Waterstone Financial 10-Q 2006 Q2 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

þ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 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.

(Exact name of registrant as specified in its charter)

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
(Address, including Zip Code, and telephone number,
including area code, of registrant’s principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yesþ          Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filero Accelerated filero Non-accelerated filerþ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yeso          Noþ

The number of shares outstanding of the issuer’s common stock, $0.01 par value per share, was 33,082,617 at July 31, 2006.

WAUWATOSA HOLDINGS, INC.

10-Q INDEX

	Page No.
PART I. FINANCIAL INFORMATION
Item l. Financial Statements
Consolidated Statements of Financial Condition as of June 30, 2006 (unaudited) and December 31, 2005	3
Consolidated Statements of Income for the three and six months ended June 30, 2006 and 2005 (unaudited)	4
Consolidated Statements of Changes in Shareholders’ Equity for the six months ended June 30, 2006 and 2005 (unaudited)	6
Consolidated Statements of Cash Flows for the six months ended June 30, 2006 and 2005 (unaudited)	7
Notes to Consolidated Financial Statements	8-15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16-38
Item 3. Quantitative and Qualitative Disclosures about Market Risk	39-41
Item 4. Controls and Procedures	42
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	43
Item 6. Exhibits	43
Signatures	44
Certification
Certification
Certification
Certification
Section 302 Certification signed by the Chairman and CEO
Section 302 Certification signed by the Chief Financial Officer
Section 906 Certification signed by the Chairman and CEO
Section 906 Certification signed by the Chief Financial Officer

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PART I — FINANCIAL INFORMATION

Item 1.Financial Statements

WAUWATOSA HOLDINGS, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	(Unaudited)
	June 30,			December 31,
	2006			2005
	(In Thousands, except share data)
Assets
Cash	$	10,788			8,761
Federal funds sold		869			5,388
Short-term investments		4,252			2,349
Cash and cash equivalents		15,909			16,498
Securities available-for-sale (at fair value)		112,577			121,955
Loans held for sale		5,566			—
Loans receivable		1,367,913			1,306,018
Less: Allowance for loan losses		5,983			5,250
Loans receivable, net		1,361,930			1,300,768
Office properties and equipment, net		31,168			25,022
Federal Home Loan Bank stock, at cost		13,366			14,406
Cash surrender value of life insurance		23,359			22,792
Prepaid expenses and other assets		11,426			9,768
Total assets	$	1,575,301			1,511,209
Liabilities and Shareholders’ Equity
Liabilities:
Demand deposits	$	67,947			82,290
Money market and savings deposits		70,319			33,565
Time deposits		930,293			929,738
Total deposits		1,068,559			1,045,593
Federal Home Loan Bank advances short-term		36,209			87,209
Federal Home Loan Bank advances long-term		202,003			114,003
Advance payments by borrowers for taxes		16,948			181
Other liabilities		16,044			32,527
Total liabilities		1,339,763			1,279,513
Shareholders’ 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, 33,057,164 shares outstanding)		337			337
Additional paid-in-capital		103,946			103,859
Accumulated other comprehensive loss (net of taxes)		(3,106	)		(1,571	)
Retained earnings		141,619			136,756
Unearned ESOP shares		(7,258	)		(7,685	)
Total shareholders’ equity		235,538			231,696
Total liabilities and shareholders’ equity	$	1,575,301			1,511,209

     See Accompanying Notes to Consolidated Financial Statements.

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WAUWATOSA HOLDINGS, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

	(Unaudited)
	Three Months Ended June 30,
	2006		2005
	(In Thousands, except share data)
Interest income:
Loans	$	20,795		18,191
Mortgage-related securities		1,018		525
Debt securities, federal funds sold and short-term investments		605		581
Total interest income		22,418		19,297
Interest expense:
Deposits		10,356		8,942
Borrowings		2,472		837
Total interest expense		12,828		9,779
Net interest income		9,590		9,518
Provision for loan losses		345		(25	)
Net interest income after provision for loan losses		9,245		9,543
Noninterest income:
Service charges on loans and deposits		452		421
Increase in cash surrender value of life insurance		230		151
Gain on sale of securities		—		(49	)
Gain on sale of loans		756		—
Other		53		148
Total noninterest income		1,491		671
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		4,239		2,892
Occupancy, office furniture, and equipment		1,032		858
Advertising		286		435
Data processing		418		286
Charitable contributions		—		188
Communications		161		158
Professional fees		289		186
Other		902		878
Total noninterest expenses		7,327		5,881
Income before income taxes		3,409		4,333
Income taxes		1,252		1,593
Net income	$	2,157		2,740
Earnings per share:
Basic	$	0.07		N/A
Diluted		0.07		N/A
Weighted average shares outstanding:
Basic		33,066,761		N/A
Diluted		33,066,761		N/A

See Accompanying Notes to Consolidated Financial Statements.

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WAUWATOSA HOLDINGS, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

	(Unaudited)
	Six Months Ended June 30,
	2006		2005
	(In Thousands, except share data)
Interest income:
Loans	$	41,001		35,504
Mortgage-related securities		2,081		1,076
Debt securities, federal funds sold and short-term investments		1,193		1,119
Total interest income		44,275		37,699
Interest expense:
Deposits		19,690		17,172
Borrowings		4,935		1,606
Total interest expense		24,625		18,778
Net interest income		19,650		18,921
Provision for loan losses		652		875
Net interest income after provision for loan losses		18,998		18,046
Noninterest income:
Service charges on loans and deposits		937		805
Increase in cash surrender value of life insurance		387		218
Gain on sale of securities		—		12
Gain on sale of loans		1,095		—
Other		265		219
Total noninterest income		2,684		1,254
Noninterest expenses:
Compensation, payroll taxes, and other employee benefits		8,102		5,729
Occupancy, office furniture, and equipment		1,994		1,768
Advertising		571		591
Data processing		793		572
Charitable contributions		—		375
Communications		322		319
Professional fees		467		397
Other		1,734		1,563
Total noninterest expenses		13,983		11,314
Income before income taxes		7,699		7,986
Income taxes		2,836		4,656
Net income	$	4,863		3,330
Earnings per share:
Basic	$	0.15		N/A
Diluted		0.15		N/A
Weighted average shares outstanding:
Basic		33,057,373		N/A
Diluted		33,057,373		N/A

See Accompanying Notes to Consolidated Financial Statements.

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WAUWATOSA HOLDINGS, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

												Accumulated
	Common				Additional				Unearned			Other
	Stock				Paid-In		Retained		ESOP			Comprehensive			Total
	Shares		Amount		Capital		Earnings		Shares			Income (Loss)			Equity
	(In Thousands)
Balances at December 31, 2004		—	$	—		—		130,713		—			(390	)		130,323
Comprehensive income:
Net income		—		—		—		3,330		—			—			3,330
Other comprehensive income:
Net unrealized holding gains (losses) on available for sale securities arising during the period, net of taxes $118		—		—		—		—		—			(229	)		(229	)
Less reclassification adjustment for net gains on available for sale
Securities realized in net income, net of taxes of $4		—		—		—		—		—			(8	)		(8	)
Total comprehensive income (loss)
Balances at June 30, 2005		—	$	—		—		134,043		—			(627	)		133,416
Balances at December 31, 2005		33,724	$	337		103,859		136,756		(7,685	)		(1,571	)		231,696
Comprehensive income:
Net income		—		—		—		4,863		—			—			4,863
Other comprehensive income:
Net unrealized holding gains (losses) on available for sale securities arising during the period, net of taxes $828		—		—		—		—		—			(1,535	)		(1,535	)
Total comprehensive income
ESOP shares committed to be released to Plan participants		—		—		87		—		427			—			514
Balances at June 30, 2006		33,724	$	337		103,946		141,619		(7,258	)		(3,106	)		235,538

     See Accompanying Notes to Consolidated Financial Statements.

