##### 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, 2005
 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
    
    (IRS Employer Identification No.)incorporation or organization)
 11200 W. Plank Ct.
Wauwatosa, WI 53226
(414) 761-1000
  þ
  þ
  þ




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##### Table of Contents



WAUWATOSA HOLDINGS, INC.
 10-Q INDEX
 Page No.PART I. FINANCIAL INFORMATIONItem l. Financial StatementsConsolidated Statements of Financial Condition as of September 30, 2005 and June 30, 2005
    
    3Consolidated Statements of Income for the three months ended September 30, 2005 and 2004
    
    4Consolidated Statements of Equity for the three months ended September 30, 2005 and 2004
    
    5Consolidated Statements of Cash Flows for the three months ended September 30, 2005 and 2004
    
    6Notes to Consolidated Financial Statements
    
    7-12Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    13-29Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    30-31Item 4. Controls and Procedures
    
    32PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    33Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
    
    33Item 3. Defaults Upon Senior Securities
    
    33Item 4. Submission of Matters to a Vote of Securities Holders
    
    33Item 5. Other Information
    
    33Item 6. Exhibits
    
    33Signatures
    
    34CertificationCertificationCertificationCertificationCertificationCertificationCertificationCertification
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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 WAUWATOSA SAVINGS BANK
 
 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 (Unaudited)September 30,
    
    
    June 30,2005
    
    
    2005AssetsCash
    
    $
    7,639,411
    
    
    
    10,106,876Federal funds sold
    
    
    306,891,487
    
    
    
    8,779,591Short-term investments
    
    
    50,623,063
    
    
    
    1,580,688Cash and cash
equivalents
    
    
    365,153,961
    
    
    
    20,467,155Securities available-for-sale (at fair value):Mortgage-related securities
    
    
    47,921,868
    
    
    
    53,444,978Debt securities
    
    
    31,061,406
    
    
    
    30,546,421Loans receivable
    
    
    1,262,930,306
    
    
    
    1,218,166,886Allowance for loan losses
    
    
    4,805,962
    
    
    
    4,606,309Loans receivable, net
    
    
    1,258,124,344
    
    
    
    1,213,560,577Office properties and equipment, net
    
    
    25,129,494
    
    
    
    24,017,859Federal Home Loan Bank stock
    
    
    14,271,400
    
    
    
    14,096,800Foreclosed properties
    
    
    250,000
    
    
    
    475,495Accrued interest receivable
    
    
    1,470,495
    
    
    
    1,145,486Cash surrender value of life insurance
    
    
    22,640,210
    
    
    
    22,078,473Prepaid expenses and other assets
    
    
    6,733,679
    
    
    
    6,298,690Total assets
    
    $
    1,772,756,857
    
    
    
    1,386,131,934Liabilities and EquityLiabilities:Demand deposits
    
    $
    18,930,623
    
    
    
    18,815,534Interest-bearing demand deposits
    
    
    81,076,167
    
    
    
    82,045,453Money market and savings deposits
    
    
    29,918,015
    
    
    
    27,116,712Time deposits
    
    
    978,725,493
    
    
    
    1,000,812,840Total deposits
    
    
    1,108,650,298
    
    
    
    1,128,790,539Federal Home Loan Bank advances short-term
    
    
    57,199,280
    
    
    
    35,000,000Federal Home Loan Bank advances long-term
    
    
    43,953,012
    
    
    
    58,162,292Advance payments by borrowers for taxes
    
    
    23,839,709
    
    
    
    15,821,004Accrued interest on deposits
    
    
    2,980,952
    
    
    
    2,974,167Obligations under capital lease
    
    
    3,409,787
    
    
    
    3,416,329Other liabilities
    
    
    396,138,308
    
    
    
    8,551,314Total liabilities
    
    
    1,636,171,346
    
    
    
    1,252,715,645Equity:Net unrealized loss on securities available-for-sale (net of taxes)
    
    
    (879,348
    )
    
    
    (626,601
    )Retained earnings
    
    
    137,464,859
    
    
    
    134,042,890Total equity
    
    
    136,585,511
    
    
    
    133,416,289Total liabilities and equity
    
    $
    1,772,756,857
    
    
    
    1,386,131,934
  -3-




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WAUWATOSA SAVINGS BANK
 
 CONSOLIDATED STATEMENTS OF INCOME
 (Unaudited)Three Months Ended September 30,2005
    
    
    2004Interest income:Loans
    
    $
    18,917,164
    
    
    
