##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 Form 10-Q
 þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended September 30, 2007
 OR
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 Commission File Number 000-51507
 WAUWATOSA HOLDINGS, INC.
  Federal
(State or other jurisdiction of 
incorporation or organization)
    
    20-3598485
(IRS Employer Identification No.)
 11200 W. Plank Ct.
Wauwatosa, WI 53226
(414) 761-1000
 þ o
  Large accelerated filer  o
    
    Accelerated filer  þ
    
    Non-accelerated filer  o
 o þ




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##### 



WAUWATOSA HOLDINGS, INC.
 10-Q INDEX
  
 Page No.PART I. FINANCIAL INFORMATIONItem l. Financial StatementsConsolidated Statements of Financial Condition as of September 30, 2007 (unaudited) and December 31, 2006
    
    
    3Consolidated Statements of Operations for the nine and three months ended September 30, 2007 and 2006
(unaudited)
    
    
    4Consolidated Statements of Changes in Shareholders Equity for the nine months ended September 30, 2007
and 2006 (unaudited)
    
    
    5Consolidated Statements of Cash Flows for the nine months ended September 30, 2007 and 2006 (unaudited)
    
    
    6-7Notes to Consolidated Financial Statements
    
    
    8-20Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20-44Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    45-46Item 4. Controls and Procedures
    
    
    46PART II. OTHER INFORMATION
    
    
    47Item 1. Legal Proceedings
    
    
    47Item 1A. Risk Factors
    
    
    47Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    47Item 6. Exhibits
    
    
    48Signatures
    
    
    49CertificationCertificationCertificationCertification
  -2-




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##### 



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 WAUWATOSA HOLDINGS, INC AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 (Unaudited)September 30,
    
    
    December 31,2007
    
    
    2006(In Thousands, except share data)AssetsCash
    
    $
    5,563
    
    
    
    26,745Federal funds sold
    
    
    16,271
    
    
    
    21,800Interest-earning deposits in other financial institutions
and other short term investments
    
    
    812
    
    
    
    25,262Cash and cash equivalents
    
    
    22,646
    
    
    
    73,807Securities available-for-sale (at fair value)
    
    
    171,324
    
    
    
    117,330Securities held-to-maturity (at amortized cost)
    
    
    7,646
    
    
    
    Loans held for sale
    
    
    10,462
    
    
    
    5,387Loans receivable
    
    
    1,381,087
    
    
    
    1,372,907Less: Allowance for loan losses
    
    
    11,482
    
    
    
    7,195Loans receivable, net
    
    
    1,369,605
    
    
    
    1,365,712Office properties and equipment, net
    
    
    32,424
    
    
    
    32,625Federal Home Loan Bank stock, at cost
    
    
    17,550
    
    
    
    17,213Cash surrender value of life insurance
    
    
    25,445
    
    
    
    24,152Prepaid expenses and other assets
    
    
    22,542
    
    
    
    12,244Total assets
    
    $
    1,679,644
    
    
    
    1,648,470Liabilities and Shareholders EquityLiabilities:Demand deposits
    
    $
    50,107
    
    
    
    58,407Money market and savings deposits
    
    
    116,156
    
    
    
    94,472Time deposits
    
    
    857,444
    
    
    
    883,339Total deposits
    
    
    1,023,707
    
    
    
    1,036,218Short term borrowings
    
    
    47,422
    
    
    
    41,224Long term borrowings
    
    
    362,950
    
    
    
    292,779Advance payments by borrowers for taxes
    
    
    24,394
    
    
    
    190Other liabilities
    
    
    18,880
    
    
    
    36,787Total liabilities
    
    
    1,477,353
    
    
    
    1,407,198Shareholders equity:Preferred stock (par value $.01 per share)
Authorized 20,000,000 shares, no shares issued
    
    
    
    
    
    
    Common stock (par value $.01 per share)
Authorized - 200,000,000 shares in 2007 and 2006
Issued - 33,975,250 shares in 2007 and 33,723,750 in 2006
Outstanding - 31,418,902 in 2007 and 33,723,750 in 2006
    
    
    340
    
    
    
    337Additional paid-in capital
    
    
    105,804
    
    
    
    104,182Accumulated other comprehensive loss (net of taxes)
    
    
    (847
    )
    
    
    (1,225
    )Retained earnings, substantially restricted
    
    
    146,060
    
    
    
    144,809Unearned ESOP shares
    
    
    (6,191
    )
    
    
    (6,831
    )Treasury shares (2,556,348 shares), at cost
    
    
    (42,875
    )
    
    
    Total shareholders equity
    
    
    202,291
    
    
    
    241,272Total liabilities and shareholders equity
    
    $
    1,679,644
    
    
    
    1,648,470
  -3-




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##### 



WAUWATOSA HOLDINGS, INC AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 Nine months ended September 30,
    
    
    Three months ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(In thousands, except per share data)Interest income:Loans
    
    $
    65,077
    
    
    
    62,314
    
    
    
    21,769
    
    
    
    21,313Mortgage-related securities
    
    
    4,075
    
    
    
    3,056
    
    
    
    1,533
    
    
    
    975Debt securities, federal funds sold and
short-term investments
    
    
    3,178
    
    
    
    2,172
    
    
    
    1,118
    
    
    
    978Total interest income
    
    
    72,330
    
    
    
    67,542
    
    
    
    24,420
    
    
    
    23,266Interest expense:Deposits
    
    
    33,641
    
    
    
    30,758
    
    
    
    11,475
    
    
    
    11,067Borrowings
    
    
    12,427
    
    
    
    7,958
    
    
    
    4,438
    
    
    
    3,023Total interest expense
    
    
    46,068
    
    
    
    38,716
    
    
    
    15,913
    
    
    
    14,090Net interest income
    
    
    26,262
    
    
    
    28,826
    
    
    
    8,507
    
    
    
    9,176Provision for loan losses
    
    
    8,852
    
    
    
    1,844
    
    
    
    2,826
    
    
    
    1,191Net interest income after
provision for loan losses
    
    
    17,410
    
    
    
    26,982
    
    
    
    5,681
    
    
    
    7,985Noninterest income:Service charges on loans and deposits
    
    
    1,479
    
    
    
    1,500
    
    
    
    426
    
    
    
    563Increase in cash surrender value of life insurance
    
    
    988
    
    
    
    875
    
    
    
    540
    
    
    
    488Loss on sale/impariment of securities
    
    
    
    
    
    
    (784
    )
    
    
    
    
    
    
    (784
    )Mortgage banking income
    
    
    2,138
    
    
    
    1,752
    
    
    
    745
    
    
    
    657Other
    
    
    626
    
    
    
