** **

** **

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-K**

 

**x****        ANNUAL REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For fiscal year ended December 31,2008**

 

**o****        TRANSITION REPORT PURSUANTTO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For transition period from                   to                   **

 

**Commission File Number 000 –17609**

 

**WESTSUBURBAN BANCORP, INC.**

(Exactname of Registrant 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) 652-2000**

 

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

 

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

 

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

 

# **CommonStock, no par value**

(Title of Class)

 

Indicate by check mark if the Registrant is awell-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  o    No  x

 

Indicate by check mark if Registrant is not requiredto file reports pursuant to Section 13 or Section 15(d) of theAct. Yes  o    No  x

 

Indicate by checkmark whether the Registrant (1) has filed all reports required to be filedby Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the Registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes  x    No  o

 

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulation S-K (§ 229.405) is not containedherein, and will not be contained, to the best of Registrant’s knowledge, indefinitive proxy or information statements incorporated by reference in Part IIIof this Form 10-K or any amendment to this Form 10-K. x

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See definition of “largeaccelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2of the Exchange Act.

 
| Large accelerated filer  o                                                    | Accelerated filer  x         |
|-----------------------------------------------------------------------------------------|-----------------------------------|
|                                                                                    |                              |
| Non-accelerated filer  o  (Do not check if a smaller reporting  company) | Smaller reporting company  o |

 

Indicate by check markwhether the Registrant is a shell company (as defined in Rule 12b-2 of theAct).     Yes  o    No  x

 

The aggregate fair value of voting common stock ofRegistrant held by non-affiliates as of June 30, 2008 was $149,327,178. (1)

 

At March 4, 2009, the total number of shares ofCommon Stock outstanding was 430,011.

 

Documents Incorporated by Reference:

 

Portions of the Annual Report to Shareholders for thefiscal year ended December 31, 2008, which is included as Exhibit 13to this Form 10-K, are incorporated by reference into Parts I, II andIV hereof, to the extent indicated herein. Portions of the Proxy Statement forthe Annual Meeting of Shareholders to be held May 13, 2009 areincorporated by reference in Part III hereof, to the extent indicatedherein.

 

(1)          Based on the last independentlyappraised fair value of the Registrant’s common stock as of February 5, 2009,and reports of beneficial ownership filed by directors and executive officersof Registrant and by beneficial owners of more than 5% of the outstandingshares of common stock of Registrant; however, such determination of sharesowned by affiliates does not constitute an admission of affiliate status orbeneficial interest in shares of common stock of Registrant.

 

 

 

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**Special Note ConcerningForward-Looking Statements**

 

This document (including information incorporated byreference) contains, and future oral and written statements of West SuburbanBancorp, Inc. (“West Suburban”) and West Suburban Bank (the “Bank” andcollectively with West Suburban and its other direct and indirect subsidiaries,the “Company”) and its management may contain, forward-looking statements,within 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 that could have a materialadverse effect on the operations and future prospects of the Company include,but are not limited to, those set fourth in the “Risk Factors” section includedunder Item 1A and the following:

 

·                                          Thestrength of the U.S. and global economies and financial markets in general andthe strength of the local economies in which the Company conducts itsoperations, including the local residential and commercial real estate markets,which may be less favorable than expected and may result in, among other things,a deterioration in 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 address the currentstresses in the U.S. and global financial markets, national security and moneylaundering.

 

·                                          Theeffects of continued adverse market conditions and further volatility ininvestment securities generally, which may result in a deterioration in thevalue of the securities in the Company’s investment portfolio.

 

·                                          Theability of the Company to comply with applicable federal, state and local laws,regulations and policies and the consequences that may result from any suchinability to comply.

 

·                                          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.

 

·                                          Theability of the Company to maintain an acceptable net interest margin.

 

·                                          Theability 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 the Internet.

 

·                                          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 customers,including 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.

 

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·                                          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 past and any future terrorist attacks, acts of war orthreats thereof and the response of the U.S. to any such attacks and threats.

 

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

 

·                                          Thecosts, effects and outcomes of existing or future litigation and disputes withthird parties.

 

·                                          Changesin accounting policies and practices, as may be adopted by state and federalregulatory agencies and the Financial Accounting Standards Board, the PublicCompany Accounting Oversight Board and the Securities and Exchange Commission.

 

·                                          Creditrisks and the risks from concentrations (by geographic area or industry) withinthe Company’s loan portfolio.

 

·                                          Thefailure of the Company’s Real Estate Investment Trust (“REIT”) to qualify as aREIT and the effects of such failure on the Company’s consolidated effectivetax rate.

 

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

 

Theserisks and uncertainties should be considered in evaluating forward-lookingstatements and undue reliance should not be placed on such statements.Additional information concerning the Company and its business, including otherfactors that could materially affect the Company’s financial results, isincluded in the Company’s filings with the Securities and Exchange Commission.

 

# **PART I**

# ** **

## **ITEM 1.        BUSINESS**

## ** **

REGISTRANT AND ITS SUBSIDIARY

 

West Suburban Bancorp, Inc., an Illinois corporation organized in1986, is a bank holding company registered under the Bank Holding Company Actof 1956, as amended (the “BHCA”), and the parent company of West Suburban Bank.

 

The Bank is headquartered in Lombard, Illinois, and, as of December 31,2008, maintained 34 full-service branches, five limited-service branches andfive 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.

 

TheBank engages in a general full service retail banking business and offers abroad variety of consumer and commercial products and services. The Bank alsooffers insurance services through West Suburban Insurance Services, Inc.,land trust services, stored value card products through the Prepaid SolutionsGroup and safe deposit 

 

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boxes.The Bank provides extended banking hours, including Sunday hours and 24-hourbanking through a proprietary network of 62 automated teller machines,Tele-Bank 24 (a bank-by-phone system) and online banking at www.westsuburbanbank.com.Other consumer related services are also available, including investmentproducts and a Visa card through West Suburban Bank Card Services.

 

The following table sets forth financial and other informationconcerning the Bank as of and for the year ended December 31, 2008(dollars in thousands):

 
| **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)               |       | 39                 |       | $          | 1,861,937  |                   | $          | 144,822    |       | $                               | 16,735     |       | 0.90       | % | 11.66 | % |
|                           |            |                    |            |            |            |                        |            |            |            |                                 |            |            |            |  |  |  |

 

COMPETITION

 

The Companyencounters competition in all areas of its business pursuits. It competes forloans, deposits, fiduciary and other services with financial and otherinstitutions located both within and outside of its market area. As of February 28,2009, the Company estimates that there were 91 other financial institutionsoperating over 675 separate banking offices within the Company’s market area.The Company also faces competition from finance companies, insurance companies,mortgage companies, securities brokerage firms, money market funds, loanproduction offices and other providers of financial services. In order tocompete effectively, develop its market base, maintain flexibility and move inpace with changing economic, technological and social conditions, the Companycontinuously refines and develops its products and services. The principalmethods of competition in the financial services industry are price, serviceand convenience.

 

EMPLOYEES

 

At December 31, 2008, the Company employed 627 persons (533full-time equivalent employees). The Company believes that its relationshipwith its employees is good. None of the Company’s employees are covered by acollective bargaining agreement with the Company.

 

SUPERVISION AND REGULATION

 

**General**

 

Financial institutions, their holding companies and their affiliatesare extensively regulated under federal and state law. As a result, the growthand earnings performance of the Company may be affected not only by managementdecisions and general economic conditions, but also by the requirements offederal and state statutes and by the regulations and policies of various bankregulatory authorities, including the Illinois Department of Financial andProfessional Regulation (the “DFPR”), the Board of Governors of theFederal Reserve System (the “Federal Reserve”) and the FederalDeposit Insurance Corporation (the “FDIC”). Furthermore, taxation lawsadministered by the Internal Revenue Service and state taxing authorities andsecurities laws administered by the Securities and Exchange Commission (the “SEC”)and state securities authorities have an impact on the business of the Company.The effect of these statutes, regulations and regulatory policies may besignificant, and cannot be predicted with a high degree of certainty.

 

Federaland state laws and regulations generally applicable to financial institutionsregulate, among other things, the scope of business, the kinds and amounts ofinvestments, reserve requirements, capital levels relative to operations, thenature and amount of collateral for loans, the establishment of branches,mergers and consolidations and the payment of dividends. This system ofsupervision and regulation establishes a comprehensive framework for therespective operations of the Company and its subsidiaries and is intendedprimarily for the protection of the FDIC-insured deposits and depositors of theBank, rather than shareholders. In addition to this generally applicableregulatory framework, recent turmoil in the credit markets prompted theenactment of unprecedented legislation that has allowed the U.S. Treasury tomake equity capital available to qualifying financial institutions to helprestore 

 

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confidenceand stability in the U.S. financial markets, which imposes additionalrequirements on institutions in which the U.S. Treasury invests.

 

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

 

**The Company**

 

***General.**** *The Company,as the sole shareholder of the Bank, is a bank holding company. As a bankholding company, the Company is registered with, and is subject to regulationby, the Federal Reserve under 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.

 

***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 U.S. In approving interstate acquisitions, the FederalReserve is required to give effect to applicable state law limitations on theaggregate amount of deposits that may be held by the acquiring bank holdingcompany and its insured depository institution affiliates in the state in whichthe target bank is located (provided that those limits do not discriminateagainst out-of-state depository institutions or their holding companies) andstate laws that require that the target bank have been in existence for aminimum period of time (not to exceed five years) before being acquired by anout-of-state bank holding company.

 

TheBHCA generally prohibits the Company from acquiring direct or indirectownership or control of more than 5% of the voting shares of any company thatis not a bank and from engaging in any business other than that of banking,managing and controlling banks or furnishing services to banks and theirsubsidiaries. This general prohibition is subject to a number of exceptions.The principal exception allows bank holding companies to engage in, and to ownshares of companies engaged in, certain businesses found by the Federal Reserveto be “so closely related to banking ... as to be a proper incident thereto.”This authority would permit the Company to engage in a variety ofbanking-related businesses, including the ownership and operation of a thriftor any entity engaged in consumer finance, equipment leasing, the operation ofa computer service bureau (including software development), and mortgagebanking and brokerage. The BHCA generally does not place territorialrestrictions on the domestic activities of non-bank subsidiaries of bankholding companies.

 

Additionally,bank holding companies that meet certain eligibility requirements prescribed bythe BHCA and elect to operate as financial holding companies may engage in, orown shares in companies engaged in, a wider range of nonbanking activities,including securities and insurance underwriting and sales, merchant banking andany other activity that the Federal Reserve, in consultation with theSecretary of the U.S. Treasury, determines by regulation or order is financialin nature, incidental to any such financial activity or complementary to anysuch financial 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.

 

Federallaw also prohibits any person or company from acquiring “control” of anFDIC-insured depository institution or its holding company without prior noticeto the appropriate federal bank regulator. “Control” is conclusively presumedto exist upon the acquisition of 25% or more of the outstanding votingsecurities of a bank or bank holding company, but may arise under certaincircumstances between 10% and 24.99% ownership.

 

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

 

TheFederal Reserve’s capital guidelines establish the following minimum regulatorycapital requirements for bank holding companies: (i) a risk-basedrequirement expressed as a percentage of total assets weighted according torisk; and (ii) a leverage requirement expressed as a percentage of totalassets. The risk-based requirement consists of a minimum ratio of total capitalto total risk-weighted assets of 8% and a minimum ratio of Tier 1 capital tototal risk-weighted assets of 4%. The leverage requirement consists of aminimum ratio of Tier 1 capital to total assets of 3% for the most highly ratedcompanies, with a minimum requirement of 4% for all others. For purposes ofthese capital standards, Tier 1 capital consists primarily of permanentstockholders’ equity less intangible assets (other than certain loan servicingrights and purchased credit card relationships). Total capital consistsprimarily of Tier 1 capital plus certain other debt and equity instruments thatdo not qualify as Tier 1 capital and a portion of the company’s allowance forloan and lease losses.