    16,501,619Mortgage-related securities
    
    
    475,924
    
    
    
    644,283Debt securities, federal funds sold and
short-term investments
    
    
    1,157,194
    
    
    
    496,898Total interest income
    
    
    20,550,282
    
    
    
    17,642,800Interest expense:Deposits
    
    
    9,321,450
    
    
    
    7,866,076Borrowings
    
    
    910,004
    
    
    
    575,011Total interest expense
    
    
    10,231,454
    
    
    
    8,441,087Net interest income
    
    
    10,318,828
    
    
    
    9,201,713Provision for loan losses
    
    
    209,157
    
    
    
    117,530Net interest income after
provision for loan losses
    
    
    10,109,671
    
    
    
    9,084,183Noninterest income:Service charges on loans and deposits
    
    
    311,190
    
    
    
    353,348Rental income
    
    
    41,691
    
    
    
    40,123Increase in cash surrender value of life insurance
    
    
    436,065
    
    
    
    213,206Gain on sale of securities
    
    
    0
    
    
    
    412Gain on sale of office properties and equipment
    
    
    0
    
    
    
    488,246Other
    
    
    216,317
    
    
    
    160,948Total noninterest income
    
    
    1,005,263
    
    
    
    1,256,283Noninterest expenses:Compensation, payroll taxes, and other employee benefits
    
    
    3,028,076
    
    
    
    2,656,642Federal insurance premiums
    
    
    36,288
    
    
    
    37,409Occupancy, office furniture, and equipment
    
    
    836,855
    
    
    
    894,752Advertising
    
    
    410,801
    
    
    
    303,760Data processing
    
    
    349,405
    
    
    
    284,724Net cost of foreclosed properties
    
    
    7,335
    
    
    
    7,584Stationery and supplies
    
    
    100,442
    
    
    
    83,198Charitable contributions
    
    
    187,500
    
    
    
    143,750Communications expense
    
    
    157,650
    
    
    
    128,403Professional Fees
    
    
    120,460
    
    
    
    70,985Other
    
    
    518,153
    
    
    
    480,957Total noninterest expenses
    
    
    5,752,965
    
    
    
    5,092,164Income before income taxes
    
    
    5,361,969
    
    
    
    5,248,302Income taxes
    
    
    1,940,000
    
    
    
    1,794,000Net income
    
    $
    3,421,969
    
    
    
    3,454,302
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WAUWATOSA SAVINGS BANK
 
 CONSOLIDATED STATEMENTS OF EQUITY
 Netunrealized
    
    
    Retainedgain (loss) on
    
    
    earnings,securities
    
    
    substantially
    
    
    Totalavailable for sale
    
    
    restricted
    
    
    equity(Unaudited)For the Three Months Ended September 30, 2004Balances at June 30, 2004
    
    $
    (2,128,668
    )
    
    
    124,927,239
    
    
    
    122,798,571Comprehensive income:Net income
    
    
    
    
    
    
    3,454,302
    
    
    
    3,454,302Other comprehensive income:Net unrealized holding losses on available for sale
securities arising during the period,
Net of tax benefit of $957,656
    
    
    1,858,980
    
    
    
    
    
    
    
    1,858,980Less reclassification adjustment for net gains on available
for sale
securities realized in net income, net of
taxes of $140
    
    
    (272
    )
    
    
    
    
    
    
    (272
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    5,313,010Balances at September 30, 2004
    
    $
    (269,960
    )
    
    
    128,381,541
    
    
    
    128,111,581For the Three Months Ended September 30, 2005Balances at June 30, 2005
    
    $
    (626,601
    )
    
    
    134,042,890
    
    
    
    133,416,289Comprehensive income:Net income
    
    
    
    
    
    
    3,421,969
    
    
    
    3,421,969Other comprehensive income:Net unrealized holding gains on available for sale securities
arising during the period,
net of tax of $130,203
    
    
    (252,747
    )
    
    
    
    
    
    
    (252,747
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    3,138,422Balances at September 30, 2005
    
    $
    (879,348
    )
    
    
    137,464,859
    
    
    
    136,585,511
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WAUWATOSA SAVINGS BANK
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)Three Months Ended September 30,2005
    
    
    2004Operating activities:Net income
    
    $
    3,421,969
    
    
    
    3,454,302Adjustments to reconcile net income to net
cash provided by operating activities:Provision for loan losses
    
    
    209,157
    
    
    
    117,530Provision for depreciation
    
    
    497,941
    
    
    
