##### 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 September 30, 2006
 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
    
    20-3598485(State or other jurisdiction of 
incorporation or organization)
    
    (IRS Employer Identification No.)
 11200 W. Plank Ct.
Wauwatosa, WI 53226
(414) 761-1000
  þ o
  o o þ
  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, 2006 (unaudited) and December 31, 2005
    
    3Consolidated Statements of Income for the three and nine months ended September 30, 2006 and 2005 (unaudited)
    
    4Consolidated Statements of Changes in Shareholders Equity for the nine months ended September 30, 2006 and 2005 (unaudited)
    
    6Consolidated Statements of Cash Flows for the nine months ended September 30, 2006 and 2005 (unaudited)
    
    7Notes to Consolidated Financial Statements
    
    8-15Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    16-37Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    38-40Item 4. Controls and Procedures
    
    41PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    42Item 6. Exhibits
    
    42Signatures
    
    43CertificationCertificationCertificationCertificationSection 302 Certification Signed by the Chairman and CEOSection 302 Certification Signed by the CFOSection 906 Certification Signed by the Chairman and CEOSection 906 Certification Signed by the CFO
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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)September 30,
    
    
    December 31,2006
    
    
    2005(In Thousands, except share data)AssetsCash
    
    $
    41,313
    
    
    
    8,761Federal funds sold
    
    
    30,009
    
    
    
    5,388Short-term investments
    
    
    70,857
    
    
    
    2,349Cash and cash equivalents
    
    
    142,179
    
    
    
    16,498Securities available-for-sale (at fair value)
    
    
    114,967
    
    
    
    121,955Loans held for sale
    
    
    3,139
    
    
    
    Loans receivable
    
    
    1,354,183
    
    
    
    1,306,018Less: Allowance for loan losses
    
    
    7,093
    
    
    
    5,250Loans receivable, net
    
    
    1,347,090
    
    
    
    1,300,768Office properties and equipment, net
    
    
    31,168
    
    
    
    25,022Federal Home Loan Bank stock, at cost
    
    
    17,450
    
    
    
    14,406Cash surrender value of life insurance
    
    
    23,972
    
    
    
    22,792Prepaid expenses and other assets
    
    
    12,102
    
    
    
    9,768Total assets
    
    $
    1,692,067
    
    
    
    1,511,209Liabilities and Shareholders EquityLiabilities:Demand deposits
    
    $
    59,446
    
    
    
    82,290Money market and savings deposits
    
    
    86,835
    
    
    
    33,565Time deposits
    
    
    915,118
    
    
    
    929,738Total deposits
    
    
    1,061,399
    
    
    
    1,045,593Federal Home Loan Bank advances short-term
    
    
    31,531
    
    
    
    87,209Federal Home Loan Bank advances long-term
    
    
    317,472
    
    
    
    114,003Advance payments by borrowers for taxes
    
    
    24,916
    
    
    
    181Other liabilities
    
    
    17,894
    
    
    
    32,527Total liabilities
    
    
    1,453,212
    
    
    
    1,279,513Shareholders equity:Preferred stock (par value $.01 per share, authorized
20,000,000 shares, no shares issued)
    
    
    
    
    
    
    Common stock (par value $.01 per share, authorized
200,000,000 shares, 33,723,750 shares issued,
33,095,344 and 33,038,385 shares outstanding, respectively)
    
    
    337
    
    
    
    337Additional paid-in-capital
    
    
    104,057
    
    
    
    103,859Accumulated other comprehensive loss (net of taxes)
    
    
    (1,019
    )
    
    
    (1,571
    )Retained earnings
    
    
    142,525
    
    
    
    136,756Unearned ESOP shares
    
    
    (7,045
    )
    
    
    (7,685
    )Total shareholders equity
    
    
    238,855
    
    
    
    231,696Total liabilities and shareholders equity
    
    $
    1,692,067
    
    
    
    1,511,209
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WAUWATOSA HOLDINGS, INC AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
 (Unaudited)Three Months Ended September 30,2006
    
    
    2005(In Thousands, except share data)Interest income:Loans
    
    $
    21,313
    
    
    
    18,917Mortgage-related securities
    
    
    975
    
    
    
    476Debt securities, federal funds sold and
short-term investments
    
    
    978
    
    
    
    1,177Total interest income
    
    
    23,266
    
    
    
    20,570Interest expense:Deposits
    
    
    11,067
    
    
    
    9,288Borrowings
    
    
    3,023
    
    
    
    943Total interest expense
    
    
    14,090
    
    
    
    10,231Net interest income
    
    
    9,176
    
    
    
    10,339Provision for loan losses
    
    
    1,191
    
    
    
    209Net interest income after
provision for loan losses
    
    
    7,985
    
    
    
    10,130Noninterest income:Service charges on loans and deposits
    
    
    563
    
    
    
    471Increase in cash surrender value of life insurance
    
    
    488
    
    
    
    436Loss on sale/impairment of securities
    
    
    (784
    )
    
    
    Mortgage banking income
    
    
    657
    
    
    
    Other
    
    
    305
    
    
    
    78Total noninterest income
    
    
    1,229
    
    
    
    985Noninterest expenses:Compensation, payroll taxes, and other employee benefits
    
    
    4,389
    
    
    
    3,028Occupancy, office furniture, and equipment
    
    
    1,142
    
    
    
    837Advertising
    
    
    375
    
    
    
    410Data processing
    
    
    708
    
    
    
    349Charitable contributions
    
    
    
    
    
    
    188Communications
    
    
    147
    
    
    
    158Professional fees
    
    
    327
    
    
    
    120Other
    
    
    683
    
    
    
    663Total noninterest expenses
    
    
    7,771
    
    
    
