##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from July 1, 2005 to December 31, 2005
 Commission file number 000-51507
 WAUWATOSA HOLDINGS, INC.
  Wisconsin
    
    20-3598485(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer Identification No.)11200 W Plank Ct, Wauwatosa, WI
    
    53226(Address of principal executive offices)
    
    (Zip Code)
 (414) 761-1000
  NONE
  Common Stock, $0.01 Par Value
  o þ
  o þ
  þ o
 o
  o o þ
  o þ
  DOCUMENTS INCORPORATED BY REFERENCE
 Part of Form 10-K Into WhichDocument
    
    Portions of Document are IncorporatedProxy Statement for Annual Meeting of
    
    Part IIIShareholders on May 16, 2006




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##### 



WAUWATOSA HOLDINGS, INC.
 FORM 10-K TRANSITION REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
FOR THE SIX-MONTH PERIOD ENDED DECEMBER 31, 2005
 TABLE OF CONTENTS
 ITEM
    
    
    
    PAGEPART I1.
    
    Business
    
    
    3-491A.
    
    Risk Factors
    
    
    49-511B.
    
    Unresolved Staff Comments
    
    
    512.
    
    Properties
    
    
    523.
    
    Legal Proceedings
    
    
    534.
    
    Submission of Matters to a Vote of Security Holders
    
    
    53Executive Officers of the Registrant
    
    
    53PART II5.
    
    Market for Registrants Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities
    
    
    546.
    
    Selected Financial Data
    
    
    55-577.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    58-747A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    75-768.
    
    Financial Statements and Supplementary Data
    
    
    77-1129.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    1139A.
    
    Controls and Procedures
    
    
    1139B.
    
    Other Information
    
    
    114PART III10.
    
    Directors and Executive Officers of the Registrant
    
    
    11511.
    
    Executive Compensation
    
    
    11512.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    11513.
    
    Certain Relationships and Related Transactions
    
    
    11514.
    
    Principal Accountant Fees and Services
    
    
    115PART IV15.
    
    Exhibits and Financial Statement Schedules
    
    
    115-116Signatures
    
    
    117Early Retirement, Resignation and Release AgreementList of SubsidiariesCertification of CEOCertification of CFOCertification of CEOCertification of CFO
  2




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##### Table of Contents



Part 1
  
 Item 1. Business
 BUSINESS OF WAUWATOSA HOLDINGS, INC.
   Cautionary Factors
  
    
    inflation and changes in the interest rate environment that reduce our margins or
reduce the fair value of financial instruments;
 3




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##### Table of Contents




    
    legislative or regulatory changes that adversely affect our business;
    
    changes in our organization, compensation and benefit plans;
    
    our ability to enter new markets successfully and take advantage of growth
opportunities;
    
    general economic conditions, either nationally or in our market areas, that are
worse than expected;
    
    significantly increased competition among depository and other financial
institutions;
    
    adverse changes in the securities 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
    Business Strategy
  4




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##### Table of Contents




    
    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
affiliated investors/developers at 15% of Wauwatosa Savings capital.
The additional capital raised in the stock offering associated with
our recent reorganization has increased our real estate lending
capacity by enabling us to originate more loans and loans with larger
balances. This has permitted us to serve over four-family borrowers
with larger lending needs and to originate larger commercial real
estate loans than we have in the past. In addition, we intend to
expand the owner-occupied residential mortgage product offering by
developing a long-term, fixed-rate loan and an indexed, adjustable
mortgage loan product.
    
    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 six banking offices, one of which is a supermarket branch open
seven days a week. In 2003 and 2004, we opened two new full service
branches in Waukesha County, Wisconsin, one in the city of Oconomowoc
and the other in the city of Pewaukee. In 2005, we opened a new,
larger branch office in Waukesha which replaced a smaller facility
that we had out grown. We plan to expand our branch network in the
next few years by adding one to two branches each year within our
existing market area defined as Milwaukee and Waukesha counties and
each of the other six contiguous counties. The first new branch office
that we expect to open in calendar 2006 will be located in the City of
Franklin, Wisconsin.
    
    Maintaining High Asset Quality.We have emphasized maintaining strong
asset quality by following conservative underwriting criteria, and by
exclusively originating loans secured by real estate in relatively
favorable economic and real estate market conditions. Through
strategies which focus on borrower workout arrangements, Wauwatosa
Savings has been proactive in managing non-performing assets such that
realized losses are minimized.
    
    Expansion of Product Offerings.We intend to broaden the line of both
retail and commercial product offerings in the upcoming years. The
first example of this is our recent purchase of Waterstone Mortgage
Corporation, a mortgage broker with offices located in Pewaukee,
Madison, Lake Geneva and Sheboygan, Wisconsin, and Livonia, Michigan.
This acquisition expands both the types of mortgage loan products
offered and the geographical coverage for those products.
 5




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Competition
 th th
  Market Area
    6




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##### Table of Contents



Lending Activities
  7




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##### Table of Contents



Loan Portfolio Composition.
 At December 31,
    
    
    At June 30,2005
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in Thousands)Real estate loans:Residential (1)Single family
    
    $
    469,395
    
    
    
    33.69
    %
    
    $
    430,333
    
    
    
    33.11
    %
    
    $
    391,864
    
    
    
    34.60
    %
    
    $
    357,212
    
    
    
    36.63
    %
    
    $
    371,754
    
    
    
    40.21
    %
    
    $
    394,118
    
    
    
    42.70
    %Two- to four-family
    
    
    256,270
    
    
    
    18.40
    
    
    
    251,268
    
    
    
    19.33
    
    
    
    224,765
    
    
    
    19.85
    
    
    
    203,655
    
    
    
    20.88
    
    
    
    185,218
    
    
    
    20.04
    
    
    
    170,079
    
    
    
    18.42Over four-family
    
    
    443,528
    
    
    
    31.84
    
    
    
    407,601
    
    
    
    31.36
    
    
    
    340,753
    
    
    
    30.09
    
    
    
    287,589
    
    
    
    29.49
    
    
    
    262,310
    
    
    
    28.38
    
    
    
    261,394
    
    
    
    28.32Construction
    
    
    165,516
    
    
    
    11.88
    
    
    
    149,540
    
    
    
    11.50
    
    
    
    110,495
    
    
    
    9.76
    
    
    
    75,535
    
    
    
    7.74
    
    
    
    66,918
    
    
    
    7.24
    
    
    
    58,100
    
    
    
    6.29Commercial
    
    
    34,543
    
    
    
    2.48
    
    
    
    36,586
    
    
    
    2.81
    
    
    
    46,138
    
    
    
    4.07
    
    
    
    43,895
    
    
    
    4.50
    
    
    
    28,552
    
    
    
    3.09
    
    
    
    30,381
    
    
    
    3.29Land
    
    
    23,685
    
    
    
    1.70
    
    
    
    24,282
    
    
    
    1.87
    
    
    
    18,307
    
    
    
    1.62
    
    
    
    7,195
    
    
    
    0.74
    
    
    
    9,434
    
    
    
    1.02
    
    
    
    8,904
    
    
    
    0.96Other loans
    
    
    159
    
    
    
    0.01
    
    
    
    202
    
    
    
    0.02
    
    
    
    186
    
    
    
    0.01
    
    
    
    214
    
    
    
    0.02
    
    
    
    214
    
    
    
    0.02
    
    
    
    167
    
    
    
    0.02Total loans
    
    
    1,393,096
    
    
    
    100.00
    %
    
    
    1,299,812
    
    
    
    100.00
    %
    
    
    1,132,507
    
    
    
    100.00
    %
    
    
    975,295
    
    
    
    100.00
    %
    
    
    924,400
    
    
    
    100.00
    %
    
    
    923,143
    
    
    
    100.00
    %Undisbursed loan proceeds
    
    
    (82,712
    )
    
    
    
    
    
    
    (77,484
    )
    
    
    
    
    
    
    (61,904
    )
    
    
    
    
    
    
    (29,173
    )
    
    
    
    
    
    
    (23,947
    )
    
    
    
    
    
    
    (33,956
    )Net deferred loan fees and
premiums
    
    
    (4,366
    )
    
    
    
    
    
    
    (4,161
    )
    
    
    
    
    
    
    (3,631
    )
    
    
    
    
    
    
    (3,099
    )
    
    
    
    
    
    
    (2,576
    )
    
    
    
    
    
    
    (2,641
    )Allowance for loan losses
    
    
    (5,250
    )
    
    
    
    
    
    
    (4,606
    )
    
    
    
    
    
    
    (3,378
    )
    
    
    
    
    
    
    (2,970
    )
    
    
    
    
    
    
    (2,479
    )
    
    
    
    
    
    
    (1,973
    )Loans, net
    
    $
    1,300,768
    
    
    
    
    
    
    $
    1,213,561
    
    
    
    
    
    
    $
    1,063,594
    
    
    
    
    
    
    $
    940,053
    
    
    
    
    
    
    $
    895,398
    
    
    
    
    
    
    $
    884,573
 
 (1)
    
    Residential mortgage loans include home equity loans and home equity lines of credit. -8-




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##### Table of Contents



Loan Portfolio Maturities and Yields.
 Residential(1)Single Family
    
    
    Two- to four-family
    
    
    Over four-family
    
    
    Construction
    
    
    Commercial
    
    
    LandWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageMaturity Date
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate(Dollars in Thousands)Jan 1, 2006  Dec
31, 2006
    
    $
    8,183
    
    
    
    6.64
    %
    
    $
    34,177
    
    
    
    6.20
    %
    
    $
    30,143
    
    
    
    6.20
    %
    
    $
    90,037
    
    
    
    6.06
    %
    
    $
    3,635
    
    
    
    6.58
    %
    
    $
    4,760
    
    
    
    6.56
    %Jan 1, 2007  Dec
31, 2007
    
    
    17,527
    
    
    
    6.39
    
    
    
    35,665
    
    
    
    6.39
    
    
    
    53,913
    
    
    
    6.00
    
    
    
    3,832
    
    
    
    6.49
    
    
    
    854
    
    
    
    5.76
    
    
    
    5,282
    
    
    
    6.18Jan 1, 2008  Dec
31, 2008
    
    
    33,681
    
    
    
    6.40
    
    
    
    65,292
    
    
    
    6.38
    
    
    
    123,113
    
    
    
    6.07
    
    
    
    14,208
    
    
    
    6.18
    
    
    
    7,877
    
    
    
    6.16
    
    
    
    2,455
    
    
    
    6.24Jan 1, 2009  Dec
31, 2009
    
    
    6,950
    
    
    
    6.52
    
    
    
    10,025
    
    
    
    6.38
    
    
    
    19,708
    
    
    
    6.14
    
    
    
    5,364
    
    
    
    6.25
    
    
    
    2,074
    
    
    
    5.50
    
    
    
    
    
    
    
    Jan 1, 2010  Dec
31, 2010
    
    
    2,061
    
    
    
    7.25
    
    
    
    1,407
    
    
    
    6.45
    
    
    
    13,585
    
    
    
    6.24
    
    
    
    2,283
    
    
    
    5.63
    
    
    
    6
    
    
    
    8.00
    
    
    
    
    
    
    
    Jan 1, 2011 and
thereafter
    
    
    400,993
    
    
    
    5.89
    
    
    
    109,704
    
    
    
    5.93
    
    
    
    203,066
    
    
    
    6.11
    
    
    
    49,792
    
    
    
    5.76
    
    
    
    20,097
    
    
    
    5.91
    
    
    
    11,188
    
    
    
    6.23Total
    
    $
    469,395
    
    
    
    5.97
    %
    
    $
    256,270
    
    
    
    6.16
    %
    
    $
    443,528
    
    
    
    6.09
    %
    
    $
    165,516
    
    
    
    5.99
    %
    
    $
    34,543
    
    
    
    6.01
    %
    
    $
    23,685
    
    
    
    6.28
    %
 Other
    
    
    Total LoansWeighted Average
    
    
    
    
    
    
    Weighted AverageMaturity Date
    
    Amount
    
    
    Rate
    
    
    Amount
    
    
    Rate(Dollars in Thousands)Jan 1, 2006  Dec 31,
2006
    
    $
    159
    
    
    
    0.00
    %
    
    $
    171,094
    
    
    
    6.16
    %Jan 1, 2007  Dec 31,
2007
    
    
    
    
    
    
    
    
    
    
    117,073
    
    
    
    6.20Jan 1, 2008  Dec 31,
2008
    
    
    
    
    
    
    
    
    
    
    246,626
    
    
    
    6.21Jan 1, 2009  Dec 31,
2009
    
    
    
    
    
    
    
    
    
    
    44,121
    
    
    
    6.23Jan 1, 2010  Dec 31,
2010
    
    
    
    
    
    
    
    
    
    
    19,342
    
    
    
    6.29Jan 1, 2011 and thereafter
    
    
    
    
    
    
    
    
    
    
    794,840
    
    
    
    5.94Total
    
    $
    159
    
    
    
    0.00
    %
    
    $
    1,393,096
    
    
    
    6.05
    %
 
 (1)
    
    Residential mortgage loans include home equity loans and home equity lines of
credit. -9-




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##### Table of Contents



Due After December 31, 2006Fixed
    
    
    Variable
    
    
    Total(In Thousands)Real estate loans:Residential(1)Single family
    
    $
    61,204
    
    
    $
    400,008
    
    
    $
    461,212Two- to four-family
    
    
    111,962
    
    
    
    110,131
    
    
    
    222,093Over four-family
    
    
    206,238
    
    
    
    207,147
    
    
    
    413,385Construction
    
    
    26,321
    
    
    
    49,158
    
    
    
    75,479Commercial
    
    
    9,733
    
    
    
    21,175
    
    
    
    30,908Land
    
    
    6,838
    
    
    
    12,087
    
    
    
    18,925Total loans
    
    $
    422,296
    
    
    $
    799,706
    
    
    $
    1,222,002
 
 (1)
    
    Residential mortgage loans include home equity loans and home equity lines of
credit. -10-




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##### Table of Contents



One- to Four-Family Residential Mortgage Loans.
      -11-




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##### Table of Contents



The Wall Street Journal
 Over Four-family Real Estate Loans.
 -12-




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##### Table of Contents



Residential Construction Loans.
   -13-




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##### Table of Contents



Commercial Real Estate Loans.
  -14-




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##### Table of Contents



Six Months EndedDecember 31,
    Years Ended June 30,2005
    
    
    2005
    
    
    2004
    
    
    2003(In Thousands)Total loans at beginning of
year
    
    $
    1,299,812
    
    
    $
    1,132,507
    
    
    $
    975,296
    
    
    $
    924,400Real estate loans originated:Residential (1)Single family
    
    
    81,397
    
    
    
    139,878
    
    
    
    146,712
    
    
    
    118,301Two- to four-family
    
    
    52,030
    
    
    
    96,560
    
    
    
    98,223
    
    
    
    85,001Over four-family
    
    
    95,734
    
    
    
    148,964
    
    
    
    129,187
    
    
    
    109,182Construction
    
    
    43,865
    
    
    
    80,221
    
    
    
    49,898
    
    
    
    52,426Commercial
    
    
    2,658
    
    
    
    11,733
    
    
    
    8,651
    
    
    
    17,843Land
    
    
    10,451
    
    
    
    19,775
    
    
    
    26,930
    
    
    
    3,909Total loans originated
    
    
    286,135
    
    
    
    497,131
    
    
    
    459,601
    
    
    
    386,662Other loans
 net activity
    
    
    (43
    )
    
    
    16
    
    
    
    (29
    )
    
    
    Loans purchased
    
    
    
    
    
    
    
    
    
    
    1,398
    
    
    
    Principal repayments
    
    
    (192,808
    )
    
    
    (329,842
    )
    
    
    (303,766
    )
    
    
    (335,766
    )Net loan activity
    
    
    93,284
    
    
    
    167,305
    
    
    
    157,211
    
    
    
    50,896Total loans at end of period
    
    $
    1,393,096
    
    
    $
    1,299,812
    
    
    $
    1,132,507
    
    
    $
    975,296
 
 (1)
    
    Residential mortgage loans include home equity loans and home equity lines of
credit. Origination, Purchasing and Servicing of Loans.
 - - -
 -15-




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##### Table of Contents



Loan Approval Procedures and Authority .
  
    
    Any secured 1-4 family mortgage loan up to $500,000 can be approved and
closed by any loan officer, commercial real estate loan officer, the Director of
Lending-Retail, or the Head of Lending.
    
    Any secured mortgage loan up to $500,000 can be approved and closed by
a commercial real estate loan officer, the Director of Lending-Retail, or the Head
of Lending.
    
    Any secured mortgage loan within $500,001-$2,999,999 must be approved
by the Officer Loan Committee. If approved, any loan officer, commercial real
estate loan officer, the Director of Lending-Retail, or the Head of Lending may
close the loan.
    