    462,819Net amortization of premium on debt and mortgage-related securities
    
    
    55,714
    
    
    
    124,956Decrease in accrued interest receivable
    
    
    6,785
    
    
    
    221,900Increase in cash surrender value of life insurance
    
    
    (436,065
    )
    
    
    (213,206
    )Decrease in accrued interest on deposits
    
    
    (325,009
    )
    
    
    (115,048
    )Increase in other liabilities
    
    
    844,414
    
    
    
    642,591FHLB stock dividends
    
    
    (174,600
    )
    
    
    (197,300
    )Gain on sale of office properties and equipment
    
    
    0
    
    
    
    (488,246
    )Other
    
    
    (349,656
    )
    
    
    195,215Net cash provided by operating activities
    
    
    3,750,650
    
    
    
    4,205,514Investing activities:Proceeds from maturities of debt securities
    
    
    4,653,130
    
    
    
    3,200,000Purchases of debt securities
    
    
    (5,350,000
    )
    
    
    (16,900,000
    )Principal repayments on mortgage-related securities
    
    
    5,263,745
    
    
    
    7,381,811Proceeds from sales of mortgage-related securities
    
    
    0
    
    
    
    5,346,842Net increase in loans receivable
    
    
    (44,772,923
    )
    
    
    (46,477,784
    )Purchases and premiums on life insurance
    
    
    (125,672
    )
    
    
    (76,418
    )Net purchases of office properties and equipment
    
    
    (1,586,851
    )
    
    
    (134,972
    )Proceeds from sales of foreclosed properties
    
    
    243,682
    
    
    
    174,614Net cash used by investing activities
    
    
    (41,674,889
    )
    
    
    (47,485,907
    )Financing activities:Net increase (decrease) in deposits
    
    
    (20,140,241
    )
    
    
    3,443,166Wauwatosa Holdings, Inc. stock subscription escrow
    
    
    386,742,582
    
    
    
    0Net change in short-term FHLB advances
    
    
    7,990,000
    
    
    
    7,292,967Proceeds from long-term FHLB advances
    
    
    0
    
    
    
    16,962,855Increase in advance payments by borrowers for taxes
    
    
    8,018,704
    
    
    
    7,497,312Net cash provided by financing activities
    
    
    382,611,045
    
    
    
    35,196,300Increase (decrease) in cash and cash
equivalents
    
    
    344,686,806
    
    
    
    (8,084,093
    )Cash and cash equivalents at beginning of period
    
    
    20,467,155
    
    
    
    19,391,669Cash and cash equivalents at end of period
    
    $
    365,153,961
    
    
    
    11,307,576Supplemental information:Cash paid or credited during the period for:Income tax payments
    
    $
    1,335,000
    
    
    
    8,219,187Interest payments
    
    
    10,224,669
    
    
    
    1,510,000Noncash investing activities:Loans receivable transferred to foreclosed properties
    
    
    0
    
    
    
    (1,325,603
    )Non Cash financing activities:Long-term FHLB advances reclassified to short-term
    
    
    14,209,280
    
    
    
    7,292,967
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WAUWATOSA SAVINGS BANK
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Basis of Presentation
     Note 2  Securities Available-for-Sale
  September 30, 2005Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealizedcost
    
    
    gains
    
    
    losses
    
    
    Fair valueMortgage-backed securities
    
    $
    5,425,700
    
    
    
    5,879
    
    
    
    (189,857
    )
    
    
    5,241,722Collateralized mortgage
obligations
    
    
    43,691,455
    
    
    
    
    
    
    
    (1,011,309
    )
    
    
    42,680,146Mortgage-related
securities
    
    
    49,117,155
    
    
    
    5,879
    
    
    
    (1,201,166
    )
    
    
    47,921,868Government sponsored entity bonds
    
    
    28,275,420
    
    
    
    4,174
    
    
    
    (349,960
    )
    
    
    27,929,634Municipals
    
    
    2,923,045
    
    
    
    208,727
    
    
    
    
    
    
    
    3,131,772Debt securities
    
    
    31,198,465
    
    
    
    212,901
    
    
    
    (349,960
    )
    
    
    31,061,406$
    80,315,620
    
    
    
    218,780
    
    
    
    (1,551,126
    )
    
    
    78,983,274
 -7-




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##### Table of Contents



June 30, 2005Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealizedcost
    
    
    gains
    
    
    losses
    
    
    Fair valueMortgage-backed securities
    
    $
    5,817,357
    
    
    
