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þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Federally Chartered Corporation | 39-0691250 | |
(State or other jurisdiction of | (I.R.S. Employer Identification No.) | |
incorporation or organization) |
11200 W Plank Ct, Wauwatosa, WI | 53226 | |
(Address of principal executive offices) | (Zip Code) |
Common Stock, $0.01 Par Value | The NASDAQ Stock Market, LLC | |
(Title of class) | (Name of each exchange on which registered) |
Large accelerated filero | Accelerated filerþ | Non-accelerated filero | Smaller reporting companyo |
Part of Form 10-K Into Which | ||
Document | Portions of Document are Incorporated | |
Proxy Statement for Annual Meeting of Shareholders on May 13, 2008 | Part III |
FOR THE YEAR ENDED DECEMBER 31, 2007
ITEM | PAGE | |||||||
PART I | ||||||||
1. | 3-52 | |||||||
1A. | 52-53 | |||||||
1B. | 53 | |||||||
2. | 54 | |||||||
3. | 55 | |||||||
4. | 55 | |||||||
PART II | ||||||||
5. | 56-58 | |||||||
6. | 59-61 | |||||||
7. | 62-85 | |||||||
7A. | 86-87 | |||||||
8. | 88-126 | |||||||
9. | 127 | |||||||
9A. | 127-129 | |||||||
9B. | 130 | |||||||
PART III | ||||||||
10. | 131 | |||||||
11. | 132 | |||||||
12. | 132 | |||||||
13. | �� | 132 | ||||||
14. | 132 | |||||||
PART IV | ||||||||
15. | 133 | |||||||
134 | ||||||||
List of Subsidiaries | ||||||||
Consent | ||||||||
Certification | ||||||||
Certification | ||||||||
Certification | ||||||||
Certification |
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• | 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 area, that are worse than expected; | ||
• | significantly increased competition among depository and other financial institutions; | ||
• | adverse changes in the securities markets; | ||
• | adverse changes in real estate markets; | ||
• | changes in accounting policies and practices, as may be adopted by the bank regulatory agencies and the Financial Accounting Standards Board; and | ||
• | changes in consumer spending, borrowing and savings habits. |
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• | Remaining a Community-Oriented Institution.We were established in Wauwatosa, Wisconsin, a suburb of Milwaukee, in 1921, and have been operating continuously since that time. We have been, and continue to be, committed to meeting the financial needs of the communities we serve, and we are dedicated to providing quality personal service to our customers. Our focus will be to retain our mutual holding company form of organization consistent with our historical, community-oriented focus. | ||
• | Continuing Emphasis on Residential Real Estate Lending.We intend to continue our emphasis on the origination of residential real estate loans, especially over four-family loans. Current loans-to-one borrower limitations cap the amount of credit that we can extend to a single or affiliated group of investors/developers at 15% of Wauwatosa Savings’ capital. Following our stock offering, we have been able to serve over four-family borrowers with larger lending needs and to originate larger commercial real estate loans than we had in the past. We provide long-term, fixed-rate loans and indexed, adjustable mortgage loan products to our owner-occupied residential mortgage customers. | ||
• | Expansion within Our Market Area.Wauwatosa Savings’ growth in recent years has been achieved through the origination of real estate mortgages funded primarily by fixed-term deposits. We currently operate eight banking offices. In 2007, we opened a new full service branch in the city of West Allis, Wisconsin. We plan to continue to expand our branch network in the future by adding one to two branches each year within our existing market area defined as Milwaukee and Waukesha counties and each of the other five contiguous counties. | ||
• | Expansion of Product Offerings.Beginning in 2007, the Bank began offering variable rate, indexed residential mortgage loan and long-term fixed rate loans. Prior to this addition, Bank customers interested in these terms were referred to the Bank’s mortgage brokerage subsidiary, Waterston Mortgage Corporation. We also broadened our residential product offering by buying high balance, high quality, low loan-to-value ratio jumbo loans secured by real estate outside our primary market area and brokered by Waterstone Mortgage Corporation. | ||
• | Improving Asset Quality.By all measures, our asset quality has deteriorated over the past two years. Current problem loans were generally originated in 2004 and 2005 with and almost all were originated prior to 2006. We identified the weaknesses in our underwriting standards and procedures in the fourth quarter of 2005. In 2006, we |
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rewrote our underwriting policies, strengthened our underwriting standards and implemented an officers’ loan committee for review and approval of all loans in excess of $500,000. We hired senior loan officers experienced in systematically identifying, objectively evaluating and documenting good credit risks. In 2007, we added an independent loan underwriting function for all residential loans and a loan review function to ensure that newly implemented controls and safeguards are uniformly implemented and applied. We also expanded our collections staff and upgraded the tools used to reduce the number of pass-due loans that become chronically delinquent. |
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At December 31, | At June 30, | |||||||||||||||||||||||||||||||||||||||||||||||
2007 | 2006 | 2005 | 2005 | 2004 | 2003 | |||||||||||||||||||||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage loans: | ||||||||||||||||||||||||||||||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||||||||||||||||||||||||||||||
One- to four-family | $ | 672,362 | 45.64 | % | 638,089 | 44.17 | % | $ | 649,996 | 46.66 | % | $ | 628,445 | 48.36 | % | $ | 576,348 | 50.89 | % | $ | 530,466 | 53.58 | % | |||||||||||||||||||||||||
Over four-family | 477,766 | 32.45 | % | 492,693 | 34.10 | % | 456,686 | 32.78 | % | 407,601 | 31.36 | % | 342,535 | 30.25 | % | 287,498 | 29.03 | % | ||||||||||||||||||||||||||||||
Construction and land | 156,289 | 10.61 | % | 168,605 | 11.67 | % | 157,861 | 11.33 | % | 143,686 | 11.05 | % | 107,522 | 9.49 | % | 87,969 | 8.88 | % | ||||||||||||||||||||||||||||||
Commercial | 51,983 | 3.53 | % | 51,062 | 3.53 | % | 35,196 | 2.53 | % | 36,586 | 2.81 | % | 46,282 | 4.09 | % | 40,221 | 4.06 | % | ||||||||||||||||||||||||||||||
Home equity | 85,954 | 5.84 | % | 91,536 | 6.34 | % | 93,230 | 6.69 | % | 83,345 | 6.41 | % | 59,667 | 5.27 | % | 43,899 | 4.43 | % | ||||||||||||||||||||||||||||||
Commercial business | 28,222 | 1.92 | % | 2,657 | 0.18 | % | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Consumer | 286 | 0.01 | % | 141 | 0.01 | % | 127 | 0.01 | % | 149 | 0.01 | % | 154 | 0.01 | % | 178 | 0.02 | % | ||||||||||||||||||||||||||||||
Total loans | 1,472,862 | 100.00 | % | 1,444,783 | 100.00 | % | 1,393,096 | 100.00 | % | 1,299,812 | 100.00 | % | 1,132,508 | 100.00 | % | 990,231 | 100.00 | % | ||||||||||||||||||||||||||||||
Undisbursed loan proceeds | (67,549 | ) | (67,390 | ) | (82,712 | ) | (77,484 | ) | (61,904 | ) | (44,110 | ) | ||||||||||||||||||||||||||||||||||||
Net deferred loan fees and premiums | (3,265 | ) | (4,486 | ) | (4,366 | ) | (4,161 | ) | (3,631 | ) | (3,099 | ) | ||||||||||||||||||||||||||||||||||||
Allowance for loan | (12,839 | ) | (7,195 | ) | (5,250 | ) | (4,606 | ) | (3,378 | ) | (2,970 | ) | ||||||||||||||||||||||||||||||||||||
lossws Loans, net | ||||||||||||||||||||||||||||||||||||||||||||||||
$ | 1,389,209 | $ | 1,365,712 | $ | 1,300,768 | $ | 1,213,561 | $ | 1,063,594 | $ | 940,053 | |||||||||||||||||||||||||||||||||||||
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One- to four-family | Over four-family | Construction and land | Commercial Real Estate | |||||||||||||||||||||||||||||
Weighted | Weighted | Weighted | Weighted | |||||||||||||||||||||||||||||
Maturity Date | Amount | Average Rate | Amount | Average Rate | Amount | Average Rate | Amount | Average Rate | ||||||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||||||||||
Jan 1, 2008 - Dec 31, 2008 | 70,350 | 6.30 | % | 103,091 | 6.51 | % | 61,524 | 6.81 | % | 8,187 | 6.55 | % | ||||||||||||||||||||
Jan 1, 2009 - Dec 31, 2009 | 76,373 | 6.58 | % | 122,046 | 6.40 | % | 23,513 | 6.85 | % | 10,372 | 6.50 | % | ||||||||||||||||||||
Jan 1, 2010 - Dec 31, 2010 | 40,574 | 6.60 | % | 77,458 | 6.37 | % | 14,127 | 6.45 | % | 8,648 | 6.63 | % | ||||||||||||||||||||
Jan 1, 2011 - Dec 31, 2011 | 8,405 | 7.00 | % | 19,491 | 6.35 | % | — | — | 3,281 | 6.14 | % | |||||||||||||||||||||
Jan 1, 2012 - Dec 31, 2012 | 3,363 | 6.98 | % | 16,102 | 6.48 | % | 434 | 7.25 | % | 2,675 | 5.83 | % | ||||||||||||||||||||
Jan 1, 2013 and thereafter | 473,297 | 6.07 | % | 139,578 | 6.42 | % | 56,691 | 6.29 | % | 18,820 | 6.72 | % | ||||||||||||||||||||
Total | $ | 672,362 | 6.21 | % | $ | 477,766 | 6.42 | % | $ | 156,289 | 6.59 | % | $ | 51,983 | 6.55 | % | ||||||||||||||||
Home Equity | Commercial Business | Consumer | Total | |||||||||||||||||||||||||||||
Weighted | Weighted | Weighted | Weighted | |||||||||||||||||||||||||||||
Maturity Date | Amount | Average Rate | Amount | Average Rate | Amount | Average Rate | Amount | Average Rate | ||||||||||||||||||||||||
Jan 1, 2008 - Dec 31, 2008 | 34,113 | 7.60 | % | 14,751 | 7.48 | % | — | — | 292,016 | 6.70 | % | |||||||||||||||||||||
Jan 1, 2009 - Dec 31, 2009 | 1,288 | 7.53 | % | 2,052 | 7.07 | % | — | — | 235,644 | 6.52 | % | |||||||||||||||||||||
Jan 1, 2010 - Dec 31, 2010 | 1,027 | 7.47 | % | 2,099 | 7.06 | % | 194 | 6.91 | % | 144,127 | 6.48 | % | ||||||||||||||||||||
Jan 1, 2011 - Dec 31, 2011 | 7,777 | 7.64 | % | 134 | 7.28 | % | 26 | 9.56 | % | 39,114 | 6.73 | % | ||||||||||||||||||||
Jan 1, 2012 - Dec 31, 2012 | 15,269 | 7.16 | % | 7,277 | 7.18 | % | 66 | 6.51 | % | 45,186 | 6.83 | % | ||||||||||||||||||||
Jan 1, 2013 and thereafter | 26,480 | 7.49 | % | 1,909 | 6.75 | % | — | — | 716,775 | 6.23 | % | |||||||||||||||||||||
Total | $ | 85,954 | 7.49 | % | $ | 28,222 | 7.29 | % | $ | 286 | 7.06 | % | $ | 1,472,862 | 6.42 | % | ||||||||||||||||
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Due After December 31, 2008 | ||||||||||||
Fixed | Variable | Total | ||||||||||
(In Thousands) | ||||||||||||
Real estate loans: | ||||||||||||
Mortgage loans | ||||||||||||
One- to four-family | $ | 8,993 | $ | 593,019 | $ | 602,012 | ||||||
Over four-family | 841 | 373,834 | 374,675 | |||||||||
Construction and land | 82,081 | 12,684 | 94,765 | |||||||||
Commercial | 2,227 | 41,569 | 43,796 | |||||||||
Home equity | 2,725 | 49,116 | 51,841 | |||||||||
Commerical | 9,250 | 4,221 | 13,471 | |||||||||
Consumer | 286 | — | 286 | |||||||||
Total loans | $ | 106,403 | $ | 1,074,443 | $ | 1,180,846 | ||||||
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Six Months | Year Ended | |||||||||||||||
Year Ended December 31, | Ended December | June 30, | ||||||||||||||
2007 | 2006 | 31, 2005 | 2005 | |||||||||||||
(In Thousands) | ||||||||||||||||
Total loans at beginning of year | $ | 1,450,170 | $ | 1,393,096 | $ | 1,299,812 | $ | 1,132,507 | ||||||||
Mortgage loans originated for investment: | ||||||||||||||||
Residential | ||||||||||||||||
One- to four-family | 65,851 | 111,316 | 110,288 | 211,209 | ||||||||||||
Over four-family | 64,857 | 99,420 | 95,734 | 148,964 | ||||||||||||
Construction and land | 33,705 | 74,104 | 54,615 | 99,996 | ||||||||||||
Commercial | 13,494 | 19,867 | 2,658 | 11,733 | ||||||||||||
Home equity | 15,886 | 11,916 | 22,840 | 25,229 | ||||||||||||
Total mortgage loans originated for investment | 193,793 | 316,623 | 286,135 | 497,131 | ||||||||||||
Consumer loans originated for investment | 157 | — | — | — | ||||||||||||
Commercial loans originated for investment | 25,229 | 2,867 | — | — | ||||||||||||
Total loans originated for investment | 219,179 | 319,490 | 286,135 | 497,131 | ||||||||||||
Other loans — net activity | — | 67 | (43 | ) | 16 | |||||||||||
Principal repayments | (191,100 | ) | (267,870 | ) | (192,808 | ) | (329,842 | ) | ||||||||
Net activity in loans held for investment | 28,079 | 51,687 | 93,284 | 167,305 | ||||||||||||
Loans originated for sale | 242,120 | 84,603 | — | — | ||||||||||||
Loans sold | (224,399 | ) | (79,216 | ) | — | — | ||||||||||
Net activity in loans held for sale | 17,721 | 5,387 | — | — | ||||||||||||
Total loans receivable and held for sale at end of period | $ | 1,495,970 | $ | 1,450,170 | $ | 1,393,096 | $ | 1,299,812 | ||||||||
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o | Any secured one- to four-family mortgage loan up to $500,000 for a borrower with total outstanding loans receivable of less than $2,000,000 that is independently underwritten can be approved and closed by any loan officer. | ||
o | Any loan up to $500,000 for a borrower with total outstanding loans receivable of less than $2,000,000 can be approved and closed by a commercial loan officer. | ||
o | Any secured mortgage loan ranging from $500,001 to $2,999,999 or any new loan to a borrower with outstanding loans receivable exceeding $2,000,000 must be approved by the Officer Loan Committee. If approved, any loan officer may close the loan. | ||
o | Any loan for $3,000,000 or greater must be approved by the Officer Loan Committee and Board of Directors prior to closing. If approved, any loan officer may close the loan. |
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At December 31, | At June 30, | |||||||||||||||||||||||
2007 | 2006 | 2005 | 2005 | 2004 | 2003 | |||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||
Non-accrual loans: | ||||||||||||||||||||||||
Residential | ||||||||||||||||||||||||
One- to four-family | $ | 32,587 | $ | 12,044 | $ | 8,766 | $ | 5,232 | $ | 4,028 | $ | 6,151 | ||||||||||||
Over four-family | 38,218 | 8,384 | 6,703 | 5,877 | 4,776 | 5,268 | ||||||||||||||||||
Construction | 3,855 | 7,664 | 1,360 | 830 | 2,072 | 1,641 | ||||||||||||||||||
Commercial real estate | 4,358 | 357 | 962 | 1,137 | 1,139 | 2,528 | ||||||||||||||||||
Home equity | 1,332 | 439 | 274 | — | — | — | ||||||||||||||||||
Commercial | — | — | — | — | — | — | ||||||||||||||||||
Consumer | — | — | — | — | — | — | ||||||||||||||||||
Total non-performing loans | 80,350 | 28,888 | 18,065 | 13,076 | 12,015 | 15,588 | ||||||||||||||||||
Real estate owned | 8,543 | 520 | 215 | 475 | 770 | — | ||||||||||||||||||
Total non-performing assets | $ | 88,893 | $ | 29,408 | $ | 18,280 | $ | 13,551 | $ | 12,785 | $ | 15,588 | ||||||||||||
Total non-performing loans to total loans, net | 5.73 | % | 2.10 | % | 1.39 | % | 1.07 | % | 1.13 | % | 1.65 | % | ||||||||||||
Total non-performing loans to total assets | 4.70 | % | 1.75 | % | 1.20 | % | 0.94 | % | 0.97 | % | 1.41 | % | ||||||||||||
Total non-performing assets to total assets | 5.20 | % | 1.78 | % | 1.21 | % | 0.98 | % | 1.03 | % | 1.41 | % |
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At or for the | ||||||||||||||||||||||||
Six Month | ||||||||||||||||||||||||
At or for the Year | Period Ended | At or for the Year Ended | ||||||||||||||||||||||
Ended December 31, | December 31, | June 30, | ||||||||||||||||||||||
2007 | 2006 | 2005 | 2005 | 2004 | 2003 | |||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||
Balance at beginning of period | $ | 7,195 | $ | 5,250 | $ | 4,606 | $ | 3,378 | $ | 2,970 | $ | 2,479 | ||||||||||||
Provision for loan losses | 11,697 | 2,201 | 1,035 | 1,238 | 860 | 520 | ||||||||||||||||||
Charge-offs: | ||||||||||||||||||||||||
Mortgage loans | ||||||||||||||||||||||||
