WEST SUBURBAN BANCORP INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

For fiscal year ended December 31, 1998

OR

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For transition period from __________ to __________

Commission File Number 0 - 17609

WEST SUBURBAN BANCORP, INC.
----------------------------------------------------------
(Exact name of Registrant as specified in its charter)

ILLINOIS 36-3452469
- --------------------------------- ---------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)

711 SOUTH MEYERS ROAD, LOMBARD, ILLINOIS 60148
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (630) 629-4200

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
NONE NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

COMMON STOCK, NO PAR VALUE
--------------------------
(Title of Class)

Indicate by check mark 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 |X| No |_|

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 10-K or any amendment
to this form 10-K |X|
-
The index to exhibits is located on page 28 of 86 total sequentially
numbered pages.

The aggregate market value of voting common stock of Registrant held by
non-affiliates as of December 31, 1998 was $136,479,816 (1). At December 31,
1998, 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, 1998 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 12, 1999 are incorporated by reference in
Part III hereof, to the extent indicated herein.

- ----------
(1) Based on the last reported price of an actual transaction in
Registrant's common stock on February 2, 1999, 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.

2

WEST SUBURBAN BANCORP, INC.

1998 Form 10-K Annual Report

Table of Contents

PART I
Sequential
Page Number

Item 1. Business............................................................. 4
Item 2. Properties...........................................................19
Item 3. Legal Proceedings....................................................21
Item 4. Submission of Matters to a Vote of Security Holders..................21

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters............................................................22
Item 6. Selected Financial Data..............................................22
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................23
Item 7A. Quantitative and Qualitative Disclosures about Market Risk...........23
Item 8. Financial Statements and Supplementary Data..........................23
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Matters .................................................23

PART III

Item 10. Directors and Executive Officers of the Registrant...................24
Item 11. Executive Compensation...............................................24
Item 12. Security Ownership of Certain Beneficial Owners and Management.......24
Item 13. Certain Relationships and Related Transactions.......................24

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K......25

Form 10-K Signature Page......................................................27

3

This report may contain certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company (as defined below)
intends such forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in the Private Securities
Reform Act of 1995, and is including this statement for purposes of indicating
such intent. Forward-looking statements which are based on certain assumptions
and describe future plans, strategies and expectations of the Company, are
generally identifiable by use of the words "believe," "expect," "intend,"
"anticipate," "estimate," "project" or similar expressions. 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 affect on the
operations and future prospects of West Suburban and the Bank (as defined below)
include, but are not limited to, changes in interest rates, general economic
conditions, legislative/regulatory changes, monetary and fiscal policies of the
U.S. Government, including policies of the U.S. Treasury and the Federal Reserve
Board, the quality or composition of the Bank's loan or investment portfolios,
demand for loan products, deposit flows, competition, demand for financial
services in the Company's market area and accounting principles, policies and
guidelines. These risks and uncertainties should be considered in evaluating
forward-looking statements and undue reliance should not be placed on such
statements. Further information concerning the Company and its business,
including additional 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."

West Suburban was incorporated in 1986 and became the parent bank holding
company of the Bank in 1988. On July 13, 1990, West Suburban acquired a
federally-chartered thrift, thereby becoming a thrift holding company until that
entity was merged into the Bank in 1997.

The Bank is headquartered in the western suburbs of Chicago among some of the
faster growing areas in Illinois. 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 size businesses. The western suburbs of Chicago have a
diversified economy, with many corporate headquarters and numerous small to
medium size 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, safe
deposit boxes and extended banking hours, including Sunday hours and 24-hour
banking through either a proprietary network of 36 automated teller machines
("ATMs") or Tele-Bank 24, a bank-by-phone system. Other consumer related
services are available, including investment products and a competitively priced
VISA card through West Suburban Bank Card Services. The Bank also offers its
customers a debit card called the West Suburban Bank Check Card.

4

The following table sets forth financial and other information concerning the
Bank as of and for the year ended December 31, 1998:

WEST SUBURBAN BANK
(Dollars in thousands)

Share- Return on Average
Year Formed/Year Number of Total holder's Net ----------------------------
Affiliated With the Parent Locations Assets Equity Income Assets Equity
- ---------------------------- --------------- -------------- ----------- ---------- ---------- ----------

West Suburban Bank 32 $1,307,811 $117,607 $16,217 1.3% 14.0%
(1962/1988)

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 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.

EMPLOYEES

The Company employed 643 persons (506 full time equivalent employees) on
December 31, 1998. The Company believes that its relationship with its employees
is good.

5

SUPERVISION AND REGULATION

General

Financial institutions and their holding companies are extensively regulated
under federal and state law. As a result, the growth and earnings performance of
the Company can be affected not only by management decisions and general
economic conditions, but also by the requirements of applicable state and
federal statutes and regulations and the policies of various governmental
regulatory authorities, including the Board of Governors of the Federal Reserve
System (the "Federal Reserve"), the Federal Deposit Insurance Corporation (the
"FDIC"), the Illinois Commissioner of Banks and Real Estate (the
"Commissioner"), the Internal Revenue Service, state taxing authorities and the
Securities and Exchange Commission (the "SEC"). The effect of applicable
statutes, regulations and regulatory policies can be significant, and cannot be
predicted with a high degree of certainty.

