** **

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-K**

 

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

 

**For fiscal year ended December 31, 2009**

 

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

 

**Fortransition period from            to          **

 

**CommissionFile Number 000 – 17609**

 

**WEST SUBURBAN BANCORP, INC.**

(Exact name ofRegistrant as specified in its charter)

 

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

 

Registrant’s telephone number, including area code:  **(630) 652-2000**

 

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

 

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

 

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

 

**Common Stock, no par value**

(Title of Class)

 

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

 

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

 

Indicate by check markwhether the Registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the Registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days. Yes  x  No  o

 

Indicate by check markwhether the registrant has submitted electronically and posted on its corporateWeb site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T during the preceding 12months (or for such shorter period that the registrant was required to submitand post such files). Yes  o  No  o

** **

Indicate by check mark if disclosure of delinquent filers pursuant toItem 405 of Regulation S-K (§ 229.405) is not contained herein, and will not becontained, to the best of Registrant’s knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form 10-Kor any amendment to this Form 10-K. x

 

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, a non-accelerated filer, or asmaller reporting company. See definition of “large accelerated filer,” “acceleratedfiler” and “small reporting company” in Rule 12b-2 of the Exchange Act.

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

 

Indicate by check mark whether the Registrant is ashell company (as defined in Rule 12b-2 of the Act).   Yes  o  No  x

 

The aggregate fair value of voting common stock of Registrant held bynon-affiliates as of June 30, 2009 was $98,068,500(1)

 

At March 2, 2010, the total number of shares of Common Stockoutstanding was 426,850.

 

Documents Incorporated by Reference:

 

Portions of the Annual Report to Shareholders for the fiscal year endedDecember 31, 2009, which is included as Exhibit 13 to this Form 10-K,are incorporated by reference into Parts I, II and IV hereof, to theextent indicated herein. Portions of the Proxy Statement for the Annual Meetingof Shareholders to be held May 12, 2010 are incorporated by reference in Part IIIhereof, to the extent indicated herein.

 

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(1)             Based on the last independently appraised fair valueof the Registrant’s common stock as of March 2, 2010 and reports ofbeneficial ownership filed by directors and executive officers of Registrantand by beneficial owners of more than 5% of the outstanding shares of commonstock of Registrant; however, such determination of shares owned by affiliatesdoes not constitute an admission of affiliate status or beneficial interest inshares of common stock of Registrant.

 

 

 

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**SpecialNote Concerning Forward-Looking Statements**

 

Thisdocument (including information incorporated by reference) contains, and futureoral and written statements of West Suburban Bancorp, Inc. (“West Suburban”)and West Suburban Bank (the “Bank” and collectively with West Suburban and itsother direct and indirect subsidiaries, the “Company”) and its management maycontain, forward-looking statements, within the meaning of such term in thePrivate Securities Litigation Reform Act of 1995, with respect to the financialcondition, results of operations, plans, objectives, future performance andbusiness of the Company. Forward-looking statements, which may be based uponbeliefs, expectations and assumptions of the Company’s management and oninformation currently available to management, are generally identifiable bythe use of words 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-lookingstatements, speak only as of the date they are made, and the Company undertakesno obligation to update any statement in light of new information or futureevents.

 

The Company’sability to predict results or the actual effect of future plans or strategiesis inherently uncertain. Factors that could have a material adverse effect onthe operations and future prospects of the Company include, but are not limitedto, those set forth in the “Risk Factors” section included under Item 1A andthe following:

 

·            The strength of the U.S. and global economies andfinancial markets in general and the strength of the local economies in whichthe Company conducts its operations, including the local residential andcommercial real estate markets, which may be less favorable than expected andmay result in, among other things, a deterioration in the credit quality andvalue of the Company’s assets.

 

·            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.

 

·            The effects of continued adverse market conditions andfurther volatility in investment securities generally, which may result in adeterioration in the value of the securities in the Company’s investmentportfolio.

 

·            The ability of the Company to comply with, and satisfythe requirements of, its formal written agreements with its regulators and theconsequences that may result from any inability to comply.

 

·            The ability of the Company to comply with applicablefederal, state and local laws, regulations and policies and the consequencesthat may result from any inability to comply.

 

·            The effects of changes in interest rates, includingthe effects of changes in the rate of prepayments of the Company’s assets, andthe policies of the Board of Governors of the Federal Reserve System.

 

·            The ability of the Company to compete with otherfinancial institutions as effectively as the Company currently intends due toincreases in competitive pressures in the financial services sector.

 

·            The ability of the Company to maintain an acceptablenet interest margin.

 

·            The ability of the Company to obtain new customers andto retain existing customers.

 

·            The timely development and acceptance of products andservices, including products and services offered through alternative deliverychannels such as the Internet.

 

·            Technological changes implemented by the Company andby other parties, including third party vendors, which may be more difficult ormore expensive than anticipated or which may have unforeseen consequences tothe Company and its customers, including technological changes implemented for,or related to, the Company’s website or new products.

 

·            The ability of the Company, and certain of itsvendors, to develop and maintain secure and reliable electronic systems,including systems developed for the Company’s website or new products.

 

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·            The ability of the Company to retain directors,executives and key employees, and the difficulty that the Company may experiencein replacing directors, executives and key employees in an effective manner.

 

·            Consumer spending and saving habits which may changein a manner that affects the Company’s business adversely.

 

·            The economic impact of past and any future terrorist attacks,acts of war or threats thereof and the response of the U.S. to any such attacksand threats.

 

·            Business combinations and the integration of acquiredbusinesses, which may be more difficult or expensive than expected.

 

·            The costs, effects and outcomes of existing or futurelitigation and disputes with third parties, including, but not limited to,claims in connection with collection actions, employment matters and sales ofbusiness units.

 

·            Changes in accounting policies and practices, as maybe adopted by state and federal regulatory agencies and the FinancialAccounting Standards Board, the Public Company Accounting Oversight Board andthe Securities and Exchange Commission.

 

·            Credit risks and the risks from concentrations (bygeographic area or industry) within the Company’s loan portfolio.

 

·            The failure of the Company’s Real Estate InvestmentTrust (“REIT”) to qualify as a REIT and the effects of such failure on theCompany’s consolidated effective tax rate.

 

·            The ability of the Company to manage the risksassociated with the foregoing as well as anticipated.

 

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

 

# **PART I**

# ** **

## **ITEM 1.        BUSINESS**

## ** **

REGISTRANT AND ITSSUBSIDIARY

 

West SuburbanBancorp, Inc., an Illinois corporation organized in 1986, is a bankholding company registered under the Bank Holding Company Act of 1956, asamended (the “BHCA”), and the parent company of West Suburban Bank.

 

The Bank isheadquartered in Lombard, Illinois, and, as of December 31, 2009,maintained 35 full-service branches, five limited-service branches and fourdepartments providing insurance, financial and other services for theconvenience of the customers of the Bank throughout the western suburbs ofChicago. Due to the nature of the market areas served by the Bank, the Bankprovides a wide range of financial services to individuals and small to mediumsized businesses. The western suburbs of Chicago have a diversified economywith many corporate headquarters and numerous small to medium sized industrialand non-industrial businesses.

 

The Bank engages in a general fullservice retail banking business and offers a broad variety of consumer andcommercial products and services. The Bank also offers insurance servicesthrough West Suburban Insurance Services, Inc., land trust services andsafe deposit boxes. The Bank provides extended banking hours, including Sundayhours and 24-hour banking through a proprietary network of 64 automated teller machines,Tele-Bank 24 (a bank-by-phone system) and online banking at www.westsuburbanbank.com.Other consumer related services are also available, including investmentproducts and a Visa card through West Suburban Bank card services.

 

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The followingtable sets forth financial and other information concerning the Bank as of andfor the year ended December 31, 2009 (dollars in thousands):

 
| **Year  Formed/Year**            | ** ** | ** **     | ** ** | ** ** | ** ** | ** **             | ** ** | ** ** | ** ** | ** **             | ** ** | ** ** | ** ** |
|----------------------------------|------------|----------------|------------|------------|------------|------------------------|------------|------------|------------|------------------------|------------|------------|------------|
| **Affiliated  with**             | ** ** | **Number  of** | ** ** | **Total**  | ** ** | **Shareholders’** | ** ** | **Net**    | ** ** | **Return  on Average** | ** ** |
| **West  Suburban**               | ** ** | **Locations**  | ** ** | **Assets** | ** ** | **Equity**             | ** ** | **Loss**   | ** ** | **Assets**             | ** ** | **Equity** | ** ** |
| West  Suburban Bank  (1962/1988) |       | 40             |       | $          | 1,933,032  |                   | $          | 145,630    |       | $                      | (815       | )          | (0.04      | )% | (0.55 | )% |
|                                  |            |                |            |            |            |                        |            |            |            |                        |            |            |            |  |  |  |

 

COMPETITION

 

The Companyencounters competition in all areas of its business pursuits. It competes forloans, deposits, fiduciary and other services with financial and otherinstitutions located both within and outside of its market area. The Companyestimates that there are 108 other financial institutions operating over 819separate banking offices within the Company’s market area. The Company alsofaces competition from finance companies, insurance companies, mortgagecompanies, securities brokerage firms, money market funds, loan productionoffices and other providers of financial services. In order to competeeffectively, develop its market base, maintain flexibility and move in pacewith changing economic, technological and social conditions, the Companycontinuously refines and develops its products and services. The principalmethods of competition in the financial services industry are price, serviceand convenience.

 

EMPLOYEES

 

At December 31,2009, the Company employed 584 persons (502 full-time equivalent employees).The Company believes that its relationship with its employees is good. None ofthe Company’s employees are covered by a collective bargaining agreement withthe Company.

 

SUPERVISION ANDREGULATION

 

**General**

 

Financial institutions, their holdingcompanies and their affiliates are extensively regulated under federal andstate law.  As a result, the growth andearnings performance of the Company may be affected not only by managementdecisions and general economic conditions, but also by the requirements offederal and state statutes and by the regulations and policies of various bankregulatory authorities, including the Illinois Department of Financial andProfessional Regulation (the “DFPR”), the Board of Governors of theFederal Reserve System (the “Federal Reserve”) and the FederalDeposit Insurance Corporation (the “FDIC”). Furthermore, taxation laws administered by the Internal Revenue Serviceand state taxing authorities and securities laws administered by the Securitiesand Exchange Commission (the “SEC”) and state securities authorities havean impact on the business of the Company. The effect of these statutes,regulations and regulatory policies may be significant, and cannot be predictedwith a high degree of certainty.

 

Federal and state laws and regulationsgenerally applicable to financial institutions regulate, among other things,the scope of business, the kinds and amounts of investments, reserverequirements, capital levels relative to operations, the nature and amount ofcollateral for loans, the establishment of branches, mergers and consolidationsand the payment of dividends. This system of supervision and regulationestablishes a comprehensive framework for the respective operations of theCompany and its subsidiaries and is intended primarily for the protection ofthe FDIC-insured deposits and depositors of the Bank, rather than shareholders.

 

The following is a summary of thematerial elements of the regulatory framework that currently applies to theCompany and its subsidiaries.  It doesnot describe all of the statutes, regulations and regulatory policies thatapply, nor does it restate all of the requirements of those that aredescribed.  Additionally, in response tothe global financial crisis that began in 2007, various legislative and regulatoryproposals have been issued addressing, among other things, the restructuring ofthe federal bank regulatory system, more stringent regulation of consumerproducts such as mortgages and credit cards, and safe and sound compensationpractices. At this time, the Company is unable to determine whether any ofthese proposals will be adopted as proposed. As such, the following is qualified in its entirety by reference toapplicable law.  Any change instatutes, regulations or regulatory policies may have a material effect on thebusiness of the Company and its subsidiaries.

 

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**TheCompany**

 

***General.**** *TheCompany, as the sole shareholder of the Bank, is a bank holding company.  As a bank holding company, the Company isregistered with, and is subject to regulation by, the Federal Reserve under theBHCA.  In accordance with FederalReserve policy, the Company is expected to act as a source of financialstrength to the Bank and to commit resources to support the Bank incircumstances where the Company might not otherwise do so.  Under the BHCA, the Company is subject toperiodic examination by the Federal Reserve. The Company is required to file with the Federal Reserve periodicreports of the Company’s operations and such additional information regardingthe Company and its subsidiaries as the Federal Reserve may require.

 

***Acquisitions, Activities andChange in Control.***** **The primary purpose of abank holding company is to control and manage banks.  TheBHCA generally requires the prior approval of the Federal Reserve forany merger involving a bank holding company or any acquisition by a bankholding company of another bank or bank holding company. Subject to certainconditions (including deposit concentration limits established by the BHCA),the Federal Reserve may allow a bank holding company to acquire banks locatedin any state of the United States. In approving interstate acquisitions,the Federal Reserve is required to give effect to applicable state lawlimitations on the aggregate amount of deposits that may be held by theacquiring bank holding company and its insured depository institutionaffiliates in the state in which the target bank is located (provided thatthose limits do not discriminate against out-of-state depository institutions ortheir holding companies) and state laws that require that the target bank havebeen in existence for a minimum period of time (not to exceed five years)before being acquired by an out-of-state bank holding company.