One- to four-family (1) | 1,397 | 524 | 97 | 1 | 320 | 26 | ||||||||||||||||||
Over four-family | 634 | — | 169 | — | 125 | — | ||||||||||||||||||
Construction and land | 3,982 | — | — | — | — | — | ||||||||||||||||||
Commercial real estate | 27 | 5 | 102 | 2 | — | — | ||||||||||||||||||
Home equity | 120 | — | — | — | — | — | ||||||||||||||||||
Consumer | 3 | 7 | 23 | 8 | 8 | 3 | ||||||||||||||||||
Total charge-offs | 6,163 | 536 | 391 | 11 | 453 | 29 | ||||||||||||||||||
Recoveries: | ||||||||||||||||||||||||
Mortgage loans | ||||||||||||||||||||||||
One- to four-family | 68 | 144 | — | — | — | — | ||||||||||||||||||
Over four-family | — | 30 | — | — | — | — | ||||||||||||||||||
Commercial real estate | 40 | 100 | — | — | — | — | ||||||||||||||||||
Home equity | 1 | — | — | — | — | — | ||||||||||||||||||
Consumer (1) | 1 | 6 | — | 1 | 1 | — | ||||||||||||||||||
Total recoveries | 110 | 280 | — | 1 | 1 | — | ||||||||||||||||||
Net charge-offs | 6,053 | 256 | 391 | 10 | 452 | 29 | ||||||||||||||||||
Allowance at end of year | $ | 12,839 | $ | 7,195 | $ | 5,250 | $ | 4,606 | $ | 3,378 | $ | 2,970 | ||||||||||||
Ratios: | ||||||||||||||||||||||||
Allowance for loan losses to non-performing loans at end of period | 15.98 | % | 24.91 | % | 29.06 | % | 35.22 | % | 28.11 | % | 19.05 | % | ||||||||||||
Allowance for loan losses to net loans outstanding at end of period | 0.92 | % | 0.52 | % | 0.40 | % | 0.38 | % | 0.32 | % | 0.32 | % | ||||||||||||
Net charge-offs to average loans outstanding (annualized) | 0.44 | % | 0.02 | % | 0.06 | % | 0.00 | % | 0.05 | % | 0.00 | % |
(1) | Prior to the year ended December 31, 2007, one- to four-family loans include home equity loans and home equity lines of credit, as a separate breakdown is not available for these years. |
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At December 31, | |||||||||||||||||||||||||||||||||||||
2007 | 2006 | 2005 | |||||||||||||||||||||||||||||||||||
% of Allowance | % of Allowance | % of Allowance in | |||||||||||||||||||||||||||||||||||
% of Loans in | in Category to | % of Loans in | in Category to | % of Loans in | in Category to | ||||||||||||||||||||||||||||||||
Allowance for | Category to | Total | Allowance for | Category to | Total | Allowance for | Category to | Total | |||||||||||||||||||||||||||||
Loan Losses | Total Loans | Allowance | Loan Losses | Total Loans | Allowance | Loan Losses | Total Loans | Allowance | |||||||||||||||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||||||||||||||||||
Real Estate: | |||||||||||||||||||||||||||||||||||||
Residential(1) | |||||||||||||||||||||||||||||||||||||
One- to four-family | 5,424 | 45.64 | % | 42.25 | % | 4,116 | 44.17 | % | 57.21 | % | 2,624 | 46.66 | % | 49.98 | % | ||||||||||||||||||||||
Over four-family | 4,369 | 32.45 | % | 34.03 | % | 2,034 | 34.10 | % | 28.27 | % | 1,716 | 32.78 | % | 32.69 | % | ||||||||||||||||||||||
Construction and land | 2,087 | 10.61 | % | 16.26 | % | 167 | 11.67 | % | 2.32 | % | 234 | 11.33 | % | 4.46 | % | ||||||||||||||||||||||
Commercial Real Estate | 280 | 3.53 | % | 2.18 | % | 764 | 3.53 | % | 10.62 | % | 630 | 2.53 | % | 12.00 | % | ||||||||||||||||||||||
Home equity | 536 | 5.84 | % | 4.17 | % | — | 6.34 | % | — | — | 6.69 | % | — | ||||||||||||||||||||||||
Commerical | 99 | 1.92 | % | 0.77 | % | — | 0.18 | % | — | — | — | — | |||||||||||||||||||||||||
Consumer | 35 | 0.01 | % | 0.27 | % | 30 | 0.01 | % | 0.42 | % | 27 | 0.01 | % | 0.51 | % | ||||||||||||||||||||||
Unallocated | 9 | 0.00 | % | 0.07 | % | 84 | 0.00 | % | 1.16 | % | 19 | — | 0.36 | % | |||||||||||||||||||||||
Total allowance for loan losses | $ | 12,839 | 100.00 | % | 100.00 | % | $ | 7,195 | 100.00 | % | 100.00 | % | $ | 5,250 | 100.00 | % | 100.00 | % | |||||||||||||||||||
(1) | Prior to the year ended December 31, 2007, one- to four-family loans include home equity loans and home equity lines of credit, as a separate breakdown is not available for those years. |
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At June 30, | |||||||||||||||||||||||||||||||||||||
2005 | 2004 | 2003 | |||||||||||||||||||||||||||||||||||
% of Loans in | % of Allowance | % of Loans in | % of Allowance | % of Loans in | % of Allowance in | ||||||||||||||||||||||||||||||||
Allowance for | Category to | in Category to | Allowance for | Category to | in Category to | Allowance for | Category to | in Category to | |||||||||||||||||||||||||||||
Loan Losses | Total Loans | Total Allowance | Loan Losses | Total Loans | Total Allowance | Loan Losses | Total Loans | Total Allowance | |||||||||||||||||||||||||||||
(Dollars In Thousands) | |||||||||||||||||||||||||||||||||||||
Real Estate: | |||||||||||||||||||||||||||||||||||||
Residential(1) | |||||||||||||||||||||||||||||||||||||
One- to four-family | 1603 | 48.36 | % | 34.80 | % | 1118 | 50.89 | % | 33.10 | % | 844 | 53.58 | % | 28.42 | % | ||||||||||||||||||||||
Over four-family | 1,646 | 31.36 | % | 35.74 | % | 1,831 | 30.25 | % | 54.20 | % | 1,852 | 29.03 | % | 62.36 | % | ||||||||||||||||||||||
Construction and land | 712 | 11.05 | % | 15.46 | % | 100 | 9.49 | % | 2.96 | % | — | 8.88 | % | — | |||||||||||||||||||||||
Commercial Real Estate | 450 | 2.81 | % | 9.77 | % | 309 | 4.09 | % | 9.15 | % | 259 | 4.06 | % | 8.72 | % | ||||||||||||||||||||||
Home equity | 10 | 6.41 | % | 0.22 | % | — | 5.27 | % | — | — | 4.43 | % | — | ||||||||||||||||||||||||
Commerical | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Consumer | 25 | 0.01 | % | 0.54 | % | 20 | 0.01 | % | 0.59 | % | 15 | 0.02 | % | 0.50 | % | ||||||||||||||||||||||
Unallocated | 160 | — | 3.47 | % | — | — | — | — | — | — | |||||||||||||||||||||||||||
Total allowance for loan losses | $ | 4,606 | 100.00 | % | 100.00 | % | $ | 3,378 | 100.00 | % | 100.00 | % | $ | 2,970 | 100.00 | % | 100.00 | % | |||||||||||||||||||
(1) | Prior to the year ended December 31, 2007, one –to four-family loans include home equity loans and home equity lines of credit, as a separate breakdown is not available for those years. |
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At December 31, | At June 30, | |||||||||||||||||||||||||||||||
2007 | 2006 | 2005 | 2005 | |||||||||||||||||||||||||||||
Amortized | Amortized | Amortized | Amortized | |||||||||||||||||||||||||||||
Cost | Fair Value | Cost | Fair Value | Cost | Fair Value | Cost | Fair Value | |||||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||||||
Securities Available for Sale: | ||||||||||||||||||||||||||||||||
Government sponsored entity bonds | $ | 13,996 | $ | 14,182 | $ | 13,450 | $ | 13,257 | $ | 26,577 | $ | 25,950 | $ | 26,580 | $ | 26,387 | ||||||||||||||||
Mortgage-related securities | 130,547 | 130,610 | 100,693 | 98,873 | 93,515 | 91,578 | 54,438 | 53,445 | ||||||||||||||||||||||||
Municipal obligations | 27,277 | 27,095 | 4,278 | 4,421 | 4,278 | 4,427 | 3,923 | 4,159 | ||||||||||||||||||||||||
Other securities | 250 | 250 | 794 | 779 | — | — | — | — | ||||||||||||||||||||||||
Total securities available for sale | $ | 172,070 | $ | 172,137 | $ | 119,215 | $ | 117,330 | $ | 124,370 | $ | 121,955 | $ | 84,941 | $ | 83,991 | ||||||||||||||||
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More than One Year | More than Five Years | |||||||||||||||||||||||||||||||||||||||
One Year or Less | through Five Years | through Ten Years | More than Ten Years | Total Securities | ||||||||||||||||||||||||||||||||||||
Weighted | Weighted | Weighted | Weighted | Weighted | ||||||||||||||||||||||||||||||||||||
Carrying | Average | Carrying | Average | Carrying | Average | Carrying | Average | Carrying | Average | |||||||||||||||||||||||||||||||
Value | Yield | Value | Yield | Value | Yield | Value | Yield | Value | Yield | |||||||||||||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||||||||||||||||||
Securities available for sale: | ||||||||||||||||||||||||||||||||||||||||
Government sponsored entity bonds | $ | 2,991 | 4.04 | % | $ | 11,191 | 4.56 | % | — | — | — | — | $ | 14,182 | 4.45 | % | ||||||||||||||||||||||||
Mortgage-related securities | 1,585 | 3.40 | % | 51,947 | 5.12 | % | 75,948 | 5.73 | % | 1,130 | 4.93 | % | 130,610 | 5.46 | % | |||||||||||||||||||||||||
Municipal obligations | — | — | — | — | 1,664 | 3.78 | % | 25,431 | 4.28 | % | 27,095 | 4.25 | % | |||||||||||||||||||||||||||
Other securities | — | — | 250 | 4.05 | % | — | — | — | — | 250 | 4.05 | % | ||||||||||||||||||||||||||||
Total securities available for sale | $ | 4,576 | 3.80 | % | $ | 63,388 | 5.04 | % | $ | 77,612 | 5.69 | % | $ | 26,561 | 4.31 | % | $ | 172,137 | 5.18 | % | ||||||||||||||||||||
Securities held to maturity: | ||||||||||||||||||||||||||||||||||||||||
Corporate notes | — | — | — | — | — | — | $ | 7,646 | 7.51 | % | $ | 7,646 | 7.51 | % | ||||||||||||||||||||||||||
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At December 31, | At June 30, | |||||||||||||||||||||||||||||||||||||||||||||||
2007 | 2006 | 2005 | 2005 | |||||||||||||||||||||||||||||||||||||||||||||
Weighted | Weighted | Weighted | Weighted | |||||||||||||||||||||||||||||||||||||||||||||
Average | Average | Average | Average | |||||||||||||||||||||||||||||||||||||||||||||
Balance | Percent | Rate | Balance | Percent | Rate | Balance | Percent | Rate | Balance | Percent | Rate | |||||||||||||||||||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||
Deposit type: | ||||||||||||||||||||||||||||||||||||||||||||||||
Demand deposits | $ | 18,950 | 1.91 | % | 0.00 | % | $ | 15,087 | 1.46 | % | 0.00 | % | $ | 17,667 | 1.69 | % | 0.00 | % | $ | 18,816 | 1.67 | % | 0.00 | % | ||||||||||||||||||||||||
NOW accounts | 34,260 | 3.44 | % | 0.82 | % | 43,320 | 4.18 | % | 0.95 | % | 64,623 | 6.18 | % | 1.41 | % | 82,045 | 7.27 | % | 1.74 | % | ||||||||||||||||||||||||||||
Regular savings | 19,162 | 1.93 | % | 0.87 | % | 18,177 | 1.75 | % | 0.40 | % | 20,962 | 2.00 | % | 0.50 | % | 23,614 | 2.09 | % | 0.50 | % | ||||||||||||||||||||||||||||
Money market and savings deposits | 95,225 | 9.57 | % | 3.66 | % | 76,295 | 7.36 | % | 4.70 | % | 12,603 | 1.21 | % | 3.03 | % | 3,503 | 0.31 | % | 1.06 | % | ||||||||||||||||||||||||||||
Total transaction accounts | 167,597 | 16.85 | % | 2.35 | % | 152,879 | 14.75 | % | 2.67 | % | 115,855 | 11.08 | % | 1.21 | % | 127,978 | 11.34 | % | 1.24 | % | ||||||||||||||||||||||||||||
Certificates of deposit | 826,938 | 83.15 | % | 4.75 | % | 883,339 | 85.25 | % | 4.63 | % | 929,738 | 88.92 | % | 3.80 | % | 1,000,813 | 88.66 | % | 3.52 | % | ||||||||||||||||||||||||||||
Total deposits | $ | 994,535 | 100.00 | % | 4.35 | % | $ | 1,036,218 | 100.00 | % | 4.34 | % | $ | 1,045,593 | 100.00 | % | 3.51 | % | $ | 1,128,791 | 100.00 | % | 3.26 | % | ||||||||||||||||||||||||
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(In Thousands) | ||||
Due | ||||
Three months or less | $ | 53,022 | ||
Over three months through six months | 28,547 | |||
Over six months through 12 months | 57,712 | |||
Over 12 months | 44,091 | |||
Total | $ | 183,372 | ||
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At or For the Six | At or For | |||||||||||||||
At or For the Year Ended | Months Ended | the Year | ||||||||||||||
December 31, | December 31, | Ended June 30, | ||||||||||||||
2007 | 2006 | 2005 | 2005 | |||||||||||||
(Dollars in Thousands) | ||||||||||||||||
Borrowings: | ||||||||||||||||
Balance outstanding at end of period | $ | 475,484 | 334,003 | 201,212 | 93,162 | |||||||||||
Weighted average interest rate at the end of period | 4.16 | % | 4.31 | % | 3.90 | % | 3.07 | % | ||||||||
Maximum amount of advances outstanding at any month end during the period | 475,484 | 349,003 | 201,212 | 106,162 | ||||||||||||
Average balance outstanding during the period | 403,577 | 277,505 | 142,560 | 80,364 | ||||||||||||
Weighted average interest rate during the period | 4.28 | % | 4.25 | % | 3.50 | % | 3.71 | % |
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• | for loans secured by raw land, the supervisory loan-to-value limit is 65% of the value of the collateral; | ||
• | for land development loans (i.e., loans for the purpose of improving unimproved property prior to the erection of structures), the supervisory limit is 75%; | ||
• | for loans for the construction of commercial, over four-family or other non-residential property, the supervisory limit is 80%; | ||
• | for loans for the construction of one- to four-family properties, the supervisory limit is 85%; and | ||
• | for loans secured by other improved property (e.g., farmland, completed commercial property and other income-producing property, including non-owner occupied, one- to four-family property), the limit is 85%. |
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• | keeping the insurance coverage limit for individual accounts and municipal accounts at $100,000 but providing an inflation adjustment process which permits an adjustment effective January 1, 2011 and every five years thereafter based on the Personal Consumption Expenditures Index (with 2005 as the base year of comparison), unless the Federal Deposit Insurance Corporation concludes such adjustment would be inappropriate for reasons relating to risks to the Deposit Insurance Fund; | ||
• | increasing insurance coverage limits for self-directed retirement accounts to $250,000, subject to the same inflation adjustment process described above; | ||
• | prohibiting undercapitalized members from accepting employee benefit plan deposits; | ||
• | providing for the payment of credits based on a member’s share of the assessment base as of December 31, 1996 and equal to an aggregate of $4.7 billion for all members, which credits can offset Federal Deposit Insurance Corporation assessments subject to certain limits; | ||
• | providing for the declaration of dividends to members (based on a member’s share of the assessment base on December 31, 1996, and premiums paid after that date) equal to 50% of the amount in the Deposit Insurance Fund in excess of a reserve ratio of 1.35% and 100% of such amount in excess of a reserve ratio of 1.50%, subject to the Federal Deposit Insurance Corporation’s right to suspend or limit dividends based on risks to the Deposit Insurance Fund; and | ||
• | eliminating the mandatory assessment (up to 23 basis points) if the Deposit Insurance Fund falls below 1.25% of insured deposits and retaining assessments based on risk, needs of the Deposit Insurance Fund, and the effect on the members’ capital and earnings. The Federal Deposit Insurance Corporation is authorized to set a reserve ratio of between 1.15% and 1.5% and will have five years to restore the Deposit Insurance Fund if the ratio falls below 1.15%. On November 2, 2006, the Federal Deposit Insurance Corporation adopted final regulations that set the designated reserve ratio for the Deposit Insurance Fund at 1.25% beginning January 1, 2007. |
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Year | Date of | |||||||||||||||
Owned Or | Acquired | Lease | December 31, 2007 | |||||||||||||
Location | Leased | Or Leased | Expiration | Net Book Value | ||||||||||||
(In Thousands) | ||||||||||||||||
Branches: | ||||||||||||||||
7500 West State Street | ||||||||||||||||
Wauwatosa, Wisconsin | Own | 1971 | N/A | $ | 1,276 | |||||||||||
6560 South 27th Street | ||||||||||||||||
Oak Creek, Wisconsin | Own | 1986 | N/A | $ | 1,291 | |||||||||||
21505 East Moreland Blvd | ||||||||||||||||
Waukesha, Wisconsin | Capital Lease | 2005 | 2009 | $ | 5,295 | |||||||||||
1233 Corporate Center Drive | ||||||||||||||||
Oconomowoc, Wisconsin | Own | 2003 | N/A | $ | 2,756 | |||||||||||
1230 George Towne Drive | ||||||||||||||||
Pewaukee, Wisconsin | Own | 2004 | N/A | $ | 3,860 | |||||||||||