    Any secured mortgage loan for $3,000,000 or greater must be approved by
the Board of Directors prior to closing.
  Non-performing and Problem Assets
   -16-




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##### Table of Contents



Non-Performing Assets.
  At December 31,
    
    
    At June 30,2005
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001(Dollars in Thousands)Non-accrual loans:Residential(1)Single family
    
    $
    5,654
    
    
    $
    3,842
    
    
    $
    3,425
    
    
    $
    4,764
    
    
    $
    4,970
    
    
    $
    4,572Two- to four-family
    
    
    3,386
    
    
    
    1,390
    
    
    
    603
    
    
    
    1,387
    
    
    
    709
    
    
    
    2,163Over four-family
    
    
    6,703
    
    
    
    5,877
    
    
    
    4,776
    
    
    
    5,268
    
    
    
    6,137
    
    
    
    1,230Construction
    
    
    760
    
    
    
    830
    
    
    
    
    
    
    
    220
    
    
    
    
    
    
    
    696Commercial
    
    
    962
    
    
    
    1,137
    
    
    
    1,139
    
    
    
    2,528
    
    
    
    141
    
    
    
    937Land
    
    
    600
    
    
    
    
    
    
    
    2,072
    
    
    
    1,421
    
    
    
    983
    
    
    
    Total non-performing loans
    
    
    18,065
    
    
    
    13,076
    
    
    
    12,015
    
    
    
    15,588
    
    
    
    12,940
    
    
    
    9,598Real estate owned
    
    
    215
    
    
    
    475
    
    
    
    770
    
    
    
    
    
    
    
    998
    
    
    
    2,927Total non-performing assets
    
    $
    18,280
    
    
    $
    13,551
    
    
    $
    12,785
    
    
    $
    15,588
    
    
    $
    13,938
    
    
    $
    12,525Total non-performing loans to total loans, net
    
    
    1.39
    %
    
    
    1.07
    %
    
    
    1.13
    %
    
    
    1.65
    %
    
    
    1.44
    %
    
    
    1.08
    %Total non-performing loans to total assets
    
    
    1.20
    %
    
    
    0.94
    %
    
    
    0.97
    %
    
    
    1.41
    %
    
    
    1.29
    %
    
    
    0.98
    %Total non-performing assets and troubled debt
restructurings to total assets
    
    
    1.21
    %
    
    
    0.98
    %
    
    
    1.03
    %
    
    
    1.41
    %
    
    
    1.39
    %
    
    
    1.28
    %
 
 (1)
    
    Residential mortgage loans include home equity loans and home equity lines of
credit.  Classified Assets.
 -17-




---



##### Table of Contents



Allowance for Loan Losses
   -18-




---



##### Table of Contents



-19-




---



##### Table of Contents



At or for the SixMonth periodEnded December 31,
    
    
    At or for the Year Ended June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001(Dollars in Thousands)Balance at beginning of period
    
    $
    4,606
    
    
    $
    3,378
    
    
    $
    3,378
    
    
    $
    2,970
    
    
    $
    2,479
    
    
    $
    1,973
    
    
    $
    1,655Provision for loan losses
    
    
    1,035
    
    
    
    363
    
    
    
    1,238
    
    
    
    860
    
    
    
    520
    
    
    
    1,336
    
    
    
    879Charge-offs:Residential(1)Single family
    
    
    37
    
    
    
    
    
    
    
    1
    
    
    
    320
    
    
    
    26
    
    
    
    307
    
    
    
    24Two- to four-family
    
    
    60
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    131
    
    
    
    104Over four-family
    
    
    169
    
    
    
    
    
    
    
    
    
    
    
    125
    
    
    
    
    
    
    
    408
    
    
    
    523Construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial
    
    
    102
    
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    25Land
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    56Other loans
    
    
    23
    
    
    
    1
    
    
    
    9
    
    
    
    9
    
    
    
    3
    
    
    
    16
    
    
    
    Total charge-offs
    
    
    391
    
    
    
    4
    
    
    
    12
    
    
    
    454
    
    
    
    29
    
    
    
    880
    
    
    
    732Recoveries:Residential1)Single family
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    47Two- to four-family
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    4Over four-family
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    96Construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Commercial
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6Land
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18Other loans
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Total recoveries
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    2
    
    
    
    
    
    
    
    50
    
    
    
    171Net charge-offs
    
    
    391
    
    
    
    4
    
    
    
    10
    
    
    
    452
    
    
    
    29
    
    
    
    830
    
    
    
    561Allowance at end of year
    
    $
    5,250
    
    
    $
    3,737
    
    
    $
    4,606
    
    
    $
    3,378
    
    
    $
    2,970
    
    
    $
    2,479
    
    
    $
    1,973Ratios:Allowance for loan losses to
non-performing loans at end of period
    
    
    29.06
    %
    
    
    28.06
    %
    
    
    35.22
    %
    
    
    28.11
    %
    
    
    19.05
    %
    
    
    19.16
    %
    
    
    20.56
    %Allowance for loan losses to net loans
outstanding at end of period
    
    
    0.40
    %
    
    
    0.33
    %
    
    
    0.38
    %
    
    
    0.32
    %
    
    
    0.32
    %
    
    
    0.28
    %
    
    
    0.22
    %Net charge-offs to average loans
outstanding (annualized)
    
    
    0.06
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.05
    %
    
    
    0.00
    %
    
    
    0.09
    %
    
    
    0.07
    %
 
 (1)
    
    Real estate loans include home equity loans and home equity lines of credit. -20-




---



##### Table of Contents



Allocation of Allowance for Loan Losses.
 At December 31,
    
    
    At June 30,2005
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofLoans in
    
    
    
    
    
    
    Loans in
    
    
    
    
    
    
    Loans in
    
    
    
    
    
    
    Loans in
    
    
    
    
    
    
    Loans in
    
    
    
    
    
    
    Loans inAllowance
    
    
    Category
    
    
    Allowance
    
    
    Category
    
    
    Allowance
    
    
    Category
    
    
    Allowance
    
    
    Category
    
    
    Allowance
    
    
    Category
    
    
    Allowance
    
    
    Categoryfor Loan
    
    
    to Total
    
    
    for Loan
    
    
    to Total
    
    
    for Loan
    
    
    to Total
    
    
    for Loan
    
    
    to Total
    
    
    for Loan
    
    
    to Total
    
    
    for Loan
    
    
    to TotalLosses
    
    
    Loans
    
    
    Losses
    
    
    Loans
    
    
    Losses
    
    
    Loans
    
    
    Losses
    
    
    Loans
    
    
    Losses
    
    
    Loans
    
    
    Losses
    
    
    Loans(Dollars in Thousands)Real Estate:Residential(1)Single family
    
    $
    1,777
    
    
    
    33.69
    %
    
    $
    1,211
    
    
    
    33.11
    %
    
    $
    766
    
    
    
    34.60
    %
    
    $
    517
    
    
    
    36.63
    %
    
    $
    163
    
    
    
    40.21
    %
    
    $
    
    
    
    
    42.70
    %Two- to four-family
    
    
    847
    
    
    
    18.40
    
    
    
    392
    
    
    
    19.33
    
    
    
    352
    
    
    
    19.85
    
    
    
    327
    
    
    
    20.88
    
    
    
    302
    
    
    
    20.04
    
    
    
    
    
    
    
    18.42Over four-family
    
    
    1,716
    
    
    
    31.84
    
    
    
    1,646
    
    
    
    31.36
    
    
    
    1,831
    
    
    
    30.09
    
    
    
    1,852
    
    
    
    29.49
    
    
    
    1,582
    
    
    
    28.38
    
    
    
    1,095
    
    
    
    28.32Construction
    
    
    234
    
    
    
    11.88
    
    
    
    712
    
    
    
    11.50
    
    
    
    100
    
    
    
    9.76
    
    
    
    
    
    
    
    7.74
    
    
    
    
    
    
    
    7.24
    
    
    
    
    
    
    
    6.29Commercial
    
    
    630
    
    
    
    2.48
    
    
    
    450
    
    
    
    2.81
    
    
    
    309
    
    
    
    4.07
    
    
    
    259
    
    
    
    4.50
    
    
    
    154
    
    
    
    3.09
    
    
    
    418
    
    
    
    3.29Land
    
    
    
    
    
    
    1.70
    
    
    
    10
    
    
    
    1.87
    
    
    
    
    
    
    
    1.62
    
    
    
    
    
    
    
    0.74
    
    
    
    
    
    
    
    1.02
    
    
    
    
    
    
    
    0.96Other
    
    
    27
    
    
    
    0.01
    
    
    
    25
    
    
    
    0.02
    
    
    
    20
    
    
    
    0.01
    
    
    
    15
    
    
    
    0.02
    
    
    
    10
    
    
    
    0.02
    
    
    
    5
    
    
    
    0.02Unallocated
    
    
    19
    
    
    
    
    
    
    
    160
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    268
    
    
    
    
    
    
    
    455
    
    
    
    Total allowance for loan
losses
    
    $
    5,250
    
    
    
    100.00
    %
    
    $
    4,606
    
    
    
    100.00
    %
    
    $
    3,378
    
    
    
    100.00
    %
    
    $
    2,970
    
    
    
    100.00
    %
    
    $
    2,479
    
    
    
    100.00
    %
    
    $
    1,973
    
    
    
    100.00
    %
 
 (1)
    
    Residential mortgage loans include home equity loans and home equity lines of
credit. -21-




---



##### Table of Contents



Investment Activities
  -22-




---



##### Table of Contents



U.S. Government and Agency Bonds.
 Mortgage-Related Securities.
  -23-




---



##### Table of Contents



Municipal Obligations.
 -24-




---



##### Table of Contents



Investment Securities Portfolio.
  At December 31,
    
    
    At June 30,2005
    
    
    2005
    
    
    2004
    
    
    2003Amortized
    
    
    
    
    
    
    Amortized
    
    
    
    
    
    
    Amortized
    
    
    
    
    
    
    AmortizedCost
    
    
    Fair Value
    
    
    Cost
    
    
    Fair Value
    
    
    Cost
    
    
    Fair Value
    
    
    Cost
    
    
    Fair Value(Dollars in Thousands)Available for Sale:Government agency bonds
    
    $
    26,577
    
    
    $
    25,950
    
    
    $
    26,580
    
    
    $
    26,387
    
    
    $
    17,683
    
    
    $
    17,462
    
    
    $
    5,007
    
    
    $
    5,084Mortgage-related securities
    
    
    93,515
    
    
    
    91,578
    
    
    
    54,438
    
    
    
    53,445
    
    
    
    80,918
    
    
    
    77,819
    
    
    
    75,759
    
    
    
    75,757Municipal obligations
    
    
    4,278
    
    
    
    4,427
    
    
    
    3,923
    
    
    
    4,159
    
    
    
    4,173
    
    
    
    4,268
    
    
    
    9,303
    
    
    
    9,611Total available for sale
    
    $
    124,370
    
    
    $
    121,955
    
    
    $
    84,941
    
    
    $
    83,991
    
    
    $
    102,774
    
    
    $
    99,549
    
    
    $
    90,070
    
    
    $
    90,452
 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 agency bonds
    
    $
    
    
    
    
    
    %
    
    $
    25,950
    
    
    
    3.65
    %
    
    $
    
    
    
    
    
    %
    
    $
    
    
    
    
    
    %
    
    $
    25,950
    
    
    
    3.65
    %Mortgage-related securities
    
    
    386
    
    
    
    3.38
    
    
    
    44,133
    
    
    
    4.12
    
    
    
    29,808
    
    
    
    5.12
    
    
    
    17,251
    
    
    
    5.34
    
    
    
    91,578
    
    
    
    4.67Municipal obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    840
    
    
    
    3.69
    
    
    
    3,587
    
    
    
    4.81
    
    
    
    4,427
    
    
    
    4.59Total securities available for
sale
    
    $
    386
    
    
    
    3.38
    %
    
    $
    70,083
    
    
    
    3.95
    %
    
    $
    30,648
    
    
    
    5.09
    %
    
    $
    20,838
    
    
    
    5.25
    %
    
    $
    121,955
    
    
    
    4.45
    %
 -25-




---



##### Table of Contents



Sources of Funds
 General.
 Deposits.
    -26-




---



##### Table of Contents



-27-




---



##### Table of Contents



At December 31,
    
    
    At June 30,2005
    
    
    2005
    
    
    2004
    
    
    2003Weighted
    
    
    
    
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    
    
    
    
    AverageBalance
    
    
    Percent
    
    
    Rate
    
    
    Balance
    
    
    Percent
    
    
    Rate
    
    
    Balance
    
    
    Percent
    
    
    Rate
    
    
    Balance
    
    
    Percent
    
    
    Rate(Dollars in Thousands)Deposit type:Demand deposits
    
    $
    17,667
    
    
    
    1.69
    %
    
    
    0.00
    %
    
    $
    18,816
    
    
    
    1.67
    %
    
    
    0.00
    %
    
    $
    15,923
    
    
    
    1.54
    %
    
    
    0.00
    %
    
    $
    9,857
    
    
    
    1.08
    %
    
    
    0.00
    %NOW accounts
    
    
    64,623
    
    
    
    6.18
    
    
    
    1.41
    
    
    
    82,045
    
    
    
    7.27
    
    
    
    1.74
    
    
    
    83,260
    
    
    
    8.04
    
    
    
    0.98
    
    
    
    30,053
    
    
    
    3.30
    
    
    
    0.99Regular savings
    
    
    20,962
    
    
    
    2.00
    
    
    
    0.50
    
    
    
    23,614
    
    
    
    2.09
    
    
    
    0.50
    
    
    
    24,877
    
    
    
    2.40
    
    
    
    0.50
    
    
    
    21,706
    
    
    
    2.39
    
    
    
    0.50Money market and
savings deposits
    
    
    12,603
    
    
    
    1.21
    
    
    
    3.03
    
    
    
    3,503
    
    
    
    0.31
    
    
    
    1.06
    
    
    
    3,597
    
    
    
    0.35
    
    
    
    1.03
    
    
    
    40,172
    
    
    
    4.42
    
    
    
    1.02Total
transaction
accounts
    
    
    115,855
    
    
    
    11.08
    
    
    
    1.21
    
    
    
    127,978
    
    
    
    11.34
    
    
    
    1.24
    
    
    
    127,657
    
    
    
    12.33
    
    
    
    0.77
    
    
    
    101,788
    
    
    
    11.19
    
    
    
    0.81Certificates of
deposit
    
    
    929,738
    
    
    
    88.92
    
    
    
    3.80
    
    
    
    1,000,813
    
    
    
    88.66
    
    
    
    3.52
    
    
    
    907,931
    
    
    
    87.67
    
    
    
    3.28
    
    
    
    807,703
    
    
    
    88.81
    
    
    
    3.70Total deposits
    
    $
    1,045,593
    
    
    
    100.00
    %
    
    
    3.51
    
    
    $
    1,128,791
    
    
    
    100.00
    %
    
    
    3.26
    
    
    $
    1,035,588
    
    
    
    100.00
    %
    
    
    2.97
    
    
    $
    909,491
    
    
    
    100.00
    %
    
    
    3.38
 -28-




---



##### Table of Contents



AtDecember 31, 2005(In Thousands)Three months or less
    
    $
    45,695Over three months through six months
    
    
    40,052Over six months through 12 months
    
    
    67,443Over 12 months
    
    
    97,567Total
    
    $
    250,757
 -29-




---



##### Table of Contents



Six MonthsEnded December 31,
    
    
    Years Ended June 30,2005
    
    
    2005
    
    
    2004
    
    
    2003(In Thousands)Beginning balance
    
    $
    1,128,791
    
    
    $
    1,035,588
    
    
    $
    909,491
    
    
    $
    841,873Net increase/(decrease) in
deposits before interest credited
    
    
    (99,191
    )
    
    
    62,085
    
    
    
    101,529
    
    
    
    39,753Interest credited
    
    
    15,993
    
    
    
    31,118
    
    
    
    24,568
    
    
    
    27,865Net increase/(decrease) in deposits
    
    
    (83,198
    )
    
    
    93,203
    
    
    
    126,097
    
    
    
    67,618Ending balance
    
    $
    1,045,593
    
    
    $
    1,128,791
    
    
    $
    1,035,588
    
    
    $
    909,491
 Advances From Federal Home Loan Bank.
 At or For the SixMonth Period EndedDecember 31,
    
    At or For the Years Ended June 30,2005
    
    2005
    
    2004
    
    2003(Dollars in Thousands)FHLB Advances:Balance outstanding at end of
period
    
    $
    201,212
    
    
    $
    93,162
    
    
    $
    60,000
    
    
    $
    60,000Weighted average interest rate at the end
of period
    
    
    3.90
    %
    
    
    3.07
    %
    
    
    3.32
    %
    
    
    3.53
    %Maximum
amount of advances outstanding at any month end during the period
    
    $
    201,212
    
    
    $
    106,162
    
    
    $
    96,000
    
    
    $
    60,000Average balance outstanding during the
period
    
    
    127,046
    
    
    
    74,641
    
    
    
    63,452
    
    
    