Federal and state laws and regulations generally applicable to financial
institutions, such as the Company and its subsidiaries, regulate, among other
things, the scope of business, investments, reserves against deposits, capital
levels relative to operations, the nature and amount of collateral for loans,
the establishment of branches, mergers, consolidations and dividends. The system
of supervision and regulation applicable to the Company and its subsidiaries
establishes a comprehensive framework for their respective operations and is
intended primarily for the protection of the FDIC's deposit insurance funds and
the depositors, rather than the shareholders, of financial institutions.

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 to the Company and
its subsidiaries, nor does it restate all of the requirements of the statutes,
regulations and regulatory policies that are described. As such, the following
is qualified in its entirety by reference to the applicable statutes,
regulations and regulatory policies. Any change in applicable law, regulations
or regulatory policies may have a material effect on the business of the Company
and its subsidiaries.

Recent Regulatory Developments

PENDING LEGISLATION. Legislation has been introduced in the Congress that would
allow bank holding companies to engage in a wider range of nonbanking
activities, including greater authority to engage in securities and insurance
activities. The expanded powers generally would be available to a bank holding
company only if the bank holding company and its bank subsidiaries remain
well-capitalized and well-managed. At this time, the Company is unable to
predict whether the proposed legislation will be enacted and, therefore, is
unable to predict the impact such legislation may have on the Company and its
subsidiaries.

The Company

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

INVESTMENTS AND ACTIVITIES. Under the BHCA, a bank holding company must obtain
Federal Reserve approval before: (i) acquiring, directly or indirectly,
ownership or control of any voting shares of another bank or bank holding
company if, after the acquisition, it would own or control more than 5%

6

of the shares of the other bank or bank holding company (unless it already owns
or controls the majority of such shares); (ii) acquiring all or substantially
all of the assets of another bank; or (iii) merging or consolidating with
another 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 within the
United States without regard to whether the acquisition is prohibited by the law
of the state in which the target bank is located. In approving interstate
acquisitions, however, 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 which 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 also generally prohibits the Company from acquiring direct or indirect
ownership or control of more than 5% of the voting shares of any company which
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."
Under current regulations of the Federal Reserve, the Company and its non-bank
subsidiaries are permitted to engage in a variety of banking-related businesses,
including the operation of a thrift, sales and 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.

Federal law also prohibits any person or company from acquiring "control" of a
bank or a bank holding company without prior notice to the appropriate federal
bank regulator. "Control" is defined in certain cases as the acquisition of 10%
of the outstanding shares of a bank or bank holding company.

CAPITAL REQUIREMENTS. Bank holding companies are required to maintain minimum
levels of capital in accordance with Federal Reserve capital adequacy
guidelines. If capital falls below minimum guideline 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: a risk-based
requirement expressed as a percentage of total risk-weighted assets, and 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%, at least one-half of which must be Tier 1 capital. 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 mortgage servicing rights and purchased credit card relationships).
Total capital consists primarily of Tier 1 capital plus certain other debt and
equity instruments which 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 will 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.

7

As of December 31, 1998, the Company had regulatory capital in excess of the
Federal Reserve's minimum requirements, with a risk-based capital ratio of 13.5%
and a leverage ratio of 10.4%.

DIVIDENDS. The Illinois Business Corporation Act, as amended, prohibits West
Suburban 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, the Federal
Reserve has issued a policy statement with regard to the payment of cash
dividends by bank holding companies. The policy statement provides that a bank
holding company should not pay cash dividends which exceed its net income or
which 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. West Suburban'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 a BIF-insured,
Illinois-chartered bank, the Bank is subject to the examination, supervision,
reporting and enforcement requirements of the Commissioner, as the chartering
authority for Illinois banks, and the FDIC, as administrator of the BIF.

DEPOSIT INSURANCE. As a 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, 1998, BIF assessments ranged from 0% of
deposits to 0.27% of deposits. For the semi-annual assessment period beginning
January 1, 1999, BIF assessment rates will continue to range from 0% of deposits
to 0.27% of deposits.

The FDIC may terminate the deposit insurance of any insured depository
institution if the FDIC determines, after a hearing, that the institution (i)
has engaged or is engaging in unsafe or unsound practices, (ii) is in an unsafe
or unsound condition to continue operations or (iii) has violated any applicable
law, regulation, order, or any condition imposed in writing by, or written
agreement with, the FDIC. The FDIC may also suspend deposit insurance
temporarily during the hearing process for a permanent termination of insurance
if the institution has no tangible capital. Management of the Company is not
aware of any activity or condition that could result in termination of the
deposit insurance of the Bank.

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

8

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. These FICO assessments are in addition to amounts assessed by the
FDIC for deposit insurance. Until January 1, 2000, the FICO assessments made
against BIF members may not exceed 20% of the amount of the FICO assessments
made against SAIF members. Between January 1, 2000 and the final maturity of the
outstanding FICO obligations in 2019, BIF members and SAIF members will share
the cost of the interest on the FICO bonds on a PRO RATA basis. During the year
ended December 31, 1998, the FICO assessment rate for SAIF members ranged
between approximately 0.061% of deposits and approximately 0.063% of deposits,
while the FICO assessment rate for BIF members ranged between approximately
0.012% of deposits and approximately 0.013% of deposits. During the year ended
December 31, 1998, the Bank paid FICO assessments totaling $.22 million.