 

The BHCA generally prohibits the Companyfrom acquiring direct or indirect ownership or control of more than 5% of thevoting shares of any company that is not a bank and from engaging in anybusiness other than that of banking, managing and controlling banks orfurnishing services to banks and their subsidiaries.  This general prohibition is subject to anumber of exceptions. The principal exception allows bank holding companies toengage in, and to own shares of companies engaged in, certain businesses foundby the Federal Reserve to be “so closely related to banking ... as to be aproper incident thereto.”  This authoritywould permit the Company to engage in a variety of banking-related businesses,including the ownership and operation of a thrift or any entity engaged inconsumer finance, equipment leasing, the operation of a computer service bureau(including software development), and mortgage banking and brokerage. The BHCAgenerally does not place territorial restrictions on the domestic activities ofnon-bank subsidiaries of bank holding companies.

 

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

 

Federal law also prohibits any person orcompany from acquiring “control” of an FDIC-insured depository institution orits holding company without prior notice to the appropriate federal bank regulator.  “Control” is conclusively presumed to existupon the acquisition of 25% or more of the outstanding voting securities of abank or bank holding company, but may arise under certain circumstances between10% and 24.99% ownership.

 

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***Capital Requirements.***  Bank holding companies are required tomaintain minimum levels of capital in accordance with Federal Reserve capitaladequacy guidelines.  If capital levelsfall below the minimum required levels, a bank holding company, among otherthings, may be denied approval to acquire or establish additional banks ornon-bank businesses.

 

The Federal Reserve’s capital guidelinesestablish the following minimum regulatory capital requirements for bankholding companies: (i) a risk-based requirement expressed as a percentageof total assets weighted according to risk; and (ii) a leveragerequirement expressed as a percentage of total assets.  The risk-based requirement consists of aminimum ratio of total capital to total risk-weighted assets of 8% and aminimum ratio of Tier 1 capital to total risk-weighted assets of 4%.  The leverage requirement consists of aminimum ratio of Tier 1 capital to total assets of 3% for the most highly ratedcompanies, with a minimum requirement of 4% for all others.  For purposes of these capital standards, Tier1 capital consists primarily of permanent stockholders’ equity less intangibleassets (other than certain loan servicing rights and purchased credit cardrelationships). Total capital consists primarily of Tier 1 capital plus Tier 2capital which consists of other non-permanent capital items such as certainother debt and equity instruments that do not qualify as Tier 1 capital and aportion of the company’s allowance for loan and lease losses.

 

The risk-based and leverage standardsdescribed above are minimum requirements. Higher capital levels will berequired if warranted by the particular circumstances or risk profiles ofindividual banking organizations. For example, the Federal Reserve’s capitalguidelines contemplate that additional capital may be required to take adequateaccount of, among other things, interest rate risk, or the risks posed byconcentrations of credit, nontraditional activities or securities trading activities.  Further, any banking organizationexperiencing or anticipating significant growth would be expected to maintaincapital ratios, including tangible capital positions (*i.e.*,Tier 1 capital less all intangible assets), well above the minimum levels.  As of December 31, 2009, the Company hadregulatory capital in excess of the Federal Reserve’s minimum requirements.

 

***Emergency Economic StabilizationAct of 2008*****.**  Events in the U.S. and global financialmarkets over the past several years, including deterioration of the worldwidecredit markets, have created significant challenges for financial institutionsthroughout the country.  In response tothis crisis affecting the U.S. banking system and financial markets, on October 3,2008, the U.S. Congress passed, and the President signed into law, theEmergency Economic Stabilization Act of 2008 (the “EESA”).  The EESA authorized the Secretary of theUnited States Department of Treasury (“Treasury”) to implement varioustemporary emergency programs designed to strengthen the capital positions offinancial institutions and stimulate the availability of credit within the U.S.financial system.  Financial institutionsparticipating in certain of the programs established under the EESA arerequired to adopt Treasury’s standards for executive compensation and corporategovernance.

 

***The TARP Capital PurchaseProgram.**** *On October 14,2008, Treasury announced that it would provide Tier 1 capital (in the form ofperpetual preferred stock) to eligible financial institutions.  This program, known as the TARP CapitalPurchase Program (the “CPP”), allocated $250 billion from the $700 billionauthorized by the EESA to Treasury for the purchase of senior preferred sharesfrom qualifying financial institutions. Under the program, eligible institutions were able to sell equityinterests to the Treasury in amounts equal to between 1% and 3% of theinstitution’s risk-weighted assets.  TheCompany did not participate in the CPP.

 

***Dividend Payments.**** *TheCompany’s ability to pay dividends to its shareholders may be affected by bothgeneral corporate law considerations and policies of the Federal Reserveapplicable to bank holding companies*.*As anIllinois corporation, the Company is subject to the Illinois BusinessCorporation Act, as amended, which prohibits the Company from paying a dividendif, after giving effect to the dividend: (i) the Company would beinsolvent; or (ii) the net assets of the Company would be less than zero;or (iii) the net assets of the Company would be less than the maximumamount then payable to shareholders of the Company who would have preferentialdistribution rights if the Company were liquidated. Additionally, policies ofthe Federal Reserve caution that a bank holding company should not pay cashdividends unless its net income available to common shareholders over the pastyear has been sufficient to fully fund the dividends and the prospective rateof earnings retention appears consistent with its capital needs, asset quality,and overall financial condition.  TheFederal Reserve also possesses enforcement powers over bank holding companiesand their non-bank subsidiaries to prevent or remedy actions that representunsafe or unsound practices or violations of applicable statutes andregulations.  Among these powers is theability to proscribe the payment of dividends by banks and bank holdingcompanies.

 

***Federal Securities Regulation.***  The Company’s common stock is registered withthe SEC under the Securities Act of 1933, as amended, and the Securities ExchangeAct of 1934, as amended (the “Exchange Act”).  Consequently, 

 

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the Company is subject to theinformation, proxy solicitation, insider trading and other restrictions andrequirements of the SEC under the Exchange Act.

 

## **The Bank**

## ** **

***General.**** *TheBank is an Illinois-chartered bank, the deposit accounts of which are insuredby the FDIC to the maximum extent provided under federal law and FDICregulations.  As an Illinois-charteredbank, the Bank is subject to the examination, supervision, reporting andenforcement requirements of the DFPR, the chartering authority for Illinoisbanks, and the FDIC, designated by federal law as the primary federal regulatorof state-chartered, FDIC-insured banks that, like the Bank, are not members ofthe Federal Reserve System (“non-member banks”).

 

***Deposit Insurance.***** **Asan FDIC-insured institution, the Bank is required to pay deposit insurancepremium assessments to the FDIC.  The FDIC has adopted a risk-basedassessment system whereby FDIC-insured depository institutions pay insurancepremiums at rates based on their risk classification.  An institution’srisk classification is assigned based on its capital levels and the level ofsupervisory concern the institution poses to the regulators.  Underthe regulations of the FDIC, as presently in effect, insurance assessmentsrange from 0.07% to 0.78% of total deposits, depending on an institution’s riskclassification, its levels of unsecured debt and secured liabilities, and, incertain cases, its level of brokered deposits.

 

Furthermore, as a result of the increasedvolume of bank failures in 2008 and 2009, on May 22, 2009, the FDICapproved a final rule imposing a special assessment on all depositoryinstitutions whose deposits are insured by the FDIC.  This one-time special assessment was imposedon institutions in the second quarter of 2009, and was collected on September 30,2009.  Pursuant to the final rule, theFDIC imposed on the Bank a special assessment in the amount of $.9 million,which was due and paid on September 30, 2009.

 

On November 12, 2009, the FDICadopted a final rule that required insured depository institutions toprepay on December 30, 2009, their estimated quarterly risk-basedassessments for the fourth quarter of 2009 and for all of 2010, 2011, and2012.  On December 30, 2009, theBank paid the FDIC $10.1 million in prepaid assessments.  An institution’s prepaid assessments werecalculated based on the institution’s actual September 30, 2009 assessmentbase, adjusted quarterly by an estimated 5 percent annual growth rate throughthe end of 2012.  The FDIC also used theinstitution’s total base assessment rate in effect on September 30, 2009,increasing it by an annualized 3 basis points beginning in 2011.  The FDIC will begin to offset prepaidassessments on March 30, 2010, representing payment of the regularquarterly risk-based deposit insurance assessment for the fourth quarter of2009.  Any prepaid assessment notexhausted after collection of the amount due on June 30, 2013, will bereturned to the institution.

 

***FDIC Temporary Liquidity Guarantee Program***.  In conjunction with Treasury’s actions toaddress the credit and liquidity crisis in financial markets, on October 14,2008, the FDIC announced the Temporary Liquidity Guarantee Program.  One component of the Temporary LiquidityGuarantee Program is the Transaction Account Guarantee Program, whichtemporarily provides participating institutions with unlimited depositinsurance coverage for non-interest bearing and certain low-interest bearingtransaction accounts maintained at FDIC insured institutions.  All institutions that did not opt out of theTransaction Account Guarantee Program were subject to a 10 basis point perannum assessment on amounts in excess of $250,000 in covered transactionaccounts through December 31, 2009. On August 26, 2009, the FDIC extended the Transaction AccountGuarantee Program for an additional six months through June 30, 2010.  Beginning January 1, 2010, theassessment levels increased to 15 basis points, 20 basis points or 25 basispoints per annum, based on the risk category to which an institution isassigned for purposes of the risk-based premium system.  The Bank did not opt out of the six-monthextension of the Transaction Account Guarantee Program.  As a result, the Bank, like every otherFDIC-insured depository institution in the United States that did not opt outof the Transaction Account Guarantee Program, is incurring fees on amounts inexcess of $250,000 in covered transaction accounts.

 

***FICO Assessments.***  The Financing Corporation (“FICO”) is a mixed-ownershipgovernmental corporation chartered by the former Federal Home Loan Bank Boardpursuant to the Federal Savings and Loan Insurance Corporation RecapitalizationAct of 1987 to function as a financing vehicle for the recapitalization of theformer Federal Savings and Loan Insurance Corporation.  FICO issued 30-year non-callable bonds ofapproximately $8.2 billion that mature by 2019. Since 1996, federal legislation has required that all FDIC-insureddepository institutions pay assessments to cover interest payments on FICO’soutstanding obligations.  These FICO 

 

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assessments are in addition to amountsassessed by the FDIC for deposit insurance. During the year ended December 31,2009, the FICO assessment rate was approximately 0.01% of deposits.

 

***Supervisory Assessments.***  All Illinois banks are required to paysupervisory assessments to the DFPR to fund the operations of the DFPR.  The amount of the assessment is calculated onthe basis of an institution’s total assets, including consolidatedsubsidiaries, as reported to the DFPR. During the year ended December 31, 2009, the Bank paid supervisoryassessments to the DFPR totaling $.25 million.

 

***Capital Requirements.***  Banks are generally required to maintaincapital levels in excess of other businesses. The FDIC has established the following minimum capital standards forstate-chartered insured non-member banks, such as the Bank: (i) a leveragerequirement consisting of a minimum ratio of Tier 1 capital to total assets of3% for the most highly-rated banks with a minimum requirement of at least 4%for all others; and (ii) a risk-based capital requirement consisting of aminimum ratio of total capital to total risk-weighted assets of 8% and aminimum ratio of Tier 1 capital to total risk-weighted assets of 4%. Ingeneral, the components of Tier 1 capital and total capital are the same asthose for bank holding companies discussed above.

 

The capital requirements described aboveare minimum requirements.  Higher capitallevels will be required if warranted by the particular circumstances or riskprofiles of individual institutions.  Forexample, regulations of the FDIC provide that additional capital may berequired to take adequate account of, among other things, interest rate risk orthe risks posed by concentrations of credit, nontraditional activities orsecurities trading activities.

 

Further, federal law and regulationsprovide various incentives for financial institutions to maintain regulatorycapital at levels in excess of minimum regulatory requirements. For example, afinancial institution that is “well-capitalized” may qualify for exemptionsfrom prior notice or application requirements otherwise applicable to certaintypes of activities and may qualify for expedited processing of other requirednotices or applications. Additionally, one of the criteria that determines abank holding company’s eligibility to operate as a financial holding company isa requirement that all of its financial institution subsidiaries be “well-capitalized.”Under the regulations of the FDIC, in order to be “well-capitalized” afinancial institution must maintain a ratio of total capital to totalrisk-weighted assets of 10% or greater, a ratio of Tier 1 capital to totalrisk-weighted assets of 6% or greater and a ratio of Tier 1 capital to totalassets of 5% or greater.

 

Federal law also provides the federalbanking regulators with broad power to take prompt corrective action to resolvethe problems of undercapitalized institutions. The extent of the regulators’ powers depends on whether the institutionin question is “adequately capitalized,” “undercapitalized,” “significantlyundercapitalized” or “critically undercapitalized,” in each case as defined byregulation.  Depending upon the capitalcategory to which an institution is assigned, the regulators’ corrective powersinclude: (i) requiring the institution to submit a capital restorationplan; (ii) limiting the institution’s asset growth and restricting itsactivities; (iii) requiring the institution to issue additional capitalstock (including additional voting stock) or to be acquired; (iv) restrictingtransactions between the institution and its affiliates; (v) restrictingthe interest rate the institution may pay on deposits; (vi) ordering a newelection of directors of the institution; (vii) requiring that seniorexecutive officers or directors be dismissed; (viii) prohibiting theinstitution from accepting deposits from correspondent banks; (ix) requiringthe institution to divest certain subsidiaries; (x) prohibiting thepayment of principal or interest on subordinated debt; and (xi) ultimately,appointing a receiver for the institution.