    46,849Weighted average interest rate during
the period
    
    
    3.55
    %
    
    
    3.59
    %
    
    
    3.27
    %
    
    
    3.84
    %
 Average Balance Sheet and Rate Yield Analysis
  Cash Dividends
  -30-




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##### Table of Contents



Subsidiary Activities
  Wauwatosa Investments, Inc.
  Main Street Real Estate Holdings, LLC.
 Waterstone Mortgage Corporation.
 Personnel
  -31-




---



##### Table of Contents



Supervision and Regulation
  Regulation of Wauwatosa Savings Bank
  Intrastate and Interstate Merger and Branching Activities
 Wisconsin Law and Regulation.
 Federal Law and Regulation de novo
 Loans and Investments
 Wisconsin Law and Regulations.
 -32-




---



##### Table of Contents



Federal Law and Regulation
  -33-




---



##### Table of Contents



Lending Standards
 Wisconsin Law and Regulation.
 Federal Law and Regulation
  
    
    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%.
  -34-




---



##### Table of Contents



Deposits
 Wisconsin Law and Regulation.
 Federal Law and Regulation
 Deposit Insurance
 Wisconsin Law and Regulation.
 Federal Law and Regulation
  -35-




---



##### Table of Contents



Capitalization
 Wisconsin Law and Regulation
 Federal Law and Regulation
  -36-




---



##### Table of Contents



Safety and Soundness Standards
  Prompt Corrective Action
  -37-




---



##### Table of Contents



Tier 1Total Capital to
    
    Capital to
    
    Tier 1 CapitalCategory
    
    Risk Weighted Assets
    
    Risk Weighted Assets
    
    to Total AssetsWell
capitalized
    
    
    310
    %
    
    
    36
    %
    
    
    35
    %Adequately
capitalized
    
    
    3 8
    %
    
    
    34
    %
    
    
    34
    %*Under
capitalized
    
    
    < 8
    %
    
    
    <4
    %
    
    
    <4
    %*Significantly
undercapitalized
    
    
    < 6
    %
    
    
    <3
    %
    
    
    <3
    %Critically undercapitalized
    
    Tangible assets to capital of < 2%
 
 *
    
    3% if the bank receives the highest rating under the uniform system  
    
    an amount equal to five percent of the banks total assets at the time it became
undercapitalized; and
    
    the amount that is necessary (or would have been necessary) to bring the bank
into compliance with all capital standards applicable with respect to such bank as
of the time it fails to comply with the plan.
   -38-




---



##### Table of Contents



Dividends
  Liquidity and Reserves
 Wisconsin Law and Regulation.
 Federal Law and Regulation
 -39-




---



##### Table of Contents



Transactions with Affiliates and Insiders
 Wisconsin Law and Regulation
 Federal Law and Regulation.
   -40-




---



##### Table of Contents



Transactions between Bank Customers and Affiliates
  Examinations and Assessments
  Customer Privacy
  Community Reinvestment Act
  -41-




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##### Table of Contents




    
    a lending test, to evaluate the institutions record of making loans in its
service areas;
    
    an investment test, to evaluate the institutions record of investing in
community development projects, affordable housing, and programs benefiting low or
moderate income individuals and businesses; and
    
    a service test, to evaluate the institutions delivery of services through its
branches, ATMs and other offices.
  Federal Home Loan Bank System
    -42-




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##### Table of Contents



USA PATRIOT Act
   
    
    All financial institutions must establish anti-money laundering programs that
include, at minimum; (a) internal policies, procedures, and controls; (b) specific
designation of an anti-money laundering compliance officer; (c) ongoing employee
training programs, and (d) an independent audit function to test the anti-money
laundering program.
    
    The Secretary of the Treasury, in conjunction with other bank regulators, may
issue regulations that provide for minimum standards with respect to customer
identification at the time new accounts are opened.
    
    Financial institutions that establish, maintain, or manage private banking
accounts or correspondent accounts in the United States for non-United States
persons or their representatives (including foreign individuals visiting the United
States) must establish appropriate, specific, and, where necessary, enhanced due
diligence policies, procedures, and controls designed to detect and report money
laundering.
    
    Financial institutions are prohibited from establishing, maintaining,
administering or managing correspondent accounts for foreign shell banks (foreign
banks that do not have a physical presence in any country), and will be subject to
certain recordkeeping obligations with respect to correspondent accounts of foreign
banks.
    
    Bank regulators are directed to consider a holding companys effectiveness in
combating money laundering when ruling on Federal Reserve Act and Bank merger act
applications.
 -43-




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##### Table of Contents



Regulation of Wauwatosa Holdings
 Holding Company Regulation
 Wisconsin Law and Regulation.
 Federal Law and Regulation
    -44-




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##### Table of Contents



Federal Securities Laws Regulation
 Securities Exchange Act.
 Sarbanes-Oxley Act of 2002.
    
    
    audit committees and auditor independence;
    
    certification of financial statements by the chief executive officer and the
chief financial officer;
    
    the forfeiture of bonuses or other incentive-based compensation and profits from
the sale of an issuers securities if the issuers financial statements later
require restatement;
    
    a prohibition on insider trading during retirement plan black-out periods;
    
    further disclosure of off-balance sheet transactions;
 -45-




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##### Table of Contents




    
    a prohibition on many personal loans to directors and officers (with exceptions
for financial institutions);
    
    expedited filing requirements for reporting of insiders transactions; and
    
    disclosure of a code of ethics and disclosure of a change or waiver of such
code.
  Regulation of Lamplighter Financial, MHC
 Bank Holding Company Regulation
 Wisconsin Law and Regulation.
 Federal Law and Regulation.
 Mutual Holding Company Regulation
  Membership.
 Permitted Activities
 Examinations and Assessments.
 -46-




---



##### Table of Contents



Federal and State Taxation
 Federal Taxation
 General.
 Method of Accounting.
 Bad Debt Reserves.
 Taxable Distributions and Recapture.
 Alternative Minimum Tax.
 -47-




---



##### Table of Contents



Net Operating Loss Carryovers.
 Corporate Dividends-Received Deduction.
 State Taxation
 Wisconsin State Taxation.
   -48-




---



##### Table of Contents



Item 1A. Risk Factors
 Changing Interest Rates May Hurt Our Profits.
  Wisconsin Tax Developments Could Reduce Our Net Income.
  -49-




---



##### Table of Contents



If Our Allowance for Loan Losses is Not Sufficient to Cover Actual Loan Losses, Our Earnings
Could Decrease.
   A Large Portion of Our Loan Portfolio Is Relatively Unseasoned Over Four-Family Loans, Which May
Be Individually Riskier Than One- To Four-Family Loans.
  -50-




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##### Table of Contents



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.
  If We Declare Dividends on Our Common Stock, Lamplighter Financial, MHC Will be Prohibited From
Waiving the Receipt of Dividends by Current Federal Reserve Board Policy.
  
 Item 1B. Unresolved Staff Comments
  -51-




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##### Table of Contents



Item 2. Properties
  YearAcquired
    
    Date of
    
    December 31, 2005Owned Or
    
    Or
    
    Lease
    
    Net BookLocation
    
    Leased
    
    Leased
    
    Expiration
    
    Value(In Thousands)Main Office:7500 West State StreetWauwatosa, Wisconsin
    
    Own
    
    
    1971
    
    
    
    N/A
    
    
    $
    1,796Branches:6560 South 27th StreetOak Creek, Wisconsin
    
    Own
    
    
    1986
    
    
    
    N/A
    
    
    
    1,22221505 East Moreland Blvd
    
    CapitalWaukesha, Wisconsin
    
    Lease
    
    
    2005
    
    
    
    2009
    
    
    
    5,6381233 Corporate Center DriveOconomowoc, Wisconsin
    
    Own
    
    
    2003
    
    
    
    N/A
    
    
    
    2,9881230 George Towne DrivePewaukee, Wisconsin
    
    Own
    
    
    2004
    
    
    
    N/A
    
    
    
    3,9471405 Capitol Drive(1)Pewaukee, Wisconsin
    
    Lease
    
    
    1999
    
    
    
    2009
    
    
    
    34Corporate Center:11200 West Plank Court(2)Wauwatosa, Wisconsin
    
    Own
    
    
    2004
    
    
    
    N/A
    
    
    
    5,114
 
 (1)
    
    Supermarket banking facility(2)
    
    Leased in 2002, purchased in 2004 -52-




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##### Table of Contents



Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Executive Officers of the Registrant
  ExecutiveOffices and Positions with Wauwatosa Holdings and
    
    OfficerName and Age
    
    Wauwatosa Savings Bank*
    
    Since (1)Donald J. Stephens, 60
(2)
    
    Chairman, Chief Executive Officer and President
of Wauwatosa Holdings, Chairman and Chief
Executive Officer of Wauwatosa Savings Bank
    
    
    1984Douglas S. Gordon, 48
(3)
    
    Chief Operating Officer of Wauwatosa Holdings,
President and Chief Operating Officer of
Wauwatosa Savings Bank
    
    
    2005Richard C. Larson, 49
    
    Chief Financial Officer and Vice President of
Wauwatosa Holdings and of Wauwatosa Savings Bank
    
    
    1990Barbara J. Coutley, 54
    
    Senior Vice President and Secretary of Wauwatosa
Holdings and of Wauwatosa Savings Bank
    
    
    1984William F. Bruss, 36
    
    General Counsel of Wauwatosa Holdings and
General Counsel, Vice President and Compliance
Officer of Wauwatosa Savings Bank
    
    
    2005
 
 *
    
    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.(2)
    
    Mr. Stephens intends to retire from the Company and the Bank effective December 31, 2006.
See Item 9B below for additional information.(3)
    
    Prior to joining Wauwatosa Holdings in October 2005, Mr. Gordon was a personal real estate
investor. -53-




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##### Table of Contents



Part II
 
 Item 5. Market for Registrants Common Equity and Related Stockholder Matters and
Issuer Purchase of Equity Securities
       High
    
    
    LowOctober 5, 2005 to December 31, 2005
    
    $
    11.95
    
    
    $
    10.35
 -54-




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##### Table of Contents



Item 6 . Selected Financial Data
 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
  At December 31,
    
    At June 30,2005
    
    2005
    
    2004
    
    2003
    
    2002
    
    2001(In Thousands)Selected Financial Condition Data:Total assets
    
    $
    1,511,209
    
    
    $
    1,386,132
    
    
    $
    1,240,084
    
    
    $
    1,104,893
    
    
    $
    1,002,435
    
    
    $
    978,616Available for sale securities
    
    
    121,955
    
    
    
    83,991
    
    
    
    99,549
    
    
    
    90,453
    
    
    
    41,733
    
    
    
    39,761Federal Home Loan Bank stock
    
    
    14,405
    
    
    
    14,097
    
    
    
    13,322
    
    
    
    8,658
    
    
    
    8,088
    
    
    
    Loans receivable, net
    
    
    1,300,768
    
    
    
    1,213,561
    
    
    
    1,063,594
    
    
    
    940,053
    
    
    
    895,398
    
    
    
    884,573Cash and cash equivalents
    
    
    16,499
    
    
    
    20,467
    
    
    
    19,392
    
    
    
    28,767
    
    
    
    38,945
    
    
    
    36,065Deposits
    
    
    1,045,593
    
    
    
    1,128,791
    
    
    
    1,035,588
    
    
    
    909,491
    
    
    
    841,873
    
    
    
    863,207Advance
payments by borrowers for taxes
    
    
    181
    
    
    
    15,821
    
    
    
    14,446
    
    
    
    13,649
    
    
    
    13,837
    
    
    
    13,966Advances from the Federal Home
Loan Bank
    
    
    201,212
    
    
    
    93,162
    
    
    
    60,000
    
    
    
    60,000
    
    
    
    35,000
    
    
    
    Total equity
    
    
    231,696
    
    
    
    133,416
    
    
    
    122,799
    
    
    
    114,596
    
    
    
    103,507
    
    
    
    92,703Allowance for loan losses
    
    
    5,250
    
    
    
    4,606
    
    
    
    3,378
    
    
    
    2,970
    
    
    
    2,479
    
    
    
    1,973Non-performing loans
    
    
    18,065
    
    
    
    13,076
    
    
    
    12,015
    
    
    
    15,588
    
    
    
    12,940
    
    
    
    9,598
 -55-




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##### Table of Contents



Six MonthsEnded December 31,
    
    
    Years Ended June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001(In Thousands, except per share amounts)Selected Operating Data:Interest income
    
    $
    42,036
    
    
    $
    36,580
    
    
    $
    74,207
    
    
    $
    66,088
    
    
    $
    66,451
    
    
    $
    70,125
    
    
    $
    68,026Interest expense
    
    
    20,758
    
    
    
    17,290
    
    
    
    36,068
    
    
    
    32,432
    
    
    
    34,459
    
    
    
    41,412
    
    
    
    49,127Net interest income
    
    
    21,278
    
    
    
    19,290
    
    
    
    38,139
    
    
    
    33,656
    
    
    
    31,933
    
    
    
    28,712
    
    
    
    18,899Provision for loan losses
    
    
    1,035
    
    
    
    363
    
    
    
    1,238
    
    
    
    860
    
    
    
    520
    
    
    
    1,336
    
    
    
    879Net interest income after
provision for loan losses
    
    
    20,243
    
    
    
    18,927
    
    
    
    36,901
    
    
    
    32,796
    
    
    
    31,472
    
    
    
    27,377
    
    
    
    19,455Noninterest income
    
    
    2,272
    
    
    
    1,985
    
    
    
    3,311
    
    
    
    3,035
    
    
    
    2,993
    
    
    
    2,141
    
    
    
    1,687Noninterest expense
    
    
    18,331
    
    
    
    12,262
    
    
    
    23,576
    
    
    
    20,384
    
    
    
    17,618
    
    
    
    13,863
    
    
    
    11,637Income before income taxes
    
    
    4,184
    
    
    
    8,650
    
    
    
    16,636
    
    
    
    15,447
    
    
    
    16,847
    
    
    
    15,655
    
    
    
    8,070Provision for income taxes
    
    
    1,471
    
    
    
    2,864
    
    
    
    7,520
    
    
    
    4,863
    
    
    
    5,742
    
    
    
    4,816
    
    
    
    2,740Net income
    
    $
    2,713
    
    
    $
    5,786
    
    
    $
    9,116
    
    
    $
    10,584
    
    
    $
    11,105
    
    
    $
    10,839
    
    
    $
    5,326Loss per share  basic (1)
    
    $
    (0.02
    )
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ALoss per share  diluted (1)
    
    $
    (0.02
    )
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
 
 (1)
    
    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. -56-




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##### Table of Contents



At or for the SixMonths EndedDecember 31,
    
    At or For the Years Ended June 30,2005
    
    2004
    
    2005
    
    2004
    
    2003
    
    2002
    
    2001Selected Financial Ratios (4) and
Other Data:Performance Ratios:Return on average assets
    
    
    0.36
    %
    
    
    0.89
    %
    
    
    0.70
    %
    
    
    0.90
    %
    
    
    1.08
    %
    
    
    1.10
    %
    
    
    0.57
    %Return on average equity
    
    
    3.22
    
    
    
    8.30
    
    
    
    7.12
    
    
    
    8.88
    
    
    
    10.19
    
    
    
    11.21
    
    
    
    6.15Interest rate spread (1)
    
    
    2.43
    
    
    
    2.89
    
    
    
    2.74
    
    
    
    2.70
    
    
    
    2.84
    
    
    
    2.50
    
    
    
    1.49Net interest margin (2)
    
    
    2.96
    
    
    
    3.13
    
    
    
    3.04
    
    
    
    2.98
    
    
    
    3.19
    
    
    
    2.97
    
    
    
    2.07Noninterest expense to average assets
    
    
    2.44
    
    
    
    1.88
    
    
    
    1.81
    
    
    
    1.74
    
    
    
    1.71
    
    
    
    1.40
    
    
    
    1.25Efficiency ratio (3)
    
    
    77.84
    
    
    
    57.64
    
    
    
    56.88
    
    
    
    55.55
    
    
    
    50.36
    
    
    
    44.93
    
    
    
    56.53Average interest-earning assets to
average interest-bearing liabilities
    
    
    118.38
    
    
    
    108.70
    
    
    
    110.29
    
    
    
    109.71
    
    
    
    110.09
    
    
    
    110.92
    
    
    
    110.88Capital Ratios:Equity to total assets at end of period
    
    
    15.33
    %
    
    
    9.43
    %
    
    
    9.63
    %
    
    
    9.90
    %
    
    
    10.37
    %
    
    
    10.33
    %
    
    
    9.47
    %Average equity to average assets
    
    
    11.25
    
    
    
    10.66
    
    
    
    9.83
    
    
    
    10.15
    
    
    
    10.56
    
    
    
    9.79
    
    
    
    9.29Total capital to risk-weighted assets
    
    
    22.79
    
    
    
    14.59
    
    
    
    14.05
    
    
    
    15.02
    
    
    
    15.61
    
    
    
    15.11
    
    
    
    13.87Tier I
capital to risk-weighted assets
    
    
    22.29
    
    
    
