##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2007
 Commission file number: 000-51507
 WAUWATOSA HOLDINGS, INC.
  Federally Chartered Corporation
    
    39-0691250(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 11200 W Plank Ct, Wauwatosa, WI
    
    53226(Address of principal executive offices)
    
    (Zip Code)
 (414) 761-1000
  Common Stock, $0.01 Par Value
    
    The NASDAQ Stock Market, LLC(Title of class)
    
    (Name of each exchange on which registered)
  NONE
  o þ
  o þ
  þ o
 þ
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
  o þ
 ®
  DOCUMENTS INCORPORATED BY REFERENCE
 Part of Form 10-K Into WhichDocument
    
    Portions of Document are IncorporatedProxy Statement for Annual Meeting of 
Shareholders on May 13, 2008
    
    Part III




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##### 



WAUWATOSA HOLDINGS, INC.
 FORM 10-K ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED DECEMBER 31, 2007
 TABLE OF CONTENTS
 ITEM
    
    
    
    PAGEPART I1.
    
    Business
    
    3-521A.
    
    Risk Factors
    
    52-531B.
    
    Unresolved Staff Comments
    
    532.
    
    Properties
    
    543.
    
    Legal Proceedings
    
    554.
    
    Submission of Matters to a Vote of Security Holders
    
    55PART II5.
    
    Market for Registrants Common Equity, Related Stockholders Matters and
Issuer Purchases of Equity Securities
    
    56-586.
    
    Selected Financial Data
    
    59-617.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    62-857A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    86-878.
    
    Financial Statements and Supplementary Data
    
    88-1269.
    
    Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
    
    1279A.
    
    Controls and Procedures
    
    127-1299B.
    
    Other Information
    
    130PART III10.
    
    Directors and Executive Officers of the Registrant
    
    13111.
    
    Executive Compensation
    
    13212.
    
    Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    13213.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    13214.
    
    Principal Accountant Fees and Services
    
    132PART IV15.
    
    Exhibits and Financial Statement Schedules
    
    133Signatures
    
    134List of SubsidiariesConsentCertificationCertificationCertificationCertification
  2




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Part 1
  
 Item 1. Business
 Introduction
    www.wsbonline.com
  3




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Cautionary Factors
  
    
    inflation and changes in the interest rate environment that reduce our margins or
reduce the fair value of financial instruments;
    
    legislative or regulatory changes that adversely affect our business;
    
    our ability to enter new markets successfully and take advantage of growth
opportunities;
    
    general economic conditions, either nationally or in our market area, that are worse
than expected;
    
    significantly increased competition among depository and other financial
institutions;
    
    adverse changes in the securities markets;
    
    adverse changes in real estate markets;
    
    changes in accounting policies and practices, as may be adopted by the bank
regulatory agencies and the Financial Accounting Standards Board; and
    
    changes in consumer spending, borrowing and savings habits.
  BUSINESS OF WAUWATOSA SAVINGS BANK
 General
   4




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5




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Business Strategy
   
    
    Remaining a Community-Oriented Institution.We were established in
Wauwatosa, Wisconsin, a suburb of Milwaukee, in 1921, and have been
operating continuously since that time. We have been, and continue to
be, committed to meeting the financial needs of the communities we
serve, and we are dedicated to providing quality personal service to
our customers. Our focus will be to retain our mutual holding company
form of organization consistent with our historical,
community-oriented focus.
    
    Continuing Emphasis on Residential Real Estate Lending.We intend to
continue our emphasis on the origination of residential real estate
loans, especially over four-family loans. Current loans-to-one
borrower limitations cap the amount of credit that we can extend to a
single or affiliated group of investors/developers at 15% of Wauwatosa
Savings capital. Following our stock offering, we have been able to
serve over four-family borrowers with larger lending needs and to
originate larger commercial real estate loans than we had in the past.
We provide long-term, fixed-rate loans and indexed, adjustable
mortgage loan products to our owner-occupied residential mortgage
customers.
    
    Expansion within Our Market Area.Wauwatosa Savings growth in recent
years has been achieved through the origination of real estate
mortgages funded primarily by fixed-term deposits. We currently
operate eight banking offices. In 2007, we opened a new full service
branch in the city of West Allis, Wisconsin. We plan to continue to
expand our branch network in the future by adding one to two branches
each year within our existing market area defined as Milwaukee and
Waukesha counties and each of the other five contiguous counties.
    
    Expansion of Product Offerings.Beginning in 2007, the Bank began
offering variable rate, indexed residential mortgage loan and
long-term fixed rate loans. Prior to this addition, Bank customers
interested in these terms were referred to the Banks mortgage
brokerage subsidiary, Waterston Mortgage Corporation. We also
broadened our residential product offering by buying high balance,
high quality, low loan-to-value ratio jumbo loans secured by real
estate outside our primary market area and brokered by Waterstone
Mortgage Corporation.
    
    Improving Asset Quality.By all measures, our asset quality has
deteriorated over the past two years. Current problem loans were
generally originated in 2004 and 2005 with and almost all were
originated prior to 2006. We identified the weaknesses in our
underwriting standards and procedures in the fourth quarter of 2005.
In 2006, we
 6




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rewrote our underwriting policies, strengthened our
underwriting standards and implemented an officers loan committee for
review and approval of all loans in excess of $500,000. We hired
senior loan officers experienced in systematically identifying,
objectively evaluating and documenting good credit risks. In 2007, we
added an independent loan underwriting function for all residential
loans and a loan review function to ensure that newly implemented
controls and safeguards are uniformly implemented and applied. We
also expanded our collections staff and upgraded the tools used to
reduce the number of pass-due loans that become chronically
delinquent.
 7




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Competition
   Market Area
   Lending Activities
   8




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Loan Portfolio Composition.
 At December 31,
    
    
    At June 30,2007
    
    
    2006
    
    
    2005
    
    
    2005
    
    
    2004
    
    
    2003Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in Thousands)Mortgage loans:Real estate loans:One- to four-family
    
    $
    672,362
    
    
    
    45.64
    %
    
    
    638,089
    
    
    
    44.17
    %
    
    $
    649,996
    
    
    
    46.66
    %
    
    $
    628,445
    
    
    
    48.36
    %
    
    $
    576,348
    
    
    
    50.89
    %
    
    $
    530,466
    
    
    
    53.58
    %Over four-family
    
    
    477,766
    
    
    
    32.45
    %
    
    
    492,693
    
    
    
    34.10
    %
    
    
    456,686
    
    
    
    32.78
    %
    
    
    407,601
    
    
    
    31.36
    %
    
    
    342,535
    
    
    
    30.25
    %
    
    
    287,498
    
    
    
    29.03
    %Construction and land
    
    
    156,289
    
    
    
    10.61
    %
    
    
    168,605
    
    
    
    11.67
    %
    
    
    157,861
    
    
    
    11.33
    %
    
    
    143,686
    
    
    
    11.05
    %
    
    
    107,522
    
    
    
    9.49
    %
    
    
    87,969
    
    
    
    8.88
    %Commercial
    
    
    51,983
    
    
    
    3.53
    %
    
    
    51,062
    
    
    
    3.53
    %
    
    
    35,196
    
    
    
    2.53
    %
    
    
    36,586
    
    
    
    2.81
    %
    
    
    46,282
    
    
    
    4.09
    %
    
    
    40,221
    
    
    
    4.06
    %Home equity
    
    
    85,954
    
    
    
    5.84
    %
    
    
    91,536
    
    
    
    6.34
    %
    
    
    93,230
    
    
    
    6.69
    %
    
    
    83,345
    
    
    
    6.41
    %
    
    
    59,667
    
    
    
    5.27
    %
    
    
    43,899
    
    
    
    4.43
    %Commercial business
    
    
    28,222
    
    
    
    1.92
    %
    
    
    2,657
    
    
    
    0.18
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    286
    
    
    
    0.01
    %
    
    
    141
    
    
    
    0.01
    %
    
    
    127
    
    
    
    0.01
    %
    
    
    149
    
    
    
    0.01
    %
    
    
    154
    
    
    
    0.01
    %
    
    
    178
    
    
    
    0.02
    %Total loans
    
    
    1,472,862
    
    
    
    100.00
    %
    
    
    1,444,783
    
    
    
    100.00
    %
    
    
    1,393,096
    
    
    
    100.00
    %
    
    
    1,299,812
    
    
    
    100.00
    %
    
    
    1,132,508
    
    
    
    100.00
    %
    
    
    990,231
    
    
    
    100.00
    %Undisbursed loan
proceeds
    
    
    (67,549
    )
    
    
    
    
    
    
    (67,390
    )
    
    
    
    
    
    
    (82,712
    )
    
    
    
    
    
    
    (77,484
    )
    
    
    
    
    
    
    (61,904
    )
    
    
    
    
    
    
    (44,110
    )Net deferred loan
fees and premiums
    
    
    (3,265
    )
    
    
    
    
    
    
    (4,486
    )
    
    
    
    
    
    
    (4,366
    )
    
    
    
    
    
    
    (4,161
    )
    
    
    
    
    
    
    (3,631
    )
    
    
    
    
    
    
    (3,099
    )Allowance for loan
    
    
    (12,839
    )
    
    
    
    
    
    
    (7,195
    )
    
    
    
    
    
    
    (5,250
    )
    
    
    
    
    
    
    (4,606
    )
    
    
    
    
    
    
    (3,378
    )
    
    
    
    
    
    
    (2,970
    )lossws
Loans, net$
    1,389,209
    
    
    
    
    
    
    $
    1,365,712
    
    
    
    
    
    
    $
    1,300,768
    
    
    
    
    
    
    $
    1,213,561
    
    
    
    
    
    
    $
    1,063,594
    
    
    
    
    
    
    $
    940,053
 -9-




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Loan Portfolio Maturities and Yields.
 One- to four-family
    
    
    Over four-family
    
    
    Construction and land
    
    
    Commercial Real EstateWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedMaturity Date
    
    Amount
    
    
    Average Rate
    
    
    Amount
    
    
    Average Rate
    
    
    Amount
    
    
    Average Rate
    
    
    Amount
    
    
    Average Rate(Dollars in Thousands)Jan 1, 2008 - Dec 31, 2008
    
    
    70,350
    
    
    
    6.30
    %
    
    
    103,091
    
    
    
    6.51
    %
    
    
    61,524
    
    
    
    6.81
    %
    
    
    8,187
    
    
    
    6.55
    %Jan 1, 2009 - Dec 31, 2009
    
    
    76,373
    
    
    
    6.58
    %
    
    
    122,046
    
    
    
    6.40
    %
    
    
    23,513
    
    
    
    6.85
    %
    
    
    10,372
    
    
    
    6.50
    %Jan 1, 2010 - Dec 31, 2010
    
    
    40,574
    
    
    
    6.60
    %
    
    
    77,458
    
    
    
    6.37
    %
    
    
    14,127
    
    
    
    6.45
    %
    
    
    8,648
    
    
    
    6.63
    %Jan 1, 2011 - Dec 31, 2011
    
    
    8,405
    
    
    
    7.00
    %
    
    
    19,491
    
    
    
    6.35
    %
    
    
    
    
    
    
    
    
    
    
    3,281
    
    
    
    6.14
    %Jan 1, 2012 - Dec 31, 2012
    
    
    3,363
    
    
    
    6.98
    %
    
    
    16,102
    
    
    
    6.48
    %
    
    
    434
    
    
    
    7.25
    %
    
    
    2,675
    
    
    
    5.83
    %Jan 1, 2013 and thereafter
    
    
    473,297
    
    
    
    6.07
    %
    
    
    139,578
    
    
    
    6.42
    %
    
    
    56,691
    
    
    
    6.29
    %
    
    
    18,820
    
    
    
    6.72
    %Total
    
    $
    672,362
    
    
    
    6.21
    %
    
    $
    477,766
    
    
    
    6.42
    %
    
    $
    156,289
    
    
    
    6.59
    %
    
    $
    51,983
    
    
    
    6.55
    %
 Home Equity
    
    
    Commercial Business
    
    
    Consumer
    
    
    TotalWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedMaturity Date
    
    Amount
    
    
    Average Rate
    
    
    Amount
    
    
    Average Rate
    
    
    Amount
    
    
    Average Rate
    
    
    Amount
    
    
    Average RateJan 1, 2008 - Dec
31, 2008
    
    
    34,113
    
    
    
    7.60
    %
    
    
    14,751
    
    
    
    7.48
    %
    
    
    
    
    
    
    
    
    
    
    292,016
    
    
    
    6.70
    %Jan 1, 2009 - Dec
31, 2009
    
    
    1,288
    
    
    
    7.53
    %
    
    
    2,052
    
    
    
    7.07
    %
    
    
    
    
    
    
    
    
    
    
    235,644
    
    
    
    6.52
    %Jan 1, 2010 - Dec
31, 2010
    
    
    1,027
    
    
    
    7.47
    %
    
    
    2,099
    
    
    
    7.06
    %
    
    
    194
    
    
    
    6.91
    %
    
    
    144,127
    
    
    
    6.48
    %Jan 1, 2011 - Dec
31, 2011
    
    
    7,777
    
    
    
    7.64
    %
    
    
    134
    
    
    
    7.28
    %
    
    
    26
    
    
    
    9.56
    %
    
    
    39,114
    
    
    
    6.73
    %Jan 1, 2012 - Dec
31, 2012
    
    
    15,269
    
    
    
    7.16
    %
    
    
    7,277
    
    
    
    7.18
    %
    
    
    66
    
    
    
    6.51
    %
    
    
    45,186
    
    
    
    6.83
    %Jan 1, 2013
and
thereafter
    
    
    26,480
    
    
    
    7.49
    %
    
    
    1,909
    
    
    
    6.75
    %
    
    
    
    
    
    
    
    
    
    
    716,775
    
    
    
    6.23
    %Total
    
    $
    85,954
    
    
    
    7.49
    %
    
    $
    28,222
    
    
    
    7.29
    %
    
    $
    286
    
    
    
    7.06
    %
    
    $
    1,472,862
    
    
    
    6.42
    %
 -10-




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Due After December 31, 2008Fixed
    
    Variable
    
    Total(In Thousands)Real estate loans:Mortgage loansOne- to four-family
    
    $
    8,993
    
    
    $
    593,019
    
    
    $
    602,012Over four-family
    
    
    841
    
    
    
    373,834
    
    
    
    374,675Construction and land
    
    
    82,081
    
    
    
    12,684
    
    
    
    94,765Commercial
    
    
    2,227
    
    
    
    41,569
    
    
    
    43,796Home equity
    
    
    2,725
    
    
    
    49,116
    
    
    
    51,841Commerical
    
    
    9,250
    
    
    
    4,221
    
    
    
    13,471Consumer
    
    
    286
    
    
    
    
    
    
    
    286Total loans
    
    $
    106,403
    
    
    $
    1,074,443
    
    
    $
    1,180,846
 One- to Four-Family Residential Mortgage Loans.
   -11-




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Over Four-family Real Estate Loans.
 -12-




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Residential Construction and Land Loans.
  -13-




---



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Commercial Real Estate Loans.
  -14-




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##### Table of Contents



Home Equity Loans . The Wall Street
Journal
 Commercial Business Loans.
  -15-




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##### Table of Contents



Six Months
    
    Year EndedYear Ended December 31,
    
    Ended December
    
    June 30,2007
    
    2006
    

31, 2005
    
    2005(In Thousands)Total loans at beginning of year
    
    $
    1,450,170
    
    
    $
    1,393,096
    
    
    $
    1,299,812
    
    
    $
    1,132,507Mortgage loans originated for investment:ResidentialOne- to four-family
    
    
    65,851
    
    
    
    111,316
    
    
    
    110,288
    
    
    
    211,209Over four-family
    
    
    64,857
    
    
    
    99,420
    
    
    
    95,734
    
    
    
    148,964Construction and land
    
    
    33,705
    
    
    
    74,104
    
    
    
    54,615
    
    
    
    99,996Commercial
    
    
    13,494
    
    
    
    19,867
    
    
    
    2,658
    
    
    
    11,733Home equity
    
    
    15,886
    
    
    
    11,916
    
    
    
    22,840
    
    
    
    25,229Total mortgage loans originated for investment
    
    
    193,793
    
    
    
    316,623
    
    
    
    286,135
    
    
    
    497,131Consumer loans originated for investment
    
    
    157
    
    
    
    
    
    
    
    
    
    
    
    Commercial loans originated for investment
    
    
    25,229
    
    
    
    2,867
    
    
    
    
    
    
    
    Total loans originated for investment
    
    
    219,179
    
    
    
    319,490
    
    
    
    286,135
    
    
    
    497,131Other loans  net activity
    
    
    
    
    
    
    67
    
    
    
    (43
    )
    
    
    16Principal repayments
    
    
    (191,100
    )
    
    
    (267,870
    )
    
    
    (192,808
    )
    
    
    (329,842
    )Net activity in loans held for investment
    
    
    28,079
    
    
    
    51,687
    
    
    
    93,284
    
    
    
    167,305Loans originated for sale
    
    
    242,120
    
    
    
    84,603
    
    
    
    
    
    
    
    Loans sold
    
    
    (224,399
    )
    
    
    (79,216
    )
    
    
    
    
    
    
    Net activity in loans held for sale
    
    
    17,721
    
    
    
    5,387
    
    
    
    
    
    
    
    Total loans receivable and held for sale at end of period
    
    $
    1,495,970
    
    
    $
    1,450,170
    
    
    $
    1,393,096
    
    
    $
    1,299,812
 -16-




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Origination and Servicing of Loans.
 - - -
 Loan Approval Procedures and Authority .
  o
    
    Any secured one- to four-family mortgage loan up to $500,000 for a
borrower with total outstanding loans receivable of less than $2,000,000 that is
independently underwritten can be approved and closed by any loan officer.o
    
    Any loan up to $500,000 for a borrower with total outstanding loans
receivable of less than $2,000,000 can be approved and closed by a commercial loan
officer.o
    
    Any secured mortgage loan ranging from $500,001 to $2,999,999 or any
new loan to a borrower with outstanding loans receivable exceeding $2,000,000 must
be approved by the Officer Loan Committee. If approved, any loan officer may close
the loan.o
    
    Any loan for $3,000,000 or greater must be approved by the Officer Loan
Committee and Board of Directors prior to closing. If approved, any loan officer
may close the loan.
 Non-Performing and Problem Assets
  -17-




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Non-Performing Assets.
  At December 31,
    
    At June 30,2007
    
    2006
    
    2005
    
    2005
    
    2004
    
    2003(Dollars in Thousands)Non-accrual loans:ResidentialOne- to four-family
    
    $
    32,587
    
    
    $
    12,044
    
    
    $
    8,766
    
    
    $
    5,232
    
    
    $
    4,028
    
    
    $
    6,151Over four-family
    
    
    38,218
    
    
    
    8,384
    
    
    
    6,703
    
    
    
    5,877
    
    
    
    4,776
    
    
    
    5,268Construction
    
    
    3,855
    
    
    
    7,664
    
    
    
    1,360
    
    
    
    830
    
    
    
    2,072
    
    
    
    1,641Commercial real estate
    
    
    4,358
    
    
    
    357
    
    
    
    962
    
    
    
    1,137
    
    
    
    1,139
    
    
    
    2,528Home equity
    
    
    1,332
    
    
    
    439
    
    
    
    274
    
    
    
    
    
    
    
    
    
    
    
    Commercial
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total non-performing loans
    
    
    80,350
    
    
    
    28,888
    
    
    
    18,065
    
    
    
    13,076
    
    
    
    12,015
    
    
    
    15,588Real estate owned
    
    
    8,543
    
    
    
    520
    
    
    
    215
    
    
    
    475
    
    
    
    770
    
    
    
