**Exhibit 13**

 

# **Profile**

 

West Suburban Bancorp,Inc. (“West Suburban”) is the parent bank holding company of West SuburbanBank, Lombard, Illinois (the “Bank” and, together with West Suburban, the“Company”). The Company had total assets at December 31, 2002 of approximately$1.6 billion. The Bank is the largest independent bank headquartered in DuPageCounty.

 
| **West  Suburban Bancorp, Inc.** |
|----------------------------------|
| **Financial  Highlights**        |

** **

 

|            |   | **Years  Ended December 31,  (Dollars in thousands, except per share data)** |   |
|-----------------|--------|------------------------------------------------------------------------------|--------|
|            |   | **2002**                                                                     |   | **2001** |   | **2000** |   | **1999** |   | **1998** |   |
| Net  income     |   | $                                                                            | 17,932 |   | $ | 20,183 |   | $ | 21,003 |   | $ | 20,045 |   | $ | 16,178 |   |
| Per  share data |   |                                                                         |   |   |   |   |   |   |   |   |   |
| Earnings        |   | 41.46                                                                        |   | 46.67 |   | 48.56 |   | 46.35 |   | 37.41 |   |
| Book  value(1)  |   | 341.47                                                                       |   | 335.30 |   | 323.17 |   | 313.61 |   | 310.74 |   |
| Net  loans      |   | 1,128,816                                                                    |   | 1,093,376 |   | 1,016,140 |   | 845,706 |   | 772,361 |   |
| Total  assets   |   | 1,586,063                                                                    |   | 1,473,559 |   | 1,431,958 |   | 1,408,062 |   | 1,308,953 |   |
| Deposits        |   | 1,420,256                                                                    |   | 1,309,720 |   | 1,269,954 |   | 1,254,255 |   | 1,155,952 |   |
|                 |        |                                                                              |        |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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(1)          Book value equalsshareholders’ equity plus common stock in ESOP subject to contingent repurchaseobligation divided by the number of outstanding shares.

** **
| **Table of Contents**                                                                                |
|------------------------------------------------------------------------------------------------------|
|                                                                                                 |
| Profile                                                                                              |
| Letter to  Our Shareholders, Customers and Friends                                                   |
| Common Stock,  Book Value and Dividends                                                              |
| Business Review                                                                                      |
| Report of Independent  Auditors                                                                      |
| Consolidated Financial  Statements                                                                   |
| Notes to Consolidated  Financial Statements                                                          |
| Selected  Financial Data                                                                             |
| Average  Balance Sheets, Net Interest Income and Average Rates and Yields on a Tax Equivalent  Basis |
| Management’s  Discussion and Analysis of Financial Condition and Results of Operations          |
| Boards of  Directors and Officers                                                                    |
| Addresses of West  Suburban Facilities                                                               |
| Map of Branches                                                                                      |
| Shareholder  Information                                                                             |

 

###### ***Special Note ConcerningForward-Looking Statements***

 

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

 

*Anumber of factors, many of which are beyond the ability of the Company tocontrol or predict, could cause actual results to differ materially from thosein its forward-looking statements. These factors include, among others, thefollowing: (i) the strength of the local and national economy;(ii) the economic impact of terrorist activities and military actions;(iii) the timely development and acceptance of new products and services,including products and services offered through alternative delivery channelssuch as the internet; (iv) changes in state and federal laws, regulationsand governmental policies concerning the Company’s general business; (v) changesin interest rates and prepayment rates of the Company’s assets;(vi) increased competition in the financial services sector and theinability to attract new customers; (vii) changes in technology and theability to develop and maintain secure and reliable electronic systems;(viii) the loss of key executives or employees; (ix) changes inconsumer spending; (x) unexpected results of acquisitions; (xi) unexpectedoutcomes of existing or new litigation involving the Company; and(xii) changes in accounting policies and practices. 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 additional factors thatcould materially affect the Company’s financial results, is included in theCompany’s filings with the Securities and Exchange Commission.*

 

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

 

In 2002, we celebrated our 40thAnniversary. Our celebration included activities intended to remind ouremployees and customers of our early days as well as to engender pride in thesuccess that we have enjoyed at West Suburban. We enjoyed music from 1962 andevents such as raffles and an outing to a minor league baseball game. Over thepast 40 years we have worked hard to expand our organization.  We have grown from one facility to 33facilities and we do not plan on stopping. In 2002, we opened a second locationin Naperville at 1296 East Chicago Avenue and our first location in Oswego at2830 Route 34.

 

As in past years, West Suburban has continued todevelop and introduce innovative new products in order to better serve theneeds of our customers and the communities in our markets. We offered a 40thAnniversary certificate of deposit that offered various interest rates atdifferent terms of maturity. We introduced a new overdraft protection productthat provides qualifying customers the peace of mind that their checks will notbe returned unpaid if they inadvertently overdraw their account. We also rolledout a number of stored value products, including a Visa gift card that isaccepted wherever Visa credit cards are accepted, Visa and MasterCard payrollcards as well as money transfer cards under the names “PowerCash” and “DineroMundial.”

 

We also continued to provide our customers traditionalbanking products such as savings accounts, checking accounts and low rate homeequity and residential mortgage loans and improved our on-line banking servicesat www.westsuburbanbank.com in an effort to offer our customers improvedaccessibility 24 hours a day.

 

During 2002, West Suburban realized a 7.6% growth intotal assets. Our loan and deposit growth during 2002 continued to be strongwith a 3.2% increase in net loans and an 8.4% increase in total deposits.Although our net income decreased 11.2% in 2002, we were still able torecognize a 1.8% growth in our book value per share.

 

We would like to express our appreciation to everyonefor the support that has allowed us to become and remain the largestindependent bank headquartered in DuPage County and we welcome your comments,criticisms and suggestions. We could not have achieved our success without thesupport of our shareholders, customers, communities, friends and employees.

 

Finally, we regretfully acknowledge the passing ofDirector Emeritus Harry W. Kuhn. Mr. Kuhn will be remembered not only for theindispensable guidance he provided to this institution but also the significantcontributions he made to his community and to those who had the privilege ofknowing him.

 

Sincerely,

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

 

----

 

# **CommonStock, Book Value and Dividends**

 

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

 

| **Year** |   | **Quarter** |   | **Book   Value(1)** |   | **Dividends  Declared** |
|----------|--------|-------------|--------|---------------------|--------|-------------------------|
| **2002** |   | 4th         |   | $                   | 341.47 |                    | $ | 18.00 |
|     |   | 3rd         |   | 351.16              |   | 8.00                    |
|     |   | 2nd         |   | 344.46              |   | 8.00                    |
|     |   | 1st         |   | 334.38              |   | 7.50                    |
|     |   |        |   |                |   |                    |
| 2001     |   | 4th         |   | $                   | 335.30 |                    | $ | 17.50 |
|     |   | 3rd         |   | 347.77              |   | 7.50                    |
|     |   | 2nd         |   | 337.51              |   | 7.50                    |
|     |   | 1st         |   | 332.74              |   | 7.50                    |

 

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(1)          Book value equalsshareholders’ equity plus common stock in ESOP subject to contingent repurchaseobligation divided by the number of outstanding shares.

 

The dividend declaredduring the 4th quarter of 2002 included a special $10.00 per share dividendpayable on January 2, 2003 to shareholders of record as of December 15, 2002.Similarly, the dividend declared during the 4th quarter of 2001 included aspecial $10.00 per share dividend payable on January 2, 2002 to shareholders ofrecord as of December 15, 2001.

 

# **Business Review**

 

As of December 31, 2002,the Company had total assets of approximately $1.6 billion and operated 33 fullservice branches, five limited-service branches as well as five departmentsproviding other services for the convenience of the customers of the Companythroughout DuPage, Kane, Kendall and Will Counties. The Bank focuses onproviding retail and commercial banking products and services in its marketarea. The Company had 487 full-time equivalent employees at December 31, 2002.

 

 

**[WSB LOGO]**

 

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**[LETTERHEAD OF****Crowe, Chizek and Company LLP]**

** **

# **REPORTOF INDEPENDENT AUDITORS**

 

 

Board of Directors andShareholders

West Suburban Bancorp,Inc.

Lombard, Illinois

 

We have audited theaccompanying consolidated balance sheets of West Suburban Bancorp, Inc. (the“Company”) as of December 31, 2002 and 2001, and the related consolidatedstatements of income, changes in shareholders’ equity, and cash flows for theyears ended December 31, 2002, 2001 and 2000. These financial statements arethe responsibility of the Company’s management. Our responsibility is toexpress an opinion on these financial statements based on our audits.

 

We conducted our auditsin accordance with auditing standards generally accepted in the United Statesof America. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An auditalso includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audits provide a reasonable basisfor our opinion.

 

In our opinion, theconsolidated financial statements referred to above present fairly, in allmaterial respects, the financial position of the Company at December 31, 2002and 2001, and the results of its operations and its cash flows for the yearsended December 31, 2002, 2001 and 2000 in conformity with accounting principlesgenerally accepted in the United States of America.

 

As disclosed in Notes 1and 14, during 2002 the Company adopted new accounting guidance for goodwilland intangible assets.

 

 
|                | /s/ Crowe, Chizek and  Company LLP |
|---------------------|------------------------------------|
|                | Crowe, Chizek and  Company LLP     |
|                |                               |
| Oak Brook, Illinois |                               |
| February 7, 2003    |                               |

 

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**WEST SUBURBAN BANCORP, INC.**

# **CONSOLIDATEDBALANCE SHEETS**

## **DECEMBER31, 2002 AND**2001

(Dollars inthousands)

 
|                                                                                              |   | **2002**  |       | **2001**  |       |
|---------------------------------------------------------------------------------------------------|--------|-----------|------------|-----------|------------|
| **Assets**                                                                                        |   |      | ** ** |      | ** ** |
| Cash  and due from banks                                                                          |   | $         | 42,566     |      | $          | 32,870 |   |
| Federal  funds sold                                                                               |   | 24,222    |       | 14,206    |       |
| Total  cash and cash equivalents                                                                  |   | 66,788    |       | 47,076    |       |
| Securities                                                                                        |   |      |       |      |       |
| Available  for sale (amortized cost of $273,304 in 2002 and $147,181 in 2001)                     |   | 278,423   |       | 147,847   |       |
| Held  to maturity (fair value of $51,129 in 2002 and $121,364 in 2001)                            |   | 49,877    |       | 120,968   |       |
| Total  securities                                                                                 |   | 328,300   |       | 268,815   |       |
| Loans,  less allowance for loan losses of $13,847 in 2002 and $12,262 in 2001                     |   | 1,128,816 |       | 1,093,376 |       |
| Premises  and equipment, net                                                                      |   | 45,641    |       | 43,877    |       |
| Other  real estate                                                                                |   | 40        |       | 1,410     |       |
| Accrued  interest and other assets                                                                |   | 16,478    |       | 19,005    |       |
| **Total assets**                                                                                  |   | $         | 1,586,063  |      | $          | 1,473,559 |   |
|                                                                                              |   |      |       |      |       |
| **Liabilities and shareholders’ equity**                                                     |   |      |       |      |       |
| Deposits                                                                                          |   |      |       |      |       |
| Demand-noninterest-bearing                                                                        |   | $         | 157,539    |      | $          | 148,044 |   |
| Interest-bearing                                                                                  |   | 1,262,717 |       | 1,161,676 |       |
| Total  deposits                                                                                   |   | 1,420,256 |       | 1,309,720 |       |
| Accrued  interest and other liabilities                                                           |   | 18,122    |       | 18,824    |       |
|                                                                                              |   |      |       |      |       |
| Common  stock in ESOP subject to contingent repurchase obligation                                 |   | 40,241    |       | 40,645    |       |
|                                                                                              |   |      |       |      |       |
| Shareholders’  equity                                                                        |   |      |       |      |       |
| Common  stock, no par value; 15,000,000 shares authorized;  432,495 shares issued and outstanding |   | 3,457     |       | 3,457     |       |
| Surplus                                                                                           |   | 38,066    |       | 38,066    |       |
| Retained  earnings                                                                                |   | 103,074   |       | 103,091   |       |
| Accumulated  other comprehensive income                                                           |   | 3,088     |       | 401       |       |
| Amount  reclassified on ESOP shares                                                               |   | (40,241   | )          | (40,645   | )          |
| **Total shareholders’ equity**                                                               |   | 107,444   |       | 104,370   |       |
| **Total liabilities and shareholders’ equity**                                               |   | $         | 1,586,063  |      | $          | 1,473,559 |   |

 

*See accompanying notes toconsolidated financial statements.*

 

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**WEST SUBURBAN BANCORP, INC.**

### **CONSOLIDATEDSTATEMENTS OF INCOME**

## **YEARSENDED DECEMBER 31, 2002, 2001 AND**2000

(Dollars inthousands, except per share data)

 
|                                                           |   | **2002** |   | **2001** |   | **2000** |   |
|----------------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
| **Interest income**                                            |   |     |   |     |   |     |   |
| Loans,  including fees                                         |   | $        | 70,242 |     | $      | 83,110   |   | $ | 82,442 |   |
| Securities                                                     |   |     |   |     |   |     |   |
| Taxable                                                        |   | 13,495   |   | 13,560   |   | 18,109   |   |
| Exempt  from federal income tax                                |   | 1,239    |   | 1,353    |   | 1,462    |   |
| Federal  funds sold                                            |   | 418      |   | 795      |   | 1,104    |   |
| Commercial  paper                                              |   | —   |   | 86       |   | 167      |   |
| Total  interest income                                         |   | 85,394   |   | 98,904   |   | 103,284  |   |
|                                                           |   |     |   |     |   |     |   |
| **Interest expense**                                           |   |     |   |     |   |     |   |
| Deposits                                                       |   | 27,762   |   | 40,312   |   | 45,864   |   |
| Other                                                          |   | 41       |   | 101      |   | 204      |   |
| Total  interest expense                                        |   | 27,803   |   | 40,413   |   | 46,068   |   |
| **Net interest income**                                        |   | 57,591   |   | 58,491   |   | 57,216   |   |
| **Provision for loan losses**                                  |   | 8,125    |   | 2,950    |   | 1,500    |   |
| **Net interest income after provision for loan losses**        |   | 49,466   |   | 55,541   |   | 55,716   |   |
|                                                           |   |     |   |     |   |     |   |
| **Noninterest income**                                         |   |     |   |     |   |     |   |
| Service  fees on deposit accounts                              |   | 5,450    |   | 3,800    |   | 3,513    |   |
| Debit  card fees                                               |   | 1,575    |   | 1,312    |   | 1,013    |   |
| Net  realized gains on securities transactions                 |   | 1,017    |   | 2,334    |   | —   |   |
| Write-down  of carrying value of securities available for sale |   | —   |   | (2,960   | )      | —   |   |
| Net  gain on sales of loans held for sale                      |   | 676      |   | 404      |   | 20       |   |
| Other                                                          |   | 4,765    |   | 4,794    |   | 3,763    |   |
| Total  noninterest income                                      |   | 13,483   |   | 9,684    |   | 8,309    |   |
|                                                           |   |     |   |     |   |     |   |
| **Noninterest expense**                                        |   |     |   |     |   |     |   |
| Salaries  and employee benefits                                |   | 19,730   |   | 19,681   |   | 18,695   |   |
| Occupancy                                                      |   | 3,753    |   | 3,505    |   | 3,238    |   |
| Furniture  and equipment                                       |   | 4,497    |   | 4,488    |   | 4,309    |   |
| Advertising  and promotion                                     |   | 1,842    |   | 1,367    |   | 838      |   |
| Other                                                          |   | 6,723    |   | 6,426    |   | 6,647    |   |
| Total  noninterest expense                                     |   | 36,545   |   | 35,467   |   | 33,727   |   |
|                                                           |   |     |   |     |   |     |   |
| **Income before income taxes**                                 |   | 26,404   |   | 29,758   |   | 30,298   |   |
| **Income tax expense**                                         |   | 8,472    |   | 9,575    |   | 9,295    |   |
| **Net income**                                                 |   | $        | 17,932 |     | $      | 20,183   |   | $ | 21,003 |   |
|                                                           |   |     |   |     |   |     |   |
| **Earnings per share (432,495 shares outstanding)**            |   | $        | 41.46  |     | $      | 46.67    |   | $ | 48.56 |   |

