**Profile**

 

West Suburban Bancorp, Inc. (“West Suburban”) is the parent bankholding company of West Suburban Bank, Lombard, Illinois (the “Bank” and,together with West Suburban, the “Company”). The Company had total assets atDecember 31, 2001 of approximately $1.5 billion. The Bank is the largestindependent bank headquartered in DuPage County.

 

 
| **West Suburban Bancorp, Inc.** |
|---------------------------------|
| **Financial Highlights**        |
|                            |   |   |   |
|                            |   | **Years  Ended December 31,** |   |
|                            |   | **(Dollars  in thousands, except per share data)** |   |
|                            |   | **2001** |   | **2000** |   | **1999** |   | **1998** |   | **1997** |   |
| Net income                      |   | $ | 20,183 |   | $ | 21,003 |   | $ | 20,045 |   | $ | 16,178 |   | $ | 21,784 |   |
| Per share data  Earnings        |   | 46.67 |   | 48.56 |   | 46.35 |   | 37.41 |   | 50.37 |   |
| Book value (1)                  |   | 335.30 |   | 323.17 |   | 313.61 |   | 310.74 |   | 306.02 |   |
| Net loans                       |   | 1,093,376 |   | 1,016,140 |   | 845,706 |   | 772,361 |   | 762,538 |   |
| Total assets                    |   | 1,473,559 |   | 1,431,958 |   | 1,408,062 |   | 1,308,953 |   | 1,293,691 |   |
| Deposits                        |   | 1,309,720 |   | 1,269,954 |   | 1,254,255 |   | 1,155,952 |   | 1,144,949 |   |
|                                 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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| (1)                                                                                                       |  Book value equals shareholders’ equity (including  common stock in ESOP subject to contingent repurchase obligation) divided by |
|-----------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                      | the number of  outstanding shares.                                                                                                         |
|                                                                                                      |
|                                                                                                      |
|                                                                                                      |
| Table of Contents                                                                                         |
| Profile                                                                                                   |
| Letter to Our Shareholders, Customers and  Friends                                                        |
| Common Stock,  Book Value and Dividends                                                                   |
| Business Review                                                                                           |
| Report of Independent  Auditors                                                                           |
| Consolidated Financial  Statements                                                                        |
| Notes to  Consolidated Financial Statements                                                               |
| Selected Financial Data                                                                                   |
| Average  Balance Sheets, Net Interest Income and Average Rates and Yields on a Tax  Equivalent Basis**.** |
| Management’s  Discussion and Analysis of Financial Condition and Results of Operations               |
| Boards of Directors and Officers                                                                          |
| Addresses  of Branches and Other Services                                                                 |
| Map of Branches                                                                                           |
| Shareholder Information                                                                                   |

 

***Special Note Concerning Forward-Looking Statements***

 

*This document (including informationincorporated by reference) contains, and future oral and written statements ofthe Company and its management may contain, forward-looking statements withinthe meaning of the Private Securities Litigation Reform Act of 1995 withrespect to the financial condition, results of operations, plans, objectives,future performance and business of the Company. Forward-looking statements,which may be based upon beliefs, expectations and assumptions of the Company’s managementand on information currently available to management, are generallyidentifiable by the use of words such as “believe,” “expect,” “anticipate,”“plan,” “intend,” “estimate,” “may,” “will,” “would,” “could,” “should” 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.*

 

*A number of factors, many of whichare beyond the ability of the Company to control or predict, could cause actualresults to differ materially from those in its forward-looking statements.These factors include, among others, the following: (i) the strength ofthe local and national economy; (ii) the economic impact of September 11th;(iii) changes in state and federal laws, regulations and governmentalpolicies concerning the Company’s general business; (iv) changes in interestrates and prepayment rates of the Company’s assets; (v) increasedcompetition in the financial services sector and the inability to attract newcustomers; (vi) changes in technology and the ability to develop andmaintain secure and reliable electronic systems; (vii) the loss of key executivesor employees; (viii) changes in consumer spending; (ix) unexpectedresults of acquisitions; (x) unexpected outcomes of existing or new litigationinvolving the Company; and (xi) changes in accounting policies andpractices.**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, includingadditional factors that could materially affect the Company’s financialresults, is included in the Company’s filings with the Securities and ExchangeCommission.*

 

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**To Our****Shareholders, Customers and Friends**

 

The year 2001 presented West Suburban with a number of opportunitiesand challenges. We feel that our development and introduction of innovativeproducts and services, as well as our commitment to profitable growth, haveallowed us to meet these opportunities and challenges successfully. Ourresources, experience and dedication to our customers have also allowed us topursue new markets for our products and services.

 

West Suburban continued to grow in 2001, opening our first location inSouth Elgin at 1870 McDonald Road. We have seen this growth continue as weexpanded our presence in Naperville by establishing a second location, whichopened in March 2002. West Suburban also has plans to open a full servicelocation in Oswego during 2002.

 

Over the past year, West Suburban continued to develop new products inorder to serve the varied needs of our customers. In May, we introduced our100% Home Equity Loan. This new home equity product was designed to benefit newand recent homeowners by providing them the opportunity to open an equity line.

 

In December, we introduced an innovative portal web site, which givesour customers new and dynamic capabilities to view account balances frommultiple financial institutions within a single web page. This comprehensiveand secure system offers our customers added convenience and flexibility.Customers can review and manage their savings, checking and retirementaccounts, and also have the option to view investment, credit card and rewardprogram accounts maintained with other institutions. These efforts, along withour existing products and services, reflect our dedication to meeting the needsof our customers as well as the needs of our market area.

 

We feel our responsibility extends beyond our immediate customer baseand into the communities we serve. As in the past, we have expressed this onthe institutional and individual levels. The tragic events of September 11thhad us all reaching out to help the victims of that horrendous act. WestSuburban helped by donating miscellaneous fees collected during the month ofOctober. The miscellaneous fees included revenue we received in connection withmoney orders, cashier checks, notary services, license plate stickers,travelers cheques, faxes and photocopies.

 

During 2001, West Suburban realized a 2.9% growth in total assets. Loanand deposit growth, during 2001, continued to be strong with a 7.6% increase innet loans and a 3.1% increase in total deposits. Additionally, we were alsoable to recognize a 3.8% growth in our book value per share.

 

We look with optimism to 2002 and the opportunities it will present tous in our position as the leading independent locally owned and managedfinancial institution in our markets. We plan to further develop our existingmarket area, and to pursue new markets in which to offer the service andmarket-leading products that have made West Suburban a success for ourcustomers and shareholders alike.

 

Once again, we would like to thank everyone for the support that hasmade us, and allowed us to remain, the largest independent bank headquarteredin DuPage County. We welcome your comments, criticisms and suggestions. Wecould not have achieved our success without the support of our shareholders,customers, communities, friends and employees.

 

Finally, we regretfully acknowledge the passing of Director EmeritusHarold Moser. Mr. Moser will be remembered not only for the indispensableguidance he provided to this institution, but also for the significantcontributions he made to his community and to those who had the privilege ofknowing him.

 

Sincerely,

 

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

 

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**Common Stock, Book Value andDividends**

 

West Suburban has a single class of common stock issued andoutstanding. The common stock is not traded on any stock exchange or on theover-the-counter market. West Suburban’s per share book value as of the end ofeach quarter and dividends declared for the last two years are set forth below:

 

| **Year** |   | **Quarter** |   | **Book Value (1)** |   | **Dividends Declared** |   |
|----------|--------|-------------|--------|--------------------|--------|------------------------|--------|
| **2001** |   | 4th         |   | $                  | 335.30 |                   | $      | 17.50 |   |
|     |   | 3rd         |   | 347.77             |   | 7.50                   |   |
|     |   | 2nd         |   | 337.51             |   | 7.50                   |   |
|     |   | 1st         |   | 332.74             |   | 7.50                   |   |
|     |   |        |   |               |   |                   |   |
| 2000     |   | 4th         |   | $                  | 323.17 |                   | $      | 17.50 |   |
|     |   | 3rd         |   | 328.62             |   | 7.50                   |   |
|     |   | 2nd         |   | 321.59             |   | 7.50                   |   |
|     |   | 1st         |   | 317.45             |   | 7.00                   |   |
|     |   |        |   |               |   |                   |   |

 

----

 
| (1)    |  Book value equals shareholders’ equity (including  common stock in ESOP subject to contingent repurchase obligation) divided by |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------|
|   | the number of  outstanding shares.                                                                                                         |

 

The dividend declared during the 4th quarter of 2001 included a special$10.00 per share dividend payable on January 2, 2002 to shareholders of recordas of December 15, 2001. Similarly, the dividend declared during the 4thquarter of 2000 included a special $10.00 per share dividend payable on January2, 2001 to shareholders of record as of December 15, 2000.

 

**BusinessReview**

 

As of December 31, 2001, the Company had total assets of approximately$1.5 billion and operated 31 full service branches, five limited servicebranches as well as five departments providing other convenient servicesthroughout DuPage, Kane, Kendall and Will Counties. The Bank focuses onproviding retail and commercial banking products and services in its markets.The Company had 527 full-time equivalent employees at December 31, 2001.

 

**[WSBLOGO]**

 

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[Letterhead of Crowe,Chizek and Company LLP]

**REPORT OF INDEPENDENT AUDITORS**

 

Board of Directors and Shareholders

West Suburban Bancorp, Inc.

Lombard, Illinois

 

We have audited the consolidated balance sheets of West SuburbanBancorp, Inc. (the “Company”) as of December 31, 2001 and 2000, and the relatedconsolidated statements of income, changes in shareholders’ equity, and cashflows for the years ended December 31, 2001, 2000 and 1999. These financialstatements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based onour audits.

 

We conducted our audits in accordance with auditing standards generallyaccepted in the United States of America. Those standards require that we planand perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on atest basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audits provide areasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to abovepresent fairly, in all material respects, the financial position of WestSuburban Bancorp, Inc. at December 31, 2001 and 2000, and the results of itsoperations and its cash flows for the years ended December 31, 2001, 2000 and1999 in conformity with accounting principles generally accepted in the UnitedStates of America.

 

 
|                |   | /s/ Crowe, Chizek and Company LLP |
|---------------------|--------|-----------------------------------|
|                |   | Crowe, Chizek and Company LLP     |
|                |
| Oak Brook, Illinois |
| February 1, 2002    |

 

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** **

**WEST SUBURBAN BANCORP, INC.**

**CONSOLIDATED BALANCE SHEETS**

**DECEMBER31, 2001 AND 2000**

**(Dollarsin thousands)**

 
|                                                                                              |   | **2001**  |       | **2000**  |   |
|---------------------------------------------------------------------------------------------------|--------|-----------|------------|-----------|--------|
| **Assets**                                                                                        |   |      | ** ** |
| Cash and due  from banks                                                                          |   | $         | 32,870     |      | $      | 55,087 |   |
| Federal funds  sold                                                                               |   | 14,206    |       | 6,180     |   |
| Total cash and  cash equivalents                                                                  |   | 47,076    |       | 61,267    |   |
| Securities                                                                                        |   |      |       |      |   |
| Available for  sale (amortized cost of $147,181 in 2001 and $133,494 in 2000)                     |   | 147,847   |       | 130,237   |   |
| Held to maturity  (fair value of $121,364 in 2001 and $163,389 in 2000)                           |   | 120,968   |       | 163,980   |   |
| Total securities                                                                                  |   | 268,815   |       | 294,217   |   |
| Loans, less  allowance for loan losses of $12,262 in 2001 and $11,399 in 2000                     |   | 1,093,376 |       | 1,016,140 |   |
| Premises and  equipment, net                                                                      |   | 43,877    |       | 39,896    |   |
| Other real  estate                                                                                |   | 1,410     |       | 1,940     |   |
| Accrued interest  and other assets                                                                |   | 19,005    |       | 18,498    |   |
| **Total  assets**                                                                                 |   | $         | 1,473,559  |      | $      | 1,431,958 |   |
|                                                                                              |   |      |       |      |   |
| **Liabilities  and shareholders’ equity**                                                    |   |      |       |      |   |
| Deposits                                                                                          |   |      |       |      |   |
| Demand-noninterest-bearing                                                                        |   | $         | 148,044    |      | $      | 136,494 |   |
| Interest-bearing                                                                                  |   | 1,161,676 |       | 1,133,460 |   |
| Total deposits                                                                                    |   | 1,309,720 |       | 1,269,954 |   |
| Accrued interest  and other liabilities                                                           |   | 18,824    |       | 22,236    |   |
| **Total  liabilities**                                                                            |   | 1,328,544 |       | 1,292,190 |   |
|                                                                                              |   |      |       |      |   |
| Common stock in  ESOP subject to contingent repurchase obligation                                 |   | 40,645    |       | 37,644    |   |
|                                                                                              |   |      |       |      |   |
| Shareholders’  equity                                                                        |   |      |       |      |   |
| Common stock, no  par value; 15,000,000 shares authorized; 432,495 shares issued and  outstanding |   | 3,457     |       | 3,457     |   |
| Surplus                                                                                           |   | 38,066    |       | 38,066    |   |
| Retained  earnings                                                                                |   | 103,091   |       | 100,208   |   |
| Accumulated  other comprehensive income (loss)                                                    |   | 401       |       | (1,963    | )      |
| Amount  reclassified on ESOP shares                                                               |   | (40,645   | )          | (37,644   | )      |
| **Total  shareholders’ equity**                                                              |   | 104,370   |       | 102,124   |   |
| **Total  liabilities and shareholders’ equity**                                              |   | $         | 1,473,559  |      | $      | 1,431,958 |   |

 

*See accompanying notes to consolidated financial statements.*

 

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* *

**WEST SUBURBAN BANCORP, INC.**

**CONSOLIDATEDSTATEMENTS OF INCOME**

**YEARSENDED DECEMBER 31, 2001, 2000 AND 1999**

**(Dollarsin thousands, except per share data)**

 
|                                                           |   | **2001** |   | **2000** |   | **1999** |   |
|----------------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
| **Interest  income**                                           |   |     |   |     |   |     |   |
| Loans, including  fees                                         |   | $        | 83,110 |     | $      | 82,442   |   | $ | 65,646 |   |
| Securities                                                     |   |     |   |     |   |     |   |
| Taxable                                                        |   | 13,560   |   | 18,109   |   | 20,636   |   |
| Exempt from  federal income tax                                |   | 1,353    |   | 1,462    |   | 1,548    |   |
| Federal funds  sold                                            |   | 795      |   | 1,104    |   | 1,833    |   |
| Commercial paper                                               |   | 86       |   | 167      |   | 142      |   |
| Total interest  income                                         |   | 98,904   |   | 103,284  |   | 89,805   |   |
|                                                           |   |     |   |     |   |     |   |
| **Interest  expense**                                          |   |     |   |     |   |     |   |
| Deposits                                                       |   | 40,312   |   | 45,864   |   | 37,112   |   |
| Other                                                          |   | 178      |   | 204      |   | 148      |   |
| Total interest  expense                                        |   | 40,490   |   | 46,068   |   | 37,260   |   |
| **Net  interest income**                                       |   | 58,414   |   | 57,216   |   | 52,545   |   |
| **Provision  for loan losses**                                 |   | 2,950    |   | 1,500    |   | 3,084    |   |
| **Net  interest income after provision for loan losses**       |   | 55,464   |   | 55,716   |   | 49,461   |   |
|                                                           |   |     |   |     |   |     |   |
| **Noninterest  income**                                        |   |     |   |     |   |     |   |
| Service fees on  deposit accounts                              |   | 3,800    |   | 3,513    |   | 3,467    |   |
| Debit card fees                                                |   | 1,312    |   | 1,013    |   | 759      |   |
| Net realized  gains on securities transactions                 |   | 2,334    |   | —   |   | 91       |   |
| Write-down of  carrying value of securities available for sale |   | (2,960   | )      | —   |   | —   |   |
| Net gain on  sales of loans held for sale                      |   | 404      |   | 20       |   | 376      |   |
| Litigation  settlement                                         |   | —   |   | —   |   | 3,555    |   |
| Other                                                          |   | 5,195    |   | 4,165    |   | 4,057    |   |
| Total  noninterest income                                      |   | 10,085   |   | 8,711    |   | 12,305   |   |
|                                                           |   |     |   |     |   |     |   |
| **Noninterest  expense**                                       |   |     |   |     |   |     |   |
| Salaries and  employee benefits                                |   | 19,681   |   | 18,695   |   | 17,329   |   |
| Occupancy                                                      |   | 3,906    |   | 3,640    |   | 3,359    |   |
| Furniture and  equipment                                       |   | 4,488    |   | 4,309    |   | 4,556    |   |
| Advertising and  promotion                                     |   | 1,367    |   | 838      |   | 756      |   |
| Other                                                          |   | 6,349    |   | 6,647    |   | 6,667    |   |
| Total  noninterest expense                                     |   | 35,791   |   | 34,129   |   | 32,667   |   |
|                                                           |   |     |   |     |   |     |   |
| **Income  before income taxes**                                |   | 29,758   |   | 30,298   |   | 29,099   |   |
| **Income  tax expense**                                        |   | 9,575    |   | 9,295    |   | 9,054    |   |
| **Net  income**                                                |   | $        | 20,183 |     | $      | 21,003   |   | $ | 20,045 |   |
|                                                           |   |     |   |     |   |     |   |
| **Earnings  per share (432,495 shares outstanding)**           |   | $        | 46.67  |     | $      | 48.56    |   | $ | 46.35 |   |

