**Exhibit13**

 

# **Profile**

 

West Suburban Bancorp, Inc.(“West Suburban”) is the parent bank holding company of West Suburban Bank,Lombard, Illinois (the “Bank” and, together with West Suburban, the “Company”).The Company had total assets at December 31, 2009 of approximately $1.9billion. The Bank is one of the largest independent banks headquartered in DuPage County,Illinois.

 

**West Suburban Bancorp, Inc.**

**Financial Highlights**

 
| ** **                                      | ** ** | **Years  Ended December 31,**                 | ** ** |
|-------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                      | ** ** | **(Dollars  in thousands, except per share data)** | ** ** |
| ** **                                      | ** ** | **2009**                                           | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
| Net  (loss) income from continuing operations   |       | $                                                  | (4,244     | ) | $ | 17,242 |   | $ | 22,814 |   | $ | 25,129 |   | $ | 25,259 |   |
| Net  income (loss) from discontinued operations |       | 3,409                                              |       | (426 | ) | 599 |   | 222 |   | 227 |   |
| Net  (loss) income                              |       | (835                                               | )          | 16,816 |   | 23,413 |   | 25,351 |   | 25,486 |   |
| Per  share data                                 |       |                                               |       |   |   |   |   |   |   |   |   |
| (Loss)  earnings from continuing operations     |       | (9.89                                              | )          | 39.87 |   | 52.75 |   | 58.11 |   | 58.41 |   |
| Earnings  (loss) from discontinued operations   |       | 7.94                                               |       | (0.99 | ) | 1.38 |   | 0.51 |   | 0.52 |   |
| (Loss)  earnings per share                      |       | (1.95                                              | )          | 38.88 |   | 54.13 |   | 58.62 |   | 58.93 |   |
| Book  value (GAAP)                              |       | 296.97                                             |       | 264.12 |   | 241.76 |   | 220.43 |   | 218.87 |   |
| Book  value (non-GAAP) (1)                      |       | 370.14                                             |       | 372.03 |   | 373.34 |   | 359.18 |   | 344.60 |   |
| Net  loans                                      |       | 1,167,675                                          |       | 1,233,595 |   | 1,226,571 |   | 1,153,885 |   | 1,091,747 |   |
| Total  assets                                   |       | 1,938,583                                          |       | 1,867,420 |   | 1,851,357 |   | 1,876,643 |   | 1,827,191 |   |
| Total  deposits                                 |       | 1,756,987                                          |       | 1,625,925 |   | 1,637,714 |   | 1,677,844 |   | 1,639,666 |   |
|                                                 |            |                                                    |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)         Book value per share (non-GAAP)represents the aggregate amount of shareholders’ equity and common stock inESOP subject to contingent repurchase obligation divided by the number ofoutstanding shares. See Note 8 to the Company’s consolidated financialstatements and “Non-GAAP Financial Measures.” This presentation is consistentwith the Company’s belief that it is unlikely that the Company would berequired to satisfy the contingent repurchase obligation.

** **

**Tableof Contents**

 
| Profile                                                                                             | 1  |
|-----------------------------------------------------------------------------------------------------|----|
| Special  Note Concerning Forward-Looking Statements and Risk Factors                                | 2  |
| Letter  to Our Shareholders, Customers and Friends                                                  | 3  |
| Common  Stock, Book Value and Dividends                                                             | 4  |
| Business Review                                                                                     | 4  |
| Management’s  Report on Internal Control Over Financial Reporting                              | 5  |
| Report  of Independent Registered Public Accounting Firm                                            | 6  |
| Consolidated  Financial Statements                                                                  | 7  |
| Notes to Consolidated Financial Statements                                                          | 11 |
| Stock Performance Presentation                                                                      | 34 |
| Selected  Financial Data                                                                            | 36 |
| Non-GAAP Financial Measures                                                                         | 37 |
| Average Balance Sheets, Net Interest Income and  Average Rates and Yields on a Tax Equivalent Basis | 38 |
| Management’s Discussion and Analysis of Financial  Condition and Results of Operations         | 39 |
| Boards  of Directors and Officers                                                                   | 50 |
| Addresses of West Suburban Facilities                                                               | 53 |
| Map of Facilities                                                                                   | 55 |
| ***Shareholder  Information***                                                                      | 56 |

 

1

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###### *** ***

###### ***Special Note ConcerningForward-Looking Statements and Risk Factors***

 

*Thisdocument (including information incorporated by reference) contains, and futureoral and written statements of the Company and its management may contain,forward-looking statements within the meaning of the Private SecuritiesLitigation Reform Act of 1995 with respect to the financial condition, resultsof operations, plans, objectives, future performance and business of theCompany. Forward-looking statements, which may be based upon beliefs,expectations and assumptions of the Company’s management and on informationcurrently available to management, are generally identifiable by the use ofwords such as “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “may,”“will,” “would,” “could,” “should” or other similar expressions. Additionally,all statements in this document, including forward-looking statements, speakonly as of the date they are made, and the Company undertakes no obligation toupdate any statement in light of new information or future events.*

 

*Anumber of factors, many of which are beyond the ability of the Company tocontrol or predict, could cause actual results to differ materially from thosein its forward-looking statements. These factors include, among others, thefollowing: (i) the strength of the U.S. and global economies and financialmarkets in general and the strength of the local economies in which the Companyconducts its operations, including the local residential and commercial realestate markets, which may be less favorable than expected and may result in,among other things, a deterioration in the credit quality and value of theCompany’s assets; (ii) the effects of, and changes in, federal, state andlocal laws, regulations and policies affecting banking, securities, taxation,insurance and monetary and financial matters, as well as any laws andregulations otherwise affecting the Company, including laws and regulationsintended to address the current stresses in the U.S. and global financialmarkets, national security and money laundering; (iii) the effects ofcontinued adverse market conditions and further volatility in investmentsecurities generally, which may result in a deterioration in the value of thesecurities in the Company’s investment portfolio; (iv) t**he ability of the Company tocomply with, and satisfy the requirements of, its formal written agreementswith its regulators and the consequences that may result from any inability tocomply;**(v) theability**of the Company to comply with applicable federal, state and locallaws, regulations and policies and the consequences that may result from anyinability to comply; (vi) the effects of changes in interest rates(including the effects of changes in the rate of prepayments of the Company’sassets) and the policies of the Board of Governors of the Federal ReserveSystem; (vii) the ability of the Company to compete with other financialinstitutions as effectively as the Company currently intends due to increasesin competitive pressures in the financial services sector; (viii) theability of the Company to maintain an acceptable net interest margin; (ix) theability of the Company to obtain new customers and retain existing customers; (x) thetimely development and acceptance of products and services, including productsand services offered through alternative delivery channels such as theInternet; (xi) technological changes implemented by the Company and by otherparties, including third party vendors, which may be more difficult or moreexpensive than anticipated or which may have unforeseen consequences to theCompany and its customers, including technological changes implemented for, orrelated to, the Company’s website or new products; (xii) the ability of theCompany, and certain of its vendors, to develop and maintain secure andreliable electronic systems, including systems developed for the Company’swebsite or new products; (xiii) the ability of the Company to retain directors,executives and key employees, and the difficulty that the Company mayexperience in replacing directors, executives and key employees in an effectivemanner; (xiv) consumer spending and saving habits which may change in a mannerthat affects the Company’s business adversely; (xv) the economic impact of pastand any future terrorist attacks, acts of war or threats thereof and theresponse of the U.S. to any such attacks and threats; (xvi) businesscombinations and the integration of acquired businesses, which may be moredifficult or expensive than expected; (xvii) the costs, effects and outcomes ofexisting or future litigation and disputes with third parties, including, butnot limited to, claims in connection with collection actions, employmentmatters and sales of business units; (xviii) changes in accounting policies andpractices, as may be adopted by state and federal regulatory agencies and theFinancial Accounting Standards Board, the Public Company Accounting OversightBoard and the Securities and Exchange Commission; (xix) credit risks and therisks from concentrations (by geographic area or industry) within the Company’sloan portfolio; (xx) the failure of the Company’s Real Estate Investment Trust(“REIT”) to qualify as a REIT and the effects of such failure on the Company’sconsolidated effective tax rate; and (xxi) the ability of the Company to managethe risks associated with the foregoing as well as anticipated.*

 

*Additionalinformation concerning the Company and its business, including risk factorsthat could materially affect the Company’s results of operations and financialcondition, is included in the Company’s filings with the Securities andExchange Commission, including the Company’s most recent Annual Report on Form 10-K.*

 

2

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# ** **

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

 

The challenges presentedby the economy during 2008 continued throughout most of 2009. The bankingindustry continued to experience a significant number of failures, thefinancial markets struggled to gain traction and the local and nationaleconomies failed to show signs of growth.

 

Although this wasdisappointing to us, we were still able to outperform most of our peers (U.S.banks between $1 and $3 billion in assets) according to Uniform BankPerformance data as of, and for the year ended, December 31, 2009. Our netloss for 2009 represented a (.04)% return on average assets in comparison to areturn of (.28)% for our peers. Our non-current loans as a percentage of grossloans was 3.25% compared to 3.76% for our peers as of December 31, 2009.

 

In 2009 at West Suburban,we experienced the first net loss in our 48 year history. The net loss in 2009totaled $.8 million compared to net income in 2008 of $16.8 million. Thedecrease resulted primarily from $24.9 million we recognized for provision forloan losses as we increased our allowance for loan losses to total loans to2.17%. We believe that increasing our allowance for loan losses was appropriatein light of the state of the local and national economies and the increases inour problem and nonaccrual loans in our loan portfolio. Additionally, during2009 we wrote off $8.3 million of pooled trust preferred securities. Even as webuilt our reserves and recorded certain losses, our performance permitted us todeclare dividends of $10 per share in 2009 and minimize our net loss. Alsoduring 2009, we were able to grow our total assets while maintaining our strongcapital levels.

 

During 2009, our board ofdirectors decided to suspend the payment of a quarterly dividend. We feel itwas a prudent business decision to suspend the payment of dividends in order tomaintain strong capital levels as we navigate our way through this time ofeconomic uncertainty. Please be assured that it is our highest priority toprotect your investment by continuing to evaluate all areas of our business,the local and national economies, as well as changes in banking regulations.

 

Helping to meet thechallenges we are being faced with includes reducing or freezing operatingcosts, including salaries, marketing and discretionary benefits.  Additionally, we have tightened our lending criteria even more than we had overthe last several years. We continue to review the rates paid on deposits andthe rates we charge on loans daily to attempt to optimize our net interestmargin while maintaining our strong and loyal customer base and the highquality of service we provide.

 

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

 

As we all have beenaffected in some way in this recession we, as you, look forward to better timesfor West Suburban as well as our Nation. Thank you for your continued supportand understanding.

 

 

Sincerely,

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

 

3

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# ** **

# **Common Stock, Book Valueand Dividends**

 

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

 
| **Year** | ** ** | **Quarter** | ** ** | **BookValue********GAAP** | ** ** | **BookValue********Non-GAAP (1)** | ** ** | **Dividends********Declared** | ** ** |
|----------|------------|-------------|------------|---------------------------|------------|-----------------------------------|------------|-------------------------------|------------|
| **2009** |       | 4th         |       | $                         | 296.97     |                              | $          | 370.14                        |       | $ | — |   |
|     |       | 3rd         |       | 290.74                    |       | 369.42                            |       | —                        |       |
|     |       | 2nd         |       | 280.02                    |       | 365.53                            |       | 2.00                          |       |
|     |       | 1st         |       | 271.55                    |       | 370.49                            |       | 8.00                          |       |
|     |       |        |       |                      |       |                              |       |                          |       |
| 2008     |       | 4th         |       | $                         | 264.12     |                              | $          | 372.03                        |       | $ | 10.00 |   |
|     |       | 3rd         |       | 263.04                    |       | 376.34                            |       | 10.00                         |       |
|     |       | 2nd         |       | 249.64                    |       | 374.87                            |       | 10.00                         |       |
|     |       | 1st         |       | 242.62                    |       | 382.15                            |       | 10.00                         |       |

 

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(1)         Book value per share (non-GAAP) represents theaggregate amount of shareholders’ equity and common stock in ESOP subject tocontingent repurchase obligation divided by the number of outstanding shares.See Note 8 to the Company’s consolidated financial statements and “Non-GAAPFinancial Measures.” This presentation is consistent with the Company’s beliefthat it is unlikely that the Company would be required to satisfy thecontingent repurchase obligation.

 

During 2009, the Company’sboard of directors decided to suspend the payment of the quarterly dividend.The board will reevaluate the payment of dividends each quarter.

 

# **Business Review**

 

As of December 31,2009, the Company had total assets of approximately $1.9 billion and maintained35 full-service branches, five limited-service branches and four departmentsproviding insurance, financial and other services for the convenience of thecustomers of the Bank throughout DuPage, Kane, Kendall and Will Counties inIllinois. The Bank focuses on providing retail and commercial banking productsand services in its market area. The Company had 502 full-time equivalentemployees at December 31, 2009.

# ** **

# ****

 

4

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# ** **

# **MANAGEMENT’S REPORT ONINTERNAL CONTROL OVER FINANCIAL REPORTING**

 

Management of the Companyis responsible for establishing and maintaining an effective system of internalcontrol over financial reporting. The Company’s system of internal control overfinancial reporting is designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with generally accepted accountingprinciples. There are inherent limitations in the effectiveness of any systemof internal control over financial reporting, including the possibility ofhuman error and the circumvention or overriding of controls. Accordingly, evenan effective system of internal control over financial reporting can provideonly reasonable assurance with respect to financial statement preparation.Projections of any evaluation of effectiveness to future periods are subject tothe risks that controls may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures maydeteriorate.

 

Management assessed theCompany’s systems of internal control over financial reporting as of December 31,2009. This assessment was based on criteria for effective internal control overfinancial reporting described in InternalControl—IntegratedFramework issued by the Committee of Sponsoring Organizations of the TreadwayCommission. Based on this assessment, management believes that, as of December 31,2009, the Company maintained effective internal control over financialreporting based on those criteria.

 

The Company’s independentauditors have issued an audit report on the effectiveness of the Company’sinternal control over financial reporting.

 

 

March 10, 2010

 

Kevin J. Acker

Chairman of the Board andChief Executive Officer

 

 

Duane G. Debs

President and ChiefFinancial Officer

 

5

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# ** **

# ****

# ** **

# **Report of Independent Registered Public Accounting Firm**

 

Board of Directors and Shareholders

West Suburban Bancorp, Inc.

Lombard,Illinois

 

We have audited theaccompanying consolidated balance sheets of West Suburban Bancorp, Inc.  (the “Company”) as of December 31, 2009and 2008, and the related consolidated statements of income, changes in shareholders’equity, and cash flows for each of the years in the three-year period ended December 31,2009. We also have audited the Company’s internal control over financialreporting as of December 31, 2009, based on the criteria established inInternal Control — Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission. The Company’s management isresponsible for these financial statements, for maintaining effective internalcontrol over financial reporting, and for its assessment of the effectivenessof internal control over financial reporting, included in the accompanying Management’sReport on Internal Controls Over Financial Reporting. Our responsibility is toexpress an opinion on these financial statements and an opinion on the Company’sinternal control over financial reporting based on our audits.

 

We conducted our audits inaccordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audits toobtain reasonable assurance about whether the financial statements are free ofmaterial misstatement and whether effective internal control over financialreporting was maintained in all material respects. Our audits of the financialstatements included examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements, assessing the accountingprinciples used and significant estimates made by management, and evaluatingthe overall financial statement presentation. Our audit of internal controlover financial reporting included obtaining an understanding of internalcontrol over financial reporting, assessing the risk that a material weaknessexists, and testing and evaluating the design and operating effectiveness ofinternal control based on the assessed risk. Our audits also includedperforming such other procedures as we considered necessary in thecircumstances. We believe that our audits provide a reasonable basis for ouropinions.

 

A company’s internal controlover financial reporting is a process designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generallyaccepted accounting principles. A company’s internal control over financialreporting includes those policies and procedures that: (1) pertain to themaintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparationof financial statements in accordance with generally accepted accountingprinciples, and that receipts and expenditures of the company are being madeonly in accordance with authorizations of management and directors of thecompany; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.

 

Because of its inherentlimitations, internal control over financial reporting may not prevent ordetect misstatements. Also, projections of any evaluation of effectiveness tofuture periods are subject to the risk that controls may become inadequatebecause of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.

 

In our opinion, the financialstatements referred to above present fairly, in all material respects, thefinancial position of the Company as of December 31, 2009 and 2008, andthe results of its operations and its cash flows for each of the years in thethree-year period ended December 31, 2009 in conformity with accountingprinciples generally accepted in the United States of America. Also in ouropinion, the Company maintained, in all material respects, effective internalcontrol over financial reporting as of December 31, 2009, based on thecriteria established in Internal Control — Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission.

 

 

/s/Crowe Horwath LLP

 

Oak Brook, Illinois

March 10, 2010

 

6

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**WEST SUBURBAN BANCORP, INC.**

# **CONSOLIDATED BALANCESHEETS**

## ***DECEMBER 31, 2009 AND 2008***

(Dollars in thousands)

 
| ** **                                                                                                                                                                                       | ** ** | **2009**  | ** ** | **2008**  | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------|------------|-----------|------------|
| **Assets**                                                                                                                                                                                       |       |      |       |      |       |
| Cash  and due from banks                                                                                                                                                                         |       | $         | 68,610     |      | $          | 33,174 |   |
| Federal  funds sold                                                                                                                                                                              |       | 80,000    |       | 22,300    |       |
| Total  cash and cash equivalents                                                                                                                                                                 |       | 148,610   |       | 55,474    |       |
| Securities                                                                                                                                                                                       |       |      |       |      |       |
| Available  for sale (amortized cost of $199,139 in 2009 and $227,333 in 2008)                                                                                                                    |       | 205,610   |       | 225,814   |       |
| Held  to maturity (fair value of $273,316 in 2009 and $244,928 in 2008)                                                                                                                          |       | 265,908   |       | 240,234   |       |
| Federal  Home Loan Bank stock                                                                                                                                                                    |       | 7,599     |       | 6,144     |       |
| Total  securities                                                                                                                                                                                |       | 479,117   |       | 472,192   |       |
| Loans,  less allowance for loan losses of $25,922 in 2009 and $15,578 in 2008                                                                                                                    |       | 1,167,675 |       | 1,233,595 |       |
| Bank-owned  life insurance                                                                                                                                                                       |       | 37,601    |       | 35,442    |       |
| Premises  and equipment, net                                                                                                                                                                     |       | 43,768    |       | 44,343    |       |
| Other  real estate                                                                                                                                                                               |       | 25,994    |       | 4,658     |       |
| Accrued  interest and other assets                                                                                                                                                               |       | 35,818    |       | 19,014    |       |
| Assets  of discontinued operations                                                                                                                                                               |       | —    |       | 2,702     |       |
| **Total assets**                                                                                                                                                                                 |       | $         | 1,938,583  |      | $          | 1,867,420 |   |
|                                                                                                                                                                                             |       |      |       |      |       |
| **Liabilities and shareholders’ equity**                                                                                                                                                    |       |      |       |      |       |
| Deposits                                                                                                                                                                                         |       |      |       |      |       |
| Demand-noninterest-bearing                                                                                                                                                                       |       | $         | 125,132    |      | $          | 132,664 |   |
| Prepaid  solutions card deposits                                                                                                                                                                 |       | 30,577    |       | 34,360    |       |
| Interest-bearing                                                                                                                                                                                 |       | 1,601,278 |       | 1,458,901 |       |
| Total  deposits                                                                                                                                                                                  |       | 1,756,987 |       | 1,625,925 |       |
| Federal  funds purchased                                                                                                                                                                         |       | —    |       | 55,000    |       |
| Prepaid  solutions cards                                                                                                                                                                         |       | 6,315     |       | 3,604     |       |
| Accrued  interest and other liabilities                                                                                                                                                          |       | 17,288    |       | 20,793    |       |
| Liabilites  of discontinued operations                                                                                                                                                           |       | —    |       | 1,199     |       |
|                                                                                                                                                                                             |       |      |       |      |       |
| Common  stock in ESOP subject to contingent repurchase obligation                                                                                                                                |       | 31,230    |       | 46,670    |       |
|                                                                                                                                                                                             |       |      |       |      |       |
| Shareholders’  equity                                                                                                                                                                       |       |      |       |      |       |
| Common  stock, no par value; 15,000,000 shares authorized; 426,850 shares issued and  outstanding at December 31, 2009 and 432,495 shares issued and  outstanding at December 31, 2008 |       | 3,412     |       | 3,457     |       |
| Surplus                                                                                                                                                                                          |       | 35,453    |       | 38,066    |       |
| Retained  earnings                                                                                                                                                                               |       | 115,544   |       | 120,676   |       |
| Accumulated  other comprehensive income (loss)                                                                                                                                                   |       | 3,584     |       | (1,300    | )          |
| Amount  reclassified on ESOP shares                                                                                                                                                              |       | (31,230   | )          | (46,670   | )          |
| **Total shareholders’ equity**                                                                                                                                                              |       | 126,763   |       | 114,229   |       |
| **Total liabilities and shareholders’ equity**                                                                                                                                              |       | $         | 1,938,583  |      | $          | 1,867,420 |   |

 

Seeaccompanying notes to consolidated financial statements.