    569
    
    
    
    179
    
    
    
    305Total noninterest income
    
    
    5,231
    
    
    
    3,912
    
    
    
    1,890
    
    
    
    1,229Noninterest expenses:Compensation, payroll taxes, and other employee benefits
    
    
    11,778
    
    
    
    12,491
    
    
    
    3,859
    
    
    
    4,389Occupancy, office furniture and equipment
    
    
    3,779
    
    
    
    3,136
    
    
    
    1,285
    
    
    
    1,142Advertising
    
    
    870
    
    
    
    946
    
    
    
    315
    
    
    
    375Data processing
    
    
    1,148
    
    
    
    1,501
    
    
    
    494
    
    
    
    708Communications
    
    
    554
    
    
    
    468
    
    
    
    171
    
    
    
    147Professional fees
    
    
    911
    
    
    
    793
    
    
    
    273
    
    
    
    327Other
    
    
    1,987
    
    
    
    2,416
    
    
    
    808
    
    
    
    683Total noninterest expenses
    
    
    21,027
    
    
    
    21,751
    
    
    
    7,205
    
    
    
    7,771Income before income taxes
    
    
    1,614
    
    
    
    9,143
    
    
    
    366
    
    
    
    1,443Income taxes (benefit)
    
    
    363
    
    
    
    3,374
    
    
    
    (55
    )
    
    
    537Net income
    
    $
    1,251
    
    
    
    5,769
    
    
    
    421
    
    
    
    906Earnings per share:Basic
    
    $
    0.04
    
    
    
    0.17
    
    
    
    0.01
    
    
    
    0.03Diluted
    
    $
    0.04
    
    
    
    0.17
    
    
    
    0.01
    
    
    
    0.03Weighted average shares outstanding:Basic
    
    
    31,912,040
    
    
    
    33,066,970
    
    
    
    30,797,083
    
    
    
    33,085,851Diluted
    
    
    31,920,231
    
    
    
    33,066,970
    
    
    
    30,804,538
    
    
    
    33,085,851
  -4-




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##### 



WAUWATOSA HOLDINGS, INC AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 (Unaudited)
 Common Stock
    
    
    Paid-In
    
    
    Comprehensive
    
    
    Retained
    
    
    ESOP
    
    
    TreasuryShares
    
    
    Amount
    
    
    Capital
    
    
    Income (Loss)
    
    
    Earnings
    
    
    Shares
    
    
    Stock
    
    
    Equity(In Thousands)Balances at December 31, 2005
    
    
    33,724
    
    
    $
    337
    
    
    
    103,859
    
    
    
    (1,571
    )
    
    
    136,756
    
    
    
    (7,685
    )
    
    
    
    
    
    
    231,696Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,769
    
    
    
    
    
    
    
    
    
    
    
    5,769Other comprehensive income (loss):Net unrealized holding gains on
available for sale securities arising during the period,
net of taxes of $569
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,061
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,061Reclassification adjustment for net losses
available for sale securities realized in net
income, net of taxes of $275
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (509
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (509
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,321ESOP shares committed to be released to Plan participants
    
    
    
    
    
    
    
    
    
    
    198
    
    
    
    
    
    
    
    
    
    
    
    640
    
    
    
    
    
    
    
    838Balances at September 30, 2006
    
    
    33,724
    
    
    $
    337
    
    
    
    104,057
    
    
    
    (1,019
    )
    
    
    142,525
    
    
    
    (7,045
    )
    
    
    
    
    
    
    238,855Balances at December 31, 2006
    
    
    33,724
    
    
    $
    337
    
    
    
    104,182
    
    
    
    (1,225
    )
    
    
    144,809
    
    
    
    (6,831
    )
    
    
    
    
    
    
    241,272Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,251
    
    
    
    
    
    
    
    
    
    
    
    1,251Other comprehensive income (loss):Net unrealized holding gains on
available for sale securities arising during the period,
net of taxes of $203
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    378
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    378Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,629ESOP shares committed to be released to Plan participants
    
    
    
    
    
    
    
    
    
    
    326
    
    
    
    
    
    
    
    
    
    
    
    640
    
    
    
    
    
    
    
    966Stock based compensation
    
    
    251
    
    
    
    3
    
    
    
    1,296
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,299Purchase of treasury stock
    
    
    (2,556
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42,875
    )
    
    
    (42,875
    )Balances at September 30, 2007
    
    
    31,419
    
    
    $
    340
    
    
    
    105,804
    
    
    
    (847
    )
    
    
    146,060
    
    
    
    (6,191
    )
    
    
    (42,875
    )
    
    
    202,291
  -5-




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##### 



WAUWATOSA HOLDINGS, INC AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Nine months ended September 30,2007
    
    
    2006(In Thousands)Operating activities:Net income
    
    $
    1,251
    
    
    
    5,769Adjustments to reconcile net income to net
cash provided by operating activities:Provision for loan losses
    
    
    8,852
    
    
    
    1,844Provision for depreciation
    
    
    1,960
    
    
    
    1,739Deferred income taxes
    
    
    (1,957
    )
    
    
    (1,116
    )Stock based compensation expense
    
    
    1,299
    
    
    
    Net amortization of premium on debt and mortgage-related securities
    
    
    (125
    )
    
    
    33Fair value of ESOP shares committed to be released
    
    
    966
    
    
    
    838Gain on sale of loans held for sale
    
    
    (1,069
    )
    
    
    (653
    )Loans originated for sale
    
    
    (160,916
    )
    
    
    (48,798
    )Proceeds on sales of loans originated for sale
    
    
    156,910
    
    
    
    46,312Increase in accrued interest receivable
    
    
    (875
    )
    
    
    (323
    )Increase in cash surrender value of life insurance
    
    
    (988
    )
    
    
    (875
    )Increase in accrued interest on deposits
    
    
    139
    
    
    
    966Increase in other liabilities
    
    
    513
    
    
    
    625Loss on sale/impairment of securities
    
    
    
    
    
    
    784(Gain) loss on sale of real estate owned and other assets
    
    
    (13
    )
    
    
    85Other
    
    
    (132
    )
    
    
    (620
    )Net cash provided by operating activities
    
    
    5,815
    
    
    
    6,610Investing activities:Net increase in loans receivable
    
    
    (21,118
    )
    
    
    (49,619
    )Purchases of:Debt securities
    
    
    (28,958
    )
    
    
    Mortgage-related securities
    
    
    (44,212
    )
    
    
    (9,266
    )Structured notes, held-to-maturity
    
    
    (7,646
    )
    
    
    Premises and equipment, net
    
    
    (1,781
    )
    
    
    (9,504
    )Waterstone Mortgage Corporation
    
    
    
