $14,420 in 2003                    |       | 1,046,125  |       | 1,074,215  |       |
| Cash surrender value of life insurance                                                           |       | 30,296     |       | 13,416     |       |
| Premises and equipment, net                                                                      |       | 40,641     |       | 42,896     |       |
| Other real estate                                                                                |       | 3,156      |       | 1,266      |       |
| Accrued interest and other assets                                                                |       | 17,548     |       | 17,178     |       |
| **Total assets**                                                                                 |       | $          | 1,748,049  |       | $          | 1,710,695 |   |
|                                                                                             |       |       |       |       |       |
| **Liabilities and shareholders’ equity**                                                    |       |       |       |       |       |
| Deposits                                                                                         |       |       |       |       |       |
| Demand-noninterest-bearing                                                                       |       | $          | 153,081    |       | $          | 143,440 |   |
| Interest-bearing                                                                                 |       | 1,416,661  |       | 1,386,491  |       |
| Total deposits                                                                                   |       | 1,569,742  |       | 1,529,931  |       |
| Prepaid solutions cards                                                                          |       | 11,646     |       | 17,049     |       |
| Accrued interest and other liabilities                                                           |       | 16,207     |       | 13,803     |       |
|                                                                                             |       |       |       |       |       |
| Common stock in ESOP subject to contingent  repurchase obligation                                |       | 53,959     |       | 51,371     |       |
|                                                                                             |       |       |       |       |       |
| Shareholders’ equity                                                                        |       |       |       |       |       |
| Common stock, no par value; 15,000,000 shares  authorized; 432,495 shares issued and outstanding |       | 3,457      |       | 3,457      |       |
| Surplus                                                                                          |       | 38,066     |       | 38,066     |       |
| Retained earnings                                                                                |       | 111,985    |       | 109,952    |       |
| Accumulated other comprehensive loss                                                             |       | (3,054     | )          | (363       | )          |
| Unearned ESOP shares                                                                             |       | —     |       | (1,200     | )          |
| Amount reclassified on ESOP shares                                                               |       | (53,959    | )          | (51,371    | )          |
| **Total shareholders’ equity**                                                              |       | 96,495     |       | 98,541     |       |
| **Total liabilities and shareholders’ equity**                                              |       | $          | 1,748,049  |       | $          | 1,710,695 |   |

 

*See accompanying notes to consolidated financialstatements.*

 

6

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**WEST SUBURBAN BANCORP, INC.**

### **CONSOLIDATED STATEMENTSOF INCOME**

## **YEARSENDED DECEMBER 31, 2004, 2003 AND 2002**

(Dollars in thousands, except per share data)

 
| ** **                                               | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|----------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| **Interest income**                                      |       |     |       |     |       |     |       |
| Loans, including fees                                    |       | $        | 59,204     |     | $          | 63,193   |       | $ | 70,242 |   |
| Securities                                               |       |     |       |     |       |     |       |
| Taxable                                                  |       | 18,158   |       | 16,037   |       | 13,495   |       |
| Exempt from federal income tax                           |       | 1,601    |       | 1,374    |       | 1,239    |       |
| Federal funds sold                                       |       | 363      |       | 197      |       | 418      |       |
| Total interest income                                    |       | 79,326   |       | 80,801   |       | 85,394   |       |
|                                                     |       |     |       |     |       |     |       |
| **Interest expense**                                     |       |     |       |     |       |     |       |
| Deposits                                                 |       | 21,805   |       | 21,951   |       | 27,762   |       |
| Other                                                    |       | 34       |       | 35       |       | 41       |       |
| Total interest expense                                   |       | 21,839   |       | 21,986   |       | 27,803   |       |
| **Net interest income**                                  |       | 57,487   |       | 58,815   |       | 57,591   |       |
| **Provision for loan losses**                            |       | 200      |       | 2,150    |       | 8,125    |       |
| **Net interest income after provision for loan  losses** |       | 57,287   |       | 56,665   |       | 49,466   |       |
|                                                     |       |     |       |     |       |     |       |
| **Noninterest income**                                   |       |     |       |     |       |     |       |
| Service fees on deposit accounts                         |       | 7,808    |       | 8,229    |       | 5,450    |       |
| Debit card fees                                          |       | 1,751    |       | 1,692    |       | 1,575    |       |
| Net realized (losses) gains on securities  transactions  |       | (2,004   | )          | 2,330    |       | 1,017    |       |
| Net gain on sales of loans held for sale                 |       | 230      |       | 834      |       | 676      |       |
| Litigation settlement                                    |       | —   |       | 1,085    |       | —   |       |
| Prepaid solutions cards                                  |       | 5,734    |       | 3,631    |       | 506      |       |
| Other                                                    |       | 4,707    |       | 4,519    |       | 4,765    |       |
| Total noninterest income                                 |       | 18,226   |       | 22,320   |       | 13,989   |       |
|                                                     |       |     |       |     |       |     |       |
| **Noninterest expense**                                  |       |     |       |     |       |     |       |
| Salaries and employee benefits                           |       | 21,513   |       | 21,769   |       | 19,730   |       |
| Occupancy                                                |       | 4,011    |       | 3,979    |       | 3,753    |       |
| Furniture and equipment                                  |       | 4,644    |       | 4,593    |       | 4,497    |       |
| Advertising and promotion                                |       | 1,459    |       | 1,296    |       | 1,842    |       |
| Professional fees                                        |       | 1,292    |       | 1,028    |       | 945      |       |
| Prepaid solutions cards                                  |       | 3,975    |       | 2,488    |       | 779      |       |
| Other                                                    |       | 6,032    |       | 5,958    |       | 5,505    |       |
| Total noninterest expense                                |       | 42,926   |       | 41,111   |       | 37,051   |       |
|                                                     |       |     |       |     |       |     |       |
| **Income before income taxes**                           |       | 32,587   |       | 37,874   |       | 26,404   |       |
| **Income tax expense**                                   |       | 8,929    |       | 11,966   |       | 8,472    |       |
| **Net income**                                           |       | $        | 23,658     |     | $          | 25,908   |       | $ | 17,932 |   |
|                                                     |       |     |       |     |       |     |       |
| **Earnings per share**                                   |       | $        | 54.82      |     | $          | 59.90    |       | $ | 41.46 |   |
| **Average shares outstanding**                           |       | 431,546  |       | 432,485  |       | 432,495  |       |

 

*See accompanying notes to consolidated financialstatements.*

 

7

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**WEST SUBURBAN BANCORP, INC.**

**CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’EQUITY**

**YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002**

(Dollars in thousands, except per share data)

 
| ** **                                                                                                        | ** ** | **Common  Stock  and  Surplus** | ** ** | **Retained  Earnings** | ** ** | **Accumulated  Other Comprehensive  Income  (Loss)** | ** ** | **Unearned  ESOP  Shares** | ** ** | **Amount  Reclassified  on ESOP  Shares** | ** ** | **Total  Shareholders’  Equity** | ** ** | **Common  Stock  in ESOP  Subject to  Contingent  Repurchase  Obligation** | ** ** |
|-------------------------------------------------------------------------------------------------------------------|------------|---------------------------------|------------|------------------------|------------|------------------------------------------------------|------------|----------------------------|------------|-------------------------------------------|------------|---------------------------------------|------------|----------------------------------------------------------------------------|------------|
| Balance, January 1, 2002                                                                                     |       | $                               | 41,523     |                   | $          | 103,091                                              |       | $                          | 401        |                                      | $          | —                                |       | $                                                                          | (40,645    | ) | $ | 104,370 |   | $ | 40,645 |   |
|                                                                                                              |       |                            |       |                   |       |                                                 |       |                       |       |                                      |       |                                  |       |                                                                       |       |
| Comprehensive income                                                                                              |       |                            |       |                   |       |                                                 |       |                       |       |                                      |       |                                  |       |                                                                       |       |
| Net income                                                                                                        |       | —                          |       | 17,932                 |       | —                                               |       | —                     |       | —                                    |       | 17,932                                |       | —                                                                     |       |
| Change in unrealized gain on available for sale  securities, net of reclassification and tax effects              |       | —                          |       | —                 |       | 2,687                                                |       | —                     |       | —                                    |       | 2,687                                 |       | —                                                                     |       |
| Total comprehensive income                                                                                        |       | —                          |       | —                 |       | —                                               |       | —                     |       | —                                    |       | 20,619                                |       | —                                                                     |       |
| Cash dividends declared - $41.50 per share                                                                        |       | —                          |       | (17,949                | )          | —                                               |       | —                     |       | —                                    |       | (17,949                               | )          | —                                                                     |       |
| Reclassification due to change in fair value of  common stock in ESOP subject to contingent repurchase obligation |       | —                          |       | —                 |       | —                                               |       | —                     |       | 404                                       |       | 404                                   |       | (404                                                                       | )          |
| Balance, December 31, 2002                                                                                   |       | 41,523                          |       | 103,074                |       | 3,088                                                |       | —                     |       | (40,241                                   | )          | 107,444                               |       | 40,241                                                                     |       |
|                                                                                                              |       |                            |       |                   |       |                                                 |       |                       |       |                                      |       |                                  |       |                                                                       |       |
| Comprehensive income                                                                                              |       |                            |       |                   |       |                                                 |       |                       |       |                                      |       |                                  |       |                                                                       |       |
| Net income                                                                                                        |       | —                          |       | 25,908                 |       | —                                               |       | —                     |       | —                                    |       | 25,908                                |       | —                                                                     |       |
| Change in unrealized gain (loss) on available for  sale securities, net of reclassification and tax effects       |       | —                          |       | —                 |       | (3,451                                               | )          | —                     |       | —                                    |       | (3,451                                | )          | —                                                                     |       |
| Total comprehensive income                                                                                        |       | —                          |       | —                 |       | —                                               |       | —                     |       | —                                    |       | 22,457                                |       | —                                                                     |       |
| Cash dividends declared - $44.00 per share                                                                        |       | —                          |       | (19,030                | )          | —                                               |       | —                     |       | —                                    |       | (19,030                               | )          | —                                                                     |       |
| Reclassification due to change in fair value of  common stock in ESOP subject to contingent repurchase obligation |       | —                          |       | —                 |       | —                                               |       | —                     |       | (11,130                                   | )          | (11,130                               | )          | 11,130                                                                     |       |
| ESOP shares committed to be released                                                                              |       | —                          |       | —                 |       | —                                               |       | (1,200                     | )          | —                                    |       | (1,200                                | )          | —                                                                     |       |
| Balance, December 31, 2003                                                                                   |       | 41,523                          |       | 109,952                |       | (363                                                 | )          | (1,200                     | )          | (51,371                                   | )          | 98,541                                |       | 51,371                                                                     |       |
|                                                                                                              |       |                            |       |                   |       |                                                 |       |                       |       |                                      |       |                                  |       |                                                                       |       |
| Comprehensive income                                                                                              |       |                            |       |                   |       |                                                 |       |                       |       |                                      |       |                                  |       |                                                                       |       |
| Net income                                                                                                        |       | —                          |       | 23,658                 |       | —                                               |       | —                     |       | —                                    |       | 23,658                                |       | —                                                                     |       |
| Change in unrealized loss on available for sale  securities, net of reclassification and tax effects              |       | —                          |       | —                 |       | (2,691                                               | )          | —                     |       | —                                    |       | (2,691                                | )          | —                                                                     |       |
| Total comprehensive income                                                                                        |       | —                          |       | —                 |       | —                                               |       | —                     |       | —                                    |       | 20,967                                |       | —                                                                     |       |
| Cash dividends declared - $50.00 per share                                                                        |       | —                          |       | (21,625                | )          | —                                               |       | —                     |       | —                                    |       | (21,625                               | )          | —                                                                     |       |
| Reclassification due to change in fair value of  common stock in ESOP subject to contingent repurchase obligation |       | —                          |       | —                 |       | —                                               |       | —                     |       | (2,588                                    | )          | (2,588                                | )          | 2,588                                                                      |       |
| ESOP shares released                                                                                              |       | —                          |       | —                 |       | —                                               |       | 1,200                      |       | —                                    |       | 1,200                                 |       | —                                                                     |       |
| **Balance, December 31, 2004**                                                                               |       | $                               | 41,523     |                   | $          | 111,985                                              |       | $                          | (3,054     | )                                         | $          | —                                |       | $                                                                          | (53,959    | ) | $ | 96,495 |   | $ | 53,959 |   |

 

*See accompanying notes to consolidated financialstatements.*

 

8

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**WEST SUBURBAN BANCORP, INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002**

(Dollars in thousands)

 
| ** **                                                                        | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|-----------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| **Cash flows from operating activities**                                          |       |     |       |     |       |     |       |
| Net income                                                                        |       | $        | 23,658     |     | $          | 25,908   |       | $ | 17,932 |   |
| Adjustments to reconcile net income to net cash  provided by operating activities |       |     |       |     |       |     |       |
| Depreciation                                                                      |       | 3,648    |       | 4,033    |       | 3,816    |       |
| Provision for loan losses                                                         |       | 200      |       | 2,150    |       | 8,125    |       |
| Deferred income tax provision (benefit)                                           |       | 755      |       | (386     | )          | (717     | )          |
| Net premium amortization of securities                                            |       | 1,863    |       | 2,016    |       | 868      |       |
| Net realized losses (gains) on securities  transactions                           |       | 2,004    |       | (2,330   | )          | (1,017   | )          |
| Federal Home Loan Bank stock dividends                                            |       | (313     | )          | (371     | )          | (234     | )          |
| Increase in cash surrender value of bank-owned life  insurance                    |       | (1,880   | )          | (1,280   | )          | (427     | )          |
| Amortization of deferred loan fees                                                |       | 326      |       | 405      |       | 142      |       |
| Net gain on sales of loans held for sale                                          |       | (230     | )          | (834     | )          | (676     | )          |
| Sales of loans held for sale                                                      |       | 16,267   |       | 70,307   |       | 53,532   |       |
| Origination of loans held for sale                                                |       | (15,435  | )          | (66,238  | )          | (51,240  | )          |
| Net loss on sales of premises and equipment                                       |       | 11       |       | 4        |       | 94       |       |
| Net loss (gain) on sales of other real estate                                     |       | 144      |       | —   |       | (451     | )          |
| ESOP compensation expense                                                         |       | 1,200    |       | —   |       | —   |       |
| Write-down of other real estate                                                   |       | —   |       | 40       |       | —   |       |
| Decrease (increase) in accrued interest and other  assets                         |       | 652      |       | (182     | )          | 1,905    |       |
| Increase (decrease) in accrued interest and other  liabilities                    |       | 2,404    |       | 805      |       | (2,724   | )          |
| **Net cash provided by operating activities**                                     |       | 35,274   |       | 34,047   |       | 28,928   |       |
| **Cash flows from investing activities**                                          |       |     |       |     |       |     |       |
| Securities available for sale                                                     |       |     |       |     |       |     |       |
| Sales                                                                             |       | 250,225  |       | 128,537  |       | 122,069  |       |
| Maturities and calls                                                              |       | 130,711  |       | 267,061  |       | 114,496  |       |
| Purchases                                                                         |       | (412,771 | )          | (585,399 | )          | (362,246 | )          |
| Securities held to maturity                                                       |       |     |       |     |       |     |       |
| Maturities and calls                                                              |       | 12,685   |       | 20,926   |       | 81,902   |       |
| Purchases                                                                         |       | (55,375  | )          | (239     | )          | (10,870  | )          |
| Net decrease (increase) in loans                                                  |       | 21,315   |       | 47,337   |       | (45,181  | )          |
| Investment in bank-owned life insurance policies                                  |       | (15,000  | )          | (10,000  | )          | —   |       |
| Purchases of premises and equipment                                               |       | (1,408   | )          | (1,293   | )          | (5,727   | )          |
| Sales of premises and equipment                                                   |       | 4        |       | 1        |       | 53       |       |
| Sales of other real estate                                                        |       | 3,613    |       | 208      |       | 1,821    |       |
| **Net cash used in investing activities**                                         |       | (66,001  | )          | (132,861 | )          | (103,683 | )          |
| **Cash flows from financing activities**                                          |       |     |       |     |       |     |       |
| Net increase in deposits                                                          |       | 39,811   |       | 109,675  |       | 110,536  |       |
| Loan to ESOP to acquire West Suburban common stock                                |       | —   |       | (1,200   | )          | —   |       |
| (Decrease) increase in prepaid solutions cards                                    |       | (5,403   | )          | 15,385   |       | 1,664    |       |
| Dividends paid                                                                    |       | (21,625  | )          | (22,490  | )          | (17,733  | )          |
| **Net cash provided by financing activities**                                     |       | 12,783   |       | 101,370  |       | 94,467   |       |
| **Net (decrease) increase in cash and cash  equivalents**                         |       | (17,944  | )          | 2,556    |       | 19,712   |       |
| **Beginning cash and cash equivalents**                                           |       | 69,344   |       | 66,788   |       | 47,076   |       |
| **Ending cash and cash equivalents**                                              |       | $        | 51,400     |     | $          | 69,344   |       | $ | 66,788 |   |
| **Supplemental disclosures**                                                      |       |     |       |     |       |     |       |
| Cash paid for                                                                     |       |     |       |     |       |     |       |
| Interest                                                                          |       | $        | 20,750     |     | $          | 22,511   |       | $ | 29,828 |   |
| Income taxes                                                                      |       | 8,090    |       | 12,964   |       | 7,823    |       |
| Other real estate acquired through loan foreclosures                              |       | 5,647    |       | 1,474    |       | —   |       |

 

*See accompanying notes to consolidated financial statements.*

 

9

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**WEST SUBURBAN BANCORP, INC.**

**NOTES TOCONSOLIDATED FINANCIAL STATEMEN****TS**

(Dollars in thousands, except per share data)

 

# **Note1 - Nature of Business and Summary of Significant Accounting Policies**

 

West Suburban Bancorp, Inc.(“West Suburban”) through the branch network of its subsidiary, West SuburbanBank (the “Bank” and, together with West Suburban, the “Company”), operates 33full-service branches, four limited-service branches and six departmentsproviding insurance, financial and other services for the convenience of thecustomers of the Bank throughout DuPage, Kane, Kendall and Will Counties inIllinois. Customers in these areas are the primary consumers of the Company’sloan and deposit products and services. Although borrower cash flow is expectedto be the primary source of repayment, the Company’s loans are generallysecured by various forms of collateral including real estate, business assets,consumer goods, personal guarantees and other items.