    3,068
    
    
    
    (179,480
    )
    
    
    5,640,945Collateralized mortgage
obligations
    
    
    48,620,674
    
    
    
    8,728
    
    
    
    (825,369
    )
    
    
    47,804,033Mortgage-related
securities
    
    
    54,438,031
    
    
    
    11,796
    
    
    
    (1,004,849
    )
    
    
    53,444,978Government sponsored
entity bonds
    
    
    26,579,430
    
    
    
    27,368
    
    
    
    (220,098
    )
    
    
    26,386,700Municipals
    
    
    3,923,334
    
    
    
    238,164
    
    
    
    (1,777
    )
    
    
    4,159,721Debt securities
    
    
    30,502,764
    
    
    
    265,532
    
    
    
    (221,875
    )
    
    
    30,546,421$
    84,940,795
    
    
    
    277,328
    
    
    
    (1,226,724
    )
    
    
    83,991,399
  Amortized
    
    
    FairCost
    
    
    ValueDue within one year
    
    $
    1,697,134
    
    
    $
    1,697,134Due after one year through five years
    
    
    26,578,286
    
    
    
    26,232,500Due after five years through ten years
    
    
    0
    
    
    
    0Due after ten years
    
    
    2,923,045
    
    
    
    3,131,772Mortgage-related securities
    
    
    49,117,155
    
    
    
    47,921,868$
    80,315,620
    
    
    $
    78,983,274
  September 30, 2005Less than 12 months
    
    
    12 months or longer
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealizedvalue
    
    
    loss
    
    
    value
    
    
    loss
    
    
    value
    
    
    lossGovernment sponsored entity
bonds
    
    $
    23,525,784
    
    
    
    (291,080
    )
    
    
    2,941,800
    
    
    
    (58,880
    )
    
    
    26,467,584
    
    
    
    (349,960
    )Mortgage-related securities
    
    
    15,807,725
    
    
    
    (222,715
    )
    
    
    31,283,361
    
    
    
    (978,451
    )
    
    
    47,091,086
    
    
    
    (1,201,166
    )$
    39,333,509
    
    
    
    (513,795
    )
    
    
    34,225,161
    
    
    
    (1,037,331
    )
    
    
    73,558,670
    
    
    
    (1,551,126
    )
  -8-




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##### Table of Contents



Note 3  Loans Receivable
  September 30,
    
    
    June 30,2005
    
    
    2005Mortgage loans:Residential real estate:Single family
    
    $
    450,246,554
    
    
    
    430,333,367Two- to four-family
    
    
    247,808,288
    
    
    
    251,267,900Over four-family
    
    
    427,232,612
    
    
    
    407,601,393Construction
    
    
    165,616,153
    
    
    
    149,539,532Commercial real estate
    
    
    36,111,545
    
    
    
    36,585,503Land
    
    
    26,141,403
    
    
    
    24,281,934Credit cards
    
    
    145,103
    
    
    
    150,042Other
    
    
    23,474
    
    
    
    52,1001,353,325,132
    
    
    
    1,299,811,771Less:Undisbursed loan proceeds
    
    
    86,190,832
    
    
    
    77,483,660Unearned loan fees
    
    
    4,203,994
    
    
    
    4,161,225$
    1,262,930,306
    
    
    
    1,218,166,886
   For the three months endedSeptember 30,2005
    
    
    2004Balance at beginning of period
    
    $
    4,606,309
    
    
    
    3,378,037Provision for loan losses
    
    
    209,157
    
    
    
    117,530Charge-offs
    
    
    (9,585
    )
    
    
    (3,917
    )Recoveries
    
    
    81
    
    
    
    Balance at end of period
    
    $
    4,805,962
    
    
    
    3,491,650Percentage of allowance to gross loans
    
    
    0.38
    %
    
    
    0.29
    %
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##### Table of Contents



Note 4  Deposits
  Within one year
    
    $
    626,517,996One to two years
    
    
    194,588,960Two to three years
    
    
    81,981,202Three to four years
    
    
    40,367,515Four through five years
    
    
    35,147,597After five years
    
    
    122,223$
    978,725,493
 Note 5  FHLB Advances
  September 30,
    
    
    June 30,2005
    
    
    2005Federal Home Loan Bank (FHLB) advances:Short-term FHLB advances:FHLB advance, 3.58%, due October 2005
    
    $
    7,990,000
    
    
    
    FHLB advance, 2.62%, due January 2006
    
    
    25,000,000
    
    
    