 

7

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**WEST SUBURBAN BANCORP, INC.**

### **CONSOLIDATEDSTATEMENTS OF INCOME**

## ***YEARS ENDED DECEMBER 31,2009, 2008 AND 2007***

(Dollars in thousands, except per share data)

 
| ** **                                                        | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** |
|-------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| **Interest income**                                               |       |     |       |     |       |     |       |
| Loans,  including fees                                            |       | $        | 62,818     |     | $          | 72,577   |       | $ | 85,088 |   |
| Securities                                                        |       |     |       |     |       |     |       |
| Taxable                                                           |       | 17,985   |       | 21,109   |       | 19,192   |       |
| Exempt  from federal income tax                                   |       | 1,135    |       | 1,176    |       | 1,121    |       |
| Federal  funds sold                                               |       | 162      |       | 198      |       | 3,061    |       |
| Total  interest income                                            |       | 82,100   |       | 95,060   |       | 108,462  |       |
|                                                              |       |     |       |     |       |     |       |
| **Interest expense**                                              |       |     |       |     |       |     |       |
| Deposits                                                          |       | 24,944   |       | 33,308   |       | 48,203   |       |
| Other                                                             |       | 43       |       | 664      |       | 3        |       |
| Total  interest expense                                           |       | 24,987   |       | 33,972   |       | 48,206   |       |
| **Net interest income**                                           |       | 57,113   |       | 61,088   |       | 60,256   |       |
| **Provision for loan losses**                                     |       | 24,925   |       | 10,360   |       | 375      |       |
| **Net interest income after provision for loan losses**           |       | 32,188   |       | 50,728   |       | 59,881   |       |
|                                                              |       |     |       |     |       |     |       |
| **Noninterest income**                                            |       |     |       |     |       |     |       |
| Service  fees on deposit accounts                                 |       | 5,941    |       | 6,357    |       | 6,435    |       |
| Debit  card fees                                                  |       | 2,052    |       | 2,150    |       | 2,081    |       |
| Bank-owned  life insurance                                        |       | 2,030    |       | (2,179   | )          | 1,525    |       |
| Net  gain on sales of loans held for sale                         |       | 553      |       | 70       |       | 50       |       |
| Net  realized gains (losses) on securities transactions           |       | 109      |       | 101      |       | (6       | )          |
| Impairment  of FHLMC preferred stock                              |       | —   |       | —   |       | (381     | )          |
| Impairment  of trust preferred securities                         |       | (8,320   | )          | —   |       | —   |       |
| Gain  on redemption of VISA stock                                 |       | —   |       | 2,075    |       | —   |       |
| Other                                                             |       | 3,421    |       | 3,890    |       | 3,980    |       |
| Total  noninterest income                                         |       | 5,786    |       | 12,464   |       | 13,684   |       |
|                                                              |       |     |       |     |       |     |       |
| **Noninterest expense**                                           |       |     |       |     |       |     |       |
| Salaries  and employee benefits                                   |       | 24,671   |       | 19,925   |       | 22,974   |       |
| Furniture  and equipment                                          |       | 5,707    |       | 5,694    |       | 5,396    |       |
| Occupancy                                                         |       | 5,038    |       | 5,172    |       | 4,509    |       |
| Professional  fees                                                |       | 3,492    |       | 1,703    |       | 1,384    |       |
| FDIC  assessments                                                 |       | 3,647    |       | 500      |       | 299      |       |
| Loan  administration                                              |       | 1,252    |       | 383      |       | 326      |       |
| Advertising  and promotion                                        |       | 727      |       | 1,834    |       | 2,077    |       |
| Other                                                             |       | 5,486    |       | 5,659    |       | 5,683    |       |
| Total  noninterest expense                                        |       | 50,020   |       | 40,870   |       | 42,648   |       |
|                                                              |       |     |       |     |       |     |       |
| **(Loss) income from continuing operations before income  taxes** |       | (12,046  | )          | 22,322   |       | 30,917   |       |
| **Income tax (benefit) expense**                                  |       | (7,802   | )          | 5,080    |       | 8,103    |       |
| **Net (loss) income from continuing operations**                  |       | (4,244   | )          | 17,242   |       | 22,814   |       |
| **Discontinued operations**                                       |       |     |       |     |       |     |       |
| Gain  on sale of prepaid solutions group, net of tax              |       | 3,313    |       | —   |       | —   |       |
| Discontinued  operations, net of tax                              |       | 96       |       | (426     | )          | 599      |       |
| **Net income (loss) from discontinued operations**                |       | 3,409    |       | (426     | )          | 599      |       |
| **Net (loss) income**                                             |       | $        | (835       | )        | $          | 16,816   |       | $ | 23,413 |   |
| ** **                                                        |       |     |       |     |       |     |       |
| **(Loss) earnings from continuing operations per share**          |       | $        | (9.89      | )        | $          | 39.87    |       | $ | 52.75 |   |
| **Earnings (loss) from discontinued operations per share**        |       | $        | 7.94       |     | $          | (0.99    | )          | $ | 1.38 |   |
| **(Loss) earnings per share**                                     |       | $        | (1.95      | )        | $          | 38.88    |       | $ | 54.13 |   |
| **Average shares outstanding**                                    |       | 429,137  |       | 432,495  |       | 432,495  |       |

 

*See accompanying notes toconsolidated financial statements.*

 

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**WEST SUBURBAN BANCORP, INC.**

#### **CONSOLIDATEDSTATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY**

**YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007**

(Dollars in thousands, except per share data)

 
| ** **                                                                                                        | ** ** | **Common********Stock********and********Surplus** | ** ** | **Retained********Earnings** | ** ** | **Accumulated********Other********Comprehensive********Income********(Loss)** | ** ** | **Amount********Reclassified********on ESOP  Shares** | ** ** | **Total Shareholders’********Equity** | ** ** |
|-------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------|------------|------------------------------|------------|-------------------------------------------------------------------------------|------------|-------------------------------------------------------|------------|--------------------------------------------|------------|
| Balance,  January 1, 2007                                                                                    |       | $                                                 | 41,523     |                         | $          | 119,572                                                                       |       | $                                                     | (5,751     | )                                          | $          | (60,009 | ) | $ | 95,335 |   |
|                                                                                                              |       |                                              |       |                         |       |                                                                          |       |                                                  |       |                                       |       |
| Comprehensive  income                                                                                             |       |                                              |       |                         |       |                                                                          |       |                                                  |       |                                       |       |
| Net  income                                                                                                       |       |                                              |       | 23,413                       |       |                                                                          |       |                                                  |       | 23,413                                     |       |
| Change  in unrealized loss onavailable for sale  securities, net ofreclassification and tax  effects              |       |                                              |       |                         |       | 4,432                                                                         |       |                                                  |       | 4,432                                      |       |
| Change  in postretirement obligations,net of reclassificaton  and tax effects                                     |       |                                              |       |                         |       | (96                                                                           | )          |                                                  |       | (96                                        | )          |
| Total  comprehensive income                                                                                       |       |                                              |       |                         |       |                                                                          |       |                                                  |       | 27,749                                     |       |
| Cash  dividends declared - $50.00 per share                                                                       |       |                                              |       | (21,625                      | )          |                                                                          |       |                                                  |       | (21,625                                    | )          |
| Reclassification  due to change in fair valueof common stock in ESOP  subject tocontingent repurchase  obligation |       |                                              |       |                         |       |                                                                          |       | 3,102                                                 |       | 3,102                                      |       |
| Balance,  December 31, 2007                                                                                  |       | 41,523                                            |       | 121,360                      |       | (1,415                                                                        | )          | (56,907                                               | )          | 104,561                                    |       |
|                                                                                                              |       |                                              |       |                         |       |                                                                          |       |                                                  |       |                                       |       |
| Cummulative  adjustment to applyguidance on bank-owned life  insurance                                            |       |                                              |       | (200                         | )          |                                                                          |       |                                                  |       | (200                                       | )          |
| Comprehensive  income                                                                                             |       |                                              |       |                         |       |                                                                          |       |                                                  |       |                                       |       |
| Net  income                                                                                                       |       |                                              |       | 16,816                       |       |                                                                          |       |                                                  |       | 16,816                                     |       |
| Change  in unrealized loss onavailable for sale  securities, net ofreclassification and tax  effects              |       |                                              |       |                         |       | 106                                                                           |       |                                                  |       | 106                                        |       |
| Change  in postretirement obligations,net of  reclassificaton and tax effects                                     |       |                                              |       |                         |       | 9                                                                             |       |                                                  |       | 9                                          |       |
| Total  comprehensive income                                                                                       |       |                                              |       |                         |       |                                                                          |       |                                                  |       | 16,931                                     |       |
| Cash  dividends declared - $40.00 per share                                                                       |       |                                              |       | (17,300                      | )          |                                                                          |       |                                                  |       | (17,300                                    | )          |
| Reclassification  due to change in fair valueof common stock in ESOP  subject tocontingent repurchase  obligation |       |                                              |       |                         |       |                                                                          |       | 10,237                                                |       | 10,237                                     |       |
| Balance,  December 31, 2008                                                                                  |       | 41,523                                            |       | 120,676                      |       | (1,300                                                                        | )          | (46,670                                               | )          | 114,229                                    |       |
|                                                                                                              |       |                                              |       |                         |       |                                                                          |       |                                                  |       |                                       |       |
| Repurchase  and retirement of 5,645 sharesof common  stock                                                        |       | (2,658                                            | )          |                         |       |                                                                          |       |                                                  |       | (2,658                                     | )          |
| Comprehensive  income                                                                                             |       |                                              |       |                         |       |                                                                          |       |                                                  |       |                                       |       |
| Net  loss                                                                                                         |       |                                              |       | (835                         | )          |                                                                          |       |                                                  |       | (835                                       | )          |
| Change  in unrealized loss onavailable for sale  securities, net ofreclassification and tax  effects              |       |                                              |       |                         |       | 4,813                                                                         |       |                                                  |       | 4,813                                      |       |
| Change  in postretirement obligations,net of  reclassificaton and tax effects                                     |       |                                              |       |                         |       | 71                                                                            |       |                                                  |       | 71                                         |       |
| Total  comprehensive income                                                                                       |       |                                              |       |                         |       |                                                                          |       |                                                  |       | 4,049                                      |       |
| Cash  dividends declared - $10.00 per share                                                                       |       |                                              |       | (4,297                       | )          |                                                                          |       |                                                  |       | (4,297                                     | )          |
| Reclassification  due to change in fair valueof common stock in ESOP  subject tocontingent repurchase  obligation |       |                                              |       |                         |       |                                                                          |       | 15,440                                                |       | 15,440                                     |       |
| **Balance, December 31, 2009**                                                                               |       | $                                                 | 38,865     |                         | $          | 115,544                                                                       |       | $                                                     | 3,584      |                                       | $          | (31,230 | ) | $ | 126,763 |   |

 

*See accompanying notes toconsolidated financial statements.*

 

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**WEST SUBURBAN BANCORP, INC.**

**CONSOLIDATED STATEMENTS OF CASHFLOWS**

**YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007**

(Dollars in thousands)

 
| ** **                                                                                           | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** |
|------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| **Cash flows from operating activities**                                                             |       |     |       |     |       |     |       |
| Net  (loss) income                                                                                   |       | $        | (835       | )        | $          | 16,816   |       | $ | 23,413 |   |
| Adjustments  to reconcile net (loss) income to net cash provided by continuing operating  activities |       |     |       |     |       |     |       |
| Depreciation                                                                                         |       | 3,246    |       | 3,342    |       | 3,218    |       |
| Provision  for loan losses                                                                           |       | 24,925   |       | 10,360   |       | 375      |       |
| Deferred  income tax benefit                                                                         |       | (5,603   | )          | (1,861   | )          | (1,269   | )          |
| Net  discount accretion and premium amortization of securities                                       |       | 673      |       | (148     | )          | 291      |       |
| Net  realized (gain) loss on securities transactions                                                 |       | (109     | )          | (101     | )          | 6        |       |
| Impairment  of FHLMC preferred stock                                                                 |       | —   |       | —   |       | 381      |       |
| Impairment  of trust preferred securities                                                            |       | 8,320    |       | —   |       | —   |       |
| Gain  on redemption of VISA stock                                                                    |       | —   |       | (2,075   | )          | —   |       |
| (Increase)  decrease in carrying value of bank-owned life insurance                                  |       | (2,030   | )          | 2,179    |       | (1,525   | )          |
| Net  gain on sales of loans held for sale                                                            |       | (553     | )          | (70      | )          | (50      | )          |
| Sales  of loans held for sale                                                                        |       | 53,168   |       | 5,480    |       | 5,875    |       |
| Origination  of loans held for sale                                                                  |       | (50,847  | )          | (6,828   | )          | (6,175   | )          |
| Net  loss (gain) on sales of premises and equipment                                                  |       | 19       |       | (5       | )          | (2       | )          |
| Net  loss (gain) on sales of other real estate                                                       |       | 3        |       | (29      | )          | 2        |       |
| Write  down of other real estate                                                                     |       | 449      |       | 121      |       | —   |       |
| (Increase)  decrease in accrued interest and other assets                                            |       | (13,893  | )          | 3,122    |       | (342     | )          |
| (Decrease)  increase in accrued interest and other liabilities                                       |       | (7,288   | )          | (5,637   | )          | 4,081    |       |
| Net  cash provided by (used in) discontinued operating activities                                    |       | 4,768    |       | 756      |       | (1,102   | )          |
| **Net cash provided by operating activities**                                                        |       | 14,413   |       | 25,422   |       | 27,177   |       |
| **Cash flows from investing activities**                                                             |       |     |       |     |       |     |       |
| Securities  available for sale                                                                       |       |     |       |     |       |     |       |
| Sales                                                                                                |       | 19,777   |       | 89,838   |       | 470      |       |
| Maturities,  calls and redemptions                                                                   |       | 83,762   |       | 167,248  |       | 89,870   |       |
| Purchases                                                                                            |       | (85,592  | )          | (22,241  | )          | (90,088  | )          |
| Securities  held to maturity and FHLB stock                                                          |       |     |       |     |       |     |       |
| Maturities,  calls and redemptions                                                                   |       | 79,754   |       | 23,603   |       | 21,054   |       |
| Purchases                                                                                            |       | (105,520 | )          | (240,376 | )          | (167     | )          |
| Net  decrease (increase) in loans                                                                    |       | 13,520   |       | (20,411  | )          | (73,725  | )          |
| Investment  in bank-owned life insurance                                                             |       | (129     | )          | (337     | )          | (1,336   | )          |
| Purchases  of premises and equipment                                                                 |       | (2,616   | )          | (5,215   | )          | (6,156   | )          |
| Sales  of premises and equipment                                                                     |       | 731      |       | 154      |       | 92       |       |
| Sales  of other real estate                                                                          |       | 3,919    |       | 519      |       | 539      |       |
| Net  cash used in discontinued investing activities                                                  |       | (701     | )          | (779     | )          | (365     | )          |
| **Net cash provided by (used in) continuing investing  activities**                                  |       | 6,905    |       | (7,997   | )          | (59,812  | )          |
| **Cash flows from financing activities**                                                             |       |     |       |     |       |     |       |
| Net  increase (decrease) in deposits                                                                 |       | 131,062  |       | (46,149  | )          | (40,130  | )          |
| Net  (decrease) increase in federal funds purchased                                                  |       | (55,000  | )          | 55,000   |       | —   |       |
| Repurchase  and retirement of common stock                                                           |       | (2,658   | )          | —   |       | —   |       |
| Net  increase in prepaid solutions cards                                                             |       | 2,711    |       | 13,315   |       | 3,544    |       |
| Dividends  paid                                                                                      |       | (4,297   | )          | (17,300  | )          | (21,625  | )          |
| **Net cash provided by (used in) financing activities**                                              |       | 71,818   |       | 4,866    |       | (58,211  | )          |
| **Net increase (decrease) in cash and cash equivalents**                                             |       | 93,136   |       | 22,291   |       | (90,846  | )          |
| **Beginning cash and cash equivalents**                                                              |       | 55,474   |       | 33,183   |       | 124,029  |       |
| **Ending cash and cash equivalents**                                                                 |       | $        | 148,610    |     | $          | 55,474   |       | $ | 33,183 |   |
| **Supplemental disclosures**                                                                         |       |     |       |     |       |     |       |
| Cash  paid for interest                                                                              |       | $        | 25,000     |     | $          | 35,031   |       | $ | 48,816 |   |
| Cash  paid for income taxes                                                                          |       | 1,918    |       | 7,824    |       | 9,082    |       |
| Other  real estate acquired through loan foreclosures                                                |       | 25,707   |       | 4,445    |       | 1,014    |       |

 

*See accompanying notes to consolidated financial statements*.

 

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## ** **

## **WEST SUBURBAN BANCORP,INC.**

## **NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS**

(Dollars inthousands, except per share data)

 

# **Note 1 - Nature ofBusiness and Summary of Significant Accounting Policies**

 

West SuburbanBancorp, Inc. (“West Suburban”) through the branch network of itssubsidiary, West Suburban Bank (the “Bank” and, together with West Suburban,the “Company”), operates 35 full-service branches, five limited-servicebranches and four departments providing insurance, financial and other servicesfor the convenience of the customers of the Bank throughout DuPage, Kane,Kendall and Will Counties in Illinois. Customers in these areas are the primaryconsumers of the Company’s loan and deposit products and services. Althoughborrower cash flow is expected to be the primary source of repayment, theCompany’s loans are generally secured by various forms of collateral orsecurity including real estate, business assets, consumer goods, personalguarantees and other items.

 

***OperatingSegments***

While the Company’ssenior management monitors the revenue streams derived from various individualand groups of products and services, operations are managed and financialperformance is evaluated on a company-wide basis. Accordingly, all of theCompany’s operations are considered by management to be aggregated in onereportable operating segment. Discrete financial information is not availableother than on a company-wide basis.

 

***Principlesof Consolidation***

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

 

***Useof Estimates***

To preparefinancial statements in conformity with accounting principles generallyaccepted in the United States of America, management makes estimates andassumptions, which are subject to change, based on available information. Theseestimates and assumptions affect the amounts reported in the financialstatements and the disclosures provided, and future results could differ. Theallowance for loan losses, fair values of financial instruments, carryingvalues of other real estate and other-than-temporary impairment of securitiesare particularly subject to change.

 

***Securities***

Debt andmarketable equity securities are classified into two categories, “available forsale” and “held to maturity.” Available for sale securities are carried at fairvalue with net unrealized gains and losses (net of deferred tax) reported inaccumulated other comprehensive income (loss) as a separate component ofshareholders’ equity. Held to maturity securities are carried at amortized costas the Company has both the ability and positive intent to hold them tomaturity. Other securities such as Federal Home Loan Bank stock are carried atcost. Interest income includes amortization of purchase premium or discount.Premiums and discounts on securities are amortized on the level-yield methodwithout anticipating prepayments, except for mortgage-backed securities whereprepayments are anticipated. Gains and losses on sales are recorded on thetrade date and determined using the specific identification method. The Companydoes not engage in trading activities.

 

Management evaluatessecurities for other-than-temporary impairment at least on a quarterly basis,and more frequently when economic or market conditions warrant such anevaluation. Declines in the fair value of securities below their cost that areother than temporary are reflected as realized losses. In estimatingother-than-temporary losses, management considers the length of time and extentthat fair value has been less than cost, the financial condition and near termprospects of the issuer and whether the Company has the intent to sell or morelikely than not would be required to sell the security before its anticipatedrecovery.

 

***Loansand Allowance for Loan Losses***

Loans thatmanagement has the intent and ability to hold for the foreseeable future oruntil maturity or payoff are reported at the principal balance outstanding, netof unearned interest, deferred loan fees and costs and an allowance for loanlosses. Interest income is accrued on the unpaid balance of the Company’s loansand includes amortization of net deferred loan fees and costs over the loanterm. Loan origination fees, net of certain direct origination costs,

 

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are deferred andrecognized in interest income using the level-yield method without anticipatingprepayments. Accrual of interest is generally discontinued on loans 90 dayspast due, or on an earlier date, if management believes, after consideringeconomic and business conditions and collection efforts, that the borrower’sfinancial condition is such that collection of principal or interest isdoubtful. In some circumstances, a loan more than 90 days past due may continueto accrue interest if it is fully secured and in the process of collection.When a loan is classified as nonaccrual, interest previously accrued but notcollected is charged back to interest income. When payments are received onnonaccrual loans they are first applied to principal, then to interest incomeand finally to expenses incurred for collection.

 

The allowance forloan losses is a valuation allowance for probable incurred credit losses in theloan portfolio. The allowance is increased by a provision for loan lossescharged to earnings. Loan losses are charged against the allowance whenmanagement believes the uncollectibility of a loan has been established.Subsequent recoveries, if any, are credited to the allowance. The allowanceconsists of specific and general components. The specific component relates tospecific loans that are individually classified as impaired. The generalcomponent covers pools of other loans and is based on historical lossexperience adjusted for current factors. The allowance for loan losses isevaluated monthly based on management’s periodic review of loan collectibilityin light of historical loan loss experience, the nature and volume of the loanportfolio, information about specific borrower situations and estimatedcollateral values and prevailing economic conditions. Although allocations ofthe allowance may be made for specific loans, the entire allowance is availablefor any loan that, in management’s judgment, should be charged-off. Management’sevaluation of loan collectibility is inherently subjective as it requiresestimates that are subject to significant revision as more information becomesavailable or as relevant circumstances change.

 

The Companyevaluates commercial, real estate construction and commercial mortgage loansmonthly for impairment. A loan is considered impaired when, based on currentinformation and events, full payment under the loan terms is not expected.Loans for which the terms have been modified and for which the borrower isexperiencing financial difficulties are considered troubled debt restructuringsand classified as impaired. Impairment is measured based on the present valueof expected future cash flows discounted at the loan’s effective interest rateor the fair value of the loan’s collateral, if repayment of the loan iscollateral dependent. A valuation allowance is maintained for the amount ofimpairment. Generally, loans 90 days or more past due and loans classified asnonaccrual status are considered for impairment. Impairment is considered on anentire category basis for smaller-balance loans of similar nature such asresidential real estate and consumer loans, and on an individual basis forother loans. In general, consumer and credit card loans are charged-off nolater than 120 days after a consumer or credit card loan becomes past due.

 

***LoansHeld for Sale***

Loans areidentified as either held for investment or held for sale upon origination.Loans held for sale are recorded at the lower of amortized cost or fair value,as determined by outside commitments from investors. Unrealized losses, if any,are recognized on a current basis by charges to earnings. At December 31,2009 and 2008, loans held for sale were $0 and $1,768, respectively. The costand fair value of loans held for sale was approximately the same. Mortgageloans held for sale are generally sold with servicing released.

 

***Bank-OwnedLife Insurance (“BOLI”)***

The Company has purchasedlife insurance policies on certain officers and directors. Bank-owned lifeinsurance is recorded at the amount that can be realized under the insurancecontract at the balance sheet date, which is the cash surrender value adjustedfor other charges or other amounts due that are probable at settlement.

 

***Premisesand Equipment***

Land is carried atcost. Premises and equipment are stated at cost less accumulated depreciation.Depreciation is generally computed on the straight-line method over theestimated useful lives of the assets ranging from 8 to 50 years for premisesand from 3 to 15 years for furniture and equipment.

 

***OtherReal Estate***

Other real estateincludes properties acquired in partial or total settlement of problem loans.Assets acquired through or instead of loan foreclosure are initially recordedat fair value less anticipated costs to sell when acquired, establishing a newcost basis. If fair value declines subsequent to acquisition, a valuationallowance is recorded through expense. Operating costs after acquisition areexpensed.

 

12

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###### *** ***

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

Premises andequipment and other long-term assets are reviewed for impairment when eventsindicate their carrying amount may not be recoverable from future undiscountedcash flows. If impaired, the assets are recorded at fair value.

 

***LoanCommitments and Related Financial Instruments***

Financialinstruments include off-balance sheet credit instruments, such as commitmentsto make loans and commercial letters of credit, issued to meet customerfinancing needs. The face amount for these items represents the exposure toloss, before considering customer collateral or ability to repay. Suchfinancial instruments are recorded when they are funded.

 

***DiscontinuedOperations***

On December 4,2009, the Company sold its prepaid solutions group. The current and comparativeresults related to the prepaid solutions group have been reflected asdiscontinued operations.

 

During 2010, theCompany anticipates transferring substantially all of the outstanding balanceson prepaid solutions cards, which represent the total of prepaid solutionscards deposits and prepaid solutions cards liabilities to another financialinstitution.

 

***IncomeTaxes***

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

 

The Company adoptedFinancial Accounting Standards Board (“FASB”) guidance “Accounting for Uncertainty in Income Taxes” as of January 1,2007. A tax position is recognized as a benefit only if it is “more likely thannot” that the tax position would be sustained in a tax examination, with a taxexamination being presumed to occur. The amount recognized is the largestamount of tax benefit that is greater than 50% likely of being realized onexamination. For tax positions not meeting the “more likely than not” test, notax benefit is recorded. The adoption had no impact on the Company’s financialcondition or results of operations.

 

The Company recognizesinterest and/or penalties related to income tax matters in income tax expense.During 2009, the Company did not record any interest or penalties related toincome tax matters in income tax expense.

 

***EmployeeStock Ownership Plan (“ESOP”) and Other Retirement Plans***

The West SuburbanBank 401(k) Profit Sharing Plan was established to assist the Company inrecruiting and retaining its personnel.Participation in the plan is subject to certain age and service requirements.Although the Company currently intends to match a percentage of thecontributions that each employee voluntarily makes to the plan, allcontributions by the Company are discretionary and subject to review by theBoard of Directors from time to time. The plan is also intended to enable longtime employees of the Company that also participate in the ESOP to diversifytheir retirement savings.

 

TheBank also maintains an ESOP, which is a noncontributory tax qualifiedretirement plan that covers employees who have satisfied specific servicerequirements. Subject to review by the Board of Directors, the Bank makescontributions to the ESOP for the benefit of the participants from time totime. Dividends declared on common stock owned by the ESOP are charged againstretained earnings.

 

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

 

The Company has apostretirement heathcare plan covering certain executives. Postretirementbenefit costs are net of service and interest costs and amortization of gainsand losses not immediately recognized.

 

13

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The Company hasdeferred compensation arrangements with certain former and current executiveofficers. Deferred compensation expense allocates the benefits over years ofservice.

 

***EarningsPer Share***

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

 

***CashFlows***

For purposes ofreporting cash flows, cash and cash equivalents include cash and due from banksand federal funds sold. Generally, federal funds are sold for one-day periods.Net cash flows are reported for customer loan, deposit, federal funds purchasedand prepaid solutions cards transactions.

 

***ComprehensiveIncome***

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

 

***LegalProceedings***

Legal proceedings,including claims and legal actions arising in the ordinary course of business,are recorded as liabilities when the likelihood of loss is probable and anamount or range of loss can be reasonably estimated.

 

***Restrictionson Cash***

Cash on hand or ondeposit with the Federal Reserve Bank of $12,546 and $12,982 was required tomeet regulatory reserve and clearing requirements at year end 2009 and 2008,respectively.

 

***DividendRestrictions***

Banking regulationsrequire maintaining certain capital levels and may limit the dividends paid bythe Bank to West Suburban or by West Suburban to shareholders. (See Note 12 inthe Consolidated Financial Statements for more specific disclosure.)

 

***FairValue of Financial Instruments***

Fair value of financialinstruments are estimated using relevant market information and otherassumptions. (See Note 10 for more specific disclosure.) Fair value estimatesinvolve uncertainties and matters of significant judgment regarding interestrates, credit risk, prepayments, and other factors, especially in the absenceof broad markets for particular items. Changes in assumptions or in marketconditions could significantly affect the estimates.