    14.20
    
    
    
    13.58
    
    
    
    14.62
    
    
    
    15.22
    
    
    
    15.07
    
    
    
    13.83Tier I capital to average assets
    
    
    14.23
    
    
    
    10.09
    
    
    
    9.84
    
    
    
    10.18
    
    
    
    10.50
    
    
    
    10.25
    
    
    
    9.60Asset Quality Ratios:Allowance for loan losses as a percent
of total loans
    
    
    0.40
    %
    
    
    0.33
    %
    
    
    0.38
    %
    
    
    0.32
    %
    
    
    0.32
    %
    
    
    0.28
    %
    
    
    0.22
    %Allowance for loan losses as a percent
of nonperforming loans
    
    
    29.06
    
    
    
    28.06
    
    
    
    35.22
    
    
    
    28.11
    
    
    
    19.05
    
    
    
    19.16
    
    
    
    20.56Net charge-offs to average outstanding
loans during the period
    
    
    0.06
    
    
    
    0.00
    
    
    
    0.00
    
    
    
    0.05
    
    
    
    0.00
    
    
    
    0.09
    
    
    
    0.07Nonperforming loans as a percent of
total loans
    
    
    1.39
    
    
    
    1.17
    
    
    
    1.07
    
    
    
    1.13
    
    
    
    1.65
    
    
    
    1.44
    
    
    
    1.08Nonperforming assets as a percent of
total assets
    
    
    1.21
    
    
    
    0.96
    
    
    
    0.98
    
    
    
    1.03
    
    
    
    1.41
    
    
    
    1.39
    
    
    
    1.28Other Data:Number of full service offices
    
    
    5
    
    
    
    5
    
    
    
    5
    
    
    
    5
    
    
    
    4
    
    
    
    3
    
    
    
    3Number of limited service offices
    
    
    1
    
    
    
    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 noninterest expense divided by the sum of net interest income and noninterest
income.(4)
    
    Ratios for six-month periods have been annualized. -57-




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##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results
of Operations
 Overview
      -58-




---



##### Table of Contents



Critical Accounting Policies
  Allowance for Loan Losses.
    Income Taxes.
 -59-




---



##### Table of Contents



Comparison of Financial Condition at December 31, 2005 and June 30, 2005
 Total
Assets.
 Loans.
 Securities Available for Sale.
 -60-




---



##### Table of Contents



Deposits .
 Federal Home Loan Bank advances .
 Advance Payments by Borrowers for Taxes.
 Other Liabilities.
 Shareholders Equity .
 -61-




---



##### Table of Contents



Average Balance Sheets, Interest and Yields/Costs
  -62-




---



##### Table of Contents



Six Month Period Ended December 31,2005
    
    
    2004Average
    
    
    Interest and
    
    
    
    
    
    
    Average
    
    
    Interest 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
    %Available for sale securities(5) (6)
    
    
    123,872
    
    
    
    2,440
    
    
    
    3.94
    
    
    
    99,988
    
    
    
    1,784
    
    
    
    3.57Other earning assets
    
    
    54,577
    
    
    
    1,080
    
    
    
    3.96
    
    
    
    24,304
    
    
    
    524
    
    
    
    4.31Total 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
    
    
    
    3.05Advances from the Federal Home Loan Bank and
Federal funds purchased
    
    
    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
    
    
    117,542
    
    
    
    
    
    
    
    
    
    
    
    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 and $504 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 is not stated on a tax equivalent
basis. -63-




---



##### Table of Contents



Year Ended June 30,2005
    
    
    2004
    
    
    2003Average
    
    
    Interest and
    
    
    
    
    
    
    Average
    
    
    Interest and
    
    
    
    
    
    
    Average
    
    
    Interest andBalance
    
    
    Dividends
    
    
    Yield/Cost
    
    
    Balance
    
    
    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
    %
    
    $
    911,743
    
    
    $
    63,815
    (1)
    
    
    7.00
    %Available for sale securities(5) (6)
    
    
    78,870
    
    
    
    3,442
    
    
    
    4.36
    
    
    
    97,092
    
    
    
    3,700
    
    
    
    3.82
    
    
    
    57,322
    
    
    
    1,839
    
    
    
    3.21Other earning assets
    
    
    37,302
    
    
    
    989
    
    
    
    2.65
    
    
    
    35,287
    
    
    
    858
    
    
    
    2.43
    
    
    
    34,847
    
    
    
    798
    
    
    
    2.29Total interest-earning assets
    
    
    1,256,616
    
    
    
    74,207
    
    
    
    5.91
    
    
    
    1,128,890
    
    
    
    66,088
    
    
    
    5.85
    
    
    
    1,003,912
    
    
    
    66,452
    
    
    
    6.62Noninterest-earning assets
    
    
    45,149
    
    
    
    
    
    
    
    
    
    
    
    44,973
    
    
    
    
    
    
    
    
    
    
    
    28,455Total assets
    
    $
    1,301,765
    
    
    
    
    
    
    
    
    
    
    $
    1,173,863
    
    
    
    
    
    
    
    
    
    
    
    1,032,367Interest-bearing liabilities:Demand and money market accounts
    
    
    76,758
    
    
    
    899
    
    
    
    1.17
    
    
    $
    88,324
    
    
    
    884
    
    
    
    1.00
    
    
    $
    65,636
    
    
    
    696
    
    
    
    1.06Savings accounts
    
    
    27,944
    
    
    
    122
    
    
    
    0.44
    
    
    
    22,675
    
    
    
    113
    
    
    
    0.50
    
    
    
    20,401
    
    
    
    150
    
    
    
    0.74Certificates of deposit
    
    
    954,322
    
    
    
    32,068
    
    
    
    3.36
    
    
    
    847,126
    
    
    
    29,084
    
    
    
    3.43
    
    
    
    772,862
    
    
    
    31,496
    
    
    
    4.08Total interest-bearing deposits
    
    
    1,059,024
    
    
    
    33,089
    
    
    
    3.12
    
    
    
    958,125
    
    
    
    30,081
    
    
    
    3.14
    
    
    
    858,899
    
    
    
    32,342
    
    
    
    3.77Advances from the Federal Home Loan Bank and
Federal funds purchased
    
    
    74,785
    
    
    
    2,783
    
    
    
    3.72
    
    
    
    65,237
    
    
    
    2,109
    
    
    
    3.23
    
    
    
    46,866
    
    
    
    1,800
    
    
    
    3.84Other interest bearing liabilities
    
    
    5,579
    
    
    
    196
    
    
    
    3.51
    
    
    
    5,624
    
    
    
    242
    
    
    
    4.29
    
    
    
    6,140
    
    
    
    317
    
    
    
    5.16Total interest-bearing liabilities
    
    
    1,139,388
    
    
    
    36,068
    
    
    
    3.17
    
    
    
    1,028,986
    
    
    
    32,432
    
    
    
    3.15
    
    
    
    911,905
    
    
    
    34,459
    
    
    
    3.78Noninterest-bearing liabilities
    
    
    34,351
    
    
    
    
    
    
    
    
    
    
    
    25,680
    
    
    
    
    
    
    
    
    
    
    
    11,445Total liabilities
    
    
    1,173,739
    
    
    
    
    
    
    
    
    
    
    
    1,054,666
    
    
    
    
    
    
    
    
    
    
    
    923,350Equity
    
    
    128,026
    
    
    
    
    
    
    
    
    
    
    
    119,197
    
    
    
    
    
    
    
    
    
    
    
    109,017Total liabilities and equity
    
    $
    1,301,765
    
    
    
    
    
    
    
    
    
    
    $
    1,173,863
    
    
    
    
    
    
    
    
    
    
    $
    1,032,367Net interest income
    
    
    
    
    
    $
    38,139
    
    
    
    
    
    
    
    
    
    
    $
    33,656
    
    
    
    
    
    
    
    
    
    
    $
    31,993Net interest rate spread (2)
    
    
    
    
    
    
    
    
    
    
    2.74
    %
    
    
    
    
    
    
    
    
    
    
    2.70
    %
    
    
    
    
    
    
    
    
    
    
    2.84
    %Net interest-earning assets (3)
    
    $
    117,288
    
    
    
    
    
    
    
    
    
    
    $
    99,904
    
    
    
    
    
    
    
    
    
    
    $
    92,007Net interest margin (4)
    
    
    
    
    
    
    
    
    
    
    3.04
    %
    
    
    
    
    
    
    
    
    
    
    2.98
    %
    
    
    
    
    
    
    
    
    
    
    3.19
    %Average interest-earning assets to average
interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    110.29
    %
    
    
    
    
    
    
    
    
    
    
    109.71
    %
    
    
    
    
    
    
    
    
    
    
    110.09
    %
 
 (1)
    
    Includes net deferred loan fee amortization income of $932, $1,008 and $930 for the years
ended June 30, 2005, 2004 and 2003, 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 is not stated on a tax equivalent
basis. -64-




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##### Table of Contents



Rate/Volume Analysis
  Six Month Period EndedDecember 31,
    
    
    Years Ended June 30,
    
    
    Years Ended June 30,2005 vs. 2004
    
    
    2005 vs. 2004
    
    
    2004 vs. 2003Increase (Decrease) Due to
    
    
    Increase (Decrease) Due to
    
    
    Increase (Decrease) Due toVolume
    
    
    Rate
    
    
    Net
    
    
    Volume
    
    
    Rate
    
    
    Net
    
    
    Volume
    
    
    Rate
    
    
    Net(In Thousands)Interest and dividend income:Loans receivable(1) (2)
    
    $
    4,649
    
    
    $
    (405
    )
    
    $
    4,244
    
    
    $
    8,811
    
    
    $
    (567
    )
    
    $
    8,244
    
    
    $
    5,625
    
    
    $
    (7,909
    )
    
    $
    (2,284
    )Securities interest and income from other earning
assets(3)
    
    
    1,106
    
    
    
    106
    
    
    
    1,212
    
    
    
    (590
    )
    
    
    465
    
    
    
    (125
    )
    
    
    1,596
    
    
    
    325
    
    
    
    1,921Total interest-earning assets
    
    
    5,755
    
    
    
    (299
    )
    
    
    5,456
    
    
    
    8,221
    
    
    
    (102
    )
    
    
    8,119
    
    
    
    7,221
    
    
    
    (7,584
    )
    
    
    (363
    )Interest expense:Demand and Money Market accounts
    
    
    
    
    
    
    380
    
    
    
    380
    
    
    
    (124
    )
    
    
    139
    
    
    
    15
    
    
    
    229
    
    
    
    (40
    )
    
    
    189Savings accounts
    
    
    (20
    )
    
    
    17
    
    
    
    (3
    )
    
    
    24
    
    
    
    (15
    )
    
    
    9
    
    
    
    15
    
    
    
    (52
    )
    
    
    (37
    )Certificates of deposit
    
    
    516
    
    
    
    1,445
    
    
    
    1,961
    
    
    
    3,613
    
    
    
    (630
    )
    
    
    2,983
    
    
    
    2,846
    
    
    
    (5,259
    )
    
    
    (2,411
    )Total interest-bearing deposits
    
    
    496
    
    
    
    1,842
    
    
    
    2,338
    
    
    
    3,513
    
    
    
    (506
    )
    
    
    3,007
    
    
    
    3,090
    
    
    
    (5,351
    )
    
    
    (2,259
    )FHLB Advances
    
    
    946
    
    
    
    59
    
    
    
    1,005
    
    
    
    (1,128
    )
    
    
    1,802
    
    
    
    674
    
    
    
    626
    
    
    
    (317
    )
    
    
    309Other interest-bearing liabilities
    
    
    14
    
    
    
    111
    
    
    
    125
    
    
    
    (2
    )
    
    
    (43
    )
    
    
    (45
    )
    
    
    (25
    )
    
    
    (51
    )
    
    
    (76
    )Total interest-bearing liabilities
    
    
    1,456
    
    
    
    2,012
    
    
    
    3,468
    
    
    
    2,383
    
    
    
    1,253
    
    
    
    3,636
    
    
    
    3,691
    
    
    
    (5,719
    )
    
    
    (2,026
    )Net change in interest income
    
    $
    4,299
    
    
    $
    (2,311
    )
    
    $
    1,988
    
    
    $
    5,838
    
    
    $
    (1,355
    )
    
    $
    4,483
    
    
    $
    3,530
    
    
    $
    (1,865
    )
    
    $
    1,663
 
 (1)
    
    Includes net deferred loan fee amortization income of $512,000, $504,000, $932,000,
$1,008,000 and $930,000 for the six month periods ended December 31, 2005 and 2004 and for the
years ended June 30, 2005, 2004 and 2003, respectively.(2)
    
    Non-accrual loans have been included in average loans receivable balance.(3)
    
    Average balance of available for sale securities is based on amortized historical cost. Comparison of Operating Results for the Six Month Periods Ended December 31, 2005 and December
31, 2004
 General.
 Interest Income.
 -65-




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##### Table of Contents



Interest Expense.
 Net Interest Income.
 Provision for Loan Losses.
 Noninterest Income.
 -66-




---



##### Table of Contents



Noninterest Expense.
 Income Tax Expense.
 Comparison of Operating Results for the Years Ended June 30, 2005 (Fiscal 2005) and June 30, 2004
(Fiscal 2004)
 General.
 -67-




---



##### Table of Contents



Interest Income.
 Interest Expense.
 Net Interest Income.
 Provision for Loan Losses.
 Noninterest Income.
 Noninterest Expense.
 Income Tax Expense.
 -68-




---



##### Table of Contents



Comparison of Operating Results for the Years Ended June 30, 2004 (Fiscal 2004) and June 30, 2003
(Fiscal 2003)
 General.
 Interest Income.
 Interest Expense.
 Net Interest Income.
 Provision for Loan Losses.
 -69-




---



##### Table of Contents



Noninterest Income.
  Noninterest Expense.
 Income Tax Expense.
 Liquidity and Capital Resources
  -70-




---



##### Table of Contents



-71-




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##### Table of Contents



Contractual Obligations, Commitments, Contingent Liabilities, and Off-balance Sheet Arrangements
   Contractual Obligations
 MoreThan
    
    
    MoreOne
    
    
    ThanYear
    
    
    ThreeOne
    
    
    Through
    
    
    YearsYear
    
    
    Three
    
    
    Through
    
    
    OverTotal
    
    
    or Less
    
    
    Years
    
    
    Five Years
    
    
    Five Years(In Thousands)Federal Home Loan Bank advances(1)
    
    $
    201,212
    
    
    $
    87,209
    
    
    $
    89,003
    
    
    $
    25,000
    
    
    $
    Operating leases(2)
    
    
    81
    
    
    
    30
    
    
    
    51
    
    
    
    
    
    
    
    Capital lease
    
    
    4,275
    
    
    
    300
    
    
    
    600
    
    
    
    3,375
    
    
    
    Salary continuation agreements
    
    
    3,730
    
    
    
    406
    
    
    
    1,067
    
    
    
    1,152
    
    
    
    1,105Total Contractual Obligations
    
    $
    209,298
    
    
    $
    87,945
    
    
    $
    90,721
    
    
    $
    29,527
    
    
    $
    1,105
 
 (1)
    
    Secured under a blanket security agreement on qualifying assets, principally,
mortgage loans. Excludes interest which will accrue on the advances.(2)
    
    Represents non-cancelable operating leases for offices. -72-




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##### Table of Contents



Other Commitments
 More
    
    
    Morethan
    
    
    thanOne
    
    
    ThreeYear
    
    
    YearsThrough
    
    
    Through
    
    
    OverOne Year
    
    
    Three
    
    
    Five
    
    
    FiveTotal
    
    
    or Less
    
    
    Years
    
    
    Years
    
    
    Years(In Thousands)Real estate loan commitments(1)
    
    $
    43,375
    
    
    $
    43,375
    
    
    $
    
    
    
    $
    
    
    
    $
    Unused portion of home equity lines of credit(2)
    
    
    31,809
    
    
    
    31,809
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of construction loans(3)
    
    
    82,712
    
    
    
    82,712
    
    
    
    
    
    
    
    
    
    
    
    Standby letters of credit
    
    
    1,576
    
    
    
    1,502
    
    
    
    40
    
    
    
    
    
    
    
    34Total Other Commitments
    
    $
    159,472
    
    
    $
    159,398
    
    
    $
    40
    
    
    
    
    
    
    $
    4
 
 General:
    
    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 and generally have fixed expiration dates or
other termination clauses.(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 Inflation and Changing Prices
  -73-




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##### Table of Contents



Quarterly Financial Information
  Quarter EndedMarch 31
    
    
    June 30
    
    
    September 30
    
    
    December 31(In thousands, except per share amounts)2005 (unaudited)Interest income
    
    $
    18,384
    
    
    $
    19,271
    
    
    
    20,550
    
    
    
    21,486Interest expense
    
    
    8,999
    
    
    
    9,779
    
    
    
    10,231
    
    
    
    10,527Net interest income
    
    
    9,385
    
    
    
    9,492
    
    
    