 

*See accompanying notes toconsolidated financial statements.*

 

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**WEST SUBURBAN BANCORP, INC.**

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

**YEARS ENDED DECEMBER 31, 2002, 2001AND 2000**

(Dollars inthousands, except per share data)

 
|                                                                                                              |   | **Common  Stock  and  Surplus** |   | **Retained  Earnings** |   | **Accumulated  Other  Compre-   hensive   Income   (Loss)** |   | **Amount  Reclassified  on ESOP  Shares** |   | **Total  Shareholders’  Equity** |   | **Common  Stock in  ESOP  Subject to   Contingent  Repurchase  Obligation** |   |
|-------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|--------|------------------------|--------|-------------------------------------------------------------|--------|-------------------------------------------|--------|---------------------------------------|--------|-----------------------------------------------------------------------------|--------|
| Balance, January 1, 2000                                                                                          |   | $                               | 41,523 |                   | $      | 96,288                                                      |   | $                                         | (2,178 | )                                     | $      | (34,096                                                                     | )      | $ | 101,537 |   | $ | 34,096 |   |
|                                                                                                              |   |                            |   |                   |   |                                                        |   |                                      |   |                                  |   |                                                                        |   |
| Comprehensive income                                                                                              |   |                            |   |                   |   |                                                        |   |                                      |   |                                  |   |                                                                        |   |
| Net income                                                                                                        |   | —                          |   | 21,003                 |   | —                                                      |   | —                                    |   | 21,003                                |   | —                                                                      |   |
| Change in unrealized loss on  available for sale securities, net of reclassification and tax effects              |   | —                          |   | —                 |   | 215                                                         |   | —                                    |   | 215                                   |   | —                                                                      |   |
| Total comprehensive income                                                                                        |   | —                          |   | —                 |   | —                                                      |   | —                                    |   | 21,218                                |   | —                                                                      |   |
| Cash dividends declared -  $39.50 per share                                                                       |   | —                          |   | (17,083                | )      | —                                                      |   | —                                    |   | (17,083                               | )      | —                                                                      |   |
| Reclassification due to change in fair value of  common stock in ESOP subject to contingent repurchase obligation |   | —                          |   | —                 |   | —                                                      |   | (3,548                                    | )      | (3,548                                | )      | 3,548                                                                       |   |
| Balance, December 31, 2000                                                                                        |   | 41,523                          |   | 100,208                |   | (1,963                                                      | )      | (37,644                                   | )      | 102,124                               |   | 37,644                                                                      |   |
|                                                                                                              |   |                            |   |                   |   |                                                        |   |                                      |   |                                  |   |                                                                        |   |
| Comprehensive income                                                                                              |   |                            |   |                   |   |                                                        |   |                                      |   |                                  |   |                                                                        |   |
| Net income                                                                                                        |   | —                          |   | 20,183                 |   | —                                                      |   | —                                    |   | 20,183                                |   | —                                                                      |   |
| Change in unrealized (loss) gain on available for  sale securities, net of reclassification and tax effects       |   | —                          |   | —                 |   | 2,364                                                       |   | —                                    |   | 2,364                                 |   | —                                                                      |   |
| Total comprehensive income                                                                                        |   | —                          |   | —                 |   | —                                                      |   | —                                    |   | 22,547                                |   | —                                                                      |   |
| Cash dividends declared -  $40.00 per share                                                                       |   | —                          |   | (17,300                | )      | —                                                      |   | —                                    |   | (17,300                               | )      | —                                                                      |   |
| Reclassification due to change in fair value of  common stock in ESOP subject to contingent repurchase obligation |   | —                          |   | —                 |   | —                                                      |   | (3,001                                    | )      | (3,001                                | )      | 3,001                                                                       |   |
| Balance, December 31, 2001                                                                                        |   | 41,523                          |   | 103,091                |   | 401                                                         |   | (40,645                                   | )      | 104,370                               |   | 40,645                                                                      |   |
|                                                                                                              |   |                            |   |                   |   |                                                        |   |                                      |   |                                  |   |                                                                        |   |
| Comprehensive income                                                                                              |   |                            |   |                   |   |                                                        |   |                                      |   |                                  |   |                                                                        |   |
| Net income                                                                                                        |   | —                          |   | 17,932                 |   | —                                                      |   | —                                    |   | 17,932                                |   | —                                                                      |   |
| Change in unrealized gain on  available for sale securities, net of reclassification and tax effects              |   | —                          |   | —                 |   | 2,687                                                       |   | —                                    |   | 2,687                                 |   | —                                                                      |   |
| Total comprehensive income                                                                                        |   | —                          |   | —                 |   | —                                                      |   | —                                    |   | 20,619                                |   | —                                                                      |   |
| Cash dividends declared -  $41.50 per share                                                                       |   | —                          |   | (17,949                | )      | —                                                      |   | —                                    |   | (17,949                               | )      | —                                                                      |   |
| Reclassification due to change in fair value of  common stock in ESOP subject to contingent repurchase obligation |   | —                          |   | —                 |   | —                                                      |   | 404                                       |   | 404                                   |   | (404                                                                        | )      |
| **Balance, December 31, 2002**                                                                                    |   | $                               | 41,523 |                   | $      | 103,074                                                     |   | $                                         | 3,088  |                                  | $      | (40,241                                                                     | )      | $ | 107,444 |   | $ | 40,241 |   |

 

*See accompanying notes toconsolidated financial statements.*

 

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**WEST SUBURBAN BANCORP, INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**YEARS ENDED DECEMBER 31, 2002, 2001AND 2000**

(Dollars inthousands)

 
|                                                                              |   | **2002** |   | **2001** |   | **2000** |   |
|-----------------------------------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
| **Cash flows from operating activities**                                          |   |     |   |     |   |     |   |
| Net  income                                                                       |   | $        | 17,932 |     | $      | 20,183   |   | $ | 21,003 |   |
| Adjustments  to reconcile net income to net cash provided by operating activities |   |     |   |     |   |     |   |
| Depreciation                                                                      |   | 3,816    |   | 3,759    |   | 3,856    |   |
| Provision  for loan losses                                                        |   | 8,125    |   | 2,950    |   | 1,500    |   |
| Deferred  income tax benefit                                                      |   | (717     | )      | (458     | )      | (406     | )      |
| Net  premium amortization of securities                                           |   | 868      |   | 495      |   | 12       |   |
| Net  realized gains on securities transactions                                    |   | (1,017   | )      | (2,334   | )      | —   |   |
| Write-down  of carrying value of securities available for sale                    |   | —   |   | 2,960    |   | —   |   |
| Federal  Home Loan Bank stock dividends                                           |   | (234     | )      | (293     | )      | (218     | )      |
| Net  gain on sales of loans held for sale                                         |   | (676     | )      | (404     | )      | (20      | )      |
| Sales  of loans held for sale                                                     |   | 53,532   |   | 38,517   |   | 358      |   |
| Origination  of loans held for sale                                               |   | (51,240  | )      | (43,793  | )      | (160     | )      |
| Net  loss (gain) on sales of premises and equipment                               |   | 94       |   | (7       | )      | (29      | )      |
| Net  gain on sales of other real estate                                           |   | (451     | )      | (11      | )      | (59      | )      |
| Decrease  (increase) in accrued interest and other assets                         |   | 1,905    |   | (660     | )      | 15       |   |
| (Decrease)  increase in accrued interest and other liabilities                    |   | (918     | )      | (3,412   | )      | 3,845    |   |
| **Net cash provided by operating activities**                                     |   | 31,019   |   | 17,492   |   | 29,697   |   |
| **Cash flows from investing activities**                                          |   |     |   |     |   |     |   |
| Securities  available for sale                                                    |   |     |   |     |   |     |   |
| Sales                                                                             |   | 122,069  |   | 24,635   |   | —   |   |
| Maturities  and calls                                                             |   | 114,496  |   | 89,033   |   | 52,600   |   |
| Purchases                                                                         |   | (362,246 | )      | (128,394 | )      | (19,178  | )      |
| Securities  held to maturity                                                      |   |     |   |     |   |     |   |
| Maturities  and calls                                                             |   | 81,902   |   | 199,093  |   | 11,729   |   |
| Purchases                                                                         |   | (10,870  | )      | (155,870 | )      | (976     | )      |
| Net  increase in loans                                                            |   | (45,181  | )      | (74,833  | )      | (172,213 | )      |
| Purchases  of premises and equipment                                              |   | (5,727   | )      | (7,740   | )      | (8,046   | )      |
| Sales  of premises and equipment                                                  |   | 53       |   | 7        |   | 32       |   |
| Sales  of other real estate                                                       |   | 1,821    |   | 868      |   | 1,708    |   |
| Investment  in company-owned life insurance policies                              |   | (427     | )      | (948     | )      | —   |   |
| **Net cash used in investing activities**                                         |   | (104,110 | )      | (54,149  | )      | (134,344 | )      |
| **Cash flows from financing activities**                                          |   |     |   |     |   |     |   |
| Net  increase in deposits                                                         |   | 110,536  |   | 39,766   |   | 15,699   |   |
| Dividends  paid                                                                   |   | (17,733  | )      | (17,300  | )      | (16,867  | )      |
| **Net cash provided by (used in) financing activities**                           |   | 92,803   |   | 22,466   |   | (1,168   | )      |
| **Net increase (decrease) in cash and cash equivalents**                          |   | 19,712   |   | (14,191  | )      | (105,815 | )      |
| **Beginning cash and cash equivalents**                                           |   | 47,076   |   | 61,267   |   | 167,082  |   |
| **Ending cash and cash equivalents**                                              |   | $        | 66,788 |     | $      | 47,076   |   | $ | 61,267 |   |
|                                                                              |   |     |   |     |   |     |   |
| **Supplemental disclosures**                                                      |   |     |   |     |   |     |   |
| Cash paid for                                                                     |   |     |   |     |   |     |   |
| Interest                                                                          |   | $        | 29,828 |     | $      | 43,533   |   | $ | 42,036 |   |
| Income taxes                                                                      |   | 7,823    |   | 11,978   |   | 10,043   |   |
| Other real  estate acquired through loan foreclosures                             |   | —   |   | 327      |   | 101      |   |

 

*Seeaccompanying notes to consolidated financial statements.*

 

----

 

## **WESTSUBURBAN BANCORP, INC.**

## **NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS**

(Dollars inthousands, except per share data)

 

# **Note1 - Nature of Business and Summary of Significant Accounting Policies**

 

West Suburban Bancorp,Inc. (“West Suburban”) through the branch network of its subsidiary, WestSuburban Bank (the “Bank” and, together with West Suburban, the “Company”),provides financial and other banking services to customers located primarily inthe western suburbs of Chicago. Customers in these areas are the primaryconsumers of the Company’s loan and deposit products and services. Althoughborrower cash flow is expected to be the primary source of repayment, theCompany’s loans are generally secured by various forms of collateral includingreal estate, business assets, consumer goods and other items.

 

While the Company’sprincipal decision makers monitor the revenue streams of the various productsand services offered by the Company, operations are managed and financialperformance is evaluated on a Company-wide basis. Accordingly, all of theCompany’s banking operations are considered by management to be aggregated inone reportable operating segment.

 

***Principles of Consolidation***

The consolidatedfinancial statements include the accounts of West Suburban and the Bank.Significant intercompany accounts and transactions have been eliminated.

 

***Use of Estimates***

To prepare financialstatements in conformity with accounting principles generally accepted in theUnited States of America, management makes estimates and assumptions, which aresubject to change, based on available information. These estimates andassumptions affect the amounts reported in the financial statements and thedisclosures provided, and future results could differ. The allowance for loanlosses, fair values of financial instruments and status of contingencies areparticularly subject to change.

 

***Securities***

Debt and marketableequity securities are classified into two categories, “held to maturity” and“available for sale.” Held to maturity securities are carried at amortized costas the Company has both the ability and positive intent to hold them tomaturity. Securities not meeting these criteria are classified as available forsale. Available for sale securities are carried at fair value with netunrealized gains and losses (net of deferred tax) reported in accumulated othercomprehensive income as a separate component of shareholders’ equity. Interestincome includes amortization of purchase premium and accretion of purchasediscount. Gains or losses on disposition are based on the net proceeds and theadjusted carrying amount of the specific securities sold. Any decline in thecarrying values of securities which is deemed to be other than temporary ischarged against current earnings. The Company does not engage in tradingactivities.

 

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

Loans that management hasthe intent and ability to hold for the foreseeable future or until maturity orpayoff are reported at the principal balance outstanding, net of unearnedinterest, deferred loan fees and costs, and an allowance for loan losses.Interest income is reported on the accrual method and includes amortization ofnet deferred loan fees and costs over the loan term. Accrual of interest is generallydiscontinued on loans 90 days past due or when management believes, afterconsidering economic and business conditions and collection efforts, that theborrower’s financial condition is such that collection of principal or interestis doubtful. In some circumstances, a loan more than 90 days past due cancontinue to accrue interest if it is fully secured and in the process ofcollection. When a loan is classified as nonaccrual, interest previouslyaccrued but not collected is charged back to interest income. When payments arereceived on nonaccrual loans they are first applied to principal, then tointerest income and finally to expenses incurred for collection.