 

*See accompanying notes to consolidated financial statements*

 

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* *

**WESTSUBURBAN BANCORP, INC.**

**CONSOLIDATEDSTATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY**

**YEARSENDED DECEMBER 31, 2001, 2000 AND 1999**

**(Dollarsin thousands, except per share data)**

** **
|                                                                                                        |   | **Common Stock and Surplus** |   | **Retained Earnings** |   | **Accumulated Other Compre- hensive  Income (Loss)** |   | **Amount Reclassified on ESOP Shares** |   | **Total Shareholders’ Equity** |   | **Common Stock in ESOP Subject to  Contingent Repurchase Obligation** |   |
|-------------------------------------------------------------------------------------------------------------|--------|------------------------------|--------|-----------------------|--------|------------------------------------------------------|--------|----------------------------------------|--------|-------------------------------------|--------|-----------------------------------------------------------------------|--------|
| Balance, January 1, 1999                                                                                    |   | $                            | 41,523 |                  | $      | 92,461                                               |   | $                                      | 409    |                                | $      | (31,292                                                               | )      | $ | 103,101 |   | $ | 31,292 |   |
|                                                                                                        |   |                         |   |                  |   |                                                 |   |                                   |   |                                |   |                                                                  |   |
| Comprehensive income                                                                                        |   |                         |   |                  |   |                                                 |   |                                   |   |                                |   |                                                                  |   |
| Net income                                                                                                  |   | —                       |   | 20,045                |   | —                                               |   | —                                 |   | 20,045                              |   | —                                                                |   |
| Change in unrealized gain (loss) on  available for sale securities, net of reclassification and tax effects |   | —                       |   | —                |   | (2,587                                               | )      | —                                 |   | (2,587                              | )      | —                                                                |   |
| Total comprehensive income                                                                                  |   | **—**                   |   | **—**            |   | **—**                                           |   | **—**                             |   | 17,458                              |   | **—**                                                            |   |
| Cash dividends declared - $37.50 per share                                                                  |   | —                       |   | (16,218               | )      | —                                               |   | —                                 |   | (16,218                             | )      | —                                                                |   |
| Reclassification due to change in fair value of stock subject to  contingent repurchase obligation          |   | —                       |   | —                |   | —                                               |   | (2,804                                 | )      | (2,804                              | )      | 2,804                                                                 |   |
| Balance, December 31, 1999                                                                                  |   | 41,523                       |   | 96,288                |   | (2,178                                               | )      | (34,096                                | )      | 101,537                             |   | 34,096                                                                |   |
|                                                                                                        |   |                         |   |                  |   |                                                 |   |                                   |   |                                |   |                                                                  |   |
| Comprehensive income                                                                                        |   |                         |   |                  |   |                                                 |   |                                   |   |                                |   |                                                                  |   |
| Net income                                                                                                  |   | —                       |   | 21,003                |   | —                                               |   | —                                 |   | 21,003                              |   | —                                                                |   |
| Change in unrealized gain (loss) on available for sale securities, net  of reclassification and tax effects |   | —                       |   | —                |   | 215                                                  |   | —                                 |   | 215                                 |   | —                                                                |   |
| Total comprehensive income                                                                                  |   | —                       |   | —                |   | —                                               |   | —                                 |   | 21,218                              |   | —                                                                |   |
| Cash dividends declared - $39.50 per share                                                                  |   | —                       |   | (17,083               | )      | —                                               |   | —                                 |   | (17,083                             | )      | —                                                                |   |
| Reclassification due to change in fair value of stock subject to  contingent repurchase obligation          |   | —                       |   | —                |   | —                                               |   | (3,548                                 | )      | (3,548                              | )      | 3,548                                                                 |   |
| Balance, December 31, 2000                                                                                  |   | 41,523                       |   | 100,208               |   | (1,963                                               | )      | (37,644                                | )      | 102,124                             |   | 37,644                                                                |   |
|                                                                                                        |   |                         |   |                  |   |                                                 |   |                                   |   |                                |   |                                                                  |   |
| Comprehensive income                                                                                        |   |                         |   |                  |   |                                                 |   |                                   |   |                                |   |                                                                  |   |
| Net income                                                                                                  |   | —                       |   | 20,183                |   | —                                               |   | —                                 |   | 20,183                              |   | —                                                                |   |
| Change in unrealized gain (loss) on available for sale securities, net  of reclassification and tax effects |   | —                       |   | —                |   | 2,364                                                |   | —                                 |   | 2,364                               |   | —                                                                |   |
| Total comprehensive income                                                                                  |   | —                       |   | —                |   | —                                               |   | —                                 |   | 22,547                              |   | —                                                                |   |
| Cash dividends declared - $40.00 per share                                                                  |   | —                       |   | (17,300               | )      | —                                               |   | —                                 |   | (17,300                             | )      | —                                                                |   |
| Reclassification due to change in fair value of stock subject to  contingent repurchase obligation          |   | —                       |   | —                |   | —                                               |   | (3,001                                 | )      | (3,001                              | )      | 3,001                                                                 |   |
| **Balance, December 31, 2001**                                                                              |   | $                            | 41,523 |                  | $      | 103,091                                              |   | $                                      | 401    |                                | $      | (40,645                                                               | )      | $ | 104,370 |   | $ | 40,645 |   |
|                                                                                                             |        |                              |        |                       |        |                                                      |        |                                        |        |                                     |        |                                                                       |        |  |  |  |  |  |  |  |

 

*See accompanying notes to consolidated financial statements.*

 

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* *

**WEST SUBURBAN BANCORP, INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999**

**(Dollarsin thousands)**

 
|                                                                              |   | **2001** |   | **2000** |   | **1999** |   |
|-----------------------------------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
| **Cash  flows from operating activities**                                         |   |     |   |     |   |     |   |
| Net income                                                                        |   | $        | 20,183 |     | $      | 21,003   |   | $ | 20,045 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities |   |     |   |     |   |     |   |
| Depreciation                                                                      |   | 3,759    |   | 3,856    |   | 3,874    |   |
| Provision for  loan losses                                                        |   | 2,950    |   | 1,500    |   | 3,084    |   |
| Deferred income  tax benefit                                                      |   | (458     | )      | (406     | )      | (519     | )      |
| Net premium  amortization and discount accretion of securities                    |   | 495      |   | 12       |   | 670      |   |
| Net realized  gains on securities transactions                                    |   | (2,334   | )      | —   |   | (91      | )      |
| Write-down of  carrying value of securities available for sale                    |   | 2,960    |   | —   |   | —   |   |
| Federal Home  Loan Bank stock dividends                                           |   | (293     | )      | (218     | )      | —   |   |
| Net gain on  sales of loans held for sale                                         |   | (404     | )      | (20      | )      | (376     | )      |
| Sales of loans  held for sale                                                     |   | 38,517   |   | 358      |   | 30,003   |   |
| Origination of  loans held for sale                                               |   | (43,793  | )      | (160     | )      | (25,500  | )      |
| Net (gain) loss  on sales of premises and equipment                               |   | (7       | )      | (29      | )      | 33       |   |
| Net gain on  sales of other real estate                                           |   | (11      | )      | (59      | )      | (59      | )      |
| (Increase)  decrease in accrued interest and other assets                         |   | (660     | )      | 15       |   | 1,266    |   |
| (Decrease)  increase in accrued interest and other liabilities                    |   | (3,412   | )      | 3,845    |   | (650     | )      |
| **Net  cash provided by operating activities**                                    |   | 17,492   |   | 29,697   |   | 31,780   |   |
| **Cash  flows from investing activities**                                         |   |     |   |     |   |     |   |
| Securities  available for sale                                                    |   |     |   |     |   |     |   |
| Sales                                                                             |   | 24,635   |   | —   |   | 21,614   |   |
| Maturities and  calls                                                             |   | 89,033   |   | 52,600   |   | 91,797   |   |
| Purchases                                                                         |   | (128,394 | )      | (19,178  | )      | (76,489  | )      |
| Securities held  to maturity                                                      |   |     |   |     |   |     |   |
| Maturities and  calls                                                             |   | 199,093  |   | 11,729   |   | 69,713   |   |
| Purchases                                                                         |   | (155,870 | )      | (976     | )      | (72,031  | )      |
| Net increase in  loans                                                            |   | (74,833  | )      | (172,213 | )      | (83,547  | )      |
| Purchases of  premises and equipment                                              |   | (7,740   | )      | (8,046   | )      | (6,329   | )      |
| Sales of  premises and equipment                                                  |   | 7        |   | 32       |   | 106      |   |
| Sales of other  real estate                                                       |   | 868      |   | 1,708    |   | 1,304    |   |
| Investment in  company-owned life insurance policies                              |   | (948     | )      | —   |   | —   |   |
| **Net  cash used in investing activities**                                        |   | (54,149  | )      | (134,344 | )      | (53,862  | )      |
| **Cash  flows from financing activities**                                         |   |     |   |     |   |     |   |
| Net increase in  deposits                                                         |   | 39,766   |   | 15,699   |   | 98,303   |   |
| Dividends paid                                                                    |   | (17,300  | )      | (16,867  | )      | (16,002  | )      |
| **Net  cash provided by (used in) financing activities**                          |   | 22,466   |   | (1,168   | )      | 82,301   |   |
| **Net  (decrease) increase in cash and cash equivalents**                         |   | (14,191  | )      | (105,815 | )      | 60,219   |   |
| **Beginning  cash and cash equivalents**                                          |   | 61,267   |   | 167,082  |   | 106,863  |   |
| **Ending  cash and cash equivalents**                                             |   | $        | 47,076 |     | $      | 61,267   |   | $ | 167,082 |   |
|                                                                              |   |     |   |     |   |     |   |   |   |   |
| **Supplemental  disclosures**                                                     |   |     |   |     |   |     |   |   |   |   |
| Cash paid for                                                                     |   |     |   |     |   |     |   |   |   |   |
| Interest                                                                          |   | $        | 43,533 |     | $      | 42,036   |   | $ | 37,085 |   |
| Income taxes                                                                      |   |     | 11,978 |     |   | 10,043   |   |   | 10,522 |   |
| Other real  estate acquired through loan foreclosures                             |   |     | 327    |     |   | 101      |   |   | 2,991 |   |
|                                                                                   |        |          |        |          |        |          |        |  |  |  |  |  |  |  |

 

*See accompanying notes to consolidated financial statements*.

 

----

 

**WESTSUBURBAN BANCORP, INC.**

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS**

(Dollars in thousands)

 

**Note 1 - Nature of Business andSummary of Significant Accounting Policies**

 

West Suburban Bancorp, Inc. (“West Suburban”) through the branchnetwork of its subsidiary, West Suburban Bank (the “Bank” and, together withWest Suburban, the “Company”), provides financial and other banking services tocustomers located primarily in the western suburbs of Chicago. Customers inthese areas are the primary consumers of the Company’s loan and depositproducts and services. The Company’s loans are generally secured by variousforms of collateral including real estate, business assets, consumer propertyand other items, although borrower cash flow is expected to be the primarysource of repayment.

 

While the Company’s principal decision makers monitor the revenuestreams of the various products and services offered by the Company, operationsare managed and financial performance is evaluated on a Company-wide basis.Accordingly, all of the Company’s banking operations are considered bymanagement to be aggregated in one reportable operating segment.

 

***Principles of Consolidation***

The consolidated financial statements include the accounts of WestSuburban and the Bank. Significant intercompany accounts and transactions havebeen eliminated.

 

***Use of Estimates***

To prepare financial statements in conformity with accountingprinciples generally accepted in the United States of America, management makesestimates and assumptions, which are subject to change, based on availableinformation. These estimates and assumptions affect the amounts reported in thefinancial statements and the disclosures provided, and future results coulddiffer. The allowance for loan losses, fair values of financial instruments andstatus of contingencies are particularly subject to change.

 

***Securities***

Debt and marketable equity securities are classified into twocategories, “held to maturity” and “available for sale.” Held to maturitysecurities are carried at amortized cost as the Company has both the abilityand positive intent to hold them to maturity. Securities not meeting thesecriteria are classified as available for sale. Available for sale securitiesare carried at fair value with net unrealized gains and losses (net of deferredtax) reported in accumulated other comprehensive income as a separate componentof shareholders’ equity. Interest income includes amortization of purchasepremium and accretion of purchase discount. Gains or losses on disposition arebased on the net proceeds and the adjusted carrying amount of the specificsecurities sold. Any decline in the carrying values of securities which isdeemed to be other than temporary is charged against current earnings. TheCompany does not engage in trading activities.

 

***Loans and Allowance for Loan Losses***

Loans that management has the intent and ability to hold for theforeseeable future or until maturity or payoff are reported at the principalbalance outstanding, net of unearned interest, deferred loan fees and costs,and an allowance for loan losses. Interest income is reported on the accrualmethod and includes amortization of net deferred loan fees and costs over theloan term. Accrual of interest is generally discontinued on a loan 90 days pastdue or when management believes, after considering economic and businessconditions and collection efforts, that the borrower’s financial condition issuch that collection of principal or interest is doubtful. In some circumstances,a loan more than 90 days past due can continue to accrue interest if it isfully secured and in the process of collection. When a loan is classified asnonaccrual, interest earned but not collected is charged back to interestincome. When payments are received on nonaccrual loans they are first appliedto principal, then to interest income and finally to expenses incurred forcollection.

 

----

 

The allowance for loan losses is a valuation allowance for probableloan losses. The allowance is increased by a provision for loan losses chargedto earnings. Loan losses are charged against the allowance when managementbelieves the uncollectibility of a loan is confirmed. Subsequent recoveries, ifany, are credited to the allowance. The allowance for loan losses is evaluatedquarterly based on management’s periodic review of loan collectibility in lightof historical loan loss experience, the nature and volume of the loanportfolio, information about specific borrower situations and estimatedcollateral values, and prevailing economic conditions. Allocations of theallowance may be made for specific loans, but the entire allowance is availablefor any loan that, in management’s judgment, should be charged-off. Thisevaluation is inherently subjective as it requires estimates that aresusceptible to significant revision as more information becomes available or asrelevant circumstances change.

 

The Company reviews commercial, real estate construction and commercialmortgage loans quarterly to determine impairment, if any. Impairment ismeasured based on the present value of expected future cash flows discounted atthe loan’s effective interest rate, the loan’s observable market price, or thefair value of the loan’s collateral, if repayment of the loan is collateral dependent.A valuation allowance is maintained for the amount of impairment. Generally,loans 90 days or more past due and all loans on nonaccrual status areconsidered for impairment. Impairment is considered on an entire category basisfor smaller-balance loans of similar nature, such as residential real estateand consumer loans, and on an individual basis for other loans.

 

***Loans Held for Sale***

Loans are identified as either held for investment or held for saleupon origination. Loans held for sale are recorded at the lower of amortizedcost or market value, determined on an aggregate basis. Unrealized losses, ifany, are recognized on a current basis by charges to earnings. At December 31,2001 and 2000, the cost and market value of loans held for sale wereapproximately the same.

 

***Premises and Equipment***

Land is carried at cost. Premises and equipment are stated at cost lessaccumulated depreciation. Depreciation is generally computed on thestraight-line method over the estimated useful lives of the assets.

 

***Other Real Estate***

Other real estate includes properties acquired in partial or totalsettlement of problem loans. The properties are recorded at the lower of costor fair value less estimated selling costs at the date acquired. Lossesrecognized at the time of acquisition of such properties are charged to theallowance for loan losses. Any subsequent decline in value is charged tocurrent operations. The revenue received from and expenses incurred inmaintaining such properties are also included in current operations.

