##### Table of Contents



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 June 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.
  Wisconsin
(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
  o þ 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 June 30, 2007 (unaudited) and December 31, 2006
    
    3Consolidated Statements of Operations for the three and six months ended June 30, 2007 and 2006 (unaudited)
    
    4-5Consolidated Statements of Changes in Shareholders Equity for the six months ended June 30, 2007 and 2006 (unaudited)
    
    6Consolidated Statements of Cash Flows for the six months ended June 30, 2007 and 2006 (unaudited)
    
    7-8Notes to Consolidated Financial Statements
    
    9-21Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    21-42Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    43-44Item 4. Controls and Procedures
    
    44PART II. OTHER INFORMATION
    
    45Item 1. Legal Proceedings
    
    45Item 1A. Risk Factors
    
    45Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    45Item 4. Submission of Matters to a Vote of Security Holders
    
    46Item 6. Exhibits
    
    46Signatures
    
    47CertificationCertificationCertificationCertification302 Certification of Chief Executive Officer302 Certification of Chief Financial Officer906 Certification of Chief Executive Officer906 Certification of Chief Financial Officer
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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 WAUWATOSA HOLDINGS, INC AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 (Unaudited)June 30,
    
    
    December 31,2007
    
    
    2006(In Thousands, except share data)AssetsCash
    
    $
    5,061
    
    
    
    26,745Federal funds sold
    
    
    22,583
    
    
    
    21,800Interest-earning deposits in other financial institutions
and other short term investments
    
    
    798
    
    
    
    25,262Cash and cash equivalents
    
    
    28,442
    
    
    
    73,807Securities available-for-sale (at fair value)
    
    
    145,320
    
    
    
    117,330Securities held-to-maturity (at amortized cost)
    
    
    7,646
    
    
    
    Loans held for sale
    
    
    8,728
    
    
    
    5,387Loans receivable
    
    
    1,376,540
    
    
    
    1,372,907Less: Allowance for loan losses
    
    
    9,570
    
    
    
    7,195Loans receivable, net
    
    
    1,366,970
    
    
    
    1,365,712Office properties and equipment, net
    
    
    32,741
    
    
    
    32,625Federal Home Loan Bank stock, at cost
    
    
    17,550
    
    
    
    17,213Cash surrender value of life insurance
    
    
    24,780
    
    
    
    24,152Prepaid expenses and other assets
    
    
    14,834
    
    
    
    12,244Total assets
    
    $
    1,647,011
    
    
    
    1,648,470Liabilities and Shareholders EquityLiabilities:Demand deposits
    
    $
    51,182
    
    
    
    58,407Money market and savings deposits
    
    
    109,508
    
    
    
    94,472Time deposits
    
    
    858,223
    
    
    
    883,339Total deposits
    
    
    1,018,913
    
    
    
    1,036,218Short term borrowings
    
    
    51,953
    
    
    
    41,224Long term borrowings
    
    
    322,950
    
    
    
    292,779Advance payments by borrowers for taxes
    
    
    16,484
    
    
    
    190Other liabilities
    
    
    19,882
    
    
    
    36,787Total liabilities
    
    
    1,430,182
    
    
    
    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 200,000,000 200,000,000 shares, 33,975,250 shares issued, 31,917,522 and 33,114,539 shares outstanding at June 30, 2007 and December 31, 2006, respectively)
    
    
    340
    
    
    
    337Additional paid-in capital
    
    
    105,281
    
    
    
    104,182Accumulated other comprehensive loss (net of taxes)
    
    
    (2,249
    )
    
    
    (1,225
    )Retained earnings, substantially restricted
    
    
    145,639
    
    
    
    144,809Unearned ESOP shares
    
    
    (6,404
    )
    
    
    (6,831
    )Treasury shares (1,486,278 shares), at cost
    
    
    (25,778
    )
    
    
    Total shareholders equity
    
    
    216,829
    
    
    
    241,272Total liabilities and shareholders equity
    
    $
    1,647,011
    
    
    
    1,648,470
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WAUWATOSA HOLDINGS, INC AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)Three months ended June 30,2007
    
    
    2006(In thousands, except per share data)Interest income:Loans
    
    $
    21,985
    
    
    
    20,795Mortgage-related securities
    
    
    1,278
    
    
    
    1,018Debt securities, federal funds sold and
short-term investments
    
    
    1,072
    
    
    
    605Total interest income
    
    
    24,335
    
    
    
    22,418Interest expense:Deposits
    
    
    11,141
    
    
    
    10,356Borrowings
    
    
    4,204
    
    
    
    2,472Total interest expense
    
    
    15,345
    
    
    
    12,828Net interest income
    
    
    8,990
    
    
    
    9,590Provision for loan losses
    
    
    5,676
    
    
    
    345Net interest income after provision for loan losses
    
    
    3,314
    
    
    
    9,245Noninterest income:Service charges on loans and deposits
    
    
    536
    
    
    
    452Increase in cash surrender value of life insurance
    
    
    267
    
    
    
    230Mortgage banking income
    
    
    824
    
    
    
    756Other
    
    
    102
    
    
    
    53Total noninterest income
    
    
    1,729
    
    
    
    1,491Noninterest expenses:Compensation, payroll taxes, and other employee benefits
    
    
    3,919
    
    
    