    Total non-performing assets
    
    $
    88,893
    
    
    $
    29,408
    
    
    $
    18,280
    
    
    $
    13,551
    
    
    $
    12,785
    
    
    $
    15,588Total non-performing loans to total loans, net
    
    
    5.73
    %
    
    
    2.10
    %
    
    
    1.39
    %
    
    
    1.07
    %
    
    
    1.13
    %
    
    
    1.65
    %Total non-performing loans to total assets
    
    
    4.70
    %
    
    
    1.75
    %
    
    
    1.20
    %
    
    
    0.94
    %
    
    
    0.97
    %
    
    
    1.41
    %Total non-performing assets to total assets
    
    
    5.20
    %
    
    
    1.78
    %
    
    
    1.21
    %
    
    
    0.98
    %
    
    
    1.03
    %
    
    
    1.41
    %
  -18-




---



##### Table of Contents



-19-




---



##### Table of Contents



Classified Assets.
  -20-




---



##### Table of Contents



Allowance for Loan Losses
     -21-




---



##### Table of Contents



At or for theSix MonthAt or for the Year
    
    Period Ended
    
    At or for the Year EndedEnded December 31,
    
    December 31,
    
    June 30,2007
    
    2006
    
    2005
    
    2005
    
    2004
    
    2003(Dollars in Thousands)Balance at beginning of period
    
    $
    7,195
    
    
    $
    5,250
    
    
    $
    4,606
    
    
    $
    3,378
    
    
    $
    2,970
    
    
    $
    2,479Provision for loan losses
    
    
    11,697
    
    
    
    2,201
    
    
    
    1,035
    
    
    
    1,238
    
    
    
    860
    
    
    
    520Charge-offs:Mortgage loansOne- to four-family (1)
    
    
    1,397
    
    
    
    524
    
    
    
    97
    
    
    
    1
    
    
    
    320
    
    
    
    26Over four-family
    
    
    634
    
    
    
    
    
    
    
    169
    
    
    
    
    
    
    
    125
    
    
    
    Construction and land
    
    
    3,982
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial real estate
    
    
    27
    
    
    
    5
    
    
    
    102
    
    
    
    2
    
    
    
    
    
    
    
    Home equity
    
    
    120
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    3
    
    
    
    7
    
    
    
    23
    
    
    
    8
    
    
    
    8
    
    
    
    3Total charge-offs
    
    
    6,163
    
    
    
    536
    
    
    
    391
    
    
    
    11
    
    
    
    453
    
    
    
    29Recoveries:Mortgage loansOne- to four-family
    
    
    68
    
    
    
    144
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Over four-family
    
    
    
    
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial real estate
    
    
    40
    
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Home equity
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer (1)
    
    
    1
    
    
    
    6
    
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    Total recoveries
    
    
    110
    
    
    
    280
    
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    Net charge-offs
    
    
    6,053
    
    
    
    256
    
    
    
    391
    
    
    
    10
    
    
    
    452
    
    
    
    29Allowance at end of year
    
    $
    12,839
    
    
    $
    7,195
    
    
    $
    5,250
    
    
    $
    4,606
    
    
    $
    3,378
    
    
    $
    2,970Ratios:Allowance for loan losses to
non-performing loans at end
of period
    
    
    15.98
    %
    
    
    24.91
    %
    
    
    29.06
    %
    
    
    35.22
    %
    
    
    28.11
    %
    
    
    19.05
    %Allowance for loan losses to
net loans outstanding at end
of period
    
    
    0.92
    %
    
    
    0.52
    %
    
    
    0.40
    %
    
    
    0.38
    %
    
    
    0.32
    %
    
    
    0.32
    %Net charge-offs to average
loans outstanding
(annualized)
    
    
    0.44
    %
    
    
    0.02
    %
    
    
    0.06
    %
    
    
    0.00
    %
    
    
    0.05
    %
    
    
    0.00
    %
 
 (1)
    
    Prior to the year ended December 31, 2007, one- to four-family loans include home equity loans
and home equity lines of credit, as a separate breakdown is not available for these years. -22-




---



##### Table of Contents



Allocation of Allowance for Loan Losses.
 At December 31,2007


2006


2005% of Allowance
    
    
    
    
    
    
    
    
    
    % of Allowance
    
    
    
    
    
    
    
    
    
    % of Allowance in% of Loans in
    
    in Category to
    
    
    
    
    
    % of Loans in
    
    in Category to
    
    
    
    
    
    % of Loans in
    
    in Category toAllowance for
    
    Category to
    
    Total
    
    Allowance for
    
    Category to
    
    Total
    
    Allowance for
    
    Category to
    
    TotalLoan Losses

    Total Loans

    Allowance

    Loan Losses

    Total Loans

    Allowance

    Loan Losses

    Total Loans

    Allowance(Dollars In Thousands)Real Estate:Residential(1)One- to four-family
    
    
    5,424
    
    
    
    45.64
    %
    
    
    42.25
    %
    
    
    4,116
    
    
    
    44.17
    %
    
    
    57.21
    %
    
    
    2,624
    
    
    
    46.66
    %
    
    
    49.98
    %Over four-family
    
    
    4,369
    
    
    
    32.45
    %
    
    
    34.03
    %
    
    
    2,034
    
    
    
    34.10
    %
    
    
    28.27
    %
    
    
    1,716
    
    
    
    32.78
    %
    
    
    32.69
    %Construction and land
    
    
    2,087
    
    
    
    10.61
    %
    
    
    16.26
    %
    
    
    167
    
    
    
    11.67
    %
    
    
    2.32
    %
    
    
    234
    
    
    
    11.33
    %
    
    
    4.46
    %Commercial Real Estate
    
    
    280
    
    
    
    3.53
    %
    
    
    2.18
    %
    
    
    764
    
    
    
    3.53
    %
    
    
    10.62
    %
    
    
    630
    
    
    
    2.53
    %
    
    
    12.00
    %Home equity
    
    
    536
    
    
    
    5.84
    %
    
    
    4.17
    %
    
    
    
    
    
    
    6.34
    %
    
    
    
    
    
    
    
    
    
    
    6.69
    %
    
    
    Commerical
    
    
    99
    
    
    
    1.92
    %
    
    
    0.77
    %
    
    
    
    
    
    
    0.18
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    35
    
    
    
    0.01
    %
    
    
    0.27
    %
    
    
    30
    
    
    
    0.01
    %
    
    
    0.42
    %
    
    
    27
    
    
    
    0.01
    %
    
    
    0.51
    %Unallocated
    
    
    9
    
    
    
    0.00
    %
    
    
    0.07
    %
    
    
    84
    
    
    
    0.00
    %
    
    
    1.16
    %
    
    
    19
    
    
    
    
    
    
    
    0.36
    %Total allowance for loan
losses
    
    $
    12,839
    
    
    
    100.00
    %
    
    
    100.00
    %
    
    $
    7,195
    
    
    
    100.00
    %
    
    
    100.00
    %
    
    $
    5,250
    
    
    
    100.00
    %
    
    
    100.00
    %
 
 (1)
    
    Prior to the year ended December 31, 2007, one- to four-family loans include home
equity loans and home equity lines of credit, as a separate breakdown is not available for those
years. -23-




---



##### Table of Contents



At June 30,2005

    2004

    2003% of Loans in
    
    % of Allowance
    
    
    
    
    
    % of Loans in
    
    % of Allowance
    
    
    
    
    
    % of Loans in
    
    % of Allowance inAllowance for
    
    Category to
    
    in Category to
    
    Allowance for
    
    Category to
    
    in Category to
    
    Allowance for
    
    Category to
    
    in Category toLoan Losses

    Total Loans

    Total Allowance

    Loan Losses

    Total Loans

    Total Allowance

    Loan Losses

    Total Loans

    Total Allowance(Dollars In Thousands)Real Estate:Residential(1)One- to four-family
    
    
    1603
    
    
    
    48.36
    %
    
    
    34.80
    %
    
    
    1118
    
    
    
    50.89
    %
    
    
    33.10
    %
    
    
    844
    
    
    
    53.58
    %
    
    
    28.42
    %Over four-family
    
    
    1,646
    
    
    
    31.36
    %
    
    
    35.74
    %
    
    
    1,831
    
    
    
    30.25
    %
    
    
    54.20
    %
    
    
    1,852
    
    
    
    29.03
    %
    
    
    62.36
    %Construction and land
    
    
    712
    
    
    
    11.05
    %
    
    
    15.46
    %
    
    
    100
    
    
    
    9.49
    %
    
    
    2.96
    %
    
    
    
    
    
    
    8.88
    %
    
    
    Commercial Real Estate
    
    
    450
    
    
    
    2.81
    %
    
    
    9.77
    %
    
    
    309
    
    
    
    4.09
    %
    
    
    9.15
    %
    
    
    259
    
    
    
    4.06
    %
    
    
    8.72
    %Home equity
    
    
    10
    
    
    
    6.41
    %
    
    
    0.22
    %
    
    
    
    
    
    
    5.27
    %
    
    
    
    
    
    
    
    
    
    
    4.43
    %
    
    
    Commerical
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Consumer
    
    
    25
    
    
    
    0.01
    %
    
    
    0.54
    %
    
    
    20
    
    
    
    0.01
    %
    
    
    0.59
    %
    
    
    15
    
    
    
    0.02
    %
    
    
    0.50
    %Unallocated
    
    
    160
    
    
    
    
    
    
    
    3.47
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total allowance for loan losses
    
    $
    4,606
    
    
    
    100.00
    %
    
    
    100.00
    %
    
    $
    3,378
    
    
    
    100.00
    %
    
    
    100.00
    %
    
    $
    2,970
    
    
    
    100.00
    %
    
    
    100.00
    %


(1)
    
    Prior to the year ended December 31, 2007, one to four-family loans include home
equity loans and home equity lines of credit, as a separate breakdown is not available for those
years. -24-




---



##### Table of Contents



-25-




---



##### Table of Contents



Mortgage Banking Activity
  -26-




---



##### Table of Contents



Investment Activities
    -27-




---



##### Table of Contents



Available-for-Sale Portfolio
 U.S. Government Sponsored Entity Bonds.
 Mortgage-Related Securities.
   Municipal Obligations.
 -28-




---



##### Table of Contents



Held-to-Maturity Portfolio.
 -29-




---



##### Table of Contents



Investment Securities Portfolio.
  At December 31,
    
    
    
    
    
    
    
    
    
    At June 30,2007
    
    2006
    
    2005
    
    2005Amortized
    
    
    
    
    
    Amortized
    
    
    
    
    
    Amortized
    
    
    
    
    
    AmortizedCost

    Fair Value
    
    Cost

    Fair Value
    
    Cost

    Fair Value
    
    Cost

    Fair Value(In Thousands)Securities
Available for Sale:Government sponsored entity
bonds
    
    $
    13,996
    
    
    $
    14,182
    
    
    $
    13,450
    
    
    $
    13,257
    
    
    $
    26,577
    
    
    $
    25,950
    
    
    $
    26,580
    
    
    $
    26,387Mortgage-related securities
    
    
    130,547
    
    
    
    130,610
    
    
    
    100,693
    
    
    
    98,873
    
    
    
    93,515
    
    
    
    91,578
    
    
    
    54,438
    
    
    
    53,445Municipal obligations
    
    
    27,277
    
    
    
    27,095
    
    
    
    4,278
    
    
    
    4,421
    
    
    
    4,278
    
    
    
    4,427
    
    
    
    3,923
    
    
    
    4,159Other securities
    
    
    250
    
    
    
    250
    
    
    
    794
    
    
    
    779
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total securities
available for sale
    
    $
    172,070
    
    
    $
    172,137
    
    
    $
    119,215
    
    
    $
    117,330
    
    
    $
    124,370
    
    
    $
    121,955
    
    
    $
    84,941
    
    
    $
    83,991
 -30-




---



##### Table of Contents



Portfolio Maturities and Yields.
 More than One Year
    
    
    More than Five YearsOne Year or Less
    
    
    through Five Years
    
    
    through Ten Years
    
    
    More than Ten Years
    
    
    Total SecuritiesWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedCarrying
    
    
    Average
    
    
    Carrying
    
    
    Average
    
    
    Carrying
    
    
    Average
    
    
    Carrying
    
    
    Average
    
    
    Carrying
    
    
    AverageValue
    
    
    Yield
    
    
    Value
    
    
    Yield
    
    
    Value
    
    
    Yield
    
    
    Value
    
    
    Yield
    
    
    Value
    
    
    Yield(Dollars in Thousands)Securities available for sale:Government sponsored
entity bonds
    
    $
    2,991
    
    
    
    4.04
    %
    
    $
    11,191
    
    
    
    4.56
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    14,182
    
    
    
    4.45
    %Mortgage-related securities
    
    
    1,585
    
    
    
    3.40
    %
    
    
    51,947
    
    
    
    5.12
    %
    
    
    75,948
    
    
    
    5.73
    %
    
    
    1,130
    
    
    
    4.93
    %
    
    
    130,610
    
    
    
    5.46
    %Municipal obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,664
    
    
    
    3.78
    %
    
    
    25,431
    
    
    
    4.28
    %
    
    
    27,095
    
    
    
    4.25
    %Other securities
    
    
    
    
    
    
    
    
    
    
    250
    
    
    
    4.05
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250
    
    
    
    4.05
    %Total securities
available for
sale
    
    $
    4,576
    
    
    
    3.80
    %
    
    $
    63,388
    
    
    
    5.04
    %
    
    $
    77,612
    
    
    
    5.69
    %
    
    $
    26,561
    
    
    
    4.31
    %
    
    $
    172,137
    
    
    
    5.18
    %Securities held to maturity:Corporate notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    7,646
    
    
    
    7.51
    %
    
    $
    7,646
    
    
    
    7.51
    %
 -31-




---



##### Table of Contents



Sources of Funds
 General.
 Deposits.
    -32-




---



##### Table of Contents



-33-




---



##### Table of Contents



At December 31,
    
    
    At June 30,2007
    
    
    2006
    
    
    2005
    
    
    2005Weighted
    
    
    
    
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    
    
    
    
    AverageBalance
    
    
    Percent
    
    
    Rate
    
    
    Balance
    
    
    Percent
    
    
    Rate
    
    
    Balance
    
    
    Percent
    
    
    Rate
    
    
    Balance
    
    
    Percent
    
    
    Rate(Dollars in Thousands)Deposit type:Demand deposits
    
    $
    18,950
    
    
    
    1.91
    %
    
    
    0.00
    %
    
    $
    15,087
    
    
    
    1.46
    %
    
    
    0.00
    %
    
    $
    17,667
    
    
    
    1.69
    %
    
    
    0.00
    %
    
    $
    18,816
    
    
    
    1.67
    %
    
    
    0.00
    %NOW accounts
    
    
    34,260
    
    
    
    3.44
    %
    
    
    0.82
    %
    
    
    43,320
    
    
    
    4.18
    %
    
    
    0.95
    %
    
    
    64,623
    
    
    
    6.18
    %
    
    
    1.41
    %
    
    
    82,045
    
    
    
    7.27
    %
    
    
    1.74
    %Regular savings
    
    
    19,162
    
    
    
    1.93
    %
    
    
    0.87
    %
    
    
    18,177
    
    
    
    1.75
    %
    
    
    0.40
    %
    
    
    20,962
    
    
    
    2.00
    %
    
    
    0.50
    %
    
    
    23,614
    
    
    
    2.09
    %
    
    
    0.50
    %Money market and
savings deposits
    
    
    95,225
    
    
    
    9.57
    %
    
    
    3.66
    %
    
    
    76,295
    
    
    
    7.36
    %
    
    
    4.70
    %
    
    
    12,603
    
    
    
    1.21
    %
    
    
    3.03
    %
    
    
    3,503
    
    
    
    0.31
    %
    
    
    1.06
    %Total transaction
accounts
    
    
    167,597
    
    
    
    16.85
    %
    
    
    2.35
    %
    
    
    152,879
    
    
    
    14.75
    %
    
    
    2.67
    %
    
    
    115,855
    
    
    
    11.08
    %
    
    
    1.21
    %
    
    
    127,978
    
    
    
    11.34
    %
    
    
    1.24
    %Certificates of
deposit
    
    
    826,938
    
    
    
    83.15
    %
    
    
    4.75
    %
    
    
    883,339
    
    
    
    85.25
    %
    
    
    4.63
    %
    
    
    929,738
    
    
    
    88.92
    %
    
    
    3.80
    %
    
    
    1,000,813
    
    
    
    88.66
    %
    
    
    3.52
    %Total deposits
    
    $
    994,535
    
    
    
    100.00
    %
    
    
    4.35
    %
    
    $
    1,036,218
    
    
    
    100.00
    %
    
    
    4.34
    %
    
    $
    1,045,593
    
    
    
    100.00
    %
    
    
    3.51
    %
    
    $
    1,128,791
    
    
    
    100.00
    %
    
    
    3.26
    %
 -34-




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##### Table of Contents



(In Thousands)DueThree months or less
    
    $
    53,022Over three months through six months
    
    
    28,547Over six months through 12 months
    
    
    57,712Over 12 months
    
    
    44,091Total
    
    $
    183,372
 -35-




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##### Table of Contents



Borrowings.
 At or For the Six
    
    At or ForAt or For the Year Ended
    
    Months Ended
    
    the YearDecember 31,
    
    December 31,
    

Ended June 30,2007
    
    2006
    
    2005
    
    2005(Dollars in Thousands)Borrowings:Balance outstanding at end of
period
    
    $
    475,484
    
    
    
    334,003
    
    
    
    201,212
    
    
    
    93,162Weighted average interest rate
at the end of period
    
    
    4.16
    %
    
    
    4.31
    %
    
    
    3.90
    %
    
    
    3.07
    %Maximum amount of advances
outstanding at any
month end during the period
    
    
    475,484
    
    
    
    349,003
    
    
    
    201,212
    
    
    
    106,162Average balance outstanding
during the period
    
    
    403,577
    
    
    
    277,505
    
    
    
    142,560
    
    
    
    80,364Weighted average interest rate
during the period
    
    
    4.28
    %
    
    
    4.25
    %
    
    
    3.50
    %
    
    
    3.71
    %
 Average Balance Sheet and Rate Yield Analysis
  Cash Dividends
  -36-




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##### Table of Contents



Subsidiary Activities
  Wauwatosa Investments, Inc.
 Waterstone Mortgage Corporation.
 Main Street Real Estate Holdings, LLC.
 Personnel
  Supervision and Regulation
  Regulation of Wauwatosa Savings Bank
  -37-




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##### Table of Contents



Intrastate and Interstate Merger and Branching Activities
 Wisconsin Law and Regulation.
 Federal Law and Regulation de novo
 Loans and Investments
 Wisconsin Law and Regulations.
   -38-




---



##### Table of Contents



Federal Law and Regulation
  Lending Standards
 Wisconsin Law and Regulation.
 Federal Law and Regulation
 -39-




---



##### Table of Contents




    
    for loans secured by raw land, the supervisory loan-to-value limit is 65% of the
value of the collateral;
    
    for land development loans (i.e., loans for the purpose of improving unimproved
property prior to the erection of structures), the supervisory limit is 75%;
    
    for loans for the construction of commercial, over four-family or other
non-residential property, the supervisory limit is 80%;
    
    for loans for the construction of one- to four-family properties, the
supervisory limit is 85%; and
    
    for loans secured by other improved property (e.g., farmland, completed
commercial property and other income-producing property, including non-owner
occupied, one- to four-family property), the limit is 85%.
  Deposits
 Wisconsin Law and Regulation.
 Deposit Insurance
 Wisconsin Law and Regulation.
 Federal Deposit Insurance.
  -40-




---



##### Table of Contents




    
    keeping the insurance coverage limit for individual accounts and municipal accounts at
$100,000 but providing an inflation adjustment process which permits an adjustment
effective January 1, 2011 and every five years thereafter based on the Personal Consumption
Expenditures Index (with 2005 as the base year of comparison), unless the Federal Deposit
Insurance Corporation concludes such adjustment would be inappropriate for reasons relating
to risks to the Deposit Insurance Fund;
    
    increasing insurance coverage limits for self-directed retirement accounts to $250,000,
subject to the same inflation adjustment process described above;
    
    prohibiting undercapitalized members from accepting employee benefit plan deposits;
    
    providing for the payment of credits based on a members share of the assessment base as
of December 31, 1996 and equal to an aggregate of $4.7 billion for all members, which
credits can offset Federal Deposit Insurance Corporation assessments subject to certain
limits;
    
    providing for the declaration of dividends to members (based on a members share of the
assessment base on December 31, 1996, and premiums paid after that date) equal to 50% of
the amount in the Deposit Insurance Fund in excess of a reserve ratio of 1.35% and 100% of
such amount in excess of a reserve ratio of 1.50%, subject to the Federal Deposit Insurance
Corporations right to suspend or limit dividends based on risks to the Deposit Insurance
Fund; and
    
    eliminating the mandatory assessment (up to 23 basis points) if the Deposit Insurance
Fund falls below 1.25% of insured deposits and retaining assessments based on risk, needs
of the Deposit Insurance Fund, and the effect on the members capital and earnings. The
Federal Deposit Insurance Corporation is authorized to set a reserve ratio of between 1.15%
and 1.5% and will have five years to restore the Deposit Insurance Fund if the ratio falls
below 1.15%. On November 2, 2006, the Federal Deposit Insurance Corporation adopted final
regulations that set the designated reserve ratio for the Deposit Insurance Fund at 1.25%
beginning January 1, 2007.
  -41-




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##### Table of Contents



Capitalization
 Wisconsin Law and Regulation
 Federal Law and Regulation
    -42-




---



##### Table of Contents



Safety and Soundness Standards
  Prompt Corrective Regulatory Action
   Dividends
  -43-




---



##### Table of Contents



Liquidity and Reserves
 Wisconsin Law and Regulation.
 Federal Law and Regulation
 -44-




---



##### Table of Contents



Transactions with Affiliates and Insiders
 Wisconsin Law and Regulation
 Federal Law and Regulation.
   -45-




---



##### Table of Contents



Transactions between Bank Customers and Affiliates
  Examinations and Assessments
  -46-




---



##### Table of Contents



Customer Privacy
  Community Reinvestment Act.
  Federal Home Loan Bank System
    -47-




---



##### Table of Contents



USA PATRIOT Act
  Regulation of Wauwatosa Holdings
 Holding Company Regulation
 Wisconsin Law and Regulation.
 Federal Law and Regulation
 -48-




---



##### Table of Contents



Waivers of Dividends by Lamplighter Financial, MHC
  Conversion of Lamplighter Financial, MHC to Stock Form
  -49-




---



##### Table of Contents



Federal Securities Laws Regulation
 Securities Exchange Act.
 Sarbanes-Oxley Act of 2002.
 Federal and State Taxation
 Federal Taxation
 General.
 -50-




---



##### Table of Contents



Method of Accounting.
 Bad Debt Reserves.
 Taxable Distributions and Recapture.
 Alternative Minimum Tax.
 Net Operating Loss Carryovers.
 Corporate Dividends-Received Deduction.
 -51-




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##### Table of Contents



State Taxation
 Wisconsin State Taxation.
  
