WSB Financial Group Inc. Case 10/30/2007

Settlement - 10/14/2008

According to a press release by WSB Financial, WSB Financial Group (NASDAQ:WSFG) , the parent company of Westsound Bank, reported on October 14, 2008, that it has entered into a settlement agreement with the lead plaintiff in the pending securities class action. The class action settlement is subject to the approval of the United States District Court for the Western District of Washington. The settlement agreement provides for the certification of a class consisting of all persons who purchased the Company’s common stock pursuant or traceable to its initial public offering completed on December 21, 2006. The total amount of the settlement is $4.85 million. The Company’s directors’ and officers’ liability insurance policy will contribute approximately $4.45 million towards the settlement amount and has previously contributed approximately $350,000 towards the Company’s legal fees. The settlement agreement contains no admission of fault or wrongdoing by the Company or the other defendants. “This settlement is a significant accomplishment and allows our management team to focus on our future,” said Terry A. Peterson, President and CEO. “It further demonstrates our focus on identifying and executing strategies to eliminate risk. While we still believe we have strong defenses, we felt it was important to get it behind us and eliminate the burden and expense of protracted litigation. We continue to maintain adequate levels of capital and liquidity, which are important measures of the Bank’s safety and soundness for both shareholders and depositors.”

Lawsuit - 10/30/2007

According to press release dated October 31, 2007, a class action lawsuit was filed on behalf of purchasers of the securities of WSB Financial, Inc. after the company initial public offering seeking to pursue remedies under the 1933 Act. The class action on behalf of all persons who purchased WSB shares, issued pursuant to the December 2006 Registration Statement and Prospectus. WSB is the holding company for Westsound Bank, a Bremerton, Wash.-based financial institution that serves the Puget Sound area.

Specifically, the complaint charges WSB, certain of its officers and directors, and the Company’s underwriter with violations of the Act. According to the complaint, the company’s registration statement for the IPO failed to disclose that the company had been violating certain banking laws and regulations relating to the origination, administration and monitoring of construction and mortgage loans. Due to the company’s misleading statements the WSB stock was traded as high as $21 per share during the class period.

The complaint further alleges that beginning in September of 2007 a series of announcements and investigations into the company’s lending practices caused the WSB stock to plummet. In late September the company announced that due to the reduced demand of mortgage loans in the market 33 jobs would be eliminated in the mortgage division of the company and, that WSB’s executive vice president of sales and lending at Westsound Bank was terminated. As a result stock price fell from $15.30 to $12.40. In a final blow, the company announced that state and federal regulators were looking into possible fraud and misconduct in its real estate lending practices. Within two days of this announcement the company’s stock dropped nearly 60 percent, from $11.20 on October 24, 2007 to $4.73 on October 25, 2007.