    
    
    
    (1,081
    )Life insurance
    
    
    (306
    )
    
    
    (306
    )FHLB stock
    
    
    (337
    )
    
    
    (4,085
    )Proceeds from:Principal repayments on mortgage-related securities
    
    
    13,796
    
    
    
    11,841Sales of mortgage related securities
    
    
    
    
    
    
    5,360Maturities of debt securities
    
    
    5,510
    
    
    
    Sales of real estate owned and other assets
    
    
    1,425
    
    
    
    2,647Redmption of FHLB stock
    
    
    
    
    
    
    1,040Net cash used in investing activities
    
    
    (83,627
    )
    
    
    (52,973
    )
  -6-




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##### 



WAUWATOSA HOLDINGS, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Nine months ended September 30,2007
    
    
    2006(In Thousands)Financing activities:Net increase (decrease) in deposits
    
    
    (13,190
    )
    
    
    15,806Net change in short-term borrowings
    
    
    (16,531
    )
    
    
    (97,209
    )Proceeds from long-term borrowings
    
    
    92,900
    
    
    
    245,000Net increase in advance payments by borrowers for taxes
    
    
    6,347
    
    
    
    8,447Purchase of treasury stock
    
    
    (42,875
    )
    
    
    Net cash provided by financing activities
    
    
    26,651
    
    
    
    172,044Increase (decrease) in cash and cash equivalents
    
    
    (51,161
    )
    
    
    125,681Cash and cash equivalents at beginning of period
    
    
    73,807
    
    
    
    16,498Cash and cash equivalents at end of period
    
    
    22,646
    
    
    
    142,179Supplemental information:Cash paid or credited during the period for:Income tax payments
    
    
    3,187
    
    
    
    2,940Interest payments
    
    
    45,930
    
    
    
    37,750Noncash investing activities:Loans receivable transferred to foreclosed properties
    
    
    8,347
    
    
    
    1,454Noncash financing activities:Long-term FHLB advances reclassified to short-term
    
    
    22,729
    
    
    
    41,531
  -7-




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##### 



WAUWATOSA HOLDINGS, INC AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Basis of Presentation
     Note 2  Reclassifications
  -8-




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##### 



Note 3  Securities
 Securities Available for Sale
 
 September 30, 2007(In Thousands)Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealizedcost
    
    
    gains
    
    
    losses
    
    
    Fair valueMortgage-backed securities
    
    $
    20,793
    
    
    
    61
    
    
    
    (293
    )
    
    
    20,561Collateralized mortgage obligations
    
    
    110,342
    
    
    
    451
    
    
    
    (1,231
    )
    
    
    109,562Mortgage-related securities
    
    
    131,135
    
    
    
    512
    
    
    
    (1,524
    )
    
    
    130,123Government sponsored entity bonds
    
    
    13,992
    
    
    
    72
    
    
    
    (36
    )
    
    
    14,028Municipal securities
    
    
    27,250
    
    
    
    134
    
    
    
    (461
    )
    
    
    26,923Debt securities
    
    
    41,242
    
    
    
    206
    
    
    
    (497
    )
    
    
    40,951Other securities
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    250$
    172,627
    
    
    
    718
    
    
    
    (2,021
    )
    
    
    171,324
 December 31, 2006(In Thousands)Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealizedcost
    
    
    gains
    
    
    losses
    
    
    Fair valueMortgage-backed securities
    
    $
    18,274
    
    
    
    3
    
    
    
    (275
    )
    
    
    18,002Collateralized mortgage obligations
    
    
    82,419
    
    
    
    1
    
    
    
    (1,549
    )
    
    
    80,871Mortgage-related securities
    
    
    100,693
    
    
    
    4
    
    
    
    (1,824
    )
    
    
    98,873Government sponsored entity bonds
    
    
    13,450
    
    
    
    
    
    
    
    (193
    )
    
    
    13,257Municipal securities
    
    
    4,278
    
    
    
    151
    
    
    
    (8
    )
    
    
    4,421Debt securities
    
    
    17,728
    
    
    
    151
    
    
    
    (201
    )
    
    
    17,678Other securities
    
    
    794
    
    
    
    
    
    
    
    (15
    )
    
    
    779$
    119,215
    
    
    
    155
    
    
    
    (2,040
    )
    
    
    117,330
  -9-




---



##### 



Amortized
    
    
    FairCost
    
    
    Value(In Thousands)Due within one year
    
    $
    998
    
    
    
    994Due after one year through five years
    
    
    12,994
    
    
    
    13,034Due after five years through ten years
    
    
    1,654
    
    
    
    1,651Due after ten years
    
    
    25,596
    
    
    
    25,272Mortgage-related securities
    
    
    131,135
    
    
    
    130,123Other securities
    
    
    250
    
    
    
    250$
    172,627
    
    
    
    171,324
  September 30, 2007Less than 12 months
    
    
    12 months or longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealizedvalue
    
    
    loss
    
    
    value
    
    
    loss
    
    
    value
    
    
    loss(In Thousands)Mortgage backed securites
    
    $
    2,541
    
    
    
    (8
    )
    
    
    13,237
    
    
    
    (285
    )
    
    
    15,778
    
    
    
    (293
    )Collateralized mortgage
obligations
    
    
    8,676
    
    
    
    (41
    )
    
    
    49,584
    
    
    
    (1,190
    )
    
    
    58,260
    
    
    
    (1,231
    )Government sponsored
entity bonds
    
    
    
    
    
    
    
    
    
    
    7,931
    
    
    
    (36
    )
    
    
    7,931
    
    
    
    (36
    )Municipal securities
    
    
    22,375
    
    
    
    (459
    )
    
    
    473
    
    
    
    (2
    )
    
    
    22,848
    
    
    
    (461
    )$
    33,592
    
    
    
    (508
    )
    
    
    71,225
    
    
    
    (1,513
    )
    
    
    104,817
    
    
    
    (2,021
    )
  Securities Held-to-Maturity
  -10-




---



##### 



Note 4  Loans Receivable
  September 30,
    
    
    December 31,2007
    
    
    2006(In Thousands)Mortgage loans:One- to four-family
    
    $
    664,912
    
    
    
    666,167Over four-family residential
    
    
    483,708
    
    
    
    480,722Commercial real estate
    
    
    50,271
    
    
    
    48,836Construction and land
    
    
    166,539
    
    
    
    168,523Total mortgage loans
    
    
    1,365,430
    
    
    
    1,364,248Consumer loans
    
    
    70,782
    
    
    
    77,878Commercial business loans
    
    
    17,286
    
    
    
    2,657Gross loans receivable
    
    
    1,453,498
    
    
    