 

----

 

The allowance for loanlosses is a valuation allowance for probable loan losses. The allowance isincreased by a provision for loan losses charged to earnings. Loan losses arecharged against the allowance when management believes the uncollectibility ofa loan is confirmed. Subsequent recoveries, if any, are credited to theallowance. The allowance for loan losses is evaluated quarterly based onmanagement’s periodic review of loan collectibility in light of historical loanloss experience, the nature and volume of the loan portfolio, information aboutspecific borrower situations and estimated collateral values, and prevailingeconomic conditions. Allocations of the allowance may be made for specificloans, but the entire allowance is available for any loan that, in management’sjudgment, should be charged-off. This evaluation is inherently subjective as itrequires estimates that are subject to significant revision as more informationbecomes available or as relevant circumstances change.

 

The Company reviewscommercial, real estate construction and commercial mortgage loans quarterly todetermine impairment, if any. Impairment is measured based on the present valueof expected future cash flows discounted at the loan’s effective interest rate,the loan’s observable market price, or the fair value of the loan’s collateral,if repayment of the loan is collateral dependent. A valuation allowance ismaintained for the amount of impairment. Generally, loans 90 days or more pastdue and all loans on nonaccrual status are considered for impairment.Impairment is considered on an entire category basis for smaller-balance loansof similar nature, such as residential real estate and consumer loans, and onan individual basis for other loans.

 

***Loans Held for Sale***

Loans are identified aseither held for investment or held for sale upon origination. Loans held forsale are recorded at the lower of amortized cost or market value, determined onan aggregate basis. Unrealized losses, if any, are recognized on a currentbasis by charges to earnings. At December 31, 2002 and 2001, the cost andmarket value of loans held for sale were approximately the same.

 

***Premises and Equipment***

Land is carried at cost.Premises and equipment are stated at cost less accumulated depreciation.Depreciation is generally computed on the straight-line method over theestimated useful lives of the assets ranging from 8 to 50 years for premisesand from 3 to 15 years for furniture and equipment. Leasehold improvements areamortized on a straight-line basis over the estimated useful lives of theimprovements or the remaining term of the leases, whichever is shorter.

 

***Other Real Estate***

Other real estateincludes properties acquired in partial or total settlement of problem loans.The properties are recorded at the lower of cost or fair value less estimatedselling costs at the date acquired. Losses recognized at the time ofacquisition of such properties are charged to the allowance for loan losses.Any subsequent decline in value is charged to current operations. The revenuereceived from and expenses incurred in maintaining such properties are alsoincluded in current operations.

 

***Goodwill***

Goodwill resulted fromthe acquisition of a financially troubled thrift institution in 1990 andrepresents the excess of the purchase price over the fair value of acquiredtangible assets and liabilities and identifiable intangible assets. Uponadopting new accounting guidance in 2002, the Company ceased amortizinggoodwill. Goodwill is assessed at least annually for impairment and any suchimpairment will be recognized in the period identified.

 

***Long-term Assets***

Premises and equipmentand other long-term assets are reviewed for impairment when events indicatetheir carrying amount may not be recoverable from future undiscounted cashflows. If impaired, the assets are recorded at discounted amounts.

 

----

 

***Income Taxes***

Income tax expense is thesum of the current year income tax due or refundable and the change in deferredtax assets and liabilities. Deferred tax assets and liabilities are theexpected future tax consequences of temporary differences between the carryingamounts and the tax basis of assets and liabilities, computed using enacted taxrates. A valuation allowance, if needed, reduces deferred tax assets to theamount expected to be realized.

 

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

The Bank maintains anESOP, which is a noncontributory tax qualified retirement plan that coversemployees who have satisfied specific service requirements. The Bank makescontributions to the ESOP for the benefit of the participants. The ESOP is notleveraged and dividends declared on common shares owned by the ESOP are chargedagainst retained earnings. Dividends paid on ESOP shares are passed through toparticipants. Allocated ESOP shares are voted by the respective participants.For earnings per share purposes, common shares held by the ESOP are classifiedas issued and outstanding. Because participants may require the Company topurchase their ESOP shares upon termination of their employment, the appraisedfair value of all ESOP shares is reclassified from shareholders’ equity.

 

***Earnings Per Share***

Earnings per share iscalculated on the basis of the daily weighted average number of sharesoutstanding. The Company has no securities outstanding that may have a dilutiveeffect on its outstanding common stock.

 

***Cash Flows***

For purposes of reportingcash flows, cash and cash equivalents include cash and due from banks, federalfunds sold and commercial paper. Generally, federal funds are sold for one-dayperiods. Maturities of commercial paper generally are less than 60 days.

 

***Comprehensive Income***

Comprehensive incomeincludes net income and other comprehensive income. The Company’s othercomprehensive income consists of the change in unrealized gains and losses onavailable for sale securities, net of reclassification adjustments and deferredtax effects.

 

***Reclassifications***

Certain reclassificationshave been made in prior years’ financial statements to conform with the currentyear’s presentation.

 

##### **Note2 - Securities**

 

The amortized cost andfair value of securities available for sale are as follows at December 31:

 
|                                         |   | **2002**            |    |
|----------------------------------------------|--------|---------------------|---------|
|                                         |   | **Amortized  Cost** |    | **Gross  Unrealized  Gains** |   | **Gross  Unrealized  Losses** |   | **Fair  Value** |   |
| Corporate                                    |   | $                   | 63,251  |   | $ | 1,758 |   | $ | (212 | ) | $ | 64,797 |   |
| U.S.  government agencies and corporations   |   | 167,075             |    | 3,319 |   | (9 | ) | 170,385 |   |
| Mortgage-backed                              |   | 18,228              |    | 462 |   | — |   | 18,690 |   |
| States  and political subdivisions           |   | 2,842               |    | 41 |   | — |   | 2,883 |   |
| Total  debt securities                       |   | 251,396             |    | 5,580 |   | (221 | ) | 256,755 |   |
| Preferred  stock and other equity securities |   | 21,908              |    | 13 |   | (253 | ) | 21,668 |   |
| Total                                        |   | $                   | 273,304 |   | $ | 5,593 |   | $ | (474 | ) | $ | 278,423 |   |

 

----

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

 

 

The amortized cost andfair value of securities held to maturity are as follows at December 31:

 
|                                       |   | **2002**            |   |
|--------------------------------------------|--------|---------------------|--------|
|                                       |   | **Amortized  Cost** |   | **Gross  Unrealized  Gains** |   | **Gross  Unrealized  Losses** |   | **Fair  Value** |   |
| U.S.  government agencies and corporations |   | $                   | 23,012 |   | $ | 832 |   | $ | — |   | $ | 23,844 |   |
| Mortgage-backed                            |   | 3,115               |   | 81 |   | (177 | ) | 3,019 |   |
| States  and political subdivisions         |   | 23,750              |   | 516 |   | — |   | 24,266 |   |
| Total                                      |   | $                   | 49,877 |   | $ | 1,429 |   | $ | (177 | ) | $ | 51,129 |   |

 
|                                       |   | **2001**            |    |
|--------------------------------------------|--------|---------------------|---------|
|                                       |   | **Amortized  Cost** |    | **Gross  Unrealized  Gains** |   | **Gross  Unrealized  Losses** |   | **Fair  Value** |   |
| U.S.  government agencies and corporations |   | $                   | 90,086  |   | $ | 755 |   | $ | (262 | ) | $ | 90,579 |   |
| Mortgage-backed                            |   | 3,438               |    | — |   | (303 | ) | 3,135 |   |
| States  and political subdivisions         |   | 27,444              |    | 306 |   | (100 | ) | 27,650 |   |
| Total                                      |   | $                   | 120,968 |   | $ | 1,061 |   | $ | (665 | ) | $ | 121,364 |   |

 

 

The amortized cost andfair value of debt securities available for sale and held to maturity atDecember 31, 2002 by contractual maturity are as follows:

 
|                                |   | **Available  for Sale** |    | **Held to  Maturity** |   |
|-------------------------------------|--------|-------------------------|---------|-----------------------|--------|
|                                |   | **Amortized  Cost**     |    | **Fair Value**        |   | **Amortized  Cost** |   | **Fair Value** |   |
| Due  in 1 year or less              |   | $                       | 8,550   |                  | $      | 8,627 |   | $ | 3,202 |   | $ | 3,242 |   |
| Due  after 1 year through 5 years   |   | 218,741                 |    | 223,628               |   | 30,240 |   | 31,360 |   |
| Due  after 5 years through 10 years |   | 24,045                  |    | 24,440                |   | 10,492 |   | 10,627 |   |
| Due  after 10 years                 |   | 60                      |    | 60                    |   | 5,943 |   | 5,900 |   |
| Total                               |   | $                       | 251,396 |                  | $      | 256,755 |   | $ | 49,877 |   | $ | 51,129 |   |

 

Expected maturities willdiffer from contractual maturities because issuers may have the right to callor prepay obligations with or without call or prepayment penalties.Approximately $143,123 of securities are callable in 2003. Most of thesecallable securities were issued by U.S. government agencies and corporations.

 

----

 

Securities with acarrying value of approximately $30,168 and $30,139 at December 31, 2002 and2001, respectively, were pledged to secure public deposits, fiduciaryactivities and for other purposes required or permitted by law.

 

Sales of securitiesavailable for sale were as follows:

 
|                   |   | **2002** |    | **2001** |   | **2000** |   |
|------------------------|--------|----------|---------|----------|--------|----------|--------|
| Proceeds  from sales   |   | $        | 122,069 |     | $      | 24,635   |   | $ | — |   |
| Gross  realized gains  |   | 1,687    |    | 1,757    |   | —   |   |
| Gross  realized losses |   | (1,266   | )       | (133     | )      | —   |   |
|                        |        |          |         |          |        |          |        |  |  |  |

 

During2001, the Company wrote down its investments in debt securities issued byComdisco, Inc., FINOVA Group, Inc. and Enron Corp. after making a determinationthat the value of the debt securities had become impaired. These impairmentlosses totaled $2,960 in 2001. The carrying values of the Comdisco, Inc.,FINOVA Group, Inc. and Enron Corp. securities totaled $4,788 at December 31,2001. The Comdisco, Inc. and Enron Corp. securities were sold in 2002. Thecarrying value of the FINOVA Group, Inc. securities was $408 at December 31,2002.

 

The Company made a nominal equity investment in anATM network a number of years ago. In 2001, the Company surrendered its stockin the ATM network in connection with the merger of the network with anotherorganization and received $1,426 and recorded a gain for the same amount.

 

Gains on securities in 2002 and 2001 also includerecoveries on securities written off in 1998 of $596 and $710, respectively.

 

**Note 3 - Loans**

 

Major classifications ofloans were as follows at December 31:

 
|                       |   | **2002**  |      | **2001**  |   |
|----------------------------|--------|-----------|-----------|-----------|--------|
| Commercial                 |   | $         | 330,775   |      | $      | 323,036 |   |
| Consumer                   |   | 11,591    |      | 10,514    |   |
| Indirect  automobile       |   | 90,617    |      | 102,183   |   |
| Real  estate               |   |      |      |      |   |
| Residential                |   | 135,311   |      | 152,495   |   |
| Commercial                 |   | 212,010   |      | 195,800   |   |
| Home  equity               |   | 169,020   |      | 145,972   |   |
| Construction               |   | 174,001   |      | 157,328   |   |
| Held  for sale             |   | 4,224     |      | 5,840     |   |
| Credit  card               |   | 13,732    |      | 10,437    |   |
| Other                      |   | 1,382     |      | 2,033     |   |
| Total                      |   | 1,142,663 |      | 1,105,638 |   |
| Allowance  for loan losses |   | (13,847   | )         | (12,262   | )      |
| Loans,  net                |   | $         | 1,128,816 |      | $      | 1,093,376 |   |

 

The Company makescommercial, personal and residential loans primarily to customers throughoutthe western suburbs of Chicago. Construction loans are generally made tocustomers engaged in the development and construction of residential realestate projects within the Company’s market area.

 

----

 

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

 

|                        |   | **2002** |   | **2001** |   | **2000** |   |
|-----------------------------|--------|----------|--------|----------|--------|----------|--------|
| Balance,  beginning of year |   | $        | 12,262 |     | $      | 11,399   |   | $ | 10,759 |   |
| Provision  for loan losses  |   | 8,125    |   | 2,950    |   | 1,500    |   |
| Loans  charged-off          |   | (6,801   | )      | (2,305   | )      | (1,502   | )      |
| Recoveries                  |   | 261      |   | 218      |   | 642      |   |
| Balance,  end of year       |   | $        | 13,847 |     | $      | 12,262   |   | $ | 11,399 |   |

 

Impaired loans aresummarized as follows at December 31:

 
|                                                                               |   | **2002** |   | **2001** |   | **2000** |   |
|------------------------------------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
| Year-end  loans with no allocated allowance for loan losses                        |   | $        | 1,853  |     | $      | 10,407   |   | $ | 961 |   |
| Year-end  loans with allocated allowance for loan losses                           |   | 13,739   |   | 5,568    |   | 114      |   |
| Total                                                                              |   | $        | 15,592 |     | $      | 15,975   |   | $ | 1,075 |   |
|                                                                               |   |     |   |     |   |     |   |
| Amount  of the allowance for loan losses allocated   to impaired loans at year-end |   | $        | 4,525  |     | $      | 2,288    |   | $ | 87 |   |
| Average  impaired loans during the year                                            |   | 17,316   |   | 4,754    |   | 2,749    |   |
| Interest  income recognized during impairment                                      |   | 318      |   | 154      |   | 41       |   |

 

Nonperforming loans wereas follows at December 31:

** **
| Loans past due over 90 days still on accrual |   | $      | 1,789  |   | $      | 11,338 |   | $ | 491   |   |
|----------------------------------------------|--------|--------|--------|--------|--------|--------|--------|---|-------|--------|
| Nonaccrual  loans                            |   | 12,021 |   | 3,945  |   | 1,064  |   |
| Total                                        |   | $      | 13,810 |   | $      | 15,283 |   | $ | 1,555 |   |

 

Mortgage loans servicedfor others are not included in the accompanying consolidated balance sheets. AtDecember 31, 2002 and 2001, the Company serviced loans for the benefit ofothers with aggregate unpaid principal balances of $28,835 and $44,751,respectively. Accordingly, retained and acquired mortgage servicing rights arenot material and are not presented as a separate asset. The Company generallysells mortgage loans with servicing released. Loan servicing fees were $112,$169 and $218 in 2002, 2001 and 2000, respectively.