    25,000,000FHLB advance, 2.21%, due January 2006
    
    
    10,000,000
    
    
    
    10,000,000FHLB advance, 3.26%, due July 2006
    
    
    11,777,463
    
    
    
    FHLB advance, 2.83%, due September 2006
    
    
    2,431,817
    
    
    
    Total short-term FHLB advances
    
    
    57,199,280
    
    
    
    35,000,000Long-term FHLB advances:FHLB advance, 3.26%, due July 2006
    
    
    
    
    
    
    11,777,463FHLB advance, 2.83%, due September 2006
    
    
    
    
    
    
    2,431,817FHLB advance, 3.56%, due February 2007
    
    
    7,000,000
    
    
    
    7,000,000FHLB advance, 3.17%, due August 2007
    
    
    5,407,750
    
    
    
    5,407,750FHLB advance, 3.19%, due September 2007
    
    
    4,123,288
    
    
    
    4,123,288FHLB advance, 3.09%, due October 2007
    
    
    4,692,931
    
    
    
    4,692,931FHLB advance, 3.67%, due January 2008
    
    
    6,818,766
    
    
    
    6,818,766FHLB
advance, 3.63%, due January 2008
    
    
    3,074,277
    
    
    
    3,074,277FHLB advance, 3.8%, due February 2008
    
    
    7,836,000
    
    
    
    7,836,000FHLB
advance, 3.58%, due August 2008
    
    
    5,000,000
    
    
    
    5,000,000Total long-term FHLB advances
    
    
    43,953,012
    
    
    
    58,162,292Total FHLB advances
    
    $
    101,152,292
    
    
    
    93,162,292
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##### Table of Contents



Note 6  Financial Instruments with Off-Balance Sheet Risk
  September 30,
    
    June 30,2005
    
    2005Financial instruments whose contract amounts represent
potential credit risk:Commitments to extend credit under first mortgage loans
    
    $
    73,737,550
    
    
    
    65,565,900Commitments to extend credit under home equity lines
of credit
    
    
    30,397,704
    
    
    
    30,253,000Standby letters of credit
    
    
    2,937,686
    
    
    
    1,374,374
 Note 7  Recent Accounting Developments
 Share-Based Payment
 The Meaning of Other-Than-Temporary Impairment and its Application to Certain
Investments
  -11-




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##### Table of Contents



Note 8  Subsequent Events
     -12-




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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;
    
    changes in our organization, compensation and benefit plans as a result of our
reorganization and initial public offering of common stock;
    
    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
  -13-




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##### Table of Contents



Critical Accounting Policies
  Allowance for Loan Losses.
    -14-




---



##### Table of Contents



Income Taxes.
   Comparison of Operating Results for the Three Months Ended September 30, 2005 and 2004
 General
 -15-




---



##### Table of Contents



Total Interest Income
    Total Interest Expense -
   Net Interest Income
 -16-




---



##### Table of Contents



Provision for Loan Losses
 Noninterest Income
 Noninterest Expense
   Income Taxes
 -17-




---



##### Table of Contents



Net Income -
 Comparison of Financial Condition at September 30, 2005 and June 30, 2005
 Total Assets
 Cash and
Cash Equivalents
 Securities
Available-for-Sale
  Loans Receivable
  -18-




---



##### Table of Contents



At September 30,
    
    
    At June 30,2005
    
    
    2005(In Thousands)Total loans at beginning of period
    
    $
    1,299,812
    
    
    $
    1,132,507Real estate loans originated:Residential (1)Single family
    
    
    31,724
    
    
    
    139,878Two- to four-family
    
    
    25,516
    
    
    
    96,560Over four-family
    
    
    51,375
    
    
    
    148,964Construction
    
    
    24,259
    
    
    
    80,221Commercial
    
    
    2,158
    
    
    
    11,733Land
    
    
    8,760
    
    
    
    19,775Total loans originated
    
    
    143,792
    
    
    
    497,131Other loans  net activity
    
    
    (33
    )
    
    
    16Principal repayments
    
    
    (90,246
    )
    
    
    (329,842
    )Net loan activity
    
    
    53,513
    
    
    
    167,305Total loans at end of period
    
    $
    1,353,325
    
    
    $
    1,299,812
 
 (1)
    
    Residential mortgage loans include home equity loans and home equity lines of
credit. Office Properties and Equipment -
 Deposits
 Borrowings
 Advance Payments by Borrowers for Taxes
 Other Liabilities
 -19-