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WAUWATOSA HOLDINGS, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	(Unaudited)
	Six Months Ended June 30,
	2006			2005
Operating activities:
Net income	$	4,863			3,330
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		652			875
Provision for depreciation		1,142			965
Deferred income taxes		(890	)		(1,521	)
Net amortization of premium on debt and mortgage-related securities		23			117
Commitment of ESOP shares		513			—
Gain on sale of loans held for sale		(1,095	)		—
Loans originated for sale		(27,249	)		—
Proceeds from sale of loans held for sale		22,778			—
Increase in accrued interest receivable		(57	)		(228	)
Increase in cash surrender value of life insurance		(387	)		(341	)
Increase in accrued interest on deposits		596			800
Decrease in other liabilities		(888	)		(48	)
FHLB stock dividends		—			(376	)
Gain on sale of securities		—			(12	)
Gain on sale of other real estate owned		(109	)		(18	)
Other		53			(349	)
Net cash provided by (used in) operating activities		(55	)		3,194
Investing activities:
Principal repayments on mortgage-related securities		7,789			6,176
Proceeds from sales of debt securities		—			262
Net increase in loans receivable		(62,299	)		(72,991	)
Net purchases of office properties and equipment		(4,365	)		(1,844	)
Purchase and premiums on life insurance		(180	)		(180	)
Redemption of FHLB stock		1,040			—
Purchase of land		(2,797	)		—
Purchase of Waterstone Mortgage Corporation		(1,082	)		—
Proceeds from sales of foreclosed properties		891			1,329
Net cash used in investing activities		(61,003	)		(67,248	)
Financing activities:
Net increase in deposits		22,966			45,903
Net change in short-term FHLB advances		(51,000	)		(15,000	)
Proceeds from long-term FHLB advances		88,000			36,507
Net decrease in advance payments by borrowers for taxes		503			3,541
Net cash provided by financing activities		60,469			70,951
(Decrease) Increase in cash and cash equivalents		(589	)		6,897
Cash and cash equivalents at beginning of period		16,498			13,570
Cash and cash equivalents at end of period	$	15,909			20,467
Supplemental information:
Cash paid or credited during the period for:
Income tax payments	$	2,940			2,795
Interest payments		24,029			17,978
Noncash investing activities:
Loans receivable transferred to foreclosed properties		626			—
Capital leases originated		—			3,423
Non Cash financing activities:
Long-term FHLB advances reclassified to short-term		7,000			35,000

     See Accompanying Notes to Consolidated Financial Statements.

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WAUWATOSA HOLDINGS, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Basis of Presentation

The consolidated financial statements include the accounts of Wauwatosa Holdings, Inc. (the “Company”) and the Company’s subsidiaries.

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information, Rule 10-01 of Regulation S-X and the instructions to Form 10-Q. The financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring accruals ) necessary to present fairly the financial position, results of operations, changes in shareholders’ equity, and cash flows of the Company for the periods presented.

The accompanying Unaudited Consolidated Financial Statements and related notes should be read in conjunction with the Company’s December 31, 2005 Transition Report on Form 10-K. Operating results for the three and six months ended June 30, 2006, are not necessarily indicative of the results that may be expected for the year ending December 31, 2006.

The preparation of the consolidated financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Significant items subject to such estimates and assumptions include the allowance for loan losses and deferred income taxes. Actual results could differ from those estimates.

Note 2 — Reclassifications

Certain items in the prior period consolidated financial statements have been reclassified to conform with the June 30, 2006 presentation.

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Note 3 — Securities Available-for-Sale

The amortized cost and fair values of the Company’s investment in securities follow:

	June 30, 2006
	(In Thousands)
			Gross		Gross
	Amortized		unrealized		unrealized
	cost		gains		losses			Fair value
Mortgage-backed securities	$	16,546		2		(730	)		15,818
Collateralized mortgage obligations		69,174		—		(3,203	)		65,971
Mortgage-related securities		85,720		2		(3,933	)		81,789
Government agency bonds		26,575		—		(879	)		25,696
Municipals		4,278		109		(50	)		4,337
Debt securities		30,853		109		(929	)		30,033
Other securities		782		—		(27	)		755
	$	117,355		111		(4,889	)		112,577

	December 31, 2005
	(In Thousands)
			Gross		Gross
	Amortized		unrealized		unrealized
	cost		gains		losses			Fair value
Mortgage-backed securities	$	17,478		3		(340	)		17,141
Collateralized mortgage obligations		76,037		—		(1,600	)		74,437
Mortgage-related securities		93,515		3		(1,940	)		91,578
Government agency bonds		26,577		—		(627	)		25,950
Municipals		4,278		176		(27	)		4,427
Debt securities		30,855		176		(654	)		30,377
	$	124,370		179		(2,594	)		121,955

The amortized cost and fair values of investment securities by contractual maturity at June 30, 2006, are shown below. Actual maturities may differ from contractual maturities because issuers have the right to call or prepay obligations with or without call or prepayment penalties.

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	Amortized		Fair
	Cost		Value
	(In Thousands)
Due within one year	$	3,000	$	2,930
Due after one year through five years		23,824		23,016
Due after five years through ten years		855		827
Due after ten years		3,424		3,510
Mutual funds		532		505
Mortgage-related securities		85,720		81,789
	$	117,355	$	112,577

Gross unrealized losses on securities available-for-sale and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:

	June 30, 2006
	Less than 12 months					12 months or longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	value		loss			value		loss			value		loss
	(In Thousands)
Government agency bonds	$	1,422		(44	)		24,274		(835	)		25,696		(879	)
Municipals		1,305		(50	)		—		—			1,305		(50	)
Mortgage-related securities		43,733		(1,624	)		37,906		(2,309	)		81,639		(3,933	)
Other securities		755		(27	)		—		—			755		(27	)
	$	47,215		(1,745	)		62,180		(3,144	)		109,395		(4,889	)

The unrealized losses reported for government agency bonds and mortgage-related securities relate exclusively to debt securities issued by government agencies such as the Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC). The unrealized loss reported for other securities relates to a mutual fund with mortgage-related investments. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company has the ability and intent to hold these securities until a market price recovery or maturity, these investments are not considered other-than-temporarily impaired. There are eleven and nineteen individual securities at June 30, 2006 that comprise the government agency bonds and mortgage-related securities, respectively, which have been in an unrealized loss position for twelve months or longer.

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Note 4 — Loans Receivable

Loans receivable are summarized as follows:

	June 30,		December 31,
	2006		2005
	(In Thousands)
Mortgage loans:
Residential real estate:
Single family	$	476,337		469,395
Two- to four-family		260,499		256,270
Over four-family		480,988		443,528
Construction		180,020		165,516
Commercial real estate		35,286		34,543
Land		26,672		23,685
Credit cards		124		126
Other		140		33
		1,460,066		1,393,096
Less:
Undisbursed loan proceeds		87,580		82,712
Unearned loan fees		4,573		4,366
Loans Receivable	$	1,367,913		1,306,018

Real estate collateralizing the Company’s first mortgage loans is located in the Company’s general lending area of metropolitan Milwaukee.

A summary of the activity in the allowance for loan loss follows:

	For the six months ended
	June 30,
	2006			2005
	(In Thousands)
Balance at beginning of period	$	5,250			3,737
Provision for loan losses		652			875
Charge-offs		(144	)		(7	)
Recoveries		225			1
Balance at end of period	$	5,983			4,606
Allowance to loans receivable		0.44	%		0.38	%

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Note 5 — Deposits

A summary of the contractual maturities of certificate accounts at June 30, 2006 is as follows:

	(In Thousands)
Within one year	$	617,647
One to two years		210,890
Two to three years		54,332
Three to four years		33,307
Four through five years		14,111
After five years		6
	$	930,293

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Note 6 — FHLB Advances

FHLB advances consist of the following:

	June 30,		December 31,
	2006		2005
	(In Thousands)
Federal Home Loan Bank (FHLB) advances:
Short-term FHLB advances:
FHLB advance, 4.41%, due January 2006	$	—		23,000
FHLB advance, 2.62%, due January 2006		—		25,000
FHLB advance, 2.21%, due January 2006		—		10,000
FHLB advance, 3.26%, due July 2006		11,777		11,777
FHLB advance, 2.83%, due September 2006		2,432		2,432
FHLB advance, 4.49%, due October 2006		15,000		15,000
FHLB advance, 3.56%, due February 2007		7,000		—
Total short-term FHLB advances		36,209		87,209
Long-term FHLB advances:
FHLB advance, 3.56%, due February 2007		—		7,000
FHLB advance, 3.17%, due August 2007		5,408		5,408
FHLB advance, 3.19%, due September 2007		4,123		4,123
FHLB advance, 3.09%, due October 2007		4,693		4,693
FHLB advance, 4.56%, due October 2007		10,000		10,000
FHLB advance, 4.73%, due December 2007		10,000		10,000
FHLB advance, 3.67%, due January 2008		6,819		6,819
FHLB advance, 3.63%, due January 2008		3,074		3,074
FHLB advance, 3.80%, due February 2008		7,836		7,836
FHLB advance, 3.58%, due August 2008		5,000		5,000
FHLB advance, 4.78%, due November 2008		9,150		9,150
FHLB advance, 4.69%, due November 2008		8,900		8,900
FHLB advance, 4.76%, due December 2008		7,000		7,000
FHLB advance, 4.72%, due October 2010		25,000		25,000
FHLB advance, 4.47%, due February 2011		25,000		—
FHLB 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		—
Total long-term FHLB advances		202,003		114,003
Total FHLB advances	$	238,212		201,212