 

# **Note 4 - Premises andEquipment**

 

Major classifications ofthese assets are summarized as follows at December 31:

 
|                           |   | **2002** |   | **2001** |   |
|--------------------------------|--------|----------|--------|----------|--------|
| Land                           |   | $        | 11,571 |     | $      | 11,396 |   |
| Premises                       |   | 40,754   |   | 38,650   |   |
| Furniture  and equipment       |   | 40,502   |   | 37,371   |   |
| Total                          |   | 92,827   |   | 87,417   |   |
| Less  accumulated depreciation |   | (47,186  | )      | (43,540  | )      |
| Premises  and equipment, net   |   | $        | 45,641 |     | $      | 43,877 |   |

 

----

 

##### **Note5 - Deposits**

 

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

 
|                       |   | **2002** |      | **2001** |   |
|----------------------------|--------|----------|-----------|----------|--------|
| Demand-noninterest-bearing |   | $        | 157,539   |     | $      | 148,044 |   |
| NOW                        |   | 272,646  |      | 251,580  |   |
| Money  market checking     |   | 231,950  |      | 228,131  |   |
| Savings                    |   | 363,396  |      | 309,744  |   |
| Time  deposits             |   |     |      |     |   |
| Less  than $100,000        |   | 303,297  |      | 288,083  |   |
| $100,000 and greater       |   | 91,428   |      | 84,138   |   |
| Total                      |   | $        | 1,420,256 |     | $      | 1,309,720 |   |

 

At December 31, 2002, thescheduled maturities of time deposits were as follows:

 
| 2003       |   | $      | 249,413 |
|------------|--------|--------|---------|
| 2004       |   | 56,729 |
| 2005       |   | 15,910 |
| 2006       |   | 4,541  |
| 2007       |   | 67,813 |
| Thereafter |   | 319    |
| Total      |   | $      | 394,725 |

 

##### **Note6 - Income Taxes**

 

Income tax expense is asfollows for the years ended December 31:

 
|                   |   | **2002** |   | **2001** |   | **2000** |   |
|------------------------|--------|----------|--------|----------|--------|----------|--------|
| Currently  payable tax |   |     |   |     |   |     |   |
| Federal                |   | $        | 7,911  |     | $      | 8,384    |   | $ | 8,322 |   |
| State                  |   | 1,278    |   | 1,649    |   | 1,379    |   |
| Deferred  tax benefit  |   | (717     | )      | (458     | )      | (406     | )      |
| Total                  |   | $        | 8,472  |     | $      | 9,575    |   | $ | 9,295 |   |

 

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

 
|                                            |   | **2002** |   | **2001** |   | **2000** |   |
|-------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
| Statutory  federal income tax rate              |   | 35.0     | %      | 35.0     | %      | 35.0     | %      |
| (Decrease)  increase in taxes resulting from    |   |     |   |     |   |     |   |
| Tax-exempt  income                              |   | (2.0     | )      | (1.5     | )      | (1.8     | )      |
| State  income taxes, net of federal tax benefit |   | 2.9      |   | 3.4      |   | 2.8      |   |
| Dividends  on ESOP shares                       |   | (4.1     | )      | (3.5     | )      | (3.3     | )      |
| Other  items, net                               |   | 0.3      |   | (1.2     | )      | (2.0     | )      |
| Effective  tax rates                            |   | 32.1     | %      | 32.2     | %      | 30.7     | %      |

 

----

 

The temporary differenceswhich created deferred tax assets and liabilities at December 31 are summarizedbelow:

 
|                                              |   | **2002** |   | **2001** |   |
|---------------------------------------------------|--------|----------|--------|----------|--------|
| Deferred  tax assets                              |   |     |   |     |   |
| Allowance  for loan losses                        |   | $        | 5,493  |     | $      | 4,864 |   |
| Deferred  compensation                            |   | 1,238    |   | 1,399    |   |
| Other                                             |   | 429      |   | —   |   |
| Total  deferred tax assets                        |   | 7,160    |   | 6,263    |   |
| Deferred  tax liabilities                         |   |     |   |     |   |
| Depreciation                                      |   | 573      |   | 522      |   |
| Federal  Home Loan Bank stock dividends           |   | 317      |   | 228      |   |
| Unrealized  gain on securities available for sale |   | 2,031    |   | 265      |   |
| Other                                             |   | 113      |   | 73       |   |
| Total  deferred tax liabilities                   |   | 3,034    |   | 1,088    |   |
| Net  deferred tax assets                          |   | $        | 4,126  |     | $      | 5,175 |   |

 

Net deferred tax assetsare included in accrued interest and other assets. No valuation allowance wasconsidered necessary for deferred tax assets.

 

# **Note 7 - EmployeeBenefit Plans**

 

The Bank maintains anESOP, which is a noncontributory tax qualified retirement plan that coversemployees who have satisfied specific service requirements. The ESOP providesincentives to employees by granting participants an interest in West Suburban’scommon stock, which represents the ESOP’s primary investment. An individualaccount is established for each participant and the benefits payable uponretirement, termination, disability or death are based upon service, the amountof the employer’s contributions and any income, expenses, gains and losses andforfeitures allocated to the participant’s account. Contributions, which aredetermined by the board of directors of the Bank, are paid by the Bank and were$1,574 in 2002, $1,697 in 2001 and $1,604 in 2000.

 

At December 31, 2002 and2001, the ESOP held 73,837 and 75,972 shares of West Suburban common stock,respectively, and substantially all shares held by the ESOP were allocated tothe accounts maintained for participants. Participants who elect to receivetheir benefit payments in the form of West Suburban common stock may requirethe Company to purchase the common stock distributed at fair value during two60-day periods. The first purchase period begins on the date the benefit ispaid and the second purchase period begins on the first anniversary of thepayment date. This contingent repurchase obligation is reflected in theCompany’s financial statements as “Common stock in ESOP subject to contingentrepurchase obligation” and reduces shareholders’ equity by an amount thatrepresents the independently appraised fair value of all West Suburban commonstock held by the ESOP, without regard to whether it is likely that the shareswould be distributed or that the recipients of the shares would be likely toexercise their right to require the Company to purchase the shares. At December31, 2002 and 2001, this contingent repurchase obligation reduced shareholders’equity by $40,241 and $40,645, respectively. During 2002 and 2001, the ESOPdistributed $751 and $400, respectively, in cash representing the interests ofparticipants. In addition, the ESOP also distributed 3,189 shares in 2002 and85 shares in 2001 of West Suburban common stock. The Company believes that theESOP will continue to have a sufficient amount of cash to distribute benefitpayments to former employees and that the exercise of the right of formeremployees to cause the Company to purchase West Suburban common stock isunlikely.

 

The Company has deferredcompensation agreements with certain former and current executive officers. Thedeferred compensation expense for the years ended December 31, 2002, 2001 and2000 amounted to $175, $152 and $143, respectively. The cash surrender value ofcompany-owned life insurance on these individuals was $2,136 and $2,131 atDecember 31, 2002 and 2001, respectively. Cash surrender value is included inaccrued interest and other assets on the consolidated balance sheets. Executiveofficers can elect to defer the payment of a percentage of their salaries andcash bonuses and members of the board of directors can elect to defer thepayment of their directors’ fees. The total accumulated liability for alldeferred compensation arrangements was $3,121 and $3,526 at  

 

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December 31, 2002 and2001, respectively. These amounts are included in accrued interest and otherliabilities on the consolidated balance sheets and are not secured by anyCompany assets.

# ** **

# **Note 8 - FinancialInstruments with Off-Balance-Sheet Risk**

# ** **

The Company is a party tooff-balance-sheet financial instruments to meet the financing needs of itscustomers. These financial instruments include commitments to extend credit andstandby letters of credit. These financial instruments involve, to varyingdegrees, elements of credit and interest rate risks.

 

Commitments to extendcredit are agreements to lend to a customer as long as there is no violation ofany condition established in the agreement. These commitments are primarilyunused lines of credit, undrawn portions of construction loans and commitmentsto make new loans. Commitments generally have fixed expiration dates or othertermination provisions and may require the payment of a fee. Since many of thecommitments are expected to expire without being exercised or drawn-upon, thetotal commitment amounts do not necessarily represent future cash requirements.The Company evaluates each customer’s creditworthiness on a case-by-case basis.The amount of collateral obtained, if deemed necessary by the Company, is basedon management’s credit evaluation of the customer. Collateral held varies andmay include accounts receivable, inventory, property and equipment orcommercial or residential properties.

 

Letters of credit areconditional commitments issued by the Company to either extend credit to acustomer or guarantee the performance of a customer for the benefit of a thirdparty. Guarantees of performance are primarily issued to support public andprivate borrowing arrangements. The credit risk involved in issuing letters ofcredit is essentially the same as that involved in extending loan facilities tocustomers. The Company holds collateral supporting those commitments for whichcollateral is deemed necessary. The extent and nature of collateral held forletters of credit varies based on management’s evaluation of various factorsthat are considered.

 

The Company’s exposure tocredit risk in connection with commitments to extend credit and standby lettersof credit is the contractual amount of those instruments. The Company uses thesame credit policies in making commitments and conditional obligations as it doesfor on-balance-sheet instruments. The Company generally requires collateral orother security to support financial instruments with credit risk. A summary ofthe contractual exposure to off-balance-sheet risk as of December 31 is asfollows:

 
|                                  |   | **December 31, 2002** |   | **December  31, 2001** |   |
|---------------------------------------|--------|-----------------------|--------|------------------------|--------|
|                                  |   | **Fixed  Rate**       |   | **Variable  Rate**     |   | **Total** |   | **Fixed  Rate** |   | **Variable  Rate** |   | **Total** |   |
| Commercial  loans and lines of credit |   | $                     | 12,539 |                   | $      | 166,751 |   | $ | 179,290 |   | $ | 12,399 |   | $ | 185,304 |   | $ | 197,703 |   |
| Check  credit lines of credit         |   | 1,316                 |   | —                 |   | 1,316 |   | 116 |   | — |   | 116 |   |
| Mortgage  loans                       |   | 9,096                 |   | 1,472                  |   | 10,568 |   | 12,806 |   | 4,470 |   | 17,276 |   |
| Home  equity lines of credit          |   | —                |   | 166,647                |   | 166,647 |   | — |   | 161,824 |   | 161,824 |   |
| Letters  of credit                    |   | —                |   | 32,661                 |   | 32,661 |   | — |   | 20,736 |   | 20,736 |   |
| Credit  card lines of credit          |   | —                |   | 107,798                |   | 107,798 |   | — |   | 58,974 |   | 58,974 |   |
| Total                                 |   | $                     | 22,951 |                   | $      | 475,329 |   | $ | 498,280 |   | $ | 25,321 |   | $ | 431,308 |   | $ | 456,629 |   |

 

Fixed rate commercialloan commitments at December 31, 2002 generally had interest rates ranging from3.75% to 9.29% with remaining terms ranging from 1 to 7 years. Fixed ratemortgage loan commitments at December 31, 2002 generally had interest ratesranging from 5.25% to 6.25% with terms ranging from 7 to 30 years. Fixed ratecheck credit lines of credit had an interest rate of 18.00% as of December 31,2002.

 

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# **Note 9 - Commitments andContingent Liabilities**

 

The Company is a party tovarious legal actions arising from normal business activities. Managementbelieves that pending actions are either without merit or that the ultimateliability, if any, resulting from them will not materially affect the Company’sconsolidated financial position or results of operations.

 

In accordance with theregulations of the Board of Governors of the Federal Reserve (the “FederalReserve”), the Bank must maintain noninterest-earning reserves as vault cash ordeposits with the Federal Reserve Bank of Chicago. At December 31, 2002, therequired reserves were approximately $13,682.

 

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

 

The methods and assumptionsused to estimate fair values of financial instruments are described as follows.For short-term assets (i.e., cash and due from banks and federal funds sold)their estimated fair values approximate their carrying values. For loans anddeposits with variable interest rates, it has been assumed that their estimatedfair values approximate their carrying values. Because of their short-terms,the carrying values of accrued interest receivable and payable approximatetheir fair value.

 

The fair values forsecurities were derived from quoted market values, or, when quotes were notavailable, the fair values were estimated based on the rate and term of thesecurity and information about the issuer. The fair values for fixed rate loanswere estimated by discounting the future cash flows from loan repayments usingcurrent interest rates for loans having comparable maturities and credit risk.The fair values for time deposits were estimated by discounting cash flows atdiscount rates comparable to current market rates for similar maturingliabilities.

 

Off-balance-sheetfinancial instruments are comprised of letters of credit and commitments toextend credit. The estimated fair value of off-balance-sheet financialinstruments is not considered material.

 

While these estimates offair value are based on management’s judgment of the most appropriate factorsas of the balance sheet date, there is no assurance that the estimated fairvalues would have been realized if the assets would have been disposed of orthe liabilities settled at that date, since market values may differ dependingon various factors. The estimated fair values would also not apply tosubsequent dates.

 

The estimated fair valuesof the Company’s financial instruments as of December 31 are set forth in thetable below:

 
|                                   |   | **2002**            |   | **2001**                  |   |
|----------------------------------------|--------|---------------------|--------|---------------------------|--------|
|                                   |   | **Carrying  Value** |   | **Estimated  Fair Value** |   | **Carrying  Value** |   | **Estimated  Fair Value** |   |
| Financial  assets                      |   |                |   |                      |   |   |   |   |   |
| Cash  and cash equivalents             |   | $                   | 66,788 |                      | $      | 66,788 |   | $ | 47,076 |   | $ | 47,076 |   |
| Securities                             |   |                |   |                      |   |   |   |   |   |
| Available  for sale                    |   | 278,423             |   | 278,423                   |   | 147,847 |   | 147,847 |   |
| Held  to maturity                      |   | 49,877              |   | 51,129                    |   | 120,968 |   | 121,364 |   |
| Loans,  less allowance for loan losses |   | 1,128,816           |   | 1,167,171                 |   | 1,093,376 |   | 1,116,263 |   |
| Accrued  interest                      |   | 8,407               |   | 8,407                     |   | 8,162 |   | 8,162 |   |
|                                   |   |                |   |                      |   |   |   |   |   |
| Financial  liabilities                 |   |                |   |                      |   |   |   |   |   |
| Deposits                               |   | 1,420,256           |   | 1,430,625                 |   | 1,309,720 |   | 1,317,323 |   |
| Accrued  interest                      |   | 3,511               |   | 3,511                     |   | 5,536 |   | 5,536 |   |
|                                        |        |                     |        |                           |        |  |  |  |  |  |  |  |  |

 

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# **Note 11 - Related PartyTransactions**

 

Certain executiveofficers and directors of the Company, their affiliates and companies in whichthey have 10% or more beneficial ownership, are customers of the Bank in theordinary course of business and had loans from the Bank totaling $26,655 and$26,212 at December 31, 2002 and 2001, respectively. During 2002, $30,880 innew loans and $30,437 in principal payments were made. Related parties haddeposits totaling $23,852 and $16,993 at December 31, 2002 and 2001,respectively.