 

Therisk-based and leverage standards described above are minimum requirements.Higher capital levels may be required if warranted by the particularcircumstances or risk profiles of individual banking organizations. Forexample, the Federal Reserve’s capital guidelines contemplate 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, anybanking organization experiencing or anticipating significant growth would beexpected to maintain capital ratios, including tangible capital positions (*i.e.*, Tier 1 capital less all intangible assets), well abovethe minimum levels. As of December 31, 2008, the Company had regulatorycapital in excess of the Federal Reserve’s minimum requirements.

 

***Dividend Payments.**** *The Company’s ability to paydividends to its shareholders may be affected by both general corporate lawconsiderations and policies of the Federal Reserve applicable to bank holdingcompanies*.*As an Illinois corporation, theCompany is subject to the Illinois Business Corporation Act, as amended, whichprohibits the Company from paying a dividend if, after giving effect to thedividend: (i) the Company would be insolvent; or (ii) the net assetsof the Company would be less than zero; or (iii) the net assets of theCompany would be less than the maximum amount then payable to shareholders ofthe Company who would have preferential distribution rights if the Company wereliquidated. Additionally, policies of the Federal Reserve caution that a bankholding company should not pay cash dividends unless its net income availableto common shareholders over the past year has been sufficient to fully fund thedividends and the prospective rate of earnings retention appears consistentwith its capital needs, asset quality, and overall financial condition. TheFederal Reserve also possesses enforcement powers over bank holding companiesand their non-bank subsidiaries to prevent or remedy actions that representunsafe or unsound practices or violations of applicable statutes andregulations. Among these powers is the ability to proscribe the payment ofdividends by banks and bank holding companies. Further, if the Company participatesin the U.S. Treasury’s Capital Purchase Program, the Company anticipates thatthe terms of the preferred stock to be issued to the U.S. Treasury will providethat no dividends on any common or preferred stock that ranks equal to orjunior to such preferred stock may be paid unless and until all accrued andunpaid dividends for all past dividend periods on the U.S. Treasury preferredstock have been fully paid.

 

***Federal Securities Regulation.***  The Company’s common stock is registered withthe 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 isan Illinois-chartered bank, the deposit accounts of which are insured by theFDIC to the maximum extent provided under federal law and FDIC regulations. Asan Illinois-chartered bank, the Bank is subject to the examination,supervision, reporting and enforcement requirements of the DFPR, the charteringauthority for Illinois banks, and the FDIC, designated by federal law as theprimary federal regulator of state-chartered, FDIC-insured banks that, like theBank, are not members of the Federal Reserve System (“non-member banks”).

 

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***Deposit Insurance.*** As an FDIC-insuredinstitution, the Bank is required to pay deposit insurance premium assessmentsto the FDIC. The FDIC has adopted a risk-based assessment system wherebyFDIC-insured depository institutions pay insurance premiums at rates based ontheir risk classification. An institution’s risk classification is assignedbased on its capital levels and the level of supervisory concern theinstitution poses to the regulators. Under the regulations of the FDIC, aspresently in effect, insurance assessments range from 0.12% to 0.50% of totaldeposits for the first quarter 2009 assessment period only (subject to theapplication of assessment credits, if any, issued by the FDIC in 2008).Effective April 1, 2009, insurance assessments will range from 0.07% to0.78% of total deposits, depending on an institution’s risk classification, itslevels of unsecured debt and secured liabilities, and, in certain cases, itslevel of brokered deposits.  In addition,under an interim rule, the FDIC plans to impose an emergency special assessmenton insured depository institutions on June 30, 2009. The emergency specialassessment will be an amount equal to 0.2% of total deposits as of June 30,2009, and will be collected on September 30, 2009.  The interim rule also authorizes theFDIC to impose additional emergency special assessments after June 30,2009, of up to 0.1% of total deposits, whenever the FDIC estimates that thereserve ratio of the deposit insurance fund will fall to a level that the FDICbelieves would adversely affect public confidence in federal deposit insuranceor to a level that will be close to zero or negative at the end of a calendarquarter. The interim rule, however, is subject to a 30-day comment period thatwill expire on April 2, 2009, and may be subject to change before any specialassessments are imposed on insured depository institutions. 

 

***FICO Assessments.***  The Financing Corporation (“FICO”) is amixed-ownership governmental corporation chartered by the former Federal HomeLoan Bank Board pursuant to the Federal Savings and Loan Insurance CorporationRecapitalization Act of 1987 to function as a financing vehicle for therecapitalization of the former Federal Savings and Loan Insurance Corporation.FICO issued 30-year non-callable bonds of approximately $8.2 billion thatmature by 2019. Since 1996, federal legislation has required that all FDIC-insureddepository institutions pay assessments to cover interest payments on FICO’soutstanding obligations. These FICO assessments are in addition to amountsassessed by the FDIC for deposit insurance. During theyear ended December 31, 2008, the FICO assessment rate was approximately0.01% of deposits.

 

***Supervisory Assessments.***  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, 2008, the Bank paid supervisory assessments tothe DFPR totaling $.21 million.

 

***Capital Requirements.*** Banks are generally required to maintain capital levels in excess ofother businesses. The FDIC has established the following minimum capitalstandards for state-chartered insured non-member banks, such as the Bank: (i) aleverage requirement consisting of a minimum ratio of Tier 1 capital to totalassets of 3% for the most highly-rated banks with a minimum requirement of atleast 4% for all others; and (ii) a risk-based capital requirementconsisting of a minimum ratio of total capital to total risk-weighted assets of8% and a minimum ratio of Tier 1 capital to total risk-weighted assets of 4%.In general, the components of Tier 1 capital and total capital are the same asthose for bank holding companies discussed above.

 

Thecapital requirements described above are minimum requirements. Higher capitallevels may be required if warranted by the particular circumstances or riskprofiles of individual institutions. For example, regulations of the FDICprovide that additional capital may be required to take adequate account of,among other things, interest rate risk or the risks posed by concentrations ofcredit, nontraditional activities or securities trading activities.

 

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

 

Federallaw also provides the federal banking regulators with broad power to takeprompt corrective action to resolve the problems of undercapitalized institutions.The extent of the regulators’ powers depends on whether the institution inquestion is “adequately capitalized,” “undercapitalized,” “significantlyundercapitalized” or “critically undercapitalized,” in each case as defined byregulation. Depending upon the capital category to which an institution 

 

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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) requiringthe institution to issue additional capital stock (including additional votingstock) or to be acquired; (iv) restricting transactions between theinstitution and its affiliates; (v) restricting the interest rate theinstitution may pay on deposits; (vi) ordering a new election of directorsof the institution; (vii) requiring that senior executive officers ordirectors be dismissed; (viii) prohibiting the institution from acceptingdeposits from correspondent banks; (ix) requiring the institution todivest certain subsidiaries; (x) prohibiting the payment of principal orinterest on subordinated debt; and (xi) ultimately, appointing a receiver forthe institution.

 

Asof December 31, 2008: (i) the Bank was not subject to a directivefrom the FDIC to increase its capital to an amount in excess of the minimumregulatory capital requirements; (ii) the Bank exceeded its minimumregulatory capital requirements under FDIC capital adequacy guidelines; and (iii) theBank was “well-capitalized,” as defined by FDIC regulations.

 

***Dividend Payments.*** The primary source of funds for the Company is dividends from the Bank.Under the Illinois Banking Act, Illinois-chartered banks generally may not paydividends in excess of their net profits.

 

Thepayment of dividends by any financial institution 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 31,2008. As of December 31, 2008, approximately $15.1 million was availableto be paid as dividends by the Bank. Notwithstanding the availability of fundsfor dividends, however, the FDIC may prohibit the payment of any dividends bythe Bank if the FDIC determines such payment would constitute an unsafe orunsound practice.

 

***Insider Transactions.*** The Bank is subject to certain restrictions imposed by federal law onextensions of credit to the Company, on investments in the stock or othersecurities of the Company and the acceptance of the stock or other securitiesof the Company as collateral for loans made by the Bank. Certain limitationsand reporting requirements are also placed on extensions of credit by the Bankto its directors and officers, to directors and officers of the Company, toprincipal shareholders of the Company and to “related interests” of suchdirectors, officers and principal shareholders. In addition, federal law andregulations may affect the terms upon which any person who is a director orofficer of the Company or the Bank or a principal shareholder of the Companymay obtain credit from banks with which the Bank maintains a correspondentrelationship.

 

***Safety and Soundness Standards.***  The federal banking agencies have adoptedguidelines that establish operational and managerial standards to promote thesafety and soundness of federally insured depository institutions. Theguidelines 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.

 

Ingeneral, the safety and soundness guidelines prescribe the goals to be achievedin each area, and each institution is responsible for establishing its ownprocedures to achieve those goals. If an institution fails to comply with anyof the standards set forth in the guidelines, the institution’s primary federalregulator may require the institution to submit a plan for achieving andmaintaining compliance. If an institution fails to submit an acceptablecompliance plan, or fails in any material respect to implement a complianceplan that has been accepted by its primary federal regulator, the regulator isrequired to issue an order directing the institution to cure the deficiency.Until the deficiency cited in the regulator’s order is cured, the regulator mayrestrict the institution’s rate of growth, require the institution to increaseits capital, restrict the rates the institution pays on deposits or require theinstitution to take any action the regulator deems appropriate under thecircumstances. Noncompliance with the standards established by the safety andsoundness guidelines may also constitute grounds for other enforcement actionby the federal banking regulators, including cease and desist orders and civilmoney penalty assessments.

 

***Branching Authority.*** Illinois banks, such as the Bank, have the authority under Illinois lawto establish branches anywhere in the State of Illinois, subject to receipt ofall required regulatory approvals.

 

Federallaw permits state and national banks to merge with banks in other statessubject to: (i) regulatory approval; (ii) federal and state depositconcentration limits; and (iii) state law limitations requiring the mergingbank to have been in existence for a minimum period of time (not to exceed fiveyears) prior to the merger. The establishment of 

 

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newinterstate branches or the acquisition of individual branches of a bank inanother state (rather than the acquisition of an out-of-state bank in itsentirety) is permitted only in those states the laws of which expresslyauthorize such expansion.

 

***State Bank Investments and Activities.***  The Bank generally is permitted to makeinvestments and engage in activities directly or through subsidiaries asauthorized by Illinois law. However, under federal law and FDIC regulations,FDIC-insured state banks are prohibited, subject to certain exceptions, frommaking or retaining equity investments of a type, or in an amount, that are notpermissible for a national bank. Federal law and FDIC regulations also prohibitFDIC-insured state banks and their subsidiaries, subject to certain exceptions,from engaging as principal in any activity that is not permitted for a nationalbank unless the bank meets, and continues to meet, its minimum regulatorycapital requirements and the FDIC determines the activity would not pose asignificant risk to the deposit insurance fund of which the bank is a member.These restrictions have not had, and are not currently expected to have, amaterial impact on the operations of the Bank.

 

***Federal Reserve System.***  Federal Reserve regulations, as presently ineffect, require depository institutions to maintain reserves against theirtransaction accounts (primarily NOW and regular checking accounts), as follows:for transaction accounts aggregating $44.4 million or less, the reserverequirement is 3% of total transaction accounts; and for transaction accountsaggregating in excess of $44.4 million, the reserve requirement is $1.023million plus 10% of the aggregate amount of total transaction accounts inexcess of $44.4 million. The first $10.3 million of otherwise reservablebalances are exempted from the reserve requirements. These reserve requirementsare subject to annual adjustment by the Federal Reserve. The Bank is incompliance with the foregoing requirements.

 

**Recent Regulatory Issues**

 

On December 3, 2008, the Bank enteredinto an Order to Cease and Desist (the “Order”) with the FDIC and theDFPR, which is based on FDIC and DFPR findings that the Bank’s SecrecyAct/Anti-Money Laundering Program (“BSA/AML Program”) was inadequate and thatthe Bank had violated various laws and regulations related to the Bank SecrecyAct (the “BSA”). The Order requires the Bank to take certain corrective actionsaimed at resolving any outstanding violations of BSA-related laws orregulations and to implement a revised BSA/AML Program, which is designed toensure compliance with these BSA-related laws and regulations. The Order also requires the Bank to, among other things,assess its BSA Department staffing needs, provide for independenttesting of BSA/AML Program compliance, conduct a review of certain historicaldeposit and transaction activity and submit periodic reports of progress to theFDIC and DFPR.