    5,753Income before income taxes
    
    
    1,443
    
    
    
    5,362Income taxes
    
    
    537
    
    
    
    1,940Net income
    
    $
    906
    
    
    
    3,422Earnings per share:Basic
    
    $
    0.03
    
    
    
    N/ADiluted
    
    
    0.03
    
    
    
    N/AWeighted average shares outstanding:Basic
    
    
    33,085,851
    
    
    
    N/ADiluted
    
    
    33,085,851
    
    
    
    N/A
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WAUWATOSA HOLDINGS, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
 (Unaudited)Nine Months Ended September 30,2006
    
    
    2005(In Thousands, except share data)Interest income:Loans
    
    $
    62,314
    
    
    
    54,421Mortgage-related securities
    
    
    3,056
    
    
    
    1,552Debt securities, federal funds sold and
short-term investments
    
    
    2,172
    
    
    
    2,296Total interest income
    
    
    67,542
    
    
    
    58,269Interest expense:Deposits
    
    
    30,758
    
    
    
    26,460Borrowings
    
    
    7,958
    
    
    
    2,549Total interest expense
    
    
    38,716
    
    
    
    29,009Net interest income
    
    
    28,826
    
    
    
    29,260Provision for loan losses
    
    
    1,844
    
    
    
    1,084Net interest income after
provision for loan losses
    
    
    26,982
    
    
    
    28,176Noninterest income:Service charges on loans and deposits
    
    
    1,500
    
    
    
    1,276Increase in cash surrender value of life insurance
    
    
    875
    
    
    
    654Gain (loss) on sale/impairment of securities
    
    
    (784
    )
    
    
    12Mortgage banking income
    
    
    1,752
    
    
    
    Other
    
    
    569
    
    
    
    297Total noninterest income
    
    
    3,912
    
    
    
    2,239Noninterest expenses:Compensation, payroll taxes, and other employee benefits
    
    
    12,491
    
    
    
    8,757Occupancy, office furniture, and equipment
    
    
    3,136
    
    
    
    2,605Advertising
    
    
    946
    
    
    
    1,002Data processing
    
    
    1,501
    
    
    
    921Communications
    
    
    468
    
    
    
    477Charitable contributions
    
    
    
    
    
    
    562Professional fees
    
    
    793
    
    
    
    518Other
    
    
    2,416
    
    
    
    2,225Total noninterest expenses
    
    
    21,751
    
    
    
    17,067Income before income taxes
    
    
    9,143
    
    
    
    13,348Income taxes
    
    
    3,374
    
    
    
    6,596Net income
    
    $
    5,769
    
    
    
    6,752Earnings per share:Basic
    
    $
    0.17
    
    
    
    N/ADiluted
    
    
    0.17
    
    
    
    N/AWeighted average shares outstanding:Basic
    
    
    33,066,970
    
    
    
    N/ADiluted
    
    
    33,066,970
    
    
    
    N/A
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WAUWATOSA HOLDINGS, INC AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 AccumulatedCommon
    
    
    Additional
    
    
    
    
    
    
    Unearned
    
    
    OtherStock
    
    
    Paid-In
    
    
    Retained
    
    
    ESOP
    
    
    Comprehensive
    
    
    TotalShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Shares
    
    
    Income (Loss)
    
    
    Equity(In Thousands)Balances at December 31, 2004
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    130,713
    
    
    
    
    
    
    
    (390
    )
    
    
    130,323Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,752
    
    
    
    
    
    
    
    
    
    
    
    6,752Other comprehensive income:Net unrealized holding gains (losses) on available for sale
securities arising during the period, net of
taxes $248
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (481
    )
    
    
    (481
    )Reclassification adjustment for net gains on available for sale
securities realized in net income, net of taxes
of $4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8
    )
    
    
    (8
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,263Balances at September 30, 2005
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    137,465
    
    
    
    
    
    
    
    (879
    )
    
    
    136,586Balances at December 31, 2005
    
    
    33,724
    
    
    $
    337
    
    
    
    103,859
    
    
    
    136,756
    
    
    
    (7,685
    )
    
    
    (1,571
    )
    
    
    231,696Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,769
    
    
    
    
    
    
    
    
    
    
    
    5,769Other comprehensive income:Net unrealized holding gains (losses) on available for sale
securities arising during the period, net of taxes $569
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,061
    
    
    
    1,061Reclassification adjustment for net losses on available for sale
securities realized in net income, net of taxes of $275
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (509
    )
    
    
    (509
    )Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,452ESOP shares committed to be released to Plan participants
    
    
    
    
    
    
    
    
    
    
    198
    
    
    
    
    
    
    
    640
    
    
    
    
    
    
    
    838Balances at September 30, 2006
    
    
    33,724
    
    
    
    337
    
    
    
    104,057
    
    
    
    142,525
    
    
    
    (7,045
    )
    
    
    (1,019
    )
    
    
    238,855
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WAUWATOSA HOLDINGS, INC AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)Nine Months Ended September 30,2006
    
    
    2005(In Thousands)Operating activities:Net income
    
    $
    5,769
    
    
    
    6,752Adjustments to reconcile net income to net
cash provided by operating activities:Provision for loan losses
    
    
    1,844
    
    
    
    1,084Provision for depreciation
    
    
    1,739
    
    
    
    1,463Deferred income taxes
    
    
    (1,116
    )
    
    
    (1,460
    )Net amortization of premium on debt and mortgage-related securities
    
    
    33
    
    
    
    173Amortization of unearned ESOP shares
    
    
    838
    
    
    
    Gain on sale of loans held for sale
    
    
    (653
    )
    
    
    Loans originated for sale
    
    
    (48,798
    )
    