    4,239Occupancy, office furniture and equipment
    
    
    1,270
    
    
    
    1,032Advertising
    
    
    282
    
    
    
    286Data processing
    
    
    415
    
    
    
    418Communications
    
    
    167
    
    
    
    161Professional fees
    
    
    368
    
    
    
    289Other
    
    
    585
    
    
    
    902Total noninterest expenses
    
    
    7,006
    
    
    
    7,327Income (loss) before income taxes
    
    
    (1,963
    )
    
    
    3,409Income taxes (benefit)
    
    
    (694
    )
    
    
    1,252Net income (loss)
    
    $
    (1,269
    )
    
    
    2,157Earnings (loss) per share:Basic
    
    $
    (0.04
    )
    
    
    0.07Diluted
    
    $
    (0.04
    )
    
    
    0.07Weighted average shares outstanding:Basic
    
    
    32,041,622
    
    
    
    33,066,761Diluted
    
    
    32,053,131
    
    
    
    33,066,761
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WAUWATOSA HOLDINGS, INC AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)Six months ended June 30,2007
    
    
    2006(In thousands, except per share data)Interest income:Loans
    
    $
    43,308
    
    
    
    41,001Mortgage-related securities
    
    
    2,542
    
    
    
    2,081Debt securities, federal funds sold and
short-term investments
    
    
    2,060
    
    
    
    1,193Total interest income
    
    
    47,910
    
    
    
    44,275Interest expense:Deposits
    
    
    22,166
    
    
    
    19,690Borrowings
    
    
    7,989
    
    
    
    4,935Total interest expense
    
    
    30,155
    
    
    
    24,625Net interest income
    
    
    17,755
    
    
    
    19,650Provision for loan losses
    
    
    6,026
    
    
    
    652Net interest income after provision for loan losses
    
    
    11,729
    
    
    
    18,998Noninterest income:Service charges on loans and deposits
    
    
    1,053
    
    
    
    937Increase in cash surrender value of life insurance
    
    
    448
    
    
    
    387Mortgage banking income
    
    
    1,393
    
    
    
    1,095Other
    
    
    447
    
    
    
    265Total noninterest income
    
    
    3,341
    
    
    
    2,684Noninterest expenses:Compensation, payroll taxes, and other employee benefits
    
    
    7,919
    
    
    
    8,102Occupancy, office furniture and equipment
    
    
    2,494
    
    
    
    1,994Advertising
    
    
    555
    
    
    
    571Data processing
    
    
    654
    
    
    
    793Communications
    
    
    383
    
    
    
    322Professional fees
    
    
    638
    
    
    
    467Other
    
    
    1,179
    
    
    
    1,734Total noninterest expenses
    
    
    13,822
    
    
    
    13,983Income before income taxes
    
    
    1,248
    
    
    
    7,699Income taxes
    
    
    418
    
    
    
    2,836Net income
    
    $
    830
    
    
    
    4,863Earnings per share:Basic
    
    $
    0.03
    
    
    
    0.15Diluted
    
    $
    0.03
    
    
    
    0.15Weighted average shares outstanding:Basic
    
    
    32,478,758
    
    
    
    33,057,373Diluted
    
    
    32,487,551
    
    
    
    33,057,373
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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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,863
    
    
    
    
    
    
    
    
    
    
    
    4,863Other comprehensive income (loss):Net unrealized holding losses on
available for sale securities arising
during the period, net of tax benefit of
$828
    
    
    
    
    
    
    
    
    
    
    
    (1,535
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,535
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,328ESOP shares committed to be released to Plan participants
    
    
    
    
    
    
    
    
    
    
    87
    
    
    
    
    
    
    
    
    
    
    
    427
    
    
    
    
    
    
    
    514Balances at June 30, 2006
    
    
    33,724
    
    
    $
    337
    
    
    
    103,946
    
    
    
    (3,106
    )
    
    
    141,619
    
    
    
    (7,258
    )
    
    
    
    
    
    
    235,538Balances at December 31, 2006
    
    
    33,724
    
    
    $
    337
    
    
    
    104,182
    
    
    
    (1,225
    )
    
    
    144,809
    
    
    
    (6,831
    )
    
    
    
    
    
    
    241,272Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    830
    
    
    
    
    
    
    
    
    
    
    
    830Other comprehensive income (loss):Net unrealized holding losses on
available for sale securities arising
during the period, net of tax benefit of
$551
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,024
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,024
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (194
    )ESOP shares committed to be released to Plan
participants
    
    
    
    
    
    
    
    
    
    
    236
    
    
    
    
    
    
    
    
    
    
    
    427
    
    
    
    
    
    
    
    663Stock based compensation
    
    
    252
    
    
    
    3
    
    
    
    863
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    866Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,778
    )
    
    
    (25,778
    )Balances at June 30, 2007
    
    
    33,976
    
    
    $
    340
    
    
    
    105,281
    
    
    
    (2,249
    )
    
    
    145,639
    
    
    
    (6,404
    )
    
    
    (25,778
    )
    
    
    216,829
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WAUWATOSA HOLDINGS, INC AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)Six months ended June 30,2007
    
    
    2006(In Thousands)Operating activities:Net income
    
    $
    830
    
    
    
    4,863Adjustments to reconcile net income to net
cash provided by operating activities:Provision for loan losses
    