 

***OperatingSegments***

While the Company’s seniormanagement monitors the revenue streams derived from various individual andgroups of products and services, any identifiable segments are not material.Moreover, operations are managed and financial performance is evaluated on aCompany-wide basis. Accordingly, all of the Company’s operations are consideredby management to be aggregated in one reportable operating segment.

 

***Principlesof Consolidation***

Theconsolidated financial statements include the accounts of West Suburban and theBank. Significant intercompany accounts and transactions have been eliminated.

 

***Useof Estimates***

To prepare financialstatements in conformity with accounting principles generally accepted in theUnited States of America, management makes estimates and assumptions, which aresubject to change, based on available information. These estimates andassumptions affect the amounts reported in the financial statements and thedisclosures provided, and future results could differ. The allowance for loanlosses, fair values of financial instruments, impairment of securities andstatus of contingencies are particularly subject to change.

 

***Securities***

Debt and marketableequity securities are classified into two categories, “available for sale” and “heldto maturity.” Available for sale securities are carried at fair value with netunrealized gains and losses (net of deferred tax) reported in accumulated othercomprehensive income (loss) as a separate component of shareholders’ equity. Heldto maturity securities are carried at amortized cost as the Company has boththe ability and positive intent to hold them to maturity. Other securities suchas Federal Home Loan Bank stock are carried at cost. Interest income includesamortization of purchase premium and accretion of purchase discount. Gains orlosses on disposition are based on the net proceeds and the adjusted carryingamount of the specific securities sold. The Company does not engage in tradingactivities.

 

Declines in the fairvalue of securities below their cost that are other than temporary arereflected as realized losses.  Inestimating other-than-temporary losses, management considers: (1) thelength of time and extent that fair value has been less than cost, (2) thefinancial condition and near term prospects of the issuer, and (3) theCompany’s ability and intent to hold the security for a period sufficient toallow for any anticipated recovery in fair value.

 

***Loansand Allowance for Loan Losses***

Loans that management hasthe intent and ability to hold for the foreseeable future or until maturity orpayoff are reported at the principal balance outstanding, net of unearnedinterest, deferred loan fees and costs and an allowance for loan losses.Interest income is reported on the accrual method and includes amortization ofnet deferred loan fees and costs over the loan term. Accrual of interest isgenerally discontinued on loans 90 days past due, or on an earlier date, ifmanagement believes, after considering economic and business conditions andcollection efforts, that the borrower’s financial condition is such thatcollection of principal or interest is doubtful. In some circumstances, a

 

10

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loan more than 90 dayspast due may continue to accrue interest if it is fully secured and in theprocess of collection. When a loan is classified as nonaccrual, interestpreviously accrued but not collected is charged back to interest income. Whenpayments are received on nonaccrual loans they are first applied to principal,then to interest income and finally to expenses incurred for collection.

 

The allowance for loanlosses is a valuation allowance for probable credit losses in the loan portfolio.The allowance is increased by a provision for loan losses charged to earnings.Loan losses are charged against the allowance when management believes theuncollectibility of a loan is confirmed. Subsequent recoveries, if any, arecredited to the allowance. The allowance consists of specific and generalcomponents. The specific component relates to loans that are individuallyclassified as impaired. The general component covers pools of other loans andis based on historical loss experience adjusted for current factors. Theallowance for loan losses is evaluated monthly based on management’s periodicreview of loan collectibility in light of historical loan loss experience, thenature and volume of the loan portfolio, information about specific borrowersituations and estimated collateral values and prevailing economic conditions.Allocations of the allowance may be made for specific loans, but the entireallowance is available for any loan that, in management’s judgment, should becharged-off. This evaluation is inherently subjective as it requires estimatesthat are subject to significant revision as more information becomes availableor as relevant circumstances change.

 

The Company evaluatescommercial, real estate construction and commercial mortgage loans monthly forimpairment. A loan is considered impaired when, based on current informationand events, full payment under the loan terms is not expected. Impairment ismeasured based on the present value of expected future cash flows discounted atthe loan’s effective interest rate or the fair value of the loan’s collateral,if repayment of the loan is collateral dependent. A valuation allowance ismaintained for the amount of impairment. Generally, loans 90 days or more pastdue and all loans classified as nonaccrual status are considered for impairment.Impairment is considered on an entire category basis for smaller-balance loansof similar nature, such as residential real estate and consumer loans, and onan individual basis for other loans.  Ingeneral, consumer and credit card loans are charged-off no later than 180 daysafter a consumer or credit card loan becomes past due.

 

***LoansHeld for Sale***

Loans are identified aseither held for investment or held for sale upon origination. Loans held forsale are recorded at the lower of amortized cost or market value, determined onan aggregate basis. Unrealized losses, if any, are recognized on a currentbasis by charges to earnings. At December 31, 2004 and 2003, the cost andmarket value of loans held for sale were approximately the same.

 

***Bank-ownedLife Insurance***

The Company has purchasedlife insurance policies on certain officers and directors. Bank-owned lifeinsurance is recorded at its cash surrender value, or the amount that can berealized.

 

***Premisesand Equipment***

Land is carried at cost.Premises and equipment are stated at cost less accumulated depreciation.Depreciation is generally computed on the straight-line method over theestimated useful lives of the assets ranging from 8 to 50 years for premisesand from 3 to 15 years for furniture and equipment. Leasehold improvements areamortized on a straight-line basis over the estimated useful lives of theimprovements or the remaining term of the leases, whichever is shorter.

 

***OtherReal Estate***

Other real estateincludes properties acquired in partial or total settlement of problem loans.The properties are recorded at the lower of cost or fair value less estimatedselling costs at the date acquired. Losses recognized at the time ofacquisition of such properties are charged to the allowance for loan losses.Any subsequent decline in value is charged to current operations. The revenuereceived from and expenses incurred in maintaining such properties are alsoincluded in current operations.

 

11

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###### ***Goodwill***

Goodwill resulted fromthe acquisition of a financial institution and represents the excess of thepurchase price over the fair value of acquired tangible assets and liabilitiesand identifiable intangible assets. Goodwill is evaluated at least annually forimpairment and any such impairment will be recognized in the period identified.

 

###### ***Long-term Assets***

Premises and equipmentand other long-term assets are reviewed for impairment when events indicatetheir carrying amount may not be recoverable from future undiscounted cashflows. If impaired, the assets are recorded at fair value.

 

***LoanCommitments and Related Financial Instruments***

Financial instrumentsinclude off-balance sheet credit instruments, such as commitments to make loansand commercial letters of credit, issued to meet customer financing needs.  The face amount for these items representsthe exposure to loss, before considering customer collateral or ability torepay.  Such financial instruments arerecorded when they are funded.

 

***IncomeTaxes***

Income tax expense is thetotal of the current year income tax due or refundable and the change indeferred tax assets and liabilities. Deferred tax assets and liabilities arethe expected future tax consequences of temporary differences between thecarrying amounts and the tax basis of assets and liabilities, computed usingenacted tax rates. A valuation allowance, if needed, reduces deferred taxassets to the amount expected to be realized.

 

***EmployeeStock Ownership Plan (“ESOP”)***

TheBank maintains an ESOP, which is a noncontributory tax qualified retirementplan that covers employees who have satisfied specific service requirements.The Bank makes contributions to the ESOP for the benefit of the participants.On December 30, 2003, the ESOP became leveraged for the first time sinceits inception. The ESOP borrowed $1.2 million from West Suburban to facilitate thepurchase of a large block of common stock from one shareholder. The ESOPretired the indebtedness on January 2, 2004. Dividends declared on commonstock owned by the ESOP are charged against retained earnings.

 

Dividendspaid on ESOP shares are passed through to participants. Earned and allocatedESOP shares are voted by the respective participants. Because participants mayrequire the Company to purchase their ESOP shares upon termination of theiremployment, the appraised fair value of all earned and allocated ESOP shares isreclassified from shareholders’ equity. Unearned ESOP shares are reported as areduction of shareholders’ equity.

 

***EarningsPer Share***

Earnings per share iscalculated on the basis of the daily weighted average number of sharesoutstanding. ESOP shares are considered outstanding for this calculation unlessunearned.

 

***CashFlows***

For purposes of reportingcash flows, cash and cash equivalents include cash and due from banks andfederal funds sold. Generally, federal funds are sold for one-day periods.  Net cash flows are reported for customer loan,deposit and prepaid solutions card transactions.

 

***ComprehensiveIncome***

Comprehensiveincome includes net income and other comprehensive income. The Company’s othercomprehensive income consists of the change in unrealized gains and losses onavailable for sale securities, net of reclassification adjustments and deferredtax effects.

 

12

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***LossContingencies***

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

 

***Restrictionson Cash***

Cash on hand or ondeposit with the Federal Reserve Bank of $13,318 and $15,012 was required tomeet regulatory reserve and clearing requirements at year end 2004 and 2003,respectively.  These balances do not earninterest.

 

***DividendRestriction***

Banking regulationsrequire maintaining certain capital levels and may limit the dividends paid bythe Bank to West Suburban or by West Suburban to shareholders.  These restrictions pose no practical limit onthe ability of the Bank or West Suburban to pay dividends at historicallevels.  (See Note 11 for more specificdisclosure.)

 

***FairValue of Financial Instruments***

Fair values of financialinstruments are estimated using relevant market information and otherassumptions, as more fully disclosed in Note 9. Fair value estimates involve uncertainties and matters of significantjudgment regarding interest rates, credit risk, prepayments, and other factors,especially in the absence of broad markets for particular items.  Changes in assumptions or in marketconditions could significantly affect the estimates.

 

***Reclassifications***

Certainreclassifications have been made in prior years’ financial statements toconform to the current year’s presentation.

 

##### ***Recent Accounting Pronouncements***

In November 2003, the Emerging Issues Task Force(“EITF”) issued consensus requirements concerning Issue 03-1, *The Meaning of Other-Than-Temporary Impairment andIts Application to Certain Investments*relating to**disclosuresfor investment securities that require additional numerical and narrativedisclosures for debt and marketable equity securities that have unrealizedlosses. The requirements applied to December 31, 2003 year-end disclosuresand were adopted by the Company in 2003. In March 2004, the guidancerelating to Issue 03-1 was expanded to include and address therecognition and measurement of impairment losses. Although the FinancialAccounting Standards Board (“FASB”) previously announced that the guidance withrespect to the recognition and measurement of impairment losses would beeffective for reporting periods beginning after June 15, 2004, in lateSeptember, FASB postponed the effectiveness of that guidance. Managementintends to continue to monitor the developments relating to the implementationof EITF Issue 03-1.

 

In December 2003,the Accounting Standards Executive Committee (“AcSEC”) issued Statement ofPosition (“SOP”) 03-3, *Accounting forCertain Loans and Debt Securities Acquired in a Transfer.*AcSECbegan this project to address practice issues relating to purchases of troubledloans (including purchases of individual loans, pools of loans or in connectionwith business combinations) and the treatment of the allowance for loan lossesin such acquisitions. This Statement clarifies that a buyer cannot carry overthe seller’s allowance for loan losses in connection with an acquisition ofloans with credit deterioration. Deterioration may be demonstrated by suchevidence as FICO scores (an automated rating process for credit reports),downgrading, decline in value of collateral or past-due status. The Statementis effective for the years beginning after December 15, 2004 and onlyapplies to loans purchased after the Statement is effective. Management willcontinue to evaluate the applicability of this SOP for prospectiveacquisitions.

 

In December 2004,FASB issued Statement 123 (revised), “Share-based Payment” which requirescompanies to record compensation cost for stock options provided to employeesin return for employee service. The cost is measured at the fair value of theoptions when granted, and this cost is expensed over the employee service period,which is normally the vesting period of the options. This will apply to awardsgranted or modified after the first quarter or year beginning after June 15,2005. Compensation cost will also be recorded for prior option grants that vestafter the date of adoption. Because the Company does not currently offer stockoptions, management does not anticipate that Statement 123 will have an impacton the Company’s financial condition or results of operation.

 

13

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##### **Note 2 - Securities**

 

Theamortized cost and fair value of securities available for sale are as followsat December 31:

 
| ** **                                | ** ** | **2004**            | ** ** |
|-------------------------------------------|------------|---------------------|------------|
| ** **                                | ** ** | **Amortized  Cost** | ** ** | **Gross  Unrealized  Gains** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Fair  Value** | ** ** |
| Corporate                                 |       | $                   | 51,198     |   | $ | 327 |   | $ | (594 | ) | $ | 50,931 |   |
| U.S. government agencies and corporations |       | 306,669             |       | 21 |   | (3,201 | ) | 303,489 |   |
| Mortgage-backed                           |       | 121,969             |       | 80 |   | (1,400 | ) | 120,649 |   |
| States and political subdivisions         |       | 5,824               |       | 10 |   | (68 | ) | 5,766 |   |
| Total debt securities                     |       | 485,660             |       | 438 |   | (5,263 | ) | 480,835 |   |
| Preferred stock                           |       | 1,003               |       | — |   | (243 | ) | 760 |   |
| Total                                     |       | $                   | 486,663    |   | $ | 438 |   | $ | (5,506 | ) | $ | 481,595 |   |

 
| ** **                                | ** ** | **2003**            | ** ** |
|-------------------------------------------|------------|---------------------|------------|
| ** **                                | ** ** | **Amortized  Cost** | ** ** | **Gross  Unrealized  Gains** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Fair  Value** | ** ** |
| Corporate                                 |       | $                   | 45,831     |   | $ | 645 |   | $ | (146 | ) | $ | 46,330 |   |
| U.S. government agencies and corporations |       | 323,910             |       | 1,724 |   | (2,055 | ) | 323,579 |   |
| Mortgage-backed                           |       | 38,346              |       | 201 |   | (506 | ) | 38,041 |   |
| States and political subdivisions         |       | 33,420              |       | 203 |   | (157 | ) | 33,466 |   |
| Total debt securities                     |       | 441,507             |       | 2,773 |   | (2,864 | ) | 441,416 |   |
| Preferred stock                           |       | 17,239              |       | 5 |   | (514 | ) | 16,730 |   |
| Total                                     |       | $                   | 458,746    |   | $ | 2,778 |   | $ | (3,378 | ) | $ | 458,146 |   |

 

The amortized cost andfair value of securities held to maturity are as follows at December 31:

 
| ** **                                | ** ** | **2004**            | ** ** |
|-------------------------------------------|------------|---------------------|------------|
| ** **                                | ** ** | **Amortized  Cost** | ** ** | **Gross  Unrealized  Gains** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Fair  Value** | ** ** |
| U.S. government agencies and corporations |       | $                   | 43,405     |   | $ | 119 |   | $ | (162 | ) | $ | 43,362 |   |
| Mortgage-backed                           |       | 12,430              |       | 25 |   | (311 | ) | 12,144 |   |
| States and political subdivisions         |       | 16,101              |       | 205 |   | (122 | ) | 16,184 |   |
| Total                                     |       | $                   | 71,936     |   | $ | 349 |   | $ | (595 | ) | $ | 71,690 |   |

 
| ** **                                | ** ** | **2003**            | ** ** |
|-------------------------------------------|------------|---------------------|------------|
| ** **                                | ** ** | **Amortized  Cost** | ** ** | **Gross  Unrealized  Gains** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Fair  Value** | ** ** |
| U.S. government agencies and corporations |       | $                   | 13,998     |   | $ | 402 |   | $ | — |   | $ | 14,400 |   |
| Mortgage-backed                           |       | 1,959               |       | 29 |   | (252 | ) | 1,736 |   |
| States and political subdivisions         |       | 13,238              |       | 304 |   | (7 | ) | 13,535 |   |
| Total                                     |       | $                   | 29,195     |   | $ | 735 |   | $ | (259 | ) | $ | 29,671 |   |

 

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Securitieswith unrealized losses at year end 2004 and 2003 not recognized in income arepresented below by the length of time the securities have been in a continuousunrealized loss position:

 
| ** **                                | ** ** | **2004**                | ** ** |
|-------------------------------------------|------------|-------------------------|------------|
| ** **                                | ** ** | **Less than 12 months** | ** ** | **12 months or more** | ** ** | **Total** | ** ** |
| ** **                                | ** ** | **Fair  Value**         | ** ** | **Unrealized  loss** | ** ** | **Fair  Value** | ** ** | **Unrealized  loss** | ** ** | **Fair  Value** | ** ** | **Unrealized  loss** | ** ** |
| Corporate                                 |       | $                       | 39,671     |   | $ | 594 |   | $ | — |   | $ | — |   | $ | 39,671 |   | $ | 594 |   |
| U.S. government agencies and corporations |       | 291,506                 |       | 2,573 |   | 32,199 |   | 790 |   | 323,705 |   | 3,363 |   |
| Mortgage-backed                           |       | 108,449                 |       | 1,045 |   | 17,497 |   | 666 |   | 125,946 |   | 1,711 |   |
| States and political subdivisions         |       | 9,563                   |       | 183 |   | 7,730 |   | 7 |   | 17,293 |   | 190 |   |
| Preferred stock                           |       | —                  |       | — |   | 760 |   | 243 |   | 760 |   | 243 |   |
| Total temporarily impaired                |       | $                       | 449,189    |   | $ | 4,395 |   | $ | 58,186 |   | $ | 1,706 |   | $ | 507,375 |   | $ | 6,101 |   |

 
| ** **                                | ** ** | **2003**                | ** ** |
|-------------------------------------------|------------|-------------------------|------------|
| ** **                                | ** ** | **Less than 12 months** | ** ** | **12 months or more** | ** ** | **Total** | ** ** |
| ** **                                | ** ** | **Fair  Value**         | ** ** | **Unrealized  loss** | ** ** | **Fair  Value** | ** ** | **Unrealized  loss** | ** ** | **Fair  Value** | ** ** | **Unrealized  loss** | ** ** |
| Corporate                                 |       | $                       | 11,032     |   | $ | 146 |   | $ | — |   | $ | — |   | $ | 11,032 |   | $ | 146 |   |
| U.S. government agencies and corporations |       | 150,600                 |       | 2,055 |   | — |   | — |   | 150,600 |   | 2,055 |   |
| Mortgage-backed                           |       | 24,804                  |       | 506 |   | 1,033 |   | 252 |   | 25,837 |   | 758 |   |
| States and political subdivisions         |       | 19,723                  |       | 164 |   | — |   | — |   | 19,723 |   | 164 |   |
| Preferred stock                           |       | 3,991                   |       | 9 |   | 4,747 |   | 505 |   | 8,738 |   | 514 |   |
| Total temporarily impaired                |       | $                       | 210,150    |   | $ | 2,880 |   | $ | 5,780 |   | $ | 757 |   | $ | 215,930 |   | $ | 3,637 |   |

 

In accordance with generally accepted accountingprinciples, unrealized losses on debt securities are not recognized ifmanagement has the intent and ability to hold the securities until the maturitydate of the securities and no concerns exist with respect to the ability of theissuer to satisfy its obligations at maturity. Management believes that thefair value of these debt securities with unrealized losses will recover as thesecurities approach their maturity date and/or reprice date. At December 31,2004, preferred stock with an amortized cost of $1.0 million had unrealizedlosses for a continuous period of twelve months or more and the amount of theunrealized losses as of that date was $.2 million. The Company has determinedthis unrealized loss to be temporary as management expects the security torecover its original costs as interest rates increase and the Company has boththe intent and ability to hold the investment until such recovery occurs. Thepreferred stock is issued by the Federal Home Loan Mortgage Corporation. Managementdoes not believe any individual unrealized loss as of December 31, 2004represents other than temporary impairment.