 

The Order does not relate to the Bank’s assetquality, capital position or the safety and soundness of its financialoperations. The Bank has begun taking the corrective actions required by theOrder to address its BSA/AML compliance issues.

 

RECENT DEVELOPMENTS

 

**The Credit Crisis and the Emergency EconomicStabilization Act of 2008**

 

Recent events in the U.S. and global financialmarkets, including the deterioration of the worldwide credit markets, havecreated significant challenges for financial institutions both in the U.S. andaround the world. Dramatic declines in the housing market during the past year,marked by falling home prices and increasing levels of mortgage foreclosuresand unemployment, have resulted in significant write-downs of asset values byfinancial institutions, including government-sponsored entities and majorcommercial and investment banks. These write-downs, initially ofresidential-related loans and mortgage-backed securities, but spreading tocredit default swaps and other derivative securities, have caused manyfinancial institutions to seek additional capital, to merge with larger andstronger institutions and, in some cases, to fail.

 

Reflecting concern about the stability of thefinancial markets generally and the strength of counterparties, many lendersand institutional investors have reduced, and in some cases, ceased to providefunding to borrowers, including other financial institutions. The availabilityof credit, confidence in the financial sector, and level of volatility in thefinancial markets have been significantly adversely affected as a result. Inrecent months, volatility 

 

9

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and disruption in the capital and credit markets havereached unprecedented levels. In some cases, the markets have produced downwardpressure on stock prices and credit capacity for certain institutions withoutregard to those institutions’ underlying financial strength.

 

In response to the financial crises affecting thebanking system and financial markets and going concern threats to investmentbanks and other financial institutions, on October 3, 2008, President Bushsigned into law, the Emergency Economic Stabilization Act of 2008 (the “EESA”).The EESA authorizes the U.S. Treasury to implement various temporary emergencyprograms designed to strengthen the capital positions of financial institutionsand stimulate the availability of credit within the U.S. financial system.Pursuant to the EESA, the U.S. Treasury has the authority to, among otherthings, purchase up to $700 billion of mortgages, mortgage-backed securitiesand certain other financial instruments from financial institutions for thepurpose of stabilizing and providing liquidity to the U.S. financial markets.The EESA also provided a temporary increase in deposit insurance coverage from$100,000 to $250,000 per insured account until December 31, 2009.

 

On October 14, 2008, the U.S. Treasury announced thatit will provide Tier 1 capital (in the form of senior perpetual preferredstock) to eligible financial institutions. This program, known as the TroubledAsset Relief Program Capital Purchase Program (the “Capital Purchase Program”),allocates $250 billion from the $700 billion authorized by the EESA to the U.S.Treasury for the purchase of senior preferred shares from qualifying financialinstitutions. Eligible institutions will be able to sell equity interests tothe U.S. Treasury in amounts equal to between 1% and 3% of the institution’srisk-weighted assets. Participating financial institutions will be required toadopt the U.S. Treasury’s standards for executive compensation and corporategovernance for the period during which the U.S. Treasury holds equity issuedunder the Capital Purchase Program. The U.S. Treasury will determine thespecific allocation, if any, for an interested financial institution afterconsultation with the appropriate federal banking agency.

 

**The Company’s Potential Participation in theCapital Purchase Program**

 

The Company has applied to receive up to $43 millionin funds from the U.S. Treasury under the Capital Purchase Program based on theCompany’s total risk-weighted assets of approximately $1.46 billion as of September 30,2008. As of the date of this annual report, this application is being reviewedby the regulators. If the Company’s application is approved and it accepts theterms of the investment, the Company will be subject to restrictions withrespect to executive compensation matters, as well as to additional agreementsthat may restrict the Company’s operations. The Company also expects that itsfederal regulators and the U.S. Treasury will maintain significant oversightover the Company as a participating institution to evaluate how the Companyuses the capital provided and to ensure that the Company strengthens itsefforts to help borrowers under the Company’s loans to avoid foreclosure, whichis one of the core aspects of the EESA.

 

**FDIC’s Temporary Liquidity Guarantee Program**

 

As another component of the EESA, the U.S. Treasuryhas authorized the FDIC to provide a 100% guarantee of the following: (i) newly-issuedsenior unsecured debt and (ii) non-interest bearing transactional depositaccounts maintained at FDIC-insured institutions. This program is known as theTemporary Liquidity Guarantee Program, with the guarantee of senior unsecureddebt referred to as the Debt Guarantee Program (the “DGP”) and the guarantee ofnon-interest bearing transactional accounts referred to as the TransactionAccount Guarantee Program (the “TAGP”). FDIC insured institutions and theirholding companies were required to opt in or out of each of the DGP and theTAGP by December 5, 2008. All insured depository institutionsautomatically participated in the Temporary Liquidity Guarantee Program for 30days following the announcement of the program without charge (subsequentlyextended to December 5, 2008) and thereafter, unless an institution optedout, at a cost of 75 basis points per annum for senior unsecured debt and 10basis points per annum for noninterest-bearing transaction deposits. TheCompany opted to continue its participation in the TAGP, but the Company decidedto opt out of the DGP.

 

**The American Recovery and Reinvestment Act of 2009**

 

On February 17, 2009, President Obama signed intolaw, The American Recovery and Reinvestment Act of 2009 (“ARRA”), which is morecommonly known as the economic stimulus or economic recovery package. ARRAincludes a wide variety of programs intended to stimulate the economy andprovide for extensive infrastructure, 

 

10

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energy, health and education needs. In addition, ARRAimposes new executive compensation and corporate governance limits on currentand future participants in the Capital Purchase Program, which are in additionto those previously announced by the U.S. Treasury. The new limits remain inplace until the participant has redeemed the preferred stock sold to the U.S.Treasury, which is now permitted under ARRA without penalty and without theneed to raise new capital, subject to the U.S. Treasury’s consultation with therecipient’s appropriate federal regulator.

 

It is not clear at this time what impact the EESA, the Capital Purchase Program, the TLGP, or other liquidity and funding initiatives will have on the financial markets and the other difficulties described above, including the high levels of volatility and limited credit availability currently being experienced, or on the U.S. banking and financial industries and the broader U.S. global economies. Further adverse effects could have an adverse effect on our business.

 

AVAILABLE INFORMATION

 

The Company’s Internet address is www.westsuburbanbank.com. The Company makes available free of charge 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 are electronically filed with, or furnished to, the Securities and Exchange Commission.

 

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 (59)  Chairman and Chief Executive Officer (1993)  and Vice President (1986) |       | Senior Vice President,  Marketing of the Bank since 1997                                                             |
|                                                                                        |       |                                                                                                                 |
| Keith W. Acker (59)  Chief Operations Officer (1996)                                        |       | Director, President and  Trust Officer of the Bank since 1986                                                        |
|                                                                                        |       |                                                                                                                 |
| Duane G. Debs (52)  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  (59)  Vice President (1997)                                           |       | Senior Vice President,  Lending of the Bank since 1989                                                               |

 

11

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STATISTICAL DATA

 

The statistical datarequired by Exchange Act Industry Guide 3, “Statistical Disclosure By BankHolding Companies,” has been incorporated by reference from the Company’s 2008Annual Report to Shareholders (attached as Exhibit 13 hereto) or is setforth below. This data should be read in conjunction with the Company’s 2008Consolidated Financial Statements and related notes, and the discussionincluded in Management’s Discussion and Analysis of Financial Condition andResults of Operations as set forth in the Company’s 2008 Annual Report toShareholders.

 

**Securities**

 

The following table sets forth bycategory the amortized cost of securities at December 31 (dollars inthousands):

 
| ** **                           | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|--------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Available for  sale                  |       |     |       |     |       |     |       |
| Corporate                            |       | $        | 24,430     |     | $          | 35,489   |       | $ | 41,384 |   |
| Trust preferred                      |       | 8,511    |       | 8,577    |       | 5,000    |       |
| U.S. government  sponsored entities  |       | 22,170   |       | 195,193  |       | 224,276  |       |
| Mortgage-backed                      |       | 162,062  |       | 207,302  |       | 176,784  |       |
| States and  political subdivisions   |       | 10,160   |       | 13,918   |       | 13,700   |       |
| Preferred stock                      |       | —   |       | 621      |       | 1,003    |       |
| Total securities  available for sale |       | 227,333  |       | 461,100  |       | 462,147  |       |
| Held to maturity                     |       |     |       |     |       |     |       |
| U.S. government  sponsored entities  |       | 28,072   |       | —   |       | 17,597   |       |
| Mortgage-backed                      |       | 193,187  |       | 11,450   |       | 13,882   |       |
| States and  political subdivisions   |       | 18,975   |       | 12,626   |       | 13,534   |       |
| Total securities  held to maturity   |       | 240,234  |       | 24,076   |       | 45,013   |       |
| Federal Home  Loan Bank stock        |       | 6,144    |       | 5,258    |       | 5,091    |       |
| Total securities                     |       | $        | 473,711    |     | $          | 490,434  |       | $ | 512,251 |   |

 

The following table sets forth, by contractualmaturity, the amortized cost and weighted average yield of debt securitiesavailable for sale at December 31, 2008. Although the mortgage-backedsecurities are listed by contractual maturity, the effective maturity issignificantly shorter due to regularly scheduled payments and prepayments ofprincipal. Yields on tax-exempt securities represent tax equivalent yields, netof premium amortization and discount accretion (dollars in thousands):

 
| ** **                         | ** ** | **Corporate**       | ** ** | **U.S. Government  Sponsored Entities** | ** ** | **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                      |       | $                   | 9,954      |                                              | 4.34       | %                   | $          | 3,020                                            |       | 3.74 | % | $ | 1,651 |   | 3.73 | % | $ | 1,887 |   | 4.44 | % |
| After 1 year but  within 5 years   |       | 14,476              |       | 4.26                                              | %          | 19,150              |       | 4.10                                             | %          | 14,834 |   | 3.76 | % | 2,795 |   | 4.64 | % |
| After 5 years  but within 10 years |       | —              |       | —                                            | %          | —              |       | —                                           | %          | 44,740 |   | 5.47 | % | 1,091 |   | 6.37 | % |
| After 10 years                     |       | —              |       | —                                            | %          | —              |       | —                                           | %          | 100,837 |   | 5.20 | % | 4,387 |   | 6.15 | % |
| Total                              |       | $                   | 24,430     |                                              | 4.29       | %                   | $          | 22,170                                           |       | 4.05 | % | $ | 162,062 |   | 5.12 | % | $ | 10,160 |   | 5.44 | % |

 

Trust preferred securities with anamortized cost of $8.5 million had contractual maturities greater than 10 yearsand a weighted average yield of 3.60%. Income on Federal Home Loan Bank stockis dependent on the declaration of dividends by the Federal Home Loan Bank.

 

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The following table sets forth, bycontractual maturity, the amortized cost and weighted average yield ofsecurities held to maturity at December 31, 2008. Although themortgage-backed securities are listed by contractual maturity, the effectivematurity is significantly shorter due to regularly scheduled payments andprepayments of principal. Yields on tax-exempt securities represent taxequivalent yields, net of premium amortization and discount accretion (dollarsin thousands):

 
| ** **                         | ** ** | **U.S. Government  Sponsored Entities** | ** ** | **Mortgage-backed**          | ** ** | **States and Political  Subdivisions** | ** ** |
|------------------------------------|------------|---------------------------------------------------|------------|------------------------------|------------|--------------------------------------------------|------------|
| ** **                         | ** ** | **Amortized  Cost**                               | ** ** | **Weighted  Average  Yield** | ** ** | **Amortized  Cost**                              | ** ** | **Weighted  Average  Yield** | ** ** | **Amortized  Cost** | ** ** | **Weighted  Average  Yield** | ** ** |
| Within 1 year                      |       | $                                                 | —     |                         | —     | %                                                | $          | — |   | — | % | $ | 2,540 |   | 7.35 | % |
| After 1 year but  within 5 years   |       | 10,002                                            |       | 4.01                         | %          | —                                           |       | — | % | 3,175 |   | 4.35 | % |
| After 5 years  but within 10 years |       | 18,070                                            |       | 4.13                         | %          | 35,941                                           |       | 4.46 | % | 3,529 |   | 5.62 | % |
| After 10 years                     |       | —                                            |       | —                       | %          | 157,246                                          |       | 4.79 | % | 9,731 |   | 5.95 | % |
| Total                              |       | $                                                 | 28,072     |                         | 4.09       | %                                                | $          | 193,187 |   | 4.73 | % | $ | 18,975 |   | 5.81 | % |

 

No securities holdings of a singleissuer, other than U.S. government sponsored entities, exceed 10% of theshareholders’ equity of the Company at December 31, 2008. Expectedmaturities may differ from contractual maturities because issuers may have theright to call or prepay obligations with or without call or prepayment penalties.Approximately $21.1 million of securities are callable in 2009. Most of thesecallable securities were issued by U.S. government sponsored entities.