 

***Reclassifications***

Certain reclassifications have been made in prioryears’ financial statements to conform to the current year’s presentation. Allapplicable information as of and for the years ended 2008 and 2007 has beenreclassified for discontinued operations comparative purposes. To conform withthe balance sheet presentation as of December 31, 2009, the Companyreclassified $34,360 of December 31, 2008 prepaid solutions cards balancesfrom liabilities to deposits. This reclassification is in accordance with theFederal Deposit Insurance Corporation’s (“FDIC”) General Counsel Opinion No. 8— “Stored Value Cards,” which became effective in the fourth quarter of 2008and clarifies which prepaid solutions cards balances are classified as deposits.The balances that have been reclassified as deposits are eligible for FDICinsurance coverage to the maximum extent permitted by law. The reclassificationof the December 31, 2008 balances did not change the Company’sconsolidated assets disclosed in the December 31, 2008 consolidatedfinancial statements and had no impact on the December 31, 2008consolidated statement of income, statement of changes in shareholders’ equityor statement of cash flows.

 

***Adoptionof New Accounting Standards***

In June 2009, the FASB replaced*The Hierarchy of GenerallyAccepted Accounting Principles*, with the *FASB Accounting Standards Codification*TM (the “Codification”)as the source of authoritative accounting principles recognized by the FASB tobe applied by nongovernmental entities in the preparation of financialstatements in conformity with GAAP. Rules and interpretive releases of theSecurities and Exchange Commission (“SEC”) under authority of federalsecurities laws are also sources of authoritative GAAP for SEC registrants. TheCodification was effective for financial statements issued for periods endingafter September 15, 2009.

 

14

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InApril 2009, the FASB amended existing guidance for determining whetherimpairment is other-than-temporary for debt securities. The guidance requiresan entity to assess whether it intends to sell, or it is more likely than notthat it will be required to sell, a security in an unrealized loss positionbefore recovery of its amortized cost basis. If either of these criteria ismet, the entire difference between amortized cost and fair value is recognizedas impairment through earnings.  Forsecurities that do not meet the aforementioned criteria, the amount ofimpairment is split into two components as follows: (1) other-than-temporaryimpairment (“OTTI”) related to other factors, which is recognized in othercomprehensive income and (2) OTTI related to credit loss, which must berecognized in the income statement.  Thecredit loss is defined as the difference between the present value of the cashflows expected to be collected and the amortized cost basis. Additionally,disclosures about OTTI for debt and equity securities were expanded. Thisguidance was effective for interim and annual reporting periods ending after June 15,2009, with early adoption permitted for periods ending after March 15,2009.  The adoption did not have amaterial impact on the Company’s consolidated financial position, results ofoperations or cash flows.

 

InApril 2009, the FASB issued guidance that emphasizes that the objective ofa fair value measurement does not change even when market activity for theasset or liability has decreased significantly. Fair value is the price that would be received for an asset sold or paidto transfer a liability in an orderly transaction (that is, not a forcedliquidation or distressed sale) between market participants at the measurementdate under current market conditions. When observable transactions or quoted prices are not consideredorderly, then little, if any, weight should be assigned to the indication ofthe asset or liability’s fair value.  Adjustments to those transactions or prices should be applied todetermine the appropriate fair value. The guidance, which was applied prospectively, was effective for interimand annual reporting periods ending after June 15, 2009, with earlyadoption permitted for periods ending after March 15, 2009.  The adoption did not have a material impacton the Company’s consolidated financial position, results of operations or cashflows.

 

InAugust 2009, the FASB amended existing guidance for the fair valuemeasurement of liabilities by clarifying that in circumstances in which aquoted price in an active market for the identical liability is not available,a reporting entity is required to measure fair value using a valuationtechnique that uses the quoted price of the identical liability when traded asan asset, that uses quoted prices for similar liabilities or similarliabilities when traded as assets, or that is consistent with existing fairvalue guidance. The amendments in this guidance also clarify that both a quotedprice in an active market for the identical liability at the measurement dateand the quoted price for the identical liability when traded as an asset in anactive market when no adjustments to the quoted price of the asset are requiredare Level 1 fair value measurements. The guidance was effective for the firstreporting period beginning after issuance. The adoption did not have a materialimpact on the Company’s consolidated financial position, results of operationsor cash flows.

 

***Newly Issued But Not Yet Effective Accounting Standards***

InJune 2009, the FASB amended previous guidance relating to transfers offinancial assets and eliminated the concept of a qualifying special purposeentity.  This guidance must be applied asof the beginning of each reporting entity’s first annual reporting period thatbegins after November 15, 2009, for interim periods within that first annualreporting period and for interim and annual reporting periods thereafter. Thisguidance must be applied to transfers occurring on or after the effective date.Additionally, on and after the effective date, the concept of a qualifyingspecial purpose entity is no longer relevant for accounting purposes.Therefore, formerly qualifying special-purpose entities should be evaluated forconsolidation by reporting entities on and after the effective date inaccordance with the applicable consolidation guidance. The disclosureprovisions were also amended and apply to transfers that occurred both beforeand after the effective date of this guidance. The Company does not expect the adoption to have a material impact on theCompany’s consolidated financial position, results of operations or cash flows.

 

InJune 2009, the FASB amended guidance for consolidation of variableinterest entity guidance by replacing the quantitative-based risks and rewardscalculation for determining which enterprise, if any, has a controllingfinancial interest in a variable interest entity with an approach focused onidentifying which enterprise has the power to direct the activities of avariable interest entity that most significantly impact the entity’s economicperformance and (1) the obligation to absorb losses of the entity or (2) theright to receive benefits from the entity. Additional disclosures about anenterprise’s involvement in variable interest entities are also required. Thisguidance is effective as of the beginning of each reporting entity’s firstannual reporting period that begins after November 15, 2009, for interimperiods within that first annual reporting period, and for interim and annualreporting periods thereafter. Early

 

15

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adoptionis prohibited. The Company does not expect the adoption to have a materialimpact on the Company’s consolidated financial position, results of operationsor cash flows.

##### ** **

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

 

Theamortized cost, unrealized gains and losses and fair value of securitiesavailable for sale are as follows at December 31:

 
| ** **                             | ** ** | **2009**            | ** ** |
|----------------------------------------|------------|---------------------|------------|
| ** **                             | ** ** | **Amortized  Cost** | ** ** | **Gross  Unrealized  Gains** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Fair  Value** | ** ** |
| U.S. government  sponsored enterprises |       | $                   | 49,621     |   | $ | 909 |   | $ | (46 | ) | $ | 50,484 |   |
| Mortgage-backed:  residential          |       | 139,151             |       | 5,313 |   | (13 | ) | 144,451 |   |
| States and political  subdivisions     |       | 10,367              |       | 314 |   | (6 | ) | 10,675 |   |
| Total debt securities                  |       | $                   | 199,139    |   | $ | 6,536 |   | $ | (65 | ) | $ | 205,610 |   |

 
| ** **                             | ** ** | **2008**            | ** ** |
|----------------------------------------|------------|---------------------|------------|
| ** **                             | ** ** | **Amortized  Cost** | ** ** | **Gross  Unrealized  Gains** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Fair  Value** | ** ** |
| Corporate                              |       | $                   | 24,430     |   | $ | — |   | $ | (753 | ) | $ | 23,677 |   |
| Trust preferred                        |       | 8,511               |       | — |   | (5,048 | ) | 3,463 |   |
| U.S. government  sponsored enterprises |       | 22,170              |       | 1,084 |   | — |   | 23,254 |   |
| Mortgage-backed:  residential          |       | 162,062             |       | 3,385 |   | (153 | ) | 165,294 |   |
| States and political  subdivisions     |       | 10,160              |       | 57 |   | (91 | ) | 10,126 |   |
| Total debt securities                  |       | $                   | 227,333    |   | $ | 4,526 |   | $ | (6,045 | ) | $ | 225,814 |   |

 

The amortized cost,unrealized gains and losses and fair value of securities held to maturity areas follows at December 31:

 
| ** **                             | ** ** | **2009**            | ** ** |
|----------------------------------------|------------|---------------------|------------|
| ** **                             | ** ** | **Amortized  Cost** | ** ** | **Gross  Unrealized  Gains** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Fair  Value** | ** ** |
| U.S. government  sponsored enterprises |       | $                   | 41,199     |   | $ | 392 |   | $ | (48 | ) | $ | 41,543 |   |
| Mortgage-backed:  residential          |       | 178,129             |       | 7,029 |   | (160 | ) | 184,998 |   |
| States and political  subdivisions     |       | 46,580              |       | 429 |   | (234 | ) | 46,775 |   |
| Total                                  |       | $                   | 265,908    |   | $ | 7,850 |   | $ | (442 | ) | $ | 273,316 |   |

 
| ** **                             | ** ** | **2008**            | ** ** |
|----------------------------------------|------------|---------------------|------------|
| ** **                             | ** ** | **Amortized  Cost** | ** ** | **Gross  Unrealized  Gains** | ** ** | **Gross  Unrealized  Losses** | ** ** | **Fair  Value** | ** ** |
| U.S. government  sponsored enterprises |       | $                   | 28,072     |   | $ | 759 |   | $ | — |   | $ | 28,831 |   |
| Mortgage-backed:  residential          |       | 193,187             |       | 4,499 |   | (26 | ) | 197,660 |   |
| States and political  subdivisions     |       | 18,975              |       | 98 |   | (636 | ) | 18,437 |   |
| Total                                  |       | $                   | 240,234    |   | $ | 5,356 |   | $ | (662 | ) | $ | 244,928 |   |

 

16

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Securities withunrealized losses at year end 2009 and 2008 not recognized in income arepresented below by the length of time the securities have been in a continuousunrealized loss position:

 
| ** **                             | ** ** | **2009**                | ** ** |
|----------------------------------------|------------|-------------------------|------------|
| ** **                             | ** ** | **Less than 12 Months** | ** ** | **12 Months or More** | ** ** | **Total** | ** ** |
| ** **                             | ** ** | **Fair  Value**         | ** ** | **Unrealized  Loss** | ** ** | **Fair  Value** | ** ** | **Unrealized  Loss** | ** ** | **Fair  Value** | ** ** | **Unrealized  Loss** | ** ** |
| U.S. government  sponsored enterprises |       | $                       | 25,637     |   | $ | (94 | ) | $ | — |   | $ | — |   | $ | 25,637 |   | $ | (94 | ) |
| Mortgage-backed:  residential          |       | 21,072                  |       | (136 | ) | 751 |   | (37 | ) | 21,823 |   | (173 | ) |
| States and political  subdivisions     |       | 2,964                   |       | (97 | ) | 1,001 |   | (143 | ) | 3,965 |   | (240 | ) |
| Total temporarily  impaired            |       | $                       | 49,673     |   | $ | (327 | ) | $ | 1,752 |   | $ | (180 | ) | $ | 51,425 |   | $ | (507 | ) |

 
| ** **                         | ** ** | **2008**                | ** ** |
|------------------------------------|------------|-------------------------|------------|
| ** **                         | ** ** | **Less than 12 Months** | ** ** | **12 Months or More** | ** ** | **Total** | ** ** |
| ** **                         | ** ** | **Fair  Value**         | ** ** | **Unrealized  Loss** | ** ** | **Fair  Value** | ** ** | **Unrealized  Loss** | ** ** | **Fair  Value** | ** ** | **Unrealized  Loss** | ** ** |
| Corporate                          |       | $                       | 4,839      |   | $ | (79 | ) | $ | 18,838 |   | $ | (674 | ) | $ | 23,677 |   | $ | (753 | ) |
| Trust preferred                    |       | —                  |       | — |   | 3,463 |   | (5,048 | ) | 3,463 |   | (5,048 | ) |
| Mortgage-backed:  residential      |       | 20,607                  |       | (143 | ) | 3,836 |   | (36 | ) | 24,443 |   | (179 | ) |
| States and political  subdivisions |       | 15,297                  |       | (727 | ) | — |   | — |   | 15,297 |   | (727 | ) |
| Total temporarily  impaired        |       | $                       | 40,743     |   | $ | (949 | ) | $ | 26,137 |   | $ | (5,758 | ) | $ | 66,880 |   | $ | (6,707 | ) |

 

Mortgage-backed:residential securities consist of securities issued by U.S. governmentsponsored enterprises and agencies, primarily Fannie Mae, Freddie Mac andGinnie Mae, institutions which the government has affirmed its commitment tosupport.

 

***Other-Than-TemporaryImpairment Evaluation***

 

Management evaluatessecurities for OTTI at least on a quarterly basis, and more frequently wheneconomic or market conditions warrant such an evaluation. The investmentsecurities portfolio is evaluated for OTTI by segregating the portfolio intotwo general segments and applying the appropriate OTTI model. Investment securitiesclassified as available for sale or held to maturity are generally evaluatedfor OTTI under FASB guidance “Investmentsin Debt and Equity Securities.” However, certain purchased beneficialinterests, including non-agency mortgage-backed securities and collateralizeddebt obligations that had credit ratings at the time of purchase of below AAare evaluated using the model outlined in FASB guidance “Beneficial Interests in Securitized Financial Assets.”

 

In determining OTTI ondebt securities, management considers many factors, including: (1) thelength of time and the extent to which the fair value has been less than cost; (2) thefinancial condition and near-term prospects of the issuer; (3) whether themarket decline was affected by macroeconomic conditions; and (4) whetherthe Company has the intent to sell the debt security or whether it is morelikely than not the Company will be required to sell the debt security beforeits anticipated recovery. The assessment of whether OTTI exists involves a highdegree of subjectivity and judgment and is based on the information availableto management at a point in time.

 

In determining OTTI onpurchased beneficial interests the Company evaluates the present value offuture cash flows to determine if there has been an adverse change in theremaining expected future cash flows.

 

When managementdetermines that OTTI exists under either model, the amount of the OTTIrecognized in earnings depends on whether the Company intends to sell thesecurity or it is more likely than not the Company will be required to sell thesecurity before recovery of its amortized cost basis, less any current-periodcredit loss. If the Company intends to sell or it is more likely than not itwill be required to sell the security before recovery of its amortized costbasis, less any current-period credit loss, the OTTI is recognized in earningsin an amount equal to 

 

17

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the entire differencebetween the investment’s amortized cost basis and its fair value at the balancesheet date. If the Company does not intend to sell the security and it is notmore likely than not that the Company will be required to sell the securitybefore recovery of its amortized cost basis less any current-period loss, theOTTI is separated into the amount representing the credit loss and the amountrelated to all other factors. The amount of the total OTTI related to thecredit loss is determined based on the present value of cash flows expected tobe collected and is recognized in earnings. The amount of the total OTTIrelated to other factors is recognized in other comprehensive income, net ofapplicable taxes. The previous amortized cost basis less the portion of theOTTI recognized in earnings becomes the new amortized cost basis of theinvestment.

 

The Company’s pooledtrust preferred securities are evaluated for OTTI using an analysis todetermine whether there has been an adverse change in the expected cash flows.The evaluation also includes monitoring the ratings assigned by national ratingagencies such as Moody’s Investor Service to determine if any downgrades haveoccurred, and a detailed review of the underlying collateral to determine abreak in yield point. These securities were investment grade at purchase, butat June 30, 2009 Moody’s rated these securities as Ca, which are highlyspeculative and are likely in, or very near, default, with some prospect ofrecovery of principal and interest, and C, which are judged to be of poorstanding and are subject to very high credit risk. The issuers in thesesecurities are primarily banks, but some of the pools do include a limitednumber of insurance companies.

 

The OTTI model considersthe structure and term of the Collateralized Debt Obligation (“CDO”) and thefinancial condition of the underlying issuers. Specifically, the model detailsinterest rates, principal balances of note classes and underlying issuers, thetiming and amount of interest and principal payments of the underlying issuers,and the allocation of the payments to the note classes. The estimate ofexpected cash flows was based on the most recent trustee reports and any otherrelevant market information, including announcements of interest paymentdeferrals or defaults of underlying trust preferred securities. Assumptionsused in the model included expected future default rates, prepayments, andrecovery. Management treats all interest payment deferrals as defaults. Inaddition, management uses the model to “stress” each CDO, or make assumptions moresevere than expected activity, to determine the degree to which assumptionscould deteriorate before the CDO could no longer fully support repayment of theCompany’s note class. As of June 30, 2009, the analysis revealed that OTTIexisted on some of these investments, and accordingly, the Company recognized$891 of credit OTTI for the quarter ended June 30, 2009. Upon completionof the September 30, 2009 analysis, management’s model indicated that allof these securities had continued to experience significant additional defaultsor deferrals during the third quarter of 2009 and additional OTTI existed onall of these securities. Based on this analysis, management decided to sell thepooled trust preferred securities and wrote down these investments to fairvalue as of September 30, 2009.  Thefair value was calculated using bid prices obtained from independent brokeragehouses. For the five pooled trust preferred securities owned by the Company,only one of the securities received multiple bids and the Company wrote thisinvestment, with an amortized cost of $2,779, down to $255 as of September 30,2009.  On October 27, 2009, theCompany sold this pooled trust preferred security for $255. The remaining fourpooled trust preferred securities, with an aggregate amortized cost of $4,905,received a bid totaling $19, which management considered to be inconsequentialand thus wrote these securities down to $0, as a full impairment loss.

 

The table below presentsa roll-forward of the credit losses recognized in earnings for the period endedDecember 31, 2009:

 
| Beginning Balance,  January 1, 2009               |   | $      | — |   |
|--------------------------------------------------------|--------|--------|--------|--------|
| Additional credit  losses not previously recorded      |   | 8,320  |   |
| Reductions for  securities that are planned to be sold |   | (8,320 | )      |
| Ending Balance,  December 31, 2009                |   | $      | — |   |

 

18

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The amortized costand fair value of debt securities available for sale and held to maturity at December 31,2009 by contractual maturity are as follows:

 
| ** **                          | ** ** | **Available for Sale** | ** ** | **Held to Maturity** | ** ** |
|-------------------------------------|------------|------------------------|------------|----------------------|------------|
| ** **                          | ** ** | **Amortized  Cost**    | ** ** | **Fair  Value**      | ** ** | **Amortized  Cost** | ** ** | **Fair  Value** | ** ** |
| Due in 1 year or less               |       | $                      | 8,538      |                 | $          | 8,703 |   | $ | 30,713 |   | $ | 30,727 |   |
| Due after 1 year  through 5 years   |       | 33,945                 |       | 34,686               |       | 12,237 |   | 12,488 |   |
| Due after 5 years  through 10 years |       | 11,191                 |       | 11,230               |       | 29,839 |   | 30,175 |   |
| Due after 10 years                  |       | 6,314                  |       | 6,540                |       | 14,990 |   | 14,928 |   |
| Mortgage-backed:  residential       |       | 139,151                |       | 144,451              |       | 178,129 |   | 184,998 |   |
| Total                               |       | $                      | 199,139    |                 | $          | 205,610 |   | $ | 265,908 |   | $ | 273,316 |   |

 

Expected maturities willdiffer from contractual maturities because issuers may have the right to callor prepay obligations with or without call or prepayment penalties.Approximately $66,155 of securities are callable in 2010. Most of thesecallable securities were issued by U.S. government sponsored enterprises.

 

Securities with acarrying value of approximately $114,177 and $130,118 at December 31, 2009and 2008, respectively, were pledged to secure public deposits, fiduciaryactivities and for other purposes required or permitted by law.

 

Sales ofsecurities available for sale were as follows:

 
|                  | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** |
|-----------------------|------------|----------|------------|----------|------------|----------|------------|
| Proceeds from sales   |       | $        | 19,777     |     | $          | 89,838   |       | $ | 470 |   |
| Gross realized gains  |       | 245      |       | 135      |       | —   |       |
| Gross realized losses |       | (136     | )          | (98      | )          | (30      | )          |
|                       |            |          |            |          |            |          |            |  |  |  |

 

*Net gains on securities transactions in 2009, 2008 and 2007include recoveries of $0, $64 and $24, respectively, on securities written downin 2001.*The tax benefit/expense recorded on securities transactionswas not material.

 

**Note 3 -Loans**

 

Majorclassifications of loans were as follows at December 31:

 
| ** **                 | ** ** | **2009**  | ** ** | **2008**  | ** ** |
|----------------------------|------------|-----------|------------|-----------|------------|
| Commercial                 |       | $         | 267,432    |      | $          | 288,234 |   |
| Consumer                   |       | 3,031     |       | 4,276     |       |
| Indirect automobile        |       | 2,395     |       | 4,454     |       |
| Real estate                |       |      |       |      |       |
| Residential                |       | 219,551   |       | 242,947   |       |
| Commercial                 |       | 280,442   |       | 276,995   |       |
| Home equity                |       | 232,607   |       | 257,150   |       |
| Construction               |       | 175,186   |       | 161,532   |       |
| Held for sale              |       | —    |       | 1,768     |       |
| Credit card                |       | 9,874     |       | 10,484    |       |
| Other                      |       | 3,079     |       | 1,333     |       |
| Total                      |       | 1,193,597 |       | 1,249,173 |       |
| Allowance for loan  losses |       | (25,922   | )          | (15,578   | )          |
| Loans, net                 |       | $         | 1,167,675  |      | $          | 1,233,595 |   |

 

19

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TheCompany makes commercial, consumer and residential real estate loans primarilyto customers throughout the western suburbs of Chicago. Construction loans areprimarily made to customers engaged in the development and construction ofresidential real estate projects within the Company’s market area. From time totime the Company will make loans outside of its market area.

 

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

 
| ** **                  | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** |
|-----------------------------|------------|----------|------------|----------|------------|----------|------------|
| Balance, beginning of  year |       | $        | 15,578     |     | $          | 9,269    |       | $ | 10,650 |   |
| Provision for loan losses   |       | 24,925   |       | 10,360   |       | 375      |       |
| Loans charged-off           |       | (14,952  | )          | (4,295   | )          | (2,046   | )          |
| Recoveries                  |       | 371      |       | 244      |       | 290      |       |
| Balance, end of year        |       | $        | 25,922     |     | $          | 15,578   |       | $ | 9,269 |   |

 

Impaired loans aresummarized as follows at December 31:

 
| ** **                                                                       | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** |
|----------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Year-end loans with no  allocated allowance for loan losses                      |       | $        | 30,754     |     | $          | 21,187   |       | $ | 1,048 |   |
| Year-end loans with  allocated allowance for loan losses                         |       | 14,636   |       | 9,036    |       | 2,685    |       |
| Total                                                                            |       | $        | 45,390     |     | $          | 30,223   |       | $ | 3,733 |   |
|                                                                             |       |     |       |     |       |     |       |
| Amount of the allowance  for loan losses allocated to impaired loans at year-end |       | $        | 1,527      |     | $          | 1,684    |       | $ | 421 |   |
| Average impaired loans  during the year                                          |       | 47,768   |       | 20,642   |       | 4,629    |       |
| Interest income  recognized during impairment                                    |       | 301      |       | 223      |       | 129      |       |

 

AtDecember 31, 2009, the Company had $8,601 of loans considered troubleddebt restructurings, which are considered impaired loans. The Company has notallocated any specific reserves to customers whose loan terms have beenmodified in troubled debt restructurings as of December 31, 2009.  The Company has not committed to lend additionalamounts to customers with outstanding loans that are classified as troubleddebt restructurings.

 

Nonperformingloans were as follows at December 31:

 
| ** **                                       | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** |
|--------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Loans past due 90 days  or more still on accrual |       | $        | 790        |     | $          | 1,705    |       | $ | 480 |   |
| Nonaccrual loans                                 |       | 38,038   |       | 23,569   |       | 2,297    |       |
| Total                                            |       | $        | 38,828     |     | $          | 25,274   |       | $ | 2,777 |   |

 

The Companygenerally sells mortgage loans with servicing rights released. Activity duringthe year is as follows:

 
| ** **                                  | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** |
|---------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Origination of loans  held for sale         |       | $        | 50,847     |     | $          | 6,828    |       | $ | 6,175 |   |
| Proceeds from sales of  loans held for sale |       | 53,168   |       | 5,480    |       | 5,875    |       |
| Net gains on sales of  loans held for sale  |       | 553      |       | 70       |       | 50       |       |
|                                             |            |          |            |          |            |          |            |  |  |  |

 

20

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# **Note 4 - Premises andEquipment**

 

Majorclassifications of assets comprising premises and equipment are summarized asfollows at December 31:

 
| ** **                     | ** ** | **2009** | ** ** | **2008** | ** ** |
|--------------------------------|------------|----------|------------|----------|------------|
| Land                           |       | $        | 15,263     |     | $          | 15,263 |   |
| Premises                       |       | 47,607   |       | 45,893   |       |
| Furniture and equipment        |       | 49,812   |       | 48,830   |       |
| Total                          |       | 112,682  |       | 109,986  |       |
| Less accumulated  depreciation |       | (68,914  | )          | (65,643  | )          |
| Premises and equipment,  net   |       | $        | 43,768     |     | $          | 44,343 |   |

 

For 2008, the Companyreclassified $955 of furniture and equipment, net to discontinued operations.