    
    Proceeds from sale of loans held for sale
    
    
    46,312
    
    
    
    Increase in accrued interest receivable
    
    
    (323
    )
    
    
    (553
    )Increase in cash surrender value of life insurance
    
    
    (875
    )
    
    
    (903
    )Increase in accrued interest on deposits
    
    
    966
    
    
    
    793Decrease in other liabilities
    
    
    625
    
    
    
    1,207FHLB stock dividends
    
    
    
    
    
    
    (550
    )(Gain) loss on sale/impairment of securities
    
    
    784
    
    
    
    (12
    )(Gain) loss on sale of other real estate owned
    
    
    85
    
    
    
    (45
    )Other
    
    
    (620
    )
    
    
    (1,110
    )Net cash provided by operating activities
    
    
    6,610
    
    
    
    6,839Investing activities:Principal repayments on mortgage-related securities
    
    
    11,841
    
    
    
    11,529Purchases of mortgage- related securities
    
    
    (9,266
    )
    
    
    Purchase of debt securities
    
    
    
    
    
    
    (1,745
    )Proceeds from sale of mortgage-related securities
    
    
    5,360
    
    
    
    Proceeds from sales of debt securities
    
    
    
    
    
    
    262Proceeds from maturities of debt securities
    
    
    
    
    
    
    1,003Net increase in loans receivable
    
    
    (49,619
    )
    
    
    (118,206
    )Net purchases of office properties and equipment
    
    
    (6,687
    )
    
    
    (3,254
    )Purchase and premiums on life insurance
    
    
    (306
    )
    
    
    (180
    )Net increase in FHLB stock
    
    
    (3,045
    )
    
    
    Purchase of land
    
    
    (2,817
    )
    
    
    Proceeds from sale of land
    
    
    1,751
    
    
    
    Purchase of
Waterstone Mortgage Corporation, net of cash received
    
    
    (1,081
    )
    
    
    Proceeds from sales of foreclosed properties
    
    
    896
    
    
    
    1,609Net cash used in investing activities
    
    
    (52,973
    )
    
    
    (108,982
    )Financing activities:Net increase in deposits
    
    
    15,806
    
    
    
    25,826Wauwatosa
Holdings, Inc. stock subscription escrow
    
    
    
    
    
    
    386,944Net change in short-term FHLB advances
    
    
    (97,209
    )
    
    
    29,496Proceeds from long-term FHLB advances
    
    
    245,000
    
    
    
    Net decrease in advance payments by borrowers for taxes
    
    
    8,447
    
    
    
    11,461Net cash provided by financing activities
    
    
    172,044
    
    
    
    453,727Increase in cash and cash equivalents
    
    
    125,681
    
    
    
    351,584Cash and cash equivalents at beginning of period
    
    
    16,498
    
    
    
    13,570Cash and cash equivalents at end of period
    
    $
    142,179
    
    
    
    365,154Supplemental information:
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(Unaudited)Nine Months Ended September 30,2006
    
    
    2005(In Thousands)Cash paid or credited during the period for:Income tax payments
    
    $
    2,940
    
    
    
    3,154Interest payments
    
    
    37,750
    
    
    
    28,217Noncash investing activities:Loans receivable transferred to foreclosed properties
    
    
    1,454
    
    
    
    269Capital leases originated
    
    
    
    
    
    
    3,423Non Cash financing activities:Long-term FHLB advances reclassified to short-term
    
    
    41,531
    
    
    
    12,703
  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 Available-for-Sale
  September 30, 2006(In Thousands)Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealizedcost
    
    
    gains
    
    
    losses
    
    
    Fair valueMortgage-backed securities
    
    $
    15,943
    
    
    
    3
    
    
    
    (314
    )
    
    
    15,632Collateralized mortgage obligations
    
    
    69,256
    
    
    
    
    
    
    
    (1,182
    )
    
    
    68,074Mortgage-related securities
    
    
    85,199
    
    
    
    3
    
    
    
    (1,496
    )
    
    
    83,706Government agency bonds
    
    
    26,271
    
    
    
    
    
    
    
    (227
    )
    
    
    26,044Municipals
    
    
    4,278
    
    
    
    169
    
    
    
    (3
    )
    
    
    4,444Debt securities
    
    
    30,549
    
    
    
    169
    
    
    
    (230
    )
    
    
    30,488Other securities
    
    
    788
    
    
    
    
    
    
    
    (15
    )
    
    
    773$
    116,536
    
    
    
    172
    
    
    
    (1,741
    )
    
    
    114,967
 December 31, 2005(In Thousands)Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealizedcost
    
    
    gains
    
    
    losses
    
    
    Fair valueMortgage-backed securities
    
    $
    17,478
    
    
    
    3
    
    
    
    (340
    )
    
    
    17,141Collateralized mortgage obligations
    
    
    76,037
    
    
    
    
    
    
    
    (1,600
    )
    
    
    74,437Mortgage-related securities
    
    
    93,515
    
    
    
    3
    
    
    
    (1,940
    )
    
    
    91,578Government agency bonds
    
    
    26,577
    
    
    
    
    
    
    
    (627
    )
    
    
    25,950Municipals
    
    
    4,278
    
    
    
    176
    
    
    
    (27
    )
    
    
    4,427Debt securities
    
    
    30,855
    
    
    
    176
    
    
    
    (654
    )
    
    
    30,377$
    124,370
    
    
    
    179
    
    
    
    (2,594
    )
    
    
    121,955
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Amortized
    
    
    FairCost
    
    
    Value(In Thousands)Due within one year
    
    $
    5,503
    
    
    $
    5,420Due after one year through five years
    
    
    22,586
    
    
    
