EXHIBIT 10.2

<PAGE>


                            WAUWATOSA HOLDINGS, INC.
                           2006 EQUITY INCENTIVE PLAN

                                     FORM OF
                      NON- QUALIFIED STOCK OPTION AGREEMENT
                               (OUTSIDE DIRECTOR)

     A. Stock options  ("Options")  for a total of ___________  shares of Common
Stock,  par value $0.01 per share, of Wauwatosa  Holdings,  Inc. (the "Company")
are  hereby  granted  to  ________________________  (the  "Participant").  Stock
Appreciation  Rights with  respect to a total of  _____________  shares are also
granted to the  Participant  and relate to the Options  granted  hereunder.  The
grant and terms of the Options and Stock Appreciation Rights shall be subject in
all respects to the Wauwatosa  Holdings,  Inc. 2006 Equity  Incentive  Plan (the
"Plan").  The terms of this Non-Qualified  Stock Option Agreement are subject to
the terms and conditions of the Plan.

     B. The Option exercise price of Common Stock is $__________ per share,  the
Fair Market Value (as defined in the Plan) of the Common Stock on __________ __,
2007, the date of grant.

     C. The Options granted hereunder shall vest in five (5) approximately equal
annual installments, with the first installment vesting and becoming exercisable
on the first  anniversary of the date of grant, or on  ______________  __, 2008,
and   succeeding   installments   on   each   anniversary   thereafter   through
___________________  __,  2012.  To the extent that the Options  awarded are not
evenly  divisible  by "five"  (5),  then the  Options in excess of those  evenly
divisible  by 5 shall  vest at the  rate of one per  year,  commencing  with the
initial  installment  vesting  and  continuing  until each such  Option is fully
vested.  For  example,  an award  of 103  Options  would  vest at the rate of 21
Options on the first,  second and third  anniversaries of the date of grant, and
at the rate of 20 on the  fourth and fifth  anniversaries  of the date of grant.
The Options granted hereunder may be exercised for up to ten (10) years from the
date of grant, subject to sub-paragraph D below.

     D. If you  terminate  service  with the Company  for any reason  other than
death, disability, following a Change in Control (as defined in the Plan) or for
cause, unvested Options will be forfeited and vested Options will be exercisable
for a period of up to one (1) year following such termination.  If you terminate
service  with the  Company  due to death,  disability  or  following a Change in
Control,  your Options,  whether or not  exercisable  at such time,  will become
exercisable by you (or your legal  representative  or  beneficiary)  for two (2)
years  following  your  termination  of service.  In no event will the period of
exercise  extend beyond the expiration of the Option term. If you are terminated
for cause, Options will be exercisable only as to those Options in which you are
vested at the time of such  termination  and must be  exercised  by the date you
cease to perform services for the Company. All rights under this Agreement shall
expire after the date of your termination of service for cause.

     E. Stock  Appreciation  Rights  ("SARs") are hereby granted with respect to
all  Options  granted  hereunder.  SARs are  granted in tandem  with the Options
granted  hereunder  and the exercise of one will cause the  cancellation  of the
other. If the Participant  exercises SARs, the Participant  will not be required
to pay the exercise  price of the related Option and will be entitled to receive
Common Stock of the Company  equal in value to the  difference  between the Fair
Market Value of the Common Stock on the date of exercise and the exercise  price
of the related Options (which will be cancelled).

<page>


     Example:  Participant  receives 1,000 Options and related SARs. The Options
     have an exercise  price of $12.  When the Company  Stock is trading at $18,
     the Participant  exercises 300 SARs.  Because the Participant has exercised
     SARs,  the  Participant  does  not  have to pay  the  exercise  price.  The
     Participant receives 100 shares of the Company stock.

         $18  Common Stock
       - $12  exercise price
         $ 6  SAR value
       x 300  SARs exercised
        $1,800/18    Common Stock = 100 shares

     F.  Options may not be  exercised if the issuance of shares of Common Stock
of the Company upon such exercise would constitute a violation of any applicable
federal or state securities or other law or regulation.  The  Participant,  as a
condition  to exercise of the Options,  shall  represent to the Company that the
shares of Common Stock of the Company that he acquires pursuant to such exercise
are being  acquired by such  Participant  for  investment and not with a present
view to  distribution  or resale,  unless counsel for the Company is then of the
opinion that such a  representation  is not required under the Securities Act of
1933 or any  other  applicable  law,  regulation,  or  rule of any  governmental
agency.

     G. Options granted under the Plan are not  transferable  other than by will
or the laws of descent and are  exercisable  during the  Participant's  lifetime
only by the Participant to whom they have been granted or the Participant's duly
appointed guardian or personal  representative.  Notwithstanding  the foregoing,
the Committee may permit a Participant to transfer a Non-Qualified  Stock Option
to a family member or a trust or partnership for the benefit of a family member,
in accordance with rules established by the Committee.

     H. A copy of the Plan is enclosed and your  attention is invited to all the
provisions  of the Plan.  You will observe that you are not required to exercise
the Options as to any  particular  number or shares at one time, but the Options
must be exercised,  if at all, and to the extent exercised, by no later than ten
years from the date of grant. The Options may be exercised during such term only
in  accordance  with the  terms of the Plan.  In the event of any  inconsistency
between this Agreement and the Plan, the terms of the Plan will control.

     I. All exercises of the Options must be made by executing and returning the
Notice of Exercise of Non-Qualified  Stock Options attached hereto as Exhibit A,
and upon receipt of any shares of Common Stock upon the exercise of any Options,
the recipient  shall  complete and return to the Company the  Acknowledgment  of
Receipt of  Non-Qualified  Stock Option Shares attached hereto as Exhibit B. All
exercises  of the SARs must be made by  executing  and  returning  the Notice of
Exercise of Stock  Appreciation  Rights  attached  hereto as Exhibit C, and upon
receipt  of any  shares of  Common  Stock  upon the  exercise  of any SARs,  the
recipient shall complete and return to the Company the Acknowledgment of Receipt
of Shares of Common Stock attached hereto as Exhibit D.

     J.  The  Participant  acknowledges  receipt  of a  copy  of  the  Wauwatosa
Holdings,  Inc. 2006 Equity  Incentive Plan and  represents  that he is familiar
with the terms and  provisions  thereof.  The  Participant  hereby  accepts  the
Options  subject to all the terms and provisions of such Plan.  The  Participant
hereby  agrees to accept as binding,  conclusive,  and final all  decisions  and
interpretations  of the Committee  established to administer  such Plan upon any
questions arising under such Plan.



<PAGE>


Date: ________________________



ATTEST:                                      WAUWATOSA HOLDINGS, INC.




By: ___________________________              By: _______________________________


WITNESS:                                      PARTICIPANT




Date: __________________________              __________________________________



 This Stock Option Agreement must be executed in duplicate originals, with one
 original retained by the Company and one original retained by the Participant.