    1,444,783Less:Undisbursed loan proceeds
    
    
    68,677
    
    
    
    67,390Unearned loan fees
    
    
    3,734
    
    
    
    4,486Total loans receivable, net
    
    $
    1,381,087
    
    
    
    1,372,907
    September 30,
    
    
    December 31,2007
    
    
    2006(In Thousands)Impaired loans for which an allowance
has been provided
    
    $
    33,075
    
    
    
    11,430Impaired loans for which no allowance
has been provided
    
    
    30,529
    
    
    
    18,499Total loans determined to be impaired
    
    $
    63,604
    
    
    
    29,929Allowance for loan losses related to
impaired loans
    
    $
    4,959
    
    
    
    1,616
 -11-




---



##### 



For the Nine Months EndedSeptember 30,2007
    
    
    2006(In Thousands)Balance at beginning of period
    
    $
    7,195
    
    
    
    5,250Provision for loan losses
    
    
    8,852
    
    
    
    1,844Charge-offs
    
    
    (4,598
    )
    
    
    (258
    )Recoveries
    
    
    33
    
    
    
    257Balance at end of period
    
    $
    11,482
    
    
    
    7,093Allowance for loan losses to loans receivable
    
    
    0.83
    %
    
    
    0.52
    %Net
charge-offs to average loans outstanding (annualized)
    
    
    0.44
    %
    
    
    0.00
    %Allowance for loan losses to non-performing loans
    
    
    16.65
    %
    
    
    33.01
    %Non-performing loans to loans receivable
    
    
    4.99
    %
    
    
    1.59
    %
 Note 5  Deposits
  (In Thousands)Within one year
    
    $
    659,768One to two years
    
    
    124,559Two to three years
    
    
    48,031Three to four years
    
    
    8,184Four through five years
    
    
    16,454After five years
    
    
    448$
    857,444
 -12-




---



##### 



Note 6  Borrowings
  September 30, 2007
    
    
    December 31, 2006Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageBalance
    
    
    Rate
    
    
    Balance
    
    
    Rate(In Thousands)
    
    
    
    
    
    
    (In Thousands)Federal Home Loan Bank (FHLB)
advances maturing:2007
    
    $
    24,693
    
    
    
    4.35
    %
    
    
    41,224
    
    
    
    3.94
    %2008
    
    
    47,779
    
    
    
    4.24
    %
    
    
    47,779
    
    
    
    4.24
    %2010
    
    
    48,900
    
    
    
    4.80
    %
    
    
    25,000
    
    
    
    4.24
    %2016
    
    
    220,000
    
    
    
    4.34
    %
    
    
    220,000
    
    
    
    4.34
    %Repurchase agreements maturing:2017
    
    
    69,000
    
    
    
    4.20
    %
    
    
    $
    410,372
    
    
    
    4.36
    %
    
    
    334,003
    
    
    
    4.31
    %
    Note 7  Stock-Based Compensation
 Stock-Based Compensation Plan
  Accounting for Stock-Based Compensation Plan
  -13-




---



##### 



Dividend Yield
    
    
    1.32
    %Risk-free interest rate
    
    
    4.44
    %Expected volatility
    
    
    31.86
    %Weighted average expected life
    
    6.5 yearsWeighted average per share value of options
    
    $
    6.27
   Weighted Average
    
    
    AggregateWeighted Average
    
    
    Years Remaining in
    
    
    Instrinsic ValueStock Options
    
    Shares
    
    
    Exercise Price
    
    
    Contractual Term
    
    
    (000s)| | | |Outstanding December 31, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Granted
    
    
    782,500
    
    
    $
    17.67
    
    
    
    9.25
    
    
    
    Excercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (15,000
    )
    
    
    17.67
    
    
    
    9.25
    
    
    
    Outstanding September 30, 2007
    
    
    767,500
    
    
    
    17.67
    
    
    
    9.25
    
    
    
    Options exercisable at
September 30, 2007
    
    
    
    
    
    
    17.67
    
    
    
    
    
    
    
    
  Weighted AverageStock Options
    
    Shares
    
    
    Grant Date Fair ValueNonvested at December 31, 2006
    
    
    
    
    
    
    Granted
    
    
    782,500
    
    
    $
    6.27Vested
    
    
    
    
    
    
    Forfeited
    
    
    (15,000
    )
    
    
    6.27Nonvested at September 30, 2007
    
    
    767,500
    
    
    
    6.27
 -14-




---



##### 



Weighted AverageRestricted Stock
    
    Shares
    
    
    Grant Date Fair ValueNonvested at December 31, 2006
    
    
    Granted
    
    
    251,500
    
    
    $
    17.67Vested
    
    
    Forfeited
    
    
    Nonvested at June 30, 2007
    
    
    251,500
    
    
    
    17.67
  -15-




---



##### 



Note 8
 Income Taxes
  Nine Months Ended
    
    
    Three Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in thousands)Income before income taxes
    
    $
    1,614
    
    
    
    9,143
    
    
    
    366
    
    
    
    1,443Tax at federal statutory rate
    
    
    565
    
    
    
    3,200
    
    
    
    128
    
    
    
    505Add effect of:State income taxes, net of Federal
income tax benefit
    
    
    46
    
    
    
    398
    
    
    
    29
    
    
    
    79Cash surrender value of life insurance
    
    
    (346
    )
    
    
    (306
    )
    
    
    (189
    )
    
    
    (171
    )Non-deductible ESOP and stock
options expense
    
    
    180
    
    
    
    69
    
    
    
    54
    
    
    
    39Tax-exempt interest income
    
    
    (179
    )
    
    
    (52
    )
    
    
    (102
    )
    
    
    (17
    )Other
    
    
    97
    
    
    
    65
    
    
    
    25
    
    
    
    102Income tax provision
    
    
    363
    
    
    
    3,374
    
    
    
    (55
    )
    
    
    537Effective tax rate
    
    
    22.5%
    
    
    
    36.9%
    
    
    
    (14.9%
    )
    
    
    36.9%
 Note 9  Financial Instruments with Off-Balance Sheet Risk
  September 30,
    
    
    December 31,2007
    
    
    2006(In Thousands)Financial instruments whose contract amounts represent potential credit risk:Commitments to extend credit
    
    $
    17,073
    
    
    
    28,067Unused portion of home equity lines of credit
    
    
    31,861
    
    
    
    34,676Unused portion of construction loans
    
    
    36,816
    
    
    
    32,714Standby letters of credit
    
    
    940
    
    
    
    639
  -16-




---



##### 



-17-




---



##### 



Note 10  Earnings per share
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(In Thousands, except per share data)Net income
    
