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EXHIBIT 10.5
 DONALD J. STEPHENS
 EARLY RETIREMENT, RESIGNATION
AND RELEASE AGREEMENT
         1.
    
    Early Retirement and Resignation. The Executive hereby resigns from
all positions (including, but not limited to, directorships) with the Bank, the Company
and their affiliates and subsidiaries, and retires as an employee of the Bank,
effective as of December 31, 2006 (the Early Retirement and Resignation Date). The
Bank, the Company and their affiliates and subdivisions hereby accept such resignation
effective as of the Early Retirement and Resignation Date. The Executive shall
continue to receive his current base salary and all benefits to which he is entitled as
a full-time




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executive employee of the Bank until the Early Retirement and Resignation Date,
including but not limited to, consideration for a 2006 year end bonus reasonably
commensurate with past bonus awards and taking into consideration the additional
contributions of the Executive in coordinating the transition of Bank and Company
management. Any such bonus shall be paid in January 2007. The parties agree that
the Bank or its affiliates may alter and reduce the Executives duties at any time
from the date hereof to the Early Retirement and Resignation Date, but that any such
reduction in duties will not constitute a violation of the Employment Agreement nor
affect the amounts owed to Executive under this paragraph 1 or the remainder of this
Agreement.2.
    
    Employment Agreement. The parties to this Agreement acknowledge and
agree that the Executives resignation shall be treated as a voluntary termination
pursuant to Section 2.4 of the Employment Agreement and that Executive shall be due the
benefits set forth therein. The parties further acknowledge that the Employment
Agreement shall continue in full force and effect following the execution of this
Agreement and that, upon and after the Early Retirement and Resignation Date, Executive
shall continue to be subject to the provisions of the Employment Agreement that by
their terms survive his termination of employment, including, but not limited to, the
provisions of Article III of the Employment Agreement regarding Executives
noncompetition and confidentiality obligations.3.
    
    SERP. The parties to this Agreement acknowledge and agree that
notwithstanding the fact that Executive will not have attained his Early Retirement
Date as of his resignation from employment with the Bank, the Executive shall be due
benefits pursuant to Section 3.1 of the SERP as if he had attained his Early Retirement
Date. The parties further acknowledge that the SERP shall continue in full force and
effect following the execution of this Agreement and that, upon Executives
resignation, Executive shall continue to be subject to the provisions of the SERP that
by their terms survive his termination of employment, including, but not limited to,
the provisions of Section 8 of the SERP regarding Executives noncompetition
obligations. Notwithstanding anything in this Agreement or the SERP, the parties agree
that the SERP payments shall commence on the first day of the month following the date
that is six (6) months after the date of the Executives separation from service (as
defined in Section 409A of the Internal Revenue Code (Section 409A)). The Company
and the Executive agree to execute any reasonable amendments to this Agreement and the
SERP as may be necessary to ensure compliance with Section 409A.
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4.
    
    ESOP. The parties to this Agreement acknowledge that the Executive shall
remain a participant in the Banks ESOP through the Early Retirement and Resignation
Date and that, on account of Executives vested years of service, Executive shall be
fully vested in his Employer Contribution Account as of the Resignation Date.5.
    
    Equity Compensation Benefits. The parties acknowledge that the Company
will be seeking shareholder approval of the Wauwatosa Holdings, Inc. 2006 Equity
Incentive Plan (the 2006 Incentive Plan) at the Companys 2006 Annual Meeting of
Shareholders to be held on May 16, 2006. The Executive acknowledges that on account of
the vesting schedule for awards under the 2006 Incentive Plan, any potential awards to
Executive would be forfeited upon his resignation. Consequently, Executive
acknowledges and agrees that he shall not be granted any awards under the 2006
Incentive Plan if it is approved by the Companys shareholders.6.
    
    Automobile. Section 2.4 of Article II of the Employment Agreement
provides that, within 15 days following the Executives voluntary termination of
employment, the Bank will transfer to the Executive title to the Bank automobile that
he is using at the time his employment terminates. To comply with the requirements of
Section 409A of the Code, the parties agree that the Executives right to title to such
automobile is terminated. In lieu of such right, the parties agree that the Bank shall
provide the Executive with a cash lump sum payment in an amount such that after payment
by the Executive of all taxes on such payment (assuming Executive is in the highest
marginal state and federal income tax brackets), the Executive retains an amount equal
to the fair market value, as of the Early Retirement and Resignation Date, of the Bank
automobile used by the Executive. The Bank shall pay such lump sum amount to the
Executive on the first business day that is at least six months after the Early
Retirement and Resignation Date. The parties agree that the Executive shall have the
right to purchase from the Bank the Bank automobile he is using at the time of his
Early Retirement and Resignation Date. The purchase price shall be the automobiles
fair market value on the date of purchase.7.
    
    Release. In consideration of the Banks performance of its promises in
this Agreement, the Executive hereby releases the Bank, the Company, their subsidiaries
and affiliates, and their officers, directors, employees, agents, predecessors and
successors from any and all claims that the Executive might have arising out of his
employment and the termination thereof arising prior to the time the Executive signs
this Agreement, with the exception of (a) Executives rights to receive vested benefits
to which the
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8.
    
    Acknowledgments. Each party acknowledges entering into this Agreement
knowingly, freely and voluntarily. The Executive acknowledges that:
 (a)
    
    he has been and is hereby advised by the Bank to consult with
legal counsel before signing this Agreement;(b)
    
    he has 21 days from the date of his receipt of this Agreement
within which to consider it;(c)
    
    he understands that this Agreement includes a final general
release of the Bank, its subsidiaries and affiliates, and their officers,
directors, employees, agents, predecessors and successors, for any and all
claims described in paragraph 6 up to the date that this Agreement is signed;
and(d)
    
    he may, within 7 calendar days following the date of his
execution of this Agreement, revoke this Agreement by giving written notice
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TIME IS OF THE ESSENCE WITH
REGARD TO THIS PARAGRAPH
 9.
    
    Representation. Each party represents and acknowledges that in
executing this Agreement, such party has not relied upon any representation or
statement not set forth herein made by the other party or any of the other partys
agents, representatives or employees with regard to the subject matter, basis or effect
of this Agreement. The Bank represents and warrants that it has obtained all consents,
approvals and authorizations required to execute, deliver and perform this Agreement,
that they are in full force and effect as of the date hereof, and that this Agreement
is a valid, binding and enforceable obligation of the Bank in accordance with its
terms.10.
    
    Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect or impair the validity or enforceability of any other
provision and this Agreement shall be construed as if such invalid or unenforceable
provision were not contained herein.11.
    
    Entire Agreement; Governing Law. This Agreement sets forth the entire
agreement between the parties hereto and completely supersedes any prior agreements or
understandings between the parties. It may be amended only by an agreement in writing
signed by both parties. This Agreement shall be governed by and construed in
accordance with the laws of the State of Wisconsin, without regard to its conflict of
laws provisions.
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/s/ Donald J. Stephens
    
    March 22, 2006DONALD J. STEPHENS
    
    Date
  By: /s/ Douglas S. Gordon
    
    March 22, 2006DOUGLAS S. GORDON, PRESIDENT
    
    Date
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