UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

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 of incorporation or organization)		(I.R.S. Employer Identification No.)

711 South Meyers Road, Lombard, Illinois		60148
(Address of principal executive offices)		(Zip Code)

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

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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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

Large accelerated filer o		Accelerated filer x

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of May 7, 2012, 426,850 shares of West Suburban common stock were outstanding.

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WEST SUBURBAN BANCORP, INC.

Form 10-Q Quarterly Report

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		Page
		Number
PART I
Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	36

PART II
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	37

	Form 10-Q Signatures	38

Special Note Concerning Forward-Looking Statements

This document (including information incorporated by reference) contains, and future oral and written statements of each of West Suburban Bancorp, Inc. (“West Suburban”) and West Suburban Bank (the “Bank” and collectively with West Suburban and its other direct and indirect subsidiaries, the “Company”) and its management may contain, 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 that could have a material adverse effect on the operations and future prospects of the Company include, but are not limited to, those set forth in the “Risk Factors” section included under Item 1A of Part I of the Company’s most recently filed Annual Report on Form 10-K and under Item 1A in Part II of this report and the following:

· The strength of the U.S. and global economies and financial markets in general and the strength of the local economies in which the Company conducts its operations, including the local residential and commercial real estate markets, 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, as well as any laws and regulations otherwise affecting the Company, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and other laws and regulations intended to address stresses in the U.S. and global financial markets, national security and money laundering.

· The effects of adverse market conditions and volatility in investment securities generally, which may result in a deterioration in the value of the securities in the Company’s securities portfolio.

· The ability of the Company to comply with, and satisfy the requirements of, any informal or formal enforcement actions with its regulators and the consequences that may result from any inability to comply.

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· The ability of the Company to comply with applicable federal, state and local laws, regulations and policies and the consequences that may result from any inability to comply.

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

· 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 the competitive pressures in the financial services sector.

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

· The ability of the Company to obtain new customers and 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.

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

· The ability of the Company to retain directors, executives and key employees, and the difficulty that the Company may experience in replacing directors, executives and key 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 past and any future terrorist attacks, acts of war or threats thereof and the response of the U.S. to any such attacks and threats.

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

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

· 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, including the “Risk Factors” section included under 1A of Part I of the Company’s most recently filed Annual Report on Form 10-K and under Item 1A in Part II of this report.

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PART I

ITEM 1. FINANCIAL STATEMENTS

WEST SUBURBAN BANCORP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

	March 31, 2012 (Unaudited)			December 31, 2011
Assets
Cash and due from banks	$	47,783		$	116,039
Federal funds sold	200			286
Total cash and cash equivalents	47,983			116,325
Securities
Available for sale (amortized cost of $607,205 in 2012 and $447,496 in 2011)	614,043			454,125
Held to maturity (fair value of $242,394 in 2012 and $271,601 in 2011)	230,345			259,035
Federal Home Loan Bank stock	6,527			7,599
Total securities	850,915			720,759
Loans, less allowance for loan losses of $27,239 in 2012 and $27,584 in 2011	958,153			956,559
Bank-owned life insurance	32,794			32,618
Premises and equipment, net	44,887			45,130
Other real estate owned, net	21,313			23,505
Accrued interest and other assets	31,743			33,788
Total assets	$	1,987,788		$	1,928,684

Liabilities and shareholders’ equity
Deposits
Demand-noninterest-bearing	$	147,189		$	152,955
Prepaid solutions card deposits	2,945			5,810
Interest-bearing	1,637,763			1,580,779
Total deposits	1,787,897			1,739,544
Prepaid solutions cards	10,100			9,980
Accrued interest and other liabilities	19,277			12,207

Common stock in ESOP subject to contingent repurchase obligation	25,103			23,230

Shareholders’ equity
Common stock, no par value; 15,000,000 shares authorized; 426,850 shares issued and outstanding	3,412			3,412
Surplus	35,453			35,453
Retained earnings	127,944			124,514
Accumulated other comprehensive income	3,705			3,574
Amount reclassified on ESOP shares	(25,103		)	(23,230		)
Total shareholders’ equity	145,411			143,723
Total liabilities and shareholders’ equity	$	1,987,788		$	1,928,684

See accompanying notes to condensed consolidated financial statements.

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WEST SUBURBAN BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011

(Dollars in thousands, except per share data)

(UNAUDITED)

	2012		2011
Interest income
Loans, including fees	$	11,815	$	12,192
Securities
Taxable	4,147		5,091
Exempt from federal income tax	386		267
Federal funds sold	1		1
Total interest income	16,349		17,551

Interest expense
Deposits	2,538		3,235
Total interest expense	2,538		3,235
Net interest income	13,811		14,316
Provision for loan losses	—		3,000
Net interest income after provision for loan losses	13,811		11,316

Noninterest income
Service fees on deposit accounts	963		1,042
Net realized gains on securities transactions	766		1,099
Debit card fees	565		518
Bank-owned life insurance	176		518
Net gain on sale of loans originated for sale	7		—
Other	1,041		1,511
Total noninterest income	3,518		4,688

Noninterest expense
Salaries and employee benefits	5,792		5,756
Furniture and equipment	1,272		1,158
Occupancy	1,251		1,469
Other real estate owned expense	1,094		439
FDIC assessments	652		1,098
Loan administration	360		184
Professional fees	341		484
Advertising and promotion	262		204
Telephone	248		216
Other	898		980
Total noninterest expense	12,170		11,988

Income before income taxes	5,159		4,016
Income tax expense	1,729		1,226
Net income	$	3,430	$	2,790

Earnings per share	$	8.04	$	6.54
Average shares outstanding	426,850		426,850

See accompanying notes to condensed consolidated financial statements.

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WEST SUBURBAN BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011

(Dollars in thousands)

(UNAUDITED)

	2012			2011
Net Income	$	3,430		$	2,790

Other comprehensive income (loss)
Unrealized gains on available for sale securities:
Unrealized holding gains arising during the period	975			504
Reclassification adjustments for gains included in net income	(766		)	(1,099		)
Tax effect	(86		)	237
Net of tax	123			(358		)

Change in postretirement obligation:
Net gain arising during the period	26			22
Reclassification adjustment for amortization of prior service cost and net gains included in net periodic pension cost	(13		)	(11		)
Tax effect	(5		)	(4		)
Net of tax	8			7

Total other comprehensive income (loss)	131			(351		)
Total comprehensive income	$	3,561		$	2,439

See accompanying notes to condensed consolidated financial statements.

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WEST SUBURBAN BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011

(Dollars in thousands)

(UNAUDITED)

	Common Stock and Surplus		Retained Earnings		Accumulated Other Comprehensive Income			Amount Reclassified on ESOP Shares			Total Shareholders’ Equity
Balance, January 1, 2011	$	38,865	$	116,698	$	285		$	(29,865	)	$	125,983

Comprehensive income
Net income			2,790								2,790
Change in unrealized gains on available for sale securities, net of reclassification and tax effects					(358		)				(358		)
Change in post-retirement obligation, net of tax effects					7						7
Total comprehensive income											2,439
Reclassification due to change in fair value of common stock in ESOP subject to contingent repurchase obligation								2,592			2,592
Balance, March 31, 2011	$	38,865	$	119,488	$	(66	)	$	(27,273	)	$	131,014

	Common Stock and Surplus		Retained Earnings		Accumulated Other Comprehensive Income		Amount Reclassified on ESOP Shares			Total Shareholders’ Equity
Balance, January 1, 2012	$	38,865	$	124,514	$	3,574	$	(23,230	)	$	143,723

Comprehensive income
Net income			3,430							3,430
Change in unrealized gains on available for sale securities, net of reclassification and tax effects					123					123
Change in post-retirement obligation, net of tax effects					8					8
Total comprehensive income										3,561
Reclassification due to change in fair value of common stock in ESOP subject to contingent repurchase obligation							(1,873		)	(1,873		)
Balance, March 31, 2012	$	38,865	$	127,944	$	3,705	$	(25,103	)	$	145,411

See accompanying notes to condensed consolidated financial statements.