 

15

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Theamortized cost and fair value of debt securities available for sale and held tomaturity at December 31, 2004 by contractual maturity are as follows:

 
| ** **                         | ** ** | **Available for Sale** | ** ** | **Held to Maturity** | ** ** |
|------------------------------------|------------|------------------------|------------|----------------------|------------|
| ** **                         | ** ** | **Amortized  Cost**    | ** ** | **Fair Value**       | ** ** | **Amortized  Cost** | ** ** | **Fair Value** | ** ** |
| Due in 1 year or less              |       | $                      | 26,479     |                 | $          | 26,412 |   | $ | 7,108 |   | $ | 7,105 |   |
| Due after 1 year through 5 years   |       | 283,448                |       | 280,770              |       | 44,181 |   | 44,249 |   |
| Due after 5 years through 10 years |       | 51,290                 |       | 50,543               |       | 3,846 |   | 3,875 |   |
| Due after 10 years                 |       | 2,474                  |       | 2,461                |       | 4,371 |   | 4,317 |   |
| Mortgage-backed                    |       | 121,969                |       | 120,649              |       | 12,430 |   | 12,144 |   |
| Total                              |       | $                      | 485,660    |                 | $          | 480,835 |   | $ | 71,936 |   | $ | 71,690 |   |

 

Expectedmaturities will differ from contractual maturities because issuers may have theright to call or prepay obligations with or without call or prepaymentpenalties. Approximately $232,397 of securities are callable in 2005. Most ofthese callable securities were issued by U.S. government agencies andcorporations.

 

Securitieswith a carrying value of approximately $53,478 and $39,556 at December 31,2004 and 2003, respectively, were pledged to secure public deposits, fiduciaryactivities and for other purposes required or permitted by law.

 

Sales of securitiesavailable for sale were as follows:

 
| ** **            | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|-----------------------|------------|----------|------------|----------|------------|----------|------------|
| Proceeds from sales   |       | $        | 250,225    |     | $          | 128,537  |       | $ | 122,069 |   |
| Gross realized gains  |       | 751      |       | 2,346    |       | 1,687    |       |
| Gross realized losses |       | (2,755   | )          | (246     | )          | (1,266   | )          |
|                       |            |          |            |          |            |          |            |  |  |  |

 

*Gains on securities in 2004, 2003and 2002 also include recoveries of $0, $230 and $596, respectively, onsecurities written off in 1998.*

* *

**Note 3 -Loans**

 

Majorclassifications of loans were as follows at December 31:

 
| ** **                | ** ** | **2004**  | ** ** | **2003**  | ** ** |
|---------------------------|------------|-----------|------------|-----------|------------|
| Commercial                |       | $         | 267,799    |      | $          | 270,220 |   |
| Consumer                  |       | 7,552     |       | 10,040    |       |
| Indirect automobile       |       | 38,651    |       | 60,929    |       |
| Real estate               |       |      |       |      |       |
| Residential               |       | 146,259   |       | 135,776   |       |
| Commercial                |       | 207,978   |       | 217,865   |       |
| Home equity               |       | 237,622   |       | 205,272   |       |
| Construction              |       | 135,264   |       | 171,975   |       |
| Held for sale             |       | 329       |       | 989       |       |
| Credit card               |       | 14,682    |       | 14,872    |       |
| Other                     |       | 516       |       | 697       |       |
| Total                     |       | 1,056,652 |       | 1,088,635 |       |
| Allowance for loan losses |       | (10,527   | )          | (14,420   | )          |
| Loans, net                |       | $         | 1,046,125  |      | $          | 1,074,215 |   |

 

16

----

 

TheCompany makes commercial, personal and residential loans primarily to customersthroughout the western suburbs of Chicago. Construction loans are primarilymade to customers engaged in the development and construction of residentialreal estate projects within the Company’s market area.

 

Changes in the allowancefor loan losses were as follows for the years ended December 31:

 
| ** **                 | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|----------------------------|------------|----------|------------|----------|------------|----------|------------|
| Balance, beginning of year |       | $        | 14,420     |     | $          | 13,847   |       | $ | 12,262 |   |
| Provision for loan losses  |       | 200      |       | 2,150    |       | 8,125    |       |
| Loans charged-off          |       | (4,564   | )          | (1,947   | )          | (6,801   | )          |
| Recoveries                 |       | 471      |       | 370      |       | 261      |       |
| Balance, end of year       |       | $        | 10,527     |     | $          | 14,420   |       | $ | 13,847 |   |

 

Impairedloans are summarized as follows at December 31:

 
| ** **                                                                       | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|----------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Year-end loans with no allocated allowance for loan  losses                      |       | $        | 664        |     | $          | 193      |       | $ | 1,853 |   |
| Year-end loans with allocated allowance for loan  losses                         |       | 6,613    |       | 22,345   |       | 13,739   |       |
| Total                                                                            |       | $        | 7,277      |     | $          | 22,538   |       | $ | 15,592 |   |
|                                                                             |       |     |       |     |       |     |       |
| Amount of the allowance for loan losses allocated to  impaired loans at year-end |       | $        | 2,317      |     | $          | 7,145    |       | $ | 4,525 |   |
| Average impaired loans during the year                                           |       | 15,606   |       | 19,565   |       | 17,316   |       |
| Interest income recognized during impairment                                     |       | 317      |       | 328      |       | 318      |       |

 

Nonperformingloans were as follows at December 31:

 
| Loans past due 90 days or more still on accrual |   | $     | 1,036  |   | $      | 380    |   | $ | 1,789  |   |
|-------------------------------------------------|--------|-------|--------|--------|--------|--------|--------|---|--------|--------|
| Nonaccrual loans                                |   | 3,815 |   | 15,008 |   | 12,021 |   |
| Total                                           |   | $     | 4,851  |   | $      | 15,388 |   | $ | 13,810 |   |

 

Mortgage loans servicedfor others are not included in the accompanying consolidated balance sheets. AtDecember 31, 2004 and 2003, the Company serviced mortgage loans for thebenefit of others with aggregate unpaid principal balances of $8,816 and $13,404,respectively. Accordingly, retained and acquired mortgage servicing rights arenot material and are not presented as a separate asset. The Company generallysells mortgage loans with servicing rights released.

 
| ** **                                 | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|--------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Activity during the year:                  |       |     |       |     |       |     |       |
| Origination of loans held for sale         |       | $        | 15,435     |     | $          | 66,238   |       | $ | 51,240 |   |
| Proceeds from sales of loans held for sale |       | 16,267   |       | 70,307   |       | 53,532   |       |
| Net gains on sales of loans held for sale  |       | 230      |       | 834      |       | 676      |       |
| Loan servicing fees                        |       | 34       |       | 61       |       | 112      |       |
|                                            |            |          |            |          |            |          |            |  |  |  |

 

17

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# **Note 4 - Premises and Equipment**

 

Major classifications ofassets comprising premises and equipment are summarized as follows at December 31:

 
| ** **                    | ** ** | **2004** | ** ** | **2003** | ** ** | ** ** | ** ** |
|-------------------------------|------------|----------|------------|----------|------------|------------|------------|
| Land                          |       | $        | 11,571     |     | $          | 11,571     |       |   |   |
| Premises                      |       | 41,535   |       | 41,080   |       |       |       |
| Furniture and equipment       |       | 42,199   |       | 41,331   |       |       |       |
| Total                         |       | 95,305   |       | 93,982   |       |       |       |
| Less accumulated depreciation |       | (54,664  | )          | (51,086  | )          |       |       |
| Premises and equipment, net   |       | $        | 40,641     |     | $          | 42,896     |       |   |   |

 

##### **Note 5 - Deposits**

 

The major categories ofdeposits are summarized as follows at December 31:

 
| ** **                | ** ** | **2004** | ** ** | **2003** | ** ** | ** ** | ** ** |
|---------------------------|------------|----------|------------|----------|------------|------------|------------|
| Demand-noninterst-bearing |       | $        | 153,081    |     | $          | 143,440    |       |   |   |
| NOW                       |       | 323,979  |       | 309,634  |       |       |       |
| Money market checking     |       | 222,214  |       | 235,538  |       |       |       |
| Savings                   |       | 447,257  |       | 447,017  |       |       |       |
| Time deposits             |       |     |       |     |       |       |       |
| Less than $100,000        |       | 322,184  |       | 303,362  |       |       |       |
| $100,000 and greater      |       | 101,027  |       | 90,940   |       |       |       |
| Total                     |       | $        | 1,569,742  |     | $          | 1,529,931  |       |   |   |

 

At December 31, 2004,the scheduled maturities of time deposits were as follows:

 
| 2005       |   | $      | 184,716 |   |   |   |   |   |
|------------|--------|--------|---------|--------|--------|--------|--------|--------|
| 2006       |   | 53,570 |    |   |   |   |   |
| 2007       |   | 89,829 |    |   |   |   |   |
| 2008       |   | 52,165 |    |   |   |   |   |
| 2009       |   | 42,931 |    |   |   |   |   |
| Thereafter |   | — |    |   |   |   |   |
| Total      |   | $      | 423,211 |   |   |   |   |   |

 

##### **Note 6 - Income Taxes**

 

Incometax expense is as follows for the years ended December 31:

 
| ** **                      | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|---------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Currently payable tax           |       |     |       |     |       |     |       |
| Federal                         |       | $        | 8,595      |     | $          | 10,625   |       | $ | 7,911 |   |
| State                           |       | (421     | )          | 1,727    |       | 1,278    |       |
| Deferred tax provison (benefit) |       | 755      |       | (386     | )          | (717     | )          |
| Total                           |       | $        | 8,929      |     | $          | 11,966   |       | $ | 8,472 |   |

 

18

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Areconciliation between taxes computed at the statutory federal income tax rateand the consolidated effective tax rates follows:

 
| ** **                                     | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Statutory federal income tax rate              |       | 35.0     | %          | 35.0     | %          | 35.0     | %          |
| (Decrease) increase in taxes resulting from    |       |     |       |     |       |     |       |
| Tax-exempt income                              |       | (1.8     | )%         | (1.2     | )%         | (2.0     | )%         |
| State income taxes, net of federal tax benefit |       | (0.6     | )%         | 2.9      | %          | 2.9      | %          |
| Dividends on ESOP shares                       |       | (2.9     | )%         | (3.5     | )%         | (4.1     | )%         |
| Other items, net                               |       | (2.3     | )%         | (1.6     | )%         | 0.3      | %          |
| Effective tax rate                             |       | 27.4     | %          | 31.6     | %          | 32.1     | %          |

 

The temporary differenceswhich created deferred tax assets and liabilities at December 31 aresummarized below:

 
| ** **                                       | ** ** | **2004** | ** ** | **2003** | ** ** | ** ** | ** ** |
|--------------------------------------------------|------------|----------|------------|----------|------------|------------|------------|
| Deferred tax assets                              |       |     |       |     |       |       |       |
| Allowance for loan losses                        |       | $        | 4,185      |     | $          | 5,732      |       |   |   |
| Deferred compensation                            |       | 2,057    |       | 1,639    |       |       |       |
| Unrealized loss on securities available for sale |       | 2,014    |       | 237      |       |       |       |
| Other                                            |       | 987      |       | 798      |       |       |       |
| Total deferred tax assets                        |       | 9,243    |       | 8,406    |       |       |       |
| Deferred tax liabilities                         |       |     |       |     |       |       |       |
| Depreciation                                     |       | 705      |       | 1,031    |       |       |       |
| Federal Home Loan Bank stock dividends           |       | 568      |       | 444      |       |       |       |
| Other                                            |       | 306      |       | 151      |       |       |       |
| Total deferred tax liabilities                   |       | 1,579    |       | 1,626    |       |       |       |
| Net deferred tax assets                          |       | $        | 7,664      |     | $          | 6,780      |       |   |   |

 

Netdeferred tax assets are included in accrued interest and other assets. Novaluation allowance was considered necessary for net deferred tax assets.

 

# **Note7 - Employee Benefit Plans**

 

TheESOP provides incentives to employees by granting participants an interest inWest Suburban’s common stock, which represents the ESOP’s primary investment.An individual account is established for each participant and the benefitspayable upon retirement, termination, disability or death are based uponservice, the amount of the employer’s contributions and any income, expenses,gains and losses and forfeitures allocated to the participant’s account.Contributions, which are determined by the board of directors of the Bank, arepaid by the Bank and were $1,879 in 2004, $2,324 in 2003 and $1,574 in 2002.

 

AtDecember 31, 2004 and 2003, the ESOP held 83,270 and 82,671 shares of WestSuburban common stock, respectively. At December 31, 2004 and 2003,respectively, 83,270 and 80,772 shares of West Suburban common stock wereallocated to ESOP participants. Upon termination of their employment,participants who elect to receive their benefit distributions in the form ofWest Suburban common stock may require the Company to purchase the common stockdistributed at fair value during two 60-day periods. The first purchaseperiod begins on the date the benefit is distributed and the second purchaseperiod begins on the first anniversary of the distribution date. Thiscontingent repurchase obligation is reflected in the Company’s financialstatements as “Common stock in ESOP subject to contingent repurchase obligation”and reduces shareholders’ equity by an amount that represents the independentlyappraised fair value of all West Suburban common stock held by the ESOP andallocated to participants, without regard to whether it is likely that theshares would be distributed or that the recipients of the shares would belikely to exercise their right to require the Company to purchase the shares.At December 31, 2004 and 2003, this contingent repurchase obligation reducedshareholders’ equity by $53,959 and $51,371, respectively.

 

19

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During2004 and 2003, the ESOP distributed $509 and $541, respectively, in cashrepresenting the interests of participants. In addition, the ESOP distributed 673shares in 2004 and 63 shares in 2003 of West Suburban common stock. The Companybelieves that the ESOP will continue to have a sufficient amount of cash todistribute benefit payments to former employees and that the exercise of the rightof former employees to cause the Company to purchase West Suburban common stockis unlikely.

 

The Company has deferredcompensation arrangements with certain former and current executive officers.The deferred compensation expense for the years ended December 31, 2004,2003 and 2002 amounted to $190, $194 and $175, respectively. Executive officerscan elect to defer the payment of a percentage of their salaries and cashbonuses and members of the board of directors can elect to defer the payment oftheir directors’ fees. In addition, the Company makes annual contributions forparticipants ($25 for six senior executive officers and $5 for other executiveofficers). As of December 31, 2004, 14 executive officers participated inthe deferred compensation plan.

 

The total accumulatedliability for all deferred compensation arrangements was $5,175 and $4,123 at December 31,2004 and 2003, respectively. These amounts are included in accrued interest andother liabilities in the consolidated balance sheets.

 

# **Note8 - Financial Instruments with Off-Balance-Sheet Risk**

 

TheCompany is a party to off-balance-sheet financial instruments to meet thefinancing needs of its customers. These financial instruments includecommitments to extend credit and standby letters of credit. These financialinstruments involve, to varying degrees, elements of credit and interest raterisks. Such financial instruments are recorded when funded.

 

Commitmentsto extend credit are agreements to lend to a customer as long as there is no violationof any condition established in the agreement. These commitments are primarilyunused lines of credit, undrawn portions of construction loans and commitmentsto make new loans. Commitments generally have fixed expiration dates or othertermination provisions and may require the payment of a fee. Since many of thecommitments are expected to expire without being exercised or drawn upon, thetotal commitment amounts do not necessarily represent future cash requirements.

 

Letters of credit areconditional commitments issued by the Company to either extend credit to acustomer or guarantee the performance of a customer for the benefit of a thirdparty. Guarantees of performance are primarily issued to support public andprivate borrowing arrangements. The credit risk involved in issuing letters ofcredit is essentially the same as that involved in extending loan facilities tocustomers.

 

The Company’s exposure tocredit risk in connection with commitments to extend credit and standby lettersof credit is the contractual amount of those instruments before consideringcustomer collateral or ability to repay. The Company uses the same creditpolicies in making commitments and conditional obligations as it does foron-balance-sheet instruments. The Company generally requires collateral orother security to support financial instruments with credit risk. The Companyevaluates each customer’s creditworthiness on a case-by-case basis. The amountof collateral obtained, if deemed necessary by the Company, is based onmanagement’s credit evaluation of the customer. Collateral held varies and mayinclude accounts receivable, inventory and equipment or commercial orresidential properties.