    22,542Due after five years through ten years
    
    
    2,460
    
    
    
    2,526Due after ten years
    
    
    
    
    
    
    Mutual funds
    
    
    788
    
    
    
    773Mortgage-related securities
    
    
    85,199
    
    
    
    83,706$
    116,536
    
    
    $
    114,967
  September 30, 2006Less than 12 months
    
    
    12 months or longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealizedvalue
    
    
    loss
    
    
    value
    
    
    loss
    
    
    value
    
    
    loss(In Thousands)Government agency bonds
    
    $
    
    
    
    
    
    
    
    
    13,217
    
    
    
    (227
    )
    
    
    13,217
    
    
    
    (227
    )Municipals
    
    
    972
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    972
    
    
    
    (3
    )Mortgage-related securities
    
    
    46,696
    
    
    
    (466
    )
    
    
    28,991
    
    
    
    (1,030
    )
    
    
    75,687
    
    
    
    (1,496
    )Other securities
    
    
    773
    
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    773
    
    
    
    (15
    )$
    48,441
    
    
    
    (484
    )
    
    
    42,208
    
    
    
    (1,257
    )
    
    
    90,649
    
    
    
    (1,741
    )
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##### Table of Contents



Note 4  Loans Receivable
  September 30,
    
    
    December 31,2006
    
    
    2005(In Thousands)Mortgage loans:Residential real estate:Single family
    
    $
    473,452
    
    
    
    469,395Two- to four-family
    
    
    254,704
    
    
    
    256,270Over four-family
    
    
    472,158
    
    
    
    443,528Construction
    
    
    179,126
    
    
    
    165,516Commercial real estate
    
    
    35,937
    
    
    
    34,543Land
    
    
    26,143
    
    
    
    23,685Credit cards
    
    
    136
    
    
    
    126Other
    
    
    17
    
    
    
    331,441,673
    
    
    
    1,393,096Less:Undisbursed loan proceeds
    
    
    82,986
    
    
    
    82,712Unearned loan fees
    
    
    4,504
    
    
    
    4,366Loans Receivable
    
    $
    1,354,183
    
    
    
    1,306,018
   For the nine months endedSeptember 30,2006
    
    
    2005(In Thousands)Balance at beginning of period
    
    $
    5,250
    
    
    
    3,737Provision for loan losses
    
    
    1,844
    
    
    
    1,084Charge-offs
    
    
    (258
    )
    
    
    (16
    )Recoveries
    
    
    257
    
    
    
    1Balance at end of period
    
    $
    7,093
    
    
    
    4,806Allowance as a percentage of loans receivable
    
    
    0.52
    %
    
    
    0.38
    %
 -11-




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##### Table of Contents



Note 5  Deposits
  (In Thousands)Within one year
    
    $
    674,323One to two years
    
    
    147,907Two to three years
    
    
    53,281Three to four years
    
    
    33,194Four through five years
    
    
    6,228After five years
    
    
    185$
    915,118
 -12-




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##### Table of Contents



Note 6  FHLB Advances
  September 30,
    
    
    December 31,2006
    
    
    2005(In Thousands)Federal Home Loan Bank (FHLB) advances:Short-term FHLB advances:FHLB advance, 4.41%, due January 2006
    
    $
    
    
    
    
    23,000FHLB advance, 2.62%, due January 2006
    
    
    
    
    
    
    25,000FHLB advance, 2.21%, due January 2006
    
    
    
    
    
    
    10,000FHLB advance, 3.26%, due July 2006
    
    
    
    
    
    
    11,777FHLB advance, 2.83%, due September 2006
    
    
    
    
    
    
    2,432FHLB advance, 4.49%, due October 2006
    
    
    15,000
    
    
    
    15,000FHLB advance, 3.56%, due February 2007
    
    
    7,000
    
    
    
    FHLB advance, 3.17%, due August 2007
    
    
    5,408
    
    
    
    FHLB advance, 3.19%, due September 2007
    
    
    4,123
    
    
    
    Total short-term FHLB advances
    
    
    31,531
    
    
    
    87,209Long-term FHLB advances:FHLB advance, 3.56%, due February 2007
    
    
    
    
    
    
    7,000FHLB advance, 3.17%, due August 2007
    
    
    
    
    
    
    5,408FHLB advance, 3.19%, due September 2007
    
    
    
    
    
    
    4,123FHLB advance, 3.09%, due October 2007
    
    
    4,693
    
    
    
    4,693FHLB advance, 4.56%, due October 2007
    
    
    10,000
    
    
    
    10,000FHLB advance, 4.73%, due December 2007
    
    
    10,000
    
    
    
    10,000FHLB advance, 3.67%, due January 2008
    
    
    6,819
    
    
    
    6,819FHLB advance, 3.63%, due January 2008
    
    
    3,074
    
    
    
    3,074FHLB advance, 3.80%, due February 2008
    
    
    7,836
    
    
    
    7,836FHLB advance, 3.58%, due August 2008
    
    
    5,000
    
    
    
    5,000FHLB advance, 4.78%, due November 2008
    
    
    9,150
    
    
    
    9,150FHLB advance, 4.69%, due November 2008
    
    
    8,900
    
    
    
    8,900FHLB advance, 4.76%, due December 2008
    
    
    7,000
    
    
    
    7,000FHLB advance, 4.72%, due October 2010
    
    
    25,000
    
    
    
    25,000FHLB advance, 4.01%, due January 2016
    
    
    50,000
    
    
    
    FHLB advance, 4.48%, due May 2016
    
    
    10,000
    
    
    
    FHLB advance, 4.49%, due June 2016
    
    
    10,000
    
    
    
    FHLB advance, 4.82%, due July 2016
    
    
    25,000
    
    
    