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##### Table of Contents



Equity
 Average Balance Sheets, Interest and Yields/Costs
  -20-




---



##### Table of Contents



Three Months Ended September 30,2005
    
    
    2004Average
    
    
    Interest and
    
    
    
    
    
    
    Average
    
    
    Interest andBalance
    
    
    Dividends
    
    
    Yield/Cost
    
    
    Balance
    
    
    Dividends
    
    
    Yield/Cost(Dollars in Thousands)Interest-earning assets:Loans receivable, net
    
    $
    1,234,933
    
    
    $
    18,917
    
    
    
    6.08
    %
    
    $
    1,089,063
    
    
    $
    16,502
    
    
    
    6.01
    %Available for sale securities(5)
    
    
    82,307
    
    
    
    765
    
    
    
    3.69
    
    
    
    101,912
    
    
    
    924
    
    
    
    3.60Other earning assets
    
    
    90,871
    
    
    
    868
    
    
    
    3.79
    
    
    
    18,787
    
    
    
    217
    
    
    
    4.58Total interest-earning assets
    
    
    1,408,111
    
    
    
    20,550
    
    
    
    5.79
    
    
    
    1,209,762
    
    
    
    17,643
    
    
    
    5.79Noninterest-earning assets
    
    
    65,868
    
    
    
    
    
    
    
    
    
    
    
    50,056Total assets
    
    $
    1,473,979
    
    
    
    
    
    
    
    
    
    
    $
    1,259,818Interest-bearing liabilities:Demand and money market accounts
    
    $
    99,806
    
    
    $
    366
    
    
    
    1.50
    
    
    $
    94,036
    
    
    
    213
    
    
    
    0.90Savings accounts
    
    
    24,107
    
    
    
    30
    
    
    
    0.50
    
    
    
    25,186
    
    
    
    32
    
    
    
    0.50Certificates of deposit
    
    
    985,999
    
    
    
    8,878
    
    
    
    3.57
    
    
    
    915,225
    
    
    
    7,658
    
    
    
    3.28Total interest-bearing deposits
    
    
    1,106,912
    
    
    
    9,274
    
    
    
    3.32
    
    
    
    1,034,447
    
    
    
    7,813
    
    
    
    3.00Mortgagors escrow accounts
    
    
    7,739
    
    
    
    47
    
    
    
    2.41
    
    
    
    7,513
    
    
    
    575
    
    
    
    2.83Advances from the Federal Home Loan Bank
and Federal funds purchased
    
    
    104,016
    
    
    
    910
    
    
    
    3.47
    
    
    
    67,275
    
    
    
    53
    
    
    
    3.39Total interest-bearing liabilities
    
    
    1,218,667
    
    
    
    10,231
    
    
    
    3.33
    
    
    
    1,109,235
    
    
    
    8,441
    
    
    
    3.02Noninterest-bearing liabilities
    
    
    120,354
    
    
    
    
    
    
    
    
    
    
    
    25,172Total liabilities
    
    
    1,339,021
    
    
    
    
    
    
    
    
    
    
    
    1,134,407Equity
    
    
    134,958
    
    
    
    
    
    
    
    
    
    
    
    125,411Total liabilities and equity
    
    $
    1,473,979
    
    
    
    
    
    
    
    
    
    
    $
    1,259,818Net interest income
    
    
    
    
    
    
    10,319
    
    
    
    
    
    
    
    
    
    
    
    9,202Net interest rate spread (2)
    
    
    
    
    
    
    
    
    
    
    2.46
    %
    
    
    
    
    
    
    
    
    
    
    2.77
    %Net interest-earning assets (3)
    
    $
    189,444
    
    
    
    
    
    
    
    
    
    
    $
    100,527Net interest margin (4)
    
    
    
    
    
    
    2.93
    %
    
    
    
    
    
    
    
    
    
    
    3.04
    %Average interest-earning assets to average
interest-bearing liabilities
    
    
    
    
    
    
    115.55
    %
    
    
    
    
    
    
    
    
    
    
    109.06
    %
 
 (1)
    
    Includes net deferred loan fee amortization income of $285,000 and $255,000 for the three
months ended September 30,2005 and 2004, respectively.(2)
    
    Net interest rate spread represents the difference between the yield on average
interest-earning assets and the cost ofaverage interest-bearing liabilities.(3)
    
    Net interest-earning assets represent total interest-earning assets less total
interest-bearing liabilities.(4)
    
    Net interest margin represents net interest income divided by average total interest-earning
assets.(5)
    