SUPERVISORY ASSESSMENTS. All Illinois banks are required to pay supervisory
assessments to the Commissioner to fund the operations of the Commissioner. The
amount of the assessment is calculated based on the bank's total assets,
including consolidated subsidiaries, as reported to the Commissioner. During the
year ended December 31, 1998, the Bank paid supervisory assessments to the
Commissioner totaling $.11 million.

CAPITAL REQUIREMENTS. The FDIC has established the following minimum capital
standards for state-chartered insured banks, such as the Bank: a leverage
requirement consisting of a minimum ratio of Tier 1 capital to total assets of
3% for the most highly-rated banks with a minimum requirement of at least 4% for
all others, and a risk-based capital requirement consisting of a minimum ratio
of total capital to total risk-weighted assets of 8%, at least one-half of which
must be Tier 1 capital. For purposes of these capital standards, Tier 1 capital
and total capital consist of substantially the same components as Tier 1 capital
and total capital under the Federal Reserve's capital guidelines for bank
holding companies (SEE "--The Company--Capital Requirements").

The capital requirements described above are minimum requirements. Higher
capital levels will be required if warranted by the particular circumstances or
risk profiles of individual institutions. For example, the 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.

During the year ended December 31, 1998, the Bank was not required by the FDIC
to increase its capital to an amount in excess of the minimum regulatory
requirement. As of December 31, 1998, the Bank exceeded its minimum regulatory
capital requirements with a leverage ratio of 9.2% and a risk-based capital
ratio of 12.2%.

Federal law 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 "well capitalized," "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: requiring the institution to submit a capital restoration plan;
limiting the institution's asset growth and restricting its activities;
requiring the institution to issue additional capital stock (including
additional voting stock) or to be acquired; restricting transactions between the
institution and its affiliates; restricting the interest rate the institution
may pay on deposits; ordering a new election of directors of the institution;
requiring that senior executive officers or directors be dismissed; prohibiting
the institution from accepting deposits from correspondent banks; requiring the
institution to divest certain subsidiaries; prohibiting the payment of principal
or interest on subordinated debt; and ultimately, appointing a receiver for the
institution. As of December 31, 1998, the Bank was "well capitalized," as
defined by FDIC regulations.

DIVIDENDS. Under the Illinois Banking Act, Illinois-chartered banks may not pay,
without prior regulatory approval, dividends in excess of their net profits.

9

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, 1998. As of December 31, 1998, approximately
$22.9 million was available to be paid as dividends to West Suburban 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 and its subsidiaries, on
investments in the stock or other securities of the Company and its
subsidiaries and the acceptance of the stock or other securities of the
Company or its subsidiaries as collateral for loans. 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 and its
subsidiaries, to principal stockholders of the Company, and to "related
interests" of such directors, officers and principal stockholders. In
addition, federal law and regulations may affect the terms upon which any
person becoming a director or officer of West Suburban or one of its
subsidiaries or a principal stockholder of West Suburban may obtain credit
from banks with which the Bank maintains a correspondent relationship.

SAFETY AND SOUNDNESS STANDARDS. The federal banking agencies have adopted
guidelines which 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 addition, in October 1998, the federal banking regulators issued
safety and soundness standards for achieving Year 2000 compliance, including
standards for developing and managing Year 2000 project plans, testing
remediation efforts and planning for contingencies.

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.

Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "Riegle-Neal Act"), both state and national banks are allowed to establish
interstate branch networks through acquisitions of other banks, subject to
certain conditions, including certain limitations on the aggregate amount of
deposits that may be held by the surviving bank and all of its insured
depository institution affiliates. 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 allowed by the
Riegle-Neal Act only if specifically authorized by state law. The legislation
allowed individual states to "opt-out" of certain provisions of the Riegle-Neal
Act by enacting appropriate legislation prior to June 1, 1997. Illinois has
enacted legislation permitting interstate mergers, subject to certain

10

conditions, including a prohibition against interstate mergers involving an
Illinois bank that has been in existence and continuous operation for fewer than
five years.

STATE BANK ACTIVITIES. 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 or its subsidiary, respectively, 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 $46.5 million or
less, the reserve requirement is 3% of total transaction accounts; and for
transaction accounts aggregating in excess of $46.5 million, the reserve
requirement is $1.395 million plus 10% of the aggregate amount of total
transaction accounts in excess of $46.5 million. The first $4.9 million of
otherwise reservable balances are exempted from the reserve requirements. These
reserve requirements are subject to annual adjustment by the Federal Reserve.
The Bank is in compliance with the foregoing requirements.

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.