    FHLB advance, 4.51%, due July 2016
    
    
    25,000
    
    
    
    FHLB advance, 4.33%, due August 2016
    
    
    25,000
    
    
    
    FHLB advance, 4.46%, due August 2016
    
    
    25,000
    
    
    
    FHLB advance, 4.25%, due September 2016
    
    
    50,000
    
    
    
    Total long-term FHLB advances
    
    
    317,472
    
    
    
    114,003Total FHLB advances
    
    $
    349,003
    
    
    
    201,212
  -13-




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##### Table of Contents



Note 7
 Financial Instruments with Off-Balance Sheet Risk
  September 30,
    
    
    December 31,2006
    
    
    2005(In Thousands)Financial instruments whose contract amounts represent
potential credit risk:Commitments to extend credit under first mortgage loans
    
    $
    51,317
    
    
    
    43,375Commitments to extend credit under home equity lines
of credit
    
    
    33,715
    
    
    
    31,809Standby letters of credit
    
    
    696
    
    
    
    1,576
  -14-




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##### Table of Contents



Note 8
 Earnings per share
   Three Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30, 2006
    
    
    September 30, 2006(In Thousands, except per share data)Net income
    
    $
    906
    
    
    $
    5,769Weighted average shares outstanding
    
    
    33,086
    
    
    
    33,067Effect of dilutive potential common shares
    
    
    
    
    
    
    Diluted weighted average shares outstanding
    
    
    33,086
    
    
    
    33,067Basic earnings per share
    
    $
    0.03
    
    
    $
    0.17Diluted earnings per share
    
    $
    0.03
    
    
    $
    0.17
 Note 9
 Recent Accounting Developments
   -15-




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##### Table of Contents



-16-




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##### 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;
    
    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
  -17-




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##### Table of Contents



Critical Accounting Policies
  Allowance for Loan Losses.
  -18-




---



##### Table of Contents



Income Taxes.
   Comparison of Operating Results for the Nine Months Ended September 30, 2006 and 2005
 General
 -19-




---



##### Table of Contents



Total Interest Income
 Total Interest Expense
  -20-




---



##### Table of Contents



Net Interest Income
 Provision for Loan Losses
 Noninterest Income
 -21-




---



##### Table of Contents



Noninterest Expense
    Income Taxes
 Net Income
 -22-




---



##### Table of Contents



Comparison of Operating results for the Three Months Ended September 30, 2006 and 2005
 General
 Total Interest Income
 Total Interest Expense
  -23-




---



##### Table of Contents



Net Interest Income
 Provision for Loan Losses
 Noninterest Income
 Noninterest Expense
  -24-




---



##### Table of Contents



Income Taxes
 Net Income
 Comparison of Financial Condition at September 30, 2006 and December 31, 2005
 Total Assets
 Cash and Cash Equivalents
 Loans
Held for Sale
 -25-




---



##### Table of Contents



Loans Receivable
  As of or for the
    
    
    As of or for theNine Months Ended
    
    
    Six Months EndedSeptember 30, 2006
    
    
    December 31, 2005(In Thousands)Total loans at beginning of period
    
    $
    1,393,096
    
    
    
    1,299,812Real estate loans originated:Residential (1)
Single family
    
    
    60,717
    
    
    
    81,397Two- to four-family
    
    
    46,835
    
    
    
    52,030Over four-family
    
    
    88,361
    
    
    
    95,734Construction
    
    
    36,715
    
    
    
    43,865Commercial
    
    
    9,156
    
    
    
    2,658Land
    
    
    7,883
    
    
    
    10,451Total loans originated
    
    
    249,667
    
    
    
    286,135Other loans  net activity
    
    
    (7
    )
    
    
    (43
    )Principal repayments
    
    
    (201,083
    )
    
    
    (192,808
    )Net loan activity
    
    
    48,577
    
    
    
    93,284Total loans at end of period
    
    $
    1,441,673
    
    
    
    1,393,096
 
 (1)
    
    Residential mortgage loans include home equity loans and home equity lines of credit. Office
Properties and Equipment
 -26-




---



##### Table of Contents



Federal
Home Loan Bank Stock
 Prepaid
Expenses and Other Assets
 Deposits
 Federal
Home Loan Bank Advances
 Advance Payments by Borrowers for Taxes
 Other Liabilities
 -27-




---



##### Table of Contents



Shareholders
Equity
 Average Balance Sheets, Interest and Yields/Costs
  -28-




---



##### Table of Contents



Three Months Ended September 30,2006
    
    
    2005Interest and
    
    
    
    
    
    
    
    
    
    
    Interest andAverage Balance
    
    
    Dividends
    
    
    Yield/Cost
    
    
    Average Balance
    
    
    Dividends
    
    
    Yield/Cost(Dollars in Thousands)Interest-earning assets:Loans receivable, net
    
    $
    1,360,697
    (1)
    
    $
    21,313
    
    
    
    6.21
    %
    
    
    1,234,933
    (1)
    
    $
    18,917
    
    
    
    6.08
    %Available for sale securities(2)
    
    
    111,241
    
    
    
    1,266
    
    
    
    4.52
    
    
    
    130,085
    
    
    
    1,183
    
    
    
    3.61Other earning assets
    
    
    70,134
    
    
    
    687
    
    
    
    3.89
    
    
    
    43,093
    
    
    
    470
    
    
    
    4.33Total interest-earning assets
    
    
    1,542,072
    
    
    
    23,266
    
    
    
    5.99
    
    
    
    1,408,111
    
    
    
    20,570
    
    
    
    5.80Noninterest-earning assets
    
    
    72,796
    
    
    
    
    
    
    
    
    