6555 S 108th St | ||||||||||||||||
Franklin, Wisconsin | Own | 2006 | N/A | $ | 2,625 | |||||||||||
W188N9820 Appleton Ave | ||||||||||||||||
Germantown, Wisconsin | Own | 2006 | N/A | $ | 2,617 | |||||||||||
10101 W Greenfield Ave | ||||||||||||||||
West Allis, Wisconsin | Own | 2006 | N/A | $ | 4,479 | |||||||||||
7136 W State Street(1) | ||||||||||||||||
Wauwatosa, Wiscsonsin | Own | 2000 | N/A | $ | 562 | |||||||||||
Corporate Center: | ||||||||||||||||
11200 West Plank Court | ||||||||||||||||
Wauwatosa, Wisconsin | Own | 2004 | N/A | $ | 4,854 |
(1) | Drive-up banking facility only. |
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2007 | High | Low | ||||||
1st Quarter | $ | 17.99 | 17.07 | |||||
2nd Quarter | 17.99 | 16.11 | ||||||
3rd Quarter | 16.65 | 14.41 | ||||||
4th Quarter | 17.02 | 12.78 |
2006 | High | Low | ||||||
1st Quarter | $ | 13.85 | $ | 11.44 | ||||
2nd Quarter | 17.06 | 13.08 | ||||||
3rd Quarter | 18.90 | 15.70 | ||||||
4th Quarter | 18.23 | 17.17 |
Total number of | Maximum number | |||||||||||||||
shares purchased | of shares that may | |||||||||||||||
Total number | Average | as part of | yet be purchased | |||||||||||||
of shares | price paid | publicly announced | under the | |||||||||||||
Period | purchased | per share | plans or programs | plans or programs (1) | ||||||||||||
October 1 - October 31, 2007 | — | — | 352,565 | |||||||||||||
November 1 - November 30, 2007 | 110,635 | 14.38 | 110,635 | 241,930 | ||||||||||||
December 1 - December 31, 2007 | 57,370 | 13.86 | 57,370 | 184,560 | ||||||||||||
168,005 | 14.20 | |||||||||||||||
(1) | At period end. |
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Stock/Index | 10/4/2005 | 12/31/05 | 3/31/06 | 6/30/06 | 9/30/06 | 12/31/06 | 3/31/07 | 6/30/07 | 9/30/07 | 12/31/07 | ||||||||||||||||||||||||||||||||||||||||||
Wauwatosa Holdings Common Stock (WAUW) | 100.00 | 114.40 | 136.00 | 170.60 | 176.50 | 178.20 | 174.80 | 165.40 | 162.50 | 128.20 | ||||||||||||||||||||||||||||||||||||||||||
NASDAQ Stock Market (^IXIC) | 100.00 | 103.08 | 109.37 | 101.53 | 105.57 | 112.90 | 113.19 | 121.68 | 126.28 | 123.98 | ||||||||||||||||||||||||||||||||||||||||||
America’s Community Bankers NASDAQ Index | 100.00 | 102.75 | 109.05 | 108.42 | 104.59 | 108.63 | 102.78 | 97.49 | 93.98 | 81.70 | ||||||||||||||||||||||||||||||||||||||||||
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At December 31, | At June 30, | |||||||||||||||||||||||
2007 | 2006 | 2005 | 2005 | 2004 | 2003 | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
Selected Financial Condition Data: | ||||||||||||||||||||||||
Total assets | $ | 1,710,202 | $ | 1,648,470 | $ | 1,511,209 | $ | 1,386,132 | $ | 1,240,084 | $ | 1,104,893 | ||||||||||||
Available for sale securities | 172,137 | 117,330 | 121,955 | 83,991 | 99,549 | 90,453 | ||||||||||||||||||
Federal Home Loan Bank stock | 19,289 | 17,213 | 14,406 | 14,097 | 13,322 | 8,658 | ||||||||||||||||||
Loans receivable, net | 1,389,209 | 1,365,712 | 1,306,716 | 1,213,561 | 1,063,594 | 940,053 | ||||||||||||||||||
Cash and cash equivalents | 17,884 | 73,807 | 16,498 | 20,467 | 19,392 | 28,767 | ||||||||||||||||||
Deposits | 994,535 | 1,036,218 | 1,045,593 | 1,128,791 | 1,035,588 | 909,491 | ||||||||||||||||||
Borrowings | 475,484 | 334,003 | 201,212 | 93,162 | 60,000 | 60,000 | ||||||||||||||||||
Total shareholders’ equity | 201,819 | 241,272 | 231,696 | 133,416 | 122,799 | 114,596 | ||||||||||||||||||
Allowance for loan losses | 12,839 | 7,195 | 5,250 | 4,606 | 3,378 | 2,970 | ||||||||||||||||||
Non-performing loans | 80,350 | 28,888 | 18,065 | 13,076 | 12,015 | 15,588 |
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Six Months | ||||||||||||||||||||||||
Ended | ||||||||||||||||||||||||
Years Ended December 31, | December 31, | Years Ended June 30, | ||||||||||||||||||||||
2007 | 2006 | 2005 | 2005 | 2004 | 2003 | |||||||||||||||||||
(In Thousands, except per share amounts) | ||||||||||||||||||||||||
Selected Operating Data: | ||||||||||||||||||||||||
Interest income | $ | 96,975 | $ | 92,228 | $ | 42,036 | $ | 74,207 | $ | 66,088 | $ | 66,451 | ||||||||||||
Interest expense | 62,134 | 53,779 | 20,758 | 36,068 | 32,432 | 34,459 | ||||||||||||||||||
Net interest income | 34,841 | 38,449 | 21,278 | 38,139 | 33,656 | 31,933 | ||||||||||||||||||
Provision for loan losses | 11,697 | 2,201 | 1,035 | 1,238 | 860 | 520 | ||||||||||||||||||
Net interest income after provision for loan losses | 23,144 | 36,248 | 20,243 | 36,901 | 32,796 | 31,472 | ||||||||||||||||||
Noninterest income | 6,842 | 5,156 | 2,244 | 3,257 | 3,035 | 2,993 | ||||||||||||||||||
Noninterest expense | 28,682 | 28,652 | 18,303 | 23,522 | 20,384 | 17,618 | ||||||||||||||||||
Income before income taxes | 1,304 | 12,752 | 4,184 | 16,636 | 15,447 | 16,847 | ||||||||||||||||||
Provision for income taxes (benefit) | (254 | ) | 4,699 | 1,471 | 7,520 | 4,863 | 5,742 | |||||||||||||||||
Net income | $ | 1,558 | $ | 8,053 | $ | 2,713 | $ | 9,116 | $ | 10,584 | $ | 11,105 | ||||||||||||
Income (loss) per share — basic (1) | $ | 0.05 | $ | 0.24 | $ | (0.02 | ) | N/A | N/A | N/A | ||||||||||||||
Income (loss) per share — diluted (1) | $ | 0.05 | $ | 0.24 | $ | (0.02 | ) | N/A | N/A | N/A | ||||||||||||||
(1) | The 2005 loss per share is based upon net loss and weighted average shares outstanding from the date of reorganization (October 4, 2005) to December 31, 2005. |
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At or for the | ||||||||||||||||||||||||
Six Months | ||||||||||||||||||||||||
At or For the Years Ended | Ended | |||||||||||||||||||||||
December 31, | December 31, | At or For the Years Ended June 30, | ||||||||||||||||||||||
2007 | 2006 | 2005 | 2005 | 2004 | 2003 | |||||||||||||||||||
Selected Financial Ratios(4) and Other Data: | ||||||||||||||||||||||||
Performance Ratios: | ||||||||||||||||||||||||
Return on average assets | 0.09 | % | 0.50 | % | 0.36 | % | 0.70 | % | 0.90 | % | 1.08 | % | ||||||||||||
Return on average equity | 0.72 | 3.41 | 3.22 | 7.12 | 8.88 | 10.19 | ||||||||||||||||||
Interest rate spread(1) | 1.74 | 2.00 | 2.43 | 2.74 | 2.70 | 2.84 | ||||||||||||||||||
Net interest margin(2) | 2.19 | 2.52 | 2.96 | 3.04 | 2.98 | 3.19 | ||||||||||||||||||
Noninterest expense to average assets | 1.73 | 1.80 | 2.44 | 1.81 | 1.74 | 1.71 | ||||||||||||||||||
Efficiency ratio(3) | 68.85 | 66.19 | 77.84 | 56.88 | 55.55 | 50.36 | ||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 111.68 | 114.59 | 118.38 | 110.29 | 109.71 | 110.09 | ||||||||||||||||||
Capital Ratios: | ||||||||||||||||||||||||
Equity to total assets at end of period | 11.80 | % | 14.64 | % | 15.33 | % | 9.63 | % | 9.90 | % | 10.37 | % | ||||||||||||
Average equity to average assets | 13.07 | 14.79 | 11.25 | 9.83 | 10.15 | 10.56 | ||||||||||||||||||
Total capital to risk-weighted assets | 13.43 | 21.36 | 22.79 | 14.05 | 15.02 | 15.61 | ||||||||||||||||||
Tier I capital to risk-weighted assets | 12.52 | 20.75 | 22.29 | 13.58 | 14.62 | 15.22 | ||||||||||||||||||
Tier I capital to average assets | 10.08 | 14.47 | 14.23 | 9.84 | 10.18 | 10.50 | ||||||||||||||||||
Asset Quality Ratios: | ||||||||||||||||||||||||
Allowance for loan losses as a percent of total loans | 0.92 | % | 0.52 | % | 0.40 | % | 0.38 | % | 0.32 | % | 0.32 | % | ||||||||||||
Allowance for loan losses as a percent of non-performing loans | 15.98 | 24.91 | 29.06 | 35.22 | 28.11 | 19.05 | ||||||||||||||||||
Net charge-offs to average outstanding loans during the period | 0.44 | 0.02 | 0.06 | 0 | 0.05 | 0 | ||||||||||||||||||
Non-performing loans as a percent of total loans | 5.73 | 2.10 | 1.39 | 1.07 | 1.13 | 1.65 | ||||||||||||||||||
Non-performing assets as a percent of total assets | 5.20 | 1.75 | 1.21 | 0.98 | 1.03 | 1.41 | ||||||||||||||||||
Other Data: | ||||||||||||||||||||||||
Number of full service offices | 8 | 7 | 5 | 5 | 5 | 4 | ||||||||||||||||||
Number of limited service offices | 1 | 1 | 1 | 1 | 1 | 1 |
(1) | Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of interest-bearing liabilities. | |
(2) | Represents net interest income as a percent of average interest-earning assets. | |
(3) | Represents non-interest expense divided by the sum of net interest income and non-interest income. | |
(4) | Ratios for six-month period have been annualized. |
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Years Ended December 31, | ||||||||||||||||||||||||||||||||||||
2007 | 2006 | 2005 | ||||||||||||||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||||||||||||||||||||||
Balance | Interest | Rate | Balance | Interest | Rate | Balance | Interest | Rate | ||||||||||||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||||||||||||||
Loans receivable, net | $ | 1,387,803 | $ | 87,101 | (1) | 6.28 | % | $ | 1,350,865 | $ | 83,822 | (1) | 6.21 | % | $ | 1,219,707 | $ | 74,020 | (1) | 6.07 | % | |||||||||||||||
Mortgage related securities(5) (6) | 111,132 | 5,869 | 5.28 | 87,102 | 4,263 | 4.89 | 83,296 | 2,466 | 2.96 | |||||||||||||||||||||||||||
Other earning assets | 90,859 | 4,005 | 4.41 | 90,729 | 4,143 | 4.57 | 61,288 | 3,250 | 5.30 | |||||||||||||||||||||||||||
Total interest-earning assets | 1,589,794 | 96,975 | 6.10 | 1,528,696 | 92,228 | 6.03 | 1,364,291 | 79,736 | 5.84 | |||||||||||||||||||||||||||
Noninterest-earning assets | 69,015 | 68,286 | 57,461 | |||||||||||||||||||||||||||||||||
Total assets | $ | 1,658,809 | $ | 1,596,982 | $ | 1,421,752 | ||||||||||||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||||||||||||||
Demand and money market accounts | 143,295 | 4,478 | 3.13 | $ | 110,907 | 2,810 | 2.53 | $ | 89,694 | 1,156 | 1.29 | |||||||||||||||||||||||||
Savings accounts | 19,299 | 83 | 0.43 | 20,658 | 101 | 0.49 | 23,812 | 119 | 0.50 | |||||||||||||||||||||||||||
Certificates of deposit | 857,319 | 40,297 | 4.70 | 925,026 | 39,080 | 4.22 | 970,977 | 34,152 | 3.52 | |||||||||||||||||||||||||||
Total interest-bearing deposits | 1,019,913 | 44,858 | 4.40 | 1,056,591 | 41,991 | 3.97 | 1,084,483 | 35,427 | 3.27 | |||||||||||||||||||||||||||
Borrowings | 381,614 | 16,791 | 4.40 | 265,821 | 11,472 | 4.32 | 110,979 | 3,719 | 3.35 | |||||||||||||||||||||||||||
Other interest bearing liabilities | 21,963 | 485 | 2.21 | 11,684 | 316 | 2.70 | 11,151 | 391 | 3.51 | |||||||||||||||||||||||||||
Total interest-bearing liabilities | 1,423,490 | 62,134 | 4.36 | 1,334,096 | 53,779 | 4.03 | 1,206,613 | 39,537 | 3.28 | |||||||||||||||||||||||||||
Noninterest-bearing liabilities | 18,442 | 26,716 | 81,398 | |||||||||||||||||||||||||||||||||
Total liabilities | 1,441,932 | 1,360,812 | 1,288,011 | |||||||||||||||||||||||||||||||||
Equity | 216,877 | 236,170 | 133,741 | |||||||||||||||||||||||||||||||||
Total liabilities and equity | $ | 1,658,809 | $ | 1,596,982 | $ | 1,421,752 | ||||||||||||||||||||||||||||||
Net interest income | $ | 34,841 | $ | 38,449 | $ | 40,199 | ||||||||||||||||||||||||||||||
Net interest rate spread(2) | 1.74 | % | 2.00 | % | 2.56 | % | ||||||||||||||||||||||||||||||
Net interest-earning assets(3) | $ | 166,304 | $ | 194,600 | $ | 157,678 | ||||||||||||||||||||||||||||||
Net interest margin(4) | 2.19 | % | 2.52 | % | 2.95 | % | ||||||||||||||||||||||||||||||
Average interest-earning assets to average interest- bearing liabilities | 111.68 | % | 114.59 | % | 113.07 | % |
(1) | Includes net deferred loan fee amortization income of $2,164,000, $885,000 and $940,000 for the years ended December 31, 2007, 2006 and 2005, respectively. | |
(2) | Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities. | |
(3) | Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. | |
(4) | Net interest margin represents net interest income divided by average total interest-earning assets. | |
(5) | Average balance of available for sale securities is based on amortized historical cost. | |
(6) | Interest income from tax exempt securities is not significant to total interest income, therefore, interest and yield on interest earnings assets are not stated on a tax equivalent basis. |
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Six Month Period Ended December 31, | ||||||||||||||||||||||||
2005 | 2004 | |||||||||||||||||||||||
Interest | Interest | |||||||||||||||||||||||
Average | and | Average | and | |||||||||||||||||||||
Balance | Dividends | Yield/Cost | Balance | Dividends | Yield/Cost | |||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Loans receivable, net | $ | 1,258,594 | $ | 38,516 | (1) | 6.12 | % | $ | 1,106,826 | $ | 34,272 | (1) | 6.19 | % | ||||||||||
Mortgage related securities(5) (6) | 65,426 | 1,389 | 4.25 | 68,044 | 1,206 | 3.54 | ||||||||||||||||||
Other earning assets | 113,023 | 2,131 | 3.77 | 56,248 | 1,102 | 3.92 | ||||||||||||||||||
Total interest-earning assets | 1,437,043 | 42,036 | 5.85 | 1,231,118 | 36,580 | 5.94 | ||||||||||||||||||
Noninterest-earning assets | 62,987 | 51,989 | ||||||||||||||||||||||
Total assets | $ | 1,500,030 | $ | 1,283,107 | ||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Demand and money market accounts | $ | 92,170 | 792 | 1.72 | $ | 92,174 | 412 | 0.89 | ||||||||||||||||
Savings accounts | 18,088 | 60 | 0.66 | 24,912 | 63 | 0.51 | ||||||||||||||||||
Certificates of deposit | 961,144 | 17,414 | 3.62 | 928,164 | 15,453 | 3.33 | ||||||||||||||||||
Total interest-bearing deposits | 1,071,402 | 18,266 | 3.41 | 1,045,250 | 15,928 | 3.05 | ||||||||||||||||||
Borrowings | 127,046 | 2,258 | 3.55 | 74,031 | 1,253 | 3.39 | ||||||||||||||||||
Other interest bearing liabilities | 15,514 | 234 | 3.02 | 13,333 | 109 | 1.64 | ||||||||||||||||||
Total interest-bearing liabilities | 1,213,962 | 20,758 | 3.42 | 1,132,614 | 17,290 | 3.05 | ||||||||||||||||||
Noninterest-bearing liabilities | 117,302 | 11,133 | ||||||||||||||||||||||
Total liabilities | 1,331,504 | 1,143,747 | ||||||||||||||||||||||
Equity | 168,766 | 139,360 | ||||||||||||||||||||||
Total liabilities and equity | $ | 1,500,030 | $ | 1,283,107 | ||||||||||||||||||||
Net interest income | $ | 21,278 | $ | 19,290 | ||||||||||||||||||||
Net interest rate spread(2) | 2.43 | % | 2.89 | % | ||||||||||||||||||||
Net interest-earning assets(3) | $ | 223,081 | $ | 98,504 | ||||||||||||||||||||
Net interest margin(4) | 2.96 | % | 3.13 | % | ||||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 118.38 | % | 108.70 | % |
(1) | Includes net deferred loan fee amortization income of $512,000 and $504,000 for the six month periods ended December 31, 2005 and 2004, respectively. | |
(2) | Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities. | |
(3) | Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. | |
(4) | Net interest margin represents net interest income divided by average total interest-earning assets. | |
(5) | Average balance of available for sale securities is based on amortized historical cost. | |
(6) | Interest income from tax exempt securities is not significant to total interest income, therefore, interest and yield on interest earnings assets are not stated on a tax equivalent basis. |
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Years Ended June 30, | ||||||||||||||||||||||||
2005 | 2004 | |||||||||||||||||||||||
Interest | Interest | |||||||||||||||||||||||
Average | And | Average | And | |||||||||||||||||||||
Balance | Dividends | Yield/Cost | Balance | Dividends | Yield/Cost | |||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||||||
Loans receivable, net | $ | 1,140,444 | $ | 69,775 | (1) | 6.12 | % | $ | 996,511 | $ | 61,530 | (1) | 6.17 | % | ||||||||||
Mortgage related securities(5) (6) | 51,229 | 2,283 | 4.46 | 86,426 | 3,264 | 3.78 | ||||||||||||||||||
Other earning assets | 64,943 | 2,149 | 3.31 | 45,953 | 1,294 | 2.82 | ||||||||||||||||||