 Item 1A. Risk Factors
 Changing Interest Rates May Hurt Our Profits.
  If Our Allowance for Loan Losses is Not Sufficient to Cover Actual Loan Losses, Our Earnings
Could Decrease.
  -52-




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##### Table of Contents



During 2007 We Experienced a Significant Deterioration in Our Loan Portfolio Resulting in
Increased Delinquencies, Non-performing Loans and Charge-offs.
  Our Shareholders Own a Minority of Wauwatosa Holdings Common Stock and Are Not Able to Exercise
Voting Control Over Most Matters Put to a Vote of Shareholders.
  
 Item 1B. Unresolved Staff Comments
  -53-




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##### Table of Contents



Item 2. Properties
  Year
    
    Date ofOwned Or
    
    Acquired
    
    Lease
    
    December 31, 2007Location
    
    Leased
    
    Or Leased
    
    Expiration
    
    Net Book Value(In Thousands)Branches:7500 West State StreetWauwatosa, Wisconsin
    
    Own
    
    
    1971
    
    
    
    N/A
    
    
    $
    1,2766560 South 27th StreetOak Creek, Wisconsin
    
    Own
    
    
    1986
    
    
    
    N/A
    
    
    $
    1,29121505 East Moreland BlvdWaukesha, Wisconsin
    
    Capital Lease
    
    
    2005
    
    
    
    2009
    
    
    $
    5,2951233 Corporate Center DriveOconomowoc, Wisconsin
    
    Own
    
    
    2003
    
    
    
    N/A
    
    
    $
    2,7561230 George Towne DrivePewaukee, Wisconsin
    
    Own
    
    
    2004
    
    
    
    N/A
    
    
    $
    3,8606555 S 108th StFranklin, Wisconsin
    
    Own
    
    
    2006
    
    
    
    N/A
    
    
    $
    2,625W188N9820 Appleton AveGermantown, Wisconsin
    
    Own
    
    
    2006
    
    
    
    N/A
    
    
    $
    2,61710101 W Greenfield AveWest Allis, Wisconsin
    
    Own
    
    
    2006
    
    
    
    N/A
    
    
    $
    4,4797136 W State Street (1)Wauwatosa, Wiscsonsin
    
    Own
    
    
    2000
    
    
    
    N/A
    
    
    $
    562Corporate Center:11200 West Plank CourtWauwatosa, Wisconsin
    
    Own
    
    
    2004
    
    
    
    N/A
    
    
    $
    4,854
 
 (1)
    
    Drive-up banking facility only. -54-




---



##### Table of Contents



Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  -55-




---



##### Table of Contents



Part II
 
 Item 5. Market for Registrants Common Equity and Related Stockholder Matters and
Issuer Purchase of Equity Securities
 ®
    -56-




---



##### Table of Contents



Market Information
  2007
    
    High
    
    Low1st Quarter
    
    $
    17.99
    
    
    
    17.072nd Quarter
    
    
    17.99
    
    
    
    16.113rd Quarter
    
    
    16.65
    
    
    
    14.414th Quarter
    
    
    17.02
    
    
    
    12.78
 2006
    
    High
    
    Low1st Quarter
    
    $
    13.85
    
    
    $
    11.442nd Quarter
    
    
    17.06
    
    
    
    13.083rd Quarter
    
    
    18.90
    
    
    
    15.704th Quarter
    
    
    18.23
    
    
    
    17.17
 Stock Repurchase Program
  Total number of
    
    Maximum numbershares purchased
    
    of shares that mayTotal number
    
    Average
    
    as part of
    
    yet be purchasedof shares
    
    price paid
    
    publicly announced
    
    under thePeriod
    
    purchased
    
    per share
    
    plans or programs
    
    plans or programs (1)October 1 - October 31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    352,565November 1 - November 30, 2007
    
    
    110,635
    
    
    
    14.38
    
    
    
    110,635
    
    
    
    241,930December 1 - December 31, 2007
    
    
    57,370
    
    
    
    13.86
    
    
    
    57,370
    
    
    
    184,560168,005
    
    
    
    14.20
 
 (1)
    
    At period end. -57-




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##### Table of Contents



PERFORMANCE GRAPH
  
 Stock/Index
    
    
    10/4/2005
    
    
    12/31/05
    
    
    3/31/06
    
    
    6/30/06
    
    
    9/30/06
    
    
    12/31/06
    
    
    3/31/07
    
    
    6/30/07
    
    
    9/30/07
    
    
    12/31/07Wauwatosa Holdings Common Stock (WAUW)
    
    
    
    100.00
    
    
    
    
    114.40
    
    
    
    
    136.00
    
    
    
    
    170.60
    
    
    
    
    176.50
    
    
    
    
    178.20
    
    
    
    
    174.80
    
    
    
    
    165.40
    
    
    
    
    162.50
    
    
    
    
    128.20NASDAQ Stock Market (^IXIC)
    
    
    
    100.00
    
    
    
    
    103.08
    
    
    
    
    109.37
    
    
    
    
    101.53
    
    
    
    
    105.57
    
    
    
    
    112.90
    
    
    
    
    113.19
    
    
    
    
    121.68
    
    
    
    
    126.28
    
    
    
    
    123.98Americas Community Bankers NASDAQ Index
    
    
    
    100.00
    
    
    
    
    102.75
    
    
    
    
    109.05
    
    
    
    
    108.42
    
    
    
    
    104.59
    
    
    
    
    108.63
    
    
    
    
    102.78
    
    
    
    
    97.49
    
    
    
    
    93.98
    
    
    
    
    81.70
 -58-




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##### Table of Contents



Item 6 . Selected Financial Data
 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
  At December 31,
    
    At June 30,2007
    
    2006
    
    2005
    
    2005
    
    2004
    
    2003(In Thousands)Selected Financial Condition
Data:Total assets
    
    $
    1,710,202
    
    
    $
    1,648,470
    
    
    $
    1,511,209
    
    
    $
    1,386,132
    
    
    $
    1,240,084
    
    
    $
    1,104,893Available for sale securities
    
    
    172,137
    
    
    
    117,330
    
    
    
    121,955
    
    
    
    83,991
    
    
    
    99,549
    
    
    
    90,453Federal Home Loan Bank stock
    
    
    19,289
    
    
    
    17,213
    
    
    
    14,406
    
    
    
    14,097
    
    
    
    13,322
    
    
    
    8,658Loans receivable, net
    
    
    1,389,209
    
    
    
    1,365,712
    
    
    
    1,306,716
    
    
    
    1,213,561
    
    
    
    1,063,594
    
    
    
    940,053Cash and cash equivalents
    
    
    17,884
    
    
    
    73,807
    
    
    
    16,498
    
    
    
    20,467
    
    
    
    19,392
    
    
    
    28,767Deposits
    
    
    994,535
    
    
    
    1,036,218
    
    
    
    1,045,593
    
    
    
    1,128,791
    
    
    
    1,035,588
    
    
    
    909,491Borrowings
    
    
    475,484
    
    
    
    334,003
    
    
    
    201,212
    
    
    
    93,162
    
    
    
    60,000
    
    
    
    60,000Total shareholders equity
    
    
    201,819
    
    
    
    241,272
    
    
    
    231,696
    
    
    
    133,416
    
    
    
    122,799
    
    
    
    114,596Allowance for loan losses
    
    
    12,839
    
    
    
    7,195
    
    
    
    5,250
    
    
    
    4,606
    
    
    
    3,378
    
    
    
    2,970Non-performing loans
    
    
    80,350
    
    
    
    28,888
    
    
    
    18,065
    
    
    
    13,076
    
    
    
    12,015
    
    
    
    15,588
 -59-




---



##### Table of Contents



Six MonthsEndedYears Ended December 31,
    
    
    December 31,
    
    
    Years Ended June 30,2007
    
    
    2006
    
    
    2005
    
    
    2005
    
    
    2004
    
    
    2003(In Thousands, except per share amounts)Selected Operating Data:Interest income
    
    $
    96,975
    
    
    $
    92,228
    
    
    $
    42,036
    
    
    $
    74,207
    
    
    $
    66,088
    
    
    $
    66,451Interest expense
    
    
    62,134
    
    
    
    53,779
    
    
    
    20,758
    
    
    
    36,068
    
    
    
    32,432
    
    
    
    34,459Net interest income
    
    
    34,841
    
    
    
    38,449
    
    
    
    21,278
    
    
    
    38,139
    
    
    
    33,656
    
    
    
    31,933Provision for loan losses
    
    
    11,697
    
    
    
    2,201
    
    
    
    1,035
    
    
    
    1,238
    
    
    
    860
    
    
    
    520Net interest income after
provision for loan losses
    
    
    23,144
    
    
    
    36,248
    
    
    
    20,243
    
    
    
    36,901
    
    
    
    32,796
    
    
    
    31,472Noninterest income
    
    
    6,842
    
    
    
    5,156
    
    
    
    2,244
    
    
    
    3,257
    
    
    
    3,035
    
    
    
    2,993Noninterest expense
    
    
    28,682
    
    
    
    28,652
    
    
    
    18,303
    
    
    
    23,522
    
    
    
    20,384
    
    
    
    17,618Income before income taxes
    
    
    1,304
    
    
    
    12,752
    
    
    
    4,184
    
    
    
    16,636
    
    
    
    15,447
    
    
    
    16,847Provision for income taxes (benefit)
    
    
    (254
    )
    
    
    4,699
    
    
    
    1,471
    
    
    
    7,520
    
    
    
    4,863
    
    
    
    5,742Net income
    
    $
    1,558
    
    
    $
    8,053
    
    
    $
    2,713
    
    
    $
    9,116
    
    
    $
    10,584
    
    
    $
    11,105Income (loss) per share  basic (1)
    
    $
    0.05
    
    
    $
    0.24
    
    
    $
    (0.02
    )
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AIncome (loss) per share  diluted (1)
    
    $
    0.05
    
    
    $
    0.24
    
    
    $
    (0.02
    )
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
 
 (1)
    
    The 2005 loss per share is based upon net loss and weighted average shares outstanding from
the date of reorganization (October 4, 2005) to December 31, 2005. -60-




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##### Table of Contents



At or for theSix MonthsAt or For the Years Ended
    
    EndedDecember 31,
    
    December 31,
    
    At or For the Years Ended June 30,2007
    
    2006
    
    2005
    
    2005
    
    2004
    
    2003Selected Financial Ratios(4)and Other Data:Performance Ratios:Return on average assets
    
    
    0.09
    %
    
    
    0.50
    %
    
    
    0.36
    %
    
    
    0.70
    %
    
    
    0.90
    %
    
    
    1.08
    %Return on average equity
    
    
    0.72
    
    
    
    3.41
    
    
    
    3.22
    
    
    
    7.12
    
    
    
    8.88
    
    
    
    10.19Interest rate spread (1)
    
    
    1.74
    
    
    
    2.00
    
    
    
    2.43
    
    
    
    2.74
    
    
    
    2.70
    
    
    
    2.84Net interest margin (2)
    
    
    2.19
    
    
    
    2.52
    
    
    
    2.96
    
    
    
    3.04
    
    
    
    2.98
    
    
    
    3.19Noninterest expense to average assets
    
    
    1.73
    
    
    
    1.80
    
    
    
    2.44
    
    
    
    1.81
    
    
    
    1.74
    
    
    
    1.71Efficiency ratio (3)
    
    
    68.85
    
    
    
    66.19
    
    
    
    77.84
    
    
    
    56.88
    
    
    
    55.55
    
    
    
    50.36Average interest-earning assets to average
interest-bearing liabilities
    
    
    111.68
    
    
    
    114.59
    
    
    
    118.38
    
    
    
    110.29
    
    
    
    109.71
    
    
    
    110.09Capital Ratios:Equity to total assets at end of period
    
    
    11.80
    %
    
    
    14.64
    %
    
    
    15.33
    %
    
    
    9.63
    %
    
    
    9.90
    %
    
    
    10.37
    %Average equity to average assets
    
    
    13.07
    
    
    
    14.79
    
    
    
    11.25
    
    
    
    9.83
    
    
    
    10.15
    
    
    
    10.56Total capital to risk-weighted assets
    
    
    13.43
    
    
    
    21.36
    
    
    
    22.79
    
    
    
    14.05
    
    
    
    15.02
    
    
    
    15.61Tier I capital to risk-weighted assets
    
    
    12.52
    
    
    
    20.75
    
    
    
    22.29
    
    
    
    13.58
    
    
    
    14.62
    
    
    
    15.22Tier I capital to average assets
    
    
    10.08
    
    
    
    14.47
    
    
    
    14.23
    
    
    
    9.84
    
    
    
    10.18
    
    
    
    10.50Asset Quality Ratios:Allowance for loan losses as a percent of total loans
    
    
    0.92
    %
    
    
    0.52
    %
    
    
    0.40
    %
    
    
    0.38
    %
    
    
    0.32
    %
    
    
    0.32
    %Allowance for loan losses as a percent of
non-performing loans
    
    
    15.98
    
    
    
    24.91
    
    
    
    29.06
    
    
    
    35.22
    
    
    
    28.11
    
    
    
    19.05Net charge-offs to average outstanding loans during the
period
    
    
    0.44
    
    
    
    0.02
    
    
    
    0.06
    
    
    
    0
    
    
    
    0.05
    
    
    
    0Non-performing loans as a percent of total loans
    
    
    5.73
    
    
    
    2.10
    
    
    
    1.39
    
    
    
    1.07
    
    
    
    1.13
    
    
    
    1.65Non-performing assets as a percent of total assets
    
    
    5.20
    
    
    
    1.75
    
    
    
    1.21
    
    
    
    0.98
    
    
    
    1.03
    
    
    
    1.41Other Data:Number of full service offices
    
    
    8
    
    
    
    7
    
    
    
    5
    
    
    
    5
    
    
    
    5
    
    
    
    4Number of limited service offices
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    1
 
 (1)
    
    Represents the difference between the weighted average yield on average interest-earning
assets and the weighted average cost of interest-bearing liabilities.(2)
    
    Represents net interest income as a percent of average interest-earning assets.(3)
    
    Represents non-interest expense divided by the sum of net interest income and non-interest
income.(4)
    
    Ratios for six-month period have been annualized. -61-




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##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 Overview
    Critical Accounting Policies
  Allowance for Loan Losses.
 -62-




---



##### Table of Contents



Income Taxes.
   -63-




---



##### Table of Contents



Comparison of Financial Condition at December 31, 2007 and at December 31, 2006
 Total Assets.
 Cash and Cash Equivalents.
 Securities Available for Sale .
 Securities Held to Maturity .
 Loans Held for Sale.
 -64-




---



##### Table of Contents



Loans Receivable.
 Federal Home Loan Bank Stock.
 Real Estate Owned .
 Prepaid Expenses and Other Assets .
 Deposits.
 -65-




---



##### Table of Contents



Borrowings.
 Other Liabilities.
 Shareholders Equity.
 Average Balance Sheets, Interest and Yields/Costs
  -66-




---



##### Table of Contents



Years Ended December 31,2007
    
    
    2006
    
    
    2005Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate(Dollars in Thousands)Interest-earning assets:Loans receivable, net
    
    $
    1,387,803
    
    
    $
    87,101
    (1)
    
    
    6.28
    %
    
    $
    1,350,865
    
    
    $
    83,822
    (1)
    
    
    6.21
    %
    
    $
    1,219,707
    
    
    $
    74,020
    (1)
    
    
    6.07
    %Mortgage related securities(5) (6)
    
    
    111,132
    
    
    
    5,869
    
    
    
    5.28
    
    
    
    87,102
    
    
    
    4,263
    
    
    
    4.89
    
    
    
    83,296
    
    
    
    2,466
    
    
    
    2.96Other earning assets
    
    
    90,859
    
    
    
    4,005
    
    
    
    4.41
    
    
    
    90,729
    
    
    
    4,143
    
    
    
    4.57
    
    
    
    61,288
    
    
    
    3,250
    
    
    
    5.30Total interest-earning assets
    
    
    1,589,794
    
    
    
    96,975
    
    
    
    6.10
    
    
    
    1,528,696
    
    
    
    92,228
    
    
    
    6.03
    
    
    
    1,364,291
    
    
    
    79,736
    
    
    
    5.84Noninterest-earning assets
    
    
    69,015
    
    
    
    
    
    
    
    
    
    
    
    68,286
    
    
    
    
    
    
    
    
    
    
    
    57,461Total assets
    
    $
    1,658,809
    
    
    
    
    
    
    
    
    
    
    $
    1,596,982
    
    
    
    
    
    
    
    
    
    
    $
    1,421,752Interest-bearing liabilities:Demand and money market accounts
    
    
    143,295
    
    
    
    4,478
    
    
    
    3.13
    
    
    $
    110,907
    
    
    
    2,810
    
    
    
    2.53
    
    
    $
    89,694
    
    
    
    1,156
    
    
    
    1.29Savings accounts
    
    
    19,299
    
    
    
    83
    
    
    
    0.43
    
    
    
    20,658
    
    
    
    101
    
    
    
    0.49
    
    
    
    23,812
    
    
    
    119
    
    
    
    0.50Certificates of deposit
    
    
    857,319
    
    
    
    40,297
    
    
    
    4.70
    
    
    
    925,026
    
    
    
    39,080
    
    
    
    4.22
    
    
    
    970,977
    
    
    
    34,152
    
    
    
    3.52Total interest-bearing deposits
    
    
    1,019,913
    
    
    
    44,858
    
    
    
    4.40
    
    
    
    1,056,591
    
    
    
    41,991
    
    
    
    3.97
    
    
    
    1,084,483
    
    
    
    35,427
    
    
    
    3.27Borrowings
    
    
    381,614
    
    
    
    16,791
    
    
    
    4.40
    
    
    
    265,821
    
    
    
    11,472
    
    
    
    4.32
    
    
    
    110,979
    
    
    
    3,719
    
    
    