 

20

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A summary of thecontractual exposure to off-balance-sheet risk as of December 31 follows:

 
| ** **                           | ** ** | **2004**        | ** ** | **2003**           | ** ** |
|--------------------------------------|------------|-----------------|------------|--------------------|------------|
| ** **                           | ** ** | **Fixed  Rate** | ** ** | **Variable  Rate** | ** ** | **Total** | ** ** | **Fixed  Rate** | ** ** | **Variable  Rate** | ** ** | **Total** | ** ** |
| Commercial loans and lines of credit |       | $               | 956        |               | $          | 168,157 |   | $ | 169,113 |   | $ | 1,094 |   | $ | 145,152 |   | $ | 146,246 |   |
| Check credit lines of credit         |       | 1,262           |       | —             |       | 1,262 |   | 1,354 |   | — |   | 1,354 |   |
| Mortgage loans                       |       | 5,170           |       | 1,750              |       | 6,920 |   | 5,251 |   | 2,899 |   | 8,150 |   |
| Home equity lines of credit          |       | —          |       | 170,301            |       | 170,301 |   | — |   | 164,967 |   | 164,967 |   |
| Letters of credit                    |       | —          |       | 31,973             |       | 31,973 |   | — |   | 33,780 |   | 33,780 |   |
| Credit card lines of credit          |       | —          |       | 76,003             |       | 76,003 |   | — |   | 72,293 |   | 72,293 |   |
| Total                                |       | $               | 7,388      |               | $          | 448,184 |   | $ | 455,572 |   | $ | 7,699 |   | $ | 419,091 |   | $ | 426,790 |   |

 

Fixedrate commercial loan commitments at December 31, 2004 generally hadinterest rates ranging from 4.75% to 9.00% with remaining terms ranging from 1 monthto 5 years. Fixed rate mortgage loan commitments at December 31, 2004generally had interest rates ranging from 4.75% to 5.88% with terms rangingfrom 10 to 30 years. Fixed rate check credit lines of credit had an interestrate of 18.00% as of December 31, 2004.

 

# **Note9 - Fair Value of Financial Instruments**

 

The methods andassumptions used to estimate fair values of financial instruments are asfollows. For short-term assets (i.e., cash and due from banks and federal fundssold), their estimated fair values approximate their carrying values. Fordeposits with variable interest rates, it has been assumed that their estimatedfair values approximate their carrying values. Because of their short terms,the carrying values of accrued interest receivable and payable approximatetheir fair value.

 

The fair values forsecurities were derived from quoted market values or, when quotes were notavailable, the fair values were estimated based on the rate and term of thesecurity and information about the issuer. The fair values for loans wereestimated by discounting the future expected cash flows from loan repaymentsusing current interest rates for loans having comparable maturities and creditrisk. The fair values for time deposits were estimated by discounting expectedcash flows at discount rates comparable to current market rates for similarmaturing liabilities.

 

Off-balance-sheetfinancial instruments are comprised of letters of credit and commitments toextend credit. The estimated fair value of off-balance-sheet financialinstruments is not considered material.

 

While these estimates offair value are based on management’s judgment of the most appropriate factorsas of the balance sheet date, there is no assurance that the estimated fairvalues would have been realized if the assets would have been disposed of orthe liabilities settled at that date, since market values may differ dependingon various factors. The estimated fair values would also not apply tosubsequent dates.

 

21

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The estimated fair valuesof the Company’s financial instruments as of December 31 are set forth inthe table below:

 
| ** **                            | ** ** | **2004**            | ** ** | **2003**                  | ** ** |
|---------------------------------------|------------|---------------------|------------|---------------------------|------------|
| ** **                            | ** ** | **Carrying  Value** | ** ** | **Estimated  Fair Value** | ** ** | **Carrying  Value** | ** ** | **Estimated  Fair Value** | ** ** |
| Financial assets                      |       |                |       |                      |       |   |   |   |   |
| Cash and cash equivalents             |       | $                   | 51,400     |                      | $          | 51,400 |   | $ | 69,344 |   | $ | 69,344 |   |
| Securities                            |       |                |       |                      |       |   |   |   |   |
| Available for sale                    |       | 481,595             |       | 481,595                   |       | 458,146 |   | 458,146 |   |
| Held to maturity                      |       | 71,936              |       | 71,690                    |       | 29,195 |   | 29,671 |   |
| Federal Home Loan Bank stock          |       | 5,352               |       | 5,352                     |       | 5,039 |   | 5,039 |   |
| Loans, less allowance for loan losses |       | 1,046,125           |       | 1,055,087                 |       | 1,074,215 |   | 1,105,763 |   |
| Accrued interest                      |       | 7,309               |       | 7,309                     |       | 7,869 |   | 7,869 |   |
|                                  |       |                |       |                      |       |   |   |   |   |
| Financial liabilities                 |       |                |       |                      |       |   |   |   |   |
| Deposits                              |       | 1,569,742           |       | 1,516,812                 |       | 1,529,931 |   | 1,541,908 |   |
| Accrued interest                      |       | 4,075               |       | 4,075                     |       | 2,986 |   | 2,986 |   |
|                                       |            |                     |            |                           |            |  |  |  |  |  |  |  |  |

 

# **Note10 - Related Party Transactions**

 

Certain executiveofficers and directors of the Company, their affiliates and companies in whichthey have 10% or more beneficial ownership, are customers of the Bank in theordinary course of business and had loans from the Bank totaling $30,421 and $29,353at December 31, 2004 and 2003, respectively. During 2004, $13,648 in loansand $12,580 in principal payments were made. Related parties had depositstotaling $43,197 and $32,351 at December 31, 2004 and 2003, respectively.

 

# **Note11 - Capital Requirements**

 

The Company and the Bankare subject to various regulatory capital requirements administered by federalbanking agencies. Failure to meet minimum capital requirements may result inthe initiation of actions by regulators that could have direct material effectson the financial statements. Under capital adequacy guidelines and theregulatory framework for prompt corrective action, each entity must meetspecific capital guidelines that involve quantitative measures of assets,liabilities and certain off-balance-sheet items as calculated under regulatoryaccounting practices. Capital amounts and classifications are also subject toqualitative judgements by the regulators about components, risk weightings andother factors.

 

Regulations require theCompany and the Bank to maintain minimum capital amounts and ratios (set forthin the following table). Management believes that as of December 31, 2004,the Company and the Bank exceeded all capital adequacy requirements.

 

Management’s presentpolicy is to limit dividends from the Bank so that the Bank qualifies as a “well-capitalized”institution as defined by the Federal Deposit Insurance Corporation ImprovementAct of 1991. This policy minimizes the amount of Federal Deposit InsuranceCorporation (“FDIC”) insurance premiums paid by the Bank and provides capitalto fund growth. As of December 31, 2004, the Bank could pay, in theaggregate, dividends of approximately $9,800 to West Suburban while remaining a“well-capitalized” institution. Dividends from the Bank are West Suburban’sprimary source of cash flow.

 

22

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Asof December 31, 2004 and 2003, the most recent notifications from the FDICcategorized the Bank as “well- capitalized” under the regulatory framework forprompt corrective action. To be categorized as “well-capitalized” the Bank mustmaintain minimum ratios for total capital to risk weighted assets, Tier 1capital to risk weighted assets and Tier 1 capital to average assets as setforth in the following table. There are no conditions or events since thatnotification that management believes would result in a change of the category.The capital amounts and ratios of the Company and the Bank for purposes of theprompt corrective action framework are presented in the table below:

 
| ** **                               | ** ** | **Actual** | ** ** | **Minimum For  Capital Adequacy  Purposes** | ** ** | **Minumum  To Be Well-  Capitalized** | ** ** |
|------------------------------------------|------------|------------|------------|---------------------------------------------|------------|---------------------------------------|------------|
| ** **                               | ** ** | **Amount** | ** ** | **Ratio**                                   | ** ** | **Amount**                            | ** ** | **Ratio** | ** ** | **Amount** | ** ** | **Ratio** | ** ** |
| **As of December 31, 2004**         |       |       |       |                                        |       |                                  |       |   |   |   |   |   |   |
| Total capital (to risk weighted assets)  |       |       |       |                                        |       |                                  |       |   |   |   |   |   |   |
| Company                                  |       | $          | 163,176    |                                        | 12.1       | %                                     | $          | 108,243 |   | 8.0 | % | $ | 135,304 |   | 10.0 | % |
| Bank                                     |       | 144,708    |       | 10.7                                        | %          | 107,870                               |       | 8.0 | % | 134,838 |   | 10.0 | % |
| Tier 1 capital (to risk weighted assets) |       |       |       |                                        |       |                                  |       |   |   |   |   |   |   |
| Company                                  |       | 152,649    |       | 11.3                                        | %          | 54,122                                |       | 4.0 | % | 81,182 |   | 6.0 | % |
| Bank                                     |       | 134,181    |       | 10.0                                        | %          | 53,935                                |       | 4.0 | % | 80,903 |   | 6.0 | % |
| Tier 1 capital (to average assets)       |       |       |       |                                        |       |                                  |       |   |   |   |   |   |   |
| Company                                  |       | 152,649    |       | 8.8                                         | %          | 69,672                                |       | 4.0 | % | 87,090 |   | 5.0 | % |
| Bank                                     |       | 134,181    |       | 7.7                                         | %          | 69,371                                |       | 4.0 | % | 86,713 |   | 5.0 | % |
|                                     |       |       |       |                                        |       |                                  |       |   |   |   |   |   |   |
| As of December 31, 2003             |       |       |       |                                        |       |                                  |       |   |   |   |   |   |   |
| Total capital (to risk weighted assets)  |       |       |       |                                        |       |                                  |       |   |   |   |   |   |   |
| Company                                  |       | $          | 163,675    |                                        | 12.0       | %                                     | $          | 109,589 |   | 8.0 | % | $ | 136,986 |   | 10.0 | % |
| Bank                                     |       | 147,535    |       | 10.8                                        | %          | 109,485                               |       | 8.0 | % | 136,856 |   | 10.0 | % |
| Tier 1 capital (to risk weighted assets) |       |       |       |                                        |       |                                  |       |   |   |   |   |   |   |
| Company                                  |       | 149,255    |       | 10.9                                        | %          | 54,794                                |       | 4.0 | % | 82,191 |   | 6.0 | % |
| Bank                                     |       | 133,115    |       | 9.7                                         | %          | 54,742                                |       | 4.0 | % | 82,113 |   | 6.0 | % |
| Tier 1 capital (to average assets)       |       |       |       |                                        |       |                                  |       |   |   |   |   |   |   |
| Company                                  |       | 149,255    |       | 8.7                                         | %          | 68,655                                |       | 4.0 | % | 85,819 |   | 5.0 | % |
| Bank                                     |       | 133,115    |       | 7.8                                         | %          | 68,634                                |       | 4.0 | % | 85,792 |   | 5.0 | % |

 

The appraised fair valueof West Suburban common stock owned by the ESOP is included in Tier 1 capital.

 

**Note 12 -Other Comprehensive Income**

 

Other comprehensiveincome components and related taxes were as follows:

 
| ** **                                                                      | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|---------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Net unrealized holding (losses) gains on available  for sale securities         |       | $        | (6,472     | )        | $          | (3,389   | )          | $ | 5,470 |   |
| Reclassification adjustments for losses and (gains)  later recognized in income |       | 2,004    |       | (2,330   | )          | (1,017   | )          |
| Net unrealized (losses) gains                                                   |       | (4,468   | )          | (5,719   | )          | 4,453    |       |
| Tax effect                                                                      |       | 1,777    |       | 2,268    |       | (1,766   | )          |
| Other comprehensive (loss) income                                               |       | $        | (2,691     | )        | $          | (3,451   | )          | $ | 2,687 |   |

 

23

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# **Note13 - Condensed Financial Information - Parent Only**

 

**Condensed Balance Sheets**

## **December 31,2004 and 2003**

 
| ** **                                                                           | ** ** | **2004** | ** ** | **2003** | ** ** | ** ** | ** ** |
|--------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|------------|------------|
| **Assets**                                                                           |       |     |       |     |       |       |       |
| Cash, substantially all on deposit in subsidiary                                     |       | $        | 14,234     |     | $          | 18,125     |       |   |   |
| Securities available for sale (amortized cost of  $3,874 in 2004 and $2,293 in 2003) |       | 3,813    |       | 2,291    |       |       |       |
| Securities held to maturity (fair value of $4,029 in  2004 and $0 in 2003)           |       | 4,149    |       | —   |       |       |       |
| Investment in subsidiary                                                             |       | 131,310  |       | 133,061  |       |       |       |
| Goodwill                                                                             |       | 712      |       | 712      |       |       |       |
| Other assets                                                                         |       | 627      |       | 136      |       |       |       |
| **Total assets**                                                                     |       | $        | 154,845    |     | $          | 154,325    |       |   |   |
|                                                                                 |       |     |       |     |       |       |       |
| **Liabilities and shareholders’ equity**                                        |       |     |       |     |       |       |       |
| Dividends payable                                                                    |       | $        | 4,325      |     | $          | 4,325      |       |   |   |
| Other liabilities                                                                    |       | 66       |       | 88       |       |       |       |
|                                                                                 |       |     |       |     |       |       |       |
| Common stock in ESOP subject to contingent  repurchase obligation                    |       | 53,959   |       | 51,371   |       |       |       |
|                                                                                 |       |     |       |     |       |       |       |
| Shareholders’ equity                                                            |       | 96,495   |       | 98,541   |       |       |       |
| **Total liabilities and shareholders’ equity**                                  |       | $        | 154,845    |     | $          | 154,325    |       |   |   |

 

**Condensed Statements of Income**

**Years Ended December 31, 2004, 2003 and 2002**

 
| ** **                                                          | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|---------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| **Income**                                                          |       |     |       |     |       |     |       |
| Dividends from subsidiary                                           |       | $        | 22,633     |     | $          | 25,586   |       | $ | 13,145 |   |
| Interest income                                                     |       |     |       |     |       |     |       |
| Deposits                                                            |       | 140      |       | 190      |       | 259      |       |
| Securities                                                          |       | 331      |       | 2        |       | 99       |       |
| Net realized losses on securities transactions                      |       | (47      | )          | —   |       | (81      | )          |
| Total income                                                        |       | 23,057   |       | 25,778   |       | 13,422   |       |
|                                                                |       |     |       |     |       |     |       |
| **Expense**                                                         |       |     |       |     |       |     |       |
| Other                                                               |       | 403      |       | 391      |       | 310      |       |
| Total expense                                                       |       | 403      |       | 391      |       | 310      |       |
| **Income before income taxes**                                      |       | 22,654   |       | 25,387   |       | 13,112   |       |
| **Income tax (benefit) expense**                                    |       | (100     | )          | (161     | )          | (6       | )          |
| **Income before equity in undistributed net income  of subsidiary** |       | 22,754   |       | 25,548   |       | 13,118   |       |
| **Equity in undistributed net income of subsidiary**                |       | 904      |       | 360      |       | 4,814    |       |
| **Net income**                                                      |       | $        | 23,658     |     | $          | 25,908   |       | $ | 17,932 |   |

 

24

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**Condensed Statements of Cash Flows**

**Years Ended December 31, 2004, 2003 and 2002**

 
| ** **                                                                        | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|-----------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| **Cash flows from operating activities**                                          |       |     |       |     |       |     |       |
| Net income                                                                        |       | $        | 23,658     |     | $          | 25,908   |       | $ | 17,932 |   |
| Adjustments to reconcile net income to net cash  provided by operating activities |       |     |       |     |       |     |       |
| Deferred income tax benefit                                                       |       | (26      | )          | (20      | )          | (12      | )          |
| Equity in undistributed net income of subsidiary                                  |       | (904     | )          | (360     | )          | (4,814   | )          |
| Net (discount accretion) and premium amortization of  securities                  |       | (90      | )          | —   |       | 15       |       |
| Net realized losses on securities transactions                                    |       | 47       |       | —   |       | 81       |       |
| (Increase) decrease in other assets                                               |       | (441     | )          | (60      | )          | 102      |       |
| (Decrease) increase in other liabilities                                          |       | (22      | )          | (1       | )          | 22       |       |
| **Net cash provided by operating activities**                                     |       | 22,222   |       | 25,467   |       | 13,326   |       |
| **Cash flows from investing activities**                                          |       |     |       |     |       |     |       |
| Securities available for sale                                                     |       |     |       |     |       |     |       |
| Sales                                                                             |       | 3,170    |       | —   |       | 10,429   |       |
| Maturities                                                                        |       | —   |       | —   |       | —   |       |
| Purchases                                                                         |       | (4,820   | )          | (2,293   | )          | —   |       |
| Securities held to maturity                                                       |       |     |       |     |       |     |       |
| Sales                                                                             |       | —   |       | —   |       | —   |       |
| Maturities                                                                        |       | —   |       | —   |       | —   |       |
| Purchases                                                                         |       | (4,038   | )          | —   |       | —   |       |
| **Net cash (used in) provided by investing  activities**                          |       | (5,688   | )          | (2,293   | )          | 10,429   |       |
| **Cash flows from financing activities**                                          |       |     |       |     |       |     |       |
| Cash dividends paid                                                               |       | (21,625  | )          | (22,490  | )          | (17,733  | )          |
| Loan to ESOP to acquire West Suburban common stock                                |       | 1,200    |       | (1,200   | )          | —   |       |
| **Net cash used in financing activities**                                         |       | (20,425  | )          | (23,690  | )          | (17,733  | )          |
| **Net (decrease) increase in cash**                                               |       | (3,891   | )          | (516     | )          | 6,022    |       |
| **Beginning cash**                                                                |       | 18,125   |       | 18,641   |       | 12,619   |       |
| **Ending cash**                                                                   |       | $        | 14,234     |     | $          | 18,125   |       | $ | 18,641 |   |

 

25

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# **Note14 - Quarterly Results of Operations (Unaudited)**

 