The Company selects loans that meet underwriting criteria established by the FHLB as collateral for outstanding advances. The Company’s borrowings at the FHLB are limited to 60% of the carrying value of unencumbered one- to four-family mortgage loans. In addition, these advances are collateralized by FHLB stock of $13,366 at June 30, 2006 and $14,406 at December 31, 2005. In the event of prepayment, the Company is obligated to pay all remaining contractual interest on the advance. The $25,000 advance due in February of 2011 is callable in August of 2006. The $50,000 advance due in January of 2016 is callable beginning in January of 2009 and quarterly thereafter. The $10,000 advance due in May of 2016 is callable beginning in May of 2007 and quarterly thereafter. The $10,000 advance due in June of 2016 is callable in June of 2007 and quarterly thereafter.

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Note 7 — Financial Instruments with Off-Balance Sheet Risk

Off-balance sheet financial instruments or obligations whose contract amounts represent credit and/or interest rate risk are as follows:

	June 30,		December 31,
	2006		2005
	(In Thousands)
Financial instruments whose contract amounts represent potential credit risk:
Commitments to extend credit under first mortgage loans	$	42,772		43,375
Commitments to extend credit under home equity lines of credit		34,034		31,809
Standby letters of credit		1,320		1,576

Forward commitments to sell mortgage loans of $5,566 at June 30, 2006, represent commitments obtained by the Company from a secondary market agency to purchase mortgages from the Company. Commitments to sell loans expose the Company to interest rate risk if market interest rates decrease during the commitment period. Commitments to sell loans are made to mitigate interest rate risk on commitments to originate loans and loans held for sale.

Note 8 — Earnings per share

Basic earnings per share (EPS) is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS is computed by dividing net income by the weighted average number of common shares outstanding adjusted for the dilutive effect of all potential common shares. At June 30, 2006, 113,913 shares of the Wauwatosa Savings Bank Employee Stock Ownership Plan have been committed to be released to Plan participants and are considered outstanding for both common and dilutive earnings per share. No earnings per share are reflected for periods prior to October 4, 2005, as there were no shares outstanding prior to the reorganization that occurred on that date.

Presented below are the calculations for basic and diluted earnings per share:

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	Three Months		Six Months
	Ended		Ended
	June 30, 2006		June 30, 2006
	(In Thousands, except per share data)
Net income	$	2,157	$	4,863
Weighted average shares outstanding		33,067		33,057
Effect of dilutive potential common shares		—		—
Diluted weighted average shares outstanding		33,067		33,057
Basic earnings per share	$	0.07	$	0.15
Diluted earnings per share	$	0.07	$	0.15

Note 9 — Recent Accounting Developments

In June 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of Financial Accounting Standards Boards Statement No. 109” (FIN 48). FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Interpretation is effective for fiscal years beginning after December 31, 2006. The Company is currently evaluating the impact of the adoption of FIN 48, with respect to its results of operations, financial position and liquidity.

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statements Regarding Forward-Looking Information

This report contains or incorporates by reference various forward-looking statements concerning the Company’s prospects that are based on the current expectations and beliefs of management. Forward-looking statements may also be made by the Company from time to time in other reports and documents as well as in oral presentations. When used in written documents or oral statements, the words “anticipate,” “believe,” “estimate,” “expect,” “objective” and similar expressions and verbs in the future tense, are intended to identify forward-looking statements. The statements contained herein and such future statements involve or may involve certain assumptions, risks and uncertainties, many of which are beyond the Company’s control, that could cause the Company’s actual results and performance to differ materially from what is expected. In addition to the assumptions and other factors referenced specifically in connection with such statements, the following factors could impact the business and financial prospects of the Company:

• 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;

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• 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.

See also the factors referred to in reports filed by the Company with the Securities and Exchange Commission (particularly those under the caption “Risk Factors” in Item 1A of the Company’s 2005 Transition Report on Form 10-K).

Overview

Our results of operations depend primarily on our net interest income. Net interest income is the difference between the interest income we earn on our interest-earning assets, consisting primarily of residential loans, construction loans and debt and mortgage-related securities and the interest we pay on our interest-bearing liabilities, consisting primarily of time deposits and borrowings from the Federal Home Loan Bank of Chicago. The Company’s banking subsidiary, Wauwatosa Savings Bank (“Wauwatosa Savings”), is a mortgage lender with mortgage loans comprising virtually 100% of total loans receivable on June 30, 2006. Further, 83.4% of loans receivable are residential mortgage loans with over four-family loans comprising 39.5% of all residential mortgage loans on June 30, 2006. Wauwatosa Savings funds loan production primarily with retail deposits and Federal Home Loan Bank advances. On June 30, 2006, total deposits comprised 79.8% of total liabilities. Time deposits, also known as certificates of deposit, account for 87.1% of total deposits. Wauwatosa Savings borrows from the Federal Home Loan Bank of Chicago as a secondary source of funding. Federal Home Loan Bank advances outstanding on June 30, 2006 totaled $238.2 million or 17.8% of total liabilities.

Our results of operations also are affected by our provision for loan losses, noninterest income and noninterest expense. Noninterest income currently consists primarily of service charges and loan brokerage fees. Noninterest expense currently consists primarily of compensation and employee benefits and occupancy expenses. Our results of operations also may be affected significantly by general and local economic and competitive conditions, governmental policies and actions of regulatory authorities.

On February 9, 2006, the Company, through its bank subsidiary, completed the acquisition of Waterstone Mortgage Corporation (“Waterstone”). Waterstone is a mortgage broker with offices in Pewaukee, Madison, Sheboygan and Lake Geneva, Wisconsin and Livonia, Michigan. Waterstone offers real estate mortgage options that are currently not being offered by Wauwatosa Savings. Revenue generated through Waterstone’s mortgage brokerage activities is included in the Consolidated Statements of Income contained in this report under the caption “Gain on sale of loans.”

The following discussion and analysis is presented to assist in the understanding and evaluation of the Company’s financial condition and results of operations. It is intended to complement the unaudited consolidated financial statements, footnotes, and supplemental financial data appearing elsewhere in this Form 10-Q and should be read in conjunction therewith. The detailed discussion focuses on the results of operations for the three and six-month periods ended June 30, 2006 and 2005 and the financial condition as of June 30, 2006 compared to the financial condition as of December 31, 2005.

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Critical Accounting Policies

Critical accounting policies are those that involve significant judgments and assumptions by management and that have, or could have, a material impact on our income or the carrying value of our assets.

Allowance for Loan Losses.Wauwatosa Savings establishes valuation allowances on loans considered impaired. A loan is considered impaired when, based on current information and events, it is probable that Wauwatosa Savings will not be able to collect all amounts due according to the contractual terms of the loan agreement. A valuation allowance is established for an amount equal to the impairment when the carrying amount of the loan exceeds the net realizable value of the underlying collateral.

Wauwatosa Savings also establishes valuation allowances based on an evaluation of the various risk components that are inherent in the credit portfolio. The risk components that are evaluated include past loan loss experience; the level of nonperforming and classified assets; current economic conditions; volume, growth, and composition of the loan portfolio; adverse situations that may affect the borrower’s ability to repay; the estimated value of any underlying collateral; regulatory guidance; and other relevant factors. The allowance is increased by provisions charged to earnings and recoveries of previously charged-off loans and reduced by charge-offs. The adequacy of the allowance for loan losses is reviewed and approved quarterly by the Wauwatosa Savings board of directors. The allowance reflects management’s best estimate of the amount needed to provide for the probable loss on impaired loans and other inherent losses in the loan portfolio, and is based on a risk model developed and implemented by management and approved by the Wauwatosa Savings board of directors.