    3.35Other interest bearing liabilities
    
    
    21,963
    
    
    
    485
    
    
    
    2.21
    
    
    
    11,684
    
    
    
    316
    
    
    
    2.70
    
    
    
    11,151
    
    
    
    391
    
    
    
    3.51Total interest-bearing liabilities
    
    
    1,423,490
    
    
    
    62,134
    
    
    
    4.36
    
    
    
    1,334,096
    
    
    
    53,779
    
    
    
    4.03
    
    
    
    1,206,613
    
    
    
    39,537
    
    
    
    3.28Noninterest-bearing liabilities
    
    
    18,442
    
    
    
    
    
    
    
    
    
    
    
    26,716
    
    
    
    
    
    
    
    
    
    
    
    81,398Total liabilities
    
    
    1,441,932
    
    
    
    
    
    
    
    
    
    
    
    1,360,812
    
    
    
    
    
    
    
    
    
    
    
    1,288,011Equity
    
    
    216,877
    
    
    
    
    
    
    
    
    
    
    
    236,170
    
    
    
    
    
    
    
    
    
    
    
    133,741Total liabilities and equity
    
    $
    1,658,809
    
    
    
    
    
    
    
    
    
    
    $
    1,596,982
    
    
    
    
    
    
    
    
    
    
    $
    1,421,752Net interest income
    
    
    
    
    
    $
    34,841
    
    
    
    
    
    
    
    
    
    
    $
    38,449
    
    
    
    
    
    
    
    
    
    
    $
    40,199Net interest rate spread (2)
    
    
    
    
    
    
    
    
    
    
    1.74
    %
    
    
    
    
    
    
    
    
    
    
    2.00
    %
    
    
    
    
    
    
    
    
    
    
    2.56
    %Net interest-earning assets (3)
    
    $
    166,304
    
    
    
    
    
    
    
    
    
    
    $
    194,600
    
    
    
    
    
    
    
    
    
    
    $
    157,678Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    2.19
    %
    
    
    
    
    
    
    
    
    
    
    2.52
    %
    
    
    
    
    
    
    
    
    
    
    2.95
    %Average interest-earning assets to
average interest- bearing liabilities
    
    
    
    
    
    
    
    
    
    
    111.68
    %
    
    
    
    
    
    
    
    
    
    
    114.59
    %
    
    
    
    
    
    
    
    
    
    
    113.07
    %
 
 (1)
    
    Includes net deferred loan fee amortization income of $2,164,000, $885,000 and $940,000
for the years ended December 31, 2007, 2006 and 2005, respectively.(2)
    
    Net interest rate spread represents the difference between the yield on average
interest-earning assets and the cost of average interest-bearing liabilities.(3)
    
    Net interest-earning assets represent total interest-earning assets less total
interest-bearing liabilities.(4)
    
    Net interest margin represents net interest income divided by average total interest-earning
assets.(5)
    
    Average balance of available for sale securities is based on amortized historical cost.(6)
    
    Interest income from tax exempt securities is not significant to total interest income,
therefore, interest and yield on interest earnings assets are not stated on a tax equivalent
basis. -67-




---



##### Table of Contents



Six Month Period Ended December 31,2005
    
    
    2004Interest
    
    
    
    
    
    
    
    
    
    
    InterestAverage
    
    
    and
    
    
    
    
    
    
    Average
    
    
    andBalance
    
    
    Dividends
    
    
    Yield/Cost
    
    
    Balance
    
    
    Dividends
    
    
    Yield/Cost(Dollars in Thousands)Interest-earning assets:Loans receivable, net
    
    $
    1,258,594
    
    
    $
    38,516
    (1)
    
    
    6.12
    %
    
    $
    1,106,826
    
    
    $
    34,272
    (1)
    
    
    6.19
    %Mortgage related securities(5) (6)
    
    
    65,426
    
    
    
    1,389
    
    
    
    4.25
    
    
    
    68,044
    
    
    
    1,206
    
    
    
    3.54Other earning assets
    
    
    113,023
    
    
    
    2,131
    
    
    
    3.77
    
    
    
    56,248
    
    
    
    1,102
    
    
    
    3.92Total interest-earning assets
    
    
    1,437,043
    
    
    
    42,036
    
    
    
    5.85
    
    
    
    1,231,118
    
    
    
    36,580
    
    
    
    5.94Noninterest-earning assets
    
    
    62,987
    
    
    
    
    
    
    
    
    
    
    
    51,989Total assets
    
    $
    1,500,030
    
    
    
    
    
    
    
    
    
    
    $
    1,283,107Interest-bearing liabilities:Demand and money market accounts
    
    $
    92,170
    
    
    
    792
    
    
    
    1.72
    
    
    $
    92,174
    
    
    
    412
    
    
    
    0.89Savings accounts
    
    
    18,088
    
    
    
    60
    
    
    
    0.66
    
    
    
    24,912
    
    
    
    63
    
    
    
    0.51Certificates of deposit
    
    
    961,144
    
    
    
    17,414
    
    
    
    3.62
    
    
    
    928,164
    
    
    
    15,453
    
    
    
    3.33Total interest-bearing deposits
    
    
    1,071,402
    
    
    
    18,266
    
    
    
    3.41
    
    
    
    1,045,250
    
    
    
    15,928
    
    
    
    3.05Borrowings
    
    
    127,046
    
    
    
    2,258
    
    
    
    3.55
    
    
    
    74,031
    
    
    
    1,253
    
    
    
    3.39Other interest bearing liabilities
    
    
    15,514
    
    
    
    234
    
    
    
    3.02
    
    
    
    13,333
    
    
    
    109
    
    
    
    1.64Total interest-bearing liabilities
    
    
    1,213,962
    
    
    
    20,758
    
    
    
    3.42
    
    
    
    1,132,614
    
    
    
    17,290
    
    
    
    3.05Noninterest-bearing liabilities
    
    
    117,302
    
    
    
    
    
    
    
    
    
    
    
    11,133Total liabilities
    
    
    1,331,504
    
    
    
    
    
    
    
    
    
    
    
    1,143,747Equity
    
    
    168,766
    
    
    
    
    
    
    
    
    
    
    
    139,360Total liabilities and equity
    
    $
    1,500,030
    
    
    
    
    
    
    
    
    
    
    $
    1,283,107Net interest income
    
    
    
    
    
    $
    21,278
    
    
    
    
    
    
    
    
    
    
    $
    19,290Net interest rate spread (2)
    
    
    
    
    
    
    
    
    
    
    2.43
    %
    
    
    
    
    
    
    
    
    
    
    2.89
    %Net interest-earning assets (3)
    
    $
    223,081
    
    
    
    
    
    
    
    
    
    
    $
    98,504Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    2.96
    %
    
    
    
    
    
    
    
    
    
    
    3.13
    %Average interest-earning
assets to average
interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    118.38
    %
    
    
    
    
    
    
    
    
    
    
    108.70
    %
 
 (1)
    
    Includes net deferred loan fee amortization income of $512,000 and $504,000 for the six month
periods ended December 31, 2005 and 2004, respectively.(2)
    
    Net interest rate spread represents the difference between the yield on average
interest-earning assets and the cost of average interest-bearing liabilities.(3)
    
    Net interest-earning assets represent total interest-earning assets less total
interest-bearing liabilities.(4)
    
    Net interest margin represents net interest income divided by average total interest-earning
assets.(5)
    
    Average balance of available for sale securities is based on amortized historical cost.(6)
    
    Interest income from tax exempt securities is not significant to total interest income,
therefore, interest and yield on interest earnings assets are not stated on a tax equivalent
basis. -68-




---



##### Table of Contents



Years Ended June 30,2005
    
    
    2004Interest
    
    
    
    
    
    
    
    
    
    
    InterestAverage
    
    
    And
    
    
    
    
    
    
    Average
    
    
    AndBalance
    
    
    Dividends
    
    
    Yield/Cost
    
    
    Balance
    
    
    Dividends
    
    
    Yield/Cost(Dollars in Thousands)Interest-earning assets:Loans receivable, net
    
    $
    1,140,444
    
    
    $
    69,775
    (1)
    
    
    6.12
    %
    
    $
    996,511
    
    
    $
    61,530
    (1)
    
    
    6.17
    %Mortgage related securities(5)
(6)
    
    
    51,229
    
    
    
    2,283
    
    
    
    4.46
    
    
    
    86,426
    
    
    
    3,264
    
    
    
    3.78Other earning assets
    
    
    64,943
    
    
    
    2,149
    
    
    
    3.31
    
    
    
    45,953
    
    
    
    1,294
    
    
    
    2.82Total interest-earning assets
    
    
    1,256,616
    
    
    
    74,207
    
    
    
    5.91
    
    
    
    1,128,890
    
    
    
    66,088
    
    
    
    5.85Non-interest-earning assets
    
    
    45,149
    
    
    
    
    
    
    
    
    
    
    
    44,973Total assets
    
    $
    1,301,765
    
    
    
    
    
    
    
    
    
    
    $
    1,173,863Interest-bearing liabilities:Demand and money market accounts
    
    $
    76,758
    
    
    
    899
    
    
    
    1.17
    
    
    $
    88,324
    
    
    
    884
    
    
    
    1.00Savings accounts
    
    
    27,944
    
    
    
    122
    
    
    
    0.44
    
    
    
    22,675
    
    
    
    113
    
    
    
    0.50Certificates of deposit
    
    
    954,322
    
    
    
    32,068
    
    
    
    3.36
    
    
    
    847,126
    
    
    
    29,084
    
    
    
    3.43Total interest-bearing deposits
    
    
    1,059,024
    
    
    
    33,089
    
    
    
    3.12
    
    
    
    958,125
    
    
    
    30,081
    
    
    
    3.14Advances from the Federal Home Loan Bank
and Federal funds purchased
    
    
    74,785
    
    
    
    2,783
    
    
    
    3.72
    
    
    
    65,237
    
    
    
    2,109
    
    
    
    3.23Other interest bearing liabilities
    
    
    5,579
    
    
    
    196
    
    
    
    3.51
    
    
    
    5,624
    
    
    
    242
    
    
    
    4.29Total interest-bearing liabilities
    
    
    1,139,388
    
    
    
    36,068
    
    
    
    3.17
    
    
    
    1,028,986
    
    
    
    32,432
    
    
    
    3.15Non-interest-bearing liabilities
    
    
    34,351
    
    
    
    
    
    
    
    
    
    
    
    25,680Total liabilities
    
    
    1,173,739
    
    
    
    
    
    
    
    
    
    
    
    1,054,666Equity
    
    
    128,026
    
    
    
    
    
    
    
    
    
    
    
    119,197Total liabilities and equity
    
    $
    1,301,765
    
    
    
    
    
    
    
    
    
    
    $
    1,173,863Net interest income
    
    
    
    
    
    $
    38,139
    
    
    
    
    
    
    
    
    
    
    $
    33,656Net interest rate spread (2)
    
    
    
    
    
    
    
    
    
    
    2.74
    %
    
    
    
    
    
    
    
    
    
    
    2.70
    %Net interest-earning assets (3)
    
    $
    117,288
    
    
    
    
    
    
    
    
    
    
    $
    99,904Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    3.04
    %
    
    
    
    
    
    
    
    
    
    
    2.98
    %Average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    110.29
    %
    
    
    
    
    
    
    
    
    
    
    109.71
    %
 
 (1)
    
    Includes net deferred loan fee amortization income of $932,000 and $1,008,000 for the years
ended June 30, 2005 and 2004, respectively.(2)
    
    Net interest rate spread represents the difference between the yield on average
interest-earning assets and the cost of average interest-bearing liabilities.(3)
    
    Net interest-earning assets represent total interest-earning assets less total
interest-bearing liabilities.(4)
    
    Net interest margin represents net interest income divided by average total interest-earning
assets.(5)
    
    Average balance of available for sale securities is based on amortized historical cost.(6)
    
    Interest income from tax exempt securities is not significant to total interest income,
therefore, interest and yield on interest earnings assets are not stated on a tax equivalent
basis. -69-




---



##### Table of Contents



Rate/Volume Analysis
  Years Ended December 31,
    
    
    Years Ended December 31,2007 vs. 2006
    
    
    2006 vs. 2005Increase (Decrease) due to
    
    
    Increase (Decrease) due toVolume
    
    
    Rate
    
    
    Net
    
    
    Volume
    
    
    Rate
    
    
    Net(In Thousands)Interest and dividend income:Loans receivable(1) (2)
    
    $
    2,311
    
    
    
    968
    
    
    
    3,279
    
    
    $
    8,108
    
    
    
    1,694
    
    
    
    9,802Mortgage relates securites(3)
    
    
    1,248
    
    
    
    358
    
    
    
    1,606
    
    
    $
    117
    
    
    
    1,680
    
    
    
    1,797Other interest earning assets
    
    
    6
    
    
    
    (144
    )
    
    
    (138
    )
    
    
    1,256
    
    
    
    (363
    )
    
    
    893Total interest-earning assets
    
    
    3,565
    
    
    
    1,182
    
    
    
    4,747
    
    
    
    9,481
    
    
    
    3,011
    
    
    
    12,492Interest expense:Demand and money market
    
    
    927
    
    
    
    741
    
    
    
    1,668
    
    
    
    325
    
    
    
    1,329
    
    
    
    1,654Savings accounts
    
    
    (6
    )
    
    
    (12
    )
    
    
    (18
    )
    
    
    (15
    )
    
    
    (3
    )
    
    
    (18
    )Certificates of deposit
    
    
    (2,262
    )
    
    
    3,479
    
    
    
    1,217
    
    
    
    (1,516
    )
    
    
    6,444
    
    
    
    4,928Total interest-bearing deposits
    
    
    (1,341
    )
    
    
    4,208
    
    
    
    2,867
    
    
    
    (1,206
    )
    
    
    7,770
    
    
    
    6,564Borrowings
    
    
    5,091
    
    
    
    229
    
    
    
    5,320
    
    
    
    6,427
    
    
    
    1,326
    
    
    
    7,753Other interest bearing liabilities
    
    
    213
    
    
    
    (45
    )
    
    
    168
    
    
    
    20
    
    
    
    (95
    )
    
    
    (75
    )Total interest-bearing liabilities
    
    
    3,963
    
    
    
    4,392
    
    
    
    8,355
    
    
    
    5,241
    
    
    
    9,001
    
    
    
    14,242Net change in net interest income
    
    $
    (398
    )
    
    
    (3,210
    )
    
    
    (3,608
    )
    
    $
    4,240
    
    
    
    (5,990
    )
    
    
    (1,750
    )
 
 (1)
    
    Includes net deferred loan fee amortization income of $2,164,000, $885,000 and $940,000 for
the years ended December 31, 2007, 2006 and 2005, respectively.(2)
    
    Non-accrual loans have been included in average loans receivable balance. -70-




---



##### Table of Contents



Six Month Period EndedDecember 31,
    
    
    Years Ended June 30,2005 vs. 2004
    
    
    2005 vs. 2004Increase (Decrease) due to
    
    
    Increase (Decrease) due toVolume
    
    
    Rate
    
    
    Net
    
    
    Volume
    
    
    Rate
    
    
    Net(In Thousands)Interest and dividend income:Loans receivable(1) (2)
    
    $
    4,649
    
    
    
    (405
    )
    
    
    4,244
    
    
    $
    8,812
    
    
    
    (567
    )
    
    
    8,245Mortgage related securites(3)
    
    $
    (48
    )
    
    
    231
    
    
    
    183
    
    
    
    (1,495
    )
    
    
    514
    
    
    
    (981
    )Other interest earning assets
    
    
    1,072
    
    
    
    (43
    )
    
    
    1,029
    
    
    
    697
    
    
    
    158
    
    
    
    855Total interest-earning assets
    
    
    5,673
    
    
    
    (217
    )
    
    
    5,456
    
    
    
    8,014
    
    
    
    105
    
    
    
    8,119Interest expense:Demand and money market accounts
    
    
    
    
    
    
    380
    
    
    
    380
    
    
    
    (124
    )
    
    
    139
    
    
    
    15Savings accounts
    
    
    (20
    )
    
    
    17
    
    
    
    (3
    )
    
    
    24
    
    
    
    (15
    )
    
    
    9Certificates of deposit
    
    
    516
    
    
    
    1,445
    
    
    
    1,961
    
    
    
    3,614
    
    
    
    (630
    )
    
    
    2,984Total interest-bearing deposits
    
    
    496
    
    
    
    1,842
    
    
    
    2,338
    
    
    
    3,514
    
    
    
    (506
    )
    
    
    3,008Borrowings
    
    
    946
    
    
    
    59
    
    
    
    1,005
    
    
    
    (1,128
    )
    
    
    1,802
    
    
    
    674Other interest bearing liabilities
    
    
    14
    
    
    
    111
    
    
    
    125
    
    
    
    (2
    )
    
    
    (44
    )
    
    
    (46
    )Total interest-bearing liabilities
    
    
    1,456
    
    
    
    2,012
    
    
    
    3,468
    
    
    
    2,384
    
    
    
    1,252
    
    
    
    3,636Net change in net interest income
    
    $
    4,217
    
    
    
    (2,229
    )
    
    
    1,988
    
    
    $
    5,630
    
    
    
    (1,147
    )
    
    
    4,483
 
 (1)
    
    Includes net deferred loan fee amortization income of $512,000, $504,000, $932,000 and
$1,008,000 for the six month periods ended December 31, 2005 and 2004 and the years ended
June 30, 2005 and 2004, respectively.(2)
    
    Non-accrual loans have been included in average loans receivable balance. -71-




---



##### Table of Contents



Comparison of Operating Results for the Years Ended December 31, 2007 and 2006
 General.
 Total Interest Income.
 Total Interest Expense.
  -72-




---



##### Table of Contents



Net Interest Income.
 Provision for Loan Losses.
 Non-interest Income.
 -73-




---



##### Table of Contents



Non-interest Expense.
     Income Taxes .
 -74-




---



##### Table of Contents



Net Income.
 Comparison of Operating Results for the Years Ended December 31 2006 and 2005
 General.
 Total Interest Income.
 Total Interest Expense.
 -75-




---



##### Table of Contents



Net Interest Income.
 Provision for Loan Losses.
 Non-interest Income.
 -76-




---



##### Table of Contents



Non-interest Expense.
     -77-




---



##### Table of Contents



Income Taxes .
 Net Income.
 Liquidity and Capital Resources
   -78-




---



##### Table of Contents



-79-




---



##### Table of Contents



-80-




---



##### Table of Contents



Contractual Obligations, Commitments, Contingent Liabilities, and Off-balance Sheet Arrangements
  Contractual Obligations
 More Than
    
    
    More thanOne Year
    
    
    Three YearsOne Year or
    
    
    Through
    
    
    Through FiveTotal
    
    
    Less
    
    
    Three Years
    
    
    Years
    
    
    Over Five Years(In Thousands)Deposits without a stated maturity (5)
    
    $
    167,597
    
    
    $
    167,597
    
    
    $
    
    
    
    $
    
    
    
    $
    Certificates of deposit (5)
    
    
    826,938
    
    
    
    627,410
    
    
    
    175,196
    
    
    
    24,077
    
    
    
    255Federal Home Loan Bank advances (1)
    
    
    385,779
    
    
    
    47,779
    
    
    
    53,000
    
    
    
    
    
    
    
    285,000Repurchase agreements (5)
    
    
    84,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84,000Operating leases (2)
    
    
    211
    
    
    
    107
    
    
    
    104
    
    
    
    
    
    
    
    Capital lease (3)
    
    
    3,675
    
    
    
    300
    
    
    
    3,375
    
    
    
    
    
    
    
    State income tax obligation (4)
    
    
    3,726
    
    
    
    1,242
    
    
    
    2,484Salary continuation agreements
    
    
    2,833
    
    
    
    576
    
    
    
    1,152
    
    
    
    340
    
    
    
    765Total Contractual Obligations
    
    $
    1,474,759
    
    
    $
    845,011
    
    
    $
    235,311
    
    
    $
    24,417
    
    
    $
    370,020
 
 (1)
    
    Secured under a blanket security agreement on qualifying assets, principally,
mortgage loans. Excludes interest which will accrue on the advances. All Federal Home Loan
Bank advances with maturities exceeding five years are callable on a quarterly basis with the
initial call at various times from February 2008 through March 2009.(2)
    