    
    6,026
    
    
    
    652Provision for depreciation
    
    
    1,313
    
    
    
    1,142Deferred income taxes
    
    
    (858
    )
    
    
    (890
    )Stock based compensation expense
    
    
    866
    
    
    
    Net amortization of premium on debt and mortgage-related securities
    
    
    (65
    )
    
    
    23Fair value of ESOP shares committed to be released
    
    
    663
    
    
    
    514Gain on sale of loans held for sale
    
    
    (766
    )
    
    
    (1,095
    )Loans originated for sale
    
    
    (108,856
    )
    
    
    (27,249
    )Proceeds on sales of loans originated for sale
    
    
    106,281
    
    
    
    22,778Increase in accrued interest receivable
    
    
    (543
    )
    
    
    (57
    )Increase in cash surrender value of life insurance
    
    
    (448
    )
    
    
    (387
    )Increase (decrease) in accrued interest on deposits
    
    
    (249
    )
    
    
    596Increase (decrease) in other liabilities
    
    
    1,202
    
    
    
    (888
    )Gain on sale of real estate owned and other assets
    
    
    (42
    )
    
    
    (109
    )Other
    
    
    (62
    )
    
    
    52Net cash provided by (used in) operating activities
    
    
    5,292
    
    
    
    (55
    )Investing activities:Net increase in loans receivable
    
    
    (8,754
    )
    
    
    (62,299
    )Purchases of:Debt securities
    
    
    (28,660
    )
    
    
    Mortgage-related securities
    
    
    (12,952
    )
    
    
    Structured notes, held-to-maturity
    
    
    (7,646
    )
    
    
    Premises and equipment, net
    
    
    (1,134
    )
    
    
    (7,162
    )Waterstone Mortgage Corporation
    
    
    
    
    
    
    (1,082
    )Life insurance
    
    
    (180
    )
    
    
    (180
    )FHLB stock
    
    
    (337
    )
    
    
    Proceeds from:Principal repayments on mortgage-related securities
    
    
    8,543
    
    
    
    7,789Maturities of debt securities
    
    
    3,001
    
    
    
    Sales of real estate owned and other assets
    
    
    1,196
    
    
    
    891Redemption of FHLB stock
    
    
    
    
    
    
    1,040Net cash used in investing activities
    
    
    (46,923
    )
    
    
    (61,003
    )
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WAUWATOSA HOLDINGS, INC AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)Six months ended June 30,2007
    
    
    2006(In Thousands)Financing activities:Net increase (decrease) in deposits
    
    
    (17,305
    )
    
    
    22,966Net change in short-term borrowings
    
    
    (7,000
    )
    
    
    (51,000
    )Proceeds from long-term borrowings
    
    
    47,900
    
    
    
    88,000Net increase (decrease) in advance payments by borrowers for taxes
    
    
    (1,551
    )
    
    
    503Purchase of treasury stock
    
    
    (25,778
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    (3,734
    )
    
    
    60,469Increase (decrease) in cash and cash equivalents
    
    
    (45,365
    )
    
    
    (589
    )Cash and cash equivalents at beginning of period
    
    
    73,807
    
    
    
    16,498Cash and cash equivalents at end of period
    
    
    28,442
    
    
    
    15,909Supplemental information:Cash paid or credited during the period for:Income tax payments
    
    
    2,542
    
    
    
    2,940Interest payments
    
    
    30,128
    
    
    
    24,029Noncash investing activities:Loans receivable transferred to foreclosed properties
    
    
    1,472
    
    
    
    626Noncash financing activities:Long-term FHLB advances reclassified to short-term
    
    
    17,729
    
    
    
    7,000
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WAUWATOSA HOLDINGS, INC AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Basis of Presentation
     Note 2  Reclassifications
  -9-




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Note 3  Securities
 Securities Available for Sale
  June 30, 2007(In Thousands)Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealizedcost
    
    
    gains
    
    
    losses
    
    
    Fair valueMortgage-backed securities
    
    $
    17,000
    
    
    
    3
    
    
    
    (481
    )
    
    
    16,522Collateralized mortgage obligations
    
    
    88,117
    
    
    
    
    
    
    
    (2,040
    )
    
    
    86,077Mortgage-related securities
    
    
    105,117
    
    
    
    3
    
    
    
    (2,521
    )
    
    
    102,599Government sponsored entity bonds
    
    
    16,490
    
    
    
    
    
    
    
    (179
    )
    
    
    16,311Municipal securities
    
    
    26,923
    
    
    
    108
    
    
    
    (871
    )
    
    
    26,160Debt securities
    
    
    43,413
    
    
    
    108
    
    
    
    (1,050
    )
    
    
    42,471Other securities
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    250$
    148,780
    
    
    
    111
    
    
    
    (3,571
    )
    
    
    145,320
 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
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Amortized
    
    
    FairCost
    
    
    Value(In Thousands)Due within one year
    
    $
    3,498
    
    
    
    3,479Due after one year through five years
    
    
    12,992
    
    
    
    12,832Due after five years through ten years
    
    
    1,354
    
    
    
    1,320Due after ten years
    
    
    25,569
    
    
    
    24,840Mortgage-related securities
    
    
    105,117
    
    
    