 

**Loan Portfolio**

 

The following table sets forth the majorloan categories at December 31 (dollars in thousands):

 
| ** **                 | ** ** | **2008**  | ** ** | **2007**  | ** ** | **2006**  | ** ** | **2005**  | ** ** | **2004**  | ** ** |
|----------------------------|------------|-----------|------------|-----------|------------|-----------|------------|-----------|------------|-----------|------------|
| Commercial                 |       | $         | 288,234    |      | $          | 270,293   |       | $         | 282,826    |      | $          | 276,898 |   | $ | 267,799 |   |
| Consumer                   |       | 4,276     |       | 5,653     |       | 6,821     |       | 7,501     |       | 7,552     |       |
| Indirect  automobile       |       | 4,454     |       | 8,559     |       | 13,855    |       | 24,939    |       | 38,651    |       |
| Real estate                |       |      |       |      |       |      |       |      |       |      |       |
| Residential                |       | 242,947   |       | 224,755   |       | 177,885   |       | 160,902   |       | 146,259   |       |
| Commercial                 |       | 276,995   |       | 249,836   |       | 232,865   |       | 225,794   |       | 207,978   |       |
| Home equity                |       | 257,150   |       | 272,098   |       | 240,720   |       | 229,514   |       | 237,622   |       |
| Construction               |       | 161,532   |       | 191,952   |       | 197,528   |       | 165,484   |       | 135,264   |       |
| Held for sale              |       | 1,768     |       | 350       |       | —    |       | 140       |       | 329       |       |
| Credit card                |       | 10,484    |       | 11,191    |       | 10,375    |       | 10,545    |       | 14,682    |       |
| Other                      |       | 1,333     |       | 1,153     |       | 1,660     |       | 711       |       | 516       |       |
| Total                      |       | 1,249,173 |       | 1,235,840 |       | 1,164,535 |       | 1,102,428 |       | 1,056,652 |       |
| Allowance for  loan losses |       | (15,578   | )          | (9,269    | )          | (10,650   | )          | (10,681   | )          | (10,527   | )          |
| Loans, net                 |       | $         | 1,233,595  |      | $          | 1,226,571 |       | $         | 1,153,885  |      | $          | 1,091,747 |   | $ | 1,046,125 |   |

 

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The following table sets forth thematurity and interest rate sensitivity of selected loan categories at December 31,2008 (dollars in thousands):

 
| ** **                | ** ** | **Remaining Maturity**     | ** ** |
|---------------------------|------------|---------------------------------|------------|
| ** **                | ** ** | **One year  or less** | ** ** | **One to  five years** | ** ** | **Over  five years** | ** ** | **Total** | ** ** |
| Commercial                |       | $                               | 194,934    |   | $ | 79,882 |   | $ | 13,418 |   | $ | 288,234 |   |
| Real  estate-construction |       | 116,057                         |       | 45,475 |   | — |   | 161,532 |   |
| Other loans               |       | 16,008                          |       | 82,620 |   | 700,779 |   | 799,407 |   |
| Total                     |       | $                               | 326,999    |   | $ | 207,977 |   | $ | 714,197 |   | $ | 1,249,173 |   |
|                      |       |                            |       |   |   |   |   |   |   |
| Variable rate             |       | $                               | 301,761    |   | $ | 107,899 |   | $ | 398,366 |   | $ | 808,026 |   |
| Fixed rate                |       | 25,238                          |       | 100,078 |   | 315,831 |   | 441,147 |   |
| Total                     |       | $                               | 326,999    |   | $ | 207,977 |   | $ | 714,197 |   | $ | 1,249,173 |   |

 

**Nonperforming Loans**

 

The following table sets forth theaggregate amount of nonperforming loans and selected ratios at December 31(dollars in thousands):

 
| ** **                                         | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|----------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| Loans past due  90 days or more still on accrual   |       | $        | 1,705      |     | $          | 480      |       | $        | 319        |     | $          | 1,665 |   | $ | 1,036 |   |
| Nonaccrual loans                                   |       | 23,569   |       | 2,297    |       | 1,131    |       | 533      |       | 3,815    |       |
| Total  nonperforming loans                         |       | 25,274   |       | 2,777    |       | 1,450    |       | 2,198    |       | 4,851    |       |
| Other real  estate                                 |       | 4,658    |       | 824      |       | 351      |       | 210      |       | 3,156    |       |
| Total  nonperforming assets                        |       | $        | 29,932     |     | $          | 3,601    |       | $        | 1,801      |     | $          | 2,408 |   | $ | 8,007 |   |
| Nonperforming  loans as a percent of total loans   |       | 2.0      | %          | 0.2      | %          | 0.1      | %          | 0.2      | %          | 0.5      | %          |
| Nonperforming  assets as a percent of total assets |       | 1.6      | %          | 0.2      | %          | 0.1      | %          | 0.1      | %          | 0.5      | %          |

 

The Company’s general policy is todiscontinue accruing interest on a loan when it becomes 90 days past due or, onan earlier date, if management believes, after considering economic andbusiness conditions and collection efforts, that the borrower’s financialcondition is such that collection of principal or interest is doubtful. In somecircumstances, a loan that is more than 90 days past due can remain on accrualstatus if it is fully secured and in process of collection. When a loan hasbeen placed on nonaccrual, interest earned but not collected is charged back tointerest income. When payments are received on nonaccrual loans, the payment isfirst applied to principal, then to interest income and finally to expensesincurred for collection. Potential problem loans are loans included on a watchlist presented to the board of directors that do not meet the definition of anonperforming loan. Our decision to include performing loans on a watch listdoes not necessarily mean that we expect losses to occur or that we believethese loans to be impaired, rather, that we believe a higher degree ofmonitoring is appropriate for these loans. Potential problem loans as of December 31,2008 were $38.4 million.

 

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**Allowance for Loan Losses**

 

The Company maintains anallowance for loan losses at a level management believes is sufficient toabsorb probable incurred credit losses in the loan portfolio. The allowance forloan losses represents the Company’s estimate of probable incurred creditlosses in the loan portfolio at each balance sheet date and is based on thereview of available and relevant information. The allowance containsallocations for probable incurred credit losses that have been identified relatingto specific borrowing relationships as well as probable incurred credit lossesfor pools of loans. The allowance for loan losses is evaluated monthly by theCompany to determine the appropriate level of the allowance. The amount of theallowance for loan losses is determined based on a variety of factors,including assessment of the credit risk of the loans in the loan portfolio,volume of the loans, delinquent loans, evaluation of current economicconditions in the market area, actual charge-offs during the period andhistorical loss experience. Loan quality is continually monitored by managementand reviewed by the loan committee on a monthly basis.

 

All categories of loansare evaluated on a category by category basis. In addition, individual commercial,construction and commercial mortgage loans are evaluated to determine if aspecific loss allocation is needed for problem loans deemed to have a shortfallin collateral. Management also considers the borrower’s current economic statusincluding liquidity and future business viability. Other factors used in theallocation of the allowance include levels and trends of past dues andcharge-offs along with concentrations of credit within the commercial andcommercial real estate loan portfolios. This evaluation is inherentlysubjective as it requires estimates that are susceptible to significantrevision as more information becomes available or as future events occur. Alongwith the allocation of the allowance on a category by category basis and thespecific allocations for individual borrowing relationships, the allowanceincludes a relatively small portion that remains unallocated.

 

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

 

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The following table setsforth the activity in the allowance for loan losses for the years ended and at December 31(dollars in thousands):

 
| ** **                                        | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|---------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| Allowance for loan  losses at beginning of period |       | $        | 9,269      |     | $          | 10,650   |       | $        | 10,681     |     | $          | 10,527 |   | $ | 14,420 |   |
| Loan charge-offs                                  |       |     |       |     |       |     |       |     |       |     |       |
| Commercial                                        |       | 1,848    |       | 1,446    |       | 72       |       | 1,250    |       | 3,936    |       |
| Consumer                                          |       | 10       |       | 17       |       | 5        |       | 12       |       | 31       |       |
| Indirect  automobile                              |       | 20       |       | 37       |       | 62       |       | 79       |       | 113      |       |
| Real estate                                       |       |     |       |     |       |     |       |     |       |     |       |
| Residential                                       |       | 3        |       | —   |       | —   |       | —   |       | —   |       |
| Commercial                                        |       | 13       |       | —   |       | —   |       | —   |       | 164      |       |
| Home equity                                       |       | 288      |       | 275      |       | 11       |       | —   |       | 12       |       |
| Construction                                      |       | 1,708    |       | —   |       | —   |       | —   |       | —   |       |
| Credit card                                       |       | 321      |       | 210      |       | 196      |       | 192      |       | 236      |       |
| Other                                             |       | 84       |       | 61       |       | 72       |       | 56       |       | 72       |       |
| Total loan  charge-offs                           |       | 4,295    |       | 2,046    |       | 418      |       | 1,589    |       | 4,564    |       |
| Loan recoveries                                   |       |     |       |     |       |     |       |     |       |     |       |
| Commercial                                        |       | 142      |       | 129      |       | 144      |       | 252      |       | 315      |       |
| Consumer                                          |       | 5        |       | 5        |       | 6        |       | 4        |       | 3        |       |
| Indirect  automobile                              |       | 25       |       | 59       |       | 37       |       | 47       |       | 65       |       |
| Real estate                                       |       |     |       |     |       |     |       |     |       |     |       |
| Residential                                       |       | —   |       | —   |       | —   |       | —   |       | —   |       |
| Commercial                                        |       | —   |       | —   |       | —   |       | —   |       | —   |       |
| Home equity                                       |       | —   |       | —   |       | —   |       | —   |       | —   |       |
| Construction                                      |       | —   |       | —   |       | —   |       | —   |       | —   |       |
| Credit card                                       |       | 48       |       | 91       |       | 39       |       | 57       |       | 73       |       |
| Other                                             |       | 24       |       | 6        |       | 11       |       | 8        |       | 15       |       |
| Total loan  recoveries                            |       | 244      |       | 290      |       | 237      |       | 368      |       | 471      |       |
| Net loan  charge-offs                             |       | 4,051    |       | 1,756    |       | 181      |       | 1,221    |       | 4,093    |       |
| Provision for  loan losses                        |       | 10,360   |       | 375      |       | 150      |       | 1,375    |       | 200      |       |
| Allowance for  loan losses at end of period       |       | $        | 15,578     |     | $          | 9,269    |       | $        | 10,650     |     | $          | 10,681 |   | $ | 10,527 |   |
|                                              |       |     |       |     |       |     |       |     |       |     |       |
| Allowance for  loan losses to total loans         |       | 1.25     | %          | 0.75     | %          | 0.91     | %          | 0.97     | %          | 1.00     | %          |
| Net charge-offs  to average total loans           |       | 0.33     | %          | 0.15     | %          | 0.02     | %          | 0.11     | %          | 0.39     | %          |

 

The amount of the additions to theallowance for loan losses charged to expense for the periods indicated werebased on a variety of factors, including actual loans charged-off during therespective year, historical loss experience, changes in the nature and volumeof the loan portfolio including nonperforming loans, specific loss allocationsfor individual loans and an evaluation of current economic conditions.

 

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The allocation shown in the followingtable, encompassing the major segments of the loan portfolio, represents onlyan estimate for each category of loans based on historical loss experience andmanagement’s judgment of amounts deemed reasonable to provide for probablelosses within each category.