    $
    421
    
    
    $
    906
    
    
    $
    1,251
    
    
    $
    5,769Weighted average shares outstanding
    
    
    30,797
    
    
    
    33,086
    
    
    
    31,912
    
    
    
    33,067Effect of dilutive potential common shares
    
    
    8
    
    
    
    
    
    
    
    8
    
    
    
    Diluted weighted average shares outstanding
    
    
    30,805
    
    
    
    33,086
    
    
    
    31,920
    
    
    
    33,067Basic earnings per share
    
    $
    0.01
    
    
    $
    0.03
    
    
    $
    0.04
    
    
    $
    0.17Diluted earnings per share
    
    $
    0.01
    
    
    $
    0.03
    
    
    $
    0.04
    
    
    $
    0.17
 -18-




---



##### 



Note 11  Charter Conversion
   Note 12  Recent Accounting Developments
    Fair Value Measurements
 -19-




---



##### 



The Fair Value Option for Financial Assets and
Financial Liabilities, Including an Amendment of FASB Statement No. 115
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Cautionary Statements Regarding Forward-Looking Information
  
    
    inflation and changes in the interest rate environment that reduce our margins or
reduce the fair value of financial instruments;
    
    legislative or regulatory changes that adversely affect our business;
 -20-




---



##### 




    
    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;
    
    adverse changes in the real estate markets;
    
    changes in accounting policies and practices, as may be adopted by the bank
regulatory agencies and the Financial Accounting Standards Board; and
    
    changes in consumer spending, borrowing and savings habits.
  Overview
   -21-




---



##### 



Critical Accounting Policies
  AllowanceforLoanLosses.
   IncomeTaxes.
 -22-




---



##### 



Comparison of Operating Results for the Nine Months Ended September 30, 2007 and 2006
 General
 Total Interest Income
 -23-




---



##### 



Total Interest Expense
   Net Interest Income
 -24-




---



##### 



Provision for Loan Losses
 Noninterest Income
 Noninterest Expense
   -25-




---



##### 



Income Taxes
 Net Income
 Comparison of Operating Results for the Three Months Ended September 30, 2007 and 2006
 General
 -26-




---



##### 



Total Interest Income
 Total Interest Expense
   -27-




---



##### 



Net Interest Income
 Provision for Loan Losses
 Noninterest Income
 Noninterest Expense
  -28-




---



##### 



Income Taxes
 Net Income
 Comparison of Financial Condition at September 30, 2007 and December 31, 2006
 Total Assets
 -29-




---



##### 



Cash and Cash Equivalents
 Securities Available for Sale
 Securities Held to Maturity
 Loans Held for Sale
 Loans Receivable
 -30-




---



##### 



As of or for the
    
    
    As of or for theNine Months Ended
    
    
    Year EndedSeptember 30, 2007
    
    
    December 31, 2006(In Thousands)Total gross loans receivable and held for sale at beginning of
period
    
    $
    1,450,170
    
    
    
    1,393,096Real estate loans originated for investment:ResidentialOne- to four-family
    
    
    55,711
    
    
    
    111,384Over four-family
    
    
    48,651
    
    
    
    99,420Construction and land
    
    
    25,070
    
    
    
    74,104Commercial
    
    
    11,557
    
    
    
    19,867Total real estate loans originated for investment
    
    
    140,989
    
    
    
    304,775Consumer loans originated for investment
    
    
    10,950
    
    
    
    11,915Commerical loans originated for investment
    
    
    23,060
    
    
    
    2,867Total loans originated for investment
    
    
    174,999
    
    
    
    319,557Principal repayments
    
    
    (166,284
    )
    
    
    (267,870
    )Net activity in loans held for investment
    
    
    8,715
    
    
    
    51,687Loans originated for sale
    
    
    160,916
    
    
    
    84,603Loans sold
    
    
    (155,841
    )
    
    
    (79,216
    )Net activity in loans held for sale
    
    
    5,075
    
    
    
    5,387Total gross loans receivable and held for sale at end of period
    
    $
    1,463,960
    
    
    
    1,450,170
 Deposits
 Borrowings
 -31-




---



##### 



Advance Payments by Borrowers for Taxes
 Other Liabilities
 Shareholders Equity
  -32-




---



##### 



Average Balance Sheets, Interest and Yields/Costs
  Three Months Ended September 30,2007
    
    
    2006Average
    
    
    Interest and
    
    
    
    
    
    
    Average
    
    
    Interest andBalance
    
    
    Dividends
    
    
    Yield/Cost
    
    
    Balance
    
    
    Dividends
    
    
    Yield/Cost(Dollars in Thousands)Interest-earning assets:Loans receivable, net
    
    $
    1,383,271
    
    
    
    21,769
    (1)
    
    
    6.24
    %
    
    $
    1,360,697
    
    
    
    21,313
    (1)
    
    
    6.21
    %Mortgage related securities(2)
    
    
    117,489
    
    
    
    1,533
    
    
    
    5.18
    
    
    
    81,039
    
    
    
    975
    
    
    
    4.77Debt securities (2), federal funds sold
and short-term investments
    
    
    93,827
    
    
    
    1,118
    
    
    
    4.73
    
    
    
    100,336
    
    
    
    978
    
    
    
    3.87Total interest-earning assets
    
    
    1,594,587
    
    
    
    24,420
    
    
    
    6.08
    
    
    
    1,542,072
    
    
    
    23,266
    
    
    
    5.99Noninterest-earning assets
    
    
    67,889
    
    
    
    
    
    
    
    
    
    
    
    72,796Total assets
    
    $
    1,662,476
    
    
    
    
    
    
    
    
    
    
    
    1,614,868Interest-bearing liabilities:Demand and money market accounts
    
    $
    147,598
    
    
    
    1,200
    
    
    
    3.23
    
    
    $
    115,723
    
    
    
    811
    
    
    
    2.78Savings accounts
    
    
    19,485
    
    
    
    20
    
    
    
    0.41
    
    
    
    20,671
    
    
    
    26
    
    
    
    0.50Certificates of deposit
    
    
    859,382
    
    
    
    10,237
    
    
    
    4.73
    
    
    
    923,379
    
    
    
    10,215
    
    
    
    4.39Total interest-bearing deposits
    
    
    1,026,465
    
    
    
    11,457
    
    
    
    4.43
    
    
    
    1,059,773
    
    
    
    11,052
    
    
    
    4.14Borrowings
    
    
    388,679
    
    
    
    4,327
    
    
    
    4.42
    
    
    
    275,209
    
    
    
    3,017
    
    
    
    4.35Other interest bearing liabilities
    
    
    27,193
    
    
    