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WEST SUBURBAN BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011

(Dollars in thousands)

(UNAUDITED)

	2012			2011
Cash flows from operating activities
Net income	$	3,430		$	2,790
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation	781			734
Provision for loan losses	—			3,000
Net premium amortization of securities	1,299			427
Net realized gains on securities transactions	(766		)	(1,099		)
Earnings on bank-owned life insurance	(176		)	(518		)
Net gain on sale of loans held for sale	(7		)	—
Sales of loans held for sale	1,094			—
Origination of loans held for sale	(786		)	—
Net gain on sales of premises and equipment	—			(2		)
Net loss (gain) on sales of other real estate owned	147			(167		)
Write down of other real estate owned	760			147
Decrease (increase) in accrued interest and other assets	1,954			(142		)
Increase in accrued interest and other liabilities	7,085			1,062
Net cash provided by operating activities	14,815			6,232
Cash flows from investing activities
Securities available for sale
Sales	12,264			34,177
Maturities, calls and redemptions	37,356			25,739
Purchases	(209,694		)	(15,931		)
Securities held to maturity
Maturities, calls and redemptions	28,522			18,552
Purchases	—			(46,940		)
Redemption of FHLB stock	1,072			—
Net (increase) decrease in loans	(2,361		)	11,222
Investment in bank-owned life insurance	—			(38		)
Purchases of premises and equipment	(570		)	(569		)
Sales of premises and equipment	32			5
Sales of other real estate owned	1,751			1,180
Net cash (used in) provided by investing activities	(131,628		)	27,397
Cash flows from financing activities
Net increase (decrease) in deposits	48,351			(3,752		)
Net increase in prepaid solutions cards	120			992
Net cash provided by (used in) financing activities	48,471			(2,760		)
Net (decrease) increase in cash and cash equivalents	(68,342		)	30,869
Beginning cash and cash equivalents	116,325			70,690
Ending cash and cash equivalents	$	47,983		$	101,559
Supplemental disclosures
Cash paid for interest	$	2,025		$	3,144
Cash paid for income taxes	—			595
Other real estate acquired through or instead of loan foreclosure	466			6,819
Loans originated from the sale of other real estate owned	143			—
Due to broker	7,031			5,209

See accompanying notes to condensed consolidated financial statements.

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WEST SUBURBAN BANCORP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(UNAUDITED)

Note 1 - Basis of Presentation

The condensed consolidated financial statements include the accounts of West Suburban Bancorp, Inc. (“West Suburban”) and West Suburban Bank (the “Bank” and collectively with West Suburban and its other direct and indirect subsidiaries, the “Company”). Intercompany accounts and transactions have been eliminated. The unaudited interim consolidated financial statements are prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures normally accompanying the annual financial statements have been omitted. The interim financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the latest Annual Report on Form 10-K filed by the Company. The condensed consolidated financial statements include all adjustments (none of which were other than normal recurring adjustments) necessary for a fair presentation of the results for the interim periods. The results for the interim periods are not necessarily indicative of the results to be expected for the entire fiscal year.

The Company’s board of directors has resolved to obtain regulatory approval prior to paying dividends, increasing debt, or redeeming West Suburban common stock in order to preserve capital and maintain the Company’s financial strength given the economic environment and its impact on the Company.

Note 2 - Securities

At March 31, 2012 and December 31, 2011, the amortized cost, unrealized gains and losses and fair value of securities available for sale were as follows:

	March 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. government sponsored enterprises	$	60,682	$	867	$	—		$	61,549
Mortgage-backed: residential	402,268		5,281		(295		)	407,254
States and political subdivisions	105,184		1,425		(965		)	105,644
Corporate	39,071		564		(39		)	39,596
Total	$	607,205	$	8,137	$	(1,299	)	$	614,043

	December 31, 2011
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasuries	$	9,865	$	555	$	—		$	10,420
U.S. government sponsored enterprises	65,784		1,101		—			66,885
Mortgage-backed: residential	298,324		3,988		(106		)	302,206
States and political subdivisions	49,733		1,284		(58		)	50,959
Corporate	23,790		142		(277		)	23,655
Total	$	447,496	$	7,070	$	(441	)	$	454,125

Mortgage-backed: residential securities consist of residential mortgage-backed securities issued by U.S. government sponsored enterprises and agencies, primarily Fannie Mae, Freddie Mac and Ginnie Mae, institutions which the government has affirmed its commitment to support. Corporate securities consist of investment grade corporate bonds.

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At March 31, 2012 and December 31, 2011, the amortized cost, unrecognized gains and losses and fair value of securities held to maturity were as follows:

	March 31, 2012
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value
U.S. Treasuries	$	30,008	$	2,654	$	—		$	32,662
U.S. government sponsored enterprises	15,115		895		—			16,010
Mortgage-backed: residential	151,709		7,609		(4		)	159,314
States and political subdivisions	33,513		895		—			34,408
Total	$	230,345	$	12,053	$	(4	)	$	242,394

	December 31, 2011
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value
U.S. Treasuries	$	30,005	$	3,111	$	—		$	33,116
U.S. government sponsored enterprises	31,623		1,034		—			32,657
Mortgage-backed: residential	163,926		7,686		(4		)	171,608
States and political subdivisions	33,481		832		(93		)	34,220
Total	$	259,035	$	12,663	$	(97	)	$	271,601

At March 31, 2012, the amortized cost and fair value of debt securities available for sale and held to maturity by contractual maturity were as follows:

	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in 1 year or less	$	521	$	521	$	292	$	296
Due after 1 year through 5 years	105,587		106,854		47,779		49,425
Due after 5 years through 10 years	77,418		77,519		25,054		27,397
Due after 10 years	21,411		21,895		5,511		5,962
Mortgage-backed: residential	402,268		407,254		151,709		159,314
Total	$	607,205	$	614,043	$	230,345	$	242,394

Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Proceeds from sales of securities available for sale totaled $12,264 and $34,177 during the three months ended March 31, 2012 and 2011, respectively. All sales of securities for the three month period ended March 31, 2012 resulted in gains.

Securities with a carrying value of approximately $82,231 and $85,413 at March 31, 2012 and December 31, 2011, respectively, were pledged to secure public deposits, fiduciary activities and for other purposes required or permitted by law.

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Securities with unrealized losses at March 31, 2012 and December 31, 2011 are presented below by the length of time the securities have been in a continuous unrealized loss position:

	March 31, 2012
	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Mortgage-backed: residential	$	64,365	$	(295	)	$	281	$	(4	)	$	64,646	$	(299	)
States and political subdivisions	46,327		(965		)	—		—			46,327		(965		)
Corporate	4,992		(39		)	—		—			4,992		(39		)
Total temporarily impaired	$	115,684	$	(1,299	)	$	281	$	(4	)	$	115,965	$	(1,303	)

	December 31, 2011
	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
Mortgage-backed: residential	$	29,707	$	(106	)	$	282	$	(4	)	$	29,989	$	(110	)
States and political subdivisions	15,350		(58		)	1,157		(93		)	16,507		(151		)
Corporate	18,434		(277		)	—		—			18,434		(277		)
Total temporarily impaired	$	63,491	$	(441	)	$	1,439	$	(97	)	$	64,930	$	(538	)

The unrealized losses at March 31, 2012 were in mortgage-backed: residential, state and political subdivisions and corporate securities. Because the decline in fair value on the debt securities in unrealized losses is attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these securities and management believes it is not more likely than not that the Company will be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at March 31, 2012.

The Company held one municipal security with a carrying value of $19,000 at March 31, 2012 and December 31, 2011, that was in excess of 10% of the Company’s shareholders’ equity. The security was issued by a local municipality, is a general obligation bond and is classified by the Company as held to maturity.

Note 3 - Loans

At March 31, 2012 and December 31, 2011, major classifications of loans were as follows:

	March 31, 2012			December 31, 2011
Commercial	$	278,462		$	278,969
Commercial real estate	293,804			284,065
Construction and development	77,785			79,197
Residential real estate:
Mortgage	151,965			151,378
Home equity	172,008			178,819
Consumer and other	11,368			11,715
Total	985,392			984,143
Allowance for loan losses	(27,239		)	(27,584		)
Loans, net	$	958,153		$	956,559

The Company makes loans to customers throughout the western suburbs of Chicago. From time to time the Company will make loans outside of its market area. There were $891 and $1,192 of loans held for sale at March 31, 2012 and December 31, 2011, respectively, which were included in the residential real estate: mortgage classification.

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Changes in the allowance for loan losses by portfolio segment for the quarter ended March 31, 2012 were as follows:

	Commercial			Commercial Real Estate			Construction and Development			Residential Real Estate			Consumer and Other			Total
Balance, beginning of year	$	15,204		$	2,990		$	4,270		$	4,581		$	539		$	27,584
Provision for loan losses	16			176			(312		)	111			9			—
Loans charged-off	(7		)	(125		)	(18		)	(244		)	(88		)	(482		)
Recoveries	13			—			—			97			27			137
Balance, period-end	$	15,226		$	3,041		$	3,940		$	4,545		$	487		$	27,239

Changes in the allowance for loan losses by portfolio segment for the quarter ended March 31, 2011 were as follows:

	Commercial			Commercial Real Estate			Construction and Development			Residential Real Estate			Consumer and Other			Total
Balance, beginning of year	$	12,638		$	4,179		$	6,243		$	4,308		$	704		$	28,072
Provision for loan losses	550			(463		)	2,801			69			43			3,000
Loans charged-off	(337		)	—			(178		)	(280		)	(113		)	(908		)
Recoveries	17			—			—			2			29			48
Balance, period-end	$	12,868		$	3,716		$	8,866		$	4,099		$	663		$	30,212

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The balance of the allowance for loan losses and the recorded investment (which does not include accrued interest) in loans by portfolio segment and based on impairment method were as follows:

