UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

 

Commission File Number 0 – 17609

 

WEST SUBURBAN BANCORP, INC.

(Exact name of Registrant as specified in its charter)

 

 

Registrant’s telephone number, including area code:  (630) 629-4200

 

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

 

Title of Each Class		Name of Each Exchange on which Registered
None		None

 

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

 

Common Stock, no par value

(Title of Class)

 

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

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K ý

 

Indicate by check mark whether the Registrant in an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934.  Yes  ý No  o

 

 

The aggregate fair value of voting common stock of Registrant held by non-affiliates as of February 22, 2005 was $189,506,221(1). At December 31, 2004, the total number of shares of Common Stock outstanding was 432,495.

 

Documents Incorporated by Reference:

 

Portions of the Annual Report to Shareholders for the fiscal year ended December 31, 2004 are incorporated by reference into Parts I, II and IV hereof, to the extent indicated herein. Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held May 11, 2005 are incorporated by reference in Part III hereof, to the extent indicated herein.

 

(1)                      Based on the last independently appraised fair value of the Registrant’s common stock on February 22, 2005, and reports of beneficial ownership filed by directors and executive officers of Registrant and by beneficial owners of more than 5% of the outstanding shares of common stock of Registrant; however, such determination of shares owned by affiliates does not constitute an admission of affiliate status or beneficial interest in shares of common stock of Registrant.

 

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Special Note Concerning Forward-Looking Statements

 

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

 

The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations and future prospects of the Company and its subsidiaries include, but are not limited to, the following:

 

•                                          The strength of the United States economy in general and the strength of the local economies in which the Company conducts its operations which may be less favorable than expected and may result in, among other things, a deterioration in the credit quality and value of the Company’s assets.

 

•                                          The effects of, and changes in, federal, state and local laws, regulations and policies affecting banking, securities, taxation, insurance and monetary and financial matters.

 

•                                          The effects of changes in interest rates (including the effects of changes in the rate of prepayments of the Company’s assets) and the policies of the Board of Governors of the Federal Reserve System.

 

•                                          The ability of the Company to compete with other financial institutions as effectively as the Company currently intends due to increases in competitive pressures in the financial services sector.

 

•                                          The inability of the Company to obtain new customers and to retain existing customers.

 

•                                          The timely development and acceptance of products and services, including products and services offered through alternative delivery channels such as the Internet.

 

•                                          Technological changes implemented by the Company and by other parties, including third party vendors, which may be more difficult or more expensive than anticipated or which may have unforeseen consequences to the Company and its customers including technological changes implemented for, or related to, the Company’s website or new products such as prepaid solutions cards, payroll cards and other similar products and services.

 

•                                          The ability of the Company to develop and maintain secure and reliable electronic systems including systems developed for the Company’s website or new products such as prepaid solutions cards, payroll cards and other similar products and services.

 

•                                          The ability of the Company to retain key executives and employees and the difficulty that the Company may experience in replacing key executives and employees in an effective manner.

 

•                                          Consumer spending and saving habits which may change in a manner that affects the Company’s business adversely.

 

•                                          The economic impact of terrorist activities and military actions.

 

•                                          Business combinations and the integration of acquired businesses which may be more difficult or expensive than expected.

 

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•                                          The costs, effects and outcomes of existing or future litigation.

 

•                                          Changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the Financial Accounting Standards Board.

 

•                                          The ability of the Company to manage the risks associated with the foregoing as well as anticipated.

 

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning the Company and its business, including other factors that could materially affect the Company’s financial results, is included in the Company’s filings with the Securities and Exchange Commission.

 

PART I

 

ITEM 1.                        BUSINESS

 

REGISTRANT AND ITS SUBSIDIARY

 

West Suburban Bancorp, Inc., an Illinois corporation (“West Suburban”), is a bank holding company registered under the Bank Holding Company Act of 1956, as amended (the “BHCA”), and the parent company of West Suburban Bank, Lombard, Illinois. West Suburban Bank may be referred to as the “Bank” and, collectively, with West Suburban, may be referred to as the “Company.”

 

The Bank is headquartered in Lombard, Illinois, and, as of December 31, 2004, maintained 33 full-service branches, four limited-service branches and six departments providing insurance, financial and other services for the convenience of the customers of the Bank throughout the western suburbs of Chicago. Due to the nature of the market areas served by the Bank, the Bank provides a wide range of financial services to individuals and small to medium sized businesses. The western suburbs of Chicago have a diversified economy with many corporate headquarters and numerous small to medium sized industrial and non-industrial businesses.

 

The Bank engages in a general full service retail banking business and offers a broad variety of consumer and commercial products and services. The Bank also offers insurance services through West Suburban Insurance Services, Inc., travel agency services through Travel With West Suburban, land trust services, stored value card products through the Prepaid Solutions Group and safe deposit boxes. The Bank provides extended banking hours including Sunday hours and 24-hour banking through a proprietary network of 60 automated teller machines (“ATMs”), Tele-Bank 24 (a bank-by-phone system) and online banking at www.westsuburbanbank.com. Other consumer related services are also available, including investment products and a Visa card through West Suburban Bank Card Services.