    
    
    65,868Total assets
    
    $
    1,614,868
    
    
    
    
    
    
    
    
    
    
    $
    1,473,979Interest-bearing liabilities:Demand and money market accounts
    
    $
    115,723
    
    
    $
    811
    
    
    
    2.78
    
    
    $
    96,954
    
    
    
    366
    
    
    
    1.50Savings accounts
    
    
    20,671
    
    
    
    26
    
    
    
    0.50
    
    
    
    24,107
    
    
    
    30
    
    
    
    0.49Certificates of deposit
    
    
    923,379
    
    
    
    10,215
    
    
    
    4.39
    
    
    
    985,999
    
    
    
    8,878
    
    
    
    3.57Total interest-bearing deposits
    
    
    1,059,773
    
    
    
    11,052
    
    
    
    4.14
    
    
    
    1,107,060
    
    
    
    9,274
    
    
    
    3.32Advances from the Federal Home Loan Bank
    
    
    275,209
    
    
    
    3,017
    
    
    
    4.35
    
    
    
    104,016
    
    
    
    910
    
    
    
    3.47Other interest-bearing liabilities
    
    
    13,742
    
    
    
    21
    
    
    
    0.61
    
    
    
    14,023
    
    
    
    47
    
    
    
    1.33Total interest-bearing liabilities
    
    
    1,348,724
    
    
    
    14,090
    
    
    
    4.14
    
    
    
    1,225,099
    
    
    
    10,231
    
    
    
    3.31Noninterest-bearing liabilities
    
    
    30,352
    
    
    
    
    
    
    
    
    
    
    
    113,922Total liabilities
    
    
    1,379,076
    
    
    
    
    
    
    
    
    
    
    
    1,339,021Equity
    
    
    235,792
    
    
    
    
    
    
    
    
    
    
    
    134,958Total liabilities and equity
    
    $
    1,614,868
    
    
    
    
    
    
    
    
    
    
    $
    1,473,979Net interest income
    
    
    
    
    
    
    9,176
    
    
    
    
    
    
    
    
    
    
    
    10,339Net interest rate spread (3)
    
    
    
    
    
    
    
    
    
    
    1.85
    %
    
    
    
    
    
    
    
    
    
    
    2.49
    %Net interest-earning assets (4)
    
    $
    193,348
    
    
    
    
    
    
    
    
    
    
    $
    183,012Net interest margin (5)
    
    
    
    
    
    
    2.36
    %
    
    
    
    
    
    
    
    
    
    
    2.91
    %Average interest-earning assets to average
interest-bearing liabilities
    
    
    
    
    
    
    114.34
    %
    
    
    
    
    
    
    
    
    
    
    114.94
    %
 
 (1)
    
    Includes net deferred loan fee amortization income of $223 and $285 for the three months
ended September 30, 2006 and 2005, respectively.(2)
    
    Average balance of available for sale 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. -29-




---



##### Table of Contents



Nine Months Ended September 30,2006
    
    
    2005Interest and
    
    
    
    
    
    
    
    
    
    
    Interest andAverage Balance
    
    
    Dividends
    
    
    Yield/Cost
    
    
    Average Balance
    
    
    Dividends
    
    
    Yield/Cost(Dollars in Thousands)Interest-earning assets:Loans receivable, net
    
    $
    1,347,925
    (1)
    
    $
    62,314
    
    
    
    6.18
    %
    
    $
    1,198,857
    (1)
    
    
    54,421
    
    
    
    6.07
    %Available for sale securities(2)
    
    
    116,583
    
    
    
    3,958
    
    
    
    4.54
    
    
    
    102,284
    
    
    
    2,840
    
    
    
    3.71Other earning assets
    
    
    40,633
    
    
    
    1,270
    
    
    
    4.18
    
    
    
    29,254
    
    
    
    1,008
    
    
    
    4.61Total interest-earning assets
    
    
    1,505,141
    
    
    
    67,542
    
    
    
    6.00
    
    
    
    1,330,395
    
    
    
    58,269
    
    
    
    5.86Noninterest-earning assets
    
    
    66,568
    
    
    
    
    
    
    
    
    
    
    
    56,580Total assets
    
    $
    1,571,709
    
    
    
    
    
    
    
    
    
    
    $
    1,386,975Interest-bearing liabilities:Demand and money market accounts
    
    $
    105,255
    
    
    
    1,865
    
    
    
    2.37
    
    
    $
    90,463
    
    
    
    852
    
    
    
    1.26Savings accounts
    
    
    20,882
    
    
    
    78
    
    
    
    0.50
    
    
    
    23,998
    
    
    
    90
    
    
    
    0.50Certificates of deposit
    
    
    934,132
    
    
    
    28,786
    
    
    
    4.12
    
    
    
    982,539
    
    
    
    25,492
    
    
    
    3.47Total interest-bearing deposits
    
    
    1,060,269
    
    
    
    30,729
    
    
    
    3.87
    
    
    
    1,097,000
    
    
    
    26,434
    
    
    
    3.22Advances from the Federal Home Loan Bank
    
    
    241,856
    
    
    
    7,751
    
    
    
    4.28
    
    
    
    97,947
    
    
    
    2,440
    
    
    
    3.33Other interest-bearing liabilities
    
    
    10,697
    
    
    
    236
    
    
    
    2.95
    
    
    
    9,200
    
    
    
    135
    
    
    
    1.96Total interest-bearing liabilities
    
    
    1,312,822
    
    
    
    38,716
    
    
    
    3.94
    
    
    
    1,204,147
    
    
    
    29,009
    
    
    
    3.22Noninterest-bearing liabilities
    
    
    22,876
    
    
    
    
    
    
    
    
    