    The repurchase agreements are callable on a quarterly basis with the initial call
in March 2009.(3)
    
    Represents non-cancelable operating leases for offices and equipment.(4)
    
    Represents remaining amounts due to the Wisconsin Department of Revenue related to
the operations of the Companys Nevada subsidiary.(5)
    
    Excludes interest  -81-




---



##### Table of Contents



Other Commitments
 More thanMore than
    
    
    ThreeOne Year
    
    
    YearsThrough
    
    
    ThroughOne Year or
    
    
    Three
    
    
    Five
    
    
    Over FiveTotal
    
    
    Less
    
    
    Years
    
    
    Years
    
    
    Years(In Thousands)Real estate loan commitments(1)
    
    $
    16,674
    
    
    $
    16,674
    
    
    $
    
    
    
    $
    
    
    
    $
    Unused portion of home equity lines of credit(2)
    
    
    31,492
    
    
    
    31,492
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of construction loans(3)
    
    
    27,336
    
    
    
    27,336
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of business lines of credit
    
    
    8,721
    
    
    
    8,721Standby letters of credit
    
    
    2,337
    
    
    
    1,776
    
    
    
    476
    
    
    
    85
    
    
    
    Total Other Commitments
    
    $
    86,560
    
    
    $
    85,999
    
    
    $
    476
    
    
    $
    85
    
    
    $
    0
  
 (1)
    
    Commitments for loans are extended to customers for up to 180 days after which they
expire.(2)
    
    Unused portions of home equity loans are available to the borrower for up to 10
years.(3)
    
    Unused portions of construction loans are available to the borrower for up to 1
year. Impact of Recent Accounting Pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Liabilities
 -82-




---



##### Table of Contents



Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements
 Written Loan
Commitments Recorded at Fair Value Through Earnings
 -83-




---



##### Table of Contents



Impact of Inflation and Changing Prices
  Quarterly Financial Information
  -84-




---



##### Table of Contents



Quarter EndedMarch 31
    
    June 30
    
    September 30
    
    December 31(In thousands, except per share data)2007 (unaudited)Interest income
    
    $
    23,575
    
    
    $
    24,335
    
    
    $
    24,420
    
    
    $
    24,645Interest expense
    
    
    14,809
    
    
    
    15,345
    
    
    
    15,913
    
    
    
    16,067Net interest income
    
    
    8,766
    
    
    
    8,990
    
    
    
    8,507
    
    
    
    8,578Provision for loan losses
    
    
    350
    
    
    
    5,676
    
    
    
    2,826
    
    
    
    2,845Net income after provision for loan
losses
    
    
    8,416
    
    
    
    3,314
    
    
    
    5,681
    
    
    
    5,733Total noninterest income
    
    
    1,603
    
    
    
    1,711
    
    
    
    1,863
    
    
    
    1,665Total noninterest expense
    
    
    6,808
    
    
    
    6,988
    
    
    
    7,178
    
    
    
    7,708Income (loss) before income taxes
    
    
    3,211
    
    
    
    (1,963
    )
    
    
    366
    
    
    
    (310
    )Income taxes (benefit)
    
    
    1,112
    
    
    
    (694
    )
    
    
    (55
    )
    
    
    (617
    )Net income (loss)
    
    $
    2,099
    
    
    $
    (1,269
    )
    
    $
    421
    
    
    $
    307Income (loss) per share  basic
    
    $
    0.06
    
    
    $
    (0.04
    )
    
    $
    0.01
    
    
    $
    0.01Income (loss) per share  diluted
    
    $
    0.06
    
    
    $
    (0.04
    )
    
    $
    0.01
    
    
    $
    0.012006 (unaudited)Interest income
    
    $
    21,857
    
    
    $
    22,418
    
    
    $
    23,266
    
    
    $
    24,687Interest expense
    
    
    11,797
    
    
    
    12,828
    
    
    
    14,090
    
    
    
    15,064Net interest income
    
    
    10,060
    
    
    
    9,590
    
    
    
    9,176
    
    
    
    9,623Provision for loan losses
    
    
    307
    
    
    
    345
    
    
    
    1191
    
    
    
    358Net income after provision for loan
losses
    
    
    9,753
    
    
    
    9,245
    
    
    
    7,985
    
    
    
    9,265Total noninterest income
    
    
    1,077
    
    
    
    1,576
    
    
    
    1,228
    
    
    
    1,275Total noninterest expense
    
    
    6,540
    
    
    
    7,412
    
    
    
    7,770
    
    
    
    6,930Income before income taxes
    
    
    4,290
    
    
    
    3,409
    
    
    
    1,443
    
    
    
    3,610Income taxes
    
    
    1,584
    
    
    
    1,252
    
    
    
    537
    
    
    
    1,326Net income
    
    $
    2,706
    
    
    $
    2,157
    
    
    $
    906
    
    
    $
    2,284Loss per share  basic
    
    $
    0.08
    
    
    $
    0.07
    
    
    $
    0.03
    
    
    $
    0.07Loss per share  diluted
    
    $
    0.08
    
    
    $
    0.07
    
    
    $
    0.03
    
    
    $
    0.07
 -85-




---



##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 Management of Market Risk
 General.
  Income Simulation.
 -86-




---



##### Table of Contents



PercentageIncrease (Decrease) in Estimated NetAnnual Interest IncomeOver 24 Months300 basis point increase in rates
    
    
    (1.54
    %)200 basis point increase in rates
    
    
    1.53
    %100 basis point increase in rates
    
    
    2.75
    %100 basis point decrease in rates
    
    
    (6.51
    %)200 basis point decrease in rates
    
    
    (10.06
    %)300 basis point decrease in rates
    
    
    (15.87
    %)
  -87-




---



##### Table of Contents



Item 8. Financial Statements and Supplementary Data
 Report of Independent Registered Public Accounting Firm
 
      
 -88-




---



##### Table of Contents



Wauwatosa Holdings, Inc. and Subsidiaries
Consolidated Statements of Financial Condition
December 31, 2007 and 2006
 December 31,2007
    
    
    2006(In Thousands, except share data)AssetsCash
    
    $
    5,492
    
    
    
    26,745Federal funds sold
    
    
    11,833
    
    
    
    19,458Interest-bearing deposits in other financial institutions
and other short term investments
    
    
    559
    
    
    
    27,604Cash and cash equivalents
    
    
    17,884
    
    
    
    73,807Securities available-for-sale (at fair value)
    
    
    172,137
    
    
    
    117,330Securities held-to-maturity (at amortized cost)
    
    
    7,646
    
    
    
    Loans held for sale
    
    
    23,108
    
    
    
    5,387Loans receivable
    
    
    1,402,048
    
    
    
    1,372,907Less: Allowance for loan losses
    
    
    12,839
    
    
    
    7,195Loans receivable, net
    
    
    1,389,209
    
    
    
    1,365,712Office properties and equipment, net
    
    
    32,018
    
    
    
    32,625Federal Home Loan Bank stock, at cost
    
    
    19,289
    
    
    
    17,213Cash surrender value of life insurance
    
    
    25,649
    
    
    
    24,152Real estate owned
    
    
    8,543
    
    
    
    520Prepaid expenses and other assets
    
    
    14,719
    
    
    
    11,724Total assets
    
    $
    1,710,202
    
    
    
    1,648,470Liabilities and Shareholders EquityLiabilities:Demand deposits
    
    $
    53,210
    
    
    
    58,407Money market and savings deposits
    
    
    114,387
    
    
    
    94,472Time deposits
    
    
    826,938
    
    
    
    883,339Total deposits
    
    
    994,535
    
    
    
    1,036,218Short-term borrowings
    
    
    53,484
    
    
    
    41,224Long-term borrowings
    
    
    422,000
    
    
    
    292,779Advance payments by borrowers for taxes
    
    
    607
    
    
    
    190Other liabilities
    
    
    37,757
    
    
    
    36,787Total liabilities
    
    
    1,508,383
    
    
    
    1,407,198Shareholders equity:Preferred stock (par value $.01 per share)Authorized -
20,000,000 shares, no shares issued
    
    
    
    
    
    
    Common stock (par value $.01 per share)Authorized - 200,000,000 shares in 2007 and 2006Issued - 33,975,250 in 2007 and 33,723,750 in 2006Outstanding - 31,250,897 in 2007 and 33,723,750
in 2006
    
    
    340
    
    
    
    337Additional paid-in capital
    
    
    106,306
    
    
    
    104,182Accumulated other comprehensive income (loss), net of taxes
    
    
    44
    
    
    
    (1,225
    )Retained earnings
    
    
    146,367
    
    
    
    144,809Unearned ESOP shares
    
    
    (5,977
    )
    
    
    (6,831
    )Treasury shares (2,724,353 shares), at cost
    
    
    (45,261
    )
    
    
    Total shareholders equity
    
    
    201,819
    
    
    
    241,272Total liabilities and shareholders equity
    
    $
    1,710,202
    
    
    
    1,648,470
 See Accompanying notes to consolidated financial statements.
 -89-




---



##### Table of Contents



Wauwatosa Holdings, Inc. and Subsidiaries
Consolidated Statements of Income
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
 Six months ended
    
    
    Year endedYears ended December 31,
    
    
    December 31,
    
    
    June 30,2007
    
    
    2006
    
    
    2005
    
    
    2005(In Thousands, except per share amounts)Interest income:Loans
    
    $
    87,101
    
    
    
    83,822
    
    
    
    38,516
    
    
    
    69,775Mortgage-related securities
    
    
    5,869
    
    
    
    4,263
    
    
    
    1,389
    
    
    
    2,283Debt securities, federal funds sold and
short-term investments
    
    
    4,005
    
    
    
    4,143
    
    
    
    2,131
    
    
    
    2,149Total interest income
    
    
    96,975
    
    
    
    92,228
    
    
    
    42,036
    
    
    
    74,207Interest expense:Deposits
    
    
    44,910
    
    
    
    42,038
    
    
    
    18,296
    
    
    
    33,285Borrowings
    
    
    17,224
    
    
    
    11,741
    
    
    
    2,462
    
    
    
    2,783Total interest expense
    
    
    62,134
    
    
    
    53,779
    
    
    
    20,758
    
    
    
    36,068Net interest income
    
    
    34,841
    
    
    
    38,449
    
    
    
    21,278
    
    
    
    38,139Provision for loan losses
    
    
    11,697
    
    
    
    2,201
    
    
    
    1,035
    
    
    
    1,238Net interest income after provision for loan losses
    
    
    23,144
    
    
    
    36,248
    
    
    
    20,243
    
    
    
    36,901Noninterest income:Service charges on loans and deposits
    
    
    1,983
    
    
    
    2,021
    
    
    
    940
    
    
    
    1,216Increase in cash surrender value of life insurance
    
    
    1,192
    
    
    
    1,055
    
    
    
    587
    
    
    
    642Gain (loss) on sale of securities
    
    
    
    
    
    
    (819
    )
    
    
    
    
    
    
    12Mortgage banking income
    
    
    2,912
    
    
    
    2,109
    
    
    
    
    
    
    
    Other
    
    
    755
    
    
    
    790
    
    
    
    717
    
    
    
    1,387Total noninterest income
    
    
    6,842
    
    
    
    5,156
    
    
    
    2,244
    
    
    
    3,257Noninterest expenses:Compensation, payroll taxes, and other employee benefits
    
    
    15,487
    
    
    
    16,209
    
    
    
    7,404
    
    
    
    11,434Occupancy, office furniture, and equipment
    
    
    4,990
    
    
    
    4,304
    
    
    
    1,802
    
    
    
    3,482Advertising
    
    
    1,158
    
    
    
    1,369
    
    
    
    764
    
    
    
    1,128Data processing
    
    
    1,622
    
    
    
    1,730
    
    
    
    840
    
    
    
    1,142Charitable contributions
    
    
    
    
    
    
    
    
    
    
    5,310
    
    
    
    2,088Communications
    
    
    729
    
    
    
    700
    
    
    
    300
    
    
    
    591Professional fees
    
    
    1,230
    
    
    
    1,243
    
    
    
    529
    
    
    
    627Real estate owned
    
    
    1,200
    
    
    
    116
    
    
    
    (54
    )
    
    
    338Other
    
    
    2,266
    
    
    
    2,981
    
    
    
    1,408
    
    
    
    2,692Total noninterest expenses
    
    
    28,682
    
    
    
    28,652
    
    
    
    18,303
    
    
    
    23,522Income before income taxes
    
    
    1,304
    
    
    
    12,752
    
    
    
    4,184
    
    
    
    16,636Income tax (benefit) expense
    
    
    (254
    )
    
    
    4,699
    
    
    
    1,471
    
    
    
    7,520Net income
    
    $
    1,558
    
    
    
    8,053
    
    
    
    2,713
    
    
    
    9,116Income (loss) per share:Basic
    
    $
    0.05
    
    
    
    0.24
    
    
    
    (0.02
    )
    
    
    N/ADiluted
    
    $
    0.05
    
    
    
    0.24
    
    
    
    (0.02
    )
    
    
    N/AWeighted average shares outstanding:Basic
    
    
    31,570,677
    
    
    
    33,076,565
    
    
    
    33,135,424
    
    
    
    N/ADiluted
    
    
    31,578,626
    
    
    
    33,076,565
    
    
    
    33,135,424
    
    
    
    N/A
 See Accompanying notes to consolidated financial statements.
 -90-




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##### Table of Contents



Wauwatosa Holdings, Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders Equity
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
 AccumulatedAdditional
    
    
    
    
    
    
    Unearned
    
    
    OtherCommon Stock
    
    
    Paid-In
    
    
    Retained
    
    
    ESOP
    
    
    Comprehensive
    
    
    TreasuryShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Shares
    
    
    Income (Loss)
    
    
    Shares
    
    
    Equity(In Thousands)Balances at December 31, 2005
    
    
    33,724
    
    
    
    337
    
    
    
    103,859
    
    
    
    136,756
    
    
    
    (7,685
    )
    
    
    (1,571
    )
    
    
    
    
    
    
    231,696Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,053
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,053Other comprehensive income:Net unrealized holding losses on
available for sale securities arising during the period,
net of taxes of $101
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (187
    )
    
    
    
    
    
    
    (187
    )Reclassification adjustment for net losses on
available for sale securities realized in net
income, net of taxes of $285
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    533
    
    
    
    
    
    
    
    533Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,399ESOP shares committed to be released to Plan participants
    
    
    
    
    
    
    
    
    
    
    323
    
    
    
    
    
    
    
    854
    
    
    
    
    
    
    
    
    
    
    
    1,177Balances at December 31, 2006
    
    
    33,724
    
    
    $
    337
    
    
    
    104,182
    
    
    
    144,809
    
    
    
    (6,831
    )
    
    
    (1,225
    )
    
    
    
    
    
    
    241,272Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,558
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,558Other comprehensive income:Net unrealized holding gains on
available for sale securities arising during the period,
net of taxes of $684
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,269
    
    
    
    
    
    
    
    1,269Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,827ESOP shares committed to be released to Plan participants
    
    
    
    
    
    
    
    
    
    
    398
    
    
    
    
    
    
    
    854
    
    
    
    
    
    
    
    
    
    
    
    1,252Stock based compensation
    
    
    251
    
    
    
    3
    
    
    
    1,726
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,729Purchase of treasury shares
    
    
    (2,724
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (45,261
    )
    
    
    (45,261
    )Balances at December 31, 2007
    
    
    31,251
    
    
    $
    340
    
    
    
    106,306
    
    
    
    146,367
    
    
    
    (5,977
    )
    
    
    44
    
    
    
    (45,261
    )
    
    
    201,819
 See Accompanying notes to consolidated financial statements.
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##### Table of Contents



Wauwatosa Holdings, Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders Equity
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
 AccumulatedAdditional
    
    
    
    
    
    
    Unearned
    
    
    OtherCommon Stock
    
    
    Paid-In
    
    
    Retained
    
    
    ESOP
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Shares
    
    
    Income (Loss)
    
    
    Equity(In Thousands)Balances at June 30, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124,927
    
    
    
    
    
    
    
    (2,129
    )
    
    
    122,798Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,116
    
    
    
    
    
    
    
    
    
    
    
    9,116Other comprehensive income:Net unrealized holding gains on
available for sale securities arising during the period, net
of taxes $799
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,509
    
    
    
    1,509Reclassification adjustment for net losses on
available for sale securities realized in net
income, net of taxes of $5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    (7
    )Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,618Balances at June 30, 2005
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    134,043
    
    
    
    
    
    
    
    (627
    )
    
    
    133,416Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,713
    
    
    
    
    
    
    
    
    
    
    
    2,713Other comprehensive income:Net unrealized holding losses on
available for sale securities arising during the period, net
of taxes $521
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (944
    )
    
    
    (944
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,769Sale of common stock, net of issuance costs of $2,439
    
    
    10,117
    
    
    
    101
    
    
    
    98,630
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    98,731Contribution of shares to charitable foundation
    
    
    557
    
    
    
    6
    
    
    
    5,559
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,565Capitalization of Lamplighter Financial, MHC
    
    
    23,050
    
    
    
    230
    
    
    
    (330
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (100
    )Purchase of ESOP shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,539
    )
    
    
    
    
    
    
    (8,539
    )ESOP shares committed to be released to Plan participants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    854
    
    
    
    
    
    
    
    854Balances at December 31, 2005
    
    
    33,724
    
    
    $
    337
    
    
    
    103,859
    
    
    
    136,756
    
    
    
    (7,685
    )
    
    
    (1,571
    )
    
    
    231,696
 See Accompanying notes to consolidated financial statements.
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##### Table of Contents



Wauwatosa Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
 Years ended
    
    
    Six months ended
    
    
    Years endedDecember 31,
    
    
    December 31,
    
    
    June 30,2007
    
    
    2006
    
    
    2005
    
    
    2005(In Thousands)Operating activities:Net income
    
    $
    1,558
    
    
    
    8,053
    
    
    
    2,713
    
    
    
    9,116Adjustments to reconcile net income to net
cash provided by (used in) operating activities:Provision for loan losses
    
    
    11,697
    
    
    
    2,201
    
    
    
    1,035
    
    
    
    1,238Provision for depreciation
    
    
    2,633
    
    
    
    2,369
    
    
    
    1,053
    
    
    
    1,607Deferred income taxes
    
    
    (2,469
    )
    
    
    (1,280
    )
    
    
    (1,933
    )
    
    
    (1,192
    )Stock based compensation
    
    
    1,729
    
    
    
    
    
    
    
    
    
    
    
    Net amortization of premium on debt and
mortgage-related securities
    
    
    (219
    )
    
    
    22
    
    
    
    (81
    )
    
    
    49Amortization of unearned ESOP shares
    
    
    1,252
    
    
    
    1,177
    
    
    
    854
    
    
    
    Gain on sale of loans held for sale
    
    
    (1,820
    )
    
    
    (1,054
    )
    
    
    
    
    
    
    Loans originated for sale
    
    
    (242,120
    )
    
    
    (84,603
    )
    
    
    
    
    
    
    Proceeds on sales of loans originated for sale
    
    
    226,219
    
    
    
    80,270
    
    
    
    
    
    
    
    Charitable contribution of common stock
    
    
    
    
    
    
    
    
    
    
    5,565
    
    
    
    Increase in accrued interest receivable
    
    
    (950
    )
    
    
    (621
    )
    
    
    (412
    )
    
    
    (230
    )Increase in cash surrender value of life insurance
    
    
    (1,192
    )
    
    
    (1,055
    )
    
    
    (587
    )
    
    
    (642
    )Increase (decrease) in accrued interest on deposits
    
    
    (45
    )
    
    
    1,301
    
    
    
    68
    
    
    
    1,269Increase in other liabilities
    
    
    1,046
    
    
    
    2,901
    
    
    
    1,241
    
    
    
    3,004FHLB stock dividends
    
    
    
    
    
    
    
    
    
    
    (309
    )
    
    
    (776
    )(Gain) loss on sale of securities
    
    
    
    
    
    
    819
    
    
    
    
    
    
    
    (12
    )(Gain) loss on sale of office properties and
equipment
    
    
    (77
    )
    
    
    7
    
    
    
    (571
    )
    
    
    (488
    )(Gain) loss related to real estate owned
    
    
    712
    
    
    
    31
    
    
    