 

The following table sets forth financial and other information concerning the Bank as of and for the year ended December 31, 2004 (dollars in thousands):

 

Year Formed/Year Affiliated with West Suburban		Number of Locations		Total Assets			Shareholders’ Equity			Net Income
													Return on Average
													Assets		Equity
West Suburban Bank (1962/1988)		37		$	1,738,809		$	131,310		$	23,538		1.36	%	17.49	%

 

COMPETITION

 

The Company encounters competition in all areas of its business pursuits. It competes for loans, deposits, fiduciary and other services with financial and other institutions located both within and outside of its market area. In order to compete effectively, to develop its market base, to maintain flexibility and to move in pace with changing economic, technological and social conditions, the Company continuously refines and develops its products and services. The principal methods of competition in the financial services industry are price, service and convenience.

 

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Under the Gramm-Leach-Bliley Act of 1999 (the “GLBA”), effective March 11, 2000, securities firms and insurance companies that elect to become financial holding companies may acquire banks and other financial institutions. The GLBA has significantly changed the competitive environment in which the Company and the Bank conduct business. The financial services industry continues to become more competitive as technological advances enable more companies to provide financial services. These technological advances may diminish the importance of depository institutions and other financial intermediaries.

 

EMPLOYEES

 

The Company employed 613 persons (497 full-time equivalent employees) on December 31, 2004. The Company believes that its relationship with its employees is good.

 

SUPERVISION AND REGULATION

 

General

 

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

 

Federal and state laws and regulations generally applicable to financial institutions regulate, among other things, the scope of business, the kinds and amounts of investments, reserve requirements, capital levels relative to operations, the nature and amount of collateral for loans, the establishment of branches, mergers and consolidations and the payment of dividends. This system of supervision and regulation establishes a comprehensive framework for the respective operations of the Company and its subsidiaries and is intended primarily for the protection of the FDIC-insured deposits and depositors of the Bank, rather than shareholders.

 

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

 

The Company

 

General.  The Company, as the sole shareholder of the Bank, is a bank holding company. As a bank holding company, the Company is registered with, and is subject to regulation by, the Federal Reserve under the Bank Holding Company Act of 1956, as amended (the “BHCA”). In accordance with Federal Reserve policy, the Company is expected to act as a source of financial strength to the Bank and to commit resources to support the Bank in circumstances where the Company might not otherwise do so. Under the BHCA, the Company is subject to periodic examination by the Federal Reserve. The Company is also required to file with the Federal Reserve periodic reports of the Company’s operations and such additional information regarding the Company and its subsidiaries as the Federal Reserve may require.

 

Acquisitions, Activities and Change in Control.  In general, a bank holding company is in the business of controlling and managing banks. The BHCA requires the prior approval of the Federal Reserve for any merger involving a bank holding company or any acquisition by a bank holding company of another bank or bank holding company. Subject to certain conditions (including certain deposit concentration limits established by the BHCA), the Federal Reserve may allow a bank holding company to acquire banks located in any state of the United States. In

 

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approving interstate acquisitions, the Federal Reserve is required to give effect to applicable state law limitations on the aggregate amount of deposits that may be held by the acquiring bank holding company and its insured depository institution affiliates in the state in which the target bank is located (provided that those limits do not discriminate against out-of-state depository institutions or their holding companies) and state laws that require that the target bank have been in existence for a minimum period of time (not to exceed five years) before being acquired by an out-of-state bank holding company.

 

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

 

Additionally, bank holding companies that meet certain eligibility requirements prescribed by the BHCA and elect to operate as financial holding companies may engage in, or own shares in companies engaged in, a wider range of nonbanking activities, including securities and insurance underwriting and sales, merchant banking and any other activity that the Federal Reserve, in consultation with the Secretary of the Treasury, determines by regulation or order is financial in nature, incidental to any such financial activity or complementary to any such financial activity and does not pose a substantial risk to the safety or soundness of depository institutions or the financial system generally. As of the date of this filing, the Company has neither applied for nor received approval to operate as a financial holding company.

 

Federal law also prohibits any person or company from acquiring “control” of an FDIC-insured depository institution or its holding company without prior notice to the appropriate federal bank regulator. “Control” is conclusively presumed to exist upon the acquisition of 25% or more of the outstanding voting securities of a bank or bank holding company, but may arise under certain circumstances at 10% ownership.

 

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

 

The Federal Reserve’s capital guidelines establish the following minimum regulatory capital requirements for bank holding companies: (i) a risk-based requirement expressed as a percentage of total assets weighted according to risk; and (ii) a leverage requirement expressed as a percentage of total assets. The risk-based requirement consists of a minimum ratio of total capital to total risk-weighted assets of 8% and a minimum ratio of Tier 1 capital to total risk-weighted assets of 4%. The leverage requirement consists of a minimum ratio of Tier 1 capital to total assets of 3% for the most highly rated companies, with a minimum requirement of 4% for all others. For purposes of these capital standards, Tier 1 capital consists primarily of permanent stockholders’ equity less intangible assets (other than certain loan servicing rights and purchased credit card relationships). Total capital consists primarily of Tier 1 capital plus certain other debt and equity instruments that do not qualify as Tier 1 capital and a portion of the company’s allowance for loan and lease losses.

 

The risk-based and leverage standards described above are minimum requirements. Higher capital levels may be required if warranted by the particular circumstances or risk profiles of individual banking organizations. For example, the Federal Reserve’s capital guidelines contemplate that additional capital may be required to take adequate account of, among other things, interest rate risk, or the risks posed by concentrations of credit, nontraditional activities or securities trading activities. Further, any banking organization experiencing or anticipating significant growth would be expected to maintain capital ratios, including tangible capital positions (i.e., Tier 1 capital less all intangible assets), well above the minimum levels. As of December 31, 2004, the Company had regulatory capital in excess of the Federal Reserve’s minimum requirements.