	Commercial		Commercial Real Estate		Construction and Development		Residential Real Estate		Consumer and Other		Total
March 31, 2012
Allowance for loan losses attributable to loans:
Individually evaluated for impairment	$	6,705	$	837	$	79	$	554	$	—	$	8,175
Collectively evaluated for impairment	8,521		2,204		3,861		3,991		487		19,064
Total ending allowance balance	$	15,226	$	3,041	$	3,940	$	4,545	$	487	$	27,239

Loans:
Individually evaluated for impairment	$	36,826	$	23,998	$	15,202	$	13,450	$	—	$	89,476
Collectively evaluated for impairment	241,636		269,806		62,583		310,523		11,368		895,916
Total ending loan balance	$	278,462	$	293,804	$	77,785	$	323,973	$	11,368	$	985,392

December 31, 2011
Allowance for loan losses attributable to loans:
Individually evaluated for impairment	$	5,568	$	805	$	—	$	331	$	—	$	6,704
Collectively evaluated for impairment	9,636		2,185		4,270		4,250		539		20,880
Total ending allowance balance	$	15,204	$	2,990	$	4,270	$	4,581	$	539	$	27,584

Loans:
Individually evaluated for impairment	$	36,272	$	20,066	$	21,099	$	13,130	$	—	$	90,567
Collectively evaluated for impairment	242,697		263,999		58,098		317,067		11,715		893,576
Total ending loan balance	$	278,969	$	284,065	$	79,197	$	330,197	$	11,715	$	984,143

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Loans individually evaluated for impairment by class of loans were as follows:

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
March 31, 2012
With no related allowance recorded:
Commercial	$	30,380	$	23,815	$	—
Commercial real estate	15,080		14,955		—
Construction and development	18,740		14,645		—
Residential real estate:
Mortgage	8,372		8,323		—
Home equity	1,286		1,250		—
With an allowance recorded:
Commercial	13,059		13,011		6,705
Commercial real estate	9,314		9,043		837
Construction and development	557		557		79
Residential real estate:
Mortgage	3,540		3,540		512
Home equity	337		337		42
Total	$	100,665	$	89,476	$	8,175

December 31, 2011
With no related allowance recorded:
Commercial	$	31,667	$	25,062	$	—
Commercial real estate	11,154		11,154		—
Construction and development	25,175		21,099		—
Residential real estate:
Mortgage	9,021		8,844		—
Home equity	1,544		1,508		—
With an allowance recorded:
Commercial	11,211		11,211		5,568
Commercial real estate	9,183		8,911		805
Residential real estate:
Mortgage	2,778		2,778		331
Total	$	101,733	$	90,567	$	6,704

Average impaired loans by class were as follows:

	Three Months Ended March 31,
	2012		2011
Commercial	$	35,831	$	41,112
Commercial real estate	21,650		12,568
Construction and development	16,703		69,389
Residential real estate:
Mortgage	11,934		8,240
Home equity	1,478		786
Total	$	87,596	$	132,095

Interest income recognized during impairment was $481 and $354 for the three months ended March 31, 2012 and 2011, respectively.

Nonperforming loans and loans past due 90 days or more still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

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The recorded investment in nonaccrual and loans past due 90 days or more still on accrual by class of loans was as follows:

	Nonaccrual		Loans Past Due 90 Days or More Still on Accrual
March 31, 2012
Commercial	$	30,273	$	29
Commercial real estate	6,392		—
Construction and development	16,301		—
Residential real estate:
Mortgage	1,778		119
Home equity	1,506		133
Consumer and other	206		37
Total	$	56,456	$	318

December 31, 2011
Commercial	$	27,141	$	—
Commercial real estate	1,115		—
Construction and development	22,197		—
Residential real estate:
Mortgage	2,232		72
Home equity	161		205
Consumer and other	212		9
Total	$	53,058	$	286

Loans past due 90 days or more still on accrual are considered to be well-collateralized and in the process of collection as of March 31, 2012.

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The aging of the recorded investment in past due loans were as follows:

	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total Past Due		Loans Not Past Due		Total
March 31, 2012
Commercial	$	1,159	$	878	$	30,302	$	32,339	$	246,123	$	278,462
Commercial real estate	1,365		599		6,392		8,356		285,448		293,804
Construction and development	557		—		15,745		16,302		61,483		77,785
Residential real estate:
Mortgage	2,354		1,675		1,897		5,926		146,039		151,965
Home equity	2,097		8		639		2,744		169,264		172,008
Consumer and other	76		92		243		411		10,957		11,368
Total	$	7,608	$	3,252	$	55,218	$	66,078	$	919,314	$	985,392

December 31, 2011
Commercial	$	1,030	$	471	$	26,903	$	28,404	$	250,565	$	278,969
Commercial real estate	1,118		2,790		809		4,717		279,348		284,065
Construction and development	1,099		2,070		19,028		22,197		57,000		79,197
Residential real estate:
Mortgage	2,310		1,203		2,304		5,817		145,561		151,378
Home equity	1,048		526		365		1,939		176,880		178,819
Consumer and other	143		39		222		404		11,311		11,715
Total	$	6,748	$	7,099	$	49,631	$	63,478	$	920,665	$	984,143

During the three months ended March 31, 2012, the terms of certain loans were modified as troubled debt restructurings (“TDRs”). The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

Modifications involving a reduction of the stated interest rate of the loan were for interest rates ranging from 3.0% to 5.9% and periods ranging from six months to 30 years. Modifications involving an extension of the maturity date were for periods ranging from six months to 24 years.

At March 31, 2012, the Company had $38,332 of loans considered TDRs, which are considered impaired loans, compared to $37,711 as of December 31, 2011. As of March 31, 2012, the Company had specifically allocated allowance for loan losses of $1,961 on $15,849 of loans considered to be TDRs. As of December 31, 2011, the Company had specifically allocated allowance for loan losses of $1,584 on $14,375 of loans considered to be TDRs. The remaining $22,483 and $23,336 of TDRs as of March 31, 2012 and December 31, 2011, respectively, did not have impaired cash flows or were considered to be collateral dependent and did not have specific allocations of the allowance due to partial charge-offs and the loans being well-collateralized. Management has not committed to lend additional amounts to customers with outstanding loans that are classified as TDRs.

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The following table presents loans by class modified as TDRs during the quarter ended March 31, 2012:

	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial real estate	2	$	505	$	505
Residential real estate: mortgage	8	1,425		1,439
Total	10	$	1,930	$	1,944

The following table presents loans by class modified as TDRs during the quarter ended March 31, 2011:

	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial real estate	1	$	374	$	374
Residential real estate: mortgage	2	382		390
Total	3	$	756	$	764

The following table presents loans by class modified as TDRs during the twelve month period ended March 31, 2012 for which there was a payment default subsequent to the modification date during the three months ended March 31, 2012:

	Number of Loans	Recorded Investment
Commercial real estate	1	$	442
Total	1	$	442

The following table presents loans by class modified as TDRs during the twelve month period ended March 31, 2011 for which there was a payment default subsequent to the modification date during the three months ended March 31, 2011:

	Number of Loans	Recorded Investment
Residential real estate: mortgage	3	$	670
Total	3	$	670

A loan is considered to be in payment default once it is 90 days past due under the modified contractual terms. Additionally, loans less than $100 are not evaluated for impairment under TDR accounting guidance.

The TDRs that subsequently defaulted described above did not increase the allowance for loan losses and did not result in any charge-offs during the three months ended March 31, 2012 and 2011, as these loans were considered to be collateral dependent and well-collateralized.

The terms of certain other loans were modified during the three months ended March 31, 2012 and 2011 that did not meet the definition of a TDR. These loans have a total recorded investment as of March 31, 2012 and 2011 of $11,890 and $423, respectively. The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties or a delay in a payment that was considered to be insignificant.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

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The Company categorizes its non-homogeneous loans into risk categories based on relevant information about the ability of borrowers to service their debt such as, among other factors: current financial information; historical payment experience; credit documentation; public information; and current economic trends. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes certain non-homogeneous loans, such as commercial, commercial real estate and construction and development loans. This analysis is done annually on a loan by loan basis. The Company uses the following definitions for classified risk ratings:

Substandard: Loans designated as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. The risk categories of loans were as follows:

	Classified		Pass		Total
March 31, 2012
Commercial	$	43,134	$	235,328	$	278,462
Commercial real estate	29,637		264,167		293,804
Construction and development	17,548		60,237		77,785
Total	$	90,319	$	559,732	$	650,051

December 31, 2011
Commercial	$	43,143	$	235,826	$	278,969
Commercial real estate	29,666		254,399		284,065
Construction and development	28,493		50,704		79,197
Total	$	101,302	$	540,929	$	642,231

The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses. For residential and consumer loan classes, the Company evaluates credit quality based on the payment and aging status of the loan. Payment status is reviewed on a daily basis by the Bank’s collection department and on a monthly basis with respect to determining adequacy of the allowance for loan losses.

Note 4 - Other Real Estate Owned

Activity in other real estate owned was as follows:

	March 31, 2012			December 31, 2011
Balance, beginning of year	$	23,505		$	20,479
Acquired through loan foreclosure	466			55,386
Reductions due to sales	(1,898		)	(46,452		)
Write-downs	(760		)	(5,908		)
Balance, period-end	$	21,313		$	23,505

Other real estate owned is reported net of a valuation allowance of $477 and $3,625 as of March 31, 2012 and December 31, 2011, respectively.