    Average balance of available for sale securities is based on amortized historical cost. -21-




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##### Table of Contents



Rate/Volume Analysis
  Three Months Ended September 30,2005 vs. 2004Increase (Decrease)Due toVolume
    
    
    Rate
    
    
    Net(In Thousands)Interest and dividend income:Loans receivable(1) (2)
    
    $
    2,240
    
    
    $
    175
    
    
    
    2,415Securities interest and income
from other earning
assets(3)
    
    
    495
    
    
    
    (3
    )
    
    
    492Total interest-earning assets
    
    
    2,735
    
    
    
    172
    
    
    
    2,907Interest expense:Demand and Money Market accounts
    
    
    6
    
    
    
    148
    
    
    
    154Savings accounts
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Certificates of deposit
    
    
    162
    
    
    
    1,146
    
    
    
    1,308Total interest-bearing deposits
    
    
    167
    
    
    
    1,294
    
    
    
    1,461FHLB Advances
    
    
    322
    
    
    
    13
    
    
    
    335Other interest-bearing
liabilities
    
    
    2
    
    
    
    (8
    )
    
    
    (6
    )Total interest-bearing
liabilities
    
    
    491
    
    
    
    1,299
    
    
    
    1,790Net change in net interest income
    
    $
    2,244
    
    
    $
    (1,127
    )
    
    
    1,117
 
 (1)
    
    Includes net deferred loan fee amortization income of $285,000 and $255,000 for the three
months ended September 30, 2005 and 2004, 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. -22-




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##### Table of Contents



ASSET QUALITY
  NON-PERFORMING LOANS AND ASSETS
 2005
    
    
    2005(Dollars in Thousands)Non-accrual loans:Residential (1)Single family
    
    $
    5,389
    
    
    $
    3,842Two- to four-family
    
    
    1,672
    
    
    
    1,390Over four-family
    
    
    4,994
    
    
    
    5,877Construction
    
    
    845
    
    
    
    830Commercial
    
    
    1,329
    
    
    
    1,137Land
    
    
    615
    
    
    
    Total non-performing loans
    
    
    14,844
    
    
    
    13,076Real estate owned
    
    
    250
    
    
    
    475Total non-performing assets
    
    $
    15,094
    
    
    $
    13,551Total non-performing loans to total loans
    
    
    1.18
    %
    
    
    1.07
    %Total non-performing loans to total assets
    
    
    0.84
    %
    
    
    0.94
    %Total non-performing assets to total assets
    
    
    0.85
    %
    
    
    0.98
    %
 
 (1)
    
    Residential mortgage loans include home equity loans and home equity lines of credit.   -23-




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##### Table of Contents



ALLOWANCE FOR LOAN LOSSES
 At or for the Three
    
    
    At and for the YearMonths Ended
    
    
    Ended June 30,September 30, 2005
    
    
    2005(Dollars in Thousands)Balance at beginning of year
    
    $
    4,606
    
    
    $
    3,378Provision for loan losses
    
    
    209
    
    
    
    1,238Charge-offs:Residential (1)Single family
    
    
    
    
    
    
    1Two- to four-family
    
    
    
    
    
    
    Over four-family
    
    
    
    
    
    
    Construction
    
    
    
    
    
    
    Commercial
    
    
    
    
    
    
    2Land
    
    
    
    
    
    
    Other loans
    
    
    9
    
    
    
    9Total charge-offs
    
    
    9
    
    
    
    12Total recoveries
    
    
    
    
    
    
    2Net charge-offs
    
    
    9
    
    
    
    10Allowance at end of year
    
    $
    4,806
    
    
    $
    4,606Ratios:Allowance for loan losses to non-performing
loans at
end of period
    
    
    32.38
    %
    
    
    35.22
    %Allowance for loan losses to total loans
outstanding at
end of period
    
    
    0.38
    %
    
    
    0.38
    %Net
charge-offs to average loans outstanding
    
    
    0.00
    %
    
    
    0.00
    %
 
 (1) Real estate loans include home equity loans, home equity lines of credit,
commercial real estate and construction loans.   Impact of Inflation and Changing Prices .
 -24-




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##### Table of Contents



Liquidity and Capital Resources
     -25-




---



##### Table of Contents



Regulatory Capital
  -26-




---



##### Table of Contents



To be well-capitalized underprompt corrective actionActual
    
    
    For capital adequacy purposes
    
    

provisionsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTotal capital (to risk-weighted
assets)
    