 

As of December 31, 2009: (i) theBank was not subject to a directive from the FDIC to increase its capital to anamount in excess of the minimum regulatory capital requirements; (ii) theBank exceeded its minimum regulatory capital requirements under FDIC capitaladequacy guidelines; and (iii) the Bank was “well-capitalized,” as definedby FDIC regulations.

 

***Dividend Payments.***  The primary source of funds for the Companyis dividends from the Bank.  Under theIllinois Banking Act, Illinois-chartered banks generally may not pay dividendsin excess of their net profits.

 

The payment of dividends by any financialinstitution is affected by the requirement to maintain adequate capitalpursuant to applicable capital adequacy guidelines and regulations, and afinancial institution generally is prohibited from paying any dividends if,following payment thereof, the institution would be undercapitalized.  As described above, the Bank exceeded itsminimum capital requirements under applicable guidelines as of December 31,2009.  As of December 31, 2009,approximately $17.4 million was available to be paid as dividends by theBank.  Notwithstanding the availabilityof funds for dividends, however, the FDIC may prohibit the payment of anydividends by the Bank if the FDIC determines such payment would constitute anunsafe or unsound practice.

 

8

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***Insider Transactions.***  The Bank is subject to certain restrictionsimposed by federal law on extensions of credit to the Company, on investmentsin the stock or other securities of the Company and the acceptance of the stockor other securities of the Company as collateral for loans made by theBank.  Certain limitations and reportingrequirements are also placed on extensions of credit by the Bank to itsdirectors and officers, to directors and officers of the Company, to principalshareholders of the Company and to “related interests” of such directors,officers and principal shareholders.  Inaddition, federal law and regulations may affect the terms upon which anyperson who is a director or officer of the Company or the Bank or a principalshareholder of the Company may obtain credit from banks with which the Bankmaintains a correspondent relationship.

 

***Safety and Soundness Standards.***  The federal banking agencies have adoptedguidelines that establish operational and managerial standards to promote thesafety and soundness of federally insured depository institutions.  The guidelines set forth standards forinternal controls, information systems, internal audit systems, loandocumentation, credit underwriting, interest rate exposure, asset growth,compensation, fees and benefits, asset quality and earnings.  In general, the safety and soundness guidelinesprescribe the goals to be achieved in each area, and each institution isresponsible for establishing its own procedures to achieve those goals.  If an institution fails to comply with any ofthe standards set forth in the guidelines, the institution’s primary federalregulator may require the institution to submit a plan for achieving andmaintaining compliance. If an institution fails to submit an acceptablecompliance plan, or fails in any material respect to implement a complianceplan that has been accepted by its primary federal regulator, the regulator isrequired to issue an order directing the institution to cure the deficiency.Until the deficiency cited in the regulator’s order is cured, the regulator mayrestrict the institution’s rate of growth, require the institution to increaseits capital, restrict the rates the institution pays on deposits or require theinstitution to take any action the regulator deems appropriate under thecircumstances. Noncompliance with the standards established by the safety andsoundness guidelines may also constitute grounds for other enforcement actionby the federal banking regulators, including cease and desist orders and civilmoney penalty assessments.

 

***Branching Authority.***  Illinois banks, such as the Bank, have theauthority under Illinois law to establish branches anywhere in the State ofIllinois, subject to receipt of all required regulatory approvals.

 

Federal law permits state and nationalbanks to merge with banks in other states subject to: (i) regulatoryapproval; (ii) federal and state deposit concentration limits; and (iii) statelaw limitations requiring the merging bank to have been in existence for aminimum period of time (not to exceed five years) prior to the merger.  The establishment of new interstate branchesor the acquisition of individual branches of a bank in another state (ratherthan the acquisition of an out-of-state bank in its entirety) is permitted onlyin those states the laws of which expressly authorize such expansion.

 

***State Bank Investments andActivities.***  The Bank generally is permitted to makeinvestments and engage in activities directly or through subsidiaries asauthorized by Illinois law.  However,under federal law and FDIC regulations, FDIC-insured state banks are prohibited,subject to certain exceptions, from making or retaining equity investments of atype, or in an amount, that are not permissible for a national bank.  Federal law and FDIC regulations alsoprohibit FDIC-insured state banks and their subsidiaries, subject to certainexceptions, from engaging as principal in any activity that is not permittedfor a national bank unless the bank meets, and continues to meet, its minimumregulatory capital requirements and the FDIC determines the activity would notpose a significant risk to the deposit insurance fund of which the bank is amember.  These restrictions have not had,and are not currently expected to have, a material impact on the operations ofthe Bank.

 

***Federal Reserve System.***  Federal Reserve regulations, as presently ineffect, require depository institutions to maintain reserves against theirtransaction accounts (primarily NOW and regular checking accounts), as follows:for transaction accounts aggregating $55.2 million or less, the reserve requirementis 3% of total transaction accounts; and for transaction accounts aggregatingin excess of $55.2 million, the reserve requirement is $1.335 million plus 10%of the aggregate amount of total transaction accounts in excess of$55.2 million.  The first $10.7million of otherwise reservable balances are exempted from the reserverequirements.  These reserve requirementsare subject to annual adjustment by the Federal Reserve.  We believe the Bank will continue to maintaincompliance with the foregoing requirements.

 

9

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**Recent Regulatory Issues**

 

On December 3, 2008, the Bankentered into an Order to Cease and Desist (the “2008 Order”) with the FDIC andthe DFPR, which is based on FDIC and DFPR findings that the Bank’s SecrecyAct/Anti-Money Laundering Program (“BSA/AML Program”) was inadequate and thatthe Bank had violated various laws and regulations related to the Bank SecrecyAct (the “BSA”). The 2008 Order requires the Bank to take certain correctiveactions aimed at resolving any outstanding violations of BSA-related laws orregulations and to implement a revised BSA/AML Program, which is designed toensure compliance with these BSA-related laws and regulations. The 2008 Orderalso requires the Bank to, among other things, assess its BSA Departmentstaffing needs, provide for independent testing of BSA/AML Program compliance,conduct a review of certain historical deposit and transaction activity andsubmit periodic reports of progress to the FDIC and DFPR. The 2008 Order doesnot relate to the Bank’s asset quality, capital position or the safety andsoundness of its financial operations. The Bank has taken all of the correctiveactions that it believes are required by the 2008 Order to address its BSA/AML Programcompliance issues.

 

On April 23, 2009, the Bank enteredinto an Order to Cease and Desist (the “2009 Order”) with the FDIC based onFDIC findings that the Bank’s program to implement consumer protection relatedlaws and regulations was inadequate and that the Bank had violated certainconsumer protection related laws and regulations.  The 2009 Order requires the Bank to takecertain corrective actions aimed at resolving outstanding violations and toimplement an improved compliance program. The 2009 Order also requires the Bankto, among other things, assess its compliance department staffing needs,provide for independent testing of the Bank’s compliance program, conduct areview of certain historical activity and submit periodic reports of progressto the FDIC. The 2009 Order does not relate to the Bank’s asset quality,capital position, the safety and soundness of its financial operations orinternal controls over financial reporting. The Bank is in the process ofimplementing all of the corrective actions required by the 2009 Order toaddress its consumer compliance issues.

 

AVAILABLE INFORMATION

 

The Company’s Internet address is www.westsuburbanbank.com. The Company makes available free of charge on or through its Internet website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after the reports are electronically filed with, or furnished to, the Securities and Exchange Commission.

 

10

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EXECUTIVE OFFICERSOF WEST SUBURBAN

 

The names and agesof the executive officers of West Suburban, along with a brief description ofthe business experience of each person during the past five years, and certainother information is set forth below:

 
| **Name (Age) and Position and Offices with West  Suburban (year first elected to office)**   | ** ** | **Principal Occupations and Employment for Past Five  Years and Other Information**                                 |
|----------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------|
|                                                                                         |       |                                                                                                                |
| Kevin J. Acker (60)  Chairman and Chief Executive Officer (1993)   and Vice President (1986) |       | Senior Vice President, Marketing of the Bank since  1997                                                            |
|                                                                                         |       |                                                                                                                |
| Keith W. Acker (60)  Chief Operations Officer (1996)                                         |       | Director, President and Trust Officer of the Bank  since 1986                                                       |
|                                                                                         |       |                                                                                                                |
| Duane G. Debs (53)  President (1997) and Chief Financial Officer (1993)                      |       | Senior Vice President, Trust Officer of the Bank  since 1997 and Vice President, Comptroller of the Bank since 1987 |
|                                                                                         |       |                                                                                                                |
| Michael P. Brosnahan (60)  Vice President (1997)                                             |       | Senior Vice President, Lending of the Bank since  1989                                                              |

 

STATISTICAL DATA

 

The statisticaldata required by Exchange Act Industry Guide 3, “Statistical Disclosure By BankHolding Companies,” has been incorporated by reference from the Company’s 2009Annual Report to Shareholders (attached as Exhibit 13 hereto) or is setforth below. This data should be read in conjunction with the Company’s 2009Consolidated Financial Statements and related notes, and the discussionincluded in Management’s Discussion and Analysis of Financial Condition andResults of Operations as set forth in the Company’s 2009 Annual Report toShareholders.

 

**Securities**

 

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

 
| ** **                             | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** |
|----------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Available  for sale                    |       |     |       |     |       |     |       |
| Corporate                              |       | $        | —     |     | $          | 24,430   |       | $ | 35,488 |   |
| Trust  preferred                       |       | —   |       | 8,511    |       | 8,578    |       |
| U.S.  government sponsored enterprises |       | 49,621   |       | 22,170   |       | 195,193  |       |
| Mortgage-backed:  residential          |       | 139,151  |       | 162,062  |       | 207,302  |       |
| States  and political subdivisions     |       | 10,367   |       | 10,160   |       | 13,918   |       |
| Preferred  stock                       |       | —   |       | —   |       | 621      |       |
| Total  securities available for sale   |       | 199,139  |       | 227,333  |       | 461,100  |       |
| Held  to maturity                      |       |     |       |     |       |     |       |
| U.S.  government sponsored enterprises |       | 41,199   |       | 28,072   |       | —   |       |
| Mortgage-backed:  residential          |       | 178,129  |       | 193,187  |       | 11,450   |       |
| States  and political subdivisions     |       | 46,580   |       | 18,975   |       | 12,626   |       |
| Total  securities held to maturity     |       | 265,908  |       | 240,234  |       | 24,076   |       |
| Federal  Home Loan Bank stock          |       | 7,599    |       | 6,144    |       | 5,258    |       |
| Total  securities                      |       | $        | 472,646    |     | $          | 473,711  |       | $ | 490,434 |   |

 

11

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The following table sets forth, bycontractual maturity, the amortized cost and weighted average yield of debtsecurities available for sale at December 31, 2009. Although themortgage-backed: residential securities are listed by contractual maturity, theeffective maturity is significantly shorter due to regularly scheduled paymentsand prepayments of principal. Yields on tax-exempt securities represent taxequivalent yields, net of premium amortization and discount accretion (dollars inthousands):

 
| ** **                         | ** ** | **U.S. Government  Sponsored Enterprises** | ** ** | **Mortgage-backed:  Residential** | ** ** | **States and Political  Subdivisions** | ** ** |
|------------------------------------|------------|--------------------------------------------|------------|-----------------------------------|------------|----------------------------------------|------------|
| ** **                         | ** ** | **Amortized  Cost**                        | ** ** | **Weighted  Average  Yield**      | ** ** | **Amortized  Cost**                    | ** ** | **Weighted  Average  Yield** | ** ** | **Amortized  Cost** | ** ** | **Weighted  Average  Yield** | ** ** |
| Within  1 year                     |       | $                                          | 6,480      |                              | 4.08       | %                                      | $          | 1,786 |   | 2.90 | % | $ | 2,058 |   | 4.76 | % |
| After  1 year but within 5 years   |       | 33,219                                     |       | 2.44                              | %          | 13,294                                 |       | 2.44 | % | 726 |   | 5.25 | % |
| After  5 years but within 10 years |       | 9,922                                      |       | 1.17                              | %          | 50,412                                 |       | 4.34 | % | 1,269 |   | 6.59 | % |
| After  10 years                    |       | —                                     |       | —                            | %          | 73,659                                 |       | 4.60 | % | 6,314 |   | 6.39 | % |
| Total                              |       | $                                          | 49,621     |                              | 2.40       | %                                      | $          | 139,151 |   | 4.27 | % | $ | 10,367 |   | 6.01 | % |

 

Income on Federal Home Loan Bank stock isdependent on the declaration of dividends by the Federal Home Loan Bank.