 

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Dividend Payments.  The Company’s ability to pay dividends to its shareholders may be affected by both general corporate law considerations and policies of the Federal Reserve applicable to bank holding companies. As an Illinois corporation, the Company is subject to the Illinois Business Corporation Act, as amended, which prohibits the Company from paying a dividend if, after giving effect to the dividend: (i) the Company would be insolvent; or (ii) the net assets of the Company would be less than zero; or (iii) the net assets of the Company would be less than the maximum amount then payable to shareholders of the Company who would have preferential distribution rights if the Company were liquidated. Additionally, policies of the Federal Reserve caution that a bank holding company should not pay cash dividends that exceed its net income or that can only be funded in ways that weaken the bank holding company’s financial health, such as by borrowing. The Federal Reserve also possesses enforcement powers over bank holding companies and their non-bank subsidiaries to prevent or remedy actions that represent unsafe or unsound practices or violations of applicable statutes and regulations. Among these powers is the ability to proscribe the payment of dividends by banks and bank holding companies.

 

Federal Securities Regulation.  The Company’s common stock is registered with the SEC under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Consequently, the Company is subject to the information, proxy solicitation, insider trading and other restrictions and requirements of the SEC under the Exchange Act.

 

The Bank

 

General.  The Bank is an Illinois-chartered bank, the deposit accounts of which are insured by the FDIC’s Bank Insurance Fund (“BIF”). As an Illinois-chartered bank, the Bank is subject to the examination, supervision, reporting and enforcement requirements of the DFPR, the chartering authority for Illinois banks, and the FDIC, designated by federal law as the primary federal regulator of state-chartered, FDIC-insured banks that, like the Bank, are not members of the Federal Reserve System (“non-member banks”).

 

Deposit Insurance.  As an FDIC-insured institution, the Bank is required to pay deposit insurance premium assessments to the FDIC. The FDIC has adopted a risk-based assessment system under which all insured depository institutions are placed into one of nine categories and assessed insurance premiums based upon their respective levels of capital and results of supervisory evaluations. Institutions classified as well-capitalized (as defined by the FDIC) and considered healthy pay the lowest premium while institutions that are less than adequately capitalized (as defined by the FDIC) and considered of substantial supervisory concern pay the highest premium. Risk classification of all insured institutions is made by the FDIC for each semi-annual assessment period.

 

During the year ended December 31, 2004, BIF assessments ranged from 0% of deposits to 0.27% of deposits. For the semi-annual assessment period beginning January 1, 2005, BIF assessment rates will continue to range from 0% of deposits to 0.27% of deposits.

 

FICO Assessments.  Since 1987, a portion of the deposit insurance assessments paid by members of the FDIC’s Savings Association Insurance Fund (“SAIF”) has been used to cover interest payments due on the outstanding obligations of the Financing Corporation (“FICO”). FICO was created in 1987 to finance the recapitalization of the Federal Savings and Loan Insurance Corporation, the SAIF’s predecessor insurance fund. As a result of federal legislation enacted in 1996, beginning as of January 1, 1997, both SAIF members and BIF members became subject to assessments to cover the interest payments on outstanding FICO obligations until the final maturity of such obligations in 2019. These FICO assessments are in addition to amounts assessed by the FDIC for deposit insurance. During the year ended December 31, 2004, the FICO assessment rate for BIF and SAIF members was approximately 0.02% of deposits.

 

Supervisory Assessments.  All Illinois banks are required to pay supervisory assessments to the DFPR to fund the operations of the DFPR. The amount of the assessment is calculated on the basis of an institution’s total assets, including consolidated subsidiaries, as reported to the DFPR. During the year ended December 31, 2004, the Bank paid supervisory assessments to the DFPR totaling $.16 million.

 

Capital Requirements.  Banks are generally required to maintain capital levels in excess of other businesses. The FDIC has established the following minimum capital standards for state-chartered insured non-member banks, such as the Bank: (i) a leverage requirement consisting of a minimum ratio of Tier 1 capital to total assets of 3% for the

 

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most highly-rated banks with a minimum requirement of at least 4% for all others; and (ii) a risk-based capital requirement consisting of a minimum ratio of total capital to total risk-weighted assets of 8% and a minimum ratio of Tier 1 capital to total risk-weighted assets of 4%. For purposes of these capital standards, the components of Tier 1 capital and total capital are the same as those for bank holding companies discussed above.

 

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

 

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

 

Federal law also provides the federal banking regulators with broad power to take prompt corrective action to resolve the problems of undercapitalized institutions. The extent of the regulators’ powers depends on whether the institution in question is “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” or “critically undercapitalized,” in each case as defined by regulation. Depending upon the capital category to which an institution is assigned, the regulators’ corrective powers include: (i) requiring the institution to submit a capital restoration plan; (ii) limiting the institution’s asset growth and restricting its activities; (iii) requiring the institution to issue additional capital stock (including additional voting stock) or to be acquired; (iv) restricting transactions between the institution and its affiliates; (v) restricting the interest rate the institution may pay on deposits; (vi) ordering a new election of directors of the institution; (vii) requiring that senior executive officers or directors be dismissed; (viii) prohibiting the institution from accepting deposits from correspondent banks; (ix) requiring the institution to divest certain subsidiaries; (x) prohibiting the payment of principal or interest on subordinated debt; and (xi) ultimately, appointing a receiver for the institution.