 

***Intangibles***

The Company accounted for the acquisition of a financially troubledsavings association in 1990 using the purchase method of accounting. Therelated intangibles are being amortized over 15 years on the straight-linemethod and are included with accrued interest and other assets on theconsolidated balance sheets. The acquisition resulted in the creation of $3,055of goodwill. The unamortized goodwill was $712 and $916 as of December 31, 2001and 2000, respectively. (See Note 14 - New Accounting Pronouncements).

 

***Long-term Assets***

Premises and equipment and other long-term assets are reviewed forimpairment when events indicate their carrying amount may not be recoverablefrom future undiscounted cash flows. If impaired, the assets are recorded atdiscounted amounts.

 

***Income Taxes***

Income tax expense is the sum of the current year income tax due orrefundable and the change in deferred tax assets and liabilities. Deferred taxassets and liabilities are the expected future tax consequences of temporarydifferences between the carrying amounts and the tax basis of assets andliabilities, computed using enacted tax rates. A valuation allowance, ifneeded, reduces deferred tax assets to the amount expected to be realized.

 

----

 

***Employee Stock Ownership Plan (“ESOP”)***

The Bank maintains an ESOP, which is a noncontributory tax qualifiedretirement plan covering substantially all full-time employees. The Bank makescontributions to the ESOP for the benefit of the participants. The ESOP is notleveraged and dividends declared on common shares owned by the ESOP are chargedagainst retained earnings. Dividends paid on ESOP shares are passed through toparticipants. Allocated ESOP shares are voted by the respective participants.For earnings per share purposes, common shares held by the ESOP are classifiedas issued and outstanding. Because participants may require the Company topurchase their ESOP shares upon termination of their employment, the appraisedfair value of all ESOP shares is reclassified from shareholders’ equity.

 

***Earnings Per Share***

Earnings per share is calculated on the basis of the daily weightedaverage number of shares outstanding. The Company has no securities that mayhave a dilutive effect on its outstanding common stock.

 

***Cash Flows***

For purposes of reporting cash flows, cash and cash equivalents includecash and due from banks, federal funds sold and commercial paper. Generally,federal funds are sold for one-day periods. Maturities of commercial papergenerally are less than 60 days.

 

***Comprehensive Income***

Comprehensive income includes net income and other comprehensiveincome. The Company’s other comprehensive income consists of the change inunrealized gains and losses on available for sale securities, net ofreclassification adjustments and deferred tax effects.

*** ***

***Reclassifications***

Certain reclassifications have been made in prior years’ financialstatements to conform with the current year’s presentation.

 

**Note 2 - Securities**

 

The amortized cost and fair value of securities available for sale areas follows at December 31:

 
|                                         |   | **2001**             |          |
|----------------------------------------------|--------|----------------------|---------------|
|                                         |   | **Amortized   Cost** |          | **Gross   Unrealized   Gains** |   | **Gross   Unrealized   Losses** |   | **Fair  Value** |   |
| Corporate                                    |   | $                    | 124,811       |   | $ | 1,842 |   | $ | (925 | ) | $ | 125,728 |   |
| U.S. government  agencies and corporations   |   | 9,280                |          | 229 |   | — |   | 9,509 |   |
| States and  political subdivisions           |   | 405                  |          | 6 |   | — |   | 411 |   |
| Total debt  securities                       |   | 134,496              |          | 2,077 |   | (925 | ) | 135,648 |   |
| Preferred stock  and other equity securities |   | 12,685               |          | — |   | (486 | ) | 12,199 |   |
| Total                                        |   | $                    |  147,181 |   | $ |  2,077 |   | $ |  (1,411 | ) | $ |  147,847 |   |

 

----

** **
|                                         |   | **2000**             |    |
|----------------------------------------------|--------|----------------------|---------|
|                                         |   | **Amortized   Cost** |    | **Gross   Unrealized   Gains** |   | **Gross   Unrealized   Losses** |   | **Fair   Value** |   |
| Corporate                                    |   | $                    | 97,390  |   | $ | 199 |   | $ | (2,200 | ) | $ | 95,389 |   |
| U.S. government agencies and corporations    |   | 26,806               |    | 4 |   | (415 | ) | 26,395 |   |
| States and political subdivisions            |   | 908                  |    | 5 |   | — |   | 913 |   |
| Total debt  securities                       |   | 125,104              |    | 208 |   | (2,615 | ) | 122,697 |   |
| Preferred stock  and other equity securities |   | 8,390                |    | — |   | (850 | ) | 7,540 |   |
| Total                                        |   | $                    | 133,494 |   | $ | 208 |   | $ | (3,465 | ) | $ | 130,237 |   |

 

The amortized cost and fair value of securities held to maturity are asfollows at December 31:

 
|                                       |   | **2001**             |
|--------------------------------------------|--------|----------------------|
|                                       |   | **Amortized   Cost** |   | **Gross   Unrealized  Gains** |   | **Gross   Unrealized   Losses** |   | **Fair   Value** |   |
| U.S. government  agencies and corporations |   | $                    | 93,524 |   | $ | 755 |   | $ | (565 | ) | $ | 93,714 |   |
| States and  political subdivisions         |   | 27,444               |   | 306 |   | (100 | ) | 27,650 |   |
| Total                                      |   | $                    | 120,968 |   | $ | 1,061 |   | $ | (665 | ) | $ | 121,364 |   |
|                                       |   |                 |   |   |   |   |   |   |   |

 
|                                       |   | **2000**           |    |
|--------------------------------------------|--------|--------------------|---------|
|                                       |   | **Amortized Cost** |    | **Gross Unrealized Gains** |   | **Gross Unrealized Losses** |   | **Fair Value** |   |
| U.S. government  agencies and corporations |   | $                  | 135,490 |   | $ | — |   | $ | (1,033 | ) | $ | 134,457 |   |
| States and  political subdivisions         |   | 28,490             |    | 449 |   | (7 | ) | 28,932 |   |
| Total                                      |   | $                  | 163,980 |   | $ | 449 |   | $ | (1,040 | ) | $ | 163,389 |   |

 

The amortized cost and fair value of debt securities available for saleand held to maturity at December 31, 2001 by contractual maturity are asfollows:

 
|                                |   | **Available  for Sale** |    | **Held to  Maturity** |   |
|-------------------------------------|--------|-------------------------|---------|-----------------------|--------|
|                                |   | **Amortized   Cost**    |    | **Fair   Value**      |   | **Amortized   Cost** |   | **Fair   Value** |   |
| Due in 1 year or  less              |   | $                       | 29,424  |                  | $      | 29,254 |   | $ | 9,182 |   | $ | 9,291 |   |
| Due after 1 year  through 5 years   |   | 98,779                  |    | 99,977                |   | 88,999 |   | 89,537 |   |
| Due after 5  years through 10 years |   | 6,233                   |    | 6,357                 |   | 16,110 |   | 16,242 |   |
| Due after 10  years                 |   | 60                      |    | 60                    |   | 6,677 |   | 6,294 |   |
| Total                               |   | $                       | 134,496 |                  | $      | 135,648 |   | $ | 120,968 |   | $ | 121,364 |   |

 

Expected maturities will differ from contractual maturities becauseissuers may have the right to call or prepay obligations with or without callor prepayment penalties. Approximately $74,600 of securities are callable in2002. Most of these callable securities were issued by U.S. government agenciesand corporations.

 

----

 

Sales of securities available for sale were as follows:

 

|                  |   | **2001** |   | **2000** |   | **1999** |   |
|-----------------------|--------|----------|--------|----------|--------|----------|--------|
| Proceeds from sales   |   | $        | 24,635 |     | $      | —   |   | $ | 21,614 |   |
| Gross realized gains  |   | 1,757    |   | —   |   | 97       |   |
| Gross realized losses |   | (133     | )      | —   |   | (6       | )      |
|                       |        |          |        |          |        |          |        |  |  |  |

 

Securities with a carrying value of approximately $30,139 and $24,160at December 31, 2001 and 2000, respectively, were pledged to secure publicdeposits, fiduciary activities and for other purposes required or permitted bylaw.

 

During 2001, the Company wrote down itsinvestments in debt securities issued by Comdisco, Inc., FINOVA Group, Inc. andEnron Corp. after it made a determination that the value of the debt securitieshad become impaired. These impairment losses totaled $2,960 in 2001. Thecarrying value of the Comdisco, Inc., FINOVA Group, Inc. and Enron Corp.securities totaled $4,788 at December 31, 2001.

 

The Company made anominal equity investment in an ATM network years ago. In 2001, the Companysurrendered its stock in the ATM network in connection with the merger of thenetwork with another organization and received $1,426 and recorded a gain forthe same amount.

 

Gains onsecurities in 2001 also include $710 of recoveries on securities written off in1998.

 

**Note 3 -Loans**

 

Major classifications of loans were as follows at December 31:

 

|                       |   | **2001**  |      | **2000**  |   |
|----------------------------|--------|-----------|-----------|-----------|--------|
| Commercial                 |   | $         | 323,036   |      | $      | 276,519 |   |
| Consumer                   |   | 10,514    |      | 9,101     |   |
| Indirect  automobile       |   | 102,183   |      | 100,847   |   |
| Real estate                |   |      |      |      |   |
| Residential                |   | 152,495   |      | 180,089   |   |
| Commercial                 |   | 195,800   |      | 183,899   |   |
| Home equity                |   | 145,972   |      | 133,609   |   |
| Construction               |   | 157,328   |      | 129,316   |   |
| Held for sale              |   | 5,840     |      | 160       |   |
| VISA - credit  card        |   | 10,437    |      | 12,037    |   |
| Other                      |   | 2,033     |      | 1,962     |   |
| Total                      |   | 1,105,638 |      | 1,027,539 |   |
| Allowance for  loan losses |   | (12,262   | )         | (11,399   | )      |
| Loans, net                 |   | $         | 1,093,376 |      | $      | 1,016,140 |   |

 

The Company makes commercial, personal and residential loans primarilyto customers throughout the western suburbs of Chicago. Construction loans aregenerally made to customers engaged in the development and construction ofresidential real estate projects within the Company’s market area.

 

----

 

Changes in the allowance for loan losses were as follows for the yearsended December 31:

 

|                       |   | **2001** |   | **2000** |   | **1999** |   |
|----------------------------|--------|----------|--------|----------|--------|----------|--------|
| Balance, beginning of year |   | $        | 11,399 |     | $      | 10,759   |   | $ | 9,998 |   |
| Provision for loan losses  |   | 2,950    |   | 1,500    |   | 3,084    |   |
| Loans charged-off          |   | (2,305   | )      | (1,502   | )      | (2,586   | )      |
| Recoveries                 |   | 218      |   | 642      |   | 263      |   |
| Balance, end of  year      |   | $        | 12,262 |     | $      | 11,399   |   | $ | 10,759 |   |

 

Impaired loans at December 31 were summarized as follows:

 

|                                                                             |   | **2001** |   | **2000** |   | **1999** |   |
|----------------------------------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
| Year-end loans with no allocated allowance for loan losses                       |   | $        | 10,407 |     | $      | 961      |   | $ | 3,269 |   |
| Year-end loans with allocated allowance for loan losses                          |   | 5,568    |   | 114      |   | 484      |   |
| Total                                                                            |   | $        | 15,975 |     | $      | 1,075    |   | $ | 3,753 |   |
|                                                                             |   |     |   |     |   |     |   |
| Amount of the  allowance for loan losses allocated to impaired loans at year-end |   | $        | 2,288  |     | $      | 87       |   | $ | 338 |   |
| Average impaired  loans during the year                                          |   | 4,754    |   | 2,749    |   | 7,244    |   |
| Interest income  recognized during impairment                                    |   | 154      |   | 41       |   | 49       |   |

 

Nonperforming loans were as follows at December 31:

 

| Loans past due over 90 days still on accrual |   | $     | 11,338 |   | $      | 491   |   | $ | 1,184 |   |
|----------------------------------------------|--------|-------|--------|--------|--------|-------|--------|---|-------|--------|
| Nonaccrual loans                             |   | 3,945 |   | 1,064  |   | 3,544 |   |
| Total                                        |   | $     | 15,283 |   | $      | 1,555 |   | $ | 4,728 |   |

 

Mortgage loans serviced for others are not included in the accompanyingconsolidated balance sheets. At December 31, 2001 and 2000, the Company wasservicing loans for the benefit of others with aggregate unpaid principalbalances of $44,751 and $65,223, respectively. Accordingly, retained andacquired mortgage servicing rights are not material and are not presented as aseparate asset. The Company generally sells mortgage loans with servicingreleased. Loan servicing fees were $169, $218 and $271 in 2001, 2000 and 1999,respectively.

 

**Note 4 - Premises and Equipment**

 

Major classifications of these assets are summarized as follows atDecember 31:

 
|                           |   | **2001** |   | **2000** |   |
|--------------------------------|--------|----------|--------|----------|--------|
| Land                           |   | $        | 11,396 |     | $      | 8,713 |   |
| Premises                       |   | 38,650   |   | 35,780   |   |
| Furniture and  equipment       |   | 37,371   |   | 35,288   |   |
| Total                          |   | 87,417   |   | 79,781   |   |
| Less accumulated  depreciation |   | (43,540  | )      | (39,885  | )      |
| Premises and  equipment, net   |   | $        | 43,877 |     | $      | 39,896 |   |

 

----

 

**Note 5 - Deposits**

 

The major categories of deposits are summarized as follows at December31:

 
|                                                                              |                       |   | **2001** |      | **2000** |   |
|-----------------------------------------------------------------------------------|----------------------------|--------|----------|-----------|----------|--------|
|                                                                              | Demand-noninterest-bearing |   | $        | 148,044   |     | $      | 136,494 |   |
|                                                                              | NOW                        |   | 251,580  |      | 236,889  |   |
|                                                                              | Money market  checking     |   | 228,131  |      | 151,151  |   |
|                                                                              | Savings                    |   | 309,744  |      | 277,565  |   |
|                                                                              | Time deposits              |   |     |      |     |   |
|                                                                              | Less than  $100,000        |   | 288,083  |      | 351,166  |   |
|                                                                              | $100,000  and over         |   | 84,138   |      | 116,689  |   |
|                                                                              | Total                      |   | $        | 1,309,720 |     | $      | 1,269,954 |   |
|                                                                              |                       |   |     |      |     |   |
| At December 31,  2001, the scheduled maturities of time deposits were as follows: |                       |   |     |      |     |
|                                                                              |                       |   |     |      |     |   |
|                                                                              | 2002                       |   | $        | 317,300   |     |   |   |
|                                                                              | 2003                       |   | 32,244   |      |     |   |
|                                                                              | 2004                       |   | 6,914    |      |     |   |
|                                                                              | 2005                       |   | 11,626   |      |     |   |
|                                                                              | 2006 and  thereafter       |   | 4,137    |      |     |   |
|                                                                              | Total                      |   | $        | 372,221   |     |   |   |

 

**Note 6 - Income Taxes**

 

Income tax expense is as follows for the years ended December 31:

 

|                  |   | **2001** |   | **2000** |   | **1999** |   |
|-----------------------|--------|----------|--------|----------|--------|----------|--------|
| Currently payable tax |   |     |   |     |   |     |   |
| Federal               |   | $        | 8,384  |     | $      | 8,322    |   | $ | 8,232 |   |
| State                 |   | 1,649    |   | 1,379    |   | 1,341    |   |
| Deferred tax  benefit |   | (458     | )      | (406     | )      | (519     | )      |
| Total                 |   | $        | 9,575  |     | $      | 9,295    |   | $ | 9,054 |   |

 

A reconciliation between taxes computed at the statutory federal incometax rate and the consolidated effective tax rates follows:

 

|                                            |   | **2001** |   | **2000** |   | **1999** |   |
|-------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
| Statutory federal income tax rate               |   | 35.0     | %      | 35.0     | %      | 35.0     | %      |
| (Decrease) increase in taxes resulting from     |   |     |   |     |   |     |   |
| Tax-exempt  income                              |   | (1.5     | )      | (1.8     | )      | (2.1     | )      |
| State income  taxes, net of federal tax benefit |   | 3.4      |   | 2.8      |   | 2.8      |   |
| Dividends on ESOP shares                        |   | (3.5     | )      | (3.3     | )      | (3.0     | )      |
| Other items, net                                |   | (1.2     | )      | (2.0     | )      | (1.6     | )      |
| Effective tax  rates                            |   | 32.2     | %      | 30.7     | %      | 31.1     | %      |

 

----

 

The temporary differences which created deferred tax assets andliabilities at December 31 are summarized below:

 

|                                              |   | **2001** |   | **2000** |   |
|---------------------------------------------------|--------|----------|--------|----------|--------|
| Deferred tax assets                               |   |     |   |     |   |
| Allowance for  loan losses                        |   | $        | 4,864  |     | $      | 4,439 |   |
| Deferred  compensation                            |   | 1,399    |   | 1,276    |   |
| Unrealized loss  on securities available for sale |   | —   |   | 1,294    |   |
| Total deferred  tax assets                        |   | 6,263    |   | 7,009    |   |
| Deferred tax  liabilities                         |   |     |   |     |   |
| Depreciation                                      |   | 522      |   | 486      |   |
| Federal Home  Loan Bank stock dividends           |   | 228      |   | 120      |   |
| Unrealized gain  on securities available for sale |   | 265      |   | —   |   |
| Other                                             |   | 73       |   | 127      |   |
| Total deferred  tax liabilities                   |   | 1,088    |   | 733      |   |
| Net deferred tax  assets                          |   | $        | 5,175  |     | $      | 6,276 |   |

 

Net deferred tax assets are included in accrued interest and otherassets. No valuation allowance was considered necessary for deferred taxassets.