Actual results could differ from this estimate, and future additions to the allowance may be necessary based on unforeseen changes in loan quality and economic conditions. In addition, federal regulators periodically review the Wauwatosa Savings allowance for loan losses. Such regulators have the authority to require Wauwatosa Savings to recognize additions to the allowance at the time of their examination.

If the allowance for loan losses is too low we may incur higher provisions for loan losses in the future resulting in lower net income. If an estimate of the allowance for loan losses is too high, we may experience lower provisions for loan losses resulting in higher net income.

Income Taxes.We recognize income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that all or some portion of the deferred tax assets will not be realized.

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Wauwatosa Savings has an investment subsidiary operating in Nevada. The income earned by that corporation is not subject to tax in Wisconsin nor has any such tax been paid. An accrued liability has been recorded pursuant to the Statement of Financial Accounting Standards Board No. 5 because the Wisconsin Department of Revenue has generally indicated that it will assess franchise taxes on certain income of such out-of-state subsidiaries. The Company has accrued an estimated liability, as of June 30, 2006, of $2.7 million net of the federal deferred tax benefit. The Company will continue to accrue state income tax on certain Nevada subsidiary earnings until such time as this issue is resolved.

If our estimated current and deferred tax assets, liabilities or any related estimated valuation allowance are too high or too low, it will affect our future net income in the period that the new information resulting in a better estimate of income tax assets and liabilities becomes available.

Comparison of Operating Results for the Six Months Ended June 30, 2006 and 2005

General — Net income for the six months ended June 30, 2006 totaled $4.9 million, or $0.15 for both basic and diluted earnings per share. Comparatively, net income for the six months ended June 30, 2005 was $3.3 million. There was no comparable earnings per share amount for the six months ended June 30, 2005. Year-to-date 2006 results generated an annualized return on average assets of 0.65% and an annualized return on average equity of 4.15%, compared to 0.52% and 5.05%, respectively, for the comparable period in 2005. The net interest margin for the first six months of 2005 was 2.67% compared to 2.95% for the first six months of 2005. The combined $2.2 million increase in net interest income ($729,000) and other income ($1.4 million) was fully offset by a $2.7 million increase in noninterest expense. The $1.5 million (46.0%) increase in net income between the comparable six-month periods is primarily the result of a decrease in the effective tax rate from 58.3% for the six months ended June 30, 2005 to 36.8% for the six months ended June 30, 2006. Income tax expense was $1.8 million higher for the six months ended June 30, 2005 due to the initial $1.8 million accrual of estimated state tax liability net of federal deferred tax benefit related to the Wisconsin Department of Revenue general indication that it will assess franchise taxes on certain income of the Wauwatosa Savings out-of-state, investment subsidiary.

Total Interest Income — Total interest income increased $6.6 million, or 17.4%, to $44.3 million during the six months ended June 30, 2006 as compared to $37.7 million for the six months ended June 30, 2005. Interest income on loans increased $5.5 million, or 15.5%, to $41.0 million for the six months ended June 30, 2006 as compared to $35.5 million for the comparable period of 2005. The increase resulted from an increase in average loan balance of $160.8 million, or 13.6%, to $1.34 billion during the six-month period ended June 30, 2006 from $1.18 billion during the comparable period in 2005. The increase in volume was compounded by a 10 basis point increase in the average yield on loans to 6.16% for the six-month period ended June 30, 2006 from 6.06% for the comparable period in 2005. The remaining increase in overall interest income was primarily due to the increase in the average balance of investment securities of $30.8 million, or 34.9%, to $119.2 million during the six-month period ended June 30, 2006 from $88.4 million during the comparable period in 2005. The increase in volume was compounded by a 77 basis point increase in the average yield on investment securities to 4.55% for the six-month period ended June 30, 2006 from 3.78% for the comparable period in 2005.

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Total Interest Expense —Total interest expense increased by $5.8 million, or 31.1%, to $24.6 million during the six months ended June 30, 2006 from $18.8 million during the six months ended June 30, 2005. This increase was the result of an increase in both the rate paid on deposits and borrowings and an increase in average borrowings outstanding.

Interest expense on deposits increased $2.5 million, or 14.7%, to $19.7 million during the six months ended June 30, 2006 from $17.2 million during the comparable period in 2005 as a result of an increase in the cost of deposits, partially offset by a decrease in average deposits outstanding. The cost of total average deposits increased by 57 basis points to 3.74% for the six-month period ended June 30, 2006 verses 3.17% for the comparable period during 2005. As market interest rates (in particular short-term interest rates) increased and deposit rates offered by competitors increased, it was necessary to increase the interest rates we offered on deposits to retain and attract new deposits, thereby increasing our cost of deposits.

Interest expense on borrowings increased $3.3 million, or 207.3%, to $4.9 million during the six months ended June 30, 2006 from $1.6 million during the comparable period in 2005. This increase was the result of increased average borrowings outstanding plus an increase in the related weighted average interest rate. The cost of advances from the Federal Home Loan Bank and of federal funds purchased increased 113 basis points to 4.24% for the six months ended June 30, 2006 verses 3.11% for the comparable period during 2005.

Net Interest Income — Net interest income increased $729,000 or 3.9%, during the six months ended June 30, 2006 as compared to the same period in 2005. The increase resulted from an increase in net average earning assets of $93.9 million, or 95.9%, to $191.7 million for the six-month period ended June 30, 2006 from $97.9 million from the comparable period in 2005. The increase in net average earning assets was offset by a 54 basis point decrease in the net interest rate spread to 2.18% for the six month period ended June 30, 2006 from 2.72% for the comparable period in 2005. The 54 basis point decrease in the net interest rate spread resulted from a 66 basis point increase in the cost of interest bearing liabilities, which was partially offset by a 12 basis point increase in the yield on interest earning assets. Consistent with industry trends, the Company has experienced net interest margin compression as the yield curve continues to flatten and even invert.

Provision for Loan Losses — Provision for loan losses decreased $223,000, or 25.5%, to $652,000 during the six months ended June 30, 2006 from $875,000 during the comparable period during 2005. The higher provision for the six months ended June 30, 2005 was the result of a significant increase in classified assets during the period. The provision for loan losses recorded during the six-month period ended June 30, 2006 was reflective of continuing increases in the overall balance of the loan portfolio, in classified assets and in delinquent loans during the period.

Noninterest Income — Total noninterest income increased $1.4 million, or 114.0%, to $2.7 million during the six months ended June 30, 2006 from $1.3 million during the comparable period in 2005. The increase is primarily the result of gain on sale of loans. The $1.1 million increase in gain on sale of loans earned during the period ended June 30, 2006 was a result of the Company’s purchase of Waterstone during the first quarter. There was no comparable income

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earned during the comparable period of 2005.

Noninterest Expense — Total noninterest expense increased $2.7 million, or 23.6%, to $14.0 million during the six months ended June 30, 2006 from $11.3 million during the comparable period in 2005. The increase was primarily the result of increases in compensation, payroll taxes and other employee benefits. Waterstone accounted for $1.2 million, or 44.4%, of the $2.7 million increase for the period.

Compensation, payroll taxes and other employee benefit expense increased $2.4 million, or 41.4%, to $8.1 million during the six months ended June 30, 2006 from $5.7 million during the comparable period in 2005. Wauwatosa Savings’ salary expense increased by $976,000, primarily as a result of a 13% increase in the overall level of full-time equivalent staff members. Compensation expense related to the ESOP Plan totaled $514,000 during the six months ended June 30, 2006. There was no expense related to the ESOP Plan during the comparable period of 2005, as the ESOP Plan did not exist until the fourth quarter of 2005. A $239,000 increase in employee health care benefits was almost entirely offset by a $226,000 reduction in pension benefits. The Company elected to freeze benefits accruing in the defined benefit pension plan in December 2005. Salary expense related to Waterstone totaled $659,000 during the six months ended June 30, 2006. There was no compensation expense related to Waterstone during the comparable period of 2005.

Income Taxes — The effective tax rate for the six months ended June 30, 2006 was 36.8% as compared to 58.3% for the comparable period during 2005. The 2005 effective tax rate was abnormally high as a result of an accrual of state income taxes recorded in 2005 attributable to an ongoing dispute with the Wisconsin Department of Revenue. Wauwatosa Savings has an investment subsidiary operating in Nevada. The income earned by that corporation is not subject to tax in the state of Wisconsin nor has any such tax been paid. During the six-month period ended June 30, 2005, an accrued liability of $2.0 million was established because the Wisconsin Department of Revenue has generally indicated that it will assess franchise taxes on certain income of such out-of-state subsidiaries. The Company has accrued an estimated liability, as of June 30, 2006 of $2.7 million net of the federal deferred tax benefit of $1.5 million.