 

As of December 31, 2004: (i) the Bank was not subject to a directive from the FDIC to increase its capital to an amount in excess of the minimum regulatory capital requirements; (ii) the Bank exceeded its minimum regulatory capital requirements under FDIC capital adequacy guidelines; and (iii) the Bank was “well-capitalized,” as defined by FDIC regulations.

 

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

 

The payment of dividends by any financial institution or its holding company is affected by the requirement to maintain adequate capital pursuant to applicable capital adequacy guidelines and regulations, and a financial institution generally is prohibited from paying any dividends if, following payment thereof, the institution would be undercapitalized. As described above, the Bank exceeded its minimum capital requirements under applicable guidelines as of December 31, 2004. As of December 31, 2004, approximately $9.8 million was available to be paid as dividends by the Bank. Notwithstanding the availability of funds for dividends, however, the FDIC may prohibit the payment of any dividends by the Bank if the FDIC determines such payment would constitute an unsafe or unsound practice.

 

Insider Transactions.  The Bank is subject to certain restrictions imposed by federal law on extensions of credit to the Company, on investments in the stock or other securities of the Company and the acceptance of the stock or other securities of the Company as collateral for loans made by the Bank. Certain limitations and reporting requirements are also placed on extensions of credit by the Bank to its directors and officers, to directors and officers of the Company, to principal shareholders of the Company and to “related interests” of such directors, officers and principal shareholders. In addition, federal law and regulations may affect the terms upon which any

 

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person who is a director or officer of the Company or the Bank or a principal shareholder of the Company may obtain credit from banks with which the Bank maintains a correspondent relationship.

 

Safety and Soundness Standards.  The federal banking agencies have adopted guidelines that establish operational and managerial standards to promote the safety and soundness of federally insured depository institutions. The guidelines set forth standards for internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, asset quality and earnings. In general, the safety and soundness guidelines prescribe the goals to be achieved in each area, and each institution is responsible for establishing its own procedures to achieve those goals. If an institution fails to comply with any of the standards set forth in the guidelines, the institution’s primary federal regulator may require the institution to submit a plan for achieving and maintaining compliance. If an institution fails to submit an acceptable compliance plan, or fails in any material respect to implement a compliance plan that has been accepted by its primary federal regulator, the regulator is required to issue an order directing the institution to cure the deficiency. Until the deficiency cited in the regulator’s order is cured, the regulator may restrict the institution’s rate of growth, require the institution to increase its capital, restrict the rates the institution pays on deposits or require the institution to take any action the regulator deems appropriate under the circumstances. Noncompliance with the standards established by the safety and soundness guidelines may also constitute grounds for other enforcement action by the federal banking regulators, including cease and desist orders and civil money penalty assessments.

 

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

 

Federal law permits state and national banks to merge with banks in other states subject to: (i) regulatory approval; (ii) federal and state deposit concentration limits; and (iii) state law limitations requiring the merging bank to have been in existence for a minimum period of time (not to exceed five years) prior to the merger. The establishment of new interstate branches or the acquisition of individual branches of a bank in another state (rather than the acquisition of an out-of-state bank in its entirety) is permitted only in those states that authorize such expansion.

 

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

 

Federal Reserve System.  Federal Reserve regulations, as presently in effect, require depository institutions to maintain non-interest earning reserves against their transaction accounts (primarily NOW and regular checking accounts), as follows: for transaction accounts aggregating $47.6 million or less, the reserve requirement is 3% of total transaction accounts; and for transaction accounts aggregating in excess of $47.6 million, the reserve requirement is $1.218 million plus 10% of the aggregate amount of total transaction accounts in excess of $47.6 million. The first $7.0 million of otherwise reservable balances are exempted from the reserve requirements. These reserve requirements are subject to annual adjustment by the Federal Reserve. As of December 31, 2004, the Bank was in compliance with the foregoing requirements.

 

The Insurance Subsidiary

 

The Bank is the sole shareholder of West Suburban Insurance Services, Inc. (“WSIS”), an Illinois corporation licensed as a general insurance agency by the Illinois Department of Insurance (the “Department”). WSIS is subject to supervision and regulation by the Department with regard to compliance with the laws and regulations governing insurance agents and by the Commissioner and the FDIC with regard to compliance with banking laws and regulations applicable to subsidiaries of Illinois-chartered, FDIC insured banks.

 

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Available Information

 

West Suburban’s Internet address is www.westsuburbanbank.com. Beginning from at least November 15, 2002, West Suburban has made available on or through its Internet website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material was electronically filed with, or furnished to, the Securities and Exchange Commission.

 

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EXECUTIVE OFFICERS OF WEST SUBURBAN

 

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

 

Name (Age) and Position and Offices with West Suburban (year first elected to office)		Principal Occupations and Employment for Past Five Years and Other Information
Kevin J. Acker (55) Chairman and Chief Executive Officer (1993) and Vice President (1986)		Senior Vice President, Marketing of the Bank since 1997
Keith W. Acker (55) Chief Operations Officer (1996)		Director, President and Trust Officer of the Bank since 1986
Duane G. Debs (48) President (1997) and Chief Financial Officer (1993)		Senior Vice President, Trust Officer of the Bank since 1997 and Vice President, Comptroller of the Bank since 1987
Michael P. Brosnahan (55) Vice President (1997)		Senior Vice President, Commercial Lending and Community Reinvestment Act Officer of the Bank since 1989

 

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STATISTICAL DATA

 

The statistical data required by Exchange Act Industry Guide 3, “Statistical Disclosure By Bank Holding Companies,” has been incorporated by reference from the Company’s 2004 Annual Report to Shareholders (attached as Exhibit 13 hereto) or is set forth below. This data should be read in conjunction with the Company’s 2004 Consolidated Financial Statements and related notes, and the discussion included in Management’s Discussion and Analysis of Financial Condition and Results of Operations as set forth in the Company’s 2004 Annual Report to Shareholders.