    10,319
    
    
    
    10,959Provision for loan losses
    
    
    900
    
    
    
    (26
    )
    
    
    209
    
    
    
    826Net income after provision
for loan losses
    
    
    8,485
    
    
    
    9,518
    
    
    
    10,110
    
    
    
    10,133Total noninterest income
    
    
    601
    
    
    
    697
    
    
    
    1,005
    
    
    
    1,267Total noninterest expense
    
    
    5,433
    
    
    
    5,881
    
    
    
    5,753
    
    
    
    12,578Income (loss) before income taxes
    
    
    3,653
    
    
    
    4,334
    
    
    
    5,362
    
    
    
    (1,178
    )Income taxes (benefit)
    
    
    3,062
    
    
    
    1,594
    
    
    
    1,940
    
    
    
    (469
    )Net income (loss)
    
    $
    591
    
    
    $
    2,740
    
    
    
    3,422
    
    
    
    (709
    )Loss per
share  basic
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    $
    (0.02
    )Loss per share  diluted
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    $
    (0.02
    )2004 (unaudited)Interest income
    
    $
    16,452
    
    
    $
    16,999
    
    
    $
    17,643
    
    
    $
    18,937Interest expense
    
    
    8,038
    
    
    
    8,138
    
    
    
    8,441
    
    
    
    8,849Net interest income
    
    
    8,414
    
    
    
    8,861
    
    
    
    9,202
    
    
    
    10,088Provision for loan losses
    
    
    337
    
    
    
    336
    
    
    
    118
    
    
    
    245Net income after provision
for loan losses
    
    
    8,077
    
    
    
    8,525
    
    
    
    9,084
    
    
    
    9,843Total noninterest income
    
    
    696
    
    
    
    694
    
    
    
    1,256
    
    
    
    729Total noninterest expense
    
    
    5,257
    
    
    
    5,012
    
    
    
    5,092
    
    
    
    7,170Income before income taxes
    
    
    3,516
    
    
    
    4,207
    
    
    
    5,248
    
    
    
    3,402Income taxes
    
    
    1,105
    
    
    
    1,381
    
    
    
    1,794
    
    
    
    1,070Net income
    
    $
    2,411
    
    
    $
    2,826
    
    
    $
    3,454
    
    
    $
    2,332Earnings per
share  basic
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/aEarnings per share  diluted
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
    
    
    
    n/a
 -74-




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##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 Management of Market Risk
 General.
  Income Simulation.
 -75-




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##### Table of Contents



PercentageIncrease (Decrease) in Estimated NetAnnual Interest IncomeOver 24 Months300 basis point increase in
rates
    
    
    (15.41
    %)200 basis point increase in
rates
    
    
    (7.91
    %)100 basis point increase in
rates
    
    
    (3.72
    %)100 basis point decrease in
rates
    
    
    1.49
    %
  -76-




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##### Table of Contents



Item 8. Financial Statements and Supplementary Data
 Report of Independent Registered Public Accounting Firm
 
    /s/ KPMG LLP
   -77-




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    /s/ Ernst & Young LLP
 
 -78-




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##### Table of Contents



Wauwatosa Holdings, Inc. and Subsidiaries
Consolidated Statements of Financial Condition
December 31, 2005, June 30, 2005 and 2004
 December 31,
    
    
    June 30,
    
    
    June 30,2005
    
    
    2005
    
    
    2004(In Thousands, except share data)AssetsCash
    
    $
    8,761
    
    
    
    10,107
    
    
    
    11,116Federal funds sold
    
    
    5,388
    
    
    
    8,779
    
    
    
    7,975Short term investments
    
    
    2,349
    
    
    
    1,581
    
    
    
    301Cash and cash equivalents
    
    
    16,498
    
    
    
    20,467
    
    
    
    19,392Securities available-for-sale (at fair value)
    
    
    121,955
    
    
    
    83,991
    
    
    
    99,549Loans receivable
    
    
    1,306,018
    
    
    
    1,218,167
    
    
    
    1,066,972Less: Allowance for loan losses
    
    
    5,250
    
    
    
    4,606
    
    
    
    3,378Loans receivable, net
    
    
    1,300,768
    
    
    
    1,213,561
    
    
    
    1,063,594Office properties and equipment, net
    
    
    25,022
    
    
    
    24,018
    
    
    
    15,894Federal Home Loan Bank stock, at cost
    
    
    14,406
    
    
    
    14,097
    
    
    
    13,321Cash surrender value of life insurance
    
    
    22,792
    
    
    
    22,078
    
    
    
    20,981Prepaid expenses and other assets
    
    
    9,768
    
    
    
    7,920
    
    
    
    7,353Total assets
    
    $
    1,511,209
    
    
    
    1,386,132
    
    
    
    1,240,084Liabilities and Shareholders EquityLiabilities:Demand deposits
    
    $
    82,290
    
    
    
    100,861
    
    
    
    99,182Money market and savings deposits
    
    
    33,565
    
    
    
    27,117
    
    
    
    28,474Time deposits
    
    
    929,738
    
    
    
    1,000,813
    
    
    
    907,932Total deposits
    
    
    1,045,593
    
    
    
    1,128,791
    
    
    
    1,035,588Federal Home Loan Bank advances short-term
    
    
    87,209
    
    
    
    35,000
    
    
    
    25,000Federal Home Loan Bank advances long-term
    
    
    114,003
    
    
    
    58,162
    
    
    
    35,000Advance payments by borrowers for taxes
    
    
    181
    
    
    
    15,821
    
    
    
    14,446Other liabilities
    
    
    32,527
    
    
    
    14,942
    
    
    
    7,252Total liabilities
    
    
    1,279,513
    
    
    
    1,252,716
    
    
    
    1,117,286Shareholders 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, 33,723,750 shares issued, 33,038,385 shares
outstanding)
    
    
    337
    
    
    
    
    
    
    
    Additional paid-in capital
    
    
    103,859
    
    
    
    
    
    
    
    Accumulated other comprehensive loss (net of taxes)
    
    
    (1,571
    )
    
    
    (627
    )
    
    
    (2,129
    )Retained earnings
    
    
    136,756
    
    
    
    134,043
    
    
    
    124,927Unearned ESOP shares
    
    
    (7,685
    )
    
    
    
    
    
    
    Total shareholders equity
    
    
    231,696
    
    
    
    133,416
    
    
    
    122,798Total liabilities and shareholders equity
    
    $
    1,511,209
    
    
    
    1,386,132
    
    
    
    1,240,084
 See accompanying notes to consolidated financial statements.
 -79-




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##### Table of Contents



Wauwatosa Holdings, Inc. and Subsidiaries
Consolidated Statements of Income
Six Months Ended December 31, 2005 and 2004
Years Ended June 30, 2005, 2004 and 2003
 Six months endedDecember 31,
    
    
    Years ended June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2003(In Thousands, except per share amounts)(Unaudited)Interest income:Loans
    
    $
    38,516
    
    
    
    34,272
    
    
    
    69,775
    
    
    
    61,530
    
    
    
    63,815Mortgage-related securities
    
    
    1,389
    
    
    
    1,206
    
    
    
    2,283
    
    
    
    3,264
    
    
    
    1,143Debt securities, federal funds sold and
short-term investments
    
    
    2,131
    
    
    
    1,102
    
    
    
    2,149
    
    
    
    1,294
    
    
    
    1,493Total interest income
    
    
    42,036
    
    
    
    36,580
    
    
    
    74,207
    
    
    
    66,088
    
    
    
    66,451Interest expense:Deposits
    
    
    18,296
    
    
    
    15,960
    
    
    
    33,285
    
    
    
    30,324
    
    
    
    32,659Borrowings
    
    
    2,462
    
    
    
    1,330
    
    
    
    2,783
    
    
    
    2,108
    
    
    
    1,800Total interest expense
    
    
    20,758
    
    
    
    17,290
    
    
    
    36,068
    
    
    
    32,432
    
    
    
    34,459Net interest income
    
    
    21,278
    
    
    
    19,290
    
    
    
    38,139
    
    
    
    33,656
    
    
    
    31,992Provision for loan losses
    
    
    1,035
    
    
    
    363
    
    
    
    1,238
    
    
    
    860
    
    
    
    520Net interest income after
provision for loan losses
    
    
    20,243
    
    
    
    18,927
    
    
    
    36,901
    
    
    
    32,796
    
    
    
    31,472Noninterest income:Service charges on loans and deposits
    
    
    940
    
    
    
    929
    
    
    
    1,216
    
    
    
    1,144
    
    
    
    1,507Increase in cash surrender value of life insurance
    
    
    587
    
    
    
    424
    
    
    
    642
    
    
    
    1,007
    
    
    
    621Gain on sale of securities
    
    
    
    
    
    
    
    
    
    
    12
    
    
    
    47
    
    
    
    30Other
    
    
    745
    
    
    
    632
    
    
    
    1,441
    
    
    
    837
    
    
    
    835Total noninterest income
    
    
    2,272
    
    
    
    1,985
    
    
    
    3,311
    
    
    
    3,035
    
    
    
    2,993Noninterest expenses:Compensation, payroll taxes, and other employee benefits
    
    
    7,404
    
    
    
    5,705
    
    
    
    11,434
    
    
    
    10,763
    
    
    
    8,730Occupancy, office furniture, and equipment
    
    
    1,802
    
    
    
    1,714
    
    
    
    3,482
    
    
    
    3,470
    
    
    
    2,535Advertising
    
    
    764
    
    
    
    536
    
    
    
    1,128
    
    
    
    1,025
    
    
    
    862Data processing
    
    
    840
    
    
    
    570
    
    
    
    1,142
    
    
    
    1,048
    
    
    
    1,175Charitable contributions
    
    
    5,310
    
    
    
    1,713
    
    
    
    2,088
    
    
    
    987
    
    
    
    1,000Communications
    
    
    300
    
    
    
    272
    
    
    
    591
    
    
    
    525
    
    
    
    528Professional fees
    
    
    529
    
    
    
    230
    
    
    
    627
    
    
    
    386
    
    
    
    386Other
    
    
    1,382
    
    
    
    1,522
    
    
    
    3,084
    
    
    
    2,180
    
    
    
    2,402Total noninterest expenses
    
    
    18,331
    
    
    
    12,262
    
    
    
    23,576
    
    
    
    20,384
    
    
    
    17,618Income before income taxes
    
    
    4,184
    
    
    
    8,650
    
    
    
    16,636
    
    
    
    15,447
    
    
    
    16,847Income taxes
    
    
    1,471
    
    
    
    2,864
    
    
    
    7,520
    
    
    
    4,863
    
    
    
    5,742Net income
    
    $
    2,713
    
    
    
    5,786
    
    
    
    9,116
    
    
    
    10,584
    
    
    
    11,105Loss per share:Basic
    
    $
    (0.02
    )
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ADiluted
    
    $
    (0.02
    )
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AWeighted average shares outstanding:Basic
    
    
    33,135,424
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ADiluted
    
    
    33,135,424
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
 See accompanying notes to consolidated financial statements.
 -80-




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##### Table of Contents



Wauwatosa Holdings, Inc. and Subsidiaries
Consolidated Statements of Changes in
Shareholders Equity
Six Months Ended December 31, 2005 
Years Ended June 30, 2005, 2004 and 2003
 AccumulatedCommon
    
    
    Additional
    
    
    
    
    
    
    Unearned
    
    
    OtherStock
    
    
    Paid-In
    
    
    Retained
    
    
    ESOP
    
    
    Comprehensive
    
    
    TotalShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Shares
    
    
    Income (Loss)
    
    
    Equity(In Thousands)Balances at June 30, 2005
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    134,043
    
    
    
    
    
    
    
    (627
    )
    
    
    133,416Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,713
    
    
    
    
    
    
    
    
    
    
    
    2,713Other comprehensive income:Net unrealized holding gains 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.
 -81-




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##### Table of Contents



Wauwatosa Holdings, Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders Equity
Six Months Ended December 31, 2005 
Years Ended June 30, 2005, 2004 and 2003
 AccumulatedOtherComprehensive
    
    
    RetainedIncome (Loss)
    
    
    Earnings
    
    
    Total Equity(In Thousands)Balances at June 30, 2002
    
    $
    269
    
    
    
    103,238
    
    
    
    103,507Comprehensive income:Net income
    
    
    
    
    
    
    11,105
    
    
    
    11,105Other comprehensive income:Net unrealized holding gains on available for
sale securities arising during the year, net of
taxes $1
    
    
    3
    
    
    
    
    
    
    
    3Less reclassification adjustment for net gains
on available for sale securities realized in net
income, net of taxes of $10
    
    
    (20
    )
    
    
    
    
    
    
    (20
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    11,088Balances at June 30, 2003
    
    
    252
    
    
    
    114,343
    
    
    
    114,595Comprehensive income:Net income
    
    
    
    
    
    
    10,584
    
    
    
    10,584Other comprehensive income:Net unrealized holding losses on available for
sale securities arising during the year, net of
taxes $1,211
    
    
    (2,350
    )
    
    
    
    
    
    
    (2,350
    )Less reclassification adjustment for net gains
on available for sale securities realized in net
income, net of taxes of $16
    
    
    (31
    )
    
    
    
    
    
    
    (31
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    8,203Balances at June 30, 2004
    
    
    (2,129
    )
    
    
    124,927
    
    
    
    122,798Comprehensive income:Net income
    
    
    
    
    
    
    9,116
    
    
    
    9,116Other comprehensive income:Net unrealized holding gains on available for sale securities arising
during the year, net of taxes $799
    
    
    1,509
    
    
    
    
    
    
    
    1,509Less reclassification adjustment for net gains 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
    
    $
    (627
    )
    
    
    134,043
    
    
    
    133,416
 See accompanying notes to consolidated financial statements.
 -82-




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##### Table of Contents



Wauwatosa Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Six Months Ended December 31, 2005 and 2004
Years Ended June 30, 2005, 2004 and 2003
 Six months endedDecember 31,
    
    
    Years ended June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2003(In Thousands)(Unaudited)Operating activities:Net income
    
    $
    2,713
    
    
    
    5,786
    
    
    
    9,116
    
    
    
    10,584
    
    
    
    11,105Adjustments to reconcile net income to net
cash provided by operating activities:Provision for loan losses
    
    
    1,035
    
    
    
    363
    
    
    
    1,238
    
    
    
    860
    
    
    
    520Provision for depreciation
    
    
    1,053
    
    
    
    945
    
    
    
    1,607
    
    
    
    1,353
    
    
    
    1,242Deferred income taxes
    
    
    (1,933
    )
    
    
    (780
    )
    
    
    (1,192
    )
    
    
    (133
    )
    
    
    287Net amortization of premium on debt and mortgage-related
securities
    
    
    (81
    )
    
    
    (229
    )
    
    
    49
    
    
    
    190
    
    
    
    210Amortization of unearned ESOP shares
    
    
    854
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Charitable contribution of common stock
    
    
    5,565
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Decrease (increase) in accrued interest receivable
    
    
    (412
    )
    
    
    (1
    )
    
    
    (230
    )
    
    
    87
    
    
    
    (255
    )Increase in cash surrender value of life insurance
    
    
    (587
    )
    
    
    (451
    )
    
    
    (642
    )
    
    
    (1,007
    )
    
    
    (620
    )Increase (decrease) in accrued interest on deposits
    
    
    68
    
    
    
    480
    
    
    
    1,269
    
    
    
    333
    
    
    
    (782
    )Increase (decrease) in other liabilities
    
    
    1,241
    
    
    
    2,322
    
    
    
    3,004
    
    
    
    (238
    )
    
    
    26FHLB stock dividends
    
    
    (309
    )
    
    
    (400
    )
    
    
    (776
    )
    
    
    (664
    )
    
    
    (240
    )Gain on sale of securities
    
    
    
    
    
    
    
    
    
    
    (12
    )
    
    
    (47
    )
    
    
    (30
    )Gain on sale of office properties and equipment
    
    
    (571
    )
    
    
    (488
    )
    
    
    (488
    )
    
    
    
    
    
    
    Other
    
    
    1,144
    
    
    
    1,654
    
    
    
    118
    
    
    
    (94
    )
    
    
    (677
    )Net cash provided by operating activities
    
    
    9,780
    
    
    
    9,201
    
    
    
    13,061
    
    
    
    11,224
    
    
    
    10,786Investing activities:Proceeds from maturities of debt securities
    
    
    6,350
    
    
    
    1,000
    
    
    
    25,397
    
    
    
    19,300
    
    
    
    52,360Proceeds from sales of debt securities
    
    
    
    
    
    
    
    
    
    
    262
    
    
    
    5,040
    
    
    
    Purchases of debt securities
    
    
    (6,700
    )
    
    
    (10,000
    )
    
    
    (34,299
    )
    
    
    (31,885
    )
    
    
    (51,578
    )Principal repayments on mortgage-related securities
    
    
    10,323
    
    
    
    14,914
    
    
    
    21,091
    
    
    
    31,993
    
    
    
    18,764Proceeds from sales of mortgage-related securities
    
    
    