 

**Note 7 - Employee Benefit Plans**

 

The Bank maintains an ESOP, which is a noncontributory tax qualifiedretirement plan that covers employees who have satisfied specific servicerequirements. The ESOP provides incentives to employees by grantingparticipants an interest in the Company’s common stock, which represents theESOP’s primary investment. An individual account is established for eachparticipant and the benefits payable upon retirement, termination, disabilityor death are based upon service, the amount of the employer’s contributions andany income, expenses, gains and losses and forfeitures allocated to theparticipant’s account. Contributions are determined by the board of directorsof the Bank, are paid by the Bank, and were $1,697 in 2001, $1,604 in 2000 and$1,479 in 1999.

 

At December 31, 2001 and 2000, the ESOP held 75,972 and 75,289 shares ofCompany common stock, respectively, and substantially all shares held by theESOP were allocated to the accounts maintained for participants. Participantswho elect to receive their benefit payments in the form of Company common stockmay require the Company to purchase the common stock distributed at fair valueduring two 60-day periods. The first purchase period begins on the distributiondate and the second purchase period begins on the first anniversary of thedistribution date. This contingent repurchase obligation is reflected in theCompany’s financial statements as “Common stock in ESOP subject to contingentrepurchase obligation” and reduces shareholders’ equity by an amount thatrepresents the independently appraised fair value of all the Company commonstock held by the ESOP, without regard to whether it is likely that the shareswould be distributed or that the recipients of the shares would be likely toexercise their right to require the Company to purchase the shares. At December31, 2001 and 2000, this contingent repurchase obligation reduced shareholders’equity by $40,645 and $37,644, respectively. During 2001 and 2000, the ESOPdistributed $316 and $487 in cash representing the interests of formeremployees in 719 and 988 shares of Company common stock, respectively. TheCompany believes that the ESOP will continue to have a sufficient amount ofcash to distribute benefit payments to former employees and that the exerciseof the right of former employees to cause the Company to purchase Companycommon stock is unlikely.

 

The Company has deferred compensation agreements with certain formerand current executive officers. The deferred compensation expense for the yearsended December 31, 2001, 2000 and 1999 amounted to $152, $143 and $140, respectively.The cash surrender value of company-owned life insurance on these individualswas $2,131 and $1,170 at December 31, 2001 and 2000, respectively. Cashsurrender value is included in accrued interest and other assets on theconsolidated balance sheets. Executive officers can elect to defer the paymentof a percentage of their salaries and cash bonuses. The total accumulatedliability for all deferred compensation arrangements was $3,125 and $2,794 atDecember 31, 2001 and 2000, respectively. These amounts are included in accruedinterest and other liabilities on the consolidated balance sheets and are notsecured by any Company assets.

 

----

 

**Note 8 - Financial Instruments withOff-Balance-Sheet Risk**

 

The Company is a party to off-balance-sheet financial instruments tomeet the financing needs of its customers. These financial instruments includecommitments to extend credit and standby letters of credit. These financialinstruments involve, to varying degrees, elements of credit and interest rate risks.

 

The Company’s exposure to credit risk in the event of nonperformance bythe other party to the financial instrument for commitments to extend creditand standby letters of credit is the contractual amount of those instruments.The Company uses the same credit policies in making commitments and conditionalobligations as it does for on-balance-sheet instruments. The Company generallyrequires collateral or other security to support financial instruments withcredit risk. A summary of the contractual exposure to off-balance-sheet risk asof December 31 is as follows:

 

|                                                                   |   | **2001** |    | **2000** |   |
|------------------------------------------------------------------------|--------|----------|---------|----------|--------|
| Financial instruments whose contractual amounts represent credit risks |   |     |    |     |   |
| Commitments to  extend credit                                          |   | $        | 435,893 |     | $      | 464,384 |   |
| Letters of  credit                                                     |   | 20,736   |    | 21,563   |   |
| Total                                                                  |   | $        | 456,629 |     | $      | 485,947 |   |

 

Commitments to extend credit are agreements to lend to a customer aslong as there is no violation of any condition established in the agreement.These commitments are primarily unused lines of credit, undrawn portions ofconstruction loans and commitments to make new loans. Commitments generallyhave fixed expiration dates or other termination provisions and may require thepayment of a fee. Since many of the commitments are expected to expire withoutbeing exercised, the total commitment amounts do not necessarily representfuture cash requirements. The Company evaluates each customer’screditworthiness on a case-by-case basis. The amount of collateral obtained, ifdeemed necessary by the Company, is based on management’s credit evaluation ofthe customer. Collateral held varies and may include accounts receivable,inventory, property and equipment or commercial or residential properties.

 

Letters of credit are conditional commitments issued by the Company toeither extend credit to a customer or guarantee the performance of a customerfor the benefit of a third party. Guarantees of performance are primarilyissued to support public and private borrowing arrangements. The credit riskinvolved in issuing letters of credit is essentially the same as that involvedin extending loan facilities to customers. The Company holds collateralsupporting those commitments for which collateral is deemed necessary. Theextent and nature of collateral held for letters of credit varies.

 

**Note 9 - Commitments and ContingentLiabilities**

 

The Company is a party to various legal actions arising from normalbusiness activities. Management believes that pending actions are eitherwithout merit or that the ultimate liability, if any, resulting from them willnot materially affect the Company’s consolidated financial position or resultsof operations.

 

In accordance with the regulations of the Board of Governors of theFederal Reserve System, the Bank must maintain noninterest-earning reserves asvault cash or deposits with the Federal Reserve Bank of Chicago. At December31, 2001, the required reserves were approximately $14,537.

 

**Note 10 - Fair Value of FinancialInstruments**

 

The methods and assumptions used to estimate fair values of financialinstruments are described as follows. For short-term assets (i.e., cash and duefrom banks and federal funds sold) their estimated fair values approximatetheir carrying values. For loans and deposits with variable interest rates, ithas been assumed that their estimated fair values approximate their carryingvalues. Because of their short-terms, the carrying value amount of accruedinterest receivable and payable approximate their fair value.

 

----

 

The fair values for securities were derived from quoted market values,or, when quotes were not available, the fair value was estimated based on therate and term of the security and information about the issuer. The fair valuesfor fixed rate loans were estimated by discounting the future cash flows fromloan repayments using current interest rates for loans having comparablematurities and credit risk. The fair values for time deposits were estimated bydiscounting cash flows at discount rates comparable to current market rates forsimilar maturing liabilities.

 

Off-balance-sheet financial instruments are comprised of letters ofcredit and commitments to extend credit. The estimated fair value ofoff-balance-sheet financial instruments is not considered material.

 

While these estimates of fair value are based on management’s judgmentof the most appropriate factors as of the balance sheet date, there is noassurance that the estimated fair values would have been realized if the assetswould have been disposed of or the liabilities settled at that date, sincemarket values may differ depending on various circumstances. The estimated fairvalues would also not apply to subsequent dates.

 

The estimated fair values of the Company’s financial instruments as ofDecember 31 are set forth in the table below:

 

|                                   |   | **2001**             |   | **2000**                   |       |
|----------------------------------------|--------|----------------------|--------|----------------------------|------------|
|                                   |   | **Carrying   Value** |   | **Estimated   Fair Value** | ** ** | **Carrying  Value** | ** ** | **Estimated  Fair Value** |   |
| Financial assets                       |   |                 |   |                       |       |   |   |   |   |
| Cash and cash  equivalents             |   | $                    | 47,076 |                       | $          | 47,076 |   | $ | 61,267 |   | $ | 61,267 |   |
| Securities                             |   |                 |   |                       |       |   |   |   |   |
| Available for  sale                    |   | 147,847              |   | 147,847                    |       | 130,237 |   | 130,237 |   |
| Held to maturity                       |   | 120,968              |   | 121,364                    |       | 163,980 |   | 163,389 |   |
| Loans, less  allowance for loan losses |   | 1,093,376            |   | 1,116,263                  |       | 1,016,140 |   | 1,024,195 |   |
| Accrued interest                       |   | 8,162                |   | 8,162                      |       | 9,655 |   | 9,655 |   |
|                                   |   |                 |   |                       |       |   |   |   |   |
| Financial  liabilities                 |   |                 |   |                       |       |   |   |   |   |
| Deposits                               |   | 1,309,720            |   | 1,317,323                  |       | 1,269,954 |   | 1,272,978 |   |
| Accrued interest                       |   | 5,536                |   | 5,536                      |       | 8,579 |   | 8,579 |   |
|                                        |        |                      |        |                            |            |  |  |  |  |  |  |  |  |

 

**Note 11 - Related Party Transactions**

 

Certain executive officers and directors of the Company, theiraffiliates and companies in which they have 10% or more beneficial ownership,are customers of the Bank in the ordinary course of business and have loansfrom the Bank totaling $26,212 and $38,116 at December 31, 2001 and 2000,respectively. During 2001, $31,900 in new loans and $43,804 in principalpayments were made. Related parties had deposits totaling $16,993 and $17,677at December 31, 2001 and 2000, respectively.

 

**Note 12 - Capital Requirements**

 

The Company and the Bank are subject to various regulatory capitalrequirements administered by federal banking agencies. Failure to meet minimumcapital requirements may result in the initiation of actions by regulators thatcould have direct material effects on the financial statements. Under capitaladequacy guidelines and the regulatory framework for prompt corrective action,each entity must meet specific capital guidelines that involve quantitativemeasures of assets, liabilities and certain off-balance-sheet items ascalculated under regulatory accounting practices. Capital amounts and classificationsare also subject to qualitative judgements by the regulators about components,risk weightings and other factors.

 

----

 

Regulations require the Company and the Bank to maintain minimumcapital amounts and ratios (set forth in the table below). Management believesthat as of December 31, 2001, the Company and the Bank exceeded all capitaladequacy requirements.

 

Management’s present policy is to limit dividends from the Bank, sothat the Bank qualifies as a “well-capitalized” institution as defined by theFederal Deposit Insurance Corporation Improvement Act of 1991, therebyminimizing the amount of Federal Deposit Insurance Corporation (“FDIC”)insurance premiums paid by the Bank and providing capital to fund growth. As ofDecember 31, 2001, the Bank could pay, in the aggregate, dividends ofapproximately $4,300 to West Suburban while remaining a “well-capitalized”institution. Dividends from the Bank are West Suburban’s primary source of cashflow.

 

As of December 31, 2001 and 2000, the most recent notifications fromthe FDIC categorized the Bank as “well capitalized” under the regulatoryframework for prompt corrective action. To be categorized as “well-capitalized”the Bank must maintain minimum ratios for total capital to risk weightedassets, Tier 1 capital to risk weighted assets and Tier 1 capital to averageassets as set forth in the table. There are no conditions or events since thatnotification that management believes would result in a change of the category.The capital amounts and ratios of the Company and the Bank for purposes of theprompt corrective action framework are presented in the table below:

 
|                                          |   | **Actual** |    | **Minimum  For Capital Adequacy Purposes** |   | **Minumum To  Be Well Capitalized** |   |
|-----------------------------------------------|--------|------------|---------|--------------------------------------------|--------|-------------------------------------|--------|
| **As  of December 31, 2001**                  |   | **Amount** |    | **Ratio**                                  |   | **Amount**                          |   | **Ratio** |   | **Amount** |   | **Ratio** |   |
| **Total  capital (to risk weighted assets)**  |   |       |    |                                       |   |                                |   |   |   |   |   |   |   |
| Company                                       |   | $          | 155,676 |                                       | 11.4   | %                                   | $      | 109,568 |   | 8.0 | % | $ | 136,960 |   | 10.0 | % |
| Bank                                          |   | 140,216    |    | 10.3                                       |   | 108,713                             |   | 8.0 |   | 135,891 |   | 10.0 |   |
| **Tier 1 capital (to risk weighted  assets)** |   |       |    |                                       |   |                                |   |   |   |   |   |   |   |
| Company                                       |   | 143,414    |    | 10.5                                       |   | 54,784                              |   | 4.0 |   | 82,176 |   | 6.0 |   |
| Bank                                          |   | 127,954    |    | 9.4                                        |   | 54,356                              |   | 4.0 |   | 81,535 |   | 6.0 |   |
| **Tier 1 capital (to average assets)**        |   |       |    |                                       |   |                                |   |   |   |   |   |   |   |
| Company                                       |   | 143,414    |    | 9.9                                        |   | 58,038                              |   | 4.0 |   | 72,548 |   | 5.0 |   |
| Bank                                          |   | 127,954    |    | 8.9                                        |   | 57,624                              |   | 4.0 |   | 72,030 |   | 5.0 |   |
|                                          |   |       |    |                                       |   |                                |   |   |   |   |   |   |   |
| As of December  31, 2000                      |   |       |    |                                       |   |                                |   |   |   |   |   |   |   |
| **Total capital (to risk weighted  assets)**  |   |       |    |                                       |   |                                |   |   |   |   |   |   |   |
| Company                                       |   | $          | 151,364 |                                       | 11.7   | %                                   | $      | 103,366 |   | 8.0 | % | $ | 129,208 |   | 10.0 | % |
| Bank                                          |   | 132,036    |    | 10.7                                       |   | 98,614                              |   | 8.0 |   | 123,267 |   | 10.0 |   |
| **Tier 1 capital (to risk weighted  assets)** |   |       |    |                                       |   |                                |   |   |   |   |   |   |   |
| Company                                       |   | 139,965    |    | 10.8                                       |   | 51,683                              |   | 4.0 |   | 77,525 |   | 6.0 |   |
| Bank                                          |   | 120,637    |    | 9.8                                        |   | 49,307                              |   | 4.0 |   | 73,960 |   | 6.0 |   |
| **Tier 1 capital (to average assets)**        |   |       |    |                                       |   |                                |   |   |   |   |   |   |   |
| Company                                       |   | 139,965    |    | 10.0                                       |   | 56,135                              |   | 4.0 |   | 70,169 |   | 5.0 |   |
| Bank                                          |   | 120,637    |    | 8.8                                        |   | 56,147                              |   | 4.0 |   | 70,184 |   | 5.0 |   |

 

The appraised fair value of Company common stock owned by the ESOP isincluded in Tier 1 capital.

 

----

 

**Note 13 - Other Comprehensive Income**

 

Other comprehensive income components and related taxes were asfollows:

 
|                                                                          |   | **2001** |   | **2000** |   | **1999** |   |
|-------------------------------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
| Unrealized holding gains (losses) on available for sale securities            |   | $        | 3,297  |     | $      | 358      |   | $ | (4,201 | ) |
| Reclassification adjustments for gains and losses later recognized in  income |   | 626      |   | —   |   | (91      | )      |
| Net unrealized gains (losses)                                                 |   | 3,923    |   | 358      |   | (4,292   | )      |
| Tax effect                                                                    |   | (1,559   | )      | (143     | )      | 1,705    |   |
| Other comprehensive income (loss)                                             |   | $        | 2,364  |     | $      | 215      |   | $ | (2,587 | ) |

 

**Note 14 - New AccountingPronouncements**

 

In July 2001, the Financial Accounting Standards Board (“FASB”) issuedStatement of Financial Accounting Standards (“Statement”) 141, “BusinessCombinations”, which requires that all business combinations initiated afterJune 30, 2001 be accounted for under a single method, the purchase method. Useof the pooling-of-interests method is no longer permitted. Statement 141 willhave no effect on the Company’s financial statements unless the Company entersinto a business combination transaction.