Total interest-earning assets | 1,256,616 | 74,207 | 5.91 | 1,128,890 | 66,088 | 5.85 | ||||||||||||||||||
Non-interest-earning assets | 45,149 | 44,973 | ||||||||||||||||||||||
Total assets | $ | 1,301,765 | $ | 1,173,863 | ||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Demand and money market accounts | $ | 76,758 | 899 | 1.17 | $ | 88,324 | 884 | 1.00 | ||||||||||||||||
Savings accounts | 27,944 | 122 | 0.44 | 22,675 | 113 | 0.50 | ||||||||||||||||||
Certificates of deposit | 954,322 | 32,068 | 3.36 | 847,126 | 29,084 | 3.43 | ||||||||||||||||||
Total interest-bearing deposits | 1,059,024 | 33,089 | 3.12 | 958,125 | 30,081 | 3.14 | ||||||||||||||||||
Advances from the Federal Home Loan Bank and Federal funds purchased | 74,785 | 2,783 | 3.72 | 65,237 | 2,109 | 3.23 | ||||||||||||||||||
Other interest bearing liabilities | 5,579 | 196 | 3.51 | 5,624 | 242 | 4.29 | ||||||||||||||||||
Total interest-bearing liabilities | 1,139,388 | 36,068 | 3.17 | 1,028,986 | 32,432 | 3.15 | ||||||||||||||||||
Non-interest-bearing liabilities | 34,351 | 25,680 | ||||||||||||||||||||||
Total liabilities | 1,173,739 | 1,054,666 | ||||||||||||||||||||||
Equity | 128,026 | 119,197 | ||||||||||||||||||||||
Total liabilities and equity | $ | 1,301,765 | $ | 1,173,863 | ||||||||||||||||||||
Net interest income | $ | 38,139 | $ | 33,656 | ||||||||||||||||||||
Net interest rate spread(2) | 2.74 | % | 2.70 | % | ||||||||||||||||||||
Net interest-earning assets(3) | $ | 117,288 | $ | 99,904 | ||||||||||||||||||||
Net interest margin(4) | 3.04 | % | 2.98 | % | ||||||||||||||||||||
Average interest-earning assets to average interest-bearing liabilities | 110.29 | % | 109.71 | % |
(1) | Includes net deferred loan fee amortization income of $932,000 and $1,008,000 for the years ended June 30, 2005 and 2004, respectively. | |
(2) | Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities. | |
(3) | Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. | |
(4) | Net interest margin represents net interest income divided by average total interest-earning assets. | |
(5) | Average balance of available for sale securities is based on amortized historical cost. | |
(6) | Interest income from tax exempt securities is not significant to total interest income, therefore, interest and yield on interest earnings assets are not stated on a tax equivalent basis. |
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Years Ended December 31, | Years Ended December 31, | |||||||||||||||||||||||
2007 vs. 2006 | 2006 vs. 2005 | |||||||||||||||||||||||
Increase (Decrease) due to | Increase (Decrease) due to | |||||||||||||||||||||||
Volume | Rate | Net | Volume | Rate | Net | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
Interest and dividend income: | ||||||||||||||||||||||||
Loans receivable(1) (2) | $ | 2,311 | 968 | 3,279 | $ | 8,108 | 1,694 | 9,802 | ||||||||||||||||
Mortgage relates securites(3) | 1,248 | 358 | 1,606 | $ | 117 | 1,680 | 1,797 | |||||||||||||||||
Other interest earning assets | 6 | (144 | ) | (138 | ) | 1,256 | (363 | ) | 893 | |||||||||||||||
Total interest-earning assets | 3,565 | 1,182 | 4,747 | 9,481 | 3,011 | 12,492 | ||||||||||||||||||
Interest expense: | ||||||||||||||||||||||||
Demand and money market | 927 | 741 | 1,668 | 325 | 1,329 | 1,654 | ||||||||||||||||||
Savings accounts | (6 | ) | (12 | ) | (18 | ) | (15 | ) | (3 | ) | (18 | ) | ||||||||||||
Certificates of deposit | (2,262 | ) | 3,479 | 1,217 | (1,516 | ) | 6,444 | 4,928 | ||||||||||||||||
Total interest-bearing deposits | (1,341 | ) | 4,208 | 2,867 | (1,206 | ) | 7,770 | 6,564 | ||||||||||||||||
Borrowings | 5,091 | 229 | 5,320 | 6,427 | 1,326 | 7,753 | ||||||||||||||||||
Other interest bearing liabilities | 213 | (45 | ) | 168 | 20 | (95 | ) | (75 | ) | |||||||||||||||
Total interest-bearing liabilities | 3,963 | 4,392 | 8,355 | 5,241 | 9,001 | 14,242 | ||||||||||||||||||
Net change in net interest income | $ | (398 | ) | (3,210 | ) | (3,608 | ) | $ | 4,240 | (5,990 | ) | (1,750 | ) | |||||||||||
(1) | Includes net deferred loan fee amortization income of $2,164,000, $885,000 and $940,000 for the years ended December 31, 2007, 2006 and 2005, respectively. | |
(2) | Non-accrual loans have been included in average loans receivable balance. |
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Six Month Period Ended | ||||||||||||||||||||||||
December 31, | Years Ended June 30, | |||||||||||||||||||||||
2005 vs. 2004 | 2005 vs. 2004 | |||||||||||||||||||||||
Increase (Decrease) due to | Increase (Decrease) due to | |||||||||||||||||||||||
Volume | Rate | Net | Volume | Rate | Net | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
Interest and dividend income: | ||||||||||||||||||||||||
Loans receivable(1) (2) | $ | 4,649 | (405 | ) | 4,244 | $ | 8,812 | (567 | ) | 8,245 | ||||||||||||||
Mortgage related securites(3) | $ | (48 | ) | 231 | 183 | (1,495 | ) | 514 | (981 | ) | ||||||||||||||
Other interest earning assets | 1,072 | (43 | ) | 1,029 | 697 | 158 | 855 | |||||||||||||||||
Total interest-earning assets | 5,673 | (217 | ) | 5,456 | 8,014 | 105 | 8,119 | |||||||||||||||||
Interest expense: | ||||||||||||||||||||||||
Demand and money market accounts | — | 380 | 380 | (124 | ) | 139 | 15 | |||||||||||||||||
Savings accounts | (20 | ) | 17 | (3 | ) | 24 | (15 | ) | 9 | |||||||||||||||
Certificates of deposit | 516 | 1,445 | 1,961 | 3,614 | (630 | ) | 2,984 | |||||||||||||||||
Total interest-bearing deposits | 496 | 1,842 | 2,338 | 3,514 | (506 | ) | 3,008 | |||||||||||||||||
Borrowings | 946 | 59 | 1,005 | (1,128 | ) | 1,802 | 674 | |||||||||||||||||
Other interest bearing liabilities | 14 | 111 | 125 | (2 | ) | (44 | ) | (46 | ) | |||||||||||||||
Total interest-bearing liabilities | 1,456 | 2,012 | 3,468 | 2,384 | 1,252 | 3,636 | ||||||||||||||||||
Net change in net interest income | $ | 4,217 | (2,229 | ) | 1,988 | $ | 5,630 | (1,147 | ) | 4,483 | ||||||||||||||
(1) | Includes net deferred loan fee amortization income of $512,000, $504,000, $932,000 and $1,008,000 for the six month periods ended December 31, 2005 and 2004 and the years ended June 30, 2005 and 2004, respectively. | |
(2) | Non-accrual loans have been included in average loans receivable balance. |
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More Than | More than | |||||||||||||||||||
One Year | Three Years | |||||||||||||||||||
One Year or | Through | Through Five | ||||||||||||||||||
Total | Less | Three Years | Years | Over Five Years | ||||||||||||||||
(In Thousands) | ||||||||||||||||||||
Deposits without a stated maturity (5) | $ | 167,597 | $ | 167,597 | $ | — | $ | — | $ | — | ||||||||||
Certificates of deposit (5) | 826,938 | 627,410 | 175,196 | 24,077 | 255 | |||||||||||||||
Federal Home Loan Bank advances (1) | 385,779 | 47,779 | 53,000 | — | 285,000 | |||||||||||||||
Repurchase agreements (5) | 84,000 | — | — | — | 84,000 | |||||||||||||||
Operating leases (2) | 211 | 107 | 104 | — | — | |||||||||||||||
Capital lease (3) | 3,675 | 300 | 3,375 | — | — | |||||||||||||||
State income tax obligation (4) | 3,726 | 1,242 | 2,484 | |||||||||||||||||
Salary continuation agreements | 2,833 | 576 | 1,152 | 340 | 765 | |||||||||||||||
Total Contractual Obligations | $ | 1,474,759 | $ | 845,011 | $ | 235,311 | $ | 24,417 | $ | 370,020 | ||||||||||
(1) | Secured under a blanket security agreement on qualifying assets, principally, mortgage loans. Excludes interest which will accrue on the advances. All Federal Home Loan Bank advances with maturities exceeding five years are callable on a quarterly basis with the initial call at various times from February 2008 through March 2009. | |
(2) | The repurchase agreements are callable on a quarterly basis with the initial call in March 2009. | |
(3) | Represents non-cancelable operating leases for offices and equipment. | |
(4) | Represents remaining amounts due to the Wisconsin Department of Revenue related to the operations of the Company’s Nevada subsidiary. | |
(5) | Excludes interest |
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More than | ||||||||||||||||||||
More than | Three | |||||||||||||||||||
One Year | Years | |||||||||||||||||||
Through | Through | |||||||||||||||||||
One Year or | Three | Five | Over Five | |||||||||||||||||
Total | Less | Years | Years | Years | ||||||||||||||||
(In Thousands) | ||||||||||||||||||||
Real estate loan commitments(1) | $ | 16,674 | $ | 16,674 | $ | — | $ | — | $ | — | ||||||||||
Unused portion of home equity lines of credit(2) | 31,492 | 31,492 | — | — | — | |||||||||||||||
Unused portion of construction loans(3) | 27,336 | 27,336 | — | — | — | |||||||||||||||
Unused portion of business lines of credit | 8,721 | 8,721 | ||||||||||||||||||
Standby letters of credit | 2,337 | 1,776 | 476 | 85 | — | |||||||||||||||
Total Other Commitments | $ | 86,560 | $ | 85,999 | $ | 476 | $ | 85 | $ | 0 | ||||||||||
(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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Quarter Ended | ||||||||||||||||
March 31 | June 30 | September 30 | December 31 | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
2007 (unaudited) | ||||||||||||||||
Interest income | $ | 23,575 | $ | 24,335 | $ | 24,420 | $ | 24,645 | ||||||||
Interest expense | 14,809 | 15,345 | 15,913 | 16,067 | ||||||||||||
Net interest income | 8,766 | 8,990 | 8,507 | 8,578 | ||||||||||||
Provision for loan losses | 350 | 5,676 | 2,826 | 2,845 | ||||||||||||
Net income after provision for loan losses | 8,416 | 3,314 | 5,681 | 5,733 | ||||||||||||
Total noninterest income | 1,603 | 1,711 | 1,863 | 1,665 | ||||||||||||
Total noninterest expense | 6,808 | 6,988 | 7,178 | 7,708 | ||||||||||||
Income (loss) before income taxes | 3,211 | (1,963 | ) | 366 | (310 | ) | ||||||||||
Income taxes (benefit) | 1,112 | (694 | ) | (55 | ) | (617 | ) | |||||||||
Net income (loss) | $ | 2,099 | $ | (1,269 | ) | $ | 421 | $ | 307 | |||||||
Income (loss) per share — basic | $ | 0.06 | $ | (0.04 | ) | $ | 0.01 | $ | 0.01 | |||||||
Income (loss) per share — diluted | $ | 0.06 | $ | (0.04 | ) | $ | 0.01 | $ | 0.01 | |||||||
2006 (unaudited) | ||||||||||||||||
Interest income | $ | 21,857 | $ | 22,418 | $ | 23,266 | $ | 24,687 | ||||||||
Interest expense | 11,797 | 12,828 | 14,090 | 15,064 | ||||||||||||
Net interest income | 10,060 | 9,590 | 9,176 | 9,623 | ||||||||||||
Provision for loan losses | 307 | 345 | 1191 | 358 | ||||||||||||
Net income after provision for loan losses | 9,753 | 9,245 | 7,985 | 9,265 | ||||||||||||
Total noninterest income | 1,077 | 1,576 | 1,228 | 1,275 | ||||||||||||
Total noninterest expense | 6,540 | 7,412 | 7,770 | 6,930 | ||||||||||||
Income before income taxes | 4,290 | 3,409 | 1,443 | 3,610 | ||||||||||||
Income taxes | 1,584 | 1,252 | 537 | 1,326 | ||||||||||||
Net income | $ | 2,706 | $ | 2,157 | $ | 906 | $ | 2,284 | ||||||||
Loss per share — basic | $ | 0.08 | $ | 0.07 | $ | 0.03 | $ | 0.07 | ||||||||
Loss per share — diluted | $ | 0.08 | $ | 0.07 | $ | 0.03 | $ | 0.07 | ||||||||
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Percentage | ||||
Increase (Decrease) in Estimated Net | ||||
Annual Interest Income | ||||
Over 24 Months | ||||
300 basis point increase in rates | (1.54 | %) | ||
200 basis point increase in rates | 1.53 | % | ||
100 basis point increase in rates | 2.75 | % | ||
100 basis point decrease in rates | (6.51 | %) | ||
200 basis point decrease in rates | (10.06 | %) | ||
300 basis point decrease in rates | (15.87 | %) |
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Wauwatosa Holdings, Inc.:
March 14, 2008
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Consolidated Statements of Financial Condition
December 31, 2007 and 2006
December 31, | ||||||||
2007 | 2006 | |||||||
(In Thousands, except share data) | ||||||||
Assets | ||||||||
Cash | $ | 5,492 | 26,745 | |||||
Federal funds sold | 11,833 | 19,458 | ||||||
Interest-bearing deposits in other financial institutions and other short term investments | 559 | 27,604 | ||||||
Cash and cash equivalents | 17,884 | 73,807 | ||||||
Securities available-for-sale (at fair value) | 172,137 | 117,330 | ||||||
Securities held-to-maturity (at amortized cost) | 7,646 | — | ||||||
Loans held for sale | 23,108 | 5,387 | ||||||
Loans receivable | 1,402,048 | 1,372,907 | ||||||
Less: Allowance for loan losses | 12,839 | 7,195 | ||||||
Loans receivable, net | 1,389,209 | 1,365,712 | ||||||
Office properties and equipment, net | 32,018 | 32,625 | ||||||
Federal Home Loan Bank stock, at cost | 19,289 | 17,213 | ||||||
Cash surrender value of life insurance | 25,649 | 24,152 | ||||||
Real estate owned | 8,543 | 520 | ||||||
Prepaid expenses and other assets | 14,719 | 11,724 | ||||||
Total assets | $ | 1,710,202 | 1,648,470 | |||||
Liabilities and Shareholders’ Equity | ||||||||
Liabilities: | ||||||||
Demand deposits | $ | 53,210 | 58,407 | |||||
Money market and savings deposits | 114,387 | 94,472 | ||||||
Time deposits | 826,938 | 883,339 | ||||||
Total deposits | 994,535 | 1,036,218 | ||||||
Short-term borrowings | 53,484 | 41,224 | ||||||
Long-term borrowings | 422,000 | 292,779 | ||||||
Advance payments by borrowers for taxes | 607 | 190 | ||||||
Other liabilities | 37,757 | 36,787 | ||||||
Total liabilities | 1,508,383 | 1,407,198 | ||||||
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 in 2007 and 2006 | ||||||||
Issued - 33,975,250 in 2007 and 33,723,750 in 2006 | ||||||||
Outstanding - 31,250,897 in 2007 and 33,723,750 in 2006 | 340 | 337 | ||||||
Additional paid-in capital | 106,306 | 104,182 | ||||||
Accumulated other comprehensive income (loss), net of taxes | 44 | (1,225 | ) | |||||
Retained earnings | 146,367 | 144,809 | ||||||
Unearned ESOP shares | (5,977 | ) | (6,831 | ) | ||||
Treasury shares (2,724,353 shares), at cost | (45,261 | ) | — | |||||
Total shareholders’ equity | 201,819 | 241,272 | ||||||
Total liabilities and shareholders’ equity | $ | 1,710,202 | 1,648,470 | |||||
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Consolidated Statements of Income
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
Six months ended | Year ended | |||||||||||||||
Years ended December 31, | December 31, | June 30, | ||||||||||||||
2007 | 2006 | 2005 | 2005 | |||||||||||||
(In Thousands, except per share amounts) | ||||||||||||||||
Interest income: | ||||||||||||||||
Loans | $ | 87,101 | 83,822 | 38,516 | 69,775 | |||||||||||
Mortgage-related securities | 5,869 | 4,263 | 1,389 | 2,283 | ||||||||||||
Debt securities, federal funds sold and short-term investments | 4,005 | 4,143 | 2,131 | 2,149 | ||||||||||||
Total interest income | 96,975 | 92,228 | 42,036 | 74,207 | ||||||||||||
Interest expense: | ||||||||||||||||
Deposits | 44,910 | 42,038 | 18,296 | 33,285 | ||||||||||||
Borrowings | 17,224 | 11,741 | 2,462 | 2,783 | ||||||||||||
Total interest expense | 62,134 | 53,779 | 20,758 | 36,068 | ||||||||||||
Net interest income | 34,841 | 38,449 | 21,278 | 38,139 | ||||||||||||
Provision for loan losses | 11,697 | 2,201 | 1,035 | 1,238 | ||||||||||||
Net interest income after provision for loan losses | 23,144 | 36,248 | 20,243 | 36,901 | ||||||||||||
Noninterest income: | ||||||||||||||||
Service charges on loans and deposits | 1,983 | 2,021 | 940 | 1,216 | ||||||||||||
Increase in cash surrender value of life insurance | 1,192 | 1,055 | 587 | 642 | ||||||||||||
Gain (loss) on sale of securities | — | (819 | ) | — | 12 | |||||||||||
Mortgage banking income | 2,912 | 2,109 | — | — | ||||||||||||
Other | 755 | 790 | 717 | 1,387 | ||||||||||||
Total noninterest income | 6,842 | 5,156 | 2,244 | 3,257 | ||||||||||||
Noninterest expenses: | ||||||||||||||||