Net Income —As a result of the foregoing factors, net income for the six months ended June 30, 2006 increased $1.5 million, or 46.0%, to $4.9 million, from $3.3 million during the comparable period in 2005.

Comparison of Operating results for the Three Months Ended June 30, 2006 and 2005

General — Net income for the quarter ended June 30, 2006 totaled $2.2 million, or $0.07 per share, as compared to $2.7 for the quarter ended June 30, 2005. There was no comparable earnings per share amount for the quarter ended June 30, 2005. The $583,000 (21.3%) decrease in net income between the comparable quarters was primarily the result of an increase in the provision for loan losses and non-interest expense partially offset by an increase in non-interest

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income. The provision for loan losses totaled $345,000 during the quarter ended June 30, 2006 as compared to a negative provision of $25,000 for the quarter ended June 30, 2005. Non-interest expense increased $1.4 million, or 24.6%, to $7.3 million during the quarter ended June 30, 2006 compared to $5.9 million during the quarter ended June 30, 2005. The increase in non-interest expense primarily results from an increase in compensation, payroll taxes and other employee benefits. Noninterest expense attributable to Waterstone for the quarter ended June 30, 2006 totaled $832,000, or 57.5%, of the $1.4 million increase. The increase in noninterest income is almost wholly attributable to gain on sale of loans generated by Waterstone in the second quarter of 2006.

Total Interest Income — Total interest income increased $3.1 million, or 16.2%, to $22.4 million in the second quarter of 2006 as compared to $19.3 million for the second quarter of 2005. Interest income on loans increased $2.6 million, or 14.3%, to $20.8 million in the second quarter of 2006 as compared to $18.2 million for the second quarter of 2005. The increase resulted from an increase in average loan balance of $156.4 million, or 13.0%, to $1.36 billion during the three-month period ended June 30, 2006 from $1.20 billion during the comparable period in 2005. The increase in volume was compounded by a 7 basis point increase in the average yield on loans to 6.14% for the three-month period ended June 30, 2006 from 6.07% for the comparable period in 2005. The remaining increase in overall interest income was primarily due to the increase in the average balance of investment securities of $29.4 million, or 34.1%, to $115.8 million during the three-month period ended June 30, 2006 from $86.4 million during the comparable period ended in 2005. The increase in volume was compounded by a 77 basis point increase in the average yield on investment securities to 4.55% for the three-month period ended June 30, 2006 from 3.78% for the comparable period in 2005.

Total Interest Expense —Total interest expense increased by $3.0 million, or 31.2%, to $12.8 million in the second quarter of 2006 from $9.8 million in the second quarter of 2005. This increase was the result of an increase in both the rate paid on deposits and borrowings and an increase in average borrowings outstanding.

Interest expense on deposits increased $1.4 million, or 15.8%, to $10.4 million in the second quarter of 2006 from $8.9 million during the comparable period in 2005 as a result of an increase in the cost of deposits, partially offset by a decrease in average deposits outstanding. The cost of total average deposits increased by 64 basis points to 3.86% for the quarter ended June 30, 2006 verses 3.22% for the quarter ended June 30, 2005. As market interest rates (in particular short-term interest rates) increased, it was necessary to increase the interest rates we offered on deposits to retain and attract new deposits, thereby increasing our cost of deposits.

Interest expense on borrowings increased $1.6 million, or 195.3%, to $2.5 million in the second quarter of 2006 from $837,000 during the comparable period in 2005. This increase was the result of increased average borrowings outstanding plus an increase in the related weighted average interest rate. The cost of advances from the Federal Home Loan Bank and of federal funds purchased increased 102 basis points to 4.23% for the quarter ended June 30, 2006 versus 3.21% for the quarter ended June 30, 2005.

Net Interest Income — Net interest income increased $72,000, or 0.8%, in the second quarter of 2006 as compared to the same period in 2005. The increase resulted from an increase in net

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average earning assets of $91.0 million, or 90.6%, to $191.4 million for the quarter ended June 30, 2006 from $100.4 million from the comparable period in 2005. The increase in net average earning assets was offset by a 60 basis point decrease in the net interest rate spread to 2.06% for the quarter ended June 30, 2006 from 2.66% for the comparable period in 2005. The 60 basis point decrease in the net interest rate spread resulted from a 70 basis point increase in the cost of interest bearing liabilities, which was partially offset by a 10 basis point increase in the yield on interest earning assets. Consistent with industry trends, the Company has experienced net interest margin compression as the yield curve continues to flatten and even invert.

Provision for Loan Losses — Provision for loan losses totaled $345,000 for the second quarter of 2006 compared to a negative provision of $25,000 during the comparable period in 2005. The provision for loan losses recorded during the second quarter of fiscal 2006 was reflective of a continued increase in the overall balance of the loan portfolio and a sustained increase in classified assets and delinquent loans during the quarter ended June 30, 2006. The negative provision during the quarter ended June 30, 2005 resulted from a reclassification of a write down on a real estate property that had previously been provided for in the general valuation allowance. The provision expense related to this property was reclassified to other non-interest expense.

Noninterest Income — Total noninterest income increased $820,000, or 122.2%, to $1.5 million in the second quarter of 2006 from $671,000 during the comparable period in 2005. The increase is primarily the result of gain on sale of loans. The $756,000 increase in gain on sale of loans earned during the quarter ended June 30, 2006 was a result of the Company’s purchase of Waterstone during the first quarter. There was no comparable income earned during the second quarter of 2005.

Noninterest Expense — Total noninterest expense increased $1.4 million, or 24.6%, to $7.3 million in the second quarter of 2006 from $5.9 million during the comparable period in 2005. The increase was primarily the result of increases in compensation, payroll taxes and other employee benefits. Noninterest expense attributable to Waterstone for the quarter ended June 30, 2006 was $832,000, or 57.5%, of the $1.4 million increase.

Compensation, payroll taxes and other employee benefit expense increased $1.3 million, or 46.6%, to $4.2 million in the second quarter of 2006 from $2.9 million during the comparable period in 2005. Wauwatosa Savings’ salary expense increased by $443,000, primarily as a result of a 13% increase in the overall level of full-time equivalent staff members. Compensation expense related to the ESOP Plan totaled $278,000 during the second quarter of 2006. There was no comparable expense during the second quarter of 2005, as the ESOP Plan did not exist until the fourth quarter of 2005. An increase of $135,000 in employee health care benefits was partially offset by a $105,000 reduction in pension expense. The Company elected to freeze the benefits accruing in the defined benefit pension plan in December of 2005. Salary expense related to Waterstone totaled $484,000 during the second quarter of 2006. There was no comparable expense during the second quarter of 2005.

Income Taxes — The effective tax rate for the second quarter of 2006 was 36.7% as compared to 36.8% for the second quarter of 2005.

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Net Income —As a result of the foregoing factors, net income for the three months ended June 30, 2006 decreased $583,000, or 21.3%, to $2.2 million, from $2.7 million during the comparable period in 2005.

Comparison of Financial Condition at June 30, 2006 and December 31, 2005

Total Assets — Total assets increased by $64.1 million, or 4.2%, to $1.6 billion at June 30, 2006 from $1.5 billion at December 31, 2005. The increase in total assets resulted primarily from continued growth of the loan portfolio.

Loans Held for Sale —Loans held for sale totaled $5.6 million as of June 30, 2006. This represents mortgage loans originated by Waterstone that will be sold on the secondary market. As Wauwatosa Savings has not historically originated loans for sale on the secondary market, and Waterstone was not purchased until February 2006, there is no comparable balance as of December 31, 2005.

Loans Receivable — Loans receivable increased $61.8 million, or 4.7%, to $1.37 billion at June 30, 2006 from $1.31 billion at December 31, 2005, primarily as a result of an increase in residential mortgage loans. Of the total increase in loans receivable, $48.6 million, or 72.6% was attributable to residential mortgage loans, of which $37.5 million was secured by over four-family residential properties and $6.9 million was secured by single family residential properties. An additional $14.5 million of the overall increase in loans receivable was attributable to construction loans.

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The following table shows loan origination, purchasing and principal repayment activity during the periods indicated.