    129
    
    
    
    1.88
    
    
    
    13,742
    
    
    
    21
    
    
    
    0.61Total interest-bearing liabilities
    
    
    1,442,337
    
    
    
    15,913
    
    
    
    4.38
    
    
    
    1,348,724
    
    
    
    14,090
    
    
    
    4.14Noninterest-bearing liabilities
    
    
    15,248
    
    
    
    
    
    
    
    
    
    
    
    30,352Total liabilities
    
    
    1,457,585
    
    
    
    
    
    
    
    
    
    
    
    1,379,076Equity
    
    
    204,891
    
    
    
    
    
    
    
    
    
    
    
    235,792Total liabilities and equity
    
    $
    1,662,476
    
    
    
    
    
    
    
    
    
    
    $
    1,614,868Net interest income
    
    
    
    
    
    
    8,507
    
    
    
    
    
    
    
    
    
    
    
    9,176Net interest rate spread (3)
    
    
    
    
    
    
    
    
    
    
    1.70
    %
    
    
    
    
    
    
    
    
    
    
    1.85
    %Net interest-earning assets (4)
    
    $
    152,250
    
    
    
    
    
    
    
    
    
    
    $
    193,348Net interest margin (5)
    
    
    
    
    
    
    
    
    
    
    2.12
    %
    
    
    
    
    
    
    
    
    
    
    2.36
    %Average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    110.56
    %
    
    
    
    
    
    
    
    
    
    
    114.34
    %
 
 (1)
    
    Includes net deferred loan fee amortization income of $498,000 and $223,000 for the three
months ended September 30,2007 and 2006, respectively.(2)
    
    Average balance of mortgage related and debt securities is based on amortized historical
cost.(3)
    
    Net interest rate spread represents the difference between the yield on average
interest-earning assets and the cost ofaverage interest-bearing liabilities.(4)
    
    Net interest-earning assets represent total interest-earning assets less total
interest-bearing liabilities.(5)
    
    Net interest margin represents net interest income divided by average total interest-earning
assets. -33-




---



##### 



Nine Months Ended September 30,2007
    
    
    2006Average
    
    
    Interest and
    
    
    
    
    
    
    Average
    
    
    Interest andBalance
    
    
    Dividends
    
    
    Yield/Cost
    
    
    Balance
    
    
    Dividends
    
    
    Yield/Cost(Dollars in Thousands)Interest-earning assets:Loans receivable, net
    
    $
    1,384,608
    
    
    
    65,077
    (1)
    
    
    6.28
    %
    
    $
    1,347,925
    
    
    
    62,314
    (1)
    
    
    6.18
    %Mortgage related securities(2)
    
    
    104,557
    
    
    
    4,075
    
    
    
    5.21
    
    
    
    85,573
    
    
    
    3,056
    
    
    
    4.77Debt securities (2), federal funds sold
and short-term investments
    
    
    92,227
    
    
    
    3,178
    
    
    
    4.61
    
    
    
    71,643
    
    
    
    2,172
    
    
    
    4.05Total interest-earning assets
    
    
    1,581,392
    
    
    
    72,330
    
    
    
    6.12
    
    
    
    1,505,141
    
    
    
    67,542
    
    
    
    6.00Noninterest-earning assets
    
    
    67,895
    
    
    
    
    
    
    
    
    
    
    
    66,568Total assets
    
    $
    1,649,287
    
    
    
    
    
    
    
    
    
    
    
    1,571,709Interest-bearing liabilities:Demand and money market accounts
    
    $
    141,644
    
    
    
    3,378
    
    
    
    3.19
    
    
    $
    105,255
    
    
    
    1,865
    
    
    
    2.37Savings accounts
    
    
    19,424
    
    
    
    60
    
    
    
    0.41
    
    
    
    20,882
    
    
    
    78
    
    
    
    0.50Certificates of deposit
    
    
    862,352
    
    
    
    30,171
    
    
    
    4.68
    
    
    
    934,132
    
    
    
    28,786
    
    
    
    4.12Total interest-bearing deposits
    
    
    1,023,420
    
    
    
    33,609
    
    
    
    4.39
    
    
    
    1,060,269
    
    
    
    30,729
    
    
    
    3.87Borrowings
    
    
    366,907
    
    
    
    12,107
    
    
    
    4.41
    
    
    
    241,856
    
    
    
    7,751
    
    
    
    4.28Other interest bearing liabilities
    
    
    19,193
    
    
    
    352
    
    
    
    2.45
    
    
    
    10,697
    
    
    
    236
    
    
    
    2.95Total interest-bearing liabilities
    
    
    1,409,520
    
    
    
    46,068
    
    
    
    4.37
    
    
    
    1,312,822
    
    
    
    38,716
    
    
    
    3.94Noninterest-bearing liabilities
    
    
    17,678
    
    
    
    
    
    
    
    
    
    
    
    22,876Total liabilities
    
    
    1,427,198
    
    
    
    
    
    
    
    
    
    
    
    1,335,698Equity
    
    
    222,089
    
    
    
    
    
    
    
    
    
    
    
    236,011Total liabilities and equity
    
    $
    1,649,287
    
    
    
    
    
    
    
    
    
    
    $
    1,571,709Net interest income
    
    
    
    
    
    
    26,262
    
    
    
    
    
    
    
    
    
    
    
    28,826Net interest rate spread (3)
    
    
    
    
    
    
    
    
    
    
    1.75
    %
    
    
    
    
    
    
    
    
    
    
    2.06
    %Net interest-earning assets (4)
    
    $
    171,872
    
    
    
    
    
    
    
    
    
    
    $
    192,319Net interest margin (5)
    
    
    
    
    
    
    
    
    
    
    2.22
    %
    
    
    
    
    
    
    
    
    
    
    2.56
    %Average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    112.19
    %
    
    
    
    
    
    
    
    
    
    
    114.65
    %
 
 (1)
    
    Includes net deferred loan fee amortization income of $1,683,000 and $713,000 for the nine
months ended September 30,2007 and 2006, respectively.(2)
    
    Average balance of mortgage related and debt securities is based on amortized historical
cost.(3)
    
    Net interest rate spread represents the difference between the yield on average
interest-earning assets and the cost ofaverage interest-bearing liabilities.(4)
    
    Net interest-earning assets represent total interest-earning assets less total
interest-bearing liabilities.(5)
    
    Net interest margin represents net interest income divided by average total interest-earning
assets -34-




---



##### 



Rate/Volume Analysis
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007 versus 2006
    
    
    2007 versus 2006Increase (Decrease) due to
    
    
    Increase (Decrease) due toVolume
    
    
    Rate
    
    
    Net
    
    
    Volume
    
    
    Rate
    
    Net(In Thousands)Interest and dividend income:Loans receivable(1) (2)
    