 

The Company leasescertain branch properties and equipment under operating leases. Rent expensewas $454, $421 and $465 for 2009, 2008 and 2007, respectively. Rent commitmentsbefore considering renewal options that generally are present, are summarizedas follows:

##### ** **

| 2010       |   | $   | 576    |   |
|------------|--------|-----|--------|--------|
| 2011       |   | 456 |   |
| 2012       |   | 316 |   |
| 2013       |   | 244 |   |
| 2014       |   | 241 |   |
| Thereafter |   | 344 |   |
| Total      |   | $   | 2,177  |   |

 

**Note 5 -Other Real Estate**

 

Activity in otherreal estate was as follows at December 31:

 
| ** **                         | ** ** | **2009** | ** ** | **2008** | ** ** |
|------------------------------------|------------|----------|------------|----------|------------|
| Beginning balance                  |       | $        | 4,658      |     | $          | 824 |   |
| Acquired through loan  foreclosure |       | 25,707   |       | 4,445    |       |
| Reductions from sales              |       | (3,922   | )          | (490     | )          |
| Direct write-down                  |       | (449     | )          | (121     | )          |
| Ending balance                     |       | $        | 25,994     |     | $          | 4,658 |   |

 

Expenses relatingto other real estate for 2009, 2008 and 2007 were $460, $127 and $0,respectively.

 

21

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##### **Note6 - Deposits**

 

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

 
| ** **                       | ** ** | **2009** | ** ** | **2008** | ** ** |
|----------------------------------|------------|----------|------------|----------|------------|
| Demand-noninterest-bearing       |       | $        | 125,132    |     | $          | 132,664 |   |
| Prepaid  solutions card deposits |       | 30,577   |       | 34,360   |       |
| NOW                              |       | 328,405  |       | 310,178  |       |
| Money  market checking           |       | 403,155  |       | 322,207  |       |
| Savings                          |       | 330,197  |       | 320,763  |       |
| Time  deposits                   |       |     |       |     |       |
| Less  than $100,000              |       | 392,501  |       | 361,313  |       |
| $100,000  and greater            |       | 147,020  |       | 144,440  |       |
| Total                            |       | $        | 1,756,987  |     | $          | 1,625,925 |   |

 

At December 31,2009, the scheduled maturities of time deposits were as follows:

 
| 2010       |   | $      | 346,086 |   |   |   |   |
|------------|--------|--------|---------|--------|--------|--------|--------|
| 2011       |   | 79,797 |    |   |   |   |
| 2012       |   | 26,249 |    |   |   |   |
| 2013       |   | 69,064 |    |   |   |   |
| 2014       |   | 18,124 |    |   |   |   |
| Thereafter |   | 201    |    |   |   |   |
| Total      |   | $      | 539,521 |   |   |   |   |

 

##### **Note7 - Income Taxes**

 

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

 
| ** **                     | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** |
|--------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Current  tax (benefit) expense |       |     |       |     |       |     |       |
| Federal                        |       | $        | (2,199     | )        | $          | 8,252    |       | $ | 9,372 |   |
| State                          |       | —   |       | (1,311   | )          | —   |       |
| Deferred  tax benefit          |       | (5,603   | )          | (1,861   | )          | (1,269   | )          |
| Total                          |       | $        | (7,802     | )        | $          | 5,080    |       | $ | 8,103 |   |

 

The Company recordedincome tax expense of $2,248 for 2009, income tax benefit of $281 for 2008 andincome tax expense of $395 for 2007 for discontinued operations.

 

A reconciliation betweentaxes computed at the statutory federal income tax rate and the consolidatedeffective tax rates follows:

 
| ** **                                      | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** |
|-------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Statutory  federal income tax rate              |       | (35.0    | )%         | 35.0     | %          | 35.0     | %          |
| Decrease  in taxes resulting from:              |       |     |       |     |       |     |       |
| Tax-exempt  income                              |       | (8.8     | )%         | (2.7     | )%         | (1.3     | )%         |
| State  income taxes, net of federal tax benefit |       | (10.1    | )%         | (3.4     | )%         | (1.1     | )%         |
| Dividends  on ESOP shares                       |       | (22.0    | )%         | (5.2     | )%         | (4.1     | )%         |
| Bank-owned  life insurance                      |       | (11.1    | )%         | (3.5     | )%         | (1.7     | )%         |
| Other  items, net                               |       | 0.1      | %          | 2.0      | %          | (0.2     | )%         |
| Effective  tax rate                             |       | (86.9    | )%         | 22.2     | %          | 26.6     | %          |

 

22

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

 
| ** **                                            | ** ** | **2009**   | ** ** | **2008**   | ** ** |
|-------------------------------------------------------|------------|------------|------------|------------|------------|
| Deferred  tax assets                                  | ** ** | ** ** | ** ** | ** ** | ** ** |
| Allowance  for loan losses                            |       | $          | 10,304     |       | $          | 6,192 |   |
| Deferred  compensation                                |       | 2,990      |       | 2,139      |       |
| Net  unrealized loss on securities available for sale |       | —     |       | 604        |       |
| Nonaccrual  loan interest income                      |       | 827        |       | 515        |       |
| Pension  obligation adjustment                        |       | 207        |       | 254        |       |
| State  net operating loss                             |       | 2,029      |       | 2,053      |       |
| Other                                                 |       | 813        |       | 707        |       |
| Total  deferred tax assets                            |       | 17,170     |       | 12,464     |       |
| Deferred  tax liabilities                             |       |       |       |       |       |
| Net  unrealized gain on securities available for sale |       | 2,573      |       | —     |       |
| Depreciation                                          |       | 499        |       | 799        |       |
| Federal  Home Loan Bank stock dividends               |       | 611        |       | 611        |       |
| Deposit  base intangible                              |       | 277        |       | 266        |       |
| Qualified  prepaid expenses                           |       | 365        |       | 323        |       |
| Total  deferred tax liabilities                       |       | 4,325      |       | 1,999      |       |
| Net  deferred tax assets                              |       | $          | 12,845     |       | $          | 10,465 |   |

 

Net deferred tax assetsare included in accrued interest and other assets. No valuation allowance wasconsidered necessary for net deferred tax assets. At December 31, 2009,the Company had net operating loss carryforwards for state tax purposestotaling approximately $42,800, which expire at various dates beginning in2018.

 

The Company filesincome tax returns in the U.S. federal jurisdiction and in Illinois. TheCompany is no longer subject to examination by the U.S. federal tax authoritiesor by Illinois tax authorities for years prior to 2006.

 

During the thirdquarter of 2008, a new State of Illinois tax law was passed which providedclarification on an uncertain tax position previously adopted by the Company.As a result, the Company determined that the reserve on the uncertain taxposition was no longer necessary and $1,311 of unrecognized tax positions wasreversed. As of December 31, 2009, the Company, based on its evaluation oftax positions, determined that no reserve was necessary.

 

A reconciliationof the beginning and ending amount of unrecognized tax benefits is as follows:

 
| ** **                              | ** ** | **2008** | ** ** |
|-----------------------------------------|------------|----------|------------|
| Balance  at January 1              |       | $        | 1,500      |   |
| Adjustments  based on tax positions     |       | 229      |       |
| Reductions  of prior year tax positions |       | (1,729   | )          |
| Balance  at December 31            |       | $        | —     |   |

 

# **Note 8 - Benefit Plans**

 

The Bank maintains theWest Suburban Bank 401(k) Profit Sharing Plan (the “401(k) Plan”),which currently serves as the Company’s principal retirement plan. The 401(k) Planwas established to address the limited availability of West Suburban commonstock for acquisition by the ESOP and to offer participants an avenue todiversify their retirement savings. The Company recorded expenses totaling $668and $1,623 during 2009 and 2008, respectively, for contributions to the 401(k) Plan.

 

The ESOP providesincentives to employees by granting participants an interest in West Suburbancommon stock, which represents the ESOP’s primary investment.

 

23

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At December 31,2009 and 2008, the ESOP held 91,317 and 90,270 shares of West Suburban commonstock, respectively, that were allocated to ESOP participants. Upon terminationof their employment, participants who elect to receive their benefitdistributions in the form of West Suburban common stock may require the Companyto purchase the common stock distributed at the appraised fair market valueduring two 60-day periods. The first purchase period begins on the date thebenefit is distributed and the second purchase period begins on the firstanniversary of the distribution date. This contingent repurchase obligation isreflected in the Company’s financial statements as “Common stock in ESOPsubject to contingent repurchase obligation” and reduces shareholders’ equityby an amount that represents the independently appraised fair market value ofall West Suburban common stock held by the ESOP and allocated to participants,without regard to whether it is likely that the shares would be distributed orthat the recipients of the shares would be likely to exercise their right torequire the Company to purchase the shares.

 

During 2009 and 2008,the ESOP distributed $788 and $1,483, respectively, in cash representing theinterests of participants. In addition, the ESOP distributed 80 shares of WestSuburban common stock in 2009 and 192 shares in 2008.

 

An individual account isestablished for each participant under the 401(k) Plan and the ESOP, andthe benefits payable upon retirement, termination, disability or death arebased upon service, the amount of the employer’s, and for the 401(k) Plan,an employee’s, contributions and any income, expenses, gains and losses andforfeitures allocated to the participant’s account.

 

The Company maintainsdeferred compensation arrangements with certain former and current executiveofficers. The deferred compensation expense was $165 for each of the yearsended December 31, 2009, 2008 and 2007. Executive officers can elect todefer the payment of a percentage of their salaries and cash bonuses andmembers of the board of directors can elect to defer the payment of theirdirectors’ fees. In addition, the Company makes annual contributions for thebenefit of current participants ($25 for certain senior executive officers and$5 for other executive officers) in the Company’s deferred compensationarrangements. As of December 31, 2009, 13 current executive officersparticipated in the deferred compensation plan.

 

The total accumulatedliability for all deferred compensation arrangements was $7,522 and $5,381 at December 31,2009 and 2008, respectively. These amounts are included in accrued interest andother liabilities in the consolidated balance sheets.

 

The Company maintains anoncontributory postretirement benefit plan covering certain senior executives.The plan provides postretirement medical, dental and long term care coveragefor certain executives and their surviving spouses. The eligible retirement ageunder the plan is age 62. The Company used a December 31 measurement datefor its postretirement benefit plan. The plan is unfunded.

 

24

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Information about changesduring 2009 and 2008 in obligations of the postretirement benefit plan follows:

 
| ** **                             | ** ** | **2009** | ** ** | **2008** | ** ** |
|----------------------------------------|------------|----------|------------|----------|------------|
| Change  in benefit obligation:         |       |     |       |     |       |
| Beginning  benefit obligation          |       | $        | 980        |     | $          | 885 |   |
| Service  cost                          |       | 41       |       | 37       |       |
| Interest  cost                         |       | 61       |       | 52       |       |
| Actuarial  (gain) loss                 |       | (70      | )          | 28       |       |
| Benefits  paid                         |       | (19      | )          | (22      | )          |
| Ending  benefit obligation             |       | 993      |       | 980      |       |
|                                   |       |     |       |     |       |
| Change  in plan assets, at fair value: |       |     |       |     |       |
| Beginning  plan assets                 |       | —   |       | —   |       |
| Employer  contributions                |       | 19       |       | 22       |       |
| Benefits  paid                         |       | (19      | )          | (22      | )          |
| Ending  plan assets                    |       | —   |       | —   |       |
|                                   |       |     |       |     |       |
| Unfunded  status at December 31   |       | $        | 993        |     | $          | 980 |   |

 

Amounts recognized inaccumulated other comprehensive loss at December 31 consist of:

 
| ** **          | ** ** | **2009** | ** ** | **2008** | ** ** |
|---------------------|------------|----------|------------|----------|------------|
| Net  actuarial loss |       | $        | 290        |     | $          | 387 |   |
| Prior  service cost |       | 231      |       | 252      |       |
| Total               |       | $        | 521        |     | $          | 639 |   |

 

The accumulated benefitobligation was $993 and $980 at December 31, 2009 and 2008, respectively.

 

Net postretirementbenefit costs included the following components:

 
| ** **                                                | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** |
|-----------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Service  cost                                             |       | $        | 41         |     | $          | 37       |       | $ | 26 |   |
| Interest  cost                                            |       | 61       |       | 52       |       | 38       |       |
| Amortization  of unrecognized prior service cost          |       | 21       |       | 21       |       | 21       |       |
| Amortization  of net loss                                 |       | 27       |       | 21       |       | 10       |       |
| Net  periodic postretirement benefit cost                 |       | 150      |       | 131      |       | 95       |       |
|                                                      |       |     |       |     |       |     |       |
| Net  (gain) loss                                          |       | (70      | )          | 28       |       | 189      |       |
| Prior  service cost                                       |       | —   |       | —   |       | —   |       |
| Amortization  of net gain                                 |       | (27      | )          | (21      | )          | (9       | )          |
| Amortization  of prior service cost                       |       | (21      | )          | (21      | )          | (21      | )          |
| Total  recognized in other comprehensive (income) loss    |       | (118     | )          | (14      | )          | 159      |       |
| Postretirement  benefit cost and other comprehensive loss |       | $        | 32         |     | $          | 117      |       | $ | 254 |   |

 

The estimated net lossand prior service costs for the defined postretirement benefit plan that willbe amortized from accumulated other comprehensive income into net periodicbenefit cost over the next fiscal year are $21 and $21, respectively.

 

The discount rate used todetermine net periodic benefit costs and benefit obligations in 2009 and 2008was 5.95% and 6.25%, respectively.

 

25

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For measurement purposes,a 9% annual rate of increase in the per capita premium cost of covered healthcare benefits was assumed for 2010, with rates reducing .5% per annum to anultimate rate of 5% in 2018. Dental benefits were assumed to increase 6% for2010 with rates reducing .5% per annum to an ultimate rate of 5% in 2012.

 

Assumed health care costtrend rates have a significant effect on the amounts reported for the healthcare plans. A one-percentage-point change in assumed health care cost trendrates would have the following effects:

 
| ** **                                               | ** ** | **One-Percentage-Point  Increase** | ** ** | **One-Percentage-Point  Decrease** | ** ** |
|----------------------------------------------------------|------------|------------------------------------|------------|------------------------------------|------------|
| Effect  on total service and interest cost               |       | $                                  | 16         |                               | $          | (13 | ) |
| Effect  on accumulated postretirement benefit obligation |       | 159                                |       | (133                               | )          |
|                                                          |            |                                    |            |                                    |            |  |  |

 

The Company expects tocontribute amounts in 2010 to satisfy its obligations. The following benefitpayments, which reflect expected future service, are expected for the yearsindicated:

 
| 2010               |   | $   | 20     |   |
|--------------------|--------|-----|--------|--------|
| 2011               |   | 21  |   |
| 2012               |   | 15  |   |
| 2013               |   | 22  |   |
| 2014               |   | 30  |   |
| Following  5 Years |   | 257 |   |

 

# **Note 9 -Off-Balance-Sheet Risk, Contingent Liabilities and Guarantees**

 

The Company is a partyto off-balance-sheet financial instruments to meet the financing needs of itscustomers. These financial instruments include commitments to extend credit andstandby letters of credit. These financial instruments involve, to varyingdegrees, elements of credit and interest rate risks. Such financial instrumentsare recorded when funded.

 

Commitmentsto extend credit are agreements to lend to a customer as long as there is noviolation of any condition established in the agreement. These commitmentsprimarily consist of unused lines of credit, undrawn portions of constructionloans and commitments to make new loans. Commitments generally have fixedexpiration dates or other termination provisions and may require the payment ofa fee. Since many of the commitments are expected to expire without beingexercised or drawn upon, the total commitment amounts do not necessarilyrepresent future cash requirements.

 

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

 

26

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

 
| ** **                            | ** ** | **2009**        | ** ** | **2008**           | ** ** |
|---------------------------------------|------------|-----------------|------------|--------------------|------------|
| ** **                            | ** ** | **Fixed  Rate** | ** ** | **Variable  Rate** | ** ** | **Total** | ** ** | **Fixed  Rate** | ** ** | **Variable  Rate** | ** ** | **Total** | ** ** |
| Commercial  loans and lines of credit |       | $               | 1,434      |               | $          | 169,158 |   | $ | 170,592 |   | $ | 4,940 |   | $ | 224,216 |   | $ | 229,156 |   |
| Check  credit lines of credit         |       | 1,027           |       | —             |       | 1,027 |   | 1,033 |   | — |   | 1,033 |   |
| Mortgage  loans                       |       | 8,419           |       | —             |       | 8,419 |   | 6,712 |   | — |   | 6,712 |   |
| Home  equity lines of credit          |       | 2,508           |       | 152,281            |       | 154,789 |   | — |   | 174,739 |   | 174,739 |   |
| Letters  of credit                    |       | —          |       | 14,650             |       | 14,650 |   | — |   | 22,795 |   | 22,795 |   |
| Credit  card lines of credit          |       | —          |       | 38,771             |       | 38,771 |   | — |   | 40,267 |   | 40,267 |   |
| Total                                 |       | $               | 13,388     |               | $          | 374,860 |   | $ | 388,248 |   | $ | 12,685 |   | $ | 462,017 |   | $ | 474,702 |   |

 

Fixedrate commercial loan commitments at December 31, 2009 generally hadinterest rates ranging from 3.75% to 7.25% with remaining terms ranging from 1month to 5 years. Fixed rate mortgage loan commitments at December 31,2009 generally had interest rates ranging from 4.50% to 5.50% with termsranging from 10 to 30 years. Fixed rate check credit lines of credit had aninterest rate of 18.00% as of December 31, 2009.

 

# **Note 10 - Fair Value ofFinancial Instruments**

 

Fair value is theexchange price that would be received for an asset or paid to transfer aliability (exit price) in the principal or most advantageous market for theasset or liability in an orderly transaction between market participants on themeasurement date.  There are three levelsof inputs that may be used to measure fair values:

 

Level 1 — Quotedprices (unadjusted) for identical assets or liabilities in active markets thatthe entity has the ability to access as of the measurement date.

Level 2 —Significant other observable inputs other than Level 1 prices such as quotedprices for similar assets or liabilities; quoted prices in markets that are notactive; or other inputs that are observable or can be corroborated byobservable market data.

Level 3 —Significant unobservable inputs that reflect a company’s own assumptions aboutthe assumptions that market participants would use in pricing an asset orliability.

 

The Company used thefollowing methods and significant assumptions to estimate the fair value ofeach type of financial instrument:

 

Securities: The fair value of securities is determined by quoted market prices, ifavailable (Level 1). For securities where quoted prices are not available, fairvalue is calculated based on market prices of similar securities (Level 2). Forsecurities where quoted prices or market prices of similar securities are notavailable, fair value is calculated using discounted cash flows or other marketindicators (Level 3). Discounted cash flows are calculated using spread to swapand LIBOR curves that are updated to incorporate loss severities, volatility,credit spread and optionality. During times when trading is more liquid, brokerquotes are used (if available) to validate the model. Rating agency andindustry research reports as well as defaults and deferrals on individualsecurities are reviewed and incorporated into the calculations.

 

Impaired Loans: The fair value of impaired loans secured by real estate with specificallocations of the allowance for loan losses is generally based on recent realestate appraisals. These appraisals may utilize a single valuation approach ora combination of approaches including comparable sales and the income approach.Adjustments are routinely made in the appraisal process by the appraisers toadjust for differences between the comparable sales and income data available.Such adjustments are usually significant and typically result in a Level 3classification of the inputs for determining fair value.

 

Other Real Estate: Nonrecurring adjustments to certain commercial and residential realestate properties classified as other real estate are measured at the lower ofcarrying amount or fair value, less costs to sell. Fair values are 

 

27

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generally based on thirdparty appraisals of the property, resulting in a Level 3 classification.   In cases where the carrying amount exceedsthe fair value, less costs to sell, an impairment loss is recognized.

 

Assets and liabilitiesmeasured at fair value on a recurring basis and a non-recurring basis, are asfollows at year end:

 
| ** **                             | ** ** | **Carrying  Value** | ** ** | **Quoted  Prices in  Active Markets for  Identical Assets  (Level 1)** | ** ** | **Significant  Other  Observable  Inputs  (Level 2)** | ** ** | **Significant  Unobservable  Inputs  (Level 3)** | ** ** |
|----------------------------------------|------------|---------------------|------------|------------------------------------------------------------------------|------------|-------------------------------------------------------|------------|--------------------------------------------------|------------|
| 2009 Recurring basis                   |       |                |       |                                                                   |       |                                                  |       |                                             |       |
| U.S. government  sponsored enterprises |       | $                   | 50,484     |                                                                   | $          | —                                                |       | $                                                | 50,484     |   | $ | — |   |
| Mortgage-backed:  residential          |       | 144,451             |       | —                                                                 |       | 144,451                                               |       | —                                           |       |
| State and political  subdivisions      |       | 10,675              |       | —                                                                 |       | 10,675                                                |       | —                                           |       |
| Total securities  available for sale   |       | $                   | 205,610    |                                                                   | $          | —                                                |       | $                                                | 205,610    |   | $ | — |   |
|                                   |       |                |       |                                                                   |       |                                                  |       |                                             |       |
| 2009 Non-recurring  basis              |       |                |       |                                                                   |       |                                                  |       |                                             |       |
| Impaired loans                         |       | $                   | 13,109     |                                                                   | $          | —                                                |       | $                                                | —     |   | $ | 13,109 |   |
| Other real estate                      |       | 25,994              |       | —                                                                 |       | —                                                |       | 25,994                                           |       |
|                                   |       |                |       |                                                                   |       |                                                  |       |                                             |       |
| 2008 Recurring basis                   |       |                |       |                                                                   |       |                                                  |       |                                             |       |
| Corporate                              |       | $                   | 23,677     |                                                                   | $          | —                                                |       | $                                                | 23,677     |   | $ | — |   |
| Trust preferred                        |       | 3,463               |       | —                                                                 |       | —                                                |       | 3,463                                            |       |
| U.S. government sponsored  enterprises |       | 23,254              |       | —                                                                 |       | 23,254                                                |       | —                                           |       |
| Mortgage-backed:  residential          |       | 165,294             |       | —                                                                 |       | 165,294                                               |       | —                                           |       |
| State and political  subdivisions      |       | 10,126              |       | —                                                                 |       | 10,126                                                |       | —                                           |       |
| Total securities  available for sale   |       | $                   | 225,814    |                                                                   | $          | —                                                |       | $                                                | 222,351    |   | $ | 3,463 |   |
|                                   |       |                |       |                                                                   |       |                                                  |       |                                             |       |
| 2008 Non-recurring  basis              |       |                |       |                                                                   |       |                                                  |       |                                             |       |
| Impaired loans                         |       | $                   | 7,352      |                                                                   | $          | —                                                |       | $                                                | —     |   | $ | 7,352 |   |
| Other real estate                      |       | 4,658               |       | —                                                                 |       | —                                                |       | 4,658                                            |       |

 

Impaired loans, which aremeasured for impairment using the fair value of the collateral for collateraldependent loans, had a carrying amount of $14,636, with a valuation allowanceof $1,527 at December 31, 2009, resulting in an additional provision forloan losses of $1,527 during 2009. At December 31, 2008, impaired loanshad a carrying amount of $9,036, with a valuation allowance of $1,684, resultingin an additional provision for loan losses of $1,263 during 2008.

 

Other real estate whichis measured at the lower of carrying or fair value less costs to sell, had anet carrying amount of $25,994, which is made up of the outstanding balance of$26,390, net of a valuation allowance of $396 at December 31, 2009,resulting in a write-down of $275 for the year ending December 31, 2009.At December 31, 2008 other real estate had a carrying amount of $4,658,which is made up of the outstanding balance of $4,779, net of a valuationallowance of $121, resulting in a write-down of $121 during 2008.