 

Securities

 

The following table sets forth by category the amortized cost of securities at December 31 (dollars in thousands):

 

		2004				2003			2002
Available for sale
Corporate		$		51,198		$	45,831		$	63,251
U.S. government agencies and corporations		306,669				323,910			167,075
Mortgage-backed		121,969				38,346			18,228
States and political subdivisions		5,824				33,420			2,842
Preferred stock		1,003				17,239			17,240
Total securities available for sale		486,663				458,746			268,636
Held to maturity
U.S. government agencies and corporations		43,405				13,998			23,012
Mortgage-backed		12,430				1,959			3,115
States and political subdivisions		16,101				13,238			23,750
Total securities held to maturity		71,936				29,195			49,877
Federal Home Loan Bank stock		5,352				5,039			4,668
Total securities		$	563,951			$	492,980		$	323,181

 

The following table sets forth, by contractual maturity, the amortized cost and weighted average yield of debt securities available for sale at December 31, 2004. Yields on tax-exempt securities represent actual coupon yields, net of premium amortization and discount accretion (dollars in thousands):

 

		Corporate					U.S. Government Agencies and Corporations					Mortgage-backed					States and Political Subdivisions
		Amortized Cost			Weighted Average Yield		Amortized Cost			Weighted Average Yield		Amortized Cost			Weighted Average Yield		Amortized Cost			Weighted Average Yield
Within 1 year		$	6,073		3.54	%	$	20,027		2.06	%	$	—		—	%	$	379		2.84	%
After 1 year but within 5 years		28,369			3.85	%	253,508			3.18	%	5,870			4.48	%	1,571			2.82	%
After 5 years but within 10 years		15,256			4.15	%	33,134			3.86	%	44,083			3.60	%	2,900			2.85	%
After 10 years		1,500			4.01	%	—			—	%	72,016			3.46	%	974			3.03	%
Total		$	51,198		3.91	%	$	306,669		3.18	%	$	121,969		3.56	%	$	5,824		2.87	%

 

The weighted average yield on preferred stock and Federal Home Loan Bank stock was 5.59% at December 31, 2004.

 

12

 

The following table sets forth, by contractual maturity, the amortized cost and weighted average yield of securities held to maturity at December 31, 2004 (dollars in thousands). Yields on tax-exempt securities represent actual coupon yields, net of premium amortization and discount accretion:

 

		U.S. Government Agencies and Corporations					Mortgage-backed					States and Political Subdivisions
		Amortized Cost			Weighted Average Yield		Amortized Cost			Weighted Average Yield		Amortized Cost			Weighted Average Yield
Within 1 year		$	6,000		2.79	%	$	—		—	%	$	1,108		3.58	%
After 1 year but within 5 years		37,405			2.87	%	—			—	%	6,775			4.88	%
After 5 years but within 10 years		—			—	%	—			—	%	3,846			3.98	%
After 10 years		—			—	%	12,430			4.30	%	4,372			4.68	%
Total		$	43,405		2.86	%	$	12,430		4.30	%	$	16,101		4.52	%

 

No securities holdings of a single issuer, other than U.S. government agencies and corporations, exceed 10% of shareholders’ equity of the Company at December 31, 2004. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without prepayment penalties. Approximately $232.4 million of securities are callable in 2005. Most of these callable securities were issued by U.S. government agencies and corporations.

 

Loan Portfolio

 

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

 

		2004			2003			2002			2001			2000
Commercial		$	267,799		$	270,220		$	330,775		$	323,036		$	276,519
Consumer		7,552			10,040			11,591			10,514			9,101
Indirect automobile		38,651			60,929			90,617			102,183			100,847
Real estate
Residential		146,259			135,776			135,311			152,495			180,089
Commercial		207,978			217,865			212,010			195,800			183,899
Home equity		237,622			205,272			169,020			145,972			133,609
Construction		135,264			171,975			174,001			157,328			129,316
Held for sale		329			989			4,224			5,840			160
Credit card		14,682			14,872			13,732			10,437			12,037
Other		516			697			1,382			2,033			1,962
Total		1,056,652			1,088,635			1,142,663			1,105,638			1,027,539
Allowance for loan losses		(10,527		)	(14,420		)	(13,847		)	(12,262		)	(11,399		)
Loans, net		$	1,046,125		$	1,074,215		$	1,128,816		$	1,093,376		$	1,016,140

 

13

 

The following table sets forth the maturity and interest rate sensitivity of selected loan categories at December 31, 2004 (dollars in thousands):

 

		Remaining Maturity
		One year or less			One to five years			Over five years			Total
Real estate-construction		$	133,261		$	2,003		$	—		$	135,264
Other loans		394,344			322,373			204,671			921,388
Total		$	527,605		$	324,376		$	204,671		$	1,056,652
Variable rate		$	512,091		$	194,135		$	4,055		$	710,281
Fixed rate		15,514			130,241			200,616			346,371
Total		$	527,605		$	324,376		$	204,671		$	1,056,652

 

Nonperforming Loans

 

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

 