    $
    355
    
    
    
    101
    
    
    
    456
    
    
    $
    1,713
    
    
    
    1,050
    
    
    
    2,763Securites
interest and income from other earning assets(3)
    
    
    349
    
    
    
    349
    
    
    
    698
    
    
    
    1,416
    
    
    
    609
    
    
    
    2,025Total interest-earning assets
    
    
    704
    
    
    
    450
    
    
    
    1,154
    
    
    
    3,129
    
    
    
    1,659
    
    
    
    4,788Interest expense:Demand and money market accounts
    
    
    246
    
    
    
    143
    
    
    
    389
    
    
    
    756
    
    
    
    757
    
    
    
    1,513Savings accounts
    
    
    (1
    )
    
    
    (5
    )
    
    
    (6
    )
    
    
    (5
    )
    
    
    (13
    )
    
    
    (18
    )Certificates of deposit
    
    
    (204
    )
    
    
    226
    
    
    
    22
    
    
    
    (1,819
    )
    
    
    3,204
    
    
    
    1,385Total interest-bearing deposits
    
    
    41
    
    
    
    364
    
    
    
    405
    
    
    
    (1,068
    )
    
    
    3,948
    
    
    
    2,880Borrowings
    
    
    1,263
    
    
    
    47
    
    
    
    1,310
    
    
    
    4,120
    
    
    
    236
    
    
    
    4,356Other interest bearing liabilities
    
    
    34
    
    
    
    74
    
    
    
    108
    
    
    
    147
    
    
    
    (31
    )
    
    
    116Total interest-bearing liabilities
    
    
    1,338
    
    
    
    485
    
    
    
    1,823
    
    
    
    3,199
    
    
    
    4,153
    
    
    
    7,352Net change in net interest income
    
    $
    (634
    )
    
    
    (35
    )
    
    
    (669
    )
    
    $
    (70
    )
    
    
    (2,494
    )
    
    
    (2,564
    )
 
 (1)
    
    Includes net deferred loan fee amortization income of $498,000, $223,000, $1,683,000 and
$713,000 for the three months ended September 30, 2007 and 2006 and the nine months ended
September 30, 2007 and 2006, 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.  -35-




---



##### 



ASSET QUALITY
  NON-PERFORMING LOANS AND ASSETS
 At September 30,
    
    
    At December 31,2007
    
    
    2006(Dollars in Thousands)Non-accrual loans:Mortgage loansOne- to four-family
    
    
    23,773
    
    
    
    12,376Over four-family
    
    
    34,033
    
    
    
    8,384Construction and land
    
    
    5,884
    
    
    
    7,664Commercial
    
    
    4,811
    
    
    
    357Total mortgage
    
    
    68,501
    
    
    
    28,781Consumer
    
    
    441
    
    
    
    107Total non-performing loans `
    
    
    68,942
    
    
    
    28,888Real estate owned
    
    
    7,408
    
    
    
    520Total non-performing assets
    
    $
    76,350
    
    
    
    29,408Total non-performing loans to total loans receivable
    
    
    4.99
    %
    
    
    2.10
    %Total non-performing loans to total assets
    
    
    4.10
    %
    
    
    1.75
    %Total non-performing assets to total assets
    
    
    4.56
    %
    
    
    1.79
    %
  -36-




---



##### 



-37-




---



##### 



ALLOWANCE FOR LOAN LOSSES
 At or for the Nine Months
    
    
    At or for the Three MonthsEnded September 30,
    
    
    Ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in Thousands)Balance at beginning of period
    
    $
    7,195
    
    
    
    5,250
    
    
    
    9,570
    
    
    
    5,983Provision for loan losses
    
    
    8,852
    
    
    
    1,844
    
    
    
    2,826
    
    
    
    1,191Charge-offs:MortgageOne- to four-family
    
    
    979
    
    
    
    248
    
    
    
    394
    
    
    
    111Over four-family
    
    
    314
    
    
    
    
    
    
    
    99
    
    
    
    Construction and land
    
    
    3,278
    
    
    
    
    
    
    
    426
    
    
    
    Commercial
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    1Consumer
    
    
    27
    
    
    
    7
    
    
    
    24
    
    
    
    1Total charge-offs
    
    
    4,598
    
    
    
    258
    
    
    
    943
    
    
    
    113Total recoveries
    
    
    33
    
    
    
    257
    
    
    
    29
    
    
    
    32Net charge-offs
    
    
    4,565
    
    
    
    1
    
    
    
    914
    
    
    
    81Allowance at end of period
    
    $
    11,482
    
    
    
    7,093
    
    
    
    11,482
    
    
    
    7,093Ratios:Allowance for loan losses to non-performing loans at end of period
    
    
    16.65
    %
    
    
    32.54
    %
    
    
    16.65
    %
    
    
    32.54Allowance for loan losses to loans
receivable at end of period
    
    
    0.83
    %
    
    
    0.52
    %
    
    
    0.83
    %
    
    
    0.52
    %Net charge-offs to average loans outstanding
    
    
    0.44
    %
    
    
    0.00
    %
    
    
    0.26
    %
    
    
    0.02
    %
    -38-




---



##### 



-39-




---



##### 



Impact of Inflation and Changing Prices
  Liquidity and Capital Resources
     -40-




---



##### 



-41-




---



##### 



Regulatory Capital
     -42-




---



##### 



September 30, 2007To Be Well-CapitalizedFor Capital
    
    Under Prompt CorrectiveActual
    
    Adequacy Purposes
    
    Action Provisions (1)Amount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioWauwatosa HoldingsTotal capital (to risk-weighted
assets)
    
    $
    213,851
    
    
    
    16.05
    %
    
    
    106,583
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/ATier I capital (to risk-weighted
assets)
    
    
    202,454
    
    
    
    15.20
    %
    
    
    53,292
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/ATier I capital (to average assets)
    
    
    202,454
    
    
    
    12.18
    %
    
    
    66,461
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/AWauwatosa SavingsTotal capital (to risk-weighted
assets)
    
    $
    179,480
    
    
    
    13.53
    %
    
    
    106,124
    
    
    
    8.00
    %
    
    
    132,690
    
    
    
    10.00
    %Tier I capital (to risk-weighted
assets)
    
    
    168,525
    
    
    
    12.70
    %
    
    
    53,062
    
    
    
    4.00
    %
    
    
    79,614
    
    
    
    6.00
    %Tier I capital (to average assets)
    
    
    168,525
    
    
    
    10.25
    %
    
    
    65,755
    
    
    