 

28

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The table below presentsa reconciliation and income statement classification of gains and losses forall assets measured at fair value on a recurring basis using significantunobservable inputs (Level 3) for the year ended December 31, 2009:

 
| ** **                               | ** ** | **Securities Available  For Sale** | ** ** |
|------------------------------------------|------------|------------------------------------|------------|
| Beginning  balance, January 1, 2009 |       | $                                  | 3,463      |   |
| Increase  in unrealized loss             |       | 5,048                              |       |
| Included  in earnings - realized         |       | (8,320                             | )          |
| Sales                                    |       | (255                               | )          |
| Interest  income on securities           |       | 64                                 |       |
| Ending  balance, December 31, 2009  |       | $                                  | —     |   |

 

Carrying valuesand estimated fair values of the Company’s financial instruments as of December 31is set forth in the table below:

 
| ** **                             | ** ** | **2009**            | ** ** | **2008**                  | ** ** |
|----------------------------------------|------------|---------------------|------------|---------------------------|------------|
| ** **                             | ** ** | **Carrying  Value** | ** ** | **Estimated  Fair Value** | ** ** | **Carrying  Value** | ** ** | **Estimated  Fair Value** | ** ** |
| Financial  assets                      |       |                |       |                      |       |   |   |   |   |
| Cash  and cash equivalents             |       | $                   | 148,610    |                      | $          | 148,610 |   | $ | 55,474 |   | $ | 55,474 |   |
| Securities                             |       |                |       |                      |       |   |   |   |   |
| Available  for sale                    |       | 205,610             |       | 205,610                   |       | 225,814 |   | 225,814 |   |
| Held  to maturity                      |       | 265,908             |       | 273,316                   |       | 240,234 |   | 244,928 |   |
| Federal  Home Loan Bank stock          |       | 7,599               |       | N/A                       |       | 6,144 |   | N/A |   |
| Loans,  less allowance for loan losses |       | 1,167,675           |       | 1,166,369                 |       | 1,233,595 |   | 1,218,633 |   |
| Accrued  interest                      |       | 6,048               |       | 6,048                     |       | 6,136 |   | 6,136 |   |
|                                   |       |                |       |                      |       |   |   |   |   |
| Financial  liabilities                 |       |                |       |                      |       |   |   |   |   |
| Deposits                               |       | 1,756,987           |       | 1,774,132                 |       | 1,625,925 |   | 1,641,225 |   |
| Federal  funds purchased               |       | —              |       | —                    |       | 55,000 |   | 55,000 |   |
| Accrued  interest                      |       | 4,994               |       | 4,994                     |       | 5,007 |   | 5,007 |   |
|                                        |            |                     |            |                           |            |  |  |  |  |  |  |  |  |

 

Estimated fair value forcash and cash equivalents, accrued interest receivable and payable, demanddeposits and variable rate loans or deposits that reprice frequently and fullyare each based on carrying value. For fixed rate loans or deposits and forvariable rate loans or deposits with infrequent repricing or repricing limits,fair value is based on discounted cash flows using current market rates appliedto estimated life and credit. Fair value of debt is based on current rates forsimilar financing. It was not practical to determine the fair value of FHLBstock due to the restrictions placed on its transferability. The fair value ofoff-balance-sheet items is not considered material.

 

# **Note 11 - Related PartyTransactions**

 

Certain executiveofficers and directors of the Company, their affiliates and companies in whichthey have 10% or more beneficial ownership, are customers of the Bank andreceived loans from the Bank totaling $8,672 and $9,730 at December 31,2009 and 2008, respectively. During 2009, $7,065 in new loans and $8,123 inprincipal payments were made. Related parties maintained deposits at the Banktotaling $39,946 and $49,261 at December 31, 2009 and 2008, respectively.

 

# **Note 12 - CapitalRequirements**

 

The Company andthe Bank are subject to various regulatory capital requirements administered byfederal banking agencies. Failure to meet minimum capital requirements mayresult in the initiation of actions by regulators that 

 

29

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could have directmaterial effects on the financial statements. Under capital adequacy guidelinesand the regulatory framework for prompt corrective action, each entity mustmeet specific capital guidelines that involve quantitative measures of assets,liabilities and certain off-balance-sheet items as calculated under regulatoryaccounting practices. Capital amounts and classifications are also subject toqualitative judgments by the regulators about components, risk weightings andother factors.

 

Regulationsrequire the Company and the Bank to maintain minimum capital amounts and ratios(set forth in the following table). Management believes that as of December 31,2009, the Company and the Bank exceeded all capital adequacy requirements.

 

Management’spresent policy is to limit dividends from the Bank so that the Bank qualifiesas a “well-capitalized” institution as defined by the Federal Deposit InsuranceCorporation Improvement Act of 1991. This policy minimizes the amount of FDICinsurance premiums paid by the Bank and provides capital to fund growth. As of December 31,2009, the Bank could pay, in the aggregate, dividends of approximately $17,400to West Suburban while remaining a “well-capitalized” institution. Dividendsfrom the Bank are West Suburban’s primary source of cash flow.

 

Asof December 31, 2009 and 2008, the Bank exceeded the minimum capitalratios required for it to qualify 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 following table. There are no conditions or eventssince that notification that management believes would result in a change ofthe category.

 

Thecapital amounts and ratios of the Company and the Bank for purposes of theprompt corrective action framework are presented in the table below:

 
| ** **                                | ** ** | **Actual** | ** ** | **Minimum  For  Capital Adequacy  Purposes** | ** ** | **Minumum  To Be Well-  Capitalized** | ** ** |
|-------------------------------------------|------------|------------|------------|----------------------------------------------|------------|---------------------------------------|------------|
| ** **                                | ** ** | **Amount** | ** ** | **Ratio**                                    | ** ** | **Amount**                            | ** ** | **Ratio** | ** ** | **Amount** | ** ** | **Ratio** | ** ** |
| **As of December 31, 2009**          |       |       |       |                                         |       |                                  |       |   |   |   |   |   |   |
| Total  capital (to risk weighted assets)  |       |       |       |                                         |       |                                  |       |   |   |   |   |   |   |
| Company                                   |       | $          | 171,609    |                                         | 12.0       | %                                     | $          | 114,005 |   | 8.0 | % | N/A |   | N/A |   |
| Bank                                      |       | 159,818    |       | 11.2                                         | %          | 113,908                               |       | 8.0 | % | 142,385 |   | 10.0 | % |
| Tier  1 capital (to risk weighted assets) |       |       |       |                                         |       |                                  |       |   |   |   |   |   |   |
| Company                                   |       | 153,696    |       | 10.8                                         | %          | 57,003                                |       | 4.0 | % | N/A |   | N/A |   |
| Bank                                      |       | 141,920    |       | 10.0                                         | %          | 56,954                                |       | 4.0 | % | 85,431 |   | 6.0 | % |
| Tier  1 capital (to average assets)       |       |       |       |                                         |       |                                  |       |   |   |   |   |   |   |
| Company                                   |       | 153,696    |       | 8.1                                          | %          | 76,396                                |       | 4.0 | % | N/A |   | N/A |   |
| Bank                                      |       | 141,920    |       | 7.5                                          | %          | 76,091                                |       | 4.0 | % | 95,114 |   | 5.0 | % |
|                                      |       |       |       |                                         |       |                                  |       |   |   |   |   |   |   |
| As  of December 31, 2008             |       |       |       |                                         |       |                                  |       |   |   |   |   |   |   |
| Total  capital (to risk weighted assets)  |       |       |       |                                         |       |                                  |       |   |   |   |   |   |   |
| Company                                   |       | $          | 177,062    |                                         | 12.1       | %                                     | $          | 117,232 |   | 8.0 | % | N/A |   | N/A |   |
| Bank                                      |       | 161,575    |       | 11.0                                         | %          | 117,136                               |       | 8.0 | % | 146,421 |   | 10.0 | % |
| Tier  1 capital (to risk weighted assets) |       |       |       |                                         |       |                                  |       |   |   |   |   |   |   |
| Company                                   |       | 161,484    |       | 11.0                                         | %          | 58,616                                |       | 4.0 | % | N/A |   | N/A |   |
| Bank                                      |       | 145,997    |       | 10.0                                         | %          | 58,568                                |       | 4.0 | % | 87,852 |   | 6.0 | % |
| Tier  1 capital (to average assets)       |       |       |       |                                         |       |                                  |       |   |   |   |   |   |   |
| Company                                   |       | 161,484    |       | 8.7                                          | %          | 74,317                                |       | 4.0 | % | N/A |   | N/A |   |
| Bank                                      |       | 145,997    |       | 7.9                                          | %          | 74,065                                |       | 4.0 | % | 92,581 |   | 5.0 | % |

 

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

 

30

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**Note 13 - Other ComprehensiveIncome**

 

Other comprehensiveincome components and related taxes were as follows:

 
| ** **                                                                    | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** |
|-------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Net  unrealized holding gain on available for sale securities                 |       | $        | 8,098      |     | $          | 277      |       | $ | 6,968 |   |
| Reclassification  adjustments for losses and gains later recognized in income |       | (109     | )          | (101     | )          | 387      |       |
| Tax  effect                                                                   |       | (3,176   | )          | (70      | )          | (2,923   | )          |
| Net  unrealized gain on available for sale securities                         |       | 4,813    |       | 106      |       | 4,432    |       |
|                                                                          |       |     |       |     |       |     |       |
| Change  in postretirement obligation, gain (loss)                             |       | 118      |       | 15       |       | (159     | )          |
| Tax  effect                                                                   |       | (47      | )          | (6       | )          | 63       |       |
| Net  change in postretirement obligation, gain (loss)                         |       | 71       |       | 9        |       | (96      | )          |
| Other  comprehensive income                                                   |       | $        | 4,884      |     | $          | 115      |       | $ | 4,336 |   |

 

A summary of the accumulated other comprehensive (loss) incomebalances, net of tax were as follows:

 
| ** **                                                  | ** ** | **Balance  at  12/31/08** | ** ** | **Current  Period  Change** | ** ** | **Balance  at  12/31/09** | ** ** |
|-------------------------------------------------------------|------------|---------------------------|------------|-----------------------------|------------|---------------------------|------------|
| Unrealized (losses) gains  on securities available for sale |       | $                         | (915       | )                           | $          | 4,813                     |       | $ | 3,898 |   |
| Unrealized loss on postretirement  obligation               |       | (385                      | )          | 71                          |       | (314                      | )          |
| Total                                                       |       | $                         | (1,300     | )                           | $          | 4,884                     |       | $ | 3,584 |   |

 

# **Note 14 - CondensedFinancial Information - Parent Only**

 

**CondensedBalance Sheets**

## **December 31, 2009and 2008**

 
| ** **                                                                     | ** ** | **2009** | ** ** | **2008** | ** ** |
|--------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| **Assets**                                                                     |       |     |       |     |       |
| Cash                                                                           |       | $        | 6,844      |     | $          | 14,977 |   |
| Securities  held to maturity (fair value $4,710 in 2009 and of $4,427 in 2008) |       | 4,841    |       | 4,703    |       |
| Investment  in subsidiary                                                      |       | 145,630  |       | 144,822  |       |
| Other  assets                                                                  |       | 959      |       | 985      |       |
| **Total assets**                                                               |       | $        | 158,274    |     | $          | 165,487 |   |
|                                                                           |       |     |       |     |       |
| **Liabilities and shareholders’ equity**                                  |       |     |       |     |       |
| Dividends  payable                                                             |       | $        | —     |     | $          | 4,325 |   |
| Other  liabilities                                                             |       | 281      |       | 263      |       |
|                                                                           |       |     |       |     |       |
| Common  stock in ESOP subject to contingent repurchase obligation              |       | 31,230   |       | 46,670   |       |
|                                                                           |       |     |       |     |       |
| Shareholders’  equity                                                     |       | 126,763  |       | 114,229  |       |
| **Total liabilities and shareholders’ equity**                            |       | $        | 158,274    |     | $          | 165,487 |   |

 

31

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**Condensed Statements of Income**

**YearsEnded December 31, 2009, 2008 and 2007**

 
| ** **                                                          | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** |
|---------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| **Income**                                                          |       |     |       |     |       |     |       |
| Dividends  from subsidiary                                          |       | $        | 3,262      |     | $          | 11,761   |       | $ | 20,558 |   |
| Interest  income                                                    |       |     |       |     |       |     |       |
| Deposits                                                            |       | 78       |       | 242      |       | 513      |       |
| Securities                                                          |       | 211      |       | 279      |       | 291      |       |
| Net  realized gains on securities transactions                      |       | —   |       | 16       |       | —   |       |
| Other                                                               |       | —   |       | 13       |       | —   |       |
| Total  income                                                       |       | 3,551    |       | 12,311   |       | 21,362   |       |
|                                                                |       |     |       |     |       |     |       |
| **Expense**                                                         |       |     |       |     |       |     |       |
| Other                                                               |       | 452      |       | 659      |       | 417      |       |
| Total  expense                                                      |       | 452      |       | 659      |       | 417      |       |
| **Income before income taxes**                                      |       | 3,099    |       | 11,652   |       | 20,945   |       |
| **Income tax (benefit) expense**                                    |       | (143     | )          | (190     | )          | 14       |       |
| **Income before equity in undistributed net income of  subsidiary** |       | 3,242    |       | 11,842   |       | 20,931   |       |
| **Equity in undistributed net (loss) income of subsidiary**         |       | (4,077   | )          | 4,974    |       | 2,482    |       |
| **Net (loss) income**                                               |       | $        | (835       | )        | $          | 16,816   |       | $ | 23,413 |   |

 

**Condensed Statements of CashFlows**

**YearsEnded December 31, 2009, 2008 and 2007**

 
| ** **                                                                        | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** |
|-----------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| **Cash flows from operating activities**                                          |       |     |       |     |       |     |       |
| Net  (loss) income                                                                |       | $        | (835       | )        | $          | 16,816   |       | $ | 23,413 |   |
| Adjustments  to reconcile net income to net cash provided by operating activities |       |     |       |     |       |     |       |
| Deferred  income tax provision (benefit)                                          |       | 7        |       | (7       | )          | 7        |       |
| Equity  in undistributed net loss (income) of subsidiary                          |       | 4,077    |       | (4,974   | )          | (2,482   | )          |
| Net  discount accretion of securities                                             |       | (139     | )          | (131     | )          | (121     | )          |
| Net  realized gains on securities transactions                                    |       | —   |       | (16      | )          | —   |       |
| Decrease  (increase) in other assets                                              |       | 19       |       | 37       |       | (69      | )          |
| Increase  (decrease) in other liabilities                                         |       | 18       |       | (37      | )          | 41       |       |
| **Net cash provided by operating activities**                                     |       | 3,147    |       | 11,688   |       | 20,789   |       |
| **Cash flows from investing activities**                                          |       |     |       |     |       |     |       |
| Securities  available for sale                                                    |       |     |       |     |       |     |       |
| Sales                                                                             |       | —   |       | 2,472    |       | —   |       |
| Maturities  and calls                                                             |       | —   |       | 485      |       | —   |       |
| **Net cash provided by investing activities**                                     |       | —   |       | 2,957    |       | —   |       |
| **Cash flows from financing activities**                                          |       |     |       |     |       |     |       |
| Repurchase  and retirement of common stock                                        |       | (2,658   | )          | —   |       | —   |       |
| Cash  dividends paid                                                              |       | (8,622   | )          | (17,300  | )          | (21,625  | )          |
| **Net cash used in financing activities**                                         |       | (11,280  | )          | (17,300  | )          | (21,625  | )          |
| **Net decrease in cash**                                                          |       | (8,133   | )          | (2,655   | )          | (836     | )          |
| **Beginning cash**                                                                |       | 14,977   |       | 17,632   |       | 18,468   |       |
| **Ending cash**                                                                   |       | $        | 6,844      |     | $          | 14,977   |       | $ | 17,632 |   |

 

32

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# **Note 15 - QuarterlyResults of Operations (Unaudited)**

 

The following table setsforth certain unaudited income, expense and per share data on a quarterly basisfor the three-month periods indicated:

 
| ** **                                                    | ** ** | **Fourth  Quarter** | ** ** | **Third  Quarter** | ** ** | **Second  Quarter** | ** ** | **First  Quarter** | ** ** |
|---------------------------------------------------------------|------------|---------------------|------------|--------------------|------------|---------------------|------------|--------------------|------------|
| **Year  Ended December 31, 2009**                        |       |                |       |               |       |                |       |               |       |
| Interest  income                                              |       | $                   | 19,825     |               | $          | 20,145              |       | $                  | 20,793     |   | $ | 21,337 |   |
| Interest  expense                                             |       | 6,083               |       | 6,082              |       | 6,295               |       | 6,527              |       |
| Net  interest income                                          |       | 13,742              |       | 14,063             |       | 14,498              |       | 14,810             |       |
| Provision  for loan losses                                    |       | 10,375              |       | 5,600              |       | 7,650               |       | 1,300              |       |
| Net  interest income after provision for loan losses          |       | 3,367               |       | 8,463              |       | 6,848               |       | 13,510             |       |
| Noninterest  income                                           |       | 3,480               |       | (3,516             | )          | 3,243               |       | 2,579              |       |
| Noninterest  expense                                          |       | 12,163              |       | 13,146             |       | 13,578              |       | 11,133             |       |
| (Loss)  income from continuing operations before income taxes |       | (5,316              | )          | (8,199             | )          | (3,487              | )          | 4,956              |       |
| Income  tax (benefit) expense                                 |       | (2,749              | )          | (5,132             | )          | (1,190              | )          | 1,269              |       |
| Net  (loss) income from continuing operations                 |       | (2,567              | )          | (3,067             | )          | (2,297              | )          | 3,687              |       |
| Gain  on sale of prepaid solutions group, net of tax          |       | 3,313               |       | —             |       | —              |       | —             |       |
| Discontinued  operations, net of tax                          |       | (335                | )          | 333                |       | (109                | )          | 207                |       |
| Net  income (loss) from discontinued operations               |       | 2,978               |       | 333                |       | (109                | )          | 207                |       |
| Net  income (loss)                                            |       | $                   | 411        |               | $          | (2,734              | )          | $                  | (2,406     | ) | $ | 3,894 |   |
| (Loss)  earnings from continuing operations per share         |       | $                   | (5.91      | )                  | $          | (7.16               | )          | $                  | (5.36      | ) | $ | 8.54 |   |
| Earnings  (loss) from discontinued operations per share       |       | 6.93                |       | 0.78               |       | (0.25               | )          | 0.48               |       |
| Earnings  (loss) per share                                    |       | 1.02                |       | (6.38              | )          | (5.61               | )          | 9.02               |       |
| ** **                                                    |       |                |       |               |       |                |       |               |       |
| Year Ended December 31, 2008                             |       |                |       |               |       |                |       |               |       |
| Interest  income                                              |       | $                   | 22,534     |               | $          | 23,785              |       | $                  | 23,876     |   | $ | 24,865 |   |
| Interest  expense                                             |       | 7,567               |       | 7,951              |       | 8,331               |       | 10,123             |       |
| Net  interest income                                          |       | 14,967              |       | 15,834             |       | 15,545              |       | 14,742             |       |
| Provision  for loan losses                                    |       | 3,250               |       | 4,060              |       | 2,200               |       | 850                |       |
| Net  interest income after provision for loan losses          |       | 11,717              |       | 11,774             |       | 13,345              |       | 13,892             |       |
| Noninterest  income                                           |       | 1,715               |       | 2,827              |       | 3,359               |       | 4,563              |       |
| Noninterest  expense                                          |       | 9,461               |       | 10,143             |       | 10,949              |       | 10,317             |       |
| Income  from continuing operations before income taxes        |       | 3,971               |       | 4,458              |       | 5,755               |       | 8,138              |       |
| Income  tax expense                                           |       | 1,406               |       | 36                 |       | 1,369               |       | 2,269              |       |
| Net  income (loss) from continuing operations                 |       | 2,565               |       | 4,422              |       | 4,386               |       | 5,869              |       |
| Discontinued  operations, net of tax                          |       | (150                | )          | 55                 |       | (139                | )          | (192               | )          |
| Net  income (loss)                                            |       | $                   | 2,415      |               | $          | 4,477               |       | $                  | 4,247      |   | $ | 5,677 |   |
| Earnings  (loss) from continuing operations per share         |       | $                   | 5.94       |               | $          | 10.22               |       | $                  | 10.14      |   | $ | 13.57 |   |
| (Loss)  earnings from discontinued operations per share       |       | (0.36               | )          | 0.13               |       | (0.32               | )          | (0.44              | )          |
| Earnings  (loss) per share                                    |       | 5.58                |       | 10.35              |       | 9.82                |       | 13.13              |       |

 

During the fourthquarter of 2009, the Company’s provision for loan losses increased $4,775primarily due to $9,688 in loan charge-offs during the quarter. Noninterestincome increased $6,996 primarily due to the Company writing off its holdingsof pooled trust preferred securities totaling $7,429 during the third quarterof 2009. Additionally, during the fourth quarter of 2009, the Company recordeda gain of $3,313, net of tax, on the sale of the prepaid solutions group.

 

During the fourthquarter of 2008, the Company’s noninterest income decreased $1,112 primarilydue to a decrease in BOLI income as a result of a decrease in the market valueof the underlying investments associated with the insurance policies that aretied to the deferred compensation plans. Income tax expense increased $1,370during the fourth quarter of 2008 due to a State of Illinois tax law passedduring the third quarter of 2008 which provided clarification on an uncertaintax position previously adopted by the Company. As a result, the Companydetermined that the reserve for the uncertain tax position was no longernecessary during the third quarter of 2008.

 

33

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**STOCK PERFORMANCE PRESENTATION**

 

*The stock performance graph belowshall not be deemed incorporated by reference by any general statementincorporating by reference this annual report into any filing under theSecurities Act of 1933 or under the Securities Exchange Act of 1934, except tothe extent West Suburban specifically incorporates this information byreference, and shall not otherwise be deemed filed under such Acts.*

 

The Securities and Exchange Commissionrequires that West Suburban include a line-graph presentation comparingcumulative, five-year shareholder returns on an indexed basis with the Standard &Poor’s 500 Stock Index (“S&P 500”) and either a nationally recognizedindustry standard or an index of peer companies selected by West Suburban. TheBoard of Directors has elected to compare an investment in its stock to a peergroup index rather than a published industry index because it believes the peergroup index includes companies whose businesses are more similar to that of theCompany than any published index. The peer group index is comprised of thefollowing companies selected by West Suburban (based on their similarity insize, loan portfolios and business markets): 1st Source Corporation; AMCOREFinancial Inc.; Corus Bankshares Inc.; MB Financial Inc.; Midwest Banc HoldingsInc.; Old Second Bancorp, Inc.; PrivateBancorp, Inc.; Taylor CapitalGroup, Inc.; and Wintrust Financial Corporation.

 

**COMPARISON OF 5 YEAR CUMULATIVETOTAL RETURN***

Among West Suburban Bancorp, Inc., TheS&P 500 Index

and a Peer Group

 

 

----

*$100invested on 12/31/04 in stock or index, including reinvestment of dividends.

Fiscalyear ending December 31.

 

Copyright©2010 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.