Thefollowing table sets forth certain unaudited income, expense and per share dataon a quarterly basis for the three-month periods indicated:

 
| **Year Ended December 31, 2004**               | ** ** | **Fourth  Quarter** | ** ** | **Third  Quarter** | ** ** | **Second  Quarter** | ** ** | **First  Quarter** | ** ** |
|-----------------------------------------------------|------------|---------------------|------------|--------------------|------------|---------------------|------------|--------------------|------------|
| Interest income                                     |       | $                   | 19,971     |               | $          | 19,908              |       | $                  | 19,936     |   | $ | 19,511 |   |
| Interest expense                                    |       | 5,944               |       | 5,579              |       | 5,295               |       | 5,021              |       |
| Net interest income                                 |       | 14,027              |       | 14,329             |       | 14,641              |       | 14,490             |       |
| Provision for loan losses                           |       | —              |       | —             |       | 200                 |       | —             |       |
| Net interest income after provision for loan losses |       | 14,027              |       | 14,329             |       | 14,441              |       | 14,490             |       |
| Noninterest income                                  |       | 5,407               |       | 2,998              |       | 5,083               |       | 4,738              |       |
| Noninterest expense                                 |       | 10,430              |       | 10,666             |       | 11,083              |       | 10,747             |       |
| Income before income taxes                          |       | 9,004               |       | 6,661              |       | 8,441               |       | 8,481              |       |
| Income tax expense                                  |       | 2,158               |       | 1,712              |       | 2,336               |       | 2,723              |       |
| Net income                                          |       | $                   | 6,846      |               | $          | 4,949               |       | $                  | 6,105      |   | $ | 5,758 |   |
| Earnings per share                                  |       | $                   | 15.87      |               | $          | 11.45               |       | $                  | 14.14      |   | $ | 13.36 |   |
|                                                |       |                |       |               |       |                |       |               |       |
| **Year Ended December 31, 2003**               |       |                |       |               |       |                |       |               |       |
| Interest income                                     |       | $                   | 19,921     |               | $          | 20,030              |       | $                  | 20,401     |   | $ | 20,449 |   |
| Interest expense                                    |       | 5,072               |       | 5,245              |       | 5,849               |       | 5,820              |       |
| Net interest income                                 |       | 14,849              |       | 14,785             |       | 14,552              |       | 14,629             |       |
| Provision for loan losses                           |       | —              |       | 1,250              |       | 500                 |       | 400                |       |
| Net interest income after provision for loan losses |       | 14,849              |       | 13,535             |       | 14,052              |       | 14,229             |       |
| Noninterest income                                  |       | 5,454               |       | 5,097              |       | 4,933               |       | 6,836              |       |
| Noninterest expense                                 |       | 11,152              |       | 10,349             |       | 10,055              |       | 9,555              |       |
| Income before income taxes                          |       | 9,151               |       | 8,283              |       | 8,930               |       | 11,510             |       |
| Income tax expense                                  |       | 2,683               |       | 2,563              |       | 3,015               |       | 3,705              |       |
| Net income                                          |       | $                   | 6,468      |               | $          | 5,720               |       | $                  | 5,915      |   | $ | 7,805 |   |
| Earnings per share                                  |       | $                   | 14.93      |               | $          | 13.23               |       | $                  | 13.68      |   | $ | 18.06 |   |

 

During the fourth quarterof 2004, the Company had an increase in noninterest income of $2,409 comparedto the third quarter of the same year. This was primarily due to net losses onsale of investment securities of $2,057 during the third quarter of 2004. Thesetransactions were undertaken to reposition the investment portfolio to shortenduration and reduce interest rate risk. The Company also experienced increased noninterestincome as a result of increased fees from its prepaid solutions and brokerageprograms. The Company also had increased interest expense of $365 during thisperiod compared to the third quarter of the same year, primarily due to higherinterest rates paid on deposits as a result of the rising interest rateenvironment. Noninterest expense decreased during the fourth quarter comparedto the third quarter of the same year, primarily due to decreased profitsharing expense resulting from a decrease in the ESOP contribution percentage.The Bank’s board of directors determined that the decrease in contributionpercentage was appropriate in light of the Bank’s performance in 2004.

 

The provision for loanlosses decreased $1,250 during the fourth quarter of 2003 compared to the thirdquarter of the same year. This was due to a decrease in nonperforming loans andnet loan charge-offs, as well as a continuing decline in total loans during thequarter. Noninterest expense increased $803 during the fourth quarter of 2003compared to the third quarter of the same year, primarily due to increasedprofit sharing expense resulting from an increase in the ESOP contributionpercentage. The Bank’s board of directors determined that the increase incontribution percentage was appropriate in light of the Bank’s performance in2003. During the fourth quarter of 2003, telephone expense decreased as theCompany was reimbursed for overcharges.

 

26

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**REPORT BY MANAGEMENT ON INTERNALCONTROL OVER F****INANCIAL REPORTING**

 

Management of the Company is responsible for establishing andmaintaining an effective system of internal control over financialreporting.  The Company’s system ofinternal control over financial reporting is designed to provide reasonableassurance regarding the reliability of financial reporting and the preparationof financial statements for external purposes in accordance with generallyaccepted accounting principles.  Thereare inherent limitations in the effectiveness of any system of internal controlover financial reporting, including the possibility of human error and thecircumvention or overriding of controls. Accordingly, even an effective system of internal control over financialreporting can provide only reasonable assurance with respect to financialstatement preparation.  Projections ofany evaluation of effectiveness to future periods are subject to the risks thatcontrols may become inadequate because of changes in conditions or that thedegree of compliance with the policies or procedures may deteriorate.

 

Management assessed the Company’s systems of internal control overfinancial reporting as of December 31, 2004. This assessment was based on criteria for effective internal controlover financial reporting described in Internal Control—Integrated Frameworkissued by the Committee of Sponsoring Organizations of the TreadwayCommission.  Based on this assessment,management believes that, as of December 31, 2004, the Company maintainedeffective internal control over financial reporting based on those criteria.

 

The Company’s independent auditors have issued an audit report onmanagement’s assessment of the Company’s internal control over financialreporting.

 

 

February 25, 2005

 

 
| /s/ Kevin J. Acker                    |   |
|---------------------------------------|--------|
| Kevin J. Acker                        |
| Chairman and Chief Executive Officer  |
|                                  |
|                                  |
| /s/ Duane G. Debs                     |   |
| Duane G. Debs                         |
| President and Chief Financial Officer |

 

27

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**[CROWE CHIZEK LOGO]**

 

 

**REPORT OF INDEPENDENT REGISTEREDPUBLIC A****CCOUNTING FIRM ON INTERNALCONTROL OVER FINANCIAL REPORTING**

** **

We have audited management’s assessment, included in the accompanyingManagement’s Report on Internal Control Over Financial Reporting, that WestSuburban Bancorp, Inc. maintained effective internal control over**financial reporting as of December 31,2004, based on criteria established inInternal Control—Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission (COSO).  West Suburban Bancorp, Inc.’s management isresponsible for maintaining effective internal control over financial reportingand for its assessment of the effectiveness of internal control over financialreporting.  Our responsibility is to expressan opinion on management’s assessment and an opinion on the effectiveness ofthe company’s internal control over financial reporting based on our audit.

 

We conducted our audit in accordance with the standards of the PublicCompany Accounting Oversight Board (United States).  Those standards require that we plan andperform the audit to obtain reasonable assurance about whether effectiveinternal control over financial reporting was maintained in all materialrespects.  Our audit included obtainingan understanding of internal control over financial reporting, evaluatingmanagement’s assessment, testing and evaluating the design and operatingeffectiveness of internal control, and performing such other procedures as weconsidered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

 

A company’s internal control over financial reporting is a processdesigned to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles.  A company’s internal control over financialreporting includes those policies and procedures that (1) pertain to themaintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2)provide reasonable assurance that transactions are recorded as necessary topermit preparation of financial statements in accordance with generally acceptedaccounting principles, and that receipts and expenditures of the company arebeing made only in accordance with authorizations of management and directorsof the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financialreporting may not prevent or detect misstatements.  Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls maybecome inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate.

 

In our opinion, management’s assessment that West Suburban Bancorp,Inc. maintained effective internal control over financial reporting as ofDecember 31, 2004, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issuedby the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Also in our opinion, West Suburban Bancorp,Inc. maintained, in all material respects, effective internal control overfinancial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued bythe Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

28

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We have also audited, in accordance with the standards of the PublicCompany Accounting Oversight Board (United States), the consolidated balance sheets of West SuburbanBancorp, Inc. as of December 31, 2004 and 2003, and the related consolidatedstatements of income, changes in shareholders’ equity, and cash flows for eachof the three years in the period ended December 31, 2004, and our report dated February25, 2005 expressed anunqualified opinion on those consolidated financial statements.

 

 
|                | /s/ Crowe Chizek and Company LLC |   |
|---------------------|----------------------------------|--------|
|                | Crowe Chizek and Company LLC     |
|                |                             |
|                |                             |
| Oak Brook, Illinois |                             |
| February 25, 2005   |                             |

 

29

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**SELECTED FINANCIAL DATA**

(Dollars in thousands,except per share data)

 

The following information should be read inconjunction with Management’s Discussion and Analysis of Financial Conditionand Results of Operations and the Company’s Consolidated Financial Statements andNotes to Consolidated Financial Statements included in this annual report.

 
| ** **                                                                                                                        | ** ** | **Years Ended December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                                                                                                        | ** ** | **2004**                     | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** | **2000** | ** ** |
| **Selected  operating data**                                                                                                      |       |                         |       |   |   |   |   |   |   |   |   |
| Interest income                                                                                                                   |       | $                            | 79,326     |   | $ | 80,801 |   | $ | 85,394 |   | $ | 98,904 |   | $ | 103,284 |   |
| Interest expense                                                                                                                  |       | 21,839                       |       | 21,986 |   | 27,803 |   | 40,413 |   | 46,068 |   |
| Net interest  income                                                                                                              |       | 57,487                       |       | 58,815 |   | 57,591 |   | 58,491 |   | 57,216 |   |
| Provision for  loan losses                                                                                                        |       | 200                          |       | 2,150 |   | 8,125 |   | 2,950 |   | 1,500 |   |
| Net interest  income after provision for loan losses                                                                              |       | 57,287                       |       | 56,665 |   | 49,466 |   | 55,541 |   | 55,716 |   |
| Noninterest  income (1)                                                                                                           |       | 18,226                       |       | 22,320 |   | 13,989 |   | 9,684 |   | 8,309 |   |
| Noninterest  expense                                                                                                              |       | 42,926                       |       | 41,111 |   | 37,051 |   | 35,467 |   | 33,727 |   |
| Income before  income taxes                                                                                                       |       | 32,587                       |       | 37,874 |   | 26,404 |   | 29,758 |   | 30,298 |   |
| Income tax  expense                                                                                                               |       | 8,929                        |       | 11,966 |   | 8,472 |   | 9,575 |   | 9,295 |   |
| Net income                                                                                                                        |       | $                            | 23,658     |   | $ | 25,908 |   | $ | 17,932 |   | $ | 20,183 |   | $ | 21,003 |   |
|                                                                                                                              |       |                         |       |   |   |   |   |   |   |   |   |
| **Per  share data**                                                                                                               |       |                         |       |   |   |   |   |   |   |   |   |
| Earnings                                                                                                                          |       | $                            | 54.82      |   | $ | 59.90 |   | $ | 41.46 |   | $ | 46.67 |   | $ | 48.56 |   |
| Cash dividends  declared                                                                                                          |       | 50.00                        |       | 44.00 |   | 41.50 |   | 40.00 |   | 39.50 |   |
| Book value (2)                                                                                                                    |       | 347.87                       |       | 346.62 |   | 341.47 |   | 335.30 |   | 323.17 |   |
|                                                                                                                              |       |                         |       |   |   |   |   |   |   |   |   |
| **Selected  balances, end of year**                                                                                               |       |                         |       |   |   |   |   |   |   |   |   |
| Securities                                                                                                                        |       | $                            | 558,883    |   | $ | 492,380 |   | $ | 328,300 |   | $ | 268,815 |   | $ | 294,217 |   |
| Loans, less  allowance for loan losses                                                                                            |       | 1,046,125                    |       | 1,074,215 |   | 1,128,816 |   | 1,093,376 |   | 1,016,140 |   |
| Total assets                                                                                                                      |       | 1,748,049                    |       | 1,710,695 |   | 1,586,063 |   | 1,473,559 |   | 1,431,958 |   |
| Deposits                                                                                                                          |       | 1,569,742                    |       | 1,529,931 |   | 1,420,256 |   | 1,309,720 |   | 1,269,954 |   |
| Shareholders’  equity plus common stock in ESOP subject to contingent repurchase obligation                                  |       | 150,454                      |       | 149,912 |   | 147,685 |   | 145,015 |   | 139,768 |   |
|                                                                                                                              |       |                         |       |   |   |   |   |   |   |   |   |
| **Ratios**                                                                                                                        |       |                         |       |   |   |   |   |   |   |   |   |
| Return on  average total assets                                                                                                   |       | 1.36                         | %          | 1.55 | % | 1.17 | % | 1.40 | % | 1.53 | % |
| Return on  average shareholders’ equity plus common stock in ESOP subject to contingent  repurchase obligation               |       | 15.58                        | %          | 16.94 | % | 12.01 | % | 13.73 | % | 14.96 | % |
| Cash dividends  declared to net income                                                                                            |       | 91.41                        | %          | 73.45 | % | 100.09 | % | 85.72 | % | 81.34 | % |
| Average  shareholders’ equity plus common stock in ESOP subject to contingent  repurchase obligation to average total assets |       | 8.73                         | %          | 9.16 | % | 9.76 | % | 10.21 | % | 10.22 | % |
| Net interest  margin (3)                                                                                                          |       | 3.60                         | %          | 3.81 | % | 4.07 | % | 4.39 | % | 4.51 | % |

 

----

(1)          Noninterest income includes a litigationsettlement of $1,085 in 2003 for the settlement of a claim related to aninvestment that the Company made in prior years. Noninterest income alsoincludes gains (losses) on sales on securities of ($2,004) in 2004, $2,330 in2003, $1,017 in 2002, $2,334 in 2001 and $0 in 2000 and a write-down of $2,960of the carrying value of securities available for sale in 2001.

(2)          Book value per share equals shareholders’equity plus common stock in ESOP subject to contingent repurchase obligationdivided by the number of outstanding shares.

(3)          Net interest margin is presented on a taxequivalent basis, assuming a federal income tax rate of 35%.

 

30

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**AVERAGE BALANCE SHEETS, NET INTER****EST INCOME AND**

## **AVERAGE RATES AND YIELDS ON A TAX EQUIVALENTBASIS**

(Dollars in thousands)

 

The following table presents for theyears indicated the total dollar amount of interest income from averageinterest-earning assets and their yields, as well as the interest expense onaverage interest-bearing liabilities and their costs, expressed both in dollarsand rates. All average balances are daily average balances. To the extentreceived, interest on nonaccruing loans has been included in the table.Interest income on nonaccrual loans was not material in 2004, 2003 and 2002.

 
| ** **                                                                                       |   | **Years  Ended December 31,** |      |
|--------------------------------------------------------------------------------------------------|--------|-------------------------------|-----------|
| ** **                                                                                       |   | **2004**                      |      | **2003** |   | **2002** |   |
| ** **                                                                                       |   | **Average   Balance**         |      | **Interest** |   | **Rate** |   | **Average  Balance** |   | **Interest** |   | **Rate** |   | **Average  Balance** |   | **Interest** |   | **Rate** |   |
| **Assets**                                                                                       |   |                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal funds  sold                                                                              |   | $                             | 24,838    |   | $ | 363 |   | 1.5 | % | $ | 17,947 |   | $ | 197 |   | 1.1 | % | $ | 25,471 |   | $ | 418 |   | 1.6 | % |
| Securities                                                                                       |   |                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                                                          |   | 494,397                       |      | 18,158 |   | 3.7 | % | 408,992 |   | 16,037 |   | 3.9 | % | 276,019 |   | 13,495 |   | 4.9 | % |
| Exempt from  federal income tax (1)                                                              |   | 40,165                        |      | 2,463 |   | 6.1 | % | 32,098 |   | 2,114 |   | 6.6 | % | 27,152 |   | 1,906 |   | 7.0 | % |
| Total securities  (1)                                                                            |   | 534,562                       |      | 20,621 |   | 3.9 | % | 441,090 |   | 18,151 |   | 4.1 | % | 303,171 |   | 15,401 |   | 5.1 | % |
| Loans (1)                                                                                        |   | 1,061,218                     |      | 59,236 |   | 5.6 | % | 1,107,082 |   | 63,237 |   | 5.7 | % | 1,102,465 |   | 70,290 |   | 6.4 | % |
| Total  interest-earning assets (1)                                                               |   | 1,620,618                     |      | 80,220 |   | 4.9 | % | 1,566,119 |   | 81,585 |   | 5.2 | % | 1,431,107 |   | 86,109 |   | 6.0 | % |
| Cash and due from  banks                                                                         |   | 39,829                        |      |   |   |   |   | 40,451 |   |   |   |   |   | 40,339 |   |   |   |   |   |
| Premises and  equipment, net                                                                     |   | 41,644                        |      |   |   |   |   | 44,362 |   |   |   |   |   | 44,957 |   |   |   |   |   |
| Other real estate                                                                                |   | 3,913                         |      |   |   |   |   | 154 |   |   |   |   |   | 1,516 |   |   |   |   |   |
| Allowance for  loan losses                                                                       |   | (13,309                       | )         |   |   |   |   | (14,566 | ) |   |   |   |   | (12,901 | ) |   |   |   |   |
| Accrued interest  and other assets (2)                                                           |   | 46,491                        |      |   |   |   |   | 32,989 |   |   |   |   |   | 25,215 |   |   |   |   |   |
| **Total  assets**                                                                                |   | $                             | 1,739,186 |   |   |   |   |   | $ | 1,669,509 |   |   |   |   |   | $ | 1,530,233 |   |   |   |   |   |
| **Liabilities  and shareholders’ equity**                                                   |   |                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing  deposits                                                                       |   |                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW                                                                                              |   | $                             | 313,023   |   | 795 |   | 0.3 | % | $ | 289,718 |   | 730 |   | 0.3 | % | $ | 260,916 |   | 1,086 |   | 0.4 | % |
| Money market  checking                                                                           |   | 232,431                       |      | 3,271 |   | 1.4 | % | 234,031 |   | 3,199 |   | 1.4 | % | 228,555 |   | 4,428 |   | 1.9 | % |
| Savings                                                                                          |   | 447,583                       |      | 5,202 |   | 1.2 | % | 414,074 |   | 5,256 |   | 1.3 | % | 337,671 |   | 6,015 |   | 1.8 | % |
| Time deposits                                                                                    |   |                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less than  $100,000                                                                              |   | 318,447                       |      | 9,510 |   | 3.0 | % | 312,473 |   | 9,924 |   | 3.2 | % | 307,122 |   | 12,697 |   | 4.1 | % |
| $100,000 and  greater                                                                            |   | 99,208                        |      | 3,027 |   | 3.1 | % | 92,811 |   | 2,842 |   | 3.1 | % | 90,053 |   | 3,536 |   | 3.9 | % |
| Total  interest-bearing deposits                                                                 |   | 1,410,692                     |      | 21,805 |   | 1.5 | % | 1,343,107 |   | 21,951 |   | 1.6 | % | 1,224,317 |   | 27,762 |   | 2.3 | % |
| Other  interest-bearing liabilities                                                              |   | 2,584                         |      | 34 |   | 1.3 | % | 2,464 |   | 35 |   | 1.4 | % | 2,130 |   | 41 |   | 1.9 | % |
| Total  interest-bearing liabilities                                                              |   | 1,413,276                     |      | 21,839 |   | 1.5 | % | 1,345,571 |   | 21,986 |   | 1.6 | % | 1,226,447 |   | 27,803 |   | 2.3 | % |
| Demand-noninterest-bearing  deposits                                                             |   | 147,130                       |      |   |   |   |   | 152,443 |   |   |   |   |   | 144,352 |   |   |   |   |   |
| Accrued interest  and other liabilities                                                          |   | 26,909                        |      |   |   |   |   | 18,567 |   |   |   |   |   | 10,157 |   |   |   |   |   |
| Shareholders’  equity plus common stock in ESOP subject to contingent repurchase obligation |   | 151,871                       |      |   |   |   |   | 152,928 |   |   |   |   |   | 149,277 |   |   |   |   |   |
| **Total  liabilities and shareholders’ equity**                                             |   | $                             | 1,739,186 |   |   |   |   |   | $ | 1,669,509 |   |   |   |   |   | $ | 1,530,233 |   |   |   |   |   |
| Net interest  income                                                                             |   |                          |      | $ | 58,381 |   |   |   |   |   | $ | 59,599 |   |   |   |   |   | $ | 58,306 |   |   |   |
| Interest rate  spread                                                                            |   |                          |      |   |   | 3.4 | % |   |   |   |   | 3.6 | % |   |   |   |   | 3.7 | % |
| Net interest  margin (1)                                                                         |   |                          |      |   |   | 3.6 | % |   |   |   |   | 3.8 | % |   |   |   |   | 4.1 | % |