Compensation, payroll taxes, and other employee benefits | 15,487 | 16,209 | 7,404 | 11,434 | ||||||||||||
Occupancy, office furniture, and equipment | 4,990 | 4,304 | 1,802 | 3,482 | ||||||||||||
Advertising | 1,158 | 1,369 | 764 | 1,128 | ||||||||||||
Data processing | 1,622 | 1,730 | 840 | 1,142 | ||||||||||||
Charitable contributions | — | — | 5,310 | 2,088 | ||||||||||||
Communications | 729 | 700 | 300 | 591 | ||||||||||||
Professional fees | 1,230 | 1,243 | 529 | 627 | ||||||||||||
Real estate owned | 1,200 | 116 | (54 | ) | 338 | |||||||||||
Other | 2,266 | 2,981 | 1,408 | 2,692 | ||||||||||||
Total noninterest expenses | 28,682 | 28,652 | 18,303 | 23,522 | ||||||||||||
Income before income taxes | 1,304 | 12,752 | 4,184 | 16,636 | ||||||||||||
Income tax (benefit) expense | (254 | ) | 4,699 | 1,471 | 7,520 | |||||||||||
Net income | $ | 1,558 | 8,053 | 2,713 | 9,116 | |||||||||||
Income (loss) per share: | ||||||||||||||||
Basic | $ | 0.05 | 0.24 | (0.02 | ) | N/A | ||||||||||
Diluted | $ | 0.05 | 0.24 | (0.02 | ) | N/A | ||||||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 31,570,677 | 33,076,565 | 33,135,424 | N/A | ||||||||||||
Diluted | 31,578,626 | 33,076,565 | 33,135,424 | N/A |
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Table of Contents
Consolidated Statements of Changes in Shareholders’ Equity
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
Accumulated | ||||||||||||||||||||||||||||||||
Additional | Unearned | Other | ||||||||||||||||||||||||||||||
Common Stock | Paid-In | Retained | ESOP | Comprehensive | Treasury | |||||||||||||||||||||||||||
Shares | Amount | Capital | Earnings | Shares | Income (Loss) | Shares | Equity | |||||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||||||
Balances at December 31, 2005 | 33,724 | 337 | 103,859 | 136,756 | (7,685 | ) | (1,571 | ) | — | 231,696 | ||||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||
Net income | — | — | — | 8,053 | — | — | — | 8,053 | ||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||||||
Net unrealized holding losses on available for sale securities arising during the period, net of taxes of $101 | — | — | — | — | — | (187 | ) | — | (187 | ) | ||||||||||||||||||||||
Reclassification adjustment for net losses on available for sale securities realized in net income, net of taxes of $285 | — | — | — | — | — | 533 | — | 533 | ||||||||||||||||||||||||
Total comprehensive income | 8,399 | |||||||||||||||||||||||||||||||
ESOP shares committed to be released to Plan participants | — | — | 323 | — | 854 | — | — | 1,177 | ||||||||||||||||||||||||
Balances at December 31, 2006 | 33,724 | $ | 337 | 104,182 | 144,809 | (6,831 | ) | (1,225 | ) | — | 241,272 | |||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||
Net income | — | — | — | 1,558 | — | — | — | 1,558 | ||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||||||
Net unrealized holding gains on available for sale securities arising during the period, net of taxes of $684 | — | — | — | — | — | 1,269 | — | 1,269 | ||||||||||||||||||||||||
Total comprehensive income | 2,827 | |||||||||||||||||||||||||||||||
ESOP shares committed to be released to Plan participants | — | — | 398 | — | 854 | — | — | 1,252 | ||||||||||||||||||||||||
Stock based compensation | 251 | 3 | 1,726 | 1,729 | ||||||||||||||||||||||||||||
Purchase of treasury shares | (2,724 | ) | — | — | — | — | — | (45,261 | ) | (45,261 | ) | |||||||||||||||||||||
Balances at December 31, 2007 | 31,251 | $ | 340 | 106,306 | 146,367 | (5,977 | ) | 44 | (45,261 | ) | 201,819 | |||||||||||||||||||||
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Consolidated Statements of Changes in Shareholders’ Equity
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
Accumulated | ||||||||||||||||||||||||||||
Additional | Unearned | Other | ||||||||||||||||||||||||||
Common Stock | Paid-In | Retained | ESOP | Comprehensive | ||||||||||||||||||||||||
Shares | Amount | Capital | Earnings | Shares | Income (Loss) | Equity | ||||||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||||||
Balances at June 30, 2004 | — | — | — | 124,927 | — | (2,129 | ) | 122,798 | ||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||
Net income | — | — | — | 9,116 | — | — | 9,116 | |||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||
Net unrealized holding gains on available for sale securities arising during the period, net of taxes $799 | — | — | — | — | — | 1,509 | 1,509 | |||||||||||||||||||||
Reclassification adjustment for net losses on available for sale securities realized in net income, net of taxes of $5 | — | — | — | — | — | (7 | ) | (7 | ) | |||||||||||||||||||
Total comprehensive income | 10,618 | |||||||||||||||||||||||||||
Balances at June 30, 2005 | — | $ | — | — | 134,043 | — | (627 | ) | 133,416 | |||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||
Net income | — | — | — | 2,713 | — | — | 2,713 | |||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||
Net unrealized holding losses on available for sale securities arising during the period, net of taxes $521 | — | — | — | — | — | (944 | ) | (944 | ) | |||||||||||||||||||
Total comprehensive income | 1,769 | |||||||||||||||||||||||||||
Sale of common stock, net of issuance costs of $2,439 | 10,117 | 101 | 98,630 | — | — | — | 98,731 | |||||||||||||||||||||
Contribution of shares to charitable foundation | 557 | 6 | 5,559 | — | — | — | 5,565 | |||||||||||||||||||||
Capitalization of Lamplighter Financial, MHC | 23,050 | 230 | (330 | ) | — | — | — | (100 | ) | |||||||||||||||||||
Purchase of ESOP shares | — | — | — | — | (8,539 | ) | — | (8,539 | ) | |||||||||||||||||||
ESOP shares committed to be released to Plan participants | — | — | — | — | 854 | — | 854 | |||||||||||||||||||||
Balances at December 31, 2005 | 33,724 | $ | 337 | 103,859 | 136,756 | (7,685 | ) | (1,571 | ) | 231,696 | ||||||||||||||||||
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Consolidated Statements of Cash Flows
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
Years ended | Six months ended | Years ended | ||||||||||||||
December 31, | December 31, | June 30, | ||||||||||||||
2007 | 2006 | 2005 | 2005 | |||||||||||||
(In Thousands) | ||||||||||||||||
Operating activities: | ||||||||||||||||
Net income | $ | 1,558 | 8,053 | 2,713 | 9,116 | |||||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||||||||||
Provision for loan losses | 11,697 | 2,201 | 1,035 | 1,238 | ||||||||||||
Provision for depreciation | 2,633 | 2,369 | 1,053 | 1,607 | ||||||||||||
Deferred income taxes | (2,469 | ) | (1,280 | ) | (1,933 | ) | (1,192 | ) | ||||||||
Stock based compensation | 1,729 | — | — | — | ||||||||||||
Net amortization of premium on debt and mortgage-related securities | (219 | ) | 22 | (81 | ) | 49 | ||||||||||
Amortization of unearned ESOP shares | 1,252 | 1,177 | 854 | — | ||||||||||||
Gain on sale of loans held for sale | (1,820 | ) | (1,054 | ) | — | — | ||||||||||
Loans originated for sale | (242,120 | ) | (84,603 | ) | — | — | ||||||||||
Proceeds on sales of loans originated for sale | 226,219 | 80,270 | — | — | ||||||||||||
Charitable contribution of common stock | — | — | 5,565 | — | ||||||||||||
Increase in accrued interest receivable | (950 | ) | (621 | ) | (412 | ) | (230 | ) | ||||||||
Increase in cash surrender value of life insurance | (1,192 | ) | (1,055 | ) | (587 | ) | (642 | ) | ||||||||
Increase (decrease) in accrued interest on deposits | (45 | ) | 1,301 | 68 | 1,269 | |||||||||||
Increase in other liabilities | 1,046 | 2,901 | 1,241 | 3,004 | ||||||||||||
FHLB stock dividends | — | — | (309 | ) | (776 | ) | ||||||||||
(Gain) loss on sale of securities | — | 819 | — | (12 | ) | |||||||||||
(Gain) loss on sale of office properties and equipment | (77 | ) | 7 | (571 | ) | (488 | ) | |||||||||
(Gain) loss related to real estate owned | 712 | 31 | 25 | 2 | ||||||||||||
Other | 1,822 | (417 | ) | 1,119 | 116 | |||||||||||
Net cash (used in) provided by operating activities | (224 | ) | 10,121 | 9,780 | 13,061 | |||||||||||
Investing activities: | ||||||||||||||||
Net increase in loans receivable | (48,643 | ) | (68,717 | ) | (88,242 | ) | (153,126 | ) | ||||||||
Purchases of: | ||||||||||||||||
Debt securities | (28,958 | ) | — | (6,700 | ) | (34,299 | ) | |||||||||
Mortgage-related securities | (47,401 | ) | (36,037 | ) | (49,682 | ) | — | |||||||||
Structured notes, held-to-maturity | (7,646 | ) | — | — | — | |||||||||||
Premises and equipment, net | (2,122 | ) | (11,598 | ) | (2,346 | ) | (6,506 | ) | ||||||||
Waterstone Mortgage Corporation, net of cash | — | (1,081 | ) | — | — | |||||||||||
Bank owned life insurance | (306 | ) | (306 | ) | (126 | ) | (456 | ) | ||||||||
FHLB stock | (2,076 | ) | (2,807 | ) | — | — | ||||||||||
Proceeds from: | ||||||||||||||||
Principal repayments on mortgage-related securities | 17,621 | 15,457 | 10,323 | 21,091 | ||||||||||||
Maturities of debt securities | 5,509 | — | 6,350 | 25,397 | ||||||||||||
Sales of debt securities | — | 12,832 | — | 262 | ||||||||||||
Sales of mortgage-related securities | — | 13,036 | — | 5,348 | ||||||||||||
Sales of foreclosed properties and other assets | 3,369 | 2,984 | 1,082 | 2,563 | ||||||||||||
Net cash used by investing activities | (110,653 | ) | (76,237 | ) | (129,341 | ) | (139,726 | ) | ||||||||
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Consolidated Statements of Cash Flows
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
Years ended | Six months ended | Years ended | ||||||||||||||
December 31, | December 31, | June 30, | ||||||||||||||
2007 | 2006 | 2005 | 2005 | |||||||||||||
(In Thousands) | ||||||||||||||||
Financing activities: | ||||||||||||||||
Net (decrease) increase in deposits | (41,683 | ) | (9,375 | ) | (83,198 | ) | 93,203 | |||||||||
Net change in short-term borrowings | (35,519 | ) | (112,209 | ) | 38,000 | 10,000 | ||||||||||
Proceeds from long-term borrowings | 177,000 | 245,000 | 70,050 | 23,162 | ||||||||||||
Net increase in advance payments by borrowers for taxes | 417 | 9 | 648 | 1,375 | ||||||||||||
Purchase of treasury stock | (45,261 | ) | — | — | — | |||||||||||
Net proceeds from sale of stock | — | — | 98,731 | — | ||||||||||||
Capitalization of Lamplighter, MHC | — | — | (100 | ) | — | |||||||||||
Financing for purchase of ESOP shares | — | — | (8,539 | ) | — | |||||||||||
Net cash provided by financing activities | 54,954 | 123,425 | 115,592 | 127,740 | ||||||||||||
Increase (decrease) in cash and cash equivalents | (55,923 | ) | 57,309 | (3,969 | ) | 1,075 | ||||||||||
Cash and cash equivalents at beginning of period | 73,807 | 16,498 | 20,467 | 19,392 | ||||||||||||
Cash and cash equivalents at end of period | $ | 17,884 | 73,807 | 16,498 | 20,467 | |||||||||||
Supplemental information: | ||||||||||||||||
Cash paid or credited during the period for: | ||||||||||||||||
Income tax payments | 4,429 | 4,777 | 2,970 | 5,925 | ||||||||||||
Interest payments | 62,179 | 52,477 | 20,691 | 34,798 | ||||||||||||
Noncash investing activities: | ||||||||||||||||
Loans receivable transferred to foreclosed properties | 13,455 | 1,572 | — | 1,921 | ||||||||||||
Obligations under capital lease | — | — | — | 3,423 | ||||||||||||
Non Cash financing activities: | ||||||||||||||||
Long-term FHLB advances reclassified to short-term | 47,779 | 66,224 | 14,209 | 25,000 |
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Table of Contents
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
1) | Summary of Accounting Policies |
a) | Organization | ||
The Board of Directors of Wauwatosa Savings Bank (the Bank) adopted the Plan of Reorganization and related Stock Issuance Plan on May 17, 2005, as amended on June 3, 2005, under which Wauwatosa Holdings, Inc. (the Company) was formed to become the mid-tier holding company for the Bank. In addition, Lamplighter Financial, MHC, a Federally-chartered mutual holding company, was formed to become the majority owner of Wauwatosa Holdings, Inc. | |||
In connection with the Plan of Reorganization and Stock Issuance Plan, on October 4, 2005, 10,117,125 shares of Wauwatosa Holdings, Inc. were sold to eligible subscribers in a registered stock offering; 556,442 shares were issued to the Wauwatosa Savings Bank Fund of the Waukesha County Community Foundation, and the remaining 23,050,183 shares were issued to Lamplighter Financial, MHC. The Company’s outstanding common shares are 73.8% owned by Lamplighter Financial, MHC at December 31, 2007. | |||
b) | Fiscal Year Change | ||
In 2005, the Company changed its fiscal year ended June 30 to a fiscal year ended December 31. The six month period ended December 31, 2005, transitions between the Company’s old and new fiscal year ends. The results of operations for the six-month period ended December 31, 2005 are not necessarily indicative of results that may be expected for any other interim period or for an entire fiscal year. | |||
c) | Nature of Operations | ||
The Company operates as a one-bank holding company. The Bank is principally engaged in the business of attracting deposits from the general public and using such deposits to originate residential real estate loans. | |||
d) | Principles of Consolidation | ||
The consolidated financial statements include the accounts and operations of Wauwatosa Holdings, Inc. and its wholly owned subsidiary, Wauwatosa Savings Bank. The Bank has the following wholly owned subsidiaries: Wauwatosa Investments, Inc., Waterstone Mortgage Corporation and Main Street Real Estate Holdings, LLC. All significant intercompany accounts and transactions have been eliminated in consolidation. | |||
The Bank provides a full range of financial services to customers through branch locations in southeastern Wisconsin. The Bank is subject to the regulations of certain federal and state agencies and undergoes periodic examinations by those regulatory authorities. | |||
e) | Use of Estimates | ||
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. |
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Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
f) | Cash and Cash Equivalents | ||
The Company considers federal funds sold and highly liquid debt instruments with a maturity of three months or less when purchased to be cash equivalents. | |||
g) | Securities | ||
Available-for-Sale Securities | |||
Management has designated certain securities as available-for-sale. As such, they are stated at fair value, with the unrealized gains and losses, net of tax, reported as a separate component of equity. | |||
The cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity or, in the case of mortgage-related securities, over the estimated life of the security. Such amortization is included in interest income from investments. Declines in the fair value of investment securities available for sale that are deemed to be other-than-temporary are charged to earnings as a realized loss and a new cost basis for the securities is established. In evaluating other-than-temporary impairment, management considers the length of time and extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value in the near term. Realized securities gains or losses on securities sales (using specific identification method) and declines in value judged to be other-than-temporary are included in investment securities gains (losses), net, in the consolidated statements of income. | |||
Held-to-Maturity Securities | |||
Debt securities that the Company has the intent and ability to hold to maturity have been designated as held-to-maturity. Such securities are stated at amortized cost. | |||
Federal Home Loan Bank Stock | |||