# ** **

# **Note 12 - CapitalRequirements**

 

The Company and the Bankare subject to various regulatory capital requirements administered by federalbanking agencies. Failure to meet minimum capital requirements may result inthe initiation of actions by regulators that could have direct material effectson the financial statements. Under capital adequacy guidelines and theregulatory framework for prompt corrective action, each entity must meetspecific capital guidelines that involve quantitative measures of assets,liabilities and certain off-balance-sheet items as calculated under regulatoryaccounting practices. Capital amounts and classifications are also subject toqualitative judgements by the regulators about components, risk weightings andother factors.

 

Regulations require theCompany and the Bank to maintain minimum capital amounts and ratios (set forthin the following table). Management believes that as of December 31, 2002, theCompany and the Bank exceeded all capital adequacy requirements.

 

Management’s presentpolicy is to limit dividends from the Bank, so that the Bank qualifies as a “well-capitalized”institution as defined by the Federal Deposit Insurance Corporation ImprovementAct of 1991, thereby minimizing the amount of Federal Deposit InsuranceCorporation (“FDIC”) insurance premiums paid by the Bank and providing capitalto fund growth. As of December 31, 2002, the Bank could pay, in the aggregate,dividends of approximately $9,300 to West Suburban while remaining a“well-capitalized” institution. Dividends from the Bank are West Suburban’sprimary source of cash flow.

 

As of December 31, 2002and 2001, the most recent notifications from the FDIC categorized the Bank as“well capitalized” under the regulatory framework for prompt corrective action.To be categorized as “well-capitalized” the Bank must maintain minimum ratiosfor total capital to risk weighted assets, Tier 1 capital to risk weightedassets and Tier 1 capital to average assets as set forth in the followingtable. There are no conditions or events since that notification thatmanagement believes would result in a change of the category.

 

----

 

The capital amounts andratios of the Company and the Bank for purposes of the prompt corrective actionframework are presented in the table below:

 
|                                         |   | **Actual** |    | **Minimum  For  Capital Adequacy  Purposes** |   | **Minumum  To Be Well  Capitalized** |   |
|----------------------------------------------|--------|------------|---------|----------------------------------------------|--------|--------------------------------------|--------|
|                                         |   | **Amount** |    | **Ratio**                                    |   | **Amount**                           |   | **Ratio** |   | **Amount** |   | **Ratio** |   |
| **As of December 31, 2002**                  |   |       |    |                                         |   |                                 |   |   |   |   |   |   |   |
| **Total capital (to risk weighted assets)**  |   |       |    |                                         |   |                                 |   |   |   |   |   |   |   |
| Company                                      |   | $          | 157,585 |                                         | 11.5   | %                                    | $      | 109,975 |   | 8.0 | % | $ | 137,469 |   | 10.0 | % |
| Bank                                         |   | 146,764    |    | 10.7                                         | %      | 109,969                              |   | 8.0 | % | 137,462 |   | 10.0 | % |
| **Tier 1 capital (to risk weighted assets)** |   |       |    |                                         |   |                                 |   |   |   |   |   |   |   |
| Company                                      |   | 143,739    |    | 10.5                                         | %      | 54,988                               |   | 4.0 | % | 82,482 |   | 6.0 | % |
| Bank                                         |   | 132,918    |    | 9.7                                          | %      | 54,985                               |   | 4.0 | % | 82,477 |   | 6.0 | % |
| **Tier 1 capital (to average assets)**       |   |       |    |                                         |   |                                 |   |   |   |   |   |   |   |
| Company                                      |   | 143,739    |    | 9.2                                          | %      | 62,570                               |   | 4.0 | % | 78,213 |   | 5.0 | % |
| Bank                                         |   | 132,918    |    | 8.5                                          | %      | 62,751                               |   | 4.0 | % | 78,439 |   | 5.0 | % |
|                                         |   |       |    |                                         |   |                                 |   |   |   |   |   |   |   |
| As  of December 31, 2001                     |   |       |    |                                         |   |                                 |   |   |   |   |   |   |   |
| **Total capital (to risk weighted assets)**  |   |       |    |                                         |   |                                 |   |   |   |   |   |   |   |
| Company                                      |   | $          | 155,676 |                                         | 11.4   | %                                    | $      | 109,568 |   | 8.0 | % | $ | 136,960 |   | 10.0 | % |
| Bank                                         |   | 140,216    |    | 10.3                                         | %      | 108,713                              |   | 8.0 | % | 135,891 |   | 10.0 | % |
| **Tier 1 capital (to risk weighted assets)** |   |       |    |                                         |   |                                 |   |   |   |   |   |   |   |
| Company                                      |   | 143,414    |    | 10.5                                         | %      | 54,784                               |   | 4.0 | % | 82,176 |   | 6.0 | % |
| Bank                                         |   | 127,954    |    | 9.4                                          | %      | 54,356                               |   | 4.0 | % | 81,535 |   | 6.0 | % |
| **Tier 1 capital (to average assets)**       |   |       |    |                                         |   |                                 |   |   |   |   |   |   |   |
| Company                                      |   | 143,414    |    | 9.9                                          | %      | 58,038                               |   | 4.0 | % | 72,548 |   | 5.0 | % |
| Bank                                         |   | 127,954    |    | 8.9                                          | %      | 57,624                               |   | 4.0 | % | 72,030 |   | 5.0 | % |

 

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

 

**Note 13 - Other Comprehensive Income**

 

Other comprehensiveincome components and related taxes were as follows:

 
|                                                                          |   | **2002** |   | **2001** |   | **2000** |   |
|-------------------------------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
| Net  unrealized holding gains on available for sale securities                |   | $        | 5,470  |     | $      | 3,297    |   | $ | 358 |   |
| Reclassification  adjustments for gains and losses later recognized in income |   | (1,017   | )      | 626      |   | —   |   |
| Net  unrealized gains                                                         |   | 4,453    |   | 3,923    |   | 358      |   |
| Tax  effect                                                                   |   | (1,766   | )      | (1,559   | )      | (143     | )      |
| Other  comprehensive income                                                   |   | $        | 2,687  |     | $      | 2,364    |   | $ | 215 |   |

 

----

 

# **Note 14 - New AccountingPronouncements**

 

The Financial Accounting Standards Board (“FASB”)issued Statement of Financial Accounting Standards (“Statement”) 147,“Acquisitions of Certain Financial Institutions” in October 2002.  The Company’s goodwill arose from itsacquisition of a financially troubled thrift institution during 1990. Theguidance in Statement 147 indicates that the Company’s acquisition of thetroubled thrift institution is a business combination resulting in goodwillthat should be accounted for under Statement 142, “Goodwill and OtherIntangible Assets.” Statement 142 generally requires that goodwill no longer beamortized to earnings, but instead be reviewed for impairment and written downif impaired.

 

Goodwill is carried on the Company’s balance sheet at$712 at both December 31, 2002 and 2001. The Company has no other intangibleassets.

 

Goodwill is no longer amortized starting in 2002. Theeffect of not amortizing goodwill is summarized as follows:

** **
|                             |   | **2002** |   | **2001** |   | **2000** |   |
|----------------------------------|--------|----------|--------|----------|--------|----------|--------|
| Reported  net income             |   | $        | 17,932 |     | $      | 20,183   |   | $ | 21,003 |   |
| Add  back: goodwill amortization |   | —   |   | 204      |   | 204      |   |
| Adjusted  net income             |   | $        | 17,932 |     | $      | 20,387   |   | $ | 21,207 |   |
|                             |   |     |   |     |   |     |   |
| Earnings  per share              |   |     |   |     |   |     |   |
| Reported  net income             |   | $        | 41.46  |     | $      | 46.67    |   | $ | 48.56 |   |
| Goodwill  amortization           |   | —   |   | 0.47     |   | 0.47     |   |
| Adjusted  net income             |   | $        | 41.46  |     | $      | 47.14    |   | $ | 49.03 |   |

 

----

 

**Note15 - Condensed Financial Information - Parent Only**

 

**Condensed Balance Sheets**

**December31, 2002 and 2001**

 
|                                                                                     |   | **2002** |    | **2001** |   |
|------------------------------------------------------------------------------------------|--------|----------|---------|----------|--------|
| **Assets**                                                                               |   |     |    |     |   |
| Cash,  substantially all on deposit in subsidiary                                        |   | $        | 18,641  |     | $      | 12,619 |   |
| Securities  available for sale (amortized cost of   $0 in 2002 and $10,525 in 2001) |   | —   |    | 10,632   |   |
| Investment  in subsidiary                                                                |   | 136,151  |    | 128,585  |   |
| Goodwill                                                                                 |   | 712      |    | 712      |   |
| Other  assets                                                                            |   | 55       |    | 145      |   |
| **Total assets**                                                                         |   | $        | 155,559 |     | $      | 152,693 |   |
|                                                                                     |   |     |    |     |   |
| **Liabilities and shareholders’ equity**                                            |   |     |    |     |   |
| Dividends  payable                                                                       |   | $        | 7,785   |     | $      | 7,569 |   |
| Other  liabilities                                                                       |   | 89       |    | 109      |   |
|                                                                                     |   |     |    |     |   |
| Common  stock in ESOP subject to contingent repurchase obligation                        |   | 40,241   |    | 40,645   |   |
|                                                                                     |   |     |    |     |   |
| Shareholders’  equity                                                               |   | 107,444  |    | 104,370  |   |
| **Total liabilities and shareholders’ equity**                                      |   | $        | 155,559 |     | $      | 152,693 |   |

 

**Condensed Statements of Income**

**Years Ended December 31, 2002, 2001and 2000**

 
|                                                                |   | **2002** |   | **2001** |   | **2000** |   |
|---------------------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
| **Income**                                                          |   |     |   |     |   |     |   |
| Dividends  from subsidiary                                          |   | $        | 13,145 |     | $      | 13,343   |   | $ | 22,040 |   |
| Interest  income                                                    |   |     |   |     |   |     |   |
| Deposits                                                            |   | 259      |   | 389      |   | 511      |   |
| Commercial  paper                                                   |   | —   |   | —   |   | 75       |   |
| Securities                                                          |   | 99       |   | 374      |   | 247      |   |
| Net  realized losses on securities transactions                     |   | (81      | )      | —   |   | —   |   |
| Total  income                                                       |   | 13,422   |   | 14,106   |   | 22,873   |   |
|                                                                |   |     |   |     |   |     |   |
| **Expense**                                                         |   |     |   |     |   |     |   |
| Goodwill  amortization                                              |   | —   |   | 204      |   | 204      |   |
| Other                                                               |   | 310      |   | 294      |   | 320      |   |
| Total  expense                                                      |   | 310      |   | 498      |   | 524      |   |
| **Income before income taxes**                                      |   | 13,112   |   | 13,608   |   | 22,349   |   |
| **Income tax (benefit) expense**                                    |   | (6       | )      | 186      |   | 202      |   |
| **Income before equity in undistributed net income of  subsidiary** |   | 13,118   |   | 13,422   |   | 22,147   |   |
| **Equity in undistributed net income of subsidiary**                |   | 4,814    |   | 6,761    |   | (1,144   | )      |
| **Net income**                                                      |   | $        | 17,932 |     | $      | 20,183   |   | $ | 21,003 |   |

 

----

 

**Condensed Statements of Cash Flows**

**YearsEnded December 31, 2002, 2001 and 2000**

 
|                                                                              |   | **2002** |   | **2001** |   | **2000** |   |
|-----------------------------------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
| **Cash flows from operating activities**                                          |   |     |   |     |   |     |   |
| Net  income                                                                       |   | $        | 17,932 |     | $      | 20,183   |   | $ | 21,003 |   |
| Adjustments  to reconcile net income to net cash provided by operating activities |   |     |   |     |   |     |   |
| Deferred  income tax benefit                                                      |   | (12      | )      | (5       | )      | —   |   |
| Equity  in undistributed net income of subsidiary                                 |   | (4,814   | )      | (6,761   | )      | 1,144    |   |
| Net  premium amortization of securities                                           |   | 15       |   | 43       |   | 10       |   |
| Net  realized losses on securities transactions                                   |   | 81       |   | —   |   | —   |   |
| Goodwill  amortization                                                            |   | —   |   | 204      |   | 204      |   |
| Decrease  (increase) in other assets                                              |   | 102      |   | (154     | )      | (12      | )      |
| Increase  in other liabilities                                                    |   | 22       |   | 17       |   | 17       |   |
| **Net cash provided by operating activities**                                     |   | 13,326   |   | 13,527   |   | 22,366   |   |
| **Cash flows from investing activities**                                          |   |     |   |     |   |     |   |
| Securities  available for sale                                                    |   |     |   |     |   |     |   |
| Sales                                                                             |   | 10,429   |   | —   |   | —   |   |
| Maturities                                                                        |   | —   |   | 4,000    |   | —   |   |
| Purchases                                                                         |   | —   |   | (10,564  | )      | (4,014   | )      |
| **Net cash provided by (used in) investing activities**                           |   | 10,429   |   | (6,564   | )      | (4,014   | )      |
| **Cash flows from financing activities**                                          |   |     |   |     |   |     |   |
| Cash  dividends paid                                                              |   | (17,733  | )      | (17,300  | )      | (16,867  | )      |
| **Net increase (decrease) in cash**                                               |   | 6,022    |   | (10,337  | )      | 1,485    |   |
| **Beginning cash**                                                                |   | 12,619   |   | 22,956   |   | 21,471   |   |
| **Ending cash**                                                                   |   | $        | 18,641 |     | $      | 12,619   |   | $ | 22,956 |   |

 

----

 

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

 