	As of or for the			As of or for the
	Six Months Ended			Six Months Ended
	June 30, 2006			December 31, 2005
	(In Thousands)
Total loans at beginning of period	$	1,393,096			1,299,812
Real estate loans originated:
Residential(1)
Single family		42,812			81,397
Two- to four-family		36,837			52,030
Over four-family		74,433			95,734
Construction		25,796			43,865
Commercial		6,824			2,658
Land		6,277			10,451
Total loans originated		192,979			286,135
Other loans — net activity		(18	)		(43	)
Principal repayments		(125,991	)		(192,808	)
Net loan activity		66,970			93,284
Total loans at end of period	$	1,460,066			1,393,096

(1) Residential mortgage loans include home equity loans and home equity lines of credit.

Office Properties and Equipment —Office properties and equipment increased $6.1 million, or 24.6%, to $31.2 million at June 30, 2006 from $25.0 million at December 31, 2005. The increase was attributable to the purchase of a building in West Allis, Wisconsin for $2.8 million and land in Franklin and Germantown, Wisconsin, totaling $2.1 million that will be utilized for future expansion of our branch network. In addition, total estimated new construction and remodeling costs for the three new branches is $3.5 million. Approximately $840,000 has been expended with respect to the construction of the Franklin and Germantown branches due to open in 2006.

Deposits — Total deposits increased $23.0 million, or 2.2%, to $1.1 billion at June 30, 2006 from $1.0 billion at December 31, 2005. Total money market and savings deposits increased $36.8 million, or 109.5%, to $70.3 million at June 30, 2006 from $33.6 million at December 31, 2005. Partially offsetting the overall increase in money market and savings deposits, demand deposits decreased $14.3 million, or 17.4%, to $67.9 million at June 30, 2006 from $82.3 million at December 31, 2005. The development and promotion of more competitively attractive retail and business money market accounts resulted in the significant increase in money market account balances during the period ended June 30, 2006. The increase in money market account balances included amounts transferred from existing demand accounts.

Borrowings — Total borrowings increased $37.0 million, or 18.3%, to $238.2 million at June 30, 2006 from $201.2 million at December 31, 2005. The increase was necessary to fund the

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continued growth of the loan portfolio.

Advance Payments by Borrowers for Taxes — Advance payments by borrowers for taxes and insurance increased $16.8 million to $16.9 million at June 30, 2006 from $181,000 at December 31, 2005. The increase was the result of payments received from borrowers’ for their real estate taxes and is seasonally normal, as these payments increase during the course of the calendar year until real estate tax obligations are paid out, primarily in December.

Other Liabilities — Other liabilities decreased $16.5 million, or 50.7%, to $16.0 million at June 30, 2006 from $32.5 million at December 31, 2005. The decrease, which is seasonally normal, was primarily due to a decrease in outstanding checks related to advance payments by borrowers for taxes. The Company receives payments from borrowers for their real estate taxes during the course of the calendar year until real estate tax obligations are paid out, primarily in December. The outstanding checks remain classified as an other liability until cashed. The balance of these outstanding checks was $123,000 at June 30, 2006 and $16.4 million at December 31, 2005.

Shareholders’ Equity — Shareholders’ equity increased $3.8 million, or 1.7%, to $235.5 million at June 30, 2006 from $231.7 at December 31, 2005. The increase was primarily attributable to net income for the six months ended June 30, 2006, which totaled $4.9 million partially offset by the increase in accumulated other comprehensive loss. Accumulated other comprehensive loss is the estimated unrealized loss attributable to the decline in market value of investment securities during the current rising interest rate environment.

Average Balance Sheets, Interest and Yields/Costs

The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments were made, as the effect thereof was not material. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.

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	Three Months Ended June 30,
	2006								2005
	Average		Interest and						Average		Interest and
	Balance		Dividends			Yield/Cost			Balance		Dividends			Yield/Cost
	(Dollars in Thousands)
Interest-earning assets:
Loans receivable, net	$	1,357,788		(1) $20,795			6.14	%	$	1,201,340		(1) $18,191			6.07	%
Available for sale securities(2)		115,831		1,314			4.55			86,383		815			3.78
Other earning assets		27,620		309			4.50			26,742		291			4.36
Total interest-earning assets		1,501,239		22,418			5.99			1,314,465		19,297			5.89
Noninterest-earning assets		67,068								52,754
Total assets	$	1,568,307							$	1,367,219
Interest-bearing liabilities:
Demand and money market accounts	$	105,872	$	604			2.29		$	88,856		299			1.35
Savings accounts		20,846		26			0.50			24,185		30			0.50
Certificates of deposit		947,275		9,717			4.11			998,548		8.605			3.46
Total interest-bearing deposits		1,073,993		10,347			3.86			1,111,589		8,934			3.22
Advances from the Federal Home Loan Bank		225,051		2,373			4.23			93,607		750			3.21
Other interest bearing liabilities		10,803		108			4.01			8,852		95			4.30
Total interest-bearing liabilities		1,309,847		12,828			3.93			1,214,048		9,779			3.23
Noninterest-bearing liabilities		24,575								21,178
Total liabilities		1,334,422								1,235,226
Equity		233,885								131,993
Total liabilities and equity	$	1,568,307							$	1,367,219
Net interest income				9,590								9,518
Net interest rate spread(3)							2.06	%							2.66	%
Net interest-earning assets(4)	$	191,392							$	100,417
Net interest margin(5)				2.56	%							2.90	%
Average interest-earning assets to average interest-bearing liabilities				114.61	%							108.27	%

(1)	Includes net deferred loan fee amortization income of $194 and $249 for the three months ended June 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.

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	Six Months Ended June 30,
	2006								2005
	Average		Interest and						Average		Interest and
	Balance		Dividends			Yield/Cost			Balance		Dividends			Yield/Cost
	(Dollars in Thousands)
Interest-earning assets:
Loans receivable, net	$	1,341,583		(1) $41,001			6.16	%	$	1,180,819		(1) $35,504			6.06	%
Available for sale securities(2)		119,219		2,692			4.55			88,384		1,657			3.78
Other earning assets		25,868		582			4.54			22,334		538			4.86
Total interest-earning assets		1,486,670		44,275			6.01			1,291,537		37,699			5.89
Noninterest-earning assets		63,647								51,936
Total assets	$	1,550,317							$	1,343,473
Interest-bearing liabilities:
Demand and money market accounts	$	100,036	$	1,041			2.10		$	87,218		486			1.12
Savings accounts		20,986		52			0.50			23,944		59			0.50
Certificates of deposit		939,721		18,585			3.99			980,809		16,615			3.42
Total interest-bearing deposits		1,060,743		19,678			3.74			1,091,971		17,160			3.17
Advances from the Federal Home Loan Bank		225,000		4,733			4.24			94,912		1,462			3.11
Other interest bearing liabilities		9,180		214			4.70			6,788		156			4.63
Total interest-bearing liabilities		1,294,923		24,625			3.83			1,193,671		18,778			3.17
Noninterest-bearing liabilities		21,102								17,926
Total liabilities		1,316,025								1,211,597
Equity		234,292								131,876
Total liabilities and equity	$	1,550,317							$	1,343,473
Net interest income				19,650								18,921
Net interest rate spread(3)							2.18	%							2.72	%
Net interest-earning assets(4)	$	191,747							$	97,866
Net interest margin(5)				2.67	%							2.95	%
Average interest-earning assets to average interest-bearing liabilities				114.81	%							108.20	%

(1)	Includes net deferred loan fee amortization income of $391 and $428 for the six months ended June 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.

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Rate/Volume Analysis

The following table sets forth the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to changes in both rate and volume that cannot be segregated have been allocated proportionately based on the changes due to rate and the changes due to volume.