 

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(1)          Interest income, netinterest margin and yields are presented on a tax equivalent basis, assuming afederal income tax rate of 35%.

(2)          The average balances ofnonaccrual loans are included in accrued interest and other assets.

 

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**MANAGEMENT’S DISCUSSION ANDANALYSIS OF FINA****NCIAL CONDITION**

**AND RESULTS OF OPERATIONS**

 

The following discussion and analysis provides information regardingthe Company’s financial condition as of December 31, 2004 and 2003, and theresults of operations for each of the three years ended December 31, 2004. Thisdiscussion and analysis should be read in conjunction with the Company’sConsolidated Financial Statements and Notes to Consolidated FinancialStatements included in this annual report. The financial information providedbelow is rounded in order to simplify the presentation of management’s discussionand analysis. However, the ratios and percentages provided below are calculatedusing the more detailed financial information contained in the financialstatements, notes and tables included elsewhere in this annual report.

 

**Critical Accounting Policies**

 

*TheCompany’s financial statements are prepared in conformity with accountingprinciples generally accepted in the United States of America. These accountingprinciples, which can be complex, are significant to our financial conditionand our results of operations and require management to apply significantjudgment with respect to various accounting, reporting and disclosure matters.Management must use estimates, assumptions and judgments to apply theseprinciples where actual measurements are not possible or practical. Theseestimates, assumptions and judgments are based on information available as ofthe date of this report and, as this information changes, actual results coulddiffer from the estimates, assumptions and judgments reflected in the financialstatements. Changes in such estimates may have a significant impact on thefinancial statements. Management has reviewed the application of these policieswith the Audit Committee of West Suburban’s Board of Directors. This Management’sDiscussion and Analysis of Financial Condition and Results of Operations shouldbe read in conjunction*theCompany’s Consolidated Financial Statements and Notes to Consolidated FinancialStatements included in this annual report.

 

In management’s view, the accounting policiesthat are critical to the Company are those relating to estimates, assumptionsand judgments regarding the determination of the adequacy of the allowance forloan losses.

 

**Allowance for Loan Losses.**  The Company maintains an allowance for loanlosses at a level management believes is sufficient to absorb credit losses inthe loan portfolio. The allowance for loan losses represents the Company’sestimate of probable losses in the loan portfolio at each balance sheet dateand is based on the review of available and relevant information. The allowancecontains allocations for probable losses that have been identified relating tospecific borrowing relationships as well as probable losses for pools of loans.The allowance for loan losses is reassessed monthly by the Company to determinethe appropriate level of the allowance. The amount of the allowance for loanlosses is determined based on a variety of factors, including assessment of thecredit risk of the loans in the loan portfolio, volume of the loans, delinquentloans, evaluation of current economic conditions in the market area, actualcharge-offs during the period and historical loss experience. Loan quality iscontinually monitored by management and reviewed by the loan committee on amonthly basis.

 

All categories of loans are evaluated on a category by category basis.In addition, individual commercial, construction and commercial mortgage loansare evaluated to determine if a specific loss allocation is needed for problemloans deemed to have a shortfall in collateral. Management also considers theborrower’s current economic status including liquidity and future businessviability. Other factors used in the allocation of the allowance include levelsand trends of past dues and charge-offs along with concentrations of creditwithin the commercial and commercial real estate loan portfolios. Thisevaluation is inherently subjective as it requires estimates that aresusceptible to significant revision as more information becomes available or asdevelopments occur. Along with the allocation of the allowance on a category bycategory basis and the specific allocations for individual borrowingrelationships, the allowance includes a relatively small portion that remainsunallocated.

 

Management adjusts the allowance for loan losses by an amountsufficient to maintain the allowance at the level determined appropriate. Loansare charged-off when deemed to be uncollectible by management. The Companybelieves that the allowance for loan losses is adequate to provide forestimated probable credit losses in the loan portfolio.

 

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**Contractual Obligations,Commitments, Off-Balance Sheet Arrangements, and Contingent Liabilities**

 

Through the normal course of operations, the Company has entered intocertain contractual obligations and other commitments. Such obligationsgenerally relate to the funding of operations through deposits, as well asleases for premises and equipment. As a financial services provider, the Companyroutinely enters into commitments to extend credit. While contractualobligations represent future cash requirements of the Company, a significantportion of commitments to extend credit may expire without being drawn upon.Such commitments are subject to the same credit policies and approval ascomparable loans made by the Company.

 

The following table presents the Company’s significant fixed anddeterminable contractual obligations and significant commitments by paymentdate as of December 31, 2004 (dollars in thousands). The payment amountsrepresent those amounts contractually due to the recipient and do not includeany carrying value adjustments. Further discussion of the nature of eachobligation is included in the referenced note to the Company’s Consolidated FinancialStatements included in this annual report.

 
| ** **                          | ** ** | **Note  Reference** | ** ** | **One Year  or Less** | ** ** | **Over One  Year to  Three Years** | ** ** | **Over Three  Years to  Five Years** | ** ** | **Over Five  Years** | ** ** | **Total** | ** ** |
|-------------------------------------|------------|---------------------|------------|-----------------------|------------|------------------------------------|------------|--------------------------------------|------------|----------------------|------------|-----------|------------|
| Deposits without  a stated maturity |       | 5                   |       | $                     | 1,146,531  |                               | $          | —                               |       | $                    | —     |      | $          | — |   | $ | 1,146,531 |   |
| Time deposits                       |       | 5                   |       | 184,716               |       | 143,399                            |       | 95,096                               |       | —               |       | 423,211   |       |
| Prepaid  solutions cards            |       |                |       | 11,646                |       | —                             |       | —                               |       | —               |       | 11,646    |       |
| Operating leases                    |       |                |       | 162                   |       | 204                                |       | 114                                  |       | 270                  |       | 750       |       |
| Commitments to  extend credit       |       |                |       |                  |       |                               |       |                                 |       |                 |       |      |       |
| Fixed rate                          |       | 8                   |       |                  |       |                               |       |                                 |       |                 |       | 7,388     |       |
| Variable rate                       |       | 8                   |       |                  |       |                               |       |                                 |       |                 |       | 448,184   |       |
|                                     |            |                     |            |                       |            |                                    |            |                                      |            |                      |            |           |            |  |  |  |  |  |

 

**Balance Sheet Analysis**

 

***Total Assets.***  Total consolidated assets of the Company atDecember 31, 2004 increased 2.2% from the prior year-end. Increases in thesecurities portfolio were the largest component of the increase in total assetsand were partially offset by decreases in loans and cash and cash equivalents.Total average assets in 2004 increased 4.2% from the prior year primarily dueto an increase in average securities. Asset growth was funded primarily byhigher levels of deposits.

 

***Cash and Cash Equivalents.***  Cash and cash equivalents at December 31, 2004decreased 25.9% from the prior year-end due to decreases in federal funds soldwhich was primarily due to increases in the securities portfolio.

 

***Securities.*** The Company’s securities portfolio increased 13.5% at December 31, 2004from the prior year-end. Specifically, the available for sale portfolioincreased 5.1% during this period while the held to maturity portfolioincreased 146.4%. During the third quarter of 2004, the Company repositionedits holdings in the securities portfolio by selling $184.6 million of availablefor sale securities. The repositioning was intended to shorten the duration,improve cash flow and reduce the interest rate risk of the portfolio. As partof the Company’s repositioning, certain securities purchased were classified asavailable for sale and other as held to maturity. This was done in order forthe Company to manage the effect of the market volatility while preserving theCompany’s liquidity. The Company made significant investments inmortgage-backed securities in 2004. Investing in mortgage-backed securities andclassifying the majority of new purchases as available for sale increases theCompany’s liquidity and is an important element in the Company’s liquiditymanagement in the current rising interest rate environment. Also, the Company considersmonthly paydowns on mortgage-backed securities as a consistent source of cashflows. This practice also allows the Company to better manage its liquidityrisk and obtain a higher yield over the entire interest rate cycle compared toother investments such as federal funds sold. During 2004, the Company’saccumulated other comprehensive loss increased $2.7 million due to a change inunrealized losses on securities available for sale, net of

 

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reclassification and tax effects. Unrealized losses on securitiesavailable for sale increased due to increases in market interest rates. TheCompany will continue to monitor its level of available for sale and held tomaturity securities and will classify new securities in the appropriatecategory at the time of purchase. Factors reviewed during this process include,but are not limited to, the current interest rate and economic environments, aswell as specific liquidity needs.

 

***Loans.*** Total loans outstanding at December 31, 2004decreased 2.9% from the prior year-end primarily due to decreased balances inthe commercial real estate, real estate construction and indirect automobileloan portfolios. The decrease in the commercial real estate loan portfolioresulted primarily from loan payoffs and reduced demand. The real estateconstruction loan portfolio declined primarily due to loan repayments and thecyclical nature of the real estate construction industry. The decrease in theindirect automobile loan portfolio was primarily due to prepayments andscheduled repayments as well as the effect of promotional programs offered bynew automobile dealers such as 0% financing. The Company expects to see thistrend continue until the automobile dealers discontinue their promotionalprograms. These decreases were partially offset by increases in the home equityloan portfolio. The growth in the home equity loan portfolio resulted from acombination of promotional marketing efforts for this product and the currentlow interest rate environment. The growth in the home equity loan portfolio wasprimarily in fixed rate second priority mortgage loans.

 

***Allowance for Loan Losses and Asset Quality.***  Net loan charge-offs were $4.1 million and$1.6 million in 2004 and 2003, respectively. Impaired loans decreased $15.3million in 2004 and the specific allowances allocated to impaired loans decreasedby $4.4 million. Nonaccrual loans decreased $11.2 million in 2004. This wasprimarily due to the completion of the foreclosure proceedings on two loanrelationships whose properties had an aggregate valuation of $9.9 million. Oneadditional loan relationship paid down $1.3 million during 2004. Approximately,$2.5 million of the Company’s nonaccrual loans at December 31, 2004 related toone loan relationship for which $.5 million of specific reserves have beenestablished. Although the Company’s analysis as of that date indicates that theestablished specific reserve would be sufficient to absorb probable losses withrespect to the loan relationship, no assurances can be provided that the actuallosses will not exceed the specific reserves. Loans 90 day or more past due andstill on accrual increased $.7 million. This increase was primarily due to twocommercial loans and one residential real estate loan becoming 90 days or morepast due. Management reviewed these loans and provided a specific reserve asnecessary. These loans are in the process of collection.

 

The ratio of the allowance for loanlosses to total loans outstanding was 1.00% and 1.32% at December 31, 2004 and2003, respectively. The following table is an analysis of the Company’s nonperformingloans and other real estate at December 31 (dollars in thousands):

 
| ** **                                                     | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** |
|----------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Loans past due 90 days or more still on accrual                |       | $        | 1,036      |     | $          | 380      |       | $ | 1,789 | ** ** |
| Nonaccrual loans                                               |       | 3,815    |       | 15,008   |       | 12,021   | ** ** |
| Total  nonperforming loans                                     |       | $        | 4,851      |     | $          | 15,388   |       | $ | 13,810 |   |
| Nonperforming  loans as a percent of total loans               |       | 0.46     | %          | 1.41     | %          | 1.21     | %          |
| Allowance for  loan losses as a percent of nonperforming loans |       | 217      | %          | 94       | %          | 100      | %          |
| Other real  estate                                             |       | $        | 3,156      |     | $          | 1,266    |       | $ | 40 |   |
| Nonperforming  assets as a percent of total assets             |       | 0.46     | %          | 0.97     | %          | 0.87     | %          |

 

***Bank-owned Life Insurance.*** The cash surrendervalue of bank-owned life insurance increased to $30.3 million at December 31,2004 from $13.4 million at December 31, 2003. During 2004, the Companypurchased $15.0 million in additional life insurance. The Company acquires lifeinsurance in connection with its strategy to fund and manage its obligationsunder certain employee benefits plans.

 

***Other Real Estate.***  During 2004, the Company acquired propertieswith an aggregate carrying value of $5.6 million and sold properties with anaggregate carrying value of $3.7 million representing an increase in balancesfor the year of $1.9 million. During January 2005, the Company entered into a $2.3million contract for the sale one property with a carrying value of $1.9million.

 

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***Deposits.***  Totaldeposits at December 31, 2004 increased 2.6% from the prior year-end. Theincrease in total deposits primarily resulted from an increase in timedeposits. Management believes the increase in time deposits is directlycorrelated with promotional efforts the Company engaged in during the year. Ingeneral, management promotes its deposit products when appropriate and pricesits products in a manner intended to maintain the Company’s net interest marginat an adequate level.

 

***Prepaid Solutions Cards.*** Outstanding balances on prepaid solutionscards decreased 31.7% from the prior year-end. This decrease was primarily dueto the run-off of outstanding balances on prepaid solutions cards associatedwith one large customer. Since the end of the year the outstanding balances oncards associated with this customer have increased as the customer completedits evaluation of its ongoing programs and resumed its introduction of newprograms. Management believes that outstanding balances will increase asprepaid solutions cardholders associated with this customer and other customersincrease card usage and as the Company enters into additional programs with newand existing customers.

 

**Capital Resources**

 

Shareholders’ equity at December 31, 2004 decreased 2.1% from December31, 2003 as a result of $23.7 million of net income, reduced by dividendsdeclared of $21.6 million, a decrease in the fair value of securities availablefor sale of $2.7 million, net of deferred taxes, an increase of $2.6 million incommon stock in ESOP subject to contingent repurchase obligation and areduction in unearned ESOP shares being committed to be released toparticipants during 2004 in the amount of $1.2 million.

 

All capital ratios are in excess of the regulatorycapital requirements which call for a minimum total risk-based capital ratio of8% for each of the Company and the Bank, a minimum Tier 1 risk-based capitalratio of 4% for each of the Company and the Bank and a minimum leverage ratio(3% for the most highly rated banks and bank holding companies that do notexpect significant growth; all other institutions are required to maintain aminimum leverage capital ratio of 4% to 5% depending on their particularcircumstances and risk and growth profiles) for each of the Company and theBank. Bank holding companies and their subsidiaries are generally expected tooperate at or above the minimum capital requirements. All capital ratios are inexcess of regulatory minimums and should allow the Company and the Bank tooperate without significant capital adequacy concerns. In addition, the Bankhas also formed a new subsidiary that participates in the Bank’s real estatelending business and is intended to qualify as a real estate investment trust.This new subsidiary is also intended to facilitate capital raising efforts, ifsuch efforts become necessary, by enabling the Bank to access the capitalmarkets through the new subsidiary.

 

Management has been advised that as ofDecember 31, 2004 and 2003, the Bank qualified as a “well-capitalized”institution as defined by the Federal Deposit Insurance Corporation ImprovementAct of 1991, as amended. On a consolidated basis, the Company also exceededregulatory capital requirements. In accordance with applicable regulations, theappraised fair value of West Suburban common stock owned by the ESOP andallocated to participants is included in Tier 1 capital.