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Note 5 - Financial Instruments with Off-Balance Sheet Risk

Unused lines of credit and other commitments to extend credit not reflected in the financial statements are as follows:

	March 31, 2012						December 31, 2011
	Fixed Rate		Variable Rate		Total		Fixed Rate		Variable Rate		Total
Commercial loans and lines of credit	$	3,868	$	134,504	$	138,372	$	2,522	$	120,710	$	123,232
Check credit lines of credit	833		—		833		867		—		867
Mortgage loans	6,403		—		6,403		5,258		—		5,258
Home equity lines of credit	1,088		127,918		129,006		1,379		129,021		130,400
Letters of credit	—		6,645		6,645		—		6,537		6,537
Credit card lines of credit	—		29,034		29,034		—		29,349		29,349
Total	$	12,192	$	298,101	$	310,293	$	10,026	$	285,617	$	295,643

Fixed rate commercial loan commitments and lines of credit at March 31, 2012 had interest rates ranging from 4.0% to 7.2% with terms ranging from two months to five years. Fixed rate mortgage loan commitments at March 31, 2012 had interest rates ranging from 3.4% to 4.9% with terms ranging from six to 30 years. Fixed rate home equity lines of credit at March 31, 2012 had interest rates ranging from 3.0% to 7.0% with terms ranging from one month to 20 years. Fixed rate check credit lines of credit at March 31, 2012 had interest rates of 18.0%.

Note 6 - Common Stock in ESOP Subject to Contingent Repurchase Obligation

At March 31, 2012 and December 31, 2011, the Employee Stock Ownership Plan (the “ESOP”) held 89,334 and 89,348 shares of West Suburban common stock, respectively. Upon termination of their employment, participants who elect to receive their benefit distributions in the form of West Suburban common stock may request the Company to purchase, when the Company is legally permitted to purchase its common stock, the common stock distributed at fair market value during two 60-day periods. The first purchase period begins on the date the benefit is distributed and the second purchase period begins on the first anniversary of the distribution date. This contingent repurchase obligation is reflected in the Company’s financial statements as “Common stock in ESOP subject to contingent repurchase obligation” and reduces shareholders’ equity by an amount that represents the independently appraised fair market value of all West Suburban common stock held by the ESOP and allocated to participants, without regard to whether it is likely that the shares would be distributed or that the recipients of the shares would be likely to exercise their right to require the Company to purchase the shares.

Note 7 - New Accounting Pronouncements

Adopted Accounting Guidance

In May, 2011, the Financial Accounting Standards Board (“FASB”) issued an amendment to achieve common fair value measurement and disclosure requirements between U.S. and International accounting principles. Overall, the guidance is consistent with existing U.S. accounting principles; however, there are some amendments that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The amendments in this guidance are effective for interim and annual reporting periods beginning after December 15, 2011. The effect of adopting this standard did not have a material effect on the Company’s operating results or financial condition, but the additional disclosures are included in Note 9.

In June 2011, the FASB amended existing guidance and eliminated the option to present the components of other comprehensive income as part of the statement of changes in shareholders’ equity. The amendment requires that comprehensive income be presented in either a single continuous statement or in two separate consecutive statements. The amendments in this guidance are effective as of the beginning of a fiscal reporting year, and interim periods within that year, that begins after December 15, 2011. The adoption of this amendment changed the presentation of the statement of comprehensive income for the Company to two consecutive statements instead of presenting it as part of the consolidated statement of shareholders’ equity.

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Note 8 - Retirement Benefits

The Bank maintains the West Suburban Bank 401(k) Profit Sharing Plan (the “401(k) Plan”), which serves as the Company’s principal retirement plan. The 401(k) Plan was established to address the limited availability of West Suburban common stock for acquisition by the ESOP and to offer participants an avenue to diversify their retirement savings.

The ESOP provides incentives to employees by granting participants an interest in West Suburban common stock, which represents the ESOP’s primary investment. An individual account is established for each participant and the benefits payable upon retirement, termination, disability or death are based upon service, the amount of the employer’s contributions and any income, expenses, gains and losses and forfeitures allocated to the participant’s account.

The Company also maintains a noncontributory postretirement benefit plan covering certain senior executives. The plan provides postretirement medical, dental and long term care coverage for certain executives and their surviving spouses.

The eligible retirement age under the plan is age 62 and the plan is unfunded. Net postretirement benefit costs are summarized in the following table:

	Three Months Ended
	March 31,
	2012		2011
Service cost	$	5	$	8
Interest cost	14		14
Amortization of prior service cost	5		5
Recognized net actuarial gain	8		6
Net periodic benefit cost	$	32	$	33

Note 9 - Fair Value of Financial Instruments

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

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

Level 2 — Significant observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

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

Securities: The fair value of securities is determined by quoted market prices, if available (Level 1). For securities where quoted prices are not available, fair value is calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair value is calculated using discounted cash flows or other market indicators (Level 3).

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

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determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based upon management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the borrower and borrower’s business, resulting in a Level 3 classification. Impaired loans are evaluated on a quarterly basis for additional impairment and are adjusted accordingly.

Other Real Estate Owned: Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate owned are measured at the lower of carrying amount or fair value, less costs to sell. Fair values are based on third party appraisals of the property, resulting in a Level 3 classification. In cases where the carrying amount exceeds the fair value, less costs to sell, an impairment loss is recognized.

Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified appraisers whose qualifications and licenses have been reviewed by management. Management has discounted the appraisals values from 0.0% to 15.0% as a result of changes in market conditions from the time of the appraisal, selling costs, and other factors determined from management’s historical knowledge.

Assets and liabilities measured at fair value on a recurring basis are as follows:

	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2012 Recurring basis
U.S. government sponsored enterprises	$	61,549	$	—	$	61,549	$	—
Mortgage-backed: residential	407,254		—		407,254		—
State and political subdivisions	105,644		—		105,644		—
Corporate	39,596		—		39,596		—
Total securities available for sale	$	614,043	$	—	$	614,043	$	—

December 31, 2011 Recurring basis
U.S. Treasuries	$	10,420	$	10,420	$	—	$	—
U.S. government sponsored enterprises	66,885		—		66,885		—
Mortgage-backed: residential	302,206		—		302,206		—
State and political subdivisions	50,959		—		50,382		577
Corporate	23,655		—		23,655		—
Total securities available for sale	$	454,125	$	10,420	$	443,128	$	577

There were no transfers between Level 1 and Level 2 during the first three months of 2012 and 2011.

The table below presents a reconciliation of the state and political subdivisions available for sale security measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

	Three Months Ended March 31,
	2012			2011
Balance of recurring Level 3 assets at January 1	$	577		$	—
Total gains or (losses) for the period:
Included in other comprehensive income	(4		)	—
Purchases, sales, issuances and settlements, net				—
Transfers in or (out) of Level 3	(573		)	—
Balance of recurring Level 3 assets at March 31	$	—		$	—

At December 31, 2011, the Company had one state and political subdivisions security where the fair value was determined using Level 3 inputs. During the quarter ended March 31, 2012, the security was transferred from Level 3 to Level 2 because additional observable market data became available. The security was rated as investment grade by two nationally recognized rating agencies. The Company’s policy is to recognize transfers into or out of a

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level as of the end of the reporting period. As a result the fair value of the security was transferred on March 31, 2012.

Assets and liabilities measured at fair value on a non-recurring basis are as follows:

	Carrying Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2012 Non-recurring basis
Impaired loans:
Commercial	$	10,886	$	—	$	—	$	10,886
Commercial real estate	8,673		—		—		8,673
Construction and development	10,224		—		—		10,224
Residential real estate:
Mortgage	3,028		—		—		3,028
Home Equity	295		—		—		295
Other real estate owned:
Construction and development	10,272		—		—		10,272
Commercial real estate	3,484		—		—		3,484

December 31, 2011 Non-recurring basis
Impaired loans:
Commercial	$	8,697	$	—	$	—	$	8,697
Commercial real estate	8,106		—		—		8,106
Construction and development	4,840		—		—		4,840
Residential real estate	2,447		—		—		2,447
Other real estate owned:
Construction and development	8,560		—		—		8,560
Commercial real estate	3,484		—		—		3,484

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $41,281 with a valuation allowance of $8,175 at March 31, 2012. At December 31, 2011, impaired loans had a carrying value of $30,795 with a valuation allowance of $6,704. Provision for loan losses made for impaired loans during the first three months ended March 31, 2012 and 2011 was $0 and $1,722, respectively.

Other real estate owned, which are at fair value less costs to sell, had a net carrying amount of $13,756, which consisted of the outstanding balance of $14,233 net of a valuation allowance of $477 at March 31, 2012. Write-downs on the other real estate owned totaled $760 and $147 for the first three months of 2012 and 2011, respectively. At December 31, 2011, other real estate owned had a carrying amount of $12,044, which consisted of the outstanding balance of $15,669, net of a valuation allowance of $3,625.