 

34

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Thefollowing table sets forth the dollar amounts of the annual Total Returns (asdefined below) for the Company, the S&P 500 and the peer group, which areplotted on the line graph on the previous page. “Total Return” means the sum ofdividends received, assuming dividend reinvestment, and the increase (ordecrease) in the share price at the end of the period compared to the beginningof the period, divided by the share price at the beginning of the period.

 
| ** **   | ** ** | **Total Return Based on Initial Investment of $100.00** | ** ** |
|--------------|------------|---------------------------------------------------------|------------|
| ** **   | ** ** | **2004**                                                | ** ** | **2005** | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** |
| The  Company |       | $                                                       | 100.00     |   | $ | 106.79 |   | $ | 121.82 |   | $ | 120.99 |   | $ | 99.66 |   | $ | 68.46 |   |
| S&P  500 |       | 100.00                                                  |       | 104.91 |   | 121.48 |   | 128.16 |   | 80.74 |   | 102.11 |   |
| Peer  Group  |       | 100.00                                                  |       | 102.56 |   | 104.28 |   | 71.42 |   | 45.89 |   | 31.30 |   |
|              |            |                                                         |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

# **TheTotal Returns of the companies included in the above peer groups have beenassigned various weights based on their relative market capitalizations.**

 

35

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# **SELECTED FINANCIAL DATA**

(Dollars inthousands, except per share data)

 

Thefollowing information should be read in conjunction with Management’sDiscussion and Analysis of Financial Condition and Results of Operations andthe Company’s Consolidated Financial Statements and Notes to ConsolidatedFinancial Statements included in this annual report. All periods reported havebeen reclassified, as appropriate, for discontinued operations comparativepurposes.

 
| ** **                                                                                                                           | ** ** | **Years  Ended December 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                                                                                           | ** ** | **2009**                           | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
| **Selected operating data**                                                                                                          |       |                               |       |   |   |   |   |   |   |   |   |
| Interest income                                                                                                                      |       | $                                  | 82,100     |   | $ | 95,060 |   | $ | 108,462 |   | $ | 105,736 |   | $ | 89,389 |   |
| Interest expense                                                                                                                     |       | 24,987                             |       | 33,972 |   | 48,206 |   | 45,334 |   | 30,269 |   |
| Net interest income                                                                                                                  |       | 57,113                             |       | 61,088 |   | 60,256 |   | 60,402 |   | 59,120 |   |
| Provision for loan losses                                                                                                            |       | 24,925                             |       | 10,360 |   | 375 |   | 150 |   | 1,375 |   |
| Net interest income after provision for loan losses                                                                                  |       | 32,188                             |       | 50,728 |   | 59,881 |   | 60,252 |   | 57,745 |   |
| Noninterest income (1)                                                                                                               |       | 5,786                              |       | 12,464 |   | 13,684 |   | 14,570 |   | 15,797 |   |
| Noninterest expense                                                                                                                  |       | 50,020                             |       | 40,870 |   | 42,648 |   | 39,929 |   | 38,109 |   |
| **(Loss) income from continuing  operations before income taxes**                                                                    |       | (12,046                            | )          | 22,322 |   | 30,917 |   | 34,893 |   | 35,433 |   |
| **Income tax (benefit) expense**                                                                                                     |       | (7,802                             | )          | 5,080 |   | 8,103 |   | 9,764 |   | 10,174 |   |
| **Net (loss) income from continuing  operations**                                                                                    |       | (4,244                             | )          | 17,242 |   | 22,814 |   | 25,129 |   | 25,259 |   |
| Gain on sale of prepaid  solutions group, net of tax                                                                                 |       | 3,313                              |       | — |   | — |   | — |   | — |   |
| Discontinued operations,  net of tax                                                                                                 |       | 96                                 |       | (426 | ) | 599 |   | 222 |   | 227 |   |
| **Net income (loss) from  discontinued operations**                                                                                  |       | 3,409                              |       | (426 | ) | 599 |   | 222 |   | 227 |   |
| **Net (loss) income**                                                                                                                |       | $                                  | (835       | ) | $ | 16,816 |   | $ | 23,413 |   | $ | 25,351 |   | $ | 25,486 |   |
| ** **                                                                                                                           |       |                               |       |   |   |   |   |   |   |   |   |
| **Per share data**                                                                                                                   |       |                               |       |   |   |   |   |   |   |   |   |
| (Loss) earnings from continuing operations per  share                                                                                |       | $                                  | (9.89      | ) | $ | 39.87 |   | $ | 52.75 |   | $ | 58.11 |   | $ | 58.41 |   |
| Earnings (loss) from discontinued operations per  share                                                                              |       | 7.94                               |       | (0.99 | ) | 1.38 |   | 0.51 |   | 0.52 |   |
| (Loss) earnings per share                                                                                                            |       | (1.95                              | )          | 38.88 |   | 54.13 |   | 58.62 |   | 58.93 |   |
| Cash dividends declared                                                                                                              |       | 10.00                              |       | 40.00 |   | 50.00 |   | 50.00 |   | 50.00 |   |
| Book value (2)                                                                                                                       |       | 370.14                             |       | 372.03 |   | 373.34 |   | 359.18 |   | 344.60 |   |
|                                                                                                                                 |       |                               |       |   |   |   |   |   |   |   |   |
| **Selected balances, end of year**                                                                                                   |       |                               |       |   |   |   |   |   |   |   |   |
| Securities                                                                                                                           |       | $                                  | 479,117    |   | $ | 472,192 |   | $ | 488,739 |   | $ | 503,201 |   | $ | 536,362 |   |
| Loans, less allowance for loan losses                                                                                                |       | 1,167,675                          |       | 1,233,595 |   | 1,226,571 |   | 1,153,885 |   | 1,091,747 |   |
| Total assets                                                                                                                         |       | 1,938,583                          |       | 1,867,420 |   | 1,851,357 |   | 1,876,643 |   | 1,827,191 |   |
| Deposits                                                                                                                             |       | 1,756,987                          |       | 1,625,925 |   | 1,637,714 |   | 1,677,844 |   | 1,639,666 |   |
| Shareholders’ equity plus common stock in ESOP  subject to contingent repurchase obligation (2)                                 |       | 157,993                            |       | 160,899 |   | 161,468 |   | 155,344 |   | 149,038 |   |
|                                                                                                                                 |       |                               |       |   |   |   |   |   |   |   |   |
| **Ratios**                                                                                                                           |       |                               |       |   |   |   |   |   |   |   |   |
| Return on average total assets                                                                                                       |       | (0.04                              | )%         | 0.90 | % | 1.26 | % | 1.38 | % | 1.43 | % |
| Return on average shareholders’ equity plus common  stock in ESOP subject to contingent repurchase obligation (2)               |       | (0.52                              | )%         | 10.40 | % | 14.83 | % | 16.83 | % | 17.05 | % |
| Cash dividends declared to net income                                                                                                |       | (514.61                            | )%         | 102.88 | % | 92.36 | % | 85.30 | % | 84.85 | % |
| Average shareholders’ equity plus common stock in  ESOP subject to contingent repurchase obligation to average total assets (2) |       | 8.57                               | %          | 8.67 | % | 8.49 | % | 8.18 | % | 8.40 | % |
| Net interest margin (3)                                                                                                              |       | 3.39                               | %          | 3.58 | % | 3.50 | % | 3.54 | % | 3.59 | % |

 

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(1)    Noninterest income includes gains(losses) on sales on securities of $109 in 2009, $101 in 2008, ($6) in 2007,$85 in 2006 and $206 in 2005. Noninterest income for 2009 includes ($8,320) forthe impairment of pooled trust preferred securities and for 2007 includes theimpairment of FHLMC stock of ($381).

(2)    See Note 8 to the Company’s consolidated financialstatements and “Non-GAAP Financial Measures.” This presentation is consistentwith the Company’s belief that it is unlikely that the Company would berequired to satisfy the contingent repurchase obligation.

(3) Net interestmargin is presented on a tax equivalent basis, assuming a federal income taxrate of 35%.

 

36

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# **NON-GAAP FINANCIALMEASURES**

 

The accounting andreporting policies of the Company conform to accounting principles generallyaccepted in the United States (“GAAP”). However, management uses certainnon-GAAP measures and ratios to evaluate and measure the Company’s performance.These measures and ratios include book value per share, return on shareholders’equity and average shareholders’ equity to average total assets. For each ofthese measures and ratios, the Company adds to shareholders’ equity the amountin “common stock in ESOP subject to contingent repurchase obligation.” Underthe ESOP, the Company has certain contingent repurchase obligations to buy backcommon stock distributed to participants, as described in more detail in Note 8to the Company’s audited financial statements. This contingent repurchaseobligation is reflected in the Company’s financial statements as “common stockin ESOP subject to contingent repurchase obligation” and, in accordance withGAAP, reduces shareholders’ equity. The Company believes that it is unlikelythat the Company would be required to satisfy its contingent repurchaseobligation and therefore believes that adjusting shareholders’ equity by adding“common stock in ESOP subject to contingent repurchase obligation” to thatamount provides a more meaningful view of the applicable measures and ratios.In addition, management believes that the return on average shareholders’equity, a financial measure frequently considered to evaluate the performanceof bank holding companies, would be significantly overstated.

 

The following tablepresents a reconciliation of certain non-GAAP performance measures and ratiosused by the Company to the most directly comparable GAAP financial measures forthe years ended December 31 (dollars in thousands, except per share data):

 
| ** **                                                                                                                                       | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| Shareholders’  equity (GAAP)                                                                                                                |       | $        | 126,763    |     | $          | 114,229  |       | $        | 104,561    |     | $          | 95,335 |   | $ | 94,660 |   |
| Shareholders’  equity plus common stock in ESOP subject to contingent repurchase obligation  (non-GAAP)                                     |       | 157,993  |       | 160,899  |       | 161,468  |       | 155,344  |       | 149,038  |       |
| Book  Value Per Share (GAAP) (1)                                                                                                                 |       | 296.97   |       | 264.12   |       | 241.76   |       | 220.43   |       | 218.87   |       |
| Book  Value Per Share (non-GAAP) (2)                                                                                                             |       | 370.14   |       | 372.03   |       | 373.34   |       | 359.18   |       | 344.60   |       |
| Return  on average shareholders’ equity (GAAP) (3)                                                                                          |       | (0.70    | )%         | 16.01    | %          | 24.04    | %          | 27.05    | %          | 26.62    | %          |
| Return  on average shareholders’ equity plus common stock in ESOP subject to  contingent repurchase obligation (non-GAAP) (4)               |       | (0.52    | )%         | 10.40    | %          | 14.83    | %          | 16.83    | %          | 17.05    | %          |
| Average  shareholders’ equity to average total assets (GAAP) (5)                                                                            |       | 6.34     | %          | 5.63     | %          | 5.24     | %          | 5.09     | %          | 5.38     | %          |
| Average  shareholders’ equity plus common stock in ESOP subject to contingent  repurchase obligation to average total assets (non-GAAP) (6) |       | 8.57     | %          | 8.67     | %          | 8.49     | %          | 8.18     | %          | 8.40     | %          |
|                                                                                                                                                  |            |          |            |          |            |          |            |          |            |          |            |  |  |  |  |  |

 

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(1)    Book Value Per Share (GAAP)equals shareholders’ equity divided by the number of outstanding shares.

(2)    Book Value Per Share(non-GAAP) equals shareholders’ equity plus common stock in ESOP subject tocontingent repurchase obligation divided by the number of outstanding shares.

(3)    Return on averageshareholders’ equity (GAAP) equals net income divided by average shareholders’equity.

(4)    Return on averageshareholders’ equity plus common stock in ESOP subject to contingent repurchaseobligation (non-GAAP) equals net income divided by average shareholders’ equityplus common stock in ESOP subject to contingent repurchase obligation.

(5)    Average shareholders’ equityto average total assets (GAAP) equals average shareholders’ equity divided byaverage total assets.

(6)    Average shareholders’ equityplus common stock in ESOP subject to contingent repurchase obligation toaverage total assets (non-GAAP) equals average shareholders’ equity plus commonstock in ESOP subject to contingent repurchase obligation divided by averagetotal assets.

 

37

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

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

(Dollars inthousands)

 

The following tablepresents for the years indicated the total dollar amount of interest incomefrom average interest-earning assets and their yields, as well as the interestexpense on average interest-bearing liabilities and their costs, expressed bothin dollars and rates. All average balances are daily average balances. To theextent received, interest on nonaccruing loans has been included in the table.

 
| ** **                                                                                            | ** ** | **Years  Ended December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                                                            | ** ** | **2009**                           | ** ** | **2008** | ** ** | **2007** | ** ** |
| ** **                                                                                            | ** ** | **Average  Balance**               | ** ** | **Interest** | ** ** | **Rate** | ** ** | **Average  Balance** | ** ** | **Interest** | ** ** | **Rate** | ** ** | **Average  Balance** | ** ** | **Interest** | ** ** | **Rate** | ** ** |
| **Assets**                                                                                            |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal  funds sold                                                                                   |       | $                                  | 61,280     |   | $ | 162 |   | 0.3 | % | $ | 7,898 |   | $ | 198 |   | 2.5 | % | $ | 58,267 |   | $ | 3,061 |   | 5.3 | % |
| Securities                                                                                            |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                                                               |       | 420,986                            |       | 17,985 |   | 4.3 | % | 465,555 |   | 21,109 |   | 4.5 | % | 467,953 |   | 19,192 |   | 4.1 | % |
| Exempt  from federal income tax (1)                                                                   |       | 28,253                             |       | 1,730 |   | 6.1 | % | 30,428 |   | 1,809 |   | 5.9 | % | 27,789 |   | 1,725 |   | 6.2 | % |
| Total  securities (1)                                                                                 |       | 449,239                            |       | 19,715 |   | 4.4 | % | 495,983 |   | 22,918 |   | 4.6 | % | 495,742 |   | 20,917 |   | 4.2 | % |
| Loans  (1)(2)                                                                                         |       | 1,201,646                          |       | 63,131 |   | 5.3 | % | 1,231,226 |   | 72,916 |   | 5.9 | % | 1,185,439 |   | 85,181 |   | 7.2 | % |
| Total  interest-earning assets (1)(2)                                                                 |       | 1,712,165                          |       | 83,008 |   | 4.8 | % | 1,735,107 |   | 96,032 |   | 5.5 | % | 1,739,448 |   | 109,159 |   | 6.3 | % |
| Cash  and due from banks                                                                              |       | 39,982                             |       |   |   |   |   | 34,877 |   |   |   |   |   | 38,444 |   |   |   |   |   |
| Premises  and equipment, net                                                                          |       | 45,448                             |       |   |   |   |   | 43,827 |   |   |   |   |   | 42,074 |   |   |   |   |   |
| Other  real estate                                                                                    |       | 10,426                             |       |   |   |   |   | 997 |   |   |   |   |   | 627 |   |   |   |   |   |
| Allowance  for loan losses                                                                            |       | (19,859                            | )          |   |   |   |   | (11,505 | ) |   |   |   |   | (9,985 | ) |   |   |   |   |
| Accrued  interest and other assets (2)                                                                |       | 82,489                             |       |   |   |   |   | 61,977 |   |   |   |   |   | 49,648 |   |   |   |   |   |
| **Total assets**                                                                                      |       | $                                  | 1,870,651  |   |   |   |   |   | $ | 1,865,280 |   |   |   |   |   | $ | 1,860,256 |   |   |   |   |   |
| **Liabilities and shareholders’ equity**                                                         |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing  deposits                                                                            |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW                                                                                                   |       | $                                  | 314,199    |   | 275 |   | 0.1 | % | $ | 307,033 |   | 1,347 |   | 0.4 | % | $ | 306,680 |   | 2,881 |   | 0.9 | % |
| Money  market checking                                                                                |       | 370,914                            |       | 6,507 |   | 1.8 | % | 326,367 |   | 8,021 |   | 2.5 | % | 290,610 |   | 12,415 |   | 4.3 | % |
| Savings                                                                                               |       | 333,243                            |       | 1,392 |   | 0.4 | % | 334,266 |   | 2,627 |   | 0.8 | % | 359,173 |   | 6,347 |   | 1.8 | % |
| Time  deposits                                                                                        |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less  than $100,000                                                                                   |       | 372,061                            |       | 12,079 |   | 3.2 | % | 368,943 |   | 15,282 |   | 4.1 | % | 393,708 |   | 18,516 |   | 4.7 | % |
| $100,000  and greater                                                                                 |       | 135,242                            |       | 4,691 |   | 3.5 | % | 146,492 |   | 6,031 |   | 4.1 | % | 164,785 |   | 8,044 |   | 4.9 | % |
| Total  interest-bearing deposits                                                                      |       | 1,525,659                          |       | 24,944 |   | 1.6 | % | 1,483,101 |   | 33,308 |   | 2.2 | % | 1,514,956 |   | 48,203 |   | 3.2 | % |
| Other  interest-bearing liabilities                                                                   |       | 8,468                              |       | 43 |   | 0.5 | % | 32,375 |   | 664 |   | 2.1 | % | 65 |   | 3 |   | 4.6 | % |
| Total  interest-bearing liabilities                                                                   |       | 1,534,127                          |       | 24,987 |   | 1.6 | % | 1,515,476 |   | 33,972 |   | 2.2 | % | 1,515,021 |   | 48,206 |   | 3.2 | % |
| Demand-noninterest-bearing  deposits                                                                  |       | 152,332                            |       |   |   |   |   | 138,106 |   |   |   |   |   | 145,314 |   |   |   |   |   |
| Accrued  interest and other liabilities                                                               |       | 23,953                             |       |   |   |   |   | 50,035 |   |   |   |   |   | 42,001 |   |   |   |   |   |
| Shareholders’  equity plus common stock in ESOP subject to contingent repurchase obligation  (3) |       | 160,239                            |       |   |   |   |   | 161,663 |   |   |   |   |   | 157,920 |   |   |   |   |   |
| **Total liabilities and shareholders’ equity**                                                   |       | $                                  | 1,870,651  |   |   |   |   |   | $ | 1,865,280 |   |   |   |   |   | $ | 1,860,256 |   |   |   |   |   |
| Net  interest income                                                                                  |       |                               |       | $ | 58,021 |   |   |   |   |   | $ | 62,060 |   |   |   |   |   | $ | 60,953 |   |   |   |
| Interest  rate spread                                                                                 |       |                               |       |   |   | 3.2 | % |   |   |   |   | 3.3 | % |   |   |   |   | 3.1 | % |
| Net  interest margin (1)                                                                              |       |                               |       |   |   | 3.4 | % |   |   |   |   | 3.6 | % |   |   |   |   | 3.5 | % |

 

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

(2)    The average balances of nonaccrual loans are includedin accrued interest and other assets.

(3)    See Note 8 to the Company’s consolidated financialstatements and “Non-GAAP Financial Measures.” This presentation is consistentwith the Company’s belief that it is unlikely that the Company would berequired to satisfy the contingent repurchase obligation.

 

38

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## **MANAGEMENT’S DISCUSSIONAND ANALYSIS OF FINANCIAL CONDITION**

## **AND RESULTS OF OPERATIONS**

 

The followingdiscussion and analysis provides information regarding the Company’s financialcondition as of December 31, 2009 and 2008, and the results of operationsfor each of the three years in the period ended December 31, 2009. Thisdiscussion and analysis should be read in conjunction with the Company’sConsolidated Financial Statements and Notes to Consolidated FinancialStatements included in this annual report. The financial information providedbelow is rounded in order to simplify the presentation of management’sdiscussion and analysis. However, the ratios and percentages provided below arecalculated using the more detailed financial information contained in thefinancial statements, notes and tables included elsewhere in this annualreport.

 

###### ***Critical Accounting Policies***

 

*The Company’s financial statements are prepared inconformity with accounting principles generally accepted in the U.S. Theseaccounting principles, which can be complex, are significant to our financialcondition and our results of operations and require management to applysignificant judgment with respect to various accounting, reporting anddisclosure matters. Management must use estimates, assumptions and judgments toapply these principles where actual measurements are not possible or practical.These estimates, assumptions and judgments are based on information availableas of the date of this report and, as this information changes, actual resultscould differ from the estimates, assumptions and judgments reflected in thefinancial statements. Changes in such estimates may have a significant impacton the financial statements. Management has reviewed the application of thesepolicies with the Audit Committee of West Suburban’s Board of Directors. ThisManagement’s Discussion and Analysis of Financial Condition and Results ofOperations should be read in conjunction*the Company’s Consolidated FinancialStatements and Notes to Consolidated Financial Statements included in thisannual report.

 

Inmanagement’s view, the accounting policies that are critical to the Company arethose relating to estimates, assumptions and judgments regarding thedetermination of the adequacy of the allowance for loan losses, the Company’sfederal and state tax obligations, the determination of the fair value ofcertain of the Company’s investment securities, and the carrying value of otherreal estate.

 

**Allowancefor Loan Losses.**The Company maintains an allowance for loan losses at a level managementbelieves is sufficient to absorb probable incurred credit losses in the loanportfolio. The allowance for loan losses represents the Company’s estimate ofprobable incurred credit losses in the loan portfolio at each balance sheetdate and is based on the review of available and relevant information. Theallowance contains allocations for probable incurred credit losses that havebeen identified relating to specific borrowing relationships as well asprobable incurred credit losses for pools of loans. The allowance for loanlosses is reassessed monthly by the Company to determine the appropriate levelof the allowance. The amount of the allowance for loan losses is determinedbased on a variety of factors, including assessment of the credit risk of theloans in the loan portfolio, volume of the loans, delinquent loans, evaluationof current economic conditions in the market area, actual charge-offs duringthe period and historical loss experience. Loan quality is continuallymonitored by management and reviewed by the loan committee on a monthly basis.

 

Loans are evaluated on acategory by category basis to determine the appropriate allocation of allowanceto each category. In addition, individual commercial, construction andcommercial mortgage loans are evaluated to determine if a specific lossallocation is needed for problem loans deemed to have a shortfall incollateral. Management also considers the borrower’s current economic statusincluding liquidity and future business viability. Other factors used in theallocation of the allowance include levels and trends of past dues andcharge-offs along with concentrations of credit within the commercial andcommercial real estate loan portfolios. This evaluation is inherentlysubjective as it requires estimates that are susceptible to significantrevision as more information becomes available or as developments occur. Alongwith the allocation of the allowance on a category by category basis and thespecific allocations for individual borrowing relationships, the allowanceincludes a relatively small portion that remains unallocated. Management adjusts the allowance for loanlosses by an amount sufficient to maintain the allowance at the leveldetermined appropriate. A loan is fully or partially charged-off when all orportions of the loan is deemed to be uncollectible by management. The Companybelieves that the allowance for loan losses is adequate to provide forestimated probable incurred credit losses in the loan portfolio.

 

39

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A loan is impaired when,based on current information and events, it is probable that the Company willbe unable to collect all amounts due according to the contractual terms of theloan agreement.  Loans for which theterms have been modified and the borrower is experiencing financialdifficulties are considered troubled debt restructurings are and classified asimpaired. Troubled debt restructurings are measured at the present value ofestimated future cash flows using the loan’s effective rate at inception.

 

**Income Taxes.** The Company is subject to income taxlaws of the U.S. and the State of Illinois. These laws are complex and subjectto different interpretations by the taxpayer and the various taxingauthorities. Management makes certain judgments and estimates about theapplication of these inherently complex laws when determining the provision forincome taxes. Federal and state taxing authorities have recently becomeincreasingly aggressive in challenging tax positions taken by financialinstitutions, including positions that may be taken by the Company. During thepreparation of the Company’s tax returns, management makes reasonableinterpretations of the tax laws which are subject to challenge upon audit bythe tax authorities. These interpretations are also subject to reinterpretationbased on management’s ongoing assessment of facts and evolving case law.

 

On a quarterly basis,management evaluates the reasonableness of its effective tax rate based uponits current best estimate of net income and applicable taxes expected for thefull year. Deferred tax assets and liabilities are evaluated on a quarterlybasis, or more frequently if necessary.

 

**Temporary Decline inFair Value of Securities.** The Company evaluates its debt and equity securities forother-than-temporary impairment under FASB guidance “Investments in Debt andEquity Securities.” The guidance applies to debt securities, as well as equitysecurities not accounted for under the equity method (i.e., cost methodinvestments), unless the investments are subject to other accounting guidance,such as FASB guidance “Beneficial Interest in Securitized Financial Assets.”Investments in securitized structures such as collateralized mortgageobligations and collateralized debt obligations that are not high qualityinvestment grade securities upon acquisition are subject to this guidance. Highquality investment grade securities are defined as securities with aninvestment grade of “AA” or higher.

 

In accordance with FASBguidance “Investments in Debt and Equity Securities,” declines in the fairvalue of securities below their cost that are other-than-temporary arereflected as realized losses. In determining OTTI on debt securities,management considers many factors, including: (1) the length of time andthe extent to which the fair value has been less than cost; (2) thefinancial condition and near-term prospects of the issuer; (3) whether themarket decline was affected by macroeconomic conditions; and (4) whetherthe Company has the intent to sell the debt security or whether it is morelikely than not the Company will be required to sell the debt security beforeits anticipated recovery. The assessment of whether OTTI exists involves a highdegree of subjectivity and judgment and is based on the information availableto management at a point in time.

 

Managementevaluates pooled trust preferred securities in accordance with FASB guidance “BeneficialInterest in Securitized Financial Assets,” which requires the evaluation of the expectedcash flows to determine whether there has been an adverse change in theexpected cash flows. Additionally, the Company monitors investment grades onthe pooled trust preferred securities to determine whether there has been anadverse change in the investment grades and performs an analysis of theunderlying collateral to determine a break in yield point. Any adverse changesin expected cash flows that are other-than-temporary are reflected as realizedlosses.

 

**OtherReal Estate.**Assetsacquired through or instead of loan foreclosure are initially recorded at lowerof cost or fair value less costs to sell when acquired, establishing a new costbasis.  If fair value declines subsequentto foreclosure, a valuation allowance is recorded through expense.  Operating costs after acquisition areexpensed as incurred.

 

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

 

Through the normal courseof operations, the Company has entered into certain contractual obligations andother commitments. Such obligations generally relate to the funding ofoperations through deposits, as well as leases for premises and equipment. As afinancial services provider, the Company routinely enters into commitments toextend

 

40

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credit. While contractualobligations represent future cash requirements of the Company, a significantportion of commitments to extend credit may expire without being drawn upon.Such commitments are subject to the same credit policies and approval ascomparable loans made by the Company.