 

**Liquidity**

 

*Effective liquidity managementensures there is sufficient cash flow to satisfy demand for credit and depositwithdrawals and to take advantage of earnings enhancement opportunities. Alarge stable core deposit base and a strong capital position are the solidfoundation for the Company’s liquidity position. Liquidity is enhanced by asecurities portfolio structured to provide liquidity as needed. The Companyalso maintains relationships with correspondent banks to purchase federal fundssubject to underwriting and collateral requirements. Additionally, subject tocredit underwriting, collateral, capital stock, and other requirements of theFederal Home Loan Bank of Chicago (“FHLB”), the Company is able to borrow fromthe FHLB on a “same day” basis. As of December 31, 2004, the Company could haveborrowed up to approximately $107 million from the FHLB secured by certain ofits real estate loans and securities. The Company manages its liquidityposition through continuous monitoring of profitability trends, asset quality,interest rate sensitivity and maturity schedules of earning assets andliabilities.*

 

Generally, the Company uses cash and cash equivalents and securities availablefor sale to meet its liquidity needs. As of December 31, 2004 and December 31,2003, these liquid assets represented 30.5% and 30.8% of total assets,

 

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respectively. During 2004, the Company’s cash and cash equivalents decreased$17.9 million. Net cash provided by operating activities was $35.3 million,while net cash used in investing activities was $66.0 million. The net cashused in investing activities was primarily used to purchase securities. Netcash flows provided by financing activities were $12.8 million, resultingprimarily from deposit growth. Management expects operating and financingactivities to be a continuing source of cash flow in the future.

 

**Income Statement Analysis – 2004 Compared to 2003**

 

***General*****.** The Company’s net income decreased 8.7% in 2004, primarilydue to a decrease in total noninterest income of $4.1 million. Net income wasalso affected negatively by an increase in total noninterest expense of $1.8million. These decreases to noninterest income and increases to noninterestexpense were partially offset by a decrease in the provision for loan losses of$2.0 million and a decrease in income tax expense of $3.0 million

 

***Net Interest Income.*** Netinterest income in 2004 decreased 2.3% compared to 2003. Net interest income isthe primary source of income for the Company. Net interest income is the differencebetween interest income earned on interest-earning assets and interest expenseincurred on interest-bearing liabilities. Net interest income is affected bychanges in volume and yield on interest-earning assets and the volume and rateson interest-bearing liabilities. Interest-earning assets consist of federalfunds sold, securities and loans. Interest-bearing liabilities primarilyconsist of deposits. The net interest margin is the percentage oftax-equivalent net interest income to average earning assets. The Company’s netinterest margin (on a fully tax-equivalent basis) decreased to 3.6% in 2004compared to 3.8% in 2003.

 

Total interest income (on a fullytax-equivalent basis) decreased 1.7% in 2004 primarily due to declining volumeand yields from assets in the Company’s loan portfolio. Average loans in 2004decreased 4.1% while the yield on the portfolio decreased 13 basis points.Yields in the Company’s real estate portfolio declined 21 basis points duringthis period. Management anticipates that additional increases in interest rateswill minimize growth activity in the mortgage loan market. Yields on theCompany’s home equity loan portfolio declined 20 basis points during thisperiod. Yields on fixed rate home equity loans have decreased due to reductionsin the Company’s rates on this product. Yields on variable rate home equitylines of credit are tied to the prime rate. The average prime rate in 2004 was4.35% compared to 4.12% in 2003. Yields on the commercial loan portfolio increased6 basis points during this period. The majority of commercial loans haveadjustable rates that are tied to the prime rate. During 2004, the prime rate increaseddue to increases in interest rates initiated by the Federal Reserve. Yields oninvestment securities decreased 26 basis points in 2004. This was primarily aresult of the Company’s reinvestment of proceeds from called and maturedsecurities along with additional funds from decreased loan volume intosecurities that provide a lower yield.

 

Total interest expense decreased .7% in2004. Interest on deposits, which accounted for substantially all of thedecline, decreased primarily due to lower market rates. The yield oninterest-bearing deposits decreased 8 basis points to 1.55% in 2004 compared to1.63% in 2003. Management anticipates a steady rise in the Company’s interestexpense resulting from the current rising interest rate environment.

 

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The following table reflects the impactof changes in volume and rates of interest-earning assets and interest-bearingliabilities on a tax equivalent basis for the years ended December 31, 2004 and2003 (dollars in thousands):

 
| ** **                          | ** ** | **2004 compared to 2003** | ** ** | **2003 compared to 2002** | ** ** |
|-------------------------------------|------------|---------------------------|------------|---------------------------|------------|
| ** **                          | ** ** | **Change due to**         | ** ** | **Total  Change**         | ** ** | **Change due to** | ** ** | **Total  Change** | ** ** |
| **Volume**                          | ** ** | **Rate**                  | **Volume** | ** **                | **Rate**   |
| **Interest  Income**                |       |                      |       |                      |       |   |   |   |   |   |   |   |   |
| Federal funds  sold                 |       | $                         | 100        |                      | $          | 66 |   | $ | 166 |   | $ | (83 | ) | $ | (138 | ) | $ | (221 | ) |
| Securities                          |       | 3,606                     |       | (1,136                    | )          | 2,470 |   | 5,675 |   | (2,925 | ) | 2,750 |   |
| Loans                               |       | (2,562                    | )          | (1,439                    | )          | (4,001 | ) | 264 |   | (7,317 | ) | (7,053 | ) |
| Total interest  income              |       | 1,144                     |       | (2,509                    | )          | (1,365 | ) | 5,856 |   | (10,380 | ) | (4,524 | ) |
|                                |       |                      |       |                      |       |   |   |   |   |   |   |   |   |
| **Interest  Expense**               |       |                      |       |                      |       |   |   |   |   |   |   |   |   |
| Interest-bearing  deposits          |       | 1,045                     |       | (1,191                    | )          | (146 | ) | 1,941 |   | (7,752 | ) | (5,811 | ) |
| Other interest-bearing  liabilities |       | 1                         |       | (2                        | )          | (1 | ) | 5 |   | (11 | ) | (6 | ) |
| Total interest  expense             |       | 1,046                     |       | (1,193                    | )          | (147 | ) | 1,946 |   | (7,763 | ) | (5,817 | ) |
| Net interest  income                |       | $                         | 98         |                      | $          | (1,316 | ) | $ | (1,218 | ) | $ | 3,910 |   | $ | (2,617 | ) | $ | 1,293 |   |

 

***Provision for Loan Losses.*** The provision for loanlosses decreased $2.0 million or 90.7% in 2004. This was primarily due to a$32.0 million decrease in total loans (including a $15.3 million decrease in impairedloans) and a $4.8 million decline in the specific reserve allocation to impairedloans during 2004. At December 31, 2004 there was $2.7 million of specificreserves allocated for $6.6 million of loans compared to $7.1 million ofspecific reserves allocated for $22.3 million of loans at December 31, 2003. Amore detailed discussion concerning the allowance for loan losses is presentedin the Allowance for Loan Loses and Asset Quality section of this annual report.

 

***Noninterest Income.***Total noninterest incomedecreased 18.3% during 2004 compared to 2003. Service fees on deposit accountsdecreased $.4 million, resulting primarily from a decline in service chargesassociated with the overdraft honors program. Although management believes theincome generated from this program may vary from period to period, the programis intended to provide continuing fee income. In 2004, the Company recorded$2.0 million in net realized losses on securities transactions compared to $2.3million in net realized gains on securities transactions in 2003. This wasprimarily due to transactions undertaken to reposition the investment portfolio,which was intended to shorten the duration and reduce the interest rate risk ofthe portfolio. The Company also experienced a decrease in net gain on sales ofloans held for sale of $.6 million due to a flat mortgage market as refinancingactivity together with new financing activity slowed significantly. During2004, the Company elected to hold certain 30-year fixed rate mortgage loans,which was a change from its prior practice of selling these loans into thesecondary market. Management anticipates that this change and additionalincreases in interest rates will have a negative impact on gains on sale ofloans held for sale. During 2003, the Company recorded $1.1 million ofadditional income in connection with a litigation settlement. Prepaid solutionscard income increased $2.1 million as a result of the implementation of newprograms and increased usage of the Company’s prepaid solutions card products. Managementbelieves that this income will continue to grow as the usage of the prepaidsolutions card products increases and the Company increases its number ofissued prepaid solutions cards. Other noninterest income increased $.2 millionprimarily due to income received from BOLI policies, which was partially offsetby decreased mortgage loan application fees due to the flat mortgage market.

 

***Noninterest Expense.***  Total noninterest expense increased 4.4%during 2004 compared to 2003. Salaries and employee benefits decreased $.3million. Normal salary increases and increased medical insurance costs wereoffset by reduced bonuses and ESOP contributions. The number of full-timeequivalent employees was 497 at December 31, 2004 compared to 499 at December31, 2003. Advertising and promotion expense increased $.2 million primarily dueto expenses for gift cards and other prepaid solutions products along with theCompany’s home equity product mailings. Professional fees increased $.3 millionprimarily due to costs associated with establishing subsidiaries as a part ofan initiative intended to enhance profitability and to provide capital-raisingalternatives. Prepaid solutions cards expense, including expenses relating tothe production of cards, postage and processing

 

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services, increased $1.5 million during this period. Managementbelieves that this expense will continue to grow as the usage of the prepaidsolutions card products increases and the Company increases its number ofissued prepaid solutions cards. Management also believes that over time theCompany will achieve some economies of scale as the need to make significantinvestments in development of new products and programs begin to slow. Otherexpense increased $.1 million primarily due to increases in Visa® cardholder expense.This increase was partially offset by a decrease in postage and freightexpense. The Company’s efficiency ratio, a measure of the amount of expenseneeded to generate each dollar of income was 57% in 2004 and 51% in 2003. Thisratio weakened primarily due to the Company experiencing $2.0 million of losseson sales of securities in 2004 compared to $2.3 million in securities gains in2003.

 

***Income Taxes.*** Income tax expense decreased 25.4%in 2004, primarily due to lower pre-tax income. Additionally, the Companyexperienced higher income levels over the same period a year ago on tax-exemptincome on municipal and agency securities, BOLI income and reduction in incomesubject to state taxation thereby reducing the effective tax rate. Theeffective tax rates for the years ended December 31, 2004 and 2003 were 27.4%and 31.6%, respectively

 

**Income Statement Analysis – 2003 Compared to 2002**

 

***General*****.** The Company’s net income increased 44.5% in 2003, partiallydue to a decrease in the provision for loan losses of $6.0 million. Net incomewas also positively affected by an increase in net interest income of $1.2million and an increase in total noninterest income of $8.3 million. Theseincreases to income and decreases to expense were partially offset by increasesin total noninterest expense of $4.1 million and to income tax expense of $3.5million.

 

***Net Interest Income.*** The Company’snet interest margin decreased to 3.8% in 2003 compared to 4.1% in 2002.

 

Total interest income (on a fullytax-equivalent basis) decreased 5.3% in 2003 primarily due to declining yieldsfrom assets in the Company’s loan portfolio. Average loans in 2003 increased..4% while the yield on the portfolio decreased 67 basis points. Yields on theCompany’s real estate loan portfolio declined 80 basis points during thisperiod. This yield declined due to the Company experiencing the continuedeffects of refinancing activity in its real estate loan portfolio. Yields onthe Company’s home equity loan portfolio declined 60 basis points during theperiod. Yields of fixed rate home equity loans have declined due to reductionsin the Company’s rates on new fixed rate home equity loans reflective of thecurrent interest rate environment. Yields on variable rate home equity lines ofcredit vary with the prime rate on semi-annual repricing dates. The averageprime rate in 2003 was 4.12% compared to 4.68% in 2002. Yields on thecommercial loan portfolio declined 65 basis points during this period. Themajority of commercial loans have adjustable rates that are tied to the primerate. During 2003, the prime rate decreased due to reductions in interest ratesinitiated by the Federal Reserve. Yields on taxable securities decreased 97basis points in 2003 primarily as a result of the Company’s reinvestment ofproceeds from called and matured securities at lower rates.

 

Total interest expense decreased 20.9% in2003. Interest on deposits, which accounted for substantially all of thischange, decreased primarily due to lower market interest rates. The Company loweredinterest rates on all categories of deposits in response to the significantdecline in market rates. The yield on interest-bearing deposits decreased 64basis points to 1.63% in 2003 compared to 2.27% in 2002.

 

***Provision for Loan Losses.*** The Company’sprovision for loan losses decreased 73.5% in 2003. The decreased expense in2003 was primarily due to $5.0 million less of net loan charge-offs and a $54.5million decrease in total loans compared to 2002. A more detailed discussionconcerning the allowance for loan losses is presented in the Allowance for LoanLosses and Asset Quality section of this report.

 

***Noninterest Income.***Total noninterest incomeincreased 59.6% during 2003 compared to 2002. Service fees on deposit accountsincreased $2.8 million primarily as a result of the implementation of anoverdraft program that provides flexibility to certain customers of theCompany. Management anticipates that the future growth in income generated fromthis program will slow but believes the program will continue to enhance feeincome. Debit card fees increased $.1 million due to increased usage. Netrealized gains on securities transactions increased $1.3 million. Managementdoes not anticipate that the Company will continue to realize significant gainsfrom sales of securities.

 

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This was evident during the fourth quarter of 2003 when the amount ofgains was nominal. The Company also experienced an increase in net gains onsales of loans held for sale of $.2 million due to higher activity resultingfrom a strong mortgage refinancing market. Management anticipates the volume ofthis activity to decline in the coming quarters due to the reduction in thenumber of customers who have not refinanced during the low interest rateenvironment. The Company also recorded $1.1 million of additional income in2003 in connection with a litigation settlement. Prepaid solutions card incomeincreased $3.1 million during 2003 compared to 2002. The Company anticipatesincome will continue to grow as the Company’s various prepaid solutions card products enjoy wideracceptance and the use of these products grows. Other noninterest incomedecreased $.2 million primarily due to reduced recoveries of expenses incurredin connection with a problem asset.

 

***Noninterest Expense.***  Total noninterest expense increased 11.0%during 2003 compared to 2002. Salary and employee benefits increased $2.0million primarily as a result of increased ESOP contribution expense, highercompensation to employees driven by the performance of the Company in 2003, theexpansion of the prepaid solutions department as well as normal salaryincreases and increased medical insurance costs. The number of full-timeequivalent employees was 499 at December 31, 2003 compared to 487 at December31, 2002. Occupancy expense increased $.2 million primarily due to increases indepreciation and maintenance expense on Bank facilities. Furniture andequipment expense increased $.1 million primarily due to increased depreciationcosts of data processing equipment, which includes a new mainframe computerpurchased in 2002. Advertising and promotion expense decreased $.5 millionprimarily due to the Company reducing the amount of advertising it outsourcedto an ad agency. Professional fees increased $.1 million due to increased legalfees in connection with problem loans and the development of prepaid solutionscard products. Prepaid solutions card expense, including expenses relating tothe production of cards, postage and processing services, increased $1.7million during 2003. Other noninterest expense increased $.5 million primarilydue to the payment of real estate taxes on properties securing delinquentloans. Additionally, the Company experienced an increase in postage expense dueto increased mailing which promoted home equity and retail banking products andservices. These increases were partially offset by a decrease in telephoneexpense which occurred due to a refund from overpayments on data and telephonelines. The Company’s efficiency ratio was 51% in 2003 and 52% in 2002.

 

***Income Taxes.*** Income tax expense increased 41.2%in 2003, primarily due to higher pre-tax income. The effective tax rates forthe years ended December 31, 2003 and 2002 were 31.6% and 32.1%, respectively.The lower effective tax rate in 2003 was due to a refund of a prior year’sstate income taxes. The refund resulted from amending the prior year’s stateincome tax return due to changes in regulations relating to the apportionmentof income.

 

**Interest Rate Sensitivity**

 

The Company attempts tomaintain a conservative posture with regard to interest rate risk by activelymanaging its asset/liability GAP position and monitoring the direction andmagnitude of gaps and risk. The Company attempts to moderate the effects ofchanges in interest rates by adjusting its asset and liability mix to achievedesired relationships between rate sensitive assets and rate sensitiveliabilities. Rate sensitive assets and liabilities are those instruments thatreprice within a given time period. An asset or liability reprices when itsinterest rate is subject to change or upon maturity.

 

Movements in general marketinterest rates are a key element in changes in the net interest margin. TheCompany’s policy is to manage its balance sheet so that fluctuations in the netinterest margin are minimized regardless of the level of interest rates,although the net interest margin does vary somewhat due to management’sresponse to increasing competition from other financial institutions.

 

39

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The Company measures interest rate sensitivity through a net interestincome analysis. The net interest income analysis measures the change in netinterest income in the event of hypothetical changes in interest rates. Thisanalysis assesses the risk of changes in net interest income in the event of asudden and sustained 100 to 200 basis point increase or decrease in marketinterest rates. This analysis is subject to the Company’s assumptions, whichinclude the following:

 

•                  Balance sheetvolume reflects the current balances and does not project future growth orchanges. The current balances establish the base case from which all percentchanges are calculated.

 

•                  The replacementrate for loan and deposit items that mature is the current rate offered by theCompany as adjusted for the assumed rate increase or decrease. The replacementrate for securities is the current market rate as adjusted for the assumed rateincrease or decrease.

 

•                  The repricingrate for balance sheet data is determined by utilizing individual accountstatistics provided by the Company’s data processing systems.

 

•                  The maturity andrepricing dates for balance sheet data are determined by utilizing individualaccount statistics provided by the Company’s data processing systems.

 

Listed below are the Company’s projected changes in net interest incomeover a twelve-month horizon for the various rate shock levels as of the periodsindicated (dollars in thousands):

 
| **December 31, 2004**  | ** ** | **Amount** | ** ** | **Dollar  Change** | ** ** | **Percent  Change** | ** ** |
|------------------------|------------|------------|------------|--------------------|------------|---------------------|------------|
| +200 basis  points     |       | $          | 56,487     |               | $          | 2,129               |       | 3.9 | % |
| +100 basis  points     |       | 55,760     |       | 1,402              |       | 2.6                 | %          |
| Base                   |       | 54,358     |       |               |       |                |       |
| -100 basis  points     |       | 49,195     |       | (5,163             | )          | (9.5                | )%         |
| -200 basis  points     |       | 44,459     |       | (9,899             | )          | (18.2               | )%         |
|                   |       |       |       |               |       |                |       |
| **December  31, 2003** |       |       |       |               |       |                |       |
| +200 basis  points     |       | $          | 46,400     |               | $          | (12,002             | )          | (20.6 | )% |
| +100 basis  points     |       | 52,376     |       | (6,026             | )          | (10.3               | )%         |
| Base                   |       | 58,402     |       |               |       |                |       |
| -100 basis  points     |       | 51,988     |       | (6,414             | )          | (11.0               | )%         |
| -200 basis  points     |       | N/A        |       | N/A                |       | N/A                 |       |

 

Management does not believe that an analysis assuming a projected 200basis point drop in market rates is relevant due to the low interest rateenvironment at December 31, 2003.

 

**Effects of Inflation**

 

Unlike industrial companies, nearly all of the assets and liabilitiesof the Company are monetary in nature. As a result, interest rates have a moresignificant impact on the Company’s performance than do the effect of generallevels of inflation. Interest rates do not necessarily move in the samedirection or experience the same magnitude of change as goods and services,since such prices are affected by inflation. In the current economicenvironment, liquidity and interest rate adjustments are features of theCompany’s asset/liability management, which are important to the maintenance ofacceptable performance levels. The Company attempts to maintain a balancebetween monetary assets and monetary liabilities, over time, to offset thepotential effects of changing interest rates.

 

40

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**BOARDS OF DIRECTO****RS**

 

**West Suburban Bancorp, Inc.**

 
| Kevin J. Acker    | Chairman of the Board                             |
|-------------------|---------------------------------------------------|
| David S. Bell     | Certified Public Accountant                       |
| Duane G. Debs     | President and Chief Financial Officer             |
| Charles P. Howard | Parkview Community Church, Business Administrator |
| Peggy P. LoCicero | Former Banker                                     |

 

**West Suburban Bank**

 
| Robert W. Schulz | Chairman; Oliver Hoffmann Corporation, Vice  President and Treasurer |
|------------------|----------------------------------------------------------------------|
| Keith W. Acker   | President                                                            |
| Craig R. Acker   | Former Banker                                                        |
| Earl K. Harbaugh | Ditch Witch Midwest, President                                       |
| Ronald J. Kuhn   | Harry W. Kuhn, Inc., Chairman, Secretary and  Treasurer              |
| Paul J. Lehman   | The Macom Corporation, President                                     |
| John G. Williams | Bracing Systems, Vice President                                      |

 

**OFFICERS**

 

**WestSuburban Bancorp, Inc.**

 
| Kevin J. Acker       | Chief Executive Officer               |
|----------------------|---------------------------------------|
| Duane G. Debs        | President and Chief Financial Officer |
| Keith W. Acker       | Chief Operations Officer              |
| Michael P. Brosnahan | Vice President                        |
| Michael J. Lynch     | Director of Internal Audit            |
| David J. Mulkerin    | Chief Compliance Officer              |
| George E. Ranstead   | Secretary to the Board and Treasurer  |

 

**West Suburban Bank**

 
| **Senior Officers**      |                                                                              |
|--------------------------|-----------------------------------------------------------------------------------|
| Keith W. Acker           | President, Trust Officer                                                          |
| Kevin J. Acker           | Senior Vice President, Marketing                                                  |
| Michael P. Brosnahan     | Senior Vice President, Commercial Lending and Community  Reinvestment Act Officer |
| James T. Chippas         | Senior Vice President, Consumer Lending                                           |
| Duane G. Debs            | Senior Vice President, Comptroller and Trust Officer                              |
| Daniel P. Grotto         | Senior Vice President, Business Development and  Prepaid Solutions                |
|                     |                                                                              |
| **Building Management**  |                                                                              |
| Edward J. Garvey         | Vice President, Building Management                                               |
|                     |                                                                              |
| **Business Development** |                                                                              |
| Doug R. Bobenhouse       | Business Development and Sales Manager - Prepaid  Solutions                       |

 

41

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| **Commercial Loans**    |                                                                              |
|-------------------------|-----------------------------------------------------------------------------------|
| Stanley C. Celner, Jr.  | Vice President, Commercial Loans                                                  |
| Grant O. Cowen          | Vice President, Commercial Loans                                                  |
| Timothy P. Dineen       | Vice President, Commercial Real Estate Loans                                      |
| Michael F. Moone        | Vice President, Commercial Real Estate Loans                                      |
| David S. Orr            | Vice President, Commercial Loans                                                  |
| Edwin S. Stephens IV    | Vice President, Commercial Loans                                                  |
| Richard D. Yanney       | Vice President, Commercial Loans                                                  |
| Gregory L. Young        | Vice President, Commercial Loans                                                  |
| John J. Schroeder       | Commercial Loan Officer                                                           |
|                    |                                                                              |
| **Compliance**          |                                                                              |
| David J. Mulkerin       | Chief Compliance Officer                                                          |
|                    |                                                                              |
| **Comptroller**         |                                                                              |
| George E. Ranstead      | Vice President, Assistant Comptroller and Investment  Officer                     |
| Jay J.P. Greifenkamp    | Vice President, Financial Analyst, Investment  Officer and Secretary to the Board |
|                    |                                                                              |
| **Consumer Loans**      |                                                                              |
| William H. Hunter       | Vice President, Consumer Loans                                                    |
| Keith J. Larson         | Vice President, Consumer Loans                                                    |
| Cynthia A. Meredith     | Vice President, Consumer Loans                                                    |
| Charles J. Svoboda      | Vice President, Consumer Loans                                                    |
| David J. Wanek          | Assistant Vice President, Consumer Loans                                          |
|                    |                                                                              |
| **Electronic Services** |                                                                              |
| Janet L. Kemble         | Assistant Vice President, Electronic Services                                     |
|                    |                                                                              |
| **Financial Services**  |                                                                              |
| Michael Abbatacola      | Vice President, Financial Services                                                |
|                    |                                                                              |
| **Human Resources**     |                                                                              |
| Mary Ellen Condon       | Vice President, Human Resources                                                   |
|                    |                                                                              |
| **Information Systems** |                                                                              |
| Steven A. Jennrich      | Vice President, Information Systems                                               |
| Jacqueline R. Weigand   | Vice President, Project Manager                                                   |
|                    |                                                                              |
| **Internal Audit**      |                                                                              |
| Michael J. Lynch        | Vice President, Director of Internal Audit                                        |
|                    |                                                                              |
| **Loan Operations**     |                                                                              |
| Sandra C. Boyce         | Vice President, Residential Mortgage Loan Processing                              |
| Gary H. Brandes         | Vice President, Consumer Loan Operations                                          |
| Kevin Bussey            | Vice President, Collections                                                       |
| Debra H. Crowley        | Vice President, Commercial Loan Operations                                        |
| Lawrence J. Ortman      | Vice President, Credit Analysis and Loan Review                                   |
| ** **              | ** **                                                                        |
| **Marketing**           | ** **                                                                        |
| Denise M. Zatarski      | Director of Marketing                                                             |

 

42

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| **Operations**                       |                                                                    |
|--------------------------------------|-------------------------------------------------------------------------|
| Danielle Budig                       | Vice President, Operations and Visa                                     |
| Jill C. Davenport                    | Assistant Vice President, Operations                                    |
|                                 |                                                                    |
| **Purchasing**                       |                                                                    |
| Helen G. Schmitt                     | Assistant Vice President, Purchasing                                    |
|                                 |                                                                    |
| **Retail Banking**                   |                                                                    |
| Jack Buscemi                         | Vice President, Retail Banking and Loss Prevention                      |
| William J. Jennrich                  | Vice President, Retail Banking                                          |
| Marcia K. Worobec                    | Vice President, Branch Operations and Branch Manager  - Westmore, Metra |
| Kathleen M. Brockman                 | Assistant Vice President, Branch Manager - Lake  Street                 |
| Sharon Buck                          | Assistant Vice President, Branch Manager -  Montgomery                  |
| Jeanne L. Carlisle                   | Assistant Vice President, Branch Manager -  Bolingbrook West            |
| Beverly D. Cornelious                | Assistant Vice President, Branch Manager -  Bolingbrook East            |
| Gina M. Corral                       | Assistant Vice President, Staff Manager                                 |
| Barbara D. Darden                    | Assistant Vice President, Branch Manager - Chicago  Avenue, Naperville  |
| Robert G. Dover, Jr.                 | Assistant Vice President, Branch Manager - North  Main                  |
| Yolanda V. Dunn                      | Assistant Vice President, Branch Manager - Eola Road                    |
| Joyce M. Fedele                      | Assistant Vice President, Branch Manager -  Charlestowne                |
| Sharon A. Fonte                      | Assistant Vice President, Branch Manager - Glendale  Heights            |
| Kenneth J. Hannah                    | Assistant Vice President, Branch Manager - Carol  Stream                |
| Priya Hira                           | Assistant Vice President, Branch Manager - Oakbrook  Terrace            |
| Kirsten L. Jensen                    | Assistant Vice President, Branch Manager - Bartlett,  South Elgin       |
| Amy Mazzoccoli                       | Assistant Vice President, Branch Manager -  Warrenville                 |
| Terry Leitner                        | Assistant Vice President, Branch Manager - 75th  Street, Westmont       |
| Jeffery W. Miska                     | Assistant Vice President, Branch Manager - Cass  Avenue                 |
| Susan Neustrom                       | Assistant Vice President, Branch Manager - Downtown  Downers            |
| Brian S. Nickleski                   | Assistant Vice President, Branch Manager - South  Main                  |
| Gwen B. O’Loughlin              | Assistant Vice President, Branch Manager - Villa  Park                  |
| Dawn M. Oles                         | Assistant Vice President, Branch Manager - St.  Charles                 |
| Robert L. Pauling                    | Assistant Vice President, Branch Manager - Stratford  Square            |
| Cynthia A. Picton                    | Assistant Vice President, Branch Manager - Galena                       |
| Kay J. Piotrowski                    | Assistant Vice President, Branch Manager - Fair Oaks                    |
| Lisa M. Schmidt                      | Assistant Vice President, Branch Manager - Danada,  Wheaton             |
| Jerome F. Sheeman                    | Assistant Vice President, Branch Manager - Finley  Road                 |
| Joseph M. Sperlik                    | Assistant Vice President, Branch Manager -  Romeoville                  |
| Jose L. Valdez                       | Assistant Vice President, Branch Manager - Oswego                       |
| Timothy C. Voreis                    | Assistant Vice President, Branch Manager - President  Street            |
|                                 |                                                                    |
| **Travel with West Suburban**        |                                                                    |
| Dennis A. Woodyatt                   | Travel Agent                                                            |
|                                 |                                                                    |
| **Trust**                            |                                                                    |
| Christine H. Pawlak                  | Trust Officer                                                           |
|                                 |                                                                    |
| **West Suburban Insurance Services** |                                                                    |
| Patricia Falstrom                    | Insurance Agent                                                         |

 

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**Addresses of West Suburban Facilities**

 

**Aurora**

Eola Road Branch: 335 North Eola Road, Aurora, Illinois 60504 - (630)898-7072

Galena Branch: 2000 West Galena Boulevard, Aurora, Illinois 60506 -(630) 896-7000

Lake Street Branch: 101 North Lake Street, Aurora, Illinois 60506 -(630) 844-5200

 

**Bartlett**

Bartlett Branch: 1061 West Stearns Road, Bartlett,Illinois 60103 - (630) 830-5330

 

**Bloomingdale**

Stratford Square Branch: 355 West Army Trail Road,Bloomingdale, Illinois 60108 - (630) 351-0600

 

**Bolingbrook**

Bolingbrook East Branch: 672 East Boughton Road, Bolingbrook, Illinois60440 - (630) 972-9550

Bolingbrook West Branch: 1104 West Boughton Road, Bolingbrook, Illinois60440 - (630) 378-9680

 

**Carol Stream**

Carol Stream Branch: 401 North Gary Avenue, Carol Stream, Illinois60188 - (630) 690-8700

Fair Oaks Branch: 1380 West Army Trail Road, Carol Stream, Illinois60188 - (630) 213-5920

President Street Branch: 879 East Geneva Road, Carol Stream, Illinois60188 - (630) 752-1175

 

**Darien**

75th Street Branch: 1005 75th Street, Darien,Illinois 60561 - (630) 852-9226

Cass Avenue Branch: 8001 South Cass Avenue, Darien, Illinois 60561 -(630) 852-6900

 

**Downers Grove**

Downtown Downers Branch: 5330 Main Street, Downers Grove, Illinois60515 - (630) 652-2775

Finley Road Branch: 2800 Finley Road, Downers Grove, Illinois 60515 -(630) 495-3600

 

**Glendale Heights**

Glendale Heights Branch: 1657 Bloomingdale Road, Glendale Heights,Illinois 60139 - (630) 690-8600

 

**Lombard**

Metra Main Branch: 100 South Main Street, Lombard, Illinois 60148 -(630) 268-9010

North Main Branch: 707 North Main Street, Lombard, Illinois 60148 -(630) 691-8558

South Main Branch: 1122 South Main Street, Lombard, Illinois 60148 -(630) 495-3605

*Westmore Branch: 711 South MeyersRoad, Lombard, Illinois 60148 - (630) 629-4200 (Headquarters)*

 

**Montgomery**

Montgomery Branch: 1830 Douglas Road, Montgomery, Illinois 60538 -(630) 844-5600

 

**Naperville**

Chicago Avenue Branch: 1296 East Chicago Avenue, Naperville, Illinois60540 - (630) 652-2140

Naperville Branch: 2020 Feldott Lane, Naperville, Illinois 60540 -(630) 416-3800

 

**Oakbrook Terrace**

Oakbrook Terrace Branch: 17W754 22nd Street, OakbrookTerrace, Illinois 60181 - (630) 916-1195

 

**Oswego**

Oswego Branch: 2830 Route 34, Oswego, Illinois 60543 - (630) 652-2790

 

**Romeoville**

Romeoville Branch: 505 North Weber Road, Romeoville, Illinois 60446 -(815) 372-0665

 

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** **

**South Elgin**

South Elgin Branch: 1870 McDonald Road, South Elgin, Illinois 60177 -(815) 841-8000

 

**St. Charles**

Charlestowne Branch: 3000 East Main Street, St. Charles, Illinois 60174- (630) 762-1395

St. Charles Branch: 315 South Randall Road, St. Charles, Illinois 60174- (630) 377-6930

 

**Villa Park**

Villa Park Branch: 40 East St. Charles Road, Villa Park, Illinois 60181- (630) 832-8775

 

**Warrenville**

Warrenville Branch: 3S041 Route 59, Warrenville, Illinois 60555 - (630)393-6060

 

**Westmont**

Westmont Branch: 6400 South Cass Avenue, Westmont, Illinois 60559 -(630) 963-2735

 

**Wheaton**

Danada Branch: 295 West Loop Road, Wheaton, Illinois 60187 - (630)871-9890

Wheaton Branch: 221 South West Street, Wheaton, Illinois 60187 - (630)221-8220

 

ATMs are available at all of the above banking branches.

 

**Limited-Service Branches**

*Beacon Hill Retirement Community: Lombard, Illinois60148*

*Financial Center: 717 South Meyers Road, Lombard,Illinois 60148*

*Lexington Health Care Center of Elmhurst: Elmhurst,Illinois 60126*

*Lexington Health Care Center of Lombard: Lombard,Illinois 60148*

 

**Other Services**

*Prepaid Solutions Group: 17W754 22ndStreet, Oakbrook Terrace, Illinois 60181 - (630) 652-2500*

*Travel with West Suburban: 711 South Meyers Road,Lombard, Illinois 60148 - (630) 495-1400*

*West Suburban Bank Land Trust: 711 South MeyersRoad, Lombard, Illinois 60148 - (630) 652-2225*

*West Suburban Bank Visa: 701 South Meyers Road, Lombard,Illinois 60148 - (630) 652-2500 extension 2903*

*West Suburban Financial Services: 711 South MeyersRoad, Lombard, Illinois 60148 - (630) 652-2232*

*West Suburban Insurance Services, Inc.: 711 SouthMeyers Road, Lombard, Illinois 60148 - (630) 652-2550*

 

45

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**[MAP OF MARKET AREA THATINDICATES LOCATION OF FACILITIES]**

 

 

**[WSB LOGO]**

 

***Wherestrength is matched by service***

 

46

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**Shareholder Information**

 

**Annual Report on Form 10-K**

A copy of West Suburban Bancorp, Inc.’s Annual Report on Form 10-K,filed with the Securities and Exchange Commission, is available on their website at www.sec.gov or without charge to shareholders by writing to:

 

Duane G. Debs

President and Chief Financial Officer

West Suburban Bancorp, Inc.

2800 Finley Road

Downers Grove, Illinois 60515

(630) 652-2801

 

**Annual Meeting of Shareholders**

The annual meeting of shareholders ofWest Suburban Bancorp, Inc. will be held at West Suburban Bank, 711 South MeyersRoad, Lombard, Illinois on Wednesday, May 11, 2005 at 8:00 a.m. Allshareholders are cordially invited to attend.

 

**Stock Transfer Agent and Registrar**

Inquiries regarding stock transfers,registration, lost certificates and changes of name and address should bedirected to the stock transfer agent and registrar by writing to:

 

George E. Ranstead

Secretary to the Board and Treasurer

West Suburban Bancorp, Inc.

2800 Finley Road

Downers Grove, Illinois 60515

(630) 652-2802

 

**Community Reinvestment Act**

West Suburban Bank adheres to awell-established policy of helping to meet the credit needs of our localcommunities, consistent with safe and sound lending practices, in accordancewith the Community Reinvestment Act. For additional information, contact:

 

Michael P. Brosnahan

Senior Vice President, Commercial Lending andCommunity Reinvestment Act Officer

West Suburban Bank

717 South Meyers Road

Lombard, Illinois 60148

(630) 652-2308

 

**Independent Registered Public Accounting Firm**

Crowe Chizek and Company LLC

One Mid America Plaza, Suite 700

Post Office Box 3697

Oak Brook, Illinois 60522

 

**Corporate Counsel**

Barack Ferrazzano Kirschbaum Perlman & Nagelberg LLP

333 West Wacker Drive, Suite 2700

Chicago, Illinois 60606

 

**MEMBER FDIC**

**[EQUAL HOUSING LENDER LOGO]**

 

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