11

EXECUTIVE OFFICERS OF THE COMPANY

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

Name (Age) and Position
and Offices with West Suburban Principal Occupations and Employment
(year first elected to office) for Past Five Years and Other Information
- ------------------------------------------------------ ---------------------------------------------------------

Kevin J. Acker (49) Senior Vice President, Marketing of the Bank since
Chairman of the Board (1993) and Vice 1997. Director and President of West Suburban
President (1986) Bank of Carol Stream/Stratford Square 1982 -
May 1997

Keith W. Acker (49) Director and President of the Bank since 1986.
Chief Operating Officer (1996) Chairman of the Board of West Suburban Bank
1986 - May 1997

Duane G. Debs (42) Senior Vice President and Comptroller of the Bank
President (1997) and Chief Financial Officer since 1997. President of West Suburban Bank of
(1993) Downers Grove/Lombard 1996 - May 1997.
Director of West Suburban Bank of
Downers Grove/Lombard 1993 - May 1997. Vice
President and Comptroller of the Bank since 1987

Michael P. Brosnahan (49) Senior Vice President, Loans of the Bank since
Vice President (1997) 1989. Director of West Suburban Bank of Aurora
1990 - May 1997

12

STATISTICAL DATA

The statistical data required by Securities and Exchange Act of 1934, as amended
(the "1934 Act") Industry Guide 3, "Statistical Disclosure By Bank Holding
Companies," has been incorporated by reference from the Company's 1998 Annual
Report to Shareholders (attached as Exhibit 13.1 hereto) or is set forth below.
This data should be read in conjunction with the Company's 1998 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 1998 Annual Report to Shareholders.

Investment Securities

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

1998 1997 1996
------------ ------------ -------------

Available For Sale:
Corporate $144,301 $170,335 $64,634
U.S. Government agencies and corporations 46,327 26,550 63,591
U. S. Treasury 505 12,084 16,151
States and political subdivisions 1,188 1,178 1,168
Preferred stock and other equity securities 12,626 8,745 14,070
------------ ------------ -------------
Total investment securities available for sale 204,947 218,892 159,614
------------ ------------ -------------
Held To Maturity:
U.S. Government agencies and corporations 136,467 162,176 130,250
States and political subdivisions 35,212 37,116 39,941
------------ ------------ -------------
Total investment securities held to maturity 171,679 199,292 170,191
------------ ------------ -------------
Total investment securities $376,626 $418,184 $329,805
============ ============ =============

The following table sets forth by contractual maturity the amortized cost and
weighted average yield (not tax-effected) of investment securities available for
sale at December 31, 1998 (dollars in thousands):

U.S. Government
Agencies and States and Political
Corporate Corporations U.S. Treasury Subdivisions
-------------------- --------------------- --------------------- ---------------------
Weighted Weighted Weighted Weighted
Amortized Average Amortized Average Amortized Average Amortized Average
Cost Yield Cost Yield Cost Yield Cost Yield
---------- -------- ---------- --------- ---------- --------- ---------- ---------

Within one year $ 46,846 6.95% $23,214 5.87%
After 1 year but within 5 97,455 7.08 23,034 5.46 $505 6.38% $988 4.30%
After 5 years but within 10 5 8.00
After 10 years 74 200 5.05
---------- --------- ---------- ---------- ---------- --------- --------- ----------
Total $144,301 7.04% $46,327 5.66% $505 6.38% $1,188 4.43%
========== ========= ========== ========== ========== ========= ========= ==========

13

The following table sets forth, by contractual maturity, the amortized cost and
weighted average yield of investment securities held to maturity at December 31,
1998. Yields on tax-exempt securities represent actual coupon yields (dollars in
thousands):

U.S. Government
Agencies and States and Political
Corporations Subdivisions
-------------------------- ---------------------------
Weighted Weighted
Amortized Average Amortized Average
Cost Yield Cost Yield
----------- ----------- ----------- -----------

Within one year $ 23,363 5.35% $ 3,809 3.80%
After 1 year but within 5 96,092 5.60 12,850 4.11
After 5 years but within 10 14,225 6.36 6,958 5.02
After 10 years 2,787 6.00 11,595 6.34
----------- ----------- ----------- -----------
Total $136,467 5.65% $35,212 4.99%
=========== =========== =========== ===========

Loan Portfolio

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

1998 1997 1996 1995 1994
------------- ------------- ----------- ------------ -------------

Commercial (1) $225,774 $233,343 $232,210 $200,986 $156,896
Installment (1) 16,468 21,015 37,511 37,986 33,542
Indirect Auto 30,412
Real estate:
Mortgage 289,934 292,675 299,664 302,062 305,010
Home equity 111,446 127,587 124,805 120,802 120,373
Construction 69,640 72,415 73,432 81,787 72,990
Held for sale 16,514 4,491 1,043 1,523 449
VISA-credit card 14,210 16,235 17,951 19,034 21,342
Other 6,748 4,549 7,229 5,407 7,048
------------- ------------- ----------- ------------ -------------
Total loans 781,146 772,310 793,845 769,587 717,650
Less:
Allowance for loan losses 9,998 9,772 9,603 8,900 8,445
------------- ------------- ----------- ------------ -------------
Loans, net $771,148 $762,538 $784,242 $760,687 $709,205
============= ============= =========== ============ =============

(1) In early 1998, installment loans ($20.2 million) for commercial loan
customers were reclassified for the years 1998 and 1997 to commercial
loans. Balances prior to 1997 were not reclassified.