		2004			2003			2002			2001			2000
Loans past due 90 days or more still on accrual		$	1,036		$	380		$	1,789		$	11,338		$	491
Nonaccrual loans		3,815			15,008			12,021			3,945			1,064
Total nonperforming loans		4,851			15,388			13,810			15,283			1,555
Other real estate		3,156			1,266			40			1,410			1,940
Total nonperforming assets		$	8,007		$	16,654		$	13,850		$	16,693		$	3,495
Nonperforming loans as a percent of total loans		0.5		%	1.4		%	1.2		%	1.4		%	0.2		%
Nonperforming assets as a percent of total assets		0.5		%	1.0		%	0.9		%	1.1		%	0.2		%

 

The Company’s policy is to discontinue accruing interest on a loan when it becomes 90 days past due or, on an earlier date, if management believes, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that collection of principal or interest is doubtful. In some circumstances a loan that is more than 90 days past due can remain on accrual status if it is fully secured and in process of collection. When a loan has been placed on nonaccrual, interest earned but not collected is charged back to interest income. When payments are received on nonaccrual loans they are first applied to principal, then to interest income and finally to expenses incurred for collection. Interest income received on nonaccrual loans was immaterial for the years presented above. Potential problem loans are loans included on a watch list presented to the board of directors that do not meet the definition of a nonperforming loan.  Our decision to include performing loans on a watch list does not necessarily mean that we expect losses to occur, but we recognize a higher degree of risk associated with these loans. Potential problem loans as of December 31, 2004 were $24.0 million.

 

14

 

Allowance for Loan Losses

 

The Company maintains an allowance for loan losses at a level management believes is sufficient to absorb credit losses in the loan portfolio. The allowance for loan losses represents the Company’s estimate of probable losses in the loan portfolio at each balance sheet date and is based on the review of available and relevant information. The allowance contains allocations for probable losses that have been identified relating to specific borrowing relationships as well as probable losses for pools of loans. The allowance for loan losses is evaluated monthly by the Company to determine the appropriate level of the allowance. The amount of the allowance for loan losses is determined based on a variety of factors, including assessment of the credit risk of the loans in the loan portfolio, volume of the loans, delinquent loans, evaluation of current economic conditions in the market area, actual charge-offs during the period and historical loss experience. Loan quality is continually monitored by management and reviewed by the loan committee on a monthly basis.

 

All categories of loans are evaluated on a category by category basis. In addition, individual commercial, construction and commercial mortgage loans are evaluated to determine if a specific loss allocation is needed for problem loans deemed to have a shortfall in collateral. Management also considers the borrower’s current economic status including liquidity and future business viability. Other factors used in the allocation of the allowance include levels and trends of past dues and charge-offs along with concentrations of credit within the commercial and commercial real estate loan portfolios. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as future events occur. Along with the allocation of the allowance on a category by category basis and the specific allocations for individual borrowing relationships, the allowance includes a relatively small portion that remains unallocated.

 

Management adjusts the allowance for loan losses by recording a provision for loan losses in an amount sufficient to maintain the allowance at the level determined appropriate. Loans are charged-off when deemed to be uncollectible by management. The Company believes that the allowance for loan losses is adequate to provide for estimated probable credit losses in the loan portfolio.

 

15

 

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

 

		2004			2003			2002			2001			2000
Allowance for loan losses at beginning of period		$	14,420		$	13,847		$	12,262		$	11,399		$	10,759
Loan charge-offs
Commercial		3,936			1,408			5,869			1,789			1,132
Consumer		31			19			61			6			50
Indirect automobile		113			186			244			171			101
Real estate
Residential		—			—			—			45			7
Commercial		164			48			341			—			—
Home equity		12			9			—			30			—
Construction		—			—			—			—			—
Credit card		236			195			274			217			208
Other		72			82			12			47			4
Total loan charge-offs		4,564			1,947			6,801			2,305			1,502
Loan recoveries
Commercial		315			227			95			113			520
Consumer		3			12			5			8			14
Indirect automobile		65			73			52			22			6
Real estate
Residential		—			—			3			4			8
Commercial		—			—			—			—			—
Home equity		—			—			—			9			—
Construction		—			—			—			—			—
Credit card		73			56			106			62			94
Other		15			2			—			—			—
Total loan recoveries		471			370			261			218			642
Net loan charge-offs		4,093			1,577			6,540			2,087			860
Provision for loan losses		200			2,150			8,125			2,950			1,500
Allowance for loan losses at end of period		$	10,527		$	14,420		$	13,847		$	12,262		$	11,399
Allowance for loan losses to total loans		1.00		%	1.33		%	1.21		%	1.11		%	1.11		%
Net charge-offs to average total loans		0.39		%	0.14		%	0.59		%	0.20		%	0.09		%

 

The amount of the additions to the allowance for loan losses charged to expense for the periods indicated were based on a variety of factors, including actual loans charged-off during the respective year, historical loss experience, changes in the nature and volume of the loan portfolio including nonperforming loans, specific loss allocations for individual loans and an evaluation of current economic conditions.

 

The allocation shown in the following table, encompassing the major segments of the loan portfolio, represents only an estimate for each category of loans based on historical loss experience and management’s judgment of amounts deemed reasonable to provide for probable losses within each category.

 

16

 

Estimated losses for categories of homogeneous loan types are generally made on an aggregate basis (dollars in thousands).