 

In July 2001, the FASB also issued Statement 142, “Goodwill and OtherIntangible Assets,” which generally requires that goodwill no longer beamortized to earnings, but instead be reviewed for impairment and written downif impaired. However, the goodwill arising from certain transactions (includinggoodwill arising from the acquisition of financially troubled institutionsaccounted for under the guidance in Statement 72, “Accounting for CertainAcquisitions of Banking or Thrift Institutions,”) is excluded from the scope ofStatement 142. Accordingly, the Company’s goodwill will continue to beamortized to earnings.

 

**Note 15 - Condensed FinancialInformation - Parent Only**

 

**CondensedBalance Sheets**

**December31, 2001 and 200**0

 
|                                                                                         |   | **2001** |    | **2000** |   |
|----------------------------------------------------------------------------------------------|--------|----------|---------|----------|--------|
| **Assets**                                                                                   |   |     |    |     |   |
| Cash,  substantially all on deposit in subsidiary                                            |   | $        | 12,619  |     | $      | 22,956 |   |
| Securities  available for sale (amortized cost of   $10,525 in 2001 and $4,004 in 2000) |   | 10,632   |    | 4,006    |   |
| Investment in  subsidiary                                                                    |   | 128,585  |    | 119,523  |   |
| Intangibles, net                                                                             |   | 712      |    | 916      |   |
| Other assets                                                                                 |   | 145      |    | 28       |   |
| **Total assets**                                                                             |   | $        | 152,693 |     | $      | 147,429 |   |
|                                                                                         |   |     |    |     |   |
| **Liabilities and shareholders’  equity**                                               |   |     |    |     |   |
| Dividends  payable                                                                           |   | $        | 7,569   |     | $      | 7,569 |   |
| Other  liabilities                                                                           |   | 109      |    | 92       |   |
| **Total liabilities**                                                                        |   | 7,678    |    | 7,661    |   |
|                                                                                         |   |     |    |     |   |
| Common stock in  ESOP subject to contingent repurchase obligation                            |   | 40,645   |    | 37,644   |   |
|                                                                                         |   |     |    |     |   |
| Shareholders’  equity                                                                   |   | 104,370  |    | 102,124  |   |
| **Total liabilities and shareholders’  equity**                                         |   | $        | 152,693 |     | $      | 147,429 |   |

 

----

 

**CondensedStatements of Income**

**YearsEnded December 31, 2001, 2000 and 1999**

 
|                                                                |   | **2001** |   | **2000** |   | **1999** |   |
|---------------------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
| **Income**                                                          |   |     |   |     |   |     |   |
| Dividends from  subsidiary                                          |   | $        | 13,343 |     | $      | 22,040   |   | $ | 14,727 |   |
| Interest income                                                     |   |     |   |     |   |     |   |
| Deposits in  subsidiary                                             |   | 389      |   | 511      |   | 361      |   |
| Commercial paper                                                    |   | —   |   | 75       |   | —   |   |
| Securities                                                          |   | 374      |   | 247      |   | 212      |   |
| Total income                                                        |   | 14,106   |   | 22,873   |   | 15,300   |   |
|                                                                |   |     |   |     |   |     |   |
| **Expense**                                                         |   |     |   |     |   |     |   |
| Amortization of  intangibles                                        |   | 204      |   | 204      |   | 204      |   |
| Other                                                               |   | 294      |   | 320      |   | 427      |   |
| Total expense                                                       |   | 498      |   | 524      |   | 631      |   |
| **Income before income taxes**                                      |   | 13,608   |   | 22,349   |   | 14,669   |   |
| **Income tax expense**                                              |   | 186      |   | 202      |   | 57       |   |
| **Income before equity in  undistributed net income of subsidiary** |   | 13,422   |   | 22,147   |   | 14,612   |   |
| **Equity in undistributed net income  of subsidiary**               |   | 6,761    |   | (1,144   | )      | 5,433    |   |
| **Net income**                                                      |   | $        | 20,183 |     | $      | 21,003   |   | $ | 20,045 |   |

 

**CondensedStatements of Cash Flows**

**YearsEnded December 31, 2001, 2000 and 1999**

 
|                                                                              |   | **2001** |   | **2000** |   | **1999** |   |
|-----------------------------------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
| **Cash  flows from operating activities**                                         |   |     |   |     |   |     |   |
| Net income                                                                        |   | $        | 20,183 |     | $      | 21,003   |   | $ | 20,045 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities |   |     |   |     |   |     |   |
| Deferred income  tax benefit                                                      |   | (5       | )      | —   |   | —   |   |
| Equity in  undistributed net income of subsidiary                                 |   | (6,761   | )      | 1,144    |   | (5,433   | )      |
| Net premium  amortization and discount accretion of securities                    |   | 43       |   | 10       |   | —   |   |
| Amortization of  intangibles                                                      |   | 204      |   | 204      |   | 204      |   |
| (Increase)  decrease in other assets                                              |   | (154     | )      | (12      | )      | 107      |   |
| Increase in  other liabilities                                                    |   | 17       |   | 17       |   | 74       |   |
| **Net cash provided by operating  activities**                                    |   | 13,527   |   | 22,366   |   | 14,997   |   |
| **Cash flows from investing  activities**                                         |   |     |   |     |   |     |   |
| Securities  available for sale                                                    |   |     |   |     |   |     |   |
| Maturities                                                                        |   | 4,000    |   | —   |   | 5,000    |   |
| Purchases                                                                         |   | (10,564  | )      | (4,014   | )      | (5,000   | )      |
| **Net cash used in investing  activities**                                        |   | (6,564   | )      | (4,014   | )      | —   |   |
| **Cash flows from financing  activities**                                         |   |     |   |     |   |     |   |
| Cash dividends  paid                                                              |   | (17,300  | )      | (16,867  | )      | (16,002  | )      |
| **Net (decrease) increase in cash**                                               |   | (10,337  | )      | 1,485    |   | (1,005   | )      |
| **Beginning cash**                                                                |   | 22,956   |   | 21,471   |   | 22,476   |   |
| **Ending cash**                                                                   |   | $        | 12,619 |     | $      | 22,956   |   | $ | 21,471 |   |

 

----

 

**Note 16 - Quarterly Results ofOperations (Unaudited)**

 

The following table sets forth certain unaudited income, expense andper share data on a quarterly basis for the three-month periods indicated:

 
|                                                 |   | **Fourth  Quarter**                                |   | **Third********Quarter** |   | **Second****Quarter**** ** |   | **First  Quarter** |
|------------------------------------------------------|--------|----------------------------------------------------|--------|--------------------------|--------|---------------------------------|--------|--------------------|
|                                                 |   |                                               |
| **Year Ended December 31, 2001**                     |   | **(Dollars  in thousands, except per share data)** |
| Interest income                                      |   | $                                                  | 22,207 |                     | $      | 24,531                          |   | $                  | 25,426 |   | $ | 26,740 |   |
| Interest expense                                     |   | 7,971                                              |   | 9,784                    |   | 10,879                          |   | 11,856             |   |
| Net interest  income                                 |   | 14,236                                             |   | 14,747                   |   | 14,547                          |   | 14,884             |   |
| Provision for  loan losses                           |   | 1,775                                              |   | 425                      |   | 375                             |   | 375                |   |
| Net interest  income after provision for loan losses |   | 12,461                                             |   | 14,322                   |   | 14,172                          |   | 14,509             |   |
| Noninterest  income                                  |   | 1,289                                              |   | 4,378                    |   | 2,174                           |   | 2,244              |   |
| Noninterest  expense                                 |   | 9,656                                              |   | 8,780                    |   | 8,851                           |   | 8,504              |   |
| Income before  income taxes                          |   | 4,094                                              |   | 9,920                    |   | 7,495                           |   | 8,249              |   |
| Income tax  expense                                  |   | 1,294                                              |   | 3,387                    |   | 2,360                           |   | 2,534              |   |
| Net income                                           |   | $                                                  | 2,800  |                     | $      | 6,533                           |   | $                  | 5,135 |   | $ | 5,715 |   |
| Earnings per  share                                  |   | $                                                  | 6.48   |                     | $      | 15.10                           |   | $                  | 11.88 |   | $ | 13.21 |   |
|                                                 |   |                                               |   |                     |   |                            |   |               |   |
| **Year Ended December 31, 2000**                     |   |                                               |   |                     |   |                            |   |               |   |
| Interest income                                      |   | $                                                  | 27,634 |                     | $      | 26,762                          |   | $                  | 25,313 |   | $ | 23,575 |   |
| Interest expense                                     |   | 12,621                                             |   | 12,159                   |   | 11,180                          |   | 10,108             |   |
| Net interest  income                                 |   | 15,013                                             |   | 14,603                   |   | 14,133                          |   | 13,467             |   |
| Provision for  loan losses                           |   | 375                                                |   | 375                      |   | 375                             |   | 375                |   |
| Net interest  income after provision for loan losses |   | 14,638                                             |   | 14,228                   |   | 13,758                          |   | 13,092             |   |
| Noninterest  income                                  |   | 2,383                                              |   | 2,212                    |   | 1,958                           |   | 2,158              |   |
| Noninterest  expense                                 |   | 9,271                                              |   | 8,055                    |   | 8,457                           |   | 8,346              |   |
| Income before  income taxes                          |   | 7,750                                              |   | 8,385                    |   | 7,259                           |   | 6,904              |   |
| Income tax  expense                                  |   | 2,528                                              |   | 2,664                    |   | 2,213                           |   | 1,890              |   |
| Net income                                           |   | $                                                  | 5,222  |                     | $      | 5,721                           |   | $                  | 5,046 |   | $ | 5,014 |   |
| Earnings per  share                                  |   | $                                                  | 12.07  |                     | $      | 13.23                           |   | $                  | 11.67 |   | $ | 11.59 |   |
|                                                      |        |                                                    |        |                          |        |                                 |        |                    |  |  |  |  |  |  |

 

The provision for loan losses increased $1,350 during the fourthquarter of 2001. This was primarily due to the write-off of one commercial loanin the amount of approximately $1,400 and an increase in nonperforming loans of$11,717 during the quarter.

 

Noninterest income decreased during the fourth quarter of 2001. Thiswas primarily due to write-downs of securities as discussed in Note 2. Thethird quarter of 2001 included a gain $1,426 on the sale of stock in an ATMnetwork, as discussed in Note 2.

 

Noninterest expense increased $876 during the fourth quarter of 2001.This was primarily due to the accrual of amounts necessary to pay employeebonuses along with standard cost of living adjustments and additional ESOPexpense.

 

Income tax expense decreased during the fourth quarter of 2001. Thiswas primarily due to lower taxable income.

 

Noninterest expense increased $1,216 during the fourth quarter of 2000.During this period, salaries and employee benefits expense increased $752,primarily due to the accrual of amounts necessary to pay employee bonuses, thehiring of personnel in connection with the opening of the Downtown Downersbranch and additional ESOP expense. Occupancy expense and equipment expenseincreased $145 and $158, respectively, during the fourth quarter primarily dueto increased depreciation as a result of the new teller system and the effectsof the branch opening. Additionally, professional fees increased $100 duringthe period.

 

----

 

**SELECTED FINANCIAL DATA**

**(Dollarsin thousands, except per share data)**

 

The following table consists of financial data derived from theConsolidated Financial Statements of the Company. This information should beread together with Management’s Discussion and Analysis of Financial Conditionand Results of Operations and the Company’s Consolidated Financial Statementsincluded elsewhere in this report.

 
|                                                           |   | **Years  Ended December 31,** |    |
|----------------------------------------------------------------|--------|-------------------------------|---------|
|                                                           |   | **2001**                      |    | **2000** |   | **1999** |   | **1998** |   | **1997** |   |
| **Selected operating data**                                    |   |                          |    |   |   |   |   |   |   |   |   |
| Interest income                                                |   | $                             | 98,904  |   | $ | 103,284 |   | $ | 89,805 |   | $ | 91,663 |   | $ | 95,208 |   |
| Interest expense                                               |   | 40,490                        |    | 46,068 |   | 37,260 |   | 42,054 |   | 44,700 |   |
| Net interest  income                                           |   | 58,414                        |    | 57,216 |   | 52,545 |   | 49,609 |   | 50,508 |   |
| Provision for  loan losses                                     |   | 2,950                         |    | 1,500 |   | 3,084 |   | 2,563 |   | 1,623 |   |
| Net interest  income after provision for loan losses           |   | 55,464                        |    | 55,716 |   | 49,461 |   | 47,046 |   | 48,885 |   |
| Noninterest  income (1)                                        |   | 10,085                        |    | 8,711 |   | 12,305 |   | 7,416 |   | 12,396 |   |
| Noninterest  expense                                           |   | 35,791                        |    | 34,129 |   | 32,667 |   | 31,161 |   | 29,690 |   |
| Income before  income taxes                                    |   | 29,758                        |    | 30,298 |   | 29,099 |   | 23,301 |   | 31,591 |   |
| Income tax  expense                                            |   | 9,575                         |    | 9,295 |   | 9,054 |   | 7,123 |   | 9,807 |   |
| Net income                                                     |   | $                             | 20,183  |   | $ | 21,003 |   | $ | 20,045 |   | $ | 16,178 |   | $ | 21,784 |   |
|                                                           |   |                          |    |   |   |   |   |   |   |   |   |
| **Per share data**                                             |   |                          |    |   |   |   |   |   |   |   |   |
| Earnings                                                       |   | $                             | 46.67   |   | $ | 48.56 |   | $ | 46.35 |   | $ | 37.41 |   | $ | 50.37 |   |
| Cash dividends  declared                                       |   | 40.00                         |    | 39.50 |   | 37.50 |   | 34.00 |   | 18.50 |   |
| Book value (2)                                                 |   | 335.30                        |    | 323.17 |   | 313.61 |   | 310.74 |   | 306.02 |   |
|                                                           |   |                          |    |   |   |   |   |   |   |   |   |
| **Selected balances, end of year**                             |   |                          |    |   |   |   |   |   |   |   |   |
| Securities                                                     |   | $                             | 268,815 |   | $ | 294,217 |   | $ | 337,828 |   | $ | 377,303 |   | $ | 417,879 |   |
| Loans, less  allowance for loan losses                         |   | 1,093,376                     |    | 1,016,140 |   | 845,706 |   | 772,361 |   | 762,538 |   |
| Total assets                                                   |   | 1,473,559                     |    | 1,431,958 |   | 1,408,062 |   | 1,308,953 |   | 1,293,691 |   |
| Deposits                                                       |   | 1,309,720                     |    | 1,269,954 |   | 1,254,255 |   | 1,155,952 |   | 1,144,949 |   |
| Shareholders’  equity (3)                                 |   | 145,015                       |    | 139,768 |   | 135,633 |   | 134,393 |   | 132,353 |   |
|                                                           |   |                          |    |   |   |   |   |   |   |   |   |
| **Ratios**                                                     |   |                          |    |   |   |   |   |   |   |   |   |
| Return on  average total assets                                |   | 1.40                          | %       | 1.53 | % | 1.52 | % | 1.26 | % | 1.71 | % |
| Return on  average shareholders’ equity (3)               |   | 13.73                         |    | 14.96 |   | 14.36 |   | 11.77 |   | 17.48 |   |
| Cash dividends  declared to net income                         |   | 85.72                         |    | 81.34 |   | 80.91 |   | 90.90 |   | 36.73 |   |
| Average  shareholders’ equity to average total assets (3) |   | 10.21                         |    | 10.22 |   | 10.61 |   | 10.73 |   | 9.78 |   |
| Net interest  margin (4)                                       |   | 4.39                          |    | 4.51 |   | 4.37 |   | 4.24 |   | 4.34 |   |
|                                                           |   |                          |    |   |   |   |   |   |   |   |   |
|                                                                |        |                               |         |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)             Noninterest incomeincludes litigation settlements of $3,555 and $2,344 in 1999 and 1997,respectively, for settlements of claims related to investments that the Companymade in prior years. Noninterest income also includes write-downs of $2,960 and$3,200 of the carrying value of securities available for sale in 2001 and 1998,respectively.