14

The following table sets forth the maturity and interest rate sensitivity of
selected loan categories at December 31, 1998 (dollars in thousands):

Remaining Maturity
----------------------------------------------------------
One year One to Over
or less five years five years Total
----------- ------------- ------------ ------------

Real estate-construction $ 69,640 $ 69,640
Other loans 407,197 $237,481 $66,828 711,506
----------- ------------- ------------ ------------
Total $476,837 $237,481 $66,828 $781,146
=========== ============= ============ ============

Variable rate $102,182 $102,182
Fixed rate 135,299 $66,828 202,127
------------- ------------ ------------
Total $237,481 $66,828 $304,309
============= ============ ============

Nonperforming Loans

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

1998 1997 1996 1995 1994
----------- ----------- ----------- ------------ ------------

Nonaccrual loans $14,979 $ 3,042 $2,283 $ 1,478 $ 279
Accruing loans past due over 90 days 3,621 4,829 3,813 11,405 4,448
----------- ----------- ----------- ------------ ------------
Total nonperforming loans 18,600 7,871 6,096 12,883 4,727
Other real estate 1,742 2,450 2,757 8,317 10,458
----------- ----------- ----------- ------------ ------------
Total nonperforming assets $20,342 $10,321 $8,853 $21,200 $15,185
=========== =========== =========== ============ ============
Ratio of nonperforming loans to
net loans 2.4% 1.0% .8% 1.7% .7%
=========== =========== =========== ============ ============
Ratio of nonperforming assets to
total assets 1.6% .8% .7% 1.8% 1.5%
=========== =========== =========== ============ ============

The Company's policy is to discontinue accruing interest on a loan when it
becomes 90 days past due or when 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 can be established that payment will be received within another 90
days or if it is fully secured and in process of collection. When a loan has
been placed on nonaccrual status, interest that has been earned but not
collected is charged back to the appropriate interest income account. When
payments are received on nonaccrual loans they are first applied to principal,
then to expenses incurred for collection and finally to interest income. The
gross amount of interest that would have been recorded if all nonaccruing loans
had been accruing interest at their original terms was approximately $615 for
the year ended December 31, 1998 and no interest on nonaccruing loans was
recorded in operations for the year ended December 31, 1998.

As of December 31, 1998, the Company had $9.4 million in credit exposure to a
leasing company consisting of a warehouse line of credit with a principal
balance of $7.3 million and $2.1 million of leases purchased from the leasing
company on a limited recourse basis. The warehouse line of credit is secured by
leases and various other assets. The leasing company was engaged in the business
of originating and servicing small equipment leases until May 1998 when it sold
substantially all of its assets. Subsequently, various irregularities in the
leasing company's operations were discovered. In August 1998, the leasing
company made an assignment for the benefit of creditors. The Company remains a
secured creditor of the leasing company.

The Company has taken possession of certain leases and other assets that secure
the warehouse line of credit and has arranged for the continued servicing of the
leases. The Company is evaluating the

15

continued retention or sale of these leases as well as the purchased leases. The
Company is also conducting negotiations with the guarantors of the leasing
company's obligations and exploring other possible ways to maximize
realizations.

In addition, the Company owns Class B Notes issued in connection with lease
securitizations arranged by the leasing company. During the third quarter of
1998, the Company recognized a loss of $3.2 million representing the
other-than-temporary impairment of the entire carrying value of the Class B
Notes, which were classified as available for sale investment securities. The
leases that comprise the underlying assets of the Class B Notes are serviced by
the institution that serves as the indenture trustee of the trust pursuant to
which Class B Notes were issued.

The Company's impaired loans consisted of commercial and non-residential
mortgage loans totaling $32,161 at December 31, 1998 and $17,156 at December 31,
1997. Of these impaired loans, $485 required a valuation allowance of $36 at
December 31, 1998 compared to impaired loans of $2,496 with a valuation
allowance of $676 at December 31, 1997. The average outstanding balance of
impaired loans was approximately $35,856 and $15,718 for the years ended
December 31, 1998 and 1997, respectively. The interest income recognized on
impaired loans was approximately $2,391 and $1,324 for the years ended December
31, 1998 and 1997, respectively. The Company had no impaired real estate
construction loans during 1998 or 1997.

Allowance for Loan Losses

The allowance for loan losses is established through a provision for loan losses
charged to expense. Loans are charged against the allowance for loan losses when
management believes that the collectibility of the principal is unlikely. The
allowance is an amount that management believes will be adequate to absorb
losses on existing loans that may become uncollectible, based on evaluations of
the collectibility of loans and prior loan loss experience. The evaluations take
into consideration such factors as changes in the nature and volume of the loan
portfolio, overall portfolio quality, review of specific problem loans and
current economic conditions that may affect the borrowers' ability to pay.

The Company reviews its commercial and real estate construction and
non-residential mortgage loans on a quarterly basis to determine the amount of
impairment, if any. Impairment is measured based on the present value of
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 is
maintained for the amount of impairment. Generally, loans 90 or more days past
due and all loans on a nonaccrual basis are considered impaired. Interest income
on impaired loans is recognized in a manner consistent with the Company's
interest policy. Based on such reviews, management at this time does not
anticipate any increase in nonperforming assets that will have a significant
affect on its operations because the estimated exposure to losses has already
been substantially reflected in its allowance for loan losses. This could,
however, change dramatically if a significant decline in the real estate market
area served by the Company occurs.