Federal Home Loan Bank stock is carried at cost, which is the amount that the stock is redeemable by tendering to the FHLB or the amount at which shares can be sold to other FHLB members. FHLB dividends are recognized as income on their ex-dividend date. | |||
h) | Loans Held for Sale | ||
Loans held for sale, which generally consist of current origination of certain fixed-rate mortgage loans, are carried at the lower of cost or estimated market value as determined on an aggregate basis. The amount by which cost exceeds market value is accounted for as a valuation adjustment to the carrying value of the loans. Changes, if any, are included in mortgage banking income in the consolidated statements of income. | |||
i) | Loans Receivable and Related Interest Income | ||
Loans are carried at the principal amount outstanding, net of any unearned income. Loan origination and commitment fees and certain direct loan origination costs are deferred and the net amount amortized as an adjustment of the related loan yield. Amortization is based on a level-yield method over the contractual life of the related loans or until the loan is paid in full. Interest on loans is accrued and credited to income as it is earned. Accrual of interest is generally discontinued either when reasonable doubt exists as to the full, timely collection of interest or principal, or when a loan becomes contractually past due more than 90 |
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Table of Contents
Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
days with respect to interest or principal. At that time, previously accrued and uncollected interest on such loans is reversed and additional income is recorded only to the extent that payments are received and the collection of principal is reasonably assured. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time, and the ultimate collectibility of the total contractual principal and interest is no longer in doubt. | |||
j) | Allowance for Loan Losses | ||
The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. | |||
The Bank establishes valuation allowances on multi-family and commercial real estate loans considered impaired. A loan is considered impaired when, based on current information and events, it is probable that the Bank 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 present value of the expected future cash flows, discounted at the loan’s original effective interest rate or the fair value of the underlying collateral. | |||
The Bank also establishes valuation allowances based on an evaluation of the various risk components that are inherent in the loan 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 reduced by charge-offs, net of recoveries. The adequacy of the allowance for loan losses is approved quarterly by the Bank’s board of directors. The allowance reflects management’s best estimate of the amount needed to provide for the probable loss on impaired loans, as well as other credit risks of the Bank, and is based on a risk model developed and implemented by management and approved by the Bank’s board of directors. | |||
Actual results could differ from this estimate, and future additions to the allowance may be necessary based on unforeseen changes in economic conditions. In addition, federal regulators periodically review the Bank’s allowance for loan losses. Such regulators have the authority to require the Bank to recognize additions to the allowance at the time of their examination. | |||
k) | Real Estate Owned | ||
Real estate owned consists of real estate properties acquired through, or in lieu of, loan foreclosure. Real estate owned is recorded at estimated fair value less anticipated selling costs based upon the property’s appraised value at the date of transfer, with any difference between the fair value of the property and the net carrying value of the loan charged to the allowance for loan losses. Gains or losses not previously recognized resulting from the sale of real estate owned are recognized in real estate owned expense on the date of sale. | |||
l) | Cash Surrender Value of Life Insurance | ||
The Company purchased bank owned life insurance on the lives of certain employees. The Company is the beneficiary of the life insurance policies. The cash surrender value of life insurance is reported at the |
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Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
amount that would be received in cash if the polices were surrendered. Increases in the cash value of the policies and proceeds of death benefits received are recorded in non-interest income. The increase in cash surrender value of life insurance is not subject to income taxes, as long as the Company has the intent and ability to hold the policies until the death benefits are received. | |||
m) | Office Properties and Equipment | ||
Office properties and equipment, including leasehold improvements and software, are stated at cost, net of depreciation and amortization. Depreciation and amortization are computed on the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized over the lease term, if shorter than the estimated useful life. Maintenance and repairs are charged to expense as incurred, while additions or major improvements are capitalized and depreciated over their estimated useful lives. Estimated useful lives of the assets are 10 to 30 years for office properties, three to 10 years for equipment, and three years for software. Rent expense related to long-term operating leases is recorded on the accrual basis. | |||
n) | Income Taxes | ||
The Company and its subsidiaries file a consolidated federal income tax return. The provision for income taxes is based upon income in the consolidated financial statements, rather than amounts reported on the income tax return. 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 as income or expense in the period that includes the enactment date. | |||
Positions taken in the Company’s tax returns may be subject to challenge by the taxing authorities upon examination. Uncertain tax positions are initially recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions are both initially and subsequently measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement with the tax authority, assuming full knowledge of the position and all relevant facts. Interest and penalties on income tax uncertainties are classified within income tax expense in the income statement. | |||
o) | ) 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. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Shares of the Employee Stock Ownership Plan committed to be released are considered outstanding for both common and diluted EPS. Incentive stock compensation awards granted in 2007 result in dilution. | |||
p) | Other Comprehensive Income | ||
Comprehensive income is the total of reported net income and all other revenues, expenses, gains and losses that under generally accepted accounting principles bypass reported net income. The Company |
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Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
includes unrealized gains or losses, net of tax, on securities available for sale in other comprehensive income. | |||
q) | Employee Stock Ownership Plan (ESOP) | ||
Compensation expense under the ESOP is equal to the fair value of common shares released or committed to be released to participants in the ESOP in each respective period. Common stock purchased by the ESOP and not committed to be released to participants is included in the consolidated statements of financial condition at cost as a reduction of shareholders’ equity. | |||
r) | Reclassifications | ||
Certain prior year amounts have been reclassified to conform to the 2007 presentation. |
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Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
2) | Securities | |
Securities Available for Sale |
December 31, 2007 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | unrealized | unrealized | ||||||||||||||
cost | gains | losses | Fair value | |||||||||||||
(In Thousands) | ||||||||||||||||
Mortgage-backed securities | $ | 20,128 | 154 | (68 | ) | 20,214 | ||||||||||
Collateralized mortgage obligations | 110,419 | 1,050 | (1,073 | ) | 110,396 | |||||||||||
Mortgage-related securities | 130,547 | 1,204 | (1,141 | ) | 130,610 | |||||||||||
Government sponsored entity bonds | 13,996 | 187 | (1 | ) | 14,182 | |||||||||||
Municipals | 27,277 | 209 | (391 | ) | 27,095 | |||||||||||
Debt securities | 41,273 | 396 | (392 | ) | 41,277 | |||||||||||
Other securities | 250 | — | — | 250 | ||||||||||||
$ | 172,070 | 1,600 | (1,533 | ) | 172,137 | |||||||||||
December 31, 2006 | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | unrealized | unrealized | ||||||||||||||
cost | gains | losses | Fair value | |||||||||||||
(In Thousands) | ||||||||||||||||
Mortgage-backed securities | $ | 18,274 | 3 | (275 | ) | 18,002 | ||||||||||
Collateralized mortgage obligations | 82,419 | 1 | (1,549 | ) | 80,871 | |||||||||||
Mortgage-related securities | 100,693 | 4 | (1,824 | ) | 98,873 | |||||||||||
Government sponsored entity bonds | 13,450 | — | (193 | ) | 13,257 | |||||||||||
Municipals | 4,278 | 151 | (8 | ) | 4,421 | |||||||||||
Debt securities | 17,728 | 151 | (201 | ) | 17,678 | |||||||||||
Other securities | 794 | — | (15 | ) | 779 | |||||||||||
$ | 119,215 | 155 | (2,040 | ) | 117,330 | |||||||||||
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Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
December 31, 2007 | ||||||||
Amortized | ||||||||
cost | Fair value | |||||||
(In Thousands) | ||||||||
Debt securities: | ||||||||
Due within one year | $ | 2,991 | 2,991 | |||||
Due after one year through five years | 11,005 | 11,191 | ||||||
Due after five years through ten years | 1,654 | 1,664 | ||||||
Due after ten years | 25,623 | 25,431 | ||||||
Mortgage-related securities | 130,547 | 130,610 | ||||||
Mutual Funds | 250 | 250 | ||||||
$ | 172,070 | 172,137 | ||||||
Six Months Ended | Year ended | |||||||||||||||
Years Ended December 31, | December 31, | June 30, | ||||||||||||||
2007 | 2006 | 2005 | 2005 | |||||||||||||
(In Thousands) | ||||||||||||||||
Proceeds | $ | — | 25,868 | — | 5,610 | |||||||||||
Gross gains | — | — | — | 16 | ||||||||||||
Gross losses | — | 819 | — | 4 |
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Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
December 31, 2007 | ||||||||||||||||||||||||
Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
value | loss | value | loss | value | loss | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
Mortgage-backed securities | $ | — | — | 3,230 | (68 | ) | 3,230 | (68 | ) | |||||||||||||||
Collateralized mortgage obligations | — | — | 38,707 | (1,073 | ) | 38,707 | (1,073 | ) | ||||||||||||||||
Government sponsored entity bonds | — | — | 998 | (1 | ) | 998 | (1 | ) | ||||||||||||||||
Municipals | 15,079 | (391 | ) | — | — | 15,079 | (391 | ) | ||||||||||||||||
Other Securities | — | — | — | — | — | — | ||||||||||||||||||
$ | 15,079 | (391 | ) | 42,935 | (1,142 | ) | 58,014 | (1,533 | ) | |||||||||||||||
December 31, 2006 | ||||||||||||||||||||||||
Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
value | loss | value | loss | value | loss | |||||||||||||||||||
(In Thousands) | ||||||||||||||||||||||||
Mortgage-backed securities | $ | 2,846 | (3 | ) | 14,922 | (272 | ) | 17,768 | (275 | ) | ||||||||||||||
Collateralized mortgage obligations | 36,140 | (467 | ) | 40,000 | (1,082 | ) | 76,140 | (1,549 | ) | |||||||||||||||
Government sponsored entity bonds | — | — | 13,257 | (193 | ) | 13,257 | (193 | ) | ||||||||||||||||
Municipals | 874 | (5 | ) | 472 | (3 | ) | 1,346 | (8 | ) | |||||||||||||||
Other Securities | 778 | (15 | ) | — | — | 778 | (15 | ) | ||||||||||||||||
$ | 40,638 | (490 | ) | 68,651 | (1,550 | ) | 109,289 | (2,040 | ) | |||||||||||||||
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Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
December 31, | ||||||||
2007 | 2006 | |||||||
(In Thousands) | ||||||||
Mortgage loans: | ||||||||
Residential real estate: | ||||||||
One- to four-family | $ | 672,362 | 638,089 | |||||
Over four-family | 477,766 | 492,693 | ||||||
Construction and land | 156,289 | 168,605 | ||||||
Commercial real estate | 51,983 | 51,062 | ||||||
Home equity | 85,954 | 91,536 | ||||||
Consumer | 286 | 141 | ||||||
Commercial loans | 28,222 | 2,657 | ||||||
1,472,862 | 1,444,783 | |||||||
Less: | ||||||||
Undisbursed loan proceeds | 67,549 | 67,390 | ||||||
Unearned loan fees | 3,265 | 4,486 | ||||||
$ | 1,402,048 | 1,372,907 | ||||||
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Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
Six months ended | Year ended | |||||||||||||||
Years ended December 31, | December 31, | June 30, | ||||||||||||||
2007 | 2006 | 2005 | 2005 | |||||||||||||
(In Thousands) | ||||||||||||||||
Balance at beginning of period | $ | 7,195 | 5,250 | 4,606 | 3,378 | |||||||||||
Provision for loan losses | 11,697 | 2,201 | 1,035 | 1,238 | ||||||||||||
Charge-offs | (6,163 | ) | (536 | ) | (391 | ) | (11 | ) | ||||||||
Recoveries | 110 | 280 | — | 1 | ||||||||||||
Balance at end of period | $ | 12,839 | 7,195 | 5,250 | 4,606 | |||||||||||
Percentage of allowance to gross loans | 0.92 | % | 0.52 | % | 0.40 | % | 0.38 | % |
December 31, | ||||||||
2007 | 2006 | |||||||
(In Thousands) | ||||||||
Impaired loans for which an allowance has been provided | $ | 27,896 | 11,430 | |||||
Impaired loans for which no allowance has been provided | 54,632 | 18,499 | ||||||
Total loans determined to be impaired | $ | 82,528 | 29,929 | |||||
Allowance for loan losses related to impaired loans | $ | 5,783 | 1,616 | |||||
Average recorded investment in impaired loans | $ | 51,110 | 14,447 | |||||
Cash basis interest income recognized from impaired loans | $ | 2,735 | 2,216 |
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Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
December 31, | ||||||||
2007 | 2006 | |||||||
(In Thousands) | ||||||||
Land | $ | 5,994 | 5,989 | |||||
Office buildings and improvements | 29,709 | 28,838 | ||||||
Furniture and equipment | 9,224 | 11,301 | ||||||
44,927 | 46,128 | |||||||
Less accumulated depreciation | (12,909 | ) | (13,503 | ) | ||||
$ | 32,018 | 32,625 | ||||||
December 31, | ||||||||
2007 | 2006 | |||||||
(In Thousands) | ||||||||
Office buildings and improvements | $ | 5,727 | 5,724 | |||||
Less accumulated depreciation | (432 | ) | (240 | ) | ||||
$ | 5,295 | 5,484 | ||||||
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Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
Capital | Operating | |||||||
lease | leases | |||||||
(In Thousands) | ||||||||
Within one year | $ | 300 | 107 | |||||
One to two years | 3,375 | 104 | ||||||
Total | $ | 3,675 | 211 | |||||
Net minimum lease payments | 3,675 | |||||||
Less amounts representing interest | (332 | ) | ||||||
Present value of net minimum capital lease payments | $ | 3,343 | ||||||
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Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
Years ended December 31, | Six months ended | Year ended | ||||||||||||||
2007 | 2006 | December 31, 2005 | 30, 2005 | |||||||||||||
(In Thousands) | ||||||||||||||||
Interest-bearing demand deposits | $ | 331 | 631 | 637 | 863 | |||||||||||
Money market and savings deposits | 4,283 | 2,326 | 122 | 202 | ||||||||||||
Time deposits | 40,296 | 39,081 | 17,537 | 32,220 | ||||||||||||
$ | 44,910 | 42,038 | 18,296 | 33,285 | ||||||||||||
(In Thousands) | ||||
Within one year | $ | 627,410 | ||
One to two years | 127,541 | |||