(2)             Book value equalsshareholders’ equity (including common stock in ESOP subject to contingentrepurchase obligation) divided by the number of outstanding shares.

(3)             Shareholders’ equityincludes common stock in ESOP subject to contingent repurchase obligation.

(4)             Net interest marginis presented on a tax equivalent basis, assuming a federal income tax rate of35%.

 

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**AVERAGE BALANCE SHEETS, NET INTEREST INCOME AND**

**AVERAGERATES AND YIELDS ON A TAX EQUIVALENT BASIS**

**(Dollers in thousands)**

 

The following table presents for the years indicated the total dollaramount of interest income from average interest-earning assets and theiryields, as well as the interest expense on average interest-bearing liabilitiesand their costs, expressed both in dollars and rates. All average balances aredaily average balances. To the extent received, interest on nonaccruing loanshas been included in the table. Interest income on nonaccrual loans was immaterialin 2001, 2000 and 1999.

 
|                                                 |   | **Years Ended December 31,** |      |         |
|------------------------------------------------------|--------|------------------------------|-----------|--------------|
|                                                 |   | **2001**                     |      | **2000**     |   | **1999** |   |   |
|                                                 |   | **Average  Balance**         |      | **Interest** |   | **Rate** |   | **Average  Balance** |   | **Interest** |   | **Rate** |   | **Average  Balance** |   | **Interest** |   | **Rate** |   |   |
| **Assets**                                           |   |                         |      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal funds sold                                   |   | $                            | 20,570    |         | 795 |   | 3.9 | % | $ | 17,630 |   | $ | 1,104 |   | 6.3 | % | $ | 37,046 |   | $ | 1,833 |   | 4.9 | % |   |
| Commercial paper                                     |   | 1,521                        |      | 86           |   | 5.7 |   | 2,306 |   | 167 |   | 7.2 |   | 2,203 |   | 142 |   | 6.4 |   |   |
| Securities                                           |   |                         |      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                              |   | 234,650                      |      | 13,560       |   | 5.8 |   | 298,960 |   | 18,109 |   | 6.1 |   | 344,064 |   | 20,636 |   | 6.0 |   |   |
| Exempt from federal  income tax  (1)            |   | 26,680                       |      | 2,082        |   | 7.8 |   | 29,074 |   | 2,250 |   | 7.7 |   | 31,168 |   | 2,380 |   | 7.6 |   |   |
| Total securities (1)                                 |   | 261,330                      |      | 15,642       |   | 6.0 |   | 328,034 |   | 20,359 |   | 6.2 |   | 375,232 |   | 23,016 |   | 6.1 |   |   |
| Loans (1)                                            |   | 1,065,944                    |      | 83,173       |   | 7.8 |   | 940,039 |   | 82,529 |   | 8.8 |   | 809,594 |   | 65,765 |   | 8.1 |   |   |
| Total interest-earning assets (1)                    |   | 1,349,365                    |      | 99,696       |   | 7.4 |   | 1,288,009 |   | 104,159 |   | 8.1 |   | 1,224,075 |   | 90,756 |   | 7.4 |   |   |
| Cash and due from banks                              |   | 39,394                       |      |         |   |   |   | 39,232 |   |   |   |   |   | 38,542 |   |   |   |   |   |   |
| Premises and equipment, net                          |   | 41,772                       |      |         |   |   |   | 37,948 |   |   |   |   |   | 34,458 |   |   |   |   |   |   |
| Other real estate                                    |   | 1,741                        |      |         |   |   |   | 2,448 |   |   |   |   |   | 1,607 |   |   |   |   |   |   |
| Allowance for loan losses                            |   | (11,892                      | )         |         |   |   |   | (11,243 | ) |   |   |   |   | (10,595 | ) |   |   |   |   |   |
| Accrued interest  and other  assets (2)         |   | 19,155                       |      |         |   |   |   | 17,452 |   |   |   |   |   | 26,929 |   |   |   |   |   |   |
| **Total assets**                                     |   | $                            | 1,439,535 |         |   |   |   |   | $ | 1,373,846 |   |   |   |   |   | $ | 1,315,016 |   |   |   |   |   |
| **Liabilities and   shareholders’ equity** |   |                         |      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing deposits                            |   |                         |      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW                                                  |   | $                            | 233,765   |         | 1,972 |   | .8 |   | $ | 217,982 |   | 2,782 |   | 1.3 |   | $ | 206,896 |   | 2,363 |   | 1.1 |   |
| Money market checking                                |   | 192,587                      |      | 6,990        |   | 3.6 |   | 137,260 |   | 7,153 |   | 5.2 |   | 112,239 |   | 4,848 |   | 4.3 |   |   |
| Savings                                              |   | 291,569                      |      | 7,634        |   | 2.6 |   | 284,240 |   | 9,539 |   | 3.4 |   | 316,304 |   | 8,350 |   | 2.6 |   |   |
| Time deposits                                        |   |                         |      |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less than $100,000                                   |   | 320,397                      |      | 18,092       |   | 5.6 |   | 341,035 |   | 19,907 |   | 5.8 |   | 315,564 |   | 16,660 |   | 5.3 |   |   |
| $ 100,000 and over                                   |   | 103,327                      |      | 5,624        |   | 5.4 |   | 106,736 |   | 6,483 |   | 6.1 |   | 90,798 |   | 4,891 |   | 5.4 |   |   |
| Total interest-bearing deposits                      |   | 1,141,645                    |      | 40,312       |   | 3.5 |   | 1,087,253 |   | 45,864 |   | 4.2 |   | 1,041,801 |   | 37,112 |   | 3.6 |   |   |
| Other interest-bearing liabilities                   |   | 3,557                        |      | 178          |   | 5.0 |   | 3,129 |   | 204 |   | 6.5 |   | 3,484 |   | 148 |   | 4.2 |   |   |
| Total interest-bearing liabilities                   |   | 1,145,202                    |      | 40,490       |   | 3.5 |   | 1,090,382 |   | 46,068 |   | 4.2 |   | 1,045,285 |   | 37,260 |   | 3.6 |   |   |
| Demand-noninterest-bearing deposits                  |   | 134,219                      |      |         |   |   |   | 130,420 |   |   |   |   |   | 118,387 |   |   |   |   |   |   |
| Accrued interest  and other  liabilities        |   | 13,127                       |      |         |   |   |   | 12,661 |   |   |   |   |   | 11,802 |   |   |   |   |   |   |
| Shareholders’ equity (3)                        |   | 146,987                      |      |         |   |   |   | 140,383 |   |   |   |   |   | 139.542 |   |   |   |   |   |   |
| **Total liabilities and shareholders’ equity**  |   | $                            | 1,439,535 |         |   |   |   |   | $ | 1,373,846 |   |   |   |   |   | $ | 1,315,016 |   |   |   |   |   |
| Net interest income                                  |   |                         |      | $            | 59,206 |   |   |   |   |   | $ | 58,091 |   |   |   |   |   | $ | 53,496 |   |   |   |   |
| Interest rate spread                                 |   |                         |      |         |   | 3.9 | % |   |   |   |   | 3.9 | % |   |   |   |   | 3.8 | % |   |
| Net interest margin                                  |   |                         |      |         |   | 4.4 | % |   |   |   |   | 4.5 | % |   |   |   |   | 4.4 | % |   |
|                                                      |        |                              |           |              |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)             Interest income andyields are presented on a tax equivalent basis, assuming a federal income taxrate of 35%.

(2)             The average balancesof nonaccrual loans are included in accrued interest and other assets.

(3)             Shareholders’ equityincludes common stock in ESOP subject to contingent repurchase obligation.

 

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**MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION**

**ANDRESULTS OF OPERATIONS**

 

The following discussion and analysis provides information regardingthe Company’s financial condition as of December 31, 2001 and 2000 and theresults of operations for the years ended December 31, 2001, 2000 and 1999.This discussion and analysis should be read with the financial statements,notes and tables included elsewhere in this annual report. The financialinformation provided below is rounded in order to simplify the presentation ofmanagement’s discussion and analysis. However, the ratios and percentagesprovided below are calculated using the more detailed financial information containedin the financial statements, notes and tables included elsewhere in this annualreport.

 

**Balance Sheet Analysis**

 

***Total Assets****.* Total assets of theCompany at December 31, 2001 increased 2.9% from the prior year-end. Increasesin the loan portfolio were the largest component of the increase in totalassets and were partially offset by decreases in cash and cash equivalents andsecurities. Total average assets in 2001 increased 4.8% from the prior year,primarily due to a 13.4% growth in average total loans partially offset byreductions in securities. Asset growth was funded primarily by higher levels ofdeposits.

 

***Cash and Cash Equivalents.***Cash andcash equivalents at December 31, 2001 decreased 23.2% from the prior year-end,due to a reduction in cash and due from banks. This decrease resulted from theuse of cash equivalents to fund growth in the loan portfolio.

 

***Securities.***  The Company’s objectives in managing the securities portfolioinclude maximizing yield over an entire interest rate cycle while providingliquidity. Aggregate holdings in securities at December 31, 2001 decreased 8.6%from the prior year-end. This decrease was primarily due to the use of proceedsfrom maturities and calls of securities to fund growth in the loan portfolio. Holdingsin the available for sale securities portfolio increased $17.6 million during2001. Increasing the available for sale securities portfolio has allowed theCompany to maintain an adequate level of liquidity while also enjoying higheryields on securities compared to the alternative of investing in federal fundssold.

 

***Loans.*** Total loans outstanding at December 31, 2001 increased 7.6% fromthe prior year-end, primarily due to growth in the commercial loan portfolio of$86.4 million. The commercial loan portfolio consists of commercial, realestate construction and commercial real estate loans. The commercial loanportfolio increased primarily due to a more favorable rate environment andcontinued economic and demographic growth in the Company’s market area. TheCompany believes that new commercial loans were underwritten in a mannerconsistent with the Company’s past loan underwriting standards and do notrepresent increased credit risk to the Company.

 

Residential real estate loans at December 31, 2001 decreased 15.3% fromthe prior year-end. This decrease was a result of mortgage refinancing activitythat was prompted by lower interest rates and the Company electing to sell the30-year mortgage loans that it originated in 2001 rather than to hold the mortgagesin the loan portfolio. Management’s decision to sell 30-year mortgage loans wasa change from 2000 when the Company retained its new 30-year mortgages, whichwere at higher rates. In addition, home equity loans at December 31, 2001increased 9.3% from the prior year-end.

 

***Allowance for Loan Losses and Asset Quality.***The Company’s provision for loan losses is based on management’s quarterlyevaluations of the adequacy of the allowance for loan losses. In theseevaluations, management considers numerous factors including, but not limitedto, historical loan loss experience, the nature and volume of the loanportfolio, information about specific borrower situations and estimatedcollateral values and prevailing economic conditions. This evaluation is inherentlysubjective as it requires estimates that are susceptible to significantrevision as more information becomes available or as future events occur.

 

The provision for loan losses increased 96.7% in 2001. The Company’sprovision for loan losses reflected management’s evaluation of the loanportfolio within the context of the factors outlined above, including growth inthe loan portfolio. The increase was 

 

----

 

primarily the result of increasing levels of nonperforming loans andnet loan charge-offs. Net loan charge-offs were $2.1 million and $.9 millionfor the years ended December 31, 2001 and 2000, respectively.

 

The ratio of the allowance for loan losses to total loans outstandingwas 1.11% at both December 31, 2001 and 2000. Nonperforming loans at December31, 2001 increased 883% from the prior year-end to $15.3 million. The majorityof the increase in nonperforming loans was due to two borrowers, which hadloans aggregating $10.9 million that became 90 days past due on December 29,2001. In addition to the nonaccrual loans at December 31, 2001, the Company hadone nonperforming loan relationship totaling $8.8 million, which managementconsidered well secured and in the process of collection. The accrual status ofloans past due over 90 days is based on management’s evaluation of therespective collateral values and collection efforts. Collateral fornonperforming loans primarily consists of real estate. The allowance for loanlosses as of December 31, 2001 and 2000 was 80% and 733% of nonperforming loansat December 31, 2001 and December 31, 2000, respectively.

 

The following table is an analysis of the Company’s nonperforming loansand other real estate at December 31 (dollars in thousands):

 

|                                             |   | **2001** |   | **2000** |   | **1999** |   |
|--------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
| Loans past due over 90 days still on accrual     |   | $        | 11,338 |     | $      | 491      |   | $ | 1,184 |   |
| Nonaccrual loans                                 |   | 3,945    |   | 1,064    |   | 3,544    |   |
| Total  nonperforming loans                       |   | $        | 15,283 |     | $      | 1,555    |   | $ | 4,728 |   |
| Nonperforming  loans as a percent of total loans |   | 1.4      | %      | .2       | %      | .6       | %      |
| Other real  estate                               |   | $        | 1,410  |     | $      | 1,940    |   | $ | 3,488 |   |

 

***Other Real Estate.*** Other real estateat December 31, 2001 decreased 27.3% from the prior year-end. During 2001, theCompany sold properties with an aggregate carrying value of $.9 million andacquired properties through loan foreclosures having an aggregate carryingvalue of $.3 million. Management will continue its efforts to reduce itsholdings in other real estate.

 

***Deposits.***Total deposits at December31, 2001 increased 3.1% from the prior year-end due to an increase in alldeposit components with the exception of time deposits.Demand-noninterest-bearing deposits and NOW accounts increased 8.5% and 6.2%,respectively. Money market checking and savings increased 50.9% and 11.6%,respectively. Management believes the growth in this portion of the deposit basewas primarily due to customers migrating from longer-term time deposits to moreliquid investments during this period of declining interest rates. Managementalso believes the decrease in time deposits was the result of maturities oftime deposits that were not reinvested due to lower interest rates offered onthese instruments. Time deposits less than $100,000 and time deposits $100,000and over decreased 18.0% and 27.9%, respectively. During 2001, average balancesin interest-bearing deposits and demand-noninterest-bearing deposits increased$54.4 million and $3.8 million, respectively.

 

**Capital Resources**

 

Shareholders’ equity at December 31, 2001 increased 2.2% from the prioryear-end as a result of $20.2 million of net income for the year, reduced by dividendsdeclared of $17.3 million and an increase in the fair value of securitiesavailable for sale of $2.4 million, net of taxes. Additionally, shareholders’equity was reduced by a $3.0 million increase in the appraised fair value ofcommon stock in ESOP subject to contingent repurchase obligation.

 

Management has been advised that as of December 31, 2001 and 2000, theBank qualified as a “well-capitalized” institution as defined by the FederalDeposit Insurance Corporation Improvement Act of 1991, as amended. On aconsolidated basis the Company exceeded regulatory capital requirements. Inaccordance with applicable regulations, the appraised fair value of Companycommon stock owned by the ESOP is included in Tier 1 capital.

 

----

 

**Liquidity**

 

Effective liquidity management ensures there is sufficient cash flow tosatisfy demand for credit and deposit withdrawals and to take advantage ofearnings enhancement opportunities. A large, stable core deposit base andstrong capital position are the solid foundation for the Company’s liquidityposition. Liquidity is enhanced by a securities portfolio structured to provideliquidity as needed. Additionally, the Company maintains lines of credit topurchase federal funds sold in the amount of $85 million from other financialinstitutions as well as an additional line of credit of approximately $89million at the Federal Home Loan Bank of Chicago. The Company manages itsliquidity position through continuous monitoring of profitability trends, assetquality, interest rate sensitivity and maturity schedules of earning assets andliabilities.

 

Generally, the Company uses cash and cash equivalents and securitiesavailable for sale to meet its liquidity needs. As of December 31, 2001 and2000, liquid assets represented 13.2% and 13.4% of total assets, respectively.During 2001, the Company’s cash and cash equivalents decreased $14.2 million.Net cash provided by operating activities was $17.5 million, while net cashused in investing activities was $54.2 million. The net cash used in investingactivities was primarily to fund loan growth. Net cash flows provided byfinancing activities totaled $22.5 million. Management expects operations to bea continuing source of cash flows in the future.

 

**IncomeStatement Analysis - 2001 Compared to 2000**

 

***General*.** TheCompany’s net income decreased 3.9% in 2001, primarily due to $3.0 million ofwrite-downs of impaired securities, increases in the provision for loan lossesof $1.5 million and total noninterest expense of $1.7 million. These increaseswere partially offset by an increase in net interest income of $1.2 million.