 

The following tablepresents the Company’s significant fixed and determinable contractualobligations and significant commitments by payment date as of December 31,2009 (dollars in thousands). The payment amounts represent those amountscontractually due to the recipient and do not include any carrying valueadjustments. Further discussion of the nature of each obligation is included inthe referenced Note to the Company’s Consolidated Financial Statements includedin this annual report.

 
| ** **                          | ** ** | **Note  Reference** | ** ** | **One Year  or Less** | ** ** | **Over One  Year to  Three Years** | ** ** | **Over Three  Years to  Five Years** | ** ** | **Over  Five Years** | ** ** | **Total** | ** ** |
|-------------------------------------|------------|---------------------|------------|-----------------------|------------|------------------------------------|------------|--------------------------------------|------------|----------------------|------------|-----------|------------|
| Deposits  without a stated maturity |       | 6                   |       | $                     | 1,186,889  |                               | $          | —                               |       | $                    | —     |      | $          | — |   | $ | 1,186,889 |   |
| Time  deposits                      |       | 6                   |       | 346,086               |       | 106,046                            |       | 87,188                               |       | 201                  |       | 539,521   |       |
| Prepaid  solutions cards deposits   |       | 6                   |       | 30,577                |       | —                             |       | —                               |       | —               |       | 30,577    |       |
| Operating  leases                   |       | 4                   |       | 576                   |       | 772                                |       | 485                                  |       | 344                  |       | 2,177     |       |
| Commitments  to extend credit       |       |                |       |                  |       |                               |       |                                 |       |                 |       |      |       |
| Fixed  rate                         |       | 9                   |       |                  |       |                               |       |                                 |       |                 |       | 13,388    |       |
| Variable  rate                      |       | 9                   |       |                  |       |                               |       |                                 |       |                 |       | 374,860   |       |
| Deferred  compensation              |       | 8                   |       |                  |       |                               |       |                                 |       |                 |       | 7,522     |       |
| Postretirement  benefit plan        |       | 8                   |       |                  |       |                               |       |                                 |       |                 |       | 993       |       |
|                                     |            |                     |            |                       |            |                                    |            |                                      |            |                      |            |           |            |  |  |  |  |  |

 

**BalanceSheet Analysis**

 

***TotalAssets.*** Totalconsolidated assets at December 31, 2009, increased 3.8% from the prioryear-end. This increase was primarily due to increases in cash and cashequivalents and other real estate owned, partially offset by decreases in theloan portfolio. Total average assets in 2009 increased .3% from the prior yearprimarily due to an increase in average federal funds sold.

 

***Cashand Cash Equivalents.*** Cash and cash equivalents at December 31, 2009 increased 167.9%from the prior year-end due to increases in cash and federal funds sold.Although rates paid on federal funds sold are currently at historically lowlevels, the Company believes that it is prudent to maintain a higher level ofliquidity with the current state of the economy.

 

***Securities.*** The Company’s securities portfolioincreased 1.5% at December 31, 2009 from the prior year-end. This increasewas primarily due to increasing holdings in securities issued by U.S.government sponsored enterprises in order to earn a higher yield when comparedto alternative investments such as federal funds sold. These securities werepurchased due to their low credit risk and the Company’s high level ofcertainty that these securities would be called prior to maturity.Additionally, the Company purchased a $30.0 million municipal bond with a oneyear maturity as a short-term alternative to federal funds sold. Theseadditions were partially offset by the Company liquidating its holdings incorporate securities in order to reduce credit risk in the portfolio. TheCompany also sold one of its holdings in pooled trust preferred securities andwrote off all of its remaining holdings in pooled trust preferred securities.

 

The Companymanages its investment portfolio to maximize the return on invested fundswithin acceptable risk guidelines, to meet pledging and liquidity requirements,and to adjust balance sheet interest rate sensitivity in an effort to insulatenet interest income against the impact of interest rate changes. The Companywill continue to monitor its level of available for sale and held to maturitysecurities and will classify new securities purchased in the appropriatecategory at the time of purchase.

 

Securities available forsale are carried at fair value, while securities held to maturity and FederalHome Loan Bank stock are carried at cost. Security portfolio gross unrealizedgains of $14.4 million were offset by gross unrealized

 

41

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losses of $.5 million asof December 31, 2009, as compared with gross unrealized gains of $9.9million and gross unrealized losses of $6.7 million as of December 31,2008.

 

Fair values forstates and political subdivisions securities are generally determined by matrixpricing, which is a mathematical technique widely used in the industry to valuedebt securities without relying exclusively on quoted prices for the specificsecurities but rather by relying on the securities’ relationship to otherbenchmark quoted securities. Characteristics utilized by matrix pricing includeinsurer, credit support, state of issuance and bond rating. These factors areused to incorporate additional spreads and municipal curves. A separate curvestructure is used for bank-qualified municipal bonds. This structure isdifferent than the approach used for general market municipals. For thebank-qualified municipal bonds, active quotes are obtained when available.

 

Fair values for U.S. government sponsored enterprisesissued securities are determined using a combination of daily closing prices,evaluations, income data, security master (descriptive) data and terms and conditionsdata. Additional data used to compute the fair value of U.S. governmentsponsored enterprises issued residential mortgage-backed pass-throughsecurities (FHLMC, FNMA, and GNMA pools) includes daily composite seasoned,pool-specific, and generic coupon evaluations, and factors and descriptive datafor individual pass-through pools. Additional data used to compute the fairvalue of U.S. government sponsored enterprises issued collateralized mortgageobligations include daily evaluations and descriptive data.

 

***Loans.***Total loans outstandingat December 31, 2009 decreased 4.4% from the prior year-end primarily due to decreases in the homeequity, residential real estate and commercial loan portfolios. These decreaseswere partially offset by an increase in the construction loan portfolio, whichwas primarily due to the increase in the outstanding balance of one borrowerwith strong financial resources and a positive relationship with the Company.The decrease in the home equity loan portfolio was due to payoffs resultingfrom refinancing activity, as well as a decrease in home equity loanoriginations. The decrease in the residential real estate loan portfolio wasdue to refinancing activity in the mortgage loan portfolio. Additionally, theCompany discontinued its purchase of mortgage loans from the secondary market.

 

***Allowance for Loan Losses and Asset Quality.***The ratio of the allowance for loan losses to total loans outstanding was 2.17%and 1.25% at December 31, 2009 and 2008, respectively. The following tableis an analysis of the Company’s nonperforming loans and other real estate at December 31(dollars in thousands):

 
| ** **                                                     | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** |
|----------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Loans  past due 90 days or more still on accrual               |       | $        | 790        |     | $          | 1,705    |       | $ | 480 |   |
| Nonaccrual  loans                                              |       | 38,038   |       | 23,569   |       | 2,297    |       |
| Total  nonperforming loans                                     |       | $        | 38,828     |     | $          | 25,274   |       | $ | 2,777 |   |
| Nonperforming  loans as a percent of total loans               |       | 3.25     | %          | 2.02     | %          | 0.22     | %          |
| Allowance  for loan losses as a percent of nonperforming loans |       | 67       | %          | 62       | %          | 334      | %          |
| Other  real estate                                             |       | $        | 25,994     |     | $          | 4,658    |       | $ | 824 |   |
| Nonperforming  assets as a percent of total assets             |       | 3.34     | %          | 1.60     | %          | 0.19     | %          |

 

The level of theallowance for loan losses is determined by evaluating the general allowance,which is allocated to pools of loans, as well as the specific allowanceallocated to impaired loans. The Company utilizes a matrix which tracks changesin various categories that management has determined to have direct effects onthe performance of the loan portfolio. These categories include: charge-offhistory, trends in the national and local economies, loan concentrations, pastdue trends, loan volume trends and loan risk migration. The matrix assignsfactors to each loan category which is used to determine the amount of thegeneral allowance. The specific allowance allocated to impaired loans is basedon the present value of expected future cash flows discounted at the loan’seffective interest rate or the fair value of the loan’s collateral, ifrepayment of the loan is collateral dependent.

 

Netloan charge-offs were $14.6 million and $4.1 million 2009 and 2008,respectively. This increase was primarily due to the increase in the level ofnonperforming loans and declines in collateral values. Nonperforming loans(nonaccrual and loans past due 90 days or more still on accrual) increased to$38.8 million at December 31, 2009, from $25.3 million at December 31,2008. Nonaccrual loans increased to $38.0 million at December 31, 2009from

 

42

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$23.6million at December 31, 2008. During the second quarter of 2009, twocommercial relationships totaling $19.5 million were classified as nonaccrual,partially offset by the transfer of two other commercial relationships totaling$14.3 million to other real estate. During the third quarter of 2009, commercialrelationships totaling $13.2 million were classified as nonaccrual, partiallyoffset by the transfer of $1.7 million of commercial and residentialrelationships to other real estate. During the fourth quarter of 2009,commercial relationships totaling $6.0 million were classified as nonaccrual,offset by the transfer of $8.6 million of commercial relationships to otherreal estate. The Company’s loans past due 90 days or more still on accrualdecreased to $.8 million at December 31, 2009 from $1.7 million at December 31,2008. This decrease was primarily due to the classification of threeresidential real estate loans along with one commercial real estate loan asnonaccrual. Additionally, three other residential real estate loans and twohome equity loans were repaid, while one commercial loan became 90 days or morepast due.

 

Theprovision for loan losses increased $14.6 million in 2009 over 2008. TheCompany determined that additional loan loss provisions were necessary due tothe increased levels of charge-offs and nonperforming loans, an increase inloan loss reserves allocated to specific impaired loans and downward trends inthe national and local economies.

 

Approximately $1.5million, or 5.9%, of the $25.9 million allowance for loan losses at December 31,2009, relates to loans specifically reserved. This compares to a specificreserve of $1.7 million, or 10.8%, of the total allowance for loan losses at December 31,2008. The general reserve as a percent of overall loans was 2.04% at December 31,2009, as compared to 1.11% at December 31, 2008. The increase in thegeneral reserve as a percent of loans is due to actual historical losses,management’s review of internal classified loans, management’s expectation ofoverall economic conditions in the areas in which the Company operates andmanagement’s expected losses with the overall level of real estate loans withinthe Company’s portfolio.

 

AtDecember 31, 2009, the Company had $8.6 million of loans consideredtroubled debt restructurings, which are considered impaired loans. The Companyhas not allocated any specific reserves to customers whose loan terms have beenmodified in troubled debt restructurings as of December 31, 2009.  The Company has not committed to lendadditional amounts to customers with outstanding loans that are classified astroubled debt restructurings.

 

***Bank-OwnedLife Insurance (“BOLI”).*** The carrying value of BOLI increased to $37.6 millionat December 31, 2009 from $35.4 million at December 31, 2008. Thisincrease was due to an increase in the market value of the underlyinginvestments associated with the insurance policies that are tied to thedeferred compensation plan. The increase was a direct result of the marketconditions that existed during the year. The underlying investments consist ofmutual funds and the investment decisions are made by the participants in thedeferred compensation plan.

 

***OtherReal Estate.***During 2009, the Company acquired properties with an aggregate carrying valueof $25.7 million. Of this amount, $23.9 million related to eight commercialloan relationships, $1.0 million related to six residential real estaterelationships and $.8 million related to two commercial real estaterelationships. During 2009, the Company sold properties with an aggregatecarrying value of $3.9 million of which $1.4 million was related toconstruction properties. On a monthly basis, the Company evaluates the carryingvalue of all other real estate properties and takes write-downs on theseproperties as necessary. During 2009, the Company recorded write downs of $.4million on six commercial properties and $.1 million on a commercial realestate property. The Company is actively marketing the properties it holds inits other real estate portfolio in a continuing effort to reduce thisportfolio.

 

***Deposits.***Totaldeposits at December 31, 2009 increased 8.1% from the prior year-end,primarily due to a significant increase in money market checking along withincreased balances in NOW, savings and time deposits. These increases werepartially offset by a decrease in demand-non-interest-bearing deposits andprepaid solutions cards deposits. Management believes that due to the currentstate of the economy, some customers have migrated from non-liquid timedeposits to more liquid deposit products such as money market checking andsavings. The increase in time deposits less than $100,000 was primarily in timedeposits with short maturities. In general, management promotes the Company’sdeposit products when it believes appropriate and prices its products in amanner intended to retain the Company’s current customers as well as attractnew customers while maintaining an acceptable net interest margin. The Companycurrently holds $30.6 million of deposits related to balances on cards issuedby the prepaid solutions group. The Company expects to transfer these depositsat carrying value during 2010 in connection with the transfer of the Company’sissuing bank responsibilities under the prepaid card programs originated by theCompany’s former prepaid solutions group.

 

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***FederalFunds Purchased.*** The Company did not have any federalfunds purchased at December 31, 2009, compared to $55.0 million at December 31,2008. This decrease was the result of the maturity of 90-day term fundspurchased by the Company in the fourth quarter of 2008 to take advantage ofattractive interest rates available from the Federal Reserve. Purchases offederal funds are infrequent, but the Company accesses its various federalfunds lines from time to time in order to meet liquidity needs when necessary.

 

***PrepaidSolutions Cards.***Outstanding balances on prepaid solutions cards, which represent thetotal of prepaid solutions cards deposits and prepaid solutions cards liabilities,decreased 2.8% at December 31, 2009 from the prior year-end. On December 4,2009, the Company sold its prepaid solutions card division. The Bank remainsthe card issuing bank under the card programs transferred, although the Bankintends to transfer such responsibilities, and the related assets andliabilities to another financial institution. Although the outstanding balanceson prepaid solutions cards will remain on the Company’s balance sheet for aperiod of time, the Company will no longer record the income and expenseassociated with the prepaid solutions cards.

 

# **Capital Resources**

 

*Shareholders’equity at December 31, 2009 increased 11.0% from December 31, 2008.The increase was primarily due to a $15.4 million decrease in the amountreclassified on ESOP shares and a change in accumulated comprehensive income toa $3.6 million unrealized gain from an unrealized loss position of $1.3 millionat December 31, 2008. This increase was partially offset by a net loss of$.8 million, dividends declared of $4.3 million and the repurchase andretirement of common stock of $2.7 million.*

 

Banking regulations require the Company and the Bankto maintain minimum capital amounts and ratios. As of December 31, 2009,all capital ratios were in excess of the regulatory capital requirements whichcall for a minimum total risk-based capital ratio of 8% for each of the Companyand the Bank, a minimum Tier 1 risk-based capital ratio of 4% for each of theCompany and the Bank and a minimum leverage ratio (3% for the most highly ratedbanks and bank holding companies that do not expect significant growth; allother institutions are required to maintain a minimum leverage capital ratio of4% to 5% depending on their particular circumstances and risk and growthprofiles) for each of the Company and the Bank. Bank holding companies andtheir subsidiaries are generally expected to operate at or above the minimumcapital requirements. As of December 31, 2009, all capital ratios were inexcess of regulatory minimums and should allow the Company and the Bank tooperate without significant capital adequacy concerns. In addition, the Bankoperates a subsidiary that participates in the Bank’s real estate lendingbusiness and is intended to qualify as a real estate investment trust. Thissubsidiary is also intended to facilitate capital raising efforts, if suchefforts become necessary, by enabling the Bank to access the capital marketsthrough the subsidiary.

 

Asof December 31, 2009 and 2008, the Bank exceeded the minimum capital ratiosrequired to qualify as a “well-capitalized” institution as defined by theFederal Deposit Insurance Corporation Improvement Act of 1991, as amended. On aconsolidated basis, the Company also exceeded regulatory capital requirements.There are no conditions or events since December 31, 2009 that managementbelieves would result in a change of it being considered “well-capitalized.” Inaccordance with applicable regulations, the appraised fair market value of WestSuburban common stock owned by the ESOP is included in Tier 1 capital.

 

# **Liquidity**

 

*Effectiveliquidity management ensures the availability of funding sources at minimumcost to meet fluctuating deposit balances, loan demand needs and to takeadvantage of earnings enhancement opportunities. A large, stable core depositbase and a strong capital position are the solid foundation for the Company’sliquidity position. Liquidity is enhanced by a securities portfolio structuredto provide liquidity as needed. The Company also maintains relationships withcorrespondent banks to purchase federal funds subject to underwriting andcollateral requirements. Additionally, subject to credit underwriting,collateral, capital stock, and other requirements of the Federal Home Loan Bankof Chicago (the “FHLB”), the Company is able to borrow from the FHLB on a “sameday” basis. As of December 31, 2009, the Company could have borrowed up toapproximately $152 million from the FHLB secured by certain of its real estateloans and securities. Furthermore, the Company has agreements in place toborrow up to $61 million in federal funds. The Company manages its liquidityposition through continuous*

* *

*44*

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* *

*monitoringof profitability trends, asset quality, interest rate sensitivity and maturityschedules of interest-earning assets and interest-bearing liabilities.*

 

Generally, the Companyuses cash and cash equivalents and securities available for sale to meet itsliquidity needs. As of December 31, 2009 and 2008, these liquid assetsrepresented 18.3% and 15.1% of total assets, respectively. The increase inliquidity was due to significantly increased balances of cash and due frombanks and federal funds sold. A more detailed discussion can be found in thecash and cash equivalents discussion of the Balance Sheet Analysis section ofthis report.

 

During 2009, the Company’scash and cash equivalents increased $93.1 million. Net cash provided byoperating activities for this period was $14.4 million, while net cash providedby investing activities was $6.9 million. Net cash provided by financingactivities for this period was $71.8 million.

 

**IncomeStatement Analysis — 2009 Compared to 2008**

 

***General*****.**The Company’s net income decreased 105.0% in 2009 to a net loss of $.8 millioncompared to 2008. The net loss resulted primarily from an increase in theprovision for loan losses of $14.6 million and the write-off of $8.3 million ofits holdings of pooled trust preferred securities. Total noninterest incomedecreased $6.7 million while total noninterest expense increased $9.2 millionprimarily from increases in salaries and employee benefits expense and FDICassessments. Net interest income before provision for loan losses decreased$4.0 million. Income tax expense decreased $10.4 million to a benefit positionin 2009. On December 4,2009, the Company sold its prepaid solutions group and recorded a gain of $3.3million, net of tax.

 

***NetInterest Income.*** Net interest income in 2009 (on a fullytax-equivalent basis) decreased 6.5% compared to 2008. Net interest income isthe primary source of income for the Company. Net interest income is thedifference between interest income earned on interest-earning assets andinterest expense incurred on interest-bearing liabilities. Net interest incomeis affected by changes in volume and yield on interest-earning assets and thevolume and rates on interest-bearing liabilities. Interest-earning assetsconsist of federal funds sold, securities and loans. Interest-bearingliabilities primarily consist of deposits. The net interest margin is thepercentage of tax-equivalent net interest income to average earning assets. TheCompany’s net interest margin (on a fully tax-equivalent basis) decreased to3.4% at December 31, 2009 compared to 3.6% at December 31, 2008.

 

Total interest income(on a tax-equivalent basis) decreased 13.6% in 2009 primarily due to decreasingyields in the Company’s loan portfolio. Average loan balances decreased 2.4%during this period. The yield on the Company’s home equity loan portfolio decreased60 basis points during this period primarily due to decreases in the interestrates charged for home equity lines of credit that adjusted as a result ofdecreases in the prime rate. These decreases were a direct result of theFederal Reserve initiating interest rate reductions of 400 basis points in 2008and 100 basis points during the last six months of 2007. The average prime ratewas 3.25% for 2009 and 5.08% for 2008. Yields on the Company’s commercial loanportfolio decreased 137 basis points during this period. This decrease waspartially due to the majority of adjustable rate commercial loans being tied tothe prime rate, as well as an $8.2 million increase in commercial nonaccrualloans during 2009, which accounted for $1.8 million of lost interest and areduction in yield of 42 basis points. Yields on federal funds sold decreased225 basis points due to decreases in interest rates initiated by the FederalReserve. Yields on investment securities decreased 23 basis points as theCompany liquidated its corporate securities portfolio, sold one of its holdingsof pooled trust preferred securities and wrote off all of its remainingholdings of pooled trust preferred securities which had experienced increasedinterest payment deferrals during 2009.

 

Total interest expensedecreased 26.4% in 2009. Lower interest on deposits, resulting from loweryields on interest-bearing deposits, accounted for most of the decrease. Thedecline was primarily due to lower cost of funds on interest-bearing depositswhich decreased 62 basis points to 1.63% in 2009 from 2.25% in 2008.Approximately 64% of the Company’s certificates of deposit are scheduled tomature in 2010, which will reduce the cost of funds as management expects thatthe certificates of deposit will be either renewed at a substantially lowerrate or replaced with lower costing alternative funding sources.

 

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The following tablereflects the impact of changes in volume and rates of interest-earning assetsand interest-bearing liabilities on a tax equivalent basis for the years ended December 31,2009 and 2008 (dollars in thousands):

 
| ** **                          | ** ** | **2009 compared to 2008** | ** ** | **2008 compared to 2007** | ** ** |
|-------------------------------------|------------|---------------------------|------------|---------------------------|------------|
| ** **                          | ** ** | **Change due to**         | ** ** | **Total**                 | ** ** | **Change due to** | ** ** | **Total** | ** ** |
| ** **                          | ** ** | **Volume**                | ** ** | **Rate**                  | ** ** | **Change** | ** ** | **Volume** | ** ** | **Rate** | ** ** | **Change** | ** ** |
| **Interest Income**                 |       |                      |       |                      |       |   |   |   |   |   |   |   |   |
| Federal  funds sold                 |       | $                         | 141        |                      | $          | (177 | ) | $ | (36 | ) | $ | (1,263 | ) | $ | (1,600 | ) | $ | (2,863 | ) |
| Securities                          |       | (2,051                    | )          | (1,152                    | )          | (3,203 | ) | 11 |   | 1,990 |   | 2,001 |   |
| Loans                               |       | (1,554                    | )          | (8,231                    | )          | (9,785 | ) | 2,712 |   | (14,977 | ) | (12,265 | ) |
| Total  interest income              |       | (3,464                    | )          | (9,560                    | )          | (13,024 | ) | 1,460 |   | (14,587 | ) | (13,127 | ) |
|                                |       |                      |       |                      |       |   |   |   |   |   |   |   |   |
| **Interest Expense**                |       |                      |       |                      |       |   |   |   |   |   |   |   |   |
| Interest-bearing  deposits          |       | 696                       |       | (9,060                    | )          | (8,364 | ) | (715 | ) | (14,180 | ) | (14,895 | ) |
| Other  interest-bearing liabilities |       | (121                      | )          | (500                      | )          | (621 | ) | 661 |   | — |   | 661 |   |
| Total  interest expense             |       | 575                       |       | (9,560                    | )          | (8,985 | ) | (54 | ) | (14,180 | ) | (14,234 | ) |
| Net  interest income                |       | $                         | (4,039     | )                         | $          | — |   | $ | (4,039 | ) | $ | 1,514 |   | $ | (407 | ) | $ | 1,107 |   |

 

***Provision for Loan Losses.***Theprovision for loan losses increased $14.6 million in 2009. The Companydetermined that additional loan loss provisions were necessary due to theincreased levels of charge-offs and nonperforming loans and continued downwardtrends in the national and local economies. A more detailed discussionconcerning the allowance for loan losses is presented in the Allowance for LoanLosses and Asset Quality section of this annual report.

 

***NoninterestIncome.*******Totalnoninterest income decreased 53.6% during 2009 compared to 2008. During 2009,the Company wrote-off $8.3 million of the Company’s holdings in pooled trustpreferred securities. Service fees on deposit accounts decreased $.4 millionprimarily due to decreased fees associated with the overdraft honors program.The BOLI investment increased $4.2 million to a gain of $2.0 million from aloss of $2.2 million for 2008 primarily due to an increase in the market valueof the underlying investments associated with the insurance policies that aretied to the deferred compensation plans. Net gains on loans held for saleincreased $.5 million primarily due to increased sales of loans held for salein the secondary market. During 2008, the Company recorded a one-time gain of$2.1 million related to the redemption of VISA stock as part of the VISAinitial public offering and recovery of expenses recorded for the Company’sobligation to indemnify VISA during the fourth quarter of 2007. Other incomedecreased $.5 million primarily due to a one time litigation settlement of $.4million recorded in 2008.