16

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

1998 1997 1996 1995 1994
------------ ----------- ------------ ------------- ------------

Allowance for loan losses at beginning of
period $9,772 $9,603 $8,900 $8,445 $7,125
Loans charged-off:
Commercial 1,868 956 484 914 302
Installment 77 213 87 47 162
Real estate mortgages 237 58 4 311 463
Home equity 37 31 46 7
VISA - credit card 483 452 495 404 356
Other 30 22 27 7 2
------------ ----------- ------------ ------------- ------------
Total loans charged-off 2,732 1,732 1,097 1,729 1,292
Loan recoveries:
Commercial 124 48 112 100 66
Installment 58 65 31 56 98
Real estate mortgages 91 6 6 8 5
Home equity 1
VISA - credit card 114 153 142 169 227
Other 8 6 3 1
------------ ----------- ------------ ------------- ------------
Total loan recoveries 395 278 295 334 396
------------ ----------- ------------ ------------- ------------
Net loans charged-off 2,337 1,454 802 1,395 896
Provision for loan losses 2,563 1,623 1,505 1,850 2,216
------------ ----------- ------------ ------------- ------------
Allowance for loan losses at end of period $9,998 $9,772 $9,603 $8,900 $8,445
============ =========== ============ ============= ============
Allowance for loan losses to total loans 1.28% 1.27% 1.21% 1.16% 1.18%
============ =========== ============ ============= ============
Net chargeoffs to average total loans .31% .19% .10% .19% .13%
============ =========== ============ ============= ============

The entire allowance for loan losses is available to absorb losses in any
particular category of loans, notwithstanding management's allocation of the
allowance. The following table sets forth the allocation of allowance for loan
losses and the percentage of loans in each category to total loans at December
31 (dollars in thousands):

1998 1997 1996 1995 1994
------------------ ----------------- ----------------- ------------------ ------------------
Amount % Amount % Amount % Amount % Amount %
-------- -------- -------- ------- ------- ------- -------- -------- -------- --------

Commercial $5,418 37.8% $4,000 39.6% $4,299 38.5% $4,403 36.7% $3,714 32.0%
Installment and other 170 3.0 331 3.3 392 5.6 385 5.6 331 5.7
Indirect auto 152 3.9
Real estate 2,141 39.2 1,993 38.5 1,895 37.9 1,877 39.4 576 42.5
Home equity 557 14.3 638 16.5 312 15.7 302 15.7 301 16.8
VISA - credit card 333 1.8 440 2.1 493 2.3 523 2.6 664 3.0
Unallocated 1,227 2,370 2,212 1,410 2,859
-------- -------- -------- ------- ------- ------- -------- -------- -------- --------
Total $9,998 100.0% $9,772 100.0% $9,603 100.0% $8,900 100.0% $8,445 100.0%
======== ======== ======== ======= ======= ======= ======== ======== ======== ========

17

Deposits

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

1998 1997 1996
------------------------- ------------------------- -------------------------
Average Average Average
Balance Rate Balance Rate Balance Rate
------------- -------- ------------- -------- ------------- --------

Demand and other noninterest-bearing $ 107,984 $ 110,248 $ 103,448
NOW accounts 221,167 1.9% 180,863 1.4% 177,019 1.6%
Money market checking 29,049 4.5 235 4.7
Money market savings 330,251 3.3 342,518 3.5 347,650 3.5

Time deposits:
Less than $100,000 360,241 5.7 421,156 5.9 334,177 5.7
$100,000 and over 83,815 5.7 87,996 5.8 63,079 5.8
------------- -------- ------------- -------- ------------- --------
Total $1,132,507 3.7% $1,143,016 3.9% $1,025,373 3.7%
============= ======== ============= ======== ============= ========

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

1998
-------------

Within 3 months $36,538
After 3 months but within 12 months 14,761
After 1 year but within 5 years 25,411
After 5 years 4,331
-------------
Total $81,041
=============

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:

1998 1997 1996
------ ------ ------

Return on average total assets 1.26% 1.71% 1.38%
Return on average shareholders' equity 11.77 17.48 13.93
Cash dividends paid to net income 60.15 34.74 42.73
Average shareholders' equity to average total assets 10.73 9.78 9.90

18

ITEM 2. PROPERTIES

West Suburban and the Bank occupy a total of approximately 225,000 square feet
in 32 locations. West Suburban's principal offices are located in approximately
32,500 square feet of office space at 711 South Meyers Road, Lombard, Illinois.
As indicated below, the Bank also operates the facility located at 711 South
Meyers Road, Lombard, Illinois as a branch.

The following table sets forth certain information concerning the facilities of
the Bank:

Location of Facilities Approximate Square Feet Status
- ----------------------- --------------------------- --------------------

711 South Meyers Road 32,500 Owned
Lombard, Illinois

701 South Meyers Road 5,200 Owned
Lombard, Illinois

717 South Meyers Road 7,100 Owned
Lombard, Illinois

100 South Main Street 650 Owned
Lombard, Illinois

Mr. Z's 100 Lease expires 2003
401 South Main Street
Lombard, Illinois

707 North Main Street 4,100 Owned
Lombard, Illinois

29 East St. Charles Road 3,200 Lease expires 2000
Villa Park, Illinois

17W754 22nd Street 6,100 Owned
Oakbrook Terrace, Illinois

Lexington Square 100 Lease expires 1999
400 West Butterfield Road
Elmhurst, Illinois