 

The following table sets forth, bycontractual maturity, the amortized cost and weighted average yield ofsecurities held to maturity at December 31, 2009. Although themortgage-backed: residential securities are listed by contractual maturity, theeffective maturity is significantly shorter due to regularly scheduled paymentsand prepayments of principal. Yields on tax-exempt securities represent taxequivalent yields, net of premium amortization and discount accretion (dollarsin thousands):

 
| ** **                        | ** ** | **U.S. Government********Sponsored  Enterprises** | ** ** | **Mortgage-backed:********Residential**  | ** ** | **States and Political********Subdivisions** | ** ** |
|-----------------------------------|------------|---------------------------------------------------|------------|------------------------------------------|------------|----------------------------------------------|------------|
| ** **                        | ** ** | **Amortized********Cost**                         | ** ** | **Weighted********Average********Yield** | ** ** | **Amortized********Cost**                    | ** ** | **Weighted********Average********Yield** | ** ** | **Amortized********Cost** | ** ** | **Weighted********Average********Yield** | ** ** |
| Within 1 year                     |       | $                                                 | —     |                                     | —     | %                                            | $          | — |   | — | % | $ | 30,713 |   | 1.34 | % |
| After 1 year but within 5 years   |       | 8,950                                             |       | 4.06                                     | %          | 5,967                                        |       | 3.17 | % | 3,287 |   | 4.71 | % |
| After 5 years but within 10 years |       | 26,215                                            |       | 3.05                                     | %          | 53,980                                       |       | 4.49 | % | 3,624 |   | 5.68 | % |
| After 10 years                    |       | 6,034                                             |       | 1.29                                     | %          | 118,182                                      |       | 4.51 | % | 8,956 |   | 6.11 | % |
| Total                             |       | $                                                 | 41,199     |                                     | 3.01       | %                                            | $          | 178,129 |   | 4.47 | % | $ | 46,580 |   | 2.83 | % |

 

No securities holdings of a single issuer,other than U.S. government sponsored enterprises, exceed 10% of theshareholders’ equity of the Company at December 31, 2009. Expectedmaturities may differ from contractual maturities because issuers may have theright to call or prepay obligations with or without call or prepaymentpenalties. Approximately $66.2 million of securities are callable in 2010. Mostof these callable securities were issued by U.S. government sponsoredenterprises.

 

12

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**Loan Portfolio**

 

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

 
| ** **                 | ** ** | **2009**  | ** **      | **2008**  | ** ** | **2007**  | ** ** | **2006**  | ** ** | **2005**  | ** ** |
|----------------------------|------------|-----------|-----------------|-----------|------------|-----------|------------|-----------|------------|-----------|------------|
| Commercial                 |       | $         | 267,432         |      | $          | 288,234   |       | $         | 270,293    |      | $          | 282,826 |   | $ | 276,898 |   |
| Consumer                   |       | 3,031     |            | 4,276     |       | 5,653     |       | 6,821     |       | 7,501     |       |
| Indirect  automobile       |       | 2,395     |            | 4,454     |       | 8,559     |       | 13,855    |       | 24,939    |       |
| Real  estate               |       |      |            |      |       |      |       |      |       |      |       |
| Residential                |       | 219,551   |            | 242,947   |       | 224,755   |       | 177,885   |       | 160,902   |       |
| Commercial                 |       | 280,442   |            | 276,995   |       | 249,836   |       | 232,865   |       | 225,794   |       |
| Home  equity               |       | 232,607   |            | 257,150   |       | 272,098   |       | 240,720   |       | 229,514   |       |
| Construction               |       | 175,186   |            | 161,532   |       | 191,952   |       | 197,528   |       | 165,484   |       |
| Held  for sale             |       | —    |            | 1,768     |       | 350       |       | —    |       | 140       |       |
| Credit  card               |       | 9,874     |            | 10,484    |       | 11,191    |       | 10,375    |       | 10,545    |       |
| Other                      |       | 3,079     |            | 1,333     |       | 1,153     |       | 1,660     |       | 711       |       |
| Total                      |       | 1,193,597 |            | 1,249,173 |       | 1,235,840 |       | 1,164,535 |       | 1,102,428 |       |
| Allowance  for loan losses |       | (25,922   | )               | (15,578   | )          | (9,269    | )          | (10,650   | )          | (10,681   | )          |
| Loans,  net                |       | $         |  1,167,675 |      | $          | 1,233,595 |       | $         | 1,226,571  |      | $          | 1,153,885 |   | $ | 1,091,747 |   |

 

The following table sets forth thematurity and interest rate sensitivity of selected loan categories at December 31,2009 (dollars in thousands):

 
| ** **                | ** ** | **Remaining  Maturity** | ** ** |
|---------------------------|------------|-------------------------|------------|
| ** **                | ** ** | **One  year  or less**  | ** ** | **One  to  five years** | ** ** | **Over  five years** | ** ** | **Total** | ** ** |
| Commercial                |       | $                       | 186,812    |   | $ | 71,565 |   | $ | 9,055 |   | $ | 267,432 |   |
| Real  estate-construction |       | 164,799                 |       | 10,387 |   | — |   | 175,186 |   |
| Other  loans              |       | 24,211                  |       | 88,341 |   | 638,427 |   | 750,979 |   |
| Total                     |       | $                       | 375,822    |   | $ | 170,293 |   | $ | 647,482 |   | $ | 1,193,597 |   |
|                      |       |                    |       |   |   |   |   |   |   |
| Variable  rate            |       | $                       | 342,463    |   | $ | 81,357 |   | $ | 388,084 |   | $ | 811,904 |   |
| Fixed  rate               |       | 33,359                  |       | 88,936 |   | 259,398 |   | 381,693 |   |
| Total                     |       | $                       | 375,822    |   | $ | 170,293 |   | $ | 647,482 |   | $ | 1,193,597 |   |

 

**NonperformingLoans**

 

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

 
| ** **                                         | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|----------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| Loans  past due 90 days or more still on accrual   |       | $        | 790        |     | $          | 1,705    |       | $        | 480        |     | $          | 319 |   | $ | 1,665 |   |
| Nonaccrual  loans                                  |       | 38,038   |       | 23,569   |       | 2,297    |       | 1,131    |       | 533      |       |
| Total  nonperforming loans                         |       | 38,828   |       | 25,274   |       | 2,777    |       | 1,450    |       | 2,198    |       |
| Other  real estate                                 |       | 25,994   |       | 4,658    |       | 824      |       | 351      |       | 210      |       |
| Total  nonperforming assets                        |       | $        | 64,822     |     | $          | 29,932   |       | $        | 3,601      |     | $          | 1,801 |   | $ | 2,408 |   |
| Nonperforming  loans as a percent of total loans   |       | 3.3      | %          | 2.0      | %          | 0.2      | %          | 0.1      | %          | 0.2      | %          |
| Nonperforming  assets as a percent of total assets |       | 3.3      | %          | 1.6      | %          | 0.2      | %          | 0.1      | %          | 0.1      | %          |

 

The Company’s general policy is todiscontinue accruing interest on a loan when it becomes 90 days past due or onan earlier date if management believes, after considering economic and businessconditions and collection efforts, 

 

13

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that the borrower’s financial conditionis such that collection of principal or interest is doubtful. In somecircumstances, a loan that is more than 90 days past due can remain on accrualstatus if it is fully secured and in process of collection. When a loan hasbeen placed on nonaccrual, interest earned but not collected is charged back tointerest income. When payments are received on nonaccrual loans, the payment isfirst applied to principal, then to interest income and finally to expensesincurred for collection. Potential problem loans are loans included on a watchlist presented to the board of directors that do not meet the definition of anonperforming loan. Our decision to include performing loans on a watch listdoes not necessarily mean that we expect losses to occur or that we believe theseloans to be impaired, rather, that we believe a higher degree of monitoring isappropriate for these loans. Potential problem loans as of December 31,2009 were $32.0 million.

 

**Allowancefor Loan Losses**

 

The Company maintains an allowance for loan losses at a levelmanagement believes is sufficient to absorb probable incurred credit losses inthe loan portfolio. The allowance for loan losses represents the Company’sestimate of probable incurred credit losses in the loan portfolio at eachbalance sheet date and is based on the review of available and relevantinformation. The allowance contains allocations for probable incurred creditlosses that have been identified relating to specific borrowing relationshipsas well as probable incurred credit losses for pools of loans. The allowancefor loan losses is reassessed monthly by the Company to determine theappropriate level of the allowance. The amount of the allowance for loan lossesis determined based on a variety of factors, including assessment of the creditrisk of the loans in the loan portfolio, volume of the loans, delinquent loans,evaluation of current economic conditions in the market area, actualcharge-offs during the period and historical loss experience. Loan quality iscontinually monitored by management and reviewed by the loan committee on amonthly basis.

 

Loans are evaluated on a category-by-category basis to determine theappropriate allocation of allowance to each category. In addition, individualcommercial, construction and commercial mortgage loans are evaluated todetermine if a specific loss allocation is needed for problem loans deemed tohave a shortfall in collateral. Management also considers the borrower’scurrent economic status including liquidity and future business viability.Other factors used in the allocation of the allowance include levels and trendsof past dues and charge-offs along with concentrations of credit within thecommercial and commercial real estate loan portfolios. This evaluation isinherently subjective as it requires estimates that are susceptible tosignificant revision as more information becomes available or as futuredevelopments occur. Along with the allocation of the allowance on acategory-by-category basis and the specific allocations for individualborrowing relationships, the allowance includes a relatively small portion thatremains unallocated.

 

Management adjuststhe allowance for loan losses by an amount sufficient to maintain the allowanceat the level determined appropriate. A loan is fully or partially charged-offwhen all or a portion of the loan is deemed to be uncollectible by management.The Company believes that the allowance for loan losses is adequate to providefor estimated probable incurred credit losses in the loan portfolio.

 

14

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The followingtable sets forth the activity in the allowance for loan losses for the yearsended and at December 31 (dollars in thousands):

 
| ** **                                        | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|---------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| Allowance  for loan losses at beginning of period |       | $        | 15,578     |     | $          | 9,269    |       | $        | 10,650     |     | $          | 10,681 |   | $ | 10,527 |   |
| Loan  charge-offs                                 |       |     |       |     |       |     |       |     |       |     |       |
| Commercial                                        |       | 8,087    |       | 1,848    |       | 1,446    |       | 72       |       | 1,250    |       |
| Consumer                                          |       | 31       |       | 10       |       | 17       |       | 5        |       | 12       |       |
| Indirect  automobile                              |       | 46       |       | 20       |       | 37       |       | 62       |       | 79       |       |
| Real  estate                                      |       |     |       |     |       |     |       |     |       |     |       |
| Residential                                       |       | 666      |       | 3        |       | —   |       | —   |       | —   |       |
| Commercial                                        |       | 36       |       | 13       |       | —   |       | —   |       | —   |       |
| Home  equity                                      |       | 911      |       | 288      |       | 275      |       | 11       |       | —   |       |
| Construction                                      |       | 4,548    |       | 1,708    |       | —   |       | —   |       | —   |       |
| Credit  card                                      |       | 550      |       | 321      |       | 210      |       | 196      |       | 192      |       |
| Other                                             |       | 77       |       | 84       |       | 61       |       | 72       |       | 56       |       |
| Total  loan charge-offs                           |       | 14,952   |       | 4,295    |       | 2,046    |       | 418      |       | 1,589    |       |
| Loan  recoveries                                  |       |     |       |     |       |     |       |     |       |     |       |
| Commercial                                        |       | 214      |       | 142      |       | 129      |       | 144      |       | 252      |       |
| Consumer                                          |       | 4        |       | 5        |       | 5        |       | 6        |       | 4        |       |
| Indirect  automobile                              |       | 37       |       | 25       |       | 59       |       | 37       |       | 47       |       |
| Real  estate                                      |       |     |       |     |       |     |       |     |       |     |       |
| Residential                                       |       | 19       |       | —   |       | —   |       | —   |       | —   |       |
| Commercial                                        |       | —   |       | —   |       | —   |       | —   |       | —   |       |
| Home  equity                                      |       | 25       |       | —   |       | —   |       | —   |       | —   |       |
| Construction                                      |       | —   |       | —   |       | —   |       | —   |       | —   |       |
| Credit  card                                      |       | 62       |       | 48       |       | 91       |       | 39       |       | 57       |       |
| Other                                             |       | 10       |       | 24       |       | 6        |       | 11       |       | 8        |       |
| Total  loan recoveries                            |       | 371      |       | 244      |       | 290      |       | 237      |       | 368      |       |
| Net  loan charge-offs                             |       | 14,581   |       | 4,051    |       | 1,756    |       | 181      |       | 1,221    |       |
| Provision  for loan losses                        |       | 24,925   |       | 10,360   |       | 375      |       | 150      |       | 1,375    |       |
| Allowance  for loan losses at end of period       |       | $        | 25,922     |     | $          | 15,578   |       | $        | 9,269      |     | $          | 10,650 |   | $ | 10,681 |   |
|                                              |       |     |       |     |       |     |       |     |       |     |       |
| Allowance  for loan losses to total loans         |       | 2.17     | %          | 1.25     | %          | 0.75     | %          | 0.91     | %          | 0.97     | %          |
| Net  charge-offs to average total loans           |       | 1.21     | %          | 0.33     | %          | 0.15     | %          | 0.02     | %          | 0.11     | %          |

 

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

 

15

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

 