	Three Months Ended June 30,									Six Months Ended June 30,
	2006 versus 2005									2006 versus 2005
	Increase (Decrease)									Increase (Decrease) Due
	Due to									to
	Volume			Rate			Net			Volume			Rate			Net
	(In Thousands)
Interest and dividend income:
Loans receivable(1) (2)	$	2,398			206			2,604		$	5,583			(86	)		5,497
Securities interest and income from other earning assets(3)		407			110			517			1,396			(317	)		1,079
Total interest-earning assets		2,805			316			3,121			6,979			(403	)		6,576
Interest expense:
Demand and Money Market accounts		43			262			305			(26	)		581			555
Savings accounts		(4	)		—			(4	)		(7	)		—			(7	)
Certificates of deposit		(462	)		1,575			1,113			(167	)		2,137			1,970
Total interest-bearing deposits		(423	)		1,837			1,414			(200	)		2,718			2,518
FHLB Advances		1,481			142			1,623			3,726			(455	)		3,271
Other interest-bearing liabilities		20			(8	)		12			58			—			58
Total interest-bearing liabilities		1,078			1,971			3,049			3,584			2,263			5,847
Net change in net interest income	$	1,727			(1,655	)		72		$	3,395			(2,666	)		729

(1)	Includes net deferred loan fee amortization income of $194, $249, $391 and $428 for the three months ended June 30, 2006 and 2005 and the six months ended June 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.

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ASSET QUALITY

The following table summarizes non-performing loans and assets:

NON-PERFORMING LOANS AND ASSETS

	At June 30,			At December 31,
	2006			2005
	(Dollars in Thousands)
Non-accrual loans:
Residential(1)
Single family	$	7,695			5,654
Two- to four-family		2,740			3,386
Over four-family		3,160			6,703
Construction		1,535			760
Commercial		0			962
Land		330			600
Total non-performing loans		15,460			18,065
Real estate owned		8			215
Total non-performing assets	$	15,468			18,280
Total non-performing loans to total loans receivable		1.13	%		1.40	%
Total non-performing loans to total assets		0.98	%		1.20	%
Total non-performing assets to total assets		0.98	%		1.21	%

(1) Residential mortgage loans include home equity loans and home equity lines of credit.

Total non-performing loans decreased by $2.6 million as of June 30, 2006, as compared to December 31, 2005, primarily as a result of decreased non-performing mortgage loans secured by over four-family real estate. Non-performing loans secured by over four-family properties

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decreased by $3.5 million as a result of two loans that were brought current during the period.

A summary of the allowance for loan losses is shown below:

ALLOWANCE FOR LOAN LOSSES

	At or for the Six			At or for the Six			At or for the Six
	Months Ended			Months Ended			Months Ended
	June 30, 2006			June 30, 2005			December 31, 2005
	(Dollars in Thousands)
Balance at beginning of period	$	5,250			3,737			4,606
Provision for loan losses		652			875			1,035
Charge-offs:
Residential(1)
Single family		—			—			37
Two- to four-family		137			—			60
Over four-family		—			—			169
Construction		—			—			—
Commercial		2			2			102
Land		—			—			—
Other loans		5			5			23
Total charge-offs		144			7			391
Total recoveries		225			1			—
Net charge-offs		(81	)		6			391
Allowance at end of period	$	5,983			4,606			5,250
Ratios:
Allowance for loan losses to non-performing loans at end of period		38.69	%		35.22	%		29.06	%
Allowance for loan losses to loans receivable at end of period		0.44	%		0.38	%		0.40	%
Net charge-offs to average loans outstanding (annualized)		(0.01	%)		0.00	%		0.06	%

⁽¹⁾  Residential loans include home equity loans and home equity lines of credit.

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The allowance for loan losses has been determined in accordance with accounting principles generally accepted in the United States. We are responsible for the timely and periodic determination of the amount of the allowance required. Future provisions for loan losses will continue to be based upon our assessment of the overall loan portfolio and the underlying collateral, trends in non-performing loans, current economic conditions and other relevant factors. To the best of management’s knowledge, all probable losses have been provided for in the allowance for loan losses.

The establishment of the amount of the loan loss allowance inherently involves judgments by management as to the adequacy of the allowance, which ultimately may or may not be correct. Higher rates of loan defaults than anticipated would likely result in a need to increase provisions in future years. Also, as over four-family loan portfolios increase, additional provisions would likely be added to the loan loss allowances as they carry a higher risk of loss. The dollar amount of the typical over four-family loan tends to be larger than our average single family loan and, therefore, any loss that we experience on these loans could be larger than what we have historically experienced on our single-family loans. See “Significant Accounting Policies” above for a discussion on the use of judgment in determining the amount of the allowance for loan losses.

Impact of Inflation and Changing Prices

The financial statements and accompanying notes of the Company have been prepared in accordance with the generally accepted accounting principles (“GAAP”). GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on performance than do the effects of inflation.

Liquidity and Capital Resources

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We maintain liquid assets at levels we consider adequate to meet our liquidity needs. Our liquidity ratio averaged 1.2% and 3.4% for the six months ended June 30, 2006 and 2005, respectively. The liquidity ratio is equal to average daily cash and cash equivalents for the period divided by average total assets. We adjust our liquidity levels to fund loan commitments, repay our borrowings, fund deposit outflows and pay real estate taxes on mortgage loans. We also adjust liquidity as appropriate to meet asset and liability management objectives. The operational adequacy of our liquidity position at any point in time is dependent upon the judgment of the Chief Financial Officer as supported by the full Asset/Liability Committee. Liquidity is monitored on a daily, weekly and monthly basis using a variety of measurement tools and indicators. Regulatory liquidity, as required by the Wisconsin Department of Financial Institutions, is based on current liquid assets as a percentage of the prior month’s average deposits and short-term borrowings. Minimum primary liquidity is equal to 4.0% of deposits and short-term borrowings and minimum total regulatory liquidity is equal to 8.0% of deposits and short-term borrowings. Wauwatosa Savings’ primary and total regulatory liquidity at June 30, 2006 was 4.3% and 12.1%, respectively.

Our primary sources of liquidity are deposits, amortization and prepayment of loans, maturities of investment securities and other short-term investments, and earnings and funds provided from operations. While scheduled principal repayments on loans are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by market interest rates, economic conditions, and rates offered by our competition. We set the interest rates on our deposits to maintain a desired level of total deposits. In addition, we invest excess funds in short-term interest-earning assets, which provide liquidity to meet lending requirements. Additional sources of liquidity used for the purpose of managing long- and short-term cash flows include $45 million in Federal funds lines of credit with three commercial banks and advances from the Federal Home Loan Bank of Chicago.

A portion of our liquidity consists of cash and cash equivalents, which are a product of our operating, investing and financing activities. At June 30, 2006 and 2005, respectively, $15.9 million and $16.5 million of our assets were invested in cash and cash equivalents. Our primary sources of cash are principal repayments on loans, proceeds from the calls and maturities of debt and mortgage-related securities, increases in deposit accounts, Federal funds purchased and advances from the Federal Home Loan Bank of Chicago.

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Our cash flows are derived from operating activities, investing activities and financing activities as reported in our Consolidated Statements of Cash Flows included in our Consolidated Financial Statements.

During the six months ended June 30, 2006 and 2005, loan originations, net of collected principal, totaled $62.3 million and $73.0 million, respectively, reflecting net growth in our portfolio due to a continued low interest rate environment and strong housing market.

Deposit flows are generally affected by the level of interest rates, the interest rates and products offered by local competitors, and other factors. Deposits increased by $23.0 million for the six months ended June 30, 2006 primarily as the result of competitive pricing offered on money market accounts.

Liquidity management is both a daily and longer-term function of business management. If we require funds beyond our ability to generate them internally, borrowing agreements exist with the Federal Home Loan Bank of Chicago, which provide an additional source of funds. At June 30, 2006, we had $238.2 million in advances from the Federal Home Loan Bank of Chicago, of which $36.2 million was due within 12 months, and an additional available borrowing limit of $270.9 million based on collateral requirements of the Federal Home Loan Bank of Chicago.

At June 30, 2006, we had outstanding commitments to originate loans of $42.7 million, unfunded commitments under construction loans of $87.6 million and unfunded commitments under lines of credit and standby letters of credit of $35.4 million. At June 30, 2006, certificates of deposit scheduled to mature in one year or less totaled $617.6 million. Based on prior experience, management believes that a significant portion of such deposits will remain with us, although there can be no assurance that this will be the case. In the event a significant portion of our deposits are not retained by us, we will have to utilize other funding sources, such as Federal Home Loan Bank of Chicago advances in order to maintain our level of assets. However, we cannot assure that such borrowings would be available on attractive terms, or at all, if and when needed. Alternatively, we would reduce our level of liquid assets, such as our cash and cash equivalents and securities available-for-sale in order to meet funding needs. In addition, the cost of such deposits may be significantly higher if market interest rates are higher or there is an increased amount of competition for deposits in our market area at the time of renewal.