    
    
    
    5,347
    
    
    
    5,348
    
    
    
    2,056
    
    
    
    9,827Purchase of mortgage-related securities
    
    
    (49,682
    )
    
    
    
    
    
    
    
    
    
    
    (39,400
    )
    
    
    (78,299
    )Purchase of FHLB stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,000
    )
    
    
    (329
    )Net increase in loans receivable
    
    
    (88,242
    )
    
    
    (79,554
    )
    
    
    (153,126
    )
    
    
    (127,550
    )
    
    
    (48,396
    )Purchase of bank owned life insurance
    
    
    (126
    )
    
    
    (126
    )
    
    
    (456
    )
    
    
    (363
    )
    
    
    (13,275
    )Net purchases of office properties and equipment
    
    
    (2,346
    )
    
    
    (4,964
    )
    
    
    (6,506
    )
    
    
    (5,087
    )
    
    
    (6,768
    )Proceeds from sales of foreclosed properties
    
    
    235
    
    
    
    732
    
    
    
    1,883
    
    
    
    2,403
    
    
    
    4,299Proceeds from sales of premises and equipment
    
    
    847
    
    
    
    680
    
    
    
    680
    
    
    
    
    
    
    
    Net cash used by investing activities
    
    
    (129,341
    )
    
    
    (71,971
    )
    
    
    (139,726
    )
    
    
    (147,493
    )
    
    
    (113,395
    )
 See accompanying notes to consolidated financial statements.
 -83-




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##### Table of Contents



Wauwatosa Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Six Months Ended December 31, 2005 and 2004
Years Ended June 30, 2005, 2004 and 2003
 Six months endedDecember 31,
    
    
    Years ended June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2003(In Thousands)(Unaudited)Financing activities:Net increase (decrease) in deposits
    
    
    (83,198
    )
    
    
    47,408
    
    
    
    93,203
    
    
    
    126,097
    
    
    
    67,620Net change in short-term FHLB advances
    
    
    38,000
    
    
    
    (25,000
    )
    
    
    10,000
    
    
    
    (10,000
    )
    
    
    Proceeds from long-term FHLB advances
    
    
    70,050
    
    
    
    21,656
    
    
    
    23,162
    
    
    
    10,000
    
    
    
    25,000Proceeds from federal funds purchased
    
    
    
    
    
    
    15,000
    
    
    
    
    
    
    
    
    
    
    
    Net increase (decrease) in advance payments by borrowers for taxes
    
    
    648
    
    
    
    (2,116
    )
    
    
    1,375
    
    
    
    797
    
    
    
    (188
    )Net proceeds from sale of stock
    
    
    98,731
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Capitalization of Lamplighter, MHC
    
    
    (100
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase of ESOP shares
    
    
    (8,539
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net cash provided by financing activities
    
    
    115,592
    
    
    
    56,948
    
    
    
    127,740
    
    
    
    126,894
    
    
    
    92,432Increase (decrease) in cash and cash
equivalents
    
    
    (3,969
    )
    
    
    (5,822
    )
    
    
    1,075
    
    
    
    (9,375
    )
    
    
    (10,177
    )Cash and cash equivalents at beginning of period
    
    
    20,467
    
    
    
    19,392
    
    
    
    19,392
    
    
    
    28,767
    
    
    
    38,944Cash and cash equivalents at end of period
    
    $
    16,498
    
    
    
    13,570
    
    
    
    20,467
    
    
    
    19,392
    
    
    
    28,767Supplemental information:Cash paid or credited during the period for:Income tax payments
    
    $
    2,970
    
    
    
    3,130
    
    
    
    5,925
    
    
    
    5,045
    
    
    
    5,115Interest payments
    
    
    20,691
    
    
    
    16,810
    
    
    
    34,798
    
    
    
    32,100
    
    
    
    35,241Noncash investing activities:Loans receivable transferred to foreclosed properties
    
    
    
    
    
    
    1,571
    
    
    
    1,921
    
    
    
    1,057
    
    
    
    2,304Obligations under capital lease
    
    
    
    
    
    
    
    
    
    
    3,423
    
    
    
    
    
    
    
    Non Cash financing activities:Long-term FHLB advances reclassified to short-term
    
    
    14,209
    
    
    
    
    
    
    
    25,000
    
    
    
    25,000
    
    
    
    10,000
 See accompanying notes to consolidated financial statements.
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
    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 Wisconsin-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 68.3% owned by
Lamplighter Financial, MHC.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 periods ended December
31, 2005 and December 31, 2004 are not necessarily indicative of results that may be
expected for any other interim period or for an entire fiscal year. The unaudited financial
statements for the six months ended December 31, 2004, in the opinion of management, include
all adjustments (consisting of normal accruals) necessary for a fair presentation in
accordance with U.S. generally accepted accounting principles.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. 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 Wauwatosa, Oak Creek, Waukesha, Oconomowoc, and Pewaukee, 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
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
    and assumptions include the allowance for loan losses and deferred income taxes. Actual
results could differ from those estimates.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)
    
    SecuritiesManagement has designated all 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.
Realized gains and losses and impairment in value determined to be other than temporary are
included in gain or loss on the sale of investments and mortgage-related securities. The
cost of securities sold is based on the specific identification method.Federal 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. In October 2005, the FHLB announced that it was indefinitely suspending the right
of members to redeem excess amounts of FHLB stock. FHLB dividends are recognized as income
on their ex-dividend date.h)
    
    Interest on LoansInterest on loans is accrued and credited to income as it is earned. Allowances are
established for uncollected interest on mortgage loans on which any payments are 90 days or
more past due and are determined to be uncollectible. 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.i)
    
    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,
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
    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; peer group
comparisons; 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.j)
    
    Foreclosed PropertiesForeclosed properties acquired through, or in lieu of, loan foreclosure are recorded at the
lower of cost or fair value, minus estimated costs to sell at the date of foreclosure.
Impairments of foreclosed properties after acquisition are charged to expense at the time of
impairment.k)
    
    Loan FeesLoan origination and commitment fees and certain direct loan origination costs are deferred
and the net amount amortized as an adjustment of the related loans 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.l)
    
    Cash Surrender Value of Life InsuranceThe Company purchased bank owned life insurance on the lives of certain officers. The
Company is the beneficiary of the life insurance policies. The cash surrender value of life
insurance is reported at the amount that would be received in cash if the polices are
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 TaxesDeferred 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
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
    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 in income in the period that includes the enactment
date. In assessing the realizability of deferred tax assets, management considers whether it
is more likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent upon the generation
of future taxable income during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of deferred tax liabilities,
projected future taxable income, and, if necessary, tax planning strategies in making this
assessment.The Company accrues for income tax exposures for amounts management deems probable to be
paid upon settlement of the related income tax issue. Amounts are accrued in the period in
which the exposure becomes probable and estimable. When the year to which the exposure
relates is closed or when the amount is no longer determined to be probable, the accrual is
reversed as a reduction of income tax expense.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. The Company does not currently have any securities or
contracts to issue common stock that, if exercised or converted into common stock, would
result in dilution. Shares of the Employee Stock Ownership Plan committed to be released
are considered outstanding for both common and diluted EPS. The calculation of EPS 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.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 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 2004 accounts have been reclassified to conform to the 2005 presentation.
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
    s)
    
    Recent Accounting PronouncementsIn May 2005, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 154, Accounting Changes and Error Corrections  a
replacement of APB Opinion No. 20 and FASB Statement No. 3 (SFAS 154). SFAS 154 changes
the accounting for and reporting of a change in accounting principle by requiring
retrospective application to prior periods financial statements of changes in accounting
principle unless impracticable. SFAS 154 is effective for accounting changes made in fiscal
years beginning after December 15, 2005. The Company does not expect the adoption of SFAS
154 will have a material impact on its results of operations, financial position, or
liquidity.In November 2005, the FASB issued FASB Staff Position (FSP) 115-1, The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments".This FSP
provides additional guidance on when an investment in a debt or equity security should be
considered impaired and when that impairment should be considered other-than-temporary and
recognized as a loss in earnings. Specifically, the guidance clarifies that an investor
should recognize an impairment loss no later than when the impairment is deemed
other-than-temporary, even if a decision to sell has not been made. The FSP also requires
certain disclosures about unrealized losses that have not been recognized as
other-than-temporary impairments. The Company applied the guidance in this FSP in 2005.
There was not a material impact on results of operations, financial position or liquidity.In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial
Instrumentsan amendment of FASB Statements No. 133 and 140 (SFAS 155). SFAS 155 amends
FASB Statements No. 133, Accounting for Derivative Instruments and Hedging Activities",and
No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities for the following purposes: permit fair value remeasurement for any hybrid
financial instrument that contains an embedded derivative that otherwise would require
bifurcation; clarify which interest-only strips and principal-only strips are not subject to
the requirements of Statement 133; establish a requirement to evaluate interests in
securitized financial assets to identify interests that are freestanding derivatives or that
are hybrid financial instruments that contain an embedded derivative requiring bifurcation;
clarify that concentrations of credit risk in the form of subordination are not embedded
derivatives; and eliminate the prohibition on a qualifying special-purpose entity from
holding a derivative financial instrument that pertains to a beneficial interest other than
another derivative financial instrument. The Company does not expect the adoption of SFAS
155 will have a material impact on its results of operations, financial position, or
liquidity.
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
    2) Securities Available for Sale
  December 31, 2005Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealizedcost
    
    
    gains
    
    
    losses
    
    
    Fair valueMortgage-backed securities
    
    $
    17,478
    
    
    
    3
    
    
    
    (340
    )
    
    
    17,141Collateralized mortgage obligations
    
    
    76,037
    
    
    
    
    
    
    
    (1,600
    )
    
    
    74,437Mortgage-related securities
    
    
    93,515
    
    
    
    3
    
    
    
    (1,940
    )
    
    
    91,578Government agency bonds
    
    
    26,577
    
    
    
    
    
    
    
    (627
    )
    
    
    25,950Municipals
    

    4,278
    
    

   176
    
    
    (27
    )
    

   4,427Debt securities
    
    
    30,855
    
    
    
    176
    
    
    
    (654
    )
    
    
    30,377$
    124,370
    
    
    
    179
    
    
    
    (2,594
    )
    
    
    121,955
 June 30, 2005Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealizedcost
    
    
    gains
    
    
    losses
    
    
    Fair valueMortgage-backed securities
    
    $
    5,817
    
    
    
    3
    
    
    
    (180
    )
    
    
    5,640Collateralized mortgage obligations
    
    
    48,621
    
    
    
    9
    
    
    
    (825
    )
    
    
    47,805Mortgage-related securities
    
    
    54,438
    
    
    
    12
    
    
    
    (1,005
    )
    
    
    53,445Government agency bonds
    
    
    26,580
    
    
    
    27
    
    
    
    (220
    )
    
    
    26,387Municipals
    

    3,923
    
    

    238
    

    
   (2
    )
    

   4,159Debt securities
    
    
    30,503
    
    
    
    265
    
    
    
    (222
    )
    
    
    30,546$
    84,941
    
    
    
    277
    
    
    
    (1,227
    )
    
    
    83,991
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
    June 30, 2004Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealizedcost
    
    
    gains
    
    
    losses
    
    
    Fair valueMortgage-backed securities
    
    $
    12,473
    
    
    
    6
    
    
    
    (267
    )
    
    
    12,212Collateralized mortgage obligations
    
    
    68,445
    
    
    
    1
    
    
    
    (2,839
    )
    
    
    65,607Mortgage-related securities
    
    
    80,918
    
    
    
    7
    
    
    
    (3,106
    )
    
    
    77,819Government agency bonds
    
    
    17,683
    
    
    
    3
    
    
    
    (224
    )
    
    
    17,462Municipals
    
    
    4,173
    
    
    
    100
    
    
    
    (5
    )
    
    
    4,268Debt securities
    
    
    21,856
    
    
    
    103
    
    
    
    (229
    )
    
    
    21,730$
    102,774
    
    
    
    110
    
    
    
    (3,335
    )
    
    
    99,549
  December 31, 2005Amortizedcost
    
    
    Fair valueDebt securities:Due within one year
    
    $
    
    
    
    
    Due after one year
through five years
    
    
    26,577
    
    
    
    25,950Due after five years
through ten years
    
    
    4,278
    
    
    
    4,427Due after ten years
    
    
    
    
    
    
    Mortgage-related securities
    
    
    93,515
    
    
    
    91,578$
    124,370
    
    
    
    121,955
 June 30, 2005
    
    
    June 30, 2004Amortized
    
    
    
    
    
    
    Amortizedcost
    
    
    Fair value
    
    
    cost
    
    
    Fair valueDebt securities:Due within one year
    
    $
    1,000
    
    
    
    998
    
    
    
    1,000
    
    
    
    995Due after one year
through five years
    
    
    26,579
    
    
    
    26,387
    
    
    
    17,684
    
    
    
    17,462Due after five years
through ten years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Due after ten years
    
    
    2,923
    
    
    
    3,161
    
    
    
    3,173
    
    
    
    3,273Mortgage-related securities
    
    
    54,438
    
    
    
    53,445
    
    
    
    80,918
    
    
    
    77,819$
    84,940
    
    
    
    83,991
    
    
    
    102,775
    
    
    
    99,549
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
     Six Months Ended December 31,
    
    
    Year ended June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2003(Unaudited)Proceeds
    
    $
    
    
    
    
    5,346
    
    
    
    5,609
    
    
    
    7,096
    
    
    
    9,827Gross gains
    
    
    
    
    
    
    4
    
    
    
    16
    
    
    
    49
    
    
    
    32Gross losses
    
    
    
    
    
    
    4
    
    
    
    4
    
    
    
    2
    
    
    
    2
  December 31, 2005Less than 12 months
    
    
    12 months or longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealizedvalue
    
    
    loss
    
    
    value
    
    
    loss
    
    
    value
    
    
    lossGovernment agency bonds
    
    $
    13,863
    
    
    
    (303
    )
    
    
    12,088
    
    
    
    (324
    )
    
    
    25,951
    
    
    
    (627
    )Municipals
    
    
    1,327
    
    
    
    (27
    )
    
    
    
    
    
    
    
    
    
    
    1,327
    
    
    
    (27
    )Mortgage-related securities
    
    
    55,679
    
    
    
    (716
    )
    
    
    35,739
    
    
    
    (1,224
    )
    
    
    91,418
    
    
    
    (1,940
    )$
    70,869
    
    
    
    (1,046
    )
    
    
    47,827
    
    
    
    (1,548
    )
    
    
    118,696
    
    
    
    (2,594
    )
 June 30, 2005Less than 12 months
    
    
    12 months or longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealizedvalue
    
    
    loss
    
    
    value
    
    
    loss
    
    
    value
    
    
    lossGovernment agency bonds
    
    $
    18,952
    
    
    
    (167
    )
    
    
    2,948
    
    
    
    (53
    )
    
    
    21,900
    
    
    
    (220
    )Municipals
    
    
    999
    
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    999
    
    
    
    (2
    )Mortgage-related securities
    
    
    17,341
    
    
    
    (173
    )
    
    
    34,378
    
    
    
    (832
    )
    
    
    51,719
    
    
    
    (1,005
    )$
    37,292
    
    
    
    (342
    )
    
    
    37,326
    
    
    
    (885
    )
    
    
    74,618
    
    
    
    (1,227
    )
 June 30, 2004Less than 12 months
    
    
    12 months or longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealizedvalue
    
    
    loss
    
    
    value
    
    
    loss
    
    
    value
    
    
    lossGovernment agency bonds
    
    $
    14,970
    
    
    
    (224
    )
    
    
    
    
    
    
    
    
    
    
    14,970
    
    
    
    (224
    )Municipals
    
    
    995
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    995
    
    
    
    (5
    )Mortgage-related securities
    
    
    56,687
    
    
    
    (1,960
    )
    
    
    20,526
    
    
    
    (1,146
    )
    
    
    77,213
    
    
    
    (3,106
    )$
    72,652
    
    
    
    (2,189
    )
    
    
    20,526
    
    
    
    (1,146
    )
    
    
    93,178
    
    
    
    (3,335
    )
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
     3) Loans Receivable
  December 31,
    
    
    June 30,2005
    
    
    2005
    
    
    2004Mortgage loans:Residential real estate:Single family
    
    $
    469,395
    
    
    
    430,333
    
    
    
    391,864Two- to four-family
    
    
    256,270
    
    
    
    251,268
    
    
    
    224,765Over four-family
    
    
    443,528
    
    
    
    407,601
    
    
    
    340,753Construction
    
    
    165,516
    
    
    
    149,540
    
    
    
    110,495Commercial real estate
    
    
    34,543
    
    
    
    36,586
    
    
    
    46,138Land
    
    
    23,685
    
    
    
    24,282
    
    
    
    18,307Credit cards
    
    
    126
    
    
    
    150
    
    
    
    154Other
    
    
    33
    
    
    
    52
    
    
    
    311,393,096
    
    
    
    1,299,812
    
    
    