    
    
    49,924Total liabilities
    
    
    1,335,698
    
    
    
    
    
    
    
    
    
    
    
    1254,071Equity
    
    
    236,011
    
    
    
    
    
    
    
    
    
    
    
    132,904Total liabilities and equity
    
    $
    1,571,709
    
    
    
    
    
    
    
    
    
    
    $
    1,386,975Net interest income
    
    
    
    
    
    
    28,826
    
    
    
    
    
    
    
    
    
    
    
    29,260Net interest rate spread (3)
    
    
    
    
    
    
    
    
    
    
    2.06
    %
    
    
    
    
    
    
    
    
    
    
    2.64
    %Net interest-earning assets (4)
    
    $
    192,319
    
    
    
    
    
    
    
    
    
    
    $
    126,248Net interest margin (5)
    
    
    
    
    
    
    2.56
    %
    
    
    
    
    
    
    
    
    
    
    2.94
    %Average interest-earning assets to average
interest-bearing liabilities
    
    
    
    
    
    
    114.65
    %
    
    
    
    
    
    
    
    
    
    
    110.48
    %
 
 (1)
    
    Includes net deferred loan fee amortization income of $614 and $713 for the nine months ended
September 30, 2006 and 2005, respectively.(2)
    
    Average balance of available for sale 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. -30-




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##### Table of Contents



Rate/Volume Analysis
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2006 versus 2005
    
    
    2006 versus 2005Increase (Decrease) Due to
    
    
    Increase (Decrease) Due toVolume
    
    
    Rate
    
    
    Net
    
    
    Volume
    
    
    Rate
    
    
    Net(In Thousands)Interest and dividend income:Loans receivable(1) (2)
    
    $
    1,991
    
    
    
    405
    
    
    
    2,396
    
    
    $
    8,478
    
    
    
    (585
    )
    
    
    7,893Securities interest and income from
other earning assets(3)
    
    
    (70
    )
    
    
    (230
    )
    
    
    (300
    )
    
    
    3,432
    
    
    
    (2,052
    )
    
    
    1,380Total interest-earning assets
    
    
    2,061
    
    
    
    635
    
    
    
    2,696
    
    
    
    11,910
    
    
    
    (2,637
    )
    
    
    9,273Interest expense:Demand and Money Market accounts
    
    
    52
    
    
    
    393
    
    
    
    445
    
    
    
    (116
    )
    
    
    1,129
    
    
    
    1,013Savings accounts
    
    
    (4
    )
    
    
    0
    
    
    
    (4
    )
    
    
    (12
    )
    
    
    0
    
    
    
    (12
    )Certificates of deposit
    
    
    (585
    )
    
    
    1,923
    
    
    
    1,338
    
    
    
    20
    
    
    
    3,274
    
    
    
    3,294Total interest-bearing deposits
    
    
    (537
    )
    
    
    2,316
    
    
    
    1,779
    
    
    
    (108
    )
    
    
    4,403
    
    
    
    4,295FHLB Advances
    
    
    1,950
    
    
    
    157
    
    
    
    2,107
    
    
    
    6,017
    
    
    
    (706
    )
    
    
    5,311Other interest-bearing liabilities
    
    
    (1
    )
    
    
    (26
    )
    
    
    (27
    )
    
    
    (27
    )
    
    
    128
    
    
    
    101Total interest-bearing liabilities
    
    
    1,412
    
    
    
    2,447
    
    
    
    3,859
    
    
    
    5,882
    
    
    
    3,825
    
    
    
    9,707Net change in net interest income
    
    $
    649
    
    
    
    (1,812
    )
    
    
    (1,163
    )
    
    $
    6,028
    
    
    
    (6,462
    )
    
    
    (434
    )
 
 (1)
    
    Includes net deferred loan fee amortization income of $223, $285, $615 and $713 for the
three months ended September 30, 2006 and 2005 and the nine months ended September 30, 2006
and 2005, 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. -31-




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##### Table of Contents



ASSET QUALITY
  NON-PERFORMING LOANS AND ASSETS
 At September 30,
    
    
    At December 31,2006
    
    
    2005(Dollars in Thousands)Non-accrual loans:Residential (1)Single family
    
    $
    7,830
    
    
    
    5,654Two- to four-family
    
    
    3,377
    
    
    
    3,386Over four-family
    
    
    6,102
    
    
    
    6,703Construction
    
    
    3,615
    
    
    
    760Commercial
    
    
    323
    
    
    
    962Land
    
    
    552
    
    
    
    600Total non-performing loans
    
    
    21,799
    
    
    
    18,065Real estate owned
    
    
    691
    
    
    
    215Total non-performing assets
    
    $
    22,490
    
    
    
    18,280Total non-performing loans to total loans receivable
    
    
    1.61
    %
    
    
    1.38
    %Total non-performing loans to total assets
    
    
    1.29
    %
    
    
    1.20
    %Total non-performing assets to total assets
    
    
    1.33
    %
    
    
    1.21
    %
 
 (1)
    
    Residential mortgage loans include home equity loans and home equity lines of credit.  -32-




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##### Table of Contents



At or for the Nine
    
    
    At or for the NineMonths Ended
    
    
    Months EndedSeptember 30, 2006
    
    
    September 30, 2005(Dollars in Thousands)Balance at beginning of period
    
    $
    5,250
    
    
    
    3,737Provision for loan losses
    
    
    1,844
    
    
    
    1,084Charge-offs:Residential (1)Single family
    
    
    88
    
    
    
    Two- to four-family
    
    
    160
    
    
    
    Over four-family
    
    
    
    
    
    
    Construction
    
    
    
    
    
    
    Commercial
    
    
    3
    
    
    