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Carrying values and estimated fair values of the Company’s financial instruments as of March 31, 2012 and December 31, 2011 are set forth in the table below:

	Carrying		Fair Value Measurement at March 31, 2012 Using
	Value		Level 1		Level 2		Level 3		Total
Financial assets
Cash and cash equivalents	$	47,983	$	47,983	$	—	$	—	$	47,983
Securities
Available for sale	614,043		—		614,043		—		614,043
Held to maturity	230,345		32,662		209,732		—		242,394
Federal Home Loan Bank stock	6,527		N/A		N/A		N/A		N/A
Loans, less allowance for loan losses	958,153		—		891		973,723		974,614
Accrued interest receivable	5,774		—		3,276		2,498		5,774

Financial liabilities
Deposits	$	1,787,897	$	1,386,995	$	405,752	$	—	$	1,792,747
Accrued interest payable	2,984		73		2,911		—		2,984

	December 31, 2011
	Carrying Value		Estimated Fair Value
Financial assets
Cash and cash equivalents	$	116,325	$	116,325
Securities
Available for sale	454,125		454,125
Held to maturity	259,035		271,601
Federal Home Loan Bank stock	7,599		N/A
Loans, less allowance for loan losses	956,559		994,934
Accrued interest receivable	5,342		5,342

Financial liabilities
Deposits	$	1,739,544	$	1,748,988
Accrued interest payable	2,471		2,471

The methods and assumptions, not previously presented, used to estimate fair values of certain other financial instruments are described as follows:

(a) Cash and Cash Equivalents

The carrying amounts of cash and short-term instruments approximate fair values and are classified as Level 1.

(b) FHLB Stock

It is not practical to determine the fair value of FHLB stock due to restrictions placed on its transferability.

(c) Loans

Fair values of loans, excluding loans held for sale, are estimated as follows: for variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price, resulting in a Level 3 classification.

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The fair value of loans held for sale is estimated based upon binding contracts and quotes from third party investors resulting in a Level 2 classification.

(d) Deposits

The fair values disclosed for demand deposits (e.g., interest and non-interest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 1 classification. The carrying amounts of variable rate, fixed-term money market accounts and certificates of deposit approximate their fair values at the reporting date resulting in a Level 2 classification. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification.

(e) Accrued Interest Receivable/Payable

The carrying amounts of accrued interest receivable/payable approximate fair value. Accrued interest receivable/payable are classified to reflect the associated underlying contracts.

(f) Off-Balance Sheet Instruments

Fair values for off-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of such commitments is not material.

Note 10 - Capital Requirements

On January 13, 2011, the Bank agreed with its regulators to maintain minimum capital ratios in excess of the minimum ratios required by applicable federal regulations. The Bank agreed to maintain minimum capital ratios equal to or exceeding 8.00% for Tier 1 capital to average total assets and 12.00% for total capital to risk-weighted assets. As of March 31, 2012, the Bank was in compliance with these heightened regulatory capital requirements. If the Bank is not in compliance with these requirements in the future, the Bank may become subject to additional regulatory actions or restrictions.

At March 31, 2012, the Bank’s Tier 1 capital to average total assets ratio was 8.38%, .38%, or $7.3 million, above the 8.00% level the Bank agreed with its regulators to maintain, and the Bank’s total capital to risk-weighted assets was 13.66%, 1.66%, or $21.8 million, above the 12.00% the Bank agreed with its regulators to maintain.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Executive Overview

At the end of 2007, the United States economy experienced a downturn, the effects of which have continued into 2012. During this period, the United States economy experienced high levels of unemployment, depressed home values, historically low levels of liquidity in the debt markets and increased volatility in the equity markets. As a result of these conditions, consumer confidence and spending decreased substantially and asset values declined. Like many other financial institutions, the Company’s financial results in recent reporting periods, including 2011 and 2012, were impacted by the continuing economic downturn.

The economic downturn has impacted the entire State of Illinois, including the Company’s primary market area, located in the western suburbs of Chicago, Illinois. According to the Bureau of Labor and Statistics, the unemployment rate in the State of Illinois at March 31, 2012 was 8.8%. High levels of unemployment have adversely impacted the ability of certain of the Company’s borrowers to meet their ongoing debt obligations. In

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addition, real estate demand in the Company’s market area remains weak, resulting in declines in the values of the real estate serving as collateral for certain of the Company’s loans.

As a result of the continuing economic situation in the national and local economies and depressed real estate values, management has focused its attention primarily on improving the performance of the Bank’s loan portfolio. The Bank’s nonaccrual loans during the first quarter of 2012 remained at a historically high level, which adversely impacted its interest income. The deterioration in the Bank’s loan portfolio has forced the Bank in recent periods to increase its allowance for loan losses compared to historical levels to absorb additional losses in the portfolio. The Bank’s Board of Directors reviews the level of its allowance for loan losses on a monthly basis. The Board responds as promptly as practical to new developments in the Bank’s loan portfolio. Although management has maintained a higher level of allowance for loan losses compared to historical levels in response to heightened levels of nonaccrual loans and believes that the allowance for loan losses is a reasonable estimate for probable incurred losses in the loan portfolio, future loan losses in excess of the allowance for loan losses would adversely affect the Bank’s financial condition and results of operations. In addition, as a result of increasing levels of foreclosures and acquisitions made in lieu of foreclosures, the Bank’s other real estate owned portfolio remained at a high level throughout 2011 and into the first quarter of 2012, further decreasing the Bank’s interest income. Management believes that the level of the Bank’s other real estate owned portfolio will remain at a high level throughout 2012 and may increase. Management has had to focus additional time and effort on selling these properties, and the Bank has incurred significant costs in connection with maintaining the properties, including real estate taxes, management fees and insurance costs. Management continues to aggressively pursue sales of the foreclosed assets in the Bank’s portfolio, but due to weak real estate demand in the Bank’s market area, management is not able to dispose of these properties as promptly as desired.

During this difficult economic period the Bank has seen low levels of quality demand for credit. Although concerns over the credit quality in the Bank’s loan portfolio exist, the Bank continues to be willing to make loans to qualified applicants that meet its traditional and prudent lending standards.

In response to the economic downturn, the Federal Reserve has maintained and has indicated that it will hold interest rates at historically low levels through the next several years. Additionally, the Federal Reserve has used various forms of monetary policy in an attempt to drive down long-term interest rates during this economic downturn. The presence of these historically low interest rates has created net interest challenges for the banking industry in general and the Bank in particular. This interest rate environment has resulted in low-yielding investment opportunities, adding to the downward pressure on the Bank’s interest income. Management has been focused on investments for the Bank’s securities portfolio that are expected to retain their value in the event of an unexpected increase in market interest rates over the next few years. Specifically, the Bank has invested in mortgage-backed securities issued by U.S. government sponsored enterprises with average maturities of less than five years. In addition, movements in general market interest rates are a key element in changes in the Bank’s interest rate margin, and management expects the interest rate environment to remain at historically low levels throughout 2012.

On January 13, 2011, the Bank agreed with its regulators to maintain minimum capital ratios in excess of the minimum ratios required by applicable federal regulations. Specifically, the Bank agreed to maintain minimum capital ratios equal to or exceeding 8.00% for Tier 1 capital to average total assets and 12.00% for total capital to risk-weighted assets. As of March 31, 2012, the Bank was in compliance with these heightened regulatory capital requirements. If the Bank is not in compliance with the requirements in the future, the Bank may become subject to additional regulatory actions or restrictions.

Critical Accounting Policies

The Company’s financial statements are prepared in conformity with accounting principles generally accepted in the U.S. These accounting principles, which can be complex, are significant to our financial condition and our results of operations and require management to apply significant judgment with respect to various accounting, reporting and disclosure matters. Management must use estimates, assumptions and judgments to apply these principles where actual measurements are not possible or practical. These estimates, assumptions and judgments are based on information available as of the date of this report and, as this information changes, actual results could differ from the estimates, assumptions and judgments reflected in the financial statements. Changes in such estimates may have a significant impact on the financial statements. Management has reviewed the application of these policies with the

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Audit Committee of West Suburban’s Board of Directors. This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company’s Condensed Consolidated Financial Statements and Notes to the Condensed Consolidated Financial Statements included in this quarterly report.

In management’s view, the accounting policies that are critical to the Company are those relating to estimates, assumptions and judgments regarding the determination of the adequacy of the allowance for loan losses, the Company’s federal and state income tax obligations, the determination of the fair value of certain of the Company’s investment securities, the fair value of common stock subject to contingent repurchase obligation and the carrying value of other real estate owned.

Allowance for Loan Losses. The allowance for loan losses is a valuation allowance for probable incurred credit losses in the loan portfolio. The allowance is increased by a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan has been established. Subsequent recoveries, if any, are credited to the allowance. The allowance consists of specific and general components. The specific component relates to specific loans that are individually classified as impaired. The allowance for loan losses is evaluated monthly based on management’s periodic review of loan collectibility in light of historical loan loss experience, the nature and volume of the loan portfolio, information about specific borrower situations and estimated collateral values and prevailing economic conditions. Although allocations of the allowance may be made for specific loans, the entire allowance is available for any loan that, in management’s judgment, should be charged-off. Management’s evaluation of loan collectibility is inherently subjective as it requires estimates that are subject to significant revision as more information becomes available or as relevant circumstances change.