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

 
| ** **           | ** ** | **2009**   | ** ** | **2008**                                                  | ** ** | **2007**   | ** ** | **2006**                                                  | ** ** | **2005**   | ** ** |
|----------------------|------------|------------|------------|-----------------------------------------------------------|------------|------------|------------|-----------------------------------------------------------|------------|------------|------------|
| ** **           | ** ** | **Amount** | ** ** | **Percent  of Loans  in Each  Category  to Total  Loans** | ** ** | **Amount** | ** ** | **Percent  of Loans  in Each  Category  to Total  Loans** | ** ** | **Amount** | ** ** | **Percent  of Loans  in Each  Category  to Total  Loans** | ** ** | **Amount** | ** ** | **Percent  of Loans  in Each  Category  to Total  Loans** | ** ** | **Amount** | ** ** | **Percent  of Loans  in Each  Category  to Total  Loans** | ** ** |
| Commercial           |       | $          | 11,434     |                                                      | 22.4       | %          | $          | 5,620                                                     |       | 23.1       | %          | $ | 4,038 |   | 21.9 | % | $ | 7,151 |   | 24.3 | % | $ | 6,616 |   | 25.1 | % |
| Consumer  (1)        |       | 162        |       | 0.5                                                       | %          | 106        |       | 0.3                                                       | %          | 193        |       | 0.6 | % | 179 |   | 0.7 | % | 154 |   | 0.7 | % |
| Indirect  automobile |       | 54         |       | 0.2                                                       | %          | 33         |       | 0.4                                                       | %          | 42         |       | 0.7 | % | 60 |   | 1.2 | % | 117 |   | 2.3 | % |
| Real  estate         |       |       |       |                                                      |       |       |       |                                                      |       |       |       |   |   |   |   |   |   |   |   |   |   |
| Residential  (2)     |       | 2,518      |       | 18.4                                                      | %          | 1,224      |       | 19.5                                                      | %          | 675        |       | 18.2 | % | 285 |   | 15.3 | % | 354 |   | 14.6 | % |
| Commercial           |       | 2,386      |       | 23.5                                                      | %          | 3,863      |       | 22.2                                                      | %          | 1,249      |       | 20.2 | % | 489 |   | 20.0 | % | 609 |   | 20.5 | % |
| Home  equity         |       | 2,812      |       | 19.5                                                      | %          | 1,337      |       | 20.6                                                      | %          | 926        |       | 22.0 | % | 746 |   | 20.7 | % | 826 |   | 20.8 | % |
| Construction         |       | 5,787      |       | 14.7                                                      | %          | 3,003      |       | 12.9                                                      | %          | 1,607      |       | 15.5 | % | 1,481 |   | 16.9 | % | 1,489 |   | 15.0 | % |
| Credit  card         |       | 674        |       | 0.8                                                       | %          | 305        |       | 1.0                                                       | %          | 250        |       | 0.9 | % | 242 |   | 0.9 | % | 258 |   | 1.0 | % |
| Unallocated          |       | 95         |       | —                                                    | %          | 87         |       | —                                                    | %          | 289        |       | — | % | 17 |   | — | % | 258 |   | — | % |
| Total                |       | $          | 25,922     |                                                      | 100.0      | %          | $          | 15,578                                                    |       | 100.0      | %          | $ | 9,269 |   | 100.0 | % | $ | 10,650 |   | 100.0 | % | $ | 10,681 |   | 100.0 | % |

 

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(1)          Consumer loans include consumer and other loans.

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

 

**Deposits**

 

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

 
| ** **                 | ** ** | **2009**             | ** ** | **2008** | ** ** | **2007**             | ** ** |
|----------------------------|------------|----------------------|------------|----------|------------|----------------------|------------|
| ** **                 | ** ** | **Average  Balance** | ** ** | **Rate** | ** ** | **Average  Balance** | ** ** | **Rate** | ** ** | **Average  Balance** | ** ** | **Rate** | ** ** |
| Demand-noninterest-bearing |       | $                    | 152,332    |     | —     | %                    | $          | 138,106 |   | — | % | $ | 145,314 |   | — | % |
| NOW                        |       | 314,199              |       | 0.1      | %          | 307,033              |       | 0.4 | % | 306,680 |   | 0.9 | % |
| Money  market checking     |       | 370,914              |       | 1.8      | %          | 326,367              |       | 2.5 | % | 290,610 |   | 4.3 | % |
| Savings                    |       | 333,243              |       | 0.4      | %          | 334,266              |       | 0.8 | % | 359,173 |   | 1.8 | % |
| Time  deposits             |       |                 |       |     |       |                 |       |   |   |   |   |   |   |
| Less  than $100,000        |       | 372,061              |       | 3.2      | %          | 368,943              |       | 4.1 | % | 393,708 |   | 4.7 | % |
| $100,000  and greater      |       | 135,242              |       | 3.5      | %          | 146,492              |       | 4.1 | % | 164,785 |   | 4.9 | % |
| Total                      |       | $                    | 1,677,991  |     | 1.5        | %                    | $          | 1,621,207 |   | 2.1 | % | $ | 1,660,270 |   | 2.9 | % |

 

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

 
| ** **                           | ** ** | **2009** | ** ** |
|--------------------------------------|------------|----------|------------|
| Within  3 months                     |       | $        | 18,736     |   |
| After  3 months but within 6 months  |       | 14,820   |       |
| After  6 months but within 12 months |       | 53,490   |       |
| After  1 year but within 5 years     |       | 59,974   |       |
| Over  5 years                        |       | —   |       |
| Total                                |       | $        | 147,020    |   |

 

**Return onEquity and Assets and Other Financial Ratios**

 

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

 
| ** **                                                                                                                                       | ** ** | **2009** | ** ** | **2008** | ** ** | **2007** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Return  on average total assets                                                                                                                  |       | (0.04    | )%         | 0.90     | %          | 1.26     | %          |
| Return  on average shareholders’ equity (GAAP) (1)                                                                                          |       | (0.70    | )%         | 16.01    | %          | 24.04    | %          |
| Return  on average shareholders’ equity plus common stock in ESOP subject to  contingent repurchase obligation (non-GAAP) (1)               |       | (0.52    | )%         | 10.40    | %          | 14.83    | %          |
| Cash  dividends declared to net income                                                                                                           |       | (514.61  | )%         | 102.88   | %          | 92.36    | %          |
| Average  shareholders’ equity (GAAP) (1)                                                                                                    |       | 6.34     | %          | 5.63     | %          | 5.24     | %          |
| Average  shareholders’ equity plus common stock in ESOP subject to contingent  repurchase obligation to average total assets (non-GAAP) (1) |       | 8.57     | %          | 8.67     | %          | 8.49     | %          |

 

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**(1)**          See Note 8 to the Company’sconsolidated financial statements and the section entitled “Non-GAAP FinancialMeasures” on page 38 of West Suburban’s Annual Report to Shareholders forthe fiscal year ended December 31, 2009 (attached as Exhibit 13hereto). This presentation is consistent with the Company’s belief that it isunlikely that the Company would be required to satisfy the contingentrepurchase obligation.

** **

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

## ** **

In addition to theother information in this Annual Report on Form 10-K, shareholders,prospective investors and other interested parties should carefully considerthe following risk factors:

 

**A continued downturnin the economy, particularly in the western suburbs of Chicago, Illinois, wherethe Company’s business is primarily conducted, could have a material adverseaffect on the Company’s business, financial condition and results of operations.**

 

TheCompany’s business and earnings are directly affected by general business andeconomic conditions in the U.S. and, in particular, economic conditions in thewestern suburbs of Chicago, Illinois. These conditions include legislative andregulatory changes, short-term and long-term interest rates, inflation, andchanges in government monetary and fiscal policies, all of which are beyond ourcontrol.

 

At theend of 2007, the U.S. economy experienced a downturn that has continued into2010. A continued downturn in economic conditions, in particular within theCompany’s primary market area within the western suburbs of Chicago, Illinois,could result in a decrease in the demand for the Company’s products andservices, an increase in the Company’s loan delinquencies and defaults, and anincrease in the Company’s problem assets and foreclosures. The value of realestate pledged as collateral for loans made by the Company has declined, andmay continue to decline, in turn reducing customers’ borrowing power, andreducing the value of assets and collateral securing the Company’s existingloans. These factors could lead to reduced interest income and an increase inthe provision for loan losses.

 

Ifcurrent economic conditions continue or worsen, the Company’s business, growthand profitability are likely to suffer a material adverse effect. To the extentthat the Company’s business customers’ underlying businesses are harmed as aresult of the general economic environment, the Company’s customers are more likelyto default on 

 

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theirloans. Negative economic trends could lead to higher past due and non-accrualloans, resulting in a material adverse effect on the Company’s financialcondition and results of operations.

 

**A furtherdeterioration of the Company’s current non-performing loans or an increase inthe number of non-performing loans may have a****material adverse affect on theCompany’s financial condition and results of operations****.**

 

Weakeningeconomic conditions in the residential and commercial real estate sectors haveadversely affected, and may continue to adversely affect, the Company’s loanportfolio. The Company’s ratio of non-performing assets to total assetsincreased in 2009 to 3.3%, from 1.6% at December 31, 2008. If loans thatcurrently are non-performing further deteriorate or loans that are currentlyperforming become non-performing loans, the Company may need to increase itsallowance for loan losses. Such an increase may have a material adverse effecton the Company’s financial condition and results of operations.

 

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

 

There are risksinherent in making any loan, including risks inherent in dealing withindividual borrowers, risks of nonpayment, risks resulting from uncertaintiesas to the future value of collateral and risks resulting from changes ineconomic and industry conditions. The Company attempts to minimize its creditrisk through prudent loan application approval procedures, careful monitoringof the concentration of its loans within specific industries and periodicindependent reviews of outstanding loans by its credit review department.However, the Company cannot ensure that its approval and monitoring procedureseffectively manage its credit risks. Should the economic climate continue toworsen, borrowers may experience difficulty, and the level of non-performingloans, charge-offs, and delinquencies could rise and require further increasesin the allowance for loan losses which could have a material adverse effect onthe Company’s business, financial condition and results of operations.

 

**TheCompany’s allowance for loan losses may prove to be insufficient to absorbprobable incurred credit losses.**

 

The Company’sestimate of the level of allowance for loan losses requires management to applysignificant judgment. The Company establishes its allowance for loan losses inconsultation with management and maintains it at a level considered adequate bymanagement to absorb probable incurred credit losses in the loan portfolio. Theamount of future loan losses is susceptible to changes in economic, operatingand other conditions, including changes in interest rates, which may be beyondthe Company’s control, and such losses may exceed current estimates. At December 31,2009, the Company’s allowance for loan losses as a percentage of total loanswas 2.17% and as a percentage of total nonperforming loans was approximately67%. Although management believes that the allowance for loan losses isadequate to absorb probable incurred credit losses in the Company’s loanportfolio, the Company cannot predict loan losses with certainty, and theCompany cannot assure you that its allowance for loan losses will provesufficient to cover actual loan losses. Loan losses in excess of its allowancefor loan losses may adversely affect the Company’s financial condition andresults of operations.

 

**TheCompany’s business is concentrated in, and dependent upon the continued growthand prosperity of, the western suburbs of Chicago.**

 

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

 

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

 

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

 

**The Company’sloan portfolio has a significant concentration of real estate loans, which areexposed to weaknesses in the U.S. and local housing markets and the overallstate of the economy.**

 

Real estatelending (including residential, commercial, home equity and construction) is alarge portion of the Company’s loan portfolio. These categories represent$907.8 million, or approximately 76.1% of the Company’s total loan portfolio asof December 31, 2009. The market value of real estate can fluctuatesignificantly in a short period of time as a result of market conditions in thegeographic area in which the real estate is located, and adverse developmentsaffecting real estate values in one or more of the Company’s markets couldincrease the credit risk associated with its loan portfolio. Additionally,construction and commercial real estate lending typically involves higher loanprincipal amounts and the repayment of the loans generally is dependent, inlarge part, on sufficient income from the properties securing the loans tocover operating expenses and debt service. Economic events or governmentalregulations outside of the control of the borrower or the Company maynegatively impact the future cash flow and market values of the affectedproperties.

 

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

 

**Commercialloans also make up a significant portion of the Company’s loan portfolio.**

 

Commercial loanswere approximately $267.4****million(excluding $280.4 million of commercial real estate loans), or approximately22.4% of the Company’s total loan portfolio as of December 31, 2009. TheCompany’s commercial loans are primarily made based on the identified cash flowof the borrower and secondarily on the underlying collateral provided by theborrower. Most often, this collateral is accounts receivable, inventory,equipment or real estate. Credit support provided by the borrower for most ofthese loans and the probability of repayment is based on the liquidation of thepledged collateral and enforcement of a personal guarantee, if a guarantee isobtained. As a result, in the case of loans secured by accounts receivable, theavailability of funds for the repayment of these loans may be substantiallydependent on the ability of the borrower to collect amounts due from itscustomers. The collateral securing these loans may depreciate over time, may bedifficult to appraise and may fluctuate in value based on the success of thebusiness. A continued decline in the U.S. economy could harm the businesses ofthe Company’s borrowers and reduce the value of the assets securing the Company’scommercial loans.