 

Estimated losses for categories ofhomogeneous loan types are generally made on an aggregate basis (dollars inthousands).

 
| ** **           | ** ** | **2008**   | ** ** | **2007**                                                                 | ** ** | **2006**   | ** ** | **2005**                                                                 | ** ** | **2004**   | ** ** |
|----------------------|------------|------------|------------|--------------------------------------------------------------------------|------------|------------|------------|--------------------------------------------------------------------------|------------|------------|------------|
| ** **           | ** ** | **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           |       | $          | 5,620      |                                                                     | 23.1       | %          | $          | 4,038                                                                    |       | 21.9       | %          | $ | 7,151 |   | 24.3 | % | $ | 6,616 |   | 25.1 | % | $ | 6,131 |   | 25.3 | % |
| Consumer (1)         |       | 106        |       | 0.3                                                                      | %          | 193        |       | 0.6                                                                      | %          | 179        |       | 0.7 | % | 154 |   | 0.7 | % | 163 |   | 0.7 | % |
| Indirect  automobile |       | 33         |       | 0.4                                                                      | %          | 42         |       | 0.7                                                                      | %          | 60         |       | 1.2 | % | 117 |   | 2.3 | % | 189 |   | 3.7 | % |
| Real estate          |       |       |       |                                                                     |       |       |       |                                                                     |       |       |       |   |   |   |   |   |   |   |   |   |   |
| Residential (2)      |       | 1,224      |       | 19.5                                                                     | %          | 675        |       | 18.2                                                                     | %          | 285        |       | 15.3 | % | 354 |   | 14.6 | % | 366 |   | 13.9 | % |
| Commercial           |       | 3,863      |       | 22.2                                                                     | %          | 1,249      |       | 20.2                                                                     | %          | 489        |       | 20.0 | % | 609 |   | 20.5 | % | 624 |   | 19.7 | % |
| Home equity          |       | 1,337      |       | 20.6                                                                     | %          | 926        |       | 22.0                                                                     | %          | 746        |       | 20.7 | % | 826 |   | 20.8 | % | 856 |   | 22.5 | % |
| Construction         |       | 3,003      |       | 12.9                                                                     | %          | 1,607      |       | 15.5                                                                     | %          | 1,481      |       | 16.9 | % | 1,489 |   | 15.0 | % | 1,637 |   | 12.8 | % |
| Credit card          |       | 305        |       | 1.0                                                                      | %          | 250        |       | 0.9                                                                      | %          | 242        |       | 0.9 | % | 258 |   | 1.0 | % | 302 |   | 1.4 | % |
| Unallocated          |       | 87         |       | —                                                                   | %          | 289        |       | —                                                                   | %          | 17         |       | — | % | 258 |   | — | % | 259 |   | — | % |
| Total                |       | $          | 15,578     |                                                                     | 100.0      | %          | $          | 9,269                                                                    |       | 100.0      | %          | $ | 10,650 |   | 100.0 | % | $ | 10,681 |   | 100.0 | % | $ | 10,527 |   | 100.0 | % |

 

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(1)          Consumerloans include consumer and other loans.

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

 

**Deposits**

 

The following table sets forth bycategory average daily deposits and interest rates for the years ended December 31(dollars in thousands):

 
| ** **                 | ** ** | **2008**             | ** ** | **2007** | ** ** | **2006**             | ** ** |
|----------------------------|------------|----------------------|------------|----------|------------|----------------------|------------|
| ** **                 | ** ** | **Average  Balance** | ** ** | **Rate** | ** ** | **Average  Balance** | ** ** | **Rate** | ** ** | **Average  Balance** | ** ** | **Rate** | ** ** |
| Demand-noninterest-bearing |       | $                    | 138,106    |     | —     | %                    | $          | 145,314 |   | — | % | $ | 152,423 |   | — | % |
| NOW                        |       | 307,033              |       | 0.4      | %          | 306,680              |       | 0.9 | % | 315,209 |   | 0.9 | % |
| Money market  checking     |       | 326,367              |       | 2.5      | %          | 290,610              |       | 4.3 | % | 254,492 |   | 4.2 | % |
| Savings                    |       | 334,266              |       | 0.8      | %          | 359,173              |       | 1.8 | % | 398,013 |   | 2.2 | % |
| Time deposits              |       |                 |       |     |       |                 |       |   |   |   |   |   |   |
| Less than  $100,000        |       | 368,943              |       | 4.1      | %          | 393,708              |       | 4.7 | % | 381,062 |   | 4.2 | % |
| $100,000 and  greater      |       | 146,492              |       | 4.1      | %          | 164,785              |       | 4.9 | % | 154,178 |   | 4.5 | % |
| Total                      |       | $                    | 1,621,207  |     | 2.1        | %                    | $          | 1,660,270 |   | 2.9 | % | $ | 1,655,377 |   | 2.7 | % |

 

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The following table sets forth bymaturity time deposits $100,000 and greater at December 31 (dollars inthousands):

 
| ** **                           | ** ** | **2008** | ** ** |
|--------------------------------------|------------|----------|------------|
| Within 3 months                      |       | $        | 26,882     |   |
| After 3 months  but within 6 months  |       | 19,256   |       |
| After 6 months  but within 12 months |       | 32,528   |       |
| After 1 year but  within 5 years     |       | 65,774   |       |
| Over 5 years                         |       | —   |       |
| Total                                |       | $        | 144,440    |   |

 

**Return on Equity and Assets andOther Financial Ratios**

 

The following table sets forth selectedfinancial ratios at and for the years ended December 31:

 
| ** **                                                                                                                                       | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Return on  average total assets                                                                                                                  |       | 0.90     | %          | 1.26     | %          | 1.38     | %          |
| Return on  average shareholders’ equity (GAAP) (1)                                                                                          |       | 16.01    | %          | 24.04    | %          | 27.05    | %          |
| Return on  average shareholders’ equity plus common stock in ESOP subject to contingent  repurchase obligation (non-GAAP) (1)               |       | 10.40    | %          | 14.83    | %          | 16.83    | %          |
| Cash dividends  declared to net income                                                                                                           |       | 102.88   | %          | 92.36    | %          | 85.30    | %          |
| Average  shareholders’ equity (GAAP) (1)                                                                                                    |       | 5.63     | %          | 5.24     | %          | 5.09     | %          |
| Average  shareholders’ equity plus common stock in ESOP subject to contingent  repurchase obligation to average total assets (non-GAAP) (1) |       | 8.67     | %          | 8.49     | %          | 8.18     | %          |

 

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**(1)   See Note 7 to the Company’s consolidatedfinancial statements and the section entitled “Non-GAAP Financial Measures” on page 37of West Suburban’s Annual Report to Shareholders for the fiscal year ended December 31,2008 (attached as Exhibit 13 hereto). This presentation is consistent withthe Company’s belief that it is unlikely that the Company would be required tosatisfy the contingent repurchase obligation.**

** **

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

## ** **

In addition to the otherinformation in this Annual Report on Form 10-K, shareholders, prospectiveinvestors and other interested parties should carefully consider the followingrisk factors:

 

**Acontinued downturn in theeconomy, particularly in the western suburbs of Chicago, Illinois, where theCompany’s business is primarily conducted, could have a material adverse affecton the Company’s business, financial condition and results of operations.**

 

The Company’s businessand earnings are directly affected by general business and economic conditionsin the U.S. and, in particular, economic conditions in the western suburbs ofChicago, Illinois. These conditions include legislative and regulatory changes,short-term and long-term interest rates, inflation, and changes in governmentmonetary and fiscal policies, all of which are beyond our control.

 

At the end of 2007, theU.S. economy experienced a downturn that has continued into 2009. A continueddownturn in economic conditions, in particular within the Company’s primarymarket area within the western suburbs of Chicago, Illinois, could result in adecrease in the demand for the Company’s products and services, an increase inthe Company’s loan delinquencies and defaults, and an increase in the Company’sproblem assets and foreclosures. The value of real estate pledged as collateralfor loans made by the Company has declined, and may continue to decline, inturn reducing customers’ borrowing power, and reducing the value of assets andcollateral securing the Company’s existing loans. These factors could lead toreduced interest income and an increase in the provision for loan losses.

 

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If current economicconditions continue or worsen, the Company’s business, growth and profitabilityare likely to suffer a material adverse effect. To the extent that the Company’sbusiness customers’ underlying businesses are harmed as a result of the generaleconomic environment, the Company’s customers are more likely to default ontheir loans. Negative economic trends could lead to higher past due andnon-accrual loans, resulting in a material adverse effect to the Company’sfinancial condition and results of operations.

 

**A further deterioration of the Company’s currentnon-performing loans or an increase in the number of non-performing loans mayhave a****material adverse affect onthe Company’s financial condition and results of operations.**

 

Weakening economicconditions in the residential and commercial real estate sectors have adverselyaffected, and may continue to adversely affect, the Company’s loan portfolio.The Company’s ratio of non-performing assets to total assets increased in 2008to 1.6% at December 31, 2008, from 0.2% at December 31, 2007. Ifloans that currently are non-performing further deteriorate or loans that arecurrently performing become non-performing loans, the Company may need toincrease its allowance for loan losses. Such an increase may have a materialadverse effect to the Company’s financial condition and results of operations.

 

**TheCompany must effectively manage its credit risk.**

 

There are risks inherentin making any loan, including risks inherent in dealing with individualborrowers, risks of nonpayment, risks resulting from uncertainties as to thefuture value of collateral and risks resulting from changes in economic andindustry conditions. The Company attempts to minimize its credit risk throughprudent loan application approval procedures, careful monitoring of theconcentration of its loans within specific industries and periodic independentreviews of outstanding loans by its credit review department. However, theCompany cannot ensure that its approval and monitoring procedures effectivelymanage its credit risks. Should the economic climate continue to worsen,borrowers may experience difficulty, and the level of non-performing loans,charge-offs, and delinquencies could rise and require further increases in theallowance for loan losses which could have a material adverse effect on theCompany’s business, financial condition and results of operations.

 

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

 

The Company’s estimate ofthe level of allowance for loan losses requires management to apply significantjudgment. The Company establishes its allowance for loan losses in consultationwith management and maintains it at a level considered adequate by managementto absorb probable incurred credit losses in the loan portfolio. The amount offuture loan losses is susceptible to changes in economic, operating and otherconditions, including changes in interest rates, which may be beyond theCompany’s control, and such losses may exceed current estimates. At December 31,2008, the Company’s allowance for loan losses as a percentage of total loanswas 1.25% and as a percentage of total nonperforming loans was approximately62%. Although management believes that the allowance for loan losses isadequate to absorb probable incurred credit losses in the Company’s loanportfolio, the Company cannot predict loan losses with certainty, and theCompany cannot assure you that its allowance for loan losses will provesufficient to cover actual loan losses. Loan losses in excess of its allowancefor loan losses may adversely affect the Company’s financial condition andresults of operations.

 

**The Company’s business isconcentrated in, and dependent upon the continued growth and prosperity of, thewestern suburbs of Chicago.**

 

The Company and itsoperating subsidiaries operate primarily in the western suburbs of Chicago, andas a result, the Company’s business, financial condition and results ofoperations are subject to changes in the economic conditions in this area. TheCompany has developed a strong presence in the counties it serves, withparticular concentration in DuPage County, and surrounding counties. Basedupon the 2000 census, these counties together represent a market of more than1.8 million people. The Company’s success depends upon the business activity,population, income levels, deposits and real estate activity in this market.Although the Company’s customers’ business and financial interests may extendwell beyond its market area, adverse economic conditions that affect itsspecific market area could reduce the Company’s growth rate, affect the abilityof its customers to repay their loans and generally affect the Company’sbusiness, financial condition and results of operations. Because of thisgeographic concentration, the 

 

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Company is less able todiversify its credit risks across multiple markets than other regional ornational financial institutions.