    25
    
    
    
    2Other
    
    
    1,822
    
    
    
    (417
    )
    
    
    1,119
    
    
    
    116Net cash (used in) provided by operating activities
    
    
    (224
    )
    
    
    10,121
    
    
    
    9,780
    
    
    
    13,061Investing activities:Net increase in loans receivable
    
    
    (48,643
    )
    
    
    (68,717
    )
    
    
    (88,242
    )
    
    
    (153,126
    )Purchases of:Debt securities
    
    
    (28,958
    )
    
    
    
    
    
    
    (6,700
    )
    
    
    (34,299
    )Mortgage-related securities
    
    
    (47,401
    )
    
    
    (36,037
    )
    
    
    (49,682
    )
    
    
    Structured notes, held-to-maturity
    
    
    (7,646
    )
    
    
    
    
    
    
    
    
    
    
    Premises and equipment, net
    
    
    (2,122
    )
    
    
    (11,598
    )
    
    
    (2,346
    )
    
    
    (6,506
    )Waterstone Mortgage Corporation, net of cash
    
    
    
    
    
    
    (1,081
    )
    
    
    
    
    
    
    Bank owned life insurance
    
    
    (306
    )
    
    
    (306
    )
    
    
    (126
    )
    
    
    (456
    )FHLB stock
    
    
    (2,076
    )
    
    
    (2,807
    )
    
    
    
    
    
    
    Proceeds from:Principal repayments on mortgage-related securities
    
    
    17,621
    
    
    
    15,457
    
    
    
    10,323
    
    
    
    21,091Maturities of debt securities
    
    
    5,509
    
    
    
    
    
    
    
    6,350
    
    
    
    25,397Sales of debt securities
    
    
    
    
    
    
    12,832
    
    
    
    
    
    
    
    262Sales of mortgage-related securities
    
    
    
    
    
    
    13,036
    
    
    
    
    
    
    
    5,348Sales of foreclosed properties and other assets
    
    
    3,369
    
    
    
    2,984
    
    
    
    1,082
    
    
    
    2,563Net cash used by investing activities
    
    
    (110,653
    )
    
    
    (76,237
    )
    
    
    (129,341
    )
    
    
    (139,726
    )
 See Accompanying notes to consolidated financial statements.
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##### Table of Contents



Wauwatosa Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
 Years ended
    
    
    Six months ended
    
    
    Years endedDecember 31,
    
    
    December 31,
    
    
    June 30,2007
    
    
    2006
    
    
    2005
    
    
    2005(In Thousands)Financing activities:Net (decrease) increase in deposits
    
    
    (41,683
    )
    
    
    (9,375
    )
    
    
    (83,198
    )
    
    
    93,203Net change in short-term borrowings
    
    
    (35,519
    )
    
    
    (112,209
    )
    
    
    38,000
    
    
    
    10,000Proceeds from long-term borrowings
    
    
    177,000
    
    
    
    245,000
    
    
    
    70,050
    
    
    
    23,162Net increase in advance payments by borrowers for taxes
    
    
    417
    
    
    
    9
    
    
    
    648
    
    
    
    1,375Purchase of treasury stock
    
    
    (45,261
    )
    
    
    
    
    
    
    
    
    
    
    Net proceeds from sale of stock
    
    
    
    
    
    
    
    
    
    
    98,731
    
    
    
    Capitalization of Lamplighter, MHC
    
    
    
    
    
    
    
    
    
    
    (100
    )
    
    
    Financing for purchase of ESOP shares
    
    
    
    
    
    
    
    
    
    
    (8,539
    )
    
    
    Net cash provided by financing activities
    
    
    54,954
    
    
    
    123,425
    
    
    
    115,592
    
    
    
    127,740Increase (decrease) in cash and cash equivalents
    
    
    (55,923
    )
    
    
    57,309
    
    
    
    (3,969
    )
    
    
    1,075Cash and cash equivalents at beginning of period
    
    
    73,807
    
    
    
    16,498
    
    
    
    20,467
    
    
    
    19,392Cash and cash equivalents at end of period
    
    $
    17,884
    
    
    
    73,807
    
    
    
    16,498
    
    
    
    20,467Supplemental information:Cash paid or credited during the period for:Income tax payments
    
    
    4,429
    
    
    
    4,777
    
    
    
    2,970
    
    
    
    5,925Interest payments
    
    
    62,179
    
    
    
    52,477
    
    
    
    20,691
    
    
    
    34,798Noncash investing activities:Loans receivable transferred to foreclosed
properties
    
    
    13,455
    
    
    
    1,572
    
    
    
    
    
    
    
    1,921Obligations under capital lease
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,423Non Cash financing activities:Long-term FHLB advances reclassified to
short-term
    
    
    47,779
    
    
    
    66,224
    
    
    
    14,209
    
    
    
    25,000
 See Accompanying notes to consolidated financial statements.
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##### Table of Contents



Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
 1)
    
    Summary of Accounting Policies
 a)
    
    OrganizationThe Board of Directors of Wauwatosa Savings Bank (the Bank) adopted the Plan of
Reorganization and related Stock Issuance Plan on May 17, 2005, as amended on June 3, 2005,
under which Wauwatosa Holdings, Inc. (the Company) was formed to become the mid-tier holding
company for the Bank. In addition, Lamplighter Financial, MHC, a Federally-chartered mutual
holding company, was formed to become the majority owner of Wauwatosa Holdings, Inc.In connection with the Plan of Reorganization and Stock Issuance Plan, on October 4, 2005,
10,117,125 shares of Wauwatosa Holdings, Inc. were sold to eligible subscribers in a
registered stock offering; 556,442 shares were issued to the Wauwatosa Savings Bank Fund of
the Waukesha County Community Foundation, and the remaining 23,050,183 shares were issued to
Lamplighter Financial, MHC. The Companys outstanding common shares are 73.8% owned by
Lamplighter Financial, MHC at December 31, 2007.b)
    
    Fiscal Year ChangeIn 2005, the Company changed its fiscal year ended June 30 to a fiscal year ended December
31. The six month period ended December 31, 2005, transitions between the Companys old and
new fiscal year ends. The results of operations for the six-month period ended December 31,
2005 are not necessarily indicative of results that may be expected for any other interim
period or for an entire fiscal year.c)
    
    Nature of OperationsThe Company operates as a one-bank holding company. The Bank is principally engaged in the
business of attracting deposits from the general public and using such deposits to originate
residential real estate loans.d)
    
    Principles of ConsolidationThe consolidated financial statements include the accounts and operations of Wauwatosa
Holdings, Inc. and its wholly owned subsidiary, Wauwatosa Savings Bank. The Bank has the
following wholly owned subsidiaries: Wauwatosa Investments, Inc., Waterstone Mortgage
Corporation and Main Street Real Estate Holdings, LLC. All significant intercompany accounts
and transactions have been eliminated in consolidation.The Bank provides a full range of financial services to customers through branch locations
in southeastern Wisconsin. The Bank is subject to the regulations of certain federal and
state agencies and undergoes periodic examinations by those regulatory authorities.e)
    
    Use of EstimatesThe preparation of the consolidated financial statements requires management of the Company
to make a number of estimates and assumptions relating to the reported amount of assets and
liabilities and the disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and expenses during
the period. Significant items subject to such estimates
and assumptions include the allowance for loan losses and deferred income taxes. Actual
results could differ from those estimates.
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Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
 f)
    
    Cash and Cash EquivalentsThe Company considers federal funds sold and highly liquid debt instruments with a maturity
of three months or less when purchased to be cash equivalents.g)
    
    SecuritiesAvailable-for-Sale SecuritiesManagement has designated certain securities as available-for-sale. As such, they are stated
at fair value, with the unrealized gains and losses, net of tax, reported as a separate
component of equity.The cost of debt securities is adjusted for amortization of premiums and accretion of
discounts to maturity or, in the case of mortgage-related securities, over the estimated
life of the security. Such amortization is included in interest income from investments.
Declines in the fair value of investment securities available for sale that are deemed to be
other-than-temporary are charged to earnings as a realized loss and a new cost basis for the
securities is established. In evaluating other-than-temporary impairment, management
considers the length of time and extent to which the fair value has been less than cost, the
financial condition and near-term prospects of the issuer, and the intent and ability of the
Company to retain its investment in the issuer for a period of time sufficient to allow for
any anticipated recovery in fair value in the near term. Realized securities gains or losses
on securities sales (using specific identification method) and declines in value judged to
be other-than-temporary are included in investment securities gains (losses), net, in the
consolidated statements of income.Held-to-Maturity SecuritiesDebt securities that the Company has the intent and ability to hold to maturity have been
designated as held-to-maturity. Such securities are stated at amortized cost.Federal Home Loan Bank StockFederal Home Loan Bank stock is carried at cost, which is the amount that the stock is
redeemable by tendering to the FHLB or the amount at which shares can be sold to other FHLB
members. FHLB dividends are recognized as income on their ex-dividend date.h)
    
    Loans Held for SaleLoans held for sale, which generally consist of current origination of certain fixed-rate
mortgage loans, are carried at the lower of cost or estimated market value as determined on
an aggregate basis. The amount by which cost exceeds market value is accounted for as a
valuation adjustment to the carrying value of the loans. Changes, if any, are included in
mortgage banking income in the consolidated statements of income.i)
    
    Loans Receivable and Related Interest IncomeLoans are carried at the principal amount outstanding, net of any unearned income. Loan
origination and commitment fees and certain direct loan origination costs are deferred and
the net amount amortized as an
adjustment of the related loan yield. Amortization is based on a level-yield method over the
contractual life of the related loans or until the loan is paid in full. Interest on loans
is accrued and credited to income as it is earned. Accrual of interest is generally
discontinued either when reasonable doubt exists as to the full, timely collection of
interest or principal, or when a loan becomes contractually past due more than 90
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Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
 days with
respect to interest or principal. At that time, previously accrued and uncollected interest
on such loans is reversed and additional income is recorded only to the extent that payments
are received and the collection of principal is reasonably assured. Generally, loans are
restored to accrual status when the obligation is brought current, has performed in
accordance with the contractual terms for a reasonable period of time, and the ultimate
collectibility of the total contractual principal and interest is no longer in doubt.j)
    
    Allowance for Loan LossesThe allowance for loan losses is established as losses are estimated to have occurred
through a provision for loan losses charged to income. Loan losses are charged against the
allowance when management believes the uncollectibility of a loan balance is confirmed.
Subsequent recoveries, if any, are credited to the allowance.The Bank establishes valuation allowances on multi-family and commercial real estate loans
considered impaired. A loan is considered impaired when, based on current information and
events, it is probable that the Bank will not be able to collect all amounts due according
to the contractual terms of the loan agreement. A valuation allowance is established for an
amount equal to the impairment when the carrying amount of the loan exceeds the present
value of the expected future cash flows, discounted at the loans original effective
interest rate or the fair value of the underlying collateral.The Bank also establishes valuation allowances based on an evaluation of the various risk
components that are inherent in the loan portfolio. The risk components that are evaluated
include past loan loss experience; the level of nonperforming and classified assets; current
economic conditions; volume, growth, and composition of the loan portfolio; adverse
situations that may affect the borrowers ability to repay; the estimated value of any
underlying collateral; regulatory guidance; and other relevant factors. The allowance is
increased by provisions charged to earnings and reduced by charge-offs, net of recoveries.
The adequacy of the allowance for loan losses is approved quarterly by the Banks board of
directors. The allowance reflects managements best estimate of the amount needed to provide
for the probable loss on impaired loans, as well as other credit risks of the Bank, and is
based on a risk model developed and implemented by management and approved by the Banks
board of directors.Actual results could differ from this estimate, and future additions to the allowance may be
necessary based on unforeseen changes in economic conditions. In addition, federal
regulators periodically review the Banks allowance for loan losses. Such regulators have
the authority to require the Bank to recognize additions to the allowance at the time of
their examination.k)
    
    Real Estate OwnedReal estate owned consists of real estate properties acquired through, or in lieu of, loan
foreclosure. Real estate owned is recorded at estimated fair value less anticipated selling
costs based upon the propertys appraised value at the date of transfer, with any difference
between the fair value of the property and the net carrying value of the loan charged to the
allowance for loan losses. Gains or losses not previously
recognized resulting from the sale of real estate owned are recognized in real estate owned
expense on the date of sale.l)
    
    Cash Surrender Value of Life InsuranceThe Company purchased bank owned life insurance on the lives of certain employees. The
Company is the beneficiary of the life insurance policies. The cash surrender value of life
insurance is reported at the
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Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
 amount that would be received in cash if the polices were
surrendered. Increases in the cash value of the policies and proceeds of death benefits
received are recorded in non-interest income. The increase in cash surrender value of life
insurance is not subject to income taxes, as long as the Company has the intent and ability
to hold the policies until the death benefits are received.m)
    
    Office Properties and EquipmentOffice properties and equipment, including leasehold improvements and software, are stated
at cost, net of depreciation and amortization. Depreciation and amortization are computed on
the straight-line method over the estimated useful lives of the related assets. Leasehold
improvements are amortized over the lease term, if shorter than the estimated useful life.
Maintenance and repairs are charged to expense as incurred, while additions or major
improvements are capitalized and depreciated over their estimated useful lives. Estimated
useful lives of the assets are 10 to 30 years for office properties, three to 10 years for
equipment, and three years for software. Rent expense related to long-term operating leases
is recorded on the accrual basis.n)
    
    Income TaxesThe Company and its subsidiaries file a consolidated federal income tax return. The
provision for income taxes is based upon income in the consolidated financial statements,
rather than amounts reported on the income tax return. Deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized as income or expense in the period that includes the
enactment date.Positions taken in the Companys tax returns may be subject to challenge by the taxing
authorities upon examination. Uncertain tax positions are initially recognized in the
financial statements when it is more likely than not the position will be sustained upon
examination by the tax authorities. Such tax positions are both initially and subsequently
measured as the largest amount of tax benefit that is greater than 50% likely of being
realized upon settlement with the tax authority, assuming full knowledge of the position and
all relevant facts. Interest and penalties on income tax uncertainties are classified
within income tax expense in the income statement.o)
    
    ) Earnings Per ShareBasic earnings per share (EPS) is computed by dividing net income by the weighted average
number of common shares outstanding for the period. Diluted EPS is computed by dividing net
income by the weighted average number of common shares outstanding adjusted for the dilutive
effect of all potential common shares. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were exercised or
converted into common stock. Shares of the Employee Stock
Ownership Plan committed to be released are considered outstanding for both common and
diluted EPS. Incentive stock compensation awards granted in 2007 result in dilution.p)
    
    Other Comprehensive IncomeComprehensive income is the total of reported net income and all other revenues, expenses,
gains and losses that under generally accepted accounting principles bypass reported net
income. The Company
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Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
 includes unrealized gains or losses, net of tax, on securities
available for sale in other comprehensive income.q)
    
    Employee Stock Ownership Plan (ESOP)Compensation expense under the ESOP is equal to the fair value of common shares released or
committed to be released to participants in the ESOP in each respective period. Common
stock purchased by the ESOP and not committed to be released to participants is included in
the consolidated statements of financial condition at cost as a reduction of shareholders
equity.r)
    
    ReclassificationsCertain prior year amounts have been reclassified to conform to the 2007 presentation.
 -99-




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##### Table of Contents



Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
 2)
    
    SecuritiesSecurities Available for Sale
  December 31, 2007Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealizedcost
    
    
    gains
    
    
    losses
    
    
    Fair value(In Thousands)Mortgage-backed securities
    
    $
    20,128
    
    
    
    154
    
    
    
    (68
    )
    
    
    20,214Collateralized mortgage obligations
    
    
    110,419
    
    
    
    1,050
    
    
    
    (1,073
    )
    
    
    110,396Mortgage-related securities
    
    
    130,547
    
    
    
    1,204
    
    
    
    (1,141
    )
    
    
    130,610Government sponsored entity bonds
    
    
    13,996
    
    
    
    187
    
    
    
    (1
    )
    
    
    14,182Municipals
    
    
    27,277
    
    
    
    209
    
    
    
    (391
    )
    
    
    27,095Debt securities
    
    
    41,273
    
    
    
    396
    
    
    
    (392
    )
    
    
    41,277Other securities
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    250$
    172,070
    
    
    
    1,600
    
    
    
    (1,533
    )
    
    
    172,137
 December 31, 2006Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealizedcost
    
    
    gains
    
    
    losses
    
    
    Fair value(In Thousands)Mortgage-backed securities
    
    $
    18,274
    
    
    
    3
    
    
    
    (275
    )
    
    
    18,002Collateralized mortgage obligations
    
    
    82,419
    
    
    
    1
    
    
    
    (1,549
    )
    
    
    80,871Mortgage-related securities
    
    
    100,693
    
    
    
    4
    
    
    
    (1,824
    )
    
    
    98,873Government sponsored entity bonds
    
    
    13,450
    
    
    
    
    
    
    
    (193
    )
    
    
    13,257Municipals
    
    
    4,278
    
    
    
    151
    
    
    
    (8
    )
    
    
    4,421Debt securities
    
    
    17,728
    
    
    
    151
    
    
    
    (201
    )
    
    
    17,678Other securities
    
    
    794
    
    
    
    
    
    
    
    (15
    )
    
    
    779$
    119,215
    
    
    
    155
    
    
    
    (2,040
    )
    
    
    117,330
  -100-




---



##### Table of Contents



Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
  December 31, 2007Amortizedcost
    
    
    Fair value(In Thousands)Debt securities:Due within one year
    
    $
    2,991
    
    
    
    2,991Due after one year
through five years
    
    
    11,005
    
    
    
    11,191Due after five years
through ten years
    
    
    1,654
    
    
    
    1,664Due after ten years
    
    
    25,623
    
    
    
    25,431Mortgage-related securities
    
    
    130,547
    
    
    
    130,610Mutual Funds
    
    
    250
    
    
    
    250$
    172,070
    
    
    
    172,137
  Six Months Ended
    
    Year endedYears Ended December 31,
    
    December 31,
    
    June 30,2007
    
    2006
    
    2005
    
    2005(In Thousands)Proceeds
    
    $
    
    
    
    
    25,868
    
    
    
    
    
    
    
    5,610Gross gains
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16Gross losses
    
    
    
    
    
    
    819
    
    
    
    
    
    
    
    4
 -101-




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##### Table of Contents



Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
  December 31, 2007Less than 12 months
    
    
    12 months or longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealizedvalue
    
    
    loss
    
    
    value
    
    
    loss
    
    
    value
    
    
    loss(In Thousands)Mortgage-backed securities
    
    $
    
    
    
    
    
    
    
    
    3,230
    
    
    
    (68
    )
    
    
    3,230
    
    
    
    (68
    )Collateralized mortgage obligations
    
    
    
    
    
    
    
    
    
    
    38,707
    
    
    
    (1,073
    )
    
    
    38,707
    
    
    
    (1,073
    )Government sponsored entity bonds
    
    
    
    
    
    
    
    
    
    
    998
    
    
    
    (1
    )
    
    
    998
    
    
    
    (1
    )Municipals
    
    
    15,079
    
    
    
    (391
    )
    
    
    
    
    
    
    
    
    
    
    15,079
    
    
    
    (391
    )Other Securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    15,079
    
    
    
    (391
    )
    
    
    42,935
    
    
    
    (1,142
    )
    
    
    58,014
    
    
    
    (1,533
    )
 December 31, 2006Less than 12 months
    
    
    12 months or longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealizedvalue
    
    
    loss
    
    
    value
    
    
    loss
    
    
    value
    
    
    loss(In Thousands)Mortgage-backed securities
    
    $
    2,846
    
    
    
    (3
    )
    
    
    14,922
    
    
    
    (272
    )
    
    
    17,768
    
    
    
    (275
    )Collateralized mortgage obligations
    
    
    36,140
    
    
    
    (467
    )
    
    
    40,000
    
    
    
    (1,082
    )
    
    
    76,140
    
    
    
    (1,549
    )Government sponsored entity bonds
    
    
    
    
    
    
    
    
    
    
    13,257
    
    
    
    (193
    )
    
    
    13,257
    
    
    
    (193
    )Municipals
    
    
    874
    
    
    
    (5
    )
    
    
    472
    
    
    
    (3
    )
    
    
    1,346
    
    
    