The Company evaluates commercial, commercial real estate and construction and development loans monthly for impairment. A loan is considered impaired when, based on current information and events, full payment under the loan terms is not expected. Loans for which the terms have been modified and for which the borrower is experiencing financial difficulties are considered TDRs and classified as impaired. Impairment is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate 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 days or more past due and loans classified as nonaccrual status are considered for impairment. Impairment is considered on an entire category basis for smaller-balance loans of similar nature such as residential real estate and consumer loans, and on an individual basis for other loans. In general, consumer and credit card loans are charged-off no later than 120 days after a consumer or credit card loan becomes past due.

The general component covers pools of other loans not classified as impaired and is based on historical loss experience adjusted for current factors. The historical loss experience is determined by portfolio segment and is based on a rolling 15 month net charge-off history. This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment. These factors include consideration of the following: levels and trends in past dues; trends in charge-offs and recoveries; trends in volume and terms of loans; effects of collateral deterioration; other changes in lending policies, procedures and practices; experience, ability and depth of lending management and other relevant staff; national and local economic trends; and trends in impaired loans, including impaired loans without a specific allowance for loan losses. The following loan portfolio segments have been identified: commercial, commercial real estate, construction and development, residential real estate and consumer and other loans.

Income Taxes. The Company is subject to income tax laws of the U.S. and the State of Illinois. These laws are complex and subject to different interpretations by the taxpayer and the various taxing authorities. Management makes certain judgments and estimates about the application of these inherently complex laws when determining the provision for income taxes. Federal and state taxing authorities sometimes aggressively challenge tax positions taken by financial institutions, including positions that may be taken by the Company. During the preparation of the Company’s tax returns, management makes reasonable interpretations of the tax laws which are subject to challenge upon audit by the tax authorities. These interpretations are also subject to reinterpretation based on management’s ongoing assessment of facts and evolving case law.

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

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

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

Other Real Estate Owned. Assets acquired through or instead of loan foreclosure are initially recorded at fair value less anticipated costs to sell when acquired, establishing a new basis. If fair value declines subsequent to acquisition, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed as incurred.

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

Through the normal course of operations, the Company has entered into certain contractual obligations and other commitments. These obligations generally relate to the funding of operations through deposits and prepaid solutions cards, as well as leases for premises and equipment. As a financial services provider, the Company routinely enters into commitments to extend credit. While contractual obligations represent future cash requirements of the Company, a significant portion of commitments to extend credit may expire without being drawn upon. Commitments to extend credit are subject to the same credit policies and approval procedures as comparable loans made by the Company.

At March 31, 2012 and December 31, 2011, the ESOP held 89,334 and 89,348 shares of West Suburban common stock, respectively. Upon termination of their employment, participants who elect to receive their benefit distributions in the form of West Suburban common stock may request the Company to purchase, when the Company is legally permitted to purchase its common stock, the common stock distributed at fair value. A more detailed discussion concerning this obligation is presented in Note 6 to the Company’s Condensed Consolidated Financial Statements included in this report. At March 31, 2012 and December 31, 2011, this contingent repurchase obligation reduced shareholders’ equity by $25.1 million and $23.2 million, respectively.

Balance Sheet Analysis

Total Assets. Total consolidated assets at March 31, 2012 increased 3.1% compared to December 31, 2011, primarily due to increases in the securities portfolios funded in part by an increase in interest-bearing deposits from customers.

Cash and Cash Equivalents. Cash and cash equivalents at March 31, 2012 decreased 58.8% from December 31, 2011. This was primarily due to a decrease in cash and due from banks, as the Company increased its holdings of available for sale investment securities.

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Securities. The Company’s securities portfolio increased 18.1% during the first three months of 2012. This increase was primarily due to investments in U.S. government sponsored enterprise-issued residential mortgage-backed securities and state and political subdivisions securities. The Company made these investments to earn a higher yield when compared to alternative investments such as federal funds sold. The Company manages its securities portfolio to maximize the return on invested funds within acceptable risk guidelines, to meet pledging and liquidity requirements, and to adjust balance sheet interest rate sensitivity in an effort to insulate net interest income against the impact of interest rate changes. The Company will continue to monitor its level of available for sale and held to maturity securities and will classify new securities purchased in the appropriate category at the time of purchase. During the first three months of 2012, the Company has continued to take advantage of the current rate environment and realized gains on sales of available for sale securities with unrealized gain positions which has positively impacted net income. During the first three months of 2012, the Company sold available for sale securities, resulting in $.8 million of realized gains. At March 31, 2012, the Company’s accumulated other comprehensive income due to unrealized gains and losses on securities available for sale was $4.0 million compared to $3.9 million at December 31, 2011.

Loans. Total loans outstanding at March 31, 2012 increased 0.1% from December 31, 2011, primarily due to an increase in the commercial real estate loan portfolio. This increase in the commercial real estate portfolio was primarily due to the addition of one large relationship and was significantly offset by decreases in the home equity and construction and development loan portfolios. The decreases in the home equity and construction and development loan portfolios were due to continued payoffs. Although the Company experienced growth in the commercial real estate loan portfolio, overall loan demand in the Company’s market area remains low compared to historical periods.

Balances in the Company’s loans are summarized in the following table (dollars in thousands):

	March 31, 2012			December 31, 2011
Commercial	$	278,462		$	278,969
Commercial real estate	293,804			284,065
Construction and development	77,785			79,197
Residential real estate:
Mortgage	151,965			151,378
Home equity	172,008			178,819
Consumer and other	11,368			11,715
Total	985,392			984,143
Allowance for loan losses	(27,239		)	(27,584		)
Loans, net	$	958,153		$	956,559

Allowance for Loan Losses and Asset Quality. The level of the allowance for loan losses is determined by evaluating the general allowance, which is allocated to pools of loans, as well as the specific allowance allocated to impaired loans. The Company utilizes a matrix which tracks changes in various factors that management has determined to have direct effects on the performance of the loan portfolio. These factors include consideration of the following: levels and trends in past dues; trends in charge-offs and recoveries; trends in volume and terms of loans; effects of collateral deterioration; other changes in lending policies, procedures and practices; experience, ability and depth of lending management and other relevant staff; national and local economic trends; and trends in impaired loans, including impaired loans without a specific allowance for loan losses. The matrix assigns factors to each loan category which is used to determine the amount of the general allowance. The specific allowance allocated to impaired loans is based on the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the loan’s collateral, if repayment of the loan is collateral dependent. A loan is considered impaired when, based on current information and events, full payment under the loan terms is not expected. Loans for which the terms have been modified and for which the borrower is experiencing financial difficulties are considered TDRs and classified as impaired.

At March 31, 2012, the allowance for loan losses was $27.2 million, compared to $27.6 million at December 31, 2011. The decrease in the allowance for loan losses was primarily in the general allowance component and is due to an improvement in the Company’s historical charge-off average percentages.

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Impaired loans totaled $89.5 million at March 31, 2012, as compared to $90.6 million at December 31, 2011. The allowance for loan losses allocated to impaired loans totaled $8.2 million at March 31, 2012 as compared to $6.7 million at December 31, 2011. The increase in allowance for loan losses allocated to impaired loans is primarily due to the addition of two relationships that required specific reserves. The relatively low specific reserves on impaired loans is a result of the majority of the impaired loans being sufficiently collateralized and due to the Company recording previous partial charge-offs on impaired loans. As of March 31, 2012, the impaired loan balance of $89.5 million is net of $11.2 million of partial charge-offs.

The general reserve as a percentage of non-impaired loans was 2.1% at March 31, 2012, as compared to 2.3% at December 31, 2011. The decrease in the general reserve as a percentage of loans is consistent with the change in the actual historical loss history, management’s review of internal classified loans and management’s expectation of overall economic conditions nationally and in the areas in which the Company operates. Net loan charge-offs were $.3 million for the three months ended March 31, 2012 compared to $.9 million during the same period in 2011.

Nonperforming loans (nonaccrual and loans past due 90 days or more still on accrual) increased to $56.8 million at March 31, 2012 from $53.3 million at December 31, 2011. This change was primarily due to $16.7 million of loans being classified as nonaccrual during the first three months of 2012. This increase was significantly offset by $12.1 million in payments made on nonperforming loans, of which $11.4 million was paid on one large relationship. Additionally, $.4 million of loans were brought current and $.5 million of loans were transferred to other real estate owned. The Company also charged off $.3 million of nonaccrual loans during the first three months of 2012.

The Company’s ratio of nonperforming loans to total loans was 5.8% at March 31, 2012 and 5.4% at December 31, 2011, due to the increase in nonperforming loans described above. The ratio of nonperforming assets (nonperforming loans and other real estate owned) to total assets decreased to 3.9% at March 31, 2012 from 4.0% at December 31, 2011.