    1,132,507Less:Undisbursed loan proceeds
    
    
    82,712
    
    
    
    77,484
    
    
    
    61,904Unearned loan fees
    
    
    4,366
    
    
    
    4,161
    
    
    
    3,631$
    1,306,018
    
    
    
    1,218,167
    
    
    
    1,066,972
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
     Six months ended December 31,
    
    
    Year ended June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2003(Unaudited)Balance at beginning of period
    
    $
    4,606
    
    
    
    3,378
    
    
    
    3,378
    
    
    
    2,970
    
    
    
    2,479Provision for loan losses
    
    
    1,035
    
    
    
    363
    
    
    
    1,238
    
    
    
    860
    
    
    
    520Charge-offs
    
    
    (391
    )
    
    
    (4
    )
    
    
    (11
    )
    
    
    (453
    )
    
    
    (29
    )Recoveries
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1
    
    
    
    Balance at end of period
    
    $
    5,250
    
    
    
    3,737
    
    
    
    4,606
    
    
    
    3,378
    
    
    
    2,970Percentage of allowance to
gross loans
    
    
    0.40
    %
    
    
    0.33
    %
    
    
    0.38
    %
    
    
    0.32
    %
    
    
    0.32
    %
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
     December 31,
    
    
    June 30,2005
    
    
    2005
    
    
    2004Nonaccrual loans
    
    $
    18,065
    
    
    
    13,076
    
    
    
    12,015Total nonperforming loans
    
    $
    18,065
    
    
    
    13,076
    
    
    
    12,015
  December 31,
    
    
    June 30,2005
    
    
    2005
    
    
    2004Impaired loans for which an allowance
has been provided
    
    $
    699
    
    
    
    1,158
    
    
    
    100Impaired loans for which no allowance
has been provided
    
    
    11,549
    
    
    
    5,951
    
    
    
    5,915Total loans determined
to be impaired
    
    $
    12,248
    
    
    
    7,109
    
    
    
    6,015Allowance for loans losses related to
impaired loans
    
    $
    230
    
    
    
    195
    
    
    
    100
 December 31,
    
    
    June 30,2005
    
    
    2005
    
    
    2004Average recorded investment in
impaired loans
    
    $
    10,784
    
    
    
    6,824
    
    
    
    5,700Cash basis interest income recognized
from impaired loans
    
    
    420
    
    
    
    492
    
    
    
    421
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
     Six months endedDecember 31,
    
    
    Years ended June 30,2005
    
    
    2005
    
    
    2004Balance at beginning of period
    
    $
    896
    
    
    
    747
    
    
    
    776New loans
    
    
    
    
    
    
    574
    
    
    
    19Repayments
    
    
    (11
    )
    
    
    (425
    )
    
    
    (48
    )Balance at end of period
    
    $
    885
    
    
    
    896
    
    
    
    747Average interest rate at end of period
    
    
    3.08
    %
    
    
    3.08
    %
    
    
    3.17
    %
  4)
    
    Office Properties and EquipmentOffice properties and equipment are summarized as follows:
 December 31,
    
    
    June 30,2005
    
    
    2005
    
    
    2004Land
    
    $
    4,962
    
    
    
    5,031
    
    
    
    4,455Office buildings and improvements
    
    
    21,796
    
    
    
    20,579
    
    
    
    12,068Furniture and equipment
    
    
    9,399
    
    
    
    8,808
    
    
    
    8,16436,157
    
    
    
    34,418
    
    
    
    24,687Less accumulated depreciation
    
    
    (11,135
    )
    
    
    (10,400
    )
    
    
    (8,793
    )$
    25,022
    
    
    
    24,018
    
    
    
    15,894
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
     December 31,
    
    
    June 30,2005
    
    
    2005Office buildings and improvements
    
    $
    5,765
    
    
    
    3,422Less accumulated depreciation
    
    
    (93
    )
    
    
    $
    5,672
    
    
    
    3,422
   Capital
    
    
    Operatinglease
    
    
    leaseWithin one year
    
    $
    300
    
    
    
    30One to two years
    
    
    300
    
    
    
    30Two to three years
    
    
    300
    
    
    
    21Three to four years
    
    
    3,375
    
    
    
    Four to five years
    
    
    
    
    
    
    After five years
    
    
    
    
    
    
    Total
    
    $
    4,275
    
    
    
    81Net minimum lease payments
    
    
    4,275Less amounts representing interest
    
    
    (872
    )Present value of net minimum
capital lease payments
    
    $
    3,403
 5)
    
    DepositsAt December 31, 2005, June 30, 2005 and 2004, time deposits with balances greater than one
hundred thousand dollars amounted to $250,757, $277,700, and $234,963, respectively. Also
included in time deposits at December 31, 2005 are brokered deposits of $104,700.
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
     Six months ended December 31,
    
    
    Year ended June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2003(Unaudited)Interest-bearing demand deposits
    
    $
    637
    
    
    
    395
    
    
    
    863
    
    
    
    741
    
    
    
    213Money market and savings deposits
    
    
    122
    
    
    
    112
    
    
    
    202
    
    
    
    326
    
    
    
    751Time deposits
    
    
    17,537
    
    
    
    15,453
    
    
    
    32,220
    
    
    
    29,257
    
    
    
    31,695$
    18,296
    
    
    
    15,960
    
    
    
    33,285
    
    
    
    30,324
    
    
    
    32,659
  Within one year
    
    $
    599,597One to two years
    
    
    196,314Two to three years
    
    
    67,789Three to four years
    
    
    33,943Four through five years
    
    
    31,709After five years
    
    
    386$
    929,738
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
    6)
    
    FHLB AdvancesFHLB advances at December 31, 2005 and at June 30, 2005 and 2004 consist of the following:
 December 31,
    
    
    June 30,2005
    
    
    2005
    
    
    2004Federal Home Loan Bank (FHLB) advances:Short-term FHLB advances:FHLB advance, 3.26%, due July 2006
    
    $
    11,777
    
    
    
    
    
    
    
    FHLB advance, 2.83%, due September 2006
    
    
    2,432
    
    
    
    
    
    
    
    FHLB advance, 4.49%, due October 2006
    
    
    15,000
    
    
    
    
    
    
    
    FHLB advance, 4.41%, due January 2006
    
    
    23,000
    
    
    
    
    
    
    
    FHLB advance, 2.62%, due January 2006
    
    
    25,000
    
    
    
    25,000
    
    
    
    FHLB advance, 2.21%, due January 2006
    
    
    10,000
    
    
    
    10,000
    
    
    
    FHLB advance, 4.47%, due December 2004
    
    
    
    
    
    
    
    
    
    
    25,000Total short-term FHLB advances
    
    
    87,209
    
    
    
    35,000
    
    
    
    25,000Long-term FHLB advances:FHLB advance, 3.26%, due July 2006
    
    
    
    
    
    
    11,777
    
    
    
    FHLB advance, 2.83%, due September 2006
    
    
    
    
    
    
    2,432
    
    
    
    FHLB advance, 3.56%, due February 2007
    
    
    7,000
    
    
    
    7,000
    
    
    
    FHLB advance, 3.17%, due August 2007
    
    
    5,408
    
    
    
    5,408
    
    
    
    FHLB advance, 3.19%, due September 2007
    
    
    4,123
    
    
    
    4,123
    
    
    
    FHLB advance, 3.09%, due October 2007
    
    
    4,693
    
    
    
    4,693
    
    
    
    FHLB advance, 4.56%, due October 2007
    
    
    10,000
    
    
    
    
    
    
    
    FHLB advance, 4.73%, due December 2007
    
    
    10,000
    
    
    
    
    
    
    
    FHLB advance, 3.67%, due January 2008
    
    
    6,819
    
    
    
    6,819
    
    
    
    FHLB advance, 3.63%, due January 2008
    
    
    3,074
    
    
    
    3,074
    
    
    
    FHLB advance, 3.80%, due February 2008
    
    
    7,836
    
    
    
    7,836
    
    
    
    FHLB advance, 3.58%, due August 2008
    
    
    5,000
    
    
    
    5,000
    
    
    
    FHLB advance, 4.78%, due November 2008
    
    
    9,150
    
    
    
    
    
    
    
    FHLB advance, 4.69%, due November 2008
    
    
    8,900
    
    
    
    
    
    
    
    FHLB advance, 4.76%, due December 2008
    
    
    7,000
    
    
    
    
    
    
    
    FHLB advance, 4.72%, due October 2010
    
    
    25,000
    
    
    
    
    
    
    
    FHLB advance, 2.62%, due January 2006
    
    
    
    
    
    
    
    
    
    
    25,000FHLB advance, 2.21%, due January 2006
    
    
    
    
    
    
    
    
    
    
    10,000Total long-term FHLB advances
    
    
    114,003
    
    
    
    58,162
    
    
    
    35,000Total FHLB advances
    
    $
    201,212
    
    
    
    93,162
    
    
    
    60,000
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
    7)
    
    Regulatory CapitalThe Company, as well as the subsidiary Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the Companys financial
statements. Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Company must meet specific capital guidelines that involve quantitative
measures of the Companys assets, liabilities, and certain off-balance-sheet items, as
calculated under regulatory accounting practices. The Companys capital amounts and
classification are also subject to qualitative judgments by the regulators about components,
risk weightings, and other factors.Quantitative measures established by regulation to ensure capital adequacy require the Company
to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I
capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I
capital (as defined) to average assets (as defined). Management believes, as of December 31,
2005, that the Company meets all capital adequacy requirements to which it is subject.As of December 31, 2005 the most recent notification from the Federal Deposit Insurance
Corporation categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized, the Bank must maintain
minimum total risk-based, Tier I risk-based and Tier I leverage ratios, as set forth in the
table below. There are no conditions or events since that notification that management
believes have changed the Banks category.As a state-chartered savings bank, the Bank is required to meet minimum capital levels
established by the state of Wisconsin in addition to federal requirements. For the state of
Wisconsin, regulatory capital consists of retained income, paid-in-capital, capital stock
equity and other forms of capital considered to be qualifying capital by the Federal Deposit
Insurance Corporation.The actual capital amounts and ratios for the Company and its subsidiary Bank as of December
31, 2005, June 30, 2005 and June 30, 2004 are presented in the table below:
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
    December 31, 2005To Be Well-CapitalizedFor Capital
    
    Under Prompt CorrectiveActual
    
    Adequacy Purposes
    
    Action Provisions (1)Amount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioWauwatosa HoldingsTotal capital (to risk-weighted
assets)
    
    $
    238,212
    
    
    
    22.79
    %
    
    
    83,723
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/ATier I capital (to risk-weighted
assets)
    
    
    233,262
    
    
    
    22.29
    %
    
    
    41,862
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/ATier I capital (to average assets)
    
    
    233,262
    
    
    
    14.23
    %
    
    
    65,564
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/AWauwatosa SavingsTotal capital (to risk-weighted
assets)
    
    $
    187,370
    
    
    
    17.90
    %
    
    
    83,689
    
    
    
    8.00
    %
    
    
    104,611
    
    
    
    10.00
    %Tier I capital (to risk-weighted
assets)
    
    
    182,120
    
    
    
    17.40
    %
    
    
    41,845
    
    
    
    4.00
    %
    
    
    62,767
    
    
    
    6.00
    %Tier I capital (to average assets)
    
    
    182,120
    
    
    
    11.12
    %
    
    
    65,535
    
    
    
    4.00
    %
    
    
    81,919
    
    
    
    5.00
    %State of Wisconsin (to total assets) (2)
    
    
    182,120
    
    
    
    12.08
    %
    
    
    90,424
    
    
    
    6.00
    %
    
    
    N/A
    
    
    
    N/A
 
 (1)
    
    Prompt corrective action provisions are not applicable at the bank holding company level. (2)
    
    State of Wisconsin regulatory capital requirements are not applicable at the bank
holding company level.
 June 30, 2005To Be Well-CapitalizedFor Capital
    
    Under Prompt CorrectiveActual
    
    Adequacy Purposes
    
    Action ProvisionsWauwatosa Savings
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioTotal capital (to risk-weighted
assets)
    
    $
    138,638
    
    
    
    14.05
    %
    
    
    78,963
    
    
    
    8.00
    %
    
    
    98,704
    
    
    
    10.00
    %Tier I capital (to risk-weighted
assets)
    
    
    134,032
    
    
    
    13.58
    %
    
    
    39,481
    
    
    
    4.00
    %
    
    
    59,222
    
    
    
    6.00
    %Tier I capital (to average assets)
    
    
    134,032
    
    
    
    9.84
    %
    
    
    54,458
    
    
    
    4.00
    %
    
    
    68,072
    
    
    
    5.00
    %State of Wisconsin (to total assets)
    
    
    134,043
    
    
    
    9.60
    %
    
    
    83,167
    
    
    
    6.00
    %
    
    
    N/A
    
    
    
    N/A
 June 30, 2004To Be Well-CapitalizedFor Capital
    
    Under Prompt CorrectiveActual
    
    Adequacy Purposes
    
    Action ProvisionsWauwatosa Savings
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioTotal capital (to risk-weighted
assets)
    
    $
    128,293
    
    
    
    15.02
    %
    
    $
    68,348
    
    
    
    8.00
    %
    
    $
    85,435
    
    
    
    10.00
    %Tier I capital (to risk-weighted
assets)
    
    
    124,915
    
    
    
    14.62
    %
    
    
    34,174
    
    
    
    4.00
    %
    
    
    51,261
    
    
    
    6.00
    %Tier I capital (to average assets)
    
    
    124,915
    
    
    
    10.18
    %
    
    
    49,062
    
    
    
    4.00
    %
    
    
    63,328
    
    
    
    5.00
    %State of Wisconsin (to total assets)
    
    
    122,798
    
    
    
    10.01
    %
    
    
    74,479
    
    
    
    6.00
    %
    
    
    N/A
    
    
    
    N/A
 8)
    
    Employee Benefit PlansThe Company participates in an industry group sponsored multi-employer defined-benefit
retirement plan covering substantially all employees with one year or more of service. Pension
plan expense was approximately $640, $240, $485, $407, and $322 for the six months ended
December 31, 2005 and 2004
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
    and for the years ended June 30, 2005, 2004, and 2003, respectively. The Companys policy is to fund pension costs accrued. During the period ended
December 31, 2005, the Company elected to freeze benefits accruing in the Pension Plan, and
will apply to the Internal Revenue Service to terminate the Plan and to pay out all benefits
to Plan participants in the fiscal year ending December 31, 2006. The expense for the six
months ended December 31, 2005 includes amounts contributed to the Plan to fully settle the
pension plan obligation.The Company has a 401(k) profit sharing plan and trust covering substantially all employees
with at least one year of service who have attained age 18. Participating employees may
annually contribute up to 15% of their pretax compensation. The Company made no contributions
to the Plan during the six months ended December 31, 2005 and 2004 and the years ended June
30, 2005, 2004, and 2003.The Company has a nonqualified salary continuation plan for one current and two former
employees. These agreements provide for payments of specific amounts over 10-year periods
subsequent to each key employees retirement. The deferred compensation liability is being
accrued ratably to the respective normal retirement date for the current employee. Payments
made to the retired employees reduce the liability. As of December 31, 2005, June 30, 2005 and
2004, approximately $2,720, $2,915 and $3,279 are accrued related to these plans,
respectively. These agreements are intended to be funded by life insurance policies owned by
the Company on these employees, which have a face amount of $12,083 and a cash surrender value
of $8,506, $8,000 and $7,333 at December 31, 2005, June 30, 2005 and 2004, respectively. The
employees, however, have no interest in these policies. The expense for compensation under
these agreements was approximately $40, $34, $74, $69, and $64 for the six months ended
December 31, 2005 and 2004 and for the years ended June 30, 2005, 2004, and 2003,
respectively.Bank-owned life insurance has a face amount of $308,481 and cash surrender value of $14,285,
$14,078 and $13,648 at December 31, 2005, June 30, 2005 and 2004, respectively.9)
    
    Employee Stock Ownership PlanIn conjunction with the mutual holding company reorganization, Wauwatosa Savings established
an Employee Stock Ownership Plan (the Plan). All employees are eligible to participate in
the Plan after they attain twenty-one years of age and complete twelve consecutive months of
service in which they work at least 1,000 hours of service. The Plan borrowed $8,539 from the
Company and purchased 761,515 shares of common stock of the Company in the open market. The
Plan debt is secured by shares of the Company. The Company has committed to make annual
contributions to the Plan necessary to repay the loan, including interest. The loan is
scheduled to be repaid in ten annual installments beginning on January 1, 2006. While the
shares are not released and allocated to Plan participants until the loan payment is made, the
shares are deemed to be earned and are therefore, committed to be released throughout the
service period. As such, one-tenth of the shares are scheduled to be released as shares are
earned over the next ten years, beginning with the six-month period ended December 31, 2005.
As the debt is repaid, shares are released from collateral and allocated to active employees
accounts. The shares pledged as collateral are reported as unearned ESOP shares in the
consolidated statement of financial condition. As shares are committed to be released from
collateral, the Company reports compensation expense equal to the average fair market price of
the shares, and the shares become outstanding for earnings per share computations.
Compensation expense attributed to the ESOP was $854 for the six months ended December 31,
2005.
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
     Beginning ESOP shares
    