 

		2004					2003					2002					2001					2000
		Amount			Percent of Loans in Each Category to Total Loans		Amount			Percent of Loans in Each Category to Total Loans		Amount			Percent of Loans in Each Category to Total Loans		Amount			Percent of Loans in Each Category to Total Loans		Amount			Percent of Loans in Each Category to Total Loans
Commercial		$	6,131		25.3	%	$	10,491		24.8	%	$	9,304		29.0	%	$	5,619		29.2	%	$	4,339		26.9	%
Consumer (1)		163			0.7	%	64			1.0	%	78			1.1	%	60			1.1	%	79			1.1	%
Indirect automobile		189			3.7	%	256			5.6	%	380			7.9	%	479			9.3	%	491			9.8	%
Real estate
Residential (2)		366			13.9	%	260			12.6	%	346			12.2	%	491			14.3	%	900			17.5	%
Commercial		624			19.7	%	523			20.0	%	615			18.6	%	1,880			17.7	%	1,808			17.9	%
Home equity		856			22.5	%	432			18.9	%	522			14.8	%	526			13.2	%	668			13.0	%
Construction		1,637			12.8	%	1,892			15.8	%	1,984			15.2	%	2,946			14.2	%	2,586			12.6	%
Credit card		302			1.4	%	326			1.3	%	432			1.2	%	245			1.0	%	324			1.2	%
Unallocated		259			—	%	176			—	%	186			—	%	16			—	%	204			—	%
Total		$	10,527		100.0	%	$	14,420		100.0	%	$	13,847		100.0	%	$	12,262		100.0	%	$	11,399		100.0	%

 

(1)          Consumer loans include consumer and other loans.

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

 

Deposits

 

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

 

		2004					2003					2002
		Average Balance			Rate		Average Balance			Rate		Average Balance			Rate
Demand-noninterest-bearing		$	147,130		—	%	$	152,443		—	%	$	144,352		—	%
NOW		313,023			0.3	%	289,718			0.3	%	260,916			0.4	%
Money market checking		232,431			1.4	%	234,031			1.4	%	228,555			1.9	%
Savings		447,583			1.2	%	414,074			1.3	%	337,671			1.8	%
Time deposits
Less than $100,000		318,447			3.0	%	312,473			3.2	%	307,122			4.1	%
$100,000 and greater		99,208			3.1	%	92,811			3.1	%	90,053			3.9	%
Total		$	1,557,822		1.4	%	$	1,495,550		1.5	%	$	1,368,669		2.0	%

 

17

 

The following table sets forth by maturity time deposits $100,000 and greater at December 31 (dollars in thousands):

 

 

Return on Equity and Assets and Other Financial Ratios

 

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

 

		2004		2003		2002
Return on average total assets		1.36	%	1.55	%	1.17	%
Return on average shareholders’ equity plus common stock in ESOP subject to contingent repurchase obligation		15.58	%	16.94	%	12.01	%
Cash dividends declared to net income		91.41	%	73.45	%	100.09	%
Average shareholders’ equity plus common stock in ESOP subject to contingent repurchase obligation to average total assets		8.73	%	9.16	%	9.76	%

 

18

 

ITEM 2.                        PROPERTIES

 

West Suburban and the Bank occupy a total of approximately 259,200 square feet in 33 full-service branches, four limited-service branches and six departments providing insurance, financial and other services. West Suburban’s principal office is located in approximately 32,500 square feet of office space at 711 South Meyers Road, Lombard, Illinois. As indicated below, the Bank also operates its principal office as a branch. Travel With West Suburban, West Suburban Bank Land Trust, West Suburban Financial Services and West Suburban Insurance Services, Inc. are located at 711 South Meyers Road. West Suburban Bank VISA is located at 701 South Meyers Road. The Prepaid Solutions Group is located at 17W754 22nd Street.

 

The following table sets forth certain information concerning the branches of the Bank as of December 31, 2004:

 

Location of Branches and other services		Approximate Square Feet		Status
711 South Meyers Road Lombard, Illinois		32,500		Owned
40 East St. Charles Road Villa Park, Illinois		2,700		Owned
17W754 22nd Street Oakbrook Terrace, Illinois		6,100		Owned
707 North Main Street Lombard, Illinois		4,100		Owned
221 South West Street Wheaton, Illinois		800		Owned
879 East Geneva Road Carol Stream, Illinois		3,600		Leased
1104 West Boughton Road Bolingbrook, Illinois		4,500		Owned
295 West Loop Road Wheaton, Illinois		4,500		Owned
6400 South Cass Avenue Westmont, Illinois		3,100		Leased
2800 Finley Road Downers Grove, Illinois		10,700		Owned
1122 South Main Street Lombard, Illinois		6,400		Owned
3S041 Route 59 Warrenville, Illinois		3,700		Owned
5330 Main Street Downers Grove, Illinois		10,500		Owned
8001 South Cass Avenue Darien, Illinois		17,800		Owned
672 East Boughton Road Bolingbrook, Illinois		7,100		Owned

 

19

 

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

 

20

 

Location of Branches and other services		Approximate Square Feet		Status
Beacon Hill Retirement Community 2400 South Finley Road Lombard, Illinois		100		Leased
717 South Meyers Road Lombard, Illinois		7,100		Owned
701 South Meyers Road Lombard, Illinois		5,200		Owned
Lexington Health Care Center of Elmhurst 400 West Butterfield Road Elmhurst, Illinois		100		Leased
Lexington Health Care Center of Lombard 555 Foxworth Boulevard Lombard, Illinois		100		Leased

 

ITEM 3.                        LEGAL PROCEEDINGS

 

There are no material pending legal proceedings to which West Suburban or the Bank is a party to other than ordinary routine litigation incidental to their respective businesses.