The ratio of the allowance for loan losses to total loans was 2.8% at March 31, 2012 and December 31, 2011. The following table presents an analysis of the Company’s nonperforming loans and other real estate owned as of the dates indicated (dollars in thousands):

	March 31, 2012			December 31, 2011
Loans past due 90 days or more still on accrual	$	318		$	286
Nonaccrual loans	56,456			53,058
Total nonperforming loans	$	56,774		$	53,344
Nonperforming loans as a percent of total loans	5.8		%	5.4		%
Allowance for loan losses as a percent of nonperforming loans	48.0		%	51.7		%
Other real estate owned	$	21,313		$	23,505
Nonperforming assets as a percent of total assets	3.9		%	4.0		%

The following table presents an analysis of the Company’s allowance for loan losses for the periods stated (dollars in thousands):

	2012			2011
	1st Qtr			4th Qtr			3rd Qtr			2nd Qtr			1st Qtr
Provision - quarter	$	—		$	2,360		$	4,750		$	1,818		$	3,000
Provision - year to date	—			11,928			9,568			4,818			3,000
Net charge-offs - quarter	345			2,642			3,890			5,024			860
Net charge-offs - year to date	345			12,416			9,774			5,884			860
Allowance at period end	27,239			27,584			27,866			27,006			30,212
Allowance at period end to total loans	2.8		%	2.8		%	2.8		%	2.8		%	3.0		%

Other Real Estate Owned. At March 31, 2012, the Company had $21.3 million in other real estate owned, compared to $23.5 million at December 31, 2011. During the first three months of 2012, the Company acquired properties with an aggregate carrying value of $.5 million and sold properties with an aggregate carrying value of $1.9 million. These sales produced a net loss of $.1 million. On a monthly basis, the Company evaluates the carrying value of all other real estate owned properties and takes write-downs on these properties as necessary. During the

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first three months of 2012, the Company recorded aggregate write-downs of $.8 million due to the continued decline in real estate values. The Company is actively marketing the properties it holds in its other real estate owned portfolio in a continuing effort to reduce the size of this portfolio.

Bank-Owned Life Insurance. Bank-owned life insurance at March 31, 2012 increased .5% from December 31, 2011, resulting from earnings on the asset during the quarter.

Deposits. Total deposits at March 31, 2012 increased 2.8% from December 31, 2011 due to increases in NOW, money market checking and savings deposits. Management believes that due to the current state of the economy, some customers have migrated from non-liquid time deposits to more liquid deposit products such as money market checking and savings deposits. In general, management promotes the Company’s deposit products when it believes appropriate and prices its products in a manner intended to retain the Company’s current customers while maintaining an acceptable net interest margin. As of March 31, 2012, the Company held $2.9 million of deposits related to balances on cards issued by the Bank’s former prepaid solutions group. The Bank is in the process of winding down its issuing bank responsibilities under the prepaid card programs originated by the Bank’s former prepaid solutions group that were transferred, and the Bank expects to reduce the level of, and eventually cease to hold, these deposits. As of March 31, 2012, the Bank had no brokered deposits.

Balances in the Company’s major categories of deposits are summarized in the following table (dollars in thousands):

	March 31, 2012		December 31, 2011		Dollar Change			Percentage Change
Demand-noninterest-bearing	$	147,189	$	152,955	$	(5,766	)	(3.8	)%
Prepaid solutions card deposits	2,945		5,810		(2,865		)	(49.3	)%
NOW	381,598		357,351		24,247			6.8	%
Money market checking	457,592		444,942		12,650			2.8	%
Savings	397,671		372,067		25,604			6.9	%
Time deposits
Less than $100,000	296,241		301,154		(4,913		)	(1.6	)%
$100,000 and greater	104,661		105,265		(604		)	(0.6	)%
Total	$	1,787,897	$	1,739,544	$	48,353		2.8	%

Prepaid Solutions Cards. Outstanding balances on prepaid solutions cards, which represent the total of prepaid solutions cards deposits and prepaid solutions cards liabilities, decreased 17.4% at March 31, 2012 from December 31, 2011. On December 4, 2009, the Company sold its prepaid solutions card division. The Bank remains the card issuing bank under a number of the card programs transferred, although the Bank is in the process of winding down such responsibilities. The outstanding balances on prepaid solutions cards will remain on the Company’s balance sheet for a period of time. The Company no longer records the income and expense associated with the prepaid solutions cards.

CAPITAL RESOURCES

Shareholders’ equity at March 31, 2012 increased 1.2% from December 31, 2011. The increase resulted from net income of $3.4 million, a change in the amount reclassified on ESOP share of $1.9 million and an increase in accumulated other comprehensive income of $.1 million. In accordance with applicable regulations, the appraised fair market value of West Suburban common stock owned by the ESOP is included in Tier 1 capital.

Banking regulations require the Company and the Bank to maintain minimum capital amounts and ratios. Regulatory capital requirements call for a minimum total risk-based capital ratio of 8% for each of the Company and the Bank, a minimum Tier 1 risk-based capital ratio of 4% for each of the Company and the Bank and a minimum leverage ratio (3% for the most highly rated banks and bank holding companies that do not expect significant growth; all other institutions are required to maintain a minimum leverage capital ratio of 4% to 5% depending on their particular circumstances and risk and growth profiles) for each of the Company and the Bank. On a consolidated basis, West Suburban exceeded these minimum regulatory capital requirements as of March 31, 2012. Bank holding companies and their subsidiaries are generally expected to operate at or above the minimum capital requirements.

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On January 13, 2011, the Bank agreed with its regulators to maintain minimum capital ratios in excess of the minimum ratios required by applicable federal regulations. The Bank agreed to maintain minimum capital ratios equal to or exceeding 8.00% for Tier 1 capital to average total assets and 12.00% for total capital to risk-weighted assets. As of March 31, 2012, the Bank was in compliance with these heightened regulatory capital requirements. If the Bank is not in compliance with the requirements in the future, the Bank may become subject to additional regulatory actions or restrictions.

The Bank also has agreed not to pay dividends to West Suburban without obtaining prior approval of its bank regulators. In addition, West Suburban’s Board of Directors has resolved to obtain regulatory approval prior to paying dividends or redeeming West Suburban common stock in order to preserve capital and maintain the Company’s financial strength given the economic environment and its impact on the Company.

As of March 31, 2012 and December 31, 2011, the Bank exceeded the minimum capital ratios required for it to qualify as “well-capitalized” under the regulatory framework for prompt corrective action. There were no conditions or events since March 31, 2012 that management believes would result in a change of the Bank being considered “well-capitalized.”

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The following table sets forth the actual and minimum capital ratios of the Company and the Bank as of the dates indicated (dollars in thousands):

	Actual				Minimum To Be Well- Capitalized				Excess
	Amount		Ratio		Amount		Ratio		Amount
As of March 31, 2012
Total capital (to risk weighted assets)
Company	$	182,364	13.91	%	N/A		N/A		N/A
Bank (1)	179,034		13.66	%	$	131,069	10.00	%	$	47,965
Tier 1 capital (to risk weighted assets)
Company	165,843		12.65	%	N/A		N/A		N/A
Bank	162,516		12.40	%	78,641		6.00	%	83,875
Tier 1 capital (to average assets)
Company	165,843		8.56	%	N/A		N/A		N/A
Bank (1)	162,516		8.38	%	96,980		5.00	%	65,536

As of December 31, 2011
Total capital (to risk weighted assets)
Company	$	174,107	13.72	%	N/A		N/A		N/A
Bank (1)	170,781		13.46	%	$	126,925	10.00	%	$	43,856
Tier 1 capital (to risk weighted assets)
Company	158,097		12.46	%	N/A		N/A		N/A
Bank	154,771		12.19	%	76,155		6.00	%	78,616
Tier 1 capital (to average assets)
Company	158,097		8.31	%	N/A		N/A		N/A
Bank (1)	154,771		8.11	%	95,362		5.00	%	59,409

(1) The Bank has agreed to maintain minimum Tier 1 capital to average assets of 8.00% and total capital to risk-weighted assets of 12.00%.

LIQUIDITY

Effective liquidity management ensures the availability of funding sources at minimum cost to meet fluctuating deposit balances, loan demand needs and to take advantage of earnings enhancement opportunities. A large, stable core deposit base and a strong capital position are the solid foundation of the Company’s liquidity position. Liquidity is enhanced by a securities portfolio structured to provide liquidity as needed. The Company also maintains relationships with correspondent banks to purchase federal funds subject to underwriting and collateral requirements. Additionally, subject to credit underwriting, collateral, capital stock, and other requirements of the Federal Home Loan Bank of Chicago (the “FHLB”), the Company is able to borrow from the FHLB on a “same day” basis. As of March 31, 2012, the Company could have borrowed up to approximately $131 million from the FHLB secured by certain of its real estate loans and securities. The Company manages its liquidity position through continuous monitoring of profitability trends, asset quality, interest rate sensitivity and maturity schedules of interest-earning assets and interest-bearing liabilities.