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

 
|                                                 |   | **Fourth  Quarter** |   | **Third  Quarter** |   | **Second  Quarter** |   | **First  Quarter** |   |
|------------------------------------------------------|--------|---------------------|--------|--------------------|--------|---------------------|--------|--------------------|--------|
| **Year  Ended December 31, 2002**                    |   |                |   |               |   |                |   |               |   |
| Interest  income                                     |   | $                   | 20,959 |               | $      | 21,562              |   | $                  | 21,680 |   | $ | 21,193 |   |
| Interest  expense                                    |   | 6,419               |   | 7,401              |   | 7,092               |   | 6,891              |   |
| Net  interest income                                 |   | 14,540              |   | 14,161             |   | 14,588              |   | 14,302             |   |
| Provision  for loan losses                           |   | 5,200               |   | 775                |   | 1,025               |   | 1,125              |   |
| Net  interest income after provision for loan losses |   | 9,340               |   | 13,386             |   | 13,563              |   | 13,177             |   |
| Noninterest  income                                  |   | 4,458               |   | 3,218              |   | 2,774               |   | 3,033              |   |
| Noninterest  expense                                 |   | 9,313               |   | 9,131              |   | 9,197               |   | 8,904              |   |
| Income  before income taxes                          |   | 4,485               |   | 7,473              |   | 7,140               |   | 7,306              |   |
| Income  tax expense                                  |   | 1,300               |   | 2,552              |   | 2,413               |   | 2,207              |   |
| Net  income                                          |   | $                   | 3,185  |               | $      | 4,921               |   | $                  | 4,727  |   | $ | 5,099 |   |
| Earnings  per share                                  |   | $                   | 7.36   |               | $      | 11.38               |   | $                  | 10.93  |   | $ | 11.79 |   |
|                                                 |   |                |   |               |   |                |   |               |   |
| Year Ended December 31, 2001                         |   |                |   |               |   |                |   |               |   |
| Interest  income                                     |   | $                   | 22,207 |               | $      | 24,531              |   | $                  | 25,426 |   | $ | 26,740 |   |
| Interest  expense                                    |   | 7,903               |   | 9,777              |   | 10,877              |   | 11,856             |   |
| Net  interest income                                 |   | 14,304              |   | 14,754             |   | 14,549              |   | 14,884             |   |
| Provision  for loan losses                           |   | 1,775               |   | 425                |   | 375                 |   | 375                |   |
| Net  interest income after provision for loan losses |   | 12,529              |   | 14,329             |   | 14,174              |   | 14,509             |   |
| Noninterest  income                                  |   | 1,091               |   | 4,282              |   | 2,067               |   | 2,244              |   |
| Noninterest  expense                                 |   | 9,526               |   | 8,691              |   | 8,746               |   | 8,504              |   |
| Income  before income taxes                          |   | 4,094               |   | 9,920              |   | 7,495               |   | 8,249              |   |
| Income  tax expense                                  |   | 1,294               |   | 3,387              |   | 2,360               |   | 2,534              |   |
| Net  income                                          |   | $                   | 2,800  |               | $      | 6,533               |   | $                  | 5,135  |   | $ | 5,715 |   |
| Earnings  per share                                  |   | $                   | 6.48   |               | $      | 15.10               |   | $                  | 11.88  |   | $ | 13.21 |   |

 

Interest expensedecreased $982 during the fourth quarter of 2002. This was primarily due tocontinued rate reductions initiated by the Federal Reserve. Additionally, theCompany experienced some run-off in time deposits as higher paying deposits maturedand promotions ended. The provision for loan losses increased $4,425 during thefourth quarter of 2002. This increase was due to management’s determinationthat additional impairment losses have been incurred on two commercial loanrelationships.  Both of these loanrelationships have been non-performing throughout 2002, and the updatedmeasurement indicated greater impairment losses. The additional impairmentlosses recognized in the fourth quarter for these two relationships were$1,370. Additionally, the Company charged-off certain commercial loans in thefourth quarter that were greater than the amount of the allowance for loanlosses previously allocated to these loans and management also determined thatthe amount of the allowance for loan losses needed to be increased based oncharge-off trends. Noninterest income increased $1,240 during the fourthquarter of 2002 primarily due to increased fees from the introduction of anoverdraft protection program and a one-time gain on the sale of other real estate.Income tax expense decreased $1,252 during the fourth quarter of 2002 primarilydue to lower pre-tax income.

 

The provision for loanlosses increased $1,350 during the fourth quarter of 2001. This was primarilydue to the write-off of one commercial loan in the amount of approximately$1,400 and an increase in nonperforming loans of $11,717 during the quarter.Noninterest income decreased $3,191 during the fourth quarter of 2001 primarilydue to write-downs of securities as discussed in Note 2. The third quarter of2001 included a gain of $1,426 on the sale of stock in an ATM network, asdiscussed in Note 2. Noninterest expense increased $835 during the fourthquarter of 2001 primarily due to the accrual of amounts necessary to payemployee bonuses along with standard cost of living adjustments and increasedESOP expense. Income tax expense decreased $2,093 during the fourth quarter of2001 primarily due to lower pre-tax income.

 

----

 

**SELECTED FINANCIAL DATA**

(Dollars in thousands, except per share data)

 

The following tableconsists of financial data derived from the Consolidated Financial Statementsof the Company. This information should be read together with Management’sDiscussion and Analysis of Financial Condition and Results of Operations andthe Company’s Consolidated Financial Statements included elsewhere in thisreport.

 
|                                                                                                                                     |   | **Years  Ended December 31,** |    |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|---------|
|                                                                                                                                     |   | **2002**                      |    | **2001** |   | **2000** |   | **1999** |   | **1998** |   |
| **Selected operating data**                                                                                                              |   |                          |    |   |   |   |   |   |   |   |   |
| Interest  income                                                                                                                         |   | $                             | 85,394  |   | $ | 98,904 |   | $ | 103,284 |   | $ | 89,805 |   | $ | 91,663 |   |
| Interest  expense                                                                                                                        |   | 27,803                        |    | 40,413 |   | 46,068 |   | 37,260 |   | 42,054 |   |
| Net  interest income                                                                                                                     |   | 57,591                        |    | 58,491 |   | 57,216 |   | 52,545 |   | 49,609 |   |
| Provision  for loan losses                                                                                                               |   | 8,125                         |    | 2,950 |   | 1,500 |   | 3,084 |   | 2,563 |   |
| Net  interest income after provision for loan losses                                                                                     |   | 49,466                        |    | 55,541 |   | 55,716 |   | 49,461 |   | 47,046 |   |
| Noninterest  income(1)                                                                                                                   |   | 13,483                        |    | 9,684 |   | 8,309 |   | 12,305 |   | 7,416 |   |
| Noninterest  expense                                                                                                                     |   | 36,545                        |    | 35,467 |   | 33,727 |   | 32,667 |   | 31,161 |   |
| Income  before income taxes                                                                                                              |   | 26,404                        |    | 29,758 |   | 30,298 |   | 29,099 |   | 23,301 |   |
| Income  tax expense                                                                                                                      |   | 8,472                         |    | 9,575 |   | 9,295 |   | 9,054 |   | 7,123 |   |
| Net  income                                                                                                                              |   | $                             | 17,932  |   | $ | 20,183 |   | $ | 21,003 |   | $ | 20,045 |   | $ | 16,178 |   |
|                                                                                                                                     |   |                          |    |   |   |   |   |   |   |   |   |
| **Per share data**                                                                                                                       |   |                          |    |   |   |   |   |   |   |   |   |
| Earnings                                                                                                                                 |   | $                             | 41.46   |   | $ | 46.67 |   | $ | 48.56 |   | $ | 46.35 |   | $ | 37.41 |   |
| Cash  dividends declared                                                                                                                 |   | 41.50                         |    | 40.00 |   | 39.50 |   | 37.50 |   | 34.00 |   |
| Book  value(2)                                                                                                                           |   | 341.47                        |    | 335.30 |   | 323.17 |   | 313.61 |   | 310.74 |   |
|                                                                                                                                     |   |                          |    |   |   |   |   |   |   |   |   |
| **Selected balances, end of year**                                                                                                       |   |                          |    |   |   |   |   |   |   |   |   |
| Securities                                                                                                                               |   | $                             | 328,300 |   | $ | 268,815 |   | $ | 294,217 |   | $ | 337,828 |   | $ | 377,303 |   |
| Loans,  less allowance for loan losses                                                                                                   |   | 1,128,816                     |    | 1,093,376 |   | 1,016,140 |   | 845,706 |   | 772,361 |   |
| Total  assets                                                                                                                            |   | 1,586,063                     |    | 1,473,559 |   | 1,431,958 |   | 1,408,062 |   | 1,308,953 |   |
| Deposits                                                                                                                                 |   | 1,420,256                     |    | 1,309,720 |   | 1,269,954 |   | 1,254,255 |   | 1,155,952 |   |
| Shareholders’  equity plus common stock in ESOP subject to contingent repurchase obligation                                         |   | 147,685                       |    | 145,015 |   | 139,768 |   | 135,633 |   | 134,393 |   |
|                                                                                                                                     |   |                          |    |   |   |   |   |   |   |   |   |
| **Ratios**                                                                                                                               |   |                          |    |   |   |   |   |   |   |   |   |
| Return  on average total assets                                                                                                          |   | 1.17                          | %       | 1.40 | % | 1.53 | % | 1.52 | % | 1.26 | % |
| Return  on average shareholders’  equity plus  common stock in ESOP subject to contingent repurchase obligation                |   | 12.01                         | %       | 13.73 | % | 14.96 | % | 14.36 | % | 11.77 | % |
| Cash  dividends declared to net income                                                                                                   |   | 100.09                        | %       | 85.72 | % | 81.34 | % | 80.91 | % | 90.90 | % |
| Average  shareholders’ equity plus  common  stock in ESOP subject to contingent repurchase obligation to average total  assets |   | 9.76                          | %       | 10.21 | % | 10.22 | % | 10.61 | % | 10.73 | % |
| Net  interest margin(3)                                                                                                                  |   | 4.07                          | %       | 4.39 | % | 4.51 | % | 4.37 | % | 4.24 | % |

 

----

(1)          Noninterestincome includes a litigation settlement of $3,555 in 1999 for the settlement ofa claim related to an investment that the Company made in prior years.Noninterest income also includes write-downs of $2,960 and $3,200 of thecarrying value of securities available for sale in 2001 and 1998, respectively.

(2)          Bookvalue equals shareholders’ equity plus common stock in ESOP subject tocontingent repurchase obligation divided by the number of outstanding shares.

(3)          Netinterest margin is presented on a tax equivalent basis, assuming a federalincome tax rate of 35%.

 

----

 

**AVERAGEBALANCE SHEETS****, NET INTEREST INCOME AND**

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

(Dollars inthousands)

 

The following tablepresents for the years indicated the total dollar amount of interest incomefrom average interest-earning assets and their yields, as well as the interestexpense on average interest-bearing liabilities and their costs, expressed bothin dollars and rates. All average balances are daily average balances. To theextent received, interest on nonaccruing loans has been included in the table.Interest income on nonaccrual loans was not material in 2002, 2001 and 2000.

 
|                                                                                             |   | **Years Ended  December 31,** |      |
|--------------------------------------------------------------------------------------------------|--------|-------------------------------|-----------|
|                                                                                             |   | **2002**                      |      | **2001** |   | **2000** |   |
|                                                                                             |   | **Average   Balance**         |      | **Interest** |   | **Rate** |   | **Average  Balance** |   | **Interest** |   | **Rate** |   | **Average  Balance** |   | **Interest** |   | **Rate** |   |
| **Assets**                                                                                       |   |                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal funds sold                                                                               |   | $                             | 25,471    |   | $ | 418 |   | 1.6 | % | $ | 20,570 |   | $ | 795 |   | 3.9 | % | $ | 17,630 |   | $ | 1,104 |   | 6.3 | % |
| Commercial paper                                                                                 |   | —                        |      | — |   | — | % | 1,521 |   | 86 |   | 5.7 | % | 2,306 |   | 167 |   | 7.2 | % |
| Securities Taxable                                                                               |   | 276,019                       |      | 13,495 |   | 4.9 | % | 234,650 |   | 13,560 |   | 5.8 | % | 298,960 |   | 18,109 |   | 6.1 | % |
| Exempt from federal income tax(1)                                                                |   | 27,152                        |      | 1,906 |   | 7.0 | % | 26,680 |   | 2,082 |   | 7.8 | % | 29,074 |   | 2,250 |   | 7.7 | % |
| Total securities(1)                                                                              |   | 303,171                       |      | 15,401 |   | 5.1 | % | 261,330 |   | 15,642 |   | 6.0 | % | 328,034 |   | 20,359 |   | 6.2 | % |
| Loans(1)                                                                                         |   | 1,102,465                     |      | 70,290 |   | 6.4 | % | 1,065,944 |   | 83,173 |   | 7.8 | % | 940,039 |   | 82,529 |   | 8.8 | % |
| Total interest-earning assets(1)                                                                 |   | 1,431,107                     |      | 86,109 |   | 6.0 | % | 1,349,365 |   | 99,696 |   | 7.4 | % | 1,288,009 |   | 104,159 |   | 8.1 | % |
| Cash and due from banks                                                                          |   | 40,339                        |      |   |   |   |   | 39,394 |   |   |   |   |   | 39,232 |   |   |   |   |   |
| Premises and equipment, net                                                                      |   | 44,957                        |      |   |   |   |   | 41,772 |   |   |   |   |   | 37,948 |   |   |   |   |   |
| Other real estate                                                                                |   | 1,516                         |      |   |   |   |   | 1,741 |   |   |   |   |   | 2,448 |   |   |   |   |   |
| Allowance for loan losses                                                                        |   | (12,901                       | )         |   |   |   |   | (11,892 | )  |   |   |   |   | (11,243 | ) |   |   |   |   |
| Accrued interest and other   assets(2)                                                           |   | 25,215                        |      |   |   |   |   | 17,351 |   |   |   |   |   | 17,452 |   |   |   |   |   |
| **Total assets**                                                                                 |   | $                             | 1,530,233 |   |   |   |   |   | $ | 1,437,731 |   |   |   |   |   | $ | 1,373,846 |   |   |   |   |   |
| **Liabilities and  shareholders’ equity**                                              |   |                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing deposits                                                                        |   |                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NOW                                                                                              |   | $                             | 260,916   |   | 1,086 |   | 0.4 | % | $ | 233,765 |   | 1,972 |   | 0.8 | % | $ | 217,982 |   | 2,782 |   | 1.3 | % |
| Money market checking                                                                            |   | 228,555                       |      | 4,428 |   | 1.9 | % | 192,587 |   | 6,990 |   | 3.6 | % | 137,260 |   | 7,153 |   | 5.2 | % |
| Savings                                                                                          |   | 337,671                       |      | 6,015 |   | 1.8 | % | 291,569 |   | 7,634 |   | 2.6 | % | 284,240 |   | 9,539 |   | 3.4 | % |
| Time deposits                                                                                    |   |                          |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Less than $100,000                                                                               |   | 307,122                       |      | 12,697 |   | 4.1 | % | 320,397 |   | 18,092 |   | 5.6 | % | 341,035 |   | 19,907 |   | 5.8 | % |
| $100,000  and greater                                                                            |   | 90,053                        |      | 3,536 |   | 3.9 | % | 103,327 |   | 5,624 |   | 5.4 | % | 106,736 |   | 6,483 |   | 6.1 | % |
| Total interest-bearing deposits                                                                  |   | 1,224,317                     |      | 27,762 |   | 2.3 | % | 1,141,645 |   | 40,312 |   | 3.5 | % | 1,087,253 |   | 45,864 |   | 4.2 | % |
| Other interest-bearing liabilities                                                               |   | 2,130                         |      | 41 |   | 1.9 | % | 2,145 |   | 101 |   | 4.7 | % | 3,129 |   | 204 |   | 6.5 | % |
| Total interest-bearing liabilities                                                               |   | 1,226,447                     |      | 27,803 |   | 2.3 | % | 1,143,790 |   | 40,413 |   | 3.5 | % | 1,090,382 |   | 46,068 |   | 4.2 | % |
| Demand-noninterest-bearing deposits                                                              |   | 144,352                       |      |   |   |   |   | 134,219 |   |   |   |   |   | 130,420 |   |   |   |   |   |
| Accrued interest and other liabilities                                                           |   | 10,157                        |      |   |   |   |   | 12,735 |   |   |   |   |   | 12,661 |   |   |   |   |   |
| Shareholders’ equity plus common stock in ESOP  subject to contingent repurchase obligation |   | 149,277                       |      |   |   |   |   | 146,987 |   |   |   |   |   | 140,383 |   |   |   |   |   |
| **Total liabilities and  shareholders’ equity**                                             |   | $                             | 1,530,233 |   |   |   |   |   | $ | 1,437,731 |   |   |   |   |   | $ | 1,373,846 |   |   |   |   |   |
| Net interest income                                                                              |   |                          |      | $ | 58,306 |   |   |   |   |   | $ | 59,283 |   |   |   |   |   | $ | 58,091 |   |   |   |
| Interest rate spread                                                                             |   |                          |      |   |   | 3.7 | % |   |   |   |   | 3.9 | % |   |   |   |   | 3.9 | % |
| Net interest margin                                                                              |   |                          |      |   |   | 4.1 | % |   |   |   |   | 4.4 | % |   |   |   |   | 4.5 | % |