    4Land
    
    
    
    
    
    
    Other loans
    
    
    7
    
    
    
    12Total charge-offs
    
    
    258
    
    
    
    16Total recoveries
    
    
    257
    
    
    
    1Net charge-offs
    
    
    1
    
    
    
    15Allowance at end of period
    
    $
    7,093
    
    
    
    4,806Ratios:Allowance for loan losses to non-performing
loans at end of period
    
    
    32.54
    %
    
    
    32.38
    %Allowance for loan losses to loans receivable at
end of period
    
    
    0.52
    %
    
    
    0.38
    %Net charge-offs to average loans outstanding
(annualized)
    
    
    0.00
    %
    
    
    0.00
    %
 
 (1)
    
    Residential loans include home equity loans and home equity lines of credit.   -33-




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Impact of Inflation and Changing Prices
  Liquidity and Capital Resources
     -34-




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##### Table of Contents



Regulatory Capital
  -35-




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##### Table of Contents



September 30, 2006To Be Well-CapitalizedFor Capital
    
    
    Under Prompt CorrectiveActual
    
    
    Adequacy Purposes
    
    
    Action Provisions (1)Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioWauwatosa HoldingsTotal capital (to risk-weighted
assets)
    
    $
    246,174
    
    
    
    21.32
    %
    
    
    92,391
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/ATier I capital (to risk-weighted
assets)
    
    
    239,171
    
    
    
    20.71
    %
    
    
    46,195
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/ATier I capital (to average assets)
    
    
    239,171
    
    
    
    14.85
    %
    
    
    64,402
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/AWauwatosa SavingsTotal capital (to risk-weighted
assets)
    
    $
    200,812
    
    
    
    18.11
    %
    
    
    88,700
    
    
    
    8.00
    %
    
    
    110,875
    
    
    
    10.00
    %Tier I capital (to risk-weighted
assets)
    
    
    193,976
    
    
    
    17.50
    %
    
    
    44,350
    
    
    
    4.00
    %
    
    
    66,525
    
    
    
    6.00
    %Tier I capital (to average assets)
    
    
    193,976
    
    
    
    12.22
    %
    
    
    63,484
    
    
    
    4.00
    %
    
    
    79,355
    
    
    
    5.00
    %State of Wisconsin (to total assets) (2)
    
    
    193,976
    
    
    
    11.78
    %
    
    
    98,778
    
    
    
    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. -36-




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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
    
    $
    146,281
    
    
    
    146,281
    
    
    
    
    
    
    
    
    
    
    
    Certificates of deposit
    
    
    915,118
    
    
    
    674,323
    
    
    
    201,188
    
    
    
    33,195
    
    
    
    6,412Federal Home Loan Bank advances (1)
    
    
    349,003
    
    
    
    31,531
    
    
    
    72,472
    
    
    
    25,000
    
    
    
    220,000Operating leases(2)
    
    
    386
    
    
    
    121
    
    
    
    239
    
    
    
    26
    
    
    
    Capital lease
    
    
    4,050
    
    
    
    300
    
    
    
    3,750
    
    
    
    
    
    
    
    Salary continuation agreements
    
    
    3,426
    
    
    
    449
    
    
    
    1,152
    
    
    
    848
    
    
    
    977$
    1,418,264
    
    
    
    853,005
    
    
    
    278,801
    
    
    
    59,069
    
    
    
    227,389
 
 (1)
    
    Secured under a blanket security agreement on qualifying assets, principally,
mortgage loans. Excludes interest which will accrue on the advances.(2)
    
    Represents non-cancelable operating leases for offices.  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)
    
    $
    51,316
    
    
    
    51,316
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of home equity lines of credit (2)
    
    
    33,715
    
    
    
    33,715
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of construction loans (3)
    
    
    82,986
    
    
    
    82,986
    
    
    
    
    
    
    
    
    
    
    
    Standby letters of credit
    
    
    696
    
    
    
    667
    
    
    
    9
    
    
    
    20
    
    
    
    Total Other Commitments
    
    $
    168,713
    
    
    
    168,684
    
    
    
    9
    
    
    
    20
    
    
    
    
 
 General: Commitments to extend credit are agreements to lend to a customer as long as there is no
violation of any condition established in the contract and generally have fixed expiration dates or
other termination clauses.(1)
    
    Commitments for loans are extended to customers for up to 180 days after which they expire.(2)
    
    Unused portions of home equity loans are available to the borrower for up to 10 years.(3)
    
    Unused portions of construction loans are available to the borrower for up to 1 year. -37-




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
 Management of Market Risk
 General.
  Income Simulation.
 -38-




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##### Table of Contents



PercentageIncrease (Decrease) in Estimated NetAnnual Interest IncomeOver 24 Months300 basis point increase in rates
    
    
    (19.40
    )%200 basis point increase in rates
    
    
    (11.86
    )100 basis point increase in rates
    
    
    (5.36
    )100 basis point decrease in rates
    
    
    4.22
  -39-




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##### Table of Contents



Item 4. Controls and Procedures
 Disclosure Controls and Procedures :
 Internal Control Over Financial Reporting :
 -40-




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 6. Exhibits
  -41-




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##### Table of Contents



WAUWATOSA HOLDINGS, INC.(Registrant)Date: October 31, 2006/s/Donald J. StephensDonald J. StephensChairman and Chief Executive OfficerDate: October 31, 2006/s/ Richard C. LarsonRichard C. LarsonChief Financial Officer
 -42-




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##### Table of Contents



Exhibit No.
    
    Description
    
    Filed Herewith31.1
    
    Sarbanes-Oxley Act Section 302
Certification signed by the Chairman and
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 Chairman and 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
 -43-