2020 Feldott Lane 4,430 Owned
Naperville, Illinois

879 Geneva Road 3,550 Lease expires 2003
Carol Stream, Illinois

6400 South Cass Avenue 3,090 Lease expires 2000
Westmont, Illinois

221 South West Street 800 Owned
Wheaton, Illinois

1104 West Boughton Road 4,500 Owned
Bolingbrook, Illinois

295 West Loop Road 4,500 Owned
Wheaton, Illinois

2800 South Finley Road 10,700 Owned
Downers Grove, Illinois

19

Location of Facilities Approximate Square Feet Status
- ----------------------- --------------------------- --------------------

3S041 Route 59 3,675 Owned
Warrenville, Illinois

Beacon Hill 100 Leased on a month to
2400 South Finley Road month basis
Lombard, Illinois

Lexington Square 100 Lease expires 1999
555 Foxworth Boulevard
Lombard, Illinois

1122 South Main Street 6,400 Owned
Lombard, Illinois

8001 South Cass Avevue 17,800 Owned
Darien, Illinois

1005 75th Street 800 Owned
Darien, Illinois

672 East Boughton Road 7,100 Owned
Bolingbrook, Illinois

355 West Army Trail Road 10,700 Owned
Bloomingdale, Illinois

401 North Gary Avenue 6,400 Owned
Carol Stream, Illinois

1380 Army Trail Road 2,300 Lease expires 2000
Carol Stream, Illinois

1657 Bloomingdale Road 4,100 Owned
Glendale Heights, Illinois

1061 West Stearns Road 3,400 Owned
Bartlett, Illinois

315 South Randall Road 1,400 Owned
St. Charles, Illinois

101 North Lake Street 19,000 Owned
Aurora, Illinois

2000 West Galena 48,000 Owned
Boulevard
Aurora, Illinois

1830 Douglas Road 2,500 Owned
Montgomery, Illinois

20

ITEM 3. LEGAL PROCEEDINGS

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

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

None.

21

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

West Suburban's authorized and outstanding equity securities consist of
Common Stock, no par value. West Suburban previously had two classes of
common stock issued and outstanding. At the Annual Meeting of Shareholders of
West Suburban held on May 13, 1998, the shareholders approved an amendment to
West Suburban's Articles of Incorporation the effect of which was to
redesignate each share of Class A Common Stock and each share of Class B
Common Stock as Common Stock. Additionally the number of votes per share of
Common Stock was reduced from five votes per share to one vote per share on
all matters submitted to the shareholders of West Suburban.

West Suburban's per share book value as of the end of each quarter and dividend
information for each quarter is set forth in the following table:

COMMON STOCK
------------------------------------
YEAR QUARTER BOOK VALUE DIVIDENDS DECLARED
---- ------- ---------- ------------------

1998 4th $310.74 $16.50
3rd 317.87 6.50
2nd 317.43 6.00
1st 311.72 5.00

1997 4th $306.02 $5.00
3rd 299.48 4.50
2nd 290.87 4.50
1st 282.10 4.50

The dividend declared in the 4th quarter of 1998 included a one time $10.00 per
share special dividend payable on January 4, 1999 to shareholders of record as
of December 15, 1998.

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 March 15, 1999, West Suburban had
432,495 shares of Common Stock outstanding held by approximately 970
shareholders of record. Management is aware of approximately 29 transactions
during 1998 involving the sale of approximately 3,527 shares of Common Stock.
The average sale price in such transactions was approximately $442.69 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" of
West Suburban's Annual Report to Shareholders for the fiscal year ended December
31, 1998 (attached as Exhibit 13.1 hereto).

22

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" of West Suburban's
Annual Report to Shareholders for the fiscal year ended December 31, 1998
(attached as Exhibit 13.1 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" of West Suburban's Annual Report to Shareholders for the fiscal year
ended December 31, 1998 (attached as Exhibit 13.1 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 and from the
section entitled "Selected Quarterly Financial Data" as set forth in West
Suburban's Annual Report to Shareholders for the fiscal year ended December 31,
1998 (attached as Exhibit 13.1 hereto).

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

None.

23

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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 1999 Proxy Statement.

Section 16(a) of the 1934 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 of such 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 1998 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 the period commencing January 1, 1998 through December 31, 1998.

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 1999 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 section entitled "Security Ownership of
Certain Beneficial Owners" of West Suburban's 1999 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 1999 Proxy Statement.

24

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

ITEM (A)1 AND 2. FINANCIAL STATEMENTS

WEST SUBURBAN BANCORP, INC. AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES

The following audited Consolidated Financial Statements of West Suburban and its
subsidiaries and related notes and independent auditors' report are incorporated
by reference from West Suburban's Annual Report to Shareholders for the fiscal
year ended December 31, 1998 (attached as Exhibit 13.1 hereto).

Annual Report
Page No.
-------------

Report of Independent Auditors 5

Consolidated Balance Sheets - December 31, 1998 and 1997 6

Consolidated Statements of Income and Comprehensive Income -
Years Ended December 31, 1998, 1997 and 1996 7

Consolidated Statements of Changes in Shareholders'
Equity - Years Ended December 31, 1998, 1997 and 1996 8

Consolidated Statements of Cash Flows - Years Ended
December 31, 1998, 1997 and 1996 9

Notes to Consolidated Financial Statements 10

The following Condensed Financial Information-Parent Only is incorporated by
reference from Note 15 to West Suburban's audited Consolidated Financial
Statements as set forth in West Suburban's Annual Report to Shareholders for the
fiscal year ended December 31, 1998 (attached as Exhibit 13.1).