    102,599Other securities
    
    
    250
    
    
    
    250$
    148,780
    
    
    
    145,320
  June 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
    
    $
    2,590
    
    
    
    (41
    )
    
    
    13,717
    
    
    
    (440
    )
    
    
    16,307
    
    
    
    (481
    )Collateralized mortgage obligations
    
    
    41,070
    
    
    
    (417
    )
    
    
    45,006
    
    
    
    (1,623
    )
    
    
    86,076
    
    
    
    (2,040
    )Government sponsored entity bonds
    
    
    5,981
    
    
    
    (47
    )
    
    
    10,329
    
    
    
    (132
    )
    
    
    16,310
    
    
    
    (179
    )Municipal securities
    
    
    22,665
    
    
    
    (859
    )
    
    
    463
    
    
    
    (12
    )
    
    
    23,128
    
    
    
    (871
    )$
    72,306
    
    
    
    (1,364
    )
    
    
    69,515
    
    
    
    (2,207
    )
    
    
    141,821
    
    
    
    (3,571
    )
  Securities Held-to-Maturity
  -11-




---



##### Table of Contents



Note 4  Loans Receivable
  June 30,
    
    
    December 31,2007
    
    
    2006(In Thousands)Mortgage loans:One- to four-family
    
    $
    660,550
    
    
    
    666,167Over four-family residential
    
    
    488,463
    
    
    
    480,722Commercial real estate
    
    
    49,501
    
    
    
    48,836Construction and land
    
    
    170,792
    
    
    
    168,523Total mortgage loans
    
    
    1,369,306
    
    
    
    1,364,248Consumer loans
    
    
    72,577
    
    
    
    77,878Commercial business loans
    
    
    10,495
    
    
    
    2,6571,452,378
    
    
    
    1,444,783Less:Undisbursed loan proceeds
    
    
    72,017
    
    
    
    67,390Unearned loan fees
    
    
    3,821
    
    
    
    4,486Total loans receivable, net
    
    $
    1,376,540
    
    
    
    1,372,907
    -12-




---



##### Table of Contents



For the Six Months EndedJune 30,2007
    
    
    2006(In Thousands)Balance at beginning of period
    
    $
    7,195
    
    
    
    5,250Provision for loan losses
    
    
    6,026
    
    
    
    652Charge-offs
    
    
    (3,655
    )
    
    
    (144
    )Recoveries
    
    
    4
    
    
    
    225Balance at end of period
    
    $
    9,570
    
    
    
    5,983Allowance for loan losses to loans receivable
    
    
    0.70
    %
    
    
    0.44
    %Net charge-offs to average loans outstanding (annualized)
    
    
    0.53
    %
    
    
    (0.01
    %)Allowance for loan losses to non-performing loans
    
    
    19.25
    %
    
    
    38.69
    %Non-performing loans to loans receivable
    
    
    3.61
    %
    
    
    2.10
    %
 -13-




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##### Table of Contents



Note 5  Deposits
  (In Thousands)Within one year
    
    $
    709,186One to two years
    
    
    75,663Two to three years
    
    
    45,250Three to four years
    
    
    15,720Four through five years
    
    
    11,634After five years
    
    
    770$
    858,223
 -14-




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##### Table of Contents



Note 6  Borrowings
  June 30, 2007
    
    
    December 31, 2006Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageBalance
    
    
    Rate
    
    
    Balance
    
    
    Rate(In Thousands)
    
    
    
    
    
    
    (In Thousands)Federal Home Loan Bank (FHLB) advances maturing:2007
    
    $
    34,224
    
    
    
    4.02
    %
    
    
    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
    
    
    24,000
    
    
    
    4.21
    %
    
    
    $
    374,903
    
    
    
    4.35
    %
    
    
    334,003
    
    
    
    4.31
    %
    Note 7  Stock-Based Compensation
 Stock-Based Compensation Plan
  Accounting for Stock-Based Compensation Plan
  -15-




---



##### Table of Contents



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
    
    
    
    9.50
    
    
    
    Excercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (7,500
    )
    
    
    17.67
    
    
    
    9.50
    
    
    
    Outstanding June 30, 2007
    
    
    775,000
    
    
    
    17.67
    
    
    
    9.50
    
    
    
    Options exercisable at June 30, 2007
    
    
    
    
    
    
    17.67
    
    
    
    
    
    
    
    
  Weighted AverageStock Options
    
    Shares
    
    Grant Date Fair ValueNonvested at December 31, 2006
    
    
    
    
    
    
    Granted
    
    
    782,500
    
    
    $
    6.27Vested
    
    
    
    
    
    
    Forfeited
    
    
    (7,500
    )
    
    
    6.27Nonvested at June 30, 2007
    
    
    775,000
    
    
    
    6.27
  -16-




---



##### Table of Contents



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
  -17-




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##### Table of Contents



Note 8  Financial Instruments with Off-Balance Sheet Risk
  June 30,
    
    December 31,2007
    
    2006(In Thousands)Financial instruments whose contract amounts represent
potential credit risk:Commitments to extend credit
    
    $
    23,858
    
    
    
    28,067Unused portion of home equity lines of credit
    
    
    32,277
    
    
    
    34,676Unused portion of construction loans
    
    
    39,741
    
    
    