 

----

(1)          Interestincome and yields are presented on a tax equivalent basis, assuming a federalincome tax rate of 35%.

(2)          Theaverage balances of nonaccrual loans are included in accrued interest and otherassets.

 

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**MANAGEMENT’S DISCUSSION****AND ANALYSIS OF FINANCIAL CONDITION**

**ANDRESULTS OF OPERATIONS**

 

The followingdiscussion and analysis provides information regarding the Company’s financialcondition as of December 31, 2002 and 2001 and the results of operations forthe years ended December 31, 2002, 2001 and 2000. This discussion and analysisshould be read with the financial statements, notes and tables included elsewherein this annual report. The financial information provided below is rounded inorder to simplify the presentation of management’s discussion and analysis.However, the ratios and percentages provided below are calculated using themore detailed financial information contained in the financial statements,notes and tables included elsewhere in this annual report.

 

**Balance Sheet Analysis**

 

***Total Assets.*** Total assets of theCompany at December 31, 2002 increased 7.6% from the prior year-end. Increasesin the securities available for sale portfolio were the largest component ofthe increase in total assets and were partially offset by decreases insecurities held to maturity. The Company also experienced increases in the loanportfolio and cash and cash equivalents. Total average assets in 2002 increased6.4% from the prior year primarily due to a 16.0% increase in averagesecurities. Average loans and cash and cash equivalents increased 3.4% and 7.0%during this period. Asset growth was funded primarily by growth in deposits.

 

***Cash and Cash Equivalents.*** Cash andcash equivalents at December 31, 2002 increased 41.9% from the prior year-end,due to increases in both cash and due from banks and federal funds sold. Theseincreases were primarily the result of growth in deposits.

 

***Securities.***  The Company’s available for sale securities portfolio increased88.3% at December 31, 2002 from the prior year-end. The Company made asignificant investment in U.S. government agency securities, which was partiallyoffset by sales of corporate securities. Holdings of corporate debt securitiesdecreased $60.9 million during 2002 to reflect the Company’s concerns regardingthe risk-adjusted credit quality of this category of investments during theeconomic downturn that is presently being experienced in the United States. TheCompany recorded $1.0 million in net realized gains on securities transactionsduring 2002. These gains included $.6 million of recoveries on securitieswritten off in 1998 and $.4 million on the sale of U.S. government agencysecurities. The Company’s held to maturity portfolio decreased 58.8% during2002, primarily due to calls of U.S. government agency securities. During thesame period, the Company’s accumulated other comprehensive income increased$2.7 million due to appreciation in the value of securities available for sale,net of deferred tax.

 

The Company’sobjectives in managing the securities portfolio include maximizing yield overan entire interest rate cycle while providing liquidity. Aggregate holdings insecurities at December 31, 2002 increased 22.1% from the prior year-end due tothe significant increase in securities available for sale. Increased holdingsin securities available for sale have allowed the Company to maintain anadequate level of liquidity while realizing higher yields compared toalternative investments.

 

***Loans.*** Total loans outstanding at December 31, 2002 increased 3.3% fromthe prior year-end primarily due to increases in the home equity, commercialreal estate and construction loan portfolios of $23.0 million, $16.2 millionand $16.7 million, respectively. Management believes the increase in the homeequity portfolio was primarily due to the increased promotional efforts forthis product, which included very competitive rates. Management believes thegrowth in the commercial real estate and construction loan portfolios wasprimarily due to a more favorable rate environment and continued economic andpopulation growth in the Company’s market area. Management also believes that newcommercial loans were written in a manner consistent with the Company’s pastloan underwriting standards and do not present increased credit risk to theCompany.

 

Residential real estateloans at December 31, 2002 decreased 11.3% from the prior year-end. Thisdecrease was primarily a result of mortgage refinancing activity that wasprompted by lower interest rates. The Company also elected to sell 30-yearmortgage loans that it originated in 2002 rather than to hold the mortgages inthe loan portfolio.

 

----

 

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

 

The provision for loanlosses increased 175.4% in 2002. The increase was primarily the result ofincreased loan charge-offs and current levels of nonperforming loans. Net loancharge-offs were $6.5 million and $2.1 million in 2002 and 2001, respectively.Commercial loan net charge-offs accounted for $5.8 million or 88.3% of netcharge-offs. Most of the commercial loan charge-offs related to four borrowers.The provision for loan losses in 2002 also reflects a higher level of averageimpaired loans, $17.3 million in 2002 compared to $4.8 million in 2001.

 

The ratio of theallowance for loan losses to total loans outstanding was 1.21% and 1.11% atDecember 31, 2002 and 2001, respectively. Despite the increased charge-offs in2002, nonperforming loans only decreased $1.5 million or 9.6% from year-end2001. Most of the nonperforming loan amounts relate to three loan relationshipsat December 31, 2002 and two loan relationships at December 31, 2001. Theaccrual status of loans past due over 90 days is based on management’sevaluation of the respective collateral values and collection efforts. Most ofthe nonperforming loans still on accrual are secured by residential realestate.

 

The following table is ananalysis of the Company’s nonperforming loans and other real estate at December31 (dollars in thousands):

 
|                                                                  |   | **2002** |   | **2001** |   | **2000** |   |
|-----------------------------------------------------------------------|--------|----------|--------|----------|--------|----------|--------|
| Loans  past due over 90 days still on accrual                         |   | $        | 1,789  |     | $      | 11,338   |   | $ | 491 |   |
| Nonaccrual  loans                                                     |   | 12,021   |   | 3,945    |   | 1,064    |   |
| Total  nonperforming loans                                            |   | $        | 13,810 |     | $      | 15,283   |   | $ | 1,555 |   |
| Nonperforming  loans as a percent of total loans                      |   | 1.2      | %      | 1.4      | %      | 0.2      | %      |
| Allowance  for loan losses as a percent of   nonperforming loans |   | 100      | %      | 80       | %      | 733      | %      |
| Other  real estate                                                    |   | $        | 40     |     | $      | 1,410    |   | $ | 1,940 |   |
| Nonperforming  assets as a percent of total assets                    |   | 0.87     | %      | 1.13     | %      | 0.24     | %      |

 

***Other Real Estate.***  At December 31, 2002, the Company had oneproperty remaining in other real estate representing a decrease of 97.2% fromthe prior year-end. During 2002, the Company sold properties with an aggregatecarrying value of $1.4 million.

 

***Deposits.*** Total deposits at December 31, 2002 increased8.4% from the prior year-end with an increase in all deposit categories.Demand-noninterest-bearing, NOW and money market checking deposits increased6.4%, 8.4% and 1.7%, respectively. Savings deposits increased 17.3%. Managementbelieves the growth in this portion of the deposit base reflects the tendencyof its customers to maintain a higher level of short-term liquid assets duringperiods of low interest rates and financial market uncertainty. Time depositsless than $100,000 increased 5.3% and time deposits $100,000 and greaterincreased 8.7%. Management believes the growth in time deposits is directlycorrelated to past promotional efforts and the uncertainty of financialmarkets. During 2002, average balances in interest-bearing deposits anddemand-noninterest-bearing deposits increased $82.7 million and $10.1 million,respectively.

 

----

 

**Capital Resources**

 

Shareholders’ equity atDecember 31, 2002 increased 2.9% from the prior year-end as a result of $17.9million of net income for the year reduced by dividends declared of the sameamount and an increase in the fair value of securities available for sale of$2.7 million, net of deferred taxes. Additionally, shareholders’ equity wasincreased by a $.4 million decrease in common stock in ESOP subject tocontingent repurchase obligation.

 

Management has beenadvised that as of December 31, 2002 and 2001, the Bank qualified as a“well-capitalized” institution as defined by the Federal Deposit InsuranceCorporation Improvement Act of 1991, as amended. On a consolidated basis theCompany also exceeded regulatory capital requirements. In accordance withapplicable regulations, the appraised fair value of Company common stock ownedby the ESOP is included in Tier 1 capital.

 

**Liquidity**

 

Effectiveliquidity management ensures there is sufficient cash flow to satisfy demandfor credit, deposit withdrawals and to take advantage of earnings enhancementopportunities. A large, stable core deposit base and a strong capital positionare the solid foundation for the Company’s liquidity position. Liquidity isenhanced by a securities portfolio structured to provide liquidity as needed.The Company also maintains relationships with correspondent banks to purchasefederal funds subject to underwriting and collateral requirements.Additionally, subject to credit underwriting, collateral, capital stock, andother requirements of the Federal Home Loan Bank of Chicago (“FHLB”), theCompany is able to borrow from the FHLB on a “same day” basis. As of December31, 2002, the Company would be able to borrow approximately $93 million fromthe FHLB secured by real estate loans and securities. The Company manages itsliquidity position through continuous monitoring of profitability trends, assetquality, interest rate sensitivity and maturity schedules of earning assets andliabilities.

 

Generally,the Company uses cash and cash equivalents and securities available for sale tomeet its liquidity needs. As of December 31, 2002 and 2001, these liquid assetsrepresented 21.8% and 13.2% of total assets, respectively. During 2002, theCompany’s cash and cash equivalents increased $19.7 million. In 2002, net cashprovided by operating activities was $31.0 million, while net cash used ininvesting activities was $104.1 million. The net cash used in investingactivities was primarily used to purchase securities available for sale andfund loan growth. Net cash flows provided by financing activities were $92.8million in 2002, resulting from deposit growth. Management expects operationsto be a continuing source of cash flow in the future.

 

**Income Statement Analysis – 2002Compared to 2001**

 

***General*.** The Company’s net incomedecreased 11.2% in 2002, primarily due to an increase in the provision for loanlosses of $5.2 million. Net income was also affected negatively by a decreasein net interest income of $.9 million and an increase in total noninterestexpense of $1.1 million. These decreases to income and increases to expensewere partially offset by an increase to total noninterest income of $3.8million and a decrease to income tax expense of $1.1 million.

 

***Net Interest Income.*** Net interestincome is the primary source of income for the Company. Net interest income isthe difference between interest income earned on interest-earning assets andinterest expense incurred on interest-bearing liabilities. Net interest incomeis affected by changes in the volume and yield on interest-earning assets andthe volume and rates on interest-bearing liabilities. Interest-earning assetsconsist of federal funds sold, commercial paper, securities and loans.Interest-bearing liabilities primarily consist of deposits. The net interestmargin is the percentage of tax equivalent net interest income to averageearning assets. The Company’s net interest margin decreased to 4.1% in 2002compared to 4.4% in 2001.

 

Total interest income ona tax equivalent basis decreased 13.6% in 2002 primarily due to decliningyields from assets in the Company’s loan portfolio. Average loans in 2002increased 3.4% while the yield on the portfolio decreased 142 basis points.This decrease was primarily due to the declining yields from assets in theCompany’s commercial loan portfolio, which declined 199 basis points duringthis period. The majority of commercial loans have adjustable rates that aretied to one of a number of rate indices. Generally, these interest rate indiceshave declined due to the significant reduction in interest rates during 2001.Yields on home equity lines of credit, which

 

----

 

vary with the prime rate,decreased 218 basis points in 2002. The average prime rate in 2002 was 4.68% comparedto 6.91% in 2001.

 

Total interest expensedecreased 31.2% in 2002. Interest on deposits, which accounted forsubstantially all of this  change,decreased primarily due to lower market interest rates. The Company loweredinterest rates on all categories of deposits in response to the significantdecline in market rates. The yield on average interest-bearing depositsdecreased 126 basis points to 2.27% in 2002 compared to 3.53% in 2001.