    (8
    )Other Securities
    
    
    778
    
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    778
    
    
    
    (15
    )$
    40,638
    
    
    
    (490
    )
    
    
    68,651
    
    
    
    (1,550
    )
    
    
    109,289
    
    
    
    (2,040
    )
  Securities Held-to-Maturity
  -102-




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##### Table of Contents



Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
 3) Loans Receivable
  December 31,2007
    
    
    2006(In Thousands)Mortgage loans:Residential real estate:One- to four-family
    
    $
    672,362
    
    
    
    638,089Over four-family
    
    
    477,766
    
    
    
    492,693Construction and land
    
    
    156,289
    
    
    
    168,605Commercial real estate
    
    
    51,983
    
    
    
    51,062Home equity
    
    
    85,954
    
    
    
    91,536Consumer
    
    
    286
    
    
    
    141Commercial loans
    
    
    28,222
    
    
    
    2,6571,472,862
    
    
    
    1,444,783Less:Undisbursed loan proceeds
    
    
    67,549
    
    
    
    67,390Unearned loan fees
    
    
    3,265
    
    
    
    4,486$
    1,402,048
    
    
    
    1,372,907
   -103-




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##### Table of Contents



Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
  Six months ended
    
    
    Year endedYears ended December 31,
    
    
    December 31,
    
    
    June 30,2007
    
    
    2006
    
    
    2005
    
    
    2005(In Thousands)Balance at beginning of period
    
    $
    7,195
    
    
    
    5,250
    
    
    
    4,606
    
    
    
    3,378Provision for loan losses
    
    
    11,697
    
    
    
    2,201
    
    
    
    1,035
    
    
    
    1,238Charge-offs
    
    
    (6,163
    )
    
    
    (536
    )
    
    
    (391
    )
    
    
    (11
    )Recoveries
    
    
    110
    
    
    
    280
    
    
    
    
    
    
    
    1Balance at end of period
    
    $
    12,839
    
    
    
    7,195
    
    
    
    5,250
    
    
    
    4,606Percentage of allowance to
gross loans
    
    
    0.92
    %
    
    
    0.52
    %
    
    
    0.40
    %
    
    
    0.38
    %
   December 31,2007
    
    
    2006(In Thousands)Impaired loans for which an allowance
has been provided
    
    $
    27,896
    
    
    
    11,430Impaired loans for which no allowance
has been provided
    
    
    54,632
    
    
    
    18,499Total loans
determined to be
impaired
    
    $
    82,528
    
    
    
    29,929Allowance for loan losses related to
impaired loans
    
    $
    5,783
    
    
    
    1,616Average recorded investment in
impaired loans
    
    $
    51,110
    
    
    
    14,447Cash basis interest income recognized
from impaired loans
    
    $
    2,735
    
    
    
    2,216
 -104-




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##### Table of Contents



Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
   4) Office Properties and Equipment
  December 31,2007
    
    
    2006(In Thousands)Land
    
    $
    5,994
    
    
    
    5,989Office buildings and improvements
    
    
    29,709
    
    
    
    28,838Furniture and equipment
    
    
    9,224
    
    
    
    11,30144,927
    
    
    
    46,128Less accumulated depreciation
    
    
    (12,909
    )
    
    
    (13,503
    )$
    32,018
    
    
    
    32,625
   December 31,2007
    
    
    2006(In Thousands)Office buildings and improvements
    
    $
    5,727
    
    
    
    5,724Less accumulated depreciation
    
    
    (432
    )
    
    
    (240
    )$
    5,295
    
    
    
    5,484
  -105-




---



##### Table of Contents



Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
  Capital
    
    
    Operatinglease
    
    
    leases(In Thousands)Within one year
    
    $
    300
    
    
    
    107One to two years
    
    
    3,375
    
    
    
    104Total
    
    $
    3,675
    
    
    
    211Net minimum lease payments
    
    
    3,675Less amounts representing interest
    
    
    (332
    )Present value of net minimum
capital lease payments
    
    $
    3,343
 5) Deposits
  -106-




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##### Table of Contents



Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
  Years ended December 31,
    
    
    Six months ended
    
    
    Year ended2007
    
    
    2006
    
    
    December 31, 2005
    
    
    30, 2005(In Thousands)Interest-bearing demand deposits
    
    $
    331
    
    
    
    631
    
    
    
    637
    
    
    
    863Money market and savings
deposits
    
    
    4,283
    
    
    
    2,326
    
    
    
    122
    
    
    
    202Time deposits
    
    
    40,296
    
    
    
    39,081
    
    
    
    17,537
    
    
    
    32,220$
    44,910
    
    
    
    42,038
    
    
    
    18,296
    
    
    
    33,285
  (In Thousands)Within one year
    
    $
    627,410One to two years
    
    
    127,541Two to three years
    
    
    47,655Three to four years
    
    
    5,638Four through five years
    
    
    18,439After five years
    
    
    255$
    826,938
 -107-




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##### Table of Contents



Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
 6) Borrowings
  December 31, 2007
    
    
    December 31, 2006Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageBalance
    
    
    Rate
    
    
    Balance
    
    
    Rate(In Thousands)
    
    
    
    
    
    
    (In Thousands)Federal funds purchased maturing:2008
    
    $
    5,705
    
    
    
    4.75
    %
    
    
    
    
    
    
    Federal Home Loan Bank (FHLB) advances maturing:2007
    
    
    
    
    
    
    
    
    
    
    41,224
    
    
    
    3.94
    %2008
    
    
    47,779
    
    
    
    4.24
    %
    
    
    47,779
    
    
    
    4.24
    %2009
    
    
    4,100
    
    
    
    4.23
    %
    
    
    
    
    
    
    2010
    
    
    48,900
    
    
    
    4.80
    %
    
    
    25,000
    
    
    
    4.72
    %2016
    
    
    220,000
    
    
    
    4.34
    %
    
    
    220,000
    
    
    
    4.34
    %2017
    
    
    65,000
    
    
    
    3.19
    %
    
    
    
    
    
    
    Repurchase agreements maturing:2018
    
    
    84,000
    
    
    
    3.97
    %
    
    
    $
    475,484
    
    
    
    4.16
    %
    
    
    334,003
    
    
    
    4.31
    %
     -108-




---



##### Table of Contents



Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
  7) Regulatory Capital
      -109-




---



##### Table of Contents



Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
 December 31, 2007To Be Well-CapitalizedFor Capital
    
    Under Prompt CorrectiveActual
    
    Adequacy Purposes
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars In Thousands)Wauwatosa SavingsTotal capital (to risk-weighted
assets)
    
    $
    181,745
    
    
    
    13.43
    %
    
    
    108,248
    
    
    
    8.00
    %
    
    
    135,311
    
    
    
    10.00
    %Tier I capital (to risk-weighted
assets)
    
    
    169,431
    
    
    
    12.52
    %
    
    
    54,124
    
    
    
    4.00
    %
    
    
    81,186
    
    
    
    6.00
    %Tier I capital (to average assets)
    
    
    169,431
    
    
    
    10.08
    %
    
    
    67,225
    
    
    
    4.00
    %
    
    
    84,031
    
    
    
    5.00
    %State of Wisconsin (to total assets)
    
    
    169,431
    
    
    
    9.94
    %
    
    
    102,250
    
    
    
    6.00
    %
    
    
    N/A
    
    
    
    N/A
 December 31, 2006Wauwatosa SavingsTotal capital (to risk-weighted
assets)
    
    $
    203,400
    
    
    
    18.19
    %
    
    
    89,439
    
    
    
    8.00
    %
    
    
    111,799
    
    
    
    10.00
    %Tier I capital (to risk-weighted
assets)
    
    
    196,464
    
    
    
    17.57
    %
    
    
    44,719
    
    
    
    4.00
    %
    
    
    67,079
    
    
    
    6.00
    %Tier I capital (to average assets)
    
    
    196,464
    
    
    
    12.10
    %
    
    
    64,961
    
    
    
    4.00
    %
    
    
    81,201
    
    
    
    5.00
    %State of Wisconsin (to total assets)
    
    
    196,464
    
    
    
    12.26
    %
    
    
    96,180
    
    
    
    6.00
    %
    
    
    N/A
    
    
    
    N/A
  December 31, 2006To Be Well-CapitalizedFor Capital
    
    Under Prompt CorrectiveActual
    
    Adequacy Purposes
    
    Action Provisions (1)Amount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars In Thousands)Wauwatosa HoldingsTotal capital (to risk-weighted
assets)
    
    $
    248,866
    
    
    
    21.36
    %
    
    
    93,216
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/ATier I capital (to risk-weighted
assets)
    
    
    241,760
    
    
    
    20.75
    %
    
    
    46,608
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/ATier I capital (to average assets)
    
    
    241,760
    
    
    
    14.47
    %
    
    
    66,820
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/A
 
 (1)
    
    Prompt corrective action provisions are not applicable at the bank
holding company level. 8) Stock Based Compensation
 Stock-Based Compensation Plan
  -110-




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##### Table of Contents



Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
  Accounting for Stock-Based Compensation Plan
   Dividend Yield
    
    
    1.32
    %Risk-free interest rate
    
    
    4.44
    %Expected volatility
    
    
    31.86
    %Weighted average expected life
    
    
    6.5
    yearsWeighted average per share value of options
    
    $
    6.25
   -111-




---



##### Table of Contents



Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
 Weighted Average
    
    AggregateWeighted Average
    
    Years Remaining in
    
    Instrinsic ValueStock Options
    
    Shares
    
    Exercise Price
    
    Contractual Term
    
    (000's)Outstanding December 31, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Granted
    
    
    797,500
    
    
    $
    17.63
    
    
    
    10.00
    
    
    
    Excercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (15,000
    )
    
    
    17.67
    
    
    
    9.50
    
    
    
    Outstanding December 31, 2007
    
    
    782,500
    
    
    
    17.63
    
    
    
    9.02
    
    
    
    Options exercisable at December 31, 2007
    
    
    
    
    
    
    17.63
    
    
    
    
    
    
    
    
  Weighted AverageStock Options
    
    Shares
    
    Grant Date Fair ValueNonvested at December 31, 2007
    
    
    
    
    
    
    Granted
    
    
    797,500
    
    
    $
    6.25Vested
    
    
    
    
    
    
    Forfeited
    
    
    (15,000
    )
    
    
    6.27Nonvested at December 31, 2007
    
    
    782,500
    
    
    
    6.25
   Weighted AverageRestricted Stock
    
    Shares
    
    Grant Date Fair ValueNonvested at December 31, 2006
    
    
    Granted
    
    
    251,500
    
    
    $
    17.67Vested
    
    
    Forfeited
    
    
    Nonvested at December 31, 2007
    
    
    251,500
    
    
    
    17.67
 -112-




---



##### Table of Contents



Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
  9) Employee Benefit Plans
      -113-




---



##### Table of Contents



Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
 10) Employee Stock Ownership Plan
   2007
    
    
    2006Beginning ESOP shares
    
    
    609,213
    
    
    
    685,365Shares committed to be released
    
    
    (76,152
    )
    
    
    (76,152
    )Unreleased shares
    
    
    533,061
    
    
    
    609,213Fair value of unreleased shares (in thousands)
    
    $
    6,834
    
    
    
    10,856
 -114-




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##### Table of Contents



Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
 11) Income Taxes
  Six months ended
    
    
    Year endedYears ended December 31,
    
    
    December 31,
    
    
    June 30,2007
    
    
    2006
    
    
    2005
    
    
    2005(In Thousands)Current:Federal
    
    $
    2,046
    
    
    
    4,761
    
    
    
    2,526
    
    
    
    5,403State
    
    
    169
    
    
    
    1,218
    
    
    
    878
    
    
    
    3,3092,215
    
    
    
    5,979
    
    
    
    3,404
    
    
    
    8,712Deferred:Federal
    
    
    (1,780
    )
    
    
    (899
    )
    
    
    (1,632
    )
    
    
    (1,155
    )State
    
    
    (689
    )
    
    
    (381
    )
    
    
    (301
    )
    
    
    (37
    )(2,469
    )
    
    
    (1,280
    )
    
    
    (1,933
    )
    
    
    (1,192
    )Total
    
    $
    (254
    )
    
    
    4,699
    
    
    
    1,471
    
    
    
    7,520
  For the yearSix months ended
    
    
    ended JuneYears ended December 31,
    
    
    December 31,
    
    
    30,2007
    
    
    2006
    
    
    2005
    
    
    2005(Dollars In Thousands)Income before income taxes
    
    $
    1,304
    
    
    
    12,752
    
    
    $
    4,184
    
    
    $
    16,636Tax at Federal statutory rate (35%)
    
    
    456
    
    
    
    4,463
    
    
    
    1,464
    
    
    
    5,822Add (deduct) effect of:State income
taxes, net of Federal
income tax benefit
    
    
    (338
    )
    
    
    545
    
    
    
    375
    
    
    
    2,127Cash surrender value of life insurance
    
    
    (417
    )
    
    
    (370
    )
    
    
    (205
    )
    
    
    (225
    )Non-deductible ESOP and stock
option expense
    
    
    258
    
    
    
    113
    
    
    
    
    
    
    
    Tax-exempt interest income
    
    
    (282
    )
    
    
    (69
    )
    
    
    (29
    )
    
    
    (64
    )Other
    
    
    69
    
    
    
    17
    
    
    
    (134
    )
    
    
    (140
    )Income tax
provision (benefit)
    
    
    (254
    )
    
    
    4,699
    
    
    
    1,471
    
    
    
    7,520Effective tax rate
    
    
    (19.6
    %)
    
    
    36.9
    %
    
    
    35.2
    %
    
    
    45.2
    %
 -115-




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Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
  December 31,2007
    
    
    2006(In Thousands)Gross deferred tax assets:Excess book depreciation
    
    $
    530
    
    
    
    455Compensation agreements
    
    
    1,189
    
    
    
    1,139Restricted stock and stock options
    
    
    558
    
    
    
    Allowance for loan losses
    
    
    5,233
    
    
    
    2,846Interest income recognized for tax but not books
    
    
    1,761
    
    
    
    817State tax liability  Nevada settlement
    
    
    869
    
    
    
    1,701State NOL carryforward
    
    
    146
    
    
    
    167Unrealized loss on securities available for sale
    
    
    
    
    
    
    660Charitable contributions carry forward
    
    
    1,144
    
    
    
    1,386Other
    
    
    139
    
    
    
    135Total gross deferred tax assets
    
    
    11,569
    
    
    
    9,306Valuation allowance  charitable
contribution carry forward
    
    
    (244
    )
    
    
    (234
    )Deferred tax assets
    
    
    11,325
    
    
    
    9,072Gross deferred tax liabilities:FHLB stock dividends
    
    
    (932
    )
    
    
    (1,018
    )Deferred loan fees
    
    
    (666
    )
    
    
    (135
    )Unrealized gain on securities available for sale
    
    
    (24
    )
    
    
    Deferred liabilities
    
    
    (1,622
    )
    
    
    (1,153
    )Net deferred
tax assets
    
    $
    9,703
    
    
    
    7,919
   -116-




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Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
 The Company files consolidated federal tax returns. The Company and two subsidiaries also file separate company
Wisconsin income tax returns. The Company is no longer subject to federal income tax
examinations by tax authorities for years before 2005 or state income tax examinations for
years before 2004.The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty
in Income Taxes, on January 1, 2007. Adoption had no effect on the liability for unrecognized
tax benefits. A reconciliation of the beginning and ending amount of unrecognized tax
benefits is as follows:
 Balance at January 1, 2007
    
    $
    4,132,000Decreases related to settlements with taxing authorities
    
    
    (4,107,000
    )Balance at December 31, 2007
    
    $
    24,000
 The beginning unrecognized benefit is Wisconsin tax on a portion of the income generated by
the Companys subsidiary located in the state of Nevada for the period July 1, 2002 through
December 31, 2006. A state of Wisconsin closing agreement regarding this matter was executed
on March 30, 2007. The settlement had an effect of reclassifying $4.1 million in unrecognized
benefits as of January 1, 2007 as accrued state tax liability. Under the terms of the closing
agreement, the Company paid $1.2 million, including interest, on the settlement date with the
remaining $3.7 million to be paid over the next three years. Management does not anticipate significant adjustments
to the total amount of unrecognized tax benefits within the next twelve months.The Company recognizes interest and penalties related to unrecognized tax benefits in income
tax expense. During the years ended 2007, 2006 and for the six-month transition period ended
December 31, 2005, the Company recognized approximately $111,000, $263,000 and $174,000 in
interest and penalties. The Company had $812,000 accrued for the payment of interest and
penalties at December 31, 2006 all of which was paid in 2007. Under the Internal Revenue Code
and Wisconsin Statutes, the Company is permitted to deduct, for tax years beginning before
1998, an annual addition to a reserve for bad debts. This amount differs from the provision
for loan losses recorded for financial accounting purposes. Under prior law, bad debt
deductions for income tax purposes were included in taxable income of later years only if the
bad debt reserves were used for purposes other than to absorb bad debt losses. Because the
Company did not intend to use the reserve for purposes other than to absorb losses, no
deferred income taxes were provided. Retained earnings at December 31, 2007 include
approximately $16.7 million for which no deferred Federal or state income taxes were provided.
Under SFAS No. 109, deferred income taxes have been provided on certain additions to the tax
reserve for bad debts.12)
    
    Financial Instruments with Off-Balance-Sheet RiskThe Company is a party to financial instruments with off-balance-sheet risk in the normal
course of business to meet the financing needs of its customers. These financial instruments
include commitments to extend credit and standby letters of credit. Those instruments involve,
to varying degrees, elements of credit and interest rate risk in excess of the amounts
recognized in the consolidated balance sheets. The contract or notional amounts of those
instruments reflect the extent of involvement the Company has in particular classes of
financial instruments.The Companys potential exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and standby letters of
credit is represented by the contractual notional amount of those instruments. The Company
uses the
same credit policies in making commitments and conditional obligations as it does for other
financial instruments reflected in the consolidated financial statements.
 -117-




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Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
 December 31,2007
    
    2006(In Thousands)Financial instruments whose contract
amounts represent potential credit risk:Commitments to extend credit under
first mortgage loans
    
    $
    16,674
    
    
    
    28,067Commitments to extend credit under
home equity lines of credit
    
    
    31,492
    
    
    
    34,676Unused portion of construction loans
    
    
    27,336
    
    
    
    32,714Unused portion of business lines of credit
    
    
    8,721
    
    
    
    Standby letters of credit
    
    
    2,337
    
    
    
    639
 Commitments to extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee. Since many of
the commitments are expected to expire without being drawn upon, the total commitment amounts
do not necessarily represent future cash requirements of the Company. The Company evaluates
each customers creditworthiness on a case-by-case basis. The amount of collateral obtained,
if deemed necessary by the Company upon extension of credit, is based on managements credit
evaluation of the counter-party. Collateral obtained generally consists of mortgages on the
underlying real estate.Standby letters of credit are conditional commitments issued by the Company to guarantee the
performance of a customer to a third party. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loan facilities to customers. The
Company holds mortgages on the underlying real estate as collateral supporting those
commitments for which collateral is deemed necessary.The Company has determined that there are no probable losses related to commitments to extend
credit or the standby letters of credit as of December 31, 2007 and 2006.In connection with its mortgage banking activities, the Company enters into forward loan sale
commitments. Forward commitments to sell mortgage loans represent commitments obtained by the
Company from a secondary market agency to purchase mortgages from the Company at specified
interest rates and within specified periods of time. Commitments to sell loans are made to
mitigate interest rate risk on commitments to originate loans and loans held for sale. As of
December 31, 2007, the Company had $23.1 million in forward loan sale commitments. A forward
sale commitment is a derivative instrument under Statement of Financial Accounting Standards
No. 133 (SFAS No. 133), Accounting for Derivative Instruments and Hedging Activities, (as
amended), which must be recognized at fair value on the consolidated balance sheet in other
assets and other liabilities with changes in its value recorded in income from mortgage
banking operations. In determining the fair value of its derivative loan commitments for
economic purposes, the Company considers the value that would be generated when the loan
arising from exercise of the loan commitment is sold in the secondary mortgage market. That
value includes the price that the loan is expected to be sold for in the secondary mortgage
market.
 -118-




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Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
 13)
    