 

**Thevalue of certain investment securities is volatile and future declines orother-than-temporary impairments could materially adversely affect ourfinancial condition and results of operations.**

 

The Company’s securitiesportfolio includes corporate securities, pooled trust preferred securitiesissued by banks and insurance companies, U.S. government sponsored entityissued securities, mortgage-backed securities issued by U.S. governmentsponsored entities, municipal securities issued by states and politicalsubdivisions and restricted stock issued by the Federal Home Loan Bank ofChicago.  Continued volatility in themarket value for certain of the Company’s investment securities, whether causedby changes in market perceptions of credit risk, as reflected in the expectedmarket yield of the security, or actual defaults in the portfolio could resultin significant fluctuations in the value of the securities.  This could have a material adverse impact onthe Company’s accumulated other comprehensive loss and shareholders’ equitydepending on the direction of the fluctuations. Furthermore, future downgrades or defaults in these securities couldresult in future classifications as other than temporarily impaired.  The Company evaluates all of its securitiesfor other-than-temporary impairment on a regular basis.  In light of the recent conditions of thebanking and insurance industries, the pooled trust preferred securities sectorhas been highly scrutinized.  As of December 31,2008, the Company determined that the decline in the value of its pooled trustpreferred securities does not represent other-than-temporary impairment.  No assurances can be provided, however, thatthe Company’s investment securities, including the pooled trust preferredsecurities, will not experience an other-than-temporary impairment, which couldhave a material adverse effect on the Company’s financial condition and resultsof operations.

 

**The Company faces intensecompetition in all aspects of its business from other banks and financialinstitutions.**

 

The banking and financialservices business in its market is highly competitive. The Company’scompetitors include large regional banks, local community banks, savings andloan associations, securities and brokerage companies, mortgage companies,insurance companies, finance companies, money market mutual funds, creditunions and other non-bank financial service providers. Increased competition inthe Company’s market may result in a decrease in the amounts of its loans anddeposits, reduced spreads between loan rates and deposit rates or loan termsthat are more favorable to the borrower. Any of these results could have amaterial adverse effect on the Company’s ability to grow and remain profitable.If increased competition causes the Company to significantly discount theinterest rates it offers on loans or increase the amount it pays on deposits,net interest income could be adversely impacted. If increased competitioncauses the Company to modify****itsunderwriting standards, it could be exposed to higher losses from lendingactivities. Additionally, many of the Company’s competitors are much larger intotal assets and capitalization, have greater access to capital markets andoffer a broader range of financial services than the Company can offer.

 

**Interest rates and other conditions impact theCompany’s results of operations.**

 

The Company’sprofitability is in part a function of the spread between the interest ratesearned on investments and loans and the interest rates paid on deposits andother interest-bearing liabilities. Like most banking institutions, the Company’snet interest spread and margin will be affected by general economic conditionsand other factors, including fiscal and monetary policies of the federalgovernment, that influence market interest rates and its ability to respond tochanges in those rates. At any given time, the Company’s assets and liabilitieswill be such that they are affected differently by a given change in interestrates. As a result, an increase or decrease in rates, the length of loan termsor the mix of adjustable and fixed rate loans in the Company’s portfolio couldhave a positive or negative effect on its net income, capital and liquidity.The Company measures interest rate risk under various rate scenarios and usingspecific criteria and assumptions. A summary of this process, along with theresults of the Company’s net interest income simulations is presented at “Quantitativeand Qualitative Disclosures About Market Risk” included under Item 7A of Part IIof this Form 10-K. Although management believes the Company’s currentlevel of interest rate sensitivity is reasonable and effectively managed,significant fluctuations in interest rates may have an adverse effect on theCompany’s business, financial condition and results of operations.

 

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**The Company’s loan portfolio hasa significant concentration of real estate loans, which are exposed toweaknesses in the U.S. and local housing markets and overall state of theeconomy.**

 

Real estate lending(including home equity, commercial, construction and residential) is a largeportion of the Company’s loan portfolio. These categories represent $925.9million, or approximately 74.1% of the Company’s total loan portfolio as of December 31,2008. The market value of real estate can fluctuate significantly in a shortperiod of time as a result of market conditions in the geographic area in whichthe real estate is located, and adverse developments affecting real estatevalues in one or more of the Company’s markets could increase the credit riskassociated with its loan portfolio. Additionally, construction and commercialreal estate lending typically involves higher loan principal amounts and therepayment of the loans generally is dependent, in large part, on sufficientincome from the properties securing the loans to cover operating expenses anddebt service. Economic events or governmental regulations outside of thecontrol of the borrower or the Company may negatively impact the future cashflow and market values of the affected properties.

 

If the loans that arecollateralized by real estate become troubled during a time when marketconditions are declining or have declined, then the Company may not be able torealize the amount of security that it anticipated at the time of originatingthe loan, which could cause the Company to increase its provision for loanlosses and adversely affect its business, financial condition and results ofoperations. The ongoing weakness in the U.S. and local housing markets and theoverall economy has lead to declines in home prices in many markets. Continueddeclines in real estate values, home sales volumes and financial stress onborrowers as a result of job losses, interest rate resets on adjustable ratemortgage loans or other factors could have continued adverse effects onborrowers that result in higher delinquencies and greater charge-offs in futureperiods, which could adversely affect the Company’s business, financialcondition and results of operations.

 

**The Company’s construction loansare based upon estimates of costs and value associated with the completedproject. These estimates may be inaccurate, and the Company may be exposed tomore losses on these construction loans than on other loans.**

 

At December 31,2008, construction loans, including land acquisition and development, totaled$161.5 million, or 12.9%, of the Company’s total loan portfolio. Constructionand land acquisition and development lending involve additional risks becausefunds are advanced based upon values associated with the completed project,which are uncertain. Because of the uncertainties inherent in evaluating theconstruction cost estimates that the Company receives from its customers andother third parties, as well as the market value of the completed project andthe effects of governmental regulation of real property, it is relativelydifficult to evaluate accurately the total funds required to complete a projectand the related loan-to-value ratio. As a result, construction loans ofteninvolve the disbursement of substantial funds with repayment dependent, inpart, on the success of the ultimate project and the ability of the borrower tosell or lease the property, rather than the ability of the borrower orguarantor to repay principal and interest. The market values of real estate throughoutthe U.S., including in the Company’s market area, dramatically declined in2008. The ongoing weakness in the U.S. real estate markets may negativelyimpact the ability of the Company’s borrowers to sell or lease theirproperties. If the Company’s appraisal of the anticipated value of thecompleted project proves to be overstated, the Company may have inadequatesecurity for the loan.

 

**Commercial loans also make up asignificant portion of the Company’s loan portfolio.**

 

Commercial loans wereapproximately $288.2****million(excluding $277.0 million of commercial real estate loans), or approximately23.1% of the Company’s total loan portfolio as of December 31, 2008. 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,equipment 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 the business.A continued decline in the U.S. economy could harm the businesses of theCompany’s borrowers and reduce the value of the assets securing the Company’scommercial loans.

 

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**The Company may experiencedifficulties in managing its growth, and its growth strategy involves risksthat may negatively impact net income.**

 

The Company has pursuedand continues to pursue an internal growth strategy, the success of which willdepend primarily upon generating an increasing level of loans and deposits atacceptable risk levels without corresponding increases in non-interestexpenses. The Company’s growth strategy has been to operate out of a number ofbranches. The Company may establish other new branches and product areas,expand into new markets or make strategic acquisitions of other financialinstitutions, which may require significant upfront investments in technology,personnel and site locations. There can be no assurance that the Company willbe successful in continuing its growth strategy and in continuing to improve ormaintain its net income by leveraging its non-interest expenses.

 

The Company may expandinto additional communities or attempt to strengthen its position in itscurrent markets by undertaking additional branch openings. The Companycurrently anticipates opening one new branch in Will County during 2009. Basedon experience, management believes that it generally takes up to two years fornew banking facilities to first achieve operational profitability, due to theimpact of overhead expenses and the start-up phase of generating loans anddeposits. To the extent that the Company undertakes additional branching, it islikely to continue to experience the effects of higher operating expenses relativeto operating income from the new operations, which may have an adverse effecton the Company’s levels of reported net income, return on average equity andreturn on average assets.

 

The Company may alsoacquire banks and related businesses that management believes provide astrategic fit with the Company’s business. To the extent that the Company growsthrough acquisitions, it may not be able to adequately and profitably managethis growth. Acquiring other banks and businesses will involve similar risks tothose commonly associated with branching, but may also involve additionalrisks, including:

 

·                  potentialexposure to unknown or contingent liabilities of banks and businesses theCompany acquires;

 

·                  exposureto potential asset quality issues of the acquired bank or related business;

 

·                  difficultyand expense of integration the operation and personnel of banks and businessesthe Company acquires; and

 

·                  thepossible loss of key employees and customers of the banks and businesses theCompany acquires.

 

**The Company may need to raiseadditional capital in the future, but that capital may not be available when itis needed.**

 

The Company is requiredby federal and state regulatory authorities to maintain adequate levels ofcapital to support its operations. The Company anticipates that its existingcapital resources will satisfy its capital requirements for the foreseeablefuture. However, the Company may at some point need to raise additional capitalto support continued growth, both internally and through acquisitions. TheCompany has applied to participate in the U.S. Department of the Treasury’sCapital Purchase Program, but as of the date of this report, the Company’sapplication has not been approved, and there is no guarantee that it will beapproved.

 

The Company’s ability toraise additional capital, if needed, will depend on conditions in the capitalmarkets at that time, which are outside its control, and on its financialperformance. Accordingly, the Company cannot assure you of its ability to raiseadditional capital, if needed, on terms acceptable to the Company. If theCompany cannot raise additional capital when needed, its ability to furtherexpand its operations through internal growth and acquisitions could bematerially impaired.

 

**The Company’s community bankingstrategy relies heavily on its management team, and the unexpected loss of keymanagers may adversely affect its operations.**

 

Much of the Company’ssuccess to date has been influenced strongly by its ability to attract and toretain senior management experienced in banking and financial services andfamiliar with the communities in its market area. The Company’s ability toretain executive officers, the current management teams and loan officers ofits operating 

 

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subsidiaries willcontinue to be important to the successful implementation of its strategy. Itis also critical, as the Company grows, to be able to attract and retainqualified additional 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.

 

**The Company and its subsidiariesare subject to examination and challenges by taxing authorities, and theCompany’s effective tax rates may be adversely affected by changes in federaland state tax laws.**

 

The Company’s effectivetax rates may be adversely affected by changes in federal or state tax laws,regulations and agency interpretations. Tax laws are complex and subject todifferent interpretations by the taxpayer and the various taxing authorities.Management makes certain judgments and estimates about the application of theseinherently complex laws when determining the provision for income taxes.Federal and state taxing authorities have recently become increasinglyaggressive in challenging tax positions taken by financial institutions,including positions that may be taken by the Company. During the preparation ofthe Company’s tax returns, management makes reasonable interpretations of thetax laws which are subject to challenge upon audit by the tax authorities.These interpretations are also subject to reinterpretation based on management’songoing assessment of facts and evolving case law.

 

A recent change inIllinois law may adversely affect the Company’s operating results and financialcondition. Under current tax law, the Company enjoys favorable tax treatmentwith respect to dividends it receives from its captive real estate investmenttrust, or REIT. Effective January 1, 2009, a new Illinois law relating tothe deductibility of REIT dividends eliminated this tax benefit and the Company’seffective tax rate will likely increase.

 

**Government regulation can resultin limitations on the Company’s operations.**

 

The Company and itsoperating subsidiaries operate in a highly regulated environment and aresubject to supervision and regulation by a number of governmental regulatoryagencies, including the Federal Reserve, the FDIC and the DFPR. Regulationsadopted by these agencies, which are generally intended to provide protectionfor depositors and customers rather than for the benefit of shareholders,govern a comprehensive range of matters relating to ownership and control ofthe Company’s shares, its acquisition of other companies and businesses,permissible activities in which the Company may engage, maintenance of adequatecapital levels and other aspects of the Company’s operations. These bankregulators possess broad authority to prevent or remedy unsafe or unsoundpractices or violations of law. The laws and regulations applicable to thebanking industry could change at any time, and the Company cannot predict theeffects of these changes on its business and profitability. Increasedregulation could increase the Company’s cost of compliance and adversely affectprofitability. For example, new legislation or regulation may limit the mannerin which the Company may conduct its business, including its ability to offernew products, obtain financing, attract deposits, make loans and achievesatisfactory interest spreads.