Two to three years | 47,655 | |||
Three to four years | 5,638 | |||
Four through five years | 18,439 | |||
After five years | 255 | |||
$ | 826,938 | |||
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Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
December 31, 2007 | December 31, 2006 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Balance | Rate | Balance | Rate | |||||||||||||
(In Thousands) | (In Thousands) | |||||||||||||||
Federal funds purchased maturing: | ||||||||||||||||
2008 | $ | 5,705 | 4.75 | % | — | — | ||||||||||
Federal Home Loan Bank (FHLB) advances maturing: | ||||||||||||||||
2007 | — | — | 41,224 | 3.94 | % | |||||||||||
2008 | 47,779 | 4.24 | % | 47,779 | 4.24 | % | ||||||||||
2009 | 4,100 | 4.23 | % | — | — | |||||||||||
2010 | 48,900 | 4.80 | % | 25,000 | 4.72 | % | ||||||||||
2016 | 220,000 | 4.34 | % | 220,000 | 4.34 | % | ||||||||||
2017 | 65,000 | 3.19 | % | — | — | |||||||||||
Repurchase agreements maturing: | ||||||||||||||||
2018 | 84,000 | 3.97 | % | — | ||||||||||||
$ | 475,484 | 4.16 | % | 334,003 | 4.31 | % | ||||||||||
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Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
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Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
December 31, 2007 | ||||||||||||||||||||||||
To Be Well-Capitalized | ||||||||||||||||||||||||
For Capital | Under Prompt Corrective | |||||||||||||||||||||||
Actual | Adequacy Purposes | Action Provisions | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
(Dollars In Thousands) | ||||||||||||||||||||||||
Wauwatosa Savings | ||||||||||||||||||||||||
Total capital (to risk-weighted assets) | $ | 181,745 | 13.43 | % | 108,248 | 8.00 | % | 135,311 | 10.00 | % | ||||||||||||||
Tier I capital (to risk-weighted assets) | 169,431 | 12.52 | % | 54,124 | 4.00 | % | 81,186 | 6.00 | % | |||||||||||||||
Tier I capital (to average assets) | 169,431 | 10.08 | % | 67,225 | 4.00 | % | 84,031 | 5.00 | % | |||||||||||||||
State of Wisconsin (to total assets) | 169,431 | 9.94 | % | 102,250 | 6.00 | % | N/A | N/A |
December 31, 2006 | ||||||||||||||||||||||||
Wauwatosa Savings | ||||||||||||||||||||||||
Total capital (to risk-weighted assets) | $ | 203,400 | 18.19 | % | 89,439 | 8.00 | % | 111,799 | 10.00 | % | ||||||||||||||
Tier I capital (to risk-weighted assets) | 196,464 | 17.57 | % | 44,719 | 4.00 | % | 67,079 | 6.00 | % | |||||||||||||||
Tier I capital (to average assets) | 196,464 | 12.10 | % | 64,961 | 4.00 | % | 81,201 | 5.00 | % | |||||||||||||||
State of Wisconsin (to total assets) | 196,464 | 12.26 | % | 96,180 | 6.00 | % | N/A | N/A |
December 31, 2006 | ||||||||||||||||||||||||
To Be Well-Capitalized | ||||||||||||||||||||||||
For Capital | Under Prompt Corrective | |||||||||||||||||||||||
Actual | Adequacy Purposes | Action Provisions (1) | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
(Dollars In Thousands) | ||||||||||||||||||||||||
Wauwatosa Holdings | ||||||||||||||||||||||||
Total capital (to risk-weighted assets) | $ | 248,866 | 21.36 | % | 93,216 | 8.00 | % | N/A | N/A | |||||||||||||||
Tier I capital (to risk-weighted assets) | 241,760 | 20.75 | % | 46,608 | 4.00 | % | N/A | N/A | ||||||||||||||||
Tier I capital (to average assets) | 241,760 | 14.47 | % | 66,820 | 4.00 | % | N/A | N/A |
(1) | Prompt corrective action provisions are not applicable at the bank holding company level. |
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Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
Dividend Yield | 1.32 | % | ||
Risk-free interest rate | 4.44 | % | ||
Expected volatility | 31.86 | % | ||
Weighted average expected life | 6.5 | years | ||
Weighted average per share value of options | $ | 6.25 |
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Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
Weighted Average | Aggregate | |||||||||||||||
Weighted Average | Years Remaining in | Instrinsic Value | ||||||||||||||
Stock Options | Shares | Exercise Price | Contractual Term | (000's) | ||||||||||||
Outstanding December 31, 2006 | — | — | ||||||||||||||
Granted | 797,500 | $ | 17.63 | 10.00 | — | |||||||||||
Excercised | — | — | ||||||||||||||
Forfeited | (15,000 | ) | 17.67 | 9.50 | — | |||||||||||
Outstanding December 31, 2007 | 782,500 | 17.63 | 9.02 | — | ||||||||||||
Options exercisable at December 31, 2007 | — | 17.63 | — | |||||||||||||
Weighted Average | ||||||||
Stock Options | Shares | Grant Date Fair Value | ||||||
Nonvested at December 31, 2007 | — | — | ||||||
Granted | 797,500 | $ | 6.25 | |||||
Vested | — | — | ||||||
Forfeited | (15,000 | ) | 6.27 | |||||
Nonvested at December 31, 2007 | 782,500 | 6.25 | ||||||
Weighted Average | ||||||||
Restricted Stock | Shares | Grant Date Fair Value | ||||||
Nonvested at December 31, 2006 | — | |||||||
Granted | 251,500 | $ | 17.67 | |||||
Vested | — | |||||||
Forfeited | — | |||||||
Nonvested at December 31, 2007 | 251,500 | 17.67 | ||||||
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Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
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Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
2007 | 2006 | |||||||
Beginning ESOP shares | 609,213 | 685,365 | ||||||
Shares committed to be released | (76,152 | ) | (76,152 | ) | ||||
Unreleased shares | 533,061 | 609,213 | ||||||
Fair value of unreleased shares (in thousands) | $ | 6,834 | 10,856 |
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Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
Six months ended | Year ended | |||||||||||||||
Years ended December 31, | December 31, | June 30, | ||||||||||||||
2007 | 2006 | 2005 | 2005 | |||||||||||||
(In Thousands) | ||||||||||||||||
Current: | ||||||||||||||||
Federal | $ | 2,046 | 4,761 | 2,526 | 5,403 | |||||||||||
State | 169 | 1,218 | 878 | 3,309 | ||||||||||||
2,215 | 5,979 | 3,404 | 8,712 | |||||||||||||
Deferred: | ||||||||||||||||
Federal | (1,780 | ) | (899 | ) | (1,632 | ) | (1,155 | ) | ||||||||
State | (689 | ) | (381 | ) | (301 | ) | (37 | ) | ||||||||
(2,469 | ) | (1,280 | ) | (1,933 | ) | (1,192 | ) | |||||||||
Total | $ | (254 | ) | 4,699 | 1,471 | 7,520 | ||||||||||
For the year | ||||||||||||||||
Six months ended | ended June | |||||||||||||||
Years ended December 31, | December 31, | 30, | ||||||||||||||
2007 | 2006 | 2005 | 2005 | |||||||||||||
(Dollars In Thousands) | ||||||||||||||||
Income before income taxes | $ | 1,304 | 12,752 | $ | 4,184 | $ | 16,636 | |||||||||
Tax at Federal statutory rate (35%) | 456 | 4,463 | 1,464 | 5,822 | ||||||||||||
Add (deduct) effect of: | ||||||||||||||||
State income taxes, net of Federal income tax benefit | (338 | ) | 545 | 375 | 2,127 | |||||||||||
Cash surrender value of life insurance | (417 | ) | (370 | ) | (205 | ) | (225 | ) | ||||||||
Non-deductible ESOP and stock option expense | 258 | 113 | — | — | ||||||||||||
Tax-exempt interest income | (282 | ) | (69 | ) | (29 | ) | (64 | ) | ||||||||
Other | 69 | 17 | (134 | ) | (140 | ) | ||||||||||
Income tax provision (benefit) | (254 | ) | 4,699 | 1,471 | 7,520 | |||||||||||
Effective tax rate | (19.6 | %) | 36.9 | % | 35.2 | % | 45.2 | % |
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Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
December 31, | ||||||||
2007 | 2006 | |||||||
(In Thousands) | ||||||||
Gross deferred tax assets: | ||||||||
Excess book depreciation | $ | 530 | 455 | |||||
Compensation agreements | 1,189 | 1,139 | ||||||
Restricted stock and stock options | 558 | — | ||||||
Allowance for loan losses | 5,233 | 2,846 | ||||||
Interest income recognized for tax but not books | 1,761 | 817 | ||||||
State tax liability — Nevada settlement | 869 | 1,701 | ||||||
State NOL carryforward | 146 | 167 | ||||||
Unrealized loss on securities available for sale | — | 660 | ||||||
Charitable contributions carry forward | 1,144 | 1,386 | ||||||
Other | 139 | 135 | ||||||
Total gross deferred tax assets | 11,569 | 9,306 | ||||||
Valuation allowance — charitable contribution carry forward | (244 | ) | (234 | ) | ||||
Deferred tax assets | 11,325 | 9,072 | ||||||
Gross deferred tax liabilities: | ||||||||
FHLB stock dividends | (932 | ) | (1,018 | ) | ||||
Deferred loan fees | (666 | ) | (135 | ) | ||||
Unrealized gain on securities available for sale | (24 | ) | — | |||||
Deferred liabilities | (1,622 | ) | (1,153 | ) | ||||
Net deferred tax assets | $ | 9,703 | 7,919 | |||||
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Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
The Company files consolidated federal tax returns. The Company and two subsidiaries also file separate company Wisconsin income tax returns. The Company is no longer subject to federal income tax examinations by tax authorities for years before 2005 or state income tax examinations for years before 2004. | ||
The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007. Adoption had no effect on the liability for unrecognized tax benefits. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: |
Balance at January 1, 2007 | $ | 4,132,000 | ||
Decreases related to settlements with taxing authorities | (4,107,000 | ) | ||
Balance at December 31, 2007 | $ | 24,000 | ||
The beginning unrecognized benefit is Wisconsin tax on a portion of the income generated by the Company’s subsidiary located in the state of Nevada for the period July 1, 2002 through December 31, 2006. A state of Wisconsin closing agreement regarding this matter was executed on March 30, 2007. The settlement had an effect of reclassifying $4.1 million in unrecognized benefits as of January 1, 2007 as accrued state tax liability. Under the terms of the closing agreement, the Company paid $1.2 million, including interest, on the settlement date with the remaining $3.7 million to be paid over the next three years. Management does not anticipate significant adjustments to the total amount of unrecognized tax benefits within the next twelve months. | ||
The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. During the years ended 2007, 2006 and for the six-month transition period ended December 31, 2005, the Company recognized approximately $111,000, $263,000 and $174,000 in interest and penalties. The Company had $812,000 accrued for the payment of interest and penalties at December 31, 2006 all of which was paid in 2007. Under the Internal Revenue Code and Wisconsin Statutes, the Company is permitted to deduct, for tax years beginning before 1998, an annual addition to a reserve for bad debts. This amount differs from the provision for loan losses recorded for financial accounting purposes. Under prior law, bad debt deductions for income tax purposes were included in taxable income of later years only if the bad debt reserves were used for purposes other than to absorb bad debt losses. Because the Company did not intend to use the reserve for purposes other than to absorb losses, no deferred income taxes were provided. Retained earnings at December 31, 2007 include approximately $16.7 million for which no deferred Federal or state income taxes were provided. Under SFAS No. 109, deferred income taxes have been provided on certain additions to the tax reserve for bad debts. | ||
12) | Financial Instruments with Off-Balance-Sheet Risk | |
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheets. The contract or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments. | ||
The Company’s potential exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for other financial instruments reflected in the consolidated financial statements. |
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Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
December 31, | ||||||||
2007 | 2006 | |||||||
(In Thousands) | ||||||||
Financial instruments whose contract amounts represent potential credit risk: | ||||||||
Commitments to extend credit under first mortgage loans | $ | 16,674 | 28,067 | |||||
Commitments to extend credit under home equity lines of credit | 31,492 | 34,676 | ||||||
Unused portion of construction loans | 27,336 | 32,714 | ||||||
Unused portion of business lines of credit | 8,721 | — | ||||||
Standby letters of credit | 2,337 | 639 |
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. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements of the Company. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the counter-party. Collateral obtained generally consists of mortgages on the underlying real estate. | ||
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company holds mortgages on the underlying real estate as collateral supporting those commitments for which collateral is deemed necessary. | ||
The Company has determined that there are no probable losses related to commitments to extend credit or the standby letters of credit as of December 31, 2007 and 2006. | ||
In connection with its mortgage banking activities, the Company enters into forward loan sale commitments. Forward commitments to sell mortgage loans represent commitments obtained by the Company from a secondary market agency to purchase mortgages from the Company at specified interest rates and within specified periods of time. Commitments to sell loans are made to mitigate interest rate risk on commitments to originate loans and loans held for sale. As of December 31, 2007, the Company had $23.1 million in forward loan sale commitments. A forward sale commitment is a derivative instrument under Statement of Financial Accounting Standards No. 133 (“SFAS No. 133”), “Accounting for Derivative Instruments and Hedging Activities,” (as amended), which must be recognized at fair value on the consolidated balance sheet in other assets and other liabilities with changes in its value recorded in income from mortgage banking operations. In determining the fair value of its derivative loan commitments for economic purposes, the Company considers the value that would be generated when the loan arising from exercise of the loan commitment is sold in the secondary mortgage market. That value includes the price that the loan is expected to be sold for in the secondary mortgage market. |
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Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
13) | Fair Values of Financial Instruments | |
Fair value information about financial instruments follows, whether or not recognized in the consolidated statements of financial condition, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. Certain financial instruments and all nonfinancial instruments are excluded from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. | ||
The carrying amounts and fair values of the Company’s financial instruments consist of the following at December 31, 2007 and 2006: |
December 31, 2007 | December 31, 2006 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
amount | value | amount | value | |||||||||||||
(In Thousands) | ||||||||||||||||
Financial Assets | ||||||||||||||||
Cash and cash equivalents | $ | 17,884 | 17,884 | 73,807 | 73,807 | |||||||||||
Securities available-for-sale | 172,137 | 172,137 | 117,330 | 117,330 | ||||||||||||
Securities held-to-maturity | 7,646 | 7,174 | — | — | ||||||||||||
Loans held for sale | 23,108 | 23,108 | 5,387 | 5,387 | ||||||||||||
Loans receivable | 1,389,209 | 1,372,856 | 1,365,712 | 1,367,223 | ||||||||||||
FHLB stock | 19,289 | 19,289 | 17,213 | 17,213 | ||||||||||||
Cash surrender value of life insurance | 25,649 | 25,649 | 24,152 | 24,152 | ||||||||||||
Accrued interest receivable | 3,129 | 3,129 | 2,179 | 2,179 | ||||||||||||
Financial Liabilities | ||||||||||||||||