    Fair Values of Financial InstrumentsFair value information about financial instruments follows, whether or not recognized in the
consolidated statements of financial condition, for which it is practicable to estimate that
value. In cases where quoted market prices are not available, fair values are based on
estimates using present value or other valuation techniques. Those techniques are
significantly affected by the assumptions used, including the discount rate and estimates of
future cash flows. In that regard, the derived fair value estimates cannot be substantiated by
comparison to independent markets and, in many cases, could not be realized in immediate
settlement of the instrument. Certain financial instruments and all nonfinancial instruments
are excluded from its disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.The carrying amounts and fair values of the Companys financial instruments consist of the
following at December 31, 2007 and 2006:
 December 31, 2007
    
    December 31, 2006Carrying
    
    Fair
    
    Carrying
    
    Fairamount
    
    value
    
    amount
    
    value(In Thousands)Financial AssetsCash and cash equivalents
    
    $
    17,884
    
    
    
    17,884
    
    
    
    73,807
    
    
    
    73,807Securities available-for-sale
    
    
    172,137
    
    
    
    172,137
    
    
    
    117,330
    
    
    
    117,330Securities held-to-maturity
    
    
    7,646
    
    
    
    7,174
    
    
    
    
    
    
    
    Loans held for sale
    
    
    23,108
    
    
    
    23,108
    
    
    
    5,387
    
    
    
    5,387Loans receivable
    
    
    1,389,209
    
    
    
    1,372,856
    
    
    
    1,365,712
    
    
    
    1,367,223FHLB stock
    
    
    19,289
    
    
    
    19,289
    
    
    
    17,213
    
    
    
    17,213Cash surrender value of
life insurance
    
    
    25,649
    
    
    
    25,649
    
    
    
    24,152
    
    
    
    24,152Accrued interest receivable
    
    
    3,129
    
    
    
    3,129
    
    
    
    2,179
    
    
    
    2,179Financial LiabilitiesDeposits
    
    
    994,535
    
    
    
    997,394
    
    
    
    1,036,218
    
    
    
    1,034,697Advance payments by
borrowers for taxes
    
    
    607
    
    
    
    607
    
    
    
    190
    
    
    
    190Borrowings
    
    
    475,484
    
    
    
    511,880
    
    
    
    334,003
    
    
    
    333,746Accrued interest payable
    
    
    4,299
    
    
    
    4,299
    
    
    
    4,344
    
    
    
    4,344Obligations under capital leases
    
    
    3,343
    
    
    
    3,343
    
    
    
    3,374
    
    
    
    3,374Other Financial InstrumentsStand-by letters of credit
    
    
    16
    
    
    
    16
    
    
    
    4
    
    
    
    4
 -119-




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Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
  a)
    
    Cash and Cash EquivalentsThe carrying amounts reported in the consolidated statements of financial condition for
cash and cash equivalents approximate those assets fair values.b)
    
    SecuritiesFair values for securities are based on quoted market prices of these or comparable
instruments.c)
    
    Loans Held for SaleFair value is estimated using the prices of the Companys existing commitments to sell
such loans and/or the quoted market price for commitments to sell similar loans.d)
    
    Loans ReceivableFair values for loans receivable are estimated using a discounted cash flow calculation
that applies current interest rates to estimated future cash flows of the loans
receivable.e)
    
    FHLB StockFor FHLB stock, the carrying amount is the amount at which shares can be redeemed with
the FHLB and is a reasonable estimate of fair value.f)
    
    Cash Surrender Value of Life InsuranceThe carrying amounts reported in the consolidated statements of financial condition for
the cash surrender value of life insurance approximate those assets fair values.g)
    
    Deposits and Advance Payments by Borrowers for TaxesThe fair values for interest-bearing and noninterest-bearing negotiable order of
withdrawal accounts, savings accounts, and money market accounts are, by definition,
equal to the amount payable on demand at the reporting date (i.e., their carrying
amounts). The fair values for fixed-rate certificates of deposit are estimated using a
discounted cash flow calculation that applies interest rates currently being offered on
certificates of similar remaining maturities to a schedule of aggregated expected monthly
maturities of the outstanding certificates of deposit. The advance payments by borrowers
for taxes are equal to their carrying amounts at the reporting date.h)
    
    BorrowingsFair values for borrowings are estimated using a discounted cash flow calculation that
applies current interest rates to estimated future cash flows of the borrowings.i)
    
    Accrued Interest Payable and Accrued Interest ReceivableFor accrued interest payable and accrued interest receivable, the carrying amount is a
reasonable estimate of fair value.
 -120-




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Notes to Consolidated Financial Statements
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
 j)
    
    Obligations under Capital LeasesThe fair value of obligations under capital leases is determined using a present value of
future minimum lease payments discounted at the current interest rate at the time of
lease inception.k)
    
    Commitments to Extend Credit and Standby Letters of CreditCommitments to extend credit and standby letters of credit are generally not marketable.
Furthermore, interest rates on any amounts drawn under such commitments would be
generally established at market rates at the time of the draw. Fair values for the
Companys commitments to extend credit and standby letters of credit are based on fees
currently charged to enter into similar agreements, taking into account the remaining
terms of the agreements, the counterpartys credit standing, and discounted cash flow
analyses. The fair value of the Companys commitments to extend credit is not material at
December 31, 2007 and 2006.
 -121-




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Notes to Consolidated Financial Statements
Years Ended December 31, 2006 and 2005 and June 30, 2005
Six Months Ended December 31, 2005
 14)
    
    Earnings (loss) per shareBasic earnings (loss) per share is computed by dividing net income (loss) by the weighted
average number of common shares outstanding for the period. Diluted EPS is computed by
dividing net income (loss) by the weighted average number of common shares outstanding
adjusted for the dilutive effect of all potential common shares. At December 31, 2007, 2006
and 2005, 228,454, 152,302 and 76,150 shares of the Employee Stock Purchase Plan have been
committed to be released to Plan participants and are considered outstanding for both common
and dilutive earnings per share, respectively. No earnings per share are reflected for
periods prior to October 4, 2005, as there were no shares outstanding prior to the
reorganization. The calculation of earnings per share for the period subsequent to the
reorganization reflect the actual net loss and weighted average shares outstanding from the
period October 5, 2005 through December 31, 2005.Presented below are the calculations for basic and diluted earnings (loss) per share.
 For the periodOctober 5, 2005For the year ended December 31,
    
    
    through December2007
    
    
    2006
    
    
    31, 2005(In Thousands, except per share amounts)Net income (loss)
    
    $
    1,558
    
    
    
    8,053
    
    
    
    (709
    )Weighted average shares outstanding
    
    
    31,571
    
    
    
    33,077
    
    
    
    33,135Effect of dilutive potential common shares
    
    
    8
    
    
    
    
    
    
    
    Diluted weighted average shares outstanding
    
    
    31,579
    
    
    
    33,077
    
    
    
    33,135Basic earnings (loss) per share
    
    $
    0.05
    
    
    
    0.24
    
    
    
    (0.02
    )Diluted earnings (loss) per share
    
    $
    0.05
    
    
    
    0.24
    
    
    
    (0.02
    )
 -122-




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Notes to Consolidated Financial Statements
Years Ended December 31, 2006 and 2005 and June 30, 2005
Six Months Ended December 31, 2005
 15) Condensed Parent Company Only Statements
 Statements of Financial Condition
 December 31,2007
    
    
    2006(In Thousands)AssetsCash and cash equivalents
    
    $
    24,352
    
    
    
    82Loans receivable
    
    
    4,829
    
    
    
    42,786Less: Allowance for loan losses
    
    
    (442
    )
    
    
    (171
    )Loans receivable, net
    
    
    4,387
    
    
    
    42,697Investment in subsidiaries
    
    
    170,143
    
    
    
    195,975Receivable from ESOP
    
    
    1,195
    
    
    
    1,238Deferred tax asset
    
    
    1,478
    
    
    
    1,062Income tax benefit receivable
    
    
    317
    
    
    
    459Other assets
    
    
    6
    
    
    
    Total Assets
    
    $
    201,878
    
    
    
    241,431Liabilities and shareholders equityLiabilities:Other liabilities
    
    
    59
    
    
    
    159Shareholders equityPreferred Stock (par value $.01 per share)
    
    
    
    
    
    
    Authorized  20,000,000 shares, no shares issuedCommon stock (par value $.01 per share)
    
    
    340
    
    
    
    337Authorized  200,000,000 shares in 2007 and 2006Issued  33,975,250 in 2007 and 33,723,750 in 2006Outstanding   31,250,897 in 2007 and 33,723,750 in 2006Additional paid-in-capital
    
    
    106,306
    
    
    
    104,182Retained earnings
    
    
    146,367
    
    
    
    144,809Unearned ESOP shares
    
    
    (5,977
    )
    
    
    (6,831
    )Treasury stock (2,724,353 shares), at cost
    
    
    (45,261
    )
    
    
    Accumulated other comprehensive loss (net of taxes)
    
    
    44
    
    
    
    (1,225
    )Total shareholders equity
    
    
    201,819
    
    
    
    241,272Total liabilities and shareholders equity
    
    $
    201,878
    
    
    
    241,431
 -123-




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Notes to Consolidated Financial Statements
Years Ended December 31, 2006 and 2005 and June 30, 2005
Six Months Ended December 31, 2005
 Statements of Operations
 For the periodFor the year ended December 31,
    
    
    October 5, 2005 through2007
    
    
    2006
    
    
    December 31, 2005(In Thousands)Interest income
    
    $
    2,163
    
    
    
    2,601
    
    
    
    97Provision for loan losses
    
    
    271
    
    
    
    171
    
    
    
    Interest income after provision for loan losses
    
    
    1,892
    
    
    
    2,430
    
    
    
    97Equity in earnings of subsidiaries*
    
    
    1,170
    
    
    
    7,390
    
    
    
    2,965Total income
    
    
    3,062
    
    
    
    9,820
    
    
    
    3,062Compensation
    
    
    446
    
    
    
    513
    
    
    
    Professional fees
    
    
    81
    
    
    
    146
    
    
    
    Charitable contribution
    
    
    
    
    
    
    
    
    
    
    5,564Other expense
    
    
    464
    
    
    
    448
    
    
    
    38Total expense
    
    
    991
    
    
    
    1,107
    
    
    
    5,602Income (loss) before income tax benefit
    
    
    2,071
    
    
    
    8,713
    
    
    
    (2,540
    )Income tax expense (benefit)
    
    
    513
    
    
    
    660
    
    
    
    (1,831
    )Net income (loss)
    
    $
    1,558
    
    
    
    8,053
    
    
    
    (709
    )
 
 *
    
    Equity in earnings of subsidiaries related to the period ended December 31, 2005 is for the period
from October 5, 2005 through December 31, 2005, the period for which Wauwatosa Holdings, Inc owned
the Bank and its subsidiaries. -124-




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Notes to Consolidated Financial Statements
Years Ended December 31, 2006 and 2005 and June 30, 2005
Six Months Ended December 31, 2005
 Statements of Cash Flows
 For the periodFor the year ended December 31,
    
    
    October 5, 2005 through2007
    
    
    2006
    
    
    December 31, 2005(In Thousands)Cash flows from operating activitiesNet income (loss)
    
    $
    1,558
    
    
    
    8,053
    
    
    
    (709
    )Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:Provision for loan losses
    
    
    271
    
    
    
    171
    
    
    
    Amortization of unearned ESOP
    
    
    1,252
    
    
    
    1,177
    
    
    
    Stock based compensation
    
    
    1,729
    
    
    
    
    
    
    
    Deferred income taxes
    
    
    (416
    )
    
    
    502
    
    
    
    (1,564
    )Charitable contribution of common stock
    
    
    
    
    
    
    
    
    
    
    5,565Equity in earnings of subsidiaries
    
    
    (1,170
    )
    
    
    (7,390
    )
    
    
    (2,965
    )Change in other assets and liabilities
    
    
    (1,650
    )
    
    
    (956
    )
    
    
    (582
    )Net cash provided by (used in) operating actitivies
    
    
    1,574
    
    
    
    1,557
    
    
    
    (255
    )Cash flows from investing activities:Net decrease (increase) in loans receivable
    
    
    37,957
    
    
    
    (42,786
    )
    
    
    Investment of proceeds in subsidiary
    
    
    
    
    
    
    
    
    
    
    (57,065
    )Net cash provided by (used in) investing activities
    
    
    37,957
    
    
    
    (42,786
    )
    
    
    (57,065
    )Cash flows from financing activities:Purchase of treasury stock
    
    
    (45,261
    )
    
    
    
    
    
    
    Dividend received from subsidiary
    
    
    30,000
    
    
    
    
    
    
    
    Net proceeds from sale of common stock
    
    
    
    
    
    
    
    
    
    
    98,731Capitalization of Lamplighter, MHC
    
    
    
    
    
    
    
    
    
    
    (100
    )Net cash provided by (used in) financing activities
    
    
    (15,261
    )
    
    
    
    
    
    
    98,631Net increase (decrease) in cash
    
    
    24,270
    
    
    
    (41,229
    )
    
    
    41,311Cash and cash equivalents at beginning of period
    
    
    82
    
    
    
    41,311
    
    
    
    Cash and cash equivalents at end of period
    
    $
    24,352
    
    
    
    82
    
    
    
    41,311
 -125-




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Notes to Consolidated Financial Statements
Years Ended December 31, 2006 and 2005 and June 30, 2005
Six Months Ended December 31, 2005
 16) Segments and Related Information
  -126-




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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
  
 Item 9A . Controls and Procedures
 Disclosure Controls and Procedures :
 Change in Internal Control Over Financial Reporting :
 Managements Annual Report on Internal Control Over Financial Reporting
    -127-




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal Control-Integrated Framework
    Internal
Control-Integrated Framework
 -128-




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-129-




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Item 9B . Other Information .
  -130-




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Part III
 
 Item 10 . Directors and Executive Officers of the Registrant
  Executive Officers of the Registrant
  ExecutiveOffices and Positions with Wauwatosa
    
    OfficerName and Age
    
    Holdings and Wauwatosa Savings Bank*
    
    Since (1)Douglas S. Gordon, 50
    
    Chief Executive Officer and
President of Wauwatosa Holdings and
of Wauwatosa Savings Bank
    
    
    2005Richard C. Larson, 50
    
    Chief Financial Officer and Senior
Vice President of Wauwatosa Holdings
and of Wauwatosa Savings Bank
    
    
    1990William F. Bruss, 38
    
    General Counsel, Senior Vice
President and Secretary of Wauwatosa
Holdings and of Wauwatosa Savings
Bank
    
    
    2005Rebecca M. Arndt, 40
    
    Vice President  Retail Operations
of Wauwatosa Savings Bank
    
    
    2006
 
 *
    
    Excluding directorships and excluding positions with Bank subsidiaries. Those positions do
not constitute a substantial part of the officers duties.(1)
    
    Indicates date when individual first held an executive officer position with the Bank. These
individuals became executive officers of Wauwatosa Holdings upon its organization as noted. -131-




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##### Table of Contents



Item 11 . Executive Compensation
  
 Item 12 . Security Ownership of Certain Beneficial Owners and Management
  Compensation Plans
  Number ofNumber of shares to be
    
    
    
    
    
    securitiesissued upon exercise of
    
    Weighted average
    
    remaining availableoutstanding options and
    
    option exercise
    
    for issuance underPlan
    
    rights
    
    price
    
    plan2006 Equity Incentive Plan
    
    
    1,494,298
    (1)
    
    $
    17.63
    
    
    
    460,298
 
 (1)
    
    Consists of 1,067,356 shares reserved for grants of stock options and 426,942 shares reserved
for grants of restricted stock. On December 31, 2007, 782,500 options are outstanding with a
weighted average exercise price of $17.63 on of which were exercisable as of that date. 
 Item 13 . Certain Relationships and Related Transactions and Director Independence
  
 Item 14 . Principal Accountant Fees and Services
  -132-




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##### Table of Contents



Part IV
 
 Item 15 . Exhibits and Financial Statement Schedules
 (a)
    
    Documents filed as part of the Report:
 Financial Statements and Financial Statement Schedules
         Exhibits
 -133-




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##### Table of Contents



SIGNATURES
  WAUWATOSA HOLDINGS, INC.March 14, 2008By:
    
    /s/Douglas S. GordonDouglas S. GordonChief Executive Officer
 POWER OF ATTORNEY
   Signature and Title
 /s/Douglas S. Gordon
    
    /s/Patrick S. LawtonDouglas S. Gordon,
    
    Patrick S. Lawton, Chairman and DirectorChief Executive Officer and Director(Principal Executive Officer)/s/Richard C. Larson
    
    /s/Thomas E. DalumRichard C. Larson, Senior Vice President
    
    Thomas E. Dalum, DirectorChief Financial Officer(Principal Financial and Accounting Officer)/s/ William F. Bruss
    
    /s/Michael L. HansenWilliam F. Bruss, Senior Vice President
    
    Michael L. Hansen, DirectorSecretary/s/Stephen J. SchmidtStephen J. Schmidt, Director
 
 *Each of the above signatures is affixed as of March 14, 2008. -134-




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##### Table of Contents



WAUWATOSA HOLDINGS, INC.
( Wauwatosa Holdings or the Company)**
Commission File No. 000-51507
 EXHIBIT INDEX
TO
2007 REPORT ON FORM 10-K
  Incorporated Herein
    
    FiledExhibit
    
    Description
    
    By Reference To
    
    Herewith2.1
    
    Plan of Reorganization from
Mutual Savings Bank to Mutual
Holding Company of Wauwatosa
Savings Bank (the Bank), as
adopted on May 17,2005 and
amended on June 3, 2005 (the
Plan)
    
    Exhibit 2.1 to the Companys
Registration Statement on
Form S-1, Registration No.
333-125715 (the 2005 S-1)3.1
    
    Proposed Articles of
Incorporation of the Company
    
    Exhibit 3.1 to 2005 S-13.2
    
    Proposed Bylaws of the Company
    
    Exhibit 3.1 to 2005 S-110.1*
    
    Wauwatosa Savings Bank
Employee Stock Ownership Plan
and Trust
    
    Exhibit 10.1 to 2005 S-110.2*
    
    Supplemental Retirement
Benefit Plan between the Bank
and Donald J. Stephens
    
    Exhibit 10.2 to 2005 S-110.3*
    
    Employment Agreement between
the Bank and Douglas S.
Gordon
    
    Exhibit 10.1 to the
Companys Current Report on
Form 8-K filed on October
26, 2005 and amended on
December 19, 200610.4*
    
    Stock Compensation Plans
    
    Exhibit 10.1 to the
companys Current Report on
Form 8-K filed on May 22,
200610.5*
    
    Early Retirement, Resignation
and Release Agreement between
the Bank and Donald J.
Stephens
    
    Exhibit 10.5 to the
Companys Annual Report on
Form 10-K filed March 27,
200611.1
    
    Statement re: Computation of
Per Share Earnings
    
    See Note 13 in Part II Item 821.1
    
    List of Subsidiaries
    
    
    
    X23.1
    
    Consent of Independent
Registered Public Accounting
Firm
    
    
    
    X
 EI-1




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##### Table of Contents



Incorporated Herein
    
    FiledExhibit
    
    Description
    
    By Reference To
    
    Herewith24.1
    
    Powers of Attorney
    
    Signature Page31.1
    
    Sarbanes-Oxley Act Section
302 Certification signed by
the Chief Executive Officer
of Wauwatosa Holdings
    
    
    
    X31.2
    
    Sarbanes-Oxley Act Section
302 Certification signed by
the Chief Financial Officer
of Wauwatosa Holdings
    
    
    
    X32.1
    
    Certification pursuant to 18
U.S. C. Section 1350, as
adopted pursuant to Section
906 of the Sarbanes-Oxley Act
of 2002 signed by the Chief
Executive Officer of
Wauwatosa Holdings
    
    
    
    X32.2
    
    Certification pursuant to 18
U.S. C. Section 1350, as
adopted pursuant to Section
906 of the Sarbanes-Oxley Act
of 2002 signed by the Chief
Financial Officer of
Wauwatosa Holdings
    
    
    
    X
 
 *
    
    Designates management or compensatory agreements, plans or arrangements required to be filed as
exhibits pursuant to Item 15(b) of Form 10-K. EI-2