 

As a financialinstitution, the Company is required under the USA PATRIOT Act and the BSA todevelop programs to prevent the Company from being used for money launderingand terrorist activities. The Company is also obligated to file suspiciousactivity reports with the U.S. Treasury’s Office of Financial Crimes EnforcementNetwork in certain circumstances. These rules also require financialinstitutions to establish procedures for identifying and verifying the identityof customers seeking to open new financial accounts. On December 3, 2008, the Bank enteredinto an Order to Cease and Desist with the FDIC and the DFPR whichrequires the Bank to take certain corrective actions aimed at resolving anyoutstanding violations of BSA-related laws or regulations and to implement arevised BSA/AML Program designed to ensure compliance with these BSA-relatedlaws and regulations. Although theOrder does not relate to the Bank’s asset quality, capital position or thesafety and soundness of its financial operations, the Order requires the Bank to, among other things,assess its BSA Department staffing needs, provide for independenttesting of BSA/AML Program compliance, conduct a review of certain historicaldeposit and transaction and submit periodic reports of progress to the FDIC andDFPR. As a result, the Company expects the Order to increase the Company’s costof regulatory compliance, which may adversely affect its earnings. In addition,if the Bank fails to comply with the Order, the failure could result in furtherregulatory actions, which may significantly limit the Company’s operations andgrowth.

 

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**TheCompany’s potential participation in the U.S. Treasury’s Capital PurchaseProgram may adversely affect the value of its common stock and the rights ofthe Company’s common shareholders.**

 

If the Companyparticipates in the U.S. Treasury’s Capital Purchase Program, the terms of thepreferred stock the Company may issue under the program could reduce investmentreturns to the Company’s common shareholders by restricting dividends andrestricting capital management practices. Without the prior consent of the U.S.Treasury, the Company will be prohibited from increasing common stock dividendsfor the first three years while the U.S. Treasury holds the preferred stock.

 

Also, the preferred stockrequires quarterly dividends to be paid at the rate of 5% per annum for thefirst five years and 9% per annum thereafter until the stock is redeemed by theCompany. The payments of these dividends will decrease the excess cash theCompany would otherwise have available to pay dividends on its common stock andto use for general corporate purposes, including working capital.

 

Finally, the Company willbe prohibited from continuing to pay dividends on its common stock unless ithas fully paid all required dividends on the preferred stock issued to the U.S.Treasury. Although the Company expects to be able to pay all required dividendson the preferred stock (and to continue to pay dividends on common stock atcurrent levels), there is no guarantee that the Company will be able to do soin the future.

 

**TheCompany has a continuing need for technological change, and it may not have theresources to effectively implement new technology.**

 

The financial servicesindustry continues to undergo rapid technological changes with frequentintroductions of new technology-driven products and services. In addition tobetter serving customers, the effective use of technology increases efficiencyand enables financial institutions to reduce costs. The Company’s futuresuccess will depend in part upon its ability to address the needs of itscustomers by using technology to provide products and services that willsatisfy customer demands for convenience as well as to create additionalefficiencies in its operations as it continues to grow and expand its marketarea. Many of the Company’s larger competitors have substantially greaterresources to invest in technological improvements. As a result, they may beable to offer additional or superior products to those that the Company will beable to offer, which would put it at a competitive disadvantage. Accordingly,the Company cannot provide you with assurance that it will be able toeffectively implement new technology-driven products and services or besuccessful in marketing such products and services to its customers.

 

**Changesin accounting standards could impact the Company’s results of operations.**

 

The accounting standardsetters, including the Financial Accounting Standards Board, the Securities andExchange Commission and other regulatory bodies, periodically change thefinancial accounting and reporting standards that govern the preparation of theCompany’s consolidated financial statements. These changes can be hard topredict and can materially impact how the Company records and reports itsfinancial condition and results of operations. In some cases, the Company couldbe required to apply a new or revised standard retroactively, resulting in therestatement of prior period financial statements.

 

**The Company’s ability to paydividends on its common stock is limited by law.**

 

West Suburban’s abilityto pay dividends on its common stock largely depends on its receipt ofdividends from the Bank. The amount of dividends that the Bank may pay to WestSuburban is limited by federal and state laws and regulations relating tofinancial institutions. As of December 31, 2008, approximately $15.1million was available to be distributed as dividends by the Bank to WestSuburban while remaining a “well-capitalized” institution. However, the FDICmay restrict the payment of dividends by the Bank. In addition, West Suburbanand the Bank may decide to limit the payment of dividends even when they havethe legal ability to pay them in order to retain earnings for use in theirbusinesses.

 

In addition, if theCompany participates in the U.S. Treasury’s Capital Purchase Program, theCompany’s ability to pay dividends will be restricted as described in moredetail under the Risk Factor entitled “The Company’s potential participation inthe U.S. Treasury’s Capital Purchase Program may adversely affect the value ofits common stock and the rights of the Company’s common shareholders.”

 

24

----

 

**There is noestablished trading market for West Suburban’s common shares.**

 

West Suburban’scommon stock is not traded on anyexchange or quoted on the NASDAQ or traded on any other established tradingmarket, and West Suburbandoes not intend to apply for listing or quotation.West Suburban cannot assure you that a liquid market will develop for WestSuburban’s common stock. If no trading market develops for West Suburban’scommon stock, it may be difficult to sell your shares or, if sold, it may bedifficult to resell the shares for a price at or above the price you paid foryour shares. Even if a trading market is established, there is no assurancethat such a trading market can be sustained.

 

**System failure or breaches of the Company’snetwork security could subject the Company to increased operating costs as wellas litigation and other liabilities.**

 

The informationtechnology systems and network infrastructure the Company uses could bevulnerable to unforeseen problems. The Company’s operations are dependent uponits ability to protect its information technology equipment against damage fromphysical theft, fire, power loss, telecommunications failure or a similarcatastrophic event, as well as from security breaches, denial of serviceattacks, viruses, worms and other disruptive problems caused by hackers. Any damageor failure that causes an interruption in the Company’s operations could have amaterial adverse effect on its business, financial condition and results ofoperations. System break-ins, phishing and other disruptions could alsojeopardize the security of information stored in and transmitted through theCompany’s information technology systems and network infrastructure, which mayresult in significant liability to the Company and may cause existing andpotential customers to refrain from doing business with it. Although theCompany, with the help of third-party service providers, intends to continue toimplement security technology and establish operational procedures to preventsuch damage, there can be no assurance that these security measures will besuccessful. In addition, advances in information technology capabilities, newdiscoveries in the field of cryptography or other developments could result ina compromise or breach of the algorithms the Company and its third-partyservice providers use to encrypt and protect customer transaction data. Afailure of such security measures could have a material adverse effect on theCompany’s business, financial condition and results of operations.

 

**The Company is subject to certainoperational risks, including customer or employee fraud and data processingsystem failures and errors.**

 

Employee errors andmisconduct could subject the Company to financial losses or regulatorysanctions and seriously harm its reputation. Misconduct by the Company’semployees could include hiding unauthorized activities from the Company,improper or unauthorized activities on behalf of its customers or improper useof confidential information. It is not always possible to prevent employeeerrors and misconduct, and the precautions the Company takes to prevent anddetect this activity may not be effective in all cases. Employee errors couldalso subject the Company to financial claims for negligence. The Companymaintains a system of internal controls and insurance coverage to mitigateagainst operational risks, including data processing system failures and errorsand customer or employee fraud. Should the Company’s internal controls fail toprevent or detect an occurrence, and if any resulting loss is not insured orexceeds applicable insurance limits, such failure could have a material adverseeffect on the Company’s business, financial condition and results of operations.

 

## **ITEM 1B.     UNRESOLVED STAFF COMMENTS**

## ** **

## **None.**

 

25

----

 

## **ITEM 2.        PROPERTIES**

## ** **

West Suburban and the Bank occupy a totalof approximately 264,300 square feet in 34 full-service branches, fivelimited-service branches and five departments providing insurance, financialand other services. West Suburban’s principal office is located inapproximately 32,500 square feet of office space at 711 South Meyers Road,Lombard, Illinois. As indicated below, the Bank also operates its principaloffice as a branch. West Suburban Bank Land Trust, West Suburban FinancialServices and WSIS are located at 711 South Meyers Road. West Suburban Bank VISAis located at 701 South Meyers Road. The Prepaid Solutions Group’s principaloffice is located at 8001 South Cass Avenue.

 

The following table sets forth certaininformation concerning the branches of the Bank as of December 31, 2008:

 
| **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      |       |
|                                                                 |       |                              |       |       |       |
| 672 East Boughton Road  Bolingbrook, Illinois                        |       | 7,100                             |       | Owned      |       |

 

26

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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      |       |
|                                                                 |       |                              |       |       |       |
| 10 Saravanos Drive  Yorkville, Illinois                              |       | 3,200                             |       | Leased     |       |
|                                                                 |       |                              |       |       |       |
| 1071 Station Drive  Oswego, Illinois                                 |       | 3,200                             |       | Leased     |       |
|                                                                 |       |                              |       |       |       |
| 1296 East Chicago Avenue  Naperville, Illinois                       |       | 2,300                             |       | Owned      |       |
|                                                                 |       |                              |       |       |       |
| 2020 Feldott Lane  Naperville, Illinois                              |       | 4,500                             |       | Owned      |       |

 

27

----

 
| **Location of Branches and Other Services**                    | ** ** | **Approximate  Square Feet** | ** ** | **Status** | ** ** |
|-----------------------------------------------------------------------------------------|------------|-----------------------------------|------------|------------|------------|
|                                                                                    |       |                              |       |       |       |
| Beacon Hill Retirement Community  2400 South Finley Road  Lombard, Illinois             |       | 100                               |       | Leased     |       |
|                                                                                    |       |                              |       |       |       |
| Clare Oaks  825 Carillon Drive  Bartlett, 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 material pending legal proceedingsto which West Suburban or the Bank is a party other than routine litigationincidental to their respective businesses.

 
| **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’sauthorized and outstanding equity securities consist of common stock, no parvalue.

 

West Suburban herebyincorporates by reference the information called for by Item 5 of this Form 10-Kfrom the sections entitled “Common Stock, Book Value and Dividends” and “StockPerformance Presentation” on page 4 and page 34, respectively, ofWest Suburban’s Annual Report to Shareholders for the fiscal year ended December 31,2008 (attached as Exhibit 13 hereto). The Company’s ability to paydividends to shareholders is largely dependent upon dividends it receives fromthe Bank, which is subject to regulatory limitations on the amount of cashdividends it may pay. See “Business — Supervision and Regulation — The Company —Dividend Payments” and “Business — Supervision and Regulation — The Bank —Dividend Payments” for a more detailed description of theses limitations.

 

West Suburban’s commonstock is not traded on any national or regional exchange. While there is noestablished trading market for West Suburban’s common stock, West Suburban isaware that from time to time limited or infrequent quotations are made withrespect to West Suburban’s common stock and that there occurs limited tradingin West Suburban’s common stock resulting from private transactions notinvolving brokers or dealers. Transactions in West Suburban’s common stock havebeen infrequent. As of March 4, 2009, West Suburban had 430,011 shares ofcommon stock outstanding held by 1,148 shareholders of record. Management isaware of 43 transactions during 

 

28

----

 

2008 involving the sale,in the aggregate, of 3,846 shares of West Suburban’s common stock, and 22transactions during 2007 involving the sale, in the aggregate, of 1,084 sharesof West Suburban’s common stock. The average sale price of transactions in 2008and 2007 was $635.27 and $702.87 per share of common stock, respectively.

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

## ** **

West Suburban herebyincorporates by reference the information called for by Item 6 of this Form 10-Kfrom the section entitled “Selected Financial Data” on page 36 of WestSuburban’s Annual Report to Shareholders for the fiscal year ended December 31,2008 (attached as Exhibit 13 hereto).

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

 

West Suburban hereby incorporates byreference the information called for by Item 7 of this Form 10-K from thesection entitled “Management’s Discussion and Analysis of Financial Conditionand Results of Operations” on pages 39 through 49 of West Suburban’sAnnual Report to Shareholders for the fiscal year ended December 31, 2008(attached as Exhibit 13 hereto).