 

ITEM 4.                        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

None.

 

PART II

 

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

 

West Suburban’s authorized and outstanding equity securities consist of common stock, no par value.

 

West Suburban hereby incorporates by reference the information called for by Item 5 of this Form 10-K from the section entitled “Common Stock, Book Value and Dividends” on page 4 of West Suburban’s Annual Report to Shareholders for the fiscal year ended December 31, 2004 (attached as Exhibit 13 hereto).

 

West Suburban’s common stock is not traded on any national or regional exchange. While there is no established trading market for West Suburban’s common stock, West Suburban is aware that from time to time limited or infrequent quotations are made with respect to West Suburban’s common stock and that there occurs limited trading in West Suburban’s common stock resulting from private transactions not involving brokers or dealers. Transactions in West Suburban’s common stock have been infrequent. As of February 22, 2005, West Suburban had 432,495 shares of common stock outstanding held by 1,114 shareholders of record. Management is aware of 21 transactions during 2004 involving the sale, in the aggregate, of 1,272 shares of West Suburban’s common stock. The average sale price in such transactions was $624.27 per share.

 

ITEM 6.                        SELECTED FINANCIAL DATA

 

West Suburban hereby incorporates by reference the information called for by Item 6 of this Form 10-K from the section entitled “Selected Financial Data” on page 30 of West Suburban’s Annual Report to Shareholders for the fiscal year ended December 31, 2004 (attached as Exhibit 13 hereto).

 

21

 

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

 

West Suburban hereby incorporates by reference the information called for by Item 7 of this Form 10-K from the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 32 through 40 of West Suburban’s Annual Report to Shareholders for the fiscal year ended December 31, 2004 (attached as Exhibit 13 hereto).

 

ITEM 7A.               QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

West Suburban hereby incorporates by reference the information called for by Item 7A of this Form 10-K from the Interest Rate Sensitivity section included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 32 through 40 of West Suburban’s Annual Report to Shareholders for the fiscal year ended December 31, 2004 (attached as Exhibit 13 hereto).

 

ITEM 8.                        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

West Suburban hereby incorporates by reference the information called for by Item 8 of this Form 10-K from the Consolidated Financial Statements on pages 6 through 26 of West Suburban’s Annual Report to Shareholders for the fiscal year ended December 31, 2004 (attached as Exhibit 13 hereto).

 

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

 

None.

 

ITEM 9A.              CONTROLS AND PROCEDURES

 

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chairman and Chief Executive Officer and the President and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of December 31, 2004. Based on that evaluation, the Company’s management, including the Chairman and Chief Executive Officer and the President and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective.

 

There have been no significant changes in the Company’s internal control over financial reporting that has affected or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

West Suburban’s management report on internal control over financial reporting is set forth in, and West Suburban hereby incorporates by reference, the section entitled “Report by Management on Internal Control over Financial Reporting” on page 27 of West Suburban’s Annual Report to Shareholders for the fiscal year ended December 31, 2004 (attached as Exhibit 13 hereto).

 

 

ITEM 9B.              OTHER INFORMATION

 

None.

 

22

 

PART III

 

ITEM 10.                 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

 

In addition, and as a supplement to the information provided under the caption “Executive Officers of West Suburban” in Part I of this Form 10-K, West Suburban hereby incorporates by reference the information called for by Item 10 of this Form 10-K regarding directors of West Suburban from the section entitled “Election of Directors” of West Suburban’s 2005 Proxy Statement.

 

Section 16(a) of the Exchange Act requires that the Company’s executive officers and directors and persons who own more than 10% of the Company’s Common Stock file reports of ownership and changes in ownership with the Securities and Exchange Commission and with the exchange on which West Suburban’s shares of Common Stock are traded. Such persons are also required to furnish the Company with copies of all Section 16(a) forms they file. Based solely on the Company’s review of the copies and forms furnished to the Company and, if appropriate, representations made to the Company by any such reporting person concerning whether a Form 5 was required to be filed for the 2004 fiscal year, the Company is not aware that any of its directors and executive officers or 10% shareholders failed to comply with the filing requirements of Section 16(a) during 2004.

 

West Suburban presently intends to adopt a code of ethics that applies to West Suburban’s principal executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions. Upon adoption, a copy of West Suburban’s code of ethics will be available in the Shareholder Information section of West Suburban’s website, www.westsuburbanbank.com.

 

ITEM 11.                 EXECUTIVE COMPENSATION

 

West Suburban hereby incorporates by reference the information called for by Item 11 of this Form 10-K from the section entitled “Executive Compensation” of West Suburban’s 2005 Proxy Statement; provided, however, Report of the Board of Directors on Executive Compensation is specifically not incorporated into this Form 10-K.

 

ITEM 12.                 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

West Suburban hereby incorporates by reference the information called for by Item 12 of this Form 10-K from the sections entitled “Security Ownership of Certain Beneficial Owners” and “Security Ownership of Management” of West Suburban’s 2005 Proxy Statement.

 

ITEM 13.                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

West Suburban hereby incorporates by reference the information called for by Item 13 of this Form 10-K from the section entitled “Transactions with Directors, Officers and Associates” of West Suburban’s 2005 Proxy Statement.

 

ITEM 14.                 PRINCIPAL ACCOUNTING FEES AND SERVICES

 

West Suburban hereby incorporates by reference the information called for by Item 14 of this Form 10-K from the section entitled “Accounting Fees and Services” of West Suburban’s 2005 Proxy Statement.

 

23