    
    761,515Shares committed to be released
    
    
    (76,150
    )Unreleased shares
    
    
    685,365Fair value of unreleased shares (in thousands)
    
    $
    7,841
 10)
    
    Income TaxesThe provision (benefit) for income taxes for the six months ended December 31, 2005 and 2004
and for the years ended June 30, 2005, 2004, and 2003 consists of the following:
 Six months ended December 31,
    
    
    Year ended June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2003(Unaudited)Current:Federal
    
    $
    2,526
    
    
    
    2,784
    
    
    
    5,403
    
    
    
    4,811
    
    
    
    5,274State
    
    
    878
    
    
    
    860
    
    
    
    3,309
    
    
    
    185
    
    
    
    1813,404
    
    
    
    3,644
    
    
    
    8,712
    
    
    
    4,996
    
    
    
    5,455Deferred:Federal
    
    
    (1,632
    )
    
    
    (69
    )
    
    
    (1,155
    )
    
    
    (86
    )
    
    
    280State
    
    
    (301
    )
    
    
    (711
    )
    
    
    (37
    )
    
    
    (47
    )
    
    
    7(1,933
    )
    
    
    (780
    )
    
    
    (1,192
    )
    
    
    (133
    )
    
    
    287Total
    
    $
    1,471
    
    
    
    2,864
    
    
    
    7,520
    
    
    
    4,863
    
    
    
    5,742
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
     Six months ended December 31,2005
    
    
    2004(Unaudited)Income before income taxes
    
    $
    4,184
    
    
    
    8,650Tax at Federal statutory rate (35%)
    
    
    1,464
    
    
    
    3,028Add (deduct) effect of:State income taxes, net of Federal
income tax benefit
    
    
    375
    
    
    
    97Cash surrender value of life insurance
    
    
    (205
    )
    
    
    (149
    )Tax-exempt interest income
    
    
    (29
    )
    
    
    (32
    )Other
    
    
    (134
    )
    
    
    (80
    )Income tax provision
    
    
    1,471
    
    
    
    2,864Effective tax rate
    
    
    35.2
    %
    
    
    33.1
    %
 Year ended June 30,2005
    
    
    2004
    
    
    2003Income before income taxes
    
    $
    16,636
    
    
    
    15,447
    
    
    
    16,847Tax at Federal statutory rate (35%)
    
    $
    5,822
    
    
    
    5,406
    
    
    
    5,897Add (deduct) effect of:State income taxes, net of Federal
income tax benefit
    
    
    2,127
    
    
    
    90
    
    
    
    122Cash surrender value of life insurance
    
    
    (225
    )
    
    
    (353
    )
    
    
    (217
    )Tax-exempt interest income
    
    
    (64
    )
    
    
    (58
    )
    
    
    (66
    )Other
    
    
    (140
    )
    
    
    (222
    )
    
    
    6Income tax provision
    
    $
    7,520
    
    
    
    4,863
    
    
    
    5,742Effective tax rate
    
    
    45.2
    %
    
    
    31.5
    %
    
    
    34.1
    %
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
     December 31,
    
    
    June 30,2005
    
    
    2005
    
    
    2004Gross deferred tax assets:Excess book depreciation
    
    $
    138
    
    
    
    394
    
    
    
    380Compensation agreements
    
    
    1,092
    
    
    
    1,169
    
    
    
    1,286Allowance for loan losses
    
    
    2,195
    
    
    
    1,857
    
    
    
    1,316State tax contingent liability
    
    
    1,243
    
    
    
    1,052
    
    
    
    Unrealized loss on securities available for sale
    
    
    844
    
    
    
    323
    
    
    
    1,100Loans to facilitate the sale of real estate owned
    
    
    589
    
    
    
    589
    
    
    
    744Charitable contributions carry forward
    
    
    1,916
    
    
    
    
    
    
    
    Other
    
    
    210
    
    
    
    153
    
    
    
    Total gross deferred tax assets
    
    
    8,227
    
    
    
    5,537
    
    
    
    4,826Valuation allowance  charitable
contribution carry forward
    
    
    (225
    )
    
    
    
    
    
    
    Deferred tax assets
    
    
    8,002
    
    
    
    5,537
    
    
    
    4,826Gross deferred tax liabilities:FHLB stock dividends
    
    
    (1,018
    )
    
    
    (893
    )
    
    
    (569
    )Deferred loan fees
    
    
    (161
    )
    
    
    (275
    )
    
    
    (268
    )Other
    
    
    
    
    
    
    
    
    
    
    (35
    )Deferred liabilities
    
    
    (1,179
    )
    
    
    (1,168
    )
    
    
    (872
    )Net deferred tax assets
    
    $
    6,823
    
    
    
    4,369
    
    
    
    3,954
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
    Wisconsin financial institutions. The Department has not issued an assessment
to the Bank, but the Department has stated that it intends to do so if the matter is not
settled.Prior to the formation of the investment subsidiary, the Bank sought and obtained a private
letter ruling from the Department regarding the non-taxability of the investment subsidiary in
the state of Wisconsin. The Bank believes that it complied with Wisconsin law and the private
ruling received from the Department. Should assessment be forthcoming, the Bank intends to
defend its position through the available administrative appeals process in place at the
Department and through other judicial remedies should they become necessary. Although the Bank
will vigorously oppose any such assessment, there can be no assurance that the Department will
not be successful in whole or in part in its efforts to tax the income of the Banks Nevada
investment subsidiary. At December 31, 2005, the Company has an accrued estimated state tax
liability of $3,553 including interest for the probable settlement amount on the basis of
facts currently known. A deferred Federal tax benefit of $1,243 has been established as a
result of this accrual. The Company does not expect the resolution of this matter to have a
material adverse affect on its consolidated results of operations and financial position
beyond the amounts accrued. However, the Company intends to accrue state income taxes on
future income of the Nevada subsidiary in line with the previously discussed accrual until
such time as the dispute is resolved.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, 2005
includes approximately $16,654 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.11)
    
    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.
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
    December 31,
    
    June 30,2005
    
    2005
    
    2004Financial instruments whose contract
amounts represent potential credit risk:Commitments to extend credit
under first mortgage loans
    
    $
    43,375
    
    
    
    65,566
    
    
    
    69,324Commitments to extend credit
home equity lines of credit
    
    
    31,809
    
    
    
    30,253
    
    
    
    22,867Standby letters of credit
    
    
    1,576
    
    
    
    1,374
    
    
    
    2,252
 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, 2005, June 30, 2005 and June 30,
2004.12)
    
    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 following methods and assumptions were used by the Company in determining its fair value
disclosures for financial instruments.
 a)
    
    Cash and Cash Equivalents and Accrued Interest ReceivableThe carrying amounts reported in the consolidated statements of financial condition for
cash and cash equivalents and accrued interest receivable approximate those assets fair
values.
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
    b)
    
    Mortgage-Related and Debt SecuritiesFair values for mortgage-related and debt securities are based on quoted market prices of
these or comparable instruments.c)
    
    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.d)
    
    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.e)
    
    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.f)
    
    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.g)
    
    FHLB AdvancesFair values for FHLB advances are estimated using a discounted cash flow calculation that
applies current interest rates to estimated future cash flows of the advances.h)
    
    Accrued Interest Payable and Accrued Interest ReceivableFor accrued interest payable and accrued interest receivable, the carrying amount is a
reasonable estimate of fair value.i)
    
    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, 2005, June 30, 2005 and June 30, 2004.
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
    j)
    
    Obligations under Capital Leases
   December 31, 2005Carrying
    
    Fairamount
    
    valueCash and cash equivalents
    
    $
    16,498
    
    
    
    16,498Securities
    
    
    121,955
    
    
    
    121,955Loans receivable
    
    
    1,300,768
    
    
    
    1,289,777FHLB stock
    
    
    14,406
    
    
    
    14,406Cash
surrender value of life insurance
    
    
    22,792
    
    
    
    22,792Accrued interest receivable
    
    
    1,558
    
    
    
    1,558Deposits
    
    
    1,045,593
    
    
    
    1,035,048Advance payments by
borrowers for taxes
    
    
    181
    
    
    
    181FHLB advances
    
    
    201,212
    
    
    
    200,146Accrued interest payable
    
    
    3,039
    
    
    
    3,039Obligations under capital leases
    
    
    3,403
    
    
    
    3,403Commitments to extend credit
    
    
    
    
    
    
    Stand-by letters of credit
    
    
    10
    
    
    
    10
 June 30,2005
    
    2004Carrying
    
    Fair
    
    Carrying
    
    Fairamount
    
    value
    
    amount
    
    valueCash and cash equivalents
    
    $
    20,467
    
    
    
    20,467
    
    
    
    19,392
    
    
    
    19,392Mortgage-related securities
    
    
    53,445
    
    
    
    53,445
    
    
    
    77,819
    
    
    
    77,819Debt securities
    
    
    30,546
    
    
    
    30,546
    
    
    
    21,730
    
    
    
    21,730Loans receivable
    
    
    1,213,561
    
    
    
    1,290,428
    
    
    
    1,063,594
    
    
    
    1,062,688FHLB stock
    
    
    14,097
    
    
    
    14,097
    
    
    
    13,321
    
    
    
    13,321Cash surrender value of
life insurance
    
    
    22,078
    
    
    
    22,078
    
    
    
    20,981
    
    
    
    20,981Accrued interest receivable
    
    
    1,145
    
    
    
    1,145
    
    
    
    916
    
    
    
    916Deposits
    
    
    1,128,791
    
    
    
    1,121,833
    
    
    
    1,035,588
    
    
    
    1,041,135Advance payments by
borrowers for taxes
    
    
    15,821
    
    
    
    15,821
    
    
    
    14,446
    
    
    
    14,446FHLB advances
    
    
    93,162
    
    
    
    93,162
    
    
    
    60,000
    
    
    
    60,000Accrued interest payable
    
    
    2,974
    
    
    
    2,974
    
    
    
    1,705
    
    
    
    1,705Obligations under capital leases
    
    
    3,416
    
    
    
    3,416
    
    
    
    
    
    
    
    Commitments to extend credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stand-by letters of credit
    
    
    9
    
    
    
    9
    
    
    
    15
    
    
    
    15
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
 13)
    
    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, 2005, 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.
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. No earnings per share are reflected for periods prior to October
4, 2005, as there were no shares outstanding prior to the reorganization.Presented below are the calculations for basic and diluted loss per share.
 Net loss (for the period October 5, 2005
through December 31, 2005)
    
    $
    (709
    )Weighted average shares outstanding
    
    
    33,135Effect of dilutive potential common shares
    
    
    Diluted weighted average shares outstanding
    
    
    33,135Basic loss per share
    
    $
    (0.02
    )Diluted loss per share
    
    $
    (0.02
    )
 -110-




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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
 14)
    
    Condensed Parent Company Only Statements
 Statement of Financial Condition
 December 31,2005AssetsCash and cash equivalents
    
    $
    41,311Investment in subsidiaries
    
    
    180,554Receivable from ESOP
    
    
    8,637Deferred tax asset
    
    
    1,564Income tax benefit receivable
    
    
    617Other assets
    
    
    1Total Assets
    
    $
    232,684Liabilities and shareholders equityLiabilities:Due to subsidiaries
    
    $
    785Other liabilities
    
    
    203988Shareholders equityPreferred 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, 33,723,750 shares issued,
33,038,385 shares outstanding)
    
    
    337Additional paid-in-capital
    
    
    103,859Retained earnings
    
    
    136,756Unearned ESOP shares
    
    
    (7,685
    )Accumulated other comprehensive loss (net of taxes)
    
    
    (1,571
    )Total shareholders equity
    
    
    231,696Total liabilities and shareholders equity
    
    $
    232,684
 Statement of Operations
 For the periodOctober 5, 2005 throughDecember 31, 2005Interest income
    
    $
    97Equity in earnings of subsidiaries*
    
    
    2,965Total income
    
    
    3,062Charitable contribution
    
    
    5,564Other expense
    
    
    38Total expense
    
    
    5,602Loss before income tax benefit
    
    
    (2,540
    )Income tax benefit
    
    
    (1,831
    )Net loss
    
    $
    (709
    )
 *
    
    Equity in earnings of subsidiaries 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.
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WAUWATOSA HOLDINGS, INC. AND SUBSIDIARIES
 Statement of Cash Flows
 For the periodOctober 5, 2005 throughDecember 31, 2005Cash flows from operating activities
    
    $Net loss
    
    
    (709
    )Adjustments to reconcile net loss to net cash provided by
operating activities:Deferred income taxes
    
    
    (1,564
    )Charitable contribution of common stock
    
    
    5,565Equity in earnings of subsidiaries*
    
    
    (2,965
    )Change in other operating activities and liabilities
    
    
    370Net cash used in operating actitivies
    
    
    697Cash flows from investing activities:Investment of proceeds in subsidiary
    
    
    (49,380
    )Cash flows from financing activities:Net proceeds from sale of common stock
    
    
    98,731Capitalization of Lamplighter, MHC
    
    
    (100
    )Extension of loan to ESOP
    
    
    (8,637
    )Net cash provided by financing activities
    
    
    89,994Net increase in cash
    
    
    41,311Cash and cash equivalents at beginning of year
    
    
    Cash and cash equivalents at end of year
    
    $
    41,311
 15)
    
    Segments and Related InformationThe Company is required to report each operating segment based on materiality thresholds of
10% or more of certain amounts, such as revenue. Additionally, the Company is required to
report separate operating segments until the revenue attributable to such segments is at least
75% of total consolidated revenue. The Company provides a broad range of financial services to
individuals and companies in southeastern Wisconsin. These services include demand, time, and
savings products, and commercial and retail lending. While the Companys chief decision-maker
monitors the revenue streams of the various products and services, operations are managed and
financial performance is evaluated on a Company-wide basis. Since the Companys business units
have similar basic characteristics in the nature of the products, production processes, and
type or class of customer for products or services, and do not meet materiality thresholds
based on the requirements of reportable segments, these business units are considered one
operating segment.
 -112-




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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 :
 -113-




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Item 9B . Other Information .
      -114-




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Part III
 
 Item 10 . Directors and Executive Officers of the Registrant
  
 Item 11 . Executive Compensation
  
 Item 12 . Security Ownership of Certain Beneficial Owners and Management
  
 Item 13 . Certain Relationships and Related Transactions
  
 Item 14 . Principal Accountant Fees and Services
  
 Part IV
 
 Item 15 . Exhibits and Financial Statement Schedules
 (a)
    
    Documents filed as part of the Report:
 1.
    
    and 2. Financial Statements and Financial Statement Schedules.
 -115-




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Exhibits
 -116-




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SIGNATURES
  WAUWATOSA HOLDINGS, INC.March 27, 2006By:
    
    /s/ Donald J. StephensDonald J. StephensChairman and Chief Executive Officer
 
 POWER OF ATTORNEY
  
  Signature and Title/s/ Donald J. Stephens
    
    /s/ Thomas E. DalumDonald J. Stephens, Chairman,
Chief Executive Officer and Director
(Principal Executive Officer)
    
    Thomas E. Dalum, Director/s/ Douglas S. Gordon
    
    /s/ Michael L. HansenDouglas S, Gordon, President, Chief Operating
    
    Michael L. Hansen, DirectorOfficer and Director/s/ Barbara J. Coutley
    
    /s/ Patrick S. LawtonBarbara J. Coutley, Senior Vice President
    
    Patrick S. Lawton, DirectorSecretary and Director/s/ Richard C. Larson
    
    /s/ Stephen J. SchmidtRichard C. Larson, Chief Financial Officer
    
    Stephen J. Schmidt, Director(Principal Financial and Accounting Officer)
 
 
    
    Each of the above signatures is affixed as of March 27, 2006.
 -117-




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WAUWATOSA HOLDINGS, INC.
( Wauwatosa Holdings or the Company)**
Commission File No. 000-51507
 
 EXHIBIT INDEX
TO
2005 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*
    
    Form of Employment Agreement
between the Bank and Donald
J. Stephens
    
    Exhibit 10.3 to 2005 S-110.4*
    
    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, 200510.5*
    
    Early Retirement, Resignation
and Release Agreement between
the Bank and Donald J.
Stephens
    
    
    
    X11.1
    
    Statement re: Computation of
Per Share Earnings
    
    See Note 13 in Part II Item 816.1
    
    Letter from Ernst & Young LLP
    
    Exhibit 16.1 to 2005 S-121.1
    
    List of Subsidiaries
    
    
    
    X24.1
    
    Powers of Attorney
    
    Signature Page
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Incorporated Herein
    
    FiledExhibit
    
    Description
    
    By Reference To
    
    Herewith31.1
    
    Sarbanes-Oxley Act Section
302 Certification signed by
the Chairman and 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
Chairman and 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