    32,714Standby letters of credit
    
    
    350
    
    
    
    639
  -18-




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##### Table of Contents



Note 9  Earnings (loss) per share
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(In Thousands, except per share data)Net income (loss)
    
    $
    (1,269
    )
    
    $
    2,157
    
    
    $
    830
    
    
    $
    4,863Weighted average shares outstanding
    
    
    32,042
    
    
    
    33,067
    
    
    
    32,479
    
    
    
    33,057Effect of dilutive potential common shares
    
    
    11
    
    
    
    
    
    
    
    9
    
    
    
    Diluted weighted average shares outstanding
    
    
    32,053
    
    
    
    33,067
    
    
    
    32,488
    
    
    
    33,057Basic earnings (loss) per share
    
    $
    (0.04
    )
    
    $
    0.07
    
    
    $
    0.03
    
    
    $
    0.15Diluted earnings (loss) per share
    
    $
    (0.04
    )
    
    $
    0.07
    
    
    $
    0.03
    
    
    $
    0.15
 -19-




---



##### Table of Contents



Note 10  Recent Accounting Developments
    Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities, Including an Amendment of FASB Statement No. 115
 -20-




---



##### Table of Contents



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;
    
    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.
  -21-




---



##### Table of Contents



Overview
     Critical Accounting Policies
  -22-




---



##### Table of Contents



Allowance for Loan Losses.
   Income Taxes.
   -23-




---



##### Table of Contents



Comparison of Operating Results for the Six Months Ended June 30, 2007 and 2006
 General
 Total Interest Income
 Total Interest Expense -
 -24-




---



##### Table of Contents



Net Interest Income
 Provision for Loan Losses
 Noninterest Income
 -25-




---



##### Table of Contents



Noninterest Expense
      -26-




---



##### Table of Contents



Income Taxes
 Net Income -
 Comparison of Operating Results for the Three Months Ended June 30, 2007 and 2006
 General
 Total Interest Income
 -27-




---



##### Table of Contents



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




---



##### Table of Contents



Noninterest Income
 Noninterest Expense
    -29-




---



##### Table of Contents



Income Taxes
 Net Loss -
 Comparison of Financial Condition at June 30, 2007 and December 31, 2006
 Total Assets
 Cash and Cash Equivalents -
 Securities Available for Sale
 Securities Held to Maturity
 Loans Held for Sale -
 -30-




---



##### Table of Contents



Loans Receivable
  As of or for the
    
    
    As of or for theSix Months Ended
    
    
    Year EndedJune 30, 2007
    
    
    December 31, 2006(In Thousands)Total 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
    
    
    40,877
    
    
    
    111,384Over four-family
    
    
    40,212
    
    
    
    99,420Construction and land
    
    
    14,252
    
    
    
    74,104Commercial
    
    
    9,607
    
    
    
    19,867Total real estate loans originated for investment
    
    
    104,948
    
    
    
    304,775Consumer loans originated for investment
    
    
    7,642
    
    
    
    11,915Commerical loans originated for investment
    
    
    15,414
    
    
    
    2,867Total loans originated for investment
    
    
    128,004
    
    
    
    319,557Principal repayments
    
    
    (120,409
    )
    
    
    (267,870
    )Net activity in loans held for investment
    
    
    7,595
    
    
    
    51,687Loans originated for sale
    
    
    108,856
    
    
    
    84,603Loans sold
    
    
    (105,515
    )
    
    
    (79,216
    )Net activity in loans held for sale
    
    
    3,341
    
    
    
    5,387Total loans receivable and held for sale at end of period
    
    $
    1,461,106
    
    
    
    1,450,170
 Deposits
 -31-




---



##### Table of Contents



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




---



##### Table of Contents



Average Balance Sheets, Interest and Yields/Costs
  Three Months Ended June 30,2007
    
    
    2006Average
    
    
    Interest and
    
    
    
    
    
    
    Average
    
    
    Interest andBalance
    
    
    Dividends
    
    
    Yield/Cost
    
    
    Balance
    
    
    Dividends
    
    
    Yield/Cost(Dollars in Thousands)Interest-earning assets:Loans receivable, net
    
    $
    1,388,292
    
    
    
    21,985
    (1)
    
    
    6.35
    %
    
    $
    1,357,788
    
    
    
    20,795
    (1)
    
    
    6.14
    %Mortgage related securities(2)
    
    
    97,816
    
    
    
    1,278
    
    
    
    5.24
    
    
    
    85,613
    
    
    
    1,018
    
    
    
    4.77Debt securities (2) , federal
funds sold and short-term investments
    
    
    96,684
    
    
    
    1,072
    
    
    
    4.45
    
    
    
    57,838
    
    
    
    605
    
    
    
    4.20Total interest-earning assets
    
    
    1,582,792
    
    
    
    24,335
    
    
    
    6.17
    
    
    
    1,501,239
    
    
    
    22,418
    
    
    
    5.99Noninterest-earning assets
    
    
    66,454
    
    
    
    
    
    
    
    
    
    
    
    67,068Total assets
    
    $
    1,649,246
    
    
    
    
    
    
    
    
    
    
    
    1,568,307Interest-bearing liabilities:Demand and money market accounts
    
    $
    141,930
    
    
    
    1,126
    
    
    
    3.18
    
    
    $
    105,872
    
    
    