    $
    142,270
    
    
    
    12.94
    %
    
    
    87,941
    
    
    
    8.00
    %
    
    
    109,926
    
    
    
    10.00
    %Tier I capital (to risk-weighted
assets)
    
    
    137,465
    
    
    
    12.51
    %
    
    
    43,970
    
    
    
    4.00
    %
    
    
    65,956
    
    
    
    6.00
    %Tier I capital (to average assets)
    
    
    137,465
    
    
    
    8.72
    %
    
    
    63,044
    
    
    
    4.00
    %
    
    
    78,805
    
    
    
    5.00
    %State of Wisconsin (to total assets)
    
    
    142,270
    
    
    
    8.03
    %
    
    
    106,364
    
    
    
    6.00
    %
    
    
    N/A
    
    
    
    N/A
 -27-




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##### Table of Contents



Proforma Stockholders Equity
  Issuance ofCommonHistorical
    
    
    Stock
    
    
    Proforma(In Thousands)Common Stock, $.01 par value per
share, 200,000,000 shares
authorized, 33,723,750 shares
issued and outstanding
    
    $
    
    
    
    
    337
    
    
    
    337Additional paid in capital
    
    
    
    
    
    
    103,888
    
    
    
    103,888Net unrealized loss on securities
    
    
    (879
    )
    
    
    
    
    
    
    (879
    )Retained earnings (1)
    
    
    137,464
    
    
    
    (3,533
    )
    
    
    133,931Total Stockholders Equity
    
    $
    136,585
    
    
    
    100,692
    
    
    
    237,277
 
 (1)
    
    The charge to retained earnings represents the charitable contribution
expense of $5,564,420, net of tax benefit. -28-




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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
    
    $
    129,925
    
    
    $
    129,925
    
    
    $
    
    
    
    $
    
    
    
    $
    Certificates of deposit
    
    
    978,725
    
    
    
    626,518
    
    
    
    276,570
    
    
    
    75,515
    
    
    
    122Federal Home Loan Bank advances (1)
    
    
    101,152
    
    
    
    57,199
    
    
    
    43,953
    
    
    
    
    
    
    
    Operating leases (2)
    
    
    89
    
    
    
    30
    
    
    
    59
    
    
    
    
    
    
    
    Capital lease
    
    
    4,325
    
    
    
    300
    
    
    
    600
    
    
    
    3,425
    
    
    
    Salary continuation agreements
    
    
    3,882
    
    
    
    456
    
    
    
    1,025
    
    
    
    1,152
    
    
    
    1,249$
    1,218,098
    
    
    $
    814,428
    
    
    $
    322,207
    
    
    $
    80,092
    
    
    $
    1,371
 
 (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)
    
    $
    73,738
    
    
    $
    73,738
    
    
    $
    
    
    
    $
    
    
    
    $
    Unused portion of home equity lines of credit (2)
    
    
    30,398
    
    
    
    30,398
    
    
    
    
    
    
    
    
    
    
    
    Unused portion of construction loans (3)
    
    
    86,191
    
    
    
    86,191
    
    
    
    
    
    
    
    
    
    
    
    Standby letters of credit
    
    
    2,938
    
    
    
    2,810
    
    
    
    94
    
    
    
    
    
    
    
    34(1)
    
    $
    193,265
    
    
    $
    193,137
    
    
    $
    94
    
    
    $
    
    
    
    $
    34
  
 (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. -29-




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
 Management of Market Risk
 General.
  Income Simulation.
 -30-




---



##### Table of Contents



PercentageIncrease (Decrease) in Estimated NetAnnual Interest IncomeOver 24 Months300 basis point
increase in
rates
    
    
    (15.42
    )200 basis point increase
in rates
    
    
    (9.97
    )100 basis point increase
in rates
    
    
    (3.92
    )100 basis point decrease
in rates
    
    
    4.45
  -31-




---



##### Table of Contents



Item 4. Controls and Procedures
 Disclosure Controls and Procedures :
 Internal Control Over Financial Reporting :
 -32-




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 2. Unregistered Sale of Equity Securities and Use of Proceeds .
   
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
  -33-




---



##### Table of Contents



WAUWATOSA HOLDINGS, INC.(Registrant)Date: November 2, 2005/s/Donald J. StephensDonald J. StephensChairman, President and Chief Executive OfficerDate: November 2, 2005/s/ Richard C. LarsonRichard C. LarsonChief Financial Officer
 -34-




---



##### 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
 -35-