 

***Net Interest Income.***Net interest income is the primary source of income for the Company. Netinterest income is the difference between interest income earned on interest-earningassets and interest expense on interest-bearing liabilities. Net interestincome is affected by changes in the volume and yield on earning assets and thevolume and rates on interest-bearing liabilities. Interest-earning assetsconsist of federal funds sold, commercial paper, securities and loans.Interest-bearing liabilities primarily consist of deposits. The net interestmargin is the percentage of tax equivalent net interest income to averageearning assets. The Company’s net interest margin decreased to 4.39% in 2001compared to 4.51% in 2000.

 

Total interest income, on a tax equivalent basis decreased 4.3% in2001, primarily due to declining yields on the loan portfolio. Average loansfor the year increased 13.4% and the average yield earned on the loan portfoliodecreased 98 basis points. This was primarily due to the declining yields onthe commercial loan portfolio. The majority of loans in the commercial loanportfolio are tied to one of a number of rate indices. These rate indices havedeclined due to the general reduction in interest rates during 2001. Forexample, the average prime rate in 2001 was 6.91% compared to 9.20% in 2000.The loan volume increases were partially offset by reductions in the averagebalances of securities, which were used to fund loan growth. The yield onaverage interest-earning assets decreased 70 basis points to 7.39% in 2001compared to 8.09% in 2000.

 

Total interest expense decreased 12.1% in 2001. Interest on deposits,which accounted for substantially all of this decrease, decreased primarily dueto lower interest rates. During 2001, the Company lowered interest rates on allcategories of deposits in response to the significant decline in market ratesduring the year. The yield on interest-bearing deposits decreased 69 basispoints to 3.53% in 2001 compared to 4.22% in 2000.

 

----

 

The following table reflects the impact of changes in volume and ratesof interest-earning assets and interest-bearing liabilities on a tax equivalentbasis for the years ended December 31, 2001 and 2000 (dollars in thousands):

 
|                                |   | **2001 compared to 2000** |   | **2000 compared to 1999** |   |
|-------------------------------------|--------|---------------------------|--------|---------------------------|--------|
|                                |   | **Change due to**         |   |                      |   | **Change due to** |   |   |   |
|                                |   | **Volume**                |   | **Rate**                  |   | **Total   Change** |   | **Volume** |   | **Rate** |   | **Total   Change** |   |
| **Interest  Income**                |   |                      |   |                      |   |   |   |   |   |   |   |   |   |
| Federal funds  sold                 |   | $                         | 114    |                      | $      | (423 | ) | $ | (309 | ) | $ | (1,216 | ) | $ | 487 |   | $ | (729 | ) |
| Commercial paper                    |   | (45                       | )      | (36                       | )      | (81 | ) | 7 |   | 18 |   | 25 |   |
| Securities                          |   | (3,992                    | )      | (725                      | )      | (4,717 | ) | (3,201 | ) | 544 |   | (2,657 | ) |
| Loans                               |   | 9,824                     |   | (9,180                    | )      | 644 |   | 11,452 |   | 5,312 |   | 16,764 |   |
| Total interest  income              |   | 5,901                     |   | (10,364                   | )      | (4,463 | ) | 7,042 |   | 6,361 |   | 13,403 |   |
|                                |   |                      |   |                      |   |   |   |   |   |   |   |   |   |
| **Interest  Expense**               |   |                      |   |                      |   |   |   |   |   |   |   |   |   |
| Interest-bearing  deposits          |   | 462                       |   | (6,014                    | )      | (5,552 | ) | 2,578 |   | 6,174 |   | 8,752 |   |
| Other  interest-bearing liabilities |   | 21                        |   | (47                       | )      | (26 | ) | (23 | ) | 79 |   | 56 |   |
| Total interest expense              |   | 483                       |   | (6,061                    | )      | (5,578 | ) | 2,555 |   | 6,253 |   | 8,808 |   |
| Net interest  income                |   | $                         | 5,418  |                      | $      | (4,303 | ) | $ | 1,115 |   | $ | 4,487 |   | $ | 108 |   | $ | 4,595 |   |

 

**NoninterestIncome.**Total noninterest income increased 15.8% in 2001,primarily due to increases in service fees on deposit accounts, debit cardfees, gains on sales of loans held for sale, gains on securities transactionsand other noninterest income which were partially offset by write-downs of thecarrying value of securities available for sale. Other noninterest incomeincreased primarily as a result of the recovery of $1.0 million in prior years’expenses incurred in connection with a problem loan. The Company recordedhigher fee income from increased use of debit cards by bank customers andhigher mortgage loan application fee income, due to greater refinancingactivity. The Company also experienced an increase in net gains on securitiestransactions, which was primarily due to the sale of an equity security. The Company made a nominal equity investmentin an ATM network years ago. In 2001, the Company surrendered its stock in theATM network in connection with the merger of the network with anotherorganization and received $1.4 million. Since the Company had only a nominalbasis in the ATM network stock, the Company realized a gain of $1.4 million.These increases to noninterest income were partially offset by impairmentwrite-downs of the carrying value of securities available for sale. During2001, the Company wrote down its investments in debt securities issued byComdisco, Inc., FINOVA Group, Inc. and Enron Corp. after it made adetermination that the value of the debt securities had become impaired. Theseimpairment losses totaled $3.0 million in 2001. The carrying value of theComdisco, Inc., FINOVA Group, Inc. and Enron Corp. securities totaled $4.8million at December 31, 2001.

 

***Noninterest Expense.***Total noninterest expense increased 4.9% in 2001, primarily as a result ofincreases in salaries and employee benefits due to increased health insurancecosts and normal salary increases. Despite a growing branch office network, thenumber of full-time equivalent employees remained constant at 527 as ofDecember 31, 2001 and 2000. Occupancy expense increased 7.3% in 2001 due to theoperation of the Charlestowne and Downtown Downers branches for a complete yearand the opening of the South Elgin branch. At December 31, 2001, the Companyhad 31 full-service and five limited service offices. The Company incurredhigher costs associated with depreciation, maintenance and winter heating.Furniture and equipment expense increased during this period due to an increasein data processing expense, which was offset by a decrease in depreciationexpense on furniture and equipment. Advertising expense increased during theperiod due to new advertising initiatives that are intended to promote theCompany’s brand and image. During 2001, the Company began advertising throughlocal cable television. Other noninterest expense also increased during thisperiod due to increased professional fees. These increases were partiallyoffset by decreases in other losses and stationary and supplies expense. TheCompany’s efficiency ratio, a measure of the amount of expense needed togenerate each dollar of revenue, was 52% in both 2001 and 2000 respectively.

 

***Provision for Loan Losses.***The Company’s provision for loan losses increased 96.7% in 2001. A moredetailed discussion concerning the allowance for loan losses is presented inthe Allowance for Loan Losses and Asset Quality section of this report.

 

----

 

***Income Taxes.*** Incometax expense increased 3.0% in 2001, partially due to lower tax-exempt income onsecurities and loans. Interest income exempt from federal income tax and incomeon U.S. government securities exempt from Illinois income tax were both lowerin 2001. The effective tax rates for the years ended December 31, 2001 and 2000were 32.2% and 30.7%, respectively.

 

**IncomeStatement Analysis - 2000 Compared to 1999**

 

***General*.** TheCompany’s net income increased 4.8% in 2000, primarily due to an increase innet interest income and a decrease in the provision for loan losses. Theseincreases to net income were partially offset by a decrease in totalnoninterest income and an increase in total noninterest expense.

 

***Net Interest Income.***The Company’s net interest margin increased to 4.51% in 2000 compared to 4.37%in 1999, as explained below.

 

Total interest income, on a tax equivalent basis increased 14.8% in2000, as a result of increases of $7.0 million due to volume changes and $6.4million due to rate changes. These increases primarily related to the loanportfolio. Average loans for the year increased 16.1% and the average yieldearned on the loan portfolio increased 66 basis points. The loan volumeincreases were partially offset by reductions in the average balances ofsecurities and federal funds sold which were used to fund loan growth. Theyield on average interest-earning assets increased 68 basis points to 8.09% in2000 compared to 7.41% in 1999. The increase in the yield on average earningassets during 2000 was due primarily to the generally higher level of interestrates in 2000 compared to 1999. For example, the average prime rate in 2000 wasapproximately 9.20% compared to 8.00% in 1999.

 

Total interest expense increased 23.6% in 2000. Interest on deposits,which accounted for substantially all of this increase, increased primarily dueto increases in interest rates, which occurred during 2000. The cost ofinterest-bearing deposits increased 66 basis points to 4.22% in 2000 compared to3.56% in 1999. Approximately $6.2 million of the increase in interest expenseon deposits was caused by higher rates. The remaining $2.6 million increase wascaused by a 4.4% increase in volume of average interest-bearing deposits.

 

***Noninterest Income.***Totalnoninterest income decreased 29.2% in 2000, which was primarily due tonon-recurring income of $3.6 million in the first quarter of 1999 representingthe settlement of a lawsuit brought by the Company in connection with aninvestment that it made in the late 1980’s. During 2000, the Company alsoexperienced decreases in gains on sales of loans held for sale as a result ofits decision to retain mortgages (which were originated at more attractiverates due to increased market rates) for its portfolio. These decreases werepartially offset by higher fee income from increased use of debit cards by bankcustomers.

 

***Noninterest Expense.***Total noninterest expense increased 4.5% in 2000, which was primarily theresult of salaries and employee benefits increasing partially due to theopening of the Romeoville, Charlestowne and Downtown Downers facilities. TheCompany’s efficiency ratio was 52% and 53% in 2000 and 1999, respectively. Theefficiency ratio for 1999 excludes the $3.6 million litigation settlement.

 

***Provision for Loan Losses.***The Company’s provision for loan losses decreased 51.4% in 2000. The decreasewas primarily the result of declining levels of nonperforming loans and netloan charge-offs. Net loan charge-offs were $.9 million and $2.3 million in2000 and 1999, respectively. The allowance for loan losses increased $.6million to $11.4 million at December 31, 2000. The ratio of the allowance forloan losses to total loans outstanding decreased to 1.11% at December 31, 2000compared to 1.26% at December 31, 1999. Nonperforming loans decreased $3.2million (67.1%) to $1.6 million at December 31, 2000. The majority of thedecrease in nonperforming loans was due to the reduction in the Company’sexposure under a loan to a leasing company along with reduced exposure on twoother loans. The allowance for loan losses was 733% and 228% of nonperformingloans at December 31, 2000 and 1999, respectively. Additional discussionconcerning the allowance for loan losses is presented in the Allowance for LoanLosses and Asset Quality section of this report.

 

***Income Taxes.*** Incometax expense increased 2.7% in 2000, which was principally due to higher pre-taxincome. The effective tax rates for the years ended December 31, 2000 and 1999were 30.7% and 31.1%, respectively.

 

----

 

**Interest Rate Sensitivity**

 

The Company attempts to maintain a conservative posture with regard tointerest rate risk by actively managing its asset/liability GAP position andmonitoring the direction and magnitude of gaps and risk. The Company attemptsto moderate the effects of changes in interest rates by adjusting its asset andliability mix to achieve desired relationships between rate sensitive assetsand rate sensitive liabilities. Rate sensitive assets and liabilities are thoseinstruments that reprice within a given time period. An asset or liabilityreprices when its interest rate is subject to change or upon maturity.

 

Movements in general market interest rates are a key element in changesin the net interest margin. The Company’s policy is to manage its balance sheetso that fluctuations in net interest margin are minimized regardless of thelevel of interest rates, although the net interest margin does vary somewhatdue to management’s response to increasing competition from other financialinstitutions.

 

Listed below are the balances in the major categories of rate sensitiveassets and liabilities that are subject to repricing as of December 31, 2001(dollars in thousands):

 
|                                                                               |   | **Three   Months or  Less** |     | **Over   Three   Months to  Twelve   Months** |   | **Over One   Year to  Five Years** |   | **Over Five   Years** |    | **Total** |   |
|------------------------------------------------------------------------------------|--------|-----------------------------|----------|-----------------------------------------------|--------|------------------------------------|--------|-----------------------|---------|-----------|--------|
| Rate sensitive assets                                                              |   |                        |     |                                          |   |                               |   |                  |    |      |   |
| Federal funds  sold                                                                |   | $                           | 14,206   |                                          | $      | —                             |   | $                     | —  |      | $      | — |   | $ | 14,206 |   |
| Securities                                                                         |   | 24,927                      |     | 25,708                                        |   | 188,976                            |   | 29,204                |    | 268,815   |   |
| Loans                                                                              |   | 420,408                     |     | 166,705                                       |   | 403,596                            |   | 114,929               |    | 1,105,638 |   |
| Total                                                                              |   | $                           | 459,541  |                                          | $      | 192,413                            |   | $                     | 592,572 |      | $      | 144,133 |   | $ | 1,388,659 |   |
|                                                                               |   |                        |     |                                          |   |                               |   |                  |    |      |   |
| Rate sensitive  liabilities                                                        |   |                        |     |                                          |   |                               |   |                  |    |      |   |
| NOW                                                                                |   | $                           | 251,580  |                                          | $      | —                             |   | $                     | —  |      | $      | — |   | $ | 251,580 |   |
| Money market  checking                                                             |   | 228,131                     |     | —                                        |   | —                             |   | —                |    | 228,131   |   |
| Savings                                                                            |   | 309,744                     |     | —                                        |   | —                             |   | —                |    | 309,744   |   |
| Time deposits                                                                      |   |                        |     |                                          |   |                               |   |                  |    |      |   |
| Less than  $100,000                                                                |   | 54,586                      |     | 188,063                                       |   | 45,421                             |   | 13                    |    | 288,083   |   |
| $  100,000 and over                                                                |   | 23,514                      |     | 51,137                                        |   | 9,487                              |   | —                |    | 84,138    |   |
| Total                                                                              |   | $                           | 867,555  |                                          | $      | 239,200                            |   | $                     | 54,908  |      | $      | 13 |   | $ | 1,161,676 |   |
|                                                                               |   |                        |     |                                          |   |                               |   |                  |    |      |   |
| Interest  sensitivity gap                                                          |   | $                           | (408,014 | )                                             | $      | (46,787                            | )      | $                     | 537,664 |      | $      | 144,120 |   | $ | 226,983 |   |
| Cumulative  interest sensitivity gap                                               |   | (408,014                    | )        | (454,801                                      | )      | 82,863                             |   | 226,983               |    |      |   |
| Cumulative net  rate sensitive assets to cumulative net rate sensitive liabilities |   | 53.0                        | %        | 58.9                                          | %      | 107.1                              | %      | 119.5                 | %       |      |   |
| Cumulative  interest sensitivity gap to total assets                               |   | (27.7                       | )        | (30.9                                         | )      | 5.6                                |   | 15.4                  |    |      |   |

 

Included in “Three Months or Less” rate sensitive liabilities are$251.6 million of NOW deposits, $228.1 million of money market checkingdeposits and $309.7 million of savings deposits that management considers morecore deposit in nature than time deposits. Approximately $74.6 million ofsecurities are callable in 2002 and are included in the above table based upontheir contractual terms. Most of these callable securities were issued by U.S.government agencies and corporations.

 

While the shorter term negative GAP position represents a potentialadverse impact on the Company’s net interest income position in periods of risinginterest rates, the same position generally results in a favorable impact wheninterest rates remain constant or decline.

 

----

 

The above table does not necessarily indicate the future impact ofgeneral interest rate movements on the Company’s net interest income becausethe repricing of certain assets and liabilities is discretionary and is subjectto competitive and other pressures. As a result, assets and liabilitiesindicated as repricing within the same period may in fact reprice at differenttimes and at different rate levels. Assets and liabilities are reported in theearliest time frame in which maturity or repricing may occur.

 

In addition to the GAP analysis above, the Company also measures ratesensitivity through a net interest income analysis. The net interest incomeanalysis measures the change in net interest income in the event ofhypothetical changes in interest rates. This analysis assesses the risk ofchanges in net interest income in the event of a sudden and sustained 100 to200 basis point increase or decrease in market interest rates. This analysis issubject to the Company’s assumptions, which include the following:

 

•                       Balancesheet volume reflects the current balances and does not project future growthor changes. This establishes the base case from which all percent changes arecalculated.

 

•                       Thereplacement rate for loan and deposit items that mature is the current rateoffered by the Company as adjusted for the assumed rate increase or decrease.The replacement rate for securities is the current market rate as adjusted forthe assumed rate increase or decrease.