    4.00
    %
    
    
    82,194
    
    
    
    5.00
    %State of Wisconsin (to total assets) (2)
    
    
    168,525
    
    
    
    10.06
    %
    
    
    100,503
    
    
    
    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. -43-




---



##### 



Contractual Obligations, Commitments, Contingent Liabilities, and Off-balance Sheet Arrangements
  Contractual Obligations
 More than
    
    
    More thanOne Year
    
    
    Three Years
    
    
    OverOne Year
    
    
    Through
    
    
    Through
    
    
    FiveTotal
    
    
    or Less
    
    
    Three Years
    
    
    Five Years
    
    
    Years(In Thousands)Deposits without a stated maturity
    
    $
    166,263
    
    
    
    166,263
    
    
    
    
    
    
    
    
    
    
    
    Certificates of deposit
    
    
    857,444
    
    
    
    659,768
    
    
    
    172,590
    
    
    
    24,638
    
    
    
    448Federal Home Loan Bank
advances (1)
    
    
    341,372
    
    
    
    47,422
    
    
    
    48,950
    
    
    
    25,000
    
    
    
    220,000Repurchase agreements (2)
    
    
    69,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69,000Operating leases(3)
    
    
    236
    
    
    
    106
    
    
    
    130
    
    
    
    
    
    
    
    Capital lease
    
    
    3,750
    
    
    
    300
    
    
    
    3,450
    
    
    
    
    
    
    
    State income
tax obligation(4)
    
    
    3,726
    
    
    
    1,242
    
    
    
    2,484
    
    
    
    
    
    
    
    Salary continuation agreements
    
    
    2,977
    
    
    
    576
    
    
    
    1,152
    
    
    
    441
    
    
    
    808$
    1,444,768
    
    
    
    875,677
    
    
    
    228,756
    
    
    
    50,079
    
    
    
    290,256
 
 (1)
    
    Secured under a blanket security agreement on qualifying assets, principally,
mortgage loans. Excludes interest which will accrue on the advances. All Federal Home Loan
Bank advances with maturities exceeding five years are callable on a quarterly basis with the
initial call at various times from July 2007 through March 2009.(2)
    
    The repurchase agreements are callable on a quarterly basis with the initial call
in March 2009.(3)
    
    Represents non-cancelable operating leases for offices.(4)
    
    Represents remaining amounts due to the Wisconsin Department of Revenue related to
the operations of the Companys Nevada subsidiary.  Other Commitments
 More than
    
    
    More thanOne Year
    
    
    Three Years
    
    
    OverOne Year
    
    
    Through
    
    
    Through
    
    
    FiveTotal
    
    
    or Less
    
    
    Three Years
    
    
    Five Years
    
    
    Years(In Thousands)Real estate
loan commitments (1)
    
    $
    17,073
    
    
    
    17,073
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of home equity lines of credit (2)
    
    
    31,861
    
    
    
    31,861
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of construction loans (3)
    
    
    36,816
    
    
    
    36,816
    
    
    
    
    
    
    
    
    
    
    
    Standby letters of credit
    
    
    940
    
    
    
    265
    
    
    
    590
    
    
    
    85
    
    
    
    Total Other Commitments
    
    $
    86,690
    
    
    
    86,015
    
    
    
    590
    
    
    
    85
    
    
    
    
 
  (1)
 (2)
 (3)
 -44-




---



##### 



Item 3. Quantitative and Qualitative Disclosures about Market Risk
 Management of Market Risk
 General.
 Income Simulation.
 PercentageIncrease (Decrease) in EstimatedAnnual Net Interest IncomeOver 24 Months300 basis point increase in rates
    
    
    (5.37
    )%200 basis point increase in rates
    
    
    (2.82
    )100 basis point increase in rates
    
    
    (1.12
    )100 basis point decrease in rates
    
    
    (3.75
    )200 basis point decrease in rates
    
    
    (4.72
    )
  -45-




---



##### 



Item 4. Controls and Procedures
 Disclosure Controls and Procedures :
 Internal Control Over Financial Reporting :
 -46-




---



##### 



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Total number of
    
    Maximum numbershares purchased
    
    of shares that mayTotal number
    
    Average
    
    as part of
    
    yet be purchasedof shares
    
    price paid
    
    publicly announced
    
    under thePeriod
    
    purchased
    
    per share
    
    plans or programs
    
    plans or programsJanuary 1 - January 31, 2007
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    1,494,298February 1 -
February 28, 2007
    
    
    112,863
    
    
    
    17.77
    
    
    
    112,863
    
    
    
    1,381,435March 1 - March 31, 2007
    
    
    713,938
    
    
    
    17.47
    
    
    
    826,801
    
    
    
    667,497April 1 - April 30, 2007
    
    
    108,968
    
    
    
    17.67
    
    
    
    935,769
    
    
    
    558,529May 1 - May 31, 2007
    
    
    241,573
    
    
    
    17.55
    
    
    
    1,177,342
    
    
    
    316,956June 1 - June 30, 2007
    
    
    308,936
    
    
    
    16.62
    
    
    
    1,486,278
    
    
    
    1,422,635July 1 - July 31, 2007 (1)
    
    
    1,070,070
    
    
    
    15.98
    
    
    
    2,556,348
    
    
    
    352,565August 1 - August 31, 2007
    
    
    
    
    
    
    September 1
- September 30, 2007
    
    
    
    
    
    
    2,556,348
    
    
    
    16.77
 
 (1)
    
    On June 12, 2007, the Board of Directors of the Company approved a share repurchase program
for approximately 1.4 million shares, or 15% of its outstanding common stock held by shareholders
other than Lamplighter Financial, MHC. -47-




---



##### 



Item 6. Exhibits
 (a) Exhibits: See Exhibit Index, which follows the signature page hereof.
 -48-




---



##### 



WAUWATOSA HOLDINGS, INC.(Registrant)Date: November 9, 2007/s/Douglas S. GordonDouglas S. GordonChief Executive OfficerDate: November 9, 2007/s/ Richard C. LarsonRichard C. LarsonChief Financial Officer
 -49-




---



##### 



Exhibit No.
    
    Description
    
    Filed Herewith31.1
    
    Sarbanes-Oxley Act Section 302
Certification signed by the Chief
Executive Officer of Wauwatosa Holdings,
Inc.
    
    X31.2
    
    Sarbanes-Oxley Act Section 302
Certification signed by the Chief
Financial Officer of Wauwatosa Holdings,
Inc.
    
    X32.1
    
    Certification pursuant to 18 U.S. C.
Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002 signed by the Chief Executive Officer
of Wauwatosa Holdings, Inc.
    
    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, Inc.
    
    X
 -50-