    604
    
    
    
    2.29Savings accounts
    
    
    19,762
    
    
    
    20
    
    
    
    0.41
    
    
    
    20,846
    
    
    
    26
    
    
    
    0.50Certificates of deposit
    
    
    856,041
    
    
    
    9,984
    
    
    
    4.68
    
    
    
    947,275
    
    
    
    9,717
    
    
    
    4.11Total interest-bearing deposits
    
    
    1,017,733
    
    
    
    11,130
    
    
    
    4.39
    
    
    
    1,073,993
    
    
    
    10,347
    
    
    
    3.86Borrowings
    
    
    370,197
    
    
    
    4,089
    
    
    
    4.43
    
    
    
    225,051
    
    
    
    2,373
    
    
    
    4.23Other interest bearing liabilities
    
    
    18,827
    
    
    
    126
    
    
    
    2.68
    
    
    
    10,803
    
    
    
    108
    
    
    
    4.01Total interest-bearing liabilities
    
    
    1,406,757
    
    
    
    15,345
    
    
    
    4.38
    
    
    
    1,309,847
    
    
    
    12,828
    
    
    
    3.93Noninterest-bearing liabilities
    
    
    14,797
    
    
    
    
    
    
    
    
    
    
    
    24,575Total liabilities
    
    
    1,421,554
    
    
    
    
    
    
    
    
    
    
    
    1,334,422Equity
    
    
    227,692
    
    
    
    
    
    
    
    
    
    
    
    233,885Total liabilities and equity
    
    $
    1,649,246
    
    
    
    
    
    
    
    
    
    
    $
    1,568,307Net interest income
    
    
    
    
    
    
    8,990
    
    
    
    
    
    
    
    
    
    
    
    9,590Net interest rate spread (3)
    
    
    
    
    
    
    
    
    
    
    1.79
    %
    
    
    
    
    
    
    
    
    
    
    2.06
    %Net interest-earning assets (4)
    
    $
    176,035
    
    
    
    
    
    
    
    
    
    
    $
    191,392Net interest margin (5)
    
    
    
    
    
    
    
    
    
    
    2.28
    %
    
    
    
    
    
    
    
    
    
    
    2.56
    %Average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    112.51
    %
    
    
    
    
    
    
    
    
    
    
    114.61
    %
 
 (1)
    
    Includes net deferred loan fee amortization income of $667,000 and $194,000 for the three
months ended June 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 of
average 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-




---



##### Table of Contents



Six Months Ended June 30,2007
    
    
    2006Average
    
    
    Interest and
    
    
    
    
    
    
    Average
    
    
    Interest andBalance
    
    
    Dividends
    
    
    Yield/Cost
    
    
    Balance
    
    
    Dividends
    
    
    Yield/Cost(Dollars in Thousands)Interest-earning assets:Loans receivable, net
    
    $
    1,385,317
    
    
    
    43,308
    (1)
    
    
    6.30
    %
    
    $
    1,341,583
    
    
    
    41,001
    (1)
    
    
    6.16
    %Mortgage related securities(2)
    
    
    97,947
    
    
    
    2,542
    
    
    
    5.23
    
    
    
    87,822
    
    
    
    2,081
    
    
    
    4.78Debt securities (2), federal
funds sold and short-term investments
    
    
    91,444
    
    
    
    2,060
    
    
    
    4.54
    
    
    
    57,265
    
    
    
    1,193
    
    
    
    4.20Total interest-earning assets
    
    
    1,574,708
    
    
    
    47,910
    
    
    
    6.14
    
    
    
    1,486,670
    
    
    
    44,275
    
    
    
    6.01Noninterest-earning assets
    
    
    67,795
    
    
    
    
    
    
    
    
    
    
    
    63,647Total assets
    
    $
    1,642,503
    
    
    
    
    
    
    
    
    
    
    
    1,550,317Interest-bearing liabilities:Demand and money market accounts
    
    $
    138,618
    
    
    
    2,174
    
    
    
    3.16
    
    
    $
    100,036
    
    
    
    1,041
    
    
    
    2.10Savings accounts
    
    
    19,392
    
    
    
    40
    
    
    
    0.42
    
    
    
    20,986
    
    
    
    52
    
    
    
    0.50Certificates of deposit
    
    
    863,862
    
    
    
    19,938
    
    
    
    4.65
    
    
    
    939,721
    
    
    
    18,585
    
    
    
    3.99Total interest-bearing deposits
    
    
    1,021,872
    
    
    
    22,152
    
    
    
    4.37
    
    
    
    1,060,743
    
    
    
    19,678
    
    
    
    3.74Borrowings
    
    
    355,841
    
    
    
    7,780
    
    
    
    4.41
    
    
    
    225,000
    
    
    
    4,733
    
    
    
    4.24Other interest bearing liabilities
    
    
    14,743
    
    
    
    223
    
    
    
    3.05
    
    
    
    9,180
    
    
    
    214
    
    
    
    4.70Total interest-bearing liabilities
    
    
    1,392,456
    
    
    
    30,155
    
    
    
    4.37
    
    
    
    1,294,923
    
    
    
    24,625
    
    
    
    3.83Noninterest-bearing liabilities
    
    
    16,234
    
    
    
    
    
    
    
    
    