Generally, the Company uses cash and cash equivalents to meet its liquidity needs. If the Company’s cash and cash equivalents are not sufficient to meet its liquidity needs, the Company would access the federal funds available for a short period of time. If longer term liquidity is needed, the Company would meet those needs using securities available for sale. As of March 31, 2012 and December 31, 2011, cash and cash equivalents together with securities available for sale collectively represented 33.3% and 29.6% of total assets, respectively.

During the first three months of 2012, the Company’s cash and cash equivalents decreased $68.3 million; net cash provided by operating activities was $14.8 million; net cash used in investing activities was $131.6 million; and net cash provided by financing activities was $48.5 million. The net cash used in investing activities was related primarily to purchases of investment securities available for sale.

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RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011

Net Income. The Company’s net income increased $.6 million to $3.4 million for the first three months of 2012 compared to $2.8 million for the first three months of 2011. The increase was primarily due to a decrease in the provision for loan losses expense of $3.0 million. No provision for loan losses was recorded for the first three months of 2012, as the Company’s evaluation of the general and specific reserve categories of the allowance for loan losses was deemed sufficient to absorb the probable incurred credit losses in the loan portfolio. This decrease in expense was partially offset by a decrease in total noninterest income of $1.2 million, along with a decrease in net interest income of $.5 million. Additionally, the Company experienced an increase in total noninterest expense of $.2 million and income tax expense of $.5 million.

Net Interest Income. Net interest income (on a fully tax-equivalent basis, assuming a tax rate of 35.0%) decreased 3.1% for the first three months of 2012 compared to the first three months of 2011. Net interest income is the primary source of income for the Company. Net interest income is the difference between interest income earned on interest-earning assets and interest expense incurred on interest-bearing liabilities. Net interest income is affected by changes in volume and yield on interest-earning assets and interest-bearing liabilities. Interest-earning assets consist of federal funds sold, securities and loans. Interest-bearing liabilities primarily consist of deposits. The net interest margin is the percentage of tax-equivalent net interest income to average earning assets. The Company’s net interest margin (on a fully tax-equivalent basis) was 3.4% and 3.5% for the three month periods ended March 31, 2012 and 2011, respectively.

Total interest income (on a tax-equivalent basis, assuming a tax rate of 35.0%) decreased 6.5% for the first three months of 2012 compared to the first three months of 2011, primarily due to a decrease in total loans and decreasing yields in the Company’s securities portfolio. Average loan balances decreased 4.1% for the first three months of 2012, and the average yield on the loan portfolio increased 5 basis points. Average securities balances increased 3.5% for the first three months of 2012, and the average yield on the securities portfolio decreased 51 basis points. Management decided to sell securities as market rates declined during the first three months of 2012. A large portion of these securities were sold in order to reduce the Company’s interest rate risk in the securities portfolio. Management’s analysis of these securities indicated that certain higher yielding securities could be sold at a gain and over time the proceeds could be reinvested at lower yields which will continue to be accretive to earnings.

Total interest expense decreased 21.5% for the first three months of 2012 compared to the first three months of 2011. Lower interest on deposits, resulting from lower yields on interest-bearing deposits, accounted for all of the decrease. The average yield on interest-bearing deposits decreased 18 basis points to .6% for the three months ended March 31, 2012, from .8% for the three months ended March 31, 2011. Approximately 59% of time deposits are scheduled to mature within one year.

The following table reflects the impact of changes in volume and interest rates on interest-earning assets and interest-bearing liabilities (on a fully tax-equivalent basis) for the first three months ended March 31, 2012 as compared to the same period in 2011 (dollars in thousands):

	Change due to						Total
	Volume			Rate			Change
Interest Income
Federal funds sold	$	—		$	—		$	—
Securities	159			(918		)	(759		)
Loans	(508		)	117			(391		)
Total interest income	(349		)	(801		)	(1,150		)
Interest Expense
Interest-bearing deposits	—			(697		)	(697		)
Other interest-bearing liabilities	—			—			—
Total interest expense	—			(697		)	(697		)
Net interest income	$	(349	)	$	(104	)	$	(453	)

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The following table presents an analysis of the Company’s year-to-date average interest-earning assets, demand-noninterest-bearing deposits and interest-bearing liabilities as of the dates indicated (dollars in thousands):

	2012		2011
	March 31		December 31		September 30		June 30		March 31
Federal funds sold	$	370	$	9,543	$	8,857	$	311	$	205
Securities	753,356		707,974		719,565		742,770		728,045
Loans	918,914		921,757		925,061		934,552		958,013
Total interest-earning assets	$	1,672,640	$	1,639,274	$	1,653,483	$	1,677,633	$	1,686,263

Demand-noninterest-bearing deposits	$	156,525	$	174,795	$	174,538	$	172,973	$	172,582
Interest-bearing deposits	1,593,390		1,576,322		1,585,176		1,595,997		1,593,572
Total deposits	$	1,749,915	$	1,751,117	$	1,759,714	$	1,768,970	$	1,766,154
Total interest-bearing liabilities	$	1,596,043	$	1,582,482	$	1,592,538	$	1,604,634	$	1,602,019

Provision for Loan Losses. A provision for loan losses is recorded when the Company’s evaluation of the general and specific reserve categories of the allowance for loan losses are not deemed sufficient to absorb probable incurred credit losses in the loan portfolio. Provision for loan losses decreased $3.0 million for the first three months of 2012 compared to the first three months of 2011, as the Company did not record any provision for loan losses during the first three months of 2012. The decline in the general allowance allocations offset net charge-offs during the quarter. A more detailed discussion of the allowance for loan losses is presented in the Allowance for Loan Losses and Asset Quality section of this report.

Noninterest Income. Total noninterest income decreased 25.0% for the first three months of 2012 compared to the first three months of 2011. The Company experienced a decrease in bank-owned life insurance income of $.3 million primarily due to the surrendering of $7.9 million of bank-owned life insurance policies in connection with the termination of a portion of the deferred compensation plan in the second half of 2011. Additionally, the Company experienced a decrease in net realized gains on securities transactions of $.3 million. The Company also experienced a decrease in other income of $.5 million primarily due to a loss on the sale of other real estate owned in the 2012 period compared to a gain in the 2011 period.

Noninterest Expense. Total noninterest expense increased 1.5% for the first three months of 2012 compared to the first three months of 2011. Other real estate owned expense increased $.7 million primarily due to increased write-downs during the 2012 period. FDIC assessment expense decreased $.4 million primarily due to changes in the assessment calculation. Furniture and equipment expense increased $.1 million primarily due to increased data processing and maintenance equipment expense. Occupancy expense decreased $.2 million primarily due to reduced rent expense net of rental income. Professional fees expense decreased $.1 million primarily due to reduced costs associated with regulatory compliance. Loan administration expense increased $.2 million primarily due to increased expenses on one large relationship, along with increased tax payments on collateral securing nonaccrual commercial, commercial real estate and construction and development loans. Other expense decreased $.1 million primarily due to reduced Visa cardholder expense and stationary and supplies expense.

Income Taxes. Income tax expense increased $.5 million for the first three months of 2012 compared to the first three months of 2011. The effective tax rates for the first three months of 2012 and 2011 were 33.5% and 30.5%, respectively. The increase was due to the higher pre-tax income and its impact on the ratio of pre-tax income to pre-tax income subject to income taxes.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company attempts to maintain a conservative posture with regard to interest rate risk by actively managing its asset/liability GAP position and monitoring the direction and magnitude of gaps and risk. The Company attempts to moderate the effects of changes in interest rates by adjusting its asset and liability mix to achieve desired relationships between rate sensitive assets and rate sensitive liabilities. Rate sensitive assets and liabilities are those

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instruments that reprice within a given time period. An asset or liability reprices when its interest rate is subject to change or upon maturity.

Movements in general market interest rates are a key element in changes in the net interest margin. The Company’s policy is to manage its balance sheet so that fluctuations in the net interest margin are minimized regardless of the level of interest rates, although the net interest margin does vary somewhat due to management’s response to increasing competition from other financial institutions.

The Company measures interest rate sensitivity through a net interest income analysis. The net interest income analysis measures the change in net interest income in the event of hypothetical changes in interest rates. This analysis assesses the risk of changes in net interest income in the event of a sudden and sustained 100 to 200 basis point increase or decrease in market interest rates. This analysis is subject to certain assumptions made by the Company, including the following:

· Balance sheet volume reflects the current balances and does not project future growth or changes. This establishes the base case from which all percentage changes are calculated.

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

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

· The maturity and repricing dates for balance sheet data are determined by utilizing individual account statistics provided by the Company’s data processing systems.

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

March 31, 2012	Amount		Dollar Change			Percentage Change
+200 basis points	$	52,963	$	(2,952	)	(5.3	)%
+100 basis points	54,186		(1,729		)	(3.1	)%
Base	55,915
-100 basis points	50,365		(5,550		)	(9.9	)%
-200 basis points	48,100		(7,815		)	(14.0

WEST SUBURBAN BANCORP INC 10-Q