 

19

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**TheCompany’s construction loans are based upon estimates of costs and valuesassociated with the completed project. These estimates may be inaccurate, andthe Company may be exposed to more losses on these construction loans than onother loans.**

 

At December 31,2009, construction loans, including land acquisition and development, totaled$175.2 million, or 14.7%, of the Company’s total loan portfolio. Constructionand land acquisition and development lending involves additional risks becausefunds are advanced based upon values associated with the completed project,which are uncertain. Because of the uncertainties inherent in evaluating theconstruction cost estimates that the Company receives from its customers andother third parties, as well as the market value of the completed project andthe effects of governmental regulation of real property, it is relativelydifficult to evaluate accurately the total funds required to complete a projectand the related loan-to-value ratio. As a result, construction loans ofteninvolve the disbursement of substantial funds with repayment dependent, inpart, on the success of the ultimate project and the ability of the borrower tosell or lease the property, rather than the ability of the borrower orguarantor to repay principal and interest. The market values of real estatethroughout the U.S., including in the Company’s market area, dramaticallydeclined in 2009. The ongoing weakness in the U.S. real estate markets maynegatively impact the ability of the Company’s borrowers to sell or lease theirproperties. If the Company’s appraisal of the anticipated value of thecompleted project proves to be overstated, the Company may have inadequatesecurity for the loan.

 

**Governmentregulation can result in limitations on the Company’s operations.**

 

The Company andits operating subsidiaries operate in a highly regulated environment and aresubject to supervision and regulation by a number of governmental regulatoryagencies, including the Federal Reserve, the FDIC and the DFPR. Regulationsadopted by these agencies, which are generally intended to provide protectionfor depositors and customers rather than for the benefit of shareholders,govern a comprehensive range of matters relating to ownership and control ofthe Company’s shares, its acquisition of other companies and businesses,permissible activities in which the Company may engage, maintenance of adequatecapital levels and other aspects of the Company’s operations. These bankregulators possess broad authority to prevent or remedy unsafe or unsoundpractices or violations of law.

 

As a financialinstitution, the Company is required to develop programs to implement numerousconsumer protection related laws and regulations and to prevent the Companyfrom being used for money laundering and terrorist activities. The Company isalso obligated to file suspicious activity reports with the U.S. Treasury’sOffice of Financial Crimes Enforcement Network in certain circumstances. On December 3,2008, the Bank entered into 2008 Order with the FDIC and the DFPR that requiresthe Bank to take certain corrective actions intended to resolve outstandingviolations of the USA PATRIOT Act and Bank Secrecy Act related laws orregulations and to implement a revised Bank Secrecy Act/Anti-Money Launderingprogram.  In addition, on April 23,2009, the Bank entered into 2009 Order (together with the 2008 Order, the “Orders”)with the FDIC which requires the Bank to take corrective actions intended toresolve outstanding violations of certain consumer protection related laws andregulations and to implement an improved compliance program.  Although the Orders do not relate to the Bank’sasset quality, capital position or the safety and soundness of its financialoperations, the Orders require the Bank to, among other things, assess itsstaffing needs, provide for independent testing, conduct a review of certainhistorical activity and submit periodic reports of progress to the FDIC andDFPR. As a result, the Company expects the Orders to increase the Company’scost of regulatory compliance, which may adversely affect its earnings. Inaddition, if the Bank is not successful in its efforts to comply with theOrders, the FDIC and the DFPR may take further regulatory actions, which couldsignificantly limit the Company’s operations and growth.

 

In addition, asresult of ongoing challenges facing the U.S. economy, the potential exists fornew laws and regulations regarding lending and funding practices and liquiditystandards to be promulgated, and bank regulatory agencies are expected to beactive in responding to concerns and trends identified in examinations,including the expected issuance of many formal or informal enforcement actionsor orders. The laws and regulations applicable to the banking industry couldchange at any time and we cannot predict the effects of these changes on ourbusiness and profitability. Increased regulation could increase our cost ofcompliance and adversely affect profitability. For example, new legislation or regulation may limit the manner in whichwe may conduct our business, including our ability to offer new products,obtain financing, attract deposits, make loans and achieve satisfactoryinterest spreads.

 

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**TheCompany may experience difficulties in managing its growth, and its growthstrategy involves risks that may negatively impact net income.**

 

The Company haspursued and continues to pursue an internal growth strategy, the success ofwhich will depend primarily upon generating an increasing level of loans anddeposits at acceptable risk levels without corresponding increases innon-interest expenses. The Company’s growth strategy has been to operate out ofa number of branches. The Company may establish other new branches and productareas, expand into new markets or make strategic acquisitions of otherfinancial institutions, which may require significant upfront investments intechnology, personnel and site locations. There can be no assurance that the Companywill be successful in continuing its growth strategy and in continuing toimprove or maintain its net income by leveraging its non-interest expenses.

 

The Company mayexpand into additional communities or attempt to strengthen its position in itscurrent markets by undertaking additional branch openings. Based on experience,management believes that it generally takes up to two years for new bankingfacilities to first achieve operational profitability, due to the impact ofoverhead expenses and the start-up phase of generating loans and deposits. Tothe extent that the Company undertakes additional branching, it is likely tocontinue to experience the effects of higher operating expenses relative tooperating income from the new operations, which may have an adverse effect onthe Company’s levels of reported net income, return on average equity andreturn on average assets.

 

**TheCompany faces intense competition in all aspects of its business from otherbanks and financial institutions.**

 

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

 

**TheCompany may need to raise additional capital in the future, but that capitalmay not be available when it is needed.**

 

The Company isrequired by federal and state regulatory authorities to maintain adequatelevels of capital to support its operations. Absent any changes in theregulatory framework, the Company anticipates that its existing capitalresources will satisfy its capital requirements for the foreseeable future.However, the Company may at some point need to raise additional capital tosupport continued growth, both internally and through acquisitions.

 

The Company’sability to raise additional capital, if needed, will depend on conditions inthe capital markets at that time, which are outside its control, and on itsfinancial performance. Accordingly, the Company cannot assure you of itsability to raise additional capital, if needed, on terms acceptable to theCompany. If the Company cannot raise additional capital when needed, itsability to further expand its operations through internal growth andacquisitions could be materially impaired.

 

**TheCompany’s community banking strategy relies heavily on its management team, andthe unexpected loss of key managers may adversely affect its operations.**

 

Much of theCompany’s success to date has been influenced strongly by its ability toattract and to retain senior management experienced in banking and financialservices and familiar with the communities in its market area. The Company’sability to retain executive officers, the current management teams and loanofficers of its operating subsidiaries will continue to be important to thesuccessful implementation of its strategy. It is also critical, as the Companygrows, to be able to attract and retain qualified additional management andloan officers with the appropriate level of experience and knowledge about itsmarket area to implement its community-based operating strategy. The unexpectedloss of services of any key management personnel, or the inability to recruitand retain 

 

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qualifiedpersonnel in the future, could have an adverse effect on the Company’sbusiness, financial condition and results of operations.

 

**Liquidity risks could affect operations andjeopardize the Company’s business, results of operations and financialcondition.**

 

Liquidity isessential to the Company’s business.  Aninability to raise funds through deposits, borrowings, the sale of loans andother sources could have a substantial negative effect on the Company’sliquidity. The Company’s primary sources of funds consist of cash fromoperations, investment maturities and sales and deposits. Additional liquidityis provided by the Company’s ability to borrow from the Federal Reserve Bankand the Federal Home Loan Bank. The Company’s access to funding sources inamounts adequate to finance or capitalize its activities or on terms that areacceptable to the Company could be impaired by factors that affect it directlyor the financial services industry or economy in general, such as further disruptionsin the financial markets or negative views and expectations about the prospectsfor the financial services industry.

 

Since late 2007,and particularly during the second half of 2008 and all of 2009, the financialservices industry and the credit markets generally were materially andadversely affected by significant declines in asset values and by a lack ofliquidity. The liquidity issues have been particularly acute for regional andcommunity banks, as many of the larger financial institutions have significantlycurtailed their lending to regional and community banks to reduce theirexposure to the risks of other banks. In addition, many of the largercorrespondent lenders have reduced or even eliminated federal funds lines fortheir correspondent customers. Furthermore, regional and community banksgenerally have less access to the capital markets than do the national andsuper-regional banks because of their smaller size and limited analystcoverage. Any decline in available funding could adversely impact the Company’sability to originate loans, invest in securities, meet its expenses, paydividends to its shareholders, or fulfill obligations such as repayingborrowings or meeting deposit withdrawal demands, any of which could have amaterial adverse impact on the Company’s liquidity, business, results ofoperations and financial condition.

 

**The amount of “other real estate” (“ORE”) mayincrease significantly, resulting in additional losses, and costs and expensesthat may negatively affect the Company’s operations.**

 

At December 31,2009, the Company had a total of $26.0 million of ORE as compared to$4.7 million at December 31, 2008. This increase in ORE is due, amongother things, to the continued deterioration of the commercial and residentialreal estate markets and the tightening of the credit market. As the amount ofORE increases, the Company’s losses and the costs and expenses of maintainingthe real estate will likewise increase. Due to the on-going economic crisis,the amount of ORE may continue to increase throughout 2010. Any additionalincrease in losses, and maintenance costs and expenses due to ORE could have amaterial adverse impact on the Company’s business, results of operations andfinancial condition. Such effects may be particularly pronounced in a market ofreduced real estate values and excess inventory, which may make the dispositionof ORE properties more difficult, increase maintenance costs and expenses, andreduce the Company’s ultimate realization from any ORE sales.

 

**Higher FDIC deposit insurance premiums andassessments could adversely affect the Company’s financial condition.**

 

Recently, higherlevels of bank failures have dramatically increased resolution costs of theFDIC and depleted the Deposit Insurance Fund. In addition, the FDIC instituted two temporary programs in 2008 tofurther insure customer deposits at FDIC-member banks through December 31,2009: deposit accounts are now insured up to $250,000 per customer (up from$100,000) and non-interest bearing transactional accounts are fully insured(unlimited coverage). These programs have placed additional stress on theDeposit Insurance Fund. On May 20, 2009, the FDIC extended the $250,000per customer insurance limit through December 31, 2013.

 

In order to maintain a strong funding position and restore reserveratios of the Deposit Insurance Fund, the FDIC increased assessment rates ofinsured institutions uniformly by 7 cents for every $100 of deposits beginningwith the first quarter of 2009, with additional changes effective April 1,2009, which required riskier institutions to pay a larger share of premiums byfactoring in rate adjustments based on secured liabilities and unsecured debtlevels.

 

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On May 22, 2009, the FDIC adopted a final rule thatimposed a special assessment on all insured depository institutions. Pursuantto the final rule, the FDIC imposed on the Bank a special assessment of $.9million, which was paid on September 30, 2009.

 

On November 12,2009, the FDIC adopted a final rule that required insured depositoryinstitutions to prepay on December 30, 2009, their estimated quarterlyrisk-based assessments for the fourth quarter of 2009 and for all of 2010,2011, and 2012.  On December 30,2009, the Bank paid the FDIC $10.1 in prepaid assessments.  These actions by the FDIC increased theCompany’s noninterest expense in 2009 and are expected to increase the Company’scosts for the foreseeable future. We anticipate that our FDIC insurancepremiums may continue to increase in the future, perhaps significantly, whichwill adversely impact our future earnings.

 

**TheCompany and its subsidiaries are subject to examination and challenges bytaxing authorities, and the Company’s effective tax rates may be adverselyaffected by changes in federal and state tax laws.**

 

The Company’seffective tax rates may be adversely affected by changes in federal or statetax laws, regulations and agency interpretations. Tax laws are complex andsubject to 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.

 

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

 

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

 

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

 

The accountingstandard setters, including the Financial Accounting Standards Board, theSecurities and Exchange Commission and other regulatory bodies, periodicallychange the financial accounting and reporting standards that govern thepreparation of the Company’s consolidated financial statements. These changescan be hard to predict and can materially impact how the Company records andreports its financial condition and results of operations. In some cases, theCompany could be required to apply a new or revised standard retroactively,resulting in the restatement of prior period financial statements.

 

**TheCompany’s ability to pay dividends on its common stock is limited by law.**

 

West Suburban’sability to pay dividends on its common stock largely depends on its receipt ofdividends from the Bank. The amount of dividends that the Bank may pay to WestSuburban is limited by federal and state laws and regulations relating tofinancial institutions. As of December 31, 2009, approximately $17.4million was available to be distributed as dividends by the Bank to WestSuburban while remaining a “well-capitalized” institution. However, the FDICmay restrict the payment of dividends by the Bank. In addition, West Suburbanand the Bank may decide to limit the payment of dividends even when they havethe legal ability to pay them in order to retain earnings for use in theirbusinesses.

 

23

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

 

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

 

**Systemfailure or breaches of the Company’s network security could subject the Companyto increased operating costs as well as litigation and other liabilities.**

 

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

 

**TheCompany is subject to certain operational risks, including customer or employeefraud and data processing system failures and errors.**

 

Employee errorsand misconduct could subject the Company to financial losses or regulatorysanctions and seriously harm its reputation. Misconduct by the Company’s employeescould include hiding unauthorized activities from the Company, improper orunauthorized activities on behalf of its customers or improper use ofconfidential information. It is not always possible to prevent employee errorsand misconduct, and the precautions the Company takes to prevent and detectthis activity may not be effective in all cases. Employee errors could alsosubject the Company to financial claims for negligence. The Company maintains asystem of internal controls and insurance coverage to mitigate againstoperational risks, including data processing system failures and errors andcustomer or employee fraud. Should the Company’s internal controls fail toprevent or detect an occurrence, and if any resulting loss is not insured orexceeds applicable insurance limits, such failure could have a material adverseeffect on the Company’s business, financial condition and results ofoperations.