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

## ** **

West Suburban hereby incorporates byreference the information called for by Item 7A of this Form 10-K from the“Interest Rate Sensitivity” section included in “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” on pages 39through 49 of West Suburban’s Annual Report to Shareholders for the fiscal yearended December 31, 2008 (attached as Exhibit 13 hereto).

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

## ** **

West Suburban herebyincorporates by reference the information called for by Item 8 of this Form 10-Kfrom the Consolidated Financial Statements and Notes to Consolidated FinancialStatements on pages 7 through 33 of West Suburban’s Annual Report toShareholders for the fiscal year ended December 31, 2008 (attached as Exhibit 13hereto).

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

 

None.

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

 

An evaluation wasperformed under the supervision and with the participation of the Company’smanagement, including the Chairman and Chief Executive Officer and thePresident and Chief Financial Officer, of the effectiveness of the design andoperation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgatedunder the Exchange Act as of December 31, 2008. Based on that evaluation,the Company’s Chairman and Chief Executive Officer and the President and ChiefFinancial Officer concluded that the Company’s disclosure controls andprocedures were effective to ensure that information required to be disclosedby the Company in reports that it files or submits under the Exchange Act isrecorded, processed, summarized and reported within the time periods specified.

 

There have been nosignificant changes in the Company’s internal control over financial reportingthat have affected, or are reasonably likely to materially affect, the Company’sinternal control over financial reporting.

 

West Suburban’smanagement report on internal control over financial reporting is set forth in,and West Suburban hereby incorporates by reference, the section entitled “Management’sReport on Internal Control over Financial Reporting” on page 5 of WestSuburban’s Annual Report to Shareholders for the fiscal year ended December 31,2008 (attached as Exhibit 13 hereto).

 

29

----

 

**ITEM 9B.****              OTHER INFORMATION**

 

None.

 

# **PART III**

# ** **

### **ITEM 10.     DIRECTORS, EXECUTIVE OFFICERS AND CORPORATEGOVERNANCE**

### ** **

In addition, and as a supplement to theinformation provided under the caption “Executive Officers of West Suburban” inPart I of this Form 10-K, West Suburban hereby incorporates byreference the information called for by Item 10 of this Form 10-Kregarding directors of West Suburban from the section entitled “Election ofDirectors” of West Suburban’s 2009 Proxy Statement.

 

Section 16(a) ofthe Exchange Act requires that the Company’s executive officers and directorsand persons who own more than 10% of the Company’s Common Stock file reports ofownership and changes in ownership with the Securities and Exchange Commissionand with the exchange on which West Suburban’s Common Stock is traded. Suchpersons are also required to furnish the Company with copies of all Section 16(a) formsthey file. Based solely on the Company’s review of the copies and formsfurnished to the Company and, if appropriate, representations made to theCompany by any such reporting person concerning whether a Form 5 wasrequired to be filed for the 2008 fiscal year, the Company is not aware thatany of its directors and executive officers or 10% shareholders failed tocomply with the filing requirements of Section 16(a) during 2008.

 

West Suburban adopted acode of ethics that applies to West Suburban’s principal executive officer,principal financial officer and principal accounting officer or controller, orpersons performing similar functions. West Suburban’s code of ethics isavailable in the Shareholder Information section of West Suburban’s website, www.westsuburbanbank.com.

 

Since the date of WestSuburban’s 2008 Proxy Statement, there have been no material changes to theprocedures by which shareholders may recommend nominees to West Suburban’sboard of directors.

 
| **ITEM 11.** | **EXECUTIVE COMPENSATION** |
|--------------|----------------------------|

## ** **

West Suburban herebyincorporates by reference the information called for by Item 11 of this Form 10-Kfrom the section entitled “Executive Compensation” of West Suburban’s 2009Proxy Statement; provided, however, that “Report of the Compensation Committeeon Executive Compensation” is specifically not incorporated into this Form 10-K.

 
| **ITEM 12.** | **SECURITY OWNERSHIP OF  CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS** |
|--------------|-----------------------------------------------------------------------------------------------------|

## ** **

West Suburban hereby incorporates byreference the information called for by Item 12 of this Form 10-K from thesections entitled “Security Ownership of Certain Beneficial Owners” and “SecurityOwnership of Management” of West Suburban’s 2009 Proxy Statement.

 
| **ITEM 13.** | **CERTAIN RELATIONSHIPS  AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE** |
|--------------|--------------------------------------------------------------------------------|

## ** **

West Suburban herebyincorporates by reference the information called for by Item 13 of this Form 10-Kfrom the section entitled “Transactions with Directors, Officers and Associates”and “Corporate Governance and the Board of Directors” of West Suburban’s 2009Proxy Statement.

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

 

West Suburban herebyincorporates by reference the information called for by Item 14 of this Form 10-Kfrom the section entitled “Accounting Fees and Services” of West Suburban’s2009 Proxy Statement.

 

30

----

 

**PART IV**

 

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

## ** **

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

 

WEST SUBURBAN BANCORP, INC. ANDSUBSIDIARIES

LIST OF FINANCIAL STATEMENTS AND

FINANCIAL STATEMENT SCHEDULES

 

The following audited ConsolidatedFinancial Statements of West Suburban and its subsidiaries and related notesand report of independent registered public accounting firm are incorporated byreference from West Suburban’s Annual Report to Shareholders for the fiscalyear ended December 31, 2008 (attached as Exhibit 13 hereto).

 
|                                                                                                                      |   | **Annual Report  Page No.** |
|---------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|
|                                                                                                                      |   |                             |
| Report of Independent Registered Public Accounting  Firm                                                                  |   | 6                                |
|                                                                                                                      |   |                             |
| Consolidated Balance Sheets — December 31, 2008  and 2007                                                       |   | 7                                |
|                                                                                                                      |   |                             |
| Consolidated Statements of Income — Years Ended  December 31, 2008, 2007 and 2006                               |   | 8                                |
|                                                                                                                      |   |                             |
| Consolidated Statements of Changes in Shareholders’  Equity — Years Ended December 31, 2008, 2007 and 2006 |   | 9                                |
|                                                                                                                      |   |                             |
| Consolidated Statements of Cash Flows — Years Ended  December 31, 2008, 2007 and 2006                           |   | 10                               |
|                                                                                                                      |   |                             |
| Notes to Consolidated Financial Statements                                                                                |   | 11                               |

 

The following Condensed FinancialInformation-Parent Only is incorporated by reference from Note 13 to WestSuburban’s audited Consolidated Financial Statements as set forth in WestSuburban’s Annual Report to Shareholders for the fiscal year ended December 31,2008 (attached as Exhibit 13 hereto).

 
|                                                                                         |   | **Annual Report  Page No.** |
|----------------------------------------------------------------------------------------------|--------|----------------------------------|
|                                                                                         |   |                             |
| Condensed Balance Sheets — December 31, 2008 and  2007                             |   | 31                               |
|                                                                                         |   |                             |
| Condensed Statements of Income — Years Ended  December 31, 2008, 2007 and 2006     |   | 32                               |
|                                                                                         |   |                             |
| Condensed Statements of Cash Flows — Years Ended  December 31, 2008, 2007 and 2006 |   | 32                               |

 

Schedules

 

Schedules other than those listed aboveare omitted for the reason that they are not required or are not applicable orthe required information is included in the financial statements incorporatedby reference or notes thereto.

 

31

----

 

Item 15(a)(3).         Exhibits

 

The exhibits required by Item 601 ofRegulation S-K are included with this Form 10-K and are listed on the “Indexto Exhibits” immediately following the signature page.

 

***

 

Upon written request to the President andChief Financial Officer of West Suburban Bancorp, Inc., 2800 Finley Road,Downers Grove, Illinois, 60515, copies of the exhibits listed above areavailable to shareholders of West Suburban by specifically identifying eachexhibit desired in the request.

 

32

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**FORM 10-K SIGNATURE PAGE**

 

Pursuant to the requirements of Section 13or 15(d) of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

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

 

Date: March 11, 2009

 

Pursuant to the requirements of theSecurities Exchange Act of 1934, this report has been signed below by thefollowing persons on behalf of the Registrant and in the capacities indicatedon the 11th day of March, 2009.

 
| **SIGNATURE**         | ** ** | ** ** |   | ** **                           |   | **TITLE** |   |
|-----------------------|------------|------------|--------|--------------------------------------|--------|-----------|--------|
|                  |       |       |   |                                 |
| /s/ Kevin J. Acker    |       | 3/11/2009  |   | Chairman, Chief  Executive Officer   |
| Kevin J. Acker        |       | Date       |   | and Director                         |
|                  |       |       |   |                                 |
|                  |       |       |   |                                 |
| /s/ Duane G. Debs     |       | 3/11/2009  |   | President, Chief  Financial Officer, |
| Duane G. Debs         |       | Date       |   | Director and Principal  Accounting   |
|                  |       |       |   | Officer                              |
|                  |       |       |   |                                 |
|                  |       |       |   |                                 |
| /s/ David S. Bell     |       | 3/11/2009  |   | Director                             |
| David S. Bell         |       | Date       |   |                                 |
|                  |       |       |   |                                 |
|                  |       |       |   |                                 |
| /s/ Peggy P. LoCicero |       | 3/11/2009  |   | Director                             |
| Peggy P. LoCicero     |       | Date       |   |                                 |
|                  |       |       |   |                                 |
|                  |       |       |   |                                 |
| /s/ Charles P. Howard |       | 3/11/2009  |   | Director                             |
| Charles P. Howard     |       | Date       |   |                                 |

 

Theforegoing includes all of the Board of Directors of West Suburban.

 

33

----

 

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 3.5 of Form 10-K of West Suburban dated March 21,  2003, under Commission File No. 0-17609.                                                    |
|               |       |                                                                                                                                                                                                                                                             |
| 4.1                |       | Specimen of Common  Stock certificate — Incorporated by reference from Exhibit 4.1 of  Form 10-K of West Suburban dated March 14, 2006, under Commission  File No. 0-17609.                                                             |
|               |       |                                                                                                                                                                                                                                                             |
| 10.1               |       | Directors and Senior  Management Deferred Compensation Plan of West Suburban.                                                                                                                                                                                    |
|               |       |                                                                                                                                                                                                                                                             |
| 10.2               |       | Restated Employment  Agreement dated December 29, 2008 between West Suburban and  Mr. Kevin J. Acker.                                                                                                                                                  |
|               |       |                                                                                                                                                                                                                                                             |
| 10.3               |       | Restated Employment  Agreement dated December 29, 2008 between West Suburban and  Mr. Keith W. Acker.                                                                                                                                                  |
|               |       |                                                                                                                                                                                                                                                             |
| 10.4               |       | Restated Employment  Agreement dated December 29, 2008 between West Suburban and Mr. Duane  G. Debs.                                                                                                                                                   |
|               |       |                                                                                                                                                                                                                                                             |
| 10.5               |       | Restated Employment  Agreement dated December 29, 2008 between West Suburban and  Mr. Michael P. Brosnahan.                                                                                                                                            |
|               |       |                                                                                                                                                                                                                                                             |
| 10.6               |       | Restated Employment  Agreement dated December 31, 2008 between West Suburban and  Mr. Daniel P. Grotto.                                                                                                                                                |
|               |       |                                                                                                                                                                                                                                                             |
| 10.7               |       | Form of Amended  and Restated Life Insurance Agreement between West Suburban and  Messrs. Kevin J. Acker, Keith W. Acker, Duane G. Debs, Michael P.  Brosnahan and Daniel P. Grotto.                                                                   |
|               |       |                                                                                                                                                                                                                                                             |
| 13                 |       | Annual  Report to Shareholders of West Suburban for fiscal year ended December 31,  2008.                                                                                                                                                                   |
|               |       |                                                                                                                                                                                                                                                             |
| 21                 |       | Subsidiaries  of Registrant.                                                                                                                                                                                                                                     |
|               |       |                                                                                                                                                                                                                                                             |
| 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.                                                                    |

 

34

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| **Exhibit Number** | ** ** | **Description**                                                                                                                                                                                      | ** ** |
|--------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
|               |       |                                                                                                                                                                                                 |
| 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.

  |

 

35

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