Annual Report
Page No.
-------------

Condensed Balance Sheets - December 31, 1998 and 1997 20

Condensed Statements of Income - Years Ended
December 31, 1998, 1997 and 1996 20

Condensed Statements of Cash Flows - Years Ended
December 31, 1998, 1997 and 1996 21

SCHEDULES

Schedules other than those listed above are omitted for the reason that they are
not required or are not applicable or the required information is shown in the
financial statements incorporated by reference or notes thereto.

25

ITEM 14(A)3. EXHIBITS

The exhibits required by Item 601 of Regulation S-K are included with this Form
10-K and are listed on the "Index to Exhibits" immediately following the
signature page.

ITEM 14(B). REPORTS ON FORM 8-K

None

***
Upon written request to the President and Chief Financial Officer of West
Suburban Bancorp, Inc., 2800 South Finley Road, Downers Grove, Illinois, 60515,
copies of the exhibits listed above are available to shareholders of West
Suburban by specifically identifying each exhibit desired in the request. A fee
of $.20 per page of exhibit will be charged to shareholders requesting copies of
exhibits to cover copying and mailing costs.

26

FORM 10-K SIGNATURE PAGE

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

WEST SUBURBAN BANCORP, INC.
(Registrant)

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

Date: March 29, 1999

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on the 29th day of March, 1999.

SIGNATURE TITLE
--------- -----

/s/ KEVIN J. ACKER 3/29/99 Chairman of the Board and
- ---------------------- --------- Director
Kevin J. Acker Date

/s/ DUANE G. DEBS 3/29/99 President, Chief Financial
- ---------------------- --------- Officer, Chief Accounting Officer and
Duane G. Debs Date Director

/s/ DAVID BELL 3/29/99 Director
- ---------------------- ---------
David Bell Date

/s/ PEGGY P. LOCICERO 3/29/99 Director
- ---------------------- ---------
Peggy P. LoCicero Date

/s/ CHARLES P. HOWARD 3/29/99 Director
- ---------------------- ---------
Charles P. Howard Date

The foregoing includes all of the Board of Directors of West Suburban.

27

INDEX TO EXHIBITS

EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ------ ----------- ----------

3.1 Articles of Incorporation - Incorporated by reference N/A
from Exhibit 3.1 of Form S-1 of West Suburban dated
November 10, 1988, under Registration No. 33-25225

3.2 Form of Certificate of Amendment to Articles of N/A
Incorporation - Incorporated by reference from Exhibit 3.2 of
Form S-1 of West Suburban dated November 10, 1988, under
Registration No. 33-25225

3.3 Certificate of Amendment to Articles of Incorporation N/A
dated May 10, 1990 - Incorporated by reference from Exhibit
3.3 of the Form 10-K of West Suburban dated March 28,
1991, Commission File No. 0-17609

3.4 Certificate of Amendment to Articles of Incorporation dated 30
June 8, 1998

3.5 By-Laws - Incorporated by reference from Exhibit 3.3 of N/A
Form S-1 of West Suburban dated November 10, 1988,
Registration No. 33-25225

4.1 Specimen of Common Stock certificate 33

4.2 Articles of Incorporation of West Suburban N/A
(see Exhibits 3.1, 3.2, 3.3, 3.4 and 3.5 above)

4.3 By-Laws of West Suburban (see Exhibit 3.5 above) N/A

10.1 Employment Agreement dated May 1, 1997 between N/A
West Suburban and Mr. Kevin J. Acker, - Incorporated by
reference from Exhibit 10.1 of Form 10-Q of West Suburban
dated August 14, 1997, Commission File No. 0-17609

10.2 Employment Agreement dated May 1, 1997 between N/A
West Suburban and Mr. Keith W. Acker, - Incorporated by
reference from Exhibit 10.2 of Form 10-Q of West Suburban
dated August 14, 1997, Commission File No. 0-17609

10.3 Employment Agreement dated May 1, 1997 between N/A
West Suburban and Mr. Duane G. Debs, - Incorporated by
reference from Exhibit 10.3 of Form 10-Q of West Suburban
dated August 14, 1997, Commission File No. 0-17609

10.4 Employment Agreement dated May 1, 1997 between N/A
West Suburban and Mr. Michael P. Brosnahan, - Incorporated
by reference from Exhibit 10.4 of Form 10-Q of West
Suburban dated August 14, 1997, Commission File No.
0-17609

28

INDEX TO EXHIBITS
(continued)

EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ------ ----------- ----------

10.5 Form of Amended Deferred Compensation Agreement N/A
between West Suburban and Messrs. Kevin J. Acker,
Keith Acker, Duane G. Debs and Michael P. Brosnahan -
Incorporated by reference from Exhibit 10.5 of Form
10-Q of West Suburban dated August 14, 1997,
Commission File No. 0-17609

10.6 Employment Agreement dated December 24, 1998 between 34
West Suburban and Mr. James Chippas

10.7 Form of Amendment to Employment Agreement dated 46
January 21, 1999 between West Suburban and Messrs.
Kevin J. Acker, Keith Acker, Duane G. Debs and
Michael P. Brosnahan

13.1 Annual Report to Shareholders of West Suburban 48
for fiscal year ended December 31, 1998

21.1 Subsidiaries of Registrant 85

27. Financial Data Schedule 86

29