    
    
    21,102Total liabilities
    
    
    1,408,690
    
    
    
    
    
    
    
    
    
    
    
    1,316,025Equity
    
    
    233,813
    
    
    
    
    
    
    
    
    
    
    
    234,292Total liabilities and equity
    
    $
    1,642,503
    
    
    
    
    
    
    
    
    
    
    $
    1,550,317Net interest income
    
    
    
    
    
    
    17,755
    
    
    
    
    
    
    
    
    
    
    
    19,650Net interest rate spread (3)
    
    
    
    
    
    
    
    
    
    
    1.77
    %
    
    
    
    
    
    
    
    
    
    
    2.18
    %Net interest-earning assets (4)
    
    $
    182,252
    
    
    
    
    
    
    
    
    
    
    $
    191,747Net interest margin (5)
    
    
    
    
    
    
    
    
    
    
    2.27
    %
    
    
    
    
    
    
    
    
    
    
    2.67
    %Average interest-earning assets to
average interest-bearing liabilities
    
    
    
    
    
    
    
    
    
    
    113.09
    %
    
    
    
    
    
    
    
    
    
    
    114.81
    %
 
 (1)
    
    Includes net deferred loan fee amortization income of $1,185,000 and $391,000 for the six
months ended June 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 of
average 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-




---



##### Table of Contents



Rate/Volume Analysis
  Three Months Ended June 30,
    
    
    Six Months Ended June 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)
    
    $
    473
    
    
    
    718
    
    
    
    1,191
    
    
    $
    1,355
    
    
    
    952
    
    
    
    2,307Securites interest and income from
other earning assets(3)
    
    
    611
    
    
    
    115
    
    
    
    726
    
    
    
    1,062
    
    
    
    266
    
    
    
    1,328Total interest-earning assets
    
    
    1,084
    
    
    
    833
    
    
    
    1,917
    
    
    
    2,417
    
    
    
    1,218
    
    
    
    3,635Interest expense:Demand and money market accounts
    
    
    243
    
    
    
    279
    
    
    
    522
    
    
    
    489
    
    
    
    644
    
    
    
    1,133Savings accounts
    
    
    (1
    )
    
    
    (5
    )
    
    
    (6
    )
    
    
    (4
    )
    
    
    (8
    )
    
    
    (12
    )Certificates of deposit
    
    
    (632
    )
    
    
    899
    
    
    
    267
    
    
    
    (1,266
    )
    
    
    2,619
    
    
    
    1,353Total interest-bearing deposits
    
    
    (390
    )
    
    
    1,173
    
    
    
    783
    
    
    
    (781
    )
    
    
    3,255
    
    
    
    2,474Borrowings
    
    
    1,598
    
    
    
    118
    
    
    
    1,716
    
    
    
    2,854
    
    
    
    193
    
    
    
    3,047Other interest bearing liabilities
    
    
    32
    
    
    
    (14
    )
    
    
    18
    
    
    
    21
    
    
    
    (12
    )
    
    
    9Total interest-bearing liabilities
    
    
    1,240
    
    
    
    1,277
    
    
    
    2,517
    
    
    
    2,094
    
    
    
    3,436
    
    
    
    5,530Net change in net interest income
    
    $
    (156
    )
    
    
    (444
    )
    
    
    (600
    )
    
    $
    323
    
    
    
    (2,218
    )
    
    
    (1,895
    )
 
 (1)
    
    Includes net deferred loan fee amortization income of $667,000, $194,000, $1,185,000 and
$391,000 for the three months ended June 30, 2007 and 2006 and the six months ended June 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-




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##### Table of Contents



ASSET QUALITY
  NON-PERFORMING LOANS AND ASSETS
 At June 30,
    
    
    At December 31,2007
    
    
    2006(Dollars in Thousands)Non-accrual loans:Mortgage loansOne- to four-family
    
    
    23,342
    
    
    
    12,376Over four-family
    
    
    14,960
    
    
    
    8,384Construction and land
    
    
    7,790
    
    
    
    7,664Commercial
    
    
    3,207
    
    
    
    357Total mortgage
    
    
    49,299
    
    
    
    28,781Consumer
    
    
    423
    
    
    
    107Total non-performing loans
    
    
    49,722
    
    
    
    28,888Real estate owned
    
    
    819
    
    
    
    520Total non-performing assets
    
    $
    50,541
    
    
    
    29,408Total non-performing loans to total loans receivable
    
    
    3.61
    %
    
    
    2.10
    %Total non-performing loans to total assets
    
    
    3.02
    %
    
    
    1.75
    %Total non-performing assets to total assets
    
    
    3.07
    %
    
    
    1.79
    %
   -36-




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##### Table of Contents



At or for the Six
    
    
    At or for the SixMonths Ended
    
    
    Months EndedJune 30, 2007
    
    
    June 30, 2006(Dollars in Thousands)Balance at beginning of period
    
    $
    7,195
    
    
    
    5,250Provision for loan losses
    
    
    6,026
    
    
    
    652Charge-offs:MortgageOne- to four-family
    
    
    585
    
    
    
    137Over four-family
    
    
    215
    
    
    
    Construction and land
    
    
    2,852
    
    
    
    Commercial
    
    
    
    
    
    
    2Consumer
    
    
    3
    
    
    