 

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

## ** **

## **None.**

 

24

----

 

## **ITEM 2.        PROPERTIES**

 

West Suburban and the Bank occupy a totalof approximately 270,300 square feet in 35 full-service branches, fivelimited-service branches and four departments providing insurance, financialand other services. West Suburban’s principal office is located inapproximately 32,500 square feet of office space at 711 South Meyers Road,Lombard, Illinois. As indicated below, the Bank also operates its principaloffice as a branch. West Suburban Bank Land Trust, West Suburban FinancialServices and West Suburban Insurance Services, Inc. are located at 711South Meyers Road, Lombard, Illinois. West Suburban Bank VISA is located at 701South Meyers Road, Lombard, Illinois.

 

The following table sets forth certaininformation concerning the branches of the Bank as of December 31, 2009:

 
| **Location  of Branches and Other Services**    | ** ** | **Approximate  Square Feet** | ** ** | **Status** | ** ** |
|-------------------------------------------------|------------|------------------------------|------------|------------|------------|
|                                            |       |                         |       |       |       |
| 711 South Meyers Road  Lombard, Illinois        |       | 32,500                       |       | Owned      |       |
|                                            |       |                         |       |       |       |
| 40 East St. Charles  Road  Villa Park, Illinois |       | 2,700                        |       | Owned      |       |
|                                            |       |                         |       |       |       |
| 17W754 22nd Street  Oakbrook Terrace, Illinois  |       | 6,100                        |       | Owned      |       |
|                                            |       |                         |       |       |       |
| 707 North Main Street  Lombard, Illinois        |       | 4,100                        |       | Owned      |       |
|                                            |       |                         |       |       |       |
| 221 South West Street  Wheaton, Illinois        |       | 800                          |       | Owned      |       |
|                                            |       |                         |       |       |       |
| 895 East Geneva Road  Carol Stream, Illinois    |       | 3,000                        |       | Leased     |       |
|                                            |       |                         |       |       |       |
| 1104 West Boughton Road  Bolingbrook, Illinois  |       | 4,500                        |       | Owned      |       |
|                                            |       |                         |       |       |       |
| 295 West Loop Road  Wheaton, Illinois           |       | 4,500                        |       | Owned      |       |
|                                            |       |                         |       |       |       |
| 6400 South Cass Avenue  Westmont, Illinois      |       | 3,100                        |       | Leased     |       |
|                                            |       |                         |       |       |       |
| 2800 Finley Road  Downers Grove, Illinois       |       | 10,700                       |       | Owned      |       |
|                                            |       |                         |       |       |       |
| 1122 South Main Street  Lombard, Illinois       |       | 6,400                        |       | Owned      |       |
|                                            |       |                         |       |       |       |
| 3S041 Route 59  Warrenville, Illinois           |       | 3,700                        |       | Owned      |       |
|                                            |       |                         |       |       |       |
| 5330 Main Street  Downers Grove, Illinois       |       | 10,500                       |       | Owned      |       |
|                                            |       |                         |       |       |       |
| 8001 South Cass Avenue  Darien, Illinois        |       | 17,800                       |       | Owned      |       |
|                                            |       |                         |       |       |       |
| 672 East Boughton Road  Bolingbrook, Illinois   |       | 7,100                        |       | Owned      |       |

 

25

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| **Location  of Branches and Other Services**       | ** ** | **Approximate  Square Feet** | ** ** | **Status** | ** ** |
|----------------------------------------------------|------------|------------------------------|------------|------------|------------|
|                                               |       |                         |       |       |       |
| 1005 75th Street   Darien, Illinois                |       | 1,000                        |       | Owned      |       |
|                                               |       |                         |       |       |       |
| 505 North Weber Road  Romeoville, Illinois         |       | 4,400                        |       | Owned      |       |
|                                               |       |                         |       |       |       |
| 401 North Gary Avenue  Carol Stream, Illinois      |       | 6,400                        |       | Owned      |       |
|                                               |       |                         |       |       |       |
| 355 West Army Trail  Road  Bloomingdale, Illinois  |       | 10,700                       |       | Owned      |       |
|                                               |       |                         |       |       |       |
| 1657 Bloomingdale Road  Glendale Heights, Illinois |       | 4,100                        |       | Owned      |       |
|                                               |       |                         |       |       |       |
| 1061 West Stearns Road  Bartlett, Illinois         |       | 3,400                        |       | Owned      |       |
|                                               |       |                         |       |       |       |
| 1380 West Army Trail  Road  Carol Stream, Illinois |       | 2,300                        |       | Leased     |       |
|                                               |       |                         |       |       |       |
| 315 South Randall Road  St. Charles, Illinois      |       | 1,400                        |       | Owned      |       |
|                                               |       |                         |       |       |       |
| 3000 East Main Street  St. Charles, Illinois       |       | 4,200                        |       | Owned      |       |
|                                               |       |                         |       |       |       |
| 1870 McDonald Road  South Elgin, Illinois          |       | 4,600                        |       | Owned      |       |
|                                               |       |                         |       |       |       |
| 101 North Lake Street  Aurora, Illinois            |       | 19,000                       |       | Owned      |       |
|                                               |       |                         |       |       |       |
| 1830 Douglas Road  Montgomery, Illinois            |       | 2,500                        |       | Owned      |       |
|                                               |       |                         |       |       |       |
| 2000 West Galena  Boulevard  Aurora, Illinois      |       | 48,000                       |       | Owned      |       |
|                                               |       |                         |       |       |       |
| 335 North Eola Road  Aurora, Illinois              |       | 4,200                        |       | Owned      |       |
|                                               |       |                         |       |       |       |
| 2830 Route 34  Oswego, Illinois                    |       | 4,800                        |       | Owned      |       |
|                                               |       |                         |       |       |       |
| 10 Saravanos Drive  Yorkville, Illinois            |       | 3,200                        |       | Leased     |       |
|                                               |       |                         |       |       |       |
| 1071 Station Drive  Oswego, Illinois               |       | 3,200                        |       | Leased     |       |
|                                               |       |                         |       |       |       |
| 1296 East Chicago  Avenue  Naperville, Illinois    |       | 2,300                        |       | Owned      |       |
|                                               |       |                         |       |       |       |
| 2020 Feldott Lane  Naperville, Illinois            |       | 4,500                        |       | Owned      |       |
|                                               |       |                         |       |       |       |
| 1004 104th Street  Naperville, Illinois            |       | 5,900                        |       | Owned      |       |

 

26

----

 
| **Location  of Branches and Other Services**                                             | ** ** | **Approximate  Square Feet** | ** ** | **Status** | ** ** |
|------------------------------------------------------------------------------------------|------------|------------------------------|------------|------------|------------|
|                                                                                     |       |                         |       |       |       |
| Beacon Hill Retirement  Community  2400 South Finley Road  Lombard, Illinois             |       | 100                          |       | Leased     |       |
|                                                                                     |       |                         |       |       |       |
| Clare Oaks  825 Carillon Drive  Bartlett, Illinois                                       |       | 100                          |       | Leased     |       |
|                                                                                     |       |                         |       |       |       |
| 717 South Meyers Road  Lombard, Illinois                                                 |       | 7,100                        |       | Owned      |       |
|                                                                                     |       |                         |       |       |       |
| 701 South Meyers Road  Lombard, Illinois                                                 |       | 5,200                        |       | Owned      |       |
|                                                                                     |       |                         |       |       |       |
| Lexington Health Care  Center of Elmhurst  400 West Butterfield Road  Elmhurst, Illinois |       | 100                          |       | Leased     |       |
|                                                                                     |       |                         |       |       |       |
| Lexington Health Care  Center of Lombard  555 Foxworth Boulevard  Lombard, Illinois      |       | 100                          |       | Leased     |       |

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

 

There are no material pending legalproceedings to which West Suburban or the Bank is a party other than routinelitigation incidental to their respective businesses.

 
| **ITEM 4.** | **[RESERVED]** |
|-------------|----------------|

 

**PART II**

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

 

West Suburban’sauthorized and outstanding equity securities consist of common stock, no parvalue.

 

West Suburbanhereby incorporates by reference the information called for by Item 5 of this Form 10-Kfrom the sections entitled “Common Stock, Book Value and Dividends” and “StockPerformance Presentation” on page 4 and page 34, respectively, ofWest Suburban’s Annual Report to Shareholders for the fiscal year ended December 31,2009 (attached as Exhibit 13 hereto). The Company’s ability to paydividends to shareholders is largely dependent upon dividends it receives fromthe Bank, which is subject to regulatory limitations on the amount of cashdividends it may pay. See “Business — Supervision and Regulation — The Company —Dividend Payments” and “Business — Supervision and Regulation — The Bank —Dividend Payments” for a more detailed description of theses limitations.

 

West Suburban’scommon stock is not traded on any national or regional exchange. While there isno established trading market for West Suburban’s common stock, West Suburbanis aware that from time to time limited or infrequent quotations are made withrespect to West Suburban’s common stock and that there occurs limited tradingin West Suburban’s common stock resulting from private transactions notinvolving brokers or dealers. Transactions in West Suburban’s common stock havebeen infrequent. As of March 2, 2010, West Suburban had 426,850 shares ofcommon stock outstanding held by 1,109 shareholders of record. Management isaware of 16 transactions during 2009 involving the sale, in the aggregate, of6,771 shares of West Suburban’s common stock, and 43 transactions during 2008involving the sale, in the aggregate, of 3,846 shares of West Suburban’s commonstock. The average sale price of transactions in 2009 and 2008 was $478.51 and$635.27 per share of common stock, respectively.

 

27

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The following table sets forth information concerning the security repurchasesmade by the Company in the fourth quarter of 2009:

 
| **Issuer  Purchases of Equity Securities** | ** ** |
|--------------------------------------------|------------|
| **Period**                                 | ** ** | **Total Number  of Shares  Purchased** | ** ** | **Average Price  Paid per Share** | ** ** | **Total Number of  Shares Purchased  as Part of Publicly  Announced Plans  or Programs** | ** ** | **Maximum Number  of Shares that May  Yet Be Purchased  Under the Plans or  Programs** | ** ** |
| October 1, 2009 through October 31, 2009   |       | — |   | — |   | — |   | — |   |
| November 1, 2009 through November 30, 2009 |       | 1,761 | (1) | $ | 369.00 |   | — |   | — |   |
| December 1, 2009 through December 31, 2009 |       | — |   | — |   | — |   | — |   |
| Total                                      |       | 1,761 | (2) | $ | 369.00 | (2) | — |   | — |   |

----

(1)   Purchased by the Company in an open-markettransaction with a third party.

(2)   During the first and fourth quarters of 2009,the Company purchased an aggregate of 5,645 shares for an average purchaseprice per share of $470.83 in open-market transactions with third parties.

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

 

West Suburbanhereby incorporates by reference the information called for by Item 6 of this Form 10-Kfrom the section entitled “Selected Financial Data” on page 36 of WestSuburban’s Annual Report to Shareholders for the fiscal year ended December 31,2009 (attached as Exhibit 13 hereto).

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

 

West Suburban hereby incorporates byreference the information called for by Item 7 of this Form 10-K from thesection entitled “Management’s Discussion and Analysis of Financial Conditionand Results of Operations” on pages 39 through 49 of West Suburban’sAnnual Report to Shareholders for the fiscal year ended December 31, 2009(attached as Exhibit 13 hereto).

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

 

West Suburban hereby incorporates byreference the information called for by Item 7A of this Form 10-K from the“Interest Rate Sensitivity” section included in “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” on pages 39through 49 of West Suburban’s Annual Report to Shareholders for the fiscal yearended December 31, 2009 (attached as Exhibit 13 hereto).

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

 

West Suburbanhereby incorporates by reference the information called for by Item 8 of this Form 10-Kfrom the Consolidated Financial Statements and Notes to Consolidated FinancialStatements on pages 7 through 33 of West Suburban’s Annual Report toShareholders for the fiscal year ended December 31, 2009 (attached as Exhibit 13hereto).

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

 

None.

 

28

----

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

 

An evaluation wasperformed under the supervision and with the participation of the Company’smanagement, including the Chairman and Chief Executive Officer and thePresident and Chief Financial Officer, of the effectiveness of the design andoperation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgatedunder the Exchange Act) as of December 31, 2009. Based on that evaluation,the Company’s Chairman and Chief Executive Officer and the President and ChiefFinancial Officer concluded that the Company’s disclosure controls and procedureswere effective to ensure that information required to be disclosed by theCompany in reports that it files or submits under the Exchange Act is recorded,processed, summarized and reported within the time periods specified.

 

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

 

West Suburban’smanagement report on internal control over financial reporting is set forth in,and West Suburban hereby incorporates by reference, the section entitled “Management’sReport on Internal Control over Financial Reporting” on page 5 of WestSuburban’s Annual Report to Shareholders for the fiscal year ended December 31,2009 (attached as Exhibit 13 hereto).

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

 

None.

 

29

----

 

# **PART III**

 
| **ITEM 10.** | **DIRECTORS,  EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE** |
|--------------|-------------------------------------------------------------|

 

In addition, and as a supplement to theinformation provided under the caption “Executive Officers of West Suburban” inPart I of this Form 10-K, West Suburban hereby incorporates byreference the information called for by Item 10 of this Form 10-Kregarding directors and corporate governance of West Suburban from the sectionsentitled “Election of Directors” and “Corporate Governance and the Board ofDirectors” of West Suburban’s 2010 Proxy Statement.