 

The following tablereflects the impact of changes in volume and rates of interest-earning assetsand interest-bearing liabilities on a tax equivalent basis for the years endedDecember 31, 2002 and 2001 (dollars in thousands):

 
|                                |   | **2002 compared to 2001** |   | **2001  compared to 2000** |   |
|-------------------------------------|--------|---------------------------|--------|----------------------------|--------|
|                                |   | **Change due  to**        |   |                       |   | **Change due  to** |   |   |   |
|                                |   | **Volume**                |   | **Rate**                   |   | **Total  Change** |   | **Volume** |   | **Rate** |   | **Total  Change** |   |
| **Interest Income**                 |   |                      |   |                       |   |   |   |   |   |   |   |   |   |
| Federal  funds sold                 |   | $                         | 81     |                       | $      | (458 | ) | $ | (377 | ) | $ | 114 |   | $ | (423 | ) | $ | (309 | ) |
| Commercial  paper                   |   | (86                       | )      | —                     |   | (86 | ) | (45 | ) | (36 | ) | (81 | ) |
| Securities                          |   | 2,125                     |   | (2,366                     | )      | (241 | ) | (3,992 | ) | (725 | ) | (4,717 | ) |
| Loans                               |   | 2,328                     |   | (15,211                    | )      | (12,883 | ) | 9,824 |   | (9,180 | ) | 644 |   |
| Total  interest income              |   | 4,448                     |   | (18,035                    | )      | (13,587 | ) | 5,901 |   | (10,364 | ) | (4,463 | ) |
|                                |   |                      |   |                       |   |   |   |   |   |   |   |   |   |
| **Interest Expense**                |   |                      |   |                       |   |   |   |   |   |   |   |   |   |
| Interest-bearing  deposits          |   | 1,876                     |   | (14,426                    | )      | (12,550 | ) | 462 |   | (6,014 | ) | (5,552 | ) |
| Other  interest-bearing liabilities |   | —                    |   | (60                        | )      | (60 | ) | (67 | ) | (36 | ) | (103 | ) |
| Total  interest expense             |   | 1,876                     |   | (14,486                    | )      | (12,610 | ) | 395 |   | (6,050 | ) | (5,655 | ) |
| Net  interest income                |   | $                         | 2,572  |                       | $      | (3,549 | ) | $ | (977 | ) | $ | 5,506 |   | $ | (4,314 | ) | $ | 1,192 |   |

 

***Noninterest Income.***Totalnoninterest income increased 39.2% in 2002. Service fees on deposit accountsincreased $1.7 million. This resulted primarily from business demand depositcustomers earning lower interest credit on their balances as a result of thelower interest rate environment in 2002. In addition, averagedemand-noninterest-bearing and NOW accounts, which generate most of the servicecharge income, increased 7.5% and 11.6%, respectively, in 2002. The Companyalso implemented a new overdraft program in the fourth quarter of 2002. Thisprogram resulted in additional service fee income being recorded. The Companyexperienced a net increase of $1.6 million in net gains on securities primarilydue to the absence of $3.0 million of impairment losses on corporate debtsecurities recognized in 2001. A more detailed discussion of security gains andlosses in 2001 is presented in the section titled Income Statement Analysis -2001 Compared to 2000. Debit card fees increased $.3 million as a result ofincreased usage. The Company also experienced an increase in net gain on salesof loans held for sale of $.3 million due to higher activity resulting from astrong mortgage refinancing market.

 

***Noninterest Expense.*** Total noninterestexpense increased 3.0% in 2002. Salaries and employee benefits were essentiallyunchanged primarily as a result of staffing reductions and reduced bonus andESOP expense partially offset by normal salary increases. The number offull-time equivalent employees was 487 and 527 at December 31, 2002 and 2001,respectively. Occupancy expense increased $.2 million primarily due toincreased depreciation and real estate tax expense associated with the openingof the Oswego and Chicago Avenue facilities along with the cost associated withoperating the South Elgin facility for a full year. Advertising and promotionincreased $.5 million primarily due to more aggressive advertising efforts.Other noninterest expense increased $.3 million primarily due to other losses,which included increased fraud related to the collection of checks presented bycustomers. The Company’s efficiency ratio, a measure of the amount of expenseneeded to generate each dollar of income was 51% in 2002 and 52% in 2001.

 

***Provision for Loan Losses.*** The Company’sprovision for loan losses increased 175.4% in 2002. A more detailed discussionconcerning the allowance for loan losses is presented in the Allowance for LoanLosses and Asset Quality section of this report.

 

----

 

***Income Taxes.*** Income tax expense decreased11.5% in 2002, primarily due to lower pre-tax income. The effective tax ratesfor the years ended December 31, 2002 and 2001 were 32.1% and 32.2%,respectively.

 

**Income Statement Analysis – 2001Compared to 2000**

 

***General*.** The Company’s net income decreased3.9% in 2001, primarily due to $3.0 million of write-downs of impairedsecurities, increases in the provision for loan losses of $1.5 million andtotal noninterest expense of $1.7 million. These increases were partiallyoffset by an increase in net interest income of $1.3 million.

 

***Net Interest Income.*** The Company’s netinterest margin decreased to 4.4% in 2001 compared to 4.5% in 2000.

 

Total interest income, ona tax equivalent basis decreased 4.3% in 2001, primarily due to decliningyields on the loan portfolio. Average loans for the year increased 13.4% andthe average yield earned on the loan portfolio decreased 98 basis points. Thiswas primarily due to the declining yields on the commercial loan portfolio. Themajority of loans in the commercial loan portfolio are tied to one of a numberof rate indices. These rate indices declined due to the general reduction ininterest rates during 2001. For example, the average prime rate in 2001 was6.91% compared to 9.20% in 2000. The loan volume increases were partiallyoffset by reductions in the average balances of securities, which were used tofund loan growth. The yield on average interest-earning assets decreased 70basis points to 7.39% in 2001 compared to 8.09% in 2000.

 

Total interest expense decreased12.3% in 2001. Interest on deposits, which accounted for substantially all ofthis decrease, decreased primarily due to lower interest rates. During 2001,the Company lowered interest rates on all categories of deposits in response tothe significant decline in market rates during the year. The yield oninterest-bearing deposits decreased 69 basis points to 3.53% in 2001 comparedto 4.22% in 2000.

 

***Noninterest Income.***Totalnoninterest income increased 16.5% in 2001, primarily due to increases in servicefees on deposit accounts, debit card fees, net gains on sales of loans held forsale, net realized gains on securities transactions and other noninterestincome which were partially offset by write-downs of the carrying value ofsecurities available for sale. Other noninterest income increased primarily asa result of the recovery of $1.0 million in prior years’ expenses incurred inconnection with a problem loan. The Company recorded higher fee income fromincreased use of debit cards by bank customers and higher mortgage loanapplication fee income, due to greater refinancing activity. The Company alsoexperienced an increase in net realized gains on securities transactions, whichwas primarily due to the sale of an equity security. The Company made a nominal equity investment in an ATM network a numberof years ago. In 2001, the Company surrendered its stock in the ATM network inconnection with the merger of the network with another organization andreceived $1.4 million. Since the Company had only a nominal basis in the ATMnetwork stock, the Company realized a gain of $1.4 million. Theseincreases to noninterest income were partially offset by impairment write-downsof the carrying value of securities available for sale. During 2001, theCompany wrote down its investments in debt securities issued by Comdisco, Inc.,FINOVA Group, Inc. and Enron Corp. after it made a determination that the valueof the debt securities had become impaired. These impairment losses totaled$3.0 million in 2001. The carrying value of the Comdisco, Inc., FINOVA Group,Inc. and Enron Corp. securities totaled $4.8 million at December 31, 2001.

 

***Noninterest Expense.*** Total noninterestexpense increased 5.2% in 2001, primarily as a result of increases in salariesand employee benefits due to increased health insurance costs and normal salaryincreases. Despite a growing branch office network, the number of full-timeequivalent employees remained constant at 527 as of December 31, 2001 and 2000.Occupancy expense increased 8.2% in 2001 due to the operation of theCharlestowne and Downtown Downers branches for a complete year and the openingof the South Elgin branch. At December 31, 2001, the Company had 31full-service and five limited service offices. The Company incurred highercosts associated with depreciation, maintenance and winter heating. Furnitureand equipment expense increased during this period due to an increase in dataprocessing expense, which was offset by a decrease in depreciation expense onfurniture and equipment. Advertising expense increased during the period due tonew advertising initiatives that are intended to promote the Company’s brandand image. During 2001, the Company began advertising through local cabletelevision. Other noninterest expense also increased during this period due toincreased professional fees. These increases were partially offset by decreasesin other losses and stationary and supplies expense. The Company’s efficiencyratio, a measure of the amount of expense needed to generate each dollar ofrevenue, was 52% in 2001 and 51% in 2000.

 

----

 

***Provision for Loan Losses.*** TheCompany’s provision for loan losses increased 96.7% in 2001. The increase wasprimarily the result of increasing levels of nonperforming loans and net loancharge-offs. Net loan charge-offs were $2.1 million and $.9 million in 2001 and2000, respectively. A more detailed discussion concerning the allowance forloan losses is presented in the Allowance for Loan Losses and Asset Qualitysection of this report.

 

***Income Taxes.*** Income tax expenseincreased 3.0% in 2001, partially due to lower tax-exempt income on securitiesand loans. Interest income exempt from federal income tax and income on U.S.government securities exempt from Illinois income tax were both lower in 2001.The effective tax rates for the years ended December 31, 2001 and 2000 were32.2% and 30.7%, respectively.

 

**InterestRate Sensitivity**

 

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

 

•                  Balancesheet volume reflects the current balances and does not project future growthor changes. The current balances establish the base case from which all percentchanges are calculated.

 

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

 

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

 

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

 

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

 

|                  |   | **Amount** |   | **Dollar  Change** |   | **Percent  Change** |   |
|-----------------------|--------|------------|--------|--------------------|--------|---------------------|--------|
| **December 31, 2002** |   |       |   |               |   |                |   |
| +200  basis points    |   | $          | 47,711 |               | $      | (9,368              | )      | (16.4 | )% |
| +100  basis points    |   | 52,436     |   | (4,643             | )      | (8.1                | )      |
| Base                  |   | 57,079     |   |               |   |                |   |
| -100  basis points    |   | 52,864     |   | (4,215             | )      | (7.4                | )      |
| -200  basis points    |   | N/A        |   | N/A                |   | N/A                 |   |
|                  |   |       |   |               |   |                |   |
| December  31, 2001    |   |       |   |               |   |                |   |
| +200  basis points    |   | $          | 46,016 |               | $      | (9,589              | )      | (17.2 | )% |
| +100  basis points    |   | 50,894     |   | (4,711             | )      | (8.5                | )      |
| Base                  |   | 55,605     |   |               |   |                |   |
| -100  basis points    |   | 52,210     |   | (3,395             | )      | (6.1                | )      |
| -200  basis points    |   | 46,711     |   | (8,894             | )      | (16.0               | )      |

 

A projected 200 basispoint drop in market rates at December 31, 2002 is not relevant due to thecurrent low interest rate environment.

 

----

 

**Effects of Inflation**

 

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

 

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

 

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

 

----

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

 

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**Addressesof West Suburban Facilities**

 

**Aurora**

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

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

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

 

**Bartlett**

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

 

**Bloomingdale**

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

 

**Bolingbrook**

Bolingbrook East Branch:672 East Boughton Road, Bolingbrook, Illinois 60440 - (630) 972-9550

Bolingbrook West Branch:1104 West Boughton Road, Bolingbrook, Illinois 60440 - (630) 378-9680

 

**Carol Stream**

Carol Stream Branch: 401North Gary Avenue, Carol Stream, Illinois 60188 - (630) 690-8700

Fair Oaks Branch: 1380West Army Trail Road, Carol Stream, Illinois 60188 - (630) 213-5920

President Street Branch:879 East Geneva Road, Carol Stream, Illinois 60188 - (630) 752-1175

 

**Darien**

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

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

 

**Downers Grove**

Downtown Downers Branch:5330 Main Street, Downers Grove, Illinois 60515 - (630) 652-2775

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

 

**Glendale Heights**

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

 

**Lombard**

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

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

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

*WestmoreBranch: 711 South Meyers Road, Lombard, Illinois 60148 - (630) 629-4200(Headquarters)*

 

**Montgomery**

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

 

**Naperville**

Chicago Avenue Branch:1296 East Chicago Avenue, Naperville, Illinois 60540 - (630) 652-2140

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

 

**Oakbrook Terrace**

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

 

**Oswego**

Oswego Branch: 2830 Route34, Oswego, Illinois 60543 - (630) 652-2790

 

**Romeoville**

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

 

----

 

**South Elgin**

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

 

**St. Charles**

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

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

 

**Villa Park**

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

 

**Warrenville**

Warrenville Branch: 3S041Route 59, Warrenville, Illinois 60555 - (630) 393-6060

 

**Westmont**

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

 

**Wheaton**

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

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

 

ATMs are available at allof the above banking branches.

 

**Limited-Service Branches**

*Beacon Hill: Lombard, Illinois 60148*

*Financial Center: 717 South Meyers Road, Lombard, Illinois60148*

*Lexington Square of Elmhurst: Elmhurst, Illinois 60126*

*Lexington Square of Lombard: Lombard, Illinois 60148*

*Mr. Z’s: 401 South Main Street, Lombard, Illinois 60148 -Closed February 28, 2003*

 

**Other Services**

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

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

*West Suburban Bank Visa: 701 South Meyers Road, Lombard,Illinois 60148 - (630) 652-2500 extension 2903*

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

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

 

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**[MAP OFMARKET AREA THAT INDICATES LOCATION OF FACILITIES]**

 

 

 

**[WSB LOGO]**

 

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

 

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**ShareholderInformation**

 

**Annual Report on Form 10-K**

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

 

Duane G. Debs

President and ChiefFinancial Officer

West Suburban Bancorp,Inc.

2800 Finley Road

Downers Grove, Illinois60515

(630) 652-2801

 

**Annual Meeting of Shareholders**

The annual meeting ofshareholders of West Suburban Bancorp, Inc. will be held at West Suburban Bank,711 South Meyers Road, Lombard, Illinois on Wednesday, May 14, 2003 at 8:00a.m. All shareholders are cordially invited to attend.

 

**Stock Transfer Agent and Registrar**

Inquiries regarding stocktransfers, registration, lost certificates and changes of name and addressshould be directed to the stock transfer agent and registrar by writing to:

 

George E. Ranstead

Secretary to the Boardand Treasurer

West Suburban Bancorp,Inc.

2800 Finley Road

Downers Grove, Illinois60515

(630) 652-2802

 

**Community Reinvestment Act**

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

 

Michael P. Brosnahan

Senior Vice President,Commercial Lending and Community Reinvestment Act Officer

West Suburban Bank

717 South Meyers Road

Lombard, Illinois 60148

(630) 652-2308

 

**Independent Auditors**

Crowe, Chizek and CompanyLLP

One Mid America Plaza,Suite 700

Post Office Box 3697

Oak Brook, Illinois 60522

 

**Corporate Counsel**

Barack FerrazzanoKirschbaum Perlman & Nagelberg LLC

333 West Wacker Drive,Suite 2700

Chicago, Illinois 60606

 

**MEMBER FDIC**

**[EQUAL HOUSING LENDER LOGO]**

 

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