 

***NoninterestExpense.***Total noninterest expense increased 22.4% during 2009 compared to 2008.Salaries and employee benefits increased $4.7 million primarily due to anincrease in the market value of the underlying investments associated with theinsurance policies that are tied to the Company’s deferred compensation plans.Additionally, the Company experienced increased salary and employee benefitsexpense related to Bank Secrecy compliance and other compliance related mattersas well as $.6 million in severance payments associated with the sale of theprepaid solutions group. Occupancy expense decreased $.1 million, primarily dueto reduced utilities expense. Advertising and promotion expense decreased $1.1million primarily due to the Company reducing its use of an advertising agencyand reduced newspaper advertising. Professional fees expense increased $1.8million primarily due to increased costs related to Bank Secrecy Act complianceand other compliance related matters and increased legal costs related tocommercial lending matters. FDIC assessments increased $3.1 million due toseveral factors, including increased assessments issued by the FDIC in supportof the deposit insurance fund as well as the Temporary Liquidity GuaranteeProgram, the Company’s participation in the FDIC’s Transaction AccountGuarantee Program, the prepaid solutions cards deposits becoming eligible forFDIC Insurance and the use of a credit balance the Company had with the FDIC inprior years. A portion of the increase in FDIC assessments is due to a one-timespecial assessment of $.9 million recognized during the second quarter of 2009.Loan administration expense increased $.9 million primarily due to real estatetax payments made for several commercial accounts.

 

46

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***IncomeTaxes.*** For2009, the Company recorded an income tax benefit of $5.6 million compared to anincome tax expense of $5.1 million for 2008. The effective tax rates for 2009and 2008 were (86.9%) and 22.2%, respectively. The decline is due to a pretaxloss and the impact of permanent differences resulting from, among other items,ESOP dividends, municipal income and BOLI income.

 

**IncomeStatement Analysis — 2008 Compared to 2007**

 

***General*****.**The Company’s net income decreased 28.2% in 2008 as compared to 2007. Netincome was positively affected by an increase in net interest income of $.8million, a decrease in total noninterest expense of $1.8 million and a decreasein income tax expense of $3.7 million. Net income was negatively affected by anincrease in the provision for loan loss of $10.0 million and a decrease intotal noninterest income of $1.2 million.

 

***NetInterest Income.*** Net interest income in2008 (on a fully tax-equivalent basis) increased 1.8% compared to 2007. Netinterest income is the primary source of income for the Company. The Company’snet interest margin (on a fully tax-equivalent basis) was 3.6% in 2008 and 3.5%in 2007.

 

Total interest income(on a tax-equivalent basis) decreased 12.0% in 2008 primarily due to decreasingyields in the Company’s loan portfolio. Average loan balances increased 3.9%during this period. The yield on the Company’s home equity loan portfoliodecreased 98 basis points during this period primarily due to decreases in theinterest rate charged for home equity lines of credit that adjusted as a resultof decreases in the prime rate. These decreases were a direct result of theFederal Reserve initiating interest rate reductions of 400 basis points in 2008and 100 basis points during the last six months of 2007. The average prime ratewas 5.08% for 2008 and 8.05% for 2007. Yields on the Company’s commercial loanportfolio decreased 259 basis points during this period. This decrease waspartially due to the majority of adjustable rate commercial loans being tied tothe prime rate, as well as a $21.3 million increase in nonaccrual loans during2008, which accounted for $1.3 million of lost interest and a reduction in yieldof 30 basis points. Yields on federal funds sold decreased 274 basis points dueto decreases in interest rates initiated by the Federal Reserve. Yields oninvestment securities increased 40 basis points due to proceeds from maturitiesand sales of securities issued by U.S. government sponsored enterprises beinginvested in higher yielding mortgage-backed securities issued by U.S.government sponsored enterprises.

 

Total interest expensedecreased 29.5% in 2008. Interest on deposits accounted for the decrease, whichwas only partially offset by an increase in interest expense on federal fundspurchased. The yield on interest-bearing deposits decreased 93 basis points to2.25% in 2008 from 3.18% in 2007.

 

***Provision for Loan Losses.***Theprovision for loan losses increased $10.0 million in 2008. The Companydetermined that additional loan loss provisions were necessary due to theincreased levels of charge-offs and nonperforming loans, an increase in loanloss reserves allocated to specific impaired loans and downward trends in thenational and local economies.

 

***NoninterestIncome.*******Totalnoninterest income decreased 8.9% during 2008 compared to 2007. BOLI incomedecreased $3.7 million, primarily due to the decline in the market value of theunderlying investments associated with the insurance policies that are tied tothe Company’s deferred compensation plans. During 2008, the Company recorded again of $1.1 million on the mandatory partial redemption of VISA stock inconnection with the VISA public offering. A portion of the VISA stock allocatedto the Company in the initial public offering was withheld to cover the costsand expenses associated with various lawsuits for which the Company, as amember of the VISA network, is obligated to indemnify VISA. As a result, theCompany also recorded $.8 million of income related to the recovery of expensesrecorded in the fourth quarter of 2007 and $.2 million in recovery of expensesrecorded during the third quarter of 2008 in connection with the creation oflitigation reserves relating to these lawsuits.

 

***NoninterestExpense.***Total noninterest expense decreased 4.2% during 2008 compared to 2007. Salariesand employee benefits decreased $3.0 million primarily due to a decline in themarket value of the underlying investments associated with the insurancepolicies that are tied to the Company’s deferred compensation plans.  Additionally, the Company experiencedincreased employee insurance expense. Furniture and equipment expense increased$.3 million, primarily due to increased equipment depreciation and dataprocessing expense. Occupancy

 

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expense increased $.7million, primarily due to costs associated with increased maintenance andutilities expense. Advertising and promotion expense decreased $.2 millionprimarily due to reduced costs associated with home equity and commercial loanadvertising. Professional fees expense increased $.3 million primarily due toincreased legal expenses.

 

***IncomeTaxes.*** Incometax expense decreased 37.3% in 2008, primarily due to lower pre-tax income. Theeffective tax rates for the years ended December 31, 2008 and 2007 were22.2% and 26.6%, respectively. This decrease was primarily due to changes inthe State of Illinois tax laws discussed in Note 7 to the Company’s financialstatements. As a result of the changes in the State of Illinois tax laws, theCompany expects the effective tax rates to be higher in future years.

# ** **

# **Interest RateSensitivity**

 

The Company attempts to maintain a conservative posturewith regard to interest rate risk by actively managing its asset/liability GAPposition and monitoring the direction and magnitude of gaps and risk. TheCompany attempts to moderate the effects of changes in interest rates byadjusting its asset and liability mix to achieve desired relationships betweenrate sensitive assets and rate sensitive liabilities. Rate sensitive assets andliabilities are those instruments that reprice within a given time period. Anasset or liability reprices when its interest rate is subject to change or uponmaturity.

 

Movements in general market interest rates are a keyelement in changes in the net interest margin. The Company’s policy is tomanage its balance sheet so that fluctuations in the net interest margin are minimizedregardless of the level of interest rates, although the net interest margindoes vary somewhat due to management’s response to increasing competition fromother financial institutions.

 

The Companymeasures interest rate sensitivity through a net interest income analysis. Thenet interest income analysis measures the change in net interest income in theevent of hypothetical changes in interest rates. This analysis assesses therisk of changes in net interest income in the event of a sudden and sustained100 to 200 basis point increase or decrease in market interest rates. Thisanalysis is subject to the Company’s assumptions, which include the following:

 

·                  Balance sheet volume reflects the currentbalances and does not project future growth or changes. The current balancesestablish the base case from which all percent changes are calculated.

 

·                  The replacement rate for loan and deposititems that mature is the current rate offered by the Company as adjusted forthe assumed rate increase or decrease. The replacement rate for securities isthe current market rate as adjusted for the assumed rate increase or decrease.

 

·                  The repricing rate for balance sheet datais determined by utilizing individual account statistics provided by theCompany’s data processing systems.

 

·                  The maturity and repricing dates forbalance sheet data are determined by utilizing individual account statisticsprovided by the Company’s data processing systems.

 

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Listed below are theCompany’s projected changes in net interest income over a twelve-month horizonfor the various rate shock levels as of the periods indicated (dollars in thousands):

 
| **December 31, 2009** | ** ** | **Amount** | ** ** | **Dollar  Change** | ** ** | **Percent  Change** | ** ** |
|----------------------------|------------|------------|------------|--------------------|------------|---------------------|------------|
| +200  basis points         |       | $          | 58,194     |               | $          | 2,388               |       | 4.3 | % |
| +100  basis points         |       | 56,317     |       | 511                |       | 0.9                 | %          |
| Base                       |       | 55,806     |       |               |       |                |       |
| -100  basis points         |       | 49,048     |       | (6,758             | )          | (12.1               | )%         |
| -200  basis points         |       | 44,371     |       | (11,435            | )          | (20.5               | )%         |
|                            |            |            |            |                    |            |                     |            |  |  |

 
| **December 31, 2008** |   |   |   |    |   |   |   |
|----------------------------|--------|--------|--------|---------|--------|--------|--------|
| +200  basis points         |   | $      | 59,584 |    | $      | 1,772  |   | 3.1 | % |
| +100  basis points         |   | 58,976 |   | 1,164   |   | 2.0    | %      |
| Base                       |   | 57,812 |   |    |   |   |   |
| -100  basis points         |   | 52,497 |   | (5,315  | )      | (9.2   | )%     |
| -200  basis points         |   | 46,324 |   | (11,488 | )      | (19.9  | )%     |
|                            |        |        |        |         |        |        |        |  |  |

 

# **Effects of Inflation**

 

Unlike industrialcompanies, nearly all of the assets and liabilities of the Company are monetaryin nature. As a result, interest rates have a more significant impact on theCompany’s performance than do the effect of general levels of inflation.Interest rates do not necessarily move in the same direction or experience thesame magnitude of change as goods and services, since such prices are affectedby inflation. In the current economic environment, liquidity and interest rateadjustments are features of the Company’s asset/liability management, which areimportant to the maintenance of acceptable performance levels. The Companyattempts to maintain a balance between monetary assets and monetaryliabilities, over time, to offset the potential effects of changing interestrates.

 

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## **BOARDS OF DIRECTORS**

 

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** **

**WestSuburban Bancorp, Inc.**

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

 

**WestSuburban Bank**

 
| Keith W. Acker   |   | Chairman, President              |
|------------------|--------|----------------------------------|
| Craig R. Acker   |   | Former Banker                    |
| David S. Bell    |   | Certified Public  Accountant     |
| Earl K. Harbaugh |   | Ditch Witch Midwest,  President  |
| John G. Williams |   | Bracing Systems, Vice  President |

 

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## **OFFICERS**

 

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**WestSuburban Bancorp, Inc.**

** **
| Kevin J. Acker       |   | Chief Executive Officer                |
|----------------------|--------|----------------------------------------|
| Duane G. Debs        |   | President and Chief  Financial Officer |
| Keith W. Acker       |   | Chief Operations  Officer              |
| Michael P. Brosnahan |   | Vice President                         |
| Timothy W. Clifford  |   | Internal Audit Manager                 |
| 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                       |
| Duane G. Debs        |       | Senior Vice President,  Comptroller and Trust Officer |

** **
| **Bank Secrecy Act and Regulatory Compliance** |
|------------------------------------------------|
| Carolyn M. Hagner                              |   | Vice  President, Bank Secrecy Act Officer and Director of Regulatory Compliance |
|                                           |   |   |
| **Building Management**                        |   |   |
| Edward J. Garvey                               |   | Vice President,  Building Management |
|                                           |   |   |
| **Cash Management**                            |   |   |
| Gary Raczek                                    |   | Vice President, Cash  Management Manager |

 

50

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| **Community Reinvestment Act** |   |                                          |
|--------------------------------|--------|-----------------------------------------------|
| Cyndia S. Heap                 |   | Community Reinvestment  Act 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 |
| Michael F. Moone               |   | Vice President,  Commercial Real Estate Loans |
| David S. Orr                   |   | Vice President,  Commercial Loans             |
| John J. Schroeder              |   | Vice President,  Commercial Loans             |
| Edwin S. Stephens IV           |   | Vice President,  Commercial Loans             |
| Gregory L. Young               |   | Vice President,  Commercial Loans             |
| Matthew R. Acker               |   | Business Development                          |

** **
| **Compliance**           | ** ** | ** **                                                                        |
|--------------------------|------------|-----------------------------------------------------------------------------------|
| Alice Anne Gaultney      |       | Compliance Officer                                                                |
|                     |       |                                                                              |
| **Comptroller**          |       |                                                                              |
| Jay J.P. Greifenkamp     |       | Vice  President, Financial Analyst, Investment Officer and Secretary to the Board |
| George E. Ranstead       |       | Vice President,  Assistant Comptroller and Investment Officer                     |
|                     |       |                                                                              |
| **Consumer Loans**       |       |                                                                              |
| Charles J. Svoboda       |       | Vice President,  Consumer Loans - Department Head                                 |
| Cynthia A. Meredith      |       | Vice President,  Consumer Loans                                                   |
| David J. Wanek           |       | Vice President,  Consumer Loans                                                   |
|                     |       |                                                                              |
| **Corporate Operations** |       |                                                                              |
| Danielle Budig           |       | Vice President,  Corporate Operations and Visa                                    |
| Michael J. Lynch         |       | Vice President,  Corporate Operations                                             |
|                     |       |                                                                              |
| **Financial Services**   |       |                                                                              |
| Michael Abbatacola       |       | Vice President,  Financial Services                                               |
|                     |       |                                                                              |
| **Human Resources**      |       |                                                                              |
| Mary Ellen Condon        |       | Vice President, Human  Resources                                                  |
|                     |       |                                                                              |
| **Information Systems**  |       |                                                                              |
| Steven A. Jennrich       |       | Vice President,  Information Systems                                              |
| Jacqueline R. Weigand    |       | Vice President, Project  Manager                                                  |
|                     |       |                                                                              |
| **Internal Audit**       |       |                                                                              |
| Timothy W. Clifford      |       | Vice President,  Internal Audit Manager                                           |
|                     |       |                                                                              |
| **Loan Operations**      |       |                                                                              |
| Kevin G. Carani          |       | Vice President,  Mortgage Processing, Loan Servicing                              |
| Sandra C. Boyce          |       | Vice President,  Residential Mortgage Loan Processing                             |
| Gary H. Brandes          |       | Vice President,  Consumer Loan Operations                                         |
| Kevin Bussey             |       | Vice President,  Collections                                                      |
| Debra H. Crowley         |       | Vice President,  Commercial Loan Operations                                       |
| Lawrence J. Ortman       |       | Vice President, Credit  Analysis and Loan Review                                  |
|                     |       |                                                                              |
| **Marketing**            |       |                                                                              |
| Denise M. Zatarski       |       | Director of Marketing                                                             |

 

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| **Purchasing**                        |       |                                                                      |
|---------------------------------------|------------|---------------------------------------------------------------------------|
| Helen G. Schmitt                      |       | Assistant Vice  President, Purchasing Manager                             |
|                                  |       |                                                                      |
| **Retail Banking**                    |       |                                                                      |
| William J. Jennrich                   |       | Vice President, Retail  Branch Banking                                    |
| Jack Buscemi                          |       | Vice President,  Regional Manager - Central Region                        |
| Marc L. DiNatale                      |       | Vice President,  Regional Manager - East Region                           |
| Kirsten L. Erickson                   |       | Vice President,  Regional Manager - West Region                           |
| Marcia K. Worobec                     |       | Vice President, Branch  Operations and Branch Manager - Westmore          |
| Jennifer Bentson                      |       | Assistant Vice  President, Branch Manager - Warrenville                   |
| Kathleen M. Brockman                  |       | Assistant Vice  President, Branch Manager - Eola Road                     |
| Jeanne L. Carlisle                    |       | Assistant Vice  President, Branch Manager - Bolingbrook West              |
| Jill E. Castillo                      |       | Assistant Vice  President, Branch Manager - Oakbrook Terrace              |
| Maribel Colon                         |       | Assistant Vice  President, Branch Manager - Oswego West                   |
| Beverly D. Cornelious                 |       | Assistant Vice  President, Branch Manager - Bolingbrook East              |
| Gina M. Corral                        |       | Assistant Vice  President, Branch Manager - President Street              |
| Barbara D. Darden                     |       | Assistant Vice  President, Branch Manager - Chicago Avenue, Naperville    |
| Robert G.  Dover, Jr.            |       | Assistant Vice  President, Branch Manager - Gary Avenue                   |
| Nansi E. Eivaz                        |       | Assistant Vice  President, Branch Manager - Romeoville                    |
| Sharon A. Fonte                       |       | Assistant Vice  President, Branch Manager - Glendale Heights              |
| James R. Graziano                     |       | Assistant Vice  President, Branch Manager - South Main                    |
| Priya Hira                            |       | Assistant Vice  President, Branch Manager - Danada, Wheaton               |
| Rosemary Kasal                        |       | Assistant Vice  President, Branch Manager - Bartlett                      |
| Mary L. Kureja                        |       | Assistant Vice  President, Branch Manager - Finley Road, Downtown Downers |
| Terry Leitner                         |       | Assistant Vice  President, Branch Manager - Cass Avenue, 75th Street |
| Jeffery W. Miska                      |       | Assistant Vice  President, Branch Manager - North Main                    |
| Carlos Muzquiz                        |       | Assistant Vice  President, Branch Manager - Lake Street                   |
| Brian S. Nickleski                    |       | Assistant Vice  President, Branch Manager - Westmont                      |
| Sandra Ochoa                          |       | Assistant Vice  President, Branch Manager - Randall Road                  |
| Gwen B. O’Loughlin               |       | Assistant Vice  President, Branch Manager - Villa Park                    |
| Robert L. Pauling                     |       | Assistant Vice  President, Branch Manager - Stratford Square              |
| Cynthia A. Picton                     |       | Assistant Vice  President, Branch Manager - West Galena                   |
| Matthew Remus                         |       | Assistant Vice  President, Branch Manager - Fair Oaks                     |
| Laura Saad                            |       | Assistant Vice  President, Branch Manager - Yorkville, Oswego             |
| Gloria Santiago                       |       | Assistant Vice  President, Branch Manager - Montgomery                    |
| Lisa M. Schmidt                       |       | Assistant Vice  President, Branch Manager - South Elgin                   |
| Patience K. Tannenbaum                |       | Assistant Vice  President, Branch Manager - Charlestowne                  |
| Mihaela Tonchevici                    |       | Assistant Vice  President, Branch Manager - River Run                     |
|                                  |       |                                                                      |
| **Trust**                             |       |                                                                      |
| Christine H. Pawlak                   |       | Trust Officer                                                             |
|                                  |       |                                                                      |
| **West Suburban Insurance  Services** |       |                                                                      |
| **Patricia Falstrom**                 | ** ** | **Insurance Agent**                                                       |

 

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## **ADDRESSES OF WESTSUBURBAN FACILITIES**

**(630) 652 - 2000**

** **

**Aurora**

Eola Road Branch: 335North Eola Road, Aurora, Illinois 60504

West Galena Branch: 2000West Galena Boulevard, Aurora, Illinois 60506

Lake Street Branch: 101North Lake Street, Aurora, Illinois 60506

 

**Bartlett**

Bartlett Branch: 1061West Stearns Road, Bartlett, Illinois 60103

 

**Bloomingdale**

Stratford Square Branch:355 West Army Trail Road, Bloomingdale, Illinois 60108

 

**Bolingbrook**

Bolingbrook East Branch:672 East Boughton Road, Bolingbrook, Illinois 60440

Bolingbrook West Branch:1104 West Boughton Road, Bolingbrook, Illinois 60440

 

**Carol Stream**

Gary Avenue Branch: 401North Gary Avenue, Carol Stream, Illinois 60188

Fair Oaks Branch: 1380West Army Trail Road, Carol Stream, Illinois 60188

President Street Branch:895 East Geneva Road, Carol Stream, Illinois 60188

 

**Darien**

75th Street Branch:1005 75th Street, Darien, Illinois 60561

Cass Avenue Branch: 8001South Cass Avenue, Darien, Illinois 60561

 

**Downers Grove**

Downtown Downers Branch:5330 Main Street, Downers Grove, Illinois 60515

Finley Road Branch: 2800Finley Road, Downers Grove, Illinois 60515

 

**Glendale Heights**

Glendale Heights Branch:1657 Bloomingdale Road, Glendale Heights, Illinois 60139

 

**Lombard**

North Main Branch: 707North Main Street, Lombard, Illinois 60148

South Main Branch: 1122South Main Street, Lombard, Illinois 60148

*WestmoreBranch: 711 South Meyers Road, Lombard, Illinois 60148 (Headquarters)*

 

**Montgomery**

Montgomery Branch: 1830Douglas Road, Montgomery, Illinois 60538

 

**Naperville**

Chicago Avenue Branch:1296 East Chicago Avenue, Naperville, Illinois 60540

Naperville Branch: 2020Feldott Lane, Naperville, Illinois 60540

River Run Branch: 1004104th Street, Naperville, IL 60564

 

**Oakbrook Terrace**

Oakbrook Terrace Branch:17W754 22nd Street, Oakbrook Terrace, Illinois 60181

 

**Oswego**

Oswego Branch: 2830 Route34, Oswego, Illinois 60543

Oswego West Branch: 1071Station Drive, Oswego, Illinois 60543

 

53

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**Romeoville**

Romeoville Branch: 505North Weber Road, Romeoville, Illinois 60446

** **

**South Elgin**

South Elgin Branch: 1870McDonald Road, South Elgin, Illinois 60177

 

**St. Charles**

Charlestowne Branch: 3000East Main Street, St. Charles, Illinois 60174

St. Charles Branch: 315South Randall Road, St. Charles, Illinois 60174

 

**Villa Park**

Villa Park Branch: 40East St. Charles Road, Villa Park, Illinois 60181

 

**Warrenville**

Warrenville Branch: 3S041Route 59, Warrenville, Illinois 60555

 

**Westmont**

Westmont Branch: 6400South Cass Avenue, Westmont, Illinois 60559

 

**Wheaton**

Danada Branch: 295 WestLoop Road, Wheaton, Illinois 60187

Wheaton Branch: 221 SouthWest Street, Wheaton, Illinois 60187

 

**Yorkville**

Yorkville Branch: 10Saravanos Drive, Yorkville, Illinois 60560

 

ATMs are available at allof the above banking branches.

 

**Limited-Service Branches**

*Beacon Hill Retirement Community:Lombard, Illinois 60148*

*Clare Oaks: Bartlett, Illinois60103*

*Financial Center: 717 SouthMeyers Road, Lombard, Illinois 60148*

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

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

 

**Other Services**

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

*West Suburban Bank Visa: 701South Meyers Road, Lombard, Illinois 60148 - (630) 652-2000 extension 2903*

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

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

 

54

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

 

****

 

***Unlike Any OtherBank***

 

55

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# **SHAREHOLDER INFORMATION**

# ** **

# **Annual Report on Form 10-K**

A copy of West SuburbanBancorp, Inc.’s Annual Report on Form 10-K, filed with the Securitiesand Exchange Commission, is available on their web site at www.sec.gov orwithout charge to shareholders by writing to:

 

Duane G. Debs

President and ChiefFinancial Officer

West Suburban Bancorp, Inc.

2800 Finley Road

Downers Grove, Illinois60515

(630) 652-2801

 

# **Annual Meeting ofShareholders**

The annual meeting ofshareholders of West Suburban Bancorp, Inc. will be held at West SuburbanBank, 711 South Meyers Road, Lombard, Illinois on Wednesday, May 12, 2010at 8:00 a.m. All shareholders are cordially invited to attend.

 

# **Stock Transfer Agent andRegistrar**

Inquiries regardingstock transfers, registration, lost certificates and changes of name andaddress should be directed to the stock transfer agent and registrar by writingto:

 

George E. Ranstead

Secretary to the Boardand Treasurer

West Suburban Bancorp, Inc.

2800 Finley Road

Downers Grove, Illinois60515

(630) 652-2802

 

# **Community ReinvestmentAct**

West Suburban Bankadheres to a well-established policy of helping to meet the credit needs of ourlocal communities, consistent with safe and sound lending practices, inaccordance with the Community Reinvestment Act. For additional information,contact:

 

Cyndia S. Heap

Community ReinvestmentAct Officer

West Suburban Bank

711 South Meyers Road

Lombard, Illinois 60148

(630) 652-2611

 

# **Independent RegisteredPublic Accounting Firm**

Crowe Horwath LLP

One Mid America Plaza, Suite 700

Post Office Box 3697

Oak Brook, Illinois 60522

 

# **Corporate Counsel**

Barack Ferrazzano Kirschbaum &Nagelberg LLP

200 West Madison Street, Suite 3900

Chicago, Illinois 60606

 
| **MEMBER FDIC** | **** | ** ** | **** |
|-----------------|------|------------|------|

 

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