 

Section 16(a) ofthe Exchange Act requires that the Company’s executive officers and directorsand persons who own more than 10% of the Company’s Common Stock file reports ofownership and changes in ownership with the Securities and Exchange Commissionand with the exchange on which West Suburban’s Common Stock is traded. Suchpersons are also required to furnish the Company with copies of all Section 16(a) formsthey file. Based solely on the Company’s review of the copies and formsfurnished to the Company and, if appropriate, representations made to theCompany by any such reporting person concerning whether a Form 5 wasrequired to be filed for the 2009 fiscal year, the Company is not aware thatany of its directors and executive officers or 10% shareholders failed tocomply with the filing requirements of Section 16(a) during 2009.

 

West Suburbanadopted a code of ethics that applies to West Suburban’s principal executiveofficer, principal financial officer and principal accounting officer orcontroller, or persons performing similar functions. West Suburban’s code ofethics is available in the Shareholder Information section of West Suburban’swebsite, www.westsuburbanbank.com.

 

Since the date ofWest Suburban’s 2009 Proxy Statement, there have been no material changes tothe procedures by which shareholders may recommend nominees to West Suburban’sboard of directors.

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

 

West Suburbanhereby incorporates by reference the information called for by Item 11 of this Form 10-Kfrom the section entitled “Executive Compensation” of West Suburban’s 2010Proxy Statement; provided, however, that “Report of the Compensation Committeeon Executive Compensation” is specifically not incorporated into this Form 10-K.

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

 

West Suburban hereby incorporates byreference the information called for by Item 12 of this Form 10-K from thesections entitled “Security Ownership of Certain Beneficial Owners” and “SecurityOwnership of Management” of West Suburban’s 2010 Proxy Statement.

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

 

West Suburbanhereby incorporates by reference the information called for by Item 13 of this Form 10-Kfrom the section entitled “Transactions with Directors, Officers and Associates”and “Corporate Governance and the Board of Directors” of West Suburban’s 2010Proxy Statement.

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

 

West Suburbanhereby incorporates by reference the information called for by Item 14 of this Form 10-Kfrom the section entitled “Accounting Fees and Services” of West Suburban’s2010 Proxy Statement.

 

30

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**PART IV**

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

 

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

 

WEST SUBURBAN BANCORP, INC. ANDSUBSIDIARIES

LIST OF FINANCIAL STATEMENTS AND

FINANCIAL STATEMENT SCHEDULES

 

The following audited ConsolidatedFinancial Statements of West Suburban and its subsidiaries and related notesand report of independent registered public accounting firm are incorporated byreference from West Suburban’s Annual Report to Shareholders for the fiscalyear ended December 31, 2009 (attached as Exhibit 13 hereto).

 
| ** **                                                                                                                |   | **Annual Report  Page No.** |
|---------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|
| Report of Independent Registered Public Accounting  Firm                                                                  |   | 6                           |
|                                                                                                                      |   |                        |
| Consolidated Balance Sheets — December 31, 2009  and 2008                                                       |   | 7                           |
|                                                                                                                      |   |                        |
| Consolidated Statements of Income — Years Ended  December 31, 2009, 2008 and 2007                               |   | 8                           |
|                                                                                                                      |   |                        |
| Consolidated Statements of Changes in Shareholders’  Equity — Years Ended December 31, 2009, 2008 and 2007 |   | 9                           |
|                                                                                                                      |   |                        |
| Consolidated Statements of Cash Flows — Years Ended  December 31, 2009, 2008 and 2007                           |   | 10                          |
|                                                                                                                      |   |                        |
| Notes to Consolidated Financial Statements                                                                                |   | 11                          |

 

The following Condensed FinancialInformation-Parent Only is incorporated by reference from Note 14 to WestSuburban’s audited Consolidated Financial Statements as set forth in WestSuburban’s Annual Report to Shareholders for the fiscal year ended December 31,2009 (attached as Exhibit 13 hereto).

 
|                                                                                         |   | **Annual  Report Page No.** |
|----------------------------------------------------------------------------------------------|--------|----------------------------------|
|                                                                                         |   |                             |
| Condensed Balance  Sheets — December 31, 2009 and 2008                             |   | 31                               |
|                                                                                         |   |                             |
| Condensed  Statements of Income — Years Ended December 31, 2009, 2008 and 2007     |   | 32                               |
|                                                                                         |   |                             |
| Condensed  Statements of Cash Flows — Years Ended December 31, 2009, 2008 and 2007 |   | 32                               |

 

Schedules

 

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

 

31

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Item 15(a)(3).         Exhibits

 

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

 

***

 

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

 

32

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**FORM 10-K SIGNATURE PAGE**

 

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

 

**WEST SUBURBAN BANCORP, INC.**

(Registrant)

 
| By     | /s/ Duane G.  Debs                     |   |
|--------|----------------------------------------|--------|
|   | Duane G. Debs                          |
|   | President and  Chief Financial Officer |

 

Date: March 12,2010

 

Pursuant to the requirements of theSecurities Exchange Act of 1934, this report has been signed below by thefollowing persons on behalf of the Registrant and in the capacities indicatedon the 12th day of March, 2010.

 

| **SIGNATURE**          | ** ** |      |   | **TITLE**                            |
|------------------------|------------|-----------|--------|--------------------------------------|
|                   |       |      |   |                                 |
| /s/ Kevin J.  Acker    |       | 3/12/2010 |   | Chairman, Chief  Executive Officer   |
| Kevin J. Acker         |       | Date      |   | and Director                         |
|                   |       |      |   |                                 |
| /s/ Duane G.  Debs     |       | 3/12/2010 |   | President, Chief  Financial Officer, |
| Duane G. Debs          |       | Date      |   | Director and  Principal Accounting   |
|                   |       |      |   | Officer                              |
|                   |       |      |   |                                 |
| /s/ David S.  Bell     |       | 3/12/2010 |   | Director                             |
| David S. Bell          |       | Date      |   |                                 |
|                   |       |      |   |                                 |
| /s/ Peggy P.  LoCicero |       | 3/12/2010 |   | Director                             |
| Peggy P.  LoCicero     |       | Date      |   |                                 |
|                   |       |      |   |                                 |
| /s/ Charles P.  Howard |       | 3/12/2010 |   | Director                             |
| Charles P.  Howard     |       | Date      |   |                                 |

 

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

 

33

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INDEX TO EXHIBITS

 
| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                               |
|---------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |       |                                                                                                                                                                                                                                                                                                                                                          |
| 3.1                 |       | Articles of  Incorporation of West Suburban filed March 14, 1986 — Incorporated by  reference from Exhibit 3.1 of Form 10-K of West Suburban dated  March 21, 2003, under Commission File No. 0-17609.                                                                                                                          |
|                |       |                                                                                                                                                                                                                                                                                                                                                          |
| 3.2                 |       | Articles of Amendment to Articles of Incorporation  of West Suburban filed November 2, 1988 — Incorporated by reference from  Exhibit 3.2 of Form 10-K of West Suburban dated March 21,  2003, under Commission File No. 0-17609.                                                                                               |
|                |       |                                                                                                                                                                                                                                                                                                                                                          |
| 3.3                 |       | Articles of Amendment to Articles of Incorporation  of West Suburban filed June 20, 1990 — Incorporated by reference from  Exhibit 3.3 of Form 10-K of West Suburban dated March 21,  2003, under Commission File No. 0-17609.                                                                                                  |
|                |       |                                                                                                                                                                                                                                                                                                                                                          |
| 3.4                 |       | Articles of Amendment to Articles of Incorporation  of West Suburban filed June 8, 1998 — Incorporated by reference from  Exhibit 3.4 of Form 10-K of West Suburban dated March 21,  2003, under Commission File No. 0-17609.                                                                                                   |
|                |       |                                                                                                                                                                                                                                                                                                                                                          |
| 3.5                 |       | Articles of Amendment to Articles of Incorporation  of West Suburban filed May 27, 2003 — Incorporated by reference from  Exhibit 3.5 of Form 10-Q of West Suburban dated August 14,  2003, under Commission File No. 0-17609.                                                                                                  |
|                |       |                                                                                                                                                                                                                                                                                                                                                          |
| 3.6                 |       | Amended and Restated By-laws of West Suburban —  Incorporated by reference from Exhibit 3.5 of Form 10-K of West  Suburban dated March 21, 2003, under Commission File No. 0-17609.                                                                                                                                                  |
|                |       |                                                                                                                                                                                                                                                                                                                                                          |
| 4.1                 |       | Specimen of  Common Stock certificate — Incorporated by reference from Exhibit 4.1 of  Form 10-K of West Suburban dated March 14, 2006, under Commission  File No. 0-17609.                                                                                                                                                          |
|                |       |                                                                                                                                                                                                                                                                                                                                                          |
| 10.1                |       | Directors and  Senior Management Deferred Compensation Plan of West Suburban — Incorporated  by reference from Exhibit 10.1 of Form 10-K of West Suburban dated  March 11, 2009, under Commission File No. 0-17609.                                                                                                                  |
|                |       |                                                                                                                                                                                                                                                                                                                                                          |
| 10.2                |       | Restated  Employment Agreement dated December 29, 2008 between West Suburban and  Mr. Kevin J. Acker — Incorporated by reference from Exhibit 10.2 of  Form 10-K of West Suburban dated March 11, 2009, under Commission File  No. 0-17609.                                                                                |
|                |       |                                                                                                                                                                                                                                                                                                                                                          |
| 10.3                |       | Restated  Employment Agreement dated December 29, 2008 between West Suburban and  Mr. Keith W. Acker — Incorporated by reference from Exhibit 10.3 of  Form 10-K of West Suburban dated March 11, 2009, under Commission  File No. 0-17609.                                                                                |
|                |       |                                                                                                                                                                                                                                                                                                                                                          |
| 10.4                |       | Restated  Employment Agreement dated December 29, 2008 between West Suburban and  Mr. Duane G. Debs — Incorporated by reference from Exhibit 10.4 of  Form 10-K of West Suburban dated March 11, 2009, under Commission  File No. 0-17609.                                                                                 |
|                |       |                                                                                                                                                                                                                                                                                                                                                          |
| 10.5                |       | Restated  Employment Agreement dated December 29, 2008 between West Suburban and  Mr. Michael P. Brosnahan — Incorporated by reference from  Exhibit 10.5 of Form 10-K of West Suburban dated March 11,  2009, under Commission File No. 0-17609.                                                                          |
|                |       |                                                                                                                                                                                                                                                                                                                                                          |
| 10.6                |       | Restated  Employment Agreement dated December 31, 2008 between West Suburban and  Mr. Daniel P. Grotto — Incorporated by reference from Exhibit 10.6  of Form 10-K of West Suburban dated March 11, 2009, under  Commission File No. 0-17609.                                                                              |
|                |       |                                                                                                                                                                                                                                                                                                                                                          |
| 10.7                |       | Form of  Amended and Restated Life Insurance Agreement between West Suburban and  Messrs. Kevin J. Acker, Keith W. Acker, Duane G. Debs, Michael P.  Brosnahan and Daniel P. Grotto — Incorporated by reference from  Exhibit 10.7 of Form 10-K of West Suburban dated March 11,  2009, under Commission File No. 0-17609. |
|                |       |                                                                                                                                                                                                                                                                                                                                                          |
| 10.8                |       | Asset Purchase  Agreement dated December 4, 2009 between West Suburban Bank and Prepaid  Solutions, Inc. — Incorporated by reference from Exhibit 10.1 of  Form 8-K of West Suburban dated December 10, 2009, under Commission  File No. 0-17609.                                                                          |
|                |       |                                                                                                                                                                                                                                                                                                                                                          |
| 10.9                |       | Agreement and General  Release dated December 4, 2009 among Mr. Daniel Grotto, West  Suburban Bancorp, Inc. and West Suburban Bank — Incorporated by  reference from Exhibit 10.2 of Form 8-K of West Suburban dated  December 10, 2009, under Commission File No. 0-17609.                                           |

 

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| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                               |
|---------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |       |                                                                                                                                                                                          |
| 13                  |       | Annual Report to  Shareholders of West Suburban for fiscal year ended December 31, 2009.                                                                                                 |
|                |       |                                                                                                                                                                                          |
| 21                  |       | Subsidiaries of  Registrant.                                                                                                                                                                  |
|                |       |                                                                                                                                                                                          |
| 31.1                |       | Certification of  Kevin J. Acker, Chairman and Chief Executive Officer, Pursuant to  Rule 13a-14(a) and Rule 15d-14(a).                                                        |
|                |       |                                                                                                                                                                                          |
| 31.2                |       | Certification of  Duane G. Debs, President and Chief Financial Officer, Pursuant to  Rule 13a-14(a) and Rule 15d-14(a).                                                        |
|                |       |                                                                                                                                                                                          |
| 32.1                |       | Certification of  Kevin J. Acker, Chairman and Chief Executive Officer, Pursuant to 18 U.S.C.  Section 1350, as Adopted Pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002. |
|                |       |                                                                                                                                                                                          |
| 32.2                |       | Certification of  Duane G. Debs, President and Chief Financial Officer, Pursuant to 18 U.S.C.  Section 1350, as Adopted Pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002. |

 

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