Deposits | 994,535 | 997,394 | 1,036,218 | 1,034,697 | ||||||||||||
Advance payments by borrowers for taxes | 607 | 607 | 190 | 190 | ||||||||||||
Borrowings | 475,484 | 511,880 | 334,003 | 333,746 | ||||||||||||
Accrued interest payable | 4,299 | 4,299 | 4,344 | 4,344 | ||||||||||||
Obligations under capital leases | 3,343 | 3,343 | 3,374 | 3,374 | ||||||||||||
Other Financial Instruments | ||||||||||||||||
Stand-by letters of credit | 16 | 16 | 4 | 4 |
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Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
a) | Cash and Cash Equivalents | |
The carrying amounts reported in the consolidated statements of financial condition for cash and cash equivalents approximate those assets’ fair values. | ||
b) | Securities | |
Fair values for securities are based on quoted market prices of these or comparable instruments. | ||
c) | Loans Held for Sale | |
Fair value is estimated using the prices of the Company’s existing commitments to sell such loans and/or the quoted market price for commitments to sell similar loans. | ||
d) | Loans Receivable | |
Fair values for loans receivable are estimated using a discounted cash flow calculation that applies current interest rates to estimated future cash flows of the loans receivable. | ||
e) | FHLB Stock | |
For FHLB stock, the carrying amount is the amount at which shares can be redeemed with the FHLB and is a reasonable estimate of fair value. | ||
f) | Cash Surrender Value of Life Insurance | |
The carrying amounts reported in the consolidated statements of financial condition for the cash surrender value of life insurance approximate those assets’ fair values. | ||
g) | Deposits and Advance Payments by Borrowers for Taxes | |
The fair values for interest-bearing and noninterest-bearing negotiable order of withdrawal accounts, savings accounts, and money market accounts are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). The fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates of similar remaining maturities to a schedule of aggregated expected monthly maturities of the outstanding certificates of deposit. The advance payments by borrowers for taxes are equal to their carrying amounts at the reporting date. | ||
h) | Borrowings | |
Fair values for borrowings are estimated using a discounted cash flow calculation that applies current interest rates to estimated future cash flows of the borrowings. | ||
i) | Accrued Interest Payable and Accrued Interest Receivable | |
For accrued interest payable and accrued interest receivable, the carrying amount is a reasonable estimate of fair value. |
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Years Ended December 31, 2007 and 2006 and June 30, 2005
Six Months Ended December 31, 2005
j) | Obligations under Capital Leases | |
The fair value of obligations under capital leases is determined using a present value of future minimum lease payments discounted at the current interest rate at the time of lease inception. | ||
k) | Commitments to Extend Credit and Standby Letters of Credit | |
Commitments to extend credit and standby letters of credit are generally not marketable. Furthermore, interest rates on any amounts drawn under such commitments would be generally established at market rates at the time of the draw. Fair values for the Company’s commitments to extend credit and standby letters of credit are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements, the counterparty’s credit standing, and discounted cash flow analyses. The fair value of the Company’s commitments to extend credit is not material at December 31, 2007 and 2006. |
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Years Ended December 31, 2006 and 2005 and June 30, 2005
Six Months Ended December 31, 2005
14) | Earnings (loss) per share | |
Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted EPS is computed by dividing net income (loss) by the weighted average number of common shares outstanding adjusted for the dilutive effect of all potential common shares. At December 31, 2007, 2006 and 2005, 228,454, 152,302 and 76,150 shares of the Employee Stock Purchase Plan have been committed to be released to Plan participants and are considered outstanding for both common and dilutive earnings per share, respectively. No earnings per share are reflected for periods prior to October 4, 2005, as there were no shares outstanding prior to the reorganization. The calculation of earnings per share for the period subsequent to the reorganization reflect the actual net loss and weighted average shares outstanding from the period October 5, 2005 through December 31, 2005. | ||
Presented below are the calculations for basic and diluted earnings (loss) per share. |
For the period | ||||||||||||
October 5, 2005 | ||||||||||||
For the year ended December 31, | through December | |||||||||||
2007 | 2006 | 31, 2005 | ||||||||||
(In Thousands, except per share amounts) | ||||||||||||
Net income (loss) | $ | 1,558 | 8,053 | (709 | ) | |||||||
Weighted average shares outstanding | 31,571 | 33,077 | 33,135 | |||||||||
Effect of dilutive potential common shares | 8 | — | — | |||||||||
Diluted weighted average shares outstanding | 31,579 | 33,077 | 33,135 | |||||||||
Basic earnings (loss) per share | $ | 0.05 | 0.24 | (0.02 | ) | |||||||
Diluted earnings (loss) per share | $ | 0.05 | 0.24 | (0.02 | ) | |||||||
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Years Ended December 31, 2006 and 2005 and June 30, 2005
Six Months Ended December 31, 2005
December 31, | ||||||||
2007 | 2006 | |||||||
(In Thousands) | ||||||||
Assets | ||||||||
Cash and cash equivalents | $ | 24,352 | 82 | |||||
Loans receivable | 4,829 | 42,786 | ||||||
Less: Allowance for loan losses | (442 | ) | (171 | ) | ||||
Loans receivable, net | 4,387 | 42,697 | ||||||
Investment in subsidiaries | 170,143 | 195,975 | ||||||
Receivable from ESOP | 1,195 | 1,238 | ||||||
Deferred tax asset | 1,478 | 1,062 | ||||||
Income tax benefit receivable | 317 | 459 | ||||||
Other assets | 6 | — | ||||||
Total Assets | $ | 201,878 | 241,431 | |||||
Liabilities and shareholders’ equity | ||||||||
Liabilities: | ||||||||
Other liabilities | 59 | 159 | ||||||
Shareholders’ equity | ||||||||
Preferred Stock (par value $.01 per share) | — | — | ||||||
Authorized — 20,000,000 shares, no shares issued | ||||||||
Common stock (par value $.01 per share) | 340 | 337 | ||||||
Authorized — 200,000,000 shares in 2007 and 2006 | ||||||||
Issued — 33,975,250 in 2007 and 33,723,750 in 2006 | ||||||||
Outstanding — 31,250,897 in 2007 and 33,723,750 in 2006 | ||||||||
Additional paid-in-capital | 106,306 | 104,182 | ||||||
Retained earnings | 146,367 | 144,809 | ||||||
Unearned ESOP shares | (5,977 | ) | (6,831 | ) | ||||
Treasury stock (2,724,353 shares), at cost | (45,261 | ) | — | |||||
Accumulated other comprehensive loss (net of taxes) | 44 | (1,225 | ) | |||||
Total shareholders’ equity | 201,819 | 241,272 | ||||||
Total liabilities and shareholders’ equity | $ | 201,878 | 241,431 | |||||
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Years Ended December 31, 2006 and 2005 and June 30, 2005
Six Months Ended December 31, 2005
For the period | ||||||||||||
For the year ended December 31, | October 5, 2005 through | |||||||||||
2007 | 2006 | December 31, 2005 | ||||||||||
(In Thousands) | ||||||||||||
Interest income | $ | 2,163 | 2,601 | 97 | ||||||||
Provision for loan losses | 271 | 171 | — | |||||||||
Interest income after provision for loan losses | 1,892 | 2,430 | 97 | |||||||||
Equity in earnings of subsidiaries* | 1,170 | 7,390 | 2,965 | |||||||||
Total income | 3,062 | 9,820 | 3,062 | |||||||||
Compensation | 446 | 513 | — | |||||||||
Professional fees | 81 | 146 | — | |||||||||
Charitable contribution | — | — | 5,564 | |||||||||
Other expense | 464 | 448 | 38 | |||||||||
Total expense | 991 | 1,107 | 5,602 | |||||||||
Income (loss) before income tax benefit | 2,071 | 8,713 | (2,540 | ) | ||||||||
Income tax expense (benefit) | 513 | 660 | (1,831 | ) | ||||||||
Net income (loss) | $ | 1,558 | 8,053 | (709 | ) | |||||||
* | Equity in earnings of subsidiaries related to the period ended December 31, 2005 is for the period from October 5, 2005 through December 31, 2005, the period for which Wauwatosa Holdings, Inc owned the Bank and its subsidiaries. |
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Years Ended December 31, 2006 and 2005 and June 30, 2005
Six Months Ended December 31, 2005
For the period | ||||||||||||
For the year ended December 31, | October 5, 2005 through | |||||||||||
2007 | 2006 | December 31, 2005 | ||||||||||
(In Thousands) | ||||||||||||
Cash flows from operating activities | ||||||||||||
Net income (loss) | $ | 1,558 | 8,053 | (709 | ) | |||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||
Provision for loan losses | 271 | 171 | — | |||||||||
Amortization of unearned ESOP | 1,252 | 1,177 | — | |||||||||
Stock based compensation | 1,729 | — | — | |||||||||
Deferred income taxes | (416 | ) | 502 | (1,564 | ) | |||||||
Charitable contribution of common stock | — | — | 5,565 | |||||||||
Equity in earnings of subsidiaries | (1,170 | ) | (7,390 | ) | (2,965 | ) | ||||||
Change in other assets and liabilities | (1,650 | ) | (956 | ) | (582 | ) | ||||||
Net cash provided by (used in) operating actitivies | 1,574 | 1,557 | (255 | ) | ||||||||
Cash flows from investing activities: | ||||||||||||
Net decrease (increase) in loans receivable | 37,957 | (42,786 | ) | — | ||||||||
Investment of proceeds in subsidiary | — | — | (57,065 | ) | ||||||||
Net cash provided by (used in) investing activities | 37,957 | (42,786 | ) | (57,065 | ) | |||||||
Cash flows from financing activities: | ||||||||||||
Purchase of treasury stock | (45,261 | ) | — | — | ||||||||
Dividend received from subsidiary | 30,000 | — | — | |||||||||
Net proceeds from sale of common stock | — | — | 98,731 | |||||||||
Capitalization of Lamplighter, MHC | — | — | (100 | ) | ||||||||
Net cash provided by (used in) financing activities | (15,261 | ) | — | 98,631 | ||||||||
Net increase (decrease) in cash | 24,270 | (41,229 | ) | 41,311 | ||||||||
Cash and cash equivalents at beginning of period | 82 | 41,311 | — | |||||||||
Cash and cash equivalents at end of period | $ | 24,352 | 82 | 41,311 | ||||||||
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Years Ended December 31, 2006 and 2005 and June 30, 2005
Six Months Ended December 31, 2005
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Wauwatosa Holdings, Inc.:
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March 14, 2008
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Table of Contents
Executive | ||||||
Offices and Positions with Wauwatosa | Officer | |||||
Name and Age | Holdings and Wauwatosa Savings Bank* | Since (1) | ||||
Douglas S. Gordon, 50 | Chief Executive Officer and President of Wauwatosa Holdings and of Wauwatosa Savings Bank | 2005 | ||||
Richard C. Larson, 50 | Chief Financial Officer and Senior Vice President of Wauwatosa Holdings and of Wauwatosa Savings Bank | 1990 | ||||
William F. Bruss, 38 | General Counsel, Senior Vice President and Secretary of Wauwatosa Holdings and of Wauwatosa Savings Bank | 2005 | ||||
Rebecca M. Arndt, 40 | Vice President — Retail Operations of Wauwatosa Savings Bank | 2006 |
* | Excluding directorships and excluding positions with Bank subsidiaries. Those positions do not constitute a substantial part of the officers’ duties. | |
(1) | Indicates date when individual first held an executive officer position with the Bank. These individuals became executive officers of Wauwatosa Holdings upon its organization as noted. |
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Number of | ||||||||||||
Number of shares to be | securities | |||||||||||
issued upon exercise of | Weighted average | remaining available | ||||||||||
outstanding options and | option exercise | for issuance under | ||||||||||
Plan | rights | price | plan | |||||||||
2006 Equity Incentive Plan | 1,494,298 | (1) | $ | 17.63 | 460,298 |
(1) | Consists of 1,067,356 shares reserved for grants of stock options and 426,942 shares reserved for grants of restricted stock. On December 31, 2007, 782,500 options are outstanding with a weighted average exercise price of $17.63 on of which were exercisable as of that date. |
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(a) | Documents filed as part of the Report: |
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WAUWATOSA HOLDINGS, INC. | ||||||
March 14, 2008 | ||||||
By: | /s/Douglas S. Gordon | |||||
Douglas S. Gordon | ||||||
Chief Executive Officer |
/s/Douglas S. Gordon | /s/Patrick S. Lawton | |
Douglas S. Gordon, | Patrick S. Lawton,Chairman and Director | |
Chief Executive Officer and Director | ||
(Principal Executive Officer) | ||
/s/Richard C. Larson | /s/Thomas E. Dalum | |
Richard C. Larson,Senior Vice President | Thomas E. Dalum,Director | |
Chief Financial Officer | ||
(Principal Financial and Accounting Officer) | ||
/s/ William F. Bruss | /s/Michael L. Hansen | |
William F. Bruss,Senior Vice President | Michael L. Hansen,Director | |
Secretary | ||
/s/Stephen J. Schmidt | ||
Stephen J. Schmidt,Director |
*Each of the above signatures is affixed as of March 14, 2008. |
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( “Wauwatosa Holdings” or the “Company”)**
Commission File No. 000-51507
TO
2007 REPORT ON FORM 10-K
Incorporated Herein | Filed | |||||
Exhibit | Description | By Reference To | Herewith | |||
2.1 | Plan of Reorganization from Mutual Savings Bank to Mutual Holding Company of Wauwatosa Savings Bank (the “Bank”), as adopted on May 17,2005 and amended on June 3, 2005 (the “Plan”) | Exhibit 2.1 to the Company’s Registration Statement on Form S-1, Registration No. 333-125715 (the “2005 S-1”) | ||||
3.1 | Proposed Articles of Incorporation of the Company | Exhibit 3.1 to 2005 S-1 | ||||
3.2 | Proposed Bylaws of the Company | Exhibit 3.1 to 2005 S-1 | ||||
10.1* | Wauwatosa Savings Bank Employee Stock Ownership Plan and Trust | Exhibit 10.1 to 2005 S-1 | ||||
10.2* | Supplemental Retirement Benefit Plan between the Bank and Donald J. Stephens | Exhibit 10.2 to 2005 S-1 | ||||
10.3* | Employment Agreement between the Bank and Douglas S. Gordon | Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 26, 2005 and amended on December 19, 2006 | ||||
10.4* | Stock Compensation Plans | Exhibit 10.1 to the company’s Current Report on Form 8-K filed on May 22, 2006 | ||||
10.5* | Early Retirement, Resignation and Release Agreement between the Bank and Donald J. Stephens | Exhibit 10.5 to the Company’s Annual Report on Form 10-K filed March 27, 2006 | ||||
11.1 | Statement re: Computation of Per Share Earnings | See Note 13 in Part II Item 8 | ||||
21.1 | List of Subsidiaries | X | ||||
23.1 | Consent of Independent Registered Public Accounting Firm | X |
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Incorporated Herein | Filed | |||||
Exhibit | Description | By Reference To | Herewith | |||
24.1 | Powers of Attorney | Signature Page | ||||
31.1 | Sarbanes-Oxley Act Section 302 Certification signed by the Chief Executive Officer of Wauwatosa Holdings | X | ||||
31.2 | Sarbanes-Oxley Act Section 302 Certification signed by the Chief Financial Officer of Wauwatosa Holdings | 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 Chief Executive Officer of Wauwatosa Holdings | 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 | X |
* | Designates management or compensatory agreements, plans or arrangements required to be filed as exhibits pursuant to Item 15(b) of Form 10-K. |
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