    5Total charge-offs
    
    
    3,655
    
    
    
    144Total recoveries
    
    
    4
    
    
    
    225Net charge-offs
    
    
    3,651
    
    
    
    (81
    )Allowance at end of period
    
    $
    9,570
    
    
    
    5,983Ratios:Allowance for loan losses to non-performing
loans at end of period
    
    
    19.25
    %
    
    
    38.69
    %Allowance for loan losses to loans receivable at
end of period
    
    
    0.70
    %
    
    
    0.44
    %Net charge-offs to average loans outstanding
    
    
    0.53
    %
    
    
    (0.01
    %)
   -37-




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-38-




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##### Table of Contents



Impact of Inflation and Changing Prices
  Liquidity and Capital Resources
     -39-




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##### Table of Contents



Regulatory Capital
  -40-




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##### Table of Contents



June 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)
    
    $
    228,564
    
    
    
    17.59
    %
    
    
    103,952
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/ATier I capital (to risk-weighted
assets)
    
    
    219,081
    
    
    
    16.86
    %
    
    
    51,976
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/ATier I capital (to average assets)
    
    
    219,081
    
    
    
    13.29
    %
    
    
    65,934
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/AWauwatosa SavingsTotal capital (to risk-weighted
assets)
    
    $
    177,040
    
    
    
    13.87
    %
    
    
    102,142
    
    
    
    8.00
    %
    
    
    127,678
    
    
    
    10.00
    %Tier I capital (to risk-weighted
assets)
    
    
    167,999
    
    
    
    13.16
    %
    
    
    51,071
    
    
    
    4.00
    %
    
    
    76,607
    
    
    
    6.00
    %Tier I capital (to average assets)
    
    
    167,999
    
    
    
    10.33
    %
    
    
    65,066
    
    
    
    4.00
    %
    
    
    81,333
    
    
    
    5.00
    %State of Wisconsin (to total assets) (2)
    
    
    167,999
    
    
    
    10.34
    %
    
    
    97,488
    
    
    
    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. -41-




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##### Table of Contents



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
    
    $
    160,690
    
    
    
    160,690
    
    
    
    
    
    
    
    
    
    
    
    Certificates of deposit
    
    
    858,223
    
    
    
    709,186
    
    
    
    120,913
    
    
    
    27,354
    
    
    
    770Federal Home Loan Bank advances (1)
    
    
    350,903
    
    
    
    51,953
    
    
    
    53,950
    
    
    
    25,000
    
    
    
    220,000Repurchase agreements (2)
    
    
    24,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,000Operating leases(3)
    
    
    260
    
    
    
    103
    
    
    
    157
    
    
    
    
    
    
    
    Capital lease
    
    
    3,825
    
    
    
    300
    
    
    
    3,525
    
    
    
    
    
    
    
    State income tax obligation(4)
    
    
    3,726
    
    
    
    1,242
    
    
    
    2,484Salary continuation agreements
    
    
    3,121
    
    
    
    576
    
    
    
    1,152
    
    
    
    543
    
    
    
    850$
    1,404,748
    
    
    
    924,050
    
    
    
    182,181
    
    
    
    52,897
    
    
    
    245,620
 
 (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)
    
    $
    23,858
    
    
    
    23,858
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of home equity lines of credit (2)
    
    
    32,277
    
    
    
    32,277
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of construction loans (3)
    
    
    39,741
    
    
    
    39,741
    
    
    
    
    
    
    
    
    
    
    
    Standby letters of credit
    
    
    350
    
    
    
    349
    
    
    
    
    
    
    
    1
    
    
    
    Total Other Commitments
    
    $
    96,226
    
    
    
    96,225
    
    
    
    
    
    
    
    1
    
    
    
    
 
 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 90 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. -42-




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
 Management of Market Risk
 General.
 Income Simulation.
 PercentageIncrease (Decrease) in Estimated NetAnnual Interest IncomeOver 24 Months300 basis point increase in
rates
    
    
    (13.46
    )%200 basis point increase in rates
    
    
    (7.01
    )100 basis point increase in rates
    
    
    (1.45
    )100 basis point decrease in rates
    
    
    6.98200 basis point decrease in rates
    
    
    17.06
    %
  -43-




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##### Table of Contents



Item 4. Controls and Procedures
 Disclosure Controls and Procedures :
 Internal Control Over Financial Reporting :
 -44-




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##### Table of Contents



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
    
    
    
    8,0201,486,278
    
    
    
    17.34
 -45-




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##### Table of Contents



Item 4. Summission of Matters to a Vote of Security Holders
  1.
    
    Elected as directors all nominees designated in the proxy statement dated March 28, 2007 as
follows:
 Number of VotesFor
    
    AgainstThomas E. Dalum
    
    
    31,624,890
    
    
    
    158,607Barbara J. Coutley
    
    
    31,609,198
    
    
    
    174,299
    
 Item 6. Exhibits
  -46-




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##### Table of Contents



WAUWATOSA HOLDINGS, INC.(Registrant)Date: August 9, 2007/s/ Douglas S. GordonDouglas S. GordonChief Executive OfficerDate: August 9, 2007
    
    /s/ Richard C. LarsonRichard C. LarsonChief Financial Officer
 -47-




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##### Table of Contents



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
 -48-