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Regulatory Capital

The Company and Wauwatosa Savings are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities, and certain off-balance-sheet items, as calculated under regulatory accounting practices. The Company’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined). Management believes, as of June 30, 2006, that the Company meets all capital adequacy requirements to which it is subject.

As of June 30, 2006 the most recent notification from the Federal Deposit Insurance Corporation categorized Wauwatosa Savings as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well capitalized,” Wauwatosa Savings must maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios, as set forth in the table below. There are no conditions or events since that notification that management believes have changed Wauwatosa Savings’ category.

As a state-chartered savings bank, Wauwatosa Savings is required to meet minimum capital levels established by the state of Wisconsin in addition to federal requirements. For the state of Wisconsin, regulatory capital consists of retained income, paid-in-capital, capital stock equity and other forms of capital considered to be qualifying capital by the Federal Deposit Insurance Corporation.

The actual capital amounts and ratios for the Company and Wauwatosa Savings as of June 30, 2006 are presented in the table below:

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	June 30, 2006
											To Be Well-Capitalized
						For Capital					Under Prompt Corrective
	Actual					Adequacy Purposes					Action Provisions (1)
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Wauwatosa Holdings
Total capital (to risk-weighted assets)	$	243,827		21.47	%		90,868		8.00	%		N/A		N/A
Tier I capital (to risk-weighted assets)		237,935		20.95	%		45,434		4.00	%		N/A		N/A
Tier I capital (to average assets)		237,935		15.66	%		60,792		4.00	%		N/A		N/A
Wauwatosa Savings
Total capital (to risk-weighted assets)	$	199,204		17.98	%		88,656		8.00	%		110,820		10.00	%
Tier I capital (to risk-weighted assets)		193,472		17.46	%		44,328		4.00	%		66,492		6.00	%
Tier I capital (to average assets)		193,472		12.73	%		60,792		4.00	%		75,990		5.00	%
State of Wisconsin (to total assets) (2)		193,472		12.65	%		91,746		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.

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Contractual Obligations, Commitments, Contingent Liabilities, and Off-balance Sheet Arrangements

The following tables present information indicating various contractual obligations and commitments of Wauwatosa Savings as of June 30, 2006 and the respective maturity dates.

Contractual Obligations

					More than		More than
					One Year		Three Years		Over
			One Year		Through		Through		Five
	Total		or Less		Three Years		Five Years		Years
	(In Thousands)
Deposits without a stated maturity	$	138,266		138,266		—		—		—
Certificates of deposit		930,293		617,646		265,222		33,308		14,117
Federal Home Loan Bank advances(1)		238,212		36,209		82,003		50,000		70,000
Operating leases (2)		413		117		244		52		—
Capital lease		4,125		300		3,825		—		—
Salary continuation agreements		3,527		406		1,152		949		1,020
	$	1,314,836		792,944		352,446		84,309		85,137

(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.

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     The following table details the amounts and expected maturities of significant off-balance sheet commitments as of June 30, 2006.

Other Commitments

					More than		More than
					One Year		Three Years		Over
			One Year		Through		Through		Five
	Total		or Less		Three Years		Five Years		Years
	(In Thousands)
Real estate loan commitments(1)	$	42,772		42,772		—		—		—
Unused portion of home equity lines of credit(2)		34,034		34,034		—		—		—
Unused portion of construction loans(3)		87,580		87,580		—		—		—
Standby letters of credit		1,320		1,109		192		—		19
Total Other Commitments	$	165,706		165,495		192		—		19

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.

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Item 3.Quantitative and Qualitative Disclosures about Market Risk

Management of Market Risk

General.The majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market risk is interest rate risk. Our assets, consisting primarily of mortgage loans, have longer maturities than our liabilities, consisting primarily of deposits. As a result, a principal part of our business strategy is to manage interest rate risk and reduce the exposure of our net interest income to changes in market interest rates. Accordingly, Wauwatosa Savings’ Board of Directors has established an Asset/Liability Committee which is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the Board of Directors. Management monitors the level of interest rate risk on a regular basis and the Asset/Liability Committee meets at least weekly to review our asset/liability policies and interest rate risk position, which are evaluated quarterly.

We have sought to manage our interest rate risk in order to minimize the exposure of our earnings and capital to changes in interest rates. During the low interest rate environment that had existed in recent years, we implemented the following strategies to manage our interest rate risk: (i) emphasized variable rate loans including variable rate one- to four-family, and commercial loans as well as three to five year commercial balloon loans, (ii) reducing and shortening the expected average life of the investment portfolio, and (iii) whenever possible, lengthening the term structure of our deposit base and our borrowings from the Federal Home Loan Bank of Chicago. These measures should serve to reduce the volatility of our net interest income in different interest rate environments.

Income Simulation.Simulation analysis is an estimate of our interest rate risk exposure at a particular point in time. At least quarterly we review the potential effect changes in interest rates could have on the repayment or repricing of rate sensitive assets and funding requirements of rate sensitive liabilities. Our most recent simulation uses projected repricing of assets and liabilities at June 30, 2006 on the basis of contractual maturities, anticipated repayments and scheduled rate adjustments. Prepayment rate assumptions can have a significant impact on

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interest income simulation results. Because of the large percentage of loans and mortgage-backed securities we hold, rising or falling interest rates may have a significant impact on the actual prepayment speeds of our mortgage-related assets that may in turn affect our interest rate sensitivity position. When interest rates rise, prepayment speeds slow and the average expected lives of our assets would tend to lengthen more than the expected average lives of our liabilities and therefore would most likely result in an increase to our liability sensitive position.

	Percentage
	Increase (Decrease) in Estimated Net
	Annual Interest Income
	Over 24 Months
300 basis point increase in rates		(16.47	)
200 basis point increase in rates		(9.13	)
100 basis point increase in rates		(2.84	)
100 basis point decrease in rates		6.30

Wauwatosa Savings’ Asset/Liability policy limits projected changes in net average annual interest income to a maximum variance of (10%) to (50%) for various levels of interest rate changes measured over a 24-month period when compared to the flat rate scenario. In addition, projected changes in the capital ratio are limited to (.15%) to (1.00%) for various levels of changes in interest rates when compared to the flat rate scenario. These limits are re-evaluated on a periodic basis and may be modified, as appropriate. Because our balance sheet is liability sensitive, income is projected to decrease proportionately with increases in interest rates. At June 30, 2006, a 300 basis point immediate and instantaneous increase in interest rates had the

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effect of reducing forecasted net interest income by 16.47% while a 100 basis point decrease in rates had the affect of increasing net interest income by 6.30%. At June 30, 2006, a 300 basis point immediate and instantaneous increase in interest rates had the effect of reducing the forecasted return on assets by 0.24% while a 100 basis point decrease in rates had the effect of increasing the return on assets by 0.09%. At June 30, 2006, a 300 basis point immediate and instantaneous increase in interest rates had the effect of reducing the capital ratio by 0.24% while a 100 basis point decrease in rates had the effect of increasing the capital ratio by 0.08%. While we believe the assumptions used are reasonable, there can be no assurance that assumed prepayment rates will approximate actual future mortgage-backed security and loan repayment activity.

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Item 4.Controls and Procedures

Disclosure Controls and Procedures:Company management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act.

Internal Control Over Financial Reporting:There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.Legal Proceedings

We are not involved in any pending legal proceedings as a defendant other than routine legal proceedings occurring in the ordinary course of business. At June 30, 2006, we believe that any liability arising from the resolution of any pending legal proceedings will not be material to our financial condition or results of operations.

Item 6.Exhibits

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

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	WAUWATOSA HOLDINGS, INC.
	(Registrant)
Date: July 31, 2006
	/s/Donald J. Stephens
	Donald J. Stephens
	Chairman and Chief Executive Officer
Date: July 31, 2006
	/s/ Richard C. Larson
	Richard C. Larson
	Chief Financial Officer

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EXHIBIT INDEX

WAUWATOSA HOLDINGS, INC.

Form 10-Q for Quarter Ended June 30, 2006

Exhibit No.	Description	Filed Herewith
31.1	Sarbanes-Oxley Act Section 302 Certification signed by the Chairman and Chief Executive Officer of Wauwatosa Holdings, Inc.	X
31.2	Sarbanes-Oxley Act Section 302 Certification signed by the Chief Financial Officer of Wauwatosa Holdings, Inc.	X
32.1	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.	X
32.2	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

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