 

•                       Therepricing rate for balance sheet data is determined by utilizing individualaccount statistics provided by the Company’s data processing systems.

 

•                       Thematurity and repricing dates for balance sheet data are determined by utilizingindividual account statistics provided by the Company’s data processingsystems.

 

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

 

| **December 31, 2001**  |   | **Amount** |   | **Dollar  Change** |   | **Percent  Change** |   |
|------------------------|--------|------------|--------|--------------------|--------|---------------------|--------|
| +200 basis points      |   | $          | 46,016 |               | $      | (9,589              | )      | (17.2 | )% |
| +100 basis  points     |   | 50,894     |   | (4,711             | )      | (8.5                | )      |
| Base                   |   | 55,605     |   |               |   |                |   |
| -100 basis  points     |   | 52,210     |   | (3,395             | )      | (6.1                | )      |
| -200 basis  points     |   | 46,711     |   | (8,894             | )      | (16.0               | )      |
|                   |   |       |   |               |   |                |   |
| **December  31, 2000** |   |       |   |               |   |                |   |
| +200 basis  points     |   | $          | 50,004 |               | $      | (8,531              | )      | (14.6 | )% |
| +100 basis  points     |   | 54,427     |   | (4,108             | )      | (7.0                | )      |
| Base                   |   | 58,535     |   |               |   |                |   |
| -100 basis  points     |   | 62,393     |   | 3,858              |   | 6.6                 |   |
| -200 basis  points     |   | 64,001     |   | 5,466              |   | 9.3                 |   |

 

**Effects of Inflation**

 

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

 

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**[WSB LOGO]**

 

 

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|                      |   | **BOARDS  OF DIRECTORS**                                               |   |
|---------------------------|--------|------------------------------------------------------------------------|--------|
|                      |   |                                                                   |
|                      |   | **West Suburban Bancorp, Inc.**                                        |
|                      |   |                                                                   |
| Kevin J. Acker            |   | Chairman of the Board                                                  |
| David S. Bell             |   | Certified Public Accountant                                            |
| Duane G. Debs             |   | President, Chief Financial Officer                                     |
| Charles P. Howard         |   | Parkview Community Church, Business Administrator                      |
| Peggy P. LoCicero         |   | Former Banker                                                          |
|                      |   |                                                                   |
|                      |   | **West Suburban Bank**                                                 |
|                      |   |                                                                   |
| Robert W. Schulz          |   | Chairman; Oliver Hoffmann Corporation, Vice  President and Treasurer   |
| Keith W. Acker            |   | President                                                              |
| Craig R. Acker            |   | Former Banker                                                          |
| Earl K. Harbaugh          |   | Ditch Witch of Illinois, Chief Executive Officer and  President        |
| Ronald J. Kuhn            |   | Harry W. Kuhn, Inc., Chairman, Secretary and Treasurer                 |
| Paul J. Lehman            |   | Macom Corporation, President                                           |
| John G. Williams          |   | Bracing Systems, Vice President                                        |
| F. Willis Caruso          |   | Director Emeritus                                                      |
| George Hazdra             |   | Director Emeritus                                                      |
| Harry W. Kuhn             |   | Director Emeritus                                                      |
| Richard Hill Lauber       |   | Director Emeritus                                                      |
| Richard P. McCarthy       |   | Director Emeritus                                                      |
| Walter T. Myers           |   | Director Emeritus                                                      |
|                      |   |                                                                   |   |
|                      |   | **OFFICERS**                                                           |   |
|                      |   |                                                                   |
|                      |   | **West Suburban Bancorp, Inc.**                                        |
|                      |   |                                                                   |
| Duane G. Debs             |   | President, Chief Financial Officer                                     |
| Keith W. Acker            |   | Chief Operations Officer                                               |
| Kevin J. Acker            |   | Vice President                                                         |
| Michael P. Brosnahan      |   | Vice President                                                         |
| Michael J. Lynch          |   | Director of Internal Audit                                             |
| David J. Mulkerin         |   | Chief Compliance Officer                                               |
| George E. Ranstead        |   | Secretary to the Board and Treasurer                                   |
|                      |   |                                                                   |
|                      |   | **West Suburban Bank**                                                 |
|                      |   |                                                                   |
| **Senior  Officers**      |   |                                                                   |
| Keith W. Acker            |   | President, Trust Officer                                               |
| Kevin J. Acker            |   | Senior Vice President, Marketing                                       |
| Michael P. Brosnahan      |   | Senior Vice President, Lending and Community  Reinvestment Act Officer |
| James T. Chippas          |   | Senior Vice President, Consumer Lending                                |
| Duane G. Debs             |   | Senior Vice President, Comptroller, Trust Officer                      |
| Daniel P. Grotto          |   | Senior Vice President, Business Development                            |
|                      |   |                                                                   |
| **Building  Management**  |   |                                                                   |
| Edward J. Garvey          |   | Vice President, Building Management                                    |
|                      |   |                                                                   |
| **Business  Development** |   |                                                                   |
| Terry T. Facenda          |   | Business Development Officer                                           |
|                           |        |                                                                        |        |  |

 

----

 
| **Commercial  Loans**              |   |                                                 |
|------------------------------------|--------|------------------------------------------------------|
| Stanley C. Celner, Jr.             |   | Vice President, Commercial Loans                     |
| Grant O. Cowen                     |   | Vice President, Commercial Loans                     |
| Timothy P. Dineen                  |   | Vice President, Commercial Real Estate Loans         |
| David S. Orr                       |   | Vice President, Commercial Loans                     |
| Gregory M. Ruffolo                 |   | Vice President, Commercial Loans                     |
| Edwin S. Stephens IV               |   | Vice President, Commercial Loans                     |
| Gregory L. Young                   |   | Vice President, Commercial Loans                     |
|                               |   |                                                 |
| **Compliance**                     |   |                                                 |
| David J. Mulkerin                  |   | Chief Compliance Officer                             |
|                               |   |                                                 |
| **Comptroller’s  Department** |   |                                                 |
| George E. Ranstead                 |   | Vice President, Assistant Comptroller, Investments   |
|                               |   |                                                 |
| **Consumer  Loans**                |   |                                                 |
| William H. Hunter                  |   | Vice President, Consumer Loans                       |
| Cynthia A. Meredith                |   | Vice President, Consumer Loans                       |
| Charles J. Svoboda                 |   | Vice President, Consumer Loans                       |
| David J. Wanek                     |   | Assistant Vice President, Consumer Loans             |
| Karyn L. Tompkins                  |   | Consumer Loan Officer                                |
|                               |   |                                                 |
| **Electronic  Services**           |   |                                                 |
| Janet L. Kemble                    |   | Assistant Vice President, Electronic Services        |
|                               |   |                                                 |
| **Financial  Services**            |   |                                                 |
| Michael Abbatacola                 |   | Vice President, Financial Services                   |
| Lynn M. Torre                      |   | Assistant Vice President, Financial Services         |
|                               |   |                                                 |
| **Human  Resources**               |   |                                                 |
| Mary Ellen Condon                  |   | Vice President, Human Resources                      |
| Gina M. Corral                     |   | Assistant Vice President, Employee Relations Manager |
|                               |   |                                                 |
| **Information  Systems**           |   |                                                 |
| Steven A. Jennrich                 |   | Vice President, Information Systems                  |
| Jacqueline R. Weigand              |   | Vice President, Project Manager                      |
|                               |   |                                                 |
| **Internal  Audit**                |   |                                                 |
| Michael J. Lynch                   |   | Vice President, Director of Internal Audit           |
|                               |   |                                                 |
| **Loan  Operations**               |   |                                                 |
| Sandra C. Boyce                    |   | Vice President, Residential Mortgage Loan Operations |
| Gary H. Brandes                    |   | Vice President, Mortgage Loan Servicing              |
| Kevin Bussey                       |   | Vice President, Collections                          |
| Debra H. Crowley                   |   | Vice President, Commercial Loan Operations           |
| Lawrence J. Ortman                 |   | Vice President, Credit Analysis and Loan Review      |
|                               |   |                                                 |
| **Marketing**                      |   |                                                 |
| Denise M. Zatarski                 |   | Director of Marketing                                |
|                               |   |                                                 |
| **Operations**                     |   |                                                 |
| Danielle Budig                     |   | Vice President, Operations, VISA                     |
| Jill C. Davenport                  |   | Assistant Vice President, Operations                 |

 

----

 
| **Purchasing**                        |   |                                                                  |
|---------------------------------------|--------|-----------------------------------------------------------------------|
| Helen G. Schmitt                      |   | Assistant Vice President, Purchasing                                  |
|                                  |   |                                                                  |
| **Retail  Banking**                   |   |                                                                  |
| Jack Buscemi                          |   | Vice President, Retail Banking, Loss Prevention                       |
| Marcia K. Worobec                     |   | Vice President, Branch Operations, Branch Manager -  Westmore, Metra  |
| Tiffany I. Bohn                       |   | Acting Branch Manager - President Street                              |
| Kathleen M. Brockman                  |   | Assistant Vice President, Branch Manager - Lake  Street               |
| Sharon Buck                           |   | Assistant Vice President, Branch Manager -  Montgomery                |
| Jeannie L. Chidester                  |   | Assistant Vice President, Branch Manager - Oakbrook  Terrace          |
| Beverly Cornelius                     |   | Assistant Vice President, Branch Manager - Bolingbrook  East          |
| Barbara D. Darden                     |   | Assistant Vice President, Branch Manager - Eola Road                  |
| Richard R. Decker                     |   | Assistant Vice President, Branch Manager - South  Elgin               |
| Joyce M. Fedele                       |   | Assistant Vice President, Branch Manager -  Charlestowne, St. Charles |
| Sharon A. Fonte                       |   | Assistant Vice President, Branch Manager - Glendale  Heights          |
| Joel K. Fopma                         |   | Assistant Vice President, Branch Manager -  Bolingbrook West          |
| Priya Hira                            |   | Assistant Vice President, Branch Manager - Villa  Park                |
| Kirsten L. Jensen                     |   | Assistant Vice President, Branch Manager - Bartlett                   |
| Norine M. LaPrall                     |   | Assistant Vice President, Branch Manager -  Warrenville               |
| Terry Leitner                         |   | Assistant Vice President, Branch Manager - 75th  Street, Westmont     |
| Brian McDonald                        |   | Assistant Vice President, Branch Manager - Carol Stream               |
| Jeffery W. Miska                      |   | Assistant Vice President, Branch Manager - Cass  Avenue               |
| Susan Neustrom                        |   | Assistant Vice President, Branch Manager - Downtown  Downers          |
| Brian S. Nickleski                    |   | Assistant Vice President, Branch Manager - South  Main                |
| Gwen B. O’Loughlin               |   | Assistant Vice President, Branch Manager - North  Main                |
| Robert L. Pauling                     |   | Assistant Vice President, Branch Manager - Stratford  Square          |
| Cynthia A. Picton                     |   | Assistant Vice President, Branch Manager - Galena                     |
| Kay J. Piotrowski                     |   | Assistant Vice President, Branch Manager -  Naperville                |
| Timothy E. Sawyer                     |   | Assistant Vice President, Branch Manager - Chicago  Avenue            |
| Lisa M. Schmidt                       |   | Assistant Vice President, Branch Manager - Danada,  Wheaton           |
| Jerome Sheeman                        |   | Assistant Vice President, Branch Manager - Finley  Road               |
| Joseph M. Sperlik                     |   | Assistant Vice President, Branch Manager -  Romeoville                |
| Joanne T. Tosch                       |   | Assistant Vice President, Branch Manager - Oswego                     |
| Yolanda V. Williams                   |   | Acting Branch Manager - Fair Oaks                                     |
|                                  |   |                                                                  |
| **Secretary  to the Board**           |   |                                                                  |
| Jay J.P. Greifenkamp                  |   | Assistant Vice President, Financial Analyst,  Secretary to the Board  |
|                                  |   |                                                                  |
| **Travel  with West Suburban**        |   |                                                                  |
| Dennis A. Woodyatt                    |   | Travel Agent                                                          |
|                                  |   |                                                                  |
| **Trust**                             |   |                                                                  |
| Christine H. Pawlak                   |   | Trust Officer                                                         |
|                                  |   |                                                                  |
| **West  Suburban Insurance Services** |   |                                                                  |
| Patricia Falstrom                     |   | Insurance Agent                                                       |

 

----

 

 

**West SuburbanBank**

**711South Meyers Road**

**Lombard,Illinois**

 

**Aurora**

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

Galena Branch: 2000 West Galena Boulevard, Aurora, Illinois 60507 -(630) 896-7000

Lake Street Branch: 101 North Lake Street, Aurora, Illinois 60507 -(630) 844-5200

 

**Bartlett**

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

 

**Bloomingdale**

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

 

**Bolingbrook**

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

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

 

**CarolStream**

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

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

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

 

**Darien**

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

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

 

**DownersGrove**

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

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

 

**GlendaleHeights**

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

 

**Lombard**

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

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

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

Westmore Branch: 711 South Meyers Road, Lombard, Illinois 60148 - (630)629-4200

 

**Montgomery**

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

 

**Naperville**

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

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

 

**OakbrookTerrace**

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

 

**Oswego**

Oswego Branch: 2830 Route 34, Oswego, Illinois 60543 - (Opening in2002)

 

**Romeoville**

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

 

----

 

**SouthElgin**

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

 

**St.Charles**

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

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

 

**VillaPark**

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

 

**Warrenville**

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

 

**Westmont**

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

 

**Wheaton**

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

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

 

ATMs are available at all of the above banking branches.

 

**LimitedService Branches**

*BeaconHill: Lombard, Illinois 60148*

*FinancialCenter: 717 South Meyers Road, Lombard, Illinois 60148*

*LexingtonSquare of Elmhurst: Elmhurst, Illinois 60126*

*LexingtonSquare of Lombard: Lombard, Illinois 60148*

*Mr.Z’s: 401 South Main Street, Lombard, Illinois 60148*

 

 

**Other Services**

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

*WestSuburban Bank Land Trust: 711 South Meyers Road, Lombard, Illinois 60148 -(630) 652-2225*

*WestSuburban Bank VISA: 701 South Meyers Road, Lombard, Illinois 60148 - (630)652-2500 extension 2903*

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

*WestSuburban Insurance Services, Inc.: 711 South Meyers Road, Lombard, Illinois60148 - (630) 652-2550*

 

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**[MAP OF AREA THAT INDICATES LOCATIONOF FACILITIES]**

 

 

 

**[WSB LOGO]**

 

***Where strength is matched by service***

 

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**ShareholderInformation**

 

**Annual Report on Form 10-K**

A copy of West Suburban Bancorp, Inc.’s Annual Report on Form 10-K,filed with the Securities and Exchange Commission, is available without chargeto shareholders by writing to:

 

Duane G. Debs

President and Chief Financial Officer

West Suburban Bancorp, Inc.

2800 Finley Road

Downers Grove, Illinois 60515

(630) 652-2801

 

**Annual Meeting of Shareholders**

The annual meeting of shareholders of West Suburban Bancorp, Inc. willbe held at West Suburban Bank, 711 South Meyers Road, Lombard, Illinois onWednesday, May 8, 2002 at 8:00 a.m. All shareholders are cordially invited toattend.

 

**Stock Transfer Agent and Registrar**

Inquiries regarding stock transfers, registration, lost certificatesand changes of name and address should be directed to the stock transfer agentand registrar by writing to:

 

George E. Ranstead

Secretary to the Board and Treasurer

West Suburban Bancorp, Inc.

2800 Finley Road

Downers Grove, Illinois 60515

(630) 652-2802

 

**Community Reinvestment Act**

West Suburban Bank adheres to a well-established policy of helping tomeet the credit needs of our local communities, consistent with safe and soundlending practices, in accordance with the Community Reinvestment Act. Foradditional information, contact:

 

Michael P. Brosnahan

Senior Vice President, Lending and CommunityReinvestment Act Officer

West Suburban Bank

717 South Meyers Road

Lombard, Illinois 60148

(630) 652-2308

 

**Independent Auditors**

Crowe, Chizek and Company LLP

One Mid America Plaza, Suite 700

Post Office Box 3697

Oak Brook, Illinois 60522

 

**Corporate Counsel**

Barack Ferrazzano Kirschbaum Perlman & Nagelberg LLC

333 West Wacker Drive, Suite 2700

Chicago, Illinois 60606

 

**MEMBER FDIC**

**[EQUAL HOUSING LENDER LOGO]**

 

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