** **

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-K**

 

| ý                                      | ** ** | **ANNUAL  REPORT PURSUANT TO SECTION 13 OR 15(d) OF**         |
|---------------------------------------------|------------|---------------------------------------------------------------|
|                                        |       | **THE  SECURITIES EXCHANGE ACT OF 1934**                      |
|                                        |       |                                                          |
| **For fiscal year ended December 31, 2005** |
|                                        |       |                                                          |
| o                                           |       | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE** |
|                                        |       | **SECURITIES  EXCHANGE ACT OF 1934**                          |

 

**For transition period from               to               **

 

**Commission File Number 0 – 17609**

 

**WESTSUBURBAN BANCORP, INC.**

(Exact name ofRegistrant as specified in its charter)

 

| **Illinois**                                 | ** ** | **36-3452469**                          |
|----------------------------------------------|------------|-----------------------------------------|
| (State or other jurisdiction                 |       | (I.R.S. Employer Identification Number) |
| of incorporation or organization)            |       |                                    |
|                                         |       |                                    |
| **711 South Meyers Road, Lombard, Illinois** | ** ** | **60148**                               |
| (Address of principal executive offices)     |       | (Zip Code)                              |

 

Registrant’s telephone number, including area code:  **(630) 629-4200**

 

Securities registered pursuant to Section 12(b) of the Act:

 

| ** **              | ** ** | ** **                                     |
|-------------------------|------------|------------------------------------------------|
| **Title of Each Class** | ** ** | **Name of Each Exchange  on which Registered** |
| **None**                | ** ** | **None**                                       |

 

Securities registered pursuant to Section 12(g) of the Act:

 

# **Common Stock, no par value**

(Title of Class)

 

Indicate by check mark if the Registrant is a well-known seasonedissuer, as defined in Rule 405 of the Securities Act.Yes o No ý

 

Indicate by check mark if the Registrant is not required to file reportspursuant to Section 13 or Section 15(d) of the Act.Yes o No ý

 

Indicate by check mark whether the Registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theRegistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. Yes ýNo o

 

Indicate by check mark if disclosure of delinquent filers pursuant toItem 405 of Regulation S-K is not contained herein, and will not be contained,to the best of Registrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K ý

 

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

 

Large accelerated filer o       Acceleratedfiler ý        Non-acceleratedfiler o

 

Indicate by check mark whether the Registrant is a shell company (asdefined in Rule 12b-2 of the Act).     Yes o  No ý

 

The aggregate fair value of voting common stock of Registrant held bynon-affiliates as of February 21, 2005 was $189,261,241(1). At December 31,2005, the total number of shares of Common Stock outstanding was 432,495.

 

Documents Incorporated by Reference:

 

Portions of the Annual Report to Shareholders for the fiscal year endedDecember 31, 2005 are incorporated by reference into Parts I, II and IV hereof,to the extent indicated herein. Portions of the Proxy Statement for the AnnualMeeting of Shareholders to be held May 10, 2006 are incorporated by referencein Part III hereof, to the extent indicated herein.

 

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(1)                      Based on the last independentlyappraised fair value of the Registrant’s common stock on February 21, 2006, andreports of beneficial ownership filed by directors and executive officers ofRegistrant and by beneficial owners of more than 5% of the outstanding sharesof common stock of Registrant; however, such determination of shares owned byaffiliates does not constitute an admission of affiliate status or beneficialinterest in shares of common stock of Registrant.

 

 

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**Special Note Concerning Forward-LookingStatements**

 

This document (including informationincorporated by reference) contains, and future oral and written statements ofWest Suburban Bancorp, Inc. (“West Suburban”) and West Suburban Bank (the “Bank”and collectively with West Suburban and its other direct and indirectsubsidiaries, the “Company”) and its management, forward-looking statementswithin the meaning of such term in the Private Securities Litigation Reform Actof 1995 with respect to the financial condition, results of operations, plans,objectives, future performance and business of the Company. Forward-lookingstatements, which may be based upon beliefs, expectations and assumptions ofthe Company’s management and on information currently available to management,are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,”“plan,” “intend,” “estimate,” “may,” “will,” “would,” “could,” “should” orother similar expressions. Additionally, all statements in this document,including forward-looking statements, speak only as of the date they are made,and the Company undertakes no obligation to update any statement in light ofnew information or future events.

 

The Company’s ability to predict results or the actual effect of futureplans or strategies is inherently uncertain. Factors which could have amaterial adverse effect on the operations and future prospects of the Companyand its subsidiaries include, but are not limited to, the following:

 

•                                          Thestrength of the United States economy in general and the strength of the localeconomies in which the Company conducts its operations which may be lessfavorable than expected and may result in, among other things, a deteriorationin the credit quality and value of the Company’s assets.

 

•                                          Theeffects of, and changes in, federal, state and local laws, regulations andpolicies affecting banking, securities, taxation, insurance and monetary andfinancial matters, as well as any laws and regulations otherwise affecting theCompany, including laws and regulations intended to enhance national security.

 

•                                          Theeffects of changes in interest rates (including the effects of changes in therate of prepayments of the Company’s assets) and the policies of the Board ofGovernors of the Federal Reserve System.

 

•                                          Theability of the Company to compete with other financial institutions aseffectively as the Company currently intends due to increases in competitivepressures in the financial services sector.

 

•                                          Theinability of the Company to obtain new customers and to retain existingcustomers.

 

•                                          Thetimely development and acceptance of products and services, including productsand services offered through alternative delivery channels such as theInternet.

 

•                                          Technologicalchanges implemented by the Company and by other parties, including third partyvendors, which may be more difficult or more expensive than anticipated orwhich may have unforeseen consequences to the Company and its customersincluding technological changes implemented for, or related to, the Company’swebsite or new products such as prepaid solutions cards, payroll cards andother similar products and services.

 

•                                          Theability of the Company, and certain of its vendors, to develop and maintainsecure and reliable electronic systems including systems developed for theCompany’s website or new products such as prepaid solutions cards, payrollcards and other similar products and services.

 

•                                          Theability of the Company to retain key executives and employees and thedifficulty that the Company may experience in replacing key executives andemployees in an effective manner.

 

•                                          Consumerspending and saving habits which may change in a manner that affects theCompany’s business adversely.

 

•                                          Theeconomic impact of terrorist activities and military actions.

 

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•                                          Businesscombinations and the integration of acquired businesses which may be moredifficult or expensive than expected.

 

•                                          Thecosts, effects and outcomes of existing or future litigation.

 

•                                          Changesin accounting policies and practices, as may be adopted by state and federalregulatory agencies and the Financial Accounting Standards Board.

 

•                                          Theability of the Company to manage the risks associated with the foregoing aswell as anticipated.

 

These risks anduncertainties should be considered in evaluating forward-looking statements andundue reliance should not be placed on such statements. Additional informationconcerning the Company and its business, including other factors that couldmaterially affect the Company’s financial results, is included in the Company’sfilings with the Securities and Exchange Commission.

 

# **PART I**

 

## **ITEM 1.  BUSINESS**

 

REGISTRANT AND ITS SUBSIDIARY

 

West Suburban Bancorp, Inc., an Illinois corporation (“West Suburban”),is a bank holding company registered under the Bank Holding Company Act of1956, as amended (the “BHCA”), and the parent company of West Suburban Bank,Lombard, Illinois. West Suburban Bank may be referred to as the “Bank” and,collectively, with West Suburban, may be referred to as the “Company.”

 

The Bank is headquartered in Lombard, Illinois, and, as of December 31,2005, 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 the western suburbs ofChicago. Due to the nature of the market areas served by the Bank, the Bankprovides a wide range of financial services to individuals and small to mediumsized businesses. The western suburbs of Chicago have a diversified economywith many corporate headquarters and numerous small to medium sized industrialand non-industrial businesses.

 

The Bank engages in ageneral full service retail banking business and offers a broad variety ofconsumer and commercial products and services. The Bank also offers insuranceservices through West Suburban Insurance Services, Inc., travel agency servicesthrough *Travel With West Suburban*, land trustservices, stored value card products through the Prepaid Solutions Group andsafe deposit boxes. The Bank provides extended banking hours including Sundayhours and 24-hour banking through a proprietary network of 58 automated tellermachines (“ATMs”), Tele-Bank 24 (a bank-by-phone system) and online banking atwww.westsuburbanbank.com. Other consumer related services are also available,including investment products and a Visa card through West Suburban Bank CardServices.

 

The following table sets forth financial and other informationconcerning the Bank as of and for the year ended December 31, 2005 (dollars inthousands):

 
| **Year Formed/Year  Affiliated with** | ** ** | **Number of** | ** ** | **Total**  | ** ** | **Shareholders’** | ** ** | **Net**    | ** ** | ** ** | ** ** |
|---------------------------------------|------------|---------------|------------|------------|------------|------------------------|------------|------------|------------|------------|------------|
| ** **                            |
| **Return on Average**                 |
| **West Suburban**                     |       | **Locations** |       | **Assets** |       | **Equity**             |       | **Income** |       | **Assets** |       | **Equity** |   |
| West  Suburban Bank                   |       |          |       |       |       |                   |       |       |       |       |       |   |   |
| (1962/1988)                           |       | 37            |       | $          | 1,818,853  |                   | $          | 126,424    |       | $          | 25,145     |   | 1.42 | % | 19.13 | % |
|                                       |            |               |            |            |            |                        |            |            |            |            |            |  |  |  |  |  |

 

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COMPETITION

 

The Company encounters competition in all areas of its business pursuits.It competes for loans, deposits, fiduciary and other services with financialand other institutions located both within and outside of its market area. Inorder to compete effectively, to develop its market base, to maintainflexibility and to move in pace with changing economic, technological andsocial conditions, the Company continuously refines and develops its productsand services. The principal methods of competition in the financial servicesindustry are price, service and convenience.

 

Under the Gramm-Leach-Bliley Act of 1999 (the “GLBA”), effective March11, 2000, securities firms and insurance companies that elect to becomefinancial holding companies may acquire banks and other financial institutions.The GLBA has significantly changed the competitive environment in which theCompany and the Bank conduct business. The financial services industrycontinues to become more competitive as technological advances enable morecompanies to provide financial services. These technological advances maydiminish the importance of depository institutions and other financialintermediaries.

 

EMPLOYEES

 

The Company employed 616 persons (495 full-time equivalent employees)on December 31, 2005. The Company believes that its relationship with itsemployees is good.

 

# **SUPERVISION AND REGULATION**

# ** **

Financial institutions,their holding companies and their affiliates are extensively regulated underfederal and state law. As a result, the growth and earnings performance of theCompany may be affected not only by management decisions and general economicconditions, but also by the requirements of federal and state statutes and bythe regulations and policies of various bank regulatory authorities, includingthe Illinois Department of Financial and Professional Regulation (the “DFPR”),the Board of Governors of the Federal Reserve System (the “Federal Reserve”)and the Federal Deposit Insurance Corporation (the “FDIC”). Furthermore,taxation laws administered by the Internal Revenue Service and state taxingauthorities and securities laws administered by the Securities and ExchangeCommission (the “SEC”) and state securities authorities have an impact onthe business of the Company. The effect of these statutes, regulations andregulatory policies may be significant, and cannot be predicted with a highdegree of certainty.

 

Federal and state lawsand regulations generally applicable to financial institutions regulate, amongother things, the scope of business, the kinds and amounts of investments,reserve requirements, capital levels relative to operations, the nature andamount of collateral for loans, the establishment of branches, mergers andconsolidations and the payment of dividends. This system of supervision andregulation establishes a comprehensive framework for the respective operationsof the Company and its subsidiaries and is intended primarily for theprotection of the FDIC-insured deposits and depositors of the Bank, rather thanshareholders.

 

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

 

**The Company**

 

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

 

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***Acquisitions,Activities and Change in Control.*******In general, a bank holding company is in the businessof controlling and managing banks. TheBHCA requires the prior approval of the Federal Reserve for any mergerinvolving a bank holding company or any acquisition by a bank holding companyof another bank or bank holding company. Subject to certain conditions(including certain deposit concentration limits established by the BHCA), theFederal Reserve may allow a bank holding company to acquire banks located inany state of the United States. In approving interstate acquisitions, theFederal Reserve is required to give effect to applicable state law limitationson the aggregate amount of deposits that may be held by the acquiring bankholding company and its insured depository institution affiliates in the statein which the target bank is located (provided that those limits do notdiscriminate against out-of-state depository institutions or their holdingcompanies) and state laws that require that the target bank have been inexistence for a minimum period of time (not to exceed five years) before beingacquired by an out-of-state bank holding company.

 

The BHCA generallyprohibits the Company from acquiring direct or indirect ownership or control ofmore than 5% of the voting shares of any company that is not a bank and fromengaging in any business other than that of banking, managing and controllingbanks or furnishing services to banks and their subsidiaries. This generalprohibition is subject to a number of exceptions. The principal exceptionallows bank holding companies to engage in, and to own shares of companiesengaged in, certain businesses found by the Federal Reserve to be “so closelyrelated to banking... as to be a proper incident thereto.” This authority wouldpermit the Company to engage in a variety of banking-related businesses,including the ownership and operation of a thrift or any entity engaged inconsumer finance, equipment leasing, the operation of a computer service bureau(including software development), and mortgage banking and brokerage. The BHCAgenerally does not place territorial restrictions on the domestic activities ofnon-bank subsidiaries of bank holding companies.

 

Additionally, bank holdingcompanies that meet certain eligibility requirements prescribed by the BHCA andelect to operate as financial holding companies may engage in, or own shares incompanies engaged in, a wider range of nonbanking activities, includingsecurities and insurance underwriting and sales, merchant banking and any otheractivity that the Federal Reserve, in consultation with the Secretary ofthe Treasury, determines by regulation or order is financial in nature,incidental to any such financial activity or complementary to any suchfinancial activity and does not pose a substantial risk to the safety orsoundness of depository institutions or the financial system generally. As ofthe date of this filing, the Company has not applied for approval to operate asa financial holding company.

 

Federal law alsoprohibits any person or company from acquiring “control” of an FDIC-insureddepository institution or its holding company without prior notice to theappropriate federal bank regulator. “Control” is conclusively presumed to existupon the acquisition of 25% or more of the outstanding voting securities of abank or bank holding company, but may arise under certain circumstances at 10%ownership.

 

***CapitalRequirements.*** Bank holding companies are required tomaintain minimum levels of capital in accordance with Federal Reserve capitaladequacy guidelines. If capital levels fall below the minimum required levels,a bank holding company, among other things, may be denied approval to acquireor establish additional banks or non-bank businesses.

 

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

 

The risk-based andleverage standards described above are minimum requirements. Higher capitallevels may be required if warranted by the particular circumstances or riskprofiles of individual banking organizations. For 

 

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example, the FederalReserve’s capital guidelines contemplate that additional capital may berequired to take adequate account of, among other things, interest rate risk,or the risks posed by concentrations of credit, nontraditional activities orsecurities trading activities. Further, any banking organization experiencingor anticipating significant growth would be expected to maintain capital ratios,including tangible capital positions (*i.e.*, Tier 1capital less all intangible assets), well above the minimum levels. As ofDecember 31, 2005, the Company had regulatory capital in excess of the FederalReserve’s minimum requirements.

 

***DividendPayments.*****The Company’sability to pay dividends to its shareholders may be affected by both generalcorporate law considerations and policies of the Federal Reserve applicable tobank holding companies*.*As anIllinois corporation, the Company is subject to the Illinois BusinessCorporation Act, as amended, which prohibits the Company from paying a dividendif, after giving effect to the dividend: (i) the Company would be insolvent; or(ii) the net assets of the Company would be less than zero; or (iii) the net assetsof the Company would be less than the maximum amount then payable toshareholders of the Company who would have preferential distribution rights ifthe Company were liquidated. Additionally, policies of the Federal Reservecaution that a bank holding company should not pay cash dividends that exceedits net income or that can only be funded in ways that weaken the bank holdingcompany’s financial health, such as by borrowing. The Federal Reserve alsopossesses enforcement powers over bank holding companies and their non-banksubsidiaries to prevent or remedy actions that represent unsafe or unsoundpractices or violations of applicable statutes and regulations. Among thesepowers is the ability to proscribe the payment of dividends by banks and bank holdingcompanies.

 

***FederalSecurities Regulation.*** The Company’s common stock is registeredwith the SEC under the Securities Act of 1933, as amended, and the SecuritiesExchange Act of 1934, as amended (the “Exchange Act”). Consequently, theCompany is subject to the information, proxy solicitation, insider trading andother restrictions and requirements of the SEC under the Exchange Act.

 

## **The Bank**

## ** **

***General.*****The Bank is an Illinois-chartered bank, the deposit accountsof which are insured by the FDIC’s Bank Insurance Fund (“BIF”). As anIllinois-chartered bank, the Bank is subject to the examination, supervision,reporting and enforcement requirements of the DFPR, the chartering authorityfor Illinois banks, and the FDIC, designated by federal law as the primaryfederal regulator of state-chartered, FDIC-insured banks that, like the Bank,are not members of the Federal Reserve System (“non-member banks”).

 

***DepositInsurance.*** As an FDIC-insured institution, the Bankis required to pay deposit insurance premium assessments to the FDIC. The FDIChas adopted a risk-based assessment system under which all insured depositoryinstitutions are placed into one of nine categories and assessed insurancepremiums based upon their respective levels of capital and results ofsupervisory evaluations. Institutions classified as well-capitalized (asdefined by the FDIC) and considered healthy pay the lowest premium whileinstitutions that are less than adequately capitalized (as defined by theFDIC) and considered of substantial supervisory concern pay the highestpremium. Risk classification of all insured institutions is made by the FDICfor each semi-annual assessment period.

 

During the year endedDecember 31, 2005, BIF assessments ranged from 0% of deposits to 0.27% of deposits.For the semi-annual assessment period beginning January 1, 2006, BIF assessmentrates will continue to range from 0% of deposits to 0.27% of deposits.

 

***FICO Assessments.*** Since 1987,a portion of the deposit insurance assessments paid by members of the FDIC’sSavings Association Insurance Fund (“SAIF”) has been used to cover interestpayments due on the outstanding obligations of the Financing Corporation (“FICO”).FICO was created in 1987 to finance the recapitalization of the Federal Savingsand Loan Insurance Corporation, the SAIF’s predecessor insurance fund. As aresult of federal legislation enacted in 1996, beginning as of January 1,1997, both SAIF members and BIF members became subject to assessments to coverthe interest payments on outstanding FICO obligations until the final maturityof such obligations in 2019. These FICO assessments are in addition to amountsassessed by the FDIC for deposit insurance. During the year endedDecember 31, 2005, the FICO assessment rate for BIF and SAIF members wasapproximately 0.01% of deposits.

 

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***SupervisoryAssessments.*** All Illinois banks are required to paysupervisory assessments to the DFPR to fund the operations of the DFPR. Theamount of the assessment is calculated on the basis of an institution’s totalassets, including consolidated subsidiaries, as reported to the DFPR. Duringthe year ended December 31, 2005, the Bank paid supervisory assessments to theDFPR totaling $.16 million.

 

***CapitalRequirements.*** Banks are generally required to maintaincapital levels in excess of other businesses. The FDIC has established thefollowing minimum capital standards for state-chartered insured non-memberbanks, such as the Bank: (i) a leverage requirement consisting of a minimumratio of Tier 1 capital to total assets of 3% for the most highly-rated bankswith a minimum requirement of at least 4% for all others; and (ii) a risk-basedcapital requirement consisting of a minimum ratio of total capital to totalrisk-weighted assets of 8% and a minimum ratio of Tier 1 capital to totalrisk-weighted assets of 4%. In general, the components of Tier 1 capital andtotal capital are the same as those for bank holding companies discussed above.

 

The capital requirementsdescribed above are minimum requirements. Higher capital levels may be requiredif warranted by the particular circumstances or risk profiles of individualinstitutions. For example, regulations of the FDIC provide that additionalcapital may be required to take adequate account of, among other things,interest rate risk or the risks posed by concentrations of credit,nontraditional activities or securities trading activities.

 

Further, federal law andregulations provide various incentives for financial institutions to maintainregulatory capital at levels in excess of minimum regulatory requirements. Forexample, a financial institution that is “well-capitalized” may qualify forexemptions from prior notice or application requirements otherwise applicableto certain types of activities and may qualify for expedited processing ofother required notices or applications. Additionally, one of the criteria thatdetermines a bank holding company’s eligibility to operate as a financialholding company is a requirement that all of its financial institutionsubsidiaries be “well-capitalized.” Under the regulations of the FDIC, in orderto be “well-capitalized” a financial institution must maintain a ratio of totalcapital to total risk-weighted assets of 10% or greater, a ratio of Tier 1capital to total risk-weighted assets of 6% or greater and a ratio of Tier 1capital to total assets of 5% or greater.

 

Federal law alsoprovides the federal banking regulators with broad power to take promptcorrective action to resolve the problems of undercapitalized institutions. Theextent of the regulators’ powers depends on whether the institution in questionis “adequately capitalized,” “undercapitalized,” “significantlyundercapitalized” or “critically undercapitalized,” in each case as defined byregulation. Depending upon the capital category to which an institution isassigned, the regulators’ corrective powers include: (i) requiring theinstitution to submit a capital restoration plan; (ii) limiting theinstitution’s asset growth and restricting its activities; (iii) requiring theinstitution to issue additional capital stock (including additional votingstock) or to be acquired; (iv) restricting transactions between the institutionand its affiliates; (v) restricting the interest rate the institution maypay on deposits; (vi) ordering a new election of directors of the institution;(vii) requiring that senior executive officers or directors be dismissed;(viii) prohibiting the institution from accepting deposits from correspondentbanks; (ix) requiring the institution to divest certain subsidiaries; (x)prohibiting the payment of principal or interest on subordinated debt; and (xi)ultimately, appointing a receiver for the institution.

 

As of December 31, 2005:(i) the Bank was not subject to a directive from the FDIC to increase itscapital to an amount in excess of the minimum regulatory capital requirements;(ii) the Bank exceeded its minimum regulatory capital requirements underFDIC capital adequacy guidelines; and (iii) the Bank was “well-capitalized,” asdefined by FDIC regulations.

 

***DividendPayments.*** The primary source of funds for theCompany is dividends from the Bank. Under the Illinois Banking Act,Illinois-chartered banks generally may not pay dividends in excess of their netprofits.

 

The payment of dividendsby any financial institution or its holding company is affected by therequirement to maintain adequate capital pursuant to applicable capitaladequacy guidelines and regulations, and a financial institution generally isprohibited from paying any dividends if, following payment thereof, theinstitution would be undercapitalized. As described above, the Bank exceededits minimum capital requirements under applicable guidelines as of December 31,2005. As of December 31, 2005, approximately $4.6 million was available tobe paid as dividends by the Bank. Notwithstanding the availability of funds fordividends, however, the FDIC may prohibit 

 

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the payment of anydividends by the Bank if the FDIC determines such payment would constitute anunsafe or unsound practice.

 

***InsiderTransactions.*** The Bank is subject to certainrestrictions imposed by federal law on extensions of credit to the Company, oninvestments in the stock or other securities of the Company and the acceptanceof the stock or other securities of the Company as collateral for loans made bythe Bank. Certain limitations and reporting requirements are also placed onextensions of credit by the Bank to its directors and officers, to directorsand officers of the Company, to principal shareholders of the Company and to “relatedinterests” of such directors, officers and principal shareholders. In addition,federal law and regulations may affect the terms upon which any person who is adirector or officer of the Company or the Bank or a principal shareholder ofthe Company may obtain credit from banks with which the Bank maintains acorrespondent relationship.

 

***Safetyand Soundness Standards.*** The federal banking agencies haveadopted guidelines that establish operational and managerial standards topromote the safety and soundness of federally insured depository institutions.The guidelines set forth standards for internal controls, information systems,internal audit systems, loan documentation, credit underwriting, interest rateexposure, asset growth, compensation, fees and benefits, asset quality andearnings. In general, the safety and soundness guidelines prescribe the goalsto be achieved in each area, and each institution is responsible forestablishing its own procedures to achieve those goals. If an institution failsto comply with any of the standards set forth in the guidelines, theinstitution’s primary federal regulator may require the institution to submit aplan for achieving and maintaining compliance. If an institution fails tosubmit an acceptable compliance plan, or fails in any material respect toimplement a compliance plan that has been accepted by its primary federalregulator, the regulator is required to issue an order directing theinstitution to cure the deficiency. Until the deficiency cited in the regulator’sorder is cured, the regulator may restrict the institution’s rate of growth,require the institution to increase its capital, restrict the rates theinstitution pays on deposits or require the institution to take any action theregulator deems appropriate under the circumstances. Noncompliance with thestandards established by the safety and soundness guidelines may alsoconstitute grounds for other enforcement action by the federal bankingregulators, including cease and desist orders and civil money penaltyassessments.

 

***BranchingAuthority.*** Illinois banks, such as the Bank, havethe authority under Illinois law to establish branches anywhere in the State ofIllinois, subject to receipt of all required regulatory approvals. Federal lawpermits state and national banks to merge with banks in other states subjectto: (i) regulatory approval; (ii) federal and state deposit concentrationlimits; and (iii) state law limitations requiring the merging bank to have beenin existence for a minimum period of time (not to exceed five years) prior tothe merger. The establishment of new interstate branches or the acquisition ofindividual branches of a bank in another state (rather than the acquisition ofan out-of-state bank in its entirety) is permitted only in those states thelaws of which expressly authorize such expansion.

 

***StateBank Investments and Activities.*** The Bankgenerally is permitted to make investments and engage in activities directly orthrough subsidiaries as authorized by Illinois law. However, under federal lawand FDIC regulations, FDIC-insured state banks are prohibited, subject tocertain exceptions, from making or retaining equity investments of a type, orin an amount, that are not permissible for a national bank. Federal law andFDIC regulations also prohibit FDIC-insured state banks and their subsidiaries,subject to certain exceptions, from engaging as principal in any activity thatis not permitted for a national bank unless the bank meets, and continues tomeet, its minimum regulatory capital requirements and the FDIC determines theactivity would not pose a significant risk to the deposit insurance fund ofwhich the bank is a member. These restrictions have not had, and are notcurrently expected to have, a material impact on the operations of the Bank.

 

***FederalReserve System.*** Federal Reserve regulations, aspresently in effect, require depository institutions to maintain non-interestearning reserves against their transaction accounts (primarily NOW and regularchecking accounts), as follows: for transaction accounts aggregating $48.3million or less, the reserve requirement is 3% of total transaction accounts;and for transaction accounts aggregating in excess of $48.3 million, thereserve requirement is $1.215 million plus 10% of the aggregate amount of totaltransaction accounts in excess of $48.3 million. The first $7.8 million ofotherwise reservable balances are exempted from the reserve requirements. Thesereserve requirements are subject to annual adjustment by the Federal Reserve.The Bank is in compliance with the foregoing requirements.

 

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**Insurance Subsidiary**

 

The Bank is the soleshareholder of West Suburban Insurance Services, Inc. (“WSIS”), anIllinois corporation licensed as a general insurance agency by the IllinoisDepartment of Insurance (the “Department”). WSIS is subject to supervision andregulation by the Department with regard to compliance with the laws andregulations governing insurance agents and by the Commissioner and the FDICwith regard to compliance with banking laws and regulations applicable tosubsidiaries of Illinois-chartered, FDIC insured banks.

 

**Available Information**

 

West Suburban’s Internet address is www.westsuburbanbank.com. Beginning from at least November 15, 2002, West Suburban has made available on or through its Internet website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after the reports were electronically filed with, or furnished to, the Securities and Exchange Commission.

 

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EXECUTIVE OFFICERS OF WEST SUBURBAN

 

The names and ages of the executive officers of West Suburban, alongwith a brief description of the business experience of each person during thepast five years, and certain other information is set forth below:

 
| **Name (Age) and Position and  Offices with West  Suburban (year first elected to office)**   | ** ** | **Principal Occupations and Employment for Past Five  Years and Other Information**                                 |
|-----------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------|
|                                                                                          |       |                                                                                                                |
| Kevin J. Acker (56)

Chairman and Chief Executive Officer (1993)  and   Vice President (1986) |       | Senior Vice President, Marketing of the Bank since 1997                                                             |
|                                                                                          |       |                                                                                                                |
| Keith W. Acker (56)  Chief Operations Officer (1996)                                          |       | Director, President and Trust Officer of the Bank since 1986                                                        |
|                                                                                          |       |                                                                                                                |
| Duane G. Debs (49)

President (1997) and Chief Financial Officer  (1993)                      |       | Senior Vice President, Trust Officer of the  Bank since 1997 and Vice President, Comptroller of the Bank since 1987 |
|                                                                                          |       |                                                                                                                |
| Michael P. Brosnahan (56)  Vice President (1997)                                              |       | Senior Vice President, Commercial Lending  and Community Reinvestment Act Officer of the Bank since 1989            |

 

10

----

 

STATISTICAL DATA

 

The statistical data required by Exchange Act Industry Guide 3, “StatisticalDisclosure By Bank Holding Companies,” has been incorporated by reference fromthe Company’s 2005 Annual Report to Shareholders (attached as Exhibit 13hereto) or is set forth below. This data should be read in conjunction with theCompany’s 2005 Consolidated Financial Statements and related notes, and thediscussion included in Management’s Discussion and Analysis of FinancialCondition and Results of Operations as set forth in the Company’s 2005 AnnualReport to Shareholders.

 

Securities

 

The following table setsforth by category the amortized cost of securities at December 31 (dollars inthousands):

 
| ** **                                | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|-------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Available for sale                        |       |     |       |     |       |     |       |
| Corporate                                 |       | $        | 45,417     |     | $          | 51,198   |       | $ | 45,831 |   |
| U.S. government agencies and corporations |       | 277,326  |       | 306,669  |       | 323,910  |       |
| Mortgage-backed                           |       | 145,289  |       | 121,969  |       | 38,346   |       |
| States and political subdivisions         |       | 10,590   |       | 5,824    |       | 33,420   |       |
| Preferred stock                           |       | 1,003    |       | 1,003    |       | 17,239   |       |
| Total securities available for sale       |       | 479,625  |       | 486,663  |       | 458,746  |       |
| Held to maturity                          |       |     |       |     |       |     |       |
| U.S. government agencies and corporations |       | 37,347   |       | 43,405   |       | 13,998   |       |
| Mortgage-backed                           |       | 13,018   |       | 12,430   |       | 1,959    |       |
| States and political subdivisions         |       | 14,580   |       | 16,101   |       | 13,238   |       |
| Total securities held to maturity         |       | 64,945   |       | 71,936   |       | 29,195   |       |
| Federal Home Loan Bank stock              |       | 5,619    |       | 5,352    |       | 5,039    |       |
| Total securities                          |       | $        | 550,189    |     | $          | 563,951  |       | $ | 492,980 |   |

 

The following table setsforth, by contractual maturity, the amortized cost and weighted average yieldof debt securities available for sale at December 31, 2005. Yields ontax-exempt securities represent tax equivalent yields, net of premiumamortization and discount accretion (dollars in thousands):

 
| ** **                        | ** ** | **Corporate**       | ** ** | **U.S. Government  Agencies and  Corporations** | ** ** | **Mortgage-backed** | ** ** | **States and Political  Subdivisions** | ** ** |
|-----------------------------------|------------|---------------------|------------|-------------------------------------------------|------------|---------------------|------------|----------------------------------------|------------|
| ** **                        | ** ** | **Amortized  Cost** | ** ** | **Weighted  Average  Yield**                    | ** ** | **Amortized  Cost** | ** ** | **Weighted  Average  Yield**           | ** ** | **Amortized  Cost** | ** ** | **Weighted  Average  Yield** | ** ** | **Amortized  Cost** | ** ** | **Weighted  Average  Yield** | ** ** |
| Within 1 year                     |       | $                   | 1,021      |                                            | 2.45       | %                   | $          | 52,966                                 |       | 2.65 | % | $ | — |   | — | % | $ | 450 |   | 5.70 | % |
| After 1 year but within 5 years   |       | 31,931              |       | 3.87                                            | %          | 212,518             |       | 3.22                                   | %          | 9,894 |   | 3.94 | % | 8,983 |   | 4.27 | % |
| After 5 years but within 10 years |       | 9,965               |       | 4.24                                            | %          | 11,842              |       | 3.22                                   | %          | 36,359 |   | 3.55 | % | 646 |   | 4.52 | % |
| After 10 years                    |       | 2,500               |       | 5.51                                            | %          | —              |       | —                                 | %          | 99,036 |   | 3.80 | % | 511 |   | 3.50 | % |
| Total                             |       | $                   | 45,417     |                                            | 4.01       | %                   | $          | 277,326                                |       | 3.11 | % | $ | 145,289 |   | 3.75 | % | $ | 10,590 |   | 4.31 | % |

 

The weighted averageyield on preferred stock and Federal Home Loan Bank stock was 4.43% at December31, 2005.

 

11

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The following table setsforth, by contractual maturity, the amortized cost and weighted average yieldof securities held to maturity at December 31, 2005 (dollars in thousands).Yields on tax-exempt securities represent tax equivalent yields, net of premiumamortization and discount accretion:

 
| ** **                         | ** ** | **U.S. Government  Agencies and  Corporations** | ** ** | **Mortgage-backed**          | ** ** | **States and Political  Subdivisions** | ** ** |
|------------------------------------|------------|-------------------------------------------------|------------|------------------------------|------------|----------------------------------------|------------|
| ** **                         | ** ** | **Amortized  Cost**                             | ** ** | **Weighted  Average  Yield** | ** ** | **Amortized  Cost**                    | ** ** | **Weighted  Average  Yield** | ** ** | **Amortized  Cost** | ** ** | **Weighted  Average  Yield** | ** ** |
| Within 1 year                      |       | $                                               | 19,750     |                         | 3.38       | %                                      | $          | — |   | — | % | $ | 723 |   | 7.16 | % |
| After 1 year  but within 5 years   |       | 17,597                                          |       | 3.44                         | %          | —                                 |       | — | % | 6,377 |   | 7.23 | % |
| After 5  years but within 10 years |       | —                                          |       | —                       | %          | —                                 |       | — | % | 3,951 |   | 6.03 | % |
| After 10  years                    |       | —                                          |       | —                       | %          | 13,018                                 |       | 4.45 | % | 3,529 |   | 6.60 | % |
| Total                              |       | $                                               | 37,347     |                         | 3.41       | %                                      | $          | 13,018 |   | 4.45 | % | $ | 14,580 |   | 6.73 | % |

 

No securities holdingsof a single issuer, other than U.S. government agencies and corporations,exceed 10% of shareholders’ equity of the Company at December 31, 2005.Expected maturities may differ from contractual maturities because issuers mayhave the right to call or prepay obligations with or without call or prepaymentpenalties. Approximately $147.0 million of securities are callable in 2006.Most of these callable securities were issued by U.S. government agencies andcorporations.

 

Loan Portfolio

 

The following table setsforth the major loan categories at December 31 (dollars in thousands):

 
| ** **                | ** ** | **2005**  | ** ** | **2004**  | ** ** | **2003**  | ** ** | **2002**  | ** ** | **2001**  | ** ** |
|---------------------------|------------|-----------|------------|-----------|------------|-----------|------------|-----------|------------|-----------|------------|
| Commercial                |       | $         | 276,898    |      | $          | 267,799   |       | $         | 270,220    |      | $          | 330,775 |   | $ | 323,036 |   |
| Consumer                  |       | 7,501     |       | 7,552     |       | 10,040    |       | 11,591    |       | 10,514    |       |
| Indirect automobile       |       | 24,939    |       | 38,651    |       | 60,929    |       | 90,617    |       | 102,183   |       |
| Real estate               |       |      |       |      |       |      |       |      |       |      |       |
| Residential               |       | 160,902   |       | 146,259   |       | 135,776   |       | 135,311   |       | 152,495   |       |
| Commercial                |       | 225,794   |       | 207,978   |       | 217,865   |       | 212,010   |       | 195,800   |       |
| Home equity               |       | 229,514   |       | 237,622   |       | 205,272   |       | 169,020   |       | 145,972   |       |
| Construction              |       | 165,484   |       | 135,264   |       | 171,975   |       | 174,001   |       | 157,328   |       |
| Held for sale             |       | 140       |       | 329       |       | 989       |       | 4,224     |       | 5,840     |       |
| Credit card               |       | 10,545    |       | 14,682    |       | 14,872    |       | 13,732    |       | 10,437    |       |
| Other                     |       | 711       |       | 516       |       | 697       |       | 1,382     |       | 2,033     |       |
| Total                     |       | 1,102,428 |       | 1,056,652 |       | 1,088,635 |       | 1,142,663 |       | 1,105,638 |       |
| Allowance for loan losses |       | (10,681   | )          | (10,527   | )          | (14,420   | )          | (13,847   | )          | (12,262   | )          |
| Loans, net                |       | $         | 1,091,747  |      | $          | 1,046,125 |       | $         | 1,074,215  |      | $          | 1,128,816 |   | $ | 1,093,376 |   |

 

12

----

 

The following table setsforth the maturity and interest rate sensitivity of selected loan categories atDecember 31, 2005 (dollars in thousands):

 
| ** **                | ** ** | **Remaining Maturity** | ** ** |
|---------------------------|------------|------------------------|------------|
| ** **                | ** ** | **One year  or less**  | ** ** | **One to  five years** | ** ** | **Over  five years** | ** ** | **Total** | ** ** |
| Real  estate-construction |       | $                      | 165,043    |   | $ | 441 |   | $ | — |   | $ | 165,484 |   |
| Other loans               |       | 404,538                |       | 315,358 |   | 217,048 |   | 936,944 |   |
| Total                     |       | $                      | 569,581    |   | $ | 315,799 |   | $ | 217,048 |   | $ | 1,102,428 |   |
|                      |       |                   |       |   |   |   |   |   |   |
| Variable  rate            |       | $                      | 558,066    |   | $ | 208,603 |   | $ | 4,744 |   | $ | 771,413 |   |
| Fixed rate                |       | 11,515                 |       | 107,196 |   | 212,304 |   | 331,015 |   |
| Total                     |       | $                      | 569,581    |   | $ | 315,799 |   | $ | 217,048 |   | $ | 1,102,428 |   |

 

Nonperforming Loans

 

The following table setsforth the aggregate amount of nonperforming loans and selected ratios atDecember 31 (dollars in thousands):

 
| ** **                                         | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
|----------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| Loans past due 90 days or more still on  accrual   |       | $        | 1,665      |     | $          | 1,036    |       | $        | 380        |     | $          | 1,789 |   | $ | 11,338 |   |
| Nonaccrual loans                                   |       | 533      |       | 3,815    |       | 15,008   |       | 12,021   |       | 3,945    |       |
| Total nonperforming loans                          |       | 2,198    |       | 4,851    |       | 15,388   |       | 13,810   |       | 15,283   |       |
| Other real estate                                  |       | 210      |       | 3,156    |       | 1,266    |       | 40       |       | 1,410    |       |
| Total nonperforming assets                         |       | $        | 2,408      |     | $          | 8,007    |       | $        | 16,654     |     | $          | 13,850 |   | $ | 16,693 |   |
|                                               |       |     |       |     |       |     |       |     |       |     |       |
| Nonperforming loans as a percent of total  loans   |       | 0.2      | %          | 0.5      | %          | 1.4      | %          | 1.2      | %          | 1.4      | %          |
| Nonperforming assets as a percent of total  assets |       | 0.1      | %          | 0.5      | %          | 1.0      | %          | 0.9      | %          | 1.1      | %          |

 

The Company’s generalpolicy is to discontinue accruing interest on a loan when it becomes 90 dayspast due or, on an earlier date, if management believes, after consideringeconomic and business conditions and collection efforts, that the borrower’sfinancial condition is such that collection of principal or interest isdoubtful. In some circumstances a loan that is more than 90 days past due canremain on accrual status if it is fully secured and in process of collection.When a loan has been placed on nonaccrual, interest earned but not collected ischarged back to interest income. When payments are received on nonaccrualloans, the payment is first applied to principal, then to interest income andfinally to expenses incurred for collection. Interest income received onnonaccrual loans was immaterial for the years presented above. Potentialproblem loans are loans included on a watch list presented to the board ofdirectors that do not meet the definition of a nonperforming loan. Our decisionto include performing loans on a watch list does not necessarily mean that weexpect losses to occur, rather, that we believe a higher degree of risk isassociated with these loans. Potential problem loans as of December 31, 2005were $19.8 million.

 

13

----

 

Allowance for Loan Losses

 

The Company maintains an allowance for loan losses at a level managementbelieves is sufficient to absorb probable incurred credit losses in the loanportfolio. The allowance for loan losses represents the Company’s estimate ofprobable incurred credit losses in the loan portfolio at each balance sheetdate and is based on the review of available and relevant information. Theallowance contains allocations for probable incurred credit losses that havebeen identified relating to specific borrowing relationships as well asprobable incurred credit losses for pools of loans. The allowance for loanlosses is evaluated monthly by the Company to determine the appropriate levelof the allowance. The amount of the allowance for loan losses is determinedbased on a variety of factors, including assessment of the credit risk of theloans in the loan portfolio, volume of the loans, delinquent loans, evaluationof current economic conditions in the market area, actual charge-offs duringthe period and historical loss experience. Loan quality is continuallymonitored by management and reviewed by the loan committee on a monthly 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 asfuture events occur. Along with the allocation of the allowance on a categoryby category 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 recording aprovision for loan losses in an amount sufficient to maintain the allowance atthe level determined appropriate. Loans are charged-off when deemed to beuncollectible by management. The Company believes that the allowance for loanlosses is adequate to provide for estimated probable incurred credit losses inthe loan portfolio.

 

14

----

 

The following table sets forth the activity in the allowance for loanlosses for the years ended and at December 31 (dollars in thousands):

 
| ** **                                        | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
|---------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| Allowance  for loan losses at beginning of period |       | $        | 10,527     |     | $          | 14,420   |       | $        | 13,847     |     | $          | 12,262 |   | $ | 11,399 |   |
| Loan  charge-offs                                 |       |     |       |     |       |     |       |     |       |     |       |
| Commercial                                        |       | 1,250    |       | 3,936    |       | 1,408    |       | 5,869    |       | 1,789    |       |
| Consumer                                          |       | 12       |       | 31       |       | 19       |       | 61       |       | 6        |       |
| Indirect automobile                               |       | 79       |       | 113      |       | 186      |       | 244      |       | 171      |       |
| Real estate                                       |       |     |       |     |       |     |       |     |       |     |       |
| Residential                                       |       | —   |       | —   |       | —   |       | —   |       | 45       |       |
| Commercial                                        |       | —   |       | 164      |       | 48       |       | 341      |       | —   |       |
| Home equity                                       |       | —   |       | 12       |       | 9        |       | —   |       | 30       |       |
| Construction                                      |       | —   |       | —   |       | —   |       | —   |       | —   |       |
| Credit card                                       |       | 192      |       | 236      |       | 195      |       | 274      |       | 217      |       |
| Other                                             |       | 56       |       | 72       |       | 82       |       | 12       |       | 47       |       |
| Total loan charge-offs                            |       | 1,589    |       | 4,564    |       | 1,947    |       | 6,801    |       | 2,305    |       |
| Loan  recoveries                                  |       |     |       |     |       |     |       |     |       |     |       |
| Commercial                                        |       | 252      |       | 315      |       | 227      |       | 95       |       | 113      |       |
| Consumer                                          |       | 4        |       | 3        |       | 12       |       | 5        |       | 8        |       |
| Indirect automobile                               |       | 47       |       | 65       |       | 73       |       | 52       |       | 22       |       |
| Real estate                                       |       |     |       |     |       |     |       |     |       |     |       |
| Residential                                       |       | —   |       | —   |       | —   |       | 3        |       | 4        |       |
| Commercial                                        |       | —   |       | —   |       | —   |       | —   |       | —   |       |
| Home equity                                       |       | —   |       | —   |       | —   |       | —   |       | 9        |       |
| Construction                                      |       | —   |       | —   |       | —   |       | —   |       | —   |       |
| Credit card                                       |       | 57       |       | 73       |       | 56       |       | 106      |       | 62       |       |
| Other                                             |       | 8        |       | 15       |       | 2        |       | —   |       | —   |       |
| Total loan recoveries                             |       | 368      |       | 471      |       | 370      |       | 261      |       | 218      |       |
| Net loan charge-offs                              |       | 1,221    |       | 4,093    |       | 1,577    |       | 6,540    |       | 2,087    |       |
| Provision  for loan losses                        |       | 1,375    |       | 200      |       | 2,150    |       | 8,125    |       | 2,950    |       |
| Allowance  for loan losses at end of period       |       | $        | 10,681     |     | $          | 10,527   |       | $        | 14,420     |     | $          | 13,847 |   | $ | 12,262 |   |
|                                              |       |     |       |     |       |     |       |     |       |     |       |
| Allowance  for loan losses to total loans         |       | 0.97     | %          | 1.00     | %          | 1.33     | %          | 1.21     | %          | 1.11     | %          |
| Net  charge-offs to average total loans           |       | 0.11     | %          | 0.39     | %          | 0.14     | %          | 0.59     | %          | 0.20     | %          |

 

The amount of theadditions to the allowance for loan losses charged to expense for the periodsindicated were based on a variety of factors, including actual loanscharged-off during the respective year, historical loss experience, changes inthe nature and volume of the loan portfolio including nonperforming loans,specific loss allocations for individual loans and an evaluation of currenteconomic conditions.

 

15

----

 

The allocation shown inthe following table, encompassing the major segments of the loan portfolio,represents only an estimate for each category of loans based on historical lossexperience and management’s judgment of amounts deemed reasonable to providefor probable losses within each category.

 

Estimated losses forcategories of homogeneous loan types are generally made on an aggregate basis(dollars in thousands).

 
| ** **          | ** ** | **2005**   | ** ** | **2004**                                                | ** ** | **2003**   | ** ** | **2002**                                                | ** ** | **2001**   | ** ** |
|---------------------|------------|------------|------------|---------------------------------------------------------|------------|------------|------------|---------------------------------------------------------|------------|------------|------------|
| ** **          | ** ** | **Amount** | ** ** | **Percent  of Loans  in Each Category  to Total Loans** | ** ** | **Amount** | ** ** | **Percent  of Loans  in Each Category  to Total Loans** | ** ** | **Amount** | ** ** | **Percent  of Loans  in Each Category  to Total Loans** | ** ** | **Amount** | ** ** | **Percent  of Loans**

**in Each Category  to Total Loans** | ** ** | **Amount** | ** ** | **Percent  of Loans  in Each Category  to Total Loans** | ** ** |
| Commercial          |       | $          | 6,616      |                                                    | 25.1       | %          | $          | 6,131                                                   |       | 25.3       | %          | $ | 10,491 |   | 24.8 | % | $ | 9,304 |   | 29.0 | % | $ | 5,619 |   | 29.2 | % |
| Consumer (1)        |       | 154        |       | 0.7                                                     | %          | 163        |       | 0.7                                                     | %          | 64         |       | 1.0 | % | 78 |   | 1.1 | % | 60 |   | 1.1 | % |
| Indirect automobile |       | 117        |       | 2.3                                                     | %          | 189        |       | 3.7                                                     | %          | 256        |       | 5.6 | % | 380 |   | 7.9 | % | 479 |   | 9.3 | % |
| Real estate         |       |       |       |                                                    |       |       |       |                                                    |       |       |       |   |   |   |   |   |   |   |   |   |   |
| Residential (2)     |       | 354        |       | 14.6                                                    | %          | 366        |       | 13.9                                                    | %          | 260        |       | 12.6 | % | 346 |   | 12.2 | % | 491 |   | 14.3 | % |
| Commercial          |       | 609        |       | 20.5                                                    | %          | 624        |       | 19.7                                                    | %          | 523        |       | 20.0 | % | 615 |   | 18.6 | % | 1,880 |   | 17.7 | % |
| Home equity         |       | 826        |       | 20.8                                                    | %          | 856        |       | 22.5                                                    | %          | 432        |       | 18.9 | % | 522 |   | 14.8 | % | 526 |   | 13.2 | % |
| Construction        |       | 1,489      |       | 15.0                                                    | %          | 1,637      |       | 12.8                                                    | %          | 1,892      |       | 15.8 | % | 1,984 |   | 15.2 | % | 2,946 |   | 14.2 | % |
| Credit card         |       | 258        |       | 1.0                                                     | %          | 302        |       | 1.4                                                     | %          | 326        |       | 1.3 | % | 432 |   | 1.2 | % | 245 |   | 1.0 | % |
| Unallocated         |       | 258        |       | —                                                  | %          | 259        |       | —                                                  | %          | 176        |       | — | % | 186 |   | — | % | 16 |   | — | % |
| Total               |       | $          | 10,681     |                                                    | 100.0      | %          | $          | 10,527                                                  |       | 100.0      | %          | $ | 14,420 |   | 100.0 | % | $ | 13,847 |   | 100.0 | % | $ | 12,262 |   | 100.0 | % |

 

----

(1)          Consumer loans include consumer and otherloans.

(2)          Residential real estate loans include realestate loans - held for sale.

 

Deposits

 

The following table setsforth by category average daily deposits and interest rates for the years endedDecember 31 (dollars in thousands):

 
| ** **                 | ** ** | **2005**            | ** ** | **2004** | ** ** | **2003**            | ** ** |
|----------------------------|------------|---------------------|------------|----------|------------|---------------------|------------|
| ** **                 | ** ** | **Average Balance** | ** ** | **Rate** | ** ** | **Average Balance** | ** ** | **Rate** | ** ** | **Average Balance** | ** ** | **Rate** | ** ** |
| Demand-noninterest-bearing |       | $                   | 150,280    |     | —     | %                   | $          | 147,130 |   | — | % | $ | 152,443 |   | — | % |
| NOW                        |       | 320,357             |       | 0.4      | %          | 313,023             |       | 0.3 | % | 289,718 |   | 0.3 | % |
| Money market checking      |       | 230,527             |       | 2.6      | %          | 232,431             |       | 1.4 | % | 234,031 |   | 1.4 | % |
| Savings                    |       | 435,022             |       | 1.6      | %          | 447,583             |       | 1.2 | % | 414,074 |   | 1.3 | % |
| Time deposits              |       |                |       |     |       |                |       |   |   |   |   |   |   |
| Less than $100,000         |       | 341,123             |       | 3.4      | %          | 318,447             |       | 3.0 | % | 312,473 |   | 3.2 | % |
| $100,000 and greater       |       | 121,928             |       | 3.6      | %          | 99,208              |       | 3.1 | % | 92,811 |   | 3.1 | % |
| Total                      |       | $                   | 1,599,237  |     | 1.9        | %                   | $          | 1,557,822 |   | 1.4 | % | $ | 1,495,550 |   | 1.5 | % |

 

16

----

 

The following table setsforth by maturity time deposits $100,000 and greater at December 31 (dollars inthousands):

 

| ** **                           | ** ** | **2005** | ** ** |
|--------------------------------------|------------|----------|------------|
| Within 3  months                     |       | $        | 36,765     |   |
| After 3  months but within 6 months  |       | 10,394   |       |
| After 6  months but within 12 months |       | 36,951   |       |
| After 1 year  but within 5 years     |       | 60,264   |       |
| Over 5 years                         |       | —   |       |
| Total                                |       | $        | 144,374    |   |

 

Return on Equity and Assets and Other Financial Ratios

 

The following table setsforth selected financial ratios at and for the years ended December 31:

 
| ** **                                                                                                                        | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Return on average total assets                                                                                                    |       | 1.43     | %          | 1.36     | %          | 1.55     | %          |
| Return on average shareholders’ equity plus  common stock in ESOP subject to contingent repurchase obligation                |       | 17.05    | %          | 15.58    | %          | 16.94    | %          |
| Cash dividends declared to net income                                                                                             |       | 84.85    | %          | 91.41    | %          | 73.45    | %          |
| Average shareholders’ equity plus common  stock in ESOP subject to contingent repurchase obligation to average total  assets |       | 8.40     | %          | 8.73     | %          | 9.16     | %          |

 

## **ITEM 1A.               RISK FACTORS**

## ** **

In addition to the other information in this Annual Report on Form10-K, shareholders, prospective investors and other interested parties shouldcarefully consider the following risk factors:

 

**The Company must effectively manage its credit risk.**

 

There are risks inherent inmaking any loan, including risks inherent in dealing with individual borrowers,risks of nonpayment, risks resulting from uncertainties as to the future valueof collateral and risks resulting from changes in economic and industryconditions. The Company attempts to minimize its credit risk through prudentloan application approval procedures, careful monitoring of the concentrationof its loans within specific industries and periodic independent reviews ofoutstanding loans by its credit review department. However, the Company cannotensure that its approval and monitoring procedures effectively manage itscredit risks.

 

**The Company’s allowance for loan losses may prove to be insufficient toabsorb probable incurred credit losses.**

 

The Company’s estimate of the level of allowance for loan lossesrequires management to apply significant judgment. The Company establishes itsallowance for loan losses in consultation with management and maintains it at alevel considered adequate by management to absorb probable incurred creditlosses in the loan portfolio. The amount of future loan losses is susceptibleto changes in economic, operating and other conditions, including changes ininterest rates, which may be beyond the Company’s control, and such losses mayexceed current estimates. At December 31, 2005, the Company’s allowancefor loan losses as a percentage of total loans was 0.97% and as a percentage oftotal nonperforming loans was approximately 486%. Although management believesthat the allowance for loan losses is adequate to absorb probable incurredcredit losses in the Company’s loan portfolio, the Company cannot predict loanlosses with certainty, and the Company cannot assure you that its allowance forloan losses will prove sufficient to cover actual loan losses. Loan losses inexcess of its allowance for loan losses may adversely affect the Company’sbusiness, financial condition and results of operations.

 

17

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**The Company’s business is concentrated in, and dependent upon thecontinued growth and prosperity of, the western suburbs of Chicago.**

 

The Company and its operating subsidiaries operate primarily in thewestern suburbs of Chicago, and as a result, the Company’s financial condition,results of operations and cash flows are subject to changes in the economicconditions in those areas. The Company has developed a strong presence in thecounties it serves, with particular concentration in DuPage County, andsurrounding counties. Based upon the 2000 census, these counties togetherrepresent a market of more than 1.8 million people. The Company’s successdepends upon the business activity, population, income levels, deposits andreal estate activity in this market. Although the Company’s customers’ businessand financial interests may extend well beyond its market area, adverse economicconditions that affect its specific market area could reduce the Company’sgrowth rate, affect the ability of its customers to repay their loans andgenerally affect the Company’s financial condition and results of operations.Because of this geographic concentration, the Company is less able to diversifyits credit risks across multiple markets than other regional or nationalfinancial institutions.

 

**The Company faces intense competition in all aspects of its businessfrom other banks and financial institutions.**

 

The banking and financial services business in its market is highlycompetitive. The Company’s competitors include large regional banks, localcommunity banks, savings and loan associations, securities and brokeragecompanies, mortgage companies, insurance companies, finance companies, moneymarket mutual funds, credit unions and other non-bank financial serviceproviders. Increased competition in the Company’s market may result in adecrease in the amounts of its loans and deposits, reduced spreads between loanrates and deposit rates or loan terms that are more favorable to the borrower.Any of these results could have a material adverse effect on the Company’sability to grow and remain profitable. If increased competition causes theCompany to significantly discount the interest rates it offers on loans orincrease the amount it pays on deposits, net interest income could be adverselyimpacted. If increased competition causes the Company to relax****its underwriting standards, it could be exposed to higherlosses from lending activities. Additionally, many of the Company’s competitorsare much larger in total assets and capitalization, have greater access tocapital markets and offer a broader range of financial services than theCompany can offer.

 

**Interestrates and other conditions impact the Company’s results of operations.**

 

The Company’s profitability is in part a function of the spread betweenthe interest rates earned on investments and loans and the interest rates paidon deposits and other interest-bearing liabilities. Like most bankinginstitutions, the Company’s net interest spread and margin will be affected bygeneral economic conditions and other factors, including fiscal and monetarypolicies of the federal government, that influence market interest rates andits ability to respond to changes in those rates. At any given time, theCompany’s assets and liabilities will be such that they are affecteddifferently by a given change in interest rates. As a result, an increase ordecrease in rates, the length of loan terms or the mix of adjustable and fixedrate loans in the Company’s portfolio could have a positive or negative effecton its net income, capital and liquidity. The Company measures interest raterisk under various rate scenarios and using specific criteria and assumptions.A summary of this process, along with the results of the Company’s net interestincome simulations is presented at “Quantitative and Qualitative DisclosuresAbout Market Risk” included under Item 7A of Part II of this Form 10-K.Although management believes the Company’s current level of interest ratesensitivity is reasonable and effectively managed, significant fluctuations ininterest rates may have an adverse effect on the Company’s business, financialcondition and results of operations.

 

**The Company’s loan portfolio has a significant concentration of realestate loans, which involve risks specific to real estate value.**

 

Real estate lending (including home equity, commercial, constructionand residential) is a large portion of the Company’s loan portfolio. Thesecategories represent $781.8 million, or approximately 70.9% of the Company’stotal loan portfolio as of December 31, 2005. The market value of real estatecan fluctuate significantly in a short period of time as a result of marketconditions in the geographic area in which the real estate is located and adversedevelopments affecting real estate values in one or more of the 

 

18

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Company’s markets could increase the credit risk associated with itsloan portfolio. Additionally, construction and commercial real estate lendingtypically involves higher loan principal amounts and the repayment of the loansgenerally is dependent, in large part, on sufficient income from the propertiessecuring the loans to cover operating expenses and debt service. Economicevents or governmental regulations outside of the control of the borrower or theCompany could negatively impact the future cash flow and market values of theaffected properties.

 

If the loans that are collateralized by real estate become troubledduring a time when market conditions are declining or have declined, then theCompany may not be able to realize the amount of security that it anticipatedat the time of originating the loan, which could cause the Company to increaseits provision for loan losses and adversely affect its operating results andfinancial condition.

 

**The Company’s construction loans are based upon estimates of costs andvalue associated with the completed project. These estimates may be inaccurateand the Company may be exposed to more losses on these construction loans thanon other loans.**

 

At December 31, 2005, construction loans, including land acquisitionand development, totaled $165.5 million, or 15.0%, of the Company’s total loanportfolio. Construction and land acquisition and development lending involveadditional risks because funds are advanced based on values associated with thecompleted project, which is uncertain. Because of the uncertainties inherent inestimating construction costs, as well as the market value of the completedproject and the effects of governmental regulation of real property, it isrelatively difficult to evaluate accurately the total funds required tocomplete a project and the related loan-to-value ratio. As a result,construction loans often involve the disbursement of substantial funds withrepayment dependent, in part, on the success of the ultimate project and theability of the borrower to sell or lease the property, rather than the abilityof the borrower or guarantor to repay principal and interest. If the Company’sappraisal of the anticipated value of the completed project proves to beoverstated, the Company may have inadequate security for the loan.

 

**Commercial loans also make up a significant portion of the Company’sloan portfolio.**

 

Commercial loans were approximately $276.9****million(excluding $225.8 million of commercial real estate loans), or approximately25.1% of the Company’s total loan portfolio as of December 31, 2005. TheCompany’s commercial loans are primarily made based on the identified cash flowof the borrower and secondarily on the underlying collateral provided by theborrower. Most often, this collateral is accounts receivable, inventory,machinery or real estate. Credit support provided by the borrower for most ofthese loans and the probability of repayment is based on the liquidation of thepledged collateral and enforcement of a personal guarantee, if a guarantee isobtained. As a result, in the case of loans secured by accounts receivable, theavailability of funds for the repayment of these loans may be substantiallydependent on the ability of the borrower to collect amounts due from itscustomers. The collateral securing these loans may depreciate over time, may bedifficult to appraise and may fluctuate in value based on the success of thebusiness.

 

**The Company may experience difficulties in managing its growth and itsgrowth strategy involves risks that may negatively impact net income.**

 

The Company has pursued and continues to pursue an internal growthstrategy, the success of which will depend primarily upon on generating anincreasing level of loans and deposits at acceptable risk levels withoutcorresponding increases in non-interest expenses. The Company’s growth strategyhas been to operate out of a number of branches. The Company may establishother new branches and product areas, expand into new markets or make strategicacquisitions of other financial institutions, which may require significantupfront investments in technology, personnel and site locations. There can beno assurance that the Company will be successful in continuing its growthstrategy and in continuing to improve or maintain its net income by leveragingits non-interest expenses.

 

The Company may expand into additional communities or attempt tostrengthen its position in its current markets by undertaking additional branchopenings. The Company currently anticipates opening two new branches in KendallCounty during 2006. Based on management’s experience, management believes thatit generally takes up to two years for new banking facilities to first achieveoperational profitability, due to the impact of overhead expenses 

 

19

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and the start-up phase of generating loans and deposits. To the extentthat the Company undertakes additional branching, it is likely to continue toexperience the effects of higher operating expenses relative to operating incomefrom the new operations, which may have an adverse effect on the Company’slevels of reported net income, return on average equity and return on averageassets.

 

**The Company may need to raise additional capital in the future, butthat capital may not be available when it is needed.**

 

The Company is required by federal and state regulatory authorities tomaintain adequate levels of capital to support its operations. The Companyanticipates that its existing capital resources will satisfy its capital requirementsfor the foreseeable future. However, the Company may at some point need toraise additional capital to support continued growth, both internally andthrough acquisitions.

 

The Company’s ability to raise additional capital, if needed, willdepend on conditions in the capital markets at that time, which are outside itscontrol, and on its financial performance. Accordingly, the Company cannotassure you of its ability to raise additional capital if needed on termsacceptable to the Company. If the Company cannot raise additional capital whenneeded, its ability to further expand its operations through internal growthand acquisitions could be materially impaired.

 

**The Company’s community banking strategy relies heavily on itsmanagement team, and the unexpected loss of key managers may adversely affectits operations.**

 

Much of the Company’s success to date has been influenced strongly byits ability to attract and to retain senior management experienced in bankingand financial services and familiar with the communities in its market area.The Company’s ability to retain executive officers, the current managementteams and loan officers of its operating subsidiaries will continue to beimportant to the successful implementation of its strategy. It is alsocritical, as the Company grows, to be able to attract and retain qualifiedadditional management and loan officers with the appropriate level ofexperience and knowledge about its market area to implement its community-basedoperating strategy. The unexpected loss of services of any key managementpersonnel, or the inability to recruit and retain qualified personnel in thefuture, could have an adverse effect on the Company’s business, financialcondition and results of operations.

 

**Government regulation can result in limitations on the Company’soperations.**

 

The Company and its operating subsidiaries operate in a highlyregulated environment and are subject to supervision and regulation by a numberof governmental regulatory agencies, including the Federal Reserve, the FDIC,and the DFPR. Regulations adopted by these agencies, which are generallyintended to provide protection for depositors and customers rather than for thebenefit of shareholders, govern a comprehensive range of matters relating toownership and control of the Company’s shares, its acquisition of othercompanies and businesses, permissible activities in which the Company mayengage, maintenance of adequate capital levels and other aspects of the Company’soperations. These bank regulators possess broad authority to prevent or remedyunsafe or unsound practices or violations of law. The laws and regulationsapplicable to the banking industry could change at any time and the Companycannot predict the effects of these changes on its business and profitability.Increased regulation could increase the Company’s cost of compliance andadversely affect profitability. For example, new legislation or regulation maylimit the manner in which the Company may conduct its business, including itsability to offer new products, obtain financing, attract deposits, make loansand achieve satisfactory interest spreads.

 

**The Company has a continuing need fortechnological change and it may not have the resources to effectively implementnew technology.**

 

The financial services industry continues to undergo rapidtechnological changes with frequent introductions of new technology-drivenproducts and services. In addition to better serving customers, the effectiveuse of technology increases efficiency and enables financial institutions toreduce costs. The Company’s future success will depend in part upon its abilityto address the needs of its customers by using technology to provide productsand services that will satisfy customer demands for convenience as well as tocreate additional efficiencies in its operations as it 

 

20

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continues to grow and expand its market area. Many of the Company’slarger competitors have substantially greater resources to invest in technologicalimprovements. As a result, they may be able to offer additional or superiorproducts to those that the Company will be able to offer, which would put it ata competitive disadvantage. Accordingly, the Company cannot provide you withassurance that it will be able to effectively implement new technology-drivenproducts and services or be successful in marketing such products and servicesto its customers.

 

**Changes in accounting standards could impactthe Company’s results of operations.**

 

The accounting standard setters, including the Financial AccountingStandards Board, the Securities and Exchange Commission and other regulatorybodies, periodically change the financial accounting and reporting standardsthat govern the preparation of the Company’s consolidated financial statements.These changes can be hard to predict and can materially impact how the Company recordsand reports its financial condition and results of operations. In some cases,the Company could be required to apply a new or revised standard retroactively,resulting in the restatement of prior period financial statements.

 

**The Company’s ability to pay dividends on its common stock is limitedby law.**

 

West Suburban’s ability to pay dividends on its common stock largelydepends on its receipt of dividends from the Bank. The amount of dividends thatthe Bank may pay to West Suburban is limited by federal and state laws andregulations relating to financial institutions. As of December 31, 2005,approximately $4.6 million was available to be distributed as dividends by theBank to West Suburban. However, the Federal Deposit Insurance Company mayrestrict the payment of dividends by the Bank. In addition, West Suburban andthe Bank may decide to limit the payment of dividends even when they have thelegal ability to pay them in order to retain earnings for use in their businesses.

 

**There is no established trading market forthe West Suburban’s common shares.**

 

West Suburban’scommon stock is not traded on any exchange orquoted on the Nasdaq or traded on any other established trading market and WestSuburban does not intend toapply for listing or quotation. West Suburban cannot assure you that a liquidmarket will develop for West Suburban’s common stock. If no trading marketdevelops for West Suburban’s common stock, it may be difficult to sell yourshares or, if sold, it may be difficult to resell the shares for a price at orabove the price you paid for your shares. Even if a trading market isestablished, there is no assurance that such a trading market can be sustained.

 

**System failure or breaches of the Company’s network security couldsubject the Company to increased operating costs as well as litigation andother liabilities.**

 

The information technologysystems and network infrastructure the Company uses could be vulnerable tounforeseen problems. The Company’s operations are dependent upon its ability toprotect its information technology equipment against damage from physicaltheft, fire, power loss, telecommunications failure or a similar catastrophicevent, as well as from security breaches, denial of service attacks, viruses,worms and other disruptive problems caused by hackers. Any damage or failurethat causes an interruption in the Company’s operations could have a material adverseeffect on its financial condition and results of operations. System break-ins,phishing and other disruptions could also jeopardize the security ofinformation stored in and transmitted through the Company’s informationtechnology systems and network infrastructure, which may result in significantliability to the Company and may cause existing and potential customers torefrain from doing business with it. Although the Company, with the help ofthird-party service providers, intends to continue to implement securitytechnology and establish operational procedures to prevent such damage, therecan be no assurance that these security measures will be successful. Inaddition, advances in information technology capabilities, new discoveries inthe field of cryptography or other developments could result in a compromise orbreach of the algorithms the Company and its third-party service providers useto encrypt and protect customer transaction data. A failure of such securitymeasures could have a material adverse effect on the Company’s financialcondition and results of operations.

 

21

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**The Company is subject to certain operational risks, including customeror employee fraud and data processing system failures and errors.**

** **

Employee errors and misconduct could subject the Company to financiallosses or regulatory sanctions and seriously harm its reputation. Misconduct bythe Company’s employees could include hiding unauthorized activities from theCompany, improper or unauthorized activities on behalf of its customers orimproper use of confidential information. It is not always possible to preventemployee errors and misconduct, and the precautions the Company takes toprevent and detect this activity may not be effective in all cases. Employeeerrors could also subject the Company to financial claims for negligence. TheCompany maintains a system of internal controls and insurance coverage tomitigate against operational risks, including data processing system failuresand errors and customer or employee fraud. Should the Company’s internalcontrols fail to prevent or detect an occurrence, and if any resulting loss isnot insured or exceeds applicable insurance limits, such failure could have amaterial adverse effect on the Company’s business, financial condition andresults of operations.

 

## **ITEM 1B.**               UNRESOLVEDSTAFF COMMENTS

 

None.

 

22

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**ITEM 2.****  PROPERTIES**

 

West Suburban and theBank occupy a total of approximately 258,600 square feet in 33 full-servicebranches, four limited-service branches and six departments providinginsurance, financial and other services. West Suburban’s principal office islocated in approximately 32,500 square feet of office space at 711 South MeyersRoad, Lombard, Illinois. As indicated below, the Bank also operates itsprincipal office as a branch. Travel With West Suburban, West Suburban BankLand Trust, West Suburban Financial Services and West Suburban InsuranceServices, Inc. are located at 711 South Meyers Road. West Suburban Bank VISA islocated at 701 South Meyers Road. The Prepaid Solutions Group is located at17W754 22nd Street.

 

The following table setsforth certain information concerning the branches of the Bank as of December31, 2005:

 
| **Location of Branches and other services**    | ** ** | **Approximate  Square Feet** | ** ** | **Status** |
|------------------------------------------------|------------|------------------------------|------------|------------|
|                                           |       |                         |       |       |
| 711 South Meyers Road  Lombard, Illinois       |       | 32,500                       |       | Owned      |
|                                           |       |                         |       |       |
| 40 East St. Charles Road  Villa Park, Illinois |       | 2,700                        |       | Owned      |
|                                           |       |                         |       |       |
| 17W754 22nd Street  Oakbrook Terrace, Illinois |       | 6,100                        |       | Owned      |
|                                           |       |                         |       |       |
| 707 North Main Street  Lombard, Illinois       |       | 4,100                        |       | Owned      |
|                                           |       |                         |       |       |
| 221 South West Street  Wheaton, Illinois       |       | 800                          |       | Owned      |
|                                           |       |                         |       |       |
| 895 East Geneva Road  Carol Stream, Illinois   |       | 3,000                        |       | Leased     |
|                                           |       |                         |       |       |
| 1104 West Boughton Road  Bolingbrook, Illinois |       | 4,500                        |       | Owned      |
|                                           |       |                         |       |       |
| 295 West Loop Road  Wheaton, Illinois          |       | 4,500                        |       | Owned      |
|                                           |       |                         |       |       |
| 6400 South Cass Avenue  Westmont, Illinois     |       | 3,100                        |       | Leased     |
|                                           |       |                         |       |       |
| 2800 Finley Road  Downers Grove, Illinois      |       | 10,700                       |       | Owned      |
|                                           |       |                         |       |       |
| 1122 South Main Street  Lombard, Illinois      |       | 6,400                        |       | Owned      |
|                                           |       |                         |       |       |
| 3S041 Route 59  Warrenville, Illinois          |       | 3,700                        |       | Owned      |
|                                           |       |                         |       |       |
| 5330 Main Street  Downers Grove, Illinois      |       | 10,500                       |       | Owned      |
|                                           |       |                         |       |       |
| 8001 South Cass Avenue  Darien, Illinois       |       | 17,800                       |       | Owned      |

 

23

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| **Location of Branches and other services**        | ** ** | **Approximate  Square Feet** | ** ** | **Status** |
|----------------------------------------------------|------------|------------------------------|------------|------------|
|                                               |       |                         |       |       |
| 1005 75th Street  Darien, Illinois                 |       | 1,000                        |       | Owned      |
|                                               |       |                         |       |       |
| 505 North Weber Road  Romeoville, Illinois         |       | 4,400                        |       | Owned      |
|                                               |       |                         |       |       |
| 401 North Gary Avenue  Carol Stream, Illinois      |       | 6,400                        |       | Owned      |
|                                               |       |                         |       |       |
| 355 West Army Trail Road  Bloomingdale, Illinois   |       | 10,700                       |       | Owned      |
|                                               |       |                         |       |       |
| 1657 Bloomingdale Road  Glendale Heights, Illinois |       | 4,100                        |       | Owned      |
|                                               |       |                         |       |       |
| 1061 West Stearns Road  Bartlett, Illinois         |       | 3,400                        |       | Owned      |
|                                               |       |                         |       |       |
| 1380 West Army Trail Road  Carol Stream, Illinois  |       | 2,300                        |       | Leased     |
|                                               |       |                         |       |       |
| 315 South Randall Road  St. Charles, Illinois      |       | 1,400                        |       | Owned      |
|                                               |       |                         |       |       |
| 3000 East Main Street  St. Charles, Illinois       |       | 4,200                        |       | Owned      |
|                                               |       |                         |       |       |
| 1870 McDonald Road  South Elgin, Illinois          |       | 4,600                        |       | Owned      |
|                                               |       |                         |       |       |
| 101 North Lake Street  Aurora, Illinois            |       | 19,000                       |       | Owned      |
|                                               |       |                         |       |       |
| 1830 Douglas Road  Montgomery, Illinois            |       | 2,500                        |       | Owned      |
|                                               |       |                         |       |       |
| 2000 West Galena Boulevard  Aurora, Illinois       |       | 48,000                       |       | Owned      |
|                                               |       |                         |       |       |
| 335 North Eola Road  Aurora, Illinois              |       | 4,200                        |       | Owned      |
|                                               |       |                         |       |       |
| 2830 Route 34  Oswego, Illinois                    |       | 4,800                        |       | Owned      |
|                                               |       |                         |       |       |
| 1296 East Chicago Avenue  Naperville, Illinois     |       | 2,300                        |       | Owned      |
|                                               |       |                         |       |       |
| 2020 Feldott Lane  Naperville, Illinois            |       | 4,500                        |       | Owned      |
|                                               |       |                         |       |       |
| 100 South Main Street  Lombard, Illinois           |       | 700                          |       | Owned      |

 

24

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| **Location of Branches and other services**                                                | ** ** | **Approximate  Square Feet** | ** ** | **Status** |
|--------------------------------------------------------------------------------------------|------------|------------------------------|------------|------------|
|                                                                                       |       |                         |       |       |
| Beacon Hill Retirement  Community  2400 South Finley Road  Lombard, Illinois               |       | 100                          |       | Leased     |
|                                                                                       |       |                         |       |       |
| 717 South Meyers Road  Lombard, Illinois                                                   |       | 7,100                        |       | Owned      |
|                                                                                       |       |                         |       |       |
| 701 South Meyers Road  Lombard, Illinois                                                   |       | 5,200                        |       | Owned      |
|                                                                                       |       |                         |       |       |
| Lexington Health Care  Center of   Elmhurst  400 West Butterfield Road  Elmhurst, Illinois |       | 100                          |       | Leased     |
|                                                                                       |       |                         |       |       |
| Lexington Health Care  Center of  Lombard  555 Foxworth Boulevard  Lombard, Illinois       |       | 100                          |       | Leased     |

 
| **ITEM 3.** | **LEGAL  PROCEEDINGS** |
|-------------|------------------------|

 

There are no materialpending legal proceedings to which West Suburban or the Bank is a party toother than ordinary routine litigation incidental to their respectivebusinesses.

 
| **ITEM 4.** | **SUBMISSION  OF MATTERS TO A VOTE OF SECURITY HOLDERS** |
|-------------|----------------------------------------------------------|

 

None.

 

**PART II**

 
| **ITEM 5.** | **MARKET  FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER  PURCHASES OF EQUITY SECURITIES** |
|-------------|-------------------------------------------------------------------------------------------------------------------------|

 

West Suburban’s authorized and outstanding equity securities consist ofcommon stock, no par value.

 

West Suburban hereby incorporates by reference the information calledfor by Item 5 of this Form 10-K from the section entitled “Common Stock, BookValue and Dividends” on page 4 of West Suburban’s Annual Report to Shareholdersfor the fiscal year ended December 31, 2005 (attached as Exhibit 13 hereto).

 

West Suburban’s common stock is not traded on any national or regionalexchange. While there is no established trading market for West Suburban’scommon stock, West Suburban is aware that from time to time limited orinfrequent quotations are made with respect to West Suburban’s common stock andthat there occurs limited trading in West Suburban’s common stock resultingfrom private transactions not involving brokers or dealers. Transactions inWest Suburban’s common stock have been infrequent. As of February 1, 2006, WestSuburban had 432,495 shares of common stock outstanding held by 1,122shareholders of record. Management is aware of 10 transactions during 2005involving the sale, in the aggregate, of 911 shares of West Suburban’s commonstock. The average sale price in such transactions was $642.70 per share.

 
| **ITEM 6.** | **SELECTED  FINANCIAL DATA** |
|-------------|------------------------------|

 

West Suburban hereby incorporates by reference the information calledfor by Item 6 of this Form 10-K from the section entitled “Selected FinancialData” on page 30 of West Suburban’s Annual Report to Shareholders for thefiscal year ended December 31, 2005 (attached as Exhibit 13 hereto).

 

25

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| **ITEM  7.** | **MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS** |
|--------------|-------------------------------------------------------------------------------------------------|

 

West Suburban herebyincorporates by reference the information called for by Item 7 of this Form10-K from the section entitled “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” on pages 32 through 40 of WestSuburban’s Annual Report to Shareholders for the fiscal year ended December 31,2005 (attached as Exhibit 13 hereto).

 
| **ITEM 7A.** | **QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK** |
|--------------|-----------------------------------------------------------------|

 

West Suburban herebyincorporates by reference the information called for by Item 7A of this Form10-K from the Interest Rate Sensitivity section included in “Management’sDiscussion and Analysis of Financial Condition and Results of Operations” onpages 32 through 40 of West Suburban’s Annual Report to Shareholders for thefiscal year ended December 31, 2005 (attached as Exhibit 13 hereto).

 
| **ITEM 8.** | **FINANCIAL  STATEMENTS AND SUPPLEMENTARY DATA** |
|-------------|--------------------------------------------------|

 

West Suburban hereby incorporates by reference the information calledfor by Item 8 of this Form 10-K from the Consolidated Financial Statements andNotes to Consolidated Financial Statements on pages 6 through 26 of WestSuburban’s Annual Report to Shareholders for the fiscal year ended December 31,2005 (attached as Exhibit 13 hereto).

 
| **ITEM 9.** | **CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND  FINANCIAL DISCLOSURE** |
|-------------|-------------------------------------------------------------------------------------------|

 

None.

 
| **ITEM 9A.** | **CONTROLS  AND PROCEDURES** |
|--------------|------------------------------|

 

An evaluation was performed under the supervision and with theparticipation of the Company’s management, including the Chairman and ChiefExecutive Officer and the President and Chief Financial Officer, of theeffectiveness of the design and operation of the Company’s disclosure controlsand procedures (as defined in Rule 13a-15(e) promulgated under theSecurities and Exchange Act of 1934, as amended) as of December 31, 2005. Basedon that evaluation, the Company’s management, including the Chairman and ChiefExecutive Officer and the President and Chief Financial Officer, concluded thatthe Company’s disclosure controls and procedures were effective.

 

There have been no significant changes in the Company’s internalcontrol over financial reporting that has affected or is reasonably likely tomaterially affect, the Company’s internal control over financial reporting.

 

West Suburban’s management report on internal control over financialreporting is set forth in, and West Suburban hereby incorporates by reference,the section entitled “Report by Management on Internal Control over FinancialReporting” on page 27 of West Suburban’s Annual Report to Shareholders for thefiscal year ended December 31, 2005 (attached as Exhibit 13 hereto).

 
| **ITEM 9B.** | **OTHER  INFORMATION** |
|--------------|------------------------|

 

None.

 

26

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# **PART III**

 
| **ITEM 10.** | **DIRECTORS  AND EXECUTIVE OFFICERS OF THE REGISTRANT** |
|--------------|---------------------------------------------------------|

 

In addition, and as asupplement to the information provided under the caption “Executive Officers ofWest Suburban” in Part I of this Form 10-K, West Suburban hereby incorporatesby reference the information called for by Item 10 of this Form 10-K regardingdirectors of West Suburban from the section entitled “Election of Directors” ofWest Suburban’s 2006 Proxy Statement.

 

Section 16(a) of the Exchange Act requires that the Company’s executiveofficers and directors and persons who own more than 10% of the Company’sCommon Stock file reports of ownership and changes in ownership with theSecurities and Exchange Commission and with the exchange on which WestSuburban’s Common Stock is traded. Such persons are also required to furnishthe Company with copies of all Section 16(a) forms they file. Based solely onthe Company’s review of the copies and forms furnished to the Company and, ifappropriate, representations made to the Company by any such reporting personconcerning whether a Form 5 was required to be filed for the 2005 fiscal year,the Company is not aware that any of its directors and executive officers or10% shareholders failed to comply with the filing requirements of Section 16(a)during 2005.

 

West Suburban adopted a code of ethics that applies to West Suburban’sprincipal executive officer, principal financial officer and principalaccounting officer or controller, or persons performing similar functions. WestSuburban’s code of ethics is available in the Shareholder Information sectionof West Suburban’s website, www.westsuburbanbank.com.

 

**ITEM 11.**        **EXECUTIVECOMPENSATION**

 

West Suburban hereby incorporates by reference the information calledfor by Item 11 of this Form 10-K from the section entitled “ExecutiveCompensation” of West Suburban’s 2006 Proxy Statement; provided, however,Report of the Board of Directors on Executive Compensation is specifically notincorporated into this Form 10-K.

 

**ITEM 12.**         **SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**

 

West Suburban herebyincorporates by reference the information called for by Item 12 of this Form10-K from the sections entitled “Security Ownership of Certain BeneficialOwners” and “Security Ownership of Management” of West Suburban’s 2006 ProxyStatement.

 

**ITEM 13.**        **CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS**

 

West Suburban hereby incorporates by reference the information calledfor by Item 13 of this Form 10-K from the section entitled “Transactions withDirectors, Officers and Associates” of West Suburban’s 2006 Proxy Statement.

 

**ITEM 14.**         **PRINCIPAL ACCOUNTING FEES AND SERVICES**

 

West Suburban hereby incorporates by reference the information calledfor by Item 14 of this Form 10-K from the section entitled “Accounting Fees andServices” of West Suburban’s 2006 Proxy Statement.

 

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**PART IV**

** **

**ITEM 15.**        **EXHIBITS,FINANCIAL STATEMENT SCHEDULES**

 

Item (a)(1) and (2).Financial Statements

 

WEST SUBURBAN BANCORP,INC. AND SUBSIDIARIESLIST OF FINANCIAL STATEMENTS ANDFINANCIAL STATEMENT SCHEDULES

 

The following auditedConsolidated Financial Statements of West Suburban and its subsidiaries andrelated notes and report of independent registered public accounting firm areincorporated by reference from West Suburban’s Annual Report to Shareholdersfor the fiscal year ended December 31, 2005 (attached as Exhibit 13 hereto).

 
| ** **                                                                                                            | ** ** | **Annual Report  Page No.** |
|-----------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|
| Report  of Independent Registered Public Accounting Firm                                                              |       | 5                           |
|                                                                                                                  |       |                        |
| Consolidated  Balance Sheets – December 31, 2005 and 2004                                                        |       | 6                           |
|                                                                                                                  |       |                        |
| Consolidated  Statements of Income – Years Ended December 31, 2005, 2004 and 2003                                |       | 7                           |
|                                                                                                                  |       |                        |
| Consolidated  Statements of Changes in Shareholders’ Equity – Years Ended December 31,  2005, 2004 and 2003 |       | 8                           |
|                                                                                                                  |       |                        |
| Consolidated  Statements of Cash Flows – Years Ended December 31, 2005, 2004 and 2003                            |       | 9                           |
|                                                                                                                  |       |                        |
| Notes  to Consolidated Financial Statements                                                                           |       | 10                          |

 

The following CondensedFinancial Information-Parent Only is incorporated by reference from Note 13 toWest Suburban’s audited Consolidated Financial Statements as set forth in WestSuburban’s Annual Report to Shareholders for the fiscal year ended December 31,2005 (attached as Exhibit 13 hereto).

 
| ** **                                                                              | ** ** | **Annual Report  Page No.** |
|-----------------------------------------------------------------------------------------|------------|-----------------------------|
| Condensed Balance  Sheets – December 31, 2005 and 2004                             |       | 24                          |
|                                                                                    |       |                        |
| Condensed Statements  of Income – Years Ended December 31, 2005, 2004 and 2003     |       | 24                          |
|                                                                                    |       |                        |
| Condensed Statements  of Cash Flows – Years Ended December 31, 2005, 2004 and 2003 |       | 25                          |

 

Schedules

 

Schedules other thanthose listed above are omitted for the reason that they are not required or arenot applicable or the required information is included in the financialstatements incorporated by reference or notes thereto.

 

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Item 15(a)(3).         Exhibits

 

The exhibits required byItem 601 of Regulation S-K are included with this Form 10-K and are listed onthe “Index to Exhibits” immediately following the signature page.

 

***

 

Upon written request tothe President and Chief Financial Officer of West Suburban Bancorp, Inc., 2800Finley Road, Downers Grove, Illinois, 60515, copies of the exhibits listedabove are available to shareholders of West Suburban by specifically identifyingeach exhibit desired in the request.

 

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**FORM 10-K SIGNATURE PAGE**

** **

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, theRegistrant has duly caused this report to be signed on its behalf by theundersigned, thereunto duly authorized.

 
| ** ** | **WEST SUBURBAN BANCORP, INC.** | ** **                             | ** ** |
|------------|---------------------------------|----------------------------------------|------------|
|       | (Registrant)                    |                                   |       |
|       |                            |                                   |       |
|       |                            |                                   |       |
|       | By                              | /s/ Duane G. Debs                      |       |   |
|       |                            | Duane G. Debs                          |
|       |                            | President and Chief  Financial Officer |
|            |                                 |                                        |            |  |

 

Date: March 14, 2006

 

Pursuant to therequirements of the Securities Exchange Act of 1934, this report has beensigned below by the following persons on behalf of the Registrant and in thecapacities indicated on the 14th day of March, 2006.

 
| **SIGNATURE**         | ** ** |      |   | **TITLE**                           |
|-----------------------|------------|-----------|--------|-------------------------------------|
|                  |       |      |   |                                |
| /s/ Kevin J. Acker    |       | 3/14/2006 |   | Chairman, Chief  Executive Officer  |
| Kevin J. Acker        |       | Date      |   | and Director                        |
|                  |       |      |   |                                |
| /s/ Duane G. Debs     |       | 3/14/2006 |   | President, Chief  Financial Officer |
| Duane G. Debs         |       | Date      |   | and Director                        |
|                  |       |      |   |                                |
| /s/ David S. Bell     |       | 3/14/2006 |   | Director                            |
| David S. Bell         |       | Date      |   |                                |
|                  |       |      |   |                                |
| /s/ Peggy P. LoCicero |       | 3/14/2006 |   | Director                            |
| Peggy P. LoCicero     |       | Date      |   |                                |
|                  |       |      |   |                                |
| /s/ Charles P. Howard |       | 3/14/2006 |   | Director                            |
| Charles P. Howard     |       | Date      |   |                                |

 

The foregoing includesall of the Board of Directors of West Suburban.

 

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INDEX TO EXHIBITS

 
| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                                                                             |
|---------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |       |                                                                                                                                                                                                                                        |
| 3.1                 |       | Articles of Incorporation of West  Suburban filed March 14, 1986 – Incorporated by reference from Exhibit 3.1 of  Form 10-K of West Suburban dated March 21, 2003, under Commission File No.  0-17609.                                 |
|                |       |                                                                                                                                                                                                                                        |
| 3.2                 |       | Articles of Amendment to Articles of Incorporation of West Suburban  filed November 2, 1988 – Incorporated by reference from Exhibit 3.2 of Form  10-K of West Suburban dated March 21, 2003, under Commission File No.  0-17609.      |
|                |       |                                                                                                                                                                                                                                        |
| 3.3                 |       | Articles of Amendment to Articles of Incorporation of West Suburban  filed June 20, 1990 – Incorporated by reference from Exhibit 3.3 of Form 10-K  of West Suburban dated March 21, 2003, under Commission File No. 0-17609.          |
|                |       |                                                                                                                                                                                                                                        |
| 3.4                 |       | Articles of Amendment to Articles of Incorporation of West Suburban  filed June 8, 1998 – Incorporated by reference from Exhibit 3.4 of Form 10-K  of West Suburban dated March 21, 2003, under Commission File No. 0-17609.           |
|                |       |                                                                                                                                                                                                                                        |
| 3.5                 |       | Articles of Amendment to Articles of Incorporation of West Suburban  filed May 27, 2003 – Incorporated by reference from Exhibit 3.5 of Form 10-Q  of West Suburban dated August 14, 2003, under Commission File No. 0-17609.          |
|                |       |                                                                                                                                                                                                                                        |
| 3.6                 |       | Amended and Restated By-laws of West Suburban – Incorporated by  reference from Exhibit 3.3 of Form 10-K of West Suburban dated March 21,  2003, under Commission File No. 0-17609.                                                    |
|                |       |                                                                                                                                                                                                                                        |
| 4.1                 |       | Specimen of Common  Stock certificate                                                                                                                                                                                                       |
|                |       |                                                                                                                                                                                                                                        |
| 10.1                |       | Form of Amended  Deferred Compensation Agreement between West Suburban and Messrs. Kevin J. Acker,  Keith W. Acker, Duane G. Debs, Michael P. Brosnahan, James T. Chippas and  Daniel P. Grotto                                             |
|                |       |                                                                                                                                                                                                                                        |
| 10.2                |       | Restated Employment  Agreement dated March 8, 2004 between West Suburban and Mr. Kevin J. Acker -  Incorporated by reference from Exhibit 10.2 of Form 10-K of West Suburban  dated March 15, 2004, Commission File No. 0-17609.       |
|                |       |                                                                                                                                                                                                                                        |
| 10.3                |       | Restated Employment  Agreement dated March 8, 2004 between West Suburban and Mr. Keith W. Acker -  Incorporated by reference from Exhibit 10.3 of Form 10-K of West Suburban dated  March 15, 2004, Commission File No. 0-17609.       |
|                |       |                                                                                                                                                                                                                                        |
| 10.4                |       | Restated Employment  Agreement dated March 8, 2004 between West Suburban and Mr. Duane G. Debs -  Incorporated by reference from Exhibit 10.4 of Form 10-K of West Suburban  dated March 15, 2004, Commission File No. 0-17609.        |
|                |       |                                                                                                                                                                                                                                        |
| 10.5                |       | Restated Employment  Agreement dated March 8, 2004 between West Suburban and Mr. Michael P.  Brosnahan - Incorporated by reference from Exhibit 10.5 of Form 10-K of West  Suburban dated March 15, 2004, Commission File No. 0-17609. |
|                |       |                                                                                                                                                                                                                                        |
| 10.6                |       | Restated Employment  Agreement dated March 8, 2004 between West Suburban and Mr. James T. Chippas  - Incorporated by reference from Exhibit 10.6 of Form 10-K of West Suburban  dated March 15, 2004, Commission File No. 0-17609.     |
|                |       |                                                                                                                                                                                                                                        |
| 10.7                |       | Restated Employment  Agreement dated March 8, 2004 between West Suburban and Mr. Daniel P. Grotto  - Incorporated by reference from Exhibit 10.7 of Form 10-K of West Suburban  dated March 15, 2004, Commission File No. 0-17609.     |
|                |       |                                                                                                                                                                                                                                        |
| 13                  |       | Annual  Report to Shareholders of West Suburban for fiscal year ended December 31,  2005                                                                                                                                                    |
|                |       |                                                                                                                                                                                                                                        |
| 21                  |       | Subsidiaries  of Registrant                                                                                                                                                                                                                 |

 

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INDEX TO EXHIBITS

(continued)

 
| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                     |
|---------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |       |                                                                                                                                                                                |
| 31.1                |       | Certification of Kevin  J. Acker, Chairman and Chief Executive Officer, Pursuant to Rule 13a-14(a)  and Rule 15d-14(a).                                                             |
|                |       |                                                                                                                                                                                |
| 31.2                |       | Certification of Duane G. Debs, President and Chief Financial  Officer, Pursuant to Rule 13a-14(a) and Rule15d-14(a).                                                               |
|                |       |                                                                                                                                                                                |
| 32.1                |       | Certification  of Kevin J. Acker, Chairman and Chief Executive Officer, Pursuant to 18  U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002. |
|                |       |                                                                                                                                                                                |
| 32.2                |       | Certification of Duane G. Debs, President and Chief Financial  Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section  906 of the Sarbanes